Bojun Education : MAJOR TRANSACTION SUBSCRIPTION OF EQUITY BY CAPITAL INJECTION

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Bojun Education Company Limited

博 駿 教 育 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1758)

MAJOR TRANSACTION

SUBSCRIPTION OF EQUITY BY CAPITAL INJECTION

THE CAPITAL INJECTION

The Board is pleased to announce that, on 11 September 2020 (after trading hours), Chengdu Bojun (a wholly-owned subsidiary of the Company), the Initial Shareholder and the Target Company entered into the Capital Injection Agreement, pursuant to which Chengdu Bojun agreed to subscribe for new capital of the Target Company in the aggregate amount of RMB245.0 million (equivalent to approximately HK$278.0 million) in cash, out of which approximately RMB96.1 million will be accounted as registered capital of the Target Company and the rest will be accounted as capital reserve of the Target Company. Upon Completion, Chengdu Bojun will hold 49.0% of the enlarged (as enlarged by the Capital Injection) registered capital of the Target Company. The financial results of the Target Company will not be consolidated into the accounts of the Group.

LISTING RULES IMPLICATIONS

As the highest applicable percentage ratio in respect of the Capital Injection exceeds 25% but is less than 100%, the Capital Injection constitutes a major transaction of the Company under Chapter 14 of the Listing Rules and is therefore subject to the reporting, announcement, circular and shareholders' approval requirements under the Listing Rules.

GENERAL

To the best of the knowledge, information and belief of the Directors after having made all reasonable enquiries, none of the Shareholders has any material interest in the Capital Injection, and therefore no Shareholder is required to abstain from voting if the Company were to convene a general meeting for the approval of the Capital Injection.

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The EGM will be convened for the purpose of considering and, if thought fit, approving, among other things, the Capital Injection Agreement and the Capital Injection.

A circular containing, among others, (i) further details of the Capital Injection Agreement and the transactions contemplated therein, and (ii) other information as required by the Listing Rules, together with the notice convening the EGM and the proxy form in respect of the EGM, is expected to be despatched to the Shareholders in accordance with the Listing Rules on or before 16 October 2020 as additional time is required for the preparation of the relevant information to be included in the circular.

Completion under the Capital Injection Agreement is subject to the satisfaction of the conditions precedent which are more particularly described in the section headed ''The Capital Injection Agreement - Conditions precedent'' of this announcement.

There is no assurance that any of the conditions precedent to the Capital Injection Agreement will be fulfilled. Therefore, the Capital Injection may or may not proceed. Shareholders and potential investors of the Company are advised to exercise caution when dealing in the securities of the Company.

The Board is pleased to announce that, on 11 September 2020 (after trading hours), Chengdu Bojun (a wholly-owned subsidiary of the Company), the Initial Shareholder and the Target Company entered into the Capital Injection Agreement, pursuant to which Chengdu Bojun agreed to subscribe for new capital of the Target Company in the aggregate amount of RMB245.0 million (equivalent to approximately HK$278.0 million) in cash, out of which approximately RMB96.1 million will be accounted as registered capital of the Target Company and the rest will be accounted as capital reserve of the Target Company. Upon Completion, Chengdu Bojun will hold 49.0% of the enlarged (as enlarged by the Capital Injection) registered capital of the Target Company.

THE CAPITAL INJECTION AGREEMENT

Principal terms of the Capital Injection Agreement are set forth below:

Date:	11 September 2020 (after trading hours)
Parties:	(1)	Chengdu Bojun;
	(2)	The Initial Shareholder; and
	(3)	The Target Company.

To the best of the knowledge, information and belief of the Directors having made all reasonable enquiries, each of the Initial Shareholder, the Target Company and their ultimate beneficial owners is an Independent Third Party.

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Subject matter

Chengdu Bojun has conditionally agreed to subscribe for new capital in the Target Company in the amount of RMB245.0 million (equivalent to approximately HK$278.0 million) in cash, out of which approximately RMB96.1 million will be accounted as registered capital of the Target Company and the rest will be accounted as capital reserve of the Target Company.

Consideration

The Consideration of the Capital Injection of RMB245,000,000 (equivalent to approximately HK$277,952,500) is to be settled in the following manner:

1. as to RMB73,500,000, being 30% of the Consideration, in cash by Chengdu Bojun within three Business Days upon the signing of the Capital Injection Agreement as prepayment and as part of the Consideration upon completion of the Capital Injection;
2. as to RMB49,000,000, being 20% of the Consideration, in cash by Chengdu Bojun within three Business Days upon completion of industrial and commercial registration in the PRC (the ''Second Payment''); and
3. as to RMB122,500,000, being 50% of the Consideration, in cash by Chengdu Bojun within 30 Business Days upon the payment of the Second Payment if the number of students of the Vocational College exceeds 18,000 as at 30 October 2020; or
4. (i) as to RMB73,500,000, being 30% of the Consideration, in cash by Chengdu Bojun within 30 Business Days upon the payment of the Second Payment if the number of students of the Vocational College does not exceed 18,000 as at 30 October 2020; and

1. as to RMB49,000,000, the remaining balance of the Consideration, being 20% of the Consideration, in cash by Chengdu Bojun on or before 31 December 2021.

The Consideration was determined by the parties after arm's length negotiations with reference to the appraised value of net asset of the Target Company of approximately RMB511.5 million as at 31 March 2020 prepared by a PRC valuer, after having considered the past financial performance and future prospect of the Target Group.

Conditions precedent

Completion shall be subject to the fulfilment of the following conditions precedent:

1. all representations and warranties of the Target Company and the Initial Shareholder remaining true and accurate on the date of the Capital Injection Agreement, and that the Target Company and the Initial Shareholder having performed and abided to all duties and obligations they shall perform and abide to as at the date of the Capital Injection Agreement;

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1. the Capital Injection Agreement being legal under all relevant laws applicable to Chengdu Bojun, the Target Company and the Initial Shareholder as at the date of the Capital Injection Agreement;
2. valid shareholders' approvals of the Target Company approving the Capital Injection having been obtained; and
3. the shareholders' approval of the Company approving transactions contemplated under the Capital Injection Agreement, subject to compliance with the Listing Rules, having been obtained.

The conditions precedent cannot be waived by the parties to the Capital Injection Agreement. If the conditions have not been satisfied within 4 months from the date of the Capital Injection Agreement, or such later date as the parties to the Capital Injection Agreement may agree in writing (the ''Long Stop Date''), the Target Company shall forthwith refund the prepayment to Chengdu Bojun within 10 Business Days after the Long Stop Date and the Capital Injection Agreement shall cease and determine and thereafter neither party shall have any obligations and liabilities towards each other thereunder save for any antecedent breaches of the terms thereof.

Completion

Completion shall take place on the 3rd Business Day following the satisfaction of all of the conditions precedent. Registration of the change in shareholding shall be filed with the relevant government authorities within 5 Business Days from the date of Completion. Upon Completion, the Target Company will be owned by Chengdu Bojun as to 49.0% and the Initial Shareholder as to 51.0% and the Target Group will be recognised as associates of the Company.

After Chengdu Bojun becomes a shareholder of the Target Company, the Target Company shall pay not less than 50% of its annual distributable profits to its shareholders as dividends.

Guarantee from the Initial Shareholder

Under the Capital Injection Agreement, the Initial Shareholder guaranteed to Chengdu Bojun in respect of the annual audited consolidated net profit after tax (prepared in accordance with the PRC accounting standards) and excluding any extraordinary gain and minority interests of Zhengzhuo Education shall not be less than 40% of the total investment amount of Chengdu Bojun in the Target Company (i.e. RMB98,000,000 when the total investment amount is RMB245.0 million), and the Target Company shall declare dividends of an amount not less than 10% of the total investment of Chengdu Bojun in the Target Company, to Chengdu Bojun. The financial year of the Target Company and Zhengzhuo Education end on 31 December. The Initial Shareholder and the Target Company shall procure that the audited auditors' reports of each of the Target Company and Zhengzhuo Education (the ''Audited Reports'') be delivered to Chengdu Bojun by 31 March in the next financial year. If the amount of dividends that could be distributed to Chengdu Bojun as shown in the Audited Reports exceeds 10% of the total investment of Chengdu Bojun in the Target Company, the Target Company shall distribute dividends to the Initial Shareholder and Chengdu Bojun according to their shareholding ratio in the Target Company by 30 April. If the amount of dividends that could be distributed to Chengdu Bojun as shown in the Audited

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Reports is less than 10% of the total investment of Chengdu Bojun in the Target Company, the Target Company shall declare preferred dividends of an amount equivalent to 10% of the total investment of Chengdu Bojun by 30 April (the ''Compensation'') and the Target Company can only use the remaining distributable profit for declaration of dividends to the Initial Shareholder. If the amount of distributable profits of the Target Company does not exceed 10% of the total investment of Chengdu Bojun in the Target Company or the Target Company does not record any distributable profits in a financial year, the Initial Shareholder shall pay the shortfall of the Compensation or the full amount of the Compensation to Chengdu Bojun.

INFORMATION OF THE PARTIES

Chengdu Bojun

Chengdu Bojun is a limited liability company established in the PRC and an indirect wholly- owned subsidiary of the Company. Chengdu Bojun is principally engaged in the provision of education consultancy services.

The Initial Shareholder

The Initial Shareholder is a limited liability company established in the PRC and is principally engaged in investment holding. The Initial Shareholder is owned by Mr. Wang Honglun as to 60% and Mr. Wang Pengcheng as to 40%, both are PRC citizens of PRC nationality.

The Target Company

The Target Company is a limited liability company established in the PRC. It is principally engaged in the business of investment holding, mainly of education-related business. As at the date of this announcement, the Target Company holds 51% equity interest in Zhengzhuo Education, which is the school sponsor to two operating vocational education institutions in Sichuan Province in the PRC. Prior to the Completion, the Target Company is wholly owned by the Initial Shareholder.

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Set out below is the shareholding structure of the Target Group as at the date of this announcement and prior to the Completion:

The Initial

Shareholder

100%

The Target

Company

51%

Zhengzhuo

Education

										100%
		100%				100%
Si Chuan Winshare		Si Chuan Winshare		Sichuan Joint
		Economic College
Vocational College		Vocational School
		("Economic College")
("Vocational College")		("Vocational School")
		(ceased operation)

Zhengzhuo Education is a limited liability company established in the PRC in July 2012. It is principally engaged in the management of vocational education institutes and is the school sponsor of the two operating vocational education institutions, being the Vocational College and the Vocational School. Zhengzhuo Education is owned as to 51% by the Target Company and as to 49% by Sichuan Zhengzhuo Enterprise Company Limited* (四川正卓實 業有限公司), a limited liability company established in the PRC, which is an Independent Third Party.

The Vocational College was established in 2013 in Sichuan Province, the PRC. It is a formal higher vocational education institution (普通高等職業學校), which offers three-year and five-year vocational programs. Students who enter the Vocational College have generally completed their high school education. The Vocational College offers students with vocational training programs in different majors, covering accounting, marketing, financial management, business administration, e-commence management, early childhood education, construction design, nursing and elderly service management. The Vocational College owns the land use right of a parcel of land of a site area of approximately 386,620 sq.m., with various academic buildings and facilities, used as school campus.

The Vocational School was established in 2012 in Sichuan Province, the PRC. It is a secondary vocational education institution (中等職業教育學校), which offers three-year vocational programs. Students who enter the Vocational School have generally completed their middle school education. The Vocational School offers students with vocation training programs in different majors, covering accounting, computer application, railway transportation management, early childhood education, hospitality management and building construction. It runs the vocation training programs at the school campus owned by the Vocational College.

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The Economic College was established in 2011 in Sichuan Province, the PRC, and has ceased operation. As at the date of this announcement, the Target Group is preparing for the deregistration of the Economic College.

As at the date of this announcement, the Target Company holds 50% equity interest in each of Sichuan Education Investment Company Limited* (四川高教投資有限公司) (''HE Investment Co'') and Sichuan High Education Group Limited* (四川高教集團有限公司) (''HE Group Co''). HE Investment Co is a limited liability company established in the PRC in March 2020 and is preparing to set up a new vocation school in Daying County, Sichuan Province. HE Group Co is a limited liability company established in the PRC in March 2020 and has not commenced any business.

Financial information

The following is the unaudited consolidated financial information of the Target Company:

For the year ended

31 December

2018 2019

RMB'000 RMB'000 (approximate) (approximate)

Revenue	127,822	133,933
Net profit before tax	4,073	17,706
Net profit after tax	4,073	17,706

Upon the Completion, Chengdu Bojun will hold 49.0% of the equity interest in the Target Company. The Target Company will not become a subsidiary or a Consolidated Affiliated Entity of the Company and the financial results of the Target Company will not be consolidated into the accounts of the Group.

REASONS FOR AND BENEFITS OF THE CAPITAL INJECTION

The Group is principally engaged in the provision of private education service, covering kindergarten, primary, middle and high schools education services, in Sichuan Province, the PRC. The Group commenced operation in 2001 and rooted in the education industry in Sichuan Province. Leveraging on the success and proven track record in the provision of private education in Sichuan Province, the PRC, the Group plans to expand its footprints in the education industry in other provinces in the PRC and capture potential investment opportunities in the education industry.

The Target Group is principally engaged in the provision of private vocational education service in Sichuan Province, the PRC.

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In recent years, the PRC government announced various plans and policies promoting the development of the vocational training industry. The Directors believe that the development of private vocational training industry will enter a golden era in view of such policies, which encourages high school graduates to pursue further studies at vocational training institutions and drives the demand for vocational education. Coupled with the vibrancy of the province in the development in vocational education, the Directors expect that more school-age students will choose to complete their studies in Sichuan Province in the future, and the Capital Injection provides an opportunity for the Group to invest in the vocational training industry in Sichuan Province, given that the two vocational education institutions indirectly owned by the Target Company are well-established in Chengdu.

Given that the Capital Injection was being made after arm's length negotiations, the Directors (including the independent non-executive Directors) consider that the Capital Injection Agreement was entered into under normal commercial terms, the terms of which are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Foreign investment in education industry in the PRC

As advised by the PRC legal adviser of the Group, the business of provision of vocational training is subject to foreign investment restrictions under the Provisions in the Special Administrative Measures for Admission of Foreign Investments (Negative List) (2020 Version) 《( 外商投資准入特別管理措施(負 面清單) (2020年版)》) (the ''Negative List''). According to the Negative List, foreign investment in vocational training institutions are permitted and the shareholding percentage of foreign investment in the business shall not exceed 50%. According to the Notice of Certain Measures on Supporting Private Education issued by the People's Government of Chengdu 《( 成都市人民政府關於印發促進民辦教育健 康規範發展若干措施的通知》) issued in January 2020, foreign investment in vocational education institutions is encouraged. Given that (i) Chengdu Bojun will only hold 49% equity interest in the Target Company and the Target Company only holds 51% equity interest in Zhengzhuo Education, which is the sponsor of two operating vocational education institutions and (ii) Zhengzhuo Education (as the school sponsor) is a limited liability company established in the PRC and fulfils the requirement to act as school sponsor, and after having consulted the Education Department of Chengdu on the qualification of school sponsor of vocational education institutions, the PRC legal adviser is of the view that the Capital Injection of Chengdu Bojun in the Target Company would not affect the school qualification of the Vocational College and the Vocational School and would not be in breach of the Negative List. As advised by the PRC legal adviser, the Capital Injection is in compliance with applicable laws and regulations of the PRC.

LISTING RULES IMPLICATIONS

As the highest applicable percentage ratio in respect of the Capital Injection exceeds 25% but is less than 100%, the Capital Injection constitutes a major transaction of the Company under Chapter 14 of the Listing Rules and is therefore subject to the reporting, announcement, circular and shareholders' approval requirements under the Listing Rules.

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GENERAL

To the best of the knowledge, information and belief of the Directors after having made all reasonable enquiries, none of the Shareholders has any material interest in the Capital Injection, and therefore no Shareholder is required to abstain from voting if the Company were to convene a general meeting for the approval of the Capital Injection.

The EGM will be convened for the purpose of considering and, if thought fit, approving, among other things, the Capital Injection Agreement and the Capital Injection.

A circular containing, among others, (i) further details of the Capital Injection Agreement and the transactions contemplated therein, and (ii) other information as required by the Listing Rules, together with the notice convening the EGM and the proxy form in respect of the EGM, is expected to be despatched to the Shareholders in accordance with the Listing Rules on or before 16 October 2020 as additional time is required for the preparation of the relevant information to be included in the circular.

Completion under the Capital Injection Agreement is subject to the satisfaction of the conditions precedent which are more particularly described in the section headed ''The Capital Injection Agreement - Conditions precedent'' of this announcement. There is no assurance that any of the conditions precedent to the Capital Injection Agreement will be fulfilled. Therefore, the Capital Injection may or may not proceed. Shareholders and potential investors of the Company are advised to exercise caution when dealing in the securities of the Company.

DEFINITIONS

Unless the context otherwise requires, the following expressions shall have the meaning set out below:

''Board''	the board of Directors
''Business Day''	a day on which banks in the PRC are generally open for
	business
''Capital Injection''	the proposed subscription of the capital in the Target
	Company by Chengdu Bojun under the Capital Injection
	Agreement
''Capital Injection	the capital injection agreement dated 11 September 2020
Agreement''	entered into between Chengdu Bojun, the Initial Shareholder
	and the Target Company in respect of the Capital Injection
''Chengdu Bojun''	Chengdu Tianfu Bojun Education Management Company
	Limited* (成都天府博駿教育管理有限公司), a wholly-
	foreign owned enterprise established under the laws of PRC
	on 26 July 2016 and an indirect wholly-owned subsidiary of
	the Company

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''Company''	Bojun Education Company Limited, a company incorporated
	in the Cayman Islands with limited liability and the issued
	Shares are listed on the Stock Exchange
''Completion''	the completion of the Capital Injection
''Consideration''	the consideration payable by Chengdu Bojun pursuant to the
	Capital Injection Agreement, being RMB245.0 million
''Consolidated Affiliated	the entity(ies) that the Company controls through the
Entity(ies)''	contractual arrangement contemplated under the new
	structured contracts as detailed in the announcement of the
	Company dated 19 June 2020
''Director(s)''	the director(s) of the Company
''EGM''	the extraordinary general meeting of the Company to be
	convened to consider and, if thought fit, to approve, among
	other things, the Capital Injection Agreement and the
	transactions contemplated thereunder
''Group''	the Company and its subsidiaries and the Consolidated
	Affiliated Entities
''HK$''	Hong Kong dollar, the lawful currency of the Hong Kong
	Special Administrative Region of the PRC
''Independent Third	independent third parties who are not connected person(s) of
Party(ies)''	the Company and are independent of and not connected with
	the Company or the Directors, chief executive, or
	substantial Shareholders of the Company or any of its
	subsidiaries or their respective associates
''Initial Shareholder''	Pi County Langjing Industrial Company Limited* (郫縣朗經
	實業有限公司), a limited liability company established
	under the laws of the PRC on 23 July 2015 and an
	Independent Third Party
''Listing Rules''	the Rules Governing the Listing of Securities on the Stock
	Exchange
''PRC''	the People's Republic of China and, for the purpose of this
	announcement only, excludes the Hong Kong Special
	Administrative Region of the PRC, the Macau Special
	Administrative Region of the PRC and Taiwan
''RMB''	Renminbi, the lawful currency of the PRC
''Share(s)''	the ordinary share(s) of HK$0.01 each in the share capital
	of the Company

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''Shareholder(s)''	the holder(s) of the Share(s)
''sq.m.''	square metre
''Stock Exchange''	The Stock Exchange of Hong Kong Limited
''Target Company''	Shenzhen Hongyuan Education Investment Company
	Limited* (深圳弘遠教育投資有限公司), a limited liability
	company established in the PRC on 17 November 2016 and
	wholly owned by the Initial Shareholder as at the date of
	this announcement
''Target Group''	the Target Company and its subsidiaries
''Zhengzhuo Education''	Sichuan Zhengzhuo Education Investment Company
	Limited* (四川正卓教育投資有限公司), a limited liability
	company established under the laws of the PRC in July
	2012, a subsidiary directly owned by the Target Company as
	to 51% and a member of the Target Group
''%''	per cent
	By Order of the Board
	Bojun Education Company Limited
	Wang Jinglei
	Chairman of the Board

Hong Kong, 11 September 2020

As at the date of this announcement, the executive Directors are Mr. Wang Jinglei and Mr. Ran Tao; the non-executive Director is Mr. Wu Jiwei; and the independent non- executive Directors are Mr. Cheng Tai Kwan Sunny, Mr. Mao Daowei, Ms. Luo Yunping and Mr. Yang Yuan.

For the purpose of this announcement, unless otherwise indicated, conversion of RMB into HK$ is calculated at the approximate exchange rate of RMB1.00 to HK$1.13. This exchange rate is for illustration purpose only and does not constitute a representation that any amounts have been, could have been, or may be exchanged at this or any other rate at all.

* for identification purpose only

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