Koolearn Technology : Annual report 2020

Koolearn Technology Holding Limited

新東方在綫科技控股有限公司

(Incorporated in the Cayman Islands with limited liability)

Stock Code: 1797

CONTENTS

2 Chairman's statement

5 Corporate information

7 Financial highlights

9 Business overview and outlook

14 Management discussion and analysis

22 Directors and senior management

26 Directors' report

40 Other information

47 Corporate governance report

59 Environmental, social and governance report

101 Independent auditor's report

1. Consolidated statement of profit or loss and other comprehensive income
2. Consolidated statement of financial position

108 Consolidated statement of changes in equity

110 Consolidated statement of cash flows

112 Notes to the consolidated financial statements

196 Definitions

CHAIRMAN'S STATEMENT

Dear Shareholders,

I am pleased to present our annual report for the year ended 31 May 2020.

Compared with our previous financial year, our total revenue has increased by 17.6% from RMB918.9 million in FY 2019 to RMB1.1 billion in FY 2020. Our total student enrolments has also increased by 30.9% from 2.2 million in FY 2019 to 2.9 million in FY 2020.

FY 2020 has presented unprecedented challenges for the education industry in China and around the world. Due to the COVID-19 pandemic, in-person classes have largely shifted online and various domestic and overseas examinations have been suspended. This has resulted in a direct increase in the demand for online education and a decrease in the number of students participating in overseas test preparation. These factors have brought significant challenges to, but also created unique opportunities in, the online education industry. In response to these challenges, we are focusing on building robust technological infrastructure to accommodate our growing needs, as well as increasing our efforts in hiring talented staff, in order to expand our business capabilities to meet these changing times. These investments may not be immediately reflected in our short-term financial results but we believe that our efforts will be ultimately reflected in the results of our business in the long-term.

Despite facing these challenges, we remained committed to supporting our students during these difficult times. We have proactively donated free courses across various subjects to a significant number of students of all grades to help alleviate some of the impact caused by the suspension of offline schools and physical learning centres as a result of COVID-19. These measures have, in turn, contributed to our student acquisition efforts, which has been reflected in our total student enrolment numbers, which has increased by 30.9% from 2.2 million in FY 2019 to

2.9 million in FY 2020. Our average spending per student has also remained relatively stable at RMB401, compared with RMB434 over the same period last year. During these turbulent times, we continue to believe that our core long-term corporate growth strategy remains key to overcoming these challenging times and sustaining growth in the long-run. We have continued to focus on optimizing our business model in order to remain relevant in this highly competitive industry. Our efforts have begun reaping results as we see our total revenue increasing by 17.6% over the past financial year from RMB918.9 million in FY 2019 to RMB1.1 billion in FY 2020.

During this Reporting Period we adjusted our course products and optimized our business structure in all three major business segments:

• for our college education segment, we optimized our product lines, which resulted in a year-on-year revenue growth of 1.6% to RMB641.7 million, accounting for 59.4% of our total revenue.
• for our K-12 education segment, we significantly increased our investment in course content and technology, leading to admirable results despite the pandemic. Our net revenue increased by 85.4% to RMB295.1 million in FY 2020, accounting for 27.3% of our total revenue and our number of student enrolments increased by 224.5% to approximately 1.86 million.
• for our pre-school segment, in order to deliver course content in a more engaging and standardised manner, we changed our operational focus to the Donut English-learning APP and optimized our business structure, leading to an improvement in the gross profit margin from -0.9% in FY 2019 to 28.3% in FY 2020.

2

Chairman's Statement (Continued)

The COVID-19 pandemic has caused significant changes in people's lifestyles, working styles, and learning habits. During the pandemic, we actively cooperated with various online platforms such as Xuexi Qiangguo, People's Daily, and CCTV broadcasting channel to provide course materials free of charge during China's winter and spring vacation periods to domestic college and working students across China, enabling them to continue their studies at home despite school closures during the virus outbreak. We also donated tens of millions of free live broadcast courses to primary and middle school students. These measures helped us broaden our customer base and widen our geographical coverage in China and also resulted in us accelerating our development of certain new business lines and courses. Leveraging on our 27 years of experience in the education industry, our comprehensive course portfolio, constantly improving course content and service quality and precision marketing strategies, I truly believe that Koolearn will continue to be the online education platform of choice for students to come.

Looking forward, we will continue to heavily invest in our human resources. At Koolearn, we have always adhered to our founding principles, including training our teachers to be the best they can be. Thus, we have continuously emphasised the importance of teacher training. To continue improving the quality of our teachers, we have implemented a teacher grading system and teacher recruitment and training; and through strict teacher selection, full class teaching observations, and course quality inspection, these measures have assisted our teachers in focusing on their strengths and keeping up with the pace of our business growth. At the same time, we actively lay out our core strategies to enhance the competitiveness of our different operational areas including teaching and tutoring, subject operations, teaching products, Internet technology and marketing. As at 31 May 2020, the Company had a total of 9,394 experienced teachers, tutors and course researchers. At the same time, we have established a team of 956 members focusing on the development of internet technology and internet products and an integrated marketing team of 3,132 members. In our K-12 segment, we have started building teacher training and tutoring talent bases across China, including Beijing, Xi'an, Wuhan, Jinan, Zhengzhou, and we plan to further expand our network of teachers and tutoring centers to more domestic in order to better attract local talent. Among them, Dongfang Youbo currently has more than 1,800 teachers, and we have plans to increase the number of faculty members. Besides Beijing and Wuhan, Dongfang Youbo also established new teacher centers in other top tier cities to ensure the supply of high quality teachers for future expansion. As the Company continues to grow, we have established a systematic evaluation system, which helps us promote and retain outstanding talent as well as implement outstanding management practices in order to ensure we can continue to uphold our principles in nurturing the best possible talent within our Group.

In FY 2020, we have begun seeing the benefits of developing our own live-streaming platform. During the COVID-19 pandemic, we have seamlessly relocated our K-12large-class courses from a third-party platform to our own proprietary platform. Going forward, we will continue to invest heavily in internet technology by: (1) improving the user terminals in terms of stability, speed and adaptability to different devices; (2) expanding the network coverage of our servers to ensure that users in different regions receive stable, high-quality services; (3) upgrading our server and cloud base technologies to establish a reliable and readily available cloud system. In order to enhance our internet user experience, we will continue to add more tools and capabilities into our platforms for improving teaching effectiveness and efficiency, such as increasing the in-class application of interactive courseware materials, enhancing the reward system for students, and further encouraging teacher-student engagement and group interactions with a view to create a "new" user experience for both students and parents. As for our online products, we will continue to provide a fast and convenient, all-round multifunctional, one-stop service to students before, during and after class by optimising our core teaching tools, data exchange, and system linkages with the aim of shortening the learning path for our students. We believe that innovation in educational technology will help students learn in a better and more effective way by making the learning experience fun and engaging.

As our product offerings and technology continue to improve, we will utilise appropriate advertising strategies to increase our customer acquisition in order to ensure a healthy growth rate of our internet users.

KOOLEARN TECHNOLOGY HOLDING LIMITED ANNUAL REPORT 2020

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Chairman's Statement (Continued)

Our acquisition cost per enrolment maintained at relatively low levels thanks to our wide brand recognition and the positive reputation that we, and New Oriental, have cultivated over the past 27 years. Moving forward, we will continue to optimise and explore high-quality customer acquisition channels. We have established an excellent marketing team dedicated to stabilising the cost of customer acquisition by adopting various online and offline approaches. For our online channels, apart from traditional advertising, we have implemented social media marketing and short video live broadcast marketing for promotional purposes. Furthermore, we will continue to adopt flexible marketing strategies to optimise our returns on each marketing dollar spent and allow us to monitor the effectiveness of our marketing efforts. Although our overall sales and marketing expenses have increased due to the provision of free classes during COVID-19 pandemic, the accumulation of visitor traffic, growth in our customer conversion team, and more diversified customer reach methods and strategies will help us consolidate our leading online education provider position in the market and allow us to ultimately achieve more better-priced student enrolment capabilities. We firmly believe that cash-burning is not the answer to customer acquisition and there is no shortcut to success. We anticipate to achieve sustainable development in the online education industry by having professional teams and excellent products as well as providing high-quality services.

This pandemic has undoubtedly popularised and accelerated the introduction of online education to many more families in China and around the world. With the adoption of 5G technology and the application of artificial intelligence and big data, the online education industry has ushered in a new period of rapid development. Our K-12 business has greatly improved during this period and accumulated a large traffic pool and significant number of core user groups. Through the "Koolearn Technology + DFUB" dual platforms, we are able to fulfil the needs of students with different economic conditions and learning preferences and capabilities. While focusing on the first and second-tier markets, the live broadcast courses of our dual teacher classes have also attracted a large number of new students from lower-tier cities during this period. DFUB's single-teacher small classes have further accelerated its penetration into the third to fifth-tier markets, and have begun to broaden its presence in surrounding county-level cities and rural areas. In our college education sector, we will further consolidate our internal resources, upgrade our existing product structure and customer acquisition channels, enhance competitiveness, and reshape our business lines. By focusing our core resources on the main business and products, we will be able to consolidate our resources, enhance operational efficiency and improve operational capabilities. We believe that a series of effective strategies in the online education market will ensure our Company's sustainable and healthy development into the future.

We have full confidence in the future development of our Group and in the industry in which we operate. We believe that our long-term investment focus in talent, innovation and technology today will not only enrich the learning experience of our students, bring a sense of accomplishment to our employees and provide high quality educational resources to society, it will also establish a solid foundation for our long-term growth and continued success tomorrow.

Finally, I would like to thank our management and employees for their continued commitment, dedicated effort, and contribution to our Group; our board of Directors for their guidance and support; and our Shareholders for your continued belief in us and our business.

YU Minhong

Chairman

Hong Kong

14 September 2020

4

CORPORATE INFORMATION

Board of Directors

Executive Directors

Mr. SUN Dongxu (孫東旭), Chief executive officer   (appointed on 16 August 2019)

Mr. YIN Qiang (尹強), Chief financial officer Mr. PAN Xin (潘欣)

  (resigned on 16 August 2019)

Nomination committee

Mr. YU Minhong, Committee chairman Mr. TONG Sui Bau

Mr. LIN Zheying (appointed on 20 January 2020) Mr. CHI Yufeng (resigned on 20 January 2020)

Company secretary

Mr. CHEUNG Kai Cheong Willie

Non-executive Directors

Mr. YU Minhong (俞敏洪), Chairman

Ms. SUN Chang (孫暢) (re-designed from executive

• Director to non-executive Director on 20 January 2020) Mr. WU Qiang (吳強)
  Ms. LEUNG Yu Hua Catherine (梁育華)

Independent non-executive Directors

Mr. TONG Sui Bau (董瑞豹)

Mr. KWONG Wai Sun Wilson (鄺偉信)

Mr. LIN Zheying (林哲莹) (appointed on 20 January 2020) Mr. CHI Yufeng (池宇峰) (resigned on 20 January 2020)

Board committees

Audit committee

Mr. TONG Sui Bau, Committee chairman

Mr. WU Qiang

Mr. KWONG Wai Sun Wilson

Remuneration committee

Mr. LIN Zheying, Committee chairman

• (appointed on 20 January 2020) Ms. SUN Chang
  Mr. TONG Sui Bau
  Mr. CHI Yufeng, Committee chairman
• (resigned on 20 January 2020)

Authorised representatives

Mr. YIN Qiang

Mr. CHEUNG Kai Cheong Willie

Auditor

Deloitte Touche Tohmatsu

Certified Public Accountants

Registered Public Interest Entity Auditors

Registered office

P.O. Box 2681

Cricket Square

Hutchins Drive

Grand Cayman

KY1-1111, Cayman Islands

Headquarters

Level 18, South Wing

2 Haidian East Third Road

Haidian District

Beijing, China

Principal place of business in Hong Kong

Level 40, Sunlight Tower

248 Queen's Road East

Wanchai, Hong Kong

KOOLEARN TECHNOLOGY HOLDING LIMITED ANNUAL REPORT 2020

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Corporate Information (Continued)

Legal advisers

As to Hong Kong Law and United States Law

Skadden, Arps, Slate, Meagher & Flom and affiliates

As to PRC Laws

Beijing Tian Yuan Law Firm

As to Cayman Islands Law

Conyers Dill & Pearman

Hong Kong share registrar

Computershare Hong Kong Investor Services Limited

Principal share registrar

Conyers Trust Company (Cayman) Limited

Principal bank

Bank of China (Hong Kong) Limited

Stock code

1797

Website

www.koolearn.hk

6

FINANCIAL HIGHLIGHTS

Financial performance highlights

			Year-on-year
	FY 2020	FY 2019	change
	RMB'000	RMB'000	(%)
Revenue	1,080,587	918,911	17.6
Loss for the year	(758,239)	(64,109)	1,082.7
Loss for the year attributable to:
- Owners of our Company	(742,005)	(39,773)	1,765.6
- Non-controlling interests	(16,234)	(24,336)	(33.3)
Loss per share
- Basic and diluted (RMB)	(0.79)	(0.06)	1,216.7
Non-IFRS measure: Adjusted loss for the year(1) (unaudited)	(658,022)	(289)	227,589.3
Non-IFRS measure: LBITDA(2) (unaudited)	(673,764)	(122,032)	452.1

Condensed consolidated statements of comprehensive income

				RMB'000
			FY 2019	FY 2018	FY 2017	FY 2016
		FY 2020
Revenue	1,080,587	918,911	650,457	446,215	334,205
Gross profit	493,086	506,409	397,926	303,612	225,130
Operating (loss)/profit	(881,185)	(188,414)	33,090	65,493	29,288
(Loss)/profit for the year	(758,239)	(64,109)	82,026	92,212	59,551
(Loss)/profit for the year attributable to owners
of our Company	(742,005)	(39,773)	91,375	93,960	59,551
Non-IFRS Measure: Adjusted
(loss)/profit for the year (unaudited)	(658,022)	(289)	73,584	92,736	30,545

Notes:

1. Adjusted loss for the year represents loss for the year less gain on fair value changes of financial assets at fair value through profit or loss ("FVTPL") plus net loss on disposal and deemed disposal of associates, listing expenses, other expenses and share-based compensation expenses for the FY. IFRS refers to the International Financial Reporting Standards ("IFRS").
2. Losses before interest, taxes, depreciation, and amortisation ("LBITDA") represents loss for the year plus income tax expenses (credit), listing expenses, other expenses, share-based compensation expenses, finance costs, impairment losses under expected credit loss model, net of reversal, depreciation of property and equipment and depreciation of right-of-use assets, less other income, gains and losses for the FY. The change of finance costs and depreciation of right-of-use assets, in the reconciliation and consequently, the change in the definition of our LBITDA, was due to our application of IFRS16 on 1 June 2019.

KOOLEARN TECHNOLOGY HOLDING LIMITED ANNUAL REPORT 2020

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Financial Highlights (Continued)

Condensed consolidated balance sheets

			RMB'000
	FY 2020	FY 2019	FY 2018	FY 2017	FY 2016
Assets:
Non-current assets	707,832	293,776	220,834	119,162	61,827
Current assets	2,341,412	2,974,817	1,199,736	1,028,844	880,654
Total assets	3,049,244	3,268,593	1,420,570	1,148,006	942,481
Equity and liabilities:
Equity attributable to owners of our Company	1,863,700	2,601,586	885,328	789,539	641,753
Non-controlling interests	-	(31,479)	(7,143)	2,206	-
Total equity	1,863,700	2,570,107	878,185	791,745	641,753
Non-current liabilities	273,868	16,530	11,049	5,192	5,323
Current liabilities	911,676	681,956	531,336	351,069	295,405
Total liabilities	1,185,544	698,486	542,385	356,261	300,728
Total equity and liabilities	3,049,244	3,268,593	1,420,570	1,148,006	942,481

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BUSINESS OVERVIEW AND OUTLOOK

Our business

We are a leading online provider of extracurricular education services in China with a comprehensive portfolio of well- recognised brands known for our high-quality courses and content, with core expertise in online after-school tutoring and test preparation. We strive to become a lifelong learning partner, empowering students to achieve their full potential. We provide our courses and products through different online platforms and mobile applications in multiple formats across three core segments, namely our college education, K-12 education and pre-school education segments.

The table below sets out, for the financial years indicated, the number of student enrolments in each type of our course offerings:

	FY 2020	FY 2019
	Student	Student
	enrolments	enrolments
	'000	'000
Students
College education	942	1,293
K-12 education	1,856	572
Pre-school education	54	314
Total	2,852	2,179

The table below sets out, for the financial years indicated, average spending per enrolment in each type of our course offerings:

		FY 2020	FY 2019
		Student	Student
		enrolments	enrolments
		'000	'000
Formal courses
College education	1,222	715
K-12 education	882	959
Pre-school education(1)	1	203
Sub-total average	1,015	646
Entry courses	38	21
Total average	401	434

Note:

1. There was product lines adjustment in pre-school education during the Reporting Period.

KOOLEARN TECHNOLOGY HOLDING LIMITED ANNUAL REPORT 2020

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Business Overview and Outlook (Continued)

Our performance overview

Overall financial performance

FY 2020 was an uncommon period for many industries in China and around the world. During the Reporting Period, we continued to invest in talents, educational resources and technological infrastructure which drives the number, scalability and quality of our products and services and has allowed our business to support a surge in the number of students trialing or using our course. The COVID-19 pandemic since the second half of FY2020 has resulted in changes in students' study plan and a decrease in the number of students participating in overseas test preparation courses due to the suspension of overseas examinations and exchange programs, while significantly increasing demand for online educational services. As the leading comprehensive online educational services provider, we always place top priority on the safety of our students and our social responsibility to the communities that we serve. In the face of this pandemic, we proactively offered free courses to a significant number of students to alleviate some of the impact caused by the suspension of offline schools and physical learning centres during the pandemic, particularly for students in Wuhan and other highly impacted cities. Whilst these initiatives cushioned the impact COVID-19 had on students and parents in China, it required us to increase our cost of revenue as we have had to further invest in underlying infrastructure and human resources to meet the surge in demand in time and students using our products and services.

During FY 2020, we followed our long-term growth strategy and made notable progress in all four business segments. Total net revenues increased by 17.6% from RMB918.9 million in FY 2019 to RMB1.1 billion in the Reporting Period. Despite revenue performance being affected in the second half of FY 2020 due to the outbreak of COVID-19, we implemented proactive measures such as providing free course offerings and services to a large number of students of all grades and all subjects across China, our total number of student enrolments increased significantly from 2.2 million in FY 2019 to 2.9 million in FY 2020.

In our college education segment, we optimised product lines and recorded RMB641.7 million in net revenue, representing a year-on-year growth of 1.6%. In the K-12 education segment, we significantly increased our investment in course content and technology, which successfully raised our brand awareness in this highly competitive market. As a direct result of our enhanced products and services, our net revenue and our student enrolments in the K-12 segment recorded a year-on-year growth of 85.4% and 224.5%, respectively. In our pre-school education segment, we changed our operational focus to the Donut English-learning APP and optimised our business structure, leading to an improvement in the gross profit margin from -0.9% in FY 2019 to 28.3% in FY 2020.

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Business Overview and Outlook (Continued)

College education

Our courses in the college segment consist of courses for college test preparation and overseas test preparation courses. Our courses are primarily used by college students and working professionals preparing for standardised tests or seeking to improve their English language proficiency. During the Reporting Period, we further improved the product structure and concentrated on higher-priced college test preparation and overseas test preparation businesses, which increased the average spending per enrolment in formal courses from RMB715 for FY 2019 to RMB1,222 over the Reporting Period. There was a significant decrease in the number of students in English language learning courses due to the optimization of product lines and delay or suspension of college and oversea exams due to the COVID-19 pandemic in the second half of FY2020. As a result, our student enrolments in the college segment recorded 0.9 million in the Reporting Period, compared to 1.3 million over the previous financial year.

K-12 education

Our comprehensive K-12 course offerings, including primarily Koolearn K-12 courses and location-based live interactive after-school tutoring courses ("DFUB"), provide after-school tutoring courses that cover the majority of standard school subjects from primary to high school in China. We also offer preparation courses designed for standardised high school and national college entrance exams. Our courses are carefully designed for K-12 students taking standard education courses in primary and high school in China.

During the Reporting Period, we made substantial progress in our K-12 expansion plan. The plan focused on three key aspects, namely: (i) upgrading our technological infrastructure; (ii) improving our online products and content; and

1. recruiting and training teaching personnel. The successful implementation of these new initiatives have helped us achieve impressive operational results in our K-12 segment. The total student enrolments for K-12 segment recorded year-on-year growth of 224.5%. More specifically, our student enrolments for Koolearn K-12 courses recorded year-on- year growth of 269.4%, while our student enrolments for DFUB courses grew year-on-year by 184.2%. Additionally, our growth in the K-12 education segment during the Reporting Period was attributed to the wider exposure of our K-12 course offerings to students across China. Due to the COVID-19 pandemic, we announced a donation of free spring semester courses to alleviate the impact caused by the suspension of offline schools and physical learning. Whilst the pandemic was, and continues to be, an unfortunate and devastating situation in China and around the world, our free courses have introduced a large number of new students to our brand and enabled them to experience our K-12 large classes. We also accelerated the expansion of our DFUB business during the Reporting Period and continued to optimise the operations of DFUB courses in each city. As at 31 May 2020, DFUB had entered into 172 cities across 24 provinces in China.

KOOLEARN TECHNOLOGY HOLDING LIMITED ANNUAL REPORT 2020

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Business Overview and Outlook (Continued)

Pre-school education

Our pre-school education segment offers inspiring and interactive English learning and other pre-school education courses designed specifically for children between the ages of three and ten. Our child-friendly online educational content is delivered through our Donut English-learning APP. During the Reporting Period, we adjusted the product line in our Donut live online English classroom courses and focused on the integration and optimisation of Donut APP, which resulted in a decrease in student enrolments during the Reporting Period.

Strategic update and future development

Despite COVID-19, FY 2020 has provided us with a unique opportunity to introduce our course offerings and services to a greater number of students in a number of new cities (including third-tier and fourth-tier cities) and allowed us to accelerate the development and introduction of new products to our students or existing products in new regions and new customers.

In line with our vision of being a lifelong learning partner to our students, going forward, we aspire to broaden our geographical presence across China and bring valuable and affordable online educational products and services to more Chinese families. We will remain committed to hiring, training and retaining top talented teaching, course research, marketing, technology professionals, which is the key to our core competitiveness. We will also continue to make strategic investments in developing an innovative and efficient central backing platform to support the growth of our front-end business expansion. We have newly developed and implemented a number of new technologies to drive the enhancement of our students' learning experience, including the Electronic Cloud Classroom Platform (ECCP) system in FY 2020, which has already become a fundamental part of our operations and supported millions of K-12 students' learning during the COVID-19 period.

Furthermore, we will take a number of actions to enhance operational efficiency by continuously refining standard operating procedures and upgrading management systems. We have restructured some of our business lines and trimmed down the scope of these business lines such that we are able to focus on key product offerings and business sub-segments. For example, during FY2020, we adjusted our college business segment, following which, we now focus on domestic test preparation and overseas test preparation business lines. We continually optimized our smart grading and correcting system in our TOEFL & IELTS courses, while enhanced investment in internet products, including launching Koolearn TOEFL Pro APP with Educational Testing Service (ETS) officially authorized content. We will continue to strengthen our collaboration with overseas English test providers, such as Cambridge Assessment English. As for our pre-school business segment, we focused more on optimising our Donut English APP in FY 2020, and in particular, in increasing the quality, engagement and scope of the educational content offered on this APP in FY2020. We believe that as we concentrate our core resources around main businesses and product lines, we are able to create and maintain a healthy business operating environment.

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Business Overview and Outlook (Continued)

Looking forward, our K-12 education business segment will remain our strategic focus and long-term growth driver. Owing to our early expansion into lower-tier cities through Dongfang Youbo, we currently enjoy a significant first- mover advantage and stand to benefit from the increasing demand in lower-tier cities alongside their rising levels of consumer consumption and standards of living. While DFUB is expected to expand its footprint even deeper into county-level cities, we plan to further strengthen and broaden our customer base in existing local cities. For our Koolearn K-12 courses, we plan to focus on upgrading our APP and online platforms. Through introducing new education technologies and adding more new interactive features to online classes, we will be able to offer the best-in-class learning experience. We have also continued our plan to establish teaching training centers in other geographical locations to attract more qualified teachers and tutors and provide systematic training programs. We will increase our investment in diversified high return-on-investment (ROI) marketing channels and evaluate their unit economics in real time, which will in return keep our average user acquisition cost at a relatively low level. As a result of our improvements to operational teams, marketing capabilities, as well as positive word-of-mouth promotion and brand loyalty, we will continue to acquire new users, while enhancing the retention and conversion rates of our students.

KOOLEARN TECHNOLOGY HOLDING LIMITED ANNUAL REPORT 2020

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MANAGEMENT DISCUSSION AND ANALYSIS

Revenue

Our revenue increased by 17.6% from RMB918.9 million in FY 2019 to RMB1.1 billion in FY 2020.

College education

Revenue from our college education segment increased by 1.6% from RMB631.4 million in FY 2019 to RMB641.7 million in FY 2020, driven primarily by an increase in revenue from college test preparation and revenue from overseas test preparation, which increased by 23.7% and 1.6% year- on-year, respectively. During the Reporting Period, we restructured our college education business lines with greater focus on our college test preparation and overseas test preparation product lines. In particular, we adjusted our English-language learning product line and reorganized certain English-language learning products with relatively high demand into our college test product line. If we excluded the impact of our product line restructuring, revenue from college test preparation courses would have recorded a 9.0% increase during the Reporting Period. Our courses for graduate school entrance exams, which typically accounts for more than half of the revenue recorded under the college test preparation business line, grew by 9.8% from the previous year. Due to the adjustment and upgrade of certain products during FY 2020 as well as the impact from delays or cancelations of certain college and overseas exams since the second half of FY 2020, student enrolment in the college education segment decreased from 1.3 million in FY 2019 to 0.9 million in FY 2020.

K-12 education

Revenue from our K-12 education segment increased by 85.4% from RMB159.2 million in FY 2019 to RMB295.1 million in FY 2020, primarily due to the expansion of DFUB courses and the strengthening of customer acquisition in our Koolearn K-12 courses. In FY 2020, while we continued to enhance course products and services, we also diversified sales and marketing channels in order to promote our Koolearn K-12 business. As DFUB courses continued to evolve and expand into more geographical cities and areas, we simultaneously launched offline promotional campaigns in cities where users were aware of our brand to further improve user awareness and retention. Student enrolments in the K-12 segment increased from 572 thousand in FY 2019 to 1,856 thousand in FY 2020.

Pre-school education

Revenue from our pre-school education segment decreased by 10.1% from RMB33.4 million in FY 2019 to RMB30.0 million in FY 2020, primarily due to the optimization and upgrade of our Donut English-learning app, where average spending per enrolment in formal courses increased from RMB105 in FY 2019 to RMB161 in FY 2020, and the termination of live English courses for Donut online classroom. These adjustments led to a decrease in both revenue and student enrolments in this segment.

Institutional customers

Revenue from our institutional customers increased by 19.8% from RMB94.9 million in FY 2019 to RMB113.7 million in FY 2020.

Cost of revenue, gross profit/loss and gross margin

Our total cost of revenue increased by 42.4% from RMB412.5 million in FY 2019 to RMB587.5 million in FY 2020, primarily due to an increase in teaching staff costs and course research staff costs, in particular in the K-12 education segment, which grew by 23% and 147.3% over FY 2019, respectively, as we devoted significant resources to enhance the quality of our courses and services.

14

Management Discussion and Analysis (Continued)

Our gross profit decreased by 2.6% from RMB506.4 million in FY 2019 to RMB493.1 million in FY 2020. Our gross profit margin decreased from 55.1% in FY 2019 to 45.6% in FY 2020, primarily due to the expansion in K-12 segment, and our donation of free courses during the COVID-19 pandemic in the second half of FY 2020.

College education

Cost of revenue for our college education segment decreased by 5.0% from RMB216.9 million in FY 2019 to RMB206.0 million in FY 2020, primarily due to a decrease in teaching materials costs.

Segment gross profit for our college education business increased by 5.1% from RMB414.5 million in FY 2019 to RMB435.7 million in FY 2020, and the segment profit margin increased from 65.6% in FY 2019 to 67.9% in FY 2020.

K-12 education

Cost of revenue for our K-12 education segment increased by 137.2% from RMB143.4 million in FY 2019 to RMB340.0 million in FY 2020, primarily due to an enhancement of our offerings for Koolearn K-12 courses and the expansion of DFUB to more regions required significant upfront investment to attract qualified teachers and design high-quality courses.

The segment gross loss for our K-12 education segment was RMB44.9 million in FY 2020, compared to a segment gross profit of RMB15.9 million in FY 2019, and the segment loss margin was 15.2% in FY 2020, compared to segment profit margin of 10.0% in FY 2019. This was primarily due to the offering of free spring semester courses to a significant number of students during the COVID-19 pandemic, the increase in teaching staff costs and course research staff costs, as we updated our Koolearn K-12 course offerings and committed more resources to course content and services, as well as an increase in IT support and technology costs given that all of our Koolearn K-12 courses and DFUB courses are delivered live.

Pre-school education

Cost of revenue for our pre-school education segment decreased by 36.1% from RMB33.7 million in FY 2019 to RMB21.5 million in FY 2020, primarily due to the adjustment of small class live- English learning courses by Donut online classroom which led to a decrease in course research staff costs and teaching materials costs, as we wound-down our live English learning courses and strengthened the development of our Donut English learning APP in this segment.

KOOLEARN TECHNOLOGY HOLDING LIMITED ANNUAL REPORT 2020

15

Management Discussion and Analysis (Continued)

Segment gross profit for our pre-school education business increased by 2,921.6% from a segment gross loss of RMB0.3 million in FY 2019 to a segment gross profit of RMB8.5 million in FY 2020, and the gross profit margin increased from a segment loss margin of 0.9% in FY 2019 to a segment profit margin of 28.3% in FY 2020, primarily due to a segment margin improvement in our Donut English learning APP and an adjustment in our Donut online classroom courses.

Institutional customers

Cost of revenue for services to institutional customers increased by 7.9% from RMB18.5 million in FY 2019 to RMB20.0 million in FY 2020.

Segment gross profit for our services to institutional customers increased by 22.7% to RMB93.7 million in FY 2020 from RMB76.4 million in FY 2019, and the gross profit margin increased from 80.5% in FY 2019 to 82.4% in FY 2020.

Other income, gains and losses

Our other income, gains and losses increased by 37.1% from RMB142.7 million in FY 2019, to RMB195.7 million in FY 2020, primarily due to RMB48.9 million of interest income from term deposits.

Selling and marketing expenses

Our selling and marketing expenses increased by 96.5% from RMB443.9 million in FY 2019 to RMB872.3 million in FY 2020, primarily due to a substantial increase in marketing expenses and staff costs, in particular expenses relating to online media promotion, as we continued to invest in the promotion of our course offerings, especially our free course offerings, in our college and K-12 segments during COVID-19. The marketing expenses in the college segment increased as we diversified our marketing channels to strengthen our leading position in this market. In the K-12 segment, marketing expenses increased primarily due to our new initiatives to gain wider market recognition and to reach our target students more precisely through diversified marketing campaigns.

Research and development expenses

Our research and development expenses increased by 115.1% from RMB147.5 million in FY 2019 to RMB317.3 million in FY 2020, primarily due to an increase in staff costs as our business strategies required more qualified research and development and technological staff and engineers to support our expansion.

Administrative expenses

Our administrative expenses increased by 78.7% from RMB103.4 million in FY 2019 to RMB184.7 million in FY 2020, primarily due to an increase in staff costs and share-based compensation expenses as our business strategies required more qualified administrative staff.

Share of results of associates

Our share of profit of associates decreased by 157.7% from RMB3.1 million in FY 2019 to a loss of RMB1.8 million in FY 2020, primarily due to an increase in losses from our share of the results of Huoerguosi Oriental New Venture Equity Investment Partnership (L.P.).

Income tax (expense) credit

From FY 2019 to FY 2020, our income tax expenses increased by 493.6% from a credit of RMB10.9 million to an expense of RMB42.8 million, primarily due to the reversal of the deferred tax assets recognised in prior periods.

Loss for the year

As a result of the foregoing, our loss for the year increased by 1,082.7% from RMB64.1 million in FY 2019 to RMB758.2 million in FY 2020.

16

Management Discussion and Analysis (Continued)

Non-IFRS measures

To supplement our financial information presented in accordance with IFRS, we also use adjusted loss for the year and LBITDA as non-IFRS measures, which are not required by, or presented in accordance with IFRS. We believe that these non-IFRS measures facilitate comparison of operating performance from period to period by eliminating potential impacts of items that our management do not consider to be indicative of our operating performance. We also believe these measures provide useful information to investors and others in understanding and evaluating our consolidated statements of profit or loss in the same manner as they have assisted our management. Please note, however, our presentation of LBITDA may not be comparable to similarly titled measures presented by other companies. The use of these non-IFRS measures have limitations as an analytical tool, and you should not consider it in isolation from, or as substitute for analysis of, our consolidated statements of profit or loss or financial condition as reported under IFRS.

We define adjusted loss for the year as loss for the year less gain on fair value changes of financial assets at FVTPL plus net loss on disposal and deemed disposal of associates, listing expenses, other expenses and share-based compensation expenses for the FY. We define LBITDA as loss for the year plus income tax expenses (credit), listing expenses, other expenses, share-based compensation expenses, finance costs, impairment losses under expected credit loss model, net of reversal, depreciation of property and equipment and depreciation of right-of-use assets less other income, gains and losses for the FY.

The following table reconciles our loss for the year to adjusted loss:
			FY 2019
		FY 2020
		RMB'000	RMB'000
		(unaudited)	(unaudited)
Reconciliation of net loss to adjusted loss:
Loss for the year	(758,239)	(64,109)
Less:
Gain on fair value changes of financial assets at FVTPL - non-current assets	36,473(1)	21,926
Add:
Net loss on disposal and deemed disposal of associates	213	-
Listing expenses	-	31,525
Other expenses	15,981	-
Share-based compensation expenses	120,496	54,221
Adjusted loss for the year	(658,022)	(289)

Note:

1. During the Reporting Period, gain on fair value changes of financial assets at FVTPL includes interest income from wealth management products, which is excluded for calculation of adjusted loss.

KOOLEARN TECHNOLOGY HOLDING LIMITED ANNUAL REPORT 2020

17

Management Discussion and Analysis (Continued)

The following table reconciles our loss for the year to LBITDA:
		FY 2019
	FY 2020
	RMB'000	RMB'000
	(unaudited)	(unaudited)
Reconciliation of loss for the year to LBITDA
Loss for the year	(758,239)	(64,109)
Add:
Income tax expense (credit)	42,788	(10,871)
Listing expenses	-	31,525
Other expenses	15,981	-
Share-based compensation expenses	120,496	54,221
Finance costs	10,576	-
Impairment losses under expected credit loss model, net of reversal	1,566	880
Depreciation of property and equipment	15,384	9,050
Depreciation of right-of-use assets	73,337	-
Less:
Other income, gains and losses	195,653	142,728
LBITDA	(673,764)	(122,032)

Liquidity and capital resources

During the Reporting Period, we met our cash requirements primarily from cash and cash equivalents and proceeds from the issuance of shares. We had cash and cash equivalents of RMB480.3 million as at 31 May 2020 compared to RMB716.5 million as at 30 November 2019 and RMB2.5 billion as at 31 May 2019. We had term deposits of RMB1.5 billion as at 31 May 2020, compared to RMB1.8 billion as at 30 November 2019; we did not have any term deposits as at 31 May 2019. Cash and cash equivalents were represented by bank balances and cash; and bank balances and cash comprised of cash and short-term deposits with an original maturity of three months or less.

During the Reporting Period, we primarily used cash to fund required working capital and other recurring expenses to support the expansion of our operations. Going forward, we believe that our liquidity requirements will be satisfied by using funds from a combination of internally generated cash and net proceeds from the Global Offering.

As at the end of FY 2020, our Group's gearing ratio was 38.9% (compared with 21.4% as at the end of FY 2019), calculated as the total liabilities divided by total assets.

18

Management Discussion and Analysis (Continued)

Cash flow

The following table sets forth our cash flows for the FY indicated:

	FY 2020	FY 2019
	RMB'000	RMB'000
Net cash used in operating activities	(521,434)	(24,711)
Net cash (used in) generated from investing activities	(1,433,379)	15,880
Net cash (used in) generated from financing activities	(135,486)	1,702,448
Net (decrease) increase in cash and cash equivalents	(2,090,299)	1,693,617
Cash and cash equivalents at the beginning of the FY	2,497,621	709,448
Effect of exchange rate changes	72,929	94,556
Cash and cash equivalents at the end of the FY	480,251	2,497,621

Net cash used in operating activities

Net cash used in operating activities primarily consists of our loss before tax for the FY adjusted by non-cash items and changes in working capital.

Our net cash used in operating activities in FY 2020 was RMB521.4 million. The difference between cash used in operating activities before tax and interest of RMB537.7 million and the loss before tax of RMB715.5 million was mainly due to: (i) the inclusion of non-cash expenses items, primarily including share-based compensation expenses of RMB120.5 million; (ii) a RMB136.2 million increase in cash as a result of movements in working capital, which in turn mainly consisted of a RMB19.2 million increase in contract liabilities and a RMB117.3 million increase in accrued expenses and other payables; and (iii) the exclusion of the effect of the net foreign exchange gain of RMB73.2 million and gain on fair value changes of financial assets at FVTPL of RMB45.7 million. The increase in contract liabilities was primarily attributable to the growth of our customer base and our increased sales. The increase in accrued expenses and other payables was primarily due to the increase in teachers' commission fees and course fees and the number of our teachers.

Net cash used in investing activities

Our net cash used in investing activities in FY 2020 was approximately RMB1.4 billion, primarily attributable to the placement of term deposits of RMB1.8 billion and purchase of property and equipment of RMB79.8 million, which was partially offset by cash generated from net disposal of financial assets at FVTPL of RMB84.4 million and withdrawal of term deposits of RMB331.1 million.

Net cash used in financing activities

Our net cash used in financing activities in FY 2020 was approximately RMB135.5 million primarily attributable to acquisition of non-controlling interest of Dongfang Youbo, which is one of our subsidiaries.

KOOLEARN TECHNOLOGY HOLDING LIMITED ANNUAL REPORT 2020

19

Management Discussion and Analysis (Continued)

Capital expenditure

The following table sets forth our capital expenditure for the FY indicated:

	FY 2020	FY 2019
	RMB'000	RMB'000
Purchase of property and equipment	79,843	20,830

Our capital expenditures were primarily for purchases of property and equipment in FY 2019 and FY 2020, respectively. Our purchases of property and equipment were RMB20.8 million and RMB79.8 million for FY 2019 and FY 2020, respectively.

Off-balance sheet commitments and arrangements

As at 31 May 2020, we had not entered into any off-balance sheet transactions.

Future plans for material investments and capital assets

As at 31 May 2020, we did not have any other foreseeable plans for material investments and capital assets.

Material acquisitions and/or disposals of subsidiaries and affiliated companies

Reference is made to our announcements of 16 August 2019 and 2 September 2019 (collectively, the "Dongfang Youbo Announcements"), in relation to our acquisition of the remaining 49% interest in Dongfang Youbo, following which Dongfang Youbo changed from a non-wholly owned subsidiary to our wholly-owned subsidiary. Save as disclosed above, during the Reporting Period, we did not have any other material acquisitions and/or disposals of subsidiaries and affiliated companies.

Employees and remuneration policy

As at 31 May 2020, we had 7,094 full-time employees and 6,683 part-time employees, among which we had 3,075 full-time and 6,319 part-time teaching, content development and content production staff; 2,853 full-time and 279 part-time selling and marketing staff; 943 full-time and 13 part-time research, development and technology staff; and 223 full-time and 72 part-time general and administrative staff. All of our employees were based in China, in our headquarters in Beijing and in various other cities across China.

Our success depends on our ability to attract, retain and motivate qualified personnel. As part of our retention strategy, we offer employees competitive salaries, performance-based bonuses and other incentives. As at

31 May 2020, 560 employees held share-based awards. The total remuneration expenses, including share-based compensation expense, for FY 2020 were RMB1.1 billion, representing a year-on-year increase of 157.8% from RMB413.3 million in FY 2019.

20

Management Discussion and Analysis (Continued)

Foreign exchange risk

Foreign exchange risk arises when commercial transactions or recognized assets and liabilities are denominated in a currency that is not the functional currency of our operating entities. We operate in the PRC with most of the transactions settled in RMB. During the Reporting Period, we held assets and liabilities that were denominated in United States dollars and Hong Kong dollars. We continuously monitor changes in currency exchange rates and will take necessary measures to mitigate exchange rate impact.

Indebtedness

During the Reporting Period, we did not incur any bank loan or other borrowing. Our Directors consider that we have adequate cash and capital resources considering our bank balances and cash, term deposits and our financial assets at FVTPL-wealth management products generated from our operating activities and the net proceeds from the Global Offering to fund our operations and expansion, therefore, we do not plan to incur any borrowing in the 12 months from the date of this report.

Pledge of assets

As at 31 May 2020, none of our Group's assets were pledged.

Contingent liabilities

As at 31 May 2020, we did not have any material contingent liabilities.

KOOLEARN TECHNOLOGY HOLDING LIMITED ANNUAL REPORT 2020

21

DIRECTORS AND SENIOR MANAGEMENT

Directors

As at the date of this annual report, our Board consists of nine members, comprising two executive Directors, four non-executive Directors and three independent non-executive Directors, namely:

			Initial date of
Name	Age	Position	appointment
SUN Dongxu (孫東旭)	34	Executive Director, Chief executive officer	16 August 2019
YIN Qiang (尹強)	46	Executive Director, Chief financial officer	23 May 2018
YU Minhong (俞敏洪)	57	Non-executive Director, Chairman	23 May 2018
SUN Chang (孫暢)	52	Non-executive Director	7 February 2018
WU Qiang (吳強)	47	Non-executive Director	23 May 2018
LEUNG Yu Hua Catherine (梁育華)	37	Non-executive Director	13 July 2018
TONG Sui Bau (董瑞豹)	49	Independent non-executive Director	15 March 2019
KWONG Wai Sun Wilson (鄺偉信)	54	Independent non-executive Director	15 March 2019
LIN Zheying (林哲莹)(1)	55	Independent non-executive Director	20 January 2020

Note:

1. Mr. Lin was appointed a Director on 20 January 2020 to replace Mr. CHI Yufeng, who resigned as a director on the same date (see our announcement of 30 January 2020),

The biographies of each of our current Directors are set out below:

Executive Directors

SUN Dongxu (孫東旭) ("Mr. Sun")

Mr. Sun, aged 34, is an executive Director and our Company's chief executive officer. Within our Group, Mr. Sun is a director of: Beijing Xuncheng since September 2019 (he is also Beijing Xuncheng's chief executive officer), also Dexin Dongfang's CEO since November 2019, Dexin Dongfang since August 2019, Xuncheng HK since November 2019, Kuxue Huisi also CEO since November 2019, and Xi'an Ruiying Huishi Network Technology Co., Ltd. (西安睿盈慧師網 絡科技有限公司) ("Xi'an Ruiying") since April 2020. Mr. Sun began his career with the New Oriental group (which, at the time, included our Group) as a teacher in the foreign exams department of Tianjin New Oriental School from June 2007 to June 2008. Between June 2008 and April 2016, Mr. Sun worked at Hefei New Oriental School, beginning as the assistant supervisor of the foreign examination department, from June 2008 to June 2009, and moving through various positions within the school to ultimately acting as the assistant principal, from March 2012 to October 2013, and principal, from October 2013 to April 2016. Aside from our Group, Mr. Sun has been the vice-president of New Oriental China since April 2019, and was previously the assistant vice-president of New Oriental China from April 2016 to April 2019. Mr. Sun received his bachelor's degree in engineering, majoring in computer science and technology, from Nankai University (南開大學), China, in June 2007.

22

Directors and Senior Management (Continued)

YIN Qiang (尹強) ("Mr. Yin")

Mr. Yin, aged 46, is an executive Director and our Company's chief financial officer. He is also a director and chief financial officer of Beijing Xuncheng, since January 2016, director of Zhuhai Chongsheng Heli Network Technology Co., Ltd. (珠海崇勝合力網絡科技有限公司) and Xi'an Ruiying, since July 2019 and April 2020, respectively. Mr. Yin received his bachelor's degree in economics from Capital University of Economics and Business (首都經濟貿易大學), China, in July 1996 and his master's degree in business management at Peking University, China, in July 2008. Mr. Yin is also a PRC accredited accountant (since October 2001). Aside from our Group, Mr. Yin has been the vice-president of New Oriental China since April 2019. Mr. Yin was the financial controller and assistant vice-president of New Oriental China from June 2005 to May 2016, and a senior accountant at PricewaterhouseCoopers from 1996 to 2001.

Non-executive Directors

YU Minhong (俞敏洪) ("Mr. Yu")

Mr. Yu, aged 57, is a non-executive Director, chairman of the Nomination Committee and Chairman of our Board. Mr. Yu is also the chairman and a director of Beijing Xuncheng, since May 2015, and certain companies under the Retained New Oriental Group, including Leci Internet Technology (Beijing) Company Limited ("Leci Internet"). Mr. Yu received his bachelor's degree in English from Peking University, China in July 1985. Mr. Yu is the founder and currently the executive chairman of the board of directors of New Oriental, since 2001, and was a director of Sunlands Technology Group, a company whose American depository shares are listed on the New York Stock Exchange under the symbol "STG", from August 2017 (and an independent director from March 2018) to June 2019. Mr. Yu is the chairman and director of New Oriental, our Controlling Shareholder and a company whose American depository shares are listed on the New York Stock Exchange under the symbol "EDU", since 2001.

SUN Chang (孫暢) ("Ms. Sun")

Ms. Sun, aged 52, is a non-executive Director and a member of the Remuneration Committee. She was our Company's co-chief executive officer until 19 January 2020. Ms. Sun is a director of Beijing Xuncheng (since May 2015) and Beijing Dexin (since March 2018). Ms. Sun received her bachelor's degree in pre-school education from Beijing Normal University (北京師範大學), China, in July 1990 and her master's degree in business administration from Renmin University of China (中國人民大學), China, in July 1999. Aside from our Group, Ms. Sun was the assistant vice-president, from 2012 to 2016, and the vice-president of New Oriental China between 2016 and 2020. Ms. Sun was the general manager of the investment division at China Netcom Group Corporation Limited (now China United Network Communications Group Co., Ltd. (中國聯合網絡通訊集團有限公司), or China Unicom (中國聯 通)) from 2000 to 2004, and the marketing manager at Microsoft (China) Co., Ltd. (微軟（中國）有限公司) from 1997 to 2000.

WU Qiang (吳強) ("Mr. Wu")

Mr. Wu, aged 47, is a non-executive Director and member of the Audit Committee. Mr. Wu is also a director of Leci Internet, since November 2015. Mr. Wu received his master's degree in engineering from the Institute of Automation at the Chinese Academy of Sciences (中國科學自動化研究所), China, in July 1997. Aside from our Group, Mr. Wu was the vice-president of New Oriental China from 2016 to April 2019, and is currently its senior vice-president, since April 2019. He was the principal of Beijing New Oriental School (北京新東方學校) from July 2014 to April 2018. Prior to this, Mr. Wu was the vice-principal of Beijing New Oriental School from 2013 to 2014, director of research and development at New Oriental China from 2005 to 2007, vice-principal of other New Oriental schools in Qingdao and Chengdu from 2008 to 2012, and a president of Beijing Mingri Dongfang Technology Co., Ltd. (北京明日東方科技有限公司) from 2000 to 2005.

KOOLEARN TECHNOLOGY HOLDING LIMITED ANNUAL REPORT 2020

23

Directors and Senior Management (Continued)

LEUNG Yu Hua Catherine (梁育華) ("Ms. Leung")

Ms. Leung, aged 37, is a non-executive Director. She has also been a director of Beijing Xuncheng, since January 2019. Ms. Leung received her bachelor of science in economics (concentration in finance) from the Wharton School of the University of Pennsylvania, the United States, in June 2004. Aside from our Group, Ms. Leung has been the vice-general manager of the strategy development department at Sixjoy Hong Kong Limited since December 2013, a subsidiary of Tencent Holdings Limited, and previously served as a senior research analyst at Arete Research Services L.L.P. from November 2012 to June 2013, and was an executive director in the investment research division at Goldman Sachs (Asia) L.L.C. from August 2010 to November 2012.

Independent Non-executive Directors

TONG Sui Bau (董瑞豹) ("Mr. Tong")

Mr. Tong, aged 49, is an independent non-executive Director, chairman of the Audit Committee and member of the Remuneration Committee and Nomination Committee. Mr. Tong received his bachelor's degree in accounting with an additional concentration in computer science from the University of Wisconsin, Madison, U.S., in May 1993. Mr. Tong was previously a member of the American Institute of Certified Professional Accountants (AICPA), from 1995 to 2009, and Chartered Financial Analyst, from 1999 to 2009. Mr. Tong has been a non-executive director of NetEase Inc. since 2009, a company whose American depository shares are listed on the Nasdaq under the symbol "NTES" and whose shares are listed on the Stock Exchange (Stock Code: 9999). He was previously an executive director and co-chief operating officer of NetEase Inc., from 2003 to 2009, and from 2004 to 2009, respectively.

KWONG Wai Sun Wilson (鄺偉信) ("Mr. Kwong")

Mr. Kwong, aged 54, is an independent non-executive Director and member of the Audit Committee. Mr. Kwong is an associate member of the Institute of Chartered Accountants in England and Wales. Mr. Kwong received his bachelor of arts degree from the University of Cambridge, United Kingdom, in June 1987. Mr. Kwong is an executive director of China Metal Recourses Utilisation Limited, since August 2013, a company listed on the Stock Exchange (stock code: 1636). Mr. Kwong also acts as an independent non-executive director of Shunfeng International Clean Energy Limited, since July 2014, a company listed on the Stock Exchange (Stock Code: 1165), C.banner International Holdings Limited, since August 2011, a company listed on the Stock Exchange (Stock Code: 1028), China Outfitters Holdings Limited, since June 2011, a company listed on the Stock Exchange (Stock Code: 1146), and China New Higher Education Group Limited, since March 2017, a company listed on the Stock Exchange, (Stock Code: 2001). Mr. Kwong was the president of Gushan Environmental Energy Limited, a company listed on the NYSE under the symbol "GU" (from December 2007 to October 2012). Prior to this, he was a managing director in the investment banking division and the head of Hong Kong and China equity capital markets at CLSA Equity Capital Markets Limited from March 2004 to July 2006, and a director and the general manager of the corporate finance division of Cazenove Asia Limited, from 2002 to 2003, and from 1997 to 2003, respectively.

LIN Zheying (林哲莹) ("Mr. Lin")

Mr. Lin, aged 55, is an independent non-executive Director, chairman of the Remuneration Committee and member of the Nomination Committee, with effect from 20 January 2020. Prior to this appointment, Mr. Lin did not hold any positions within our Group. Mr. Lin received his bachelor's degree majoring in planning statistics from the Shanxi College of Finance and Economics (currently known as the Shanxi University of Finance and Economics),

24

Directors and Senior Management (Continued)

China, in July 1987, a master's degree in business administration from the Guanghua School of Management, Peking University in China, in July 2006, and a doctoral degree in business administration from ESC Rennes School of Business, France, in June 2008. Aside from our Group, Mr. Lin served as a director of Shenzhen Fengchao Technology Limited, from November 2016 to December 2017; and has been serving as a vice-chairperson of S.F. Holdings (Group) Co. Ltd., since June 2014, and an executive director of Ancient Jade Capital Management Co., Ltd., since January 2011. Aside from our Company, Mr. Lin also holds, or have held within the past three years, directorships in the following listed companies: (i) executive director and vice-chairperson of S.F. Holding Co., Ltd., a company listed on the Shenzhen stock exchange (Stock Code: 002352), since March 2017; and (ii) independent non- executive director of Shanghai Dongzheng Automotive Finance Co., Ltd., a company listed on the Hong Kong Stock Exchange (Stock Code: 2718), from August 2018 until June 2020.

Both Mr. Tong and Mr. Kwong have appropriate professional accounting or related financial management experience for the purpose of Rule 3.10(2) of the Listing Rules.

We have received from each independent non-executive Director an annual confirmation of his independence pursuant to Rule 3.13 of the Listing Rules, and our Board considers each of them independent.

Save as disclosed in this annual report and in our annual results announcement of 16 August 2020, (a) none of our Directors has: (i) held any other directorship on another public company in Hong Kong or overseas in the last three years preceding the date of this report; (ii) has any other professional qualifications; or (iii) any other relationship with any other Director, senior manager or substantial shareholder (as defined in the Listing Rules) of our Company; and

1. no other matters have occurred during FY 2020 that need to be disclosed pursuant to Rule 13.51B(1) of the Listing Rules or that need to be brought to the attention of our Shareholders or the Stock Exchange.

Senior management

Mr. Sun is our Company's chief executive officer and Mr. Yin is our Company's chief financial officer. Mr. Sun and Mr. Yin are also our executive Directors. See "- Executive Director" above for their biographies.

Company secretary

CHEUNG Kai Cheong Willie (張啟昌) ("Mr. Cheung")

Mr. Cheung is a manager of SWCS Corporate Services Group (Hong Kong) Limited, a provider of a wide range of corporate services, and the company secretary of our Company. Mr. Cheung has been a member of the Hong Kong Institute of Certified Public Accountants since January 2009, and a fellow member of the Association of Chartered Certified Accountants since October 2008. Mr. Cheung received his bachelor's degree in arts (with honours), majoring in accounting and finance from University of Glamorgan, the United Kingdom, in June 1996.

Save as disclosed above, there have been no further matters during FY 2020 that need to be disclosed pursuant to Rule 13.51B(1) of the Listing Rules.

KOOLEARN TECHNOLOGY HOLDING LIMITED ANNUAL REPORT 2020

25

DIRECTORS' REPORT

Our Board is pleased to present this Directors' report together with our Group's consolidated financial statements for FY 2020.

Our company and our principal activities

Our Company is an investment holding company. We were incorporated as an exempted company with limited liability under the laws of the Cayman Islands on 7 February 2018, and our Shares were listed on the Main Board of the Stock Exchange on 28 March 2019.

Our Group is an online provider of extracurricular education services in China with core expertise in online after-school tutoring and test preparation. Our education products include website and mobile applications for our three core segments: college, K-12 and pre-school. We offer our courses mainly through our four platforms: Koolearn, DFUB, Donut and Koo.

	Koolearn	DFUB	Donut	Koo
College education
Chinese college test preparation	✓
Overseas test preparation	✓
English learning and others	✓			✓
K-12 education	✓	✓
Pre-school education	✓		✓

Our subsidiaries are set out in Note 40 to the consolidated financial statements.

Business review

A fair review of our Group's business (as required by Schedule 5 to the Companies Ordinance, Chapter 622 of the Laws of Hong Kong), including an analysis of our Group's financial performance, an indication of our Group's likely future business developments, a description of the principal risks and uncertainties facing our Group and our Group's key relationships with our stakeholders who have a significant impact on our Group and on which our Group's success depends, is set out in "Chairman's statement", "Business overview and outlook", and "Management discussion and analysis." These discussions form part of this annual report. Events affecting our Company that have occurred between the end of FY 2020 and date of this annual report are set out in "Events after the Reporting Period."

Financial results and summary

Our Group's results for FY 2020 are set out in the "Consolidated statement of profit or loss and other comprehensive income" at pages 105.

A summary of our Group's condensed consolidated results and financial positions is set out at pages 106 to 107.

26

Directors' Report (Continued)

Our major customers and suppliers

During FY 2020: (a) our Group's five largest customers accounted for approximately 2.45% of our total revenues, while the largest customer accounted for approximately 0.75% of our total revenues; and (b) our Group's top five suppliers accounted for approximately 17.01% of our total purchase amounts, while the largest supplier accounted for approximately 4.77% of our total purchase amounts.

None of our Directors, and, to the best of our Directors' knowledge, none of their respective associates, or any Shareholder who, to the best of our Directors' knowledge, owns 5% or more of our issued capital, has any interest in any of our five largest customers and suppliers during FY 2019 and up to the date of this annual report.

Use of net proceeds from our global offering

Our Shares were listed on the Main Board of the Stock Exchange on 28 March 2019. Net proceeds received from our Global Offering (as defined in the Prospectus) aggregated approximately HK$1.8 billion, and as of the beginning of FY 2020, the full amount was remaining. As at 31 May 2020, our Group had used the net proceeds from the Global Offering in the following manner and according to the intended uses set out in the Prospectus:

		Net proceeds	Utilised	Utilised
		from Global	during	during	Remaining
HK$ million(2)	Offering(1)	FY 2019	FY 2020	amount
Staff recruitment and training activities	533.0	-	143.5	389.5
Acquisitions and/or investments	533.0	-	-	533.0
Course development	178.0	-	18.5	159.5
Technology infrastructure	178.0	-	158.1	19.9
Marketing activities	178.0	-	158.1	19.9
Working capital and general corporate purposes	178.0	-	71.8	106.2

Notes:

1. Includes net proceeds from the partial exercise of the over-allotment options, as detailed in our Company's announcement of 22 April 2019, which will be used by our Company for the purposes and in the same allocation proportions set out in the Prospectus. The same amounts have been carried forward to the beginning of this Reporting Period.
2. Converted from RMB at the exchange rate of HK$1:RMB0.89385, being the midpoint rate of HKD to RMB published by the People's Bank of China on the business day before the date of the annual results announcement on 21 August 2020. The figures presented in this table are approximations and subject to currency exchange fluctuation and rounding.

The remaining balance was placed with banks and financial institutions or under held in accordance with our treasury policy detailed in "Business - Risk management and internal control - Treasury management policy" in the Prospectus. Our Group will apply the remaining net proceeds in the manner set out in the Prospectus. Our Company will gradually utilise the remaining amount of the net proceeds in accordance with the intended purposes depending on actual business needs and circumstances surrounding the utilisation and as at the date of this report, we anticipate to use up the remaining amount of the net proceeds within five to ten years of the Listing Date.

KOOLEARN TECHNOLOGY HOLDING LIMITED ANNUAL REPORT 2020

27

Directors' Report (Continued)

Share capital

Movements in our Company's share capital and details of issued Shares during FY 2020 are set out at Note 28 to the consolidated financial statements.

On 19 November 2019, our Shareholders granted to our Directors a general mandate to repurchase up to 10% of our then-total number of issued Shares. During FY 2020, we did not make any repurchases on the Stock Exchange, and neither we nor our subsidiaries purchased, sole or redeemed any of our Company's listed securities.

Debentures issued

Our Group did not issue any debentures during FY 2020.

Emolument policy and directors' remuneration

In compliance with the Corporate Governance Code set out in Appendix 14 to the Listing Rules, we established the Remuneration Committee to formulate our Directors' remuneration policies. The remuneration is determined based on each Director's and senior manager's qualification, position, responsibility and seniority. In additional to this, our Directors and senior managers may have been granted options under our Pre-IPO ESOP and are eligible to participate as grantees of our Post-IPO ESOP. Our Directors', senior managers' and top five highest paid individuals' remuneration are detailed at Notes 11, 12 and 39 to the consolidated financial statements.

None of our Directors waived or agreed to waive any remuneration and there were no emoluments paid by our Group to any of our Directors as an inducement to join, or upon joining our Group, or as compensation for loss of office. Our Group did not pay any of our Directors any discretionary bonuses during FY 2020.

Equity-linked agreements

Except as disclosed in this annual report, no equity-linked agreement was entered into by our Group, or existed during FY 2020.

Final dividends

Our Board did not recommend the payment of a final dividend for FY 2020 (FY 2019: nil).

Property and equipment

Movements in our Group's property and equipment during FY 2020 are detailed in Note 15 to the consolidated financial statements.

Bank loans and borrowings

Our Group did not incur any bank loans or other borrowings during FY 2020.

28

Directors' Report (Continued)

Material litigation

As at the end of FY 2020, our Company was not involved in any material litigation or arbitration. Nor were our Directors aware of any material litigation or claims that were pending or threatened against our Company.

Reserves

As at the end of FY 2020, we had distributable reserves of approximately RMB2.7 billion, further details of which are set out at Note 42 to the consolidated financial statements.

Directors and their service contracts and appointment letters

Directors and senior management

A list of Directors and senior managers and their biographical details (including changes in our Board during FY 2020) are set out in "Directors and senior management".

The interests and short positions as at the end of FY 2020 of our Directors, and our Company's chief executives and substantial shareholders (as defined in the SFO) in our Company and associated corporations (as appropriate) that falls to be disclosed under Part XV of the SFO are set out in "Other information".

Directors' service agreements

Each of our executive Directors entered into a service agreement with our Company for an initial term of three years from the effective date of the appointment or until the third annual general meeting of our Company since the effective date of the appointment, whichever is earlier (and subject to retirement requirements as and when required by our Articles of Association). The appointment of Mr. Yin took effect on the Listing Date and the appointment of Mr. Sun took effect on 16 August 2019. No annual director fees are payable to the executive Directors under the current arrangement.

Each of our non-executive Directors and independent non-executive Directors signed a letter of appointment with our Company for an initial term of three years with effect from the Listing Date or until the third annual general meeting of our Company since the Listing Date (which is earlier, and subject to retirement requirements as and when required by our Articles of Association). Under the current arrangement, no annual director fees are payable to the non- executive Directors, while each of our independent non-executive Directors are to receive an annual director's fee of RMB120,000.

Permitted Indemnity Provision

Pursuant to Article 164 of the Articles of Association and subject to applicable Laws, every Director (including resigned directors during the period of his/her directorship at our Company) shall be indemnified out of the assets and profits of our Company against all losses or liabilities incurred or sustained by him/her as a director of our Company, except for losses or liabilities in respect of fraud or dishonesty. This permitted indemnity provision was in force during FY 2020 and continued to be in force as at the date of this report.

KOOLEARN TECHNOLOGY HOLDING LIMITED ANNUAL REPORT 2020

29

Directors' Report (Continued)

Our Controlling Shareholder's and Directors' competing business

New Oriental, our Controlling Shareholder, controls two businesses that provide education services and products in educational consulting and software development, namely Leci Internet Technology (Beijing) Company Limited and Beijing Bilin New Oriental Education & Technology Company Limited (collectively, the "Other Businesses"). However, given that our Directors consider these Other Businesses to be distinct from our businesses in terms of business focus and strategy, and in particular, and given that New Oriental has given a non-compete undertaking to our Company, the scope of which includes the Other Businesses, we do not consider these Other Businesses to compete with us in any material way. See "Relationship with our Controlling Shareholder" in the Prospectus for further details on how our business is distinguished from that of New Oriental (and its other subsidiaries), the Other Businesses and why we consider them not to compete with our Group, and the non-compete undertaking given by New Oriental to our Company.

Save as disclosed in this report and the Prospectus, neither our Controlling Shareholder nor any of our Directors had any interest in a business, apart from that of our Group, that competes or is likely to compete, directly or indirectly, with our Group's business, which would require disclosure pursuant to Rule 8.10 of the Listing Rules.

Continuing connected transactions

We have entered into a number of continuing transactions with our connected persons in our ordinary and usual course of business, which constitute continuing connected transactions under the Listing Rules. We set out below details of our non-exempt continuing connected transactions in accordance with Chapter 14A of the Listing Rules:

Contractual Arrangements

Overview

Our Group entered into a series of Contractual Arrangements with Beijing Xuncheng and Kuxue Huisi, and their Registered Shareholders, pursuant to which our Company obtained effective control over and had the right to receive all of the economic benefits derived from Beijing Xuncheng and Kuxue Huisi, and proportional control and right to receive the economic benefits derived from our then non-wholly owned subsidiary, Dongfang Youbo, through our Operating Entity's controlling interest and proportionate shareholding in Dongfang Youbo. On 16 August 2019, we, through Beijing Xuncheng, acquired the remaining interest in Dongfang Youbo, following which, Dongfang Youbo became a wholly-owned subsidiary of our Company and assumed the same rights and obligations as Kuxue Huisi under the Contractual Arrangements.

As a result of the Contractual Arrangements, the financial results of our Consolidated Affiliated Entities are able to be consolidated into our Group's financial information as if they were our Company's subsidiaries. We set out a summary of our Contractual Arrangements during FY 2019.

30

Directors' Report (Continued)

The following simplified diagram illustrates the flow of economic benefits from our Consolidated Affiliated Entities to our Group under the Contractual Arrangements:

Company

100%

	WFOEs (1)			Registered
				Shareholders (2)
Service fees	Management and
consultation services
	Consolidated Affiliated Entities (3)

Notes:

1. Dexin Dongfang and Zhuhai Chongsheng Heli Network Technology Co., Ltd. (珠海崇勝合力網絡科技有限公司) ("Zhuhai Chongsheng") (collectively, the "WFOEs").
2. Our Registered Shareholders are New Oriental China, Linzhi Tencent Technology Co., Ltd. (林芝騰訊科技有限公司) and the Tianjing Limited Partnerships.
3. Beijing Xuncheng, our Operating Entity, and its subsidiaries.
4. "→" denotes legal and beneficial ownership in the equity interests of the WFOEs.
5. "-"denotes legal ownership in the equity interests of the Consolidated Affiliated Entities,
6. "4 " denotes control by the WFOEs under the Contractual Arrangements through: (a) powers of attorney to exercise all Registered Shareholders' rights in the Operating Entity, (b) exclusive options to acquire all or part of the equity interests in the Operating Entity, and (c) equity pledges over the equity interests in the Operating Entity.
7. "---"denotes the control by the WFOEs over the Consolidated Affiliates Entities through the respective powers of attorney to exercise all shareholders' rights in Beijing Xuncheng, exclusive options to acquire all or part of the equity interests in the Consolidated Affiliates Entities and equity pledges over the equity interest in the Consolidated Affiliates Entities.

Summary of our Contractual Arrangements

We set out below a brief description of each of the specific agreements that comprise the Contractual Arrangements, the further details of which are set out in "Contractual Arrangements" in the Prospectus:

1. Exclusive Management Consultancy and Business Cooperation Agreement
   Dexin Dongfang, on the one hand, and the Registered Shareholders and our Relevant VIE Entities, on the other hand, entered into an exclusive management consultancy and business cooperation agreement on 10 May 2018 ("Exclusive Management Consultancy and Business Cooperation Agreement"), pursuant to which Dexin Dongfang has the exclusive right to provide, or designate any third party to provide, each of our Relevant VIE Entities with corporate management and educational services, intellectual property licensing services as well as technical and business support services. Such services include, among others, advisory services, research and consulting services, market development and planning services, human resources and internal information management, sales of proprietary products and intellectual property and know-how, and other additional services as the parties may mutually agree from time to time.

KOOLEARN TECHNOLOGY HOLDING LIMITED ANNUAL REPORT 2020

31

Directors' Report (Continued)

1. Exclusive Call Option Agreement
   Dexin Dongfang, on the one hand, and the Registered Shareholders and Beijing Xuncheng, on the other hand, entered into an exclusive call option agreement on 10 May 2018 ("Exclusive Call Option Agreement"), pursuant to which Dexin Dongfang had an exclusive option to purchase all or part of the equity interests in Beijing Xuncheng from the Registered Shareholders for the minimum amount of consideration permitted by applicable PRC Law and under circumstances in which Dexin Dongfang or its designated third party is permitted under PRC laws to acquire all or part of the equity interests of Beijing Xuncheng.
2. Equity Pledge Agreement
   Dexin Dongfang, on the one hand, and the Registered Shareholders and Beijing Xuncheng, on the other hand, entered into an equity pledge agreement on 10 May 2018 ("Equity Pledge Agreement"), pursuant to which the Registered Shareholders unconditionally and irrevocably pledged all of their respective equity interests in Beijing Xuncheng to Dexin Dongfang in order to guarantee the performance of the Contractual Arrangements by the Relevant VIE Entities and the Registered Shareholders. Under the Equity Pledge Agreement, the Registered Shareholders have agreed that, without prior written consent of Dexin Dongfang, they will not transfer or dispose of the pledged equity interests or create or allow any third party to create any encumbrance on the pledged equity interests that would prejudice Dexin Dongfang's interest.
3. Powers of Attorney
   Each of the Registered Shareholders and Beijing Xuncheng has executed an irrevocable power of attorney on 10 May 2018 ("Powers of Attorney"), appointing Dexin Dongfang (or any person that it designates) to appoint directors and vote on behalf of that relevant Registered Shareholder on all matters of our Consolidated Affiliated Entities that require shareholders' approval.
4. Supplemental Agreement of Zhuhai Chongsheng
   Dexin Dongfang and Zhuhai Chongsheng, on the one hand, and Beijing Xuncheng and the Registered Shareholders, among others, on the other hand, entered into a supplemental agreement on 10 October 2019, pursuant to which, Zhuhai Chongsheng joined as a party to the Contractual Arrangements (including the Exclusive Management Consultancy and Business Cooperation Agreement, Exclusive Call Option Agreement, Equity Pledge Agreement, and Powers of Attorney). Pursuant to the supplemental agreement, Zhuhai Chongsheng shared the same rights and obligations as Dexin Dongfang under the Contractual Arrangements (as appropriate).
5. Acceptance Letter
   Dongfang Youbo executed a letter of acceptance dated 10 October 2019, under which, it assumed the same rights and obligations as Kuxue Guisi, the other wholly-owned subsidiary of Beijing Xuncheng, under the Exclusive Management Consultancy and Cooperation Agreement.

Reasons for our Contractual Arrangements

We operate online and mobile education platforms in China, which constitute value-added telecommunication service business ("Relevant Business"). The operation of a Relevant Business is subject to foreign investment restrictions under PRC law, namely: (a) foreign investors are restricted from holding more than 50% equity interest in a company operating the Relevant Business ("Relevant Company"), and (b) the foreign investor holding any equity interest in a Relevant Company must meet certain qualification requirements. See "Contractual Arrangements - PRC Laws relating to foreign investment restrictions" in the Prospectus for more information on these restrictions.

32

Directors' Report (Continued)

Given the above restrictions and as advised by Tian Yuan Law Firm, our PRC legal adviser ("PRC Legal Adviser"), we determined that it was not viable for our Company to hold our Consolidated Affiliated Entities directly through equity ownership. Instead, we operate our Relevant Business through our Consolidated Affiliated Entities. To maintain effective control over the Relevant Business operated by our Consolidated Affiliated Entities and to receive the economic benefits generated by our Relevant Business, a series of Contractual Arrangements have been entered into between our WFOEs, our Consolidated Affiliated Entities and their Registered Shareholders.

Our Directors believe that: (a) the Contractual Arrangements are fundamental to our Group's legal structure and business operations; and (b) the Contractual Arrangements (and the terms of the VIE agreements underlying the Contractual Arrangements) have been entered into in the ordinary and usual course of business and on normal commercial terms or better for our Company and are fair and reasonable and in the interests of our Company and our Shareholders as a whole.

Qualification requirements

As mentioned above, in addition to the 50% foreign ownership restriction, a foreign investor who invests in a value-added telecommunications business in China must satisfy qualification requirements, including having prior experience in operating value-added telecommunications business and a proven track record of business operations overseas ("Qualification Requirements").

See "Contractual Arrangements - PRC Laws relating to foreign investment restrictions - Qualification requirements" in the Prospectus for the current position of Qualification Requirements in respect of value-added telecommunications business in China.

Our PRC legal adviser advised us that, as at the date of this report: (a) the MIIT guidance memorandum issued by the Ministry of Industry and Information Technology of the PRC (中華人民共和國工業和信息化部) (formerly known as Ministry of Information Industry) (stating that an applicant is required to provide, among others, satisfactory proof of the Qualification Requirements and business development plan, and that applicants should submit written statements about the main foreign investors' experience and qualifications or that of their parents or subsidiaries in providing value-added telecommunications services; see page 183 of the Prospectus) had no legal or regulatory effect under the PRC Laws; and (b) no applicable PRC Laws had provided clear guidance or interpretation on the Qualification Requirements.

Despite the lack of clear guidance on or interpretation of the Qualification Requirements, we have been gradually building up our track record of overseas telecommunications business operations for the purposes of being qualified, as early as possible, to acquire the entire equity interests in any of our Consolidated Affiliated Entities when the relevant PRC Laws allow foreign investors to invest and to hold any equity interests in enterprises that engage in the Relevant Business. We are in the process of expanding our overseas value-added telecommunications business through our overseas subsidiaries. We have taken various measures to meet the Qualification Requirements, for example:

1. Xuncheng HK has registered a domain name overseas and will expand its business operations in Hong Kong and overseas as and when appropriate;

KOOLEARN TECHNOLOGY HOLDING LIMITED ANNUAL REPORT 2020

33

Directors' Report (Continued)

1. we have made our app, Donut, available for download and use on international iTunes and Android based systems such as Google Play stores through Xuncheng HK; and
2. we established our overseas www.koolearn.hk, which is primarily for the purpose of introducing our business to users and investor relations.

Subject to the discretion of the competency authority in determining whether our Group has fulfilled the Qualification Requirements, our PRC legal adviser is of the view that these steps are reasonable and appropriate to comply with the Qualification Requirements.

Risks relating to our Contractual Arrangements

We believe that the following risks, among others, may be associated with the use of our Contractual Arrangements:

1. the PRC government may find that the agreements that establish the structure for operating our business in China do not comply with applicable PRC Laws, which may subject us to severe penalties and our business may be materially and adversely affected;
2. substantial uncertainties exist in relation to the interpretation and implementation of the Foreign Investment Law of the PRC (中華人民共和國外商投資法) and how it may impact the viability of our current corporate structure, corporate governance and business operations;
3. we rely on the Contractual Arrangements with our Consolidated Affiliated Entities and the Registered Shareholders for our business operations in China, which may not be as effective in providing operational control or enabling us to derive economic benefits as through ownership of controlling equity interest;
4. we may lose the ability to use and enjoy assets held by our Consolidated Affiliated Entities that are material to our business operations if any of our Consolidated Affiliated Entities declares bankruptcy or become subject to a dissolution or liquidation proceeding;
5. the largest ultimate shareholder of Beijing Xuncheng, Mr. Yu, may have conflicts of interest with us, which may materially and adversely affect our business;
6. if we exercise the option to acquire equity ownership of our Operating Entity, the ownership transfer may subject us to certain limitations and substantial costs; and
7. our Contractual Arrangements may be subject to scrutiny by the PRC tax authorities, and a finding that we owe additional taxes could substantially reduce our consolidated net income and the value of your investment.

See "Risk factors - Risks relating to our Contractual Arrangements" in the Prospectus for further discussion on these risks.

34

Directors' Report (Continued)

Listing Rules implications and waiver

For the purposes of Chapter 14A of the Listing Rules, our Consolidated Affiliated Entities are treated as our Company's wholly-owned subsidiaries, and their directors, chief executives and substantial shareholders (as defined in the Listing Rules, which include the Registered Shareholders) and their respective associates are treated as "connected persons." As such, our Contractual Arrangements constitute continuing connected transactions for our Company.

Given that the highest applicable percentage ration under the Listing Rules is expected to be higher than 5% and more than HK$10 million, and this transaction constitutes a non-exempt continuing connected transaction, we have applied to the Stock Exchange, and the Stock Exchange has granted to us, a waiver from strict compliance with, in respect of the Contractual Arrangements: (a) the announcement, circular and independent shareholders' approval requirements under Chapter 14A of the Listing Rules pursuant to Rule 14A.105 of the Listing Rules; (b) the requirement under Rule 14A.53 of the Listing Rules of setting an annual cap for the transactions; and (c) the requirement under Rule 14A.52 of the Listing Rules of limiting the terms of the Contractual Arrangements to three years or less, for as long as our Shares are listed on the Stock Exchange ("Applicable Requirements"), subject to the following conditions:

1. no change to our Contractual Arrangements without our independent non-executive Directors' approval;
2. no change to the agreements underlying our Contractual Arrangements without independent Shareholders' approval;
3. our Contractual Arrangements shall continue to enable our Group to receive the economic benefits derived by our Consolidated Affiliated Entities;
4. our Contractual Arrangements may be renewed and/or reproduced without strict compliance with the Applicable Requirements (including obtaining our Shareholders' approval): (i) upon the expiry of the existing arrangements; or (ii) in relation to any existing, newly established or acquired wholly foreign-owned enterprises or operating company (including branch company), engaging in the same business as that of our Group where such renewal and/or reproduction is justified by business expediency and on substantially the same terms and conditions as the existing Contractual Arrangements; and
5. we will disclose details relating to our Contractual Arrangements on an on-going basis.

Other continuing connected transactions

As discussed in the Prospectus, the following transactions also constitute non-exempt continuing connected transactions of our Group for FY 2020:

New Oriental Framework Agreement

On 13 March 2019, our Company (for itself and on behalf of the other members of our Group) and New Oriental (for itself and on behalf of the other members of the Retained New Oriental Group) entered into the New Oriental Framework Agreement, pursuant to which, our Group and the Retained New Oriental Group would provide each

KOOLEARN TECHNOLOGY HOLDING LIMITED ANNUAL REPORT 2020

35

Directors' Report (Continued)

other, among others, the following non-exempt continuing connected transactions for our Company: (i) sub- licensing of TPO examinational materials, (ii) provision of educational materials; and (iii) provision of online and offline educational resources. The New Oriental Framework Agreement is for a period of three years from the Listing Date to the date immediately before the third anniversary of the Listing Date (being 27 March 2022, both dates inclusive), and the terms of which were entered into on normal commercial terms.

The annual cap and actual transaction amounts for the above non-exempted continuing connected transactions for FY

2020 are:

		Annual transaction
	Annual cap	amount
	for FY 2020	for FY 2020
No. Transaction	(RMB million)	(RMB million)

1. Sub-licensing of TPO examination materials from our Group to

the Retained New Oriental Group

17.0

16.9

2. Provision of educational materials from the Retained New

Oriental Group to our Group

4.5

1.8

3. Provision of educational resources:

-	from our Group to the Retained New Oriental Group (online
	resources)	3.8	0.2
-	from the Retained New Oriental Group to our Group (offline
	resources)	19.5	6.9

New Oriental is our Controlling Shareholder and a substantial shareholder (under the Listing Rules) and is a connected person of our Company at the issuer level, and its subsidiaries are associates and, as such, also connected persons of our Company.

Tencent Framework Agreement

On 13 March 2019, our Company (for itself and on behalf of other members of our Group) and Shenzhen Tencent Computer entered into the Tencent Framework Agreement, pursuant to which, among others, Tencent would provide to our Group, the following non-exempt continuing connected transactions for our Company: (i) cloud and technical services, and (ii) payment services. The Tencent Framework Agreement is for a period of three years from the Listing Date to the date immediately before the third anniversary of the Listing Date (being 27 March 2022, both dates inclusive), and the terms of which were entered into on normal commercial terms.

36

Directors' Report (Continued)

The annual cap and actual transaction amounts for the above non-exempted continuing connected transactions for FY

2020 are:

			Annual transaction
		Annual cap	amount
		for FY 2020	for FY 2020
No.	Transaction	(RMB million)	(RMB million)
1.	Cloud and technical services from Tencent to our Group	12.8	10.2
2.	Payment services from Tencent to our Group	5.2	3.3

Shenzhen Tencent Computer is a subsidiary of Tencent, both of which are core connected persons of our Company.

Tigerstep Framework Agreement

On 13 March 2019, our Company (for itself and on behalf of the other members of our Group) and Tigerstep (for itself and on behalf of its subsidiaries) entered into the Tigerstep Framework Agreement, pursuant to which Tigerstep (and its subsidiaries) would lease certain property locations to our Group to be used as, among other purposes, office space, recording studios and administration premises. The Tigerstep Framework Agreement is for a period of three years from the Listing Date to the date immediately before the third anniversary of the Listing Date (being 27 March 2022, both dates inclusive), and the terms of which were entered into on normal commercial terms.

The annual cap and actual transaction amounts for the above non-exempted continuing connected transaction for FY

2020 are:

		Annual transaction
	Annual cap	amount
	for FY 2020	for FY 2020
No. Transaction	(RMB million)	(RMB million)

1. Property leasing from Tigerstep (and its subsidiaries) to our

Group	11.5	11.1

Tigerstep and its subsidiaries are associates of Mr. Yu, one of our Directors, and as such, are connected persons of our Company.

Confirmations in respect of our continuing connected transactions

Confirmations from our independent non-executive Directors

Our independent non-executive Directors have reviewed our Contractual Arrangements and each of our framework agreements (collectively, the "CCT Agreements") and confirmed that:

With respect to our Contractual Arrangements:

1. the transactions carried out during FY 2020 have been entered into in accordance with the relevant provisions of our CCT Arrangements; and

KOOLEARN TECHNOLOGY HOLDING LIMITED ANNUAL REPORT 2020

37

Directors' Report (Continued)

1. no dividends or other distributions have been made by our Relevant VIE Entities to the holders of its equity interests that are not otherwise subsequently assigned or transferred to our Group during FY 2020;

With respect to all CCT Agreements:

1. the transactions underlying the CCT Agreements are in the ordinary and usual course of the Group's business, and terms of the CCT agreements and their underlying transactions are on normal commercial terms or better, fair and reasonable and in the interest of our Company and our Shareholders as a whole.

Save as disclosed in this section, we did not enter into any other transaction during FY 2020, including the related party transactions disclosed under Note 39 to the financial statements in this annual report, that would fall to be disclosed under Chapter 14A of the Listing Rules. We have complied with the requirements in Chapter 14A of the Listing Rules during FY 2020.

Confirmations from our Company's independent auditors

Our independent external auditor has confirmed in a letter to our Board that, with respect to the continuing connected transactions of our Company (including our Contractual Arrangements):

1. nothing has come to their attention that causes them to believe that the disclosed continuing connected transactions have not been approved by our board of directors.
2. for transactions involving the provision of goods or services by our Group, nothing has come to their attention that causes them to believe that the transactions were not, in all material respects, in accordance with the pricing policies of our Company.
3. nothing has come to their attention that causes them to believe that the transactions were not entered into, in all material respects, in accordance with the relevant agreements governing such transactions.
4. with respect to the aggregate amount of each of the continuing connected transactions, nothing has come to their attention that causes them to believe that the disclosed continuing connected transactions have exceeded the annual cap as set by our Company.

Contracts with our Controlling Shareholder or management contracts

Save as disclosed in this annual report, no other contracts of significance or contract or significance for the provision of services had been entered into among our Group and our Controlling Shareholder during FY 2020.

No contract, concerning the management and administration of the whole or any substantial part of our Company's business was entered into or existed during FY 2020.

Save as disclosed in this annual report, and in particular the " - Continuing connected transactions" above, none of our Directors (or any entity connected with our Directors) had a material interest, either directly or indirectly, in any transaction, arrangement or contract of significance to which our Company was a party and which subsisted during FY 2020.

Pre-emptive rights

There are no provisions for pre-emptive rights under our Articles of Association or Cayman Islands Laws that would oblige our Company to offer new Shares on a pro-rata basis to existing Shareholders.

38

Directors' Report (Continued)

Tax relief and exemption

Our Directors are not aware of any tax relief and exemption available to our Shareholders by reason of them holding our Company's securities.

Auditor

Our Group's consolidated financial statements have been audited by Deloitte Touche Tohmatsu, who will retire and, being eligible, offer themselves for re-appointment at our upcoming annual general meeting. There was no change in our Company's independent external auditors since Listing .

Events after the Reporting Period

See: (i) our announcement of 21 August 2020 on the revision of the annual caps for FY 2021 for two of our continuing connected transactions, the "provision of educational materials" transaction under the New Oriental Framework Agreement and the "property leasing" transaction under the Tigerstep Framework Agreement; and

1. our announcement of 25 August 2020 on the granting of options under the Post-IPO ESOP. Aside from these announcements and this annual report, our Group did not have any significant event occur after the Reporting Period.

Environmental policies and performance

We are committed to fulfilling our social responsibility, promoting employee benefits and development, protecting the environment and giving back to our community and achieving sustainable growth. Further details of our environmental and social performance as set out in the "Environmental, social and governance report" included in this annual report.

Public float

Based on the information publicly available to our Company, and to the best knowledge of our Directors, as at the date of this annual report, our Company maintained the prescribed percentage of public float under the Listing Rules.

Compliance with relevant laws and regulations

Save as otherwise disclosed in this annual report and our Prospectus, to the best of our knowledge, we have complied with all relevant Laws that have a material and significant impact on our Group.

Closure of register of members

Our Company's annual general meeting (the "AGM") will be held on 5 November 2020. Our register of members will be closed from 2 November 2020 to 5 November 2020 (both days inclusive) in order to determine the identity of our Shareholders who are entitled to attend the AGM, during which period no Share transfers will be registered. To be eligible to attend the AGM, all properly completed transfer forms accompanied by the relevant share certificates must be lodged for registration with our Company's branch share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong not later than 4:30 p.m. on 30 October 2020.

By the order of our Board

YU Minhong

Chairman

Hong Kong

14 September 2020

KOOLEARN TECHNOLOGY HOLDING LIMITED ANNUAL REPORT 2020

39

OTHER INFORMATION

Disclosure of interests

Directors and chief executives

As at the end of FY 2020, the interests and short positions of our Directors and Company's chief executives (being those as at the end of FY 2020) in our Shares, underlying Shares and debentures of our Company or its associated corporations (within the meaning of Part XV of the SFO), as recorded in the register required to be kept by our Company pursuant to Section 352 of the SFO, or as otherwise notified to our Company and the Stock Exchange pursuant to the Model Code are set out below. All interests disclosed represent long positions in Shares. Our Directors and Company's chief executives do not hold any short positions in Shares.

Interest in our Shares

					Approximate
Name of			Number of	percentage of
Director or		Relevant	ordinary	shareholding in
chief executive	Nature of interest	entity	Shares	our Company(1)
Mr. Sun(2)	Beneficial owner		8,500,000	0.90%
Mr. Yu(3)	Beneficial owner		16,695,285	1.78%
		Beneficiary of a trust	Tigerstep	15,858,832	1.69%
Ms. Sun(4)	Interest in a controlled corporation	First Bravo	14,742,640	1.57%
Mr. Yin(5)	Beneficial owner		2,900,000	0.31%
		Interest in a controlled corporation	Perfect Go	3,371,196	0.36%
Mr. Wu(6)	Beneficial owner		1,350,000	0.14%

Notes:

1. The percentages are calculated based on our Company's total number of issued Shares, being 939,464,602 Shares, as at 31 May 2020.
2. These interests represent the 8,000,000 Shares and 500,000 Shares that may be issued pursuant to an exercise of options granted to Mr. Sun under the Pre-IPO ESOP and the Post-IPO ESOP, respectively.
3. These interests comprise: (i) 16,695,285 Shares that may be issued pursuant to an exercise of options granted to Mr. Yu under the Pre-IPO ESOP; and (ii) 15,858,832 Shares held through Tigerstep Developments Limited ("Tigerstep"). Mr. Yu is a beneficiary of a family trust that controls Tigerstep through a trust arrangement, and as such, under the SFO, Mr. Yu is deemed to be interested in all of Tigerstep's interests in our Company.
4. First Bravo Asia Limited ("First Bravo") is wholly-owned by Ms. Sun. Under the SFO, Ms. Sun is deemed to be interested in all of First Bravo's interests in our Company.
5. These interests comprise: (i) 2,100,000 Shares and 800,000 Shares that may be issued pursuant to an exercise of options granted to Mr. Yin under the Pre-IPO ESOP and Post-IPO ESOP, respectively; and (ii) 3,371,196 Shares held through Perfect Go Industries Limited ("Perfect Go"), which is wholly-owned by Mr. Yin, and as such, under the SFO, Mr. Yin is deemed to be interested in all of Perfect Go's interests in our Company.
6. These interests represent the 1,350,000 Shares that may be issued pursuant to an exercise of options granted to Mr. Wu under the Pre-IPO ESOP.

40

Other Information (Continued)

Interest in our Controlling Shareholder
Name of		Total	Percentage of
Director or		number of	shareholding in
chief executive	Nature of interest	shares	New Oriental(1)
Mr. Yu(1)	Interest in a controlled corporation; beneficiary of a trust	19,750,272	12.4%

Note:

1. According to the best knowledge of our Directors, New Oriental is held by Tigerstep as to approximately 12.4% while Mr. Yu is a beneficiary of a family trust that controls Tigerstep through a trust arrangement. Under the SFO, Mr. Yu is deemed to be interested in all of Tigerstep's interests in New Oriental.

Interest in our associated corporations (other than New Oriental)

			Amount of	Approximate
			registered	percentage of
Name of		Associated	capital	shareholding in the
director	Nature of interest	corporation	(RMB)	associated corporation
Mr. Yu	Nominee shareholder whose	Beijing Xuncheng(1)	122,351,229	74.49%

• shareholder's rights are subject to
• contractual arrangements

Beneficial owner	Century Friendship(1)	8,000,000	80%
Interest in a controlled corporation	New Oriental China(1)	10,000,000	100%
Interest of controlled limited partnership	New Venture(2)	5,000	50%

Notes:

1. Beijing Century Friendship Education Investment Co., Ltd. ("Century Friendship") and New Oriental Education & Technology Group Co., Ltd. ("New Oriental China") are controlled through a series of contractual arrangements by, and are therefore treated as subsidiaries of New Oriental. Mr. Yu holds an 80% equity interest in Century Friendship, which in turn, holds the entire equity interests in New Oriental China. New Oriental China holds a 74.49% equity interest in, and has entered into our Contractual Arrangements with (as defined and detailed in the section headed "Contractual Arrangements" in the Prospectus), Beijing Xuncheng. Under the SFO, Mr. Yu is deemed to be interested in all of Century Friendship's interests in New Oriental China, and all of New Oriental China's interests in Beijing Xuncheng.
2. Huoerguosi Oriental New Venture Equity Investment Partnership (L.P.) ("New Venture") is held by our Company as to more than 20%, and is held by New Oriental China as to 50%. Mr. Yu controls New Oriental China and, under the SFO, is deemed to be interested in all of New Oriental China's interests in New Venture.

KOOLEARN TECHNOLOGY HOLDING LIMITED ANNUAL REPORT 2020

41

Other Information (Continued)

Substantial shareholders

As at the end of FY 2020, as far as our Directors are aware, the following persons (other than our Directors and the chief executive of our Company) had interests or short positions in our Shares or underlying Shares of our Company as recorded in the register required to be kept by our Company pursuant to Section 336 of the SFO. All of the interests below represent long positions in shares. As far as our Directors are aware, none of the persons listed below held any short positions in Shares.

				Approximate
				percentage of
			Number of	shareholding in
Name of Shareholder	Nature of interest	ordinary shares	our Company(1)
New Oriental	Beneficial interest	500,000,000	53.22%
Image Frame(2)	Beneficial interest	90,416,181	9.62%
Tencent	Interest in a controlled corporation	90,416,181	9.62%

Notes:

1. The percentages are calculated based on our Company's total number of issued Shares, being 939,464,602 Shares, as at 31 May 2020.
2. Image Frame Investment (HK) Limited ("Image Frame") is a subsidiary of Tencent Holdings Limited ("Tencent"). Under the SFO, Tencent is deemed to be interested in all of Image Frame's interests in our Company.

Share Option Schemes

Our Company has adopted two share incentive plans, the Pre-IPO ESOP and Post-IPO ESOP (collectively, the "Share Option Schemes"). See "Statutory and general information" as Appendix IV to the Prospectus for further details of our Share Option Schemes.

The purpose of our Share Option Schemes is to provide respective eligible participants with an opportunity to acquire proprietary interest in our Company and to encourage the eligible participants to work towards enhancing the value of our Company and our Shares for the benefit of our Company and our Shareholders as a whole. The Share Option Schemes are further intended to provide our Company with a flexible means of retaining, incentivising, rewarding, remunerating, compensating and/or providing benefits to their respective eligible participants.

The eligible participants of each of the Share Option Schemes include, among others, any director, employee or contractor or affiliate of our Group (including nominees and/or trustees of any employee benefit trust(s) established for them) who our Board considers, in its sole discretion, to have contributed or will contribute to our Group.

42

Other Information (Continued)

Pre-IPO ESOP

Maximum number of Shares

The overall limit in the number of options under the Pre-IPO ESOP represents 47,836,985 underlying Shares, subject to possible adjustments under the Pre-IPO ESOP, all of which were granted to eligible participants by the end of FY 2019. As at the end of FY 2020, 3,129,000 options under the Pre-IPO ESOP had been exercised, 31,000 had been cancelled, 5,425,500 options had lapsed, and options to subscribe for an aggregate of 39,251,485 underlying Shares remained outstanding, representing approximately 4.18% of our total issued share capital as at the end of FY 2020.

No further options were granted following the Listing and no further options may be granted under the Pre-IPO ESOP.

Limit for each participant

There is no specified limit on the maximum number of underlying Shares for which any particular grantee may subscribe under the Pre-IPO ESOP.

Remaining life of the Pre-IPO ESOP and option period

The Pre-IPO ESOP is valid for six years from the Listing Date (being from 28 March 2019 to 27 March 2025), which is also the maximum option period, following which any outstanding options shall expire and may not be exercised. The remaining life of the scheme is approximately four and a half years.

Each grantee gave an undertaking at the date of accepting their respective grant to hold the vested options for a minimum period of six months (from the vesting date of the respective options) before exercising ("Minimum Period"). On 16 August 2019, our Board resolved to waive this Minimum Period for the grantees.

Consideration and subscription price

Each grantee paid a consideration of RMB1.00 for the grant of options under the Pre-IPO ESOP. The subscription price under the Pre-IPO ESOP is HK$8.88 per Share.

KOOLEARN TECHNOLOGY HOLDING LIMITED ANNUAL REPORT 2020

43

Other Information (Continued)

Details of option grants

As at the end of FY 2020, (a) our Directors held unexercised options under the Pre-IPO ESOP to subscribe for a total of 28,145,285 Shares, representing 3.0% of the issued share capital of our Company, and (b) other 85 grantees held unexercised options under the Pre-IPO ESOP to subscribe for a total of 11,106,200 Shares, representing approximately 1.18% of the issued share capital of our Company, details of which are as follows:

						Number of options
Name or			Maximum period during		Outstanding	Exercised	Cancelled	Lapsed	Outstanding
category	Date of	Vesting	which options are	Exercise	as at 1 June	during the	during the	during the	as at end of
of grantee	grant	period	exercisable	price	2019	FY 2020	FY 2020	FY 2020	FY 2020
Mr. Yu	6 March 2019	Three years	From immediately after	HK$8.88	16,695,285	Nil	Nil	Nil	16,695,285
		from Listing	the end of the vesting	per Share
		Date	period to the day prior to
			the sixth anniversary of
			the Listing Date
Mr. Sun	6 March 2019	Three years	From immediately after	HK$8.88	8,000,000	Nil	Nil	Nil	8,000,000
		from Listing	the end of the vesting	per Share
		Date	period to the day prior to
			the sixth anniversary of
			the Listing Date
Mr. Yin	6 March 2019	Three years	From immediately after	HK$8.88	2,100,000	Nil	Nil	Nil	2,100,000
		from Listing	the end of the vesting	per Share
		Date	period to the day prior to
			the sixth anniversary of
			the Listing Date
Mr. Wu	6 March 2019	Three years	From immediately after	HK$8.88	1,350,000	Nil	Nil	Nil	1,350,000
		from Listing	the end of the vesting	per Share
		Date	period to the day prior to
			the sixth anniversary of
			the Listing Date
Other	6 March 2019	Three years	From immediately after	HK$8.88	16,595,200	3,129,000	Nil	2,360,000	11,106,200
grantees (in		from Listing	the end of the vesting	per Share
aggregate)		Date	period to the day prior to
			the sixth anniversary of
			the Listing Date
Total					44,740,485	3,129,000	Nil	2,360,000	39,251,485

Further details of movements in the Pre-IPO ESOP is set out in Note 30 to the consolidated financial statements.

44

Other Information (Continued)

Post-IPO ESOP

Maximum number of Shares

The maximum number of Shares that may be allotted and issued:

1. upon exercise of all outstanding options granted and yet to be exercised under the Post-IPO ESOP and any other share option schemes of our Group (collectively, the "All Share Option Schemes") must not exceed 30% of our Company's total issued share capital from time to time ("Scheme Limit"). No options may be granted if such options results in the Scheme Limit being exceeded;
2. upon exercise of all options granted under All Share Option Schemes must not exceed 10% (being 91,395,910 Shares) of the total number of Shares in issue on the Listing Date (being 913,959,102 Shares); and
3. the limit in (b) above may be refreshed at any time with our Shareholders' approval, provided that the total number of Shares that may be issued upon exercise of all options granted under All Share Option Schemes do not exceed 10% of our Company's total issued share capital at the date of approval. Options previously granted (including those outstanding, cancelled, lapsed or exercised under All Share Option Schemes) will not be counted in the 10% refresher limit.

Limit for each participant

Unless specifically approved by our Shareholders, each eligible participant under the Post-IPO ESOP may only be granted options (including both exercised and outstanding options) within any 12-month period that represent underlying Shares that aggregate to 1% of our Company's total issued share capital at that particular time.

Further details of movements in the Post-IPO ESOP is set out in Note 30 to the consolidated financial statements.

Remaining life of the Post-IPO ESOP and option period

The Post-IPO ESOP is valid for ten years from the Grant Date (being from 29 January 2020 to 28 January 2030), which is also the maximum option period, following which any outstanding options shall expire and may not be exercised. Under the Post-IPO ESOP rules, there is no minimum period for which an option must be held before it can be exercised.

Consideration and subscription price

Each grantee shall pay a consideration of RMB1.00 for the grant of options under the Post-IPO ESOP. The subscription price per Share under the Post-IPO ESOP shall be determined by our Board in its absolute discretion and notified to the participant, but shall be no less than the higher of:

1. the closing price of our Shares as stated in the daily quotations sheet issued by the Stock Exchange ("Daily Quotations Sheet") on the grant date;
2. the average closing price of our Shares as stated in the Daily Quotations Sheet for the five business days immediately preceding the grant date; and
3. the nominal value of each Share on the grant date.

KOOLEARN TECHNOLOGY HOLDING LIMITED ANNUAL REPORT 2020

45

Other Information (Continued)

Details of option grants

As at the end of FY 2020, (a) our Directors held unexercised options under the Post-IPO ESOP to subscribe for a total of 1,300,000 Shares, representing approximately 0.14% of the issued share capital of our Company, and (b) the other 507 grantees held unexercised options under the Post-IPO ESOP to subscribe for a total of 36,899,000 Shares, representing approximately 3.93% of the issued share capital of our Company, the details of which are set out below:

							Number of options
											Closing price
											of the Shares
Name or					Outstanding		Exercised	Cancelled	Lapsed	Outstanding	immediately
category of	Date of	Vesting	Exercisable	Exercise	as at	Granted during	during	during	during	as at end of	before
grantee	grant	period	Period	price	1 June 2019	FY 2020	FY 2020	FY 2020	FY 2020	FY 2020	the date of grant

Mr. Sun	29 January	(1) One-third of the	Ten years	HK$25.35
	2020	options to vest on	from the date	per Share
Mr. Yin	29 January	the date immediately	of grant
	2020	before the first
Other grantees	29 January	anniversary of the
(in aggregate)	2020	date of grant ("First
Vesting Date");
		(2) One-third of the
		options to vest on
		the date immediately
		before the first
		anniversary of the
		First Vesting Date
		("Second Vesting
		Date"); and
		(3) One-third of the
		options to vest on
		the date immediately
		before the first
		anniversary of the
		Second Vesting Date
		("Third Vesting
		Date").
Total

Nil	500,000	Nil	Nil	Nil	500,000	HK$25.35
Nil	800,000	Nil	Nil	Nil	800,000	HK$25.35
Nil	38,700,000	Nil	Nil	1,801,000	36,899,000	HK$25.35

Nil

40,000,000

Nil

Nil

1,801,000

38,199,000

46

CORPORATE GOVERNANCE REPORT

Corporate governance practices

We are committed to maintaining and promoting stringent corporate governance standards. Our Company's corporate governance principles are to promote effective internal control measures and to enhance the transparency and accountability of our Board to all our Shareholders.

During FY 2020, we applied the principles and code provisions of the Corporate Governance Code contained in Appendix 14 to the Listing Rules as the basis of our corporate governance practices and we have complied with all the code provisions set out therein. Our Board will continue to enhance its corporate governance practices appropriate to the conduct and growth of its business and to review such practices from time to time to ensure that they comply with statutory and professional standards and align with the latest development.

Our Directors' compliance with the Model Code

During FY 2020, we adopted the Model Code contained in Appendix 10 to the Listing Rules as our Company's code of conduct regarding our Directors' dealing in our Company's securities. Having made specific enquiry of all our Directors, all Directors confirmed that they have complied with the provisions of the Model Code throughout FY 2020.

Our Board

As at the date of this report, our Board consists of nine Directors, comprising two executive Directors, four non- executive Directors and three independent non-executive Directors.

See "Corporate Information" pages 6 to 7 for details of our Board and board committee members. See "Director's report - Directors and senior management" at pages 19 to 22 for the biographical information of our Directors.

During FY 2020, our Company has met the requirements of the Listing Rules relating to the appointment of at least three independent non-executive Directors and representing at least one-third of our Board, with at least one of whom possessing the appropriate professional qualifications or accounting or related financial management expertise (being Mr. TONG Siu Bau and Mr. KWONG Wai Sun Wilson). Mr. Tong is an independent non-executive Director who possesses the appropriate qualifications to act as chairman of our Audit Committee.

None of our Board members are related to one another.

Responsibilities and delegation

Our Board assumes responsibility for the leadership and control of our Company, and is responsible for directing and supervising our Company's affairs in the best interests of our Company and our Shareholders.

Mr. Yu is the Chairman of our Board and Mr. Sun is our chief executive officer. Our Chairman provides leadership and is responsible for the effective functioning and leadership of, and providing advice to, our Board. Our chief executive officer focuses on our Company's overall strategic planning, overall management and business direction.

KOOLEARN TECHNOLOGY HOLDING LIMITED ANNUAL REPORT 2020

47

Corporate Governance Report (Continued)

Our Board directly, and indirectly through our three board committees (being the audit committee, remuneration committee and nomination committee, collectively, the "Board Committees"), leads and provides to management strategies and overseeing the implementation of these strategies, as well as supervising our Company's internal control and risk management systems, and assumes ultimate responsibility for preparing the accounts. Our Board makes the final decision on policy matters, strategies and budgets, internal control and risk management, material transactions, financial information, directorship appointment, and other significant operational matters of our Company. Our Board may delegate certain responsibilities, including implementing its decisions, directing and coordinating the daily operations of our Company and management to our chief executive officers, other senior managers and management. These delegated functions and responsibilities are periodically reviewed by our Board.

Each of our Directors bring a wide variety of business and industry experience, knowledge and professionalism to our Board for its efficient and effective functioning. Our Directors have full and timely access to all information of our Company, and may upon request, seek independent professional advice in appropriate circumstances at our Company's expense for discharging their duties to our Company. Our Directors will disclose to our Company details of other offices held by them.

Appointment and re-election of Directors

According to our Articles of Associations, at each annual general meeting of our Company, one-third of our Directors for the time being (or, if their number is not a multiple of three, the number nearest to but not less than one-third) will retire from office by rotation provided that every Director shall be subject to retirement at an annual general meeting at least once every three years. A Director appointed by our Board or by ordinary resolutions of our Company, either to fill a casual vacancy or as an addition to our Board, will hold office only until our Company's next general meeting. All retiring Directors will be eligible for re-election.

Each Director (including our non-executive Directors and independent non-executive Directors) is engaged for a term of three years and are subject to retirement and re-election in accordance with our Articles of Association.

Continuous professional development of Directors

Our Company and each of our Directors understand the importance of our Directors participating in appropriate continuous professional development to allow them to keep on top of regulatory developments and changes in order to effectively perform their responsibilities and to ensure that their contribution to our Board remains informed and relevant. Our Directors are encouraged to attend relevant training at our Company's expense.

During FY 2020, each of our Directors received professional training, which include, among others: (a) participating in continuous professional training seminar(s), conference(s), course(s) and/or meeting(s); (b) reading materials provided by external parties, or prepared by our Company, and provided from time to time to Directors, regarding legal and regulatory changes and matters relevant to directors' duties and responsibilities and our Group's business; and/or (c) news, journals, magazines or other reading materials that touch on legal and regulatory changes and matters relevant to our Directors discharging their directors' duties and responsibilities or that concern our Group's business.

48

Corporate Governance Report (Continued)

Attendance records of Directors

During FY 2020 and as at the Latest Practicable Date, our Directors attended the following meetings:

					Annual
	Board	Audit	Remuneration	Nomination	general
Director	meetings	committee	committee	committee	meeting
Mr. Sun (appointed on 16 August 2019)	3/4	-	-	-	1/1
Mr. Yin	4/4	-	-	-	1/1
Mr. Pan (resigned on 16 August 2019)	1/4	-	-	-	-
Mr. Yu	4/4	-	-	2/2	1/1
Ms. Sun	4/4	-	2/2	-	1/1
Mr. Wu	4/4	2/2	-	-	0/1
Ms. Leung	4/4	-	-	-	0/1
Mr. Chi (resigned on 20 January 2020)	4/4	-	2/2	2/2	1/1
Mr. Lin (appointed on 20 January 2020)	-	-	-	-	-
Mr. Tong	4/4	2/2	2/2	2/2	1/1
Mr. Kwong	4/4	2/2	-	-	1/1

The Board will meet at least four times a year, at approximately quarterly intervals, and the chairman of the Board will hold at least one meeting a year with the independent non-executive Directors without the executive Directors present. Schedules for regular Board meetings are normally agreed with Directors in advance to facilitate their attendance. At least 14 days' notice for all regular Board meetings will be given to all Directors and all Directors are given the opportunity to include items or businesses for discussion in the agenda. For all other Board meetings, reasonable notice will be given. Relevant agenda and accompanying meeting papers will be sent to all Directors in a timely manner and at least three days in advance of every regular Board meeting.

Board committees

We have established three Board committees, namely, the Audit Committee, the Nomination Committee and the Remuneration Committee, for overseeing particular aspects of the Company's affairs. All Board committees are established with specific written terms of reference which deal clearly with their authority and duties, and are posted on the Company's website and the Stock Exchange's website.

KOOLEARN TECHNOLOGY HOLDING LIMITED ANNUAL REPORT 2020

49

Corporate Governance Report (Continued)

Audit Committee

We have established the Audit Committee with written terms of reference in compliance with Rule 3.21 of the Listing Rules and the Corporate Governance Code. The Audit Committee comprises of three non-executive Directors (including two independent non-executive Directors), namely, Mr. Tong (committee chairman), Mr. Wu and Mr. Kwong.

The primary duties of the Audit Committee are to review and supervise the financial reporting process and internal controls system (including risk management) of our Group, review and approve connected transactions and provide advice and comments to the Board.

None of the members of the Audit Committee is a former partner of the Company's existing external auditor, Deloitte Touche Tohmatsu ("Auditor").

The Audit Committee has performed the following major tasks during FY 2020:

• discussing and making recommendation on the re-appointment of the Auditor;
• reviewing and monitoring the independence and objectivity of the Auditor and the effectiveness of the audit process for our Group's annual audit for FY 2020;
• reviewing the annual results of our Group for FY 2020;
• reviewing our Company's financial controls, risk management and internal control systems;
• discussing the effectiveness of the risk management and internal control systems of our Company with the management;
• reviewing the effectiveness and resources of our Company's internal auditors and ensuring its co-ordination with the Auditor;
• reviewing our Company's and its subsidiaries' operating, financial and accounting policies and practice;
• reviewing any management letter and material queries from the Auditor and the management's response, and ensuring timely response to the issues raised by the Auditor's management letter was provided by our Board;
• reviewing arrangements employees of our Company can use, in confidence, to raise concerns about possible improprieties in financial reporting, internal control or other matters and to ensure that proper arrangements are in place for fair and independent investigation of these matters and for appropriate follow-up action; and
• reviewing the continuing connected transactions of the Group carried out during FY 2020.

50

Corporate Governance Report (Continued)

Remuneration Committee

We have established a Remuneration Committee with written terms of reference in compliance with Rule 3.25 of the Listing Rules and the Corporate Governance Code. The Remuneration Committee comprises of three non-executive Directors (including two independent non-executive Directors), namely, Mr. Lin (committee chairman), Ms. Sun and Mr. Tong.

The primary duties of the Remuneration Committee are to review and make recommendations to our Board on the terms of remuneration packages, bonuses and other compensation payable to our Directors and senior managers.

During FY 2020, the Remuneration Committee reviewed and made recommendations on the remuneration packages of our Directors and our Company's senior managers.

We set out below the remuneration of our Company's senior managers (including our executive Directors) by band for FY 2020:

Annual remuneration	Number of individuals
HK$6,000,001 to HK$10,000,000	1
HK$10,000,001 to HK$20,000,000	1

Further details of the remuneration for FY 2020 are set out in Note 11 to the consolidated financial statements.

Nomination Committee

We have established the Nomination Committee with written terms of reference in compliance with the Corporate Governance Code. The Nomination Committee comprises of three non-executive Directors (including two independent non-executive Directors), namely, Mr. Yu (committee chairman), Mr. Lin and Mr. Tong.

The primary duties of the Nomination Committee are to make recommendations to our Board on the appointment of Directors and management of Board succession.

The Nomination Committee has performed the following major tasks during FY 2020:

• reviewing the structure, size and composition (including the skills, knowledge and experience) of the Board;
• developing the criteria for identifying and assessing the qualifications of and evaluating candidates for directorship;
• assessing the independence of all the independent non-executive Directors;

KOOLEARN TECHNOLOGY HOLDING LIMITED ANNUAL REPORT 2020

51

Corporate Governance Report (Continued)

• making recommendations to the Board on the selection of individuals nominated for directorships; and
• making recommendations to the Board on the appointment or re-appointment of directors and succession planning for directors of our Company.

We have adopted a Board diversity policy to enhance greater diversity of members on our Board. See " - Board diversity policy" at page 52.

We have also adopted a director nomination policy to guide our Nomination Committee in identifying and recommending candidates for directorship positions and to make recommendations to our Board on the succession planning of directors. See " - Director nomination policy" at page 52.

Corporate governance functions

Our Board is responsible for performing the functions set out in the code provision D.3.1 of the Corporate Governance Code.

Our Board shall review our Company's corporate governance policies and practices, our Directors' and senior managers' training and continuous professional development, our Company's policies and practices on compliance with legal and regulatory requirements, our Company's compliance with the Corporate Governance Code, and the disclosure in this Corporate Governance Report. Our Board has performed the above duties during FY 2020.

Risk management and internal controls

Our Board acknowledges that it is overall responsible for our Company's risk management and internal control systems and for reviewing their effectiveness. These systems are designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss. Nevertheless, our Board is committed to minimising and managing these risks. Our Audit Committee, internal audit department and senior management together monitor the implementation of our internal control and risk management policies on an ongoing basis to ensure our policies and implementation are effective and sufficient.

Risk management and internal control systems and policies

Our Group has adopted a "three line of defense model" in designing its risk management and internal control systems:

• The first line of defense - Business and operations: our Group's management and operational departments, collectively, form the "first line of defense." They are responsible for implementing risk management and internal control policies in their day-to-day operations and identifying and managing the risks arising from their areas of work.

52

Corporate Governance Report (Continued)

• The second line of defense - Risk management and internal control function: our internal audit department forms the "second line of defense." The internal audit department is responsible for formulating internal control and risk management policies and managing the implementation of these policies. It supervises the work of participants who form the "first line of defense" and reports any major issues to our Audit Committee and, where necessary, our Board. The internal audit department maintains a high degree of independence to ensure the effectiveness and fairness of its work.
• The third line of defense - Internal review and continuous improvement: the "third line of defense" mainly consists of the Audit Committee, which is responsible for reviewing the effectiveness and adequacy of our Company's risk management and internal control policies and systems on a regular basis and ensuring such policies and systems are improved and updated over time. The Audit Committee reports its work and findings and any major issues to our Board.

During FY 2020, our Audit Committee held 2 meetings, and as at the date of this report, our Audit Committee also conducted 2 reviews of our risk management and internal controls systems and policies and has reported its findings to our Board. Our Board is satisfied that our Company's risk management and internal control systems and policies are effective and adequate.

Our Group has established a whistle-blowing procedure. The internal audit department is responsible for receiving any alleged anti-fraud,anti-bribery or other whistle-blowing incidents. It then performs a preliminary assessment to determine whether the case warrants further investigation. If the case is determined to have sufficient basis for further investigation, it will be reported to our Audit Committee. Our Audit Committee is responsible for investigating all cases referred to it and will report its findings and recommendations to our Board and our Company's management where necessary. For confirmed cases of breach, our Board or our Company's management may take disciplinary action according to our Audit Committee's recommendation and the relevant policies, and where the case involves a violation of relevant Laws, the case will be reported to the relevant regulatory authority.

Our Group has also adopted an information disclosure policy which sets out comprehensive guidelines on handling and disseminating inside information. Our Board is entrusted with the responsibility of monitoring and implementing the procedural requirements set out in the information disclosure policy.

Significant risks of the Company

During FY 2020, our Company identified several significant risks through its risk management system and has formulated and implemented measures for managing these risks accordingly.

1. Market competition and innovation risk

The private education sector in China is highly fragmented, competitive and evolving rapidly. We face significant competition from other online education companies and we also compete with traditional offline education companies; new businesses and some traditional education companies are also entering the online education market. To enhance and maintain our competitive advantage, we need to continuously innovate and improve our online course offerings and services.

Our Company's management monitors and analyses the market trends and our Company's competitors, researches students' demands and translates these findings into improved product features or new product offerings.

KOOLEARN TECHNOLOGY HOLDING LIMITED ANNUAL REPORT 2020

53

Corporate Governance Report (Continued)

1. Product and service quality risk
   Our revenue is primarily driven by the number of students enrolled in and the amount of course fees they are prepared to pay for our online courses on our Koolearn, Koo, DFUB and Donut platforms. The key to our ability to attract students is that we consistently deliver high quality teaching and education content. If we fail to maintain the quality of our products and services as we innovate and expand, we risk losing our attractiveness to students and, in turn, our revenue.
   We have established an internal review system to review the performance of our teaching staff and channel the feedback to our teachers on a regular basis. We have also placed a strong emphasis on our technological capabilities and user experience across our platforms and we strive to continuously upgrade and improve our systems and platforms according to feedback and reviews.
2. Regulatory and compliance risk
   The internet industry and the education industry, including foreign ownership and licensing and filing requirements for companies in these two industries, are heavily regulated in China. Furthermore, the Laws relating to online education businesses and companies, where the two industries cross paths, are relatively new and evolving, and their interpretation and enforcement remain subject to significant uncertainty. As a result, in certain circumstances, it may be difficult to determine what actions or omission may be deemed to be in violation of applicable Laws, which may pose a significant risk when conducting our online education businesses.
   We have set up a specialised working group to closely watch and analyse relevant developments in the legal and regulatory landscape of China's online education industry and to continuously review our compliance status. We have also employed external compliance consultants to monitor the compliance of our daily operations.
3. Information security risk
   In the course of conducting our online education business, we have collected, and are in possession of, a large amount of user data. Any leakage or unauthorised use of our user data, whether the result of cyber-attacks, system failures or other causes, could significantly damage our brand and reputation, and in turn, our student enrolment and revenue, as well as expose us to potential legal liability under relevant personal data Laws.
   We have adopted internal rules on the handling of user data as well as emergency measures. We conduct internal reviews on our cyber security systems and measures regularly and keep these up-to-date.
4. Crisis management and reputation risk
   "New Oriental" is a household brand in the private education industry in China. We continuously develop and promote our business under the "New Oriental" name to benefit from its market recognition. Market recognition, on the other hand, also means increased public scrutiny, especially after our Listing on the Stock Exchange.
   We have set up a specialised public relations department and formulated internal rules on crisis management to manage our brand, communicate to our customers and stakeholders and to ensure we are capable of responding to public relations crisis in a professional and prompt manner.

54

Corporate Governance Report (Continued)

Directors' responsibilities in respect of the financial statements

Our Directors acknowledge their responsibility for preparing our Company's consolidated financial statements for FY 2020. Our Directors are not aware of any material uncertainties relating to events or conditions that may cast significant doubt upon our Company's ability to continue as a going concern.

Our auditor's reporting responsibilities for our Company's Consolidated financial statements is summarised in the "Independent auditor's report" prepared by them and set out at pages 101 to 195.

Director nomination policy

Our Company has adopted a director nomination policy ("Director Nomination Policy") that sets out the considerations and procedures for selecting and nominating directors on our Board, and for succession planning of our Company's directors. In assessing a candidate's suitability and the potential contribution to our Board, our Nomination Committee would consider a number of aspects, including the candidate's reputation for integrity, his/her professional qualifications and skills, accomplishments and experience and Board diversity considerations (see Diversity Policy below). Our Nomination Committee will identify, consider and recommend suitable individuals to act as directors on our Board, and make recommendations to our Board on the appointment or re-appointment of directors and their succession planning.

Notwithstanding, the ultimate responsibility for selecting and appointing directors rests with our entire Board.

Board diversity policy

Our Company has adopted a board diversity policy ("Diversity Policy") that sets out our approach to achieving diversity of members on our Board. We embrace the benefits of having a diverse Board and view diversity at the Board level, including gender diversity, as an essential element in maintaining our competitive edge and enhancing our ability to attract, retain and motivate employees. In identifying and selecting suitable candidates to serve on our Board as Directors, our Nomination Committee would consider a number of aspects, including gender, age, cultural and educational background, professional qualifications, skills, knowledge, and industry and regional experience.

The Nomination Committee will discuss periodically and when necessary, agree on measurable objectives for achieving diversity, including gender diversity, among our Board members as recommendations proposed to our Board for adoption. At present, our Board has not set any measurable objectives.

The Nomination Committee will review our Diversity Policy as appropriate from time to time to ensure its effectiveness.

Dividend policy

Our Company has adopted a dividend policy ("Dividend Policy"), which aims to increase or maintain the value of dividends per Share, to provide reasonable return in investment to investors, and to allow Shareholders to assess its dividend pay-out trend and intention.

Pursuant to our Dividend Policy, a dividend may only be declared and paid out of our Company's profits and reserves that are lawfully available for distribution (including share premium), and may not be declared and paid out if this would result in our Company being unable to pay its debts as they fall due in the ordinary course of business. Our Board has absolute discretion as to whether to pay a dividend, and alternatively, Shareholders may by way of ordinary resolution declare dividends provided that no dividend declared is in excess of the amount recommended by our Board.

KOOLEARN TECHNOLOGY HOLDING LIMITED ANNUAL REPORT 2020

55

Corporate Governance Report (Continued)

The form, frequency, and amount of dividends declared and paid will depend on, among others, our Company's: (a) future operations and business prospects; (b) cash flow, general financial condition, and capital adequacy ratio; and (c) the availability of dividends received from subsidiaries, considering applicable statutory and regulatory restrictions (if any) and other factors that our Board considers relevant. At present, our Company does not have a fixed dividend payout ratio.

Our Board will continue to review and amend our Dividend Policy as appropriate from time to time.

Auditor's remuneration

We have appointed Deloitte Touche Tohmatsu, Certified Public Accountants, Hong Kong as our Company's external auditor for FY 2020. Our Auditor's reporting responsibilities for the consolidated financial statements is summarised in the "Independent auditor's report" prepared by them and set out at pages 101 to 195.

We set out below details of fees paid or payable to Deloitte for Deloitte providing audit and non-audit services to us during FY 2020:

Services provided by Deloitte	Fees paid or payable
(RMB '000)
Audit services	4,000
Non-audit services	480
Total	4,480

Company Secretary

Our Company Secretary is Mr. CHEUNG Kai Cheong Willie ("Mr. Cheung"), a manager of SWCS Corporate Services Group (Hong Kong) Limited. Mr. Cheung's primary contact persons at our Company are the head of investor relations (Ms. Helen SONG) and our executive Director and chief financial officer (Mr. Yin). During FY 2020, Mr. Cheung has undertaken no less than 15 hours of relevant professional training in compliance with Rule 3.29 of the Listing Rules.

Shareholders' rights

Pursuant to Article 58 of the Articles of Association, our Board may whenever it thinks fit call extraordinary general meetings. Any one or more Members holding at the date of deposit of the requisition not less than one-tenth of the paid up capital of the Company carrying the right of voting at general meetings of the Company shall at all times have the right, by written requisition to the Board or the Secretary of the Company, to require an extraordinary general meeting to be called by the Board for the transaction of any business specified in such requisition; and such meeting shall be held within two (2) months after the deposit of such requisition. If within twenty-one (21) days of such deposit the Board fails to proceed to convene such meeting the requisitionist(s) himself (themselves) may do so in the same manner, and all reasonable expenses incurred by the requisitionist(s) as a result of the failure of the Board shall be reimbursed to the requisitionist(s) by the Company.

There are no provisions allowing Shareholders to propose new resolutions at the general meetings under the Articles of Association. However, Shareholders who wish to propose resolutions may follow Article 58 of the Articles of Association for requisitioning an extraordinary general meeting and including a resolution at such meeting. The requirements and procedures of Article 58 are set out above.

56

Corporate Governance Report (Continued)

Communication with Shareholders and investors

Shareholders may send enquiries to the following:

Address: Level 18, South Wing

2 Haidian East Third Road

Haidian District

Beijing, China

Attention: Head of Investor Relations

The Board of Directors/Ms. Helen SONG

Email: [e-mail]

For shareholding matters, or transfer of Shares, change of name or address, replacement of share certificates, please write to our Hong Kong share registrar below:

Address:	For change of name or address, replacement of share certificates, or other enquiries
	Level 17M, Hopewell Centre
	183 Queen's Road East
	Wanchai, Hong Kong
	For Share transfers
	Shops 1712-1716, Level 17, Hopewell Centre
	183 Queen's Road East
	Wanchai, Hong Kong
Attention:	Computershare Hong Kong Investor Services Limited
Telephone:	[phone]
Email:	[e-mail]

KOOLEARN TECHNOLOGY HOLDING LIMITED ANNUAL REPORT 2020

57

Corporate Governance Report (Continued)

To requisition a general meeting:

Address: Level 40, Sunlight Tower

248 Queen's Road East

Wanchai, Hong Kong

Attention: Koolearn Technology Holding Limited

The Board of Directors/Mr. CHEUNG Kai Cheong Willie

Other: The requisition must be duly signed by Shareholders who hold at least one-tenth of our Company's paid up capital that carries voting rights at our Company's general meetings. The requisition must include notice or statement, or enquiry (as the case may be), and Shareholders are to provide their full name, contact details and identification in order to give effect to the requisition. Shareholders' information may be disclosed as required by the laws.

We believe that effective communication with Shareholders is essential to maintaining our relationship with investors and enhancing investors' understanding of our business performance and direction. We endeavour to maintain an on-going dialogue with Shareholders, and in particular, through annual general meetings and extraordinary general meetings.

During FY 2020 and up to the date of this annual report, we have not made any changes to our Articles of Association. The current version of our Articles of Association is available for viewing on our website (www.koolearn.hk) and the Stock Exchange's website (www.hkexnews.hk).

58

ENVIRONMENTAL, SOCIAL AND

GOVERNANCE REPORT

CONTENTS

Information about the ESG Report	60
ESG Management	61
1.	Green Development	63
	1.1	Emission management	63
	1.2	Conservation of resources	65
2.	People-oriented Principle	67
	2.1	Protection of employees' rights and interests	67
	2.2	Value employees' development	70
	2.3	Care about the health and life of employees	73
3.	Win-win Cooperation	77
	3.1	Supplier management	77
	3.2	Agent management	78
4.	High-quality Services	79
	4.1	Provision of high-quality education services	79
	4.2	Ensuring information security of customers	84
	4.3	Enhancing product innovation and R&D	86
5.	Compliant Operation	89
	5.1	Integrity and compliance management	89
6.	Public Welfare Practices	90
	6.1	Actions to combat the "epidemic"	90
	6.2	Supporting public welfare and charity	91
ESG Index		95

KOOLEARN TECHNOLOGY HOLDING LIMITED ANNUAL REPORT 2020

59

Environmental, Social and Governance Report (Continued)

Information about the ESG Report

ESG reporting scope:

This report covers Koolearn Technology Holding Limited (the "Company") and its subsidiaries (together, the "Group"). This report has the same reporting scope as the report for FY 2019. For easy reference and reading, "Company", "we", "us", or "our" shall also refer to the Group in this report.

Reporting period:

This report is released annually, covering the period from 1 June 2019 to 31 May 2020. Certain content may be beyond the aforesaid reporting period for illustrative purposes.

Basis for preparation:

This report was prepared in accordance with the Environmental, Social and Governance (ESG) Reporting Guide in Appendix 27 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules") and with reference to standard requirements including the GRI Sustainability Reporting Standards (GRI Standards) published by the Global Reporting Initiative.

Reporting principles:

Materiality: The materiality of our ESG issues is determined by the Board. The process of stakeholder communication and identification of material issues and the materiality matrix are all disclosed in this report.

Quantitative: Statistical standards, methods, assumptions and/or calculation tools for quantitative key performance indicators herein and sources of conversion factors are all explained in the definitions of the report.

Balance: This report shall provide an unbiased picture of the environmental, social, and governance performance of our Group during the reporting period. It should avoid selections, omissions, or presentation formats that may inappropriately influence the decision or judgment of report readers.

Consistency: The statistical methodologies applied to the data disclosed in this report shall be consistent.

Description of data:

Unless otherwise stated, the amounts in this report are denominated in Renminbi ("RMB"). In addition to the data of the last report, the scope of this report is expanded to include data of six new indicators relating to product responsibility and one new indicator relating to community investment.

Form of publication:

This report is published online and prepared in both Traditional Chinese and English. The online version is available on the website of The Stock Exchange of Hong Kong Limited (the "Hong Kong Stock Exchange") at www.hkexnews.hk.

60

Environmental, Social and Governance Report (Continued)

ESG Management

• ESG governance structure
  Given its emphasis on environmental, social and governance ("ESG") works, our Group has established a top- down ESG governance structure.
  The board of directors (the "Board") of our Group is responsible for managing and deciding ESG issues, reviewing material ESG issues, monitoring the implementation of ESG works, as well as reviewing and approving information disclosed in the Environmental, Social and Governance Reports. The report is published upon review by the Board.
  Our Group has established an ESG working group led by the Investor Relations Department, members of which include the senior management and the person-in-charge of ESG issues in each department. The ESG working group is responsible for performing and facilitating ESG works, including the establishment and updating of the ESG indicator system, the evaluation and determination of our Group's exposure to environmental, social and governance risks, the formulation and implementation of corresponding measures, etc.
  For more details about our Group's corporate governance, please refer to the Corporate Governance Report.
• Stakeholder communication
  Our Group considers stakeholder communication to be an important method for improving ESG works. Our Group has respected the opinions of stakeholders and maintained constant communication with stakeholders. Diversified communication channels have been established for the purposes of understanding stakeholders' expectations and demands and providing timely responses to stakeholder feedback. We have prepared a stakeholder communication chart from the perspective of sustainable development to provide a basis for the identification of material issues of our Group.

KOOLEARN TECHNOLOGY HOLDING LIMITED ANNUAL REPORT 2020

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Environmental, Social and Governance Report (Continued)

Stakeholders	Communication channels	Issues of concern
Government	•	Regular communication	•	Compliance with laws
	and regulatory	•	Regular report and information	•	Payment for tax pursuant to laws
	authorities		disclosure	•	Support to economic development
				•	Cultivation of teaching talents
				•	Protection of intellectual property rights
				•	Anti-corruption
				•	Green development
Shareholders	•	Regular report and information disclosure	•	Compliant operation
		•	Investor meeting	•	Return on investment
		•	Results press conference	•	Corporate governance
		•	Results roadshow	•	Corporate development strategies
		•	Official website
		•	Teleconference
Customers	•	Communication during daily service	•	Information security and privacy
			provision		protection
		•	Customer satisfaction survey	•	Well-qualified teacher team
		•	Official website	•	High-quality courses and services
		•	Customer service hotline and platform	•	Protection of customers' rights and
					interests
				•	Stable and fast network connection
Suppliers and	•	Public tender	•	Fair and open procurement
	business	•	Satisfaction survey	•	Win-win cooperation
	partners	•	Supplier meeting
		•	Routine communication
Employees	•	Regular meeting	•	Protection of employees' rights and
		•	Staff training		interests
		•	Employee care event	•	Salaries and benefits
		•	Web portal, WeChat official account, etc.	•	Career development and training
Community and	•	Public media	•	High-quality educational resources
	media	•	New media platform	•	Promotion of universal education
		•	Press conference	•	Public welfare in the community
		•	Public welfare and charitable event
Environment	•	Green office	•	Energy conservation
		•	Environmental information disclosure	•	Reduction of emissions
		•	Environmental promotion event

62

Environmental, Social and Governance Report (Continued)

• Identification of material issues
  Considering the importance of environmental, social and governance issues to stakeholders and the significance of the issues to the environment and society, our Group has evaluated material environmental, social and governance issues related to our businesses and has selected a total of 25 issues of concern by stakeholders in accordance with the Environmental, Social and Governance Reporting Guide in Appendix 27 to the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited and international standards. A materiality matrix was developed as a basis for our Group's attention to and disclosure of ESG issues.

High

Impacts on stakeholders

	Promotion of universal education	High-quality courses and services
			Well-qualified teacher team
	Information security and privacy protection	High-quality educational
		Stable and fast network connection	resources
		Salaries and benefits		Protection of customers'
Compliance with laws		right and interest
Payment for tax pursuant to laws	Cultivation of teaching talents	Compliant operation
Green development	Anti-corruption
	Protection of employees'	Protection of intellectual
Reduction of emissions	rights and interests	property rights
Energy conservation	Career development and training
Corporate governance
		Corporate development
Support to economic	Win-win cooperation	strategies
	Return on investment
development
Fair and open procurement

Public welfare in the community

High

Impacts on businesses of the Company

1. Green Development

1.1 Emission management

Our Group is not involved in large-scale production and pollutant emission given its primary focus on the education industry. In strict compliance with the Environmental Protection Law of the People's Republic of China, the Law of the People's Republic of China on the Prevention and Control of Environmental Pollution by Solid Waste and other national laws, regulations and policies, our Group has formulated the Regulations on Management of Office Environment to manage various types of emissions. While ensuring that emissions such as wastewater, hazardous and non-hazardous wastes are disposed of in compliance with requirements of municipal governments, our Group reduces the generation of emissions and greenhouse gases by controlling and minimising resource consumption at source, which sufficiently reduces the impact caused by the business operations of our Group to the ecological environment.

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63

Environmental, Social and Governance Report (Continued)

During the reporting period, our Group was not involved in any major incidents of violation of laws and regulations in connection with environmental and ecological issues.

Management of	Our greenhouse gas emissions mainly arise from the daily use of electricity by offices,
	greenhouse	outsourced heat used for office heating and indirect greenhouse gas emissions from
	gas emissions	business travel. Our Group does not own or control any direct emission sources such as
		vehicles, generators and gas cookers, and neither does it use fuels such as coal, gasoline,
		diesel, natural gas, etc. Hence, there is no direct greenhouse gas emissions.

We have taken multiple measures to reduce the generation of greenhouse gases in the course of our operations:

• During the reporting period, particularly during the COVID-19 outbreak, we proactively promoted working from home by utilizing video conferences and teleconferences, which resulted in fewer business by employees and thereby reduced greenhouse gas emissions generated from business travel.
• We encourage employees to take public transport.

Management	Our wastewater discharge only involves domestic sewage produced from day-to-day
	of wastewater	office operation, which we are not authorised to directly deal with and which fall	under
	discharge	the centralised management of municipal governments. Moreover, we enhance the
		management of water resources in offices to minimise waste and actively implement
		water-saving measures to reduce the generation and discharge of sewage.
Management	The hazardous wastes generated in the course of our operations are mainly all kinds of
	of hazardous	obsolete electronic equipment arising from the day-to-day operation of offices, including
	wastes	servers, computer mainframes, monitors and laptops as well as toner cartridges and ink
		cartridges used for printers.
		When we deliver hazardous wastes to a qualified third-party professional company for
		processing, we well select those with value for recycling and reuse in order to	reduce
		waste generation:

• Obsolete electronic products that do not contain confidential information and cannot be recycled are delivered to a third party professional company for processing.
• Usable old computer monitors, memory banks and hard drives that do not contain confidential information are recycled and reused.

Management of	The non-hazardous waste we generate consists mainly of office waste paper and general
	non-hazardous	domestic waste produced during our day-to-day office operations, which are all delivered
	wastes	to the property management company for centralised processing. We use less paper by
		facilitating electronisation and encouraging repetitive use to reduce the production of non-
		hazardous wastes.

64

Environmental, Social and Governance Report (Continued)

Table of key performance indicators - Emissions:

Indicators	Unit	FY 2020	FY 2019
Office sewage discharge	(m3)	1,735.70	1,348.95
Scope 2: Greenhouse gas emission from
indirect sources	(tCO2e)	1,293.56	1,440.55
Total greenhouse gas emission	(tCO2e)	1,293.56	1,440.55
Greenhouse gas emission per capita	(tCO2e/person)	0.09	0.23
Generation of electronic waste	(kg)	3,533	6,906
Disposal of obsolete microcomputer (mainframe)	(quantity)	125	265
Disposal of obsolete monitors	(quantity)	128	348
Disposal of obsolete laptops	(quantity)	57	84
Disposal of obsolete servers	(quantity)	0	78
Disposal of obsolete printers	(quantity)	14	6
Disposal of obsolete toner and ink cartridges	(quantity)	1,180	450
Disposal of other obsolete electronic equipment	(quantity)	40	146
Generation of electronic waste per capita	(kg/person)	0.26	1.11
Use of office paper	(tonne)	14.12	21.06
Use of office paper per capita	(kg/person)	1.03	3.38

Notes:

1. Greenhouse gas measurement is based on the 2006 IPCC Guidelines for National Greenhouse Gas Inventories and Fifth Assessment Report 2013 of Intergovernmental Panel on Climate Change (IPCC), etc. The electricity emission factor refers to the 2017 Emission Factors for Purchased Electricity within Mainland China as published by the Department of Climate Change under the Ministry of Ecology and Environment of the People's Republic of China.
2. The volume of sewage discharge is calculated according to the amount of water used. The sewage discharge coefficient is based on GB50318-2017National Standard for Urban Drainage Works Planning Specification of the People's Republic of China and relevant documents of the National Bureau of Statistics of the People's Republic of China.
3. Disposal of obsolete toner and ink cartridges used in offices significantly increased during the reporting period due to the growing number of employees and business dealings resulted from our business expansion.

1.2 Conservation of resources

Despite being an office-type company not involving massive consumption of energy, our Group pays particular attention to efficient use of energy and resources and strictly abides by the Environmental Protection Law of the People's Republic of China, the Energy Conservation Law of the People's Republic of China and other national laws, regulations and policies. During the reporting period, our Group was not involved in any material incidents of violation of laws during use of energy and water resources.

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65

Environmental, Social and Governance Report (Continued)

The resources used by our Group consist primarily of electricity used in day-to-day office operations, outsourced heat for office heating, and water supplied by municipal water sources.

As a company relying heavily on human resources, our Group divides resource conservation into two major parts. Firstly, it maintains close connection with property management companies to ensure a stable supply of electricity and water and avoid wastage caused by malfunction. Secondly, it develops a green office culture of conservation by promoting resource conservation to employees. As required by the Regulations on Management of Office Environment and given our insistence on starting from the little things, we have implemented a variety of measures to save resources and improve efficiency of resource use. Energy conservation and emission reduction are made possible as energy conservation and environmental protection principles are embedded into our everyday operations.

Energy conservation		We advocate electricity saving, put up electricity saving signs and green
		office posters, and promote energy conservation habits through daily
		communications to raise employees' awareness of environmental protection
		and improve their day-to-day practices.
		Energy-efficient cooling equipment and other technological means are used in
		our own data centre to reduce energy consumption. Its energy consumption is
		lower than the average level of general data centres in the PRC.
		Priority is given to energy-efficient products, such as energy-efficient
		refrigerators, LED lamps and air-conditioners, during procurement of equipment.
		We avoid energy waste by requiring employees to turn off the power and
		not to keep lights on before leaving the office, and to switch off electronic
		equipment or turn on the power saving mode in time to reduce standby power
		consumption during non-office hours.
Water conservation		We put up water conservation slogans in office area, toilets, pantries, etc. to
		enhance the water saving awareness of employees;
		We check the faucets, water pipes and water dispensers regularly to prevent
		water waste caused by equipment damage.
Paper saving		We actively promote paperless office and build online management systems
		and platforms to reduce paper used during the review and approval process;
		We promote paper saving, advise employees to use double-sided printing and
		reuse one-sided paper when printing internal communication documents, and
		require employees to place printer paper neatly and separate reusable paper from
		white paper to avoid damage and waste paper caused by disorderly placement.

66

Environmental, Social and Governance Report (Continued)

Table of key performance indicators - Use of resources:

Indicators	Unit	FY 2020	FY 2019
Total electricity consumption	('0,000 kWh)	161.46	185.97
Consumption of outsourced heat	(million kJ)		1,093.56
1,419.22
Comprehensive energy consumption	(tce)	246.90	265.90
Comprehensive energy consumption per capita	(kgce/person)	17.92	42.65
Total water consumption	(tonne)	2,042	1,587
Water consumption per capita	(tonne/person)		0.25
0.15

Note:

Comprehensive energy consumption is calculated using the energy statistics calculation method of the National Bureau of Statistics of the People's Republic of China.

2. People-oriented Principle

2.1 Protection of employees' rights and interests

Our Group upholds the principle of equal employment, attaches importance to employees' rights and interests, and strictly complies with the requirements under the Labour Law of the People's Republic of China, the Labour Contract Law of the People's Republic of China, the Social Insurance Law of the People's Republic of China and other national laws and regulations. We have formulated comprehensive employment management measures and a sound salaries and benefits system to protect employees in the areas of recruitment, dismissal, working hours, leaves and other rights and interests. We value diversity whereby all employees are offered equal employment and development opportunities without being discriminated based on factors such as gender and age.

• Equal employment

We have formulated the Recruitment Management System to standardise the employee recruitment process which covers job opening announcements by a department, recruitment and selection, background investigation, employment approval and so on. To achieve better recruitment results and attract outstanding talent, we carry out recruitment on a fair basis. We treat every candidate equally in the recruitment process without setting discriminatory conditions on gender, age and other factors.

• Employee diversity

As an education company, talent is the key to our development. During the recruitment process, we attach significance to the diversity of applicants by encouraging people of different faculties, employment backgrounds and nationalities to file applications. When cultivating talent, we focus on providing more diversified cultivation plans and training courses to employees and encourage communications among employees of different backgrounds to stimulate creativity. During the reporting period, we continuously conducted the following:

• We attach great importance to the qualifications of our teachers. High standards are set for the qualifications, background and competence of our teachers. During society recruitment, we give priority to teachers with outstanding and professional capability, extensive teaching experience and integrity. In campus recruitment, we require applicants to have a bachelor's degree or above who, if employed, will be required to receive trainings on moral conduct, teaching contents and teaching ability.

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67

Environmental, Social and Governance Report (Continued)

• • We strive to develop a product specialist team, for the purpose of which we have employed product specialists and teaching specialists with rich experience in pedagogical research and development (R&D) and pedagogical approaches to monitor our products and teaching quality.
• Protection of employees' rights and interests

In accordance with the requirements of national laws and regulations, we have formulated management policies such as the Remuneration Administrative Measures, Attendance Management System and Administrative Measures for Annual Leaves and Rest Days to ensure that employees are provided with attractive remuneration packages, reasonable working hours and various welfare benefits, through which we stimulate their enthusiasm and productivity and promote the co-development of employees and our Group.

Remuneration system		We have established a remuneration structure covering basic
		salary, performance bonus, etc., and set up a multi-layered pay
		scale. A salary system has also been implemented for all salary
		ranks, under which the position of an employee in a salary range
		is determined based on his/her capability, experience and other
		factors.
Management of		A flexible working hours policy has been implemented. Based on
working hours		the needs of employees, we have also set up an irregular working
		hours policy as well as a comprehensive working hours policy,
		under which employees may apply for compensated leave or
		overtime pay if they work overtime.
		We provide paid annual leave, marital leave, bereavement leave,
		sick leave, casual leave, maternity leave and medical leave for
		employees in accordance with laws. We have also created special
		holidays, such as providing additional Spring Festival holidays for
		non-local employees.
Employee benefits		We make contributions to social insurances and housing provident
		fund for employees that have entered into labour contracts with
		us in accordance with laws and provide supplementary medical
		insurance to protect the labour rights and interests of employees,
		who may also enjoy a discounted rate when purchasing insurance
		for their children.
		We provide transport subsidies, meal allowances and
		communication fee subsidies for employees.
		We actively enter into cooperation with catering companies within
		the proximity of the company to provide benefits for employees
		such as meal discounts.

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Environmental, Social and Governance Report (Continued)

• Prohibition of child labour and forced labour

We strictly abide by the Labour Law of the People's Republic of China, the Provisions on the Prohibition of Using Child Labour of the People's Republic of China, the Law of the People's Republic of China on the Protection of Minors, the Trade Union Law of the People's Republic of China and other laws and regulations, and have established a series of measures to prohibit and prevent employment of child labour and forced labour, for example:

• Established recruitment information collection and approval procedures and required applicants to provide authentic and valid identification. The employment of minors is forbidden.
• Set up the Attendance Management System to reasonably stipulate the working hours of employees, and provide compensation for overtime work such as overtime pay or compensated leaves. Forced labour is forbidden.

During the reporting period, our Group was not involved in any incidents of violation of the codes, rules and regulations related to child labour and forced labour in China or places where it operated.

Table of key performance indicators - Employment:

Indicators		Unit	FY 2020	FY 2019
Total number of employees		(person)	13,777	6,235
Number of employees	Full-time	(person)	7,094	1,690
by type of employment	Part-time	(person)	6,683	4,545
Number of employees	Below 30	(person)	11,910	4,882
by age group	30-50	(person)	1,848	1,320
	Above 50	(person)	19	33
Number of employees	Male	(person)	4,390	2,868
by gender	Female	(person)	9,387	3,367
Number of employees	Beijing	(person)	4,490	6,192
by province	Tianjin	(person)	2,330
	Shandong	(person)	494
	Hubei	(person)	1,666	43
	Shaanxi	(person)	2,095
	Henan	(person)	1,102
	Others	(person)	1,600
Number and percentage	Staff	(person)	12,437	5,787
of employees by rank	Supervisor and
	manager	(person)	1,263	422
	Controller or
	above	(person)	77	26

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2.2 Value employees' development

We see employees as an important driver of corporate development. Adhering to the principle of co-development of the Company and employees, we assist employees in identifying their career path, provide employees with diversified and equal training and promotion opportunities and facilitate communication among employees of different backgrounds to stimulate creativity.

Employees are not subject to any change or discrimination in trainings and promotion due to their gender, rank, age and other differences, and their rights to have equal development are protected.

• Staff training
  We have developed policies like Training Management System and Administrative Measures for New Employee Training to specify the employee training system, training process management and evaluation system for training effectiveness. Apart from strengthening their working capability in the existing position, we also encourage employees to make plans to enrich their knowledge and skills and unleash their potential to improve on an ongoing basis, which contributes to the co-developmentof the Company and employees.

Comprehensive	We are committed to providing our employees with a wealth of learning
	hierarchical training	resources, and have established a comprehensive training system
	system	featuring clear targets, detailed plans, diversified content and follow-ups
		for all employees. Management, teachers, general staff and new staff
		are all provided with a full range of trainings including pre-employment,
		on-the-job, internal transfer and promotion trainings.
			Trainings for management: We provide management with
			trainings in the areas of management skills enhancement, personal
			improvement and leadership and CEIBS courses through dispatch,
			visits, study tours, and book lending, for example, leadership
			training, time management training and international advanced
			management experience training. These serve to enhance the
			innovation and sustainability of each business segment and
			facilitate our Group's formation of an excellent team of leaders and
			an echelon of reserve cadres.
			Trainings for the teachers: New teachers are required to receive
			teaching qualification certification training, teaching skills training,
			content development training, demo course training and mandatory
			course training on our online teacher training academy; we provide

senior teachers with various specially-designed training programmes to transform their roles from teaching into training and developing new teachers, which enables us to develop more and better teacher teams; and tutors learn how to effectively manage classes via the training programmes on our online teacher training academy.

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		Regular trainings: We provide regular practical trainings for all
		employees in the areas of professional skills and knowledge,
		general skills and knowledge, and licencing qualification by means
		of both internal and external teaching to allow employees to
		quickly understand all products and businesses of our Group and
		improve their productivity. Moreover, we support and encourage
		individuals to take continuing education courses. Our Group
		assists employees in obtaining their MBA and other professional
		qualifications by offering them with specialised trainings.
		Trainings for new employees: We have established a mentor
		training system. New employees are provided with induction
		training, vocational training and position	training by	means
		of face-to-face teaching, outward bound activities and online
		courses to help them comprehensively adapt to the new working
		environment and blend into the corporate culture.
Tailor-made employee	We	have	formulated target-oriented	training schemes	based	on our
training schemes	strategic	development needs and	job-specific	ability	requirements.
	We conduct a survey on training needs every year by handing out the
	Departmental Training Needs Form. We devise annual training schemes
	with reference to our Group's annual strategic goals and development
	plans, development needs of each business segment, staff functions
	and gap analysis to provide various trainings in line with the demands of
	employees and the development needs of our Group.

Evaluation of regular

• training
• effectiveness

We organise assessments regularly after the trainings to evaluate the effectiveness of training. Together with the reward and punishment measures established, we are able to encourage employees to improve their professional quality while obtaining constructive feedback about the effectiveness of trainings for the purposes of further optimisation of training content.

With respect to the teacher team, we have a general assessment system for reviewing teacher performance and rewarding excellent performance with incentives. The assessment indicators include student feedback, professional ethics, total class hours, contribution to content development and contributions to teacher training.

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• Appraisal and promotion of employees
  We are devoted to providing employees with a smooth career path and clear appraisal and promotion plans based on the principles of legality, fairness, competition, incentive, cost and transparency to facilitate the growth of employees.

Dual career ladder   system

• We have established a dual career ladder system focusing on two major categories, namely management and professional. Management refers to positions that specialise in administrative and managerial duties, while professional refers to positions that specialise in professional and technical duties.
• In order to help employees find the right career advancement direction, we have established a staff rotation mechanism to enhance employees' comprehensive capabilities and to facilitate their development.

Performance appraisal   system

• An employee performance appraisal is conducted annually, in which we assess employees' completion of performance targets set for their positions. We specify different key appraisal points for positions such as teachers and technicians based on their respective job types.

Table of key performance indicators - Development and training:

Indicators		Unit	FY 2020	FY 2019
Percentage of employees trained	(%)	94	82
Percentage of employees	Male	(%)	92	84
	trained by gender	Female	(%)	94	80
Percentage of employees	Staff	(%)	93	81
	trained by rank	Supervisor and manager	(%)	96	87
		Controller or above	(%)	86	77
Total number of employee
	training sessions		(session)	1,101	90
Total number of employees
	trained		(person-time)	146,422	7,240
Average training hours of
	employees		(hour/person)	37	4
Average training hours of	Male	(hour/person)	35	4
	employees by gender	Female	(hour/person)	38	4
Average training hours of	Staff	(hour/person)	39	3
	employees by rank	Supervisor and manager	(hour/person)	15	13
		Controller or above	(hour/person)	27	16

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2.3 Care about the health and life of employees

As employees are our greatest resource, we are committed to providing employees with a healthy, safe and people-oriented corporate culture and environment. Insisting on the people-oriented principle, we proactively organise employee care activities, attach significance to communications with employees and care about the work, life, physical and mental health of employees. A wide range of employee activities are conducted to build an enthusiastic and harmonious working environment where employees become united and are dedicated to striving for better career development. This in turn strengthens the cohesiveness of the Company and the sense of belonging of employees. In addition, we pay attention to the safety of our office premises and basic facilities with an aim to create a comfortable working environment for employees.

• Care for employees

Employee		We collect opinions from employees on the management,
engagement		systems and policies of our Group through the employee feedback
		collection	mailbox, employee satisfaction	surveys, employee
		chat rooms and other channels with an aim to promote mutual
		communication and provide timely response to the opinions and
		demands of employees, and effectively address their difficulties.
		We build communication channels between leaders and employees
		by conducting annual symposiums, debriefing meetings,
		management communication meetings, etc.
		A regular communication mechanism supported by routine trainings
		has been formed.
Care for		We have	formulated the Interim Measures	for Administration

• employeesof the Employee Care and Mutual Aid Fund to provide active assistance to employees and their families with serious illness and support employees with familial financial difficulties;
• • Corresponding benefits are granted to employees for marriage, childbirth and birthdays.
  • We negotiate with external business operators to obtain discounts for employees.
  • As we care for our female employees, we introduced menstrual leave for female employees and provide facilities such as breastfeeding rooms and refrigerators for the convenience of breastfeeding employees.

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Celebration of	 We prepare holiday gifts for employees at traditional Chinese
festivals	festivals such as the Spring Festival, Dragon Boat Festival and
	Mid-Autumn Festival.
	 We have organised featured activities at special festivals, such
	as the "Today, I Confess My Love for You" message writing
	campaign on the WeChat platform on Valentine's Day as well
	as celebration activities for the Children's Festival, Mid-Autumn
	Festival and Women's Day.
	 During the COVID-19 outbreak, we organised a writing campaign
	called "Meet in Words - Send Warmth and Love to Your Pals in
	Wuhan", in which we encouraged staff members to send appreciation
	or inspirational messages to our staff members in Wuhan.
C u l t u r a l a n d	 Every year, we regularly organise travel activities for all teachers
sports	and staff and provide them with certain subsidies.
activities	 We regularly organise team building activities for employees and
	receive favourable feedback from them.
	 We organise sports events such as badminton competitions and
	swimming galas to encourage employees to strike a proper balance
	between work and rest. We seek to ensure that employees are
	physically and mentally happy and therefore have higher working
	efficiency.

Case: "Meet in Words - Send Warm and Love to Your Pals in Wuhan" writing campaign

On 14 February 2020, which was the Valentine's Day, when most parts of the country were still under lockdown due to the COVID-19 outbreak, the Company organised a message writing campaign for staff. Through this campaign, we expressed gratitude to the staff members in Wuhan for their continuous dedication to the Company and the local development and their efforts contributed to the country during the severe epidemic outbreak.

We sent our blessing, encouragement and care through words and the internet to our pals in the Koolearn Wuhan Base. We managed to meet in words despite the outbreak. This campaign received overwhelmingly positive feedback from our staff members, showing that the lockdown in Wuhan was unable to block our care and blessing.

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Environmental, Social and Governance Report (Continued)

• Health of employees
  As we care about the physical and mental health of our employees, we provide them with a safe and healthy working environment and adopt a number of measures to safeguard their health in strict compliance with the Law of the People's Republic of China on Prevention and Control of Occupational Diseases and relevant laws and regulations.
  In the face of the global outbreak of COVID-19 in 2020, to act in line with the national epidemic prevention measures, the Group postponed the resumption of work during this critical period and prioritised remote work-from-home arrangements upon the resumption of work to mitigate the risk of infection.

Care about		We placed green plants and installed air purifiers in the office,
	employees'		and newly renovated offices are put into operation only after
	occupational health		being confirmed safe upon inspection	for hazard factors
			with the aim of providing employees with a healthy working
			environment.
			We regularly arrange medical examinations for employees
			and provide them with professional medical and health
			services. 100% of our employees have been provided
			medical examinations by company during the reporting
			period.
			We organise lectures with the theme of professional health
			to enhance employees' occupational health awareness.
			We provide employees with activities	and facilities such
			as boxing classes, neck and shoulder pain classes, free
			gymnasium benefits, etc. to reduce suffering experienced as
			a result of prolonged sitting periods.
Proactive epidemic		We flexibly adjusted the time of resumption of work and
	prevention		made remote work-from-home arrangements to mitigate the
			risk of infection according to the epidemic prevention level in
			the cities where we operated.
			Regular reports on the body temperature and health condition
			of employees were made according to the community
			epidemic prevention requirements.
			We stored necessary medicines and preventive supplies
			which were provided to the frontline epidemic prevention
			staff and other employees of the Company.
			We provided counselling to employees in high risk regions to
			safeguard their physical and mental health.

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• Safety of employees
  We build a safe and healthy working environment for employees. We have formulated the Safety Management System to specify the departments responsible for safety management and supervision, various facility safety management matters, fire safety management matters, safety education and training, safety accident handling and reward and punishment mechanisms, etc.

Safety management		A safety working group has been established under all
	and supervision		departments to implement the accountability system. The
	system		department heads are the first individuals in charge of the
			safety works in their respective department.
			An emergency coordination working group and a work safety
			supervision team have been established as standing units at
			the Group level and are led by the CEO of the Group. They
			are in charge of coordinating the handling of major safety
			incidents and emergencies, and are responsible for guiding
			and supervising safety management.
			The Human Resources and Administration Department is the
			competent department for supervising our Group's safety
			works. It is responsible for conducting safety management
			promotions and trainings, guiding and supervising the
			implementation of safety management and preparation of
			safety management plans of all departments, and assisting in
			handling all safety accidents.
			Team or group members of each branch maintain
			communications with the local government and the property
			management company of the office area, and take part in
			the safety inspection and maintenance of infrastructure and
			equipment as well as relevant drills in compliance with local
			requirements.
			Fire safety inspections and property safety inspections are
			regularly conducted to detect and eliminate potential safety
			hazards in a timely manner.

Safety education   training

• We regularly organise safety management trainings, such as earthquake and fire safety drills, safety equipment operation, first aid measures and practices, to help employees become familiar with the safety management systems, master first aid knowledge, and learn methods and ways of prevention, self-rescue, rescue assistance, escape, and emergency evacuation.

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Table of key performance indicators - Health and safety:

Indicators	Unit	FY 2020	FY 2019
Number of people suffered from
work-related injuries and fatalities
in the past three years	(person)	1	0
Number of days lost due to
work-related injuries	(day)	23	0

Note:

During the reporting period, an employee fell down and suffered from bone fracture in a staff outward bound activity. The Company processed the work-related injury verification and filed a social insurance claim. Safety promotion was also conducted in the Company to avoid similar accidents.

3. Win-win Cooperation

3.1 Supplier management

Our Group is dedicated to facilitating the sustainable development of suppliers. We have formulated and implemented the Supplier Management Implementation Rules, pursuant to which we continue to optimise the supplier management procedures in practices and formulate comprehensive standards for supplier admission, evaluation, etc. Provided that product quality is guaranteed, we continue to procure suppliers to perform environmental and social responsibilities and endeavour to improve communication with and the capability of suppliers.

Continuous		Supplier admission: we have in place a specific inspection team which
	optimisation		conducts pre-review,on-site inspection and evaluation of new suppliers in
	of the supplier		respect of their qualifications and operational capabilities so as to strictly
	management		ensure the quality of suppliers.
	system
			Establishment of supplier database: We have established a supplier
			database. The supplier list is subject to dynamic updates according to the
			results of the regular supplier evaluations; based on such evaluation results,
			we have established a supplier blacklist, pursuant to which we will terminate
			cooperation with suppliers that have major problems within a specified period
			and will not make procurements from them for three years.
			Supplier evaluation: We evaluate suppliers in areas of quality of goods
			supplied and services, financial management, safety, environmental protection,
			etc. through daily evaluations and regular evaluations. Unqualified suppliers will
			be required to make rectifications within a specified period.

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Procuring		Suppliers who we cooperate with shall sign a social responsibility commitment
	suppliers		letter, which ensures that they will comply with the environmental protection
	to perform		policies and various national laws and regulations.

• environmental
• and social
• responsibilities

Supplier		If circumstances permit, we will regularly convene supplier meetings to explain
	communication		the Company's procurement policy, future business development plan and
	and capacity		commend outstanding suppliers with an aim to facilitate the establishment of
	development		long-term cooperative relationships;
			We regularly carry out technology and management exchange activities to help
			suppliers improve their comprehensive capabilities.

Table of key performance indicators - Supply chain management:

Indicators		Unit	FY 2020	FY 2019
Total number of suppliers	(quantity)	81	41
Number of suppliers	Beijing	(quantity)	54	35
	by geographical
	region	Other regions	(quantity)	19	6
Number of suppliers where the practices
	are being implemented	(quantity)	81	41
Annual evaluation ratio of suppliers where
the practices are being implemented	(%)	100	100

3.2 Agent management

We strive to create a positive and healthy market order by managing agents in a stringent manner. The Management Regulations for the Operation of Agents have been formulated and implemented to regulate various sale and promotion behaviours during the sale process to protect the legal interests and rights of agents to the greatest extent possible and promote the win-win situation between the industry chain and the industry.

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Regulating the		Cross-regionsales: Cross-region sales by specific business agents in
	market order		unauthorised regions are prohibited.
			Brand management: All agents are required to use the unified name of
			"Koolearn" or "Koolearn Online Class" for promotion and sales. Any addition to
			or reprocessing of the trademarks and words is forbidden.
			Sales promotion: The selling prices of the courses shall be the same as those
			shown in our official website. Improper behaviour, such as customer snatching,
			is prohibited.
Strengthening		Regional heads regularly visit the offline service centres to conduct reviews on
	supervision		marketing, services, product price, etc. in accordance with the Management
	ability		Regulations for the Operation of Agents.

• Our Company has set up a whistleblowing and complaint mailbox ([e-mail]). Corresponding punishments will be imposed on agents which are involved in any non-compliant sale behaviours, such as selling a product at a price lower than that shown in the office website.

4. High-quality Services

4.1 Provision of high-quality education services

Our Group is a leading online education service provider in China. We primarily offer online education courses to students covering a full spectrum of ages in three core segments - college education, K-12 education and pre-school education. In addition, using our online education modules, we also provide educational content packages to schools and institutional customers such as universities, public libraries, telecom operators and online video streaming providers. Our Group strives to provide first-rate education services to all students in strict compliance with the Law for Promoting Private Education of the People's Republic of China, the Opinion on Supervising After-schoolTutoring Institutions of the General Office of the State Council and other laws and regulations. By virtue of our strong content development capabilities, well-qualified teacher team and outstanding technology platform, we provide high-quality courses and satisfying services to users.

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• Management of the teaching platform

Focusing on user experience, our Group endeavours to create a stable, convenient and efficient online learning platform. We have formulated the Comprehensive System & Procedures for KOOLEARN Platform Quality Management, under which we specify clear rules and policies and implement systems to enable the stable operation of the online platform and ensure the course videos play smoothly, so that users are able to have a high-quality learning experience.

Ensuring stable 	We adopt ISO9001 quality system standards as the quality assurance
	operation of	basis for our platform development. All-inclusive quality management
	the platform	standards covering the entire process and involving all staff are adopted
		during platform development.
		The product platform is embedded in the management and surveillance
		backstage, enabling comprehensive monitoring of the server, operational
		system, middleware and applications from the operation level and
		application level. Operation and maintenance staff and developers are
		able to access a wide range of monitoring services, which effectively
		reduces the risk of failures and speeds up our handling of incidents.
		The platform adopts a sophisticated multi-layerservice-oriented
		distributed architecture, which ensures that the platform maintains
		strong stability and load capacity during peak access times as the
		access level, service level and data level may be quickly expanded.

Ensuring smooth  We reserve a live streaming room for each teacher before the class to

  broadcasting improve the live streaming environment.   of the courses

• Our courses are live streamed through the technology platform, and technicians and educational administration staff supervise the whole process to ensure the smoothness, allowing students to have better experiences.
• Thematic video courses are recorded in a professional studio equipped with professional photography equipment and specialists. Teachers will conduct rehearsals before the official recording, based on which the video team will adjust the setting and parameters. In the official recording, professional camera operators will monitor the whole process to ensure the quality.

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Environmental, Social and Governance Report (Continued)

• Management of teaching quality

Upholding the principle of utilising different teaching methods for different students, we provide users with well-designed courses to comprehensively ensure our teaching quality. Each course offered on the online platform passes our stringent review to enable students to receive high-quality course content. With our continuous efforts, the teacher team has developed into one with excellent quality. In addition, we provide students with carefully prepared supplementary teaching materials, so that students may better master the knowledge learnt in the courses.

Course content  Selection of course topics: Our selection of course topics is based on the overall product planning and market demand. The topics are determined upon discussion, elimination and narrowing down.

• Course planning: The syllabus and curriculum are formulated by the teaching department. Teachers prepare lessons, design teaching processes and produce courseware according to the curriculum, course features and subject rationale. The curriculum is subject to inspection and verification by the educational administration team.
• Course review and approval: After an online course is recorded, the educational administration staff will bookmark the video and review the content of the courses. If any content does not meet the standards, re-recording or supplementary recording is required. Editing and post-production work for the video will be done by the professional video team to ensure the quality of video courses.

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Teacher team		Trainings for teachers: These trainings include pedagogical R&D
		training and time-sensitive trainings. Upon receiving training conducted
		by the pedagogical R&D team of the subject and through continuous
		MOOC recording and improvement, teachers produce content with
		their own personalised features. One to two sessions of time-sensitive
		training are arranged every week to nurture a teacher team with
		integrated qualities and comprehensive development. The training
		content includes current changes in the development of the education
		and training industry, personal development direction and planning of
		teachers, etc.
		Competency tests for teachers: The person-in-chargeof the
		pedagogical R&D team is responsible for leading the long-term
		preparation and exercise work. Each pedagogical R&D team will arrange
		regular tests in stages based on its own circumstances to ensure the
		competency of teachers.
		Review of course quality: We assess the teaching level and student
		management of teachers by reviewing the course video playback and
		provide feedback regarding each part; we also review the recorded
		videos of teachers who have not yet give a lesson and provide
		guidance and feedback accordingly. The teaching ability and teaching
		administration of teachers are effectively improved to create a
		comfortable and efficient classroom experience for students.
Teaching		Electronic lecture notes are provided for all courses and paper lecture
assistance		notes are provided for some courses. The electronic version of the
		lecture notes is provided by the teaching department and is uploaded
		by the educational administration department to the student backstage
		platform, while paper lecture notes which are required to be delivered
		to students through the logistic department are carefully typeset and
		proofread by typesetters and designers of the educational administration
		department.

• Quality management of marketing services

We recruit our students primarily through online sales. Students can purchase our courses and products on the official website of Koolearn, as well as through our flagship stores on Tmall.com and JD.com. We also acquire students from channels such as brand and in-feed online advertising, traffic conversion from entry courses, word-of-mouth referrals, marketing on new media and offline experience centres. In order to standardise our student recruitment, we uniformly design various promotional materials and reasonably regulate advertisements and promotions to prevent false publicity in strict compliance with the Advertising Law of the People's Republic of China and other laws and regulations. We set up product pricing procedures in accordance with relevant national

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standards and provide fixed prices across the country as well as the same concession policies and discount criteria to ensure the uniform and transparent pricing of our products. In addition, we have

formulated the Quality Control of Marketing Services - Quality Inspection Redline Rules to specify

penalties regarding non-compliant sales activities to cultivate a fair, healthy and positive sales environment.

• Communications with customers

To gain an in-depth understanding of the demands of customers and assist each student to attain expected results, we expand our responsible teaching attitude outside of lessons. Our Group maintains communications with students and parents on an irregular basis by various means and procures students to develop and improve their qualities and academic results, which results in parents placing more confidence in our Group.

Online channels		Questionnaires: We collect student information in the preparation
		stage before the commencement of a course to help teachers quickly
		understand their students. We collect information about the satisfaction
		level of parents and students in the conclusion stage of the course for
		the purpose of improving the courses and services in the next level.
		Live streaming courses: We live stream our courses from beginning to
		end to help parents keep track of the courses.
		Phone survey: We utilise one-to-one phone surveys to shorten the
		distance between teachers and parents and	students, understand
		the satisfaction level of customers towards their experience and help
		student solve problems.
		WeChat official account: We publish information related to study
		consultation, activity promotion, production	introduction, etc.
		through our WeChat official account, which concurrently serves as a
		communication channel for students and parents.
Offline channels		Parent meetings: Face-to-face meetings with parents are conducted
		to discuss the basic information of teachers, analyse tests and learning
		performances as well as common questions and solutions.
		Offline meetings: We meet with parents and students on a one-to-one
		or one-to-many basis for discussion of learning performance,
		formulation of study plans, analysis of test papers, interactions, etc.
		Seminars: We convey our cutting-edge educational concept through
		seminars. We conducted a total of 261 sessions of seminar in FY 2020,
		including 68 sessions about inspirational messages, 80 sessions about
		family education and 113 about academic subjects.

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• Handling of complaints

After sincerely listening to the feedback and opinions of customers, we made continuous improvements and optimise our management standards to enable customers to have a higher satisfaction level. Our Group has formulated and implemented the Regulations on Handling of Complaints, pursuant to which all complaints shall be handled on the day they are received until completion and we will immediately provide customers satisfactory replies.

Complaint channels	Measures for handling complaints
	Service hotlines		Share user feedback every day in the form of
	Complaint emails		daily report;
	Website messages		Provide standard answers to enquires
	Online feedback on the course page		received by the customer service department
			every week;
			Publish trending questions and solutions every
			week;
			Analyse negative feedback from users every
			week to identify areas of improvement
			regarding internal services and products based
			on data on negative feedback and update
			the information to the internal server of the
			customer service department and responsible
			teachers in the business department.

4.2 Ensuring information security of customers

As an online service provider, our Group pays significant attention to information security and improves our data security through multiple protective measures to safeguard the security of confidential information of customers. In strict compliance with the Law on the Protection of Consumer Rights and Interests of the People's Republic of China, the Decision of the Standing Committee of the National People's Congress on Strengthening Information Protection on Networks, the Provisions on Protecting the Personal Information of Telecommunications and Internet Users and other laws and regulations, we duly carry out information security related works, put in place accountability for information security and establish a sound management system. We have formulated internal policies, such as the Regulations on Data Security Management and Measures for Management and Protection of Information Security, to require those who access and use data to comply with national laws and regulations as well as requirements of the Company in relation to data security and confidentiality to be responsible for the protection of data security and the prevention any loss and leakage of data. We apply certain security technologies and procedures and conduct monthly inspections on data security to eliminate various types of information security risk, fully protect the security of our information systems and enable them to operate efficiently.

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Protection of		We establish firewalls, network security isolation and secure routing protocol to
	system		prevent malicious code injection, and utilise prevention and control tools to scan
	security		hacker tools.

• We conduct data desensitization for key data during the development and testing environment.
• We enable fault tolerance and disaster recovery functions for system data to enable data to be quickly recovered after being damaged or influenced.
• We separate confidential R&D information and specify the clearance level of all types of staff for accessing data and documents as well as their authorisation to share data and information.
• Intranet VPN is used in the core system for encrypted access. We have strict approval processes for activation and deactivation of authorisation, control the export of data, and we encrypt key information.

Protection of		When customer information is entered into the database, we perform
	customer		field-level encryption on sensitive data (especially contact information).
	privacy

• Sensitive data is transmitted after encryption. Measures are taken to protect systems that store sensitive data in the aspects of network, application and data, especially those involving personal information and data of customers or employees.
• Databases storing sensitive data are included in the database security audit and monitoring system. Access to and operation of the databases is subject to security audit and monitoring.
• A sound information security and confidentiality management system is established to realise an accountability policy for information security and confidentiality and enhance the security awareness of teachers who shall spontaneously abide by the relevant rules of the Company and not divulge or disseminate customer information.
• We nurture the data security awareness of employees and require them to receive trainings and assessments related to security capabilities. A confidentiality agreement is also entered into with employees to specify their job duties and code of conduct. In case of any violation of the confidentiality agreement, we will immediately terminate labour or cooperative relationships with the employees concerned who will also be held accountable for relevant legal responsibilities. We also require employees to keep personal information which they have handled confidential after leaving the position.

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4.3 Enhancing product innovation and R&D

• Innovation and R&D
  Our Group strives to keep introducing innovative products and services to improve the learning experience of students in a revolutionary way and satisfy the diverse needs of users. We have established a scientific innovation incentive system and have provided employees with multi- dimensional innovation platforms and opportunities to nurture creativity and facilitate the continuous improvement of our products and technology services.
• • A scientific assessment system is established to provide incentives to developers based on the principles of objectivity, fairness, openness and focus on actual performance. We have formulated the Intellectual Property Right Reward and Punishment System. An employee whose invention at work is patented will be granted an inventor or designer reward.
  • We actively encourage employees to conduct innovative research and experimentation to the extent where costs and risks are controllable. Developers are given sufficient autonomy to individually organise seminars and formulate R&D plans, etc.
  • We provide training opportunities to developers, including regular internal trainings and brainstorming activities, and organise external exchange activities for brainstorming to strengthen their innovation capabilities.
  • We organise internal innovation competitions such as "1024 Programmers Festival" to encourage employees to innovate.

Case: Launch of the livestreaming platform

On 29 October 2019, after 21 weeks of hard efforts, our Group launched the first phase of its livestreaming platform, which is the most important self-developed R&D project in the year. With clear targets and determination to overcome difficulties and challenges, our product, development and test teams have made tremendous efforts to realise the launch of the live streaming platform over all those months. This platform has received positive feedback from users of trial courses immediately upon the launch.

Case: Launch of the integrated educational administration project

During the reporting period, our Group launched the integrated educational administration project, which involved 15 peripheral systems and the participation of more than 160 employees in product, R&D and testing positions. The establishment of an integrated educational administration foundation was completed following the simultaneous launch of the course development, class scheduling and subsequent registration systems. The integrated educational administration system is composed of three modules, namely "course development, class scheduling and subsequent registration", and may help educational administration staff and teachers to quickly and carefully develop new courses, flexibly schedule classes and send notifications on subsequent courses based on the actual situations of students. As such, the working efficiency of teachers and staff and the course registration experience of students are significantly improved.

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Environmental, Social and Governance Report (Continued)

• Protection of intellectual property rights and patents
  Our Group pays significant attention to the protection of intellectual property rights. In strict compliance with the Copyright Law of the People's Republic of China and the Patent Law of the People's Republic of China, our Group has formulated and implemented the Administrative Measures for Patent, the Administrative Measures for Copyright, the Intellectual Property Rights Management System, the Reward and Punishment System for Intellectual Property Rights and the Confidentiality Agreement on Intellectual Property Rights to protect trademarks, copyrights, trade secrets and other intellectual property rights by treating them as important assets of the Group. We fully respect the intellectual property rights of our business partners and avoid any acts of infringement.

Protection of		We have entered into employment or service agreements with our
	intellectual		teachers, which acknowledge that we own the intellectual property
	property rights		rights developed by the teachers in connection with their employment
	of our		with or services for us.
	products		Our live and pre-recorded videos, textbooks and teaching materials are all
			embedded with the watermarks of "Koolearn" and "新東方在綫", which,
			together with our proprietary DRM system, protects our copyrights and
			educational resources.
			We prohibit downloads of our pre-recorded or live videos by
			technological means.
			We implant a hidden watermark in our course videos to combat
			infringement. If a video is illegally copied, we can extract the invisible
			watermark from the illegal video to take action against the infringement.
			We have engaged a qualified external service provider to monitor any
			infringement or misappropriation of our intellectual property rights. We will
			take actions such as complaints, administrative measures and/or judicial
			procedures, depending on the level of infringement.
Protection of		We only use pictures from the photo gallery of our partners or those
	the intellectual		created in-house to avoid infringement of intellectual property rights.
	property rights
	of our
	business
	partners

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Table of key performance indicators - Product responsibility:

Indicators		Unit	FY 2020	FY 2019
Number of customer complaints	(case)	617	435
Percentage of customer
	complaints being handled	(%)	100	100
Service satisfaction		(%)	95	96
Number of members of the R&D team	(person)	956	437
R&D expense		(RMB million)	317.10	147.52
Percentage of R&D expense over
	operating income		(%)	44.00	16.10
Number of patent application	(person)	1	2
Number of institutions in partnership with
	Koolearn Education Cloud	(quantity)	567	568
Percentage of teachers	Bachelor's degree	(%)	74	-
	by educational	Master's degree	(%)	25	-
	background	PhD and above	(%)	1	-
Percentage of teachers	China	(%)	99	-
	by nationality	Other countries	(%)	1	-

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5. Compliant Operation

5.1 Integrity and compliance management

Our Group strictly abides by the Company Law of the People's Republic of China, the Anti-Money Laundering Law of the People's Republic of China and other national laws and regulations in relation to anti-corruption.On the basis of the Professional Code of Ethics of New Oriental Education & Technology Group Co., Ltd. issued by the parent company, the Anti-fraud and Anti-corruption Management System, the Implementation Rules on Whistleblowing, the Internal Control Management System and the Risk Management System have also been formulated to ensure that the Company maintains integrity and compliance management.

• Anti-corruptionmonitoring and report
  Our Group has established an anti-fraud and anti-corruption internal control mechanism, which includes establishing whistleblowing and complaint channels to prevent and detect fraud and corruption, implementing control measures to reduce the chance of any instance of fraud or corruption, and taking appropriate and effective remedies to redress the harm caused by any fraudulent or corrupt practices.
  Our Group has set up various whistleblowing channels, such as whistleblowing hotline, whistleblowing post box, whistleblowing email and face-to-face whistleblowing. All contracts signed by the Company with external suppliers and students specify that any cases of corruption or acceptance of bribes by any staff of the Company may be reported through such whistleblowing channels. Designated staff of the Audit and Supervision Department will follow up and handle the reports received. Reports that are qualified for investigation upon analysis and verification will be accepted and investigated by an investigation team formed for such purpose. The matters reported, if found to be true, will be either dealt with by the Company or passed to the judicial authority for handling based on the severity level.
  The Audit and Supervision Department regularly analyses the Company's business data and has established a business data model to prevent and examine signs of fraud by tracking and monitoring data abnormalities, to follow up and address corruption and fraudulent practices as soon as they occur. For the procurement section which has a higher risk of corruption, the Audit and Supervision Department conducts random inspections of procurement prices on a regular basis, makes separate price quotations for audit purposes and communicates with stakeholders regarding the separately quoted prices to investigate the reasonableness of the prices and prevent any occurrence of corrupt and fraudulent practices.
• Anti-corruptiontrainings
  Our Group actively carries out anti-corruption trainings and regularly shares internal control and management knowledge on the Company's official account and other platforms to strengthen employees' awareness of anti-corruption and anti-fraud. We organised a learning activity for all staff to study the Professional Code of Ethics of New Oriental Education & Technology Group Co., Ltd. and conducted an online examination annually to ensure that all employees learn and understand the requirements of the Code of Ethics. We have introduced common law courses such as Prevention of Risks of Dereliction of Duty by Corporate Employees on our online learning platform to enhance employees' awareness of anti-corruption, avoid corruption at the source and promote the Company's compliance development with integrity.

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6. Public Welfare Practices

6.1 Actions to combat the "epidemic"

Novel Coronavirus (COVID-19) broke out at the beginning of 2020. In the face of the significant impact brought by the epidemic, our Group maximized its business advantages and became the first online education institution to start "donating courses" across the country. The courses our Group donated for public welfare purposes received more than 10 million views in aggregate. The social responsibility of the online education industry was fully demonstrated in a series of actions to combat the epidemic through public welfare practices.

During the epidemic outbreak, Koolearn provided free live streaming courses to numerous users of different groups.

Primary, middle	Regular-priced courses were offered free of charge. The free spring live
	and high school	streaming courses received more than 10 million views from across the country.
	students	We also cooperated with "Yangshipin" and Baidu's "Zhi Le Hao Xue" to provide
		free synchronous courses covering all subjects of primary, middle and high
		schools.
College students	In cooperation with the Central New Media Platform of the Chinese Communist
		Youth League, we offered hundreds of thousands of free courses to ensure
		that the needs of college students to prepare for various examinations were
		satisfied. These courses included regular-pricedCET-4 and CET-6 courses,
		postgraduate entrance examination on English, and postgraduate entrance
		examination on mathematics, New Concept English, teacher qualification
		certificate exquisite courses as well as courses for overseas examinations such
		as IELTS, TOEFL and GRE.
Young children	Some of the Donut English courses of Koolearn were offered free of charge to
		the public.
Teachers	DFUB, a wholly-owned subsidiary of Koolearn, offered online pedagogical
		trainings to teachers across the country for public welfare purposes.
University libraries	In order to support the learning needs of users during the epidemic outbreak,
	and urban public	the library.koolearn.com was available for access by users of University libraries
	libraries across	and urban public libraries across the country free of charge. The offering covers
	the country	a wide range of exquisite courses on domestic examinations, overseas studies,
		minor languages, applied foreign languages, professional certification, job search
		guidance, literature research, information literacy, etc. There were more than
		920,000 click-throughs in aggregate during the period of free product offering.
Promoting	To maximise the reach, the Company proactively shared public welfare courses
	educational	with more than 30 organisations.
	equity

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6.2 Supporting public welfare and charity

With an unwavering enthusiasm in public welfare undertakings, our Group strives to leverage its advantages in educational services to improve accessibility of educational resources and carry out various public welfare campaigns. In strict compliance with the Charity Law of the People's Republic of China and other laws and regulations, we hold various public welfare campaigns in a standardised and orderly manner.

Supporting youth	 "2019 Global Vision Youth National Challenge Competition" (2019年國際視野
development	新青年全國挑戰賽) was organised for undergraduates across the country to
	empower and facilitate the growth of the new generation in China.
	 We jointly created the exemplary public course named "Youngsters of the
	Powerful Nation" (《強國青年》) with entities such as the learning platform of
	Xuexi Qiangguo.
	 The "Postgraduate New Youth Night Run" (研值新青年熒光夜跑活動) were
	held in nearly ten university campuses in ten sessions with the participation
	of nearly 8,000 people.

Donations for

• poverty
• alleviation

• To successively achieve poverty alleviation in Liangshan Yi Autonomous Prefecture and support Xichang University in carrying out precise poverty relief measures, we made donations for the establishment of three "Loving Bookstores".
• We coordinated with the New Oriental Group and the Beijing Qingxi Yuanshan Public Welfare Foundation to provide students in the mountain areas of Yunnan - Guizhou Plateau with courseware well-matched with local syllabus totalling to 343 course hours.
• We held the "Hundred-Day Action Group - Public Welfare Reading Day Scheme" (新東方在綫百日行動派讀書日公益計劃) and made donations to establish a book corner in Taiyang Village Primary School in Duchang County, Jiangxi Province.

Sharing of		We shared knowledge related to English learning through public platforms
knowledge		free of charge and recommended excellent courses prior to important pre-
		examination times to help university students develop good learning habits.
		We livestreamed nine free videos during the year, the themes of which
		covered CET-4 and CET-6, postgraduate entrance examinations, TOEFL,
		IELTS, improvement of learning literacy, etc.

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Table of key performance indicators - Community Investment:

Indicators	Unit	FY 2020	FY 2019
Number of public welfare campaigns	(session)	279	294
Number of staff participating in public
welfare campaigns	(person-time)	4,147	1,620
Hours spent by staff in participating in
public welfare campaigns	(hour)	3,042	384

Case: "2019 Global Vision Youth National Challenge Competition"

From September to November 2019, Koolearn launched the "2019 Global Vision Youth Competition" targeting undergraduates aged 18 to 26 across the country. With the theme of "You deserve a larger stage", the competition aimed to assist the new generation of Chinese youngsters to stand in the sanctuary of the greatest human civilisation and the highest stage of global political bargains with their global vision and high-level insight. They acquired greater abilities in international exchange, employment and development and were able to develop a global vision and leadership skills.

A total of two first prizes, four second prizes and six third prizes were granted to winners that passed through the preliminary, semi-final and final rounds, facing fierce competition and strict evaluation by the judges. Winners of the first prize also received the opportunity to receive young talent trainings provided by the World Federation of United Nations Associations and were able to fly to Geneva, Switzerland to embark on a one-week trip to the United Nations. The winners of the second prize were qualified for entering the final interview of Koolearn's management trainee programme and had the opportunity to join the Company and grow together with Koolearn.

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Environmental, Social and Governance Report (Continued)

Case: Hundred-Day Action Group - Public Welfare Reading Day Scheme

In view of the World Book Day on 23 April, the sixth session of the Hundred-Day Action Group of New Oriental introduced the "Hundred Days of Great Public Welfare" section. Koolearn cooperated with 10dian.com to launch the "Hundred-Day Action Group - Public Welfare Reading Day Scheme", under which users who participated in the Hundred-Day Action Group were encouraged to establish a good habit of reading for one hundred days and contribute towards improving public welfare.

The Hundred-Day Action Group of New Oriental received the support of more than 100,000 participants who included primary, middle and high school students, college students, working learners and parents. In merely a week, they donated a total of two million "perseverance coins", representing double of the targeted value. Koolearn made donations to establish a humanistic book corner in Taiyang Village Primary School in Duchang County, Jiangxi Province in the name of the ten thousand persistent participants as a gesture of gratitude to the perseverance and kindness of every user.

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Case: The exemplary public course of "Youngsters of the Powerful Nation"

In view of the Youth Day on 4 May, the trailer of the exemplary public course named "Youngsters of the Powerful Nation" jointly produced by Koolearn, the learning platform of Xuexi Qiangguo, the Communication Centre of Chinese Communist Youth League, China Youth Daily and China Literary and Art Volunteers' Association was officially released. The featured programme of "Youngsters of the Powerful Nation" was produced in the form of "exemplary models + sharing of experience". In the first season, eight youngsters were selected from the fields of scientific research, healthcare, culture and arts, sports, etc., to share the stories of youngsters struggling in their own field and portray a picture showing the spiritual outlook of Chinese youngsters in the new era, so as to provide guide for young people to become "patriotic, ambitious, truth-seeking and action-taking" new generation youngsters.

While co-launching the exemplary public course of "Youngsters of the Powerful Nation", Koolearn also offered 100,000 free "Course Packages for Youngsters of the Powerful Nation" for the campaign to help youngster make progress and achieve growth. The course packages included various types of free courses, such as postgraduate entrance examinations, CET-4 and CET-6, New Concept English, TOEFL, IELTS, GRE, minor languages, etc.

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Environmental, Social and Governance Report (Continued)

ESG Index

No.	Indicator Description	Page
A1 Emissions	General Disclosure	P60
	Information on:
	(a) the policies; and
	(b) compliance with relevant laws and regulations that have a significant
	impact on the issuer
	relating to air and greenhouse gas emissions, discharge into water and land,
	and the generation of hazardous and non-hazardous waste.
	Note: Air emissions include NOx, SOx, and other pollutants regulated under national laws and
	regulations.
	Greenhouse gases include carbon dioxide, methane, nitrous oxide,
	hydrofluorocarbons, perfluorocarbons and sulphur hexafluoride.
	Hazardous wastes are those defined by national regulations.
A1 Emissions	A1.1 The types of emissions and respective emissions data.	P61
A1 Emissions	A1.2 Greenhouse gas emissions in total (in tonnes) and, where appropriate,	P61
	intensity (e.g. per unit of production volume, per facility).
A1 Emissions	A1.3 Total hazardous waste produced (in weight or volume) and, where	Not applicable1
	appropriate, intensity (e.g. per unit of production volume, per facility, per
	official employee).
A1 Emissions	A1.4 Total non-hazardous waste produced (in weight or volume) and, where	P61
	appropriate, intensity (e.g. per unit of production volume, per facility, per
	official employee).

1 Note: In addition to electronic waste, the Company did not produce other hazardous waste during its operations. According to the latest relevant explanation of the Ministry of Ecology and Environment of the PRC, "electronic waste" is not classified as "hazardous waste", therefore this indicator is not applicable.

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No.	Indicator Description	Page

A1 Emissions

A1 Emissions

A2 Use of

  Resources

A1.5 Description of measures to mitigate emissions and results achieved.	P60
A1.6 Description of how hazardous and non-hazardous wastes are handled,	P60
reduction initiatives and results achieved.
General Disclosure	P60-P63

Policies on the efficient use of resources, including energy, water and other raw materials.

Note: Resources may be used in production, in storage, transportation, in buildings, electronic equipment, etc.

A2 Use of	A2.1 Direct and/or indirect energy consumption by type (e.g. electricity,	P63
Resources	gas or oil) in total (kWh in '000s) and intensity (e.g. per unit of production
	volume, per facility).
A2 Use of	A2.2 Water consumption in total and intensity (e.g. per unit of production	P63
Resources	volume, per facility).
A2 Use of	A2.3 Description of energy use efficiency initiatives and results achieved.	P61-P63
Resources
A2 Use of	A2.4 Description of whether there are any issues in sourcing water that is fit	P60
Resources	for purpose, water efficiency initiatives and results achieved.
A2 Use of	A2.5 Total packaging material used for finished products (in tonnes) and, if	Not applicable
Resources	applicable, with reference to per unit produced.
		* Our Group mainly
		provides online
		education services
		which involve no
		finished products
		and packaging
		material

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Environmental, Social and Governance Report (Continued)

No.	Indicator Description	Page
A3 The	General Disclosure	P61-P63
	Environment
	and Natural	Policies on minimising the issuer's significant impact on the environment
	Resources	and natural resources.
A3 The	A3.1 Description of the significant impacts of activities on the environment	P61-P63
	Environment	and natural resources and the actions taken to manage them.

• and Natural
• Resources

B1	Employment	General Disclosure	P63-P65
		Information on:
		(a)	the policies; and
		(b) compliance with relevant laws and regulations that have a significant
			impact on the issuer
		relating to compensation and dismissal, recruitment and promotion, working
		hours, rest periods, equal opportunity, diversity, anti-discrimination, and
		other benefits and welfare.
B1	Employment	B1.1 Total workforce by gender, employment type, age group and	P65
		geographical region.
B1	Employment	B1.2 Employee turnover rate by gender, age group and geographical region.	Not disclosed
B2	Health and	General Disclosure	P71-P72
Safety
		Information on:
		(a)	the policies; and
		(b) compliance with relevant laws and regulations that have a significant
			impact on the issuer

relating to the provision of a safe working environment and the protection of employees from occupational hazards.

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No.	Indicator Description	Page
B2	Health and	B2.1	Number and rate of work-related fatalities.	P73
	Safety
B2	Health and	B2.2	Lost days due to work injury.	P73
	Safety
B2	Health and	B2.3	Description of occupational health and safety measures adopted and	P71-P72
	Safety	how they are implemented and monitored.
B3	Development	General Disclosure	P66-P68
	and Training
			Policies on improving employees' knowledge and skills for discharging
			duties at work and descriptions of training activities.
			Note: Training refers to vocational training. It may include internal and external courses paid for by
			the employer.
B3	Development	B3.1	The percentage of employees trained by gender and employee	P68
	and Training	category (e.g. senior management, middle management).
B3	Development	B3.2	The average training hours completed per employee by gender and	P68
	and Training	employee category.
B4	Labour	General Disclosure	P65
	Standards
			Information on:
			(a)	the policies; and
			(b) compliance with relevant laws and regulations that have a significant
				impact on the issuer

relating to the prevention of child and forced labour.

B4 Labour	B4.1	Description of measures in place to review employment practices in	P65
	Standards	the avoidance of child and forced labour.
B4 Labour	B4.2	Description of steps taken to eliminate such practices when	P65
	Standards	discovered.

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