China Maple Leaf Educational Systems Limited — Annual Report 2019

Dec 17, 2019

(Incorporated in the Cayman Islands with limited liability) Stock Code: 1317

2019 ANNUAL REPORT

• For identification purposes only

CHINA MAPLE LEAF EDUCATIONAL SYSTEMS LIMITED 2019 ANNUAL REPORT

Corporate Information	2
Letter from the Chairman	4
Corporate Profile	7
Five-Year Financial Summary	9
Financial and Operational Highlights	12
Management Discussion and Analysis	14
Directors and Senior Management	31
Report of the Directors	37
Corporate Governance Report	65
Independent Auditor’s Report	75
Consolidated Financial Statements	79

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CORPORATE INFORMATION

BOARD OF DIRECTORS

Executive Directors

Mr. Shu Liang Sherman Jen (Chairman and Chief Executive Officer (“ CEO ”)) Ms. Jingxia Zhang (Chief Financial Officer (“ CFO ”)) Mr. James William Beeke

NOMINATION AND CORPORATE GOVERNANCE COMMITTEE

Mr. Shu Liang Sherman Jen (Chairman) Mr. Peter Humphrey Owen Mr. Xiaodan Mei* Mr. Alan Shaver[#]

Non-executive Director

• Resigned on 31 August 2019

• Appointed on 31 August 2019

Mr. Howard Robert Balloch (Vice Chairman)

COMPANY SECRETARY

Independent Non-executive Directors

Mr. Peter Humphrey Owen Mr. Xiaodan Mei * Mr. Alan Shaver[#] Mr. Lap Tat Arthur Wong

Ms. Wan Mun Yee, Sabine

AUTHORIZED REPRESENTATIVES

Ms. Jingxia Zhang Ms. Wan Mun Yee, Sabine

AUDIT COMMITTEE

Mr. Lap Tat Arthur Wong (Chairman) Mr. Peter Humphrey Owen Mr. Xiaodan Mei * Mr. Alan Shaver[#]

REMUNERATION COMMITTEE

Mr. Peter Humphrey Owen (Chairman) Mr. Xiaodan Mei * Mr. Alan Shaver[#] Mr. Howard Robert Balloch

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CORPORATE INFORMATION

AUDITORS

Deloitte Touche Tohmatsu Certified Public Accountants

LEGAL ADVISORS

As to Hong Kong law

Herbert Smith Freehills

As to PRC law

Tian Yuan Law Firm

As to Cayman Islands law

Maples and Calder (Hong Kong) LLP

REGISTERED OFFICE

Maples Corporate Services Limited P.O. Box 309, Ugland House Grand Cayman, KY1-1104 Cayman Islands

HEADQUARTERS AND PRINCIPAL PLACE OF BUSINESS IN CHINA

Maple Leaf Educational Park 6 Central Street Jinshitan National Tourist Area Dalian, Liaoning Province 116650 China

PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE

Maples Fund Services (Cayman) Limited P.O. Box 1093, Boundary Hall, Cricket Square Grand Cayman, KY1-1102 Cayman Islands

HONG KONG BRANCH SHARE REGISTRAR

Tricor Investor Services Limited Level 54, Hopewell Centre 183 Queen’s Road East Hong Kong

STOCK CODE

1317

COMPANY WEBSITE

www.mapleleaf.cn

INVESTOR RELATIONS

Email: ir@mapleleaf.net.cn Address: Room 1302, 13/F, Tai Tung Building 8 Fleming Road, Wanchai, Hong Kong

PRINCIPAL PLACE OF BUSINESS IN HONG KONG

Room 1302, 13/F, Tai Tung Building 8 Fleming Road, Wanchai, Hong Kong

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LETTER FROM THE CHAIRMAN

Dear Shareholders,

On behalf of the board (the “ Board ”) of directors (the “ Directors ”) of China Maple Leaf Educational Systems Limited, I am pleased to present the annual report comprising the consolidated results of the Company and its subsidiaries (collectively the “ Group ”) for the year ended 31 August 2019.

RESULTS AND DIVIDENDS

First of all, our financial performance for the year ended 31 August 2019 was encouraging. Our total revenue increased by 17.1% to reach a record high of RMB1,570.2 million. Our profit increased by 21.5% to reach RMB654.2 million and our adjusted net profit for the year grew by 16.5% to reach RMB690.3 million. In line with our policy of sharing our success with our shareholders, the Board recommends the payment of a final dividend of HK$5.6 cents per share for the year ended 31 August 2019. Together with the interim dividend of HK$4.7 cents per share, the Group expects to declare a total dividend of HK$10.3 cents per share for the year ended 31 August 2019.

KEY ACHIEVEMENTS

The past year saw a satisfactory growth for the Group through domestic acquisitions and steps taken to pave the way for further expansion abroad.

In December 2018, the Group acquired 66% interest in the Luzhou-based company that controlled the Luzhou No. 7 Jiade International School (the “ Luzhou School ”), for a total consideration of RMB184,800,000 (equivalent

to approximately HK$210,167,178) which was satisfied in part by cash and in part by the allotment and issuance of 16,136,042 consideration shares by the Company. In January 2019, the Group further acquired 9% interest in the same company for an additional consideration of RMB25,200,000 (equivalent to approximately HK$28,659,960). The total consideration for the acquisition was adjusted to RMB177,000,000 (equivalent to approximately HK$201,302,100) pursuant to the terms of the supplemental agreement. Our aggregate equity interest in the Luzhou-based company increased to 75%. This acquisition further expands the Group’s school network and continues to build brand awareness in Chongqing and Sichuan Provinces. The Luzhou School is the third school of the Group’s Chongqing educational park and will add a stable student source for and increases enrolment of Chongqing High school. Acquisition of the Luzhou School will improve the profitability of the Group and strengthen its leading position in the international education industry in China.

As part of its overseas expansion plan, the Group launched a high school, MLES-UniSA in February 2019 at Mawson Lakes Campus of UniSA in Adelaide which is the third overseas school of Maple Leaf. UniSA is one of the leading universities in Australia and is ranked among the Top 50 young universities worldwide by both QS and Times Higher Education.

In March 2019, Maple Leaf Educational Systems attained AdvancED Corporate Systems accreditation and all of the Group’s high schools, middle schools, elementary schools and foreign national schools were accredited by AdvancED (now known as Cognia), the largest school accreditation agency in the world.

In March 2019, Maple Leaf international school was recognised as “The 10 Best International Schools in China 2018” by Knowledge Review, a United Kingdom leading education magazine for higher education offering news, blogs, articles and courses from the best universities.

Finally, in August 2019, the Group acquired a beautifully landscaped 27.4-acre campus in the historic Brockville Ontario, Canada, and plans to open this school in September 2020. It is an ideal setting for more Canadian and international students to study together and benefit from Maple Leaf’s rich, bilingual, academic, universityprep program.

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LETTER FROM THE CHAIRMAN

BUSINESS HIGHLIGHTS

The Group operates all of our schools under the “Maple Leaf” brand. Each school year normally runs from the beginning of September each year to the middle of July in the following year. At the end of the 2018/2019 school year a total of 41,241 students were enrolled in 95 schools located in 24 cities in China, Canada and South Australia, representing a growth of 23.2% compared with the student enrolment as at the end of the 2017/2018 school year. Revenue from tuition and boarding fees increased by 18.9% to RMB1,318.5 million. In June 2019, 2,116 high school students graduated from our schools, 113 of whom received offers from one of the QS top 10 universities in the world, and more than 73.3% of them receiving offers from at least one of the Maple Leaf Global Top 100 universities. Subsequent to the year ended 31 August 2019, we have continued to grow. By 15 October 2019 we had 41,508 students enrolled in our schools, representing an increase of 13.5% compared to the same date in 2018. Furthermore, we have also added to our network using an asset light model a total of 5 schools in two new cities, Ji’nan and Thunder Bay, which in aggregate 26 cities, and one city where we already had schools, namely Xiangyang, bringing our network to a total of 100 schools located in 22 Chinese cities, 3 Canadian cities and 1 Australian city.

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OUTLOOK

The overall target set in our amended Fifth Five-Year Plan (from 2015/2016 to 2019/2020 school years) is to reach total student enrolment of more than 45,000 by the end of the 2019/2020 school year. The Group has established Hainan Maple Leaf Educational District in year 2018 and Hubei Maple Leaf Educational District in year 2019 respectively. We expect to set up one more educational district in Tianjin by the end of our Fifth Five-Year Plan, and in total we have three educational districts.

Pursuant to our school development plan for 2019/2020 school year, we will continue to open more middle and elementary schools in second and third-tier cities in China as feeder schools to provide students to our high schools located in nearby cities. In this regard, the asset-light model, attained by partnering with local government, remains our key strategy. We will also continue to explore potential acquisition opportunities in China that create synergies with the Group and fit the educational philosophy of Maple Leaf. We will also consider opening schools in first-tier cities in China, including Beijing, within the next two years.

Apart from the expansion plan in China, the Board is of the view that further overseas expansion is a part of our long-term growth strategies. We can see the growing demand for bilingual English and Chinese education in “Belt and Road” countries, where China and other countries are making strategic investments in infrastructure and development. The Group believes Maple Leaf has unique advantages in filling up the gap between the limited provision and the huge demand for quality international K-12 education along the Belt and Road. We also believe that our students in China will benefit from a global presence of Maple Leaf brand schools.

The Board is confident that the Group will maintain its leading position as an international school operator in China by combining the best of both Western and Chinese educational philosophies.

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LETTER FROM THE CHAIRMAN

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SHARE AWARD SCHEME AND SHARE OPTION SCHEME

The Board recognises the importance of the retention and motivation of talent in the implementation of the Fifth Five-Year Plan. The Company has adopted a restricted share award scheme (“ Share Award Scheme ”) and a postIPO share option scheme under which share awards and share options will be granted to the Directors, executive officers, senior management, employees and consultants of the Group. The Share Award Scheme and the share option scheme will assist to attract and retain talent, recognise their contributions, and align their interests with those of the shareholders of the Company (the “ Shareholders ”). In July 2015, the trustee of the Share Award Scheme purchased a total of 62,160,000 shares of the Company on the market. As of 31 August 2019, share awards have been granted to 1,015 eligible participants of the Group, and share options have been granted to 270 eligible participants of the Group.

APPRECIATION

On the exciting moment of celebrating the 5th anniversary of the listing of the Group, on behalf of the Board, I would like to express my heartfelt gratitude to our students’ parents, the local governments, and our Shareholders for their continuing support. I also wish to thank our fellow Board members and senior management for their contributions and hard work during the year and extend my appreciation to our management, teachers and staff for their endeavors and commitments in providing the highest quality education for many thousands of Maple Leaf students.

Shu Liang Sherman Jen

China Maple Leaf Educational Systems Limited Chairman and Chief Executive Officer

Hong Kong, 28 November 2019

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CORPORATE PROFILE

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China Maple Leaf Educational Systems Limited (the “ Company ”, together with its subsidiaries and consolidated affiliated entities, collectively the “ Group ”) is a leading international school operator, from preschool to grade 12 (“ K12 ”) education, in the People’s Republic of China (“ China ” or the “ PRC ”) as measured by student enrolment.

Founded in 1995, the Group’s headquarter is located at Dalian, Liaoning Province, China. With over twenty four years’ experience in operating international schools in China, the Group provides high quality K-12 education by combining the merits of both Western and Chinese educational philosophies in 26 cities in China, Canada and South Australia, namely Dalian, Wuhan, Tianjin, Chongqing, Zhenjiang, Luoyang, Ordos, Shanghai, Pingdingshan, Yiwu, Jingzhou, Pinghu, Xi’an, Huai’an, Haikou, Huzhou, Yancheng, Weifang, Shenzhen, Luzhou, Ji’nan, Xiangyang, Kamloops, Richmond, Adelaide and Thunder Bay.

As at 15 October 2019, the Group had 41,508 students and 3,433 teachers. As of 15 October 2019, we had 100 schools of which 96 are located in China, 3 are located in Canada and 1 is located in South Australia, comprising 16 high schools (for students in grade 10 to 12), 26 middle schools (for students in grade 7 to 9), 26 elementary schools (for students in grade 1 to 6), 29 preschools and 3 foreign nationals schools. Over 90% of our students are local Chinese mainly from the increasing affluence middle-income families and the rest are from other countries.

Our high schools are certified by both the Ministry of Education of BC, Canada and the Chinese educational authorities, where we offer a bilingual and dual-curriculum to our students. Our high school graduates receive both a fully accredited BC diploma and a Chinese diploma. Furthermore, Maple educational systems has attained AdvancED Corporate Systems accreditation and all of our high schools, middle schools, elementary schools and foreign nationals schools are accredited by AdvancED (now known as Cognia), the largest school accreditation agency in the world. Our middle and elementary schools provide Chinese compulsory education with English enhancement classes to our students. Currently, the Group employs approximately 408 BC-certified teachers and approximately 175 ESL teachers.

The Group launched its Maple Leaf Global Top 100 University Guide (“ Maple Leaf Guide ”) based on well recognised international rankings, such as QS, US News and MacLean’s, in 2015/2016 school year. The Group believes that the Maple Leaf Guide is suitable for the majority of its students who aim for English-language universities. For the year ended 31 August 2019, the Group graduated 2,116 high school students, 113 of whom received offers from one of the QS top 10 universities in the world, including Imperial College London and University College London, 1,550 graduates, being more than 73.3% of them receiving offers from at least one of the Maple Leaf Global Top 100 universities.

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CORPORATE PROFILE

OUR SCHOOL NETWORK

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FIVE-YEAR FINANCIAL SUMMARY

RESULTS

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Year ended 31 August
2015 2016 2017 2018 2019
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Revenue 652,984 829,770 1,083,182 1,341,267 1,570,231
Cost of revenue (354,277) (428,029) (543,331) (717,163) (835,397)
Gross profit 298,707 401,741 539,851 624,104 734,834
Profit before taxation 216,897 325,890 440,662 547,879 680,899
Profit for the year 205,546 307,564 413,723 538,403 654,169
Adjusted net profit (Note 1) 210,846 322,587 437,227 592,393 690,263
Basic earnings per share (RMB cents) 8.55 11.57 15.32 19.02 22.20
Year ended 31 August
Profitability Margins 2015 2016 2017 2018 2019
Gross profit margin 45.7% 48.4% 49.8% 46.5% 46.8%
Net profit margin 31.5% 37.1% 38.2% 40.1% 41.7%
Adjusted net profit margin 32.3% 38.9% 40.4% 44.2% 44.0%
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Note 1: Adjusted net profit was derived from the profit for the year after adjusting for those items which are not indicative of the Group’s operating performances, including (i) dividend income from held for trading investments and (ii) share-based payments.

Government grants and gain or loss from held for trading investments are no longer non-recurring items which were excluded from the adjusted items for the year ended 31 August 2019, hence the comparative figure for the years ended 31 August 2015, 2016, 2017 and 2018 was restated for consistent presentation.

OPERATIONAL DATA

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At the end of school year
2014/2015 2015/2016 2016/2017 2017/2018 2018/2019
Total student enrolment 16,078 19,334 26,088 33,478 41,241
Total number of schools 40 46 60 82 95
Estimated total capacity for students 26,090 30,040 38,660 51,715 60,400
Overall utilisation rate 61.6% 64.4% 67.5% 64.7% 68.3%
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FIVE-YEAR FINANCIAL SUMMARY

ASSETS AND LIABILITIES

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At 31 August
2015 2016 2017 2018 2019
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Non-current assets 1,660,364 1,941,628 2,672,680 3,005,907 3,475,273
Current assets 1,155,639 1,284,696 1,744,238 2,790,223 3,048,461
Current liabilities 982,121 1,183,564 1,566,413 1,866,728 2,018,979
Net current assets/(liabilities) 173,518 101,132 177,825 923,495 1,029,482
Total assets less current liabilities 1,833,882 2,042,760 2,850,505 3,929,402 4,504,755
Total equity 1,812,294 2,021,485 2,501,518 3,691,829 4,245,775
Non-current liabilities 21,588 21,275 348,987 237,573 258,980
Total equity and non-current liabilities 1,833,882 2,042,760 2,850,505 3,929,402 4,504,755
At 31 August
Selected Major Items 2015 2016 2017 2018 2019
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Property, plant and equipment 1,397,751 1,505,847 1,814,438 2,105,782 2,419,241
Bank balances and cash 1,022,141 1,237,902 1,649,296 2,220,694 2,762,328
– –
Bank borrowings 424,146 431,338 330,989
Deferred revenue 660,138 802,848 1,008,348 1,168,873 –
Contractual liabilities – – – – 1,375,604
At 31 August
Liquidity 2015 2016 2017 2018 2019
Gearing ratio (Note 2) – – 17.0% 11.7% 7.8%
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Note 2: The gearing ratio was calculated as total borrowings divided by total equity as at the end of the relevant financial year.

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FIVE-YEAR FINANCIAL SUMMARY

OPERATING CASH FLOWS

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Year ended 31 August
2015 2016 2017 2018 2019
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Net cash from operating activities 444,039 532,877 698,681 750,359 857,009
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CAPITAL EXPENDITURES

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Year ended 31 August
2015 2016 2017 2018 2019
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Purchase of property, plant and equipment 212,259 146,713 224,071 214,445 135,263
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DIVIDEND PER SHARE

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Year ended 31 August
2015 2016 2017 2018 2019
HK$ cents HK$ cents HK$ cents HK$ cents HK$ cents
Interim dividend 1.3 2.1 3.0 4.0 4.7
Final dividend 2.2 2.9 4.3 5.1 5.6
Special dividend 1.4 – – – –
Total 4.9 5.0 7.3 9.1 10.3
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FINANCIAL AND OPERATIONAL HIGHLIGHTS For the year ended 31 August 2019

REVENUE BY CATEGORY

NUMBER OF SCHOOLS BY CATEGORY

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RMB’000
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1,570,231
1,341,267
515,737
+17.1%
531,340
245,381 Tuition
1,318,517
Tuition (+18.9%)
1,108,733
190,010
451,587
311,981
76,786
50,438
24,964 29,026
232,534 251,714
FY2018 FY2019
High school Middle school
Elementary school Pre-school
Foreign national school Others
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95
82 15
13
+15.9% 24
22
25
24
28
20
3 3
2017/2018 2018/2019
High school Middle school
Elementary school Pre-school
Foreign national school
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STUDENT ENROLMENT

AVERAGE TUITION FEE PER STUDENT*

RMB

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41,241
8,155
33,478
+23.2%
8,987
8,841
6,156
18,771
14,704
3,264 5,096
367 378
FY2018 FY2019
High school Middle school
Elementary school Pre-school
Foreign national school
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37,227
35,293
-5.2%
FY2018 FY2019
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• Average tuition fee per student is calculated by dividing total tuition fees for the year over average total student enrolment during the year

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FINANCIAL AND OPERATIONAL HIGHLIGHTS For the year ended 31 August 2019

GROSS PROFIT AND MARGIN

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RMB’000
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734,834
624,104
+17.7%
46.80%
46.50%
FY2018 FY2019
Gross Profit Gross Profit Margin
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ADJUSTED NET PROFIT AND MARGIN

RMB’000

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690,263
592,393
+16.5%
44.2%
44.0%
FY2018 FY2019
Adjusted Net Profit Adjusted Net Profit Margin
Adjusted net profit for the year ended 31 August 2018 was
restated for consistant presentation
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NUMBER OF TEACHERS AND STUDENT-TEACHER RATIO

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3,433
2,955
+16.2%
12:1
11:1
2017/2018 2018/2019
Number of Teachers Student-teacher Ra�o
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SCHOOL CAPACITY AND UTILIZATION

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60,400
51,715
+16.8%
68.3%
64.7%
2017/2018 2018/2019
School Capacity U�liza�on Rate
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MANAGEMENT DISCUSSION AND ANALYSIS

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MARKET REVIEW

A Pathway to Overseas Universities for Children of the Increasing Affluence of Middle-Incomes Families in China

In China, many middle-income parents today are well-educated and well-travelled, with an international vision. These parents consider studying in international schools as a pathway to overseas universities for their children. They recognise the importance of an all-round education to the personal development of their children. These parents consider that international schools usually put more emphasis on students’ critical thinking, advanced learning and creativity and provide a joyful learning environment with pastoral care for their children. Parents in China are sending approximately over 600,000 students overseas for further studies in 2018 alone.

Increasing Demand for Bilingual International Schools in China

Chinese parents generally believe that international schools in China that place a strong emphasis on English teaching better prepare their children for overseas education in English-speaking countries. They also realise that the influence of China on the global economy is becoming increasingly important. Therefore, if their children receive a bilingual education in China, followed by university studies in an English-speaking country, their children will be better equipped with the language and cultural skills that can open the doors to better job opportunities in China and internationally.

The reduced pace of China’s economic growth has not affected the plan of middle-income parents to send their children to bilingual international schools as they generally believe that a high-quality education is a worthwhile investment for the future of their children.

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MANAGEMENT DISCUSSION AND ANALYSIS

Classification of International Schools in China

International schools in China are generally divided into the following categories:

1. Foreign national schools are only allowed to provide preschool to grade 12 (“ K-12 ”) education to children of foreign nationals who have permits for residence in China. These schools are not allowed to enrol children of Chinese nationals. The selection of curriculum is determined by the schools themselves. Foreign national schools may be established by foreign institutions, foreign invested enterprises established in China, branches of international organizations in China or foreign individuals residing in China.

2. Sino-foreign joint venture high schools or preschools are primarily intended for Chinese nationals and are also allowed to enrol foreign nationals. They are established through cooperation between Chinese educational institutions and foreign educational institutions, the latter of which can only own less than 50% of the joint venture. These Sino-foreign joint ventures cannot own or operate middle and elementary schools.

3. Domestic Chinese-owned schools are permitted to provide a foreign curriculum in high school (grade 10 to 12) and are able to enrol children of both Chinese nationals and foreign nationals. However, these schools must provide the Chinese compulsory curriculum at middle school (grade 7 to 9) and elementary school (grade 1 to 6) levels. There is no mandatory national curriculum at preschool level.

Except for the Group’s foreign national schools and Dalian Maple Leaf International School (High School), which is a Sino-foreign joint venture private school, all of the Group’s schools are domestic Chinese-owned schools.

The Group’s Market Position

With over 24 years of experience in operating international schools in China, the Group is one of the leading international school operators in China in terms of student enrolment, offering high quality, bilingual K-12 education, combining the merits of both Western and Chinese educational philosophies. The Group’s high schools are certified by both the Ministry of Education of British Columbia (“ BC ”), Canada and Chinese educational authorities respectively, which allow the Group’s graduates to receive both a fully accredited BC diploma and a Chinese diploma. Furthermore, Maple Leaf Educational Systems has attained AdvancED Corporate Systems accreditation and all of the Group’s high schools, middle schools, elementary schools and foreign national schools are accredited by AdvancED (now known as Cognia), the largest school accreditation agency in the United States of America. The Group’s middle and elementary schools provide Chinese compulsory education with English enhancement classes to students. The Group’s preschools provide a game-based, bilingual curriculum designed and developed by Maple Leaf Educational Systems.

The Group targets mainly Chinese students from the increasing affluence of middle-income families in China who aim to pursue higher education abroad and for whom our tuition fees are affordable and competitive. The Group operates all of its schools under the “Maple Leaf” brand, most of which are located in second and third-tier cities in China (With the exception of Shanghai and Shenzhen being first-tier cities). As of 2019, over 16,000 high school students have successfully completed our high school program and become a significant part of the wave of Chinese studying in postsecondary institutions abroad.

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MANAGEMENT DISCUSSION AND ANALYSIS

BUSINESS REVIEW

The 2018/2019 school year was the fourth year of the Group’s fifth five-year plan from 2015/2016 to 2019/2020 school years (“ Fifth Five-Year Plan ”). At the end of the 2018/2019 school year, the Group’s student enrolment was 41,241, which was in line with the expected target student enrolment set for the 2018/2019 school year pursuant to the Fifth Five-Year Plan. The Board is cautiously optimistic that the number of students to be enrolled at the end of the Fifth Five-Year Plan will achieve the expected target.

In 2015/2016 school year, the Group first launched its MLES Global Top 100 University Guide (“ MLES Guide ”) based on well recognized international rankings, such as QS, US News and MacLean’s. The Group believes that the MLES Guide is suitable for the majority of its students who aim to apply for English-language universities. For the year ended 31 August 2019, the Group graduated 2,116 high school students from our schools, 113 of whom received offers from the top 10 universities in the world, including Imperial College London and University College London, while 1,550 graduates, being more than 73.3% of the graduates, receiving offers from at least one of the MLES Global Top 100 universities.

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Revenue

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Year ended 31 August
2019 % of 2018 % of
RMB’000 Total RMB’000 Total
Tuition fees
— High school 515,737 32.8 531,340 39.6
— Middle school 245,381 15.6 190,010 14.2
— Elementary school 451,587 28.9 311,981 23.2
— Preschool 76,786 4.9 50,438 3.8
— Foreign national school 29,026 1.8 24,964 1.9
1,318,517 84.0 1,108,733 82.7
Summer and winter camps 54,096 3.4 50,672 3.8
Textbooks 46,044 2.9 44,161 3.3
Others 151,574 9.7 137,701 10.2
Total 1,570,231 100 1,341,267 100
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C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9 17

MANAGEMENT DISCUSSION AND ANALYSIS

For the year ended 31 August 2019, tuition fees remained the major revenue contributor, accounting for over 84% of the total revenue. Tuition fees increased by RMB209.8 million or 1.3%, primarily due to an increase in student enrolment and an increase in the tuition fee rates charged for the new students enrolled in certain schools for the 2018/2019 school year.

Tuition fees generally include boarding fees. Tuition fees are mainly received prior to the beginning of each school year and are initially recorded as contract liabilities which were recorded as deferred revenue in the previous financial years. Tuition fees received in advance are then recognized as revenue proportionately across the relevant school year. For the 2018/2019 school year, the Group’s high schools charged tuition fees ranging between RMB59,000 and RMB210,000.

Tuition fees from high schools decreased by 2.9%, while tuition fees from middle schools and elementary schools increased by 29.1% and 44.7% respectively. The positive performance in our middle schools and elementary schools was mainly attributable to the opening of 2 middle schools and 1 elementary school in the 2018/2019 school year and a significant growth in student enrolment in Yancheng, Xi’an and Ordos.

Revenue from other sources principally comprises revenue derived from self-operated supermarkets selling food and miscellaneous school supplies in our school campuses, sale of school uniforms and provision of other services. Revenue from other sources increased by RMB19.2 million, primarily due to an increase in the sale of school uniforms and an increase in the provision other services.

Student Enrolment

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At the end of school year
% of % of
2018/2019 Total 2017/2018 Total
High school 8,155 19.8 8,987 26.8
Middle school 8,841 21.4 6,156 18.4
Elementary school 18,771 45.5 14,704 43.9
Preschool 5,096 12.4 3,264 9.8
Foreign national school 378 0.9 367 1.1
Total number of students enrolled 41,241 100 33,478 100
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The total number of students enrolled at the end of the 2018/2019 school year increased by 7,763, or 23.2%, of which 63.0% came from the new schools opened in the 2018/2019 school year in Luzhou and Yancheng, while the remaining growth came from existing schools in Wuhan, Ordos and Xi’an.

At the end of the 2018/2019 school year, the proportion of high school students decreased while the aggregate proportion of middle school and elementary school students increased largely due to the additions of 2 middle schools and 1 elementary school in the 2018/2019 school year. This was in line with the Group’s strategic objective of increasing the capacity of the Group’s middle schools for the Group’s high schools, improving the preparedness for high school entrants and reducing the need for student intake outside the Maple Leaf system.

18 C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9

MANAGEMENT DISCUSSION AND ANALYSIS

Average Tuition Fee per Student

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For the year ended
31 August
2019 2018
Tuition fees (RMB’000) 1,318,517 1,108,733
Average student enrolment [] 37,359 29,783
Average tuition fee per student [#] (RMB’000) 35.3 37.2
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* Average student enrolment is calculated as the average of the total number of students enrolled at the end of two consecutive school years.

# Average tuition fee per student is calculated by dividing tuition fees for the year ended 31 August of the relevant year over average student enrolment.

Average tuition fee per student dropped by approximately 5.1%, due to the relatively lower average tuition fee rate charged by our acquired schools in Haikou and Luzhou as compared our existing school’s average tuition fee rate and the large number of students enrolled in the elementary schools and preschools.

The Group’s Schools

14 new schools were added to the Group’s school network for the year ended 31 August 2019, including a preschool in Wuhan, Hubei Province, 7 preschools in Xiangyang, Hubei Province, a middle school and an elementary school in Luzhou, Sichuan Province, a high school and a middle school in Yancheng, Jiangsu Province, a preschool in Xi’an, Shaanxi Province, and a high school in Adelaide, South Australia.

As at 31 August 2019, the Group had 95 schools located in 24 cities in China, Canada and South Australia, namely Dalian, Wuhan, Tianjin, Chongqing, Zhenjiang, Luoyang, Ordos, Shanghai, Pingdingshan, Jingzhou, Yiwu, Huai’an, Pinghu, Xi’an, Haikou, Weifang, Huzhou, Yancheng, Shenzhen, Xiangyang, Luzhou, Kamloops, Richmond and Adelaide. The following table shows a summary of the Group’s schools by category as at the end of the two financial years:

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As at 31 August
2019 2018
High schools 15 13
Middle schools 24 22
Elementary schools 25 24
Preschools 28 20
Foreign national schools 3 3
Total 95 82
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MANAGEMENT DISCUSSION AND ANALYSIS

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Utilisation of the Group’s Schools

The Group’s utilisation rate is calculated as the number of students enrolled divided by the physical capacity for a given school. Except for the Group’s preschools and foreign national schools, all of the Group’s schools are generally boarding schools. For these boarding schools, the capacity for students is calculated based on the number of beds in their dormitories. For the Group’s foreign national schools, the capacity for students is calculated based on the number of desks in their classrooms. For the Group’s preschools, the capacity for students is calculated based on the number of beds used for naps in the schools. As a general rule, a new school takes some time to build its utilisation rate, especially at the high school level.

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As at the end of
school year
2018/2019 2017/2018
Total number of students enrolled 41,241 33,478
Total capacity 60,400 51,715
Overall utilisation 68.3% 64.7%
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Total capacity for students increased due to the addition of 14 new schools in the 2018/2019 school year, especially in Xiangyang, Luzhou and Yancheng. The 3.6% increase in the overall utilisation rate was due to a significant increase in the number of students enrolled in existing school in Wuhan, Yancheng, Xi’an and Ordos and the increase in the number of students enrolled in the acquired schools in Luzhou and Xiangyang.

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MANAGEMENT DISCUSSION AND ANALYSIS

The Group’s Teachers

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As at the end of
school year
2018/2019 2017/2018
Total number of teachers 3,433 2,955
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The total number of teachers increased primarily because more PRC-certified teachers were recruited for the opening of 2 middle schools, 1 elementary school and 8 preschools in the 2018/2019 school year. The Group’s student-teacher ratio slightly increased from 11:1 to 12:1 from 2017/2018 to 2018/2019 school year, mainly due to the increased ratio of middle schools and elementary schools. As at the end of the 2018/2019 school year, the Group had approximately 408 BC-certified teachers compared to 397 at the end of the 2017/2018 school year. In the 2018/2019 school year, there was a 10%–15% increment in the salary rates of the Group’s teachers.

RECENT BUSINESS UPDATE

Growth in Student Enrolment as at 15 October 2019

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Percentage
As at 15 October Change Change
2019 2018
Total number of students enrolled 41,508 36,564 +4,944 +13.5%
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The financial year of the Group ends on 31 August each year, while its school year normally runs from the beginning of September each year to the middle of July in the next year and each school year is divided into two terms. The number of students enrolled may vary from time to time in each school year. The above student enrolment numbers as at 15 October represent unaudited internal statistics of the total number of students enrolled in the first term of the relevant school year for comparison purposes only.

According to the Group’s experience, the Group expects student enrolment to further increase in the second half of the 2019/2020 school year because some new students will be admitted in the second term.

New Schools Opened in September 2019

As of 30 September 2019, the Group opened the following 5 new schools in China and Canada using an asset light model, after which the total number of schools were increased to 100.

City	Number of schools	Category of schools	Estimated Student Capacity
Xiangyang, Hubei Province	2	Middle school and elementary school	1,200
Jinan, Shandong Province	2	Middle school and elementary school	1,500
Thunder Bay, Ontario, Canada	1	High school	80

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MANAGEMENT DISCUSSION AND ANALYSIS

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Acquisition in Luzhou

On 10 December 2018, the Group entered into a sale and purchase agreement (the “ SPA ”) to acquire 66% equity interest in Luzhou No. 7 Jiade Education Investment Co., Ltd. (the “ Target Company ”) for a consideration of RMB184,800,000 (equivalent to approximately HK$210,167,178) which was satisfied in part by cash and in part by the allotment and issuance of 16,136,042 consideration shares by the Company. The Target Company operates Luzhou No. 7 Jiade International School (the “ Target School ”) which has more than 3,200 students and 380 teachers, and provides middle school and elementary school education in Luzhou, Sichuan Province, China.

On 23 January 2019, the Group further entered into a supplemental sale and purchase agreement (the “ Supplemental SPA ”) amending the terms of the original SPA to acquire an additional 9% equity interest in the Target Company for an additional consideration of RMB25,200,000 (equivalent to approximately HK$28,659,960). The total consideration for the acquisition was adjusted to RMB177,000,000 (equivalent to approximately HK$201,302,100) pursuant to the terms of the Supplemental SPA.

The Group completed the acquisition of an aggregate of 75% equity interest in the Target Company on 24 January 2019. For details of the acquisition, please refer to the Company’s announcements dated 10 December 2018 and 28 January 2019. The results of the Target Company and the Target School have been consolidated into the Group’s results from March 2019 onward.

The acquisition of the Target School further expands the Group’s school network and continues to build brand awareness in Chongqing and Sichuan Provinces. The Target School is the third school of the Group’s Chongqing educational park and will add a stable student source for and increases enrolment of Chongqing High school. The acquisition of the Target School will improve the profitability of the Group and strengthen its leading position in the international education industry in China.

22 C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9

MANAGEMENT DISCUSSION AND ANALYSIS

FUTURE DEVELOPMENT

The Fifth Five-Year Plan from 2015/2016 to 2019/2020 School Years

The school year of 2018/2019 is the fourth year of the Group’s Fifth Five-year Plan. In order to achieve the amended target student enrolment of over 45,000 by the end of the 2019/2020 school year pursuant to the Fifth Five-year Plan, the Group will continue to work towards the Group’s strategic expansion from stand-alone schools to educational parks and from educational parks to educational school districts in China. The core of Maple Leaf Educational School Districts is to accelerate the establishment of a pyramid-shaped student structure to achieve a 12-year consistent education as well as to improve academic performance; to enhance the rate of internal admission; and to highlight the characteristic of Maple Leaf education starting from the elementary schools to form a system advantage to contribute long-term development. In the school years of 2017/2018 and 2018/2019, the Group established Hainan and Hubei Maple Leaf Educational School Districts respectively. The Group expects to set up one more educational district in Tianjin at the end of the Fifth Five-Year Plan.

The Sixth Five-Year Plan from 2020/2021 to 2024/2025 School Years

The Group is actively developing the blueprint for the sixth Five-Year Plan, the overall goal is to establish 10 educational school districts in China, and 2 educational school districts in North America and Asia Pacific areas at the end of the sixth Five-Year Plan with estimated target enrolment of 110,000 students. The Company has also introduced the new Maple Leaf World School Program (“ World School Program ”). Implementation of the World School Program will take place over a 3-year period commencing from September 2020. Pursuant to the World School Program, the Company’s high school program in China will be shifting from the British Columbia curriculum to the Maple Leaf World School curriculum. The Company’s first batch of graduates from the World School Program will receive the Maple Leaf High School Graduation Diplomas in June 2023, endorsed by Cognia (formerly known as AdvancED), which is the largest, globally recognized school accrediting agency in the world.

Expansion Strategies

The Group will continue to adopt multiple expansion strategies including, but not limited to, building more asset-light schools, acquiring of schools with synergy to the Group, and expansion of certain self-owned school campuses to achieve higher utilisation rates in both the PRC and overseas. The enforcement of the amended Law for Promoting Private Education and the full implementation of two-child policy create a good opportunity for the vigorous growth of student enrolment.

Expansion of Student Capacity for Self-owned School Campus

Driven by strong student placement, Wuhan, Tianjin (Teda) and Chongqing campuses have been overall fully utilized. Tianjin (Teda) and Chongqing campuses have completed expansion before the commencement of 2018/2019 school year. Capacity for 1,500 students is expected to be added at the commencement of the 2020/2021 school year in Wuhan.

New Schools’ Development under Pipeline in China

The Group is under negotiations with local government or other entities for opening more asset-light schools in China. The Group is planning to open more high schools in first-tier cities,

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including Beijing, and is exploring relevant potential opportunities to open middle and elementary schools in second and third-tier cities.

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MANAGEMENT DISCUSSION AND ANALYSIS

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Overseas Expansion

Overseas expansion is part of the Group’s long-term growth strategy. The Group believes that a global presence of Maple Leaf branded schools will definitely help the Group’s student recruitment in China as Chinese parents recognise that Maple Leaf is able to offer a broader array of educational opportunities for their children. In fact, the demand for bilingual English and Chinese education is growing not only in China but also in other regions of the world, such as North America, Australia and Southeast Asia. The Group believes that with its unique advantages in having both English and Chinese curricula, and both ESL and CSL programs, it is well positioned to meet the demand for quality international K-12 education along the Belt and Road countries, where there is a demand for blending the best of Western and Chinese cultures.

Upon graduation from the Group’s high schools, Maple Leaf students are admitted into a wide range of international universities principally in Canada, the United Kingdom, the United States, Australia and Switzerland. As interest to study in Australia among the Group’s students has increased rapidly, a high school was opened in February 2019 at Mawson Lakes Campus of UniSA in Adelaide which is the third overseas school of Maple Leaf, MLES-UniSA. UniSA is one of the leading universities in Australia and is ranked among the Top 50 young universities worldwide by both QS and Times Higher Education.

Project New Sprouts

Ensuring an adequate supply of quality school principals is a critical element for success in the Group’s expansion. In this regard, the Group has maintained strategic cooperative collaboration with several well-known universities in China, including Beijing Normal University, Northeast Normal University, Central China Normal University, Beijing Foreign Studies University and Wuhan University, from which the Group’s schools recruit their master degree graduates with outstanding performance as the Group’s trainee principals. After two years’ study and on-the-job practicum, 10 successful trainees have been appointed for various positions at Maple Leaf middle or elementary schools.

MLES Future STEM Teacher Program

In collaboration with Thompson Rivers University and Lakehead University in Canada, and UniSA in South Australia, certain graduates from the Group’s high schools who meet the university requirements will be trained to earn their university degrees and their BC teaching certificates. These graduates will be recruited by the Group’s high schools as BC-certified teachers once they have obtained the required qualifications. This will provide an additional source of recruitment of BC-certified teachers to meet the future demand from the Group’s high schools.

24 C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9

MANAGEMENT DISCUSSION AND ANALYSIS

Other Talent Strategies

Two-year in-service training is an important platform for the Group’s executives’ continuous development. This continuous training program nurtured a large number of outstanding executives, including school principals, for the Group. The Maple Leaf “1+5” leadership team equips and operates new Maple Leaf schools with the Group’s new model and new experience. The Educational Management and Leadership Master’s Program at Royal Roads University enables executive candidates to embark on management careers and take on greater responsibilities in Maple Leaf in the future. The first two cohorts have successfully completed this program and the third cohort is being actively recruited across the Group.

Conclusion

With the support of its dedicated management team, the Group is confident that it is able to maintain its leading position as a K-12 international school operator in China, expand its school network inside and outside China and provide quality educational services to the society.

OTHER UPDATE

Latest Development of the Implementation Rules for the Law for Promoting Private Education

Interpretation of the major terms of the Draft for Review

On 10 August 2018, the Ministry of Justice issued the “Implementation Rules for the Law for Promoting Private Education of the People’s Republic of China (Revised Draft) (Draft for Review)” ( 《中華人民共和國民辦教育促進法實 施條例（修訂草案）（送審稿）》 ) (the “ Draft for Review ”) for public consultation. The Draft for Review outlines the detailed implementation measures for the top-level design of the classified management system of the higher level law of the Law for Promoting Private Education, which helps to regulate and facilitate the classified management, classified support and classified development of the private education in China, with an aim to promoting the distinctive and quality development of the private education by catering to the diversified and selective demands of different families for education in the new era.

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MANAGEMENT DISCUSSION AND ANALYSIS

The Draft for Review proposes certain restrictive measures such as “contractual arrangements”, “education groups” and “connected transactions” to protect the legitimate interests and rights of the non-profit schools, particularly safeguarding the property interest of the non-profit schools and preventing the improper transfer of the operation revenue of the non-profit schools. These restrictive regulations represent the acknowledgement of the objective existence of “education groups” and “connected transactions” by the government, and also set out regulatory principles without detailed regulatory measures, which shall be implemented by the local governments through system innovation according to the development of their respective local economy and private education after the passing of the Implementation Rules.

While strengthening the regulation of the private schools, the Draft for Review specifies that private schools shall be entitled to tuition fee autonomy and tax preference policies enjoyed by the public schools, which will be beneficial to the operation of schools operated by entities under the listed education groups. The new law allows the private schools to enrol students from various regions after filing with the relevant authorities, which will not only enlarge the coverage of recruitment regions of the private schools but also enrich their student sources, contributing to the increase of the number of enrolled students of such schools.

The Draft for Review proposes classified reform on existing private schools, which shall be conducted in a smooth and orderly manner after taking into consideration of the history and actual situation of such schools.

After the issue of the Draft for Review on 10 August 2018, some local governments such as Sichuan and Wenzhou have issued their own Local Implementation Rules for the Law for Promoting Private Education, with an aim to encouraging the expansion of resources to develop quality private education, enlarging the operation scale of the schools and realizing the group-oriented development of private schools, which represents the initial legislation intention by the state and local governments to encourage the healthy development of private education.

Maple Leaf Education sticking to the group-oriented development strategy in view of huge potential in the international education market

Maple Leaf Education always sticks to the strategy of rich connotation, brand image, distinctive characteristics as well as quality development, which is in line with the development guideline for private schools stipulated by the new law and new policies. With the further implementation of economic reform in China, international education plays an increasingly greater role in supporting the development of the city’s economy. Maple Leaf Education expects to explore greater market potential in anticipation of increased market share of the international education.

For future development, Maple Leaf Education has basically completed the development layout for its “Fifth Five-Year Plan”, and has made steady progress in overseas development. There is still room for improvement in the utilization of school resources within the Group, providing promising prospect for endogenous development. Endorsed by its sophisticated management system and curriculum system modes and stable school operation capability, Maple Leaf Group represents a favourable brand choice for cooperation with the government in school operation.

26 C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9

MANAGEMENT DISCUSSION AND ANALYSIS

FINANCIAL REVIEW

Revenue

The Group derives revenue from tuition fees from the Group’s high schools, middle schools, elementary schools, preschools and foreign national schools, the sale and lease of textbooks and other educational materials to the Group’s students, fees from the Group’s summer and winter camps, revenue from other educational services and revenue from the self-operated supermarkets in the Group’s school campuses.

Total revenue of the Group increased by RMB228.9 million, or 17.1%, from RMB1,341.3 million for the financial year ended 31 August 2018 to RMB1,570.2 million for the financial year ended 31 August 2019. The increase was primarily due to the increase in revenue from tuition fees by RMB209.8 million and the increase in revenue from others by RMB19.2 million.

Revenue from tuition fees increased by18.9% from RMB1,108.7 million for the financial year ended 31 August 2018 to RMB1,318.5 million for the financial year ended 31 August 2019, largely due to the increase in student enrolment by 23.2%. Revenue from others increased by 8.2% from RMB232.5 million for the financial year ended 31 August 2018 to RMB251.7 million for the financial year ended 31 August 2019, mainly due to an increase in provision of school uniforms and an increase in provision of other services.

Cost of Revenue

The Group’s cost of revenue primarily consists of staff costs, depreciation and amortisation, other training expenses and other costs. Staff costs consist of salaries and benefits paid to the Group’s teachers and other teaching staff. Depreciation and amortisation relate to the depreciation of property and equipment and the amortisation of books for lease. Training expenses relate to travel expenses and other expenses incurred in connection with the Group’s summer and winter camps overseas. Other costs include daily operating expenses of the Group’s schools and facilities, including the utility costs, the cost of furniture at the Group’s schools, the cost of maintaining the Group’s facilities.

Cost of revenue increased by RMB118.2 million, or 16.5%, from RMB717.2 million for the financial year ended 31 August 2018 to RMB835.4 million for the financial year ended 31 August 2019. The increase was largely due to an increase in teaching staff costs by RMB67.2 million, an increase in depreciation and amortization by RMB28.0 million, and an increase in other costs by RMB20.6 million.

Teaching staff costs increased by 14.6% from RMB458.9 million for the financial year ended 31 August 2018 to RMB526.1 million for the financial year ended 31 August 2019, primarily due to an increase in the number of teachers from 2,955 as at the end of the 2017/2018 school year to 3,433 as at the end of the 2018/2019 school year and an increase in staff salaries of the Group since September 2018. Depreciation and amortization increased from RMB62.7 million for the financial year ended 31 August 2018 to RMB90.7 million for the financial year ended 31 August 2019, primarily due to additional depreciation charge for the Group’s schools in Pingdingshan and Haikou from September 2018. Other costs increased from RMB153.8 million for the financial year ended 31 August 2018 to RMB174.4 million for the financial year ended 31 August 2019, primarily due to an increase in the cost of sales of goods and educational materials to students.

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MANAGEMENT DISCUSSION AND ANALYSIS

Gross Profit

As a result of the foregoing, gross profit increased by 17.7% from RMB624.1 million for the financial year ended 31 August 2018 to RMB734.8 million for the financial year ended 31 August 2019. The Group’s gross margin remained constant from 46.5% for the financial year ended 31 August 2018 to 46.8% for the financial year ended 31 August 2019.

Investment and Other Income

Investment and other income consist mainly of interest income from the Group’s bank deposits, rental income from investment properties and government grants. Investment and other income increased by 13.4% from RMB54.3 million for the financial year ended 31 August 2018 to RMB61.6 million for the financial year ended 31 August 2019. Bank interest income increased by 45.0% from RMB25.1 million for the financial year ended 31 August 2018 to RMB36.3 million for the financial year ended 31 August 2019. For the financial year ended 31 August 2019, government grants increased by RMB3.2 million primarily due to more immediate retreat of tax received from government during this period.

Other Gains and Losses

Other gains and losses consist primarily of gains on the extinguishment of other payables, gain or loss on financial investments and foreign exchange gains and losses. Other gains and losses increased from a gain of RMB75.7 million for the financial year ended 31 August 2018 to a gain of RMB128.8 million for the financial year ended 31 August 2019. The increase was mainly attributable to the combined effects of (i) a decrease in net loss on foreign exchange of RMB14.6 million, (ii) an increase in a gain arising from changes in fair value of financial assets measured at FVTPL by RMB39.5 million, and (iii) an increase in a gain on the extinguishment of other payables by RMB15.4 million.

Marketing Expenses

Marketing expenses mainly consist of commercials and expenses for producing, printing and distributing advertising and promotional materials, and salaries and benefits for personnel engaged in selling and marketing activities. Marketing expenses decreased by 15.0% from RMB40.0 million for the financial year ended 31 August 2018 to RMB34.0 million for the financial year ended 31 August 2019. Marketing expenses as a percentage of revenue decreased from 3.0% for the year ended 31 August 2018 to 2.2% for the year ended 31 August 2019, primarily due to a decrease in advertising and promotional expenses and student placement related expenses as a percentage of revenue.

Administrative Expenses

Administrative expenses consist primarily of the salaries and other benefits for general and administrative staff, depreciation of office buildings and equipment, travel expenses, employee share options and certain professional expenses. Administrative expenses increased by 28.1% from RMB155.6 million for the financial year ended 31 August 2018 to RMB199.3 million for the financial year ended 31 August 2019, due to the Group has increased staff salaries from September 2018. However, administrative expenses as a percentage of total revenue only slightly increased from 11.6% for the financial year ended 31 August 2018 to 12.7% for the year ended 31 August 2019 as a result of the Group’s effective cost control measures.

Finance Costs

For the financial year ended 31 August 2019, finance costs mainly represented interest expenses for secured bank borrowings. Finance costs increased from RMB10.6 million for the financial year ended 31 August 2018 to RMB11.0 million for the financial year ended 31 August 2019 primarily due to the increment of interest rate for bank borrowings.

28 C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9

MANAGEMENT DISCUSSION AND ANALYSIS

Profit before Taxation

As a result of the foregoing, the Group recorded a profit before taxation of RMB680.9 million for the financial year ended 31 August 2019, compared with RMB547.9 million for the financial year ended 31 August 2018. Profit before taxation as a percentage of revenue of the Group was 43.4% for the financial year ended 31 August 2019, compared with 40.8% for the financial year ended 31 August 2018.

Taxation

Income tax expense of the Group increased from RMB9.5 million for the financial year ended 31 August 2018 to RMB26.7 million for the financial year ended 31 August 2019, mainly due to the accumulated tax losses from previous years for diploma education business have been fully applied. The effective tax rate of the Group for the financial years ended 31 August 2019 and 2018 was 3.9% and 1.7% respectively. The increase in the Group’s effective tax rate was primarily due to some of the diploma education business started to pay China EIT.

Profit for the Year

As a result of the above factors, profit for the year of the Group increased by 21.5% from RMB538.4 million for the financial year ended 31 August 2018 to RMB654.2 million for the financial year ended 31 August 2019.

Adjusted Net Profit

Adjusted net profit was derived from adjusting the profit for the year for those non-recurring items which are not indicative of the Group’s operating performances. The following table reconciles profit for the year to adjusted net profit for both financial years:

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Year ended 31 August
2019 2018
RMB’000 RMB’000
Profit for the year 654,169 538,403
Add:
Dividend income from held for trading investments (497) (2,934)
Share-based payments 36,591 56,924
Adjusted net profit 690,263 592,393
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Adjusted net profit for the year ended 31 August 2019 increased by RMB97.9 million or 16.5%. Adjusted net profit margin was 44.0% for the year ended 31 August 2019, and compared with 44.2% for the year ended 31 August 2018.

Capital Expenditures

For the year ended 31 August 2019, the Group paid RMB135.3 million for property and equipment primarily related to the buildings for certain schools in Yiwu, Zhejiang Province and Tianjin Teda and Maple Leaf Red Clothing Company. For the year ended 31 August 2018, the Group paid RMB214.4 million for property and equipment primarily related to the buildings of schools in Pingdingshan, Henan Province, Haikou, Hainan Province and Chongqing.

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MANAGEMENT DISCUSSION AND ANALYSIS

Liquidity, Financial Resources and Capital Structure

The following table sets forth a summary of the Group’s cash flows for the two financial years:

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Year ended 31 August
2019 2018
RMB’000 RMB’000
Net cash from operating activities 857,009 750,359
Net cash used in investing activities (38,356) (758,129)
Net cash (used in) from financing activities (304,066) 544,268
Net increase in cash and cash equivalents 514,587 536,498
Cash and cash equivalents as at 1 September 2,220,694 1,649,296
Effect of foreign exchange rate changes 27,047 34,900
Cash and cash equivalents as at 31 August represented
by bank balances and cash 2,762,328 2,220,694
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As at 31 August 2019, the Group’s bank balances and cash amounted to RMB2,762.3 million, were mainly denominated in RMB and HK$. Bank balances and cash increased mainly because of the increment of contractual liabilities which were recorded as deferred revenue in the previous financial years and the disposal of short-term investments.

As at 31 August 2019, the Group’s bank borrowings were RMB331.0 million which were mainly denominated in Singapore Dollar, with variable interest rates with reference to Singapore Interbank Offered Rate. Of the Group’s bank borrowings as at 31 August 2019, 36% will mature every month and subject to roll over and the remaining 64% will mature in the second year. These bank borrowings were secured by the Group’s bank deposits and investment properties.

The Group expects that its future capital expenditures will primarily be financed by its internal resources.

Gearing Ratio

The gearing ratio of the Group was calculated as total borrowings divided by total equity as at the end of the relevant financial year. Gearing ratio decreased from 11.7% for the year ended 31 August 2018 to 7.8% for the year ended 31 August 2019 primarily due to the repayment of bank loans during this period.

Foreign Exchange Exposure

The majority of the Group’s revenue and expenditures are denominated in RMB, the functional currency of the Company, except that certain expenditures and liabilities are denominated in foreign currencies such as HK$, USD, CAD and SGD. As at 31 August 2019, certain bank balances and cash and liabilities were denominated in HK$, USD, CAD and SGD. The Group did not enter into any financial arrangement for hedging purposes as it is expected that its foreign exchange exposure will not be material.

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MANAGEMENT DISCUSSION AND ANALYSIS

Contingent Liabilities

On 15 November 2016, the Company received a writ of summons from Hong Kong Zhixin Financial News Agency Ltd. (“ Zhixin ”) seeking among other things, specific performance of the consultancy agreement (the “ Agreement ”) between the Company and Zhixin by the allotment and issue of 7,000,000 shares of the Company to Zhixin, and damages in lieu or in addition thereof (“ Zhixin Case ”). On 28 November 2016, the Company filed with the High Court of the Hong Kong Special Administrative Region its acknowledgement of service of the writ and indicated its intention to defend the claim.

In December 2016, Zhixin took out an application for summary judgment against the Company. The hearing of the summary judgment application took place on 25 October 2017 in which Zhixin’s application was dismissed. The case now proceeded to the main trial stage.

On 29 January 2018, Zhixin filed its amended statement of claim to allege that it is entitled to 17,500,000 shares of the Company by virtue of an option provided in the Agreement. Zhixin Case is still in the process of filing pleadings by both parties.

Based on information currently available to the Company, it is not possible to estimate the financial effect of the Zhixin Case. As of 31 August 2019, the Company has not made any provision in respect of the Zhixin Case. The Company will provide an update as and when there is any material development in this matter.

The number of shares disclosed above has not considered the effect of share subdivision that became effective on 9 July 2018.

Pledge of Assets

As at 31 August 2019, the Group pledged a total bank deposits of RMB132.0 million and certain investment properties with an aggregate carrying amount of RMB348.1 million to certain licensed banks for certain banking facilities.

Material Acquisition and Disposal of Subsidiaries

Save as disclosed above, the Group had no material acquisition and disposal of subsidiaries during the year ended 31 August 2019.

Significant Investment Held

As at 31 August 2019, no significant investment was held by the Group.

Employee Benefits

As at 31 August 2019, the Group had 6,170 (2018: 5,369) full-time employees. The Group provides external and internal training programs to its employees. The Group participates in various employee benefit plans, including provident fund, housing pension, medical, basic pension and unemployment benefit plans, occupational injury and maternity leave insurance. The Company also has a post-IPO share option scheme and a share award scheme set up for its employees and other eligible persons. Salaries and other benefits of the Groups’ employees are generally reviewed on a regular basis in accordance with individual qualifications and performance, results and performance of the Group and relevant market conditions. Total employee remuneration (excluding directors’ remuneration) for the year ended 31 August 2019 amounted to RMB625.9 million (2018: RMB584.1 million).

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DIRECTORS AND SENIOR MANAGEMENT

OUR BOARD OF DIRECTORS

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Name Age Position/Title Date of Appointment
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Shu Liang Sherman Jen	65	Executive Director, Chairman of the Board, CEO and	June 2007
		President of China Operations
Jingxia Zhang	62	Executive Director, Senior Vice President and CFO	March 2008
James William Beeke	69	Executive Director, Vice President and Superintendent	April 2014(2)
		of Global Education (other than PRC)
Howard Robert Balloch	68	Non-executive Director and Vice Chairman of the Board	March 2008
Peter Humphrey Owen	72	Independent Non-executive Director	June 2014(1)
Alan Shaver	73	Independent Non-executive Director	August 2019
Lap Tat Arthur Wong	59	Independent Non-executive Director	June 2014(1)

Notes:

(1) Effective from the listing of the Company’s shares on The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) on 28 November 2014.

(2) Mr. James William Beeke worked for the Group from 2005 to 2009 and again from 2014 up to now, he was appointed as Director from 12 March 2008 to 20 January 2010 and reappointed on 25 April 2014.

Executive Directors

Shu Liang Sherman Jen (“Mr. Jen”) , aged 65, is our controlling Shareholder (the “ Controlling Shareholder ”) and founder. Mr. Jen was appointed as a Director in June 2007 and was re-designated as an executive Director and was appointed as chairman of the nomination and corporate governance committee of our Company, both taking effect on 28 November 2014, and is primarily responsible for the overall business and strategy of our Group, including the introduction of the dual diploma school model. He has been the chairman of the Board, CEO of our Company since 2007, and co-chief executive officer (“ Co-CEO ”) since March 2014. Mr. Jen was re-designated as CEO on 15 August 2016 following the resignation of the other Co-CEO and was appointed as the president of China operations on 1 September 2016.

Mr. Jen is also the president of Dalian Maple Leaf International School, a subsidiary of the Company, since 1995, the chairman of Dalian Maple Leaf Educational Group Co., Ltd., a consolidated affiliated entity, since 2003, and the director of Maple Leaf Educational Systems Limited, a subsidiary of the Company, since 1992, Tech Global Investment Limited, a subsidiary of the Company, since 2007, Maple Leaf Education Asia Pacific Limited (formerly known as Hong Kong Maple Leaf Educational Systems Limited), a subsidiary of the Company, since 2009 and Dalian Beipeng Educational Software Development Inc., a subsidiary of the Company, since 2011. His contributions lead us to become one of the leading international school service providers in China.

Mr. Jen has more than 24 years of experience in the education industry. In 2004, he was selected as one of the most influential figures in the private education industry in China by sohu.com. In 2005, he received the Outstanding Chinese Entrepreneur Award from the Overseas Chinese Affairs Office of the State Council of the PRC. In 2011, he was honored as one of the “Top Ten Figures of our Time” by a group of media organizations and industry associations. In 2013, he received the Governor General’s Medallion from Mr. David Johnston, Governor General of Canada, for his contributions to international education. In October 2014, he received the Chinese Government Friendship Award from the PRC Premier Mr. Li Keqiang and two Vice Premiers, which is the highest honor awarded by the Chinese government to foreign experts for their outstanding contributions to the modernized development of the PRC. In 2019, he was recognised as one of the “Top 10 Most Influential Education leaders in China” by Knowledge Review, a United Kingdom leading education magazine, and was honorably featured on the cover of the August 2019 edition. Mr. Jen has not held any directorship roles in any other listed companies in the last three years. Mr. Jen is a resident of Hong Kong. Mr. Jen is not a resident of Canada for Canadian taxation purposes.

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Mr. Jen received his Bachelor of Arts degree in English Language and Arts from Beijing Foreign Languages University, PRC in May 1978, his Master of Business Administration by distance learning from the University of Wales, New Port, United Kingdom in September 2005 and an Honorary Doctor of Laws degree (Hon. LL.D) from Royal Roads University in BC, Canada in June 2013.

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Jingxia Zhang (“Ms. Zhang”) , aged 62, is the senior vice president and was redesignated from co-chief financial officer to chief financial officer of our Company with effect from 16 June 2015. Ms. Zhang was appointed as a Director in March 2008 and was re-designated as an executive Director taking effect on 28 November 2014. Ms. Zhang joined the Group in April 1995 and is primarily responsible for the overall management and financial operations of the schools in our Group. Ms. Zhang is one of the key members of the management team of the Company and has made important contributions to the Group.

Prior to joining our Group, Ms. Zhang was the director of finance of Jilin Province Dunhua City Pharmaceutical Factory, a Chinese pharmaceutical manufacturer, where Ms. Zhang was responsible for managing its accounts and financial operations. Ms. Zhang has not held any directorship roles in any other listed companies in the last three years.

Ms. Zhang received her Financial Accounting diploma by distance learning from Jilin Accounting School, PRC in July 1991.

James William Beeke (“Mr. Beeke”) , aged 69, is our Director, vice president and superintendent of global education (other than PRC) of the Group. He was appointed as a Director in April 2014 and was re-designated as an executive Director taking effect on 28 November 2014. Mr. Beeke previously served as the vice chairman of the Board and the superintendent of the BC Program of the Group from 2005 to 2009 and again from 2014 to 2016. Mr. Beeke was appointed as the superintendent of global education (other than PRC) of the Group and ceased to be the superintendent of BC program of the Group with effect from 15 August 2016. Mr. Beeke is primarily responsible for overseeing the development of the Group’s educational programs outside of the PRC.

Prior to joining our Group, Mr. Beeke was employed by the BC provincial government as deputy inspector, and later, inspector for the Ministry of Education of the BC provincial government from 1996 to 1998 and from 1998 to 2005, respectively. As inspector, he was responsible for the inspection, certification and funding of all independent schools in the province, and developed and directed BC’s Offshore School Certification Program. Since September 2009, he has been president of Signum International Educational Services Inc., a company which provides educational consultant services to schools in Canada and internationally, where he was responsible for assisting schools with board governance and strategic development planning, performing school reviews, conducting principal evaluations and providing analysis and comparisons of provincial curricula. Mr. Beeke has not held any directorship roles in any other listed companies in the last three years.

Mr. Beeke received his Bachelor of Arts degree and Master of Arts degree from Western Michigan University in Michigan, United States, in December 1971 and August 1973, respectively. He received the Certificate of Qualification from the British Columbia Teachers in June 1991, Certificate of Recognition from the British Columbia Minister of Education in 1991, Certificates of Recognition from the Chinese Consulate (Vancouver, Canada) and from British Columbia Ministry of Education in June 2005 and Certificate of Honorary Award from Liaoning Provincial Government of PRC in 2006.

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DIRECTORS AND SENIOR MANAGEMENT

Non-executive Director

Howard Robert Balloch (“Mr. Balloch”) , aged 68, was appointed as a Director in March 2008 and was re-designated as a non-executive Director and was appointed as a member of the remuneration committee, both taking effect on 28 November 2014. Mr. Balloch is responsible for supervising the overall management and strategic planning of our Group. He was appointed as vice chairman of the Board on 3 January 2017.

Mr. Balloch is a retired Canadian diplomat. Prior to joining our Group, he served as Canadian Ambassador to the PRC and Mongolia from April 1996 to July 2001, and to the Democratic People’s Republic of Korea from March 2000 to July 2001. Subsequently, he served as the president and chief executive officer of the Canada China Business Council, a private, non-profit business association that facilitates and promotes trade and investment between Canada and China, from 2001 to 2006, and subsequently as its vice chairman until September 2016. Mr. Balloch founded and served as president and chairman of The Balloch Group from 2001 to 2011, a boutique investment bank that advised domestic and multinational corporations in China. The Balloch Group was acquired in 2011 by Canaccord Genuity Group Inc., a Canadian company listed on both the Toronto Stock Exchange (“ TSX ”) (stock code: CF) and the London Stock Exchange (stock code: CF). Mr. Balloch served as Chairman of Canaccord Genuity Asia, the Asian subsidiary of Canaccord Genuity Group Inc. from 2011 to 2013. From January 2002 to January 2015, he served as a director of Ivanhoe Energy Inc., a company involved in heavy oil exploration and production technology and listed on the TSX (stock code: IE) and NASDAQ (stock code: IVAN) until it was delisted in March 2015. Mr. Balloch has also served as the director of several companies outside the Group. He has been a director of Methanex Corp. from December 2004 to April 2019, a company listed on both the TSX (stock code: MX) and NASDAQ (stock code: MEOH), which is engaged in the supply, distribution and marketing of methanol to major international markets. He has also served as a director of Sinopec Canada, a nonpublic subsidiary of Sinopec International Petroleum Exploration and Production Corporation, since April 2014 and a partner of PacBridge Partners (Canada) Ltd, a company specializes in providing early stage and growth capital to companies since January 2018.

Mr. Balloch received a Bachelor of Arts degree and a Master of Arts degree from McGill University, Canada in June 1972 and June 1974, respectively.

Independent Non-executive Directors

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Peter Humphrey Owen (“Mr. Owen”) , aged 72, was appointed as an independent non-executive Director in June 2014, and was appointed as a chairman of our remuneration committee and a member of our audit committee and nomination and corporate governance committee, all taking effect on 28 November 2014. Mr. Owen is primarily responsible for supervising and providing independent judgment to our Board.

Prior to joining the Group, Mr. Owen served as the vice chair of the Workers Compensation Review Board of BC in 1986. He subsequently held various positions at the Ministry of Education of the BC provincial government until May 2011, including the positions of director, executive director, and assistant deputy minister, responsible for education related legislation, governance, international education, policy and planning, and a variety of program areas. Mr. Owen has not held any directorship roles in any other listed companies in the last three years.

Mr. Owen received a Bachelor of Arts degree from Simon Fraser University, Canada in May 1976 and a Bachelor of Laws degree (LLB) from the University of British Columbia, Canada in May 1979.

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Alan Shaver (“Mr. Shaver”) , aged 72 was appointed as an independent non-executive Director and a member of audit committee, remuneration committee and nomination and corporate governance committee, all taking effect from 31 August 2019. Mr. Shaver is primarily responsible for supervising and providing independent judgment to our Board.

Mr. Shaver is a member and the chair of the board of directors of Innovate BC, a BC provincial Crown Agency whose mission is to promote the growth of BC’s high tech economy. Prior to that, he served as the president and vice chancellor of Thompson Rivers University from 2010 to 2018, and served as the vice president academic and provost of Dalhousie University from 2006 to 2010. From 1975 to 2006, Mr. Shaver held various positions in McGill University, including assistant professor, associate professor, professor, chair of the Department of Chemistry, and dean of the Faculty of Science. He also worked at the University of Western Ontario from 1972 to 1975, where he served as a National Research Council Postdoctoral Fellow and Department of Chemistry teaching fellow.

Mr. Shaver completed his Bachelor of Science degree in Carleton University majoring in chemistry in 1969, and obtained his doctorate degree in Organometallic Chemistry at Massachusetts Institute of Technology in 1972.

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Lap Tat Arthur Wong (“Mr. Wong”) , aged 59, was appointed as an independent nonexecutive Director in June 2014, and was appointed as the chairman of the audit committee, both taking effect on 28 November 2014. Mr. Wong is primarily responsible for supervising and providing independent judgment to our Board.

Prior to joining our Group, from 1982 to 2008, Mr. Wong held various positions in Deloitte Touche Tohmatsu in Hong Kong, San Jose and Beijing, with the latest position as a partner in the Beijing office. He subsequently served as the CFO in the following companies: Asia New-Energy Holdings Pte. Ltd., a manufacturer of fertilizer, chemicals and new energy products, from 2008 to 2009; Nobao Renewable Energy Holding Ltd., a renewable energy company, from March 2010 to November 2010; GreenTree Inns Hotel Management Group, Inc., an economy hotel chain from 2011 to 2012; and Beijing Radio Cultural Transmission Company Limited, a music production and music data management service company, from January 2013 to November 2018.

Mr. Wong previously served as an independent non-executive director at Besunyen Holdings Co Ltd., a herbal tea processing and marketing company listed on the Stock Exchange (stock code: 00926) from July 2010 to April 2014, an independent director of YOU On Demand Holdings Inc, a media company listed on NASDAQ (stock code: YOD) from January 2014 to April 2016, an independent director of Xueda Education Group, a company listed on NYSE (stock code: XUE) from March 2015 to June 2016 and an independent non-executive director and the chairperson of the audit committee of the following listed companies: VisionChina Media, Inc., an out-of-home advertising network company listed on NASDAQ (but this company has been delisted since April 2017) (stock code: VISN) from December 2011 to January 2017; Petro-king Oilfield Services Ltd., a consultancy and oilfield project services company listed on the Stock Exchange (stock code: 02178) from February 2013 to June 2017; Sky Solar Holdings, Ltd., a company listed on NASDAQ (stock code: SKYS) from November 2014 to May 2017; and China Automotive Systems, Inc., an automotive systems and components manufacturer listed on NASDAQ (stock code: CAAS) from May 2012 to July 2019. He currently serves as an independent non-executive director and the chairperson of the audit committee of the following listed companies: Daqo New Energy Corp., a polysilicon manufacturer listed on NYSE (stock code: DQ) since December 2012 and Canadian Solar Inc, a global solar energy provider listed on NASDAQ (stock code: CSIQ) since March 2019.

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DIRECTORS AND SENIOR MANAGEMENT

Mr. Wong received a Higher Diploma in Accountancy from The Hong Kong Polytechnic University in November 1982 and a Bachelor of Science degree in Applied Economics from University of San Francisco in December 1988. He became an associate and subsequently a fellow of the Hong Kong Institute of Certified Public Accountants in 1985 and 1995, respectively. He became a fellow of the Association of Chartered Certified Accountants in 1990 and a member of the American Institute of Certified Public Accountants in 1992.

OUR SENIOR MANAGEMENT

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Name Age Position
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Shu Liang Sherman Jen	65	CEO and President of China Operations
Jingxia Zhang	62	Senior Vice President and CFO
James William Beeke	69	Vice President and Superintendent of Global Education (other than PRC)
Linsheng Chen	60	Vice President and the Chinese Program Superintendent
Xiaofeng Cao	46	Vice President
Fang Bao	43	Vice President
Hongge Ren	35	Vice President

The biography of each member of the senior management team (other than our executive Directors) is set out below:

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Linsheng Chen (“Mr. Chen”) , aged 60, has been the vice president and Chinese program superintendent of our Group since September 2012. He is primarily responsible for management of the Chinese curriculum and evaluation of our schools. Mr. Chen has been supervising the content and quality of the Chinese curriculum and conducting periodic reviews of the operation of our schools.

Mr. Chen served as the head of the educational affairs department of Dalian Maple Leaf High School from August 2000 to April 2006, where he was responsible for managing the Chinese curriculum. He later served as the Chinese program superintendent of Shenyang Maple Leaf International School from May 2006 to March 2007, where he was responsible for managing the Chinese curriculum. He was also the headmaster of Wuhan Maple Leaf International School from April 2007 to August 2012, where he was responsible for the overall operation of the school. Mr. Chen has not held any directorship roles in any listed companies in the last three years.

Mr. Chen received a Bachelor’s degree in Chinese from Hunan Normal University in Hunan, China in December 1981.

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Xiaofeng Cao (“Mr. Cao”) , aged 46, joined the Group as vice president in March 2015 and is primarily responsible for school construction projects and general affairs of school campus. Mr. Cao has over 10 years’ experience in senior management. Prior to joining the Group, Mr. Cao was a vice president of Etonkids Educational Group.

Mr. Cao received a Bachelor’s degree from Wuhan Textile Engineering Institute in 1995, a Master of Labor Economics from Renmin University of China in 2011 and a Doctor’s degree in Educational Management from Beijing Normal University in 2014.

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Fang Bao (“Mr. Bao”) , aged 43, has been the vice president of the Group since 10 January 2018. He is primarily responsible for supervising winter and summer programs, talent training programs and overseeing the marketing centre of the Group. He served as the director assistant of general office, the vice director of headquarter development committee office and the director of headquarter development centre of the Group from August 2009 to August 2015. He later served as the vice president of Dalian Maple Leaf Science and Education Industrial Group Co., Ltd (a member of the Group) since September 2015.

Mr. Bao graduated with a bachelor’s degree in science, majoring in computer science, from The University of Auckland (New Zealand) in 2009.

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Hongge Ren (“Mr. Ren”) , aged 35, has been a vice president of the Group since 10 January 2018. He oversees three departments: Maple Leaf Education Systems Research Institute (“ MLESRI ”), ESL Teaching Centre and Graduation Service Centre. His major projects include research of the Maple Leaf Global Curriculum, promotion of the Belt and Road education program and scholarship programs of the Group. He has also served as principal of MLESRI and vice chairman of the Global Alumni Association of Maple Leaf International Schools since August 2015.

Mr. Ren graduated with a bachelor’s degree in commerce, majoring in entrepreneurship, from the University of Victoria, Canada in 2008 and a master’s degree in education, majoring in technology, innovation and education, from Harvard University in 2013. He received the British Columbia Independent School Teaching Certificate in 2016.

COMPANY SECRETARY

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Ms. Wan Mun Yee, Sabine (“Ms. Wan”) , has been appointed as the company secretary and authorised representative of the Company since 27 August 2018. She is a manager of Corporate Services of Tricor Services Limited and has over 20 years of experience in the corporate secretarial field. Ms. Wan is a Chartered Secretary and a Member of both The Hong Kong Institute of Chartered Secretaries and The Institute of Chartered Secretaries and Administrators in the United Kingdom.

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REPORT OF THE DIRECTORS

The Board of China Maple Leaf Educational Systems Limited present their report together with the audited financial statements of the Group for the year ended 31 August 2019.

GENERAL INFORMATION

The Company was incorporated in the Cayman Islands on 5 June 2007 as an exempted company with limited liability. The principal place of business of the Company in Hong Kong is located at Room 1302, 13/F., Tai Tung Building, 8 Fleming Road, Wanchai, Hong Kong.

The Company’s shares (“ Shares ”) were listed (the “ Listing ”) on the Main Board of the Stock Exchange on 28 November 2014 (“ Listing Date ”).

PRINCIPAL ACTIVITIES AND SUBSIDIARIES

The Group is an international school operator which offers a bilingual K-12 education primarily in the PRC under the “Maple Leaf” brand. The core component of our business is a dual-curriculum and dual-diploma high school education that enables our high school graduates to receive a diploma fully accredited by BC, Canada and a Chinese diploma. A list of the Company’s subsidiaries, together with their places of incorporation and principal activities, is set out in note 41 to the financial statements.

BUSINESS REVIEW

A fair review of the business of the Group during the year as required by Schedule 5 to the Companies Ordinance (Chapter 622 of the Laws of Hong Kong), including an analysis of the Group’s financial performance, an indication of likely future developments in the Group’s business and the Group’s key relationships with its stakeholders who have a significant impact on the Group and on which the Group’s success depends, is set out in the sections headed “Letter from the Chairman” and “Management Discussion and Analysis” of this report. These discussions form part of this report.

Principal Risks and Uncertainties

Save as disclosed in the section headed “Risks relating to the Contractual Arrangements” under “Connected Transactions” in this report, the following list is a summary of certain principal risks and uncertainties facing the Group.

• Our operations and business prospects;

• Our business and operating strategies and our ability to implement such strategies;

• Our ability to develop and manage our operation and business;

• Our business depends on the market recognition of our Maple Leaf brand;

• Our ability to maintain or increase student enrolment in our schools;

• Our ability to maintain or increase tuition fees;

38 C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9

REPORT OF THE DIRECTORS

• Our ability to control our operating costs;

• Competition in the education industry where we serve;

• Our business depends on our ability to recruit and retain dedicated and capable teachers and other school personnel;

• Ability to obtain or renew the necessary licenses or government approvals for our business and operations; and

• Changes to regulatory and operating conditions in the education industry where we serve, in particular, the regulatory changes under the new law and new policies.

Some of the above risks and uncertainties are beyond the Group’s control and should any of these occur, the Group’s business, financial position and results of operation may be materially adversely affected.

In addition, the Group also faces various market risks. In particular, the Group is exposed to credit, liquidity, interest rate and currency risks that arise in the normal course of the Group’s business. In order to meet these challenges, the Group has established the following structures and measures to manage the Group’s risks:

• the Board is responsible and has general powers over the management and operation of our schools, and is in charge of the overall risk control of the Group. Any significant business decision involving material risks, such as decisions to expand into new geographic regions or to raise tuitions, are reviewed, analyzed and approved at the board level to ensure a thorough examination of the associated risks at the Group’s highest corporate governance body;

• the Group maintains insurance coverage which we believe is in line with the customary practice in the PRC education industry. The Group also adopts health and safety measures on our campuses to safeguard our students’ wellbeing; and

• the Group has made arrangements with banks to ensure that the Group is able to obtain credits to support its business operation and expansion.

However, the above is not an exhaustive list. Investors are advised to make their own judgment or consult their own investment advisors before making any investment in the Shares. As recommended under “Review of Disclosure in Issuer’s annual reports to monitor rule compliance report” issued by the Stock Exchange in 2016 and 2017, the Company discussed specifically how the major risk areas would affect the business operations, the potential financial impact, and whether they had undertaken any measure to manage risk areas.

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REPORT OF THE DIRECTORS

Environmental Policies and Performance

The Group realizes the importance of environmental protection in pursuing long-term sustainability. In particular, the Group promotes energy saving and recycling of materials in our headquarters and schools including turning off unnecessary lighting, air-conditioning and electrical appliances. The Group also encourages the use of recycled paper and promotes double sided printing and copying. The Group is committed to improving environmental sustainability and will closely monitor its performance. These policies are supported by our staff and were implemented effectively. During the financial year ended 31 August 2019, we have not been subject to any fines or other penalties due to noncompliance with any health, safety or environmental regulations. For details, please refer to our Environmental, Social and Governance (“ ESG ”) Report to be published separately.

Compliance with Relevant Laws and Regulations

During the year ended 31 August 2019, the Group was not aware of material non-compliance with relevant laws and regulations that have a significant impact on the business and operations of the Group.

Relationships with employees, customers and suppliers

(a) Employees

The Group believes that employees are valuable assets. The Group provides a competitive remuneration package to attract and motivate employees. Please refer to the section headed “Management Discussion and Analysis — Employees Benefits” for further details. The Group regularly reviews the remuneration package of employees and makes necessary adjustments to conform to the market standard. The Group is also passionately committed to developing staff and provides employees with rewarding career paths and a friendly working environment.

(b) Customers

The Group strives to achieve corporate sustainability in providing quality services to our customers. To ensure continuous improvement of the quality of services, the Group regularly reviews its curriculum and teaching material in order to ensure the quality of education delivered by the Group meets the standard set by various educational institutions around the world. The Group believes that maintaining a high admission rate to topranked universities can help strengthen its market competitiveness in the industry. For the year ended 31 August 2019, the Group graduated 2,116 high school students, 113 of whom received offers from one of the QS top 10 universities in the world, and 1,550 graduates, being more than 73.3% of them receiving offers from at least one of the Maple Leaf Global Top 100 universities.

(c) Suppliers

The Group understands the importance of working closely with our suppliers to ensure the sustainability of our business. The Group has established long standing relationships with our suppliers to ensure they share our commitment to quality and ethics.

Save for disclosed in this report, there were no material and significant dispute between the Group and its employees, customers and/or suppliers during the financial year ended 31 August 2019.

FINANCIAL RESULTS

The results of the Group for the year ended 31 August 2019 are set out in the consolidated statement of profit or loss and other comprehensive income on page 79 of this report.

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REPORT OF THE DIRECTORS

DIVIDENDS

In February 2019, the Company paid a final dividend of HK$5.1 cents per share for the year ended 31 August 2018, and in May 2019 it paid an interim dividend of HK$4.7 cents per share for the six months ended 28 February 2019.

The Board has resolved to recommend the payment of a final dividend of HK$5.6 cents per share for the year ended 31 August 2019, subject to the approval by the Shareholders of the Company at the forthcoming annual general meeting (“ AGM ”) to be held on 22 January 2020. Together with the interim dividend paid, this made up a total dividend of HK$10.3 cents per share for the year ended 31 August 2019.

There is no arrangement under which a shareholder has waived or agreed to waive any dividends.

Dividend Policy

On 9 November 2018, the Board adopted a dividend policy which sets out the principles and guidelines of the Group. The Company intends to distribute no less than 40% of its annual adjusted net profits as dividends to its shareholders. The declaration and payment of dividends shall be determined at the sole and absolute discretion of the Board which shall take into account the Company’s financial results, cash flow position, business conditions and strategies, future operations and earnings, capital requirements and expenditure plans, interests of the shareholders, any restrictions on dividend payment and any other factors considered relevant by the Board. A dividend may be proposed and/or declared by the Board for a financial year or period as interim dividend, final dividend, special dividend and any distribution of net profits deemed appropriate by the Board.

FIVE-YEAR FINANCIAL SUMMARY

A summary of the results and assets and liabilities of the Group for the most recent five years is set out in the section headed “Five-Year Financial Summary” on pages 9 to 11 of this report.

PROPERTY, PLANT AND EQUIPMENT

Details of movements in property and equipment during the year are set out in note 13 to the financial statements.

INVESTMENT PROPERTIES

Details of investment properties as at 31 August 2019 are set out in note 15 to the financial statements. The fair value of the investment properties at 31 August 2019 was RMB381.9 million. The book value of the investment properties held by the Group as at 31 August 2019 as included in the financial statements in this report was RMB348.1 million.

As at 31 August 2019, the properties held for investment in Singapore and the PRC for which the percentage ratios, as defined under Rule 14.04(9) of the Rules Governing the Listing of Securities on the Stock Exchange (“ Listing Rules ”), exceed 5% are set out below.

PARTICULARS OF INVESTMENT PROPERTIES

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Location Existing Use Tenure
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11 Hillside Drive, Singapore 548926	School campus	Leasehold estate for 103 years commenced
(Land Lot No. 99180L Mukim 22)		from 16 November 2012
No. 78 Caiyun Road, Xigang District, Dalian,	Offices	Leasehold estate for 30 years commenced
China 116011 (Land Lot no. 2-11-2-10-1)		from December 2003

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REPORT OF THE DIRECTORS

BANK LOANS AND OTHER BORROWINGS

As at 31 August 2019, the Group maintained variable interests rate bank loans secured by bank deposits and an investment property to finance the acquisition of investment property.

SHARE CAPITAL

Details of the movements in share capital of the Company are set out in note 28 to the financial statements.

PERMITTED INDEMNITY

In accordance with article 33.1 of the Company’s articles of association (“ Articles of Association ”), every Director, auditor or other officer of the Company shall be entitled to be indemnified out of the assets of the Company against all losses or liabilities incurred or sustained by him/her as a Director, auditor or other officer of the Company in defending any proceedings, whether civil or criminal, in which judgment is given in his/her favour, or in which he/she is acquitted.

DIRECTORS

The Directors during the year ended 31 August 2019 and up to the date of this report were as follows:

Executive Directors:

Mr. Shu Liang Sherman Jen Ms. Jingxia Zhang Mr. James William Beeke

Non-executive Director:

Mr. Howard Robert Balloch

Independent Non-executive Directors:

Mr. Peter Humphrey Owen Mr. Xiaodan Mei* Mr. Alan Shaver[#] Mr. Lap Tat Arthur Wong

* Resigned on 31 August 2019

# Appointed on 31 August 2019

In accordance with article 16.18 of the Company’s Articles of Association, Mr. Shu Liang Sherman Jen, Mr. Howard Robert Balloch and Mr. Peter Humphrey Owen will retire by rotation at the forthcoming AGM and, being eligible, have offered themselves for re-election.

In accordance with article 16.2 of the Company’s Articles of Association, Mr. Alan Shaver who was appointed as a Director to fill a casual vacancy by the Board, will hold office until the next following general meeting and as such, Mr. Alan Shaver will retire at the forthcoming AGM and, being eligible, has offered himself for re-election.

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INDEPENDENCE OF INDEPENDENT NON-EXECUTIVE DIRECTORS

The Company has received, from each of the Independent Non-executive Directors, a confirmation of his independence pursuant to Rule 3.13 of the Listing Rules. Based on such confirmations, the Company considers that all Independent Non-executive Directors are independent.

DIRECTORS’ SERVICE CONTRACTS

Each of our Executive Directors has entered into a service contract with our Company pursuant to which they agreed to act as Executive Directors until the year ended 31 August 2022. Either the Company or the Director has the right to give the other party not less than three months prior written notice to terminate the agreement.

Each of our Non-executive Director and Independent Non-executive Directors has signed a letter of appointment with our Company. The term of office of our Non-executive Director and Independent Non-executive Directors will end on 31 August 2022, except that, the letter of appointment of Mr. Alan Shaver with the Company will end on 30 August 2022. Either the Company or the Director has the right to give the other party not less than three months prior written notice to terminate the agreement.

None of the Directors proposed for re-election at the forthcoming AGM has entered into any service contract with the Group which is not determinable by the Group within one year without payment of compensation (other than statutory compensation).

DIRECTORS’ AND SENIOR EXECUTIVES’ EMOLUMENTS AND FIVE HIGHEST PAID INDIVIDUALS

Details of the emoluments of the Directors and those of the five highest paid individuals of the Group for the year ended 31 August 2019 are set out in note 10 to the financial statements. There has been no arrangement under which any Director has waived or agreed to waive any emoluments.

Directors’ remuneration is determined by the Board, or the Company in general meeting, as the case may be, such sum (unless otherwise directed by the resolution by which it is determined) to be divided amongst the Directors in such proportions and in such manner as they may agree, or failing agreement, equally, except that in such event any Director holding office for less than the whole of the relevant period in respect of which the remuneration is paid shall only rank in such division in proportion to the time during such period for which he has held office. Such remuneration shall be in addition to any other remuneration to which a Director who holds any salaried employment or office in the Company may be entitled by reason of such employment or office. The Directors anticipate that they will periodically review the compensation levels of key executives of the Group. Based on the Group’s performance and the executives’ respective contributions to the Group, the Directors may, with the approval of the Company’s remuneration committee, grant salary increases or pay bonuses to executives. All Directors receive reimbursements from the Company for expenses which are necessarily and reasonably incurred for providing services to the Company or executing matters in relation to the operations of the Company.

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REPORT OF THE DIRECTORS

DIRECTORS’ INTERESTS IN CONTRACTS AND COMPETING BUSINESSES

Save as disclosed in note 38 to the financial statements headed “Related Party Transactions and Balances” and the section headed “Connected Transactions” of this report below, neither Director nor any entity connected with any of our Directors had a material interest, whether directly or indirectly, in any contract of significance to the business of the Group to which the Company or any of its subsidiaries was a party as at 31 August 2019 or at any time during the year ended 31 August 2019.

During the year ended 31 August 2019, neither our Controlling Shareholders (as defined in the Listing Rules) nor any of our Directors were interested in the business of operating international schools or educational institutions, other than our Group, which, competes or is likely to compete, either directly or indirectly, with our Group’s business and which requires disclosure pursuant to Rule 8.10 of the Listing Rules.

CONTRACTS WITH CONTROLLING SHAREHOLDERS

No contract of significance has been entered into among the Company or any of its subsidiaries and the Controlling Shareholders during the year ended 31 August 2019.

CONNECTED TRANSACTIONS

Non-exempt Continuing Connected Transactions

We have entered into a number of continuing agreements and arrangements (“ Contractual Arrangements ” or “ VIE Structure ”) 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 the continuing connected transactions for our Group.

Contractual Arrangements

Reasons for the Contractual Arrangements

PRC laws and regulations currently prohibit foreign ownership of elementary and middle schools in China. Furthermore, although PRC laws and regulations allow foreign investment in foreign nationals schools, preschools and high schools, government authorities either impose restrictions in this respect or, as a matter of policy, withhold approval for such ventures altogether (as discussed further below in the section headed “Updates in Relation to the Qualification Requirement”). The Contractual Arrangements among us, Dalian Beipeng Educational Software Development Inc. (“ Beipeng Software ”), our consolidated affiliated entities and shareholders of our consolidated affiliated entities are therefore necessary to achieve our business objectives, although they have been as narrowly tailored as possible so as to minimize potential conflict with current PRC laws and regulations.

Our Directors (including the Independent Non-executive Directors) consider that the Contractual Arrangements are fundamental to our Group’s legal structure and business operations and have been entered into: (i) in the ordinary and usual course of business of the Company; (ii) on normal commercial terms; and (iii) in accordance with the respective agreement governing them on terms that are fair and reasonable and in the interests of the shareholders as a whole. Our Directors also believe that our Group’s structure whereby the financial results of the consolidated affiliated entities are consolidated into our Group’s financial statements as if they were our Group’s subsidiaries, and the flow of economic benefits of their business to our Group places our Group in a special position in relation to relevant rules concerning connected transactions under the Listing Rules.

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REPORT OF THE DIRECTORS

Risks relating to the Contractual Arrangements

We believe the following risks are associated with the Contractual Arrangements. Further details of these risks are set out on pages 26 to 32 of the Company’s prospectus dated 18 November 2014 (“ Prospectus ”).

1. If the PRC government finds that the agreements that establish the structure for operating our business in China do not comply with applicable PRC laws and regulations, we could be subject to severe penalties and our business may be materially and adversely affected.

2. Our Contractual Arrangements may not be as effective in providing control over our consolidated affiliated entities as equity ownership.

3. Any failure by our consolidated affiliated entities or their respective ultimate shareholders to perform their obligations under our Contractual Arrangements would potentially lead to our having to incur additional costs and expend substantial resources to enforce such arrangements, temporary or permanent loss of control over our primary operations or loss of access to our primary sources of revenue.

4. The ultimate owners of our consolidated affiliated entities may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.

5. Certain terms of our Contractual Arrangements may not be enforceable under PRC laws.

6. The Contractual Arrangements between Beipeng Software and our consolidated affiliated entities and Dalian Maple Leaf International School (High School) (“ Dalian Maple Leaf High School ”) may subject our Group to increased income tax due to the different income tax rates applicable to Beipeng Software and our consolidated affiliated entities and Dalian Maple Leaf High School, which may adversely affect our results of operations.

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 net income and the value of our investment.

8. We rely on dividends and other payments from Beipeng Software to pay dividends and other cash distributions to our shareholders.

9. Our consolidated affiliated entities and Dalian Maple Leaf High School may be subject to significant limitations on their ability to operate private education or make payments to related parties or otherwise be materially and adversely affected by changes in PRC laws and regulations.

10. The discontinuation of any preferential tax treatments currently available to us, in particular the tax exempt status of our schools, could result in a decrease of our net income and materially and adversely affect our results of operations.

11. If any of our PRC subsidiaries or consolidated affiliated entities becomes the subject of a bankruptcy or liquidation proceeding, we may lose the ability to use and enjoy certain important assets, which could reduce the size of our operations and materially and adversely affect our business, ability to generate revenue and the market price of our Shares.

12. Our exercise of the option to acquire the equity interests of our consolidated affiliated entities may be subject to certain limitations and the ownership transfer may subject us to substantial costs.

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REPORT OF THE DIRECTORS

Contractual Arrangements in Place

The Contractual Arrangements that were in place as at 31 August 2019 are as follows:

• (i) an exclusive management consultancy and business cooperation agreement dated 11 May 2014 and entered into by and among Beipeng Software, Dalian Maple Leaf Educational Group Co., Ltd (“ Dalian Educational Group ”) and its subsidiary entities, including but not limited to companies, schools and other entities which it directly or indirectly holds more than 50% interests of, and Ms. Shu’E Ren (the “ Founder’s Sister ”), a sister of Mr. Shu Liang Sherman Jen (“ Founder ”), pursuant to which Dalian Educational Group and the Founder’s Sister agreed to engage Beipeng Software as the exclusive service provider to provide Dalian Educational Group and its subsidiary entities with comprehensive business management consultancy and educational consultancy services, intellectual property licenses, technical support and business support services, and in return, Beipeng Software will charge for the services;

• (ii) an exclusive management consultancy and business cooperation agreement dated 11 May 2014 and entered into by and between Beipeng Software and Dalian Maple Leaf High School, pursuant to which Dalian Maple Leaf High School agreed to engage Beipeng Software as the exclusive service provider to provide Dalian Maple Leaf High School with comprehensive educational consultancy services, intellectual property licenses and technical support and business support services, and in return, Beipeng Software will charge for the services;

• (iii) an exclusive management consultancy and business cooperation agreement dated 22 August 2014 and entered into by and among Beipeng Software, Dalian Maple Leaf Foreign Nationals School (“ Dalian Foreign School ”), Wuhan Maple Leaf Foreign Nationals School (“ Wuhan Foreign School ”) and the Founder, pursuant to which Dalian Foreign School, Wuhan Foreign School and the Founder agreed to engage Beipeng Software as the exclusive service provider to provide Wuhan Foreign School and Dalian Foreign School with comprehensive educational consultancy services, intellectual property licenses and technical support and business support services, and in return, Beipeng Software will charge for the services;

• (iv) an exclusive call option agreement dated 11 May 2014 and entered into by and among our Company, Dalian Educational Group and the Founder’s Sister, pursuant to which the Founder’s Sister granted, at nil consideration, an exclusive, unconditional and irrevocable option to our Company or our nominee to acquire from the Founder’s Sister part or all of her equity interests in Dalian Educational Group for nil consideration or the minimum amount of consideration permitted by applicable PRC laws and regulations;

• (v) an exclusive call option agreement dated 11 May 2014 and entered into by and among our Company, Dalian Maple Leaf Science and Education Co., Ltd (“ Dalian Science and Education ”) and the Founder’s Sister, pursuant to which the Founder’s Sister granted, at nil consideration, an exclusive, unconditional and irrevocable option to our Company or our nominee to acquire from the Founder’s Sister part or all of her equity interests in Dalian Science and Education for nil consideration or the minimum amount of consideration permitted by applicable PRC laws and regulations;

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REPORT OF THE DIRECTORS

• (vi) an exclusive call option agreement dated 22 August 2014 and entered into by and among our Company, the Founder and Wuhan Foreign School, pursuant to which the Founder granted, at nil consideration, an exclusive, unconditional and irrevocable option to our Company or our nominee to acquire from the Founder part or all of his sponsor interests in Wuhan Foreign School for nil consideration or the minimum amount of consideration permitted by applicable PRC laws and regulations;

• (vii) an exclusive call option agreement dated 11 May 2014 and entered into among our Company, the Founder and Dalian Foreign School, pursuant to which the Founder granted, at nil consideration, an exclusive, unconditional and irrevocable option to our Company or our nominee to acquire from the Founder part or all of his sponsor interests in Dalian Foreign School for nil consideration or the minimum amount of consideration permitted by applicable PRC laws and regulations;

• (viii) an equity pledge agreement dated 26 May 2014 and entered into by and among Beipeng Software, Dalian Educational Group and the Founder’s Sister, pursuant to which the Founder’s Sister pledged all of her equity interests in Dalian Educational Group to Beipeng Software to guarantee the performance of the obligations of the Founder’s Sister and Dalian Educational Group and its Subsidiary Entities under the exclusive management consultancy and business cooperation agreement (as described in item (i)), the exclusive call option agreement (as described in item (iv)), and power of attorney (as described in item (x));

• (ix) an equity pledge agreement dated 26 May 2014 and entered into by and among Beipeng Software, Dalian Science and Education and the Founder’s Sister, pursuant to which the Founder’s Sister pledged all of her equity interests in Dalian Science and Education to Beipeng Software to guarantee the performance of the obligations of Dalian Science and Education and its subsidiary entities under the exclusive management consultancy and business cooperation agreement (as described in item (i)), the exclusive call option agreement (as described in item (v)) and power of attorney (as described in item (x));

• (x) a power of attorney executed by the Founder’s Sister dated 11 May 2014 appointing Beipeng Software, or nominee(s) of Beipeng Software, as her attorney-in-fact to exercise the shareholder’s rights in Dalian Educational Group and Dalian Science and Education; and

• (xi) a power of attorney executed by the Founder dated 11 May 2014 appointing Beipeng Software, or nominee(s) of Beipeng Software, as his attorney-in-fact to exercise the shareholder’s rights in Dalian Foreign School and Wuhan Foreign School.

On 22 September 2017, Education Department of Zhejiang Province issued an administrative licensing decision (Zhe Jiao Xu Ke [2017] No. 23) approving to change the sponsor of Yiwu Maple Leaf Foreign Nationals School (“ Yiwu Foreign School ”) from the Founder to Beipeng Software. Yiwu Foreign School, Beipeng Software, the Company and the Founder entered into a VIE termination agreement on 8 November 2018, which terminated the relevant VIE agreements for Yiwu Foreign School (“ Termination ”), including: (i) the exclusive management consultancy and business cooperation agreement entered into by Beipeng Software, Yiwu Foreign School and the Founder on 22 June 2016, (ii) the exclusive call option agreement entered into by the Company, the Founder and Yiwu Foreign School on 22 June 2016, and (iii) the power of attorney executed by the Founder on 22 June 2016. Upon the completion of the Termination, Yiwu Foreign School was transferred to the Group and as at the date of this report, Yiwu Foreign School is directly held by Beipeng Software and not subject to VIE structure.

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REPORT OF THE DIRECTORS

Apart from the above, there are no other new Contractual Arrangements entered into, renewed or reproduced between the Group and the PRC consolidated affiliated entities during the financial year ended 31 August 2019. There was no material change in the Contractual Arrangements and/or the circumstances under which they were adopted for the year ended 31 August 2019, except that Xiangyang Star of Hope kindergarten, Liuhuajian Star of Hope Kindergarten, Tiandi Star of Hope Kindergarten, Dingfu Star of Hope Kindergarten, Qiantang Star of Hope Kindergarten, Lvdi Star of Hope Kindergarten, Dongjin Star of Hope Kindergarten, Yancheng Maple Leaf International School Co., Ltd, Wuhan East Lake New Technology Development Zone Maple Leaf Bilingual Preschool, Xiangyang Junpeng Education Consulting Co., Ltd., Luzhou No. 7 Jiade Education Investment Co. Ltd., Luzhou No. 7 Jiade International School, Jinan Maple Leaf International School and Xiangyang Maple Leaf International School have been added as subsidiary entities of Dalian Educational Group pursuant to the requirements of the management consultancy and business cooperation agreement in (i) above.

For the year ended 31 August 2019, except that the VIE termination agreement entered into between Yiwu Foreign School and relevant VIE parties above, none of the Contractual Arrangements has been unwound as none of the restrictions that led to the adoption of structured contracts under the Contractual Arrangements has been removed.

The Group has adopted various measures to ensure the effective operation of the Group with the implementation of the Contractual Arrangements and the Group’s compliance with the Contractual Arrangements including the review of the overall performance of and compliance with the structured contracts under the Contractual Arrangements by the Board at least once a year.

We have been advised by our PRC legal advisor that the Contractual Arrangements do not violate the relevant PRC regulations.

Revenue, profit before taxation and assets subject to the Contractual Arrangements

For the year ended 31 August 2019, the revenue and profit before taxation subject to the Contractual Arrangements are RMB1,255.3 million and RMB522.6 million (amounted to approximately 79.9% and 76.8% of the total revenue and profit before taxation of the Group), respectively. As at 31 August 2019, the total assets subject to the Contractual Arrangements is RMB4,257.9 million, amounted to approximately 65.3% of the total assets of the Group.

Listing Rules Implications

As the Founder is our Controlling Shareholder and our chairman of the Board and is therefore our connected person pursuant to Rule 14A.07(1) of the Listing Rules. The Founder’s sister is the Sister of the Founder and is therefore an associate of the Founder and our connected person pursuant to Rules 14A.12(2)(a) and 14A.07(4) of the Listing Rules. Dalian Educational Group is wholly owned by the Founder’s Sister and is therefore an associate of the Founder and our connected person pursuant to Rules 14A.12(2)(b) and 14A.07(4) of the Listing Rules. Dalian Science and Education is 95.3% indirectly owned by the Founder’s Sister via Dalian Educational Group, which she controls, and is therefore an associate of the Founder and our connected person pursuant to Rules 14A.12(2)(b) and 14A.07(4) of the Listing Rules. Each of Wuhan Foreign School and Dalian Foreign School is wholly owned by the Founder and is therefore an associate of the Founder and our connected person pursuant to Rules 14A.12(1)(c) and 14A.07(4) of the Listing Rules. Accordingly, the Contractual Arrangements constitute connected transactions of the Company under the Listing Rules.

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REPORT OF THE DIRECTORS

Waiver from the Stock Exchange and Annual Review

The Stock Exchange has granted a specific waiver to the Company from strict compliance with the connected transactions requirement of Chapter 14A of the Listing Rules in respect of the Contractual Arrangements, including (i) the announcement and independent Shareholders’ approval requirements, (ii) the requirement of setting an annual cap for the fees payable to Beipeng Software under the Contractual Arrangements and (iii) the requirement of limiting the term of the Contractual Arrangements to three years or less, for so long as the Shares are listed on the Stock Exchange, subject however to the condition that the Contractual Arrangements subsist and that the consolidated affiliated entities will continue to be consolidated into our Group’s financial results as if they were our Group’s subsidiaries. If any terms of the Contractual Arrangements are altered or if the Group enters into any new agreements with any connected persons in the future, the Group must fully comply with the relevant requirements under the Listing Rules unless we obtain a separate waiver from the Stock Exchange.

Agreements with Beipeng Software

Pursuant to the exclusive management consultancy and business cooperation agreements (i) Beipeng Software, Dalian Educational Group and any of its subsidiaries and schools and the Founder’s Sister entered into on 11 May 2014 and (ii) among Beipeng Software, Wuhan Foreign School, Dalian Foreign School and the Founder entered into on 22 August 2014, each of which superseded all previous agreements among the parties with respect to subject matters thereof, Beipeng Software has the exclusive right to provide, or designate any third party to provide each of the Group’s consolidated affiliated entities with intellectual property development and licensing services as well as comprehensive technical and educational consultancy services (the “ Services ”). Such Services include educational software and course materials, research and development, employee training, technology development, transfer and consulting services, public relation services, market survey, research and consulting services, market development and planning services, human resource and internal information management, network development, upgrade and ordinary maintenance services, sales of proprietary products, and software and trademark and know-how licensing and other additional services as the parties may mutually agree from time to time.

For the year ended 31 August 2019 the Services provided by Beipeng Software to the Dalian Educational Group and its subsidiaries, Wuhan Foreign School and Dalian Foreign School amounted to RMB56.0 million.

Confirmation from Independent Non-executive Directors

Our Independent Non-executive Directors have reviewed the Contractual Arrangements and confirmed that (i) the transactions carried during year ended 31 August 2019 have been entered into in accordance with the relevant provisions of the Contractual Arrangements and that the profit generated by the consolidated affiliated entities has been retained by the Beipeng Software, (ii) no dividends or other distributions have been made by the consolidated affiliated entities to the holders of its equity interests which are not otherwise subsequently assigned or transferred to the Group during the year ended 31 August 2019, (iii) no new contracts were entered into, renewed or reproduced between the Group and the consolidated affiliated entities during the year ended 31 August 2019, and (iv) the Contractual Arrangements were entered into in the ordinary and usual course of business of the Group, on normal commercial terms and are fair and reasonable and in the interests of the shareholders as a whole.

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REPORT OF THE DIRECTORS

Confirmations from the Company’s Independent Auditors

The auditors of the Company have confirmed in a letter to the Board that, with respect to the aforesaid continuing connected transactions entered into in the year ended 31 August 2019:

1. nothing has come to their attention that causes the auditors to believe that the disclosed continuing connected transactions have not been approved by the Board; and

2. nothing has come to their attention that causes the auditors to believe that the transactions were not entered into, in all material respects, in accordance with the relevant agreements under the Contractual Arrangements governing such transactions;

During the year ended 31 August 2019, no related party transactions disclosed in note 38 to the financial statements constituted a connected transaction or continuing connected transaction which should be disclosed pursuant to the Listing Rules. The Company has complied with the disclosable requirements set out in Chapter 14A of the Listing Rules.

Updates in Relation to the Qualification Requirement

Our PRC legal advisor, Tianyuan Law Firm has advised us that there have not been changes in the relevant regulatory developments and guidance relating to the Qualification Requirement since the publication of the Prospectus.

Efforts and Actions Undertaken to Comply with the Qualification Requirement

In February 2019, the Group opened a high school, MLES-UniSA, at Mawson Lakes campus of UniSA in Adelaide, South Australia. Maple Leaf University School — Lakehead was opened in September 2019 at Thunder Bay, Ontario, Canada.

Up to the date of this report, apart from the above actions and other steps taken as disclosed in the Prospectus and previous year’s annual reports, the Group is still in the progress of working on different ways of obtaining the Qualification Requirement.

MANAGEMENT CONTRACTS

No contracts concerning the management and administration of the whole or any substantial part of the business of the Company were entered into or existed for the year ended 31 August 2019.

CUSTOMERS AND SUPPLIERS

Our customers primarily consist of our students and their parents or other guardians. We did not have a single customer who accounted for more than 5% of our revenue for the two years ended 31 August 2019 and 2018.

For the year ended 31 August 2019, our five largest suppliers in aggregate accounted for approximately 5.32% (2018: 4.24%) of our cost of revenue and our largest supplier accounted for approximately 1.77% (2018: 1.72%) of our cost of revenue. None of our Directors, their respective close associates, or any Shareholder of the Company who, to the knowledge of our Directors, owns more than 5% of our issued capital, has any interest in any of our five largest suppliers.

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REPORT OF THE DIRECTORS

DIRECTORS’ AND CHIEF EXECUTIVE’S INTEREST AND SHORT POSITIONS IN THE SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY AND ITS ASSOCIATED CORPORATION

As at 31 August 2019, the interests and short positions of the Directors and the chief executive of the Company in the shares, underlying shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (“ SFO ”), Chapter 571 of the Laws of Hong Kong) which (a) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they have taken, or are deemed to have taken, under such provisions of the SFO); or (b) were required, pursuant to section 352 of the SFO, to be recorded in the register required to be kept by the Company; or (c) were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (“ Model Code ”) as set out in Appendix 10 to the Listing Rules, to be notified to the Company and the Stock Exchange were as follows:

Long positions in Shares and underlying Shares of the Company

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----- Start of picture text -----

Interest in Total interest Approximate
Interest in underlying in Shares and percentage of
Name of Director/chief executive Capacity Shares Shares underlying Shares shareholding
----- End of picture text -----

Shu Liang Sherman Jen (“Mr. Jen”)	Founder of a discretionary trust	1,483,639,818	–	1,483,639,818	49.53%
	who can influence how	(Note 1)
	the trustee exercises
	his discretion
	Beneficial interest	52,322,850	1,600,000	53,922,850	1.80%
			(Note 2)
	Interest of spouse	1,342	–	1,342	0.00%
		(Note 3)
Jingxia Zhang	Beneficial interest	3,511,146	1,600,000	5,111,146	0.17%
			(Note 2)
James William Beeke	Interest of controlled corporation	1,174,000	–	1,174,000	0.04%
		(Note 4)
	Beneficial interest	51,342	800,000	851,342	0.03%
			(Note 2)
Howard Robert Balloch	Interest of controlled corporation	7,903,644	–	7,903,644	0.26%
		(Note 5)
	Beneficial interest	1,161,342	800,000	1,961,342	0.07%
			(Note 2)
Peter Humphrey Owen	Beneficial interest	121,342	861,600	982,942	0.03%
			(Note 2)
Xiaodan Mei#	Beneficial interest	8,000	–	8,000	0.00%
Lap Tat Arthur Wong	Beneficial interest	520,000	861,600	1,381,600	0.05%
			(Note 2)

C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9 51

REPORT OF THE DIRECTORS

Notes:

1. Sherman Investment Holdings Limited (“ Sherman Investment ”) is a company incorporated in the British Virgin Islands, which is indirectly wholly owned by a discretionary trust, Mr. Jen is the founder of the discretionary trust who can influence how the trustee exercises his discretion, and is deemed to be interested in 1,483,639,818 Shares.

2. These interests in underlying Shares represent the interests in outstanding options granted pursuant to the Post-IPO share option scheme approved and adopted by the Company on 10 November 2014 (“ Post-IPO Share Option Scheme ”) to subscribe for the relevant number of Shares.

3. Mr. Jen is the spouse of Ms. Meichen Amy Yan (“ Ms. Yan ”) who is interested in 1,342 Shares. Mr. Jen is deemed to be interested in all the Shares in which Ms. Yan is interested by virtue of the SFO.

4. These Shares were held by Signum International Educational Services Inc. (“ Signum Services ”), a company which is owned as to 51% by Mr. James William Beeke and the remaining balance by his spouse. Mr. James William Beeke is deemed to be interested in all the Shares held by Signum Services.

5. These Shares were held by Balloch Investment Holdings Limited (“ Balloch Investment ”), a company which is owned as to 50% by each of Mr. Howard Robert Balloch and his spouse. Mr. Howard Robert Balloch is deemed to be interested in all the Shares held by Balloch Investment.

• # Resigned on 31/8/2019

Long position in shares in associated corporation

Name of Director	Name of associated corporation	Capacity	Number of issued shares	Percentage of total issued shares of the associated corporation
Mr. Jen	Sherman Investment	Founder of a discretionary	50,000	100%
		trust who can influence
		how the trustee exercises
		his discretion*

• A discretionary trust has been set up and the entire issued capital of Sherman Investment was transferred from Mr. Jen to Sherman International Investment Limited (“ Sherman Int’l ”), the shares of which form the assets of a trust, of which Mr. Jen is the Founder.

Save as disclosed above, as at 31 August 2019, none of the Directors or the chief executive of the Company had any interests or short positions in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO), which (a) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they have taken, or are deemed to have taken, under such provisions of the SFO); or (b) were required, pursuant to section 352 of the SFO, to be recorded in the register required to be kept by the Company; or (c) were required, pursuant to the Model Code, to be notified to the Company and the Stock Exchange.

52 C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9

REPORT OF THE DIRECTORS

SUBSTANTIAL SHAREHOLDERS’ INTERESTS AND SHORT POSITIONS IN THE SHARES AND UNDERLYING SHARES OF THE COMPANY

As at 31 August 2019, the following persons or corporations, other than the Directors or the chief executive of the Company, had interests or short positions in the Shares or underlying Shares as recorded in the register required to be kept by the Company pursuant to section 336 of the SFO:

Long positions

Name of Shareholder	Capacity	Total interest in Shares and underlying Shares	Approximate percentage of interest in the Company
Sherman Investment (Note 1)	Beneficial interest	1,483,639,818	49.53%
Sherman Int’l (Note 2)	Interest of controlled corporation	1,483,639,818	49.53%
HSBC International Trustee	Trustee	1,483,639,818	49.53%
Limited (“HSBC Trustee”) (Note 3)
Ms. Yan (Note 4)	Interest of spouse	1,537,562,668	51.33%
	Beneficial interest	1,342	0.00%

Notes:

(1) Sherman Investment is indirectly wholly owned by a discretionary trust, Mr. Jen is the founder of the discretionary trust who can influence how the trustee exercises his discretion. Sherman Investment has a direct beneficial interest in 49.53% of the shareholding of the Company.

(2) Sherman Int’l owns 100% shareholding in Sherman Investment and is therefore deemed to be interested in all the Shares which Sherman Investment is interested by virtue of the SFO.

(3) HSBC Trustee is the trustee of a discretionary trust, of which Mr. Jen is the founder, owns 100% shareholding in Sherman Int’l and is therefore deemed to be interested in all the Shares which Sherman Int’l is interested by virtue of the SFO.

(4) Ms. Yan is the spouse of Mr. Jen and, therefore, Ms. Yan is deemed to be interested in all the Shares and underlying Shares in which Mr. Jen is interested or deemed to be interested by virtue of the SFO. Mr. Jen is interested in: (i) 52,322,850 Shares and options granted pursuant to the Post-IPO Share Option Scheme to subscribe for 1,600,000 Shares, and (II) 1,483,639,818 Shares held by a discretionary trust.

Save as disclosed above, as at 31 August 2019, no other person or corporation, other than the Directors or the chief executive of the Company, had an interest or short position in the Shares or underlying Shares as recorded in the register required to be kept by the Company pursuant to Section 336 of the SFO.

REMUNERATION POLICY

Employees of the Group are selected, remunerated and promoted on the basis of their merit, qualifications, competence and contribution to the Group. Compensation of key executives of the Group is determined by the Company’s remuneration committee which reviews and determines executives’ compensation based on the Group’s performance and the executives’ respective contributions to the Group.

The Company also has a provident fund set up for its employees and share incentive schemes as described below.

C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9 53

REPORT OF THE DIRECTORS

SHARE INCENTIVE SCHEMES

In order to incentivize our Directors, senior management, other employees and consultants for their contribution to the Group and to attract and retain suitable personnel to our Group, we adopted the Pre-IPO Share Option Scheme on 1 April 2008 and on 10 November 2014, adopted the Post-IPO Share Option Scheme (the “ Post-IPO Share Option Scheme ”) and the restricted share units scheme which was subsequently modified by the Board on 28 April 2015 and renamed as the Share Award Scheme (the “ Share Award Scheme ”).

Details on the movement of the relevant scheme for the year ended 31 August 2019 is set out in note 30 to the financial statements.

1. Employee Pre-IPO Share Option Scheme

The Board approved and adopted the Pre-IPO Share Option Scheme on 1 April 2008 (the “ Effective Date ”) to attract and retain the best available personnel, to provide additional incentives to employees, Directors and consultants of the Company and any Parent Corporate or Subsidiary Corporate (as defined in Section 424(e) and Section 424(f) of the US Inland Revenue Code of 1986, respectively) of the Company and any business, corporation, partnership, limited liability company or other entity in which the Company or a Parent Corporate or a Subsidiary Corporate of the Company holds a substantial ownership interest, directly or indirectly (“ Related Entities ”) and to promote the success of the Company’s business. The terms of the Pre-IPO Share Option Scheme are not subject to the provisions of Chapter 17 of the Listing Rules as the Pre-IPO Share Option Scheme will not involve our Company granting options to subscribe for Shares once the Company became a listed issuer.

(a) Eligible Persons

The Board or any other committee of Directors appointed by the Board to administer the Pre-IPO Share Option Scheme (the “ Administrator ”) may grant awards to those employees, Directors and consultants of the Company or a Related Entity (“ Eligible Person ”).

(b) Term of the Pre-IPO Share Option Scheme

Unless earlier terminated by the Board in accordance with its terms, the Pre-IPO Share Option Scheme will continue in effect for a term of 10 years from the Effective Date. The Board has the authority to amend, suspend or terminate the Pre-IPO Share Option Scheme subject to the approval of the Shareholders of the Company to the extent necessary to comply with applicable law.

(c) Share Limits

Our Board has authorized the issuance of up to 66,702,832 Shares (adjusted for any share-splits or other dilutive issuances), representing approximately 2.22% of the issued shares as at the date of this report, upon the exercise of awards granted under the Pre-IPO Share Option Scheme.

(d) Option Grants

The Administrator may grant one or more options (“ Option ”) under the Pre-IPO Share Option Scheme to any Eligible Person. Subject to the express provisions of the scheme, the Administrator will determine the number of Shares subject to each Option. Options granted will be evidenced by an option agreement entered into between the Company and the grantee (“ Option Agreement ”).

54 C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9

REPORT OF THE DIRECTORS

(e) Vesting and Exercising the Option

An Option may be exercised only to the extent that it is both vested and exercisable. The Administrator will determine the vesting and/or exercisability provisions of each Option, which provisions will be set forth in the applicable Option Agreement.

An Option shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Option by the person entitled to exercise the Option and full payment for the Shares with respect to which the Option is exercised.

(f) Exercise Price

The Administrator will determine the purchase price per share of the Share covered by each Option (the “ Exercise Price ” of the Option) at the time of the grant of the Option. Such exercise price will be set forth in the applicable Option Agreement. The exercise price of an Option shall not be less than the par value of the Shares on the date of grant.

(g) Termination, Suspension and Amendments to the Pre-IPO Share Option Scheme

The Board may at any time amend, suspend or terminate the scheme; provided, however, that no such amendment shall be made without the approval of the Company’s Shareholders to the extent such approval is required by applicable laws, or if such amendment would change any of the provisions relating to the rights to amend the terms of Options granted or the scheme. No award may be granted during any suspension of the scheme or after termination of the scheme. No suspension or termination of the scheme shall adversely affect any rights under awards already granted to a grantee.

(h) Outstanding Share Options

The table below discloses movements in the outstanding share options granted to all grantees under the Pre-IPO Share Option Scheme as at 31 August 2019. No Options were granted from the Listing Date to 31 August 2019.

==> picture [483 x 54] intentionally omitted <==

----- Start of picture text -----

Number of share options
As at Exercised Cancelled Lapsed As at
Date of 1 September during during during 31 August Exercise Exercise Vesting
Grenatees grant 2018 the year the year the year 2019 period price period
----- End of picture text -----

Employees in aggregate
11 employees	1 September	323,148	–	–	(323,148)	–	10 years after	RMB0.47	Four years
	2009						the date of		from the
							grant		date of grant
12 employees	2 June 2014	5,978	–	–	–	5,978	10 years after	RMB0.47	None
							the date of
							grant
Total		329,126	–	–	(323,148)	5,978

C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9 55

REPORT OF THE DIRECTORS

2. Post-IPO Share Option Scheme

(a) Purpose of the Post-IPO Share Option Scheme

The Company adopted the Post-IPO Share Option Scheme on 10 November 2014 to enable our Group to grant options to selected participants as incentives or rewards for their contributions to our Group. Our Directors consider the Post-IPO Share Option Scheme, with its broadened basis of participation, will enable our Group to reward our employees, our Directors and other selected participants for their contributions to our Group. Given that our Directors are entitled to determine the performance targets to be achieved as well as the minimum period that an option must be held before an option can be exercised on a case by case basis, and that the exercise price of an option cannot in any event fall below the price stipulated in the Listing Rules or such higher price as may be fixed by our Directors, it is expected that grantees of an option will make an effort to contribute to the development of our Group so as to bring about an increased market price of the Shares in order to capitalize on the benefits of the options granted.

(b) Who may join

Our Directors (which expression shall, for the purpose of this paragraph, include a duly authorized committee thereof) may, at their absolute discretion, invite any person belonging to any of the following classes of participants, who our Board considers, in its sole discretion, have contributed or will contribute to our Group, to take up options to subscribe for Shares:

• (i) any Directors (including Executive Directors, Non-executive Directors and Independent Non-executive Directors) and employees of any member of our Group; and

• (ii) any advisers, consultants, distributors, contractors, customers, suppliers, agents, business partners, joint venture business partners, service providers of any member of our Group.

For the purposes of the Post-IPO Share Option Scheme, the options may be granted to any company wholly owned by one or more persons belonging to any of these classes of participants. For the avoidance of doubt, the grant of any options by our Company for the subscription of Shares or other securities of our Group to any person who falls within any of these classes of participants shall not, by itself, unless our Directors otherwise so determine, be construed as a grant of option under the Post-IPO Share Option Scheme.

The eligibility of any of these class of participants to the grant of any option shall be determined by our Directors from time to time on the basis of our Directors’ opinion as to the participant’s contribution to the development and growth of our Group.

(c) Maximum number of Shares

The maximum number of Shares which may be issued upon the exercise of all outstanding options granted and yet to be exercised under the Post-IPO Share Option Scheme and any other share option scheme of our Group shall not in aggregate exceed 10% of the shares in issue of our Company.

The total number of Shares which may be issued upon exercise of all options to be granted under the PostIPO Share Option Scheme and any other share option scheme of our Group shall not in aggregate exceed 10% of the Shares in issue on the Listing Date, such 10% limit represents 266,800,000 Shares (the “ General Scheme Limit ”) but excluding any Shares which may be issued upon the exercise of the over-allotment option for the Listing.

56 C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9

REPORT OF THE DIRECTORS

As at the date of this report, the Company had a total of 204,378,000 Shares available for issue under the Post-IPO Share Option Scheme (representing approximately 6.82% of the issued Shares as at the date of this report).

Subject to paragraph (a) above and without prejudice to paragraph (d) below, our Company may issue a circular to its Shareholders and seek approval of its Shareholders in a general meeting to extend the General Scheme Limit provided that the total number of Shares which may be issued upon exercise of all options to be granted under the Post-IPO Share Option Scheme and any other share option scheme of our Group shall not exceed 10% of the Shares in issue as at the date of approval of the limit and, for the purpose of calculating the limit, options (including those outstanding, cancelled, lapsed or exercised in accordance with the Post-IPO Share Option Scheme and any other share option scheme of our Group) previously granted under the Post-IPO Share Option Scheme and any other share option scheme of our Group will not be counted. The circular sent by our Company to its Shareholders shall contain, among other information, the information required under the Listing Rules.

Subject to paragraph (a) above and without prejudice to paragraph (c) herein, our Company may seek separate Shareholders’ approval in a general meeting to grant options beyond the General Scheme Limit or, if applicable, the extended limit referred to in paragraph (c) herein to participants specifically identified by our Company before such approval is sought. In such event, our Company must send a circular to its Shareholders containing a general description of the specified participants, the number and terms of options to be granted, the purpose of granting options to the specified participants with an explanation as to how the terms of the options serve such purpose and such other information required under the Listing Rules.

(d) Maximum entitlement of each participant

The total number of Shares issued and which may fall to be issued upon exercise of the options granted under the Post-IPO Share Option Scheme and any other share option scheme of our Company (including both exercised and outstanding options) to each participant in any 12-month period shall not exceed 1% of the issued share capital of our Company for the time being (the “ Individual Limit ”). Any further grant of options in aggregate in excess of the Individual Limit in any 12-month period up to and including the date of such further grant shall be subject to the issue of a circular to our Shareholders and our Shareholders’ approval in general meeting of our Company with such participant and his associates abstaining from voting. The number and terms (including the exercise price) of options to be granted to such participant must be fixed before Shareholders’ approval and the date of board meeting for proposing such further grant should be taken as the date of grant for the purpose of calculating the exercise price under note (1) to Rule 17.03(9) of the Listing Rules.

(e) Grant of options to connected persons

Any grant of options under the Post-IPO Share Option Scheme to a Director, chief executive or Substantial Shareholder of our Company or any of their respective associates must be approved by our Independent Non-executive Directors (excluding any Independent Non-executive Director who is the proposed grantee of the options).

C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9 57

REPORT OF THE DIRECTORS

Where any grant of options to a substantial Shareholder of our Company or an Independent Non-executive Director or any of their respective associates would result in the Shares issued and to be issued upon exercise of all options already granted and to be granted (including options exercised, cancelled and outstanding) to such person in the 12-month period up to and including the date of such grant:

• (i) representing in aggregate over 0.1% (or such other higher percentage as may from time to time be specified by the Stock Exchange) of the Shares in issue; and

• (ii) having an aggregate value, based on the closing price of the Shares as stated in the Stock Exchange’s daily quotations sheet as at the date of the offer of grant, in excess of HK$5 million (or such other higher amount as may from time to time be specified by the Stock Exchange);

such further grant of options must be approved by our Shareholders in a general meeting. Our Company must send a circular to its Shareholders. All connected persons of our Company must abstain from voting at such general meeting, except that any connected person may vote against the relevant resolution at the general meeting provided that his intention to do so has been stated in the circular. Any vote taken at the general meeting to approve the grant of such options must be taken on a poll.

Any change in the terms of options granted to a substantial Shareholder or an Independent Non-executive Director or any of their respective associates must be approved by our Shareholders in a general meeting.

(f) Time of acceptance and exercise of option

An option may be accepted by a participant within five business days from the date of the offer of grant of the option.

An option may be exercised in accordance with the terms of the Post-IPO Share Option Scheme at any time during a period to be determined and notified by our Directors to each grantee, which period may commence on a day after the date upon which the offer for the grant of options is made but shall end in any event not later than 10 years from the date of grant of the option subject to the provisions for early termination under the Post-IPO Share Option Scheme. Unless otherwise determined by our Directors and stated in the offer of the grant of options to a grantee, there is no minimum period required under the PostIPO Share Option Scheme for the holding of an option before it can be exercised.

(g) Subscription price for Shares

The subscription price per Share under the Post-IPO Share Option Scheme will be a price determined by our Directors, but shall not be less than the highest of:

• (i) the closing price of the Shares as stated in the Stock Exchange’s daily quotations sheet on the date of the offer of grant, which must be a business day;

• (ii) the average closing price of the Shares as stated in the Stock Exchange’s daily quotations for the five trading days immediately preceding the date of the offer of grant (provided that in the event that any option is proposed to be granted within a period of less than five business days after the trading of the Shares first commences on the Stock Exchange, the new issue price of the Shares for the Listing shall be used as the closing price for any business day falling within the period before Listing); and

• (iii) the nominal value of a share on the date of grant.

A nominal consideration of HK$1.00 is payable upon acceptance of the grant of an option.

58 C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9

REPORT OF THE DIRECTORS

(h) Restriction on the time of grant of options

No offer for grant of options shall be made after an inside information event has occurred or an inside information matter has been the subject of a decision until such inside information has been announced in accordance with the requirements of the Securities and Futures Ordinance and the Listing Rules. In particular, during the period commencing one month immediately preceding the earlier of (i) the date of the meeting of our Directors (as such date is first notified to the Stock Exchange in accordance with the requirements of the Listing Rules) for the approval of our Company’s results for any year, half-year, quarter or any other interim period (whether or not required under the Listing Rules), and (ii) the last date on which our Company must publish its announcement of its results for any year, half-year, quarter or any other interim period (whether or not required under the Listing Rules), and ending on the date of the announcement of the results, no offer for grant of options may be made.

Our Directors may not grant any option to a participant who is a Director during the period or time in which Directors are prohibited from dealing in shares pursuant to the Model Code prescribed by the Listing Rules or any corresponding code or securities dealing restrictions adopted by our Company.

(i) Period of the Post-IPO Share Option Scheme

The Post-IPO Share Option Scheme will remain in force for a period of 10 years from 10 November 2014.

(j) Outstanding Share Options

The table below discloses movements in the outstanding share options granted to all grantees under the Post-IPO Share Option Scheme as at 31 August 2019. 11,554,000 Options were granted under the Post-IPO Share Option Scheme during the financial year ended 31 August 2019.

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----- Start of picture text -----

Number of share options
As at Granted Exercised Cancelled Lapsed As at
1 September during during during during 31 August Exercise price Vesting
Grenatees Date of grant 2018 the year the year the year the year 2019 Exercise period/date (Note) period/date
----- End of picture text -----

Directors
Shu Liang Sherman Jen	14 June 2018	692,000	–	–	–	(692,000)	–	1 January 2019–31 January 2019	HK$7.22	1 January 2019
	28 June 2019	–	1,600,000	–	–	–	1,600,000	1 January 2020–31 January 2020	HK$3.11	1 January 2020
Jingxia Zhang	14 June 2018	400,000	–	–	–	(400,000)	–	1 January 2019–31 January 2019	HK$7.22	1 January 2019
		400,000		–	–	–	400,000	1 January 2020–31 January 2020	HK$7.22	1 January 2020
		400,000		–	–	–	400,000	1 January 2021–31 January 2021	HK$7.22	1 January 2021
		400,000		–	–	–	400,000	1 January 2022–31 January 2022	HK$7.22	1 January 2022
		400,000		–	–	–	400,000	1 January 2023–31 January 2023	HK$7.22	1 January 2023
James William Beeke	14 June 2018	200,000	–	–	–	(200,000)	–	1 January 2019–31 January 2019	HK$7.22	1 January 2019
		200,000		–	–	–	200,000	1 January 2020–31 January 2020	HK$7.22	1 January 2020
		200,000		–	–	–	200,000	1 January 2021–31 January 2021	HK$7.22	1 January 2021
		200,000		–	–	–	200,000	1 January 2022–31 January 2022	HK$7.22	1 January 2022
		200,000		–	–	–	200,000	1 January 2023–31 January 2023	HK$7.22	1 January 2023
Howard Robert Balloch	14 June 2018	200,000	–	–	–	(200,000)	–	1 January 2019–31 January 2019	HK$7.22	1 January 2019
		200,000		–	–	–	200,000	1 January 2020–31 January 2020	HK$7.22	1 January 2020
		200,000		–	–	–	200,000	1 January 2021–31 January 2021	HK$7.22	1 January 2021
		200,000		–	–	–	200,000	1 January 2022–31 January 2022	HK$7.22	1 January 2022
		200,000		–	–	–	200,000	1 January 2023–31 January 2023	HK$7.22	1 January 2023

C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9 59

REPORT OF THE DIRECTORS

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----- Start of picture text -----

Number of share options
As at Granted Exercised Cancelled Lapsed As at
1 September during during during during 31 August Exercise price Vesting
Grenatees Date of grant 2018 the year the year the year the year 2019 Exercise period/date (Note) period/date
----- End of picture text -----

Peter Humphrey Owen	14 June 2018	138,400	–	–	–	(138,400)	–	1 January 2019–31 January 2019	HK$7.22	1 January 2019
		138,400		–	–	–	138,400	1 January 2020–31 January 2020	HK$7.22	1 January 2020
		138,400		–	–	–	138,400	1 January 2021–31 January 2021	HK$7.22	1 January 2021
		138,400		–	–	–	138,400	1 January 2022–31 January 2022	HK$7.22	1 January 2022
		138,400		–	–	–	138,400	1 January 2023–31 January 2023	HK$7.22	1 January 2023
	28 June 2019	–	308,000	–	–	–	62,000	1 January 2020–31 January 2020	HK$3.11	1 January 2020
							62,000	1 January 2021–31 January 2021	HK$3.11	1 January 2021
							62,000	1 January 2022–31 January 2022	HK$3.11	1 January 2022
							62,000	1 January 2023–31 January 2023	HK$3.11	1 January 2023
							60,000	1 January 2024–31 January 2024	HK$3.11	1 January 2024
Xiaodan Mei	14 June 2018	138,400	–	–	–	(138,400)	–	1 January 2019–31 January 2019	HK$7.22	1 January 2019
		138,400		–	(138,400)	–	–	1 January 2020–31 January 2020	HK$7.22	1 January 2020
		138,400		–	(138,400)	–	–	1 January 2021–31 January 2021	HK$7.22	1 January 2021
		138,400		–	(138,400)	–	–	1 January 2022–31 January 2022	HK$7.22	1 January 2022
		138,400		–	(138,400)	–	–	1 January 2023–31 January 2023	HK$7.22	1 January 2023
Lap Tat Arthur Wong	14 June 2018	138,400	–	–	–	(138,400)	–	1 January 2019–31 January 2019	HK$7.22	1 January 2019
		138,400		–	–	–	138,400	1 January 2020–31 January 2020	HK$7.22	1 January 2020
		138,400		–	–	–	138,400	1 January 2021–31 January 2021	HK$7.22	1 January 2021
		138,400		–	–	–	138,400	1 January 2022–31 January 2022	HK$7.22	1 January 2022
		138,400		–	–	–	138,400	1 January 2023–31 January 2023	HK$7.22	1 January 2023
	28 June 2019	–	308,000	–	–	–	62,000	1 January 2020–31 January 2020	HK$3.11	1 January 2020
							62,000	1 January 2021–31 January 2021	HK$3.11	1 January 2021
							62,000	1 January 2022–31 January 2022	HK$3.11	1 January 2022
							62,000	1 January 2023–31 January 2023	HK$3.11	1 January 2023
							60,000	1 January 2024–31 January 2024	HK$3.11	1 January 2024
Sub-total		6,768,000	2,216,000	–	(553,600)	(1,907,200)	6,523,200

Note: The closing price of the Shares immediately before the date on which the Options were granted was HK$3.09.

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Number of share options
As at Granted Exercised Cancelled Lapsed As at
1 September during during during during 31 August Exercise price Vesting
Grenatees Date of grant 2018 the year the year the year the year 2019 Exercise period/date (Note) period/date
----- End of picture text -----

Employees in aggregate
Fourth tranche	14 June 2018	8,620,000	–	–	(180,000)	(8,440,000)	–	1 January 2019–31 January 2019	HK$7.22	1 January 2019
Fifth tranche	14 June 2018	8,620,000	–	–	(1,300,000)	–	7,320,000	1 January 2020–31 January 2020	HK$7.22	1 January 2020
Sixth tranche	14 June 2018	8,620,000	–	–	(1,300,000)	–	7,320,000	1 January 2021–31 January 2021	HK$7.22	1 January 2021
Seventh tranche	14 June 2018	8,620,000	–	–	(1,300,000)	–	7,320,000	1 January 2022–31 January 2022	HK$7.22	1 January 2022
Eighth tranche	14 June 2018	8,620,000	–	–	(1,300,000)	–	7,320,000	1 January 2023–31 January 2023	HK$7.22	1 January 2023
Ninth tranche	28 June 2019	–	460,000	–	–	–	460,000	1 January 2020–31 January 2020	HK$3.11	1 January 2020
Tenth tranche	28 June 2019	–	3,028,000	–	(270,000)	–	2,758,000	1 January 2020–31 January 2020	HK$3.11	1 January 2020
Eleventh tranche	28 June 2019	–	2,980,000	–	(270,000)	–	2,710,000	1 January 2021–31 January 2021	HK$3.11	1 January 2021
Twelfth tranche	28 June 2019	–	2,870,000	–	(255,000)	–	2,615,000	1 January 2022–31 January 2022	HK$3.11	1 January 2022
Sub-total		43,100,000	9,338,000	–	(6,175,000)	(8,440,000)	37,823,000
Total		49,868,000	11,554,000	–	(6,728,600)	(10,347,200)	44,346,200

The accounting policy adopted for the Options is set out in note 30 to the financial statements.

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REPORT OF THE DIRECTORS

3. Share Award Scheme

• (a) The Share Award Scheme was adopted by the Company on 10 November 2014 and modified by the Board on 28 April 2015.

The grant of share awards (the “ Awards ”) recognises the contribution of the Directors, executive officers, senior management, employees and consultants of the Company and of its subsidiaries and consolidated affiliated entities (collectively, “ Scheme Companies ” and each, a “ Scheme Company ”) to the historical achievements of the Company. The Company has the intention to continue exploring ways to incentivize, retain and reward Scheme Companies’ directors, executive officers, senior management and employees and may implement other share award schemes or other share-based remuneration schemes in the future.

(b) Awards

Each Award is a right to receive a Share at the end of the vesting period, subject to vesting conditions provided for under the Share Award Scheme. For each Award, the Eligible Participants (as defined below) may receive, subject to vesting, one Share.

Awards cannot be sold, pledged or transferred by the Eligible Participants by any means, except by inheritance.

(c) Grant of Awards

The Share Award Scheme provides for the grant of Awards by the Company to beneficiaries (the “ Beneficiaries ”) selected at the discretion of the Board from among the Directors, executive officers, senior management, employees and consultants of the Scheme Companies (the “ Eligible Participants ”). Shares will not be released under the Awards until the applicable vesting conditions have been satisfied.

(d) Shares underlying the Awards

The Company will from time to time transfer the necessary funds and instruct the scheme trustee (“ Scheme Trustee ”) to acquire Shares through on-market transactions so as to satisfy Awards.

The Share Award Scheme Shares will be held on trust by the Scheme Trustee until their release to the Beneficiaries upon vesting of their Awards.

The grant of Awards by the Company to a connected person of the Company will be subject to the requirements of Chapter 14A of the Listing Rules.

(e) Restrictions on grants and Share purchases

No instruction may be given to the Scheme Trustee to acquire Shares and no Award may be granted when the Board is in possession of unpublished inside information in relation to the Scheme Companies or when dealings by Directors are prohibited under any code or requirement of the Listing Rules and all applicable laws from time to time.

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REPORT OF THE DIRECTORS

(f) Vesting of Awards

Vesting of Awards is subject to continued employment of the Beneficiaries with a Scheme Company over the vesting period as determined by the Board. Upon vesting, the Company will instruct the Scheme Trustee to release Share Award Scheme Shares to the Beneficiary on its behalf.

In the event of termination of the employment or corporate officer’s mandate of a Beneficiary with a Scheme Company, his or her Awards will be forfeited: (i) in the case of employment contracts, such forfeiture shall take effect on the date of receipt of the dismissal letter or the submission of the resignation letter (as the case may be), notwithstanding any period of notice (regardless of whether it has been given or satisfied), or on the date of the termination of the employment agreement for other circumstances, and (ii) in the case of corporate officer’s mandate, such forfeiture shall take effect on the date of the expiration of the term of the mandate, or on the date of the dismissal or notification of such dismissal.

In the case of retirement or early retirement of the Beneficiary, Awards are not forfeited. However, the Shares are not released until they vest on the grantee.

If a Beneficiary’s employer ceases to be a Scheme Company during the vesting period, the continued employment condition will be deemed not to have been satisfied.

No consideration is paid or payable by the grantees for the Shares to be issued under the Share Award Scheme.

(g) Limit for each Beneficiary

Pursuant to a resolution passed at a meeting of the Board on 29 November 2016, the maximum number of Awards which may be granted to a Beneficiary but unvested under the Share Award Scheme was revised to not exceed 1% of the Shares in issue from time to time.

(h) The Share Award Scheme Period

The Share Award Scheme shall be valid and effective from 28 April 2015 and end on the earlier of (i) the business day immediately prior to the tenth anniversary of 28 April 2015 except in respect of any non-vested Awards granted prior to the expiration of the Share Award Scheme, for the purpose of giving effect to the vesting of such Awards or otherwise as may be required in accordance with the provisions of the Share Award Scheme; and (ii) such date of early termination as determined by the Board provided that such termination shall not affect any subsisting rights of any Beneficiary in respect of the Awards already granted.

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REPORT OF THE DIRECTORS

(i) Outstanding Shares awarded

In July 2015, the Scheme Trustee purchased a total of 62,160,000 Shares on the Stock Exchange at a total consideration of approximately HK$74.7 million (equivalent to approximately RMB59.0 million). During the year 31 August 2019, the Scheme Trustee did not purchase any Share on the Stock Exchange and no Shares under the Share Award Scheme were granted to Eligible Participants of the Group. The table below discloses movements in the outstanding Shares granted under the Share Award Scheme to all grantees at 31 August 2019.

Grantees	Date of grant	As at 1 September 2018	Number of share award Granted during the year Vested during the year Forfeited during the year	Number of share award Granted during the year Vested during the year Forfeited during the year	Number of share award Granted during the year Vested during the year Forfeited during the year	As at 31 August 2019	Vesting period/date	Vesting conditions
Employees in aggregate
Seventh tranche	3 March 2017	632,000	–	(616,000)	(16,000)	–	31 May 2019	Subject to performance conditions
Tenth tranche	12 March 2018	4,926,000	–	(4,816,000)	(110,000)	–	31 May 2019	Subject to performance conditions
Eleventh tranche	12 March 2018	264,000	–	–	(44,000)	220,000	31 May 2020	Subject to performance conditions
Total		5,822,000		(5,432,000)	(170,000)	220,000

Note: The vesting period or date is subject to the completion of certain administrative procedures relevant to the Scheme Trustee and the grantees.

Further details on the movement of the Shares awarded during the year ended 31 August 2019 are set out in note 30 to the financial statements.

The other principal terms of the Pre-IPO Share Option Scheme and Post-IPO Share Option Scheme are set out in the Prospectus.

Contingent Liabilities

On 15 November 2016, the Company received a writ of summons from Hong Kong Zhixin Financial News Agency Ltd. (“ Zhixin ”) seeking among other things, specific performance of the consultancy agreement (the “ Agreement ”) between the Company and Zhixin by the allotment and issue of 7,000,000 shares of the Company to Zhixin, and damages in lieu or in addition thereof (“ Zhixin Case ”). On 28 November 2016, the Company filed with the High Court of the Hong Kong Special Administrative Region its acknowledgement of service of the writ and indicated its intention to defend the claim.

In December 2016, Zhixin took out an application for summary judgment against the Company. The hearing of the summary judgment application took place on 25 October 2017 in which Zhixin’s application was dismissed. The case now proceeds to the main trial stage.

On 29 January 2018, Zhixin filed its amended statement of claim to allege that it is entitled to 17,500,000 shares of the Company by virtue of an option provided in the Agreement. Zhixin Case is still in the process of filing pleadings by both parties.

Based on information currently available to the Company, it is not possible to estimate the financial effect of the Zhixin Case. As at 31 August 2019, the Company has not made any provision in respect of the Zhixin Case. The Company will provide an update as and when there is any material development in this matter.

The number of shares disclosed above has not considered the effect of Share Subdivision that became effective on 9 July 2018.

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REPORT OF THE DIRECTORS

PURCHASE, SALES OR REDEMPTION OF OUR COMPANY’S SHARES

Neither the Company nor any of its subsidiaries purchased, sold or redeemed any listed securities of the Company during the year ended 31 August 2019.

PROFESSIONAL TAX ADVICE RECOMMENDED

If the Shareholders of the Company are unsure about the taxation implications of purchasing, holding, disposing of, dealing in, or the exercise of any rights in relation to the Shares of the Company, they are advised to consult an expert.

SUFFICIENCY OF PUBLIC FLOAT

Based on information that is publicly available to the Company and within the knowledge of the Directors, the Directors confirm that the Company has maintained the prescribed public float under the Listing Rules during the year ended 31 August 2019.

PRE-EMPTIVE RIGHTS

There are no provisions for pre-emptive rights under the laws of the Cayman Islands or under the Company’s Articles of Association that require the Company to offer new Shares on a pro-rata basis to its existing Shareholders.

LITIGATION

Save as disclosed in the section headed “Contingent liabilities” in “Management Discussion and Analysis” and “Report of the Directors”, the Group did not have any material litigation outstanding as at 31 August 2019.

CONTINUING DISCLOSURE PURSUANT TO LISTING RULES

The Company does not have any other disclosure obligations under Rules 13.20, 13.21 and 13.22 of the Listing Rules.

CHANGE IN DIRECTORS’ AND CHIEF EXECUTIVES’ INFORMATION

Save as disclosed in the section headed “Directors and Senior Management” in this report, no change in information of Directors and chief executives is required to be disclosed pursuant to Rule 13.51B (1) of the Listing Rules.

EVENTS AFTER THE REPORTING PERIOD

There were no significant events after the reporting period.

USE OF PROCEEDS

Use of Proceeds from the Placing and Subscription

The net proceeds from the placing and subscription of 110,000,000 shares of the Company, after deducting placing commission and related expenses, amounted to approximately HK$989.5 million (equivalent to approximately RMB813.8 million as at the date of completion, being 17 January 2018) which is intended to be applied in the manner as set out in the section headed “Reasons for the Placing and the Subscription and Use of Proceeds” of the Company’s announcement dated 12 January 2018 and in the section headed “Completion of the Placing and the Subscription” of the Company’s announcement dated 17 January 2018.

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REPORT OF THE DIRECTORS

• approximately 95% (representing approximately HK$940.0 million) is expected to be used as cash reserves for potential overseas acquisitions and payment of the related expenses; and

• approximately 5% (representing approximately HK$49.5 million) is expected to be used for other general corporate purposes to expand and enhance the existing business of the Company.

As at the date of this report, approximately HK$38.4 million has been used for other general corporate purposes to expand and enhance the existing business of the Company.

The number of shares disclosed above has not considered the effect of Share Subdivision that became effective on 9 July 2018.

The unutilized net proceeds are generally placed in licensed financial institutions as short-term deposits.

NON-COMPETITION UNDERTAKING

In March 2008, each of the Founders, Ms. Meichen Amy Yan, Ms. Shu Ling Jen and Sherman Investment undertook to the Company and among others not to establish new entities or schools that are in competition with the entities or schools directly or indirectly controlled by us without our consent (“ Non-competition Undertaking ”).

The Founders, Ms. Meichen Amy Yan, Ms. Shu Ling Jen and Sherman Investment undertook to the Company and among others have confirmed their compliance with the Non-Competition Undertaking throughout the period from the Listing Date to 31 August 2019. The Independent Non-executive Directors have also reviewed the compliance with the Noncompetition Undertaking and are satisfied that they have complied with the undertakings.

AUDIT COMMITTEE

The Audit Committee has reviewed the audited consolidated financial statements of the Group for the year ended 31 August 2019 and has met with the independent auditors, Messrs. Deloitte Touche Tohmatsu (“ Deloitte ”). The Audit Committee has also discussed matters with respect to the accounting policies and practices adopted by the Company and internal control with senior management members of the Company.

AUDITORS

The consolidated financial statements for the year ended 31 August 2019 have been audited by Deloitte. A resolution for the re-appointment of Deloitte as the Company’s auditors is to be proposed at the forthcoming AGM.

On behalf of the Board Shu Liang Sherman Jen Chairman and Chief Executive Officer

Hong Kong, 28 November 2019

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CORPORATE GOVERNANCE REPORT

The Board of China Maple Leaf Educational Systems Limited is pleased to present this Corporate Governance Report in the Company’s annual report for the year ended 31 August 2019.

CORPORATE GOVERNANCE CODE

The Board has committed to achieving high corporate governance standards. The Board believes that high corporate governance standards are essential in providing a framework for the Company to safeguard the interests of Shareholders and to enhance corporate value and accountability.

During the year ended 31 August 2019, the Company has applied the principles as set out in the Corporate Governance Code and Corporate Governance Report (the “ CG Code ”) contained in Appendix 14 to the Listing Rules on the Stock Exchange and has complied with all the applicable code provisions, save and except for code provision A.2.1 which stipulates that the roles of chairman and chief executive should not be performed by the same individual. Details of such deviation are set out in the section headed “Chairman and Chief Executive Officer” below.

The Board will continue to review and monitor the practices of the Company for the purpose of complying with the CG Code and maintaining a high standard of corporate governance practices of the Company.

MODEL CODE FOR SECURITIES TRANSACTIONS

The Company has adopted the Model Code as set out in Appendix 10 to the Listing Rules as its own securities dealing code to regulate all dealings by Directors and relevant employees of securities in the Company and other matters covered by the Model Code.

Specific enquiries have been made of all the Directors and the relevant employees and they have confirmed that they have complied with the Model Code during the year ended 31 August 2019.

BOARD OF DIRECTORS

The Board currently comprises seven members, consisting of three Executive Directors, one Non-executive Director and three Independent Non-executive Directors.

The composition of the Board as at the date of this report is as follows:

Executive Directors

Mr. Shu Liang Sherman Jen (Chairman and Chief Executive Officer)

Ms. Jingxia Zhang Mr. James William Beeke

Non-executive Director

Mr. Howard Robert Balloch (Vice Chairman)

Independent Non-executive Directors

Mr. Peter Humphrey Owen Mr. Xiaodan Mei (resigned on 31 August 2019) Mr. Alan Shaver (appointed on 31 August 2019) Mr. Lap Tat Arthur Wong

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CORPORATE GOVERNANCE REPORT

The biographical information of the Directors are set out in the section headed “Directors and Senior Management” in this report.

None of the members of the Board is related to one another.

Chairman and Chief Executive Officer

Code provision A.2.1 of the CG Code stipulates that the roles of chairman and chief executive should not be performed by the same individual.

The Board does not have a separate chairman and CEO. Mr. Shu Liang Sherman Jen performs the dual roles of both chairman and CEO. The Board believes that by vesting the roles of both chairman and CEO in the same person, the Company derives the benefit of ensuring consistent leadership within our Group, which in turn enables more effective and efficient overall strategic planning for our Group. The Board considers that the balance of power and authority for the present arrangement will not be impaired and this structure will enable the Company to make and implement decisions promptly and effectively.

Board Meetings and Shareholders’ Meetings Held

During the year ended 31 August 2019, the Board convened four Board meetings and the Company convened an annual general meeting (“ AGM ”). A summary of the attendance record of the Directors is set out in the following table:

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Name of Director Board Meetings AGM
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Executive Directors
Mr. Shu Liang Sherman Jen	4/4	1/1
Ms. Jingxia Zhang	4/4	1/1
Mr. James William Beeke	4/4	0/1
Non-executive Director
Mr. Howard Robert Balloch	4/4	0/1
Independent Non-executive Directors
Mr. Peter Humphrey Owen	4/4	0/1
Mr. Xiaodan Mei (resigned on 31 August 2019)	1/4	0/1
Mr. Alan Shaver (appointed on 31 August 2019)	N/A	N/A
Mr. Lap Tat Arthur Wong	4/4	1/1

The Board will meet at least four times in each financial year at approximately quarterly intervals in accordance with code provision A.1.1 of the CG Code.

Apart from regular Board meetings, the Chairman also held a meeting with the Independent Non-executive Directors without the presence of other directors during the year ended 31 August 2019.

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CORPORATE GOVERNANCE REPORT

Independent Non-executive Directors

The Board at all times met the requirements of the Listing Rules relating to the appointment of at least three independent non-executive Directors representing more than one-third of the Board with one of whom possessing appropriate professional qualifications or accounting or related financial management expertise.

The Company has received from each independent non-executive Director a written annual confirmation in respect of his independence in accordance with the independence guidelines set out in Rule 3.13 of the Listing Rules. Based on such confirmation, the Board considers that all independent non-executive Directors are independent.

Non-executive Directors and Directors’ Re-election

Code provision A.4.1 of the CG Code stipulates that non-executive Directors shall be appointed for a specific term, subject to re-election, whereas code provision A.4.2 states that all Directors appointed to fill a casual vacancy shall be subject to election by Shareholders at the first general meeting after appointment and that every director, including those appointed for a specific term, shall be subject to retirement by rotation at least once every three years.

All Directors including non-executive Director and independent non-executive Directors have been appointed for a fixed term of less than three years. Each of the Directors is subject to retirement by rotation once every three years in accordance with the Company’s Articles of Association. The Articles of Association requires that at every annual general meeting of the Company one-third of the Directors for the time being (or, if their number is not three or a multiple of three, then the number nearest to, but not less than, one-third) shall retire from office by rotation provided that every director (including those appointed for a specific term) shall be subject to retirement by rotation at least once every three years.

Responsibilities, Accountabilities and Contributions of the Board and Management

The Board is responsible for leadership and control of the Company and oversees the Group’s businesses, strategic decisions and performance and is collectively responsible for promoting the success of the Company by directing and supervising its affairs. The Board takes decisions objectively in the interests of the Company.

All Directors, including non-executive Director and independent non-executive Directors, have brought a wide spectrum of valuable business experience, knowledge and professionalism to the Board for its efficient and effective functioning.

All Directors have full and timely access to all the information of the Company as well as the services and advice from the company secretary and senior management. The Directors may, upon request, seek independent professional advice in appropriate circumstances, at the Company’s expenses for discharging their duties to the Company.

The Directors shall disclose to the Company details of other offices held by them and the Board regularly reviews the contribution required from each Director to perform his responsibilities to the Company.

The Board reserves for its decision all major matters relating to policy matters, strategies and budgets, internal control and risk management, material transactions (in particular those that may involve conflict of interests), financial information, appointment of Directors and other significant operational matters of the Company. Responsibilities relating to implementing decisions of the Board, directing and coordinating the daily operations and management of the Company are delegated to the management.

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CORPORATE GOVERNANCE REPORT

Continuous Professional Development of Directors

Directors shall keep abreast of responsibilities as a Director of the Company and of the conduct, business activities and development of the Group.

Every newly appointed Director will receive formal, comprehensive and tailored induction on the first occasion of his/ her appointment to ensure appropriate understanding of the business and operations of the Group and full awareness of Director’s responsibilities and obligations under the Listing Rules and relevant statutory requirements.

In accordance with code provision A.6.5 of the CG Code with regard to continuous professional development, Directors should participate in appropriate continuous professional development to develop and refresh their knowledge and skills to ensure that their contribution to the Board remains informed and relevant. All Directors are encouraged to attend relevant training courses at the Company’s expenses.

During the year ended 31 August 2019, the key methods of attaining continuous professional development by each of the Directors are summarized as follows:

Name of Director	Attending courses/ seminars/ conferences	Reading books/ journals/ articles
Mr. Shu Liang Sherman Jen	✓	✓
Ms. Jingxia Zhang	✓	✓
Mr. James William Beeke	✓	✓
Mr. Howard Robert Balloch	✓	✓
Mr. Peter Humphrey Owen	✓	✓
Mr. Xiaodan Mei (resigned on 31 August 2019)	✓	✓
Mr. Alan Shaver (appointed on 31 August 2019)	N/A	N/A
Mr. Lap Tat Arthur Wong	✓	✓

BOARD COMMITTEES

The Board has established three committees, namely, the Audit Committee, the Remuneration Committee and the Nomination and Corporate Governance Committee, for overseeing particular aspects of the Company’s affairs. Each of these committees was established with defined written terms of reference. The terms of reference of the Board committees are posted on the Company’s website and the Stock Exchange’s website and are available to Shareholders upon request.

The majority of the members of each Board committee are independent non-executive Directors and the list of the chairman and members of each Board committee is set out in the section headed “Corporate Information” in this report.

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CORPORATE GOVERNANCE REPORT

Audit Committee

The Company has established an Audit Committee with written terms of reference in compliance with Rule 3.21 of the Listing Rules and paragraph C.3 of the CG Code. The primary duties of the Audit Committee are to assist the Board by providing an independent view of the effectiveness of the financial reporting process, internal control procedures and risk management systems of our Group, to oversee the audit process and the relationship with external auditor, to review arrangements enabling employees of the Group to raise concerns about possible improprieties in financial reporting, internal control or other matters of the Company and to perform other duties and responsibilities as assigned by our Board.

The Audit Committee consists of three members: Mr. Lap Tat Arthur Wong, Mr. Peter Humphrey Owen, Mr. Xiaodan Mei (resigned on 31 August 2019) and Mr. Alan Shaver (appointed on 31 August 2019), all of whom are Independent Non-executive Directors. Mr. Lap Tat Arthur Wong is the chairman of the Audit Committee.

During the year ended 31 August 2019, the Audit Committee held three meetings. The attendance record of the meetings is set out in the table below:

Name of Committee Member	Attendance/ Number of meetings
Mr. Lap Tat Arthur Wong	3/3
Mr. Peter Humphrey Owen	3/3
Mr. Xiaodan Mei (resigned on 31 August 2019)	3/3
Mr. Alan Shaver (appointed on 31 August 2019)	N/A

During the meetings, the Audit Committee reviewed the annual results and reports for the year ended 31 August 2018 and the interim results and report for the six months ended 28 February 2019, significant issues on the financial reporting and compliance procedures, internal control and risk management systems, scope of work and appointment of external auditors.

During the year ended 31 August 2019, the Audit Committee also met with the external auditors twice in the absence of the executive Directors.

Remuneration Committee

The Company has established a Remuneration Committee with written terms of reference in compliance with paragraph B.1 of the CG Code. The primary duties of the Remuneration Committee include but are not limited to, (i) making recommendations to the Board on the Company’s policy and structure for all remuneration of Directors and senior management and on the establishment of a formal and transparent procedure for developing policy on such remuneration; (ii) making recommendations to the Board on the remuneration packages of all Directors and senior management; (iii) reviewing and approving performance-based remuneration by reference to corporate goals and objectives resolved by the Board from time to time; and (iv) reviewing and approving the terms of incentive schemes and Directors’ service contracts.

The Remuneration Committee consists of three members: Mr. Peter Humphrey Owen, Mr. Howard Robert Balloch, Mr. Xiaodan Mei (resigned on 31 August 2019) and Mr. Alan Shaver (appointed on 31 August 2019). Mr. Balloch is a Nonexecutive Director and Mr. Owen, Mr. Mei and Mr. Shaver are Independent Non-executive Directors. Mr. Owen is the chairman of the Remuneration Committee.

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CORPORATE GOVERNANCE REPORT

During the year ended 31 August 2019, the Remuneration Committee held one meeting. The attendance record of the meetings is set out in the table below:

Name of Committee Member	Attendance/ Number of meetings
Mr. Peter Humphrey Owen	1/1
Mr. Howard Robert Balloch	1/1
Mr. Xiaodan Mei (resigned on 31 August 2019)	0/1
Mr. Alan Shaver (appointed on 31 August 2019)	N/A

During the meeting, the Remuneration Committee reviewed the remuneration policy and structure of the Company, the remuneration packages of the executive Directors and senior management, compensation for senior staff, longterm incentive for enhancing staff retention and recruitment and other related matters of the Company. The Remuneration Committee also reviewed the adequacy of its Terms of Reference and the efficiency of the work of the Committee.

During the year ended 31 August 2019, total remuneration paid/payable to the senior management (including all executive Directors) by band expressed in Hong Kong dollars is set out below:

Band	Number of senior management
HK$500,000 to HK$1,000,000	0
HK$1,000,001 to HK$1,500,000	3
HK$2,500,001 to HK$3,000,000	1
HK$4,000,001 to HK$4,500,000	1

Nomination and Corporate Governance Committee

The Company has established a Nomination and Corporate Governance Committee with written terms of reference in compliance with paragraphs A.5 and D.3 of the CG Code. The Nomination and Corporate Governance Committee has the following two main functions: (i) nomination function including reviewing the structure, size, composition and performance of the Board, developing and recommending to the Board on nomination guidelines, assessing the independence of independent non-executive Directors and making recommendations to the Board on matters relating to the appointment of Directors; and (ii) corporate governance function including developing and reviewing the Company’s corporate governance policies and practices, reviewing and monitoring the training and continuous professional development of Directors and senior management, reviewing and monitoring the Company’s policies and practices on compliance with legal and regulatory requirements and reviewing the Company’s compliance with the CG Code and disclosure in the Corporate Governance Report.

The Nomination and Corporate Governance Committee consists of three members: Mr. Shu Liang Sherman Jen, Mr. Peter Humphrey Owen, Mr. Xiaodan Mei (resigned on 31 August 2019) and Mr. Alan Shaver (appointed on 31 August 2019). Mr. Jen is an Executive Director and Mr. Owen, Mr. Mei and Mr. Shaver are Independent Non-executive Directors. Mr. Jen is the chairman of the Nomination and Corporate Governance Committee.

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CORPORATE GOVERNANCE REPORT

Director Nomination Policy

On 9 November 2018, the Company adopted a director nomination policy which sets out the selection criteria and process and the Board succession planning considerations in relation to nomination and appointment of Directors. When assessing and selecting candidates of directors, the Nomination and Corporate Governance Committee (“ N&GC ”) and the Board will consider the character, integrity, qualification (including professional qualification, skills, knowledge and experience and diversity elements as described in the Board Diversity Policy of the candidates. For appointment of independent non-executive Directors, the Company will also consider the independence of the candidates in accordance with the Listing Rules and the commitment of sufficient time in order to discharge the duties as the member of the Board and the Board Committees.

For appointment of directors, the N&GC should recommend to the Board to appoint suitable candidates for directorship. For person nominated by shareholders for election as a director at the general meeting of the Company, the N&GC and/or the Board should assess such candidate based on the above selection criteria to determine the eligibility of such candidate to be appointed as a director, and thus make recommendation to the shareholders on the proposal of election of director at the general meeting.

For re-election of directors at the general meeting, the N&GC and/or the Board should review the overall contribution and services made by the retired directors to the Company, and consider whether their level of engagement and performance in the Board meet the above standards, and make recommendation to the shareholders on the proposed re-election of directors at the general meeting.

During the year ended 31 August 2019, the Nomination and Corporate Governance Committee held one meeting. The attendance record of the meeting is set out in the table below:

Name of Committee Member	Attendance/ Number of meeting
Mr. Shu Liang Sherman Jen	1/1
Mr. Peter Humphrey Owen	1/1
Mr. Xiaodan Mei (resigned on 31 August 2019)	1/1
Mr. Alan Shaver (appointed on 31 August 2019)	N/A

During the meeting, the Nomination and Corporate Governance Committee reviewed the structure, size, composition and diversity of the Board, assessed the independence of Independent Non-executive directors, made recommendation to the Board for the re-election of directors, reviewed the Company’s policies and practices on corporate governance and on compliance with legal and regulatory requirements and discussed the adequacy on the training and continuous professional development of Directors and senior management.

Board Diversity Policy

A revised Board Diversity Policy was adopted by the Board on 9 November 2018.

The Company recognises and embraces the benefits of having a diverse Board to enhance the quality of its performance and strives to maintain a Board with diversity perspectives at all levels, in particular, those are aligning with the Company’s strategies and objectives. In determining the composition of the Board and the nomination of directors, the Company takes into consideration a number of factors, including but not limited to gender, age, cultural and educational background, professional qualifications and skills, knowledge and industries and regional experience. Measurable objectives are adopted for achieving diversity of the Board. The Company will conduct regular assessment on the diversity perspective, measurable objectives and progress in achieving the objective of diversity.

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CORPORATE GOVERNANCE REPORT

The Nomination and Corporate Governance Committee is responsible for monitoring and reviewing the Policy annually. During the year ended 31 August 2019, the Nomination and Corporate Governance committee was satisfied with the diversity of the existing Board and did not recommend any change of the size of the Board.

DIRECTORS’ RESPONSIBILITY IN RESPECT OF THE FINANCIAL STATEMENTS

The Directors acknowledge their responsibility for preparing the financial statements of the Company for the year ended 31 August 2019.

The Directors are not aware of any material uncertainties relating to events or conditions that may cast significant doubt upon the Company’s ability to continue as a going concern.

The statement of the independent auditors of the Company about their reporting responsibilities on the financial statements is set out in the Independent Auditor’s Report on pages 75 to 78 in this report.

AUDITORS’ REMUNERATION

The Company appointed Deloitte Touche Tohmatsu as the external auditors for the year ended 31 August 2019. During the year ended 31 August 2019, the total fees paid/payable, excluding disbursements, in respect of audit and non-audit services provided by the Group’s external auditors are set out below:

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Amount
Items of auditors’ services RMB’000
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Audit service:
Annual audit service	2,780
Non-audit services:
ESG consultation service	105
Tax advisory service	17
Transfer pricing service	100
Review on continuing connected transactions	100
Total	3,102

RISK MANAGEMENT AND INTERNAL CONTROLS

The Board highly values and has the overall responsibility for establishing and maintaining adequate and effective systems of risk management and internal control of the Group to safeguard the Group’s assets and stakeholders’ interests, and reviewing their effectiveness annually.

The Group’s risk management and internal control systems include a management structure with defined lines of responsibility and limits of authority. These systems aim to provide reasonable, but not absolute, assurance that assets are safeguard against misappropriations, transactions are executed in accordance with the management’s authorisation, and accounting records are reliable and proper for preparing financial information and are not materially misstated. The systems are designed to identify, evaluate and manage effectively risks rather than to eliminate the risk of failure to achieve business objectives.

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CORPORATE GOVERNANCE REPORT

The Group has established a risk management framework in providing direction in identifying, evaluating and managing significant risks. Risks that would adversely affect the achievement of the Group’s objectives are identified and assessed and prioritised according to a set of standard criteria. Risk mitigation plans and risk owners are then established for those risks which are considered to be significant.

The Board assesses the effectiveness of the risk management and internal control systems through the reviews performed by the Audit Committee, executive management, internal audit department and external auditors. During the year ended 31 August 2019, the Audit Committee reviewed the report from internal audit department for the effectiveness of the Group’s risk management and internal control systems, inter alia, the financial, operational and compliance control functions of the Group, and confirmed that the management has performed their duties to maintain effective risk management and internal control systems, and has ensured the adequacy of resources, staff qualifications and experience, training programmes and budget of the Company’s accounting, internal audit and financial report functions. The Board considered that the risk management and internal control systems are effective and adequate and is committed to improve the Group’s risk management and internal control systems on an ongoing basis.

The Group complies with requirements of the SFO and the Listing Rules. The Group discloses inside information to the public as soon as reasonably practicable unless the information falls within any of the safe harbours as provided in the SFO. Before the information is fully disclosed to the public, the Group ensures the information is kept strictly confidential. If the Group believes that the necessary degree of confidentiality cannot be maintained or that confidentiality may have been breached, the Group would immediately disclose the information to the public. The Group is committed to ensure that information contained in announcements are not false or misleading as to a material fact, or false or misleading through the omission of a material fact in view of presenting information in a clear and balanced way, which requires equal disclosure of both positive and negative facts.

COMPANY SECRETARY

Ms. Wan Mun Yee, Sabine (“ Ms. Wan ”) of Tricor Services Limited, an external service provider, has been engaged by the Company as its company secretary since 27 August 2018. Ms. Grace Jen, assistant to CFO, was the primary contact person between the Company and Ms. Wan during her tenure.

Ms. Wan undertook no less than 15 hours of relevant professional training during the year ended 31 August 2019.

SHAREHOLDERS’ RIGHTS

To safeguard Shareholders’ interests and rights, a separate resolution is proposed for each substantially separate issue at general meetings, including the election of individual Directors. All resolutions put forward at general meetings will be voted by poll pursuant to the Listing Rules and poll results will be posted on the websites of the Company and the Stock Exchange after each general meeting.

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CORPORATE GOVERNANCE REPORT

Convening an Extraordinary General Meeting (“EGM”) and Putting Forward Proposals at EGM

Pursuant to article 12.3 of the Articles of Association, the Board may, whenever it thinks fit, convene an EGM.

General meetings shall also be convened on the written requisition of any two or more members deposited at the principal place of business of the Company in Hong Kong or, in the event the Company ceases to have such a principal place of business, the registered office specifying the objects of the meeting and signed by the requisitionists, provided that such requisitionists held as at the date of deposit of the requisition not less than one-tenth of the paid up capital of the Company which carries the right of voting at general meetings of the Company.

If the Board does not within 21 days from the date of deposit of the requisition proceed duly to convene the meeting to be held within a further 21 days, the requisitionists themselves or any of them representing more than one-half of the total voting rights of all of them, may convene the general meeting in the same manner, as nearly as possible, as that in which meetings may be convened by the Board provided that any meeting so convened shall not be held after the expiration of three months from the date of deposit of the requisition, and all reasonable expenses incurred by the requisitionists as a result of the failure of the Board shall be reimbursed to them by the Company.

The requisition must state clearly the name of the requisitionists, their shareholding in the Company, the reason(s) to convene an EGM, the agenda proposed to be included and the details of the business(es) proposed to be transacted in the EGM and signed by the requisitionists.

Putting Forward Enquiries to the Board

For putting forward any enquiries to the Board, Shareholders may send written enquiries to the Company. The Company will not normally deal with verbal or anonymous enquiries.

Contact Details

Shareholders may send their enquiries or requests as mentioned above to the following:

Address: Room 1302, 13/F., Tai Tung Building, 8 Fleming Road, Wanchai, Hong Kong Investor Relations Department Fax: (852) 3565 5967 Email: ir@mapleleaf.net.cn

For the avoidance of doubt, Shareholder(s) must deposit and send the original duly signed written requisition, notice or statement, or enquiry (as the case may be) to the above address, and provide their full name, contact details and identification in order to give effect thereto. Shareholders’ information may be disclosed as required by law.

COMMUNICATION WITH SHAREHOLDERS AND INVESTORS

The Company considers that effective communication with Shareholders is essential for enhancing investor relations and investor understanding of the Group’s business, performance and strategies. The Company endeavors to maintain an ongoing dialogue with Shareholders and in particular, through annual general meetings and other general meetings. The chairman of the Board, the chairmen of Audit Committee, Remuneration Committee and Nomination and Corporate Governance Committee, or, in their absence, other members of the respective committees, will make themselves available at the annual general meetings to meet Shareholders and answer their enquiries.

The Company has not made any changes to its Articles of Association during the year ended 31 August 2019. An up-todate version of the Company’s Articles of Association is also available on the Company’s website and the Stock Exchange’s website.

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INDEPENDENT AUDITOR’S REPORT

TO THE MEMBERS OF CHINA MAPLE LEAF EDUCATIONAL SYSTEMS LIMITED

(incorporated in the Cayman Islands with limited liability)

OPINION

We have audited the consolidated financial statements of China Maple Leaf Educational Systems Limited (the “ Company ”) and its subsidiaries (collectively referred to as the “ Group ”) set out on pages 79 to 176, which comprise the consolidated statement of financial position as at 31 August 2019, and the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 August 2019, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (“ IFRSs ”) issued by the International Accounting Standards Board and have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance.

BASIS FOR OPINION

We conducted our audit in accordance with International Standards on Auditing (“ ISAs ”) issued by International Auditing and Assurance Standards Board. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (“ the Code ”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

KEY AUDIT MATTER

Key audit matter is the matter that, in our professional judgment, was of most significance in our audit of the consolidated financial statements of the current period. This matter was addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter.

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INDEPENDENT AUDITOR’S REPORT

KEY AUDIT MATTER (Continued)

Key audit matter How our audit addressed the key audit matter

Impairment assessment of goodwill

We identified the impairment assessment of goodwill as a key audit matter due to significant judgment and estimation involved in the discounted future cash flow model which was prepared and used by the management in considering the impairment of goodwill.

Impairment of goodwill is assessed by the management by comparing the recoverable amount and carrying amount of the relevant cash generating units at the end of the reporting period. Significant judgments and assumptions were required by management of the Group in assessing the recoverable amounts of those cash generating units. The recoverable amounts are determined with reference to the value in use of the relevant cash generating units, which required significant assumptions on discount rates, growth rates of student number and tuition fee.

Details of the key estimation uncertainties and the impairment assessment on goodwill are disclosed in notes 4 and 16, respectively, to the consolidated financial statements.

Our procedures in relation to impairment assessment of goodwill included:

• Understanding the management’s impairment assessment process, including the methodology applied and key assumptions used;

• Obtaining the discounted future cash flow analysis prepared by the management and checking its mathematical accuracy;

• Involving our internal valuation specialists to evaluate the appropriateness of the methodologies of the goodwill impairment test and assess reasonableness of key assumptions adopted in the discounted future cash flow model;

• Evaluating the reasonableness of the key assumptions adopted by the management, including discount rates, growth rates of student number and tuition fee; and

• Assessing the competence, capability and objectivity of the valuer.

OTHER INFORMATION

The directors of the Company are responsible for the other information. The other information comprises the information included in the annual report, but does not include the consolidated financial statements and our auditor’s report thereon.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

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INDEPENDENT AUDITOR’S REPORT

RESPONSIBILITIES OF DIRECTORS AND THOSE CHARGED WITH GOVERNANCE FOR THE CONSOLIDATED FINANCIAL STATEMENTS

The directors of the Company are responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with IFRSs and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group’s financial reporting process.

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

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INDEPENDENT AUDITOR’S REPORT

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in the independent auditor’s report is Chung Chin Cheung.

Deloitte Touche Tohmatsu

Certified Public Accountants Hong Kong

28 November 2019

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CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the Year Ended 31 August 2019

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2019 2018
NOTES RMB’000 RMB’000
Revenue 5 1,570,231 1,341,267
Cost of revenue (835,397) (717,163)
Gross profit 734,834 624,104
Investment and other income 6 61,573 54,261
Other gains and losses 7 128,752 75,713
Marketing expenses (33,990) (40,034)
Administrative expenses (199,303) (155,558)
Finance costs (10,967) (10,607)
Profit before taxation 680,899 547,879
Taxation 8 (26,730) (9,476)
Profit for the year 9 654,169 538,403
Other comprehensive income:
Item that may be reclassified subsequently to profit or loss:
Exchange difference arising on the translation of foreign operations 7,823 8,490
Total comprehensive income for the year 661,992 546,893
Profit (loss) for the year attributable to:
Owners of the Company 656,756 542,830
Non-controlling interests (2,587) (4,427)
654,169 538,403
Total comprehensive income (expense) attributable to:
Owners of the Company 664,579 551,320
Non-controlling interests (2,587) (4,427)
661,992 546,893
EARNINGS PER SHARE
Basic (RMB cents) 12 22.20 19.02
Diluted (RMB cents) 12 22.19 18.99
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At 31 August 2019

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31/8/2019 31/8/2018
NOTES RMB’000 RMB’000
Non-current Assets
Property, plant and equipment 13 2,419,241 2,105,782
Prepaid lease payments 14 263,412 207,628
Investment properties 15 348,065 342,936
Goodwill 16 252,848 165,968
Other intangible assets 17 44,012 38,826
Deposit paid for acquisition of property and equipment 13,640 10,159
Books for lease 2,055 2,608
Pledged bank deposits 18 132,000 132,000
3,475,273 3,005,907
Current Assets
Inventories 15,337 16,977
Deposits, prepayments and other receivables 19 144,283 76,782
Financial assets at fair value through profit or loss 20 76,066 –
Held for trading investments 20 – 116,770
Available-for-sale investments 21 – 246,000
Pledged bank deposits 18 – 113,000
Restricted cash 22 50,447 –
Bank balances and cash 23 2,762,328 2,220,694
3,048,461 2,790,223
Current Liabilities
Deferred revenue 24 – 1,168,873
Contract liabilities 24 1,375,604 –
Other payables and accrued expenses 25 436,815 399,452
Income tax payable 83,085 73,866
Borrowings 26 123,475 224,537
2,018,979 1,866,728
Net Current Assets 1,029,482 923,495
Total Assets Less Current Liabilities 4,504,755 3,929,402
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 31 August 2019

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31/8/2019 31/8/2018
NOTES RMB’000 RMB’000
Capital and Reserves
Share capital 28 9,309 9,255
Reserves 4,143,594 3,642,279
Equity attributable to owners of the Company 4,152,903 3,651,534
Non-controlling interests 92,872 40,295
Total Equity 4,245,775 3,691,829
Non-Current Liabilities
Deferred tax liabilities 27 51,466 30,772
Borrowings 26 207,514 206,801
258,980 237,573
4,504,755 3,929,402
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The consolidated financial statements on pages 79 to 176 were approved and authorised for issue by the Board of Directors on 28 November 2019 and are signed on its behalf by:

Shuliang Sherman Jen

Jingxia Zhang

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For the Year Ended 31 August 2019

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Attributable to owners of the Company
Shares
held for
restricted Share-
share Statutory based Non-
Share Share Other award Translation surplus payment Retained controlling
capital premium reserve scheme reserve reserve reserve profits Sub-total interests Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(note a) (note b)
At 1 September 2017 8,549 747,724 – (42,717) (2,850) 205,383 7,610 1,505,488 2,429,187 72,331 2,501,518
Profit (loss) for the year – – – – – – – 542,830 542,830 (4,427) 538,403
Other comprehensive income
for the year – – – – 8,490 – – – 8,490 – 8,490
Total comprehensive income (expense)
for the year – – – – 8,490 – – 542,830 551,320 (4,427) 546,893
Acquisition of a subsidiary – – – – – – – – – 47,939 47,939
Acquisition of additional interest in a
– – – – – – –
subsidiary (Note c) (2,040) (2,040) (75,548) (77,588)
Issue of new shares (Note 28(2)) 705 813,099 – – – – – – 813,804 – 813,804
Transfer to statutory surplus reserve – – – – – 20,186 – (20,186) – – –
Share-based payments – – – – – – 57,356 – 57,356 – 57,356
Dividends recognised as distribution
– – – – – – – –
(Note 11) (200,585) (200,585) (200,585)
Dividends distributed to the restricted
share award scheme – 2,114 – – – – – – 2,114 – 2,114
Exercise of share options 1 555 – – – – (178) – 378 – 378
Shares vested under restricted share
award scheme – – – 13,678 – – (48,055) 34,377 – – –
At 31 August 2018 9,255 1,362,907 (2,040) (29,039) 5,640 225,569 16,733 2,062,509 3,651,534 40,295 3,691,829
Profit (loss) for the year – – – – – – – 656,756 656,756 (2,587) 654,169
Other comprehensive income
for the year – – – – 7,823 – – – 7,823 – 7,823
Total comprehensive income (expense)
for the year – – – – 7,823 – – 656,756 664,579 (2,587) 661,992
Acquisition of a subsidiary (Note 34b) 54 51,009 – – – – – – 51,063 55,164 106,227
Transfer to statutory surplus reserve – – – – – 26,148 – (26,148) – – –
Share-based payments – – – – – – 36,591 – 36,591 – 36,591
Dividends recognised as distribution
(Note 11) – (253,280) – – – – – – (253,280) – (253,280)
Dividends distributed to the restricted
share award scheme – 2,416 – – – – – – 2,416 – 2,416
Shares vested under restricted share
award scheme – – – 5,184 – – (22,218) 17,034 – – –
At 31 August 2019 9,309 1,163,052 (2,040) (23,855) 13,463 251,717 31,106 2,710,151 4,152,903 92,872 4,245,775
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the Year Ended 31 August 2019

• Note a: Shares held for restricted share award scheme is comprised of shares purchased from open market that are to be used for the share award scheme approved by the directors of the Company on 10 November 2014 (the “ Share Award Scheme ”).

• Note b: Pursuant to the relevant laws in the People’s Republic of China (the “ PRC ”), the Company’s subsidiaries in the PRC shall make appropriations from after-tax profit to non-distributable reserve funds as determined by the board of the directors of the relevant PRC subsidiaries. These reserves include (i) general reserve of the limited liabilities companies and (ii) the development fund of schools:

• (i) In accordance with relevant PRC regulations, for PRC subsidiaries with limited liability, it is required to make annual appropriations to statutory surplus reserve of 10% of after-tax profits as determined in accordance with PRC accounting standards for each calendar year until the balance reaches 50% of the relevant PRC entity’s registered capital.

• (ii) According to the relevant PRC laws and regulations, for private school that does not require reasonable return, it is required to appropriate to development fund of not less than 25% of the annual increase of net assets of the relevant school as determined in accordance with PRC accounting standards in the PRC. The development fund shall be used for construction or maintenance of the school or procurement or upgrading of educational equipment.

• Note c: On 24 November 2017, the Group acquired the remaining 47.6% of the issued share capital of Hainan Maple Leaf Science and Education Group Co., Ltd. (“ Hainan Science ”) for a cash consideration of RMB56,166,000 and a waiver of accounts receivable amounted to RMB21,422,000 due from the non-controlling shareholder. The difference between the amount of non-controlling interests and the fair value of the consideration paid was recognised in other reserve.

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CONSOLIDATED STATEMENT OF CASH FLOWS

For the Year Ended 31 August 2019

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2019 2018
RMB’000 RMB’000
OPERATING ACTIVITIES
Profit before taxation 680,899 547,879
Adjustments for:
Amortisation of books for lease 2,072 2,347
Amortisation of intangible assets 7,235 1,141
Amortisation of prepaid lease payments 6,420 5,823
Depreciation of investment properties 3,888 3,789
Depreciation of property and equipment 81,871 60,685
–
Dividend income from financial assets at fair value through profit or loss (497)
–
Dividend income from held for trading investments (2,934)
Net foreign exchange gain (17,180) (31,754)
Loss (gain) on disposal of property, plant and equipment 1,080 (151)
–
Gain on disposal of interest in a joint venture (247)
Interest expenses 10,967 10,607
Interest income (36,343) (26,062)
–
Gain on fair value changes of financial assets at fair value through profit or loss (39,533)
–
Loss on fair value change of held for trading investments 12,853
Share-based payments 36,591 57,356
Operating cash flows before movements in working capital 737,470 641,332
Increase in deferred revenue – 140,255
Increase in contract liabilities 168,098 –
Increase in deposits, prepayments and other receivables (58,702) (15,690)
Decrease in inventories 1,872 1,834
Decrease in other payables and accrued expenses (6,432) (33,413)
Cash generated from operations 842,306 734,318
Income tax paid (20,620) (13,937)
Interest received 35,323 29,978
NET CASH FROM OPERATING ACTIVITIES 857,009 750,359
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CONSOLIDATED STATEMENT OF CASH FLOWS

For the Year Ended 31 August 2019

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2019 2018
RMB’000 RMB’000
INVESTING ACTIVITIES
–
Government grants received 24,700
Proceeds from disposal of
–
— financial assets at fair value through profit or loss 2,972,137
–
— held for trading investments 10,518
Proceeds from disposal of property and equipment 1,955 3,876
–
Dividends received from held for trading investments 2,934
Dividends received from financial assets at fair value through profit or loss 497 –
Proceeds from disposal of interest in a joint venture – 359
Purchase of
–
— financial assets at fair value through profit or loss (2,645,747)
— available-for-sale investments – (246,000)
–
— held for trading investments (132,215)
Purchase of property and equipment (135,263) (214,445)
Net cash outflow from acquisition of subsidiaries (Note 34) (168,970) (196,263)
–
Settlement of acquisition consideration payable (4,858)
–
Settlement of contingent acquisition consideration (4,600)
Payments for prepaid lease payments (1,541) (9,860)
Purchase of books for lease (1,519) (1,733)
–
Placement of restricted bank deposits (50,447)
NET CASH USED IN INVESTING ACTIVITIES (38,356) (758,129)
FINANCING ACTIVITIES
Proceeds from issue of new shares – 813,804
–
Placement of restricted bank deposits (107,136)
–
Release from restricted bank deposits 107,136
–
Withdrawal of pledged bank deposits 113,000
Repayments of borrowings (155,235) (4,670)
Interest paid (10,967) (10,607)
Dividends paid (250,864) (198,471)
Proceeds from exercise of share options – 378
–
Acquisition of additional interest in a subsidiary (56,166)
NET CASH (USED IN) FROM FINANCING ACTIVITIES (304,066) 544,268
NET INCREASE IN CASH AND CASH EQUIVALENTS 514,587 536,498
CASH AND CASH EQUIVALENTS AT 1 SEPTEMBER 2,220,694 1,649,296
Effect of foreign exchange rate changes 27,047 34,900
CASH AND CASH EQUIVALENTS AT 31 AUGUST REPRESENTED BY BANK BALANCES
AND CASH 2,762,328 2,220,694
----- End of picture text -----

86 C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

1. GENERAL

China Maple Leaf Educational Systems Limited (the “ Company ” together with its subsidiaries collectively referred to as the “ Group ”) was incorporated in the Cayman Islands as an exempted company with limited liability under Companies Law Chapter 22 of the Cayman Islands on 5 June 2007. Its shares are listed on the Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”). Its parent is Sherman Investment Holdings Limited incorporated in the British Virgin Islands (“ BVI ”) and its ultimate controlling party is Mr. Sherman Jen, who is also the Chairman of the board and Chief Executive Officer of the Company. The address of the registered office of the Company is Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands and the address of principal place of business of the Company is Maple Leaf Educational Park, 6 Central Street, Jinshitan National Tourist Area, Dalian, Liaoning Province 116650, the People’s Republic of China (“ PRC ”).

The Group operates a network of bilingual private schools and preschools in the PRC under the “Maple Leaf” brand, focusing on high schools that offer dual-diploma curriculum (British Columbia curriculum and Chinese curriculum) and bilingual education mainly within the PRC.

Due to regulatory restrictions on foreign ownership in the schools in the PRC, the Group conducts a substantial portion of the business through Dalian Maple Leaf Educational Group Co., Ltd (“ Dalian Educational Group ”), Dalian Maple Leaf Science and Education Co., Ltd (“ Dalian Science and Education ”), Dalian Maple Leaf Foreign National School (“ Dalian Foreign School ”), Wuhan Maple Leaf Foreign National School (“ Wuhan Foreign School ”) and Yiwu Maple Leaf Foreign National School (“ Yiwu Foreign School ”) (collectively referred to as “ Consolidated Affiliated Entities ”) in the PRC. The wholly-owned subsidiary, Dalian Beipeng Educational Software Development Inc. (“ Beipeng Software ”), has entered into the contractual arrangements (the “ Contractual Arrangements ”) with the Consolidated Affiliated Entities and their respective equity holders, which enable Beipeng Software and the Group to:

• exercise effective financial and operational control over the Consolidated Affiliated Entities;

• exercise equity holders’ voting rights of the Consolidated Affiliated Entities;

• receive substantially all of the economic interest returns generated by the Consolidated Affiliated Entities in consideration for the business support, technical and consulting services provided by Beipeng Software;

• obtain an irrevocable and exclusive right to purchase all or part of equity interests in the Consolidated Affiliated Entities from the respective equity holders at nil consideration or a minimum purchase price permitted under PRC laws and regulations. Beipeng Software may exercise such options at any time until it has acquired all equity interests and/or all assets of the Consolidated Affiliated Entities. In addition, the Consolidated Affiliated Entities are not allowed to sell, transfer, or dispose any assets, or make any distributions to their equity holders without prior consent of Beipeng Software; and obtain a pledge over the entire equity interest of Dalian Educational Group and Dalian Science and Education from their equity holders as collateral security for all of Dalian Educational Group and Dalian Science and Education’s payments due to Beipeng Software and to secure performance of Dalian Educational Group and Dalian Science and Education and their respective subsidiaries obligations under the Contractual Arrangements.

There are no pledge agreements for Dalian Foreign School, Wuhan Foreign School and Yiwu Foreign School due to the PRC law restriction. To further enhance the Company’s security over Dalian Foreign School, Wuhan Foreign School and Yiwu Foreign School, the Company segregated the duties of different people and functions to ensure that the company seals of Dalian Foreign School, Wuhan Foreign School and Yiwu Foreign School are properly secured, are within the full control of the Company and cannot be used without its permission.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

1. GENERAL (Continued)

The Group does not have any equity interest in the Consolidated Affiliated Entities. However, as a result of the Contractual Arrangements, the Group has power over the Consolidated Affiliated Entities, has rights to variable returns from its involvement with the Consolidated Affiliated Entities and has the ability to affect those returns through its power over the Consolidated Affiliated Entities and is considered to have control over the Consolidated Affiliated Entities. Consequently, the Company regards the Consolidated Affiliated Entities as indirect subsidiaries. The Group has consolidated the assets and liabilities and income and expenses of the Consolidated Affiliated Entities in the consolidated financial statements of the Group.

The following financial statement balances and amounts of the Consolidated Affiliated Entities and the Consolidated Affiliated Entities’ subsidiaries were included in the consolidated financial statements:

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2019 2018
RMB’000 RMB’000
Revenue 1,255,262 1,027,772
Profit before taxation 522,577 540,032
31/8/2019 31/8/2018
RMB’000 RMB’000
Non-current assets 2,533,889 2,071,486
Current assets 1,723,976 1,268,679
Current liabilities (1,676,598) (1,430,840)
----- End of picture text -----

The consolidated financial statements are presented in Renminbi (“ RMB ”), which is the same as the functional currency of the Company.

2. ADOPTION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRSs”)

New and Amendments to IFRSs that are mandatorily effective for the current year

The Group has applied the following new and amendments to IFRSs issued by the International Accounting Standards Board for the first time in the current year:

IFRS 9	Financial Instruments
IFRS 15	Revenue from Contracts with Customers and the related Amendments
International Financial Reporting	Foreign Currency Transactions and Advance Consideration
Interpretations Committee
Interpretation 22
Amendments to IFRS 2	Classification and Measurement of Share-based Payment Transactions
Amendments to IAS 28	As part of the Annual Improvements to IFRSs 2014–2016 Cycle
Amendments to IAS 40	Transfers of Investment Property

Except as described below, the application of the new and amendments to IFRSs in the current year has had no material impact on the Group’s financial performance and positions for the current and prior years and/or on the disclosures set out in these consolidated financial statements.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

2. ADOPTION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRSs”) (Continued)

2.1 IFRS 15 Revenue from Contracts with Customers

The Group has applied IFRS 15 for the first time in the current year. IFRS 15 superseded IAS 18 Revenue, IAS 11 Construction Contracts and the related interpretations.

The Group has applied IFRS 15 retrospectively with the cumulative effect of initially applying this Standard recognised at the date of initial application, 1 September 2018. Any difference at the date of initial application is recognised in the opening retained profits (or other components of equity, as appropriate) and comparative information has not been restated. Furthermore, in accordance with the transition provisions in IFRS 15, the Group has elected to apply the Standard retrospectively only to contracts that are not completed at 1 September 2018. Accordingly, certain comparative information may not be comparable as comparative information was prepared under IAS 18 Revenue and the related interpretations.

The Group recognises revenue from the following major sources which arise from contracts with customers:

• Tuition and boarding fees

• Summer and winter camps

• Sales of textbooks

• Others: represent revenue from other educational related services and sale of goods and educational materials.

Information about the Group’s performance obligations and the accounting policies resulting from application of IFRS 15 are disclosed in notes 5 and 3 respectively.

Summary of effects arising from initial application of IFRS 15

There were no material impact of transition to IFRS 15 on retained profits as at 1 September 2018. The following reclassification adjustments were made to the amounts recognised in the consolidated statement of financial position at 1 September 2018. Line items that were not affected by the changes have not been included.

		Carrying amounts previously reported 31 August 2018 RMB’000	Reclassification RMB’000	Carrying amounts under IFRS 15 at 1 September 2018 RMB’000
	Current Liabilities
	Contract liabilities	–	1,168,873	1,168,873
	Deferred revenue	1,168,873	(1,168,873)	–

At the date of initial application, included in the total deferred revenue RMB1,168,873,000 related to the consideration received from students for tuition and boarding services. These balances were reclassified to contract liabilities upon application of IFRS 15.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

2. ADOPTION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRSs”) (Continued)

2.1 IFRS 15 Revenue from Contracts with Customers (Continued)

Summary of effects arising from initial application of IFRS 15 (Continued)

The following tables summarise the impacts of applying IFRS 15 on the Group’s consolidated statement of financial position as at 31 August 2019 and its consolidated statement of cash flows for the current year for each of the line items affected. Line items that were not affected by the changes have not been included.

Impact on the consolidated statement of financial position

		As Reported RMB’000	Adjustments RMB’000	Amounts without application of IFRS 15 RMB’000
Current Liabilities
Contract liabilities		1,375,604	(1,375,604)	–
Deferred revenue		–	1,375,604	1,375,604

Impact on the consolidated statement of cash flows

		As Reported RMB’000	Adjustments RMB’000	Amounts without application of IFRS 15 RMB’000
OPERATING ACTIVITIES
Increase in contract liabilities		168,098	(168,098)	–
Increase in deferred revenue		–	168,098	168,098

2.2 IFRS 9 Financial Instruments

In the current year, the Group has applied IFRS 9 Financial Instruments and the related consequential amendments to other IFRSs. IFRS 9 introduces new requirements for 1) the classification and measurement of financial assets and financial liabilities, 2) expected credit losses (“ ECL ”) for financial assets and 3) general hedge accounting.

The Group has applied IFRS 9 in accordance with the transition provisions set out in IFRS 9, i.e. applied the classification and measurement requirements (including impairment under ECL model) retrospectively to instruments that have not been derecognised as at 1 September 2018 (date of initial application) and has not applied the requirements to instruments that have already been derecognised as at 1 September 2018. The difference between carrying amounts as at 31 August 2018 and the carrying amounts as at 1 September 2018 are recognised in the opening retained profits and other components of equity, without restating comparative information.

90 C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

2. ADOPTION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRSs”) (Continued)

2.2 IFRS 9 Financial Instruments (Continued)

Accordingly, certain comparative information may not be comparable as comparative information was prepared under IAS 39 Financial Instruments: Recognition and Measurement.

Accounting policies resulting from application of IFRS 9 are disclosed in note 3.

Summary of effects arising from initial application of IFRS 9

The table below illustrates the classification and measurement of financial assets subject to ECL under IFRS 9 and IAS 39 at the date of initial application, 1 September 2018.

		Notes	Available- for-sale investments RMB’000	Held for trading investments RMB’000	Financial assets at FVTPL RMB’000
	Closing balance at 31 August 2018 — IAS 39		246,000	116,770	–
	Effect arising from initial application of IFRS 9
	Reclassification from
	available-for-sale investments	(a)	(246,000)	–	246,000
	held for trading investments	(b)	–	(116,770)	116,770
	Opening balance at 1 September 2018		–	–	362,770

(a) Available-for-sale (“ AFS ”) investments

At the date of initial application of IFRS 9, the Group’s wealth management products of RMB246,000,000 were reclassified from AFS investments measured at fair value to financial assets at fair value through profit or loss (“ FVTPL ”) as the cash flows of these investments does not represent solely payments of principal and interest on the principal amount outstanding.

(b) Held for trading investments

Equity securities held for trading that was measured at fair value are classified as FVTPL under IFRS 9 based on the facts and circumstances as at the date of initial application and the Group’s investment trading strategy.

(c) Impairment under ECL model

Deposits and other receivables, pledged bank deposits, restricted cash and bank balances and cash are classified as financial assets at amortised cost. ECL for these financial assets are assessed on 12 months ECL (“ 12m ECL ”) basis, unless when there has been a significant increase in credit risk since initial recognition, the Group recognises lifetime ECL.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

2. ADOPTION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRSs”) (Continued)

2.3 Amendments to IAS 40 Transfers of Investment Property

The amendments clarify that a transfer to, or from, investment property necessitates an assessment of whether a property meets, or has ceased to meet, the definition of investment property, supported by evidence that a change in use has occurred. The amendments further clarify that situations other than the ones listed in IAS 40 may evidence a change in use, and that a change in use is possible for properties under construction (i.e. a change in use is not limited to completed properties).

At the date of initial application, the Group assessed the classification of certain properties based on conditions existed at that date, there is no impact to the classification at 1 September 2018.

2.4 Impacts on opening consolidated statement of financial position arising from the application of all new standards

As a result of the changes in the entity’s accounting policies above, the opening consolidated statement of financial position had to be restated. The following table shows the adjustments recognised for each individual line item, and line items that were not affected by the changes have not been included.

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31 August 1 September
2018 2018
(Audited) IFRS 15 IFRS 9 (Restated)
RMB’000 RMB’000 RMB’000 RMB’000
----- End of picture text -----

Current Assets
AFS investments	246,000	–	(246,000)	–
Held for trading investments	116,770	–	(116,770)	–
Financial assets at FVTPL	–	–	362,770	362,770
Current Liabilities
Contract liabilities	–	1,168,873	–	1,168,873
Deferred revenue	1,168,873	(1,168,873)	–	–

Note: For the purposes of reporting cash flows from operating activities under indirect method for the year ended 31 August 2019, movements in working capital have been computed based on opening statement of financial position as at 1 September 2018 as disclosed above.

92 C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

2. ADOPTION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRSs”) (Continued)

New and amendments to IFRSs issued but not effective

The Group has not early applied the following new and revised IFRSs that have been issued but are not yet effective.

IFRS 16	Leases1
IFRS 17	Insurance Contracts2
IFRIC 23	Uncertainty over Income Tax Treatments1
Amendments to IFRS 3	Definition of a Business4
Amendments to IFRS 9	Prepayment Features with Negative Compensation1
Amendments to IFRS 10 and IAS 28	Sale or Contribution of Assets between an Investor and
	its Associate or Joint Venture3
Amendments to IAS 1 and IAS 8	Definition of Material5
Amendments to IAS 19	Plan Amendment, Curtailment or Settlement1
Amendments to IAS 28	Long-term Interests in Associates and Joint Ventures1
Amendments to IFRSs	Annual Improvements to IFRSs 2015–2017 Cycle1
Amendments to IFRS 9, IAS 39 and IFRS 7	Interest Rate Benchmark Reform5

• 1 Effective for annual periods beginning on or after 1 January 2019

• 2 Effective for annual periods beginning on or after 1 January 2021

• 3 Effective for annual periods beginning on or after a date to be determined

• 4 Effective for business combinations and asset acquisitions for which the acquisition date is on or after the beginning of the first annual period beginning on or after 1 January 2020

• 5 Effective for annual periods beginning on or after 1 January 2020

Except for the new and amendments to IFRSs mentioned below, the directors of the Company anticipate that the application of all other new and amendments to IFRSs will have no material impact on the consolidated financial statements in the foreseeable future.

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C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

2. ADOPTION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRSs”) (Continued)

New and amendments to IFRSs issued but not effective (Continued)

IFRS 16 Leases

IFRS 16 introduces a comprehensive model for the identification of lease arrangements and accounting treatments for both lessors and lessees. IFRS 16 will supersede IAS 17 “Leases” and the related interpretations when it becomes effective.

IFRS 16 distinguishes lease and service contracts on the basis of whether an identified asset is controlled by a customer. In addition, IFRS 16 requires sales and leaseback transactions to be determined based on the requirements of IFRS 15 as to whether the transfer of the relevant asset should be accounted as a sale. IFRS 16 also includes requirements relating to subleases and lease modifications.

Distinctions of operating leases and finance leases are removed for lessee accounting, and is replaced by a model where a right-of-use asset and a corresponding liability have to be recognised for all leases by lessees, except for short-term leases and leases of low value assets.

The right-of-use asset is initially measured at cost and subsequently measured at cost (subject to certain exceptions) less accumulated depreciation and impairment losses, adjusted for any remeasurement of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at that date. Subsequently, the lease liability is adjusted for interest and lease payments, as well as the impact of lease modifications, amongst others. For the classification of cash flows, the Group currently presents upfront prepaid lease payments as investing cash flows in relation to leasehold lands for owned use while other operating lease payments are presented as operating cash flows. Upon application of IFRS 16, lease payments in relation to lease liability will be allocated into a principal and an interest portion which will be presented as financing cash flows by the Group.

Other than certain requirements which are also applicable to lessor, IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17, and continues to require a lessor to classify a lease either as an operating lease or a finance lease.

Furthermore, extensive disclosures are required by IFRS 16.

As at 31 August 2019, the Group has non-cancellable operating lease commitments of RMB215,497,000, as disclosed in note 36. A preliminary assessment indicates that these arrangements will meet the definition of a lease. Upon application of IFRS 16, the Group will recognise a right-of-use asset and a corresponding liability in respect of all these leases unless they qualify for low value or short-term leases upon the application of IFRS 16.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

2. ADOPTION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRSs”) (Continued)

New and amendments to IFRSs issued but not effective (Continued)

IFRS 16 Leases (Continued)

In addition, the Group currently considers refundable rental deposits paid of RMB5,910,000 and refundable rental deposits received of RMB3,942,000 as rights and obligations under leases to which IAS 17 applies. Based on the definition of lease payments under IFRS 16, such deposits are not payments relating to the right to use the underlying assets accordingly, the carrying amounts of such deposits may be adjusted to amortised cost and such adjustments are considered as additional lease payments. Adjustments to refundable rental deposits paid would be considered as additional lease payments and included in the carrying amount of right-of-use assets. Adjustments to refundable rental deposits received would be considered as advance lease payments.

The application of new requirements may result in changes in measurement, presentation and disclosure as indicated above. The Group intends to elect the practical expedient to apply IFRS 16 to contracts that were previously identified as leases applying IAS 17 and IFRIC 4 Determining whether an Arrangement contains a Lease and not apply this standard to contracts that were not previously identified as containing a lease applying IAS 17 and IFRIC 4. Therefore, the Group will not reassess whether the contracts are, or contain a lease which already existed prior to the date of initial application. Furthermore, the Group intends to elect the modified retrospective approach for the application of IFRS 16 as lessee and will recognise the cumulative effect of initial application to opening retained profits without restating comparative information.

Amendments to IFRS 3 Definition of a Business

The amendments:

• add an optional concentration test that permits a simplified assessment of whether an acquired set of activities and assets is not a business. The election on whether to apply the optional concentration test is available on transaction-by-transaction basis;

• clarify that to be considered a business, an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs; and

• narrow the definitions of a business and of outputs by focusing on goods and services provided to customers and by removing the reference to an ability to reduce costs.

The amendments are applied prospectively to all business combinations and asset acquisitions for which the acquisition date is on or after the first annual reporting period beginning on or after 1 January 2020, with early application permitted.

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C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

3. SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements have been prepared in accordance with IFRSs issued by the International Accounting Standards Board. In addition, the consolidated financial statements include applicable disclosures required by the Rules Governing the Listing of Securities on the Stock Exchange and by the Hong Kong Companies Ordinance.

The consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments that are measured at fair values at the end of each reporting period, as explained in the accounting policies set out below.

Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in the consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of IFRS 2 “Share-based Payment”, leasing transactions that are within the scope of IAS 17, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in IAS 2 “Inventories” or value in use in IAS 36 “Impairment of Assets”.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

For financial instruments which are transacted at fair value and a valuation technique that unobservable inputs is to be used to measure fair value in subsequent periods, the valuation technique is calibrated so that the results of the valuation technique equals the transaction price.

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and

• Level 3 inputs are unobservable inputs for asset or liability.

The principal accounting policies are set out below.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities (including the Consolidated Affiliated Entities) controlled by the Company and its subsidiaries. Control is achieved when the Company:

• (i) has power over the investee;

• (ii) is exposed, or has rights, to variable returns from its involvement with the investee; and

• (iii) has the ability to use its power to affect its returns.

The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control over the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date the Group gains control until the date when the Group ceases to control the subsidiary.

Profit or loss and each item of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies.

All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

Non-controlling interests in subsidiaries are presented separately from the Group’s equity therein, which represent present ownership interests entitling their holders to a proportionate share of net assets of the relevant subsidiaries upon liquidation.

Changes in the Group’s interests in existing subsidiaries

Changes in the Group’s interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s relevant components of equity and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries, including re-attribution of relevant reserves between the Group and the non-controlling interests according to the Group’s and the non-controlling interests proportionate interests.

Any difference between the amount by which the non-controlling interests are adjusted, and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Business combinations

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are generally recognised in profit or loss as incurred.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value, except that:

• (i) deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are recognised and measured in accordance with IAS 12 “Income Taxes” and IAS 19 “Employee Benefits” respectively;

• (ii) liabilities or equity instruments related to share-based payment arrangements of the acquiree or sharebased payment arrangements of the Group entered into to replace “share-based payment” arrangements of the acquiree are measured in accordance with IFRS 2 at the acquisition date (see the accounting policy below); and

• (iii) assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations” are measured in accordance with that standard.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net amount of the identifiable assets acquired and the liabilities assumed as at acquisition date. If, after re-assessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the relevant subsidiary’s net assets in the event of liquidation are initially measured at fair value or at the noncontrolling interests’ proportionate share of the recognised amounts of the acquiree’s identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis.

When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with the corresponding adjustments made against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the “measurement period” (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.

The subsequent accounting for the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent report dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured to fair value at subsequent reporting dates, with the corresponding gain and loss being recognised in profit or loss.

98 C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Goodwill

Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business (see the accounting policy above) less accumulated impairment losses, if any.

For the purposes of impairment testing, goodwill is allocated to each of the cash-generating units that is expected to benefit from the synergies of the combination, which represent the lowest level at which the goodwill is monitored for internal management purposes and not larger than an operating segment.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually or more frequently whenever there is indication that the unit may be impaired. For goodwill arising on an acquisition in a reporting period, the cash-generating unit to which goodwill has been allocated is tested for impairment before the end of that reporting period. If the recoverable amount is less than the carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill and then to the other assets on a pro-rata basis based on the carrying amount of each asset in the unit.

On disposal of the relevant cash-generating unit or any of the cash-generating unit within the group of cashgenerating units, the attributable amount of goodwill is included in the determination of the amount of profit or loss on disposal. When the Group disposes of an operation within the cash-generating unit (or a cash-generating unit within a group of cash-generating units), the amount of goodwill disposed of is measured on the basis of the relative values of the operation (or the cash-generating unit) disposed of and the portion of the cash-generating unit (or the group of cash-generating units) retained.

Revenue from contracts with customers (upon application of IFRS 15 in accordance with transitions in note 2)

Under IFRS 15, the Group recognises revenue when (or as) a performance obligation is satisfied, i.e. when “control” of the goods or services underlying the particular performance obligation is transferred to the customer.

A performance obligation represents a good and service that is distinct or a series of distinct goods or services that are substantially the same.

Control is transferred over time and revenue is recognised over time by reference to the progress towards complete satisfaction of the relevant performance obligation if one of the following criteria is met:

• the customer simultaneously receives and consumes the benefits provided by the Group’s performance as the Group performs;

• the Group’s performance creates and enhances an asset that the customer controls as the Group performs; or

• the Group’s performance does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date.

99

C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Revenue from contracts with customers (upon application of IFRS 15 in accordance with transitions in note 2) (Continued)

Otherwise, revenue is recognised at a point in time when the customer obtains control of the distinct good or service.

A contract asset represents the Group’s right to consideration in exchange for goods or services that the Group has transferred to a customer that is not yet unconditional. It is assessed for impairment in accordance with IFRS 9. In contrast, a receivable represents the Group’s unconditional right to consideration, i.e. only the passage of time is required before payment of that consideration is due.

A contract liability represents the Group’s obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer.

A contract asset and a contract liability relating to the same contract are accounted for and presented on a net basis.

Contracts with multiple performance obligations (including allocation of transaction price)

For contracts that contain more than one performance obligations, the Group allocates the transaction price to each performance obligation on a relative stand-alone selling price basis.

The stand-alone selling price of the distinct good or service underlying each performance obligation is determined at contract inception. It represents the price at which the Group would sell a promised good or service separately to a customer. If a stand-alone selling price is not directly observable, the Group estimates it using appropriate techniques such that the transaction price ultimately allocated to any performance obligation reflects the amount of consideration to which the Group expects to be entitled in exchange for transferring the promised goods or services to the customer.

Over time revenue recognition: measurement of progress towards complete satisfaction of a performance obligation

The progress towards complete satisfaction of a performance obligation in tuition and boarding services are measured based on output method, which is to recognise revenue on the basis of direct measurements of the value of the goods or services transferred to the customer to date relative to the remaining goods or services promised under the contract, that best depict the Group’s performance in transferring control of goods or services.

Revenue recognition (prior to 1 September 2018)

Revenue is recognised when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the Group and when specific criteria have been met for each of the Group’s activities, as described below.

Service income includes tuition fees from foreign schools, preschools, elementary schools, middle schools and high schools of the Group.

100 C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Revenue recognition (prior to 1 September 2018) (Continued)

Tuition and boarding fees received from foreign schools, preschools, elementary schools, middle schools and high schools are generally paid in advance at the beginning of each school year or semester, or prepaid monthly, and are initially recorded as deferred revenue. Tuition and boarding fees are recognised proportionately over the relevant period of the applicable program. The portion of tuition and boarding payments received from students but not yet earned is recorded as deferred revenue and is reflected as a current liability as such amounts represent revenue that the Group expects to earn within one year. The academic year of the Group’s school is generally from September to June of the following year.

The Group also provides overseas study tour and educational vacation activities to students. Revenue from such services are recognised proportionately over the relevant period which the service is rendered.

The Group also rents educational books to students for high school education. Book rental fee is generally billed to a student at the beginning of an academic year and is recognised on a straight-line basis over the period of renting. Rental fees received in advance are recorded as deferred revenue.

Revenue from the sale of goods and educational materials is recognised when the goods are delivered and titles have passed, at which time all the following conditions are satisfied:

• the Group has transferred to the buyer the significant risks and rewards of ownership of goods;

• the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

• the amount of revenue can be measured reliably;

• it is probable that the economic benefits associated with the transaction will flow to the Group; and

• the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Group and the amount of the income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.

Dividend income from investments is recognised when the Group’s right to receive payment has been established.

Leasing

Leases are classified as operating leases whenever the terms of the lease do not transfer substantially all the risks and rewards of ownership to the lessee.

The Group as lessor

Rental income from operating leases is recognised in profit or loss on a straight-line basis over the term of the relevant lease.

The Group as lessee

Operating lease payments are recognised as an expense on a straight-line basis over the lease term.

C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9 101

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are recognised in profit or loss in the period in which they arise.

For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated into RMB using exchange rates prevailing at the end of each reporting period. Income and expenses items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during the period, in which case, the exchange rates prevailing at the dates of transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity under the heading of translation reserve.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

Government grants

Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received.

Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current assets are recognised as a deduction from the carrying amount of the relevant asset in the consolidated statement of financial position and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.

Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in profit or loss in the period in which they become receivable.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Retirement benefit costs

Payments to state-managed retirement benefit schemes are recognised as expenses when employees have rendered services entitling them to the contributions.

Short-term employee benefits

Short-term employee benefits are recognised at the undiscounted amount of the benefits expected to be paid as and when employee rendered the services. All short-term employee benefits are recognised as an expense unless another IFRS requires to permits the inclusion of the benefit in the cost of an asset.

A liability is recognised for benefits accruing to employees (such as wages and salaries, annual leaves and sick leave) after deducting any amount already paid.

Equity-settled share-based payment transactions

Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equitysettled share-based transactions are set out in note 30.

The fair value of equity-settled share-based payments determined at the grant date of the equity-settled sharebased payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest based on assessment of all relevant non-market vesting conditions. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the share-based payment reserve. For equity-settled share-based payments that vest immediately at the date of grant, the fair value of the equity-settled share-based payments granted is expensed immediately to profit or loss.

When share options are exercised, the amount previously recognised in share-based payment reserve will be transferred to share premium. When restricted shares are vested, the amount previously recognised in sharebased payment reserve will be transferred to shares held for restricted share award scheme, with any difference recognised to retained profits.

Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of the goods or services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service. The fair values of the goods or services received are recognised as expenses.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before taxation as reported in the consolidated statement of profit or loss and other comprehensive income because of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

The measurement of deferred tax liabilities reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively.

104 C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Property, plant and equipment

Property, plant and equipment including buildings held for use in the production or supply of goods or services, or for administrative purposes (other than construction in progress as described below) are stated in the consolidated statement of financial position at cost less subsequent accumulated depreciation and subsequent accumulated impairment losses, if any.

Depreciation is recognised so as to write off the cost of items of property, plant and equipment other than properties under construction less their residual values over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

Construction in progress is carried out at cost, less any recognised impairment loss. Construction in progress is classified to the appropriate categories of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property and equipment, commences when the assets are ready for their intended use.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

Investment properties

Investment properties are properties held to earn rentals and/or for capital appreciation.

Investment properties are initially measured at cost, including any directly attributable expenditure. Subsequent to initial recognition, investment properties are stated at cost less subsequent accumulated depreciation and any accumulated impairment losses. Depreciation is recognised so as to write off the cost of investment properties over their estimated useful lives and after taking into account of their estimated residual value, using the straightline method.

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposals. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the profit or loss in the period in which the property is derecognised.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Intangible assets

Intangible assets acquired in a business combination

Intangible assets acquired in a business combination are recognised separately from goodwill and are initially recognised at their fair value at the acquisition date (which is regarded as their cost).

Subsequent to initial recognition, intangible assets acquired in a business combination with finite useful lives are reported at cost less accumulated amortisation and accumulated impairment losses.

Amortisation for intangible assets with finite useful lives is recognised on a systematic basic over its useful life. The estimated useful life and amortization method are reviewed at the end of each reporting period.

An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains and losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in profit or loss when the asset is derecognised.

Impairment of tangible and intangible assets other than goodwill

At the end of the reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the relevant asset is estimated in order to determine the extent of the impairment loss, if any.

The recoverable amount of tangible and intangible assets are estimated individually, when it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cashgenerating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flow are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the assets (or a cash-generating unit) for which the estimated of future cash flows have not been adjusted.

If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the assets (or a cash-generating unit) is reduced to its recoverable amount. In allocating the impairment loss, the impairment loss is allocated first to reduce the carrying amount of any goodwill (if applicable) and then to the other assets on a pro-rata basis based on the carrying amount of each asset in the unit. The carrying amount of an asset is not reduced below the highest of its fair value less costs of disposal (if measurable), its value in use (if determinable) and zero. The amount of the impairment loss that would otherwise have been allocated to the asset is allocated pro rata to the other assets of the unit. An impairment loss is recognised immediately in profit or loss.

Where an impairment loss subsequently reverses, the carrying amount of the assets (or a cash-generating unit) is increased to the revised estimated of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or a cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

106 C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Prepaid lease payments

Prepaid lease payments represent payments for obtaining land use right and is amortised to profit or loss on a straight-line basis over the lease terms as stated in the relevant land use right certificate granted for usage by the Group in the PRC and the remaining terms of the operating license of the PRC entity, whichever is the shorter. Prepaid lease payments which is to be amortised to profit or loss in the next twelve months is classified as current assets.

Books for lease

Books for lease are stated in the consolidated statement of financial position at cost less subsequent accumulated amortisation and subsequent accumulated impairment losses, if any. Amortisation is recognised in the consolidated statement of profit or loss and other comprehensive income on a straight-line basis over the period of the books’ economic life.

Inventories

Inventories are stated at the lower of cost and net realisable value. Costs of inventories are determined on a weighted-average basis. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.

Financial instruments

Financial assets and financial liabilities are recognised in the consolidated statement of financial position when a group entity becomes a party to the contractual provisions of the instrument. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the market place.

Financial assets and financial liabilities are initially measured at fair value except for trade receivables arising from contracts with customers which are initially measured in accordance with IFRS 15 since 1 September 2018. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

The effective interest method is a method of calculating the amortised cost of a financial asset or financial liabilities and of allocating interest income and interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts and payments (including all fees paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset or financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Financial instruments (Continued)

Financial assets

Classification and subsequent measurement of financial assets (upon application of IFRS 9 in accordance with transitions in note 2)

Financial assets that meet the following conditions are subsequently measured at amortised cost:

• the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and

• the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial assets that meet the following conditions are subsequently measured at fair value through other comprehensive income (“ FVTOCI ”):

• the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling; and

• the contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

All other financial assets are subsequently measured at FVTPL, except that at the date of initial application/initial recognition of a financial asset that the Group may irrevocably elect to present subsequent changes in fair value of an equity investment in other comprehensive income (“ OCI ”) if that equity investment is neither held for trading nor contingent consideration recognised by an acquirer in a business combination to which IFRS 3 Business Combinations applies.

In addition, the Group may irrevocably designate a financial asset that are required to be measured at the amortised cost or FVTOCI criteria as measured at FVTPL if doing so eliminates or significantly reduces an accounting mismatch.

• (i) Amortised cost and interest income Interest income is recognised using the effective interest method for financial assets measured subsequently at amortised cost and debt instruments/receivables subsequently measured at FVTOCI. Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset, except for financial assets that have subsequently become credit-impaired (see below). For financial assets that have subsequently become credit-impaired, interest income is recognised by applying the effective interest rate to the amortised cost of the financial asset from the next reporting period. If the credit risk on the creditimpaired financial instrument improves so that the financial asset is no longer credit-impaired, interest income is recognised by applying the effective interest rate to the gross carrying amount of the financial asset from the beginning of the reporting period following the determination that the asset is no longer credit-impaired.

108 C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Financial instruments (Continued)

Financial assets (Continued)

Classification and subsequent measurement of financial assets (upon application of IFRS 9 in accordance with transitions in note 2) (Continued)

• (ii) Financial assets at FVTPL

Financial assets that do not meet the criteria for being measured at amortised cost or FVTOCI or designated as FVTOCI are measured at FVTPL.

Financial assets at FVTPL including investment in listed equity securities and wealth management products which are measured at fair value at the end of each reporting period, with any fair value gains or losses recognised in profit or loss. The net gain or loss recognised in profit or loss includes any dividend or interest earned on the financial asset and is included in the “other gains and losses” line item.

Dividends from these investments in equity instruments are recognised in profit or loss when the Group’s right to receive the dividends is established, unless the dividends clearly represent a recovery of part of the cost of the investment. Dividends are included in the “Investment and other income” line item in profit or loss.

Impairment of financial assets (upon application IFRS 9 with transitions in accordance with note 2)

The Group recognises a loss allowance for ECL on financial assets which are subject to impairment under IFRS 9 (including deposits and other receivables, pledged bank deposits, restricted cash and bank balances and cash). The amount of ECL is updated at each reporting date to reflect changes in credit risk since initial recognition.

Lifetime ECL represents the ECL that will result from all possible default events over the expected life of the relevant instrument. In contrast, 12m ECL represents the portion of lifetime ECL that is expected to result from default events that are possible within 12 months after the reporting date. Assessment are done based on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current conditions at the reporting date as well as the forecast of future conditions.

The Group measures the loss allowance for deposits and other receivables, pledged bank deposits, restricted cash and bank balances and cash equal to 12m ECL, unless when there has been a significant increase in credit risk since initial recognition, the Group recognises lifetime ECL. The assessment of whether lifetime ECL should be recognised is based on significant increases in the likelihood or risk of a default occurring since initial recognition.

(i) Significant increase in credit risk

In assessing whether the credit risk has increased significantly since initial recognition, the Group compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition. In making this assessment, the Group considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward- looking information that is available without undue cost or effort.

C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9 109

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Financial instruments (Continued)

Financial assets (Continued)

Impairment of financial assets (upon application IFRS 9 with transitions in accordance with note 2) (Continued) (i) Significant increase in credit risk (Continued)

In particular, the following information is taken into account when assessing whether credit risk has increased significantly:

• an actual or expected significant deterioration in the financial instrument’s external (if available) or internal credit rating;

• significant deterioration in external market indicators of credit risk;

• existing or forecast adverse changes in business, financial or economic conditions that are expected to cause a significant decrease in the debtor’s ability to meet its debt obligations;

• an actual or expected significant deterioration in the operating results of the debtor;

• an actual or expected significant adverse change in the regulatory, economic, or technological environment of the debtor that results in a significant decrease in the debtor’s ability to meet its debt obligations.

Irrespective of the outcome of the above assessment, the Group presumes that the credit risk has increased significantly since initial recognition when contractual payments are more than 30 days past due, unless the Group has reasonable and supportable information that demonstrates otherwise.

The Group regularly monitors the effectiveness of the criteria used to identify whether there has been a significant increase in credit risk and revises them as appropriate to ensure that the criteria are capable of identifying significant increase in credit risk before the amount becomes past due.

(ii) Definition of default For internal credit risk management, the Group considers an event of default occurs when information developed internally or obtained from external sources indicates that the debtor is unlikely to pay its creditors, including the Group, in full (without taking into account any collaterals held by the Group).

• (iii) Credit-impaired financial assets

A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is creditimpaired includes observable data about the following events:

• (a) significant financial difficulty of the counterparty;

• (b) a breach of contract, such as a default or past due event;

• (c) it is becoming probable that the borrower will enter bankruptcy or other financial reorganization.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Financial instruments (Continued)

Financial assets (Continued)

• Impairment of financial assets (upon application IFRS 9 with transitions in accordance with note 2) (Continued) (iv) Write-off policy

The Group writes off a financial asset when there is information indicating that the counterparty is in severe financial difficulty and there is no realistic prospect of recovery, for example, when the counterparty has been placed under liquidation or has entered into bankruptcy proceedings. Financial assets written off may still be subject to enforcement activities under the Group’s recovery procedures, taking into account legal advice where appropriate. A write-off constitutes a derecognition event. Any subsequent recoveries are recognised in profit or loss.

• (v) Measurement and recognition of ECL

The measurement of ECL is a function of the probability of default, loss given default (i.e. the magnitude of the loss if there is a default) and the exposure at default. The assessment of the probability of default and loss given default is based on historical data adjusted by forward-looking information. Estimation of ECL reflects an unbiased and probability-weighted amount that is determined with the respective risks of default occurring as the weights.

Generally, the ECL is estimated as the difference between all contractual cash flows that are due to the Group in accordance with the contract and all the cash flows that the Group expects to receive, discounted at the effective interest rate determined at initial recognition. For a lease receivable, the cash flows used for determining the ECL is consistent with the cash flows used in measuring the lease receivable in accordance with IFRS 16 (starting from 1 September 2019) or IAS 17 (prior to 1 September 2019).

Where ECL is measured on a collective basis or cater for cases where evidence at the individual instrument level may not yet be available, the financial instruments are grouped on the basis:

• Nature of financial instruments (i.e. the Group’s other receivables are each assessed as a separate group.);

• Past-due status;

• Nature, size and industry of debtors.

The grouping is regularly reviewed by management to ensure the constituents of each group continue to share similar credit risk characteristics.

Interest income is calculated based on the gross carrying amount of the financial asset unless the financial asset is credit impaired, in which case interest income is calculated based on amortised cost of the financial asset.

The Group recognises an impairment gain or loss in profit or loss for all financial instruments by adjusting their carrying amount, with the exception of deposits and other receivables, pledged bank deposits, restricted cash and bank balances and cash where the corresponding adjustment is recognised through a loss allowance account.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Financial instruments (Continued)

Financial assets (Continued)

Classification and subsequent measurement of financial assets (before application of IFRS 9 on 1 September 2018) Financial assets are classified into the following specified categories: financial assets at FVTPL, AFS financial assets and loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Financial assets at FVTPL

Financial assets are classified as at FVTPL when the financial asset is (i) held for trading, (ii) it is designated as at FVTPL.

A financial asset is classified as held for trading if:

• it has been acquired principally for the purpose of selling in the near term; or

• on initial recognition it is a part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or

• it is a derivative that is not designated and effective as a hedging instrument.

A financial asset other than a financial asset held for trading may be designated as at FVTPL upon initial recognition if:

• such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

• the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

• it forms part of a contract containing one or more embedded derivatives, and IAS 39 permits the entire combined contract (asset or liability) to be designated as at FVTPL.

Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss includes any dividend or interest earned on the financial assets and is included in the other gains and losses line item.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Financial instruments (Continued)

Financial assets (Continued)

Classification and subsequent measurement of financial assets (before application of IFRS 9 on 1 September 2018) (Continued)

AFS financial assets

AFS financial assets are non-derivatives that are either designated as AFS or are not classified as (a) loans and receivables, (b) held-to-maturity investments or (c) financial assets at FVTPL.

Financial instruments held by the Group that are classified as AFS financial assets are measured at fair value at the end of each reporting period. Changes in the carrying amount of AFS financial instruments relating to interest income calculated using the effective interest method, and changes in foreign exchange rates are recognised in profit or loss. Other changes in the carrying amount of AFS financial assets are recognised in other comprehensive income and accumulated under the heading of investments revaluation reserve. When the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the investments revaluation reserve is reclassified to profit or loss.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. At the end of each reporting period subsequent to initial recognition, loans and receivables (including deposits, other receivables, pledged bank deposits, restricted cash and bank balances and cash) are carried at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy in respect of impairment of financial assets below).

Interest income is recognised by applying the effective interest rate, except for short-term receivables where the recognition of interest would be immaterial.

Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial assets, the estimated future cash flows of the financial assets have been affected.

For all other financial assets, objective evidence of impairment could include:

• significant financial difficulty of the issuer or counterparty; or

• breach of contract, such as a default or delinquency in interest or principal payments; or

• it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or

• disappearance of an active market for that financial asset because of financial difficulties.

For financial assets carried at amortised cost, the amount of impairment loss recognised is the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the financial asset’s original effective interest rate.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Financial instruments (Continued)

Financial assets (Continued)

Classification and subsequent measurement of financial assets (before application of IFRS 9 on 1 September 2018) (Continued)

Impairment of financial assets (Continued)

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of other receivables, where the carrying amount is reduced through the use of an allowance account. When other receivables are considered uncollectible, it is written off against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. Subsequent recoveries of amounts previously written off are credited to profit or loss.

When an AFS financial asset is considered to be impaired, cumulative gains or losses previously recognised in other comprehensive income are reclassified to profit or loss in the period in which the impairment takes place.

For financial assets measured at amortised cost, if, in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment losses was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

Impairment losses on AFS debt investments will be subsequently reversed through profit or loss if an increase in the fair value of investment can be objectively related to an event occurring after the recognition of the impairment loss.

Derecognition of financial assets

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.

On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss.

Financial liabilities and equity instruments

Classification as debt or equity

Debt and equity instruments issued by a group entity are classified either as financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the group entity are recognised at the proceeds received, net of direct issue costs.

Repurchase of the Company’s own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Financial instruments (Continued)

Financial assets (Continued)

Classification and subsequent measurement of financial assets (before application of IFRS 9 on 1 September 2018) (Continued)

Financial liabilities

Financial liabilities including other payables and borrowings are subsequently measured at amortised cost, using the effective interest method.

Derecognition of financial liabilities

The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, which are described in note 3, the Directors are required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Critical accounting judgment

The following is the critical accounting judgment, apart from those involving estimations, that the Directors have made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognised in the consolidated financial statements.

Contractual Arrangements

The Group conducts a substantial portion of the business through the Consolidated Affiliated Entities in the PRC due to regulatory restrictions on foreign ownership in the Group’s schools in the PRC. The Group does not have any equity interest in the Consolidated Affiliated Entities. The Directors assessed whether or not the Group has control over the Consolidated Affiliated Entities based on whether the Group has the power over the Consolidated Affiliated Entities, has rights to variable returns from its involvement with the Consolidated Affiliated Entities and has the ability to affect those returns through its power over the Consolidated Affiliated Entities. After assessment, the Directors concluded that the Group has control over the Consolidated Affiliated Entities as a result of the Contractual Arrangements and other measures and accordingly, the Group has consolidated the financial information of the Consolidated Affiliated Entities in the consolidated financial statements.

Nevertheless, the Contractual Arrangements and other measures may not be as effective as direct legal ownership in providing the Group with direct control over the Consolidated Affiliated Entities and uncertainties presented by the PRC legal system could impede the Group’s beneficiary rights of the results, assets and liabilities of the Consolidated Affiliated Entities. The Directors, based on the advice of its legal counsel, consider that the Contractual Arrangements among Beipeng Software, the Consolidated Affiliated Entities and their equity holders are in compliance with the relevant PRC laws and regulations and are legally enforceable.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Continued)

Key sources of estimation uncertainty

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

(a) Useful life and impairment of property, plant and equipment

The Group’s management determines the estimated useful lives and the depreciation method in determining the related depreciation charges for its property, plant and equipment. This estimate is based on the management’s experience of the actual useful lives of property, plant and equipment of similar nature and functions. In addition, management assesses impairment whenever events or changes in circumstances indicate that the carrying amount of an item of property, plant and equipment may not be recoverable. Management will increase the depreciation charge where useful lives are estimated to be shorter than previously estimated, or will write off or write down obsolete assets that have been abandoned or impaired. As at 31 August 2019, the carrying amount of property and equipment was RMB2,419,241,000 (2018: RMB2,105,782,000). Any change in these estimates may have a material impact on the results of the Group.

(b) Goodwill impairment

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating unit to which goodwill has been allocated. Significant judgment and assumptions were required by management of the Group in assessing the impairment recoverable amounts of cash generating units. The recoverable amounts are determined with reference to the value in use of the relevant cash generating units, which required significant assumptions on discount rates, growth rates of students and tuition fee during the forecasting period in order to derive the net present value of the discounted future cash flow analysis. Where the actual future cash are less than expected, or change in facts and circumstances which results in downward revision of future cash, there will be a change of recoverable amount, a material impairment loss may arise.

The carrying amount of goodwill at the end of the reporting period was approximately RMB252,848,000 (2018: RMB165,968,000). Details of the impairment loss assessment are set out in note 16.

116 C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

5. REVENUE AND SEGMENT INFORMATION

Revenue represents (i) service income from tuition fees and boarding fees, (ii) fees from summer and winter camps provided to students, (iii) fees from selling educational books to students, and (iv) fees from overseas studies consulting services, sales of goods and educational materials to students, less refunds, and sales related tax.

A. For the year ended 31 August 2019

The revenues attributable to the Group’s service lines are as follows:

(i) Disaggregation of revenue from contracts with customers

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2019
RMB’000
Types of goods or services
Tuition and boarding fees 1,318,517
Summer and winter camps 54,096
Sales of textbooks 46,044
Others 151,574
1,570,231
Timing of revenue recognition
Over time 1,458,545
A point in time 111,686
1,570,231
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(ii) Performance obligations for contracts with customers

Key requirements of IFRS 15.119 include:

• when performance obligations are satisfied

• significant payment terms (including significant financing components)

• the nature of goods and services

• obligations for refunds

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

5. REVENUE AND SEGMENT INFORMATION (Continued)

A. For the year ended 31 August 2019 (Continued)

(ii) Performance obligations for contracts with customers (Continued)

Tuition and boarding fees (revenue recognised over time)

For tuition and boarding services the Group provides classroom education services and boarding services through the Group’s high schools, middle schools, elementary schools, preschools and foreign schools to customers (individual students) during the service period for a fixed fee. These services are mainly paid in advance prior to the beginning of each school year. The service period for tuition and boarding services is the related school year. A contract liability is recognised for fee received whereas revenue has yet been recognised.

The directors of the Company have determined that the performance obligation of providing tuition and boarding services is satisfied over time as customers simultaneously receive and consume the benefits of these services throughout the service period.

Revenue from summer and winter camps (revenue recognised over time)

Other education related services include summer and winter camps and educational vacation activities provided to students for a fixed fee. These services are mainly paid in advance prior to the service is provided. The service period for other education related services is the duration of the summer and winter camps or educational vacation activities. A contract liability is recognised for fee received whereas revenue has yet been recognised.

The directors of the Company have determined that the performance obligation of other education related services is satisfied over time as customers simultaneously receive and consume the benefits of these services throughout the service period.

Sales of textbooks (revenue recognised at a point in time)

The Group sales textbooks and other educational materials to students which are purchased from third parties. The Group recognises revenue from sales of textbooks and educational materials at a point in time when the control of textbooks and educational materials are passed to students. The Group considers that it is acting as the principal in the transaction as the Group controls the specific goods before it is transferred to the customer after taking into considerations indicators such as the Group is primarily responsible for fulfilling the promise to provide the goods to its customers and has the inventory risk. Therefore, the Group recognises revenue from sales of textbooks and educational materials on a gross basis.

Others (including revenue recognised overtime and at a point in time)

Others represent revenue from management fee received from school canteen operated by third party service providers, fees from overseas studies consulting service and sales of goods and educational materials, which individually are not material. For management fee received, the Group recognises revenue over time through the duration of the service period; and for fees from overseas studies consulting service, sales of goods and other educational materials, the Group recognises revenue at a point in time when the control of the goods and services are passed to students.

118 C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

5. REVENUE AND SEGMENT INFORMATION (Continued)

A. For the year ended 31 August 2019 (Continued)

(iii) Transaction price allocated to the remaining performance obligation for contracts with customers

The transaction price allocated to the remaining performance obligations (unsatisfied or partially unsatisfied) as at 31 August 2019 is expected to be recognised within one year amounted to RMB1,345,922,000. As permitted under IFRS 15, the transaction price allocated to these unsatisfied contracts is not disclosed.

The Group is mainly engaged in international school education in the PRC. The Group’s chief operating decision maker (“ CODM ”) has been identified as the Chief Executive Officer who reviews revenue analysis by services lines when making decisions about allocating resources and assessing performance of the Group.

The revenues attributable to the Group’s service lines are as follows:

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2019 2018
RMB’000 RMB’000
Tuition and boarding fees 1,318,517 1,108,733
Others 251,714 232,534
1,570,231 1,341,267
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B. For the year ended 31 August 2018

The revenues attributable to the Group’s service lines are as follows:

		2018 RMB’000
	Tuition and boarding fees	1,108,733
	Others	232,534
		1,341,267

As there is no other discrete financial information available for assessment of the performance of different services, no segment information is presented.

Major customers

No single customer contributes 10% or more of total revenue of the Group for the years ended 31 August 2019 and 2018.

Geographical information

The Group primarily operates in the PRC. All revenue of the Group are generated from services and goods provided to the external customers in the PRC.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

6. INVESTMENT AND OTHER INCOME

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2019 2018
RMB’000 RMB’000
Bank interest income 36,343 25,054
Rental income from investment properties 15,746 15,054
Government grant 8,445 5,166
Dividend income from financial assets at FVTPL 497 –
–
Dividend income from held for trading investments 2,934
–
Interest income from wealth management products 1,008
Others 542 5,045
61,573 54,261
7. OTHER GAINS AND LOSSES
2019 2018
RMB’000 RMB’000
Reversal of other payables 72,190 56,847
–
Gain arising from changes in fair value of financial assets measured at FVTPL 39,533
–
Loss from changes in fair value of held for trading investments (12,853)
Net foreign exchange gain 17,180 31,754
(Loss) gain on disposal of property, plant and equipment (1,080) 151
Others 929 (186)
128,752 75,713
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7. OTHER GAINS AND LOSSES

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

8. TAXATION

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2019 2018
RMB’000 RMB’000
The charge comprises
Current tax:
PRC enterprise income tax 29,839 29,348
Deferred tax (Note 27) (3,109) (19,872)
26,730 9,476
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The income tax expense for the year can be reconciled to the profit before taxation as follows:

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2019 2018
RMB’000 RMB’000
Profit before taxation 680,899 547,879
Tax at PRC EIT rate of 25% 170,225 136,970
Tax effect of preferential tax rate granted (10,059) (5,410)
Tax effect of tax loss not recognised 4,979 5,798
Utilisation of tax loss previously not recognised (651) (2,991)
Tax effect of income not taxable for tax purposes (303,792) (253,435)
Tax effect of expenses not deductible for tax purposes 166,028 128,544
Tax charge for the year 26,730 9,476
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The Company was incorporated in the Cayman Islands and Maple Leaf Educational Systems Limited (“ Maple BVI was incorporated in the BVI. Both are tax exempted as no business is carried out in the Cayman Islands and the BVI under the tax laws of the Cayman Islands and the BVI, respectively.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

8. TAXATION (Continued)

No provision for Hong Kong Profits Tax has been made as the Group’s operation in Hong Kong had no assessable profit for the years ended 31 August 2019 and 2018. On 21 March 2018, the Hong Kong Legislative Council passed The Inland Revenue (Amendment) (No. 7) Bill 2017 (the “ Bill ”) which introduces the two-tiered profits tax rates regime. The Bill was signed into law on 28 March 2018 and was gazetted on the following day. Under the twotiered profits tax rates regime, the first HK$2 million of profits of the qualifying group entity will be taxed at 8.25%, and profits above HK$2 million will be taxed at 16.5%. The profits of group entities not qualifying for the twotiered profits tax rates regime will continue to be taxed at a flat rate of 16.5%.

Taxation arising in other jurisdictions is calculated as the rates prevailing in the relevant jurisdictions.

Beipeng Software is entitled to High and New Technology Enterprise (“ HNTE ”) status starting from the calendar year of 2017. Beipeng Software is eligible for a preferential enterprise income tax rate of 15% starting from the calendar year of 2017. The HNTE status is valid for three years, and may be renewed at the end of three years.

According to the Implementation Rules for the Law for Promoting Private Education, private schools for which the sponsors do not require reasonable returns are eligible to enjoy the same preferential tax treatment as public schools. Dalian Maple Leaf International School (the “ Dalian High School ”), Dalian Maple Leaf International School (Middle School and Elementary School), Tianjin Teda Maple Leaf International School, Wuhan Maple Leaf International School, Wuhan Maple Leaf School, Zhenjiang Maple Leaf International School, Chongqing Maple Leaf International School, Tianjin Huayuan Maple Leaf International School, Shanghai Maple Leaf International School, Yiwu Maple Leaf International School affiliated School, Zhejiang Yiwu Maple Leaf International School, Hainan Maple Leaf International School, Huzhou Maple Leaf International School, Henan Maple Leaf International School , Xian Maple Leaf International School, Pinghu Maple Leaf International School, Huaian Enlai Maple Leaf International School, Yancheng Maple Leaf International School, Teenager Growth Service Centre — Hainan Meishe, Maple Leaf International Schools — Haikou Jiangdong, Maple Leaf International Schools — Haikou Meiwen, Maple Leaf International Schools — Haikou Xiuying and Inner Mongolia Ordos Maple Leaf International School have been granted enterprise income tax exemption for the tuition income from relevant local tax bureaus.

During the year ended 31 August 2019, non-taxable tuition income was RMB1,215,167,000 (2018: RMB1,013,739,000), and the related expense of RMB627,643,000 (2018: RMB498,873,000) was not deductible.

As at 31 August 2019, the Group had unused tax loss of RMB52,107,000 (2018: RMB35,379,000) available for offset against future taxable profits. No deferred tax assets have been recognised in respect of such tax losses due to the unpredictability of future taxable profit streams. As of 31 August 2019, tax losses of RMB52,107,000 (2018: RMB35,379,000) will expire in various years before 2024 (2018: 2023).

Under the EIT law of PRC, withholding tax is imposed on dividends declared in respect of profits earned by PRC subsidiaries from 1 January 2008 onwards. Deferred taxation has not been provided for in the consolidated financial statements in respect of temporary differences attributable to accumulated undistributed profits of the PRC subsidiaries amounting to RMB2,698,392,000 at 31 August 2019 (2018: RMB2,036,227,000) as the Group is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

9. PROFIT FOR THE YEAR

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2019 2018
RMB’000 RMB’000
Profit for the year has been arrived at after charging (crediting):
Staff costs, including directors’ remuneration
— salaries and other allowances 570,584 512,400
— retirement benefit scheme contributions 30,886 24,632
— share-based payments 36,591 56,924
Total staff costs 638,061 593,956
Gross rental income from investment properties (15,746) (15,054)
Less:
Direct operating expenses incurred for investment properties that
generated rental income during the year (included in
administrative expenses) 1,695 1,525
Net rental income (14,051) (13,529)
Depreciation of property, plant and equipment 81,871 60,685
Amortisation of intangible assets 7,235 1,141
Amortisation of prepaid lease payments 6,420 5,823
Depreciation of investment properties 3,888 3,789
Auditors’ remuneration 2,969 2,680
Amortisation of books for lease 2,072 2,347
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

10. DIRECTORS’, CHIEF EXECUTIVES’ AND EMPLOYEES’ EMOLUMENTS

Directors and chief executives

Details of the emoluments paid to the Directors and the chief executives of the Company are as follows:

For the year ended 31 August 2019:

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Retirement
Salaries and benefit
Directors’ other Share-based scheme
fee allowances payments contributions Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive directors
— Sherman Jen (Note 1) – 3,522 582 9 4,113
– –
— Zhang Jingxia 1,969 1,402 3,371
— James William Beeke – 776 701 – 1,477
Non-executive director
— Howard Robert Balloch 455 – 701 – 1,156
Independent
non-executive directors
— Lap Tat Arthur Wong 386 – 511 – 897
— Peter Humphrey Owen 363 – 510 – 873
— Xiao Dan Mei (Note 2) 324 – (19) – 305
– – – – –
— Alan Shaver (Note 3)
Total 1,528 6,267 4,388 9 12,192
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

10. DIRECTORS’, CHIEF EXECUTIVES’ AND EMPLOYEES’ EMOLUMENTS (Continued)

Directors and chief executives (Continued)

For the year ended 31 August 2018:

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Retirement
Salaries and benefit
Directors’ other Share-based scheme
fee allowances payments contributions Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
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Executive directors
— Sherman Jen (Note 1)	–	3,383	214	15	3,612
— Zhang Jingxia	–	1,891	370	–	2,261
— James William Beeke	–	773	411	–	1,184
Non-executive director
— Howard Robert Balloch	429	–	411	–	840
Independent
non-executive directors
— Lap Tat Arthur Wong	354	–	355	–	709
— Peter Humphrey Owen	340	–	355	–	695
— Xiao Dan Mei	319	–	279	–	598
Total	1,442	6,047	2,395	15	9,899

Notes:

(1) Mr. Sherman Jen is also the chief executive officer of the Company for both years, and his emoluments disclosed above include those for services rendered by him as the chief executive officer.

(2) Dr. Xiao Dan Mei, has resigned from his position as an independent non-executive director of the Company effective from 31 August 2019.

(3) Dr. Alan Shaver, has been appointed as an independent non-executive director of the Company and a member of audit committee, remuneration committee and nomination and corporate governance committee effective from 31 August 2019.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

10. DIRECTORS’, CHIEF EXECUTIVES’ AND EMPLOYEES’ EMOLUMENTS (Continued)

Employees

The five highest paid individuals of the Group included three directors for the year ended 31 August 2019 (2018: three) whose emoluments are included in the disclosures above. The emoluments of the remaining two individuals for the year ended 31 August 2019 (2018: two), are as follows:

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2019 2018
RMB’000 RMB’000
Salaries and other benefits 1,510 1,300
Share-based payments 1,065 580
Retirement benefit scheme contributions 17 18
2,592 1,898
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The emoluments of the five highest paid individuals, other than directors, were within the following bands:

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2019 2018
No. of No. of
employees employees
Hong Kong Dollars (“ HK$ ”) nil to HK$1,000,000 – 1
HK$1,000,001 to HK$1,500,000 2 1
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No inducement paid or payable by the Group to the Directors to join or upon joining the Group and no Directors has waived any remuneration during both years.

11. DIVIDENDS

During the year ended 31 August 2019, a final dividend of HK$5.1 cents (equivalent to approximately RMB4.4 cents) per share (total dividend of RMB130,659,000) in respect of the year ended 31 August 2018 and an interim dividend of HK$4.7 cents (equivalent to approximately RMB4.1 cents) per share (total dividend of RMB122,621,000) in respect of the six months period ended 28 February 2019 were paid to the shareholders of the Company and the trustee holding the shares under the Share Award Scheme.

During the year ended 31 August 2018, a final dividend of HK$4.3 cents (equivalent to approximately RMB3.5 cents) per share (total dividend of RMB104,423,000) in respect of the year ended 31 August 2017 and an interim dividend of HK$4.0 cents (equivalent to approximately RMB3.3 cents) per share (total dividend of RMB96,162,000) in respect of the six months period ended 28 February 2018 were paid to the shareholders of the Company and the trustee holding the shares under the Share Award Scheme.

A final dividend of HK$5.6 cents per share in respect of the year ended 31 August 2019 has been proposed by the Directors and is subject to approval by the shareholders at the forthcoming annual general meeting of the Company.

The number of shares adopted in the calculation of the dividend for the years ended 31 August 2019 and 2018 has been retrospectively adjusted to reflect the share subdivision disclosed and as defined in note 28 which became effective on 9 July 2018.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

12. EARNINGS PER SHARE

The calculation of the basic and diluted earnings per share for the year ended 31 August 2019 and 2018 were based on the following data:

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2019 2018
RMB’000 RMB’000
Earnings:
Earnings for the purpose of basic and diluted earnings per share
(Profit for the year attributable to owners of the Company) 656,756 542,830
2019 2018
Number of Number of
shares shares
’000 ’000
Number of shares:
Weighted average number of ordinary shares for the purpose of basic
earnings per share 2,958,034 2,853,896
Effect of dilutive potential ordinary shares 2,078 5,070
Weighted average number of ordinary shares for the purpose of diluted
earnings per share 2,960,112 2,858,966
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The number of shares adopted in the calculation of the basic earnings per share and the diluted earnings per share for the years ended 31 August 2019 and 2018 has been retrospectively adjusted to reflect the share subdivision disclosed and as defined in note 28 which became effective on 9 July 2018.

The number of shares adopted in the calculation of the basic earnings per share for the years ended 31 August 2019 and 2018 has been arrived after eliminating the ungranted or unvested shares of the Company held under the Share Award Scheme.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

13. PROPERTY, PLANT AND EQUIPMENT

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Leasehold Motor Furniture Computer Construction
Buildings improvements vehicles and fixtures equipment in progress Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
COST
At 1 September 2017 1,770,236 13,885 12,043 36,385 83,468 202,528 2,118,545
Additions 5,401 226 988 7,754 17,779 146,447 178,595
Acquired on acquisition
of subsidiaries – 111,151 1,229 3,306 5,350 55,900 176,936
Transfer from construction
– – – – –
in progress 280,426 (280,426)
– –
Disposals (1,256) (1,125) (1,336) (4,069) (7,786)
Exchange adjustment – – – – – 353 353
At 31 August 2018 2,054,807 125,262 13,135 46,109 102,528 124,802 2,466,643
Additions – 2,822 952 7,400 13,878 78,157 103,209
Acquired on acquisition
of subsidiaries 289,645 – 250 1,434 4,155 – 295,484
Transfer from construction
– – – – –
in progress 157,548 (157,548)
– –
Disposals (1,327) (3,415) (1,024) (1,292) (7,058)
– – – – –
Exchange adjustment (328) (328)
At 31 August 2019 2,500,673 128,084 10,922 53,919 119,269 45,083 2,857,950
DEPRECIATION
–
At 1 September 2017 223,049 3,892 5,953 14,605 56,608 304,107
–
Provided for the year 38,479 5,595 1,448 3,338 11,825 60,685
– –
Eliminated on disposals (509) (1,040) (376) (2,006) (3,931)
–
At 31 August 2018 261,019 9,487 6,361 17,567 66,427 360,861
–
Provided for the year 52,983 8,920 1,493 5,398 13,077 81,871
– –
Eliminated on disposals (234) (2,686) (395) (708) (4,023)
–
At 31 August 2019 313,768 18,407 5,168 22,570 78,796 438,709
CARRYING VALUES
At 31 August 2019 2,186,905 109,677 5,754 31,349 40,473 45,083 2,419,241
At 31 August 2018 1,793,788 115,775 6,774 28,542 36,101 124,802 2,105,782
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

13. PROPERTY, PLANT AND EQUIPMENT (Continued)

The above items of property, plant and equipment, other than construction in progress, after taking into account their estimated residual value of 5% of the cost, are depreciated on a straight-line basis at the following rates per annum:

Buildings 1.9% to 3.2% Leasehold improvements over the term of the lease Motor vehicles 19% Furniture and fixtures 11.9% to 19% Computer equipment 19%

The Group’s buildings are situated on land in the PRC held by the Group under medium-term lease.

At 31 August 2019, the Group is in the process of obtaining the property certificate for the buildings with carrying value of RMB170,705,000 (2018: RMB241,513,000) which are located in the PRC.

14. PREPAID LEASE PAYMENTS

The Group’s prepaid lease payments comprise leasehold land in the PRC under medium-term lease and are analysed for reporting purposes as:

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31/8/2019 31/8/2018
RMB’000 RMB’000
Current assets (included in deposits, prepayments and other receivables) 7,323 5,786
Non-current assets 263,412 207,628
270,735 213,414
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The prepaid lease payments represent prepaid land use rights located in the PRC which are amortised on a straight-line basis over lease terms of 29 to 50 years as stated in the relevant land use right certificates granted for usage by the government.

At 31 August 2019, the carrying value of the land use rights of RMB34,934,000 (2018: RMB35,903,000) is granted by the government. The Group is legally entitled to use these land use rights for 29 to 50 years which is stated in the corresponding state-owned land use certificate. However, without the relevant administrative authorities’ permission, the Group cannot transfer, lease or mortgage these land use rights granted by the government.

C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9 129

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

15. INVESTMENT PROPERTIES

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RMB’000
COST
At 1 September 2017 348,684
Exchange adjustments 9,092
At 31 August 2018 357,776
Exchange adjustments 9,262
At 31 August 2019 367,038
DEPRECIATION
At 1 September 2017 10,886
Provided for the year 3,789
Exchange adjustments 165
At 31 August 2018 14,840
Provided for the year 3,888
Exchange adjustments 245
At 31 August 2019 18,973
CARRYING VALUES
At 31 August 2019 348,065
At 31 August 2018 342,936
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The fair value of the Group’s investment properties at 31 August 2019 is RMB381,935,000 (2018: RMB372,674,000). The fair value has been arrived at based on a valuation carried out by Debenham Tie Leung Limited (“ DTZ ”) and Savills Valuation And Professional Service (S) Pte Ltd. (“ Savills ”). DTZ is a member of the Hong Kong Institute of Surveyors, Savills is a member of the Singapore Institute of Valuers and Surveyors. Both DTZ and Savills are independent valuers not connected with the Group. The valuation was determined by capitalising the rental income derived from the existing tenancies with due provision for the reversionary income potential of the property interests. The key inputs are term capitalisation rate and market unit rent of individual unit.

There has been no change from the valuation technique used in the prior year. In estimating the fair value of the properties, the highest and best use of the properties is their current use.

130 C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

15. INVESTMENT PROPERTIES (Continued)

Details of the Group’s investment properties and information about the fair value hierarchy are as follows:

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Level 3
Carrying value Fair value
RMB’000 RMB’000
Commercial property units located in the PRC
At 31 August 2019 9,732 33,000
At 31 August 2018 10,344 33,000
Level 3
Carrying value Fair value
RMB’000 RMB’000
Commercial property units located in Singapore
At 31 August 2019 338,333 348,935
At 31 August 2018 332,592 339,674
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The above investment properties are depreciated on a straight-line basis at 1% and 3.2% per annum, respectively. The Group’s investment properties are situated on land in the PRC and Singapore, the investment properties located in Singapore have been pledged to secure banking borrowing of the Group (note 26).

16. GOODWILL

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2019 2018
RMB’000 RMB’000
COST AND CARRYING VALUES
At 1 September 165,968 60,464
Arising on acquisition of subsidiaries 86,880 105,504
At 31 August 252,848 165,968
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

16. GOODWILL (Continued)

The goodwill arose from acquisitions of Dalian Maple Leaf Lanxi Wenyuan Preschool (“ Lanxi ”) in June 2007, Dalian Maple Leaf Jinhai Preschool (“ Jinhai ”) in April 2009, Jingzhou Maple Leaf International School (“ Jingzhou ”) in August 2015, Hainan Science and Education Group Co., Ltd. (subsequently renamed as Hainan Maple Leaf Science and Education Group Co., Ltd, “Hainan Science”) in May 2017, Yisidun International Education Investment (Shenzhen) Co., Ltd (“ Yisidun ”) in January 2018, Haikou Meishe Qianyan Educational Management Co., Ltd. (“ Meishe ”), Haikou Meicheng Qianyan Educational Management Co., Ltd. (“ Meicheng ”), Haikou Meihua Qianyan Educational Management Co., Ltd. (“ Meihua ”), Haikou Meiwen Qianyan Educational Technology Co., Ltd. (“ Meiwen ”) and Haikou Changchunteng Qianyan Educational Management Co., Ltd. (“ Changchunteng ”) (collectively the “ Five Meis ”) in June 2018, Xiangcheng Star of Hope Kindergarten, Liuhuajian Star of Hope Kindergarten , Tiandi Star of Hope Kindergarten, Dingfu Star of Hope Kindergarten, Qiantang Star of Hope Kindergarten, Lvdi Star of Hope Kindergarten and Dongjin Star of Hope Kindergarten (collectively the “ Junpeng ”) in January 2019 and Luzhou Qizhong Jiade Education Investment Co., Ltd (“ Jiade ”) in March 2019 respectively. Goodwill arose on acquisition of subsidiaries are allocated to the cash-generating units that are expected to benefit from the business combination. The carrying amount of goodwill has been allocated as follows:

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31/8/2019 31/8/2018
RMB’000 RMB’000
Cash-generating units:
Lanxi 1,026 1,026
Jinhai 956 956
Jingzhou 10,417 10,417
Hainan Science 48,065 48,065
Yisidun 30,453 30,453
Five Meis 75,051 75,051
–
Junpeng 74,310
Jiade 12,570 –
252,848 165,968
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The Group tests goodwill annually for impairment or more frequently if there are indicators that goodwill might be impaired. During the years ended 31 August 2019 and 2018, management of the Group determines that there is no impairment of any of its cash-generating units containing goodwill.

The recoverable amount of each cash-generating unit has been determined based on value in use calculation. The calculation use cash flow projections based on financial budgets approved by management covering a five-year period and discount rate. Extrapolated growth rate used in cash flow projections is based on the relevant industry growth forecasts and does not exceed the average long-term growth rate for the relevant industry. Other key assumptions for the value in use calculations relate to the estimation of cash flows which include budgeted revenue and gross margin, such estimation is based on each cash-generating unit’s past performance and management’s expectations for future market development. Management believes that any reasonably possible change in any of these assumptions would not cause the aggregate carrying amount of each cash-generating unit to exceed its aggregate recoverable amount. The major underlying assumptions are summarised below:

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

16. GOODWILL (Continued)

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Discount rate Extrapolated growth rate
2019 2018 2019 2018
Lanxi 18% 18% 3% 3%
Jinhai 18% 18% 3% 3%
Jingzhou 18% 18% 3% 3%
Hainan Science 18% 18% 3% 3%
Yisidun 23% 22% 3% 3%
Five Meis 18.5% 17.5%–19% 3% 3%
Junpeng 17% N/A 3% N/A
Jiade 17% N/A 3% N/A
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17. OTHER INTANGIBLE ASSETS

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Student Favorable
base Licence lease Total
RMB’000 RMB’000 RMB’000 RMB’000
COST
–
At 1 September 2017 6,800 1,200 8,000
Acquired through acquisition of a subsidiary 26,300 300 6,200 32,800
At 31 August 2018 33,100 1,500 6,200 40,800
Acquired through acquisition of subsidiaries 12,200 221 – 12,421
At 31 August 2019 45,300 1,721 6,200 53,221
AMORTISATION
At 1 September 2017 445 388 – 833
Provided for the year 254 334 553 1,141
At 31 August 2018 699 722 553 1,974
Provided for the year 5,787 408 1,040 7,235
At 31 August 2019 6,486 1,130 1,593 9,209
CARRYING VALUES
At 31 August 2019 38,814 591 4,607 44,012
At 31 August 2018 32,401 778 5,647 38,826
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C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9 133

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

17. OTHER INTANGIBLE ASSETS (Continued)

All of the Group’s student base, licence and favorable lease were acquired through business combination. Student base and favorable lease has finite estimated useful life and they are amortised on expected usage of the intangible assets. Licence has finite estimated useful life and it is amortised on the straight-line basis over the following periods.

Licence:

1.75–4 years

18. PLEDGED BANK DEPOSITS

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31/8/2019 31/8/2018
RMB’000 RMB’000
Deposits pledged for banking facilities 132,000 245,000
Analysed for reporting purposes as:
–
Current assets disclosed as pledged bank deposits 113,000
Non-current assets disclosed as pledged bank deposits 132,000 132,000
132,000 245,000
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The amount represents bank deposits pledged to banks as security for certain banking facilities granted to the Group.

Dalian Educational Group, a subsidiary of the Company, entered into a banking facility agreement with Bank of China on 17 November 2016. Bank deposits of RMB113,000,000 placed with the bank at the interest rate of 2.63% per annum is pledged with the bank for a period of two years. The Group repaid the bank loan secured by pledged deposits of RMB113,000,000 of Dalian Maple Leaf Educational Group Co., Ltd during the current year.

Dalian Educational Group entered into another banking facility agreement with United Overseas Bank on 23 August 2016. Bank deposits of RMB132,000,000 placed with the bank at the interest rate of 2.61% per annum is pledged with the bank for a period of five years.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

19. DEPOSITS, PREPAYMENTS AND OTHER RECEIVABLES

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31/8/2019 31/8/2018
RMB’000 RMB’000
Receivable from third parties 39,028 31,374
Management fees receivables 31,384 13,132
–
Short-term loan to a third party (note) 30,000
Prepaid rent and other prepaid expenses 11,113 4,176
Deposits 5,910 7,653
Interest receivables 6,619 5,599
Prepaid lease payments 7,323 5,786
Staff advances 1,069 1,765
Others 11,837 7,297
144,283 76,782
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Note: On July 2019, the Group entered into a short-term loan agreement with Zhangqiu Construction and Investment Limited of RMB30,000,000, the loan is due in one year. According to the loan agreement, the interest rate shall be the same as base rate published by the People’s Bank of China for the same period.

20. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

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Financial assets mandatorily measured at FVTPL: 31/8/2019 31/8/2018
RMB’000 RMB’000
Listed securities:
— Equity securities listed in Hong Kong Stock Exchange 9,729 116,770
–
Wealth management products issued by banks 66,337
Analysed for reporting purposes as:
Current assets 76,066 116,770
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21. AVAILABLE-FOR-SALE INVESTMENTS

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|||
|---|---|
|31/8/2018|
|RMB’000|
|Wealth management products|246,000|

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Wealth management products are purchased from various banks with expected rate of return ranging from 1.35% to 3.9% per annum, and maturity period ranging from 90 days to 92 days. The returns of these wealth management products are not guaranteed. On 1 September 2018, wealth management products are reclassified to financial assets mandatorily measured at FVTPL.

C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9 135

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

22. RESTRICTED CASH

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31/08/2019 31/08/2018
RMB’000 RMB’000
–
Restricted cash (Note) 50,447
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Note:

During the current year, the Group placed RMB48,288,000 in a bank account managed by both the Group and the seller of the acquisition target in Jiade, therefore the amount deposited is recorded as restricted cash.

During the current year, the Group placed RMB2,159,000 in a bank account managed by both the Group and the seller of five schools in Hainan, therefore the amount deposited is recorded as restricted cash. This acquisition was completed in 1 June 2018, and the amount will be paid to the seller upon satisfaction of certain conditions in relation to the construction project acquired.

23. BANK BALANCES AND CASH

Bank balance and cash comprises cash and short-term deposits held by the Group with an original maturity of three months or less.

As at 31 August 2019, the Group’s bank deposits carry interest at market rates which range from 0.30% to 2.65% (31 August 2018: 0.30% to 2.5%) per annum.

At the end of each year, included in bank balances are the following amounts denominated in currencies other than the functional currency of the relevant group entities to which they relate.

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31/8/2019 31/8/2018
RMB’000 RMB’000
Currency:
HK$ 305,266 609,966
United States dollar (“ USD ”) 166,330 245,779
Canadian dollar (“ CAD ”) 92,857 13,226
Singapore dollar (“ SGD ”) 3,631 2,748
Australian dollar (“ AUD ”) 141 15
568,225 871,734
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The Group’s credit risk primarily arises from restricted cash and bank balances. The credit risk on these balances is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies.

136 C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

24. CONTRACT LIABILITIES\DEFERRED REVENUE

Contract liabilities

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31/8/2019
RMB’000
Tuition and boarding fees 1,302,744
Others 72,860
1,375,604
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Deferred revenue

	31/8/2018 RMB’000
Tuition	and boarding fees 1,111,033
Others	57,840
	1,168,873

25. OTHER PAYABLES AND ACCRUED EXPENSES

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31/8/2019 31/8/2018
RMB’000 RMB’000
Miscellaneous expenses received from students (Note) 193,121 181,865
Payables for purchase of property and equipment 67,702 96,275
Deposits received from students 17,278 17,920
Accrued payroll 23,660 21,234
–
Contingent consideration in business combination 4,600
Acquisition consideration payable 68,718 9,076
Other tax payables 6,804 12,354
Payables for purchase of goods 6,485 2,882
Prepayment from lessee 3,942 4,346
–
Payable for land use right 3,000
Accrued operating expenses 2,326 6,130
Others 46,779 39,770
436,815 399,452
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Note: The amount represents the miscellaneous expenses received from students which will be paid out on behalf of students.

C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9 137

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

26. BORROWINGS

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31/8/2019 31/8/2018
RMB’000 RMB’000
Secured bank borrowings 330,989 431,338
The carrying amounts of the above borrowings are repayable:
Within one year 123,475 224,537
Within a period of more than one year but not exceeding two years 4,926 4,795
Within a period of more than two years but not exceeding five years 202,588 202,006
330,989 431,338
Less: Amounts due within one year shown under current liabilities (123,475) (224,537)
Amounts shown under non-current liabilities 207,514 206,801
----- End of picture text -----

During the financial year ended 31 August 2019, the Group obtained bank loans amount to SGD64,503,000 (equivalent to RMB330,989,000). These bank loans are secured by pledged deposits of RMB132,000,000 of Dalian Educational Group, mortgaged over an investment property owned by Maple Leaf Education Hillside Pte. Limited (“ Maple Hillside ”) of RMB338,333,000 (Note 15), and existing and future legal assignment of rental proceeds, rental deposits and other rights of Maple Hillside. These loans carry interest at variable interest rates from 2.03% to 3.76% (31 August 2018: 1.33% to 2.98%) per annum.

On 15 March 2019, the Group acquired 75% of the equity interest in Luzhou Qizhong Jiade Education Investment Company Limited (Note 34(b)). Among net assets acquired, it includes a long-term bank loan with principle amount of RMB44,000,000 which carries interest at a fixed interest rate 9.78% per annum. On 25 March 2019, the Group repaid this loan.

138 C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

27. DEFERRED TAX LIABILITIES

The following are the major deferred tax liabilities provided and movements thereon during the current and prior years:

Fair value adjustment on assets acquired through business combination RMB’000	Services income (Note) RMB’000	Total RMB’000
At 1 September 2017 22,651	19,171	41,822
Credit to profit or loss (701)	(19,171)	(19,872)
Acquisition of subsidiaries 8,822	–	8,822
At 31 August 2018 30,772	–	30,772
Credit to profit or loss (3,109)	–	(3,109)
Acquisition of subsidiaries 23,803	–	23,803
At 31 August 2019 51,466	–	51,466

Note:

The amount represents the deferred tax liabilities on taxable temporary differences arising from the services income earned by Beipeng Software from the Consolidated Affiliated Entities under the Contractual Arrangements.

Tax authority conducted a tax status inspection on Beipeng Software for the calendar year 2012 to 2017. Based on the conclusion of this tax status inspection, management of the Group believes that the chance to settle the deferred tax liabilities on the temporary differences arising from the services income earned by Beipeng Software from the Consolidated Affiliated Entities under the Contractual Arrangements is remote, thus the amount is reversed during 2018.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

28. SHARE CAPITAL

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Shown in the
consolidated
Number of financial
shares Amount statements as
’000 USD’000 RMB’000
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Authorised
At 1 September 2017	4,000,000	4,000
Subdivision of ordinary shares (Note 3)	4,000,000	–
At 31 August 2018 and 2019	8,000,000	4,000
Issued and fully paid
At 1 September 2017	1,379,488	1,380	8,549
Exercise of share options (Note 1)	105	–	1
Issue of new shares (Note 2)	110,000	110	705
Subdivision of ordinary shares (Note 3)	1,489,592	–	–
At 31 August 2018	2,979,185	1,490	9,255
Shares issued in consideration for the acquisition
of a subsidiary (Note 4)	16,136	8	54
At 31 August 2019	2,995,321	1,498	9,309
Notes:

• (1) During the year ended 31 August 2018, options to subscribe 100,000 ordinary shares with par value of USD0.001 per share were exercised at HK$4.40 (equivalent to RMB3.73) per share. Options to subscribe for 5,035 ordinary shares with par value of USD0.001 per share were exercised at HK$1.15 (equivalent to RMB0.96) per share. These shares rank pari passu with other shares in issue in all respect.

• (2) On 17 January 2018, the Company issued 110,000,000 new shares at HK$9.10 (equivalent to approximately RMB7.48) per share by way of placement to not less than six individuals, who and whose ultimate beneficial owner are independent third parties. The net proceeds from the subscription amounted to approximately HK$989,465,000 (equivalent to approximately RMB813,804,000).

• (3) On 9 July 2018, each of the authorised ordinary shares of par value of USD0.001 is subdivided into two ordinary shares of par value of USD0.0005, such subdivided shares shall rank pari passu in all respects with each other (the “ Share Subdivision ”).

• (4) On 15 March 2019, the Company issued 16,136,042 ordinary shares with par value USD0.0005 each to Sichuan Wangshi Group Co., Ltd. (the “ Vendor ” to acquire 75% equity interest in Luzhou Jiade. At the date of acquisition, the fair value of ordinary shares was HK$3.71 (equivalent to RMB3.16) per share (Note 34 (b)).

29. RETIREMENT BENEFIT PLANS

The employees of the Group in the PRC are members of a state-managed retirement benefits scheme operated by the PRC Government. The Group is required to contribute a specified percentage of payroll costs as determined by respective local government authority to the retirement benefits scheme to fund the benefit scheme. The only obligation of the Group with respect to the retirement benefits scheme is to make the specified contributions under the scheme.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

30. SHARE-BASED PAYMENTS

Share Award Scheme

The number of restricted shares disclosed below has been retrospectively adjusted to reflect the Share Subdivision that became effective on 9 July 2018 (note 28).

The Company adopted the Share Award Scheme on 28 April 2015 for the primary purpose of providing incentives to directors, eligible employees and consultants (the “ Selected Participants ”). During the year ended 31 August 2015, the trustee purchased 62,160,000 shares of the Company on the Stock Exchange at a total consideration of HK$74,743,000 (equivalent to RMB58,982,000) for the Share Award Scheme.

The maximum number of award shares which may be granted to Selected Participants but unvested under the Share Award Scheme shall not exceed 1% of the total number of issued shares of the Company from time to time.

The Company has appointed a trustee to administrate and hold the Company’s shares before they are vested and transferred to the Selected Participants. The trustee purchases the Company’s shares being awarded from the open market using cash contributed by the Company to satisfy awards made under the Share Award Scheme.

Details of the restricted share granted under Share Award Scheme are as follows:

Restricted shares type	Date of grant	Restricted shares granted	Vesting date/period	Fair value at grant date RMB
Share Award Scheme-3rd	1 March 2016	2,452,000	31 May 2018	1.79
Share Award Scheme-6th	3 March 2017	4,704,000	31 May 2018	2.25
Share Award Scheme-7th	3 March 2017	696,000	31 May 2019	2.25
Share Award Scheme-9th	22 December 2017	280,000	22 December 2017	3.78
Share Award Scheme-10th	12 March 2018	100,000	12 March 2018	4.28
Share Award Scheme-11th	13 March 2018	13,348,000	31 May 2018–31 May 2020	4.31
Share Award Scheme-12th	27 August 2018	158,000	27 August 2018	3.94

Movements of the restricted shares granted under Share Award Scheme during the years ended 31 August 2019 and 2018 are as follows:

For the financial year ended 31 August 2019

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Outstanding Granted Vested Forfeited Outstanding
Restricted at 1 September during during during at 31 August
shares type 2018 the year the year the year 2019
Employees: Share Award Scheme-7th 632,000 – (616,000) (16,000) –
Share Award Scheme-11th 5,190,000 – (4,816,000) (154,000) 220,000
Total 5,822,000 – (5,432,000) (170,000) 220,000
----- End of picture text -----

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

30. SHARE-BASED PAYMENTS (Continued)

Share Award Scheme (Continued)

For the financial year ended 31 August 2018

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Outstanding Granted Vested Forfeited Outstanding
Restricted at 1 September during during during at 31 August
shares type 2017 the year the year the year 2018
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Executive director:
James William Beeke	Share Award Scheme-9th	–	60,000	(60,000)	–	–
Non-executive director:
Howard Robert
Balloch	Share Award Scheme-9th	–	60,000	(60,000)	–	–
Independent non-
executive director:
Lap Tat Arthur Wong	Share Award Scheme-9th	–	60,000	(60,000)	–	–
Peter Humphrey
Owen	Share Award Scheme-9th	–	60,000	(60,000)	–	–
Xiaodan Mei	Share Award Scheme-9th	–	40,000	(40,000)	–	–
Employees:
	Share Award Scheme-3rd	2,160,000	–	(2,056,000)	(104,000)	–
	Share Award Scheme-6th	4,684,000	–	(4,216,000)	(468,000)	–
	Share Award Scheme-7th	696,000	–	–	(64,000)	632,000
	Share Award Scheme-11th	–	13,348,000	(7,604,000)	(554,000)	5,190,000
	Share Award Scheme-12th	–	158,000	(158,000)	–	–
Consultant
	Share Award Scheme-10th	–	100,000	(100,000)	–	–
Total		7,540,000	13,886,000	(14,414,000)	(1,190,000)	5,822,000

Pursuant to the Share Award Scheme, the vesting of the 3rd, 7th and 11th trench of the restricted shares are subject to satisfaction of certain performance conditions. These performance conditions including targets on the Group’s annual revenue and net profit excluding exceptional and non-recurring items in the consolidated statement of profit or loss and other comprehensive income exceed a specified amount.

The Group recorded share-based compensation expense of RMB13,445,000 for the year ended 31 August 2019 (2018: RMB50,346,000), in relation to the restricted shares granted by the Company under the Share Award Scheme.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

30. SHARE-BASED PAYMENTS (Continued)

Post-IPO Share Option Scheme

The Company’s Post-IPO share option scheme (the “ Post-IPO Share Option Scheme ”) was approved and adopted by the Company on 10 November 2014 to take effect from 28 November 2014 for the purpose of enabling the Company to grant options to the Selected Participants as incentives or rewards for their contributions to the Group.

The maximum number of shares which may be issued upon the exercise of all outstanding options granted and yet to be exercised under the Post-IPO Share Option Scheme and any other share option scheme of the Company shall not in aggregate exceed 10% of the issued share capital of the Company from time to time.

The number of option shares disclosed below has been retrospectively adjusted to reflect the Share Subdivision that became effective on 9 July 2018.

Details of share options granted are as follows:

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Date of Exercise Fair value
Tranche Date of grant expiration Option granted Vesting date Exercisable period price at grant date
HK$ HK$
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Post-IPO-1st	16	February 2016	15 February 2026	400,000	1 March 2017	1 March 2017–	2.20	1.14
						15 February 2026
Post-IPO-2nd	16	February 2016	15 February 2026	400,000	1 March 2018	1 March 2018–	2.20	1.19
						15 February 2026
Post-IPO-3rd	16	February 2016	15 February 2026	400,000	1 March 2019	1 March 2019–	2.20	1.23
						15 February 2026
Post-IPO-4th	14	June 2018	31 January 2023	6,768,000	1 January 2019–	1 January 2019–	7.22	2.16
					1 January 2023	31 January 2023
Post-IPO-5th	14	June 2018	31 January 2023	43,500,000	1 January 2019–	1 January 2019–	7.22	2.16
					1 January 2023	31 January 2023
Post-IPO-6th	28	June 2019	31 January 2024	2,216,000	1 January 2020–	1 January 2019–	3.11	1.09
					1 January 2024	31 January 2024
Post-IPO-7th	28	June 2019	31 January 2024	9,338,000	31 July 2019–	31 July 2019–	3.11	0.85
					1 January 2022	31 January 2022

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

30. SHARE-BASED PAYMENTS (Continued)

Post-IPO Share Option Scheme (Continued)

Movements of the Company’s share options granted under the Post-IPO Share Option Scheme are as followings:

For the year ended 31 August 2019:

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Outstanding Granted Forfeited Lapsed Exercised Outstanding
at 1 September during during during during at 31 August
Date of grant Option type 2018 the year the year the year the year 2019
Executive director:
Sherman Jen 14 June 2018 Post-IPO-4th 692,000 – – (692,000) – –
Zhang Jingxia 14 June 2018 Post-IPO-4th 2,000,000 – – (400,000) – 1,600,000
James William Beeke 14 June 2018 Post-IPO-4th 1,000,000 – – (200,000) – 800,000
Sherman Jen 28 June 2019 Post-IPO-6th – 1,600,000 – – – 1,600,000
Non-executive director
and vice chairman:
Howath Robert Balloch 14 June 2018 Post-IPO-4th 1,000,000 – – (200,000) – 800,000
Independent non-executive director:
Peter Humphrey Owen 14 June 2018 Post-IPO-4th 692,000 – – (138,400) – 553,600
Mei Xiao Dan 14 June 2018 Post-IPO-4th 692,000 – (553,600) (138,400) – –
Wong Lap Tat Arthur 14 June 2018 Post-IPO-4th 692,000 – – (138,400) – 553,600
Peter Humphrey Owen 28 June 2019 Post-IPO-6th – 308,000 – – – 308,000
Wong Lap Tat Arthur 28 June 2019 Post-IPO-6th – 308,000 – – – 308,000
Employees in aggregate:
14 June 2018 Post-IPO-5th 43,100,000 – (5,380,000) (8,440,000) – 29,280,000
28 June 2019 Post-IPO-7th – 9,338,000 (795,000) – – 8,543,000
Total 49,868,000 11,554,000 (6,728,600) (10,347,200) – 44,346,200
–
Exercisable at the end of the year
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

30. SHARE-BASED PAYMENTS (Continued)

Post-IPO Share Option Scheme (Continued)

For the year ended 31 August 2018:

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----- Start of picture text -----

Outstanding Granted Forfeited Exercised Outstanding
at 1 September during during during at 31 August
Date of grant Option type 2017 the year the year the year 2018
----- End of picture text -----

Executive director:
Sherman Jen	14 June 2018	Post-IPO-4th	–	692,000	–	–	692,000
Zhang Jingxia	14 June 2018	Post-IPO-4th	–	2,000,000	–	–	2,000,000
James William Beeke	14 June 2018	Post-IPO-4th	–	1,000,000	–	–	1,000,000
Non-executive director
and vice chairman:
Howath Robert Balloch	14 June 2018	Post-IPO-4th	–	1,000,000	–	–	1,000,000
Independent non-executive
director:
Peter Humphrey Owen	14 June 2018	Post-IPO-4th	–	692,000	–	–	692,000
Mei Xiao Dan	14 June 2018	Post-IPO-4th	–	692,000	–	–	692,000
Wong Lap Tat Arthur	14 June 2018	Post-IPO-4th	–	692,000	–	–	692,000
Employees in aggregate
	16 February 2016	Post-IPO-1st	200,000	–	–	(200,000)	–
	16 February 2016	Post-IPO-2nd	200,000	–	(200,000)	–	–
	16 February 2016	Post-IPO-3rd	200,000	–	(200,000)	–	–
	14 June 2018	Post-IPO-5th	–	43,500,000	(400,000)	–	43,100,000
Total			600,000	50,268,000	(800,000)	(200,000)	49,868,000
Exercisable at the end of the	year						–

C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9 145

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

30. SHARE-BASED PAYMENTS (Continued)

Post-IPO Share Option Scheme (Continued)

Pursuant to the Scheme, the 4th, 5th, 6th and 7th trench of options granted under the Post-IPO Share Option Scheme shall be vested during the vesting period starting from the grant date (the “ vesting commencement date ”) and ending on the expiry of the vesting period in the following manner:

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----- Start of picture text -----

Exercisable period Trench 4 Trench 5 Trench 6 Trench 7
----- End of picture text -----

1 January 2019 to 31 January 2019	20%	20%	–	–
31 July 2019 to 31 January 2020	–	–	–	5%
1 January 2020 to 31 January 2020	20%	20%	78%	32%
1 January 2021 to 31 January 2021	20%	20%	6%	32%
1 January 2022 to 31 January 2022	20%	20%	6%	31%
1 January 2023 to 31 January 2023	20%	20%	6%	–
1 January 2024 to 31 January 2024	–	–	4%	–

The following variables and assumptions were used to calculate the fair values of share options granted at the grant date:

	Post-IPO 4th
	Batch 1 Batch 2 Batch 3 Batch 4 Batch 5
Grant date share price (HK$) Exercise price (HK$) Expected volatility Contractual option life Dividend yield Risk-free interest rate Exercise multiple	7.07 7.07 7.07 7.07 7.07 7.22 7.22 7.22 7.22 7.22 44.90% 45.50% 49.60% 51.60% 51.60% 0.6 1.6 2.6 3.6 4.6 0.00% 0.00% 0.00% 0.00% 0.00% 1.80% 2.00% 2.20% 2.30% 2.40% 2.80 2.80 2.80 2.80 2.80

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

30. SHARE-BASED PAYMENTS (Continued)

Post-IPO Share Option Scheme (Continued)

		Post-IPO 5th
	Batch 1	Batch 2 Batch 3 Batch 4 Batch 5
Grant date share price (HK$) Exercise price (HK$) Expected volatility Contractual option life Dividend yield Risk-free interest rate Exercise multiple	7.07 7.22 44.90% 0.6 0.00% 1.80% 2.20	7.07 7.07 7.07 7.07 7.22 7.22 7.22 7.22 45.50% 49.60% 51.60% 51.60% 1.6 2.6 3.6 4.6 0.00% 0.00% 0.00% 0.00% 2.00% 2.20% 2.30% 2.40% 2.20 2.20 2.20 2.20
		Post-IPO 6th
	Batch 1	Batch 2 Batch 3 Batch 4 Batch 5
Grant date share price (HK$) Exercise price (HK$) Expected volatility Contractual option life Dividend yield Risk-free interest rate Exercise multiple	3.09 3.11 50.00% 0.6 0.00% 2.10% 2.80	3.09 3.09 3.09 3.09 3.11 3.11 3.11 3.11 64.80% 57.80% 57.70% 57.20% 1.6 2.6 3.6 4.6 0.00% 0.00% 0.00% 0.00% 1.80% 1.80% 1.70% 1.60% 2.80 2.80 2.80 2.80
		Post-IPO 7th
		Batch 1 Batch 2 Batch 3 Batch 4
Grant date share price (HK$) Exercise price (HK$) Expected volatility Contractual option life Dividend yield Risk-free interest rate Exercise multiple		3.09 3.09 3.09 3.09 3.11 3.11 3.11 3.11 50.00% 50.00% 64.80% 57.80% 0.1 0.6 1.6 2.6 0.00% 0.00% 0.00% 0.00% 2.10% 2.10% 1.80% 1.80% 2.20 2.20 2.20 2.20

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

30. SHARE-BASED PAYMENTS (Continued)

Post-IPO Share Option Scheme (Continued)

In calculating the fair value of the options under Post-IPO Share Option Scheme, the following major assumptions were used:

(1) Risk-free interest rate

The risk-free interest rate for periods within the contractual life of the option is based on the yield to maturity of the HK Government Bond as of the grant date with maturity closest to the relevant option expiry date.

(2) Dividend yield

Under the Post-IPO Share Option Scheme, it is assumed that the dividend yield to ordinary shares during the expected life of the option is 0.00%.

(3) Expected volatility

Expected volatility is calculated with reference to the historical price volatility data of comparable companies.

(4) Contractual option life

The option life was the original contractual term.

(5) Exercise multiple

A ratio of the stock price to the contractual strike price at which point it is assumed that the option will be exercised prior to maturity.

(6) Exercise price

The exercise price of the option was determined by the Directors.

(7) Fair value of ordinary share

Fair value of ordinary share was the closing price in the open market at the grant date.

The binomial model has been used to estimate the fair value of the share options. The variables and assumptions used in computing the fair value of the share options are based on the Directors’ best estimate. Changes in variables and assumptions may result in changes in the fair value of the share options.

The Group recorded share-based compensation expense of RMB23,146,000 for the year ended 31 August 2019 (2018: RMB7,010,000), in relation to the share options granted under the Post-IPO Share Option Scheme.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

30. SHARE-BASED PAYMENTS (Continued)

Pre-IPO Share Option Scheme

The Company’s pre-IPO share option scheme (the “ Pre-IPO Share Option Scheme ”) was adopted pursuant to a resolution passed on 1 April 2008 for the primary purpose of providing incentives to directors and eligible employees.

The number of option shares disclosed below has been retrospectively adjusted to reflect the Share Subdivision that became effective on 9 July 2018.

Under the Pre-IPO Share Option Scheme, the Directors may grant options to eligible directors, employees and consultants to subscribe for shares in the Company, up to a total of 66,702,832 shares.

Details of specific category of options granted under the Pre-IPO Share Option Scheme are as follows:

Options type	Date of grant	Date of expiration	Options granted	Vesting period	Exercisable period	Exercise price RMB	Fair value at grant date RMB
Pre-IPO-1st	1 September 2008	31 August 2018	32,548,412	1 September 2008–	1 September 2009–	0.47	0.12
				31 August 2012	31 August 2018
Pre-IPO-2nd	1 September 2009	31 August 2019	6,852,298	1 September 2009–	1 September 2010–	0.47	0.14
				31 August 2013	31 August 2019
Pre-IPO-3rd	2 June 2014	1 June 2024	27,302,122	2 June 2014–	28 November 2014–	0.47	0.56
				28 November 2014	1 June 2024

Movements of the Company’s share options granted under the Pre-IPO Share Option Scheme are as follows:

For the year ended 31 August 2019

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Outstanding at Granted Expired Exercised Outstanding at
1 September during during during 31 August
Date of grant Option type 2018 the year the year the year 2019
Employees and consultants
in aggregate:
1 September 2009 Pre-IPO-2nd 323,148 – (323,148) – –
2 June 2014 Pre-IPO-3rd 5,978 – – – 5,978
Total 329,126 – (323,148) – 5,978
Exercisable at the end of
the year 5,978
----- End of picture text -----

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

30. SHARE-BASED PAYMENTS (Continued)

Pre-IPO Share Option Scheme (Continued)

For the year ended 31 August 2018

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----- Start of picture text -----

Outstanding Granted Expired Exercised Outstanding
at 1 September during during during at 31 August
Date of grant Option type 2017 the year the year the year 2018
----- End of picture text -----

Executive director:
Sherman Jen	2 June 2014	Pre-IPO-3rd	4,030	–	–	(4,030)	–
Zhang Jingxia	2 June 2014	Pre-IPO-3rd	2,014	–	–	(2,014)	–
James William Beeke	2 June 2014	Pre-IPO-3rd	1,342	–	–	(1,342)	–
Independent non-executive
director:
Peter Humphrey Owen	2 June 2014	Pre-IPO-3rd	1,342	–	–	(1,342)	–
Employees and consultants in
aggregate:
	1 September 2008	Pre-IPO-1st	13,564	–	(12,222)	(1,342)	–
	1 September 2009	Pre-IPO-2nd	323,148	–	–	–	323,148
	2 June 2014	Pre-IPO-3rd	5,978	–	–	–	5,978
Total			351,418	–	(12,222)	(10,070)	329,126
Exercisable at the end of
the year							329,126

The Group recognised the total expense of nil for the years ended 31 August 2019 and 2018 in relation to the PreIPO share options granted by the Company.

31. CAPITAL RISK MANAGEMENT

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through the optimization of the debt and equity balance. The Group’s overall strategy remains unchanged from prior year.

The capital structure of the Group consists of bank balance and cash, borrowings and equity attributable to equity holders of the Company, comprising capital, reserves and retained profits.

The Directors review the capital structure on a continuous basis taking into account the cost of capital and the risks associated with each class of capital. Based on recommendations of the Directors, the Group will balance its overall capital structure through repurchase of shares or issuance of new shares.

150 C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

32. FINANCIAL INSTRUMENTS

(a) Categories of financial instruments

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31/8/2019 31/8/2018
RMB’000 RMB’000
Financial assets
FVTPL
— Listed equity securities 9,729 116,770
–
— Wealth management products 66,337
Financial assets at amortised cost 3,057,716 –
Loans and receivables – 2,523,452
AFS investments – 246,000
Financial liabilities
Liabilities measured at amortised cost 733,398 788,256
FVTPL
–
— Contingent consideration payable 4,600
----- End of picture text -----

(b) Financial risk management objectives and policies

The Group’s major financial instruments include deposits, other receivables, held for trading investments, pledged bank deposits, restricted cash, bank balances and cash, other payables and borrowings. Details of these financial instruments are disclosed in the respective notes. These risks include market risk (currency risk and interest rate risk), credit risk and liquidity risk. Management of the Group manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

Market risk

(i) Currency risk

The Group conducts its business mainly in the PRC. The majority of the Group’s revenue and expenditures are denominated in RMB. The Company and several subsidiaries of the Company have bank balances, other receivables, other payables and borrowings which are denominated in foreign currencies. The carrying amounts of the Group’s foreign currency denominated monetary assets and liabilities at the end of reporting period are as follows:

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Liabilities Assets
31/8/2019 31/8/2018 31/8/2019 31/8/2018
RMB’000 RMB’000 RMB’000 RMB’000
HK$ 1,568 109,342 305,266 729,332
SGD 118,549 330,296 1,408 2,748
CAD – 4,982 80,856 14,083
USD – – 161,069 245,779
120,117 444,620 548,599 991,942
----- End of picture text -----

C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9 151

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

32. FINANCIAL INSTRUMENTS (Continued)

(b) Financial risk management objectives and policies (Continued)

Market risk (Continued)

(i) Currency risk (Continued)

Sensitivity analysis

The Group is mainly exposed to the currency of USD, SGD, CAD and HK$. The following table details the Group’s sensitivity to a 5% (2018: 5%) increase and decrease in RMB against USD, SGD, CAD and HK$. 5% (2018: 5%) is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts the translation at the year-end for a 5% (2018: 5%) change in foreign currency rates. A positive number below indicates a decrease in profit before tax where RMB strengthens 5% against USD, SGD, CAD and HK$. For a 5% (2018: 5%) weakening of RMB against USD, SGD, CAD and HK$, there would be an equal and opposite impact on the profit, and the balances below would be negative.

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2019 2018
RMB’000 RMB’000
Profit or loss related to USD 8,053 12,289
Profit or loss related to SGD (5,857) (16,235)
Profit or loss related to CAD 4,043 455
Profit or loss related to HK$ 19,123 30,999
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In the opinion of the Directors, the sensitivity analysis is unrepresentative of the inherent foreign currency risk as the exposure at the end of the reporting year does not reflect the exposure for the full year.

(ii) Interest rate risk

The Group is exposed to fair value interest rate risk in relation to fixed-rate pledged bank deposits (see note 18 for details of these deposits). The Group is also exposed to cash flow interest rate risk through the impact of interest rate changes on variable-rate interest bearing financial assets and liabilities, mainly bank balances and cash and borrowings. The Group currently does not use any derivative contracts to hedge its exposure to interest rate risk, however, the Directors will consider hedging significant interest rate risk when the need arise.

Sensitivity analysis

The sensitivity analysis below has been determined based on the exposure to interest rates for variable interest rate bank balances and borrowings. If interest rates had been 5 basis points higher/lower and all other variables were held consistent, the Group’s post-tax profit for the year ended 31 August 2019 would decrease/increase by RMB122,000 (2018: decrease/increase by RMB976,000).

152 C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

32. FINANCIAL INSTRUMENTS (Continued)

(b) Financial risk management objectives and policies (Continued)

Market risk (Continued)

(iii) Other price risk

The Group is exposed to equity price risk through its investments in listed equity securities for the year ended 31 August 2019. The management manages the exposure to equity price risk of investments in listed equity securities by closely monitoring fluctuation of these investments.

Sensitivity analysis

The sensitivity analysis below has been determined based on the exposure to equity price risks relating to held-for-trading equity instruments investments at the reporting date.

If the price of the respective equity instruments had been 5% higher/lower, post-tax profit for the year ended 31 August 2019 would increase/decrease by RMB486,450 as a result of the changes in fair value.

Credit risk and impairment assessment

Credit risk refers to the risk that the Group’s counterparties default on their contractual obligations resulting in financial losses to the Group. The Group’s credit risk exposures are primarily attributable to wealth management products, deposits and other receivables, pledged bank deposits, restricted cash and bank balances and cash. The Group does not hold any collateral or other credit enhancements to cover its credit risks associated with its financial assets.

Except for investment in wealth management products which is subsequently measure at FVTPL, the Group performed impairment assessment for financial assets under ECL model. Information about the Group’s credit risk management, maximum credit risk exposures and the related impairment assessment, if applicable, are summarised as below:

Pledged bank deposits/restricted cash/bank balances and cash

Credit risk on pledged bank deposits/restricted bank deposits/bank balances and cash is limited because the counterparties are reputable banks with high credit ratings assigned by credit agencies. The Group assessed 12m ECL for pledged bank deposits/restricted bank deposits/bank balances and cash by reference to information relating to probability of default and loss given default of the respective credit rating grades published by external credit rating agencies. Based on the average loss rates, the 12m ECL on pledged bank deposits/restricted cash/bank balances and cash is considered to be insignificant.

Other receivables and deposits

For other receivables and deposits, the directors of the Company make periodic individual assessment on the recoverability of other receivables and deposits based on historical settlement records, past experience, and also quantitative and qualitative information that is reasonable and supportive forward-looking information. The directors of the Company believe that there are no significant increase in credit risk of these amounts since initial recognition and the Group provided impairment based on 12m ECL. For the year ended 31 August 2019, the Group assessed the ECL for other receivables and deposits were insignificant and thus no loss allowance was recognised.

C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9 153

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

32. FINANCIAL INSTRUMENTS (Continued)

(b) Financial risk management objectives and policies (Continued)

Liquidity risk

The Group manages liquidity risk by maintaining adequate bank balance and cash, monitoring forecast and actual cash flows.

The following tables detail the Group’s remaining contractual maturity for its financial liabilities based on the agreed repayment terms. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group and the Company can be required to pay. The table includes both interest and principal cash flows. The interest rates as at the end of the reporting period are used for the cash flow calculation in relation to variable rate interest bearing financial liabilities.

	Weighted average interest rate %	On demand or less than 1 year RMB’000	1–2 years RMB’000	2–3 years RMB’000	3–4 years RMB’000	4–5 years RMB’000	Undiscounted cash flows RMB’000	Total carrying amount RMB’000
Non derivative financial liabilities Other payables Variable rates interest borrowings	– 3.32%	402,409 133,776	– 12,300	– 203,194	– –	– –	402,409 349,270	402,409 330,989
At 31 August 2019		536,185	12,300	203,194	–	–	751,679	733,398
Non derivative financial liabilities
Other payables	–	356,918	–	–	–	–	356,918	356,918
Variable rates
interest borrowings	2.84%	233,498	11,077	10,929	197,715	–	453,219	431,338
At 31 August 2018		590,416	11,077	10,929	197,715	–	810,137	788,256

154 C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

32. FINANCIAL INSTRUMENTS (Continued)

(c) Fair value measurements of financial instruments

Fair value of the Group’s financial assets and financial liabilities that are measured at fair value on a recurring basis.

Some of the Group’s financial assets and financial liabilities are measured at fair value at the end of each reporting period. The following table gives information about how the fair value of these financial assets and financial liabilities are determined (in particular, the valuation technique and inputs used).

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Fair value as at Significant
Finance assets/Financial Fair value Valuation techniques unobservable
liabilities 31 August 2019 31 August 2018 hierarchy and key inputs input(s)
Financial assets at FVTPL
— Listed equity securities Listed equity – Level 1 Quoted bid prices in an active market NA
(see Note 20) securities:
RMB9,729,000
Held for trading
investments
— Listed equity securities – Listed equity Level 1 Quoted bid prices in an active market NA
(see Note 20) securities:
RMB116,770,000
Financial assets at FVTPL
— wealth management wealth – Level 2 Discounted cash flow, future cash flows are NA
products management estimated based on contractual terms of the
products: wealth management products and discounted
RMB66,337,000 at a rate that reflects that credit risk of
the counterparties
AFS investments wealth Level 2 Discounted cash flow, future cash flows are NA
— wealth management management estimated based on contractual terms of the
products products: wealth management products and discounted
(see Note 21) RMB246,000,000 at a rate that reflects that credit risk of
the counterparties
Contingent consideration Liabilities: Level 3 Discounted cash flow method was used to Probability
in a business RMB4,600,000 capture the present value of the expected of students
combination future economic benefits that will flow out of base;
the Group arising from the contingent Discount
consideration, based on an appropriate rate
discount rate.
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C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9 155

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

32. FINANCIAL INSTRUMENTS (Continued)

(c) Fair value measurements of financial instruments (Continued)

Reconciliation of Level 3 fair value measurements

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Contingent consideration in
business combinations
2019 2018
RMB’000 RMB’000
–
Opening balance 4,600
Business combination – 12,547
Settlements (4,600) (7,947)
–
Closing balance 4,600
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The Directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the consolidated financial statements approximate their fair values.

There were no transfers between Level 1, Level 2 and Level 3 for the years ended 31 August 2019 and 2018.

33. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES

The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group’s consolidated statement of cash flows from financing activities.

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Acquisition
Dividends Interest consideration
payable Borrowings payable payable Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
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At 1 September 2017	–	424,146	–	–	424,146
Financing cash flows	(198,471)	(4,670)	(10,607)	–	(213,748)
Dividends paid	198,471	–	–	–	198,471
Interest expenses	–	–	10,607	–	10,607
Acquisition of additional interest
of a subsidiary	–	–	–	21,422	21,422
Non-cash transaction	–	–	–	(21,422)	(21,422)
Foreign exchange translation	–	11,862	–	–	11,862
At 31 August 2018	–	431,338	–	–	431,338
Financing cash flows	(250,864)	(155,235)	(10,967)	–	(417,066)
Dividends paid	250,864	–	–	–	250,864
Interest expenses	–	–	10,967	–	10,967
Acquisition of a subsidiary	–	44,000	–	–	44,000
Foreign exchange translation	–	10,886	–	–	10,886
At 31 August 2019	–	330,989	–	–	330,989

156 C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

34. ACQUISITION OF SUBSIDIARIES

(a) Acquisition of Junpeng

On 1 January 2019, the Group acquired 100% of the equity interest in Junpeng at a total consideration of RMB129,820,000. The acquisition has been accounted for using the acquisition method. The amount of goodwill arising as a result of the acquisition was RMB74,310,000. Junpeng is principally engaged in the operation of a K-12 boarding school located in Xiangyang City of Hubei Province.

Consideration transferred:

	RMB’000
	Cash 129,820

Acquisition-related costs amounting to RMB185,000 have been excluded from the consideration transferred and have been recognised as an expense during the year ended 31 August 2019.

Assets and liabilities recognised at the date of acquisition are as follows:

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----- Start of picture text -----

RMB’000
----- End of picture text -----

Property and equipment	56,722
Other intangible assets	8,821
Inventories	232
Deposit, prepayments and other receivables	5,293
Bank balances and cash	5,659
Contract liabilities	(2,946)
Other payables and accrued expenses	(8,036)
Deferred tax liabilities	(10,235)
	55,510

The property and equipment and other intangible assets were valued at fair value by the Company with reference to an independent valuation provided by Duff & Phelps, an independent firm of professional valuer not connected with the Group, who has appropriate qualification and recent experience of valuation of similar assets. Its address is Suite 801- 803, 8/F Tower 2, China Central Place, 79 Jianguo Road, Chaoyang District, Beijing, China.

Goodwill arising on acquisition:

		RMB’000
	Consideration transferred	129,820
	Less: Fair value of identifiable net assets acquired	(55,510)
	Goodwill arising on acquisition	74,310

C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9 157

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

34. ACQUISITION OF SUBSIDIARIES (Continued)

(a) Acquisition of Junpeng (Continued)

Goodwill arose in the acquisition of Junpeng because the cost of the combination included a control premium. In addition, the consideration paid for the combination effectively included amounts in relation to the revenue growth, future market development and the assembled workforce of Junpeng. These benefits are not recognised separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets.

None of the goodwill arising on this acquisition is expected to be deductible for tax purposes.

Net cash outflow on acquisition of Junpeng:

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----- Start of picture text -----

RMB’000
----- End of picture text -----

Consideration paid in cash	123,320
Less: cash and cash equivalent balances acquired	(5,659)
	117,661

Impact of acquisition on the results of the Group

Included in the profit for the period is a profit of RMB6,458,000 attributable to the additional business generated by Junpeng. Revenue for the period includes RMB13,209,000 generated from Junpeng.

Had the acquisition been completed on 1 September 2018, total group revenue for the period would have been RMB1,575,523,000, and profit for the period would have been RMB654,355,000. The pro forma information is for illustrative purposes only and is not necessarily an indication of revenue and results of operations of the Group that actually would have been achieved had the acquisition been completed on 1 September 2018, nor is it intended to be a projection of future results.

In determining the ‘pro- forma’ revenue and profit of the Group had Junpeng been acquired at the beginning of the current year, the Directors have calculated depreciation of property and equipment and amortization of intangible assets acquired on the basis of the fair values arising in the initial accounting for the business combination rather than the carrying amounts recognised in the preacquisition financial statements.

158 C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

34. ACQUISITION OF SUBSIDIARIES (Continued)

(b) Acquisition of Jiade

On 15 March 2019, the Group acquired 75% of the equity interest Jiade at a total consideration of RMB178,063,000. The acquisition has been accounted for using the acquisition method. The amount of goodwill arising as a result of the acquisition was RMB12,570,000. Jiade is principally engaged in the operation of a K-12 boarding school located in Luzhou City of Sichuan Province (subsequently renamed as Maple Leaf Jiade International School), which is a private non-enterprise organisation wholly-owned by Jiade.

Consideration transferred:

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----- Start of picture text -----

RMB’000
----- End of picture text -----

Cash	127,000
Equity instruments issued (Note)	51,063
	178,063

Note:

As part of the consideration for the acquisition of Jiade, 16,136,042 ordinary shares with par value of USD0.0005 each were issued, the amount of ordinary shares issued was determined based on the price of HK$3.71 per share on the date of the acquisition agreement. The fair value of the ordinary shares issued were determined using the acquisition date share price, amounted to HK$59,865,000 (equivalent to approximately RMB51,063,000).

Acquisition-related costs amounting to RMB265,000 have been excluded from the consideration transferred and have been recognised as an expense during the year ended 31 August 2019.

Assets and liabilities recognised at the date of acquisition are as follows:

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----- Start of picture text -----

RMB’000
----- End of picture text -----

Bank balances and cash	17,691
Deposit, prepayments and other receivables	949
Property and equipment	238,762
Prepayment for land use right	62,200
Other intangible assets	3,600
Contract liabilities	(35,687)
Other payables and accrued expenses	(9,290)
Deferred tax liabilities	(13,568)
Long term bank loan	(44,000)
	220,657

The property and equipment and other intangible assets were valued at fair value by the Company with reference to an independent valuation provided by Duff & Phelps, an independent firm of professional valuers not connected with the Group, who has appropriate qualification and recent experience of valuation of similar assets. Its address is Suite 801–803, 8/F Tower 2, China Central Place, 79 Jianguo Road, Chaoyang District, Beijing, China.

C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9 159

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

34. ACQUISITION OF SUBSIDIARIES (Continued)

(b) Acquisition of Jiade (Continued)

Non-controlling interests

The non-controlling interest (25%) in Jiade recognised at the acquisition date was measured by reference to the proportionate share of recognised amounts of net assets of Jiade and amounted to RMB55,164,000.

Goodwill arising on acquisition:

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----- Start of picture text -----

RMB’000
----- End of picture text -----

Consideration transferred	178,063
Add: Non-controlling interests (25%)	55,164
Less: Fair value of identifiable net assets acquired	(220,657)
Goodwill arising on acquisition	12,570

Goodwill arose in the acquisition of Jiade because the cost of the combination included a control premium. In addition, the consideration paid for the combination effectively included amounts in relation to the revenue growth, future market development and the assembled workforce of Jiade. These benefits are not recognised separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets.

None of the goodwill arising on this acquisition is expected to be deductible for tax purposes.

Net cash outflow on acquisition of Jiade:

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----- Start of picture text -----

RMB’000
----- End of picture text -----

Consideration paid in cash	69,000
Less: cash and cash equivalent balances acquired	(17,691)
	51,309

Impact of acquisition on the results of the Group

Included in the profit for the year is a profit of RMB11,729,000 attributable to the business operated by Jiade. Revenue for the year includes RMB30,001,000 generated from Jiade.

Had the acquisition been completed on 1 September 2018, total group revenue for the year would have been RMB1,612,914,000, and profit for the year would have been RMB667,316,000. The pro forma information is for illustrative purposes only and is not necessarily an indication of revenue and results of operations of the Group that actually would have been achieved had the acquisition been completed on 1 September 2018, nor is it intended to be a projection of future results.

In determining the ‘pro-forma’ revenue and profit of the Group had Jiade been acquired at the beginning of the current year, the Directors have calculated depreciation of equipment and amortization of intangible assets acquired on the basis of the fair values arising in the initial accounting for the business combination rather than the carrying amounts recognised in the preacquisition financial statements.

160 C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

34. ACQUISITION OF SUBSIDIARIES (Continued)

(c) Acquisition of Yisidun

On 23 January 2018, the Group acquired 55% of the equity interest in Yisidun at a total consideration of RMB89,045,000. The acquisition has been accounted for using the acquisition method. The amount of goodwill arising as a result of the acquisition was RMB30,453,000. Yisidun is principally engaged in the operation of a K-12 boarding school located in Shenzhen City of Guangdong Province, Shenzhen Yisidun Longgang School, which is a private non-enterprise organisation wholly-owned by Yisidun.

Consideration transferred:

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----- Start of picture text -----

RMB’000
----- End of picture text -----

Cash	81,098
Contingent consideration arrangement (Note)	7,947
	89,045

Note:

Based on the relevant agreement, the Group is required to pay an additional amount of RMB7,947,000 if Shenzhen Yisidun Longgang School meet the target student enrolment for the school year ended 31 August 2018. The fair value of such contingent consideration amounted to RMB7,947,000 as at the acquisition date which has been included in other payable and accrued expenses on the consolidated statement of financial position. The management has reassessed the fair value of the contingent consideration as at 31 August 2018, there were no fair value change noted based on the assessment result.

Acquisition-related costs amounting to RMB100,000 have been excluded from the consideration transferred and have been recognised as an expense during the year ended 31 August 2018.

Assets and liabilities recognised at the date of acquisition are as follows:

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----- Start of picture text -----

RMB’000
----- End of picture text -----

Bank balances and cash	8,221
Deposit, prepayments and other receivables	2,794
Inventories	606
Property and equipment	118,285
Other intangible assets	2,300
Deferred revenue	(6,584)
Other payables and accrued expenses	(18,516)
Deferred tax liabilities	(575)
	106,531

The property and equipment and other intangible assets were valued at fair value by the Company with reference to an independent valuation provided by Duff & Phelps, an independent firm of professional valuers not connected with the Group, who has appropriate qualification and recent experience of valuation of similar assets. Its address is Suite 801–803, 8/F Tower 2, China Central Place, 79 Jianguo Road, Chaoyang District, Beijing, China.

C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9 161

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

34. ACQUISITION OF SUBSIDIARIES (Continued)

(c) Acquisition of Yisidun (Continued)

Non-controlling interests

The non-controlling interest (45%) in Yisidun recognised at the acquisition date was measured by reference to the proportionate share of recognised amounts of net assets of Yisidun and amounted to RMB47,939,000.

Goodwill arising on acquisition:

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----- Start of picture text -----

RMB’000
----- End of picture text -----

Consideration transferred	89,045
Add: Non-controlling interests (45%)	47,939
Less: Fair value of identifiable net assets acquired	(106,531)
Goodwill arising on acquisition	30,453

Goodwill arose in the acquisition of Yisidun because the cost of the combination included a control premium. In addition, the consideration paid for the combination effectively included amounts in relation to the revenue growth, future market development and the assembled workforce of Yisidun. These benefits are not recognised separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets.

None of the goodwill arising on this acquisition is expected to be deductible for tax purposes.

Net cash outflow on acquisition of Yisidun:

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----- Start of picture text -----

RMB’000
----- End of picture text -----

Consideration paid in cash	85,071
Less: cash and cash equivalent balances acquired	(8,221)
	76,850

Impact of acquisition on the results of the Group

Included in the profit for the year is a loss of RMB17,314,000 attributable to the business operated by Yisidun. Revenue for the year includes RMB8,453,000 generated from Yisidun.

Had the acquisition been completed on 1 September 2017, total group revenue for the year would have been RMB1,347,631,000, and profit for the year would have been RMB521,593,000. The pro forma information is for illustrative purposes only and is not necessarily an indication of revenue and results of operations of the Group that actually would have been achieved had the acquisition been completed on 1 September 2017, nor is it intended to be a projection of future results.

In determining the ‘pro-forma’ revenue and profit of the Group had Yisidun been acquired at the beginning of the current year, the Directors have calculated depreciation of property and equipment and amortization of intangible assets acquired on the basis of the fair values arising in the initial accounting for the business combination rather than the carrying amounts recognised in the preacquisition financial statements.

162 C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

34. ACQUISITION OF SUBSIDIARIES (Continued)

(d) Acquisition of the Five Meis

On 1 June 2018, the Group acquired 100% of the equity interest in the Five Meis at a total consideration of RMB150,000,000. The acquisitions has been accounted for using the acquisition method. The amount of goodwill arising as a result of the acquisition was RMB75,051,000. The Five Meis are principally engaged in the operation of K-12 boarding schools and preschool located in Haikou City of Hainan Province.

Consideration transferred:

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----- Start of picture text -----

RMB’000
----- End of picture text -----

Cash	145,400
Contingent consideration arrangement (Note)	4,600
	150,000

Note: Based on the relevant agreements, the Group is required to pay an additional amount of RMB4,600,000 if the Five Meis meet the students enrolment target for the school year ended 31 August 2019. The fair value of such contingent arrangement amounted to RMB4,600,000 as at acquisition date which has been included in other payable and accrued expenses on the consolidated statement of financial position. The management has reassessed the fair value of the contingent consideration as at 31 August 2018, there were no fair value change noted based on the assessment result.

Acquisition-related costs amounting to RMB330,000 have been excluded from the consideration transferred and have been recognised as an expense during the year ended 31 August 2018.

Assets and liabilities recognised at the date of acquisition are as follows:

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----- Start of picture text -----

RMB’000
----- End of picture text -----

Bank balances and cash	20,885
Deposit, prepayments and other receivables	6,399
Property and equipment	58,651
Other intangible assets	30,500
Deferred revenue	(13,686)
Other payables and accrued expenses	(19,553)
Deferred tax liabilities	(8,247)
	74,949

The property and equipment and other intangible assets were valued at fair value by the Company with reference to an independent valuation provided by Duff & Phelps, an independent firm of professional valuers not connected with the Group, who has appropriate qualification and recent experience of valuation of similar assets. Its address is Suite 801–803, 8/F Tower 2, China Central Place, 79 Jianguo Road, Chaoyang District, Beijing, China.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

34. ACQUISITION OF SUBSIDIARIES (Continued)

• (d) Acquisition of the Five Meis (Continued)

Goodwill arising on acquisition:

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RMB’000
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Consideration transferred	150,000
Less: Fair value of identifiable net assets acquired	(74,949)
Goodwill arising on acquisition	75,051

Goodwill arose in the acquisition of the Five Meis because the cost of the combination included a control premium. In addition, the consideration paid for the combination effectively included amounts in relation to the revenue growth, future market development and the assembled workforce of The Five Meis. These benefits are not recognised separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets.

None of the goodwill arising on this acquisition is expected to be deductible for tax purposes.

Net cash outflow on acquisition of The Five Meis:

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----- Start of picture text -----

RMB’000
----- End of picture text -----

Consideration paid in cash	140,298
Less: cash and cash equivalent balances acquired	(20,885)
	119,413

Impact of acquisition on the results of the Group

Included in the profit for the year is a profit of RMB6,343,000 attributable to the business operated by the Five Meis. Revenue for the year includes RMB13,012,000 generated from the Five Meis.

Had the acquisition been completed on 1 September 2017, total group revenue for the year would have been RMB1,374,616,000, and profit for the year would have been RMB543,377,000. The pro forma information is for illustrative purposes only and is not necessarily an indication of revenue and results of operations of the Group that actually would have been achieved had the acquisition been completed on 1 September 2017, nor is it intended to be a projection of future results.

In determining the ‘pro-forma’ revenue and profit of the Group had the Five Meis been acquired at the beginning of the current year, the directors have calculated depreciation of equipment and amortization of intangible assets acquired on the basis of the fair values arising in the initial accounting for the business combination rather than the carrying amounts recognised in the preacquisition financial statements.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

35. MAJOR NON-CASH TRANSACTIONS

Part of the consideration for the acquisition of Jiade set out in note 34b that occurred during the current year which comprised issuing 16,136,042 ordinary shares with par value of USD0.0005 each, the amount of ordinary shares issued was determined based on the price of HK$3.71 per share on the date of the acquisition agreement. The fair value of the ordinary shares issued were determined using the acquisition date share price, amounted to HK$59,865,000 (equivalent to approximately RMB51,063,000).

36. OPERATING LEASES

The Group as lessee

Minimum lease payments paid under operating leases during the financial year:

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2019 2018
RMB’000 RMB’000
Premises 20,383 13,924
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At the end of each financial year, the Group’s commitments for future minimum lease payments under noncancellable operating leases fall due as follows:

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31/8/2019 31/8/2018
RMB’000 RMB’000
Within one year 26,381 16,776
In the second to fifth year inclusive 88,568 49,950
Over five years 100,548 33,626
215,497 100,352
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Operating lease payments represent rentals payable by the Group for certain of its office properties. Leases are negotiated and rentals are fixed for lease terms of 1 to 25 years.

The Group as lessor

Property rental income earned during the year was RMB15,746,000 (2018: RMB15,054,000). The properties are expected to generate rental yields of 4% (2018: 4%) based on the cost on an ongoing basis. Certain properties held have committed tenants for the next year.

At the end of the financial year, the Group had contracted with tenants for the following future minimum lease payments:

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----- Start of picture text -----

31/8/2019 31/8/2018
RMB’000 RMB’000
Within one year 15,248 14,596
In the second to third year inclusive 4,682 16,209
19,930 30,805
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

37. CAPITAL COMMITMENTS

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31/8/2019 31/8/2018
RMB’000 RMB’000
Capital expenditure contracted for but not provided in the consolidated
financial statements in respect of the acquisition of property
and equipment 74,212 7,713
Capital expenditure contracted for but not provided in the consolidated
–
financial statements in respect of business acquisitions 130,000
74,212 137,713
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There was no capital commitments for which were authorised but not contracted for as at 31 August 2019 and 2018.

38. RELATED PARTY TRANSACTIONS AND BALANCES

Compensation of key management personnel

The remuneration of Directors and other members of key management of the Group during the financial year are as follows:

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2019 2018
RMB’000 RMB’000
Short-term benefits 10,698 10,621
Post-employment benefits 52 42
Share-based payments 6,520 3,403
Other benefits in kind 2,424 –
19,694 14,066
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

39. CONTINGENT LIABILITIES

On 15 November 2016, the Company received a writ of summons from Hong Kong Zhixin Financial News Agency Ltd. (“ Zhixin ”) seeking among other things, specific performance of the consultancy agreement between the Company and Zhixin by the allotment and issue of 7,000,000 shares of the Company to Zhixin, and damages in lieu or in addition thereof (“ Zhixin Case ”). On 28 November 2016, the Company filed with the High Court of the Hong Kong Special Administrative Region its acknowledgement of service of the writ and indicated its intention to defend the claim.

In December 2016, Zhixin took out an application for summary judgment against the Company. The hearing of the summary judgment application took place on 25 October 2017 in which Zhixin’s application was dismissed. The case now proceeds to the main trial stage.

On 29 January 2018, Zhixin filed its amended statement of claim to allege that it is entitled to 17,500,000 shares of the Company by virtue of an option (the “ Option ”) provided in the Agreement. Zhixin Case is still in the process of filing pleadings by both parties.

Based on information currently available to the Company, it is not possible to estimate the financial effect of the Zhixin Case. As at 31 August 2019, the Company has not made any provision in respect of the Zhixin Case. The Company will provide an update as and when there is any material development in this matter.

The number of shares disclosed above has not considered the effect of Share Subdivision that became effective on 9 July 2018 (note 28).

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

40. STATEMENT OF FINANCIAL POSITION AND RESERVES OF THE COMPANY

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31/8/2019 31/8/2018
RMB’000 RMB’000
Non-Current Assets
Investments in subsidiaries 192,696 192,696
Amounts due from subsidiaries 334,699 280,981
Property and equipment 36 43
527,431 473,720
Current Assets
Deposits, prepayments and other receivables 17,957 2,596
–
Financial assets at fair value through profit or loss 76,066
–
Held for trading investments 116,770
Bank balances and cash 545,216 849,671
639,239 969,037
Current Liabilities
Other payables and accrued expenses 1,593 5,028
Amounts due to subsidiaries 3,877 11,665
–
Borrowing 104,339
5,470 121,032
Net Current Assets 633,769 848,005
Total Assets Less Current Liabilities 1,161,200 1,321,725
Capital and Reserves
Share capital (Note 28) 9,309 9,255
Reserves 1,151,891 1,312,470
1,161,200 1,321,725
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

40. STATEMENT OF FINANCIAL POSITION AND RESERVES OF THE COMPANY (Continued)

Movement in reserves is as follows:

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Shares held
for
restricted
share Share-based
Share award payment Accumulated
premium scheme reserve losses Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 1 September 2017 747,224 (42,717) 7,610 (26,810) 685,307
– – –
Loss for the year (45,198) (45,198)
Total comprehensive expense
– – –
for the year (45,198) (45,198)
Issue of new shares 813,099 – – – 813,099
– – –
Share-based payments 57,356 57,356
– – –
Dividends recognised as distribution (200,585) (200,585)
Dividends distribute to the
restricted share award scheme 2,114 – – – 2,114
Exercise of share options 555 – (178) – 377
Shares vested under restricted
share award scheme – 13,678 (48,055) 34,377 –
At 31 August 2018 1,362,407 (29,039) 16,733 (37,631) 1,312,470
– – –
Profit for the year 2,685 2,685
Total comprehensive income
– – –
for the year 2,685 2,685
Issue of new shares 51,009 – – – 51,009
– – –
Share-based payments 36,591 36,591
– – –
Dividends recognised as distribution (253,280) (253,280)
Dividends distribute to the
restricted share award scheme 2,416 – – – 2,416
Shares vested under restricted
share award scheme – 5,184 (22,218) 17,034 –
At 31 August 2019 1,162,552 (23,855) 31,106 (17,912) 1,151,891
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

41. PARTICULARS OF PRINCIPAL SUBSIDIARIES OF THE COMPANY

Details of the Company’s principal subsidiaries at the end of the reporting period are set out below:

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----- Start of picture text -----

Proportion of ownership
Issued and interests and voting power
Date and place of fully paid held by the Group
incorporation/ share capital/ As at 31 August
Name of subsidiary establishment registered capital 2019 2018 Principal activities
Maple BVI 28 April 1992 USD500,000 100% 100% Investment holding
BVI
Dalian High School 15 April 1996 USD5,000,000 100% 100% High school education
大連楓葉國際學校 The PRC
Beipeng Software 10 March 2008 USD33,400,000 100% 100% Technical support
大連北鵬教育軟件開發有限公司 The PRC
Dalian Maple Leaf International School
(Middle School and Elementary School) 3 September 1996 RMB8,500,000 100% 100% Middle and elementary
大連楓葉國際學校 ( 民辦初中、小學 ) The PRC school education
Dalian Educational Group 23 May 2003 RMB140,000,000 100% 100% Investment holding
大連楓葉教育集團有限公司 The PRC
Dalian Foreign School 31 August 2005 nil 100% 100% Education-related
大連楓葉外籍人員子女學校 (Note i) The PRC services
Dalian Maple Leaf Qianshan Xincheng 22 September 2005 RMB200,000 100% 100% Preschool education
Preschool The PRC
大連楓葉千山心城幼兒園
Wuhan Foreign School 9 December 2006 nil 100% 100% Education-related
武漢楓葉外籍人員子女學校 (Note i) The PRC services
Lanxil 1 June 2007 RMB200,000 100% 100% Preschool education
大連楓葉蘭溪文苑幼兒園 The PRC
Wuhan Maple Leaf International School 26 June 2007 RMB21,303,454 100% 100% High school education
武漢楓葉國際學校 The PRC
Dalian Maple Leaf Jiabao Preschool 24 April 2008 RMB200,000 100% 100% Preschool education
大連楓葉佳寶幼兒園 The PRC
Tianjin Teda Maple Leaf International School 1 September 2008 RMB8,000,000 100% 100% High, middle and
天津泰達楓葉國際學校 The PRC elementary school
education
Jinhai 1 April 2009 RMB100,000 100% 100% Preschool education
大連楓葉金海幼兒園 The PRC
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

41. PARTICULARS OF PRINCIPAL SUBSIDIARIES OF THE COMPANY (Continued)

==> picture [460 x 534] intentionally omitted <==

----- Start of picture text -----

Proportion of ownership
Issued and interests and voting power
Date and place of fully paid held by the Group
incorporation/ share capital/ As at 31 August
Name of subsidiary establishment registered capital 2019 2018 Principal activities
Dalian Maple Leaf Xiangzhou Preschool 10 April 2009 RMB200,000 100% 100% Preschool education
大連沙河口楓葉香洲心城幼兒園 The PRC
Chongqing Maple Leaf International School 25 June 2009 RMB43,500,000 100% 100% High, middle, elementary
重慶楓葉國際學校 The PRC school and preschool
education
Dalian Maple Leaf Kaifaqu Preschool 10 December 2009 RMB200,000 100% 100% Preschool education
大連開發區楓葉幼兒園 The PRC
Wuhan Maple Leaf School 24 June 2010 RMB2,000,000 100% 100% Middle and elementary
武漢楓葉學校 The PRC school education
Dalian Maple Leaf Xianghe Huayuan Preschool 3 December 2010 RMB200,000 100% 100% Preschool education
大連市甘井子區楓葉祥和花園幼兒園 The PRC
Dalian Maple Leaf Zhonghua Mingcheng 10 June 2011 RMB500,000 100% 100% Preschool education
Preschool The PRC
大連西崗楓葉中華名城幼兒園
Zhenjiang Maple Leaf International School 21 June 2011 RMB10,000,000 100% 100% High, middle and
鎮江楓葉國際學校 The PRC elementary school
education
Henan Maple Leaf International School 26 April 2012 RMB2,010,000 100% 100% High, middle and
河南楓葉國際學校 The PRC elementary school
education
Inner Mongolia Ordos Maple Leaf 26 April 2012 RMB30,000 100% 100% Middle and elementary
International School The PRC school education
內蒙古鄂爾多斯楓葉國際學校
Mapleleaf International Academy (Korea) 27 April 2012 Korea won 100% 100% Education related
The Republic of 1,500,000,000 services
Korea
Inner Mongolia Ordos Maple Leaf 17 May 2012 RMB30,000 100% 100% Preschool education
The First Preschool The PRC
楓葉第壹幼兒園
Shanghai Maple Leaf International School 20 March 2013 RMB5,000,000 100% 100% High and middle school
上海楓葉國際學校 The PRC education
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

41. PARTICULARS OF PRINCIPAL SUBSIDIARIES OF THE COMPANY (Continued)

==> picture [460 x 572] intentionally omitted <==

----- Start of picture text -----

Proportion of ownership
Issued and interests and voting power
Date and place of fully paid held by the Group
incorporation/ share capital/ As at 31 August
Name of subsidiary establishment registered capital 2019 2018 Principal activities
Pingdingshan Maple Leaf International 20 January 2014 RMB1,000,000 100% 100% Middle and elementary
School The PRC school education
平頂山楓葉國際學校
Tianjin Huayuan Maple Leaf International 11 September 2014 RMB4,000,000 100% 100% Middle and elementary
School The PRC school education
天津華苑楓葉國際學校
Pingdingshan Maple Leaf International 3 November 2014 RMB100,000 100% 100% Preschool education
School affiliated preschool The PRC
平頂山楓葉國際學校附屬幼兒園
Zhejiang Yiwu Maple Leaf 30 March 2015 RMB500,000 100% 100% High school education
International School The PRC
浙江義烏楓葉國際學校
Yiwu Maple Leaf International 6 November 2014 RMB500,000 100% 100% Middle and elementary
School affiliated School The PRC school education
義烏楓葉國際學校附屬學校
Dalian Maple Leaf International Travel 27 March 2015 RMB3,000,000 100% 100% Vacation cultural
Agency Co Ltd. The PRC exchange and
大連楓葉國際旅行社有限公司 overseas study
services
Dalian Maple Leaf Stationery Co., Ltd. 27 March 2015 RMB500,000 100% 100% Stationery sales related
大連楓葉文化用品有限公司 The PRC services
Dalian Maple Leaf Red Supermarket Co., Ltd. 29 April 2015 RMB2,000,000 100% 100% Retail business
大連楓葉紅超市有限公司 The PRC
Jingzhou 15 July 1998 RMB30,000,000 100% 100% High, middle and
荊州楓葉國際學校 The PRC elementary school
education
Dalian Maple Leaf Catering Co., Ltd. 26 May 2015 RMB1,000,000 100% 100% Catering services
大連楓葉餐飲服務有限公司 The PRC
Zhejiang Yiwu Maple Leaf International 29 May 2015 RMB500,000 100% 100% Preschool education
School affiliated preschool The PRC
浙江義烏楓葉國際學校附屬幼兒園
Dalian Maple Leaf Science and Education 28 July 2015 RMB50,000,000 100% 100% Education related
Industrial Group Co., Ltd The PRC services
大連楓葉科教產業集團有限公司
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

41. PARTICULARS OF PRINCIPAL SUBSIDIARIES OF THE COMPANY (Continued)

==> picture [460 x 584] intentionally omitted <==

----- Start of picture text -----

Proportion of ownership
Issued and interests and voting power
Date and place of fully paid held by the Group
incorporation/ share capital/ As at 31 August
Name of subsidiary establishment registered capital 2019 2018 Principal activities
Dalian Maple Leaf Spring Water Co., Ltd. 4 August 2015 RMB500,000 100% 100% Water sales related
大連楓葉泉飲料有限公司 The PRC services
Dalian Maple Leaf Red Clothing Co., Ltd. 26 August 2015 RMB100,000 100% 100% Clothing related services
大連楓葉紅服裝有限公司 The PRC
Pinghu Maple Leaf International School 2 September 2015 RMB2,000,000 100% 100% Middle and elementary
平湖楓葉國際學校 The PRC school education
Tianjin Maple Leaf Zhonghua Teda Preschool 6 April 2016 RMB1,500,000 100% 100% Preschool education
天津經濟技術開發區楓葉幼稚園 The PRC
Maple Leaf Education North America 4 February 2016 nil 100% 100% Education related
Limited (Note vii) Canada services
Huaian Enlai Maple Leaf International School 18 March 2016 RMB2,000,000 100% 100% Middle and elementary
淮安恩來楓葉國際學校 The PRC school education
Dalian Maple Leaf Red Construction 19 March 2016 RMB50,000,000 100% 100% Construction services
Project Co., Ltd. The PRC
大連楓葉紅建設工程有限公司
Dalian Maple Leaf Dream Architectural 19 March 2016 RMB8,000,000 100% 100% Construction services
Design Institute Co., Ltd. The PRC
大連楓葉夢建築設計院有限公司
Dalian Maple Leaf Beipeng Engineering 24 March 2016 RMB1,000,000 100% 100% Construction services
Supervision Co., Ltd. The PRC
大連北鵬工程監理有限公司
Xian Maple Leaf International School 7 April 2016 RMB2,000,000 100% 100% High, middle and
西鹹新區空港楓葉國際學校 The PRC elementary school
education
Dalian Maple Leaf Red Project 30 June 2016 RMB20,000,000 100% 100% Construction services
Management Co., Ltd. The PRC
大連楓葉紅工程項目管理有限公司
Yiwu Foreign school (Note ii) 1 May 2016 RMB500,000 100% 100% Education related
義烏楓葉外籍人員子女學校 The PRC services
Maple Leaf Education Hillside Pte. Ltd 16 August 2011 SGD 100,000 100% 100% Education related
Singapore services
Maple Leaf Educational Tours and 13 October 2016 nil 100% 100% Education related
Services Ltd. (Note vii) Canada services
楓葉教育旅遊服務有限公司
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

41. PARTICULARS OF PRINCIPAL SUBSIDIARIES OF THE COMPANY (Continued)

==> picture [460 x 582] intentionally omitted <==

----- Start of picture text -----

Proportion of ownership
Issued and interests and voting power
Date and place of fully paid held by the Group
incorporation/ share capital/ As at 31 August
Name of subsidiary establishment registered capital 2019 2018 Principal activities
Dalian Maple Leaf Jinshitan Preschool 18 November 2016 RMB200,000 100% 100% Preschool education
大連金普新區金石灘楓葉幼稚園 The PRC
Hainan Maple Leaf International School 24 January 1994 RMB37,500 100% 100% High, middle and
海南楓葉國際學校 The PRC elementary school
education
Yancheng Maple Leaf International School 2 March 2017 RMB30,000 100% 100% Elementary school
鹽城楓葉國際學校 The PRC education
Huzhou Maple Leaf International School 23 March 2017 RMB2,000,000 100% 100% Middle and elementary
湖州楓葉國際學校 The PRC school education
Liangping Maple Leaf International School 1 March 2017 RMB500,000 100% 100% Middle and elementary
重慶市梁平楓葉國際學校 The PRC school education
Weifang Maple Leaf International School 13 March 2017 RMB500,000 100% 100% Middle and elementary
濰坊楓葉國際學校 The PRC school education
Liangping Maple Leaf International 23 March 2017 RMB30,000 100% 100% Preschool education
Preschool The PRC
重慶市梁平楓葉國際學校附屬幼稚園
Maple Leaf International Academy 30 August 2016 RMB106,000,000 55% 55% High, middle and
— Shenzhen The PRC elementary school
深圳市楓葉學校 education
Haikou Xiuying Maple Leaf Preschool 2 January 2018 RMB100,000 100% 100% Preschool education
海口市秀英區國科園幼稚園 The PRC
Pinghu Maple Leaf Bilingual Preschool 2 January 2018 RMB500,000 100% 100% Preschool education
平湖市楓葉雙語幼稚園 The PRC
Changchunteng 20 December 2017 RMB1,000,000 100% 100% Investment holding
海口常春藤前沿教育管理有限公司 The PRC
Haikou Changchunteng Preschool 11 November 2012 RMB3,000,000 100% 100% Preschool education
海口市常春藤幼稚園 The PRC
Teenager Growth Service Centre 17 May 2018 RMB1,000,000 100% 100% Education-related
— Hainan Meishe The PRC services
海南省美舍青少年成長服務中心
Maple Leaf International Schools 1 September 2004 RMB3,300,000 100% 100% High, middle and
— Haikou Jiangdong The PRC elementary school
海口江東楓葉國際學校 education
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For the Year Ended 31 August 2019

41. PARTICULARS OF PRINCIPAL SUBSIDIARIES OF THE COMPANY (Continued)

==> picture [460 x 564] intentionally omitted <==

----- Start of picture text -----

Proportion of ownership
Issued and interests and voting power
Date and place of fully paid held by the Group
incorporation/ share capital/ As at 31 August
Name of subsidiary establishment registered capital 2019 2018 Principal activities
Maple Leaf International Schools 1 August 2014 RMB3,000,000 100% 100% Elementary school
— Haikou Xiuying The PRC education
海口市秀英區楓葉國際學校
Maple Leaf International Schools 21 March 2013 RMB2,000,000 100% 100% Elementary school
— Haikou Meiwen The PRC education
海口美文楓葉國際學校
Horgos Xiwen Educational Services Co., Ltd 2 January 2018 HKD30,000 100% 100% Education related
霍爾果斯西文教育服務有限公司 The PRC services
Maple leaf Preschool Educational 3 August 2018 RMB20,000,000 100% 100% Education related
Management Co. Ltd. — Dalian The PRC services
大連楓葉學前教育企業管理有限公司
Maple Leaf International Preschool 1 August 2018 RMB200,000 100% 100% Preschool education
— Xi’an The PRC
西鹹新區空港新城楓葉幼稚園
Huzhou Maple Leaf International School 30 August 2018 RMB50,000 100% 100% Preschool education
湖州楓葉國際學校附屬幼稚園 The PRC
Star of Hope Kindergarten — Xiangcheng 1 January 2019 nil 100% N/A Preschool education
襄陽市襄城區希望之星幼兒園 The PRC
(Notes ii/vii)
Star of Hope Kindergarten — Liuhuajian 1 January 2019 nil 100% N/A Preschool education
襄陽市襄城區希望之星六化建幼兒園 The PRC
(Notes ii/vii)
Star of Hope Kindergarten — Tiandi (Note ii) 1 January 2019 RMB13,160,000 100% N/A Preschool education
襄陽市高新技術產業開發區希望之 The PRC
星幼兒園
Star of Hope Kindergarten — Dingfu (Note ii) 1 January 2019 RMB10,610,000 100% N/A Preschool education
襄陽市高新技術產業開發區希望之 The PRC
星鼎府幼兒園
Star of Hope Kindergarten — Qiantang 1 January 2019 RMB 12,110,000 100% N/A Preschool education
襄陽市樊城區希望之星幼兒園 (Note ii) The PRC
Star of Hope Kindergarten — Lvdi 1 January 2019 nil 100% N/A Preschool education
襄陽市樊城區希望之星綠地幼兒園 The PRC
(Notes ii/vii)
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C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9 175

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

41. PARTICULARS OF PRINCIPAL SUBSIDIARIES OF THE COMPANY (Continued)

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Proportion of ownership
Issued and interests and voting power
Date and place of fully paid held by the Group
incorporation/ share capital/ As at 31 August
Name of subsidiary establishment registered capital 2019 2018 Principal activities
Star of Hope Kindergarten — Dongjin 1 January 2019 nil 100% N/A Preschool education
(Notes ii/vii) The PRC
襄陽東津新區 ( 經開區 ) 希望之星幼兒園
Maple Leaf International School Company 21 September 2018 RMB 1,000,000 100% N/A High school education
Limited — Yancheng (Note ii) The PRC
鹽城楓葉國際學校有限公司
Wuhan East Lake New Technology 5 December 2018 RMB 440,000 100% N/A Preschool education
Development Zone Maple Leaf Bilingual The PRC
Preschool Co., Ltd.
武漢東湖新技術開發區楓葉
雙語幼兒園 (Note ii)
Maple Leaf Jiade International School 15 March 2019 RMB 37,100,000 75% N/A Middle and elementary
— Luzhou (Note ii) The PRC school education
瀘州市江陽區楓葉佳德學校
Maple Leaf Jiade International School 17 April 2019 RMB 500,000 100% N/A Middle and elementary
— Jinan (Note ii) The PRC school education
濟南市章丘區楓葉雙語學校
Maple Leaf Jiade International School 5 August 2019 RMB 2,000,000 100% N/A Middle and elementary
— Xiangyang (Note ii) The PRC school education
襄陽高新技術產業開發區楓葉學校
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The above table lists the subsidiaries of the Company which, in the opinion of the directors, principally affected the results for the year or formed a substantial portion of the net assets of the Group. To give details of other subsidiaries would, in the opinion of the directors, result in particulars of excessive length.

Notes:

• (i) The registered capital of Dalian Foreign School and Wuhan Foreign School are nil as there is no capital requirement for foreign schools under the PRC laws and regulations.

• (ii) These subsidiaries were established or acquired by the Group during the year ended 31 August 2019.

• (iii) Except for Maple BVI which are directly held by the Company, all subsidiaries are indirectly held by the Company.

(iv) The English names of the subsidiaries established in the PRC are for identification purpose only. The official names of these subsidiaries are in Chinese.

(v) Except for Dalian High School, Beipeng Software, Dalian Maple Leaf International Travel Agency Co., Ltd., Dalian Maple Leaf Stationery Co., Ltd., Dalian Maple Leaf Red Supermarket Co., Ltd., Dalian Maple Leaf Catering Co., Ltd., Dalian Maple Leaf Science and Education Industrial Group. Co., Ltd, Dalian Maple Leaf Spring Water Co., Ltd., Dalian Maple Leaf Red Clothing Co., Ltd., Dalian Maple Leaf Red Project Management Co., Ltd., Dalian Maple Leaf Beipeng Engineering Supervision Co., Ltd., Dalian Maple Leaf Red Construction Project Co., Ltd. and Dalian Maple Leaf Dream Architectural Design Institute Co., Ltd.,all subsidiaries established in the PRC are controlled by the Group through the Contractual Arrangements, details of which are set out in Note 1.

176 C H I N A M A P L E L E A F E D U C AT I O N A L S Y S T E M S L I M I T E D / A N N U A L R E P O R T 2 0 1 9

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended 31 August 2019

41. PARTICULARS OF PRINCIPAL SUBSIDIARIES OF THE COMPANY (Continued)

Notes: (Continued)

• (vi) The legal forms of Beipeng Software, Dalian Educational Group, Dalian Science and Education, Dalian Maple Leaf International Travel Agency Co., Ltd., Dalian Maple Leaf Stationery Co., Ltd., Dalian Maple Leaf Red Supermarket Co., Ltd., Dalian Maple Leaf Catering Co., Ltd., Dalian Maple Leaf Science and Education Industrial Group. Co., Ltd, Dalian Maple Leaf Spring Water Co., Ltd., Dalian Maple Leaf Red Clothing Co., Ltd., Dalian Maple Leaf Red Project Management Co., Ltd., Dalian Maple Leaf Beipeng Engineering Supervision Co., Ltd., Dalian Maple Leaf Red Construction Project Co., Ltd., Dalian Maple Leaf Dream Architectural Design Institute Co., Ltd, Hainan Science, Yisidun, Haikou Changchunteng Qianyan Educational Management Co., Ltd., Haikou Meicheng Qianyan Educational Management Co., Ltd., Haikou Meishe Qianyan Educational Management Co., Ltd., Haikou Meihua Qianyan Educational Management Co., Ltd., Haikou Meiwen Qianyan Educational Technology Co., Ltd., Maple leaf Educational Service Co. Ltd. — Horgos and Maple leaf Preschool Educational Management Co. Ltd. — Dalian, Luzhou Qizhong Jiade Education Investment Pty Ltd and Xiangyang Junpeng Education Consulting Co. Ltd were limited liability companies incorporated in the PRC. All other entities established in the PRC are schools, including high schools, middle schools, elementary schools and preschools.

• (vii) The registered capital of these subsidiaries are nil as there is no capital requirement under the Local laws and regulations.

• (viii) None of the subsidiaries have issued any debt securities at the end of 31 August 2019 and 2018.

42. APPROVAL OF THESE CONSOLIDATED FINANCIAL STATEMENTS

These consolidated financial statements were approved and authorised for issue by the board of directors on 28 November 2019.