Hope Education Group Co., Ltd. Ltd. Co., Hope Education Group 希望教育集團有限公司 2020 Annual Report 2020 Annual 2020 Annual Report 年度報告 (Incorporated in the Cayman Islands with limited liability) Stock Code: 1765 Contents Page 2 Corporate Information 44 Report of Directors 4 Our Schools 77 Corporate Governance Report 7 Chairman’s Statement 94 ESG Report 9 Financial and Business Summary 117 Independent Auditor’s Report 11 Management Discussion and Analysis 131 Notes to Financial Statements 34 Directors and Senior Management 233 Definitions CORPORATE INFORMATION BOARD OF DIRECTORS AUTHORIZED REPRESENTATIVES Executive Directors Mr. Li Tao Ms. Leung Wing Han Sharon Mr. Xu Changjun (Chairman) Mr. Wang Huiwu (Chief Executive Officer) JOINT COMPANY SECRETARIES Mr. Li Tao Mr. Huang Zhongcai Non-executive Directors Ms. Leung Wing Han Sharon Mr. Wang Degen REGISTERED OFFICE Mr. Lu Zhichao Mr. Tang Jianyuan PO Box 309, Ugland House Grand Cayman, KY1-1104 Independent Non-executive Directors Cayman Islands Mr. Zhang Jin HEADQUARTERS AND PRINCIPAL PLACE Mr. Chen Yunhua OF BUSINESS IN CHINA Dr. Gao Hao 5/F, Administrative Building Audit Committee Sichuan TOP IT Vocational Institute 2000 Xi Qu Avenue, Pidu District Mr. Zhang Jin (Chairman) Chengdu Mr. Lu Zhichao PRC Mr. Tang Jianyuan Mr. Chen Yunhua PRINCIPAL PLACE OF BUSINESS Dr. Gao Hao IN HONG KONG Nomination and Remuneration Committee 40th Floor, Sunlight Tower No. 248 Queen’s Road East Mr. Chen Yunhua (Chairman) Wanchai, Hong Kong Mr. Wang Huiwu Dr. Gao Hao LEGAL ADVISOR AS TO HONG KONG LAW Strategy and Development Committee William Ji & Co. LLP (in association with Tian Yuan Law Firm Hong Kong Office) Mr. Wang Huiwu (Chairman) Suite 702, 7th Floor Mr. Xu Changjun Two Chinachem Central Mr. Wang Degen 26 Des Voeux Road Central Mr. Lu Zhichao Central Mr. Li Tao Hong Kong 2 HOPE EDUCATION GROUP CO., LTD. • 2020 ANNUAL REPORT CORPORATE INFORMATION AUDITOR PRINCIPAL BANKERS Ernst & Young Bank of China Certified Public Accountants China Minsheng Bank 22/F, CITIC Tower Agricultural Bank of China 1 Tim Mei Avenue Central, Hong Kong COMPANY’S WEBSITE COMPLIANCE ADVISOR www.hopeedu.com Giraffe Capital Limited STOCK CODE 3/F, 8 Wyndham Street Central 1765 Hong Kong PRINCIPAL SHARE REGISTRAR Maples Fund Services (Cayman) Limited PO Box 1093, Boundary Hall Cricket Square Grand Cayman, KY1-1102 Cayman Islands HONG KONG SHARE REGISTRAR Computershare Hong Kong Investor Services Limited Shops 1712-1716, 17th Floor, Hopewell Centre 183 Queen’s Road East Wanchai, Hong Kong HOPE EDUCATION GROUP CO., LTD. • 2020 ANNUAL REPORT 3 OUR SCHOOLS OVERVIEW AND DISTRIBUTION OF OUR SCHOOLS We have 16 Schools in 6 provinces, include 6 Colleges & Universities, 8 Junior Colleges, 2 Technician Colleges Sichuan Tianyi College Southwest Jiaotong University Hope college Provide junior college Provide Undergraduate education and junior college M&A in 2011 education Found in 2009 Sichuan Vocational college of Culture & Communication Sichuan Hope Automotive Vocational college Provide junior college Provide junior college education education M&A in 2014 Found in 2013 Sichuan TOP IT vocational Institute Sichuan Hope Automotive Technician College Provide junior college Provide Technician education college education M&A in 2017 Found in 2016 Suzhou TOP Institute of Yinchuan University of Energy ShanXi Medical University Jinci College Hebi Automotive Engineering College information & technology Provide Undergraduate and junior Independent College that provide Provide junior college education Provide junior college education college education undergraduate education M&A in 2019 M&A in 2019 M&A in 2019 M&A in 2014 Energy College of Science and technology of Business College of Guizhou University of Guizhou Vocational Institute of Technology Guizhou Technician College of technology Guizhou University Finance and Economics Provide junior college education Provide Technician college education Independent College that provide Independent College that provide undergraduate education undergraduate education Found in 2016 Found in 2019 M&A in 2019 M&A in 2014 Nanchang Vocational institute of film and television communication Provide junior college education M&A in 2020 4 HOPE EDUCATION GROUP CO., LTD. • 2020 ANNUAL REPORT OUR SCHOOLS CAMPUS UNDER CONSTRUCTION INTI International University of Malaysia A higher education institution that offers junior college, pre-university, bachelor, master and doctor degrees M&A in 2020 Gansu Baiyin Minde vocational college Xingtai Vocational Institute of Technology Chong Qing Digital and Technology College JiangXi Zhangshu Medical college HOPE EDUCATION GROUP CO., LTD. • 2020 ANNUAL REPORT 5 OUR SCHOOLS BUSINESS PERFORMANCE REVIEW School scale is increasing 16 year by year 14 9 9 8 6 6 3 2 2 1 1 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 BUSINESS PERFORMANCE REVIEW Scale of enrollment Enrolled students 71,746 CAGR 32.4% CAGR 37.2% 194,554 48,789 140,125 31,025 86,033 23,385 24,600 75,694 51,672 40,047 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020 6 HOPE EDUCATION GROUP CO., LTD. • 2020 ANNUAL REPORT CHAIRMAN’S STATEMENT Dear Shareholders, On behalf of the Board, I am pleased to present to the Shareholders the annual report of the Company for the eight months ended 31 August 2020. STRIVE AHEAD IN THE UNUSUAL YEAR OF 2020 2020 is an unusual year. Under this circumstance, we strive ahead and consolidate the outstanding development momentum from the past few years, which let us to attain a better result and realized the all-round enhancement in the following four areas: school operating scale, school operating region, operating results and financial results. – Continuous expansion in school operating scale: since our listing in 2018, the number of schools under the Company has been increased from nine higher education institutions to 16 higher education institutions, which includes six colleges and universities, eight junior colleges and two technician colleges. Four junior colleges are under construction, which means the number of schools of the Company will increase to 20 in the foreseeable future, and the number is doubled as compare to the number during our listing. Currently, there are nearly 200,000 full-time students, a record high of the Company. – Breakthrough in overseas operation: in 2020, the Company acquired Inti International University of Malaysia. Inti International University of Malaysia is entitled to award doctorate and master degrees, and our goal is to develop this university into an internationally well-known university. The Company is actively promoting the synergy in source of students between domestic and foreign institutions, and more than 17,000 students from schools under the Company enrolled in Inti International University of Malaysia and other foreign institutions under cooperation. The acquisition of Inti International University of Malaysia provides a stable path for students from schools in PRC under the Company to study abroad, meanwhile, it provides support and protection to the sustainable and speed development of Inti International University of Malaysia, and this synergy will be fully realized. – The consolidation of acquired schools is further demonstrated: The Company acquired Hebi Automotive Engineering Vocational College, Suzhou Top Institute of Information Technology and Yinchuan University of Energy last year, the enrollment and the registration rate recorded a significant increase. After the acquisition, the enrollment of the above three schools recorded an average increase of 91.6%, and the highest number is 166.9%, which laid a better foundation for the sustainable growth in the revenue of the Company for the next three to four years. By referencing Suzhou Top Institute of Information Technology as an example for colleges, the enrollment for the academic year 2019/2020, which is before the acquisition, was 1,677, and in the academic year of 2020/2021 the enrollment is 4,476, a year-on-year increase of 166%, for independent colleges, Yinchuan University of Energy is used as an example, the enrollment for the academic year 2019/2020, which is before the acquisition, was 4,843, and in the academic year of 2020/2021 the enrollment is 7,380, a year-on-year increase of 52.3%. The registration rate of these three schools recorded a significant increase, in which the registration rate of Yinchuan University of Energy has been increased from 84.4% for the academic year of 2019/2020 (before the acquisition) to 94.9% for the academic year of 2020/2021. In the past five years, the operating income, EBITDA, students enrolled and net profit of the Company recorded a speedy growth, which increased by nearly three times, four times, five times and six times respectively, and the school operating network covers seven provinces of Mainland China. These results are the outcomes from the joint efforts of all academic staff and management members, and the benefits from the strong emphasis and support on education industry from the state. HOPE EDUCATION GROUP CO., LTD. • 2020 ANNUAL REPORT 7 CHAIRMAN’S STATEMENT THE BRIGHT FUTURE ENHANCED CONFIDENCE ON DEVELOPMENT We are a team that emphasis on “action”, and insist on the strategy of “firmly seize the opportunity”: we uphold our value on continuous expansion of school operating network through the main strategy of merger and acquisition complement with newly built schools and trusteeship on one hand, and on the other hand we uphold the value of continuous enhancement on talent cultivation quality and the goodwill