☐ |
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☒ |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐ |
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Title of each class
|
Trading
Symbol(s)
|
Name of each exchange on which registered
|
||
American Depositary Shares, each representing four
ordinary shares, par value $0.0001 per share |
DL
|
New York Stock Exchange, Inc.
|
Large accelerated filer | ☐ | Accelerated filer |
☒
|
|||
Non-accelerated filer
|
☐ | Emerging growth company | ☐ |
U.S. GAAP ☒ |
International Financial Reporting Standards as issued by the
International Accounting Standards Board ☐
|
Other ☐ |
|
|
1
|
|
|
|
|
1
|
|
|
|
|
2
|
|
|
|
|
3
|
|
|
|
|
3
|
|
|
|
|
3
|
|
|
|
|
49
|
|
|
|
|
89
|
|
|
|
|
89
|
|
|
|
|
121
|
|
|
|
|
134
|
|
|
|
|
135
|
|
|
|
|
136
|
|
|
|
|
136
|
|
|
|
|
144
|
|
|
|
|
145
|
|
|
|
|
146
|
|
|
|
|
146
|
|
|
|
|
146
|
|
|
|
|
147
|
|
|
|
|
149
|
|
|
|
|
149
|
|
|
|
|
149
|
|
|
|
|
149
|
|
|
|
|
149
|
|
|
|
|
150
|
|
|
|
|
150
|
|
|
|
|
150
|
|
|
|
|
150
|
|
|
|
|
150
|
|
|
|
|
150
|
|
|
|
|
150
|
|
|
|
|
151
|
|
• |
all references to years are to the calendar year from January 1 to December 31 and references to our fiscal year or years are to the fiscal year or years ended September 30;
|
• |
“we,” “us,” “our company,” “our,” and “CDEL” refer to China Distance Education Holdings Limited and its subsidiaries and PRC affiliated entity, Beijing Champion
Hi-Tech
Co., Ltd., or Beijing Champion, and its subsidiaries, and Beijing Champion Healthcare Education Technology Co., Ltd., or Champion Healthcare Education, as the context requires;
|
• |
“Zhengbao Yucai” refers to Beijing Zhengbao Yucai Education Technology Company Limited by Shares.
|
• |
“course enrollment” for a period refers to the cumulative total number of
fee-based
courses enrolled in by our course participants during such period, counting each and every course enrolled in by a single student as one course enrollment;
|
• |
“China,” “Chinese” and “PRC” refers to the People’s Republic of China, excluding, for purposes of this annual report only, Taiwan and the Special Administrative Regions of Hong Kong and Macau;
|
• |
all references to “Renminbi” or “RMB” are to the legal currency of China, and all references to “U.S. dollar,” “dollar,” “$” or “US$” are to the legal currency of the United States; and
|
• |
“U.S. GAAP” refers to generally accepted accounting principles in the United States.
|
• |
our goals and growth strategies;
|
• |
our future prospects and market acceptance of our courses and other products and services;
|
• |
our future business development and results of operations;
|
• |
projected revenues, profits, earnings and other estimated financial information;
|
• |
projected enrollment numbers;
|
• |
our plans to expand and enhance our courses and other products and services;
|
• |
the anticipated benefits of acquisition of Jiangsu Zhengbao Asset Financial Advisory Co., Ltd. (formerly known as Nanjing Xin Asset Financial Advisory Co., Ltd.), or Jiangsu Asset, and Beijing Ruida Chengtai Education Technology Co., Ltd., or Beijing Ruida, and other strategic investments;
|
• |
the anticipated benefits of the disposal of Beijing Champion Tax Management and Advisory Co., Ltd., or Champion Tax Advisory, or “Tax School Program” (now known as Beijing Champion Yuanjian Education Technology Co., Ltd., or Champion Yuanjian);
|
• |
competition in the education and test preparation markets;
|
• |
Chinese laws, regulations and policies, including those applicable to the Internet, Internet content providers, the education and telecommunications industries, mergers and acquisitions, taxation and foreign exchange;
|
• |
the impact of the outbreak of the coronavirus disease
(“COVID-19”);
and
|
• |
the impact of the completion or termination of the currently pending going-private transaction with respect to the Company described in “Item 4.A. History and Development of the Company — Proposed Going-private Transaction.”
|
ITEM 3.
|
KEY INFORMATION
|
Years Ended September 30,
|
||||||||||||||||||||
2016
|
2017
|
2018
|
2019
|
2020
|
||||||||||||||||
(In thousands of $, except share, per share and per ADS data)
|
||||||||||||||||||||
Selected Consolidated Statement of Operations Data:
|
||||||||||||||||||||
Net revenues:
|
||||||||||||||||||||
Online education services
|
93,923 | 95,503 | 117,026 | 145,917 | 159,338 | |||||||||||||||
Books and reference materials
|
8,067 | 8,980 | 10,213 | 27,372 | 22,061 | |||||||||||||||
Others
|
15,558 | 26,505 | 39,429 | 38,533 | 28,159 | |||||||||||||||
Total net revenues
|
117,548 | 130,988 | 166,668 | 211,822 | 209,558 | |||||||||||||||
Cost of sales:
|
||||||||||||||||||||
Cost of services and others
(5)
|
(43,796 | ) | (50,540 | ) | (78,936 | ) | (85,252 | ) | (81,976 | ) | ||||||||||
Cost of tangible goods sold
|
(4,538 | ) | (6,872 | ) | (8,947 | ) | (19,489 | ) | (19,622 | ) | ||||||||||
Total cost of sales
|
(48,334 | ) | (57,412 | ) | (87,883 | ) | (104,741 | ) | (101,598 | ) | ||||||||||
Gross profit
|
69,214 | 73,576 | 78,785 | 107,081 | 107,960 | |||||||||||||||
Operating expenses:
|
||||||||||||||||||||
Selling expenses
(5)
|
(24,517 | ) | (34,910 | ) | (44,717 | ) | (61,460 | ) | (69,848 | ) | ||||||||||
General and administrative expenses
(5)
|
(16,778 | ) | (19,468 | ) | (21,253 | ) | (24,919 | ) | (25,478 | ) | ||||||||||
Impairment of goodwill
|
— | — | — | (1,517 | ) | — | ||||||||||||||
Total operating expenses
|
(41,295 | ) | (54,378 | ) | (65,970 | ) | (87,896 | ) | (95,326 | ) | ||||||||||
Change in fair value in connection with business combination
|
— | — | 84 | 695 | — | |||||||||||||||
Other operating income
|
806 | 1,912 | 3,051 | 2,968 | 6,155 | |||||||||||||||
Operating income
|
28,725 | 21,110 | 15,950 | 22,848 | 18,789 | |||||||||||||||
Interest income (expense), net
|
1,465 | 482 | (809 | ) | (612 | ) | 1,534 | |||||||||||||
Exchange gain (loss)
|
2,462 | 128 | 2,476 | 3,296 | (5,261 | ) | ||||||||||||||
Impairment loss from long-term investments
|
— | (679 | ) | (2,835 | ) | (6,920 | ) | (910 | ) | |||||||||||
Gain from disposal of an investment
|
— | — | — | 318 | — | |||||||||||||||
Gain from deconsolidation of a subsidiary
|
— | — | — | 6,869 | — | |||||||||||||||
Income before income taxes
|
32,652 | 21,041 | 14,782 | 25,799 | 14,152 | |||||||||||||||
Income tax expense
|
(6,150 | ) | (4,620 | ) | (2,307 | ) | (8,121 | ) | (5,460 | ) | ||||||||||
Loss from equity method investments
|
(91 | ) | (153 | ) | (172 | ) | (1,484 | ) | (555 | ) | ||||||||||
Net income
|
26,411 | 16,268 | 12,303 | 16,194 | 8,137 | |||||||||||||||
Less: Net income (loss) attributable to noncontrolling interest
|
121 | 1,333 | 677 | (5,060 | ) | (2,293 | ) | |||||||||||||
Net income attributable to China Distance Education Holdings Limited
|
26,290 | 14,935 | 11,626 | 21,254 | 10,430 | |||||||||||||||
Net income per ordinary share:
|
||||||||||||||||||||
Net income attributable to China Distance Education Holdings Limited shareholders
|
||||||||||||||||||||
Basic
|
0.19 | 0.11 | 0.09 | 0.16 | 0.08 | |||||||||||||||
Diluted
|
0.19 | 0.11 | 0.09 | 0.16 | 0.08 | |||||||||||||||
Dividends declared per share
|
0.225 | 0.1125 | 0.1125 | — | 0.145 |
Years Ended September 30,
|
||||||||||||||||||||
2016
|
2017
|
2018
|
2019
|
2020
|
||||||||||||||||
(In thousands of $, except share, per share and per ADS data)
|
||||||||||||||||||||
Net income per ADS:
|
||||||||||||||||||||
Net income attributable to China Distance Education Holdings Limited shareholders
(1)
|
||||||||||||||||||||
Basic
|
0.77 | 0.45 | 0.35 | 0.64 | 0.31 | |||||||||||||||
Diluted
|
0.76 | 0.45 | 0.35 | 0.64 | 0.31 | |||||||||||||||
Weighted average shares used in calculating net income per share:
|
||||||||||||||||||||
Basic
|
136,497,929 | 131,432,211 | 132,363,620 | 133,060,900 | 133,984,929 | |||||||||||||||
Diluted
|
138,465,944 | 133,203,255 | 133,117,155 | 134,138,117 | 135,232,224 | |||||||||||||||
Other Consolidated Financial Data
|
||||||||||||||||||||
Gross Margin
(2)
|
58.9 | % | 56.2 | % | 47.3 | % | 50.6 | % | 51.5 | % | ||||||||||
Operating Margin
(3)
|
24.4 | % | 16.1 | % | 9.6 | % | 10.8 | % | 9.0 | % | ||||||||||
Net Margin
(4)
|
22.4 | % | 11.4 | % | 7.0 | % | 10.0 | % | 5.0 | % |
(1)
|
One ADS represents four ordinary shares.
|
(2)
|
Gross margin represents gross profit as a percentage of net revenues.
|
(3)
|
Operating margin represents operating income as a percentage of net revenues.
|
(4)
|
Net margin represents net income attributable to CDEL as a percentage of net revenues.
|
(5)
|
Includes the following amounts of share-based compensation expenses for the periods indicated:
|
Years Ended September 30,
|
||||||||||||||||||||
2016
|
2017
|
2018
|
2019
|
2020
|
||||||||||||||||
(in thousands of $)
|
||||||||||||||||||||
Cost of services and others
|
162 | 164 | 161 | 23 | 139 | |||||||||||||||
Selling expenses
|
84 | 85 | 80 | 10 | 58 | |||||||||||||||
General and administrative expenses
|
1,769 | 1,862 | 2,065 | 1,972 | 2,421 | |||||||||||||||
Total share-based compensation expenses
|
2,015 | 2,111 | 2,306 | 2,005 | 2,618 |
As of September 30,
|
||||||||||||||||||||
2016
|
2017
|
2018
|
2019
|
2020
|
||||||||||||||||
(in thousands of $)
|
||||||||||||||||||||
Selected Consolidated Balance Sheet Data:
|
||||||||||||||||||||
Cash and cash equivalents
|
53,677 | 60,526 | 30,826 | 67,977 | 80,056 | |||||||||||||||
Term deposits
|
— | — | — | — | 13,440 | |||||||||||||||
Restricted cash – current
|
15,547 | 34,855 | 51,736 | 38,358 | 4,212 | |||||||||||||||
Restricted cash –
non-current
|
— | — | — | — | 16,849 | |||||||||||||||
Short-term investments
|
1,278 | 5,261 | 17,073 | 22,118 | 20,343 | |||||||||||||||
Long-term investments
|
3,079 | 43,631 | 33,837 | 25,379 | 26,324 | |||||||||||||||
Total assets
|
148,920 | 224,551 | 328,925 | 355,350 | 398,139 | |||||||||||||||
Short-term bank borrowings
|
15,551 | 29,965 | 50,975 | 38,502 | 4,012 | |||||||||||||||
Deferred revenue – current
|
36,332 | 50,506 | 78,194 | 94,202 | 105,953 | |||||||||||||||
Refundable fees – current
|
862 | 1,074 | 13,837 | 435 | 1,729 | |||||||||||||||
Deferred revenue –
non-current
|
— | — | — | 33,564 | 33,928 | |||||||||||||||
Refundable fees –
non-current
|
— | — | — | 2,440 | 2,602 | |||||||||||||||
Long-term bank borrowing
|
— | 19,930 | 12,027 | — | 16,000 | |||||||||||||||
Total liabilities
|
92,448 | 151,739 | 219,160 | 231,604 | 271,195 | |||||||||||||||
Total China Distance Education Holdings Limited shareholders’ equity
|
45,236 | 48,783 | 44,274 | 72,831 | 77,975 | |||||||||||||||
Total noncontrolling interest
|
11,236 | 24,029 | 65,491 | 50,915 | 48,969 | |||||||||||||||
Total liabilities and equity
|
148,920 | 224,551 | 328,925 | 355,350 | 398,139 | |||||||||||||||
Ordinary shares
|
13 | 13 | 13 | 13 | 14 |
• |
If we are unable to continue to attract course participants to enroll in our courses, or to charge our course participants competitive but profitable fees, our revenues may decline and we may not be able to maintain profitability.
|
• |
If we fail to develop and introduce new courses, services and products that meet our target course participants’ expectations, or adopt new technologies important to our business, our competitive position and ability to generate revenues may be materially and adversely affected.
|
• |
If we fail to maintain and enhance recognition of our brands, we may face difficulty in obtaining new business partners and course participants, and our business reputation and operating results may be harmed.
|
• |
Our business could be adversely affected if there are changes in the perceived difficulty, requirements or formats of professional examinations, courses and continuing education in China, or if certain professional qualifications and certificates are cancelled by the government authorities.
|
• |
Our business could be adversely affected if there are changes in the timing of release of examination policies.
|
• |
Our business is dependent on our lecturers comprised primarily of academics and experienced practitioners within their respective industries who are typically engaged on a part-time contractual basis.
|
• |
Our business, financial condition and results of operations have been and are likely to continue to be materially and adversely affected by the outbreak of
COVID-19.
|
• |
The consummation of the proposed going-private transaction is uncertain, and the announcement and pendency of the transaction could have an adverse effect on our business, results of operations and financial condition.
|
• |
Failure to attract and retain qualified personnel and experienced senior management could disrupt our operations and adversely affect our business and competitiveness.
|
• |
Our financial performance and prospects could be affected by natural calamities or health epidemics.
|
• |
Substantial uncertainties and restrictions exist with respect to the interpretation and application of PRC laws and regulations relating to the distribution of Internet content in China. If the PRC government finds that the structure we have adopted for our business operations does not comply with PRC laws and regulations, we could be subject to severe penalties, including the shutting down of our websites.
|
• |
Our contractual arrangements may be subject to national security review under PRC laws and regulations and, thus, be challenged by relevant regulatory authorities.
|
• |
We rely on contractual arrangements with our affiliated PRC entities and their shareholders for our China operations, which may not be as effective in providing operating control as direct ownership.
|
• |
New legislation or changes in the PRC regulatory requirements regarding private education may affect our business operations and prospects.
|
• |
The shareholders of our affiliated PRC entities may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.
|
• |
We may rely principally on dividends and other distributions on equity paid by our PRC subsidiaries for our cash requirements. Limitations on the ability of our PRC subsidiaries to transfer funds to us could materially and adversely affect our ability to grow, make investments or acquisitions, pay dividends, and otherwise fund and conduct our businesses.
|
• |
If any of our affiliated entities fails to obtain and maintain the licenses and approvals required to conduct its internet related business in China, our business, financial condition and results of operations may be materially and adversely affected.
|
• |
Any changes in the PRC foreign investment legal regime may materially and adversely affect our operations and the contractual arrangements.
|
• |
PRC economic, political and social conditions, as well as changes in any government policies, laws and regulations, could adversely affect the overall economy in China or the prospects of the education market, which in turn could adversely affect our business.
|
• |
Evolution of and uncertainties in the interpretation and enforcement of PRC laws and regulations could adversely impact our corporate structure and business and limit the legal protections available to you and us.
|
• |
Fluctuations in exchange rates could result in foreign currency exchange losses.
|
• |
The discontinuation of any of the preferential tax treatments currently available us could materially increase our tax liabilities.
|
• |
The audit reports included in this annual report are prepared by an auditor who is not inspected by the Public Company Accounting Oversight Board and, as such, you are deprived of the benefits of such inspection. In addition, various legislative and regulatory developments related to U.S.-listed China-based companies due to lack of PCAOB inspection and other developments may have a material adverse impact on our listing and trading in the U.S. and the trading prices of our ADSs.
|
• |
Stock prices of companies with business operations primarily in China have fluctuated widely in recent years, and the trading prices of our ADSs are likely to be volatile, which could result in substantial losses to investors.
|
• |
The sale or availability for sale of substantial amounts of our ADSs could adversely affect their market price.
|
• |
The voting rights of holders of ADSs must be exercised in accordance with the terms of the deposit agreement, and the procedures established by the depositary. The process of voting through the depositary may involve delays that limit the time available to you to consider proposed shareholders’ actions and also may restrict your ability to subsequently revise your voting instructions.
|
• |
We are a Cayman Islands company and, because judicial precedent regarding the rights of shareholders is more limited under Cayman Islands law than under U.S. federal or state laws, holders of ADSs may have less protection of shareholder rights than they would under U.S. federal or state laws.
|
• |
Certain judgments obtained against us by our shareholders may not be enforceable.
|
• |
breakdowns or system failures resulting in a prolonged shutdown of our servers, including failures attributable to power shutdowns, or attempts to gain unauthorized access to our systems, which may cause loss or corruption of data or malfunctions of software or hardware;
|
• |
disruption or failure in the national backbone network, which would make it impossible for visitors and course participants to log on to our websites;
|
• |
damage from fire, flood, power loss and telecommunications failures; and
|
• |
any infection by or spread of computer virus.
|
• |
investors’ perception of, and demand for, securities of companies which primarily provide professional education and test preparation courses;
|
• |
conditions of the U.S. and other capital markets in which we may seek to raise funds;
|
• |
our future results of operations, financial condition and cash flows;
|
• |
PRC governmental regulation of foreign investment in Internet, educational services and professional training services companies;
|
• |
economic, political and other conditions in China; and
|
• |
PRC governmental policies relating to foreign currency borrowings.
|
• |
revoking the business and operating licenses of our PRC subsidiaries, Beijing Champion or its subsidiaries, or Champion Healthcare Education, which business and operating licenses are essential to the operation of our business;
|
• |
levying fines;
|
• |
confiscating our income, the income of our PRC subsidiaries or that of Beijing Champion or its subsidiaries or Champion Healthcare Education;
|
• |
shutting down our servers or blocking our websites;
|
• |
discontinuing or restricting our operations or the operations of our PRC subsidiaries, Beijing Champion or its subsidiaries or Champion Healthcare Education;
|
• |
imposing conditions or requirements with which we, our PRC subsidiaries, Beijing Champion or its subsidiaries or Champion Healthcare Education may not be able to comply;
|
• |
requiring us, our PRC subsidiaries, Beijing Champion or its subsidiaries or Champion Healthcare Education to restructure our relevant ownership structure, operations or contractual arrangements; and
|
• |
taking other regulatory or enforcement actions that could be harmful to our business.
|
• |
opposes the fundamental principles of the PRC constitution;
|
• |
compromises state security, divulges state secrets, subverts state power or damages national unity;
|
• |
harms the dignity or interests of the state;
|
• |
incites ethnic hatred or racial discrimination or damages inter-ethnic unity;
|
• |
sabotages China’s religious policy or propagates heretical teachings or feudal superstition;
|
• |
disseminates rumors, disturbs social order or disrupts social stability;
|
• |
propagates obscenity, pornography, gambling, violence, murder, fear or abets the commission of crimes;
|
• |
insults or slanders a third party or infringes upon the lawful rights of a third party; and
|
• |
includes other content prohibited by laws or regulations.
|
• |
provisions that restrict the ability of our shareholders to call meetings and to propose special matters for consideration at shareholder meetings;
|
• |
provisions that authorize our board of directors, without action by our shareholders, to issue preferred shares and to issue additional ordinary shares, including ordinary shares represented by ADSs; and
|
• |
provisions that provide for a staggered board, whereby our board will be divided into three classes of directors, with directors in each class serving staggered three-year terms. With a staggered board, at least two annual shareholders’ meetings, instead of one, would generally be required to effect a change in a majority of the board. A staggered board tends to discourage proxy contests for the election of directors and purchases of a substantial block of shares because a staggered board operates to prevent a third party from obtaining control of our board in a relatively short period of time. See “Item 6.C. Directors, Senior Management and Employees — Board Practices.”
|
• |
we do not wish to receive a discretionary proxy;
|
• |
we think there is substantial shareholder opposition to the particular question; or
|
• |
we think the subject of the particular question would have a material adverse impact on our shareholders.
|
ITEM 4.
|
INFORMATION ON THE COMPANY
|
Discipline
|
Website
|
Contribution to
Revenue (%) |
Number of
Course Offerings |
Number of
Classes |
||||||||||||
Accounting
|
|
www.chinaacc.com
www.ck100.com
|
|
53.8 | % | 45 | 2,796 | |||||||||
Healthcare
|
|
www.med66.com
|
|
12.4 | % | 38 | 858 | |||||||||
Engineering & Construction
|
|
www.jianshe99.com
|
|
4.5 | % | 85 | 2,471 | |||||||||
Legal
|
|
www.ruidaedu.com
|
|
2.9 | % | 5 | 205 | |||||||||
Others
|
2.4 | % | 92 | 1,315 | ||||||||||||
Total
|
76.0 | % | 265 | 7,645 |
• |
Elementary, Intermediate and Advanced Level Accounting Professional Qualification Examinations.
|
• |
CPA Qualification Examination.
|
• |
Continuing Education for Accounting Personnel.
|
• |
Tax Agent Qualification Examination.
|
• |
Professional development courses.
|
• |
International Professional Qualification Examinations.
|
• |
National Practicing Medical Doctor Qualification Examination
|
• |
Healthcare Professional Technical Qualification Examination.
|
• |
National Pharmacist Qualification Examination.
|
• |
National Nursing Qualification Examination.
|
• |
Health Manager Examination.
|
• |
Foundation Classes:
|
• |
Intensified Focus Classes:
|
• |
Exam Questions Analysis Classes:
|
• |
Crash-Course Classes:
|
• |
Exam Simulation System and/or Professional Development Courses:
|
• |
Live Streamed Courses:
|
• |
online and mobile payment on computers, tablets or smart phones using credit or debit cards, or via third-party payment networks;
|
• |
purchase of prepaid study cards;
|
• |
cash payment made at our offices; or
|
• |
installment loans offered by other institutions.
|
• |
Online-Offline Blended Learning: we work
hand-in-hand
|
• |
Practical Training: we provide students accounting practical skills training courses to prepare them for real-world accounting work.
|
• |
Internship: we assist students in obtaining virtual internships in accounting where interns can handle real accounting tasks from our enterprise customers using our accounting cloud services.
|
• |
Employment Advisory & Recruitment: we offer students employment guidance services to help them prepare for job opportunities. Using our big data analysis, we can match the employment goals of students with the recruitment needs of employers.
|
• |
The Telecommunications Regulations (2014, as amended in 2016);
|
• |
The Administrative Measures for Telecommunications Business Operating Licenses (2017); and
|
• |
The Internet Information Services Administrative Measures (2000, as amended in 2011).
|
• |
the ownership structures of Beijing Champion and its subsidiaries, Champion Healthcare Education and our wholly owned subsidiaries in China are in compliance with existing published PRC laws and regulations; and
|
• |
our contractual arrangements among our wholly owned subsidiaries in China, Beijing Champion, Champion Healthcare Education and their shareholders, are valid and binding, will not result in any violation of published PRC laws or regulations currently in effect, and are enforceable in accordance with their terms and conditions.
|
(1) |
Equity pledge agreements, powers of attorney, acknowledgement letters, tri-party agreement re VIE structure and letter of undertaking
|
(2) |
Technical support and consultancy services agreement, courseware license agreement and letter of undertaking
|
(3) |
Software license agreement and courseware production entrustment agreement
|
(4) |
Equity pledge agreement, exclusive option agreement, powers of attorney, tri-party agreement re VIE structure and letter of undertaking
|
(5) |
Exclusive business cooperation agreement and letter of undertaking
|
• |
Number of enrollments in our courses
|
• |
Fees for our courses
|
• |
Our ability to expand the range of courses and other services.
|
• |
Impact of business acquisitions and strategic investments.
|
Year Ended September 30,
|
||||||||||||||||||||||||
2018
|
2019
|
2020
|
||||||||||||||||||||||
$
|
% of net
revenues |
$
|
% of net
revenues |
$
|
% of net
revenues |
|||||||||||||||||||
(In thousands, except for percentages)
|
||||||||||||||||||||||||
Net Revenues
|
||||||||||||||||||||||||
Online education services
|
117,026 | 70.2 | % | 145,917 | 68.9 | % | 159,338 | 76.0 | % | |||||||||||||||
Books and reference materials
|
10,213 | 6.1 | % | 27,372 | 12.9 | % | 22,061 | 10.5 | % | |||||||||||||||
Others
|
39,429 | 23.7 | % | 38,533 | 18.2 | % | 28,159 | 13.5 | % | |||||||||||||||
Total net revenues
|
166,668 | 100.0 | % | 211,822 | 100.0 | % | 209,558 | 100.0 | % |
For the Year Ended September 30,
|
||||||||||||||||||||||||
2018
|
2019
|
2020
|
||||||||||||||||||||||
$
|
% of net
revenues |
$
|
% of net
revenues |
$
|
% of net
revenues |
|||||||||||||||||||
(In thousands of $, except for percentages)
|
||||||||||||||||||||||||
Net Revenues
|
166,668 | 100.0 | % | 211,822 | 100.0 | % | 209,558 | 100.0 | % | |||||||||||||||
Cost of sales:
|
||||||||||||||||||||||||
Cost of services and others
|
(78,936 | ) | (47.4 | )% | (85,252 | ) | (40.2 | )% | (81,976 | ) | (39.1 | )% | ||||||||||||
Cost of tangible goods sold
|
(8,947 | ) | (5.3 | )% | (19,489 | ) | (9.2 | )% | (19,622 | ) | (9.4 | )% | ||||||||||||
Total cost of sales
|
(87,883 | ) | (52.7 | )% | (104,741 | ) | (49.4 | )% | (101,598 | ) | (48.5 | )% | ||||||||||||
Gross profit and gross margin
1
|
78,785 | 47.3 | % | 107,081 | 50.6 | % | 107,960 | 51.5 | % |
1
|
Gross profit is equal to net revenues less cost of sales. Gross margin is equal to gross profit divided by net revenues.
|
Years ended September 30,
|
||||||||||||
2018
|
2019
|
2020
|
||||||||||
$
|
$
|
$
|
||||||||||
(in thousands)
|
||||||||||||
Current tax expense
|
5,717 | 7,060 | 10,543 | |||||||||
Deferred tax expense (benefit)
|
(3,410 | ) | 1,061 | (5,083 | ) | |||||||
2,307 | 8,121 | 5,460 |
• |
our critical accounting policies discussed below;
|
• |
the related judgments made by us and other uncertainties affecting the application of these policies;
|
• |
the sensitivity of our reported results to changes in prevailing facts and circumstances and our related estimates and assumptions; and
|
• |
the risks and uncertainties described under “Item 3.D. Key Information — Risk Factors.”
|
Professional
education service |
Business
start-up training service(*) |
Sale of
learning simulation software |
Total
|
|||||||||||||
(in thousands of $)
|
||||||||||||||||
Estimated fair value
|
276,533 | N/A | 48,604 | 325,137 | ||||||||||||
Carrying value net
|
87,710 | N/A | 41,399 | 129,109 |
* |
Because the carrying amount of business start-up training service reporting unit as of September 30, 2019 exceeds its fair value, we recorded an impairment charge of $1.5 million related to business start-up training services during the fiscal year ended September 30, 2019.
|
Years Ended September 30,
|
||||||||||||||||||||||||
2018
|
2019
|
2020
|
||||||||||||||||||||||
$
|
% of net
revenues |
$
|
% of net
revenues |
$
|
% of net
revenues |
|||||||||||||||||||
(In thousands, except for percentages)
|
||||||||||||||||||||||||
Net Revenues
|
||||||||||||||||||||||||
Online education services
|
117,026 | 70.2 | % | 145,917 | 68.9 | % | 159,338 | 76.0 | % | |||||||||||||||
Books and reference materials
|
10,213 | 6.1 | % | 27,372 | 12.9 | % | 22,061 | 10.5 | % | |||||||||||||||
Others
|
39,429 | 23.7 | % | 38,533 | 18.2 | % | 28,159 | 13.5 | % | |||||||||||||||
Total net revenues
|
166,668 | 100.0 | % | 211,822 | 100.0 | % | 209,558 | 100.0 | % | |||||||||||||||
Cost of sales:
|
||||||||||||||||||||||||
Cost of services and others
|
(78,936 | ) | (47.4 | )% | (85,252 | ) | (40.2 | )% | (81,976 | ) | (39.1 | )% | ||||||||||||
Cost of tangible goods sold
|
(8,947 | ) | (5.3 | )% | (19,489 | ) | (9.2 | )% | (19,622 | ) | (9.4 | )% | ||||||||||||
Total cost of sales
|
(87,883 | ) | (52.7 | )% | (104,741 | ) | (49.4 | )% | (101,598 | ) | (48.5 | )% | ||||||||||||
Gross profit
|
78,785 | 47.3 | % | 107,081 | 50.6 | % | 107,960 | 51.5 | % | |||||||||||||||
Operating expenses:
|
||||||||||||||||||||||||
Selling expenses
|
(44,717 | ) | (26.8 | )% | (61,460 | ) | (29.0 | )% | (69,848 | ) | (33.3 | )% | ||||||||||||
General and administrative expenses
|
(21,253 | ) | (12.8 | )% | (24,919 | ) | (11.8 | )% | (25,478 | ) | (12.2 | )% | ||||||||||||
Impairment of goodwill
|
— | — | % | (1,517 | ) | (0.7 | )% | — | — | % | ||||||||||||||
Total operating expenses
|
(65,970 | ) | (39.6 | )% | (87,896 | ) | (41.5 | )% | (95,326 | ) | (45.5 | )% | ||||||||||||
Change in fair value in connection with business combination
|
84 | 0.1 | % | 695 | 0.3 | % | — | — | % | |||||||||||||||
Other operating income
|
3,051 | 1.8 | % | 2,968 | 1.4 | % | 6,155 | 2.9 | % | |||||||||||||||
Operating income
|
15,950 | 9.6 | % | 22,848 | 10.8 | % | 18,789 | 9.0 | % | |||||||||||||||
Interest income
|
2,522 | 1.5 | % | 2,207 | 1.0 | % | 2,555 | 1.2 | % | |||||||||||||||
Interest expense
|
(3,331 | ) | (2.0 | )% | (2,819 | ) | (1.3 | )% | (1,021 | ) | (0.5 | )% | ||||||||||||
Exchange gain (loss)
|
2,476 | 1.5 | % | 3,296 | 1.6 | % | (5,261 | ) | (2.5 | )% | ||||||||||||||
Impairment loss from long-term investments
|
(2,835 | ) | (1.7 | )% | (6,920 | ) | (3.3 | )% | (910 | ) | (0.4 | )% | ||||||||||||
Gain from disposal of an investment
|
— | — | % | 318 | 0.2 | % | — | — | % | |||||||||||||||
Gain from deconsolidation of a subsidiary
|
— | — | % | 6,869 | 3.2 | % | — | — | % | |||||||||||||||
Income before income taxes
|
14,782 | 8.9 | % | 25,799 | 12.2 | % | 14,152 | 6.8 | % | |||||||||||||||
Income tax expense
|
(2,307 | ) | (1.4 | )% | (8,121 | ) | (3.8 | )% | (5,460 | ) | (2.6 | )% | ||||||||||||
Loss from equity method investment
|
(172 | ) | (0.1 | )% | (1,484 | ) | (0.7 | )% | (555 | ) | (0.3 | )% | ||||||||||||
Net income
|
12,303 | 7.4 | % | 16,194 | 7.6 | % | 8,137 | 3.9 | % | |||||||||||||||
Less: Net income (loss) attributable to noncontrolling interest
|
677 | 0.4 | % | (5,060 | ) | (2.4 | )% | (2,293 | ) | (1.1 | )% | |||||||||||||
Net income attributable to China Distance Education Holdings Limited
|
11,626 | 7.0 | % | 21,254 | 10.0 | % | 10,430 | 5.0 | % |
For the Year Ended September 30,
|
||||||||||||
(in thousands of $)
|
2018
|
2019
|
2020
|
|||||||||
Net revenues of reportable segments:
|
|
|||||||||||
Professional education services
|
150,484 | 196,047 | 197,835 | |||||||||
Business start-up training services
|
4,608 | 2,796 | 2,207 | |||||||||
Sale of learning simulation software
|
11,576 | 12,979 | 9,516 | |||||||||
Total net revenues of reportable segments
|
166,668 | 211,822 | 209,558 | |||||||||
Total net revenues of our company
|
166,668 | 211,822 | 209,558 | |||||||||
Operating costs and expenses of reportable segments:
|
|
|||||||||||
Cost of sales:
|
|
|||||||||||
Professional education services
|
(79,168 | ) | (96,044 | ) | (94,162 | ) | ||||||
Business start-up training services
|
(2,644 | ) | (1,777 | ) | (1,033 | ) | ||||||
Sale of learning simulation software
|
(6,071 | ) | (6,920 | ) | (6,403 | ) | ||||||
Selling expenses:
|
|
|||||||||||
Professional education services
|
(39,698 | ) | (56,334 | ) | (65,474 | ) | ||||||
Business start-up training services
|
(1,127 | ) | (1,226 | ) | (915 | ) | ||||||
Sale of learning simulation software
|
(3,892 | ) | (3,900 | ) | (3,459 | ) | ||||||
General and administrative expenses:
|
|
|||||||||||
Professional education services
|
(14,548 | ) | (16,745 | ) | (16,773 | ) | ||||||
Business start-up training services
|
(896 | ) | (1,930 | ) | (584 | ) | ||||||
Sale of learning simulation software
|
(1,316 | ) | (1,389 | ) | (1,171 | ) | ||||||
Impairment of goodwill
|
||||||||||||
Business start-up training services
|
— | (1,517 | ) | — | ||||||||
Unallocated corporate expenses
|
(4,493 | ) | (4,855 | ) | (6,950 | ) | ||||||
Total operating costs and expense:
|
|
|||||||||||
Professional education services
|
(133,414 | ) | (169,123 | ) | (176,409 | ) | ||||||
Business start-up training services
|
(4,667 | ) | (6,450 | ) | (2,532 | ) | ||||||
Sale of learning simulation software
|
(11,279 | ) | (12,209 | ) | (11,033 | ) | ||||||
Unallocated corporate expenses
|
(4,493 | ) | (4,855 | ) | (6,950 | ) | ||||||
Other operating income:
|
|
|||||||||||
Professional education services
|
643 | 1,053 | 4,976 | |||||||||
Business start-up training services
|
76 | 102 | 5 | |||||||||
Sale of learning simulation software
|
2,332 | 1,813 | 1,174 | |||||||||
Operating income (loss):
|
|
|||||||||||
Professional education services
|
17,797 | 28,672 | 26,402 | |||||||||
Business start-up training services
|
17 | (3,552 | ) | (320 | ) | |||||||
Sale of learning simulation software
|
2,629 | 2,583 | (343 | ) | ||||||||
Unallocated corporate expenses
|
(4,493 | ) | (4,855 | ) | (6,950 | ) |
For the Year Ended September 30,
|
||||||||||||
2018
|
2019
|
2020
|
||||||||||
$
|
$
|
$
|
||||||||||
(In thousands)
|
||||||||||||
Net cash generated from operating activities
|
50,094 | 81,795 | 40,961 | |||||||||
Net cash (used in) investing activities
|
(55,497 | ) | (25,058 | ) | (16,149 | ) | ||||||
Net cash (used in) financing activities
|
(3,302 | ) | (24,219 | ) | (40,254 | ) | ||||||
Exchange rate effect on cash and cash equivalents and restricted cash
|
(4,114 | ) | (8,745 | ) | 10,224 | |||||||
Net (decrease) increase in cash and cash equivalents and restricted cash
|
(12,819 | ) | 23,773 | (5,218 | ) | |||||||
Cash and cash equivalents and restricted cash at beginning of the year
|
95,381 | 82,562 | 106,335 | |||||||||
Cash and cash equivalents and restricted cash at end of the year
|
82,562 | 106,335 | 101,117 |
Payment Due by Period
|
||||||||||||||||||||||||
Total
|
Within 1
Year |
1-3
Years |
3-5
Years |
More than
5 Years |
Others
|
|||||||||||||||||||
(In thousands of $)
|
||||||||||||||||||||||||
Operating lease obligations
(1)
|
32,379 | 5,411 | 9,565 | 8,597 | 8,806 | — | ||||||||||||||||||
Others
(2)
|
160 | — | — | — | — | 160 | ||||||||||||||||||
Short term borrowing
(3)
|
4,045 | 4,045 | — | — | — | — | ||||||||||||||||||
Long term borrowing
(3)
|
16,319 | 248 | 16,071 | — | — | — | ||||||||||||||||||
Total
|
52,903 | 9,704 | 25,636 | 8,597 | 8,806 | 160 |
(1)
|
Our operating lease obligations primarily relate to our leased servers and bandwidth as well as our leased offices, training center and staff quarters in China and Hong Kong. The office, training center and staff quarter leases expire at different times over the period from the date of this annual report through 2030 and will become subject to renewal. We will evaluate the need to renew each office, training center and staff quarter lease on a case-by-case basis prior to its expiration.
|
(2)
|
Liabilities for unrecognized tax benefits. The balance disclosed under “Others” represents liabilities for which reasonable estimates about the timing of the payment cannot be made.
|
(3)
|
CDEL Hong Kong drew down a two-year term loan of $20.0 million from a bank in April 2020. The loan is effective from April 2020 to April 2022. The balances include the principal and unpaid interest payment of the loan as of September 30, 2020. See “-Indebtedness” for the repayment schedules of the above loan.
|
Name
|
Age
|
Position
|
||||
Zhengdong Zhu
|
53 | Chairman of the Board of Directors, Chief Executive Officer | ||||
Baohong Yin
|
54 | Deputy Chairman of the Board of Directors | ||||
Feijia Ji
|
48 | Senior Executive Vice President, Director | ||||
Xiaoshu Chen
|
58 | Independent Director | ||||
Annabelle Yu Long
|
48 | Independent Director | ||||
Liankui Hu
|
71 | Independent Director | ||||
Carol Yu
|
59 | Independent Director | ||||
Mark Marostica
|
60 | Co-Chief Financial Officer | ||||
Philip Chan
|
50 | Co-Chief Financial Officer |
Name of Recipient
|
Type of Incentive
Securities
|
Number of Ordinary
Shares Issued or to be Issued |
Exercise Price
per Ordinary Share |
Date of Grant
or Issue |
Vesting Start
Date |
Date of
Expiration |
||||||
Carol Yu | nonvested ordinary shares |
25,000 ordinary
shares |
not applicable | December 3, 2017 |
restriction
removed on the first anniversary of the issue date |
not applicable | ||||||
nonvested ordinary shares |
30,000 ordinary
shares
|
not applicable | December 3, 2018 |
restriction
removed on the first anniversary of the issue date |
not applicable | |||||||
nonvested ordinary shares |
35,000 ordinary
shares
|
not applicable | December 3, 2019 |
restriction
removed on
the first anniversary of the issue date |
not applicable | |||||||
Baohong Yin | nonvested ordinary shares |
25,000 ordinary
shares |
not applicable | December 3, 2017 |
restriction
removed on the first anniversary of the issue date |
not applicable | ||||||
nonvested ordinary shares |
30,000 ordinary
shares
|
not applicable | December 3, 2018 |
restriction
removed on the first anniversary of the issue date |
not applicable | |||||||
nonvested ordinary shares |
35,000 ordinary
shares
|
not applicable | December 3, 2019 |
restriction
removed on the first anniversary of the issue date |
not applicable | |||||||
Xiaoshu
Chen
|
nonvested ordinary shares |
25,000 ordinary
shares |
not applicable | December 3, 2017 |
restriction
removed on the first anniversary of the issue date |
not applicable | ||||||
nonvested ordinary shares |
30,000 ordinary
shares |
not applicable | December 3, 2018 |
restriction
removed on
the first anniversary of the issue date |
not applicable |
nonvested ordinary shares |
35,000 ordinary
shares
|
not applicable | December 3, 2019 |
restriction
removed on the first anniversary of the issue date |
not applicable | |||||||
Annabelle Yu Long | nonvested ordinary shares |
25,000 ordinary
shares |
not applicable | December 3, 2017 |
restriction
removed on the first anniversary of the issue date |
not applicable | ||||||
nonvested ordinary shares |
30,000 ordinary
shares
|
not applicable | December 3, 2018 |
restriction
removed on the first anniversary of the issue date |
not applicable | |||||||
nonvested ordinary shares |
35,000 ordinary
shares
|
not applicable | December 3, 2019 |
restriction
removed on
the first anniversary of the issue date |
not applicable | |||||||
Liankui Hu | nonvested ordinary shares |
25,000 ordinary
shares |
not applicable | December 3, 2017 |
restriction
removed on the first anniversary of the issue date |
not applicable | ||||||
nonvested ordinary shares |
30,000 ordinary
shares
|
not applicable | December 3, 2018 |
restriction
removed on the first anniversary of the issue date |
not applicable | |||||||
nonvested ordinary shares |
35,000 ordinary
shares
|
not applicable | December 3, 2019 |
restriction
removed on the first anniversary of the issue date |
not applicable | |||||||
Feijia Ji | nonvested ordinary shares |
14,000 ordinary
shares |
not applicable | January 17, 2018 |
The vesting
period is two years, with four equal semi-annual installments |
not applicable | ||||||
nonvested ordinary shares |
20,760 ordinary
shares |
not applicable | December 28, 2018 |
The vesting
period is two years, with four equal semi-annual installments |
not applicable | |||||||
nonvested ordinary shares |
22,540 ordinary
shares |
not applicable | December 20, 2019 |
The vesting
period is one year, with two equal semi-annual installments |
not applicable |
nonvested ordinary shares |
8,476 ordinary
shares |
not applicable | November 13, 2020 |
The vesting
period is one year, with two equal semi-annual installments |
not applicable | |||||||
Mark Marostica | nonvested ordinary shares |
33,680 ordinary
shares |
not applicable | January 17, 2018 |
The vesting
period is two years, with four equal semi-annual installments |
not applicable | ||||||
nonvested ordinary shares |
36,480 ordinary
shares |
not applicable | December 28, 2018 |
The vesting
period is two years, with four equal semi-annual installments |
not applicable | |||||||
nonvested ordinary shares |
291,968 ordinary
shares |
not applicable | January 12, 2019 |
The vesting
period is one year, with two equal semi-annual installments |
not applicable | |||||||
nonvested ordinary shares |
42,120 ordinary
shares |
not applicable | December 20, 2019 |
The vesting
period is one year, with two equal semi-annual installments |
not applicable | |||||||
nonvested ordinary shares |
220,504 ordinary
shares |
not applicable | January 12, 2020 |
The vesting
period is one
year, with two equal semi-annual installments |
not applicable | |||||||
Philip Chan | nonvested ordinary shares |
33,680 ordinary
shares |
not applicable | January 17, 2018 |
The vesting
period is two years, with four equal semi-annual installments |
not applicable | ||||||
nonvested ordinary shares |
35,280 ordinary
shares |
not applicable | December 28, 2018 |
The vesting
period is two years, with four equal semi-annual installments |
not applicable |
nonvested ordinary shares |
160,000 ordinary
shares |
not applicable | January 1, 2019 |
The vesting
period is one year, with two equal semi-annual installments |
not applicable | |||||||
nonvested ordinary shares |
41,856 ordinary
shares |
not applicable | December 20, 2019 |
The vesting
period is one year, with two equal semi-annual installments |
not applicable | |||||||
nonvested ordinary shares |
173,052 ordinary
shares |
not applicable | January 1, 2020 |
The vesting
period is one year, with two equal semi-annual installments |
not applicable | |||||||
nonvested ordinary shares |
41,236 ordinary
shares |
not applicable | November 13, 2020 |
The vesting
period is one year, with two equal semi-annual installments |
not applicable | |||||||
Zhengdong Zhu | nonvested ordinary shares |
38,160 ordinary
shares |
not applicable | January 17, 2018 |
The vesting
period is two years, with four equal semi-annual installments |
not applicable | ||||||
nonvested ordinary shares |
58,360 ordinary
shares |
not applicable | December 28, 2018 |
The vesting
period is two years, with four equal semi-annual installments |
not applicable | |||||||
nonvested ordinary shares |
109,904 ordinary
shares |
not applicable | December 20, 2019 |
The vesting
period is one year, with two equal semi-annual installments |
not applicable | |||||||
nonvested ordinary shares |
133,968 ordinary
shares |
not applicable | November 13, 2020 |
The vesting
period is one year, with two equal semi-annual installments |
not applicable |
• |
convening shareholders’ meetings and reporting its work to shareholders at such meetings;
|
• |
implementing shareholders’ resolutions;
|
• |
determining our business plans and investment proposals;
|
• |
formulating our profit distribution plans and loss recovery plans;
|
• |
determining our debt and finance policies and proposals for the increase or decrease in our registered capital and the issuance of debentures;
|
• |
formulating our major acquisition and disposition plans, and plans for merger, division or dissolution;
|
• |
proposing amendments to our second amended and restated memorandum of association and articles of association; and
|
• |
exercising any other powers conferred by the shareholders’ meetings or under our second amended and restated memorandum of association and articles of association.
|
• |
appointing the independent auditor;
|
• |
pre-approving all auditing and non-auditing services permitted to be performed by the independent auditor;
|
• |
setting clear hiring policies for employees and former employees of the independent auditor;
|
• |
reviewing with the independent auditor any audit problems or difficulties and management’s responses;
|
• |
reviewing and approving all related party transactions on an ongoing basis;
|
• |
reviewing and discussing the annual audited financial statements with management and the independent auditor;
|
• |
reviewing and discussing with management and the independent auditor major issues regarding accounting principles and financial statement presentations;
|
• |
reviewing reports prepared by management relating to significant financial reporting issues and judgments;
|
• |
discussing earnings press releases with management, as well as financial information and earnings guidance provided to analysts and rating agencies;
|
• |
reviewing with management and the independent auditor the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on our financial statements;
|
• |
discussing policies with respect to risk assessment and risk management with management, internal auditors and the independent auditor;
|
• |
timely reviewing reports from management regarding all critical accounting policies and practices to be used by our company, all alternative treatments of financial information within U.S. GAAP that have been discussed with management and all other material written communications between the independent auditor and management;
|
• |
establishing procedures for the receipt, retention and treatment of complaints received from our employees regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters;
|
• |
annually reviewing and reassessing the adequacy of our audit committee charter;
|
• |
such other matters that are specifically delegated to our audit committee by our board of directors from time to time;
|
• |
meeting separately, periodically, with management, internal auditors and the independent auditor; and
|
• |
reporting regularly to the full board of directors.
|
• |
reviewing and approving our overall compensation policies;
|
• |
reviewing and approving corporate goals and objectives relevant to the compensation of our chief executive officer, evaluating our chief executive officer’s performance in light of those goals and objectives, reporting the results of such evaluation to the board of directors and determining our chief executive officer’s compensation level based on this evaluation;
|
• |
determining the compensation level of our other executive officers;
|
• |
making recommendations to the board of directors with respect to our incentive-compensation plan and equity-based compensation plans;
|
• |
administering our equity-based compensation plans in accordance with the terms thereof; and
|
• |
such other matters that are specifically delegated to the compensation committee by our board of directors from time to time.
|
• |
seeking and evaluating qualified individuals to become new directors as needed;
|
• |
reviewing and making recommendations to the board of directors regarding the independence and suitability of each board member for continued service; and
|
• |
evaluating the nature, structure and composition of other board committees.
|
• |
our directors and executive officers as a group;
|
• |
each person known to us to own beneficially more than 5% of our ordinary shares;
|
Ordinary Shares
Beneficially Owned |
||||||||
Number
(1)
|
Percent
(2)
|
|||||||
Directors and Executive Officers:
|
||||||||
Zhengdong Zhu
(3)
|
53,119,017 | 38.84 | % | |||||
Baohong Yin
(4)
|
53,119,017 | 38.84 | % | |||||
Xiaoshu Chen
(5)
|
2,234,800 | 1.63 | % | |||||
Mark Marostica
|
* | * | ||||||
Philip Chan
|
* | * | ||||||
Feijia Ji
|
* | * | ||||||
Annabelle Yu Long
|
* | * | ||||||
Liankui Hu
|
* | * | ||||||
Carol Yu
|
* | * | ||||||
Directors and Executive Officers Combined
|
58,117,548 | 42.50 | % | |||||
Principal Shareholders:
|
||||||||
Champion Shine Trading Limited
(6)
|
52,752,617 | 38.58 | % | |||||
YM Investment Limited, The Li Family (PTC) Limited and
Ms. Lam Lai Ming
(7)
|
25,814,468 | 18.88 | % | |||||
Zhangxing Wang, Qi Wang, and Home Value Holding Co., Ltd.
(8)
|
13,213,740 | 9.66 | % | |||||
Wells Fargo & Company and Wells Capital Management Incorporated
(9)
|
9,430,972 | 6.90 | % |
* |
Beneficially owns less than 1% of our outstanding ordinary shares.
|
(1)
|
The number of ordinary shares beneficially owned by each of the listed persons includes ordinary shares that such person has the right to acquire within 60 days after January 15, 2021.
|
(2)
|
Percentage of beneficial ownership for each of the persons listed above is determined by dividing (i) the number of ordinary shares beneficially owned by such person by (ii) the total number of ordinary shares outstanding, plus the number of ordinary shares such person has the right to acquire within 60 days after January 15, 2021. The total number of ordinary shares outstanding as of January 15, 2021 is 136,747,601.
|
(3)
|
Includes (i) 44,800,245 ordinary shares, and 7,952,372 ordinary shares represented by 1,988,093 ADSs, held by Champion Shine Trading Limited, (ii) 65,000 ordinary shares represented by 16,250 ADSs held by Baohong Yin, and (iii) 152,840 ordinary shares held by Zhengdong Zhu, and (iv) 148,560 ordinary shares consisting of restricted share awards of our company by Zhengdong Zhu. Champion Shine Trading Limited is a British Virgin Islands company whose sole shareholder is Zhengdong Zhu. The Chairman and the Deputy Chairman are husband and wife. Therefore, Zhengdong Zhu may be deemed to share the voting and dispositive power over the ordinary shares owned or beneficially owned by the Deputy Chairman. The business address of Zhengdong Zhu is 18th Floor, Xueyuan International Tower 1, Zhichun Road, Haidian District, Beijing 100083, China.
|
(4)
|
Includes (i) 44,800,245 ordinary shares, and 7,952,372 ordinary shares represented by 1,988,093 ADSs, held by Champion Shine Trading Limited, (ii) 65,000 ordinary shares represented by 16,250 ADSs held by Baohong Yin, and (iii) 152,840 ordinary shares held by Zhengdong Zhu, and (iv) 148,560 ordinary shares consisting of restricted share awards of our company. Zhengdong Zhu is the sole shareholder of Champion Shine Trading Limited. Zhengdong Zhu and Baohong Yin are husband and wife. Therefore, Baohong Yin may be deemed to share the voting and dispositive power over the ordinary shares held by Zhengdong Zhu. The business address of Baohong Yin is 18th Floor, Xueyuan International Tower, 1 Zhichun Road, Haidian District, Beijing 100083, China.
|
(5)
|
Includes (i) 1,000,000 ordinary shares, and 899,800 ordinary shares represented by 224,950 ADSs, held by Jetlong Investments Limited, (ii) 255,000 ordinary shares held by Xiaoshu Chen, and (iv) options to purchase 80,000 ordinary shares held by Xiaoshu Chen. Jetlong Investments Limited is a British Virgin Islands company whose sole shareholder and sole director is Xiaoshu Chen. The business address of Xiaoshu Chen is Southeastern University, No. 2 Sipailou, Nanjing 210096, China.
|
(6)
|
Includes 44,800,245 ordinary shares and 1,988,093 ADSs representing 7,952,372 ordinary shares held by Champion Shine Trading Limited, a British Virgin Islands company whose sole shareholder and sole director is Zhengdong Zhu. The address of Champion Shine Trading Limited is Suites 1501-1503, 15th Floor, Gloucester Tower, The Landmark, 15 Queen’s Road Central, Hong Kong.
|
(7)
|
The number of ordinary shares beneficially owned is as reported in a Schedule 13D filed by YM Investment Limited, The Li Family (PTC) Limited and Ms. Lam Lai Ming on February 14, 2020. The business address of YM Investment Limited reported on the Schedule 13D is c/o Vistra Corporate Services Center, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands. The business address of The Li Family (PTC) Limited reported on the Schedule 13D is 80 Main Street, P.O. Box 3200, Road Town, Tortola, VG 1110, British Virgin Islands. The residential address of Ms. Lam Lai Ming reported on the Schedule 13D is c/o Suite 2901, 29th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong.
|
(8)
|
The number of ordinary shares beneficially owned is as reported in a Schedule 13D filed by Zhangxing Wang, Qi Wang, Home Value Holding Co., Ltd. on December 2, 2020. Zhangxing Wang and Qi Wang’s principal business addresses as reported in the Schedule 13D is 42/F, World Trade Tower, No. 500 Guangdong Road, Shanghai, People’s Republic of China. The principal office of the Home Value as reported in the Schedule 13D is the offices of Offshore Incorporations Limited, P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Island.
|
(9)
|
The number of Ordinary Shares beneficially owned is as reported in a Schedule 13G filed by Wells Fargo & Company on February 4, 2020. The business address of Wells Fargo & Company as reported in the Schedule 13G is 420 Montgomery Street, San Francisco, CA 94163. The business address of Wells Capital Management Incorporated as reported in the Schedule 13G is 525 Market St, 10th Floor, San Francisco, CA 94105.
|
ITEM
|
7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
|
ITEM
|
8. FINANCIAL INFORMATION
|
ITEM
|
9. THE OFFER AND LISTING
|
ITEM
|
10. ADDITIONAL INFORMATION
|
• |
the statutory provisions as to the required majority vote have been met;
|
• |
the shareholders have been fairly represented at the meeting in question and the statutory majority are acting bona fide without coercion of the minority to promote interests adverse to those of the class;
|
• |
the arrangement is such that may be reasonably approved by an intelligent and honest man of that class acting in respect of his interest; and
|
• |
the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Law.
|
• |
a company is acting or proposing to act illegally or beyond the scope of its authority;
|
• |
the act complained of, although not beyond the scope of its authority, could be effected duly if authorized by more than a simple majority vote which has not been obtained; and
|
• |
those who control the company are perpetrating a “fraud on the minority.”
|
• |
that no law which is enacted in the Cayman Islands imposing any tax to be levied on profits or income or gains or appreciations shall apply to CDEL Cayman or its operations; and
|
• |
that the aforesaid tax or any tax in the nature of estate duty or inheritance tax shall not be payable on the shares, debentures or other obligations of CDEL Cayman.
|
• |
dealers in securities or currencies;
|
• |
traders in securities that elect to use a mark-to-market method of accounting for securities holdings;
|
• |
banks or certain financial institutions;
|
• |
insurance companies;
|
• |
tax-exempt organizations;
|
• |
partnerships or other entities treated as partnerships or other pass-through entities for U.S. federal income tax purposes or persons holding ADSs or ordinary shares through any such entities;
|
• |
regulated investments companies or real estate investment trusts;
|
• |
persons that hold ADSs or ordinary shares as part of a hedge, straddle, constructive sale, conversion transaction or other integrated investment;
|
• |
persons whose functional currency for tax purposes is not the U.S. dollar;
|
• |
persons liable for alternative minimum tax; or
|
• |
persons who actually or constructively own 10% or more of the total combined voting power of all classes of our shares entitled to vote (including ADSs and ordinary shares).
|
• |
An individual citizen or resident of the United States for U.S. federal income tax purposes;
|
• |
a corporation, or other entity taxable as a corporation, that was created or organized in or under the laws of the United States or any state thereof or the District of Columbia;
|
• |
an estate the income of which is subject to U.S. federal income tax regardless of its source; or
|
• |
a trust if (a) a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (b) the trust has a valid election in effect to be treated as a U.S. person.
|
ITEM
|
12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
|
• |
Expenses incurred by the depositary, the custodian or their respective agents in connection with inspections of the relevant share register maintained by the local registrar and/or performing due diligence on the central securities depository: an annual fee of US$1.00 per 100 ADSs (such fee to be assessed against holders of record as at the date or dates set by the depositary as it sees fit and collected at the discretion of the depositary, subject to our prior consent, by billing such holders for such fee or by deducting such fee from one or more cash dividends or other cash distributions)
|
• |
Taxes and other governmental charges incurred by the depositary or the custodian on any ADR or ordinary shares underlying an ADR, including any applicable interest and penalties thereon, and any share transfer or other taxes and other governmental charges
|
• |
Cable, telex, electronic transmission and delivery expenses
|
• |
Transfer or registration fees for the registration of transfer of deposited securities on any applicable register in connection with the deposit or withdrawal of deposited securities including those of a central depository for securities (where applicable)
|
• |
Expenses of the depositary in connection with the conversion of foreign currency into U.S. dollars
|
• |
Fees and expenses incurred by the depositary in connection with compliance with exchange control regulations and other regulatory requirements applicable to the shares, deposited securities and ADSs; and
|
• |
Any other fees, charges, costs or expenses that may be incurred by the depositary from time to time
|
ITEM
|
13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
|
ITEM
|
14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
|
Fiscal Year ended September 30,
|
||||||||||||||||
2019
|
2020
|
|||||||||||||||
RMB
|
US$
|
RMB
|
US$
|
|||||||||||||
Audit fees
(1)
|
5,574,400 | 832,000 | 5,915,000 | 845,000 | ||||||||||||
Audit-related fees
(2)
|
3,001,600 | 448,000 | 3,185,000 | 455,000 | ||||||||||||
Tax and accounting consulting fees
(3)
|
320,000 | 47,761 | 80,000 | 11,429 |
(1)
|
“Audit fees” means the aggregate fees billed or payable for professional services rendered by our independent auditors in connection with the audit of our consolidated financial statements or the review of our interim consolidated financial statements required for statutory or regulatory filings.
|
(2)
|
“Audit-related fees” means the aggregate fees billed or payable for professional services rendered by our independent auditors in connection with the review of our interim consolidated financial statements not required for statutory or regulatory filings.
|
(3)
|
“Tax and accounting consulting fees” means the aggregate fees billed or payable for tax compliance services, transfer pricing and requests for rulings or technical advice from taxing authorities and tax planning services, and accounting consulting services for the application of generally accepted accounting principles.
|
• |
We are not required to obtain shareholder approval for the adoption of, or material revisions to, our equity-compensation plans where our directors consider it in the best interests of the company to do so and when the issue price of shares issued pursuant to such plans is otherwise fair.
|
• |
Our compensation committee of our board of directors is not comprised entirely of independent directors.
|
• |
Our nomination committee of our board of directors is not comprised entirely of independent directors.
|
8.1* | —Subsidiaries of Registrant. | |
11.1 | —Code of Business Conduct and Ethics of the Registrant. (1) | |
12.1* | —CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
12.2* | —CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
13.1** | —CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
13.2** | —CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
15.1* | —Consent of Deloitte Touche Tohmatsu Certified Public Accountants LLP. | |
15.2* | —Consent of Jingtian & Gongcheng. | |
101.INS* | —Inline XBRL Instance Document — the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |
101.SCH* | —Inline XBRL Taxonomy Extension Schema Document | |
101.CAL* | —Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF* | —Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB* | —Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE* | —Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104* | Cover Page Interactive Data File — the cover page XBRL tags are embedded within the Exhibit 101 Inline XBRL document set |
(1) |
Incorporated by reference to Exhibit 4.2 to the Registrant’s registration statement on Form F-1 (File No. 333-152167) filed with the SEC on July 7, 2008, as amended.
|
(2) |
Incorporated by reference to the Registration Statement on Form F-6 (File No. 333-152345) furnished with the SEC with respect to American depositary shares representing our ordinary shares on July 15, 2008.
|
(3) |
Incorporated by reference to Exhibit 2.4 to the Registrant’s Annual Report on Form 20-F (File No. 001-34122) for the year ended September 30, 2010 filed with the SEC on March 25, 2011.
|
(4) |
Incorporated by reference to the Registrant’s Annual Report on Form 20-F (File No. 001-34122) for the year ended September 30, 2008 filed with the SEC on March 16, 2009.
|
(5) |
Incorporated by reference to the Registrant’s Annual Report on Form 20-F (File No. 001-34122) for the year ended September 30, 2012 filed with the SEC on January 31, 2013.
|
(6) |
Incorporated by reference to Exhibit A to the Form 6-K (File No. 001-34122) furnished with the SEC on April 20, 2018.
|
(7) |
Incorporated by reference to the Registrant’s Annual Report on Form 20-F (File No. 001-34122) for the year ended September 30, 2015 filed with the SEC on January 27, 2016.
|
(8) |
Incorporated by reference to Exhibit 99.2 to the Form 6-K (File No. 001-34122) furnished with the SEC on December 1, 2020.
|
* |
Filed herewith
|
** |
Furnished herewith
|
China Distance Education Holdings Limited
|
||
/s/ Mark Marostica | ||
Name:
Title:
|
Mark Marostica
Co-Chief Financial Officer
|
/s/ Philip Chan | ||
Name:
Title:
|
Philip Chan
Co-Chief Financial Officer
|
CONTENTS
|
PAGE | |
F-2 | ||
F-4 | ||
F-6 | ||
F-7 | ||
F-8 | ||
F-9 | ||
F-11 | ||
F-82 |
As of September 30, | ||||||||
2019 | 2020 | |||||||
US$ | US$ | |||||||
ASSETS
|
||||||||
Current assets
|
||||||||
Cash and cash equivalents
|
67,977 | 80,056 | ||||||
Term deposits
|
— | 13,440 | ||||||
Restricted cash - current
|
38,358 | 4,212 | ||||||
Short-term investments
|
22,118 | 20,343 | ||||||
Accounts receivable, net of allowance for doubtful accounts of US$1,282 and US$1,864 as of September 30, 2019 and 2020, respectively
|
7,330 | 6,154 | ||||||
Inventories
|
4,232 | 4,863 | ||||||
Prepayment and other current assets
|
26,732 | 31,315 | ||||||
Amounts due from related parties
|
515 | 3,074 | ||||||
Deferred costs
|
1,427 | 1,657 | ||||||
|
|
|
|
|||||
Total current assets
|
168,689 | 165,114 | ||||||
|
|
|
|
|||||
Non-current assets
|
||||||||
Restricted cash – non-current
|
— | 16,849 | ||||||
Property, plant and equipment, net
|
37,935 | 42,331 | ||||||
Operating lease right-of-use assets
|
— | 30,029 | ||||||
Goodwill, net
|
74,829 | 78,966 | ||||||
Other intangible assets, net
|
30,113 | 23,161 | ||||||
Deposit for purchases of non-current assets
|
4,448 | 2,186 | ||||||
Long-term investments
|
25,379 | 26,324 | ||||||
Deferred tax assets
|
3,865 | 5,690 | ||||||
Other non-current assets
|
10,092 | 7,489 | ||||||
|
|
|
|
|||||
Total non-current assets
|
186,661 | 233,025 | ||||||
|
|
|
|
|||||
Total assets
|
355,350 | 398,139 | ||||||
|
|
|
|
|||||
LIABILITIES AND EQUITY
|
||||||||
Current liabilities
|
||||||||
Bank borrowings
|
38,502 | 4,012 | ||||||
Accrued expenses and other liabilities (including accrued expenses and other liabilities of the
consolidated variable interest entities or VIEs
without recourse to China Distance Education Holdings Limited of US$35,491 and US$49,232 as of September 30, 2019 and 2020, respectively)
|
38,267 | 55,454 | ||||||
Amount
s
due to related parties
|
600 | 802 | ||||||
Income tax payable (including income tax payable of the consolidated VIEs without recourse to China Distance Education Holdings Limited of US$8,188 and US$14,451 as of September 30, 2019 and 2020, respectively)
|
10,899 | 17,378 | ||||||
Deferred revenue – current (including deferred revenue – current of the consolidated VIEs without recourse to China Distance Education Holdings Limited of
US$93,364 and US$104,929 as of September 30, 2019 and 2020, respectively)
|
94,202 | 105,953 | ||||||
Operating lease liabilities, current (including operating lease liabilities, current of the consolidated VIE
nil and US$3,835 as of September 30, 2019 and 2020, respectively)
s
without recourse to China Distance Education Holdings Limited of
|
— | 4,160 | ||||||
Refundable fees – current (including refundable
fees – current of the
consolidated VIEs without recourse to China Distance Education Holdings Limited of US$435 and US$1,729 as of September 30, 2019 and 2020, respectively)
|
435 | 1,729 | ||||||
|
|
|
|
|||||
Total current liabilities
|
182,905 | 189,488 | ||||||
|
|
|
|
As of September 30, | ||||||||
2019 | 2020 | |||||||
US$ | US$ | |||||||
Non-current liabilities
|
||||||||
Deferred revenue – non-current (including deferred revenue – non-current of the consolidated VIEs without recourse to China Distance Education Holdings Limited of
US$33,564 and US$33,928 as of September 30, 2019 and 2020, respectively)
|
33,564 | 33,928 | ||||||
Refundable fees – non-current (including refundable fees– non-current of the consolidated VIEs without recourse to China Distance Education Holdings Limited
of US$2,440 and US$2,602 as of September 30, 2019 and 2020, respectively)
|
2,440 | 2,602 | ||||||
Deferred tax liabilities
|
12,695 | 6,088 | ||||||
Long-term bank borrowing
|
— | 16,000 | ||||||
Operating lease liabilities, non-current (including operating lease liabilities, non-current of the consolidated VIE
of nil and US$22,749 as of September 30, 2019 and 2020, respectively)
s
without recourse to China Distance Education Holdings Limited
|
— | 23,089 | ||||||
|
|
|
|
|||||
Total non-current liabilities
|
48,699 | 81,707 | ||||||
|
|
|
|
|||||
Total liabilities
|
231,604 | 271,195 | ||||||
|
|
|
|
|||||
Commitments and contingencies (Note 22)
|
||||||||
Equity
|
||||||||
Ordinary shares (par value of US$0.0001 per share; 500,000,000 shares authorized; 134,210,745 and 135,320,433 shares issued and outstanding as of September 30, 2019 and 2020, respectively)
|
13 | 14 | ||||||
Additional paid-in capital
|
24,507 | 27,316 | ||||||
Accumulated other comprehensive loss
|
(12,357 | ) | (832 | ) | ||||
Retained earnings
|
60,668 | 51,477 | ||||||
|
|
|
|
|||||
Total China Distance Education Holdings Limited shareholder’s equity
|
72,831 | 77,975 | ||||||
Noncontrolling interests
|
50,915 | 48,969 | ||||||
|
|
|
|
|||||
Total equity
|
123,746 | 126,944 | ||||||
|
|
|
|
|||||
Total liabilities and equity
|
355,350 | 398,139 | ||||||
|
|
|
|
For the years ended September 30, | ||||||||||||
2018 | 2019 | 2020 | ||||||||||
US$ | US$ | US$ | ||||||||||
Revenues, net of value-added tax and related surcharges
|
||||||||||||
Online education services
|
117,026 | 145,917 | 159,338 | |||||||||
Books and reference materials
|
10,213 | 27,372 | 22,061 | |||||||||
Others
|
39,429 | 38,533 | 28,159 | |||||||||
|
|
|
|
|
|
|||||||
Total net revenues
|
166,668 | 211,822 | 209,558 | |||||||||
|
|
|
|
|
|
|||||||
Cost of sales
|
||||||||||||
Cost of services and others
|
(78,936 | ) | (85,252 | ) | (81,976 | ) | ||||||
Cost of tangible goods sold
|
(8,947 | ) | (19,489 | ) | (19,622 | ) | ||||||
|
|
|
|
|
|
|||||||
Total cost of sales
|
(87,883 | ) | (104,741 | ) | (101,598 | ) | ||||||
|
|
|
|
|
|
|||||||
Gross profit
|
78,785 | 107,081 | 107,960 | |||||||||
Operating expenses
|
||||||||||||
Selling expenses
|
(44,717 | ) | (61,460 | ) | (69,848 | ) | ||||||
General and administrative expenses
|
(21,253 | ) | (24,919 | ) | (25,478 | ) | ||||||
Impairment of goodwill
|
— | (1,517 | ) | — | ||||||||
|
|
|
|
|
|
|||||||
Total operating expenses
|
(65,970 | ) | (87,896 | ) | (95,326 | ) | ||||||
Change in fair value in connection with business combination
|
84 | 695 | — | |||||||||
Other operating income
|
3,051 | 2,968 | 6,155 | |||||||||
|
|
|
|
|
|
|||||||
Operating income
|
15,950 | 22,848 | 18,789 | |||||||||
Interest income
|
2,522 | 2,207 | 2,555 | |||||||||
Interest expense
s
|
(3,331 | ) | (2,819 | ) | (1,021 | ) | ||||||
Gain from deconsolidation of a subsidiary
|
— | 6,869 | — | |||||||||
Impairment loss from long-term investments
|
(2,835 | ) | (6,920 | ) | (910 | ) | ||||||
Other income
|
— | 318 | — | |||||||||
Exchange gain (loss)
|
2,476 | 3,296 | (5,261 | ) | ||||||||
|
|
|
|
|
|
|||||||
Income before income taxes and loss from equity method investments
|
14,782 | 25,799 | 14,152 | |||||||||
Income tax expense
s
|
(2,307 | ) | (8,121 | ) | (5,460 | ) | ||||||
Loss from equity method investments
|
(172 | ) | (1,484 | ) | (555 | ) | ||||||
|
|
|
|
|
|
|||||||
Net income
|
12,303 | 16,194 | 8,137 | |||||||||
Less: Net income (loss) attributable to noncontrolling interests
|
677 | (5,060 | ) | (2,293 | ) | |||||||
Net income attributable to China Distance Education Holdings Limited
|
11,626 | 21,254 | 10,430 | |||||||||
|
|
|
|
|
|
|||||||
Net income per share:
|
||||||||||||
Net income attributable to ordinary shareholders
|
||||||||||||
Basic
|
0.09 | 0.16 | 0.08 | |||||||||
Diluted
|
0.09 | 0.16 | 0.08 | |||||||||
|
|
|
|
|
|
|||||||
Weighted average shares used in calculating net income per share
|
||||||||||||
Basic
|
132,363,620 | 133,060,900 | 133,984,929 | |||||||||
Diluted
|
133,117,155 | 134,138,117 | 135,232,224 | |||||||||
|
|
|
|
|
|
For the years ended September 30, | |||||||||||||
2018 | 2019 | 2020 | |||||||||||
US$ | US$ | US$ | |||||||||||
Net income
|
12,303 | 16,194 | 8,137 | ||||||||||
Other comprehensive (loss) income, net of tax
|
|||||||||||||
Foreign currency translation adjustments
|
(8,118 | ) | (8,854 | ) | 13,733 | ||||||||
Unrealized gain on available-for-sale investments, net of tax effect of US$420, US$219 and US$79
for the years ended September 30, 2018, 2019 and 2020, respectively
|
2,599 | 1,375 | 318 | ||||||||||
|
|
|
|
|
|
||||||||
Comprehensive income
|
6,784 | 8,715 | 22,188 | ||||||||||
Less: comprehensive (loss) income attributable to noncontrolling interests
|
(1,196 | ) | (7,195 | ) | 233 | ||||||||
|
|
|
|
|
|
||||||||
Comprehensive income attributable to China Distance Education Holdings Limited
|
7,980 | 15,910 | 21,955 | ||||||||||
|
|
|
|
|
|
China Distance Education Holding Limited shareholders | ||||||||||||||||||||||||||||||||
Number of
ordinary shares |
Ordinary
shares |
Additional
paid-in
capital |
Accumulated
other comprehensive loss |
Retained
earnings |
Total China
Distance Education Holding Limited shareholders’ equity |
Noncontrolling
interests |
Total
equity |
|||||||||||||||||||||||||
US$ | US$ | US$ | US$ | US$ | US$ | US$ | ||||||||||||||||||||||||||
Balance as of September 30, 2017
|
131,854,773 | 13 | 19,097 | (3,367 | ) | 33,040 | 48,783 | 24,029 | 72,812 | |||||||||||||||||||||||
Net income for the year
|
— | — | — | — | 11,626 | 11,626 | 677 | 12,303 | ||||||||||||||||||||||||
Foreign currency translation adjustments
|
— | — | — | (6,245 | ) | — | (6,245 | ) | (1,873 | ) | (8,118 | ) | ||||||||||||||||||||
Options exercised
|
952,148 | — | 1,489 | — | — | 1,489 | — | 1,489 | ||||||||||||||||||||||||
Share-based compensation expenses (Note 26)
|
468,600 | — | 2,306 | — | — | 2,306 | — | 2,306 | ||||||||||||||||||||||||
Dividends to shareholders (Note 27)
|
— | — | — | — | (14,949 | ) | (14,949 | ) | — | (14,949 | ) | |||||||||||||||||||||
Capital contribution from noncontrolling interests
|
— | — | 29 | — | — | 29 | 60 | 89 | ||||||||||||||||||||||||
Noncontrolling interest arising from acquisitions
|
— | — | — | — | — | — | 42,598 | 42,598 | ||||||||||||||||||||||||
Unrealized gain on available-for-sale investments, net of tax effect of US$420
|
— | — | — | 2,599 | — | 2,599 | — | 2,599 | ||||||||||||||||||||||||
Loan to optionees in connection with exercise of options
|
— | — | (1,557 | ) | — | — | (1,557 | ) | — | (1,557 | ) | |||||||||||||||||||||
Repayment of loan to optionees in connection with exercise of options
|
— | — | 193 | — | — | 193 | — | 193 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Balance as of September 30, 2018
|
133,275,521 | 13 | 21,557 | (7,013 | ) | 29,717 | 44,274 | 65,491 | 109,765 | |||||||||||||||||||||||
Net income (loss) for the year
|
— | — | — | — | 21,254 | 21,254 | (5,060 | ) | 16,194 | |||||||||||||||||||||||
Foreign currency translation adjustments
|
— | — | — | (6,719 | ) | — | (6,719 | ) | (2,135 | ) | (8,854 | ) | ||||||||||||||||||||
Share-based compensation expenses (Note 26)
|
935,224 | — | 2,005 | — | — | 2,005 | — | 2,005 | ||||||||||||||||||||||||
Dividends paid by a subsidiary to its noncontrolling interests shareholders
|
— | — | — | — | — | — | (291 | ) | (291 | ) | ||||||||||||||||||||||
Capital contribution from noncontrolling interests
|
— | — | — | — | — | — | 29 | 29 | ||||||||||||||||||||||||
Unrealized gain on available-for-sale investments, net of tax effect of US$219
|
— | — | — | 1,375 | — | 1,375 | — | 1,375 | ||||||||||||||||||||||||
Repayment of loan to optionees in connection with exercise of options
|
— | — | 135 | — | — | 135 | — | 135 | ||||||||||||||||||||||||
Purchase of noncontrolling interests of a consolidated subsidiary
|
— | — | 810 | — | — | 810 | (7,119 | ) | (6,309 | ) | ||||||||||||||||||||||
Modified retrospective adjustment of upon adoption of
|
||||||||||||||||||||||||||||||||
Topic 606 (Note 2)
|
— | — | — | — | 9,697 | 9,697 | — | 9,697 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Balance as of September 30, 2019
|
134,210,745 | 13 | 24,507 | (12,357 | ) | 60,668 | 72,831 | 50,915 | 123,746 | |||||||||||||||||||||||
Net income (loss) for the year
|
— | — | — | — | 10,430 | 10,430 | (2,293 | ) | 8,137 | |||||||||||||||||||||||
Foreign currency translation adjustments
|
— | — | — | 11,207 | — | 11,207 | 2,526 | 13,733 | ||||||||||||||||||||||||
Share-based compensation expenses (Note 26)
|
1,109,688 | 1 | 2,617 | — | — | 2,618 | — | 2,618 | ||||||||||||||||||||||||
Dividends to shareholders (Note 27)
|
— | — | — | — | (19,621 | ) | (19,621 | ) | — | (19,621 | ) | |||||||||||||||||||||
Dividends paid by a subsidiary to its noncontrolling interests shareholders
|
— | — | — | — | — | — | (2,546 | ) | (2,546 | ) | ||||||||||||||||||||||
Capital contribution from noncontrolling interests
|
— | — | — | — | — | — | 367 | 367 | ||||||||||||||||||||||||
Unrealized gain on available-for-sale investments, net of tax effect of US$79
|
— | — | — | 318 | — | 318 | — | 318 | ||||||||||||||||||||||||
Repayment of loan to optionees in connection with exercise of options
|
— | — | 192 | — | — | 192 | — | 192 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Balance as of September 30, 2020
|
135,320,433 | 14 | 27,316 | (832 | ) | 51,477 | 77,975 | 48,969 | 126,944 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended September 30, | ||||||||||||
2018 | 2019 | 2020 | ||||||||||
US$ | US$ | US$ | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||||||
Net income
|
12,303 | 16,194 | 8,137 | |||||||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||||||
Share-based compensation
|
2,306 | 2,005 | 2,618 | |||||||||
Depreciation of property, plant and equipment
|
3,069 | 3,958 | 4,649 | |||||||||
Amortization of other intangible assets
|
3,230 | 8,765 | 8,566 | |||||||||
Non-cash operating lease cost
|
— | — | 4,716 | |||||||||
Provision of inventories
|
15 | 1,090 | 1,069 | |||||||||
Change in allowance for doubtful accounts
|
199 | (8 | ) | 499 | ||||||||
Impairment loss on goodwill
|
— | 1,517 | — | |||||||||
Losses on disposition of property, plant and equipment
|
21 | 344 | 354 | |||||||||
Loss from equity method investments
|
172 | 1,484 | 555 | |||||||||
Impairment loss from long-term investments
|
2,835 | 6,920 | 910 | |||||||||
Gain from disposal of an investment
|
— | (318 | ) | — | ||||||||
Change in fair value in connection with a business combination
|
(84 | ) | (695 | ) | — | |||||||
Gain from deconsolidation of a subsidiary
|
— | (6,869 | ) | — | ||||||||
Changes in operating assets and liabilities:
|
||||||||||||
Accounts receivable
|
(1,921 | ) | (631 | ) | 1,012 | |||||||
Inventories
|
(1,769 | ) | (2,712 | ) | (1,467 | ) | ||||||
Prepayments and other current assets
|
|
|
(2,710
|
)
|
|
|
(7,568
|
)
|
(6,926 | ) | ||
Amounts due from related parties
|
7 | (535 | ) | (2,453 | ) | |||||||
Deferred costs
|
(458 | ) | (359 | ) | (151 | ) | ||||||
Operating lease right-of-use assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets
|
(3,050 | ) | 1,154 | (1,571 | ) | |||||||
Other non-current assets
|
(1,328 | ) | (1,306 | ) | 3,038 | |||||||
Accrued expenses and other liabilities
|
357 | (179 | ) | 15,435 | ||||||||
Amount
s
due to related part
ies
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax payable
|
582 | 1,112 | 6,456 | |||||||||
Deferred revenue
|
23,243 | 68,368 | 5,210 | |||||||||
Operating lease liabilities
|
|
|
|
|
|
|
|
|
|
|
|
)
|
Refundable fees
|
13,444 | (10,836 | ) | 1,264 | ||||||||
Deferred tax liabilities
|
(369 | ) | 277 | (7,129 | ) | |||||||
|
|
|
|
|
|
|||||||
Net cash provided by operating activities
|
50,094 | 81,795 | 40,961 | |||||||||
|
|
|
|
|
|
|||||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||||||
Purchase of businesses, net of cash acquired of US$565, nil and nil as of September 30, 2018, 2019 and
2020, respectively
|
(15,488 | ) | — | — | ||||||||
Disposal of a consolidated subsidiary, net of cash disposed of nil, US$4,787 and nil as of September 30, 2018, 2019 and
2020, respectively
|
— | (2,769 | ) | — | ||||||||
Purchase of term deposits
|
— | — | (25,158 | ) | ||||||||
Maturity of term deposits
|
— | — | 12,133 | |||||||||
Purchase of short-term investments
|
(21,905 | ) | (20,660 | ) | (5,500 | ) | ||||||
Maturity of short-term investments
|
28,211 | 14,714 | 8,350 | |||||||||
Acquisition of property, plant and equipment
|
(15,462 | ) | (9,601 | ) | (4,417 | ) | ||||||
Purchase of additional equity interests of a consolidated subsidiary
|
— | (5,571 | ) | — | ||||||||
Settlement of contingent consideration related to previously acquired equity interests of a consolidated subsidiary
|
— | (1,048 | ) | — | ||||||||
Proceeds from disposition of property, plant and equipment
|
49 | — | — | |||||||||
Proceeds from disposal of equity securities without readily determinable fair value
|
— | 3,589 | 762 |
Years ended September 30, | ||||||||||||
2018 | 2019 | 2020 | ||||||||||
US$ | US$ | US$ | ||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES - continued
|
||||||||||||
Acquisition of other intangible assets
|
(736 | ) | (663 | ) | (290 | ) | ||||||
Payment of deposit for the acquisition of non-current assets
|
(8,359 | ) | (2,744 | ) | (488 | ) | ||||||
Payment of deposit for the purchase of investments
|
— | (218 | ) | — | ||||||||
Purchase of equity method investments
|
(2,600 | ) | (87 | ) | (114 | ) | ||||||
Purchase of equity securities without readily determinable fair value
|
(18,136 | ) | — |
(1,427
|
) | |||||||
Purchase of available-for-sale investments
|
(1,071 | ) | — | — | ||||||||
|
|
|
|
|
|
|||||||
Net cash used in investing activities
|
(55,497 | ) | (25,058 | ) | (16,149 | ) | ||||||
|
|
|
|
|
|
|||||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||||||
Capital contribution from noncontrolling interests
|
89 | 29 | 367 | |||||||||
Loan repayments
|
(22,190 | ) | (24,092 | ) | (38,646 | ) | ||||||
Bank borrowings
|
35,300 | — | 20,000 | |||||||||
Repayment of short-term loan to a related party
|
(1,677 | ) | — | — | ||||||||
Proceeds from share options exercised by employees
|
1,489 | — | — | |||||||||
Loan to optionees in connection with exercise of options
|
(1,557 | ) | — | — | ||||||||
Repayment of loan to optionees in connection with exercise of options
|
193 | 135 | 192 | |||||||||
Dividends paid to shareholders
|
(14,949 | ) | — | (19,621 | ) | |||||||
Dividends paid by a subsidiary to its noncontrolling interests shareholders
|
— | (291 | ) | (2,546 | ) | |||||||
|
|
|
|
|
|
|||||||
Net cash used in financing activities
|
(3,302 | ) | (24,219 | ) | (40,254 | ) | ||||||
|
|
|
|
|
|
|||||||
Exchange rate effect on cash and cash equivalents and restricted cash
|
(4,114 | ) | (8,745 | ) | 10,224 | |||||||
|
|
|
|
|
|
|||||||
Net (decrease) increase in cash and cash equivalents and restricted cash
|
(12,819 | ) | 23,773 | (5,218 | ) | |||||||
Cash and cash equivalents and restricted cash at beginning of the year
|
95,381 | 82,562 | 106,335 | |||||||||
|
|
|
|
|
|
|||||||
Cash and cash equivalents and restricted cash at end of the year
|
82,562 | 106,335 | 101,117 | |||||||||
|
|
|
|
|
|
|||||||
Supplemental schedule of cash flow information:
|
||||||||||||
Income tax paid
|
(5,942 | ) | (5,898 | ) | (6,922 | ) | ||||||
Supplemental schedule of non-cash activities:
|
||||||||||||
Acquisition of property, plant and equipment and other intangible assets through utilization of deposits
|
474 | 6,238 | 2,909 | |||||||||
Income tax reversal
|
299 | 79 | 627 | |||||||||
|
|
|
|
|
|
1.
|
ORGANIZATION AND BASIS OF PRESENTATION
|
1.
|
ORGANIZATION AND BASIS OF PRESENTATION
|
1.
|
ORGANIZATION AND BASIS OF PRESENTATION
|
• |
Agreements that transfer economic benefits to Champion Technology
|
1.
|
ORGANIZATION AND BASIS OF PRESENTATION
|
• |
Agreements that provide the Company effective control over Beijing Champion
|
1.
|
ORGANIZATION AND BASIS OF PRESENTATION
|
• |
Agreements that provide the Company effective control over Beijing Champion - continued
|
• |
Agreements that transfer economic benefits to Zhongxi Healthcare Education
|
1.
|
ORGANIZATION AND BASIS OF PRESENTATION
|
• |
Agreements that transfer economic benefits to Zhongxi Healthcare Education - continued
|
1.
|
ORGANIZATION AND BASIS OF PRESENTATION
|
• |
Agreements that provide the Company effective control over Zhongxi Healthcare Education
|
1.
|
ORGANIZATION AND BASIS OF PRESENTATION
|
|
•
|
|
Risks in relation to the VIE structure
|
|
•
|
|
revoke the business and operating licenses of the Company’s PRC subsidiaries or consolidated affiliated entities;
|
|
•
|
|
restrict the rights to collect revenues from any of the Company’s PRC subsidiaries;
|
|
•
|
|
discontinue or restrict the operations of any related-party transactions among the Company’s PRC subsidiaries or consolidated affiliated entities;
|
|
•
|
|
require the Company’s PRC subsidiaries or consolidated affiliated entities to restructure the relevant ownership structure or operations;
|
|
•
|
|
take other regulatory or enforcement action, including levying fines that could be harmful to the Company’s business; or
|
|
•
|
|
impose additional conditions or requirements with which the Company may not be able to comply.
|
1.
|
ORGANIZATION AND BASIS OF PRESENTATION
|
|
•
|
|
Risks in relation to the VIE structure - continued
|
1.
|
ORGANIZATION AND BASIS OF PRESENTATION
|
As of September 30, | ||||||||
2019 | 2020 | |||||||
US$ | US$ | |||||||
Cash and cash equivalents
|
39,919 | 67,257 | ||||||
Prepayment and other current assets
|
24,533 | 28,334 | ||||||
Total current assets
|
192,471 | 113,040 | ||||||
Total assets
|
314,943 | 271,168 | ||||||
Deferred revenue – current
|
93,364 | 104,929 | ||||||
Total current liabilities
|
137,478 | 174,978 | ||||||
Deferred revenue – non-current
|
33,564 | 33,928 | ||||||
Total non-current liabilities
|
36,004 | 64,007 | ||||||
Total liabilities
|
173,483 | 238,985 | ||||||
|
|
|
|
For the years ended September 30, | ||||||||||||
2018 | 2019 | 2020 | ||||||||||
US$ | US$ | US$ | ||||||||||
Net revenues
|
151,146 | 183,893 | 197,110 | |||||||||
|
|
|
|
|
|
|||||||
Net income
|
29,532 | 36,393 | 33,439 | |||||||||
|
|
|
|
|
|
|||||||
Net cash provided by operating activities
|
44,054 | 41,568 | 29,294 | |||||||||
|
|
|
|
|
|
|||||||
Net cash used in investing activities
|
(44,414 | ) | (20,517 | ) | (3,127 | ) | ||||||
|
|
|
|
|
|
|||||||
Net cash used in financing activities
|
(5,706 | ) | — | (1,713 | ) | |||||||
|
|
|
|
|
|
|||||||
Effects of exchange rate changes
|
(555 | ) | (1,609 | ) | 2,884 | |||||||
|
|
|
|
|
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
Category
|
Estimated useful life | Estimated residual value | ||||||
Buildings
|
35~50 years |
5-10
|
% | |||||
Electronic and office equipment
|
5 years |
5-10
|
% | |||||
Motor vehicles
|
5 years |
5-10
|
% | |||||
Leasehold improvement and building improvement
|
Shorter of lease term or 5 years | — |
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
Category
|
Estimated useful life | |
Computer software
|
3~5 years | |
Trademarks and domain names
|
3~11 years | |
Courseware
|
1~5 years | |
Business contracts
|
3~5.5 years | |
Copyrights
|
5~7 years | |
Others
|
3.5~8 years |
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
|
(a)
|
Equity securities without readily determinable fair values
|
(b) |
Equity method investments
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
|
(b)
|
Equity method investments - continued
|
(c) |
Available-for-sale securities investments
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
Over-time | A point-in-time | Total | ||||||||||
US$ | US$ | US$ | ||||||||||
Online education services
|
158,548 | 790 | 159,338 | |||||||||
Books and reference materials
|
— | 22,061 | 22,061 | |||||||||
Other professional education services
|
7,352 | 9,084 | 16,436 | |||||||||
|
|
|
|
|
|
|||||||
Professional education services
|
165,900 | 31,935 | 197,835 | |||||||||
Sales of learning simulation software
|
— | 9,516 | 9,516 | |||||||||
Business start-up training services
|
— | 2,207 | 2,207 | |||||||||
|
|
|
|
|
|
|||||||
Total
|
165,900 | 43,658 | 209,558 | |||||||||
|
|
|
|
|
|
|||||||
Refundable
course model |
Non-refundable
course model |
Total | ||||||||||
US$ | US$ | US$ | ||||||||||
Online education services
|
37,357 | 121,981 | 159,338 | |||||||||
Books and reference materials
|
— | 22,061 | 22,061 | |||||||||
Other professional education services
|
— | 16,436 | 16,436 | |||||||||
|
|
|
|
|
|
|||||||
Professional education services
|
37,357 | 160,478 | 197,835 | |||||||||
Sales of learning simulation software
|
— | 9,516 | 9,516 | |||||||||
Business start-up training services
|
— | 2,207 | 2,207 | |||||||||
|
|
|
|
|
|
|||||||
Total
|
37,357 | 172,201 | 209,558 | |||||||||
|
|
|
|
|
|
|
|
Over-time
|
|
|
A point-in-time
|
|
|
Total
|
|
|||
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|||
Online education services
|
|
|
144,221
|
|
|
|
1,696
|
|
|
|
145,917
|
|
Books and reference materials
|
|
|
—
|
|
|
|
27,372
|
|
|
|
27,372
|
|
Other professional education services
|
|
|
14,079
|
|
|
|
8,679
|
|
|
|
22,758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional education services
|
|
|
158,300
|
|
|
|
37,747
|
|
|
|
196,047
|
|
Sales of learning simulation software
|
|
|
—
|
|
|
|
12,979
|
|
|
|
12,979
|
|
Business start-up training services
|
|
|
—
|
|
|
|
2,796
|
|
|
|
2,796
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
158,300
|
|
|
|
53,552
|
|
|
|
211,822
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Refundable
course model |
|
|
Non-refundable
course model |
|
|
Total
|
|
|||
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|||
Online education services
|
|
|
22,465
|
|
|
|
123,452
|
|
|
|
145,917
|
|
Books and reference materials
|
|
|
—
|
|
|
|
27,372
|
|
|
|
27,372
|
|
Other professional education services
|
|
|
—
|
|
|
|
22,758
|
|
|
|
22,758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional education services
|
|
|
22,465
|
|
|
|
173,582
|
|
|
|
196,047
|
|
Sales of learning simulation software
|
|
|
—
|
|
|
|
12,979
|
|
|
|
12,979
|
|
Business start-up training services
|
|
|
—
|
|
|
|
2,796
|
|
|
|
2,796
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
22,465
|
|
|
|
189,357
|
|
|
|
211,822
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
US$ | ||||
Years ending September 30,
|
||||
2021
|
105,953 | |||
2022
|
27,003 | |||
2023
|
6,379 | |||
2024
|
470 | |||
2025
|
76 | |||
|
|
|||
139,881 | ||||
|
|
|
|
US$
|
|
|
Years ending September 30,
|
|
|||
2020
|
|
|
94,202
|
|
2021
|
|
|
24,999
|
|
2022
|
|
|
7,288
|
|
2023
|
|
|
1,159
|
|
2024
|
|
|
118
|
|
|
|
|
|
|
|
|
127,766
|
|
|
|
|
|
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
3.
|
BUSINESS ACQUISITIONS
|
US$ |
Amortization
period |
|||||||
Cash
|
2,526 | |||||||
Other current assets
|
753 | |||||||
Property, plant and equipment
|
1,984 | 25 years | ||||||
Intangible assets
|
||||||||
Customer relationship
|
545 | 8 years | ||||||
Others
|
90 | 1-5 years | ||||||
Goodwill
|
3,547 | |||||||
Other current liabilities
|
(1,550 | ) | ||||||
Deferred tax liabilities
|
(574 | ) | ||||||
Noncontrolling interest
|
(1,262 | ) | ||||||
|
|
|||||||
Total
|
6,059 | |||||||
|
|
3.
|
BUSINESS ACQUISITIONS
|
Year
September 30,
|
||||||
2018 | ||||||
US$ | ||||||
Pro forma net revenues
|
2,581 | |||||
Pro forma net loss attributable to the Company
|
(561 | ) | ||||
Pro forma net income per ordinary share-basic
|
0.09 | |||||
Pro forma net income per ordinary share-diluted
|
0.09 |
3.
|
BUSINESS ACQUISITIONS
|
3.
|
BUSINESS ACQUISITIONS
|
US$ |
Amortization
period |
|||||||
Cash
|
1,639 | |||||||
Other current assets
|
9,578 | |||||||
Property, plant and equipment
|
118 | 5 years | ||||||
Intangible assets
|
||||||||
Supplier contracts
|
25,118 | 5.5 years | ||||||
Trademark
|
2,741 | 3 years | ||||||
Courseware
|
4,478 | 3.5 years | ||||||
Software
|
344 | 5.3 years | ||||||
Others
|
210 | 2.5-5.5 years | ||||||
Goodwill
|
48,931 | |||||||
Other current liabilities
|
(684 | ) | ||||||
Deferred tax liabilities
|
(8,115 | ) | ||||||
Noncontrolling interest
|
(41,336 | ) | ||||||
|
|
|||||||
Total
|
43,022 | |||||||
|
|
3.
|
BUSINESS ACQUISITIONS
|
4.
|
SHORT-TERM INVESTMENTS
|
4.
|
SHORT-TERM INVESTMENTS
|
As of September 30, | ||||||||
2019 | 2020 | |||||||
US$ | US$ | |||||||
Held-to-maturity investments
|
1,517 | — | ||||||
Available-for-sale investments
|
20,601 | 20,343 | ||||||
|
|
|
|
|||||
22,118 | 20,343 | |||||||
|
|
|
|
5.
|
ACCOUNTS RECEIVABLE, NET
|
As of September 30, | ||||||||
2019 | 2020 | |||||||
US$ | US$ | |||||||
Accounts receivable
|
8,612 | 8,018 | ||||||
Less: allowance for doubtful accounts
|
(1,282 | ) | (1,864 | ) | ||||
|
|
|
|
|||||
Accounts receivable, net
|
7,330 | 6,154 | ||||||
|
|
|
|
As of September 30, | ||||||||
2019 | 2020 | |||||||
US$ | US$ | |||||||
Balance at beginning of the year
|
1,342 | 1,282 | ||||||
(Reversal) provision of the allowance for doubtful accounts
|
(8 | ) | 499 | |||||
Foreign currency adjustment
|
(52 | ) | 83 | |||||
|
|
|
|
|||||
Balance at end of the year
|
1,282 | 1,864 | ||||||
|
|
|
|
6.
|
INVENTORIES
|
As of
September 30, |
||||||||
2019 | 2020 | |||||||
US$ | US$ | |||||||
Books and other goods
|
3,727 | 3,482 | ||||||
Paper and other raw materials
|
1,035 | 1,671 | ||||||
|
|
|
|
|||||
Less: inventory provisions for slow-moving and obsolescence
|
(530 | ) | (290 | ) | ||||
|
|
|
|
|||||
Total
|
4,232 | 4,863 | ||||||
|
|
|
|
7.
|
PREPAYMENT AND OTHER CURRENT ASSETS
|
As of September 30, | ||||||||||||
Notes | 2019 | 2020 | ||||||||||
US$ | US$ | |||||||||||
Prepaid expenses
|
8,974 | 6,557 | ||||||||||
Capitalized commission fees
|
(1 | ) | 4,974 | 8,440 | ||||||||
Advance to suppliers
|
(2 | ) | 3,938 | 4,799 | ||||||||
Funds receivable
|
(3 | ) | 2,364 | 4,349 | ||||||||
Staff advances
|
(4 | ) | 1,591 | 1,480 | ||||||||
Receivable from disposal of a subsidiary
|
(5 | ) | 1,540 | 1,621 | ||||||||
Others
|
3,351 | 4,069 | ||||||||||
|
|
|
|
|||||||||
Prepayment and other current assets, net
|
26,732 | 31,315 | ||||||||||
|
|
|
|
(1) |
Capitalized commission fees primarily consist of the incremental sales commission relating to obtaining the customer contracts as described in Note 2.
|
7.
|
PREPAYMENT AND OTHER CURRENT ASSETS
|
(2)
|
Advance to suppliers represents interest-free cash deposits paid to suppliers for future purchase of raw materials and finished goods. The risk of loss arising from non-performance by or bankruptcy of the suppliers is assessed prior to making the deposits and is monitored on a regular basis by management. A charge to cost of sales will be recorded in the period in which a loss becomes probable. As of September 30, 2020, the Group has not experienced any loss of advance to suppliers.
|
(3)
|
Funds receivable arise due to the time taken to clear customers’ payment transactions through external payment networks. When customers remit fees to the Group via external payment networks using their bank accounts or credit cards, there is a clearing period before the cash is received by the Group which usually takes one to three business days. These course fees are treated as a receivable until the cash is received.
|
(4)
|
Staff advances were provided to staff for travelling and business related use which were subsequently expensed when incurred.
|
(5)
|
Receivable from disposal of a subsidiary refers to the remaining consideration receivable due from the buyers of Beijing Champion Tax Management and Advisory Co., Ltd. (“Champion Tax Advisory”), a previously consolidated subsidiary of the Group. The balance as of September 30, 2019 and 2020 was received on January 8, 2020 and January 8, 2021, respectively.
|
8.
|
PROPERTY, PLANT AND EQUIPMENT, NET
|
As of September 30, | ||||||||
2019 | 2020 | |||||||
US$ | US$ | |||||||
Buildings
|
8,756 | 9,216 | ||||||
Electronic and office equipment
|
20,069 | 20,107 | ||||||
Leasehold improvement and building improvement
|
10,843 | 15,935 | ||||||
Motor vehicles
|
2,086 | 2,294 | ||||||
|
|
|
|
|||||
Total
|
41,754 | 47,552 | ||||||
Less: Accumulated depreciation
|
(17,454 | ) | (19,904 | ) | ||||
Construction in progress
|
13,635 | 14,683 | ||||||
|
|
|
|
|||||
37,935 | 42,331 | |||||||
|
|
|
|
9.
|
GOODWILL, NET
|
For the years ended September 30 | ||||||||||||||||||||||||||||||||
2019 | 2020 | |||||||||||||||||||||||||||||||
Professional
education services |
Business
start-up
training services |
Sales of
learning simulation software |
Total |
Professional
education services |
Business
start-up
training services |
Sales of
learning simulation software |
Total | |||||||||||||||||||||||||
US$ | US$ | US$ | US$ | US$ | US$ | US$ | US$ | |||||||||||||||||||||||||
Gross amount
|
||||||||||||||||||||||||||||||||
Beginning balance
|
56,214 | 1,642 | 21,660 | 79,516 | 54,016 | 1,517 | 20,813 | 76,346 | ||||||||||||||||||||||||
Exchange difference
|
(2,198 | ) | (125 | ) | (847 | ) | (3,170 | ) | 3,040 | — | 1,097 | 4,137 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Ending balance
|
54,016 | 1,517 | 20,813 | 76,346 | 57,056 | 1,517 | 21,910 | 80,483 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Accumulated impairment loss
|
— | (1,517 | ) | — | (1,517 | ) | — | (1,517 | ) | — | (1,517 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Goodwill, net
|
54,016 | — | 20,813 | 74,829 | 57,056 | — | 21,910 | 78,966 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.
|
OTHER INTANGIBLE ASSETS, NET
|
As of September 30, | ||||||||
2019 | 2020 | |||||||
US$ | US$ | |||||||
Computer software
|
5,858 | 6,452 | ||||||
Trademarks and domain names
|
5,429 | 5,730 | ||||||
Courseware
|
4,601 | 4,843 | ||||||
Business contracts
|
23,917 | 25,178 | ||||||
Copyrights
|
9,692 | 10,204 | ||||||
Others
|
871 | 918 | ||||||
|
|
|
|
|||||
Total intangible assets
|
50,368 | 53,325 | ||||||
|
|
|
|
|||||
Less: Accumulated amortization
|
||||||||
Computer software
|
(4,316 | ) | (5,001 | ) | ||||
Trademarks and domain names
|
(2,727 | ) | (3,790 | ) | ||||
Courseware
|
(1,857 | ) | (3,213 | ) | ||||
Business contracts
|
(5,667 | ) | (10,457 | ) | ||||
Copyrights
|
(5,346 | ) | (7,227 | ) | ||||
Others
|
(342 | ) | (476 | ) | ||||
|
|
|
|
|||||
Accumulated amortization
|
(20,255 | ) | (30,164 | ) | ||||
|
|
|
|
|||||
Intangible assets, net
|
30,113 | 23,161 | ||||||
|
|
|
|
Amortization | ||||
US$ | ||||
2021
|
8,551 | |||
2022
|
6,846 | |||
2023
|
5,841 | |||
2024
|
1,447 | |||
2025
|
273 | |||
2026 and thereafter
|
203 | |||
|
|
|||
23,161 | ||||
|
|
11.
|
LONG-TERM INVESTMENTS
|
As of September 30, | ||||||||
2019 | 2020 | |||||||
US$ | US$ | |||||||
Equity securities without readily determinable fair value:
|
||||||||
Beijing teacheredu.cn Science & Technology Co., Ltd. (“Beijing teacheredu”) (a)
|
11,199 | 11,789 | ||||||
Other equity securities without readily determinable fair value
|
762 | 1,473 | ||||||
Equity method investments:
|
||||||||
Beijing Champion Yuanjian Education Technology Co., Ltd. (“Yuanjian”) (b)
|
2,488 | 3,012 | ||||||
Other equity method investments (c)
|
2,590 | 941 | ||||||
Available-for-sale securities investments:
|
||||||||
Chongqing Moses Robots Co., Ltd. (“Chongqing Moses Robots”) (d)
|
4,617 | 5,597 | ||||||
Beijing Niuke Technology Co., Ltd (“Niuke Technology”) (e)
|
2,434 | 2,353 | ||||||
Other available-for-sale investments (f)
|
1,289 | 1,159 | ||||||
|
|
|
|
|||||
Total
|
25,379 | 26,324 | ||||||
|
|
|
|
(a) |
In December 2017, the Group entered into a share transfer agreement with certain shareholders of Beijing teacheredu, an organization specialized in teacher’s continuing education, to purchase 14.5% equity interest for a consideration of RMB80.0 million (US$11,119). The Group accounted for the equity investments using the measurement alternative when the equity method is not applicable and there is no readily determinable fair value for the investments.
In October 2020, Beijing teacheredu completed its share issuance plan and the equity interest held by the Group was reduced from 14.5% to 13.8%. For the years ended September 30, 2018, 2019 and 2020, no impairment loss was recorded in regard to the investment.
|
11.
|
LONG-TERM INVESTMENTS
|
(b) |
On December 29, 2018, the Group entered into a Share Transfer Agreement with Beijing Zhengbao TongChuang Technology Co., Ltd (“TongChuang”) and Beijing Zhengbao TongCheng Co., Ltd (“TongCheng”), to transfer 60% equity interest of Champion Tax Advisory to its key employees, for a total consideration of RMB35.9 million (US$5,020) (refer to
N
ote 17). Upon the completion of the share transfer, the Group holds 40% of Champion Tax Advisory, which was subsequently renamed as Yuanjian. The Group maintains significant influence over Yuanjian, and therefore, the remaining 40% equity interest retained was accounted for as an equity method investment. During the years ended September 30, 2019 and 2020, the Group recorded share of net
(
loss
)
income amounting
to
US$
(
658
)
and US$386, respectively.
|
(c) |
The other equity method investments represent several insignificant investments classified as equity method investments as of September 30, 2019 and 2020. During the years ended September 30, 2018, 2019 and 2020, the Group recorded share of net income
(
loss
)
amounting
to
US$61, US$
(
47
)
and US$
(
941
)
, respectively. During the years ended September 30,
2018,
2019 and 2020, the Group recorded impairment loss from long-term investments amounting to
nil,
nil and US$910
, respectively
.
|
(d) |
In November 2017, the Group entered into a capital contribution agreement with Chongqing Moses Robots, an industrial automation solution provider, and its shareholders to purchase 10.0% equity interest for a consideration of RMB10.0 million (US$1,503), with certain redemption features. The investment was classified as available-for-sale security as the Group determined that the shares were debt securities in nature due to the redemption features and measured the investment subsequently at fair value. Chongqing Moses Robots did not achieve pre-agreed performance target, as a result, one of the redemption events was triggered. As part of the redemption process, the Group and the investee agreed to exchange the cash redemption for a 5% additional equity interest issued by the founding shareholders to the Group. As a result, the Group further increased its equity interest in Chongqing Moses Robots to 15%. Unrealized holding gain of US$1,070 and US$626 was reported in other comprehensive loss for the years ended September 30, 2019 and 2020, respectively.
|
(e) |
In September 2016, the Group purchased 8.5% equity in Niuke Technology for RMB4.3 million (US$639). In April 2018, Niuke Technology issued additional shares of which the Group subscribed additional 3% equity interest for RMB4.5 million (US$655), resulting in a 10.65% stake of total ownership. The Group accounted for both the initial and subsequent investments as available-for-sale as the Group determined that the shares were debt securities in nature due to certain redemption features. The Group initially and subsequently measured the investment at fair value. Unrealized holding gain (loss) of US$170 and US$(178) were reported in other comprehensive
income
(loss) for the years ended September 30, 2019 and 2020, respectively.
|
(f) |
Other investments represent several insignificant investments classified as available-for-sale investments as of September 30, 2019 and 2020. Unrealized holding gains (loss) of US$135 and US$(130) were reported in other comprehensive
i
(loss) for the years ended September 30, 2019 and 2020, respectively.
ncome
|
12.
|
FAIR VALUE MEASUREMENT
|
For the year ended September 30, 2020 | ||||||||||||||||
Fair value
of September 30, 2020 |
Quoted prices in
active markets for identical assets |
Significant
other observable inputs |
Significant
unobservable inputs |
|||||||||||||
(Level 1) | (Level 2) | (Level 3) | ||||||||||||||
|
|
|
US$
|
|
|
|
US$
|
|
|
|
US$
|
|
|
|
US$
|
|
Fair value measured
|
||||||||||||||||
Cash and cash equivalents
|
80,056 | 80,056 | — | — | ||||||||||||
Short-term investments:
|
||||||||||||||||
Available-for-sale securities
|
20,343 | — | 20,343 | — | ||||||||||||
Long-term investments:
|
||||||||||||||||
Available-for-sale securities
|
9,109 | — | 2,353 | 6,756 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total assets measured at fair value
|
109,508 | 80,056 | 22,696 | 6,756 | ||||||||||||
|
|
|
|
|
|
|
|
For the year ended September 30, 2019 | ||||||||||||||||
Fair value
of September 30, 2019 |
Quoted prices in
active markets for identical assets |
Significant
other observable inputs |
Significant
unobservable inputs |
|||||||||||||
(Level 1) | (Level 2) | (Level 3) | ||||||||||||||
|
|
|
US$
|
|
|
|
US$
|
|
|
|
US$
|
|
|
|
US$
|
|
Fair value measured
|
||||||||||||||||
Cash and cash equivalents
|
67,977 | 67,977 | — | — | ||||||||||||
Short-term investments:
|
||||||||||||||||
Available-for-sale securities
|
20,601 | — | 20,601 | — | ||||||||||||
Long-term investments:
|
||||||||||||||||
Available-for-sale securities
|
8,340 | — | 1,289 | 7,051 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total assets measured at fair value
|
96,918 | 67,977 | 21,890 | 7,051 | ||||||||||||
|
|
|
|
|
|
|
|
12.
|
FAIR VALUE MEASUREMENT
|
12.
|
FAIR VALUE MEASUREMENT
|
Available-for-sale
Investments |
||||
US$ | ||||
Balance as of September 30, 2018
|
4,648 | |||
|
|
|||
Transfer from
L
evel 2 fair value measurement
|
2,327 | |||
Transfer to
L
evel 2 fair value measurement
|
(1,154 | ) | ||
Unrealized gain
|
1,459 | |||
Exchange loss
|
(229 | ) | ||
|
|
|||
Balance as of September 30, 2019
|
7,051 | |||
|
|
|||
Transfer from
L
evel 2 fair value measurement
|
1,289 | |||
Transfer to
L
evel 2 fair value measurement
|
(2,434 | ) | ||
Unrealized gain
|
606 | |||
Exchange gain
|
244 | |||
|
|
|||
Balance as of September 30, 2020
|
6,756 | |||
|
|
12.
|
FAIR VALUE MEASUREMENT
|
13.
|
OTHER NON-CURRENT ASSETS
|
As of September 30, | ||||||||||||
Notes | 2019 | 2020 | ||||||||||
US$ | US$ | |||||||||||
Long-term prepaid expenses
|
(1 | ) | 3,864 | 2,318 | ||||||||
Rental deposits
|
(2 | ) | 1,017 | 1,244 | ||||||||
Long-term capitalized commission fees
|
(3 | ) | 3,251 | 3,043 | ||||||||
Long-term receivables
|
1,540 | — | ||||||||||
Others
|
420 | 884 | ||||||||||
|
|
|
|
|||||||||
10,092 | 7,489 | |||||||||||
|
|
|
|
13.
|
OTHER NON-CURRENT ASSETS
|
(1) |
Long-term prepaid expenses represent golf club membership fees. Such fees
are
amortized over ten years and
are
recorded as general and administrative expenses on the consolidated statements of operations.
|
(2) |
Rental deposits represent office rental deposits for the Group’s daily operations, which will not be refunded within one year.
|
(3) |
Long-term capitalized commission fees primarily consist of the long-term incremental sales commission relating to obtaining the customer contract
s
as described in Note 2.
|
14.
|
ACCRUED EXPENSES AND OTHER LIABILITIES
|
As of September 30, | ||||||||||||
Note | 2019 | 2020 | ||||||||||
US$ | US$ | |||||||||||
Tuition fee payable to government agencies
|
(1 | ) | 12,971 | 24,109 | ||||||||
Salary and welfare payable
|
8,691 | 10,577 | ||||||||||
Accrued expenses
|
8,317 | 11,386 | ||||||||||
Remuneration payable to lecturers
|
2,701 | 4,648 | ||||||||||
Uncertain income tax liabilities (Note 19)
|
152 | 160 | ||||||||||
Other payable
|
5,435 | 4,574 | ||||||||||
|
|
|
|
|||||||||
38,267 | 55,454 | |||||||||||
|
|
|
|
(1) |
Tuition fee payable to government agencies mainly represents the portion of tuition fee
s
collected by the Group on behalf of the government agencies which provide certain continuing education courses. The Group is only responsible for the student enrollment and provision of online platform and shares certain percentage of tuition fee
s
as service fee
s
.
|
15.
|
BANK BORROWINGS
|
• |
On June 22, 2018, the loan originally drawn down in 2017 was subsequently renewed in an amount of US$15,081 and extended to
June 26, 2019, with an annual interest rate of approximately 3.437%, subject to adjustment each quarter. In connection with the loan agreement, an additional term deposit of RMB11.6 million (US$1,738) was provided to the bank. An additional term deposit of RMB3.6 million (US$526) was made by Champion Technology with maturity date on June 25, 2019 and recorded as restricted cash on the consolidated balance sheet as of September 30, 2018. |
• |
On June 27, 2019, the loan was terminated and replaced by a new loan agreement, for an amount of RMB115.2 million under the BEA Facility, with a maturity date of March 31, 2020. The loan bears interest rate of 3.43% subject to adjustment each quarter. The loan is scheduled to be repaid in two installments before the following dates: November 30, 2019 and March 31, 2020, in an amount of US$3,000 and US$12,100, respectively. On November 22,
2019 and March 27, 2020, US
$3,000
and US$12,100 were repaid according to the payment schedules. The term deposit used to secure the loan was subsequently released upon the settlement.
|
15.
|
BANK BORROWINGS
|
• |
On December 18, 2017, US$20,100 of the HSB Facility was drawn down at approximately 2.82% interest rate, subject to adjustment each quarter, for a term of 12 months. The loan was secured by a term deposit of RMB134.7 million (US$20,246) provided by Champion Technology. The Group repaid US$5,000 in November 2018. On December 14, 2018, the remaining US$15,100 of the loan was subsequently renewed and extended to June 19, 2019 with a 3.49% annual interest rate, subject to adjustment each quarter. On May 17, 2019, the loan was subsequently renewed and extended to November 30, 2019, and it was further extended to January 14, 2020 on June 6, 2019, with a
3.59
% annual interest rate, subject to adjustment each quarter. Part of the loan in an amount of US$8,000 and US$6,000 was repaid in June 2019 and September 2019, respectively. The balance of the loan of US$1,100 was repaid on December 13,
2019. The term deposit used to secure the loan was subsequently released upon the settlement.
|
• |
On January 5, 2018, US$15,200 of the HSB Facility was drawn down at approximately 2.91% interest rate, subject to adjustment each quarter, for a term of 12 months. The loan was secured by a term deposit of RMB101.8 million (US$15,301) provided by Champion Technology. On December 20, 2018, the loan was subsequently renewed and extended to June 19, 2019 with an interest rate of 3.99%, subject to adjustment each quarter. On May 17, 2019, the loan was subsequently renewed and extended to December 19, 2019, and further extended to January 14, 2020 on June 6, 2019, with a
3.59
% annual interest rate, subject to adjustment each quarter. The balance of the loan amounting to US$6,900 and US$8,300 were repaid on December 13, 2019 and January 14, 2020,
respectively. The term deposit used to secure the loan was subsequently released upon the settlement.
|
• |
On April 15, 2020, US$20,000 of the
f
acility was drawn down at approximately 2.58% interest rate, subject to adjustment each quarter, for a term of
24
months. The loan was secured by a term deposit of RMB143.0 million (US$21,062) provided by
Zhongxi
Healthcare
Education
. The loan is scheduled to be repaid in three installments before the following dates: April 14, 2021, October 14, 2021, and April 14, 2022, in an amount of US$4,000, US$8,000, and US$8,000, respectively.
|
15.
|
BANK BORROWINGS
|
• |
On July 21, 2017, Zhengbao Yucai and BSB signed an equity pledge agreement, pursuant to which Zhengbao Yucai agreed to provide a pledge of 80% of equity interest of NetinNet held by Zhengbao Yucai to secure the loan. The loan was drawn down on July 21, 2017.
|
• |
On January 31, 2018, Zhengbao Yucai elected to early repay an amount of RMB47.0 million (US$6,843) of the loan. On May 24, 2019, Zhengbao Yucai elected to early repay an amount of RMB35.0 million (US$5,073).
The outstanding loan balance as of September 30, 2019 amounting to RMB
50.6 million (US$7,072)
was fully paid in the year ended September 30, 2020.
|
16.
|
RELATED-PARTY TRANSACTIONS
|
17.
|
DECONSOLIDATION OF A SUBSIDIARY
|
18.
|
RESTRICTED NET ASSETS
|
18.
|
RESTRICTED NET ASSETS
|
19.
|
INCOME TAX
|
19.
|
INCOME TAX -
|
19.
|
INCOME TAX -
|
For the years ended September 30, | ||||||||||||
2018 | 2019 | 2020 | ||||||||||
US$ | US$ | US$ | ||||||||||
Non - PRC
|
(656 | ) | (3,332 | ) | (12,574 | ) | ||||||
PRC
|
15,438 | 29,131 | 26,726 | |||||||||
|
|
|
|
|
|
|||||||
14,782 | 25,799 | 14,152 | ||||||||||
|
|
|
|
|
|
For the years ended September 30, | ||||||||||||
2018 | 2019 | 2020 | ||||||||||
US$ | US$ | US$ | ||||||||||
Current tax expense
s
|
5,717 | 7,060 | 10,543 | |||||||||
Deferred tax (benefit) expense
s
|
(3,410 | ) | 1,061 | (5,083 | ) | |||||||
|
|
|
|
|
|
|||||||
2,307 | 8,121 | 5,460 | ||||||||||
|
|
|
|
|
|
For the years ended September 30, | ||||||||||||
2018 | 2019 | 2020 | ||||||||||
US$ | US$ | US$ | ||||||||||
Income before taxes
|
14,782 | 25,799 | 14,152 | |||||||||
|
|
|
|
|
|
|||||||
Income tax expense
s
computed at applicable tax rates of 25%
|
3,696 | 6,450 | 3,538 | |||||||||
Effect of different tax rates in different jurisdictions
|
770 | 704 | 3,010 | |||||||||
Non-deductible expenses
|
152 | 1,059 | 1,362 | |||||||||
Effect of tax holidays
|
(2,610 | ) | (1,934 | ) | (2,148 | ) | ||||||
Effect of valuation allowances
|
285 | 1,232 | 184 | |||||||||
Withholding tax on undistributed earnings
|
313 | 689 | 141 | |||||||||
Income tax reversal
|
(299 | ) | (79 | ) | (627 | ) | ||||||
|
|
|
|
|
|
|||||||
2,307 | 8,121 | 5,460 | ||||||||||
|
|
|
|
|
|
|||||||
Effective income tax rate
|
15.61 | % | 31.48 | % | 38.58 | % | ||||||
|
|
|
|
|
|
For the years ended September 30, | ||||||||||||
2018 | 2019 | 2020 | ||||||||||
US$ | US$ | US$ | ||||||||||
The aggregate amount of tax holidays
|
2,610 | 1,934 | 2,148 | |||||||||
|
|
|
|
|
|
|||||||
The
aggregate increase
on basic and diluted net income per share:
|
||||||||||||
- Basic
|
0.02 | 0.01 | 0.02 | |||||||||
|
|
|
|
|
|
|||||||
- Diluted
|
0.02 | 0.01 | 0.02 | |||||||||
|
|
|
|
|
|
As of September 30, | ||||||||
2019 | 2020 | |||||||
US$ | US$ | |||||||
Deferred tax assets
|
||||||||
Advertising expenses carry-forwards
|
— | 1,652 | ||||||
Accrued expenses
|
984 | 1,618 | ||||||
Allowance for doubtful accounts
|
1,031 | 1,073 | ||||||
Impairment loss from long-term investments
|
1,178 | 1,472 | ||||||
Property, plant and equipment
|
103 | 104 | ||||||
Net operating loss carry-forwards
|
2,811 | 4,585 | ||||||
|
|
|
|
|||||
|
6,107 | 10,504 | ||||||
Less: valuation allowance
|
(2,242 | ) | (2,616 | ) | ||||
|
|
|
|
|||||
Total deferred tax assets
|
|
|
|
|
|
|
|
|
Deferred tax assets, net
|
3,865 | 5,690 | ||||||
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
||||||||
Intangible assets
|
7,085 | 5,488 | ||||||
Withholding tax on undistributed earnings
|
3,556 | 133 | ||||||
Unrealized gain on available-for-sale investments
|
647 | 760 | ||||||
Capitalized commission fees
|
1,407 | 1,905 | ||||||
|
|
|
|
|||||
Total deferred tax liabilities
|
12,695 | 8,286 | ||||||
Deferred tax liabilities, net
|
|
|
12,695
|
|
|
|
6,088
|
|
|
|
|
|
19.
|
INCOME TAX
|
20.
|
EMPLOYEE DEFINED CONTRIBUTION PLAN
|
21.
|
LEASES
|
For the year ended
September 30, 2020 |
||||
US$ | ||||
Cash payments for the operating leases
|
6,592 | |||
ROU assets obtained in exchange for the new operating lease liabilities
|
29 | |||
|
|
21.
|
LEASES
|
US$ | ||||
Years ending
September 30, 2020
|
9,225 | |||
2021
|
5,169 | |||
2022
|
3,775 | |||
2023
|
3,701 | |||
2024
|
3,805 | |||
2025 and thereafter
|
21,195 | |||
|
|
|||
Total future lease payments
|
46,870 | |||
|
|
22.
|
COMMITMENTS AND CONTINGENCIES
|
22.
|
COMMITMENTS AND CONTINGENCIES
|
23.
|
NONCONTROLLING INTERESTS
|
Zhengbao
Yucai |
NetinNet |
Jiangsu
Asset |
Beijing
Ruida |
Total | ||||||||||||||||
US$ | US$ | US$ | US$ | US$ | ||||||||||||||||
Balance as of September 30, 2018
|
15,319 | 8,719 | 1,059 | 40,394 | 65,491 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Capital contribution from noncontrolling interest shareholders
|
29 | — | — | — | 29 | |||||||||||||||
Purchase of equity interests from noncontrolling interest shareholders
|
— | — | — | (7,119 | ) | (7,119 | ) | |||||||||||||
Foreign currency translation adjustment attributed to noncontrolling interest shareholders
|
(463 | ) | (372 | ) | (39 | ) | (1,261 | ) | (2,135 | ) | ||||||||||
Cash dividends paid to noncontrolling interests by a subsidiary
|
— | (291 | ) | — | — | (291 | ) | |||||||||||||
(Loss) gain attributed to noncontrolling interest shareholders
|
(6,173 | ) | 1,808 | (55 | ) | (640 | ) | (5,060 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance as of September 30, 2019
|
8,712 | 9,864 | 965 | 31,374 | 50,915 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Capital contribution from noncontrolling interest shareholders
|
— | 367 | — | — | 367 | |||||||||||||||
Foreign currency translation adjustment attributed to noncontrolling interest shareholders
|
426 | 531 | 53 | 1,516 | 2,526 | |||||||||||||||
Cash dividends paid to noncontrolling interests by a subsidiary
|
— | (847 | ) | — | (1,699 | ) | (2,546 | ) | ||||||||||||
(Loss) gain attributed to noncontrolling interest shareholders
|
(1,017 | ) | 506 | 101 | (1,883 | ) | (2,293 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance as of September 30, 2020
|
8,121 | 10,421 | 1,119 | 29,308 | 48,969 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
23.
|
NONCONTROLLING INTERESTS
|
For the years ended September 30, | ||||||||||||
2018 | 2019 | 2020 | ||||||||||
US$ | US$ | US$ | ||||||||||
Net income attributable to the Company
|
11,626 | 21,254 | 10,430 | |||||||||
Transfers from noncontrolling interest:
|
||||||||||||
Increase in the Group’s additional paid-in capital in relation to capital contribution made by Jiangsu Asset’s noncontrolling interest
|
29 | — | — | |||||||||
Increase in the Group’s additional paid-in capital in relation to share purchase from noncontrolling interests of Beijing Ruida
|
— | 810 | — | |||||||||
Changes from net income attributable to the Company’s shareholders and transfer from noncontrolling interests
|
|
11,655
|
|
|
22,064
|
|
|
10,430
|
|
|||
|
|
|
|
|
|
24.
|
SEGMENT REPORTING
|
For the years ended September 30, | ||||||||||||
2018 | 2019 | 2020 | ||||||||||
US$ | US$ | US$ | ||||||||||
Net revenues
|
166,668 | 211,822 | 209,558 | |||||||||
Professional education services
|
150,484 | 196,047 | 197,835 | |||||||||
Business start-up training services
|
4,608 | 2,796 | 2,207 | |||||||||
Sales of learning simulation software
|
11,576 | 12,979 | 9,516 | |||||||||
|
|
|
|
|
|
|||||||
Operating costs and expenses:
|
||||||||||||
Cost of sales
|
(87,883 | ) | (104,741 | ) | (101,598 | ) | ||||||
Professional education services
|
(79,168 | ) | (96,044 | ) | (94,162 | ) | ||||||
Business start-up training services
|
(2,644 | ) | (1,777 | ) | (1,033 | ) | ||||||
Sales of learning simulation software
|
(6,071 | ) | (6,920 | ) | (6,403 | ) | ||||||
Selling and marketing
|
(44,717 | ) | (61,460 | ) | (69,848 | ) | ||||||
Professional education services
|
(39,698 | ) | (56,334 | ) | (65,474 | ) | ||||||
Business start-up training services
|
(1,127 | ) | (1,226 | ) | (915 | ) | ||||||
Sales of learning simulation software
|
(3,892 | ) | (3,900 | ) | (3,459 | ) | ||||||
General and administrative
|
(16,760 | ) | (20,064 | ) | (18,528 | ) | ||||||
Professional education services
|
(14,548 | ) | (16,745 | ) | (16,773 | ) | ||||||
Business start-up training services
|
(896 | ) | (1,930 | ) | (584 | ) | ||||||
Sales of learning simulation software
|
(1,316 | ) | (1,389 | ) | (1,171 | ) | ||||||
Impairment of goodwill
|
— | (1,517 | ) | — | ||||||||
Business start-up training services
|
— | (1,517 | ) | — | ||||||||
Unallocated corporate expenses
|
(4,493 | ) | (4,855 | ) | (6,950 | ) | ||||||
|
|
|
|
|
|
|||||||
Total operating costs and expenses
|
(153,853 | ) | (192,637 | ) | (196,924 | ) | ||||||
Professional education services
|
(133,414 | ) | (169,123 | ) | (176,409 | ) | ||||||
Business start-up training services
|
(4,667 | ) | (6,450 | ) | (2,532 | ) | ||||||
Sales of learning simulation software
|
(11,279 | ) | (12,209 | ) | (11,033 | ) | ||||||
Unallocated corporate expenses
|
(4,493 | ) | (4,855 | ) | (6,950 | ) | ||||||
|
|
|
|
|
|
|||||||
Other operating income
|
3,051 | 2,968 | 6,155 | |||||||||
Professional education services
|
643 | 1,053 | 4,976 | |||||||||
Business start-up training services
|
76 | 102 | 5 | |||||||||
Sales of learning simulation software
|
2,332 | 1,813 | 1,174 | |||||||||
|
|
|
|
|
|
|||||||
Operating income (loss)
|
15,950 | 22,848 | 18,789 | |||||||||
Professional education services
|
17,797 | 28,672 | 26,402 | |||||||||
Business start-up training services
|
17 | (3,552 | ) | (320 | ) | |||||||
Sales of learning simulation software
|
2,629 | 2,583 | (343 | ) | ||||||||
Unallocated corporate expenses
|
(4,493 | ) | (4,855 | ) | (6,950 | ) | ||||||
|
|
|
|
|
|
24.
|
SEGMENT REPORTING
|
For the years ended September 30, | ||||||||||||
2018 | 2019 | 2020 | ||||||||||
US$ | US$ | US$ | ||||||||||
Segment assets
|
328,925 | 355,350 | 398,139 | |||||||||
Professional education services
|
236,496 | 273,005 | 307,054 | |||||||||
Business start-up training services
|
46,205 | 36,735 | 40,865 | |||||||||
Sales of learning simulation software
|
46,224 | 45,610 | 50,220 | |||||||||
|
|
|
|
|
|
|||||||
Total assets
|
328,925 | 355,350 | 398,139 | |||||||||
|
|
|
|
|
|
|||||||
Amortization and depreciation
|
6,299 | 12,723 | 13,215 | |||||||||
Professional education services
|
4,479 | 10,939 | 11,481 | |||||||||
Business start-up training services
|
36 | 69 | 60 | |||||||||
Sales of learning simulation software
|
1,784 | 1,715 | 1,674 | |||||||||
|
|
|
|
|
|
|||||||
(Loss) gain from equity method investments
|
(172 | ) | (1,484 | ) | (555 | ) | ||||||
Professional education services
|
58 | (1,173 | ) | (555 | ) | |||||||
Business start-up training services
|
(230 | ) | (311 | ) | — | |||||||
|
|
|
|
|
|
25.
|
NET INCOME PER SHARE
|
For the years ended September 30, | ||||||||||||
2018 | 2019 | 2020 | ||||||||||
US$ | US$ | US$ | ||||||||||
Numerator:
|
||||||||||||
Net income
|
11,626 | 21,254 | 10,430 | |||||||||
- allocated to ordinary share - basic
|
11,583 | 21,117 | 10,352 | |||||||||
- allocated to nonvested share - basic
|
43 | 137 | 78 | |||||||||
|
|
|
|
|
|
|||||||
Denominator:
|
||||||||||||
Weighted average number of ordinary shares outstanding
|
132,363,620 | 133,060,900 | 133,984,929 | |||||||||
Weighted average number of nonvested share
|
487,685 | 862,436 | 1,010,719 | |||||||||
Plus incremental weighted average ordinary shares from assumed exercise of share options using the treasury stock method
|
265,850 | 214,781 | 236,576 | |||||||||
|
|
|
|
|
|
|||||||
Weighted average ordinary shares outstanding used in computing diluted net income per share
|
133,117,155 | 134,138,117 | 135,232,224 | |||||||||
|
|
|
|
|
|
|||||||
Basic net income per share
|
0.09 | 0.16 | 0.08 | |||||||||
|
|
|
|
|
|
|||||||
Basic net income per nonvested share
|
0.09 | 0.16 | 0.08 | |||||||||
|
|
|
|
|
|
|||||||
Diluted net income per share
|
0.09 | 0.16 | 0.08 | |||||||||
|
|
|
|
|
|
|||||||
Diluted net income per nonvested share
|
0.09 | 0.16 | 0.08 | |||||||||
|
|
|
|
|
|
26.
|
SHARE INCENTIVE PLAN
|
26.
|
SHARE INCENTIVE PLAN
|
Share option granted to
employees and
non-executive
directors
|
Number of
shares |
Weighted-
average exercise price |
Weighted-
average remaining contractual term (years) |
Aggregated
intrinsic value |
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
US$
|
|
|
|
US$
|
|
Outstanding as of September 30, 2017
|
2,025,600 | 2.85 | 6.53 | — | ||||||||||||
|
|
|||||||||||||||
Exercised
|
(895,148 | ) | 1.66 | |||||||||||||
Forfeited
|
(71,352 | ) | 1.17 | |||||||||||||
|
|
|||||||||||||||
Outstanding as of September 30, 2018
|
1,059,100 | 1.39 | 5.58 | 718 | ||||||||||||
|
|
|||||||||||||||
Forfeited
|
(19,000 | ) | 1.81 | 5.14 | — | |||||||||||
|
|
|||||||||||||||
Outstanding as of September 30, 2019
|
1,040,100 | 1.39 | 4.57 | — | ||||||||||||
|
|
|||||||||||||||
Forfeited
|
(71,100 | ) | 0.98 | 2.85 | — | |||||||||||
|
|
|||||||||||||||
Outstanding as of September 30, 2020
|
969,000 | 1.29 | 3.62 | 1,067 | ||||||||||||
|
|
|||||||||||||||
Expected to vest
as of
September 30, 202
0
|
— | — | — | — | ||||||||||||
|
|
|||||||||||||||
Exercisable as of September 30, 2020
|
969,000 | 1.29 | 3.62 | 1,067 | ||||||||||||
|
|
26.
|
SHARE INCENTIVE PLAN
|
26.
|
SHARE INCENTIVE PLAN
|
26.
|
SHARE INCENTIVE PLAN
|
Number of
Nonvested shares outstanding |
Weight average
grant-date fair value |
Aggregated
intrinsic value |
||||||||||
US$ |
US$
|
|||||||||||
Nonvested shares outstanding as of September 30, 2017
|
328,390 | 3.44 | 551 | |||||||||
|
|
|||||||||||
Granted
|
468,600 | 2.29 | ||||||||||
Vested
|
(346,493 | ) | 3.11 | |||||||||
|
|
|||||||||||
Nonvested shares outstanding as of September 30, 2018
|
450,497 | 2.49 | 933 | |||||||||
|
|
|||||||||||
Granted
|
955,168 | 1.76 | ||||||||||
Forfeited
|
(19,944 | ) | 2.13 | |||||||||
Vested
|
(678,881 | ) | 2.16 | |||||||||
|
|
|||||||||||
Nonvested shares outstanding as of September 30, 2019
|
706,840 | 1.84 | 965 | |||||||||
|
|
|||||||||||
Granted
|
1,109,688 | 2.08 | — | |||||||||
Vested
|
(1,089,404 | ) | 1.96 | — | ||||||||
|
|
|||||||||||
Nonvested shares outstanding as of September 30, 2020
|
727,124 | 2.03 | 1,741 | |||||||||
|
|
|||||||||||
Nonvested shares expected to vest as of September 30, 2020
|
727,124 | 2.03 | 1,741 | |||||||||
|
|
25.
|
SHARE INCENTIVE PLAN
|
As of September 30, | ||||||||||||
2018 | 2019 | 2020 | ||||||||||
US$ | US$ | US$ | ||||||||||
Cost of sales
|
161 | 23 | 139 | |||||||||
General and administrative expenses
|
2,065 | 1,972 | 2,421 | |||||||||
Selling expenses
|
80 | 10 | 58 | |||||||||
|
|
|
|
|
|
|||||||
2,306 | 2,005 | 2,618 | ||||||||||
|
|
|
|
|
|
27.
|
CASH DIVIDEND
|
28.
|
SUBSEQUENT EVENTS
|
|
(1)
|
On November 13, 2020, the Company granted 458,168 nonvested shares to executive directors, officers and employees. These nonvested shares are subject to one-year vesting period. The Company is in the process of assessing the accounting impact of this transaction.
|
|
(2)
|
On December 1, 2020, the Company announced that it has entered into a definitive agreement and plan of merger (the “Merger Agreement”) with Champion Distance Education Investments Limited (“Parent”) and China Distance Learning Investments Limited (“Merger Sub”), a wholly owned subsidiary of Parent, pursuant to which, subject to the terms and conditions thereof, Merger Sub will merge with and into the Company, with the Company continuing as the surviving entity and becoming a wholly-owned subsidiary of Parent (the “Merger”). If completed, the Merger will result in the Company becoming a privately-held company, the Company’s ADSs will no longer be listed on the NYSE, and its ADS program will be terminated.
|
|
(3)
|
On January 15, 2021, the outstanding loan balance amounting to US$20,000 with Hang Seng Bank as of September 30, 2020 was early repaid by CDEL Hong Kong. This early settlement was mainly due to certain terms of the Debt Commitment Letter, which limit the user of the Parent’s future proceed upon privatization.
|
As of September 30, | ||||||||
2019 | 2020 | |||||||
US$ | US$ | |||||||
ASSETS
|
||||||||
Current assets
|
||||||||
Cash and cash equivalents
|
1,383 | 283 | ||||||
Prepayment and other current assets
|
381 | 427 | ||||||
Amounts due from subsidiaries
|
8,474 | 8,480 | ||||||
|
|
|
|
|||||
Total current assets
|
10,238 | 9,190 | ||||||
|
|
|
|
|||||
Non-current assets
|
||||||||
Long-term investments
|
1,289 | 1,159 | ||||||
Investment in subsidiaries
|
192,265 | 225,251 | ||||||
|
|
|
|
|||||
Total non-current assets
|
193,554 | 226,410 | ||||||
|
|
|
|
|||||
Total assets
|
203,792 | 235,600 | ||||||
|
|
|
|
|||||
LIABILITIES AND EQUITY
|
||||||||
Current liabilities
|
||||||||
Accrued expenses and other liabilities
|
989 | 2,314 | ||||||
Amounts due to subsidiaries
|
98,434 | 155,311 | ||||||
Bank borrowings
|
31,538 | — | ||||||
|
|
|
|
|||||
Total current liabilities
|
130,961 | 157,625 | ||||||
|
|
|
|
|||||
Total liabilities
|
130,961 | 157,625 | ||||||
|
|
|
|
|||||
Shareholders’ equity
|
||||||||
Ordinary shares (par value of US$0.0001 per share; 500,000,000shares authorized; 134,210,745 and 135,320,433
|
13 | 14 | ||||||
Additional paid-in capital
|
24,507 | 27,316 | ||||||
Accumulated other comprehensive loss
|
(12,357 | ) | (832 | ) | ||||
Retained earnings
|
60,668 | 51,477 | ||||||
|
|
|
|
|||||
Total equity
|
72,831 | 77,975 | ||||||
|
|
|
|
|||||
Total liabilities and equity
|
203,792 | 235,600 | ||||||
|
|
|
|
For the years ended September 30, | ||||||||||||
2018 | 2019 | 2020 | ||||||||||
US$ | US$ | US$ | ||||||||||
Cost of sales
|
(161 | ) | (23 | ) | (139 | ) | ||||||
Selling expenses
|
(80 | ) | (10 | ) | (58 | ) | ||||||
General and administrative expenses
|
(2,887 | ) | (3,100 | ) | (5,823 | ) | ||||||
|
|
|
|
|
|
|||||||
Operating loss
|
(3,128 | ) | (3,133 | ) | (6,020 | ) | ||||||
Share of equity income in its subsidiaries and the VIEs
|
14,763 | 23,776 | 21,385 | |||||||||
Interest income
|
1 | 21 | 6 | |||||||||
Interest expense
s
|
(2,110 | ) | (2,261 | ) | (932 | ) | ||||||
Exchange gain (loss)
|
2,100 | 2,851 | (4,009 | ) | ||||||||
|
|
|
|
|
|
|||||||
Net income
|
11,626 | 21,254 | 10,430 | |||||||||
|
|
|
|
|
|
For the years ended September 30, | ||||||||||||
2018 | 2019 | 2020 | ||||||||||
US$ | US$ | US$ | ||||||||||
Net income
|
11,626 | 21,254 | 10,430 | |||||||||
Other comprehensive (loss) income Foreign currency translation adjustment
|
(6,245 | ) | (6,719 | ) | 11,207 | |||||||
|
|
|
|
|
|
|||||||
Total comprehensive income
|
5,381 | 14,535 | 21,637 | |||||||||
|
|
|
|
|
|
For the years ended September 30, | ||||||||||||
2018 | 2019 | 2020 | ||||||||||
US$ | US$ | US$ | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||||||
Net cash (used in) provided by operating activities
|
(9,575 | ) | 18,025 | 49,752 | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||||||
Proceeds from share options exercised by employees
|
1,489 | — | — | |||||||||
Loan to optionees in connection with exercise of options
|
(1,558 | ) | — | — | ||||||||
Repayment of loan to optioneesin connection with exercise of options
|
193 | 135 | 192 | |||||||||
Capital contribution from noncontrolling interests
|
29 | — | — | |||||||||
New short-term loans drawn down
|
20,573 | — | — | |||||||||
Loan repayments
|
—
|
(19,000 | ) | (31,423 | ) | |||||||
Dividends paid to shareholders
|
(14,949 | ) | — | (19,621 | ) | |||||||
|
|
|
|
|
|
|||||||
Net cash provided by (used in) financing activities
|
5,777 | (18,865 | ) | (50,852 | ) | |||||||
|
|
|
|
|
|
|||||||
Net decrease in cash and cash equivalents and restricted cash
|
(3,798 | ) | (840 | ) | (1,100 | ) | ||||||
Cash and cash equivalents and restricted cash at beginning of the year
|
6,021 | 2,223 | 1,383 | |||||||||
|
|
|
|
|
|
|||||||
Cash and cash equivalents and restricted cash at end of the year
|
2,223 | 1,383 | 283 | |||||||||
|
|
|
|
|
|
1.
|
BASIS FOR PREPARATION
|
2.
|
INVESTMENTS IN SUBSIDIARIES AND THE VIEs
|
Exhibit 2.5
DESCRIPTION OF SECURITIES
REGISTERED UNDER SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
The American Depositary Shares (ADSs), each representing four ordinary shares of China Distance Education Holdings Limited (we, our, the Company, or us), are registered under Section 12(b) of the Securities Exchange Act of 1934, as amended, and are listed and traded on the New York Stock Exchange. This exhibit contains a description of the rights of (i) the holders of our ordinary shares and (ii) the holders of our ADSs. Our ordinary shares underlying the ADSs are held by Deutsche Bank Trust Company Americas, as depositary (the depositary or the depositary bank), and holders of our ADSs are not treated as holders of our ordinary shares.
DESCRIPTION OF ORDINARY SHARES
General
Our authorized share capital is US$50,000, divided into 500,000,000 ordinary shares, par value US$0.0001 per share. The number of ordinary shares that had been issued as of September 30, 2020 is provided on the cover of the annual report on Form 20-F for the fiscal year ended September 30, 2020 of which this exhibit is a part. Ownership of our ordinary shares is not recognized until registered in our register of members. No shares shall be issued as bearer securities. Our ordinary shares are not available to the market; rather, our ADSs are traded on the New York Stock Exchange.
We are an exempted company incorporated with limited liability under the Companies Act (as amended) of the Cayman Islands (the Companies Act), in January 2008. Our shareholders who are non-residents and/or non-citizens of the Cayman Islands may freely hold and vote their shares. A Cayman Islands exempted company:
|
is a company that conducts its business outside the Cayman Islands; |
|
is exempted from certain requirements of the Companies Act, including the filing of an annual return of its shareholders with the Registrar of Companies and holding an annual general meeting; |
|
does not have to make its register of members open to inspection; |
|
may obtain an undertaking against the imposition of any future taxation; and |
|
may issue shares with no par value. |
Our affairs are governed by our second amended and restated memorandum and articles of association (as amended, the Memorandum and Articles of Association) and the Companies Act. The following summarizes the material terms of our Memorandum and Articles of Association and the Companies Act insofar as they relate to the material terms of our ordinary shares. This summary is not complete, and you should read our Memorandum and Articles of Association, which were filed with the U.S. Securities and Exchange Commission (the SEC) and are incorporated by reference as an exhibit to the annual report of which this exhibit is a part.
The following discussion primarily addresses our ordinary shares and the rights of holders of ordinary shares. The holders of our ADSs will not be treated as our shareholders and will be required to surrender their ADSs for cancellation and withdrawal from the depositary facility in which the ordinary shares are held in order to receive the shares that their ADSs represent, and to exercise shareholders rights in respect of the ordinary shares. However, the holders of ADSs generally have the right under our deposit agreement with the depositary, dated July 29, 2008 (as supplemented by the Restricted Issuance Agreement dated as of August 16, 2010, the depositary agreement) to instruct the depositary bank to exercise the voting rights for the ordinary shares represented by their ADSs. See DESCRIPTION OF AMERICAN DEPOSITARY SHARES below.
Meetings
Subject to the companys regulatory requirements, an annual general meeting and any extraordinary general meeting shall be called by not less than ten days notice in writing. Notice of every general meeting will be given to all of our shareholders other than those that, under the provisions of our Memorandum and Articles of Association or the terms of issue of the ordinary shares they hold, are not entitled to receive such notices from us, and also to our principal external auditors. Extraordinary general meetings may be called only by the chairman of our board of directors or a majority of our board of directors and may not be called by any other person.
A meeting called by shorter notice than that mentioned above, subject to the Companies Act, nevertheless, will be deemed to have been duly called, if it is so agreed (1) in the case of a meeting called as an annual general meeting, by all of our shareholders entitled to attend and vote at the meeting; (2) in the case of any other meeting, by a majority in number of our shareholders having a right to attend and vote at the meeting, being a majority together holding not less than 95% in nominal value of the issued ordinary shares giving that right.
Two shareholders present in person or by proxy that represent not less than one-third in nominal value of our total issued and outstanding voting shares will constitute a quorum. No business other than the appointment of a chairman may be transacted at any general meeting unless a quorum is present at the commencement of business. However, the absence of a quorum will not preclude the appointment of a chairman. If present, the chairman of our board of directors shall be the chairman presiding at any shareholders meetings.
A corporation being a shareholder shall be deemed for the purpose of our Memorandum and Articles of Association to be present in person if represented by its duly authorized representative being the person appointed by resolution of the directors or other governing body of such corporation to act as its representative at the relevant general meeting or at any relevant general meeting of any class of our shareholders. Such duly authorized representative shall be entitled to exercise the same powers on behalf of the corporation that he represents as that corporation could exercise if it were our individual shareholder.
The quorum for a separate general meeting of the holders of a separate class of shares is described in Modification of Rights below.
Voting Rights Attaching to the Shares
Subject to any special rights or restrictions as to voting attached to any shares, at any general meeting on a show of hands every shareholder who is present in person or by proxy (or, in the case of a shareholder being a corporation, by its duly authorized representative) shall have one vote, and on a poll every shareholder present in person or by proxy (or, in the case of a shareholder being a corporation, by its duly authorized representative) shall have one vote for each fully paid share of which such shareholder is the holder.
Under our Memorandum and Articles of Association, all votes will be by show of hands unless voting by way of a poll is required by the rules of the New York Stock Exchange, or a poll is demanded by (i) the chairman of the meeting, (ii) at least three shareholders present in person or in the case of a shareholder being a corporation by its duly authorized representative or by proxy for the time being entitled to vote at the meeting, (iii) any shareholder or shareholders present in person or in the case of a shareholder being a corporation by its duly authorized representative or by proxy and representing not less than one-tenth of the total voting rights of all shareholders having the right to vote at the meeting, (iv) by a shareholder or shareholders present in person or in the case of a shareholder being a corporation by its duly authorized representative or by proxy and holding shares in the Company conferring a right to vote at a meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid on all shares conferring that right, or (v) if required by the rules of the New York Stock Exchange, by any director or directors of the Company who, individually or collectively, hold proxies in respect of shares representing 5% or more of the total voting rights at such meeting.
No shareholder shall be entitled to vote or be reckoned in a quorum, in respect of any share, unless such shareholder is duly registered as our shareholder at the applicable record date for that meeting and all calls or installments due by such shareholder to us have been paid.
If a recognized clearing house (or its nominee(s)), being a corporation, is our shareholder, it may authorize such person or persons as it thinks fit to act as its representative(s) at any meeting or at any meeting of any class of shareholders provided that, if more than one person is so authorized, the authorization shall specify the number and class of shares in respect of which each such person is so authorized. A person authorized pursuant to this provision is entitled to exercise the same powers on behalf of the recognized clearing house (or its nominee(s)) as if such person was the registered holder of our shares held by that clearing house (or its nominee(s)) including the right to vote individually on a show of hands.
Protection of Minority Shareholders
The Grand Court of the Cayman Islands may, on the application of shareholders holding not less than one-fifth of our shares in issue, appoint an inspector to examine our affairs and to report thereon in a manner as the Grand Court of the Cayman Islands shall direct.
Any shareholder may petition that the Grand Court of the Cayman Islands make a winding up order, if the court is of the opinion that it is just and equitable that we should be wound up.
Claims against us by our shareholders must, as a general rule, be based on the general laws of contract or tort applicable in the Cayman Islands or their individual rights as shareholders as established by our Memorandum and Articles of Association.
The Cayman Islands courts ordinarily would be expected to follow English case law precedents which permit a minority shareholder to commence a representative action against, or derivative actions in our name to challenge (1) an act which is ultra vires or illegal, (2) an act which constitutes a fraud against the minority and the wrongdoers are themselves in control of us, and (3) an irregularity in the passing of a resolution which requires a qualified (or special) majority.
Pre-Emption Rights
There are no pre-emption rights applicable to the issue of new shares under either Cayman Islands law or our Memorandum and Articles of Association.
Liquidation Rights
Subject to any special rights, privileges or restrictions as to the distribution of available surplus assets on liquidation for the time being attached to any class or classes of shares, (1) if we are wound up and the assets available for distribution among our shareholders are more than sufficient to repay the whole of the capital paid up at the commencement of the winding up, the excess shall be distributed pari passu among those shareholders in proportion to the amount paid up at the commencement of the winding up on the shares held by them, respectively; and (2) if we are wound up and the assets available for distribution among the shareholders as such are insufficient to repay the whole of the paid-up capital, those assets shall be distributed so that, as nearly as may be, the losses shall be borne by the shareholders in proportion to the capital paid up at the commencement of the winding up on the shares held by them, respectively.
If we are wound up, the liquidator may, with the sanction of a special resolution (meaning a majority of not less than two-thirds of affirmative votes cast by the holders of the shares of the Company, being entitled so to do, at a general shareholders meeting) and any other sanction required by the Companies Act, divide among our shareholders in specie or kind the whole or any part of our assets (whether or not they shall consist of properties of the same kind) and may, for such purpose, set such value as the liquidator deems fair upon any property to be divided and may determine how such division shall be carried out as between the shareholders or different classes of shareholders. The liquidator may also vest any part of these assets in trustees upon such trusts for the benefit of the shareholders as the liquidator shall think fit, but so that no shareholder will be compelled to accept any shares or other property upon which there is a liability.
Modification of Rights
Except with respect to share capital (as described below) and the location of the registered office, alterations to our Memorandum and Articles of Association may only be made by special resolution,.
Subject to the Companies Act and without prejudice to the provisions relating to share rights in our Memorandum and Articles of Association, all or any of the special rights attached to shares of any class (unless otherwise provided for by the terms of issue of the shares of that class) may be varied, modified or abrogated with the sanction of a special resolution passed at a separate general meeting of the holders of the shares of that class. The provisions of our Memorandum and Articles of Association relating to general meetings shall apply similarly to every such separate general meeting, but so that the quorum for the purposes of any such separate general meeting or at its adjourned meeting shall be a person or persons together holding (or represented by proxy) on the date of the relevant meeting not less than one-third in nominal value of the issued shares of that class, that every holder of shares of the class shall be entitled on a poll to one vote for every such share held by such holder and that any holder of shares of that class present in person or by proxy may demand a poll.
The special rights conferred upon the holders of any class of shares shall not, unless otherwise expressly provided in the rights attaching to or the terms of issue of such shares, be deemed to be varied, modified or abrogated by the creation or issue of further shares ranking pari passu therewith.
Alteration of Capital
We may from time to time by the affirmative vote of a simple majority of the votes entitled to vote thereon (an ordinary resolution):
|
increase our capital by such sum, to be divided into shares of such amounts, as the resolution shall prescribe; |
|
consolidate and divide all or any of our share capital into shares of larger amounts than our existing shares; |
|
cancel any shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person, and diminish the amount of our share capital by the amount of the shares so cancelled or, in the case of shares without par value, diminish the number of shares into which our capital is divided, subject to the provisions of the Companies Act; |
|
sub-divide our shares or any of them into shares of smaller amounts than is fixed by our Memorandum and Articles of Association, subject nevertheless to the Companies Act, and so that the resolution whereby any share is sub-divided may determine that, as between the holders of the shares resulting from such sub-division, one or more of the shares may have any such preferred, deferred or other rights, or be subject to any such restrictions as compared with the others as we have power to attach to unissued or new shares; and |
|
divide our shares into several classes and without prejudice to any special rights previously conferred on the holders of existing shares, attach to these shares respectively any preferential, deferred, qualified or special rights, privileges, conditions or such restrictions that in the absence of any such determination in general meeting may be determined by our directors. |
We may, by special resolution, subject to any confirmation or consent required by the Companies Act, reduce our share capital or any capital redemption or other undistributable reserve in any manner authorized by law.
Transfer of Shares
Subject to any applicable restrictions set forth in our Memorandum and Articles of Association, any of our shareholders may transfer all or any of his or her shares by an instrument of transfer in the usual or common form or in a form prescribed by the New York Stock Exchange or in any other form that our directors may approve.
Our directors may decline to register any transfer of any share which is not paid up or on which we have a lien. Our directors may also decline to register any transfer of any share unless:
|
the instrument of transfer is lodged with us accompanied by the certificate for the shares to which it relates and such other evidence as our directors may reasonably require to show the right of the transferor to make the transfer; |
|
the instrument of transfer is in respect of only one class of share; |
|
the instrument of transfer is properly stamped (in circumstances where stamping is required); |
|
in the case of a transfer to joint holders, the number of joint holders to whom the share is to be transferred does not exceed four; and |
|
a fee of such maximum sum as the New York Stock Exchange may determine to be payable or such lesser sum as our directors may from time to time require is paid to us in respect thereof. |
If our directors refuse to register a transfer, they shall, within two months after the date on which the instrument of transfer was lodged, send to each of the transferor and the transferee notice of such refusal.
The registration of transfers may, on notice being given by advertisement in such one or more newspapers or by any other means in accordance with the requirements of the New York Stock Exchange, be suspended and the register closed at such times and for such periods as our directors may from time to time determine; provided, however, that the registration of transfers shall not be suspended nor the register closed for more than 30 days in any year as our directors may determine.
Share Repurchase
We are empowered by the Companies Act and our Memorandum and Articles of Association to purchase our own shares, subject to certain restrictions. Our directors may only exercise this power on our behalf, subject to the Companies Act, our Memorandum and Articles of Association and any applicable requirements imposed from time to time by the New York Stock Exchange or the SEC.
Dividends
Subject to the Companies Act, our directors may declare dividends in any currency to be paid to our shareholders. Dividends may be declared and paid out of our profits, realized or unrealized, or from any reserve set aside from profits which our directors determine is no longer needed. Our board of directors may also declare and pay dividends out of the share premium account or any other fund or account that can be authorized for this purpose in accordance with the Companies Act.
Except in so far as the rights attaching to, or the terms of issue of, any share otherwise provides, (1) all dividends shall be declared and paid according to the amounts paid up on the shares in respect of which the dividend is paid, but no amount paid up on a share in advance of calls shall be treated for this purpose as paid up on that share; and (2) all dividends shall be apportioned and paid pro rata according to the amounts paid up on the shares during any portion or portions of the period in respect of which the dividend is paid.
Our directors may also pay any dividend that is payable on any shares semi-annually or on any other dates, whenever our financial position, in the opinion of our directors, justifies such payment.
Our directors may deduct from any dividend or bonus payable to any shareholder all sums of money (if any) presently payable by such shareholder to us on account of calls or otherwise.
No dividend or other money payable by us on or in respect of any share shall bear interest against us.
In respect of any dividend proposed to be paid or declared on our share capital, our directors may resolve and direct that (1) such dividend be satisfied wholly or in part in the form of an allotment of shares credited as fully paid up, provided that our shareholders entitled thereto will be entitled to elect to receive such dividend (or part thereof if our directors so determine) in cash in lieu of such allotment or (2) the shareholders entitled to such dividend will be entitled to elect to receive an allotment of shares credited as fully paid up in lieu of the whole or such part of the dividend as our directors may think fit. Our directors may also resolve in respect of any particular dividend that, notwithstanding the foregoing, a dividend may be satisfied wholly in the form of an allotment of shares credited as fully paid up without offering any right to shareholders to elect to receive such dividend in cash in lieu of such allotment.
Any dividend, interest or other sum payable in cash to the holder of shares may be paid by check or warrant sent by mail addressed to the holder at his registered address, or addressed to such person and at such addresses as the holder may direct. Every check or warrant shall, unless the holder or joint holders otherwise direct, be made payable to the order of the holder or, in the case of joint holders, to the order of the holder whose name stands first on the register in respect of such shares, and shall be sent at his or their risk and payment of the check or warrant by the bank on which it is drawn shall constitute a good discharge to us.
All dividends unclaimed for one year after having been declared may be invested or otherwise made use of by our board of directors for the benefit of our company until claimed. Any dividend unclaimed after a period of six years from the date of declaration of such dividend shall be forfeited and shall revert to us.
Whenever our directors have resolved that a dividend be paid or declared, our directors may further resolve that such dividend be satisfied wholly or in part by the distribution of specific assets of any kind, and in particular of paid up shares, debentures or warrants to subscribe for our securities or securities of any other company. Where any difficulty arises with regard to such distribution, our directors may settle it as they think expedient. In particular, our directors may issue fractional certificates, ignore fractions altogether or round the same up or down, fix the value for distribution purposes of any such specific assets, determine that cash payments shall be made to any of our shareholders upon the footing of the value so fixed in order to adjust the rights of the parties, vest any such specific assets in trustees as may seem expedient to our directors, and appoint any person to sign any requisite instruments of transfer and other documents on behalf of the persons entitled to the dividend, which appointment shall be effective and binding on our shareholders.
Untraceable Shareholders
We are entitled to sell any shares of a shareholder who is untraceable, provided that:
|
all checks or warrants in respect of dividends of such shares, being not less than three in total number, for any sums payable in cash to the holder of such shares have remained un-cashed for a period of 12 years prior to the publication of the advertisement and during the three months referred to below; |
|
we have not during that time received any indication of the existence of the shareholder or person entitled to such shares by death, bankruptcy or operation of law; and |
|
if required by the New York Stock Exchange we have caused an advertisement to be published in newspapers in the manner stipulated by our Memorandum and Articles of Association, giving notice of our intention to sell these shares, and a period of three months has elapsed since such advertisement and the New York Stock Exchange has been notified of such intention. |
The net proceeds of any such sale shall belong to us, and when we receive these net proceeds we shall become indebted to the former shareholder for an amount equal to such net proceeds.
Calls on Shares and Forfeiture of Shares.
Our board of directors may from time to time make calls upon shareholders for any amounts unpaid on their shares in a notice served to such shareholders at least 14 days prior to the specified time and place of payment. The shares that have been called upon and remain unpaid are subject to forfeiture.
Differences in Corporate Law
The Companies Act is modeled after similar laws in England but does not follow recent changes in English laws. In addition, the Companies Act differs from laws applicable to United States corporations and their shareholders. Set forth below is a summary of the significant differences between the provisions of the Companies Act applicable to us and the laws applicable to companies incorporated in the United States; specifically, in the state of Delaware.
Mergers and Similar Arrangements. The Companies Act permits mergers and consolidations between Cayman Islands companies and between Cayman Islands companies and non-Cayman Islands companies. For these purposes, (a) merger means the merging of two or more constituent companies and the vesting of their undertaking, property and liabilities in one of such companies as the surviving company and (b) a consolidation means the combination of two or more constituent companies into a combined company and the vesting of the undertaking, property and liabilities of such companies in the consolidated company. In order to effect such a merger or consolidation, the directors of each constituent company must approve a written plan of merger or consolidation, which must then be authorized by (a) a special resolution of the shareholders of each constituent company, and (b) such other authorization, if any, as may be specified in such constituent companys articles of association. The written plan of merger or consolidation must be filed with the Registrar of Companies together with, among others, a declaration as to the solvency of the consolidated or surviving company, a statement of the assets and liabilities of each constituent company and an undertaking that a copy of the certificate of merger or consolidation will be given to the members and creditors of each constituent company and that notification of the merger or consolidation will be published in the Cayman Islands Gazette. Dissenting shareholders have the right to be paid the fair value of their shares (which, if not agreed between the parties, will be determined by the Cayman Islands court) if they follow the required procedures, subject to certain exceptions. Court approval is not required for a merger or consolidation which is effected in compliance with these statutory procedures.
A merger between a Cayman parent company and its Cayman subsidiary or subsidiaries does not require authorization by a resolution of shareholders of that Cayman subsidiary if a copy of the plan of merger is given to every member of that Cayman subsidiary to be merged unless that member agrees otherwise. For this purpose a company is a parent of a subsidiary if it holds issued shares that together represent at least ninety percent (90%) of the votes at a general meeting of the subsidiary.
The consent of each holder of a fixed or floating security interest over a constituent company is required unless this requirement is waived by a court in the Cayman Islands.
Save in certain limited circumstances, a shareholder of a Cayman constituent company who dissents from the merger or consolidation is entitled to payment of the fair value of his shares (which, if not agreed between the parties, will be determined by the Cayman Islands court) upon dissenting to the merger or consolidation, provided that the dissenting shareholder complies strictly with the procedures set out in the Companies Act. The exercise of dissenter rights will preclude the exercise by the dissenting shareholder of any other rights to which he or she might otherwise be entitled by virtue of holding shares, save for the right to seek relief on the ground that the merger or consolidation is void or unlawful.
Separate from the statutory provisions relating to mergers and consolidations, the Companies Act also contains statutory provisions that facilitate the reconstruction and amalgamation of companies by way of schemes of arrangement, provided that the arrangement is approved by a majority in number of each class of shareholders and creditors with whom the arrangement is to be made, and who must in addition represent seventy-five per cent in value of each such class of shareholders or creditors, as the case may be, that are present and voting either in person or by proxy at a meeting, or meetings, convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands. While a dissenting shareholder has the right to express to the court the view that the transaction ought not to be approved, the court can be expected to approve the arrangement if it determines that:
|
the statutory provisions as to the required majority vote have been met; |
|
the shareholders have been fairly represented at the meeting in question and the statutory majority are acting bona fide without coercion of the minority to promote interests adverse to those of the class; |
|
the arrangement is such that may be reasonably approved by an intelligent and honest man of that class acting in respect of his interest; and |
|
the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Act. |
The Companies Act also contains a statutory power of compulsory acquisition which may facilitate the squeeze out of dissentient minority shareholder upon a tender offer. When a tender offer is made and accepted by holders of 90.0% of the shares affected within four months, the offeror may, within a two-month period commencing on the expiration of such four-month period, by notice in the prescribed manner require the holders of the remaining shares to transfer such shares to the offeror on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands but this is unlikely to succeed in the case of an offer which has been so approved unless there is evidence of fraud, bad faith or collusion.
If an arrangement and reconstruction by way of scheme of arrangement is thus approved and sanctioned, or if a tender offer is made and accepted, in accordance with the foregoing statutory procedures, a dissenting shareholder would have no rights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of Delaware corporations, providing rights to receive payment in cash for the judicially determined value of the shares.
Shareholders Suits. In principle, we will normally be the proper plaintiff to sue for a wrong done to us as a company, and as a general rule a derivative action may not be brought by a minority shareholder. However, based on English authorities, which would in all likelihood be of persuasive authority in the Cayman Islands, the Cayman Islands court can be expected to follow and apply the common law principles (namely the rule in Foss v. Harbottle and the exceptions thereto) so that a non-controlling shareholder may be permitted to commence a class action against or derivative actions in the name of the company to challenge actions where:
|
a company acts or proposes to act illegally or ultra vires; |
|
the act complained of, although not ultra vires, could only be effected duly if authorized by more than a simple majority vote that has not been obtained; and |
|
those who control the company are perpetrating a fraud on the minority. |
Corporate Governance. Cayman Islands laws do not restrict transactions with directors, requiring only that directors exercise a duty of care and owe a fiduciary duty to the companies for which they serve. Under our Memorandum and Articles of Association, subject to any separate requirement for audit committee approval under the applicable rules of the New York Stock Exchange or unless disqualified by the chairman of the relevant board meeting, so long as a director discloses the nature of his interest in any contract or arrangement which he is interested in, such a director may vote in respect of any contract or proposed contract or arrangement in which such director is interested and may be counted in the quorum at such meeting.
Indemnification of Directors and Executive Officers and Limitation of Liability. The ability of Cayman Islands companies to provide in their articles of association for indemnification of officers and directors is limited, insofar as it is not permissible for the directors to contract out of the core fiduciary duties they owe to the company, nor would any indemnity be effective if it were held by the Cayman Islands courts to be contrary to public policy, which would include any attempt to provide indemnification against civil fraud or the consequences of committing a crime. Our Memorandum and Articles of Association provide that our directors and officers shall be indemnified against all actions, costs, charges, losses, damages and expenses they shall or may incur or sustain by or by reason of any act done, concurred in or omitted in or about the execution of their duty, or supposed duty; and none of them shall be answerable for the acts, receipts, neglects or defaults of the other or others of them or for joining in any receipts for the sake of conformity, or for any bankers or other persons with whom any moneys or effects belonging to the Company shall or may be lodged or deposited for safe custody, or for insufficiency or deficiency of any security upon which any moneys of or belonging to the Company shall be placed out on or invested, or for any other loss, misfortune or damage which may happen in the execution of their respective offices, or in relation thereto; provided that such indemnity shall not extend to any matter in respect of any fraud or dishonesty which may attach to any of our directors and officers. In addition, each shareholder agrees to waive any claim or right of action he might have, whether individually or by or in the right of the Company, against any director on account of any action taken by such director, or the failure of such director to take any action in the performance of his duties with or for the Company; provided that such waiver shall not extend to any matter in respect of any fraud or dishonesty which may attach to such director.
Anti-Takeover Provisions in Our Memorandum and Articles of Association. Some provisions of our Memorandum and Articles of Association may discourage, delay or prevent a change in control of our company or management that shareholders may consider favorable, including provisions that authorize our board of directors to issue preferred shares in one or more series and to designate the price, rights, preferences, privileges and restrictions of such preferred shares without any further vote or action by our shareholders, and the fact that we have a classified board of directors, with three classes of directors, each of which stands for election in a given year to serve for a term of three years, unless a director earlier resigns or is removed.
However, under Cayman Islands law, our directors may only exercise the rights and powers granted to them under our Memorandum and Articles of Association, as amended and restated from time to time, for a proper purpose and for what they believe in good faith to be in the best interests of our company.
Directors Fiduciary Duties. Under Delaware corporate law, a director of a Delaware corporation has a fiduciary duty to the corporation and its shareholders. This duty has two components: the duty of care and the duty of loyalty. The duty of care requires that a director act in good faith, with the care that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform himself of all material information reasonably available regarding a significant transaction. The duty of loyalty requires that a director act in a manner he or she reasonably believes to be in the best interests of the corporation and its stockholders. He or she must not use his or her corporate position for personal gain or advantage. This duty prohibits self-dealing by a director and mandates that the best interest of the corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally. In general, actions of a director are presumed to have been made on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the corporation. However, this presumption may be rebutted by evidence of a breach of one of the fiduciary duties. Should such evidence be presented concerning a transaction by a director, a director must prove the procedural fairness of the transaction and that the transaction was of fair value to the corporation.
As a matter of Cayman Islands law, a director of a Cayman Islands company is in the position of a fiduciary with respect to the company and therefore he owes duties to the company including the following a duty to act in good faith in the best interests of the company, a duty not to make a personal profit based on his or her position as director (unless the company permits him to do so), a duty not to put himself in a position where the interests of the company conflict with his or her personal interest or his or her duty to a third party and a duty to exercise powers for the purpose for which such powers were intended. A director of a Cayman Islands company owes to the company a duty to act with diligence, skill and care. It was previously considered that a director need not exhibit in the performance of his duties a greater degree of skill than may reasonably be expected from a person of his knowledge and experience. However, English and Commonwealth courts have moved towards an objective standard with regard to the required skill and care and these authorities are likely to be followed in the Cayman Islands.
Shareholder Proposals. Under the SECs rules and regulations, a shareholder has the right to put any proposal before the annual meeting of shareholders of a public company, provided it complies with the notice provisions in the governing documents and the SECs rules applicable to such proposals. The Delaware General Corporation Law does not provide shareholders an express right to put any proposal before the annual meeting of shareholders, but in keeping with common law, Delaware corporations generally afford shareholders an opportunity to make proposals and nominations provided that they comply with the notice provisions in the certificate of incorporation or bylaws. A special meeting may be called by the board of directors or any other person authorized to do so in the governing documents, but shareholders may be precluded from calling special meetings.
Cayman Islands law provides shareholders with only limited rights to requisition a general meeting, and does not provide shareholders with any right to table resolutions at a general meeting. However, these rights may be provided in a companys articles of association. Our Memorandum and Articles of Association provide that, an annual general meeting of the Company shall be held in each year other than the year of the Companys incorporation; each general meeting, other than an annual general meeting, shall be called an extraordinary general meeting, which may be called only by the chairman of our board of directors or a majority of our board of directors and may not be called by any other person. As an exempted Cayman Islands company, we are not obliged by law to hold shareholders annual general meetings.
Cumulative Voting. Under the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless the corporations certificate of incorporation specifically provides for it. Cumulative voting potentially facilitates the representation of minority shareholders on a board of directors since it permits the minority shareholder to cast all the votes to which the shareholder is entitled on a single director, which increases the shareholders voting power with respect to electing such director. Cayman Islands law does not prohibit cumulative voting, but our Memorandum and Articles of Association do not provide for cumulative voting. As a result, our shareholders are not afforded any less protections or rights on this issue than shareholders of a Delaware corporation.
Appointment of Directors. The shareholders may by ordinary resolution elect any person to be a director to fill a casual vacancy, and by special resolution elect any person to be a director as an addition to the existing board of directors. The directors may appoint any person as a director to fill a casual vacancy on the board of directors or as an addition to the existing board of directors. Any director appointed by the board of directors to fill a casual vacancy shall, unless designated by the board of directors as a class A director, a class B director or a class C director, hold office until the first general meeting after his appointment and be subject to re-election at such meeting, and any director appointed by the board of directors as an addition to the existing board of directors shall hold office only until the next following annual general meeting of the Company and shall then be eligible for re-election. The class A, class B, and class C directors stand for re-election at staggered intervals.
Removal of Directors. Under the Delaware General Corporation Law, a director of a corporation with a classified board may be removed only for cause with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Under our Memorandum and Articles of Association, directors may be removed at any time by special resolution of our shareholders notwithstanding any agreement between the Company and such director (but without prejudice to any claim for damages under such agreement).
Transactions with Interested Shareholders. The Delaware General Corporation Law contains a business combination statute applicable to Delaware public corporations whereby, unless the corporation has specifically elected not to be governed by such statute in its certificate of incorporation or bylaws, it is prohibited from engaging in certain business combinations with an interested shareholder for three years following the date that such person becomes an interested shareholder. An interested shareholder generally is a person or a group who or which owns or owned 15% or more of the targets outstanding voting stock or who or which is an affiliate or associate of the corporation and owned 15% or more of the corporations outstanding voting stock within the past three years. This has the effect of limiting the ability of a potential acquirer to make a two-tiered bid for the target in which all shareholders would not be treated equally. The statute does not apply if, among other things, prior to the date on which such shareholder becomes an interested shareholder, the board of directors approves either the business combination or the transaction which resulted in the person becoming an interested shareholder. This encourages any potential acquirer of a Delaware corporation to negotiate the terms of any acquisition transaction with the targets board of directors.
Cayman Islands law has no comparable statute. As a result, we cannot avail ourselves of the types of protections afforded by the Delaware business combination statute. However, although Cayman Islands law does not regulate transactions between a company and its significant shareholders, it does provide that such transactions must be entered into bona fide in the best interests of the company and for a proper corporate purpose and not with the effect of constituting a fraud on the minority shareholders.
Dissolution; Winding Up. Under the Delaware General Corporation Law, unless the board of directors approves the proposal to dissolve, dissolution must be approved by shareholders holding 100% of the total voting power of the corporation. Only if the dissolution is initiated by the board of directors may it be approved by a simple majority of the corporations outstanding shares. Delaware law allows a Delaware corporation to include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions initiated by the board.
Under Cayman Islands law, a company may be wound up by either an order of the courts of the Cayman Islands or by a special resolution of its shareholders or, if the company is unable to pay its debts as they fall due, by an ordinary resolution of its shareholders. The court has authority to order winding up in a number of specified circumstances including where it is, in the opinion of the court, just and equitable to do so. Under the Companies Act and our Memorandum and Articles of Association, our company may be dissolved, liquidated or wound up by a special resolution of our shareholders.
Variation of Rights of Shares. Under the Delaware General Corporation Law, a corporation may vary the rights of a class of shares with the approval of a majority of the outstanding shares of such class, unless the certificate of incorporation provides otherwise. Under our Memorandum and Articles of Association, subject to the Companies Act and without prejudice to the provisions relating to share rights in our Memorandum and Articles of Association, we may only vary the rights attached to any class of shares (subject to the terms of issue of the shares of that class) with the sanction of a special resolution passed at a separate general meeting of the holders of the shares of that class.
Amendment of Governing Documents. Under the Delaware General Corporation Law, a corporations certificate of incorporation may be amended only if adopted and declared advisable by the board of directors and approved by a majority of the outstanding shares entitled to vote and the bylaws may be amended with the approval of a majority of the outstanding shares entitled to vote and may, if so provided in the certificate of incorporation, also be amended by the board of directors. Under the Companies Act, our Memorandum and Articles of Association may only be amended by special resolution of our shareholders.
Rights of Non-Resident or Foreign Shareholders. There are no limitations imposed by our Memorandum and Articles of Association on the rights of non-resident or foreign shareholders to hold or exercise voting rights on our shares. In addition, there are no provisions in our Memorandum and Articles of Association governing the ownership threshold above which shareholder ownership must be disclosed.
Directors Power to Issue Shares. Under our Memorandum and Articles of Association, our board of directors is empowered to issue or allot shares or grant options and warrants with or without preferred, deferred, qualified or other special rights or restrictions.
Issuance of Additional Ordinary Shares or Preferred Shares
Our Memorandum and Articles of Association authorizes our board of directors to issue additional ordinary shares from time to time as our board of directors shall determine, to the extent of available authorized but unissued shares.
Our Memorandum and Articles of Association authorize our board of directors to establish from time to time one or more series of preferred shares and to determine, with respect to any series of preferred shares, the terms and rights of that series, including:
|
the designation of the series; |
|
the number of shares of the series; |
|
the dividend rights, dividend rates, conversion rights, voting rights; and |
|
the rights and terms of redemption and liquidation preferences. |
Our board of directors may issue series of preferred shares without action by our shareholders to the extent authorized but unissued. Accordingly, the issuance of preferred shares may adversely affect the rights of the holders of the ordinary shares. In addition, the issuance of preferred shares may be used as an anti-takeover device without further action on the part of the shareholders. Issuance of preferred shares may dilute the voting power of holders of ordinary shares.
Subject to applicable regulatory requirements, our board of directors may issue additional ordinary shares without action by our shareholders to the extent of available authorized but unissued shares. The issuance of additional ordinary shares may be used as an anti-takeover device without further action on the part of the shareholders. Such issuance may dilute the voting power of existing holders of ordinary shares.
Inspection of Books and Records
Holders of our ordinary shares have no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders or our corporate records. However, our Memorandum and Articles of Association provide that our register of members will be open to inspection for such times and on such days as our board of directors shall determine. Our accounting and other records are not available for inspection (other than by the board of directors) unless otherwise provided by applicable law, authorized by the board of the directors, or by the shareholders in a general meeting. However, we will provide our shareholders with annual audited financial statements.
DESCRIPTION OF AMERICAN DEPOSITARY SHARES
General
American Depositary Shares are frequently referred to as ADSs and represent ownership interests in securities that are on deposit with a depositary bank. ADSs may be represented by certificates that are commonly known as American Depositary Receipts or ADRs. Our ADRs are titled American Depositary Receipt for American Depositary Shares representing deposited ordinary shares of China Distance Education Holdings Limited.
Deutsche Bank Trust Company Americas has agreed to act as the depositary bank for the ADSs representing our ordinary shares. The principal executive office of the depositary is located at 60 Wall Street, New York, NY 10005, U.S.A. A depositary bank typically appoints a custodian to safekeep the securities on deposit. In this case, the custodian is Deutsche Bank AG, Hong Kong Branch (the custodian). We appointed Deutsche Bank Trust Company Americas as depositary pursuant to the deposit agreement, which has been filed with the SEC under cover of a Registration Statement on Form F-6 and is incorporated by reference as an exhibit to the annual report of which this exhibit is a part.
We are providing you with a summary description of the material terms of the ADSs and of your material rights as an owner of ADSs. Please remember that summaries by their nature lack the precision of the information summarized and that a holders rights and obligations as an owner of ADSs will be determined by reference to the terms of the deposit agreement and not by this summary. This summary is not complete, and you should read the entire deposit agreement.
Each ADS represents rights with regard to four ordinary shares on deposit with the custodian, including the right to receive any other property received by the depositary bank or the custodian on behalf of the owners of the ADS but that has not been distributed to the owners of ADSs because of legal restrictions or practical considerations, and to instruct the depositary how you would like to vote the shares which your ADSs represent.
If you are an owner of ADSs, you are a party to the deposit agreement and therefore will be bound to its terms and to the terms of the ADR that represents your ADSs. The deposit agreement and the ADRs specify our rights and obligations as well as your rights and obligations as an owner of ADSs and those of the depositary. As a holder of our ADSs, you appoint the depositary to act on your behalf in certain circumstances. The deposit agreement and the ADRs are governed by New York law. However, our obligations to the holders of ordinary shares will continue to be governed by the laws of the Cayman Islands, which may be different from the laws of the United States.
As an owner of ADSs, you may hold your ADSs either (A) directly (i) by having an ADR registered in your name, or (ii) by holding ADSs in the Direct Registration System, or DRS, or (B) indirectly through your broker or other financial institution. If you hold ADSs directly, you are an ADS holder. This description assumes you hold your ADSs directly. If you hold the ADSs indirectly, you must rely on the procedures of your broker or other financial institution to assert the rights of ADS holders described in this section. You should consult with your broker or financial institution.
Notices
The depositary shall arrange, at our request and expense, to provide copies thereof to all holders or make such notices, reports and other communications, including proxy soliciting materials, available to all holders on a basis similar to that for holders of shares or on such other basis as we may advise the depositary or as may be required by any applicable law, regulation or stock exchange requirement.
On or before the first date on which we give notice, by publication or otherwise, of any meeting of holders of shares or of any adjourned meeting or of the taking of any action by such holders other than at a meeting, or of the taking of any action in respect of any cash or other distributions or the offering of any rights in respect of our ordinary shares, we will transmit to the depositary and the custodian a copy of the notice thereof in the English language but otherwise in the form given or to be given to holders of our shares. The Company shall also furnish to the custodian and the depositary a summary, in English, of any applicable provisions or proposed provisions of the Memorandum and Articles of Association that may be relevant or pertain to such notice of meeting or be the subject of a vote thereat.
The depositary will, at our expense, make available a copy of any such notices, reports or communications issued by us and delivered to the depositary for inspection by the holders of the ADSs at the depositarys principal office, at the office of the custodian and at any other designated transfer office.
Dividends and Distributions
The depositary has agreed to pay to you the cash dividends or other distributions it or the custodian receives on shares or other deposited securities, after deducting its fees, charges and expenses and any taxes withheld and governmental charges incurred, duties or governmental charges. You will receive these distributions in proportion to the number of shares your ADSs represent as of the record date (which will be as close as practicable to the record date for our ordinary shares) set by the depositary with respect to the ADSs.
Distributions of Cash
The depositary will convert any cash dividend or other cash distribution we pay on the ordinary shares or any net proceeds from the sale of any ordinary shares, rights, securities or other entitlements into U.S. dollars, if it can do so in its judgment on a practicable basis and can transfer the U.S. dollars to the United States upon an averaged or other practicable basis without regard to any distinctions among ADS holders on account of exchange restrictions, the date of delivery of any ADR or otherwise. If that is not practicable, lawful or if any governmental agency or authority approval or license is needed and cannot be obtained or cannot be obtained without unreasonable cost or within a reasonable period, the deposit agreement allows the depositary to distribute the foreign currency only to those ADS holders to whom it is practicable to do so. It will hold the foreign currency it cannot convert for the account of the ADS holders who have not been paid. It will not invest the foreign currency and it will not be liable for any interest.
Before making a distribution, any withholding taxes, or other governmental charges together with fees and expenses of the depositary that must be paid will be deducted. It will distribute only whole U.S. dollars and cents and will round fractional cents to the nearest whole cent. If the exchange rates fluctuate during a time when the depositary cannot convert the foreign currency, you may lose some or all of the value of the distribution.
Distributions of Shares
The depositary may, upon our timely instruction, distribute additional ADSs representing any ordinary shares we distribute as a dividend or free distribution to the extent reasonably practicable and permissible under law subject to deduction of fees, charges and expenses of the depositary and taxes and governmental charges in accordance with the provisions of the deposit agreement. The depositary will only distribute whole ADSs. It will try to sell ordinary shares which would require it to deliver a fractional ADS and distribute the net proceeds in the same way as it does with cash. If the depositary does not distribute additional ADSs, the outstanding ADSs will also represent the new ordinary shares. If we offer or cause to be offered to holders of the ordinary shares an option to elect to receive dividends in fully paid shares instead of cash, we will consult with the depositary to determine whether that option will be made available to you and, if so, the related procedures.
Elective Distributions
If we offer holders of our ordinary shares the option to receive dividends in either cash or ordinary shares, the depositary, after consultation with us and having received timely notice of such elective distribution by us, has discretion to determine to what extent such elective distribution will be made available to you as a holder of the ADSs. We must first instruct the depositary to make such elective distribution available to you and furnish it with satisfactory evidence that it is legal to do so. The depositary could decide it is not legal or reasonably practical to make such elective distribution available to you, or it could decide that it is only legal or reasonably practical to make such elective distribution available to some but not all holders of the ADSs. In such case, the depositary shall, on the basis of the same determination as is made in respect of the ordinary shares for which no election is made, distribute either cash in the same way as it does in a cash distribution, or additional ADSs representing ordinary shares in the same way as it does in a share distribution. The depositary is not obligated to make available to you a method to receive the elective dividend in ordinary shares rather than in ADSs. There can be no assurance that you will be given the opportunity to receive elective distributions on the same terms and conditions as the holders of ordinary shares.
Rights to Purchase Additional Shares
If we offer holders of our securities any rights to subscribe for additional shares or any other rights, the depositary, after consultation with us and having received timely notice of such distribution by us, has discretion to determine how these rights are made available to you as a holder of the ADSs. We must first instruct the depositary to make such rights available to you and furnish the depositary with satisfactory evidence that it is legal to do so. The depositary could decide that it is not legal or reasonably practical to make the rights available to you, or it could decide that it is only legal or reasonably practical to make the rights available to some but not all of the holders of the ADSs. The depositary could decide to sell the rights and distribute the proceeds in the same way as it does with cash. If the depositary decides that it is not legal or reasonably practical to make the rights available to you or sell the rights, the rights that are not distributed or sold could lapse. In that case, you will receive no value for them. The depositary is not responsible for a failure in determining whether or not it is legal or reasonably practical to distribute the rights to holders of ADSs in general or any holder in particular, for any foreign exchange exposure or loss incurred in connection with such sale or exercise or the content of any material forwarded to you by the depositary on our behalf. The depositary is liable for damages, however, if it acts with gross negligence or willful misconduct, in accordance with the provisions of the deposit agreement.
If the depositary makes rights available to you, it will exercise the rights and purchase the ordinary shares on your behalf. The depositary will then deposit the ordinary shares and deliver ADSs to you. It will only exercise rights if you pay it the exercise price and any other fees and charges of, and expenses incurred by, the depositary and any taxes and other governmental charges that the rights require you to pay.
U.S. securities laws or laws of the Cayman Islands may restrict the sale, deposit, transfers and cancellation of the ADSs represented by ordinary shares purchased upon the exercise of rights. For example, you may not be able to trade these ADSs freely in the United States. In this case, the depositary may deliver restricted depositary shares.
Other Distributions
Subject to receipt of timely notice from us with the request to make any such distribution available to you, and provided the depositary has determined such distribution is lawful and reasonably practicable and feasible and in accordance with the terms of the deposit agreement, the depositary will send to you anything else we distribute on deposited securities by any means it deems practical in proportion to the number of ADSs held by you, upon receipt of applicable fees and charges of, and expenses incurred by, the depositary and net of any taxes and other governmental charges withheld. If it cannot make the distribution in that way, or has not received a timely request for distribution from us, the depositary has a choice. It may decide to sell by public or private sale, net of fees and charges of, and expenses incurred by, the depositary and any taxes and other governmental charges, what we distributed and distribute the net proceeds, in the same way as it does with cash. Or, it may decide to dispose of such property in any way it deems reasonably practicable for nominal or no consideration. However, the depositary is not required to distribute any securities (other than ADSs) to you unless it receives satisfactory evidence from us that it is legal to make that distribution.
The depositary may dispose of all or a portion of the property so distributed and deposited in such amounts and in such manner (includes public or private sale) as the depositary may deem practicable or necessary to satisfy any taxes (including applicable interest and penalties) and after governmental charges applicable to the distribution.
The depositary shall not be held responsible for the failure to make a distribution if the depositary determines that it is unlawful or impractical to make the distribution available to any ADS holders. We have no obligation to register ADSs, ordinary shares, rights or other securities under the Securities Act. We also have no obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to ADS holders. This means that you may not receive the distributions we make on our ordinary shares or any value for them if it is illegal, infeasible or impractical for us to make them available to you.
Issuance of ADSs
The depositary will deliver ADSs if you or your broker deposit shares or evidence of rights to receive ordinary shares with the custodian. Upon each deposit of shares, receipt of related documentation and compliance with the other provisions of the deposit agreement, including the payment of the fees and charges of, and expenses incurred by, the depositary and of any taxes or charges, such as stamp taxes or share transfer taxes or fees, the depositary will issue an ADR or ADRs in the name of the person entitled thereto evidencing the number of ADSs to which that person is entitled.
Cancellation of ADSs
You may turn in your ADSs at the depositarys corporate trust office or by providing appropriate instructions to your broker. Upon payment of the fees and charges of, and expenses incurred by the depositary and of any taxes or charges, such as stamp taxes or share transfer taxes or fees, the depositary will deliver the shares and any other deposited securities underlying the ADSs to you or a person you designate at the office of the custodian. Or, at your request, risk and expense, the depositary will deliver the deposited securities at its office, if feasible.
The depositary may only restrict the withdrawal of deposited securities in connection with:
|
temporary delays caused by closing our transfer books or those of the depositary or the deposit of shares in connection with voting at a shareholders meeting, or the payment of dividends; |
|
the payment of fees, taxes and similar charges; or compliance with any U.S. or foreign laws or governmental regulations relating to the ADRs or to the withdrawal of deposited securities. |
This right of withdrawal may not be limited by any other provision of the deposit agreement.
Interchange between Certificated ADSs and Uncertificated ADSs
You may surrender your ADR to the depositary for the purpose of exchanging your ADR for uncertificated ADSs. The depositary will cancel that ADR and will send you a statement confirming that you are the owner of uncertificated ADSs. Alternatively, upon receipt by the depositary of a proper instruction from a holder of uncertificated ADSs requesting the exchange of uncertificated ADSs for certificated ADSs, the depositary will execute and deliver to you an ADR evidencing those ADSs.
Voting Rights
You may instruct the depositary to vote the deposited securities. Otherwise, you will not be able to exercise your right to vote unless you withdraw the shares. However, you may receive notice of the meeting without sufficient time to effect withdrawal of your shares. The voting rights of holders of ordinary shares are described in Voting Rights Attaching to the Shares above.
Upon receipt of timely notice from us, the depositary will notify you of the upcoming vote and arrange to deliver our voting materials to you. The materials will (1) describe the matters to be voted on and (2) explain how you may instruct the depositary to vote the ordinary shares or other deposited securities underlying your ADSs as you direct or you will be deemed to have directed. For instructions to be valid, the depositary must receive them on or before the date specified by the depositary in this regard. The depositary will try, as far as practical, subject to any applicable laws and the provisions of our Memorandum and Articles of Association, to vote or to have its agents vote the shares or other deposited securities as you instruct. Under the deposit agreement, if we do not timely procure the demand for a vote by poll with respect to any given resolution, and no other relevant party has made such a demand, the depositary shall refrain from voting and any voting instructions received from any ADS holders shall lapse. The depository will have no obligation to demand voting on a poll basis with respect to any resolution and shall have no liability to any holder for not having demanded voting on a poll basis.
If the depositary (i) does not timely receive voting instructions from you or (ii) timely receives voting instructions from you but such voting instructions fail to specify the manner in which the depositary is to vote the deposited securities represented by your ADSs, the depositary shall deem you to have instructed the depositary to give a discretionary proxy to a person designated by us to vote such deposited securities and will give a discretionary proxy to a person designated by us to vote such deposited securities. The depositary will give such person a discretionary proxy in such circumstances to vote on all questions to be voted upon unless we inform the depositary that:
|
we do not wish to receive a discretionary proxy; |
|
we are aware that substantial shareholder opposition exists against the outcome for which our designee would vote; or |
|
the outcome for which our designee would vote would materially and adversely affect shareholder rights. |
We cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your shares. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions or for the effect of such vote. This means that you may not be able to exercise your right to vote and there may be nothing you can do if your ordinary shares are not voted as you requested.
Reclassifications, Recapitalizations and Mergers
If we:
|
change the nominal or par value of our ordinary shares; |
|
reclassify, split up, sub-divide, cancel or consolidate any of the deposited securities; |
|
recapitalize, reorganize, amalgamate, merge, consolidate, sell all or substantially all of our assets, or take any similar action; or |
|
distribute securities on the ordinary shares that are not distributed to you; |
Then:
|
the cash, shares or other securities received by the depositary will become deposited securities. Each ADS will automatically represent its equal share of the new deposited securities; and |
|
the depositary may, and will if we ask it to, subject to receipt of an opinion that such action is in accordance with applicable law and regulation, (i) distribute some or all of the cash, securities or other property it received; (ii) deliver new ADSs or ask you to surrender your outstanding ADSs in exchange for new ADSs identifying the new deposited securities; (iii) sell any securities or property received at public or private sale and allocate the net proceeds of such sale for the account of holders of ADSs on an averaged or other practicable basis without regard to any distinctions among holders and distribute the net proceeds as cash; or (iv) treat the cash, securities or other property it receives as part of the deposited securities, and each ADS will then represent a proportionate interest in that property subject in all cases to the fees, charges and expenses of the depositary and taxes and governmental charges withheld. |
Amendment and Termination
We may agree with the depositary to amend the deposit agreement and the form of ADR without your consent for any reason. If an amendment adds or increases fees or charges, except for taxes and other governmental charges or expenses of the depositary for registration fees, facsimile costs, delivery charges or similar items, including expenses incurred in connection with foreign exchange control regulations and other charges specifically payable by ADS holders under the deposit agreement, or materially prejudices a substantial existing right of ADS holders, it will not become effective for outstanding ADSs until 30 days after the depositary notifies ADS holders of the amendment. At the time an amendment becomes effective, you are considered, by continuing to hold your ADSs, to agree to the amendment and to be bound by the ADRs and the deposit agreement as amended. An amendment can become effective before notice is given if necessary to ensure compliance with a new law, rule or regulation.
The depositary will terminate the deposit agreement if we ask it to do so, in which case the depositary will give notice to you at least 90 days prior to termination. The depositary may also terminate the deposit agreement if the depositary has told us that it would like to resign and we have not appointed a new depositary within 90 days. In this case, the depositary must notify you at least 30 days before termination.
After termination, the depositary and its agents will do the following under the deposit agreement but nothing else: collect distributions on the deposited securities, sell rights and other property, and deliver shares and other deposited securities upon cancellation of ADSs upon payment of any fees, charges, taxes or other governmental charges. After expiration of six months after termination, the depositary may sell any remaining deposited securities by public or private sale. After that, the depositary will hold the money it received on the sale, as well as any other cash it is holding under the deposit agreement for the pro rata benefit of the ADS holders that have not surrendered their ADSs. It will not invest the money and has no liability for interest. The depositarys only obligations will be to account for the money and other cash. After termination our only obligations will be to indemnify the depositary and to pay fees and expenses of the depositary that we agreed to pay.
Books of Depositary
The depositary will maintain ADS holder records at its depositary office. You may inspect such records at such office during regular business hours but solely for the purpose of communicating with other holders in the interest of business matters relating to the ADSs and the deposit agreement.
The depositary will maintain facilities in New York to record and process the issuance, cancellation, combination, split-up and transfer of ADRs.
These facilities may be closed from time to time, to the extent not prohibited by law or if any such action is deemed necessary or advisable by the depositary or us, in good faith, at any time or from time to time because of any requirement of law, any government or governmental body or commission or any securities exchange on which the ADRs or ADSs are listed, or under any provision of the deposit agreement or provisions of, or governing, the deposited securities, or any meeting of our shareholders or for any other reason.
Limitations on Obligations and Liabilities
The deposit agreement expressly limits our obligations and the obligations of the depositary. It also limits our liability and the liability of the depositary. We and the depositary, including its agents:
|
are only obligated to take the actions specifically set forth in the deposit agreement without gross negligence or willful misconduct; |
|
are not liable if either of us is prevented, forbidden or delayed by law or circumstances beyond our control from performing our obligations under the deposit agreement, including, without limitation, requirements of any present or future law, regulation, governmental or regulatory authority or share exchange of any applicable jurisdiction, any present or future provisions of our Memorandum and Articles of Association, on account of possible civil or criminal penalties or restraint, any provisions of or governing the deposited securities or any act of God, war or other circumstances beyond each of our control as set forth in the deposit agreement; |
|
are not liable if either of us exercises or fails to exercise discretion permitted under the deposit agreement, the provisions of or governing the deposited securities or our Memorandum and Articles of Association; |
|
have no obligation to become involved in a lawsuit or other proceeding related to the deposited securities or ADSs or the deposit agreement on your behalf or on behalf of any other party; |
|
may rely upon any documents we believe in good faith to be genuine and to have been signed or presented by the proper person; |
|
disclaim any liability for any action/inaction in reliance on the advice or information of legal counsel, accountants, any person presenting shares for deposit, holders and beneficial owners (or authorized representatives) of ADRs, or any person believed in good faith to be competent to give such advice or information; |
|
disclaim any liability for inability of any holder to benefit from any distribution, offering, right or other benefit made available to holders of deposited securities but not made available to holders of ADSs; and |
|
disclaim any liability for any indirect, special, punitive or consequential damages. |
The depositary and any of its agents also disclaim any liability for any failure to carry out any instructions to vote, the manner in which any vote is cast or the effect of any vote or failure to determine that any distribution or action may be lawful or reasonably practicable or for allowing any rights to lapse in accordance with the provisions of the deposit agreement, the failure or timeliness of any notice from us, the content of any information submitted to it by us for distribution to you or for any inaccuracy of any translation thereof, any investment risk associated with the acquisition of an interest in the deposited securities, the validity or worth of the deposited securities, the credit-worthiness of any third party, or for any tax consequences that may result from ownership of ADSs, shares or deposited securities.
In the deposit agreement, we have agreed to indemnify the depositary under certain circumstances.
Requirements for Depositary Actions
Before the depositary issues, delivers or registers a transfer of an ADS, makes a distribution on an ADS, or permits withdrawal of shares, the depositary may require:
|
payment of share transfer or other taxes or other governmental charges and transfer or registration fees charged by third parties for the transfer of any shares or other deposited securities and payment of the applicable fees, expenses and charges of the depositary; |
|
production of satisfactory proof of the identity and genuineness of any signature or other information it deems necessary; and |
|
compliance with regulations it may establish, from time to time, consistent with the deposit agreement, including presentation of transfer documents. |
The depositary may also suspend the issuance and delivery of ADSs, the deposit of shares, the registration, transfer, split up or combination of ADSs or the withdrawal of deposited securities generally when the register of the depositary is closed or at any time if the depositary or we think it is necessary or advisable to do so.
Your Right to Receive the Ordinary Shares Underlying Your ADSs
You have the right to cancel your ADSs and withdraw the underlying shares at any time except:
|
when there are temporary delays caused by (1) the closing of the depositarys or our transfer books; (2) the transfer of shares is blocked to permitting voting at a shareholders meeting; or (3) payment of dividends; |
|
when you or other ADS holders seeking to withdraw shares owe money to pay fees, taxes and similar charges; or |
|
when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to ADSs or to the withdrawal of shares or other deposited securities. |
This right of withdrawal may not be limited by any other provision of the deposit agreement.
Pre-release of ADSs
The deposit agreement permits the depositary to deliver ADSs before deposit of the underlying shares. This is called a pre-release of the ADSs. The depositary may also deliver ordinary shares upon cancellation of pre-released ADSs, even if the ADSs are cancelled before the pre-release transaction has been closed out. A pre-release transaction is closed out as soon as the underlying shares are delivered to the depositary. The depositary may receive ADSs instead of ordinary shares to close out a pre-release transaction. The depositary may pre-release ADSs or shares only under the following conditions: (a) before or at the time of the pre-release, the person to whom the pre-release is being made (1) represents to the depositary in writing that it or its customer owns the ordinary shares or ADSs to be deposited, (2) assigns all beneficial right, title and interest in such shares or ADSs to the depositary for the benefit of the holders of ADSs, (3) undertakes to not take any action with respect to such shares or ADSs that is inconsistent with the transfer of beneficial ownership (including without the consent of the depositary, disposing of such shares or ADSs other than in satisfaction of such pre-release), (4) indicates the depositary as owner of such shares or ADSs in its records, and (5) unconditionally guarantees to deliver such shares or ADSs to the depositary or the custodian as the case may be; (b) the pre-release is fully collateralized with cash or other collateral that the depositary considers appropriate; (c) the depositary must be able to close out the pre-release on not more than five business days notice; and (d) each pre-release is subject to such further indemnities and credit regulations as the depositary deems appropriate. In addition, the depositary will limit the number of ADSs that may be outstanding at any time as a result of pre-release, although the depositary may disregard the limit from time to time, if it thinks it is appropriate to do so, including (i) due to a decrease in the aggregate number of ADSs outstanding that causes existing pre-release transactions to temporarily exceed the limit stated above or (ii) where otherwise required by market conditions.
Exhibit 8.1
Subsidiaries of Registrant
Name: Wholly Owned Subsidiaries: |
Place of Incorporation | |||
1. | China Healthcare Investment Limited | British Virgin Islands | ||
2. | China Distance Education Ltd. | Hong Kong | ||
3. | China Healthcare Education Limited | Hong Kong | ||
4. | Practice Enterprises Network China International Links Ltd. | Hong Kong | ||
5. | Beijing Champion Distance Education Technology Co., Ltd. | PRC | ||
6. | Beijing Champion Education Technology Co., Ltd. | PRC | ||
7. | Beijing Champion Accounting Education Technology Co., Ltd. | PRC | ||
8. | Beijing Zhongxi Champion Healthcare Education Technology Co., Ltd. | PRC | ||
9. | Xiamen Zhongxi Champion Education Technology Co., Ltd. | PRC | ||
10. | Shanghai Xidong Information Technology Co., Ltd. | PRC | ||
11. | Jiangsu Champion Education Technology Co., Ltd. | PRC |
Consolidated Controlled Companies:
1. | Beijing Zhengbao Yucai Education Technology Company Limited | PRC | ||
2. | Nanjing Champion Vocational Training School | PRC | ||
3. | Xiamen NetinNet Software Co., Ltd. | PRC | ||
4. | Xiamen NetinNet Education Technology Co., Ltd. | PRC | ||
5. | Xiamen NetinNet Finance Technology Co., Ltd. | PRC | ||
6. | Yunqi Zhixin (Hangzhou) Technology Co., Ltd. | PRC | ||
7. | Shanghai Huzheng Education Technology Co., Ltd. | PRC | ||
8. |
Beijing Chuang Qingchun Chuang Weilai Education Technology Co., Ltd. | PRC | ||
9. |
Guangdong Zhengbao Yucai Education Co., Ltd. | PRC | ||
10. |
JinMaLan (Tianjin) Business Start-up Services Co., Ltd. | PRC | ||
11. |
Beijing NetinNet Technology Co., Ltd. | PRC | ||
12. |
JinMaLan (Anqing) Business Start-up Services Co., Ltd. | PRC | ||
13. |
Nanchang Champion Vocational Training School | PRC | ||
14. | Haimen Zhengbao Yucai Vocational Training School | PRC |
Consolidated Affiliated Companies:
1. | Beijing Champion Hi-Tech Co., Ltd. | PRC | ||
2. | Beijing Caikaowang Company Limited | PRC | ||
3. | Beijing Champion Wangge Education Technology Co., Ltd. | PRC | ||
4. | Beijing Champion Culture Development Co., Ltd. | PRC | ||
5. | Beijing Haidian District Champion Training School | PRC | ||
6. | Beijing Champion Healthcare Education Technology Co., Ltd. | PRC | ||
7. | Beijing Champion International Education Technology Co., Ltd. | PRC | ||
8. | Jiangsu Zhengbao Asset Financial Advisory Co., Ltd. | PRC | ||
9. | Jiangsu Caishuibang Enterprise Management Co., Ltd. | PRC | ||
10. | Beijing Ruida Chengtai Education Technology Co., Ltd. | PRC | ||
11. | Shenzhen Ruida Chengtai Education Technology Co., Ltd. | PRC | ||
12. | Guangzhou Ruida Chengtai Education Technology Co., Ltd. | PRC | ||
13. | Hangzhou Ruitai Education Technology Co., Ltd. | PRC | ||
14. | Nanjing Ruida Chengtai Education Technology Co., Ltd. | PRC | ||
15. | Beijing Youbang Culture and Art Training School | PRC | ||
16. | Hainan Ruida Chengtai Education Technology Co., Ltd. | PRC | ||
17. | Jiangsu Champion Healthcare Education Technology Co., Ltd. | PRC | ||
18. | Jiangsu Champion E&C Education Technology Co., Ltd. | PRC | ||
19. | Jiangsu Champion Self-taught Education Technology Co., Ltd. | PRC | ||
20. | Beijing Champion H&E Technology Co., Ltd. | PRC | ||
21. | Beijing Champion E&C Education Technology Co., Ltd. | PRC | ||
22. | Beijing Champion Self-taught Education Technology Co., Ltd. | PRC |
Exhibit 12.1
Certification by the Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Zhengdong Zhu, certify that:
1. |
I have reviewed this annual report on Form 20-F of China Distance Education Holdings Limited; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; |
4. |
The companys other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: |
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. |
(c) |
Evaluated the effectiveness of the companys disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) |
Disclosed in this report any change in the companys internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the companys internal control over financial reporting; and |
5. |
The companys other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the companys auditors and the audit committee of the companys board of directors (or persons performing the equivalent functions): |
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the companys ability to record, process, summarize and report financial information; and |
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the companys internal control over financial reporting. |
Date: January 22, 2021
By: |
/s/ Zhengdong Zhu |
|
Name: | Zhengdong Zhu | |
Title: | Chief Executive Officer |
Exhibit 12.2
Certification by the Chief Financial Officers
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
We, Mark Marostica and Philip Chan, certify that:
1. |
I have reviewed this annual report on Form 20-F of China Distance Education Holdings Limited; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; |
4. |
The companys other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: |
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. |
(c) |
Evaluated the effectiveness of the companys disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) |
Disclosed in this report any change in the companys internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the companys internal control over financial reporting; and |
5. |
The companys other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the companys auditors and the audit committee of the companys board of directors (or persons performing the equivalent functions): |
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the companys ability to record, process, summarize and report financial information; and |
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the companys internal control over financial reporting. |
Date: January 22, 2021
By: |
/s/ Mark Marostica |
|
Name: |
Mark Marostica |
|
Title: |
Co-Chief Financial Officer |
|
By: |
/s/ Philip Chan |
|
Name: |
Philip Chan |
|
Title: |
Co-Chief Financial Officer |
Exhibit 13.1
Certification by the Chief Executive Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, Zhengdong Zhu, Chief Executive Officer of China Distance Education Holdings Limited (the Company), hereby certifies, to the best of his knowledge, that the Companys annual report on Form 20-F for the year ended September 30, 2020 (the Report) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for the periods presented in the Report.
Date: January 22, 2021
By: |
/s/ Zhengdong Zhu |
|
Name: |
Zhengdong Zhu |
|
Title: |
Chief Executive Officer |
Exhibit 13.2
Certification by the Co-Chief Financial Officers
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, Mark Marostica and Philip Chan, Co-Chief Financial Officers of China Distance Education Holdings Limited (the Company), hereby certify, to the best of their knowledge, that the Companys annual report on Form 20-F for the year ended September 30, 2020 (the Report) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for the periods presented in the Report.
Date: January 22, 2021
By: |
/s/ Mark Marostica |
|
Name: |
Mark Marostica | |
Title: |
Co-Chief Financial Officer | |
By: |
/s/ Philip Chan |
|
Name: |
Philip Chan | |
Title: |
Co-Chief Financial Officer |
Exhibit 15.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement No. 333-157129 on Form S-8 of our reports dated January 22, 2021 relating to the financial statements of China Distance Education Holdings Limited and the effectiveness of China Distance Education Holdings Limiteds internal control over financial reporting, appearing in this Annual Report on Form 20-F for the year ended September 30, 2020.
/s/ Deloitte Touche Tohmatsu Certified Public Accountants LLP
Beijing, the Peoples Republic of China
January 22, 2021
Exhibit 15.2
中国北京市朝阳区建国路 77 号华贸中心 3 号写字楼 34 层 邮政编码 100025
电话: (86-10) 5809-1000 传真: (86-10) 5809-1100
January 22, 2021
China Distance Education Holdings Limited (the Company)
18th Floor, Xueyuan International Tower
1 Zhichun Road, Haidian District
Beijing 100083, Peoples Republic of China
Ladies and Gentlemen:
We have acted as legal advisor as to the laws of the Peoples Republic of China to the Company in connection with the filing by the Company with the United States Securities and Exchange Commission of an annual report on Form 20-F for the fiscal year ended September 30, 2020 and any amendments thereto (the Annual Report).
We hereby consent to the use and reference to our name and our opinions and views in the Annual Report. We further consent to the filing of this letter as an exhibit to the Annual Report.
In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the United States Securities Act of 1933, as amended, or the regulations promulgated thereunder.
Sincerely yours, |
/s/ Jingtian & Gongcheng |
Jingtian & Gongcheng |