Scholar Education Group — Capital/Financing Update 2020

Dec 28, 2020

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

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SCHOLAR EDUCATION GROUP 思 考 樂 教 育 集 團

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1769)

ADOPTION OF SHARE AWARD SCHEME AND

SHARE PURCHASE PURSUANT TO SHARE AWARD SCHEME

ADOPTION OF SHARE AWARD SCHEME

The Board is pleased to announce that, on 28 December 2020, the Board approved the adoption of the Scheme. The purposes and objectives of the Scheme are (i) to recognise and motivate the contributions by certain Eligible Participants and to provide them with incentives in order to retain them for the continual operation and development of the Group; (ii) to attract suitable personnel for further development of the Group; and (iii) to provide certain Eligible Participants with a direct economic interest in attaining a long-term relationship with the Group.

The Scheme does not constitute a share option scheme or an arrangement involving the grant of options to participants over new Shares or other new securities of the Company which is analogous to a share option scheme for the purpose of Chapter 17 of the Listing Rules and is not required to comply with the rules thereunder. No approval from the Shareholders is required for the adoption of the Scheme.

SHARE PURCHASE PURSUANT TO SHARE AWARD SCHEME

The Board also resolved to provide from time to time but in any event a total sum of not exceeding HK$100 million for the Trustee to purchase existing Shares at appropriate time and hold such Shares for future award of Shares under the Scheme.

The Board believes that the current share price of the Company significantly undervalues the Company’s performance and underlying value, which represents a good opportunity to purchase Shares for future award of Shares under the Scheme. The Company is confident in its own business outlook and prospects. The Shares purchased will be provided as the Shares for the Scheme to continue providing incentive to certain Eligible Participants in the future.

The Board believes that the Share Purchase as incentive will create value for the Shareholders, and healthy current financial position of the Group enables the Company to provide the necessary funding to the Trustee to carry out the Share Purchase while maintaining sufficient financial resources for continued growth of the Group’s operations.

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ADOPTION OF SHARE AWARD SCHEME

The Board is pleased to announce that, on 28 December 2020, the Board approved the adoption of the Scheme.

A summary of the Scheme Rules is set out below:

Purposes and Objectives

The purposes and objectives of the Scheme are (i) to recognise the contributions by certain Eligible Participants and to provide them with incentives in order to retain them for the continual operation and development of the Group; (ii) to attract suitable personnel for further development of the Group; and (iii) to provide certain Eligible Participants with a direct economic interest in attaining a long-term relationship with the Group.

Duration

Subject to any early termination as may be determined by the Board pursuant to Scheme Rules, the Scheme shall be valid and effective from the Adoption Date to the date the last of the Awarded Shares has been vested and transferred to the relevant Selected Participant or has lapsed in accordance with the Scheme Rules provided that no Award shall be made on or after the 10th anniversary date of the Adoption Date.

Administration

The Scheme shall be subject to the administration of the Board in accordance with the Scheme Rules and the terms of the Trust Deed. The Trustee shall hold the trust fund (including the Awarded Shares and related income) in accordance with the terms of the Trust Deed. The Board may from time to time issue implementation and operation manual for the Scheme.

Operation

The Board may, at any time and from time to time, cause to be paid by the Group an amount of cash to the Trustee for the purchase of Shares on the market at the prevailing market price for the operation of the Scheme. Once purchased, the Shares are to be held by the Trustee for the award of Shares under the Scheme. As no new Shares will be issued for the award of Shares under the Scheme, the Operation of the Scheme is not expected to have a dilutive impact to the Shareholders.

Scheme Limit

As the operation of the Scheme will not involve any issuance of new Shares and is not expected to have any dilutive impact to the Shareholders, the Board does not consider that it is necessary to set a scheme limit for the Scheme. However, the maximum number of shares which may be awarded to a Selected Participant under the Scheme shall not exceed 1% of the issued share capital of the Company as at the Adoption Date.

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Award of Awarded Shares

Subject to the Scheme Rules, the Board may, from time to time, at its sole and absolute discretion select any Eligible Participant (other than an Excluded Participant) for participation in the Scheme as a Selected Participant. As at the date of this announcement, the Board has not identified any Eligible Participant for the grant of any Award.

In determining the number of Awarded Shares for a Selected Participant, the Board may take into consideration matters including (without limitation), the general financial condition of the Group and the rank and performance of the relevant Selected Participant.

The Board is entitled to impose any conditions (including, without limitation, the performance, operating and financial targets and other criteria such as payment of grant price, if any, to be satisfied by the Selected Participant), as it deems appropriate in its sole and absolute discretion before the Awarded Shares can vest. The Board shall inform (i) such Selected Participant the number of Awarded Shares, the vesting conditions and the vesting schedule; and (ii) the Trustee the relevant information of the Selected Participant and the relevant conditions of the Awarded Shares.

No Awards will be granted to any Excluded Participant, including any connected person of the Company at the time of the proposed grant.

Any Award made under the Scheme Rules shall be personal to the Selected Participant to whom it is made and shall not be assignable or transferrable and, subject to the Scheme Rules, no Selected Participant shall in any way sell, transfer, charge, mortgage, encumber or create any interest in favour of any other person over or in relation to such Award or the related income or any of the Returned Shares under the Scheme prior to the Vesting Date.

Vesting of Awarded Shares

Subject to the terms and conditions of the Scheme and the fulfillment of all relevant vesting conditions, the respective Awarded Shares held by the Trustee on behalf of a Selected Participant pursuant to the provision of the Scheme Rules shall vest in such Selected Participant in accordance with the vesting schedule (if any) and the Trustee shall cause the Awarded Shares to be transferred to such Selected Participant on the Vesting Date(s), provided that the Selected Participant remains at all times after the grant of the Award and on each relevant Vesting Date an Eligible Participant.

Where any Awarded Shares and the related income which is in the form of Shares are not vested in any Selected Participant for whatever reasons in accordance with the Scheme Rules, all such unvested Awarded Shares and the related income shall become and for all intents and purposes be deemed to become the Returned Shares for the purposes of the Scheme and in accordance with the Scheme Rules.

In respect of a Selected Participant who retired by agreement with a member of the Group at any time prior to or on the Vesting Date, all the Awarded Shares of the relevant Selected Participant shall be deemed to be vested on the day immediately prior to his or her retirement with the relevant member of the Group.

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Disqualification of Selected Participant

In the event that prior to or on the Vesting Date, a Selected Participant is found to be an Excluded Participant or is deemed by the Board in its sole and absolute discretion to cease to be an Eligible Participant under the following circumstances:

• (a) where such person has committed any act of fraud or dishonesty or misconduct;

• (b) where such person has been declared or adjudged to be bankrupt by a competent court or governmental body or has failed to pay his or her debts as they fall due (after the expiry of any applicable grace period) or has entered into any arrangement or composition with his or her creditors generally or an administrator has taken possession of any of his or her assets;

• (c) where such person has been convicted of any criminal offence; or

• (d) where such person has been convicted of or is being held liable for any offence under or any breach of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) or other securities laws or regulations in Hong Kong or any other applicable laws or regulations in force from time to time.

Lapse of Award

(1) Total Lapse

In the event that prior to or on the Vesting Date, under the following circumstances and subject to the terms of the Scheme, the Award shall, unless the Board otherwise agrees, lapse forthwith and the Awarded Shares of such Award shall not vest on the relevant Vesting Date but shall become Returned Shares for the purpose of the Scheme:

• (i) the relevant Selected Participant dies or ceases to be an Eligible Participant;

• (ii) the Subsidiary by which a Selected Participant is employed ceases to be a Subsidiary of the Company (or of a member of the Group); or

• (iii) an order for the winding-up of the Company is made or a resolution is passed for the voluntary winding-up of the Company.

(2) Partial Lapse

In the event that prior to or on the Vesting Date, under the following circumstances and subject to the terms of the Scheme, the relevant part of the Award made to such Selected Participant shall, unless the Board otherwise agrees, lapse forthwith and the relevant Awarded Shares shall not vest on the relevant Vesting Date but shall become Returned Shares for the purpose of the Scheme:

• (i) a Selected Participant is found to be an Excluded Participant; or

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• (ii) a Selected Participant fails to return duly executed transfer documents prescribed by the Trustee for the relevant Awarded Shares within the stipulated period.

In case there is any lapsed Award, the Trustee shall hold the Returned Shares subject to future grants to be made by the Board in its sole and absolute discretion.

Restrictions

No Award shall be made by the Board pursuant to the Scheme Rules and no payment shall be made to the Trustee and no instructions to purchase Shares shall be given to the Trustee under the Scheme where any Director is in possession of inside information in relation to the Group or where dealings in Shares by Directors are prohibited under any code or requirement of the Listing Rules and all applicable laws from time to time, including the Model Code for Securities Transactions by Directors of Listed Companies contained in the Listing Rules.

Alteration of the Scheme

The Scheme may be altered in any respect by a resolution of the Board provided that no such alteration shall operate to affect materially and adversely any subsisting rights of any Selected Participant under the Scheme Rules. Written notice of any amendment to the Scheme shall be given to all Selected Participants and the Trustee.

Voting Rights

The Trustee shall not exercise the voting rights in respect of any Shares held by it as nominee or under the Trust (if any).

Termination

If not otherwise extended by the Board, the Scheme shall terminate on the earlier of (i) the 10th anniversary date of the Adoption Date; and (ii) such date of early termination as determined by the Board provided that such termination shall not affect any subsisting rights of any Selected Participant under the Scheme.

Upon termination of the Scheme, all Shares remaining in the trust fund of the Trust shall be sold by the Trustee. The net proceeds of aforesaid sale and such other funds remaining in the Trust shall be remitted to the Company forthwith after the sale. For the avoidance of doubt, the Trustee may not transfer any Shares to the Company nor may the Company otherwise hold any Shares whatsoever (other than its interest in the proceeds of sale of such Shares mentioned above).

SHARE PURCHASE PURSUANT TO SHARE AWARD SCHEME

On 28 December 2020, the Board also resolved to provide from time to time but in any event a total sum of not exceeding HK$100 million for the Trustee to purchase existing Shares on the market at the prevailing market price (the ‘‘Share Purchase’’) at appropriate time and hold such Shares for future award of Shares under the Scheme.

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The Board believes that the current share price of the Company significantly undervalues the Company’s performance and underlying value, which represents a good opportunity to purchase Shares for future award of Shares under the Scheme. The Company is confident in its own business outlook and prospects. The Shares purchased will be provided as the Shares for the Scheme to continue providing incentive to certain Eligible Participants in the future.

The Board believes that the Share Purchase as incentive will create value for the Shareholders, and healthy current financial position of the Group enables the Company to provide the necessary funding to the Trustee to carry out the Share Purchase while maintaining sufficient financial resources for continued growth of the Group’s operations.

Based on the closing price of the Shares as at the date of this announcement, the maximum number of Shares in board lot that can be purchased is approximately 8,264,000 Shares, which represents approximately 1.49% of the issued share capital of the Company as at the date of this announcement.

The Board will closely monitor the operation of the Scheme and the status of the Share Purchase having regard to, among other thing, the market price of the Shares, the number of Shares purchased by the Trustee and the number of Shares needed to satisfy the Awards granted (and to be granted) under the Scheme and adjust the scale of the Share Purchase from time to time. In particular, the Board may increase the scale of the Share Purchase if the Shares continue to trade at a level that reflects, in the opinion of the Board, a significant undervaluation of the Company and it remains in the interest of the Company for the Trustee to make such increased purchases of Shares to achieve the purposes and objectives of the Scheme. With a view to optimising the capital resources of the Group for the longterm sustainable development of the Group, the Board may instruct the Trustee to halt the Share Purchase when the market price of the Shares reaches a level that the Board considers no longer reflects an undervaluation of the Company and consider other alternatives to achieve the said purposes and objectives.

As at the date of this announcement, no Shares have been awarded pursuant to the Scheme. The Board will from time to time review and determine at its sole and absolute discretion such number of the Shares to be awarded with such vesting conditions it may deem appropriate and the number of Shares to be further purchased from the market under the Scheme.

LISTING RULES IMPLICATIONS

The Scheme does not constitute a share option scheme or an arrangement involving the grant of options to participants over new Shares or other new securities of the Company that is analogous to a share option scheme for the purpose of Chapter 17 of the Listing Rules and is not required to comply with the rules thereunder. No approval from the Shareholders is required for the adoption of the Scheme.

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The Trustee will not become a connected person of the Company under Chapter 14A of the Listing Rules for the following reasons:

• (a) to the Company’s best knowledge and belief after making reasonable enquiries, the Trustee is a professional trustee engaged by the Company for the Scheme. The Trustee and its ultimate beneficial owner(s) are third parties independent of the Company;

• (b) the Trustee shall not exercise the voting rights in respect of any Shares held by it under the Deed, and the Trustee will not, in any event, become a substantial shareholder of the Company; and

• (c) no Awards will be granted to any Excluded Participant, including any connected person of the Company at the time of the proposed grant. Thus, the Trustee will not become an associate of any connected person of the Company under Rule 14A.12(1)(b) of the Listing Rules.

Furthermore, the Shares held by the Trustee will be regarded as being ‘‘in public hands’’ under the Listing Rules. On account of (c) above, the Trustee will not hold any Awarded Shares on trust for any Director. Therefore, the Trustee will not become a close associate of any Director, and as a corollary, the Trustee will not become a core connected person of the Company for the purpose of Rule 8.24 of the Listing Rules.

DEFINITIONS

• ‘‘Adoption Date’’ 28 December 2020, being the date on which the Scheme Rules are adopted by the Board for the establishment of the Scheme

• ‘‘Award’’ an award of Shares by the Board to a Selected Participant pursuant to the Scheme Rules

• ‘‘Awarded Share(s)’’ in respect of a Selected Participant, such number of Shares determined by the Board and granted to such Selected Participant pursuant to the Scheme Rules

• ‘‘Board’’ the board of Directors or a committee or sub-committee or person(s) as from time to time delegated with the power and authority by the board of Directors to administer the Scheme

• ‘‘Company’’ Scholar Education Group, a company incorporated in the Cayman Islands with limited liability on 7 February 2018

• ‘‘Director(s)’’ the director(s) of the Company

• ‘‘Eligible Participant’’ any employee (whether full time or part time) of any member of the Group, in each case, in the sole and absolute discretion of the Board, who have contributed or will contribute to the growth and development of the Group

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‘‘Excluded Participant’’	(i) at the time of the proposed grant of an Award, any connected
	person of the Company; or (ii) any Eligible Participant who is resident
	in a place where the award of the Awarded Shares and/or the vesting
	and transfer of the Awarded Shares pursuant to the terms of the
	Scheme is not permitted under the laws and regulations of such place
	or where in the view of the Board or the Trustee (as the case may be),
	compliance with applicable laws and regulations in such place makes it
	necessary or expedient to exclude such Eligible Participant
‘‘Group’’	the Company with its subsidiaries and consolidated affiliated entities
‘‘HK$’’	Hong Kong dollars, the lawful currency for the time being of Hong
	Kong
‘‘Hong Kong’’	the Hong Kong Special Administrative Region of the PRC
‘‘Listing Rules’’	the Rules Governing the Listing of Securities on the Stock Exchange
‘‘Returned Shares’’	such Awarded Shares or the related income which are not vested and/or
	are forfeited in accordance with the terms of the Scheme or such
	Shares being deemed to be Returned Shares in accordance with the
	terms of the Scheme and the Trust Deed
‘‘Scheme’’	the ‘‘Share Award Scheme’’ of the Company constituted by the Scheme
	Rules
‘‘Scheme Rules’’	the rules relating to the Scheme, as approved and adopted by the Board
	on the Adoption Date in its present form or as amended from time to
	time
‘‘Selected Participant(s)’’	Eligible Participant(s) selected by the Board pursuant to the Scheme
	Rules for participating in the Scheme
‘‘Share(s)’’	ordinary share(s) of US$0.001 each in the share capital of the
	Company
‘‘Shareholder(s)’’	holder(s) of the Share(s)
‘‘Stock Exchange’’	The Stock Exchange of Hong Kong Limited
‘‘Subsidiary’’	a company which is for the time being and from time to time a
	subsidiary of the Company or a consolidated affiliated entity operated
	through contractual arrangements
‘‘Trust’’	the trust constituted by the Trust Deed

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‘‘Trust Deed’’ a trust deed dated 28 December 2020 and entered into between the Company as settlor and the Trustee as trustee (as restated, supplemented and amended from time to time) ‘‘Trustee’’ Kastle Limited, and any additional or replacement trustees, being the trustee or trustees for the time being declared in the Trust Deed

• ‘‘Vesting Date’’ in respect of a Selected Participant, the date on which his or her entitlement to the Awarded Shares is vested in such Selected Participant in accordance with the Scheme Rules

• ‘‘%’’ per cent

In this announcement, the terms ‘‘associate’’, ‘‘close associate’’, ‘‘connected person’’ and ‘‘substantial shareholder’’ have the meanings given to such terms in the Listing Rules, unless the context otherwise requires.

By order of the Board SCHOLAR EDUCATION GROUP CHEN QIYUAN Chairman and Executive Director

Hong Kong, 28 December 2020

As at the date of this announcement, the Board comprises:

Executive Directors

Mr. Chen Qiyuan (chairman) Mr. Chen Hongyu Mr. Qi Mingzhi (chief executive officer) Mr. Xu Chaoqiang

Independent non-executive Directors Mr. Huang Victor Dr. Liu Jianhua Mr. Yang Xuezhi

Non-executive Director

Mr. Shen Jing Wu (vice chairman)

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