Virscend Education Company Limited

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement. Virscend Education Company Limited (Incorporated in the Cayman Islands with limited liability) (Stock Code: 1565) INSIDE INFORMATION PROPOSED JOINT ESTABLISHMENT OF CHENGDU FOREIGN LANGUAGES SCHOOL (ZIGONG PURUN CAMPUS) PROPOSED JOINT ESTABLISHMENT OF CHENGDU FOREIGN LANGUAGES SCHOOL (ZIGONG PURUN CAMPUS) The Board is pleased to announce that, on 30 June 2016, Chengdu Foreign Languages School, a consolidated affiliated entity of the Company, has entered into the School Establishment Agreement with Purun Holdings and Chengdu Yirui pursuant to which the Parties agreed to establish the School. Upon establishment of the School, its school sponsor s interest is expected to be held as to 47% by Chengdu Foreign Languages School, 23% by Purun Holdings, 20% by Purun Education and 10% by Chengdu Yirui. LISTING RULES IMPLICATIONS As none of the applicable percentage ratios as defined under Rule 14.07 of the Listing Rules in respect of the School Establishment Agreement is 5% or more, it does not constitute a notifiable transaction of the Company under Chapter 14 of the Listing Rules. As the establishment of the School is subject to regulatory approvals from the relevant authorities in the PRC, which may or may not be obtained, and the opening of the School may or may not be on schedule, Shareholders and potential investors of the Company are advised to exercise caution when dealing in the Shares. This announcement is made pursuant to the Inside Information Provisions (as defined in the Listing Rules) under Part XIVA of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) and Rule 13.09 of the Listing Rules. 1

PROPOSED JOINT ESTABLISHMENT OF CHENGDU FOREIGN LANGUAGES SCHOOL (ZIGONG PURUN CAMPUS) The Board is pleased to announce that, on 30 June 2016, Chengdu Foreign Languages School, a consolidated affiliated entity of the Company, has entered into the School Establishment Agreement with Purun Holdings and Chengdu Yirui pursuant to which the parties agreed to establish the School, which is expected to be located inside the Purun City development* ( ) in Zigong, Sichuan, PRC. The total investment of the Group in the School, which is to be contributed by Chengdu Foreign Languages School, is currently estimated to be approximately RMB50,000,000, which will be funded by the net proceeds from the global offering of the Company. The principal terms of the School Establishment Agreement is set out below: SCHOOL ESTABLISHMENT AGREEMENT Date 30 June 2016 Parties 1. Purun Holdings, an Independent Third Party; 2. Chengdu Foreign Languages School, a consolidated affiliated entity of the Company; and 3. Chengdu Yirui, an Independent Third Party. The School The School is expected to commence its first school year on 1 September 2017. The table below sets out the expected programs to be offered at the School and the expected student capacity for each program, subject to the approvals from the relevant education authorities in the PRC and the actual admissions at the School: Expected student capacity Program (approximately) Kindergarten 300 Primary school (six years, full-time) 1,200 Middle school (three years, full-time) and High school (three years, full-time) 3,000 2

Total investment and capital contributions The total investment to be made by the Parties is expected to be approximately RMB250,000,000. The table below sets out the contributions of the Parties towards the school sponsors interest in the School. Name of the school sponsors Estimated total investment amount Amount of capital contribution Percentage of school sponsor s interest (%) Chengdu Foreign Languages School Cash RMB50,000,000 RMB2,350,000 47% Purun Holdings Cash RMB1,150,000 RMB1,150,000 23% Purun Education 1 Cash RMB1,000,000 RMB1,000,000 20% Land and school campus School site of 150 mu to 200 mu and School campus of estimated RMB172,850,000 Chengdu Yirui Cash RMB25,000,000 RMB500,000 10% Total RMB250,000,000 RMB5,000,000 100% Note 1: Purun Education is a wholly-owned subsidiary of Purun Trading as at the date of this announcement. Chengdu Yirui will make capital contribution into Purun Education once Purun Trading contributes the school site for the School into Purun Education, and Purun Education will be held as to 99% by Purun Trading and 1% by Chengdu Yirui after such capital contribution by Chengdu Yirui. All additional contributions shall be capital contributions and shall not be treated as shareholders loan. Chengdu Foreign Languages School and Chengdu Yirui s additional contributions in excess of their respective capital contribution will be used for other acquisitions, such as education equipment and other auxiliary facilities for the School campus. 3

School site The School will be located inside the Purun City development* ( ) in Zigong, Sichuan, PRC. It is expected that the construction of the School campus, including interior decorations, will be completed by 1 April 2017. Purun Education will be responsible for providing and developing the land and building of the School campus. Once the construction of the School campus is completed, the School campus shall be provided to the School for its use without any charge during the subsistence of the School Establishment Agreement. The transfer of the land and building of the School campus is strictly restricted to ensure the stability of the operation of the School. Licenses and permits Purun Education will be responsible for obtaining the necessary construction, inspection and governmental approvals for the School campus. Chengdu Foreign Languages School will be responsible for the governmental approval and acquisition of education equipment and other preparation for the establishment of the School. Chengdu Yirui will be responsible for the management and supervision of the establishment of the School. Zigong Structured Contracts Upon the establishment of the School, the School will enter into the Zigong Structured Contracts with Tibet Huatai and others. The Zigong Structured Contracts shall be in all material respects a reproduction of the relevant Structured Contracts entered into by the consolidated affiliated entities of the Company. Dividends or profit distribution Dividends shall be made according to the Party s relevant percentage of school sponsor s interest. In the case of Chengdu Foreign Languages School, the dividends shall be paid as service fees under the Zigong Structured Contracts to Tibet Huatai. Dividends and service fees shall be paid on or before 1 May each year for prior financial year s dividends and service fees. 4

Restricted transfers During the period when Chengdu Foreign Languages School (or its other designated entity) is a school sponsor of the School, Purun Holdings, Purun Education and Chengdu Yirui shall not transfer, mortgage, pledge, securitise or in any way limit or impose liabilities on their school sponsor s interest to any third party unless with written consent from Chengdu Foreign Languages School (or its other designated entity). Purun Holdings shall not transfer its interest in Purun Trading while Purun Trading shall not transfer, mortgage or pledge its interest in Purun Education to any third party unless with written consent from Chengdu Foreign Languages School (or from other designated entity of the Company). Termination of the School The joint establishment and operation of the School among the Parties will continue until the School Establishment Agreement is terminated in accordance with the terms of the said agreement. STRUCTURE OF CHENGDU FOREIGN LANGUAGES SCHOOL (ZIGONG PURUN CAMPUS) Upon establishment of the School, the structure of the School is set out as below: Purun Holdings 100% Purun Trading Chengdu Yirui Company 100% Tibet Huatai 99% 1% Purun Education Chengdu Foreign Languages School 23% 20% 10% 47% The School school sponsor s interest shareholding Zigong Structured Contracts Structured Contracts 5

REASONS FOR AND BENEFITS OF THE PROPOSED SCHOOL ESTABLISHMENT AGREEMENT As disclosed in the Prospectus, it is part of the Group s business strategies to expand its school network and increase its market penetration in China s private education sector, including entering into cooperative arrangements with business partners who are Independent Third Parties, to establish new schools. The Directors believe the Group can substantially lower its capital requirement to expand its operations with this asset-light model and through the School Establishment Agreement. The Directors are of the view that the terms and conditions for entering into the School Establishment Agreement and the establishment of the School are fair and reasonable, and are in the interests of the Company and Shareholders as a whole. BACKGROUND INFORMATION OF PARTIES TO THE SCHOOL ESTABLISHMENT AGREEMENT The Group and Chengdu Foreign Languages School The Group is principally engaged in the provision of preschool to grade twelve and university private education services in PRC. Chengdu Foreign Languages School is a private school established under the laws of the PRC in September 2000, where the school sponsor s interest is wholly-owned by Sichuan Derui, and a consolidated affiliated entity of the Company. Purun Holdings Purun Holdings is principally engaged in property development. Chengdu Yirui Chengdu Yirui is principally engaged in education consulting service and education project management and supervision. LISTING RULES IMPLICATIONS As none of the applicable percentage ratios as defined under Rule 14.07 of the Listing Rules in respect of the School Establishment Agreement is 5% or more, it does not constitute a notifiable transaction of the Company under Chapter 14 of the Listing Rules. This announcement is made pursuant to the Inside Information Provisions (as defined in the Listing Rules) under Part XIVA of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) and Rule 13.09 of the Listing Rules. 6

As the establishment of the School is subject to regulatory approvals from the relevant authorities in the PRC, which may or may not be obtained, and the opening of the School may or may not be on schedule, Shareholders and potential investors of the Company are advised to exercise caution when dealing in the Shares. DEFINITIONS Unless the context requires otherwise, the following expressions shall have the following meanings in this announcement: Board Chengdu Foreign Languages School Chengdu Yirui the board of Directors Chengdu Foreign Languages School*( ), a private school established under the laws of the PRC in September 2000, where the school sponsor s interest is wholly-owned by Sichuan Derui, and a consolidated affiliated entity of the Company Chengdu Yirui Education Consulting Co., Ltd.*( ), a limited liability company established in the PRC on 11 November 2015, and an Independent Third Party Company Virscend Education Company Limited, a company incorporated in the Cayman Islands on 13 March 2015 as an exempted company and the shares of which are listed on the Stock Exchange connected person(s) Directors has the meaning ascribed to it under the Listing Rules the directors of the Company Group the Company, its subsidiaries and consolidated affiliated entities Hong Kong Independent Third Party(ies) Listing Rules the Hong Kong Special Administrative Region of the PRC person(s) or company(ies) which is (are) not a connected person(s) of the Company the Rules Governing the Listing of Securities of the Stock Exchange 7

Party(ies) PRC or China parties to the School Establishment Agreement, namely, Purun Holdings, Chengdu Foreign Languages School and Chengdu Yirui, and Party shall refer to any one of them as the case may be the People s Republic of China which, for the purpose of this announcement, excludes Hong Kong, Macau Special Administrative Region of the PRC and Taiwan Prospectus prospectus of the Company dated 31 December 2015 Purun Education Purun Holdings Purun Trading RMB School Zigong Purun Education Consulting Services Co., Ltd.* ( ), a limited liability company established in the PRC on 25 March 2015, an Independent Third Party, which is wholly-owned by Purun Trading as at the date of this announcement. Chengdu Yirui will make capital contribution into Purun Education once Purun Trading contributes the school site for the School into Purun Education, and Purun Education will be held as to 99% by Purun Trading and 1% by Chengdu Yirui after such capital contribution by Chengdu Yirui Sichuan Purun Holdings Group Co., Ltd.* ( ), a limited liability company established in the PRC on 11 June 2012, and an Independent Third Party Zigong Purun Trading Co., Ltd.* ( ), a limited liability company established in the PRC on 3 July 2012, an Independent Third Party, which is wholly-owned by Purun Holdings as at the date of this announcement Renminbi, the lawful currency of PRC the private school to be established inside the Purun City development* ( ) in Zigong, Sichuan, PRC under the School Establishment Agreement, and the tentative name of the school is Chengdu Foreign Languages School (Zigong Purun Campus)*( ( )) 8

School Establishment Agreement Share(s) Shareholder(s) Sichuan Derui Stock Exchange Structured Contracts Tibet Huatai the joint school establishment agreement dated 30 June 2016 entered into between Purun Holdings, Chengdu Foreign Languages School and Chengdu Yirui in relation to the establishment of the School ordinary shares of HK$0.01 each in the share capital of the Company holder(s) of the Share(s) Sichuan Derui Enterprise Development Co., Ltd.* ( ) (previously known as Sichuan Province Derui Enterprise Development Company* ( )), a company established under the laws of the PRC on 3 January 1993, which is owned as to 69.44% by Mr. Yan Yude, 18.55% by Ms. Yan Hongjia, 3.00% by Ms. Wang Xiaoying, 2.65% by Ms. Ye Jiaqi, 1.59% by Mr. Ye Jiayu, 1.59% by Ms. Yan Bixian, 1.59% by Ms. Yan Birong and 1.59% by Ms. Yan Bihui The Stock Exchange of Hong Kong Limited collectively, the business cooperation agreement, the exclusive technical service and management consultancy agreement, the exclusive call option agreement, the equity pledge agreement, the school sponsors and directors rights entrustment agreement, the school sponsors powers of attorney, the directors powers of attorney, the loan agreement and the spouse undertakings, further details of which are set out in the section headed Structured Contracts of the prospectus of the Company dated 31 December 2015 Tibet Huatai Education Management Consulting Co., Ltd.* ( ), a wholly foreignowned enterprise established under the laws of PRC on 22 August 2015, and a wholly-owned subsidiary of the Company 9

Zigong Structured Contracts a series of agreements to be entered into among Tibet Huatai, the Parties and the School upon establishment of the School, which will include the business cooperation agreement, the exclusive technical service and management consultancy agreement, the exclusive call option agreement, the school sponsors and directors rights entrustment agreement, the school sponsors powers of attorney, the directors powers of attorney, and the spouse undertakings By order of the Board of Virscend Education Company Limited Wang Xiaoying Chairwoman Sichuan Province, the PRC, 30 June 2016 As at the date of this announcement, the executive Directors are Ms. Wang Xiaoying, Dr. Xu Ming, Mr. Ye Jiayu and Mr. Yan Yude and the independent non-executive Directors are Mr. Sit Chiu Wing, Mr. Chan Kim Sun and Ms. Xu Dayi. * For identification purpose only 10