4.A. History and Development of the Company The Group commenced education service business in August 2003. The Group remained an offline, classroom-based education service provider until the Group transitioned to an exclusively online education model in 2014. In September 2015, Sunlands Technology Group (formerly known as “Studyvip Online Education International Limited” and “Sunlands Online Education Group”), our current ultimate holding company, was incorporated under the laws of the Cayman Islands. It was renamed as Sunlands Online Education Group in October 2017, and further renamed as Sunlands Technology Group in August 2018. In October 2015, our wholly-owned subsidiary, Sunlands Online Education HK Limited, or Sunlands HK, was incorporated in Hong Kong. In July 2017, Tianjin Alaman Education Technology Co., Ltd. (formerly known as “Tianjin Studyvip Education Co., Limited”), or Tianjin Alaman, our wholly-owned subsidiary, was incorporated in the PRC. It was renamed as Tianjin Alaman Education Technology Co., Ltd. in February 2021 and was deregistered in March 2024. In August 2017, Wuhan Studyvip Online Education Co. Limited, or Wuhan Zhibo, our wholly-owned subsidiary, was incorporated in the PRC. Wuhan Zhibo is wholly owned by Sunlands HK. In June 2019, Hubei Zhidao Online Education Technology Co., Ltd. (formerly known as “Wuhan Shangde Online Education Technology Co., Ltd.” and “Wuhan Zhidao Online Education Technology Co., Ltd.”), or Wuhan Shangde, our wholly-owned subsidiary, was incorporated in the PRC. It was renamed as Wuhan Zhidao Online Education Technology Co., Ltd. in November 2022 and was further renamed as Hubei Zhidao Online Education Technology Co., Ltd. in August 2025. Wuhan Shangde is wholly owned by Wuhan Zhibo. In December 2020, Cheerwins Technology Group, or Cheerwins Cayman, our wholly-owned subsidiary, was incorporated in Cayman. In March 2025, Cheerwins Cayman was dissolved. In January 2021, Cheerwins Online Education HK limited, or Cheerwins HK, our wholly-owned subsidiary, was incorporated in Hong Kong. Cheerwins HK is wholly owned by Cheerwins Cayman and was deregistered in November 2024. In April 2021, FireSky Investment HK Limited, or FireSky Investment, our wholly-owned subsidiary, was incorporated in Hong Kong. In June 2021, Wuhan Zhongtudao Technology Co., Ltd, or Wuhan Zhongtudao, our wholly-owned subsidiary, was incorporated in the PRC. Wuhan Zhongtudao is wholly owned by FireSky Investment. In December 2025, Wuhan Zhongtudao was dissolved. Currently, substantially all of the Group’s business operations are conducted in the PRC through our subsidiaries incorporated in the PRC, and the contractual arrangements among our PRC subsidiaries and the VIEs. Our wholly-owned PRC subsidiaries would enter into a series of contractual arrangements, including the Exclusive Technical Consultation and Service Agreement, the Business Operation Agreement, the Equity Interest Pledge Agreement, the Option Agreement, and Powers of Attorney, with the VIEs, their shareholders, and, where applicable, their operating subsidiaries (the “VIE Contractual Arrangements”). The VIE Contractual Arrangements allow us to (i) direct the activities of the VIEs that most significantly impact the VIEs’ economic performance, (ii) receive substantially all of the economic benefits of the VIEs, and (iii) have an exclusive option to purchase all or part of the equity interests in the VIEs when and to the extent permitted by PRC law. As a result, we are considered the primary beneficiary of the VIEs for accounting purposes and are able to consolidate their operating results in the Group’s financial statements under U.S. GAAP. In December 2013, we entered into the VIE Contractual Arrangements with Beijing Shangde Jiaxun Education Technology Co., Ltd., or Sunlands Jiaxun, and its shareholders and operating subsidiaries, including the predecessor of Beijing Yuanchilaxiang Education Technology Co., Ltd (formerly known as “Beijing Shangde Online Education Technology Co., Ltd.”), or Beijing Sunlands, a limited liability company through which we currently conduct business in the PRC. As part of our plan to obtain equity financing in the PRC, we terminated the VIE Contractual Arrangements with Sunlands Jiaxun, and its shareholders and operating subsidiaries, through a series of transactions from 2015 to 2016. In August 2017, Wuhan Zhibo entered into the VIE Contractual Arrangements with Beijing Sunlands and its shareholders. In March 2023, due to the change of shareholders of Beijing Sunlands, Wuhan Zhibo updated the VIE Contractual Arrangements with Beijing Sunlands and its new shareholders. In December 2025, Wuhan Zhibo terminated the contractual arrangements with Beijing Sunlands, its shareholders and its operating subsidiaries, and Beijing Sunlands became a wholly-owned subsidiary of Wuhan Zhibo since then. In May 2018, Tianjin Alaman entered into the VIE Contractual Arrangements with Tianjin Shangde Online Education Technology Co., Ltd, or Tianjin Shangde, and its shareholders. As part of our efforts to streamline our corporate structure, the VIE Contractual Arrangements between Tianjin Alaman and Tianjin Shangde were terminated in December 2020. 55 From September 2019 to December 2020, Wuhan Zhibo entered into the VIE Contractual Arrangements with (i) Wuhan Xiaoyan Technology Co., Ltd., or Wuhan Xiaoyan, (ii) Wuhan Jiayan Online Education Technology Co., Ltd., or Wuhan Jiayan, (iii) Beijing Odysseus Education Technology Co., Ltd., or Beijing Odysseus, (iv) Guangzhou Wudawei Education Technology Co., Ltd., or Guangzhou Wudawei, (v) Guangzhou Tianyong Online Education Technology Co., Ltd., or Guangzhou Tianyong, and (vi) Hubei Yuanji Online Technology Co., Ltd. (formerly known as “Wuhan Hadeliang Online Education Technology Co., Ltd.,” “Wuhan Xingui Online Technology Co., Ltd.” and “Wuhan Yuanji Online Technology Co., Ltd.”), or Wuhan Hadeliang, and (vii) Tianjin Shangde, as well as their shareholders. As part of our efforts to streamline our corporate structure, the VIE Contractual Arrangements between Wuhan Zhibo and (i) Wuhan Xiaoyan, (ii) Beijing Odysseus, (iii) Guangzhou Wudawei, (iv) Guangzhou Tianyong, (v) Wuhan Hadeliang, (vi) Wuhan Jiayan and (vii) Tianjin Shangde, as well as their shareholders, were terminated respectively through a series of transactions from April 2021 to October 2023. From December 2020 to February 2021, Tianjin Alaman entered into the VIE Contractual Arrangements with (i) Hubei Fangtang Technology Co., Ltd. (formerly known as “Wuhan Fangtang Education Technology Co., Ltd.” and “Wuhan Fangtang Technology Co., Ltd.”), or Wuhan Fangtang, (ii) Beijing Zhiziyuanshui Education Technology Co., Ltd., or Beijing Zhiziyuanshui, and (iii) Beijing Feibian Education Technology Co., Ltd., or Beijing Feibian, as well as their shareholders. As part of our efforts to streamline our corporate structure, the VIE Contractual Arrangements between Tianjin Alaman and (i) Wuhan Fangtang, (ii) Beijing Zhiziyuanshui, and (iii) Beijing Feibian, as well as their shareholders, were terminated respectively through a series of transactions from April 2022 to June 2022. In June 2021, Wuhan Zhongtudao entered into the VIE Contractual Arrangements with Wuhan Xiaoyan and its shareholders. In November 2025, Wuhan Zhongtudao terminated the VIE Contractual Arrangements with Wuhan Xiaoyan and its shareholders. Following such termination and the subsequent dissolution of Wuhan Zhongtudao, in December 2025, Wuhan Zhibo entered into the VIE Contractual Arrangements with Wuhan Xiaoyan and its shareholders. In November 2021, Wuhan Zhibo entered into the VIE Contractual Arrangements with Beijing Lingding Management Consulting Co., Ltd., or Beijing Lingding, and its shareholders. In August 2023, due to the change of shareholders of Beijing Lingding, Wuhan Zhibo updated the VIE Contractual Arrangements with Beijing Lingding and its new shareholders. In October 2017, we effectuated a one-for-two share split, pursuant to which each of its issued and outstanding ordinary shares and preferred shares was split into two ordinary shares or preferred shares, as the case may be. In March 2018, we completed an initial public offering of 13,000,000 ADSs, representing 520,000 Class A ordinary shares and the ADSs were listed on the New York Stock Exchange under the symbol “STG.” In connection with our initial public offering, (i) DIAMOND TOWER INVESTMENTS LIMITED, our shareholder and an affiliate of Orchid Asia Group, purchased from us 104,348 Class A ordinary shares, and (ii) ELITE CONCEPT HOLDINGS LIMITED, our shareholder and an affiliate of New Oriental Education & Technology Group Inc., or New Oriental, purchased from us 34,783 Class A ordinary shares. These private placements are being made pursuant to Regulation S of the U.S. Securities Act of 1933, as amended. In August 2021, we changed the ratio of the ADSs representing its Class A ordinary shares from one (1) ADS representing one twenty-fifth (1/25) Class A ordinary shares to one (1) ADS representing one half (1/2) Class A ordinary shares. The change of the ADS ratio became effective on August 31, 2021. In December 2021, we approved a share repurchase program under which our company is authorized to repurchase up to US$15.0 million of Class A ordinary shares in the form of ADSs over the next 24 months until December 2023. In December 2023, we extended such share repurchase program for another 24 months until December 2025. In June 2022, our board of directors declared a special cash dividend in the amount of US$1.36 per ordinary share, or US$0.68 per ADS to holders of our ordinary shares and ADSs as of June 30, 2022. The aggregate amount of such cash dividends was approximately US$9.5 million. The Group’s corporate headquarters is located at Building 6, Chaolai Science Park, No. 36 Chuangyuan Road, Chaoyang District, Beijing, the People’s Republic of China. The Group’s telephone number at this address is +86-10-52413738. Our registered office in the Cayman Islands is located at the offices of Maples Corporate Services Limited at PO Box 309, Ugland House, Grand Cayman KY1-1104, Cayman Islands. Our agent for service of process in the United States is Cogency Global Inc. located at 10 East 40th Street, 10th Floor, New York, N.Y. 10016. The SEC maintains a website on the Internet at http://www.sec.gov that contains reports and information statements and other information about us. The Group’s corporate website is www.sunlands.com. None of the information contained on our website, or any website referred to in this annual report, is part of this annual report. 4.B. Business Overview Mission We believe education should nurture and spread new ideas to enrich lives. High-quality education should be available 56 to everyone. We all share a common aspiration to improve ourselves through education. The Group’s mission is to transform education through technology and innovation, making learning experiences enjoyable and rewarding. Overview The Group is a leader in China’s adult online education market and China’s adult personal interest learning market. The Group has a deep understanding of the educational needs of the Group’s prospective students and offer solutions that help them achieve their goals. The Group offers online professional courses and educational content, including various interest courses, aimed at preparing students for professional certification exams, enhancing their professional skills, and catering to their personal interests. In addition, the Group offers various degree- or diploma-oriented post-secondary courses through the Group’s online platforms. Founded in 2003 as a traditional education company, the Group transitioned to an online education model in 2014. The Group’s online education model enables students to access the course and educational content offerings anywhere and anytime. The Group has been successful in addressing the unmet demand of a large, growing market and served approximately 4,940,000 students across China since the Group transitioned to an online education model in 2014. The number of the Group’s students was 1,131,435, 1,067,128 and 979,741, respectively, in 2023, 2024 and 2025. For the same years, the Group’s new student enrollments were 616,341, 674,649 and 579,788, respectively. Solutions The Group offers adult online education and adult personal interest learning education through extensive courses and educational content offerings. As of December 31, 2025, the Group offered interest, professional skills and professional certification preparation courses, and degree- or diploma-oriented post-secondary courses. The Group adopts a counseling-oriented sales and marketing approach that seeks to offer education solutions to students to meet their needs based on their background and goals. The Group provides professional assistance and counseling to help students make informed decisions that best suit their learning needs. In addition, the Group’s enrollment consultants also help them formulate effective study plans throughout their enrollments in the courses. Students can access the Group’s services either through PC or mobile applications. The Group’s online platform cultivates a personalized, interactive learning environment by featuring a virtual learning community and a vast library of educational content offerings that adapt to the learning habits of students. The Group focuses on cultivating an engaging community among students, teachers and mentors, improving educational content development capabilities, and developing proprietary IT infrastructure and systems. The Group encourages students to become more committed and engaged by creating an interactive learning environment that fosters their desire to learn and build confidence in learning. The Group provides students with strong learning support through dedicated mentors, powered by the Group’s proprietary IT systems and live streaming platform. The Group offers a unique approach to education research and development that organizes subject content into Learning Outcome Trees, the Group’s proprietary knowledge management system. The Learning Outcome Trees enable the Group to customize teaching notes for teachers, and develop comprehensive course outlines and quiz banks to enhance the learning experience. Based on student feedback and the latest updates on exam policies, the Group further updates the educational content in the Learning Outcome Trees to continually improve teaching quality. The Group seeks to hire experienced and passionate teachers who can make learning fun and interactive. The Group equips the faculty members not only with a comprehensive set of teaching methods but also advanced technologies and data insights to enable them to develop their professional skills and enhance the Group’s overall teaching quality. The Group’s net revenues were RMB2,159.6 million, RMB1,990.2 million and RMB2,019.9 million (US$288.8 million), respectively, and the Group’s gross billings were RMB1,504.6 million, RMB1,555.4 million and RMB1,467.4 million (US$209.8 million), respectively, in 2023, 2024 and 2025. The Group recorded net income of RMB640.8 million, RMB342.1 million and RMB365.6 million (US$52.3 million) in 2023, 2024 and 2025. The Group’s deferred revenues were RMB1,113.9 million, RMB916,5 million and RMB585.3 million (US$83.7 million), respectively, as of December 31, 2023, 2024 and 2025. Business Model and Online Education Services The Group offers adult online education services and adult personal interest learning courses through online and mobile platforms to adult students. The Group delivers a diverse, comprehensive range of online courses in a live streaming format focused on fostering an interactive learning experience and community-oriented student support services. The Group also provides students with a variety of proprietary educational content to help reinforce what is taught in classes and assess their learning outcomes. 57 The Group promotes services through a multi-channel strategy, including online and mobile advertising, to effectively convert sales leads into student enrollments. Through the Group’s technology that connects students with faculty and employees, the Group gathers and analyzes data at each stage of students’ interactions with the Group in real-time, allowing the Group to better understand students’ learning needs and enabling the Group to continually improve the quality of service. Course Offerings The Group offers a wide range of online courses addressing various educational needs of adults in China. Currently, the Group’s course offerings mainly cover two main components, namely (i) interest, professional skills and professional certification preparation courses, and (ii) degree- or diploma-oriented post-secondary courses. The following table sets forth the Group’s net revenues, gross billings and new student enrollments attributable to each type of course offering. For a reconciliation of the Group’s gross billings and net revenues, see “—Non-GAAP Financial Measures.” For the Year Ended December 31, 2023 2024 2025 Net revenues (RMB in thousands) Interest, professional skills and professional certification preparation courses 1,449,858 1,498,058 1,499,704 Degree- or diploma-oriented post-secondary courses 534,041 205,578 272,138 Sales of products(1) 144,233 244,901 213,344 Others(2) 31,452 41,667 34,695 Total 2,159,584 1,990,204 2,019,881 Gross billings (RMB in thousands) Interest, professional skills and professional certification preparation courses 1,481,075 1,541,953 1,466,649 Degree- or diploma-oriented post-secondary courses 23,542 13,414 739 Total 1,504,617 1,555,367 1,467,388 New student enrollments Interest, professional skills and professional certification preparation courses 585,254 658,690 568,920 Degree- or diploma-oriented post-secondary courses 31,087 15,959 10,868 Total 616,341 674,649 579,788 Note: (1) Include revenues from sales of products such as printed books and learning materials associated with the courses we offer. Revenues from sales of goods for the year ended December 31, 2023 were previously included in "others" of net revenues for the respective years. (2) Include commissions received for providing referral services to third-party companies. Interest, professional skills and professional certification preparation courses The Group develops interest and professional skills courses that help students cater to their interests and develop professional skills as the Group saw a surging trend in adults undertaking such courses online. As of December 31, 2025, the Group offered professional skills and interest courses such as Wealth Management, Voice Acting, Chinese Painting and Calligraphy. In addition, the Group also offers professional certification preparation courses designed to give students the skills, knowledge and abilities that are commonly required or helpful for a broad range of professions. The employment market is becoming increasingly competitive, motivating workers to enhance their career competitiveness through vocational education. As of December 31, 2025, the professional certification preparation courses covered various industries and professions, including Accounting, Human Resources and Teaching. The Group’s solid foundation and rich resources in course portfolio has enabled the Group to successfully grasp market opportunities and effectively scale up the Group’s offerings. In recent years, the Group’s course offerings have become more diversified, and the interest, professional skills and professional certification preparation course offerings have contributed to an increasing proportion of the Group’s overall revenues. In 2023, 2024 and 2025, the interest, professional skills and professional certification preparation courses represented approximately 67.1%, 75.3% and 74.2%, respectively, of the Group’s net revenues, and approximately 98.4%, 99.1% and 99.9%, respectively, of the Group’s gross billings. In addition, the interest, professional skills and professional certification preparation courses represented approximately 95.0%, 97.6% and 98.1%, respectively, of the Group’s new student enrollments in 2023, 2024 and 2025. See also “Item 3. Key Information—3.D. Risk Factors—Risks Related to the Group’s Business—To the extent the Group relies on certain types of course offerings to generate revenues, the Group will be subject to concentration risks, including risks resulting from changes in government policies.” 58 In addition to the course offerings discussed above, the Group also offers exam preparation “crash courses” for exam-taking students. Instead of covering a wide range of topics in a particular subject matter, these courses are meant to cover the most frequently tested areas in the exams and provide training on test-taking strategies and skills to help students improve their performance in actual exams. Degree- or diploma-oriented post-secondary courses The degree- or diploma-oriented post-secondary course offerings primarily consist of preparation courses for the STE, a state-administered exam in China for learners pursuing associate diplomas or bachelor’s degrees, and other degree- or diploma-oriented post-secondary courses. As of December 31, 2025, STE courses covered 11 majors, including Administrative Management, Chinese Language and Literature, Accounting, Business Management, Human Resource Management, Law, Public Administration, Computer Information Management, Pre-School Education, Marketing and English. Other degree- or diploma-oriented post-secondary course offerings include preparation courses for the entrance examinations of Master of Business Administration (“MBA”) in China and overseas. Degree- or diploma-oriented post-secondary courses, especially STE courses, have historically accounted for the largest proportion of the Group’s net revenues, gross billings and new student enrollments. In recent years, the Group’s course offerings have become more diversified. In 2023, 2024 and 2025, degree- or diploma-oriented post-secondary courses represented approximately 24.8%, 10.3% and 13.5%, respectively, of the Group’s net revenues, and approximately 1.6%, 0.9% and 0.1%, respectively, of the Group’s gross billings. In addition, degree- or diploma-oriented post-secondary courses represented approximately 5.0%, 2.4% and 1.9%, respectively, of the Group’s new student enrollments for the years ended December 31, 2023, 2024 and 2025. Interactive Learning Process Live streaming course delivery The Group’s teachers deliver courses in a live streaming format through the Group’s websites and mobile application. We believe that the Group is one of the first to offer live streaming courses in China’s education industry. The Group’s live streaming course delivery format allows the Group to cost-effectively expand student enrollments and maintain high teaching quality. Live streaming also improves efficiency of instruction and enriches the learning experience in a number of ways: •Time efficiency and no geographic limitations. While classroom-based students are often required to spend time commuting, the Group’s live streaming learning format allows them to attend courses anytime, anywhere as long as there is Internet. •High level of engagement and interaction. The live streaming application (through support functions and plug-ins) allow students to engage in real-time Q&A with the faculty and their fellow students through live chats, which fosters an engaging and interactive learning setting. The live streaming application has a “tipping” function that allows students to “tip” the teacher with virtual gifts if they like the course, which improves student engagement and student-teacher interaction. •Greater learning flexibility. Every live class is recorded and made available to students enrolled in the course throughout their enrollment period, which allows them to attend courses at their convenience. This scheduling flexibility appeals to adult students with full-time jobs. The replay function allows students to learn at their own pace. We believe the live streaming format and highly interactive learning experience makes the Group’s services highly attractive to students. In 2023, 2024 and 2025, the Group’s new student enrollments were 616,341, 674,649 and 579,788, respectively. Virtual learning community The Group strives to build a vibrant and highly interactive virtual community for students and faculty to augment their learning and teaching experience. For example, the Group has a bulletin board forum, available through the Group’s website and mobile application that enables students in real time to share their ideas and learning experience with, as well as pose questions and answers to fellow students and the Group’s faculty. This also provides a stimulating learning platform for students to socialize and interact with an extended network of fellow students and faculty members and to forge beneficial relationships. In addition, students can authorize his or her fellow students to view their learning progress and milestones, thus fostering an engaging and friendly competitive environment. We believe a highly interactive virtual student community drives the existing students’ level of engagement and significantly enhances the Group’s attractiveness to prospective students. Community-Oriented Class Setup 59 The Group’s classes are set up to cultivate an interactive learning environment. The Group is committed to developing a sense of community among students and faculty, which we believe is critical to improving results. Furthermore, the Group’s community-oriented learning environment, coupled with the student-centric faculty structure, enable the Group to provide our students attention and support beyond class hours at a time and in a manner that is convenient to them, which further drives student engagement, customer loyalty and course consumption. The Group’s class is set up by schools, divisions and classes. Students are assigned to different schools and divisions based on the major and number of students enrolled for a given academic period. Students in the same division are further assigned to different “classes” for administrative purposes. Educational Content Development and Offerings Content Development The Group maintains an experienced team of course and educational content development professionals. The course and educational content development team is dedicated to designing course offerings, as well as developing and improving a wide range of proprietary educational content, such as course outlines, quiz banks and teaching notes, for substantially all of the Group’s online course offerings. The Group regularly upgrades the educational content to make it more practical, and easier to comprehend and apply in real exams. For instance, the Group regularly releases major updates to the Group’s proprietary quiz banks and mock questions for students pursuing the STE exams to reflect updates in the test topics in the government-administered STE exams. Benefiting from the Group’s IT infrastructure, the course and educational content development team is able to view and analyze student performance in quiz banks and mock questions, which enables them to identify weaknesses in the educational content and make timely adjustments and upgrades accordingly. The course and educational content development team also seeks feedbacks from teachers and students regarding the effectiveness of the Group’s educational content, through online questionnaires or in-person meetings. In addition to the Group’s proprietary educational content, the course and educational content development professionals also design and recommend to the teachers’ best practices in teaching methods. While the teachers retain substantial control of and flexibility in the way their classes are taught, the course and educational content development professionals continually work closely with them to ensure the Group’s courses and educational content are delivered in an engaging, effective manner. The Group uses Learning Outcome Trees to help the Group structure and deliver the Group’s educational content offerings, including course outlines, teaching notes and quiz banks, more effectively. Content Offerings The Group supports the learning experience with a wide range of educational content designed to help them capture key takeaways from, and reinforce what is taught in, the live streaming lessons, and to assess learning outcomes both during and after class hours. The Group also provides the teachers with educational content to help them prepare and teach classes effectively. All of the educational content was developed by the Group’s in-house research and development team and distributed electronically to students and faculty through the online platforms. Our educational content offerings primarily consist of the following: •Course outlines. The Group develops course-specific outlines based on the curriculum requirements of the applicable government authorities and the Learning Outcome Trees to ensure high-quality teaching is delivered consistently across the Group’s course offerings. As students’ levels of academic ability vary, the course outlines are designed with the flexibility to address particular students’ strengths and weaknesses. •Teaching notes. The Group offers teaching notes to the teachers providing them with roadmaps on how to spend class time effectively. The teaching notes set out the learning outcomes based on the Learning Outcome Trees, key issues and frequently tested topics of a given course as well as recommended teaching strategies. They also contain suggested allocation of time to spend on different sub-subjects and questions to ask to stimulate the desired discussion. The Group generally uses standardized teaching notes for the same courses, even taught by different teachers, to ensure consistency of teaching quality. •Quiz banks. The Group maintains and regularly update large quiz banks, including ones specifically designed for the state-administered STE exams. A majority of the quizzes in the quiz banks were developed in-house, leveraging the Group’s understanding of the topics frequently tested in the exams as well as the significant data accumulated during teaching, while the rest are based on real exams in the past. Also, students can search within the quiz banks using keywords from Learning Outcome Trees, which has greatly improved their learning effectiveness. In addition to quiz banks, the Group also offers mock exams to provide students with realistic practice sessions for their real final exams. Students 60 The Group has a large student base, primarily as a result of the Group’s well-established brand and effective sales and marketing efforts. In 2023, 2024 and 2025, the Group had 1,131,435, 1,067,128 and 979,741 students, respectively, and the Group’s new student enrollments were 616,341, 674,649 and 579,788, respectively. The Group’s students are primarily working adults who generally have limited time to devote to lengthy and regular classroom studies at designated physical locations. Such students also need an engaging learning atmosphere that encourages participation and interaction, and require more assistance and supervision from their teachers and mentors. The Group’s target students generally have aspirations to obtain more knowledge, pursue higher education and improve their social and economic status. At the same time, many of them cannot identify their specific education needs or solutions for such needs, especially given that education products and services can be complex and the relatively high costs may deter them from fulfilling their educational needs. To help them meet their aspirations and understand the potential educational solutions, the Group focuses marketing and sales practices on counseling-oriented interactions and strive to deliver the courses and educational content in a highly engaging and student-friendly manner. Faculty The Group maintains a team of full-time faculty dedicated to helping students succeed. As of December 31, 2025, the Group’s faculty primarily consisted of 57 teachers and 18 mentors based in Beijing and Wuhan, China. Teachers and mentors assume different roles and responsibilities. Generally, teachers are responsible for delivering courses and educational content to students, while mentors focus on providing academic and administrative support throughout the students’ learning process. We believe its different functions require different skills and personal attributes, and therefore the Group applies differentiated recruitment, training, and evaluation and compensation strategies to teachers and mentors. For risks related to the Group’s faculty, see “Item 3. Key Information—3.D. Risk Factors—Risks Related to the Group’s Business—The Group may not be able to continue to recruit, train and retain a sufficient number of qualified faculty members.” Teachers We believe maintaining a high-quality team of teachers is the bedrock of the Group’s brand and reputation, particularly given the Group’s online course delivery model where each teacher is expected to cover a larger number of students than in offline, classroom-based courses. The Group monitors the total number of hours teachers teach regularly to provide both an optimal number of teachers for the Group’s large student enrollments and adequate teaching assignments for each of the teachers. Most of the teachers are full-time employees, while the Group also engage part-time teachers. For part-time teachers, the Group enters into agreements with qualified individuals and pays for the classes taught by them, or it collaborates with third party companies that arrange teachers to teach classes and pays for the teaching services rendered. The training the Group provides to teachers is designed to allow teachers to develop their own teaching style and methodology while maintaining high teaching quality. Recruitment The Group hires the Group’s teachers based on numerous criteria, including educational backgrounds, teaching experience, and performance in mock lessons. The Group typically looks for candidates with a bachelor’s degree from a top university or college in China or a master’s or higher degree. Additionally, given the interactive nature of the live streaming lessons, the Group looks for teachers with strong communication skills, great passion for teaching and excellent ability of working under pressure. Training and support The Group offers standard training programs to newly-hired teachers. The Group also imposes a probation period and requires each newly hired teacher to pass a number of internal qualification tests throughout the probation to be formally employed as full-time teachers. The Group also provides on-the-job training on instructional and communication skills to teachers on a regular basis. The Group’s proprietary IT system is key to the teacher training efforts as it not only allows them to monitor student engagement and academic performance on a real time basis but also to adjust teaching methodology and strategy accordingly to keep students engaged. Evaluation and compensation The Group has developed a fully-digital and systematic assessment approach that provides teachers with transparent and helpful feedback that serves as the foundation for their professional development and helps them to build fulfilling careers with us. The Group adopts a comprehensive set of key performance indicators, or metrics, to evaluate teacher performance. These metrics include student attendance rate and student satisfaction, among others. The Group also collects student reviews after each class and closely monitors the educational content delivered by teachers to facilitate teacher evaluation efforts and to improve teaching quality. In addition, the Group uses mock lessons to assess a teacher’s teaching skills and ability to engage students in a live streaming course setting, especially in instances where multiple teachers are 61 competing to teach the same course. The Group pays teachers base salaries and service fees generally on a per-lesson basis. The service fees per lesson of a teacher are based primarily on his or her rating and other factors, such as student reviews and exam results. To incentivize teachers, the Group also provides them with discretionary, merit-based bonuses based on their performance, measured by selected metrics. The Group enters into with each teacher a standard employment agreement typically for an initial term of three years which automatically renews at the end of each term. Mentors The mentors’ principal role is to provide academic guidance and support to students on a daily basis to help navigate their way throughout the entire duration of studies. The mentors’ roles and responsibilities typically include: •understanding and responding to student inquiries and concerns; •monitoring students’ learning progress as well as their overall academic and personal development; •providing psychological support to help students cope with the challenging aspects of their studies, particularly in a rigorous academic environment; and •encouraging students to share ideas and learning experience and achievements with peers and faculty to foster a sense of community and teamwork spirit. Recruitment The Group tends to look for mentors who demonstrate excellent interpersonal and communication skills and a commitment in participating in the education profession and impacting a diverse audience. The Group typically requires mentors to possess a bachelor’s degree. Training and support The Group provides mentors with an orientation program and periodic on-the-job training to improve their ability to engage and build relationships with students. The Group also provides mentors with training opportunities that address specific challenges. The Group has also introduced systems and tools that enable teachers to monitor student activities and outcomes and take appropriate actions when the students demonstrate a low level of engagement. Evaluation and compensation The Group uses various metrics in terms of student engagement to measure the performance of mentors. These metrics include student’s class attendance, refund request rate, as well as the percentage of outperforming students. With each of mentors the Group enters into a standard employment agreement typically for an initial term of three years which automatically renews at the end of each term. Marketing, Branding and Sales The Group’s marketing philosophy is to promote the Group’s services to prospective students in a cost-effective manner based on the Group’s deep understanding of their unique profile and needs. The Group has acquired many of the existing students through effective marketing campaigns focused on showing how the Group’s services can address their specific educational needs. At the same time, the Group markets services to a larger group of prospective students who are not aware of solutions available to satisfy their needs through tailored marketing efforts designed to awaken their potential demands and navigate them through their decision-making process. The Group has built a large, well-trained professional sales and marketing team. As of December 31, 2025, the Group had a total of 1,151 sales and marketing personnel. The Group maintains sales and marketing personnel in major regional markets, such as Beijing, Wuhan, Shenzhen and Guangzhou. The Group’s sales and marketing force adopt sales and marketing strategies customized based on the needs and profile of prospective students in different markets. The Group divides the sales and marketing personnel into different teams, each dedicated to executing marketing strategies in a particular course offering or demographics. Advertising, Marketing and Branding The Group generates leads primarily from online channels, which consist of search engine marketing and mobile marketing. Empowered by data analytics capabilities, the Group uses automated bidding strategies to place ads intelligently, as well as to track performance of ads in real time, which enables the Group to generate more qualified clicks leading to the Group’s websites. The Group puts ads on strategically chosen mobile applications that generate premium traffic quality to maximize return of investment from mobile marketing channels. The Group’s search engine marketing channels effectively target students who possess preliminary interest in the 62 Group’s services. The Group purchases key words from major search service providers in China, such as Baidu, and enhances returns from search engine marketing channels using search engine optimization techniques. The Group monitors end-to-end performance metrics of search engine marketing channels on a continuous basis. The Group also generates leads online through mobile marketing channels, which mainly include display advertising on leading mobile news apps, as well as social media platforms and online shopping platforms. The display advertising formats the Group uses generally include launch screen display, banners, text hyperlinks, videos and rich media. The Group also operates branded official accounts on Weixin/WeChat, Sina Weibo, Tik Tok and other social media platforms to raise brand awareness and increase sales leads generated on these platforms. We believe that the Group’s mobile marketing efforts are particularly effective in awakening potential demands of prospective students who have not yet developed a specific learning plan. The terms of the agreements the Group enters into with the search engine and mobile marketing partners are typically one year. The Group pays the search engine and mobile marketing partners generally on a cost-per-click basis. Counseling-Oriented Sales Counseling services To convert leads generated into student enrollments, the Group provides customized, comprehensive counseling to prospective students throughout the lead nurturing and enrollment cycle. This counseling-oriented sales approach is supported by a capable sales team consisting of live chat personnel, call center staff and recruitment consultants based in the Group’s regional enrollment centers. The Group provides extensive training to sales team to ensure they are capable of explaining course offerings, addressing questions and concerns, and recommending courses that best suit prospective students’ learning objectives. The Group also uses data analytics tools and models to identify a prospective student’s educational needs, which helps the sales team provide tailor-made counseling services. Enrollment process The Group uses multi-layer lead-nurturing strategies to acquire new student enrollments in a cost-effective manner. Each of the leads generated are initially directed to the live chat support team who is responsible for answering prospective students’ enquires, encouraging them to register with the Group’s platforms, and collecting necessary information. Once a prospective student indicates an interest in purchasing the courses, the Group matches such student with the most suitable sales professional based on data analytics and tools. Such sales professional will follow up with the prospective student. In addition, the Group launches advertisements on various platforms, where the Group is able to obtain the contact information of the prospective students if they indicate interest in the Group’s courses. The Group then invites prospective students to join the online learning group and provide them with access to the trial courses. A prospective student that has signed up for the courses will be directed to the local enrollment centers to complete course purchase and registration with the assistance of the enrollment consultants. The enrollment consultants are also responsible for providing counseling services to enrolling students and guiding them through the payment process. Students can also choose to complete the purchase and enrollment process entirely online. IT Infrastructure and Capabilities The Group devotes significant resources to maintaining a reliable, scalable and secure IT infrastructure. The Group has built the integrated IT infrastructure primarily based on tools, technologies and platforms that the Group has developed in-house and, to a lesser extent, third-party software and applications that the Group has licensed or purchased. The Group maintains a dedicated IT development and support team. As of December 31, 2025, the Group had 115 technology development personnel. Genesis The Group’s IT infrastructure is critical to supporting the pursuit of excellent student experience and optimal operating efficiency. The Group has developed Genesis, the Group’s proprietary integrated IT infrastructure, to support and connect students and employees during every major aspect of business operations, encompassing marketing, sales, course delivery and development, and operation management. Powering various services and functions, including information and data transmission and sharing, centralized data tracking and data analytics, Genesis is composed of both student interface and employee interface. For one thing, the student interface supports applications and platforms that enable students to enroll in courses, attend classes, access educational content, interact within the Group’s virtual community, and engage in other learning activities throughout their service periods; for another thing, Genesis also incorporates different subsets of functions used by the Group’s employees, ranging from teachers and mentors to the marketing and sales personnel. The employee interface is specifically customized to provide the employees with information and data most relevant to their responsibilities. In addition, Genesis supports a centralized database allowing its users, including students and employees, to contribute, share and store content and data 63 across various applications and platforms. The Group launched the personalized study programs in 2018. This in-house developed software uses machine learning and natural language processing technology to analyze student behavior and their level of understanding of specific courses. Based on this analysis, the Group is able to predict test results, with a high accuracy rate, and develop tailor-made learning solutions that are designed to improve study outcomes. Mobile Platforms The Group is one of the first movers in China’s education sector to deliver interactive education services via mobile platforms, which has enabled students to learn and connect with fellow students and faculty in a more efficient and flexible manner. The Group’s Sunlands mobile app, available on both iOS and Android, is built with a clear and functional interface that enables access to course and educational content offerings and virtual learning community. The Group has also built mobile WAP pages which allow students and faculty to enjoy a similar level of functionality as the Group’s mobile app without installation. Tuition and Fees The Group’s tuition fees, including academic fees and registration fees, are charged generally on a per-program basis. From time to time, the Group offers tuition discounts under various marketing campaigns and promotions. For example, discounts may also be made available to students who purchase multiple courses at a time. The Group accepts fee payments through major third-party online payment solutions in China, including Alipay, Union Pay and WeChat Pay, as well as bank transfers and credit cards. Students typically self-finance their education or obtain financing from third-party financing programs that cooperate with us. The Group currently offers the following two payment options to students: •Lump-sum prepayment option. Under a prepaid payment plan, a student is required to make a one-time, lump-sum payment of the tuition to the Group directly at the beginning of the academic period. •Installment payment plan. The Group offers an installment payment option that enables eligible students to obtain loans from accredited credit providers in China to finance all or part of their tuition. The credit providers perform credit assessment, approve loan applications, provide the funds and collect delinquent payments. Once a student’s loan application is approved by the credit provider, the tuition will be fully paid to the Group by such credit provider. The Group also partners with credit intermediaries, who connect students with credit providers. Under the loan agreement between the borrowing student and the lending credit provider, the borrowing student is required to repay the loan principal in installments over a period generally ranging from 3 to 12 months. Under the cooperation agreement between the Group and each credit provider, the Group is responsible for making interest payments under a student loan to the lending credit provider. Interest payments and service fees are recorded as a reduction to the total contractual tuition price. The Group generally does not guarantee the payment of the loan principal by the students. See “Item 3. Key Information—3.D. Risk Factors—Risks Related to the Group’s Business—The Group may face risks associated with the installment tuition payment plan the Group offers to its students.” In 2023, 2024 and 2025, the Group’s student loan coverage ratios were 1.3%, 1.9% and 1.7%, respectively. During the same periods, the Group made interest payments of RMB1.5 million, RMB1.7 million and RMB1.9 million (US$0.3 million), respectively, to the credit providers. The Group generally offers students a full, unconditional refund within 24 hours upon enrollment. If a student requests a refund after taking at least one live streaming course lasting 30 minutes due to any material academic issue associated with the Group’s courses within certain refund period, the Group offers a refund excluding the registration fees and the fees of delivered courses upon the Group’s confirmation. In addition, the Group offers students a refund for the undelivered courses excluding the registration fees. Starting from June 2019, the Group offers such refund during the entire service period. When calculating gross billings for a specific period, the Group deducts the total amount of refunds from the total amount of cash received for the sale of course packages for such period. Intellectual Property The Group relies on a combination of patent, copyright, trademark and trade secret laws and restrictions on disclosure to protect the Group’s intellectual property rights. The Group owns copyrights to the educational content the Group developed in-house. The Group enters into standard employment agreements with teachers, course development staff and other employees which provide that the intellectual property created by them in connection with their employment is the Group’s intellectual property. As of December 31, 2025, the Group has registered 380 trademarks with the Trademark Office of the PRC State Administration of Industry and Commerce, registered 143 software copyrights with the PRC State Copyright Bureau, and registered 252 domain names. Despite the Group’s efforts to protect itself from infringement or misappropriation of the Group’s intellectual property rights, unauthorized parties may attempt to copy or otherwise obtain and use the Group’s intellectual property. In the event 64 of a successful claim of infringement and the Group’s failure or inability to develop non-infringing intellectual property or license the infringed or similar intellectual property on a timely basis, the Group’s business could be harmed. See “Item 3. Key Information—3.D. Risk Factors—Risks Related to the Group’s Business—The Group may from time to time be subject to infringement claims relating to intellectual properties of third parties.” and “Item 3. Key Information—3.D. Risk Factors—Risks Related to the Group’s Business—If the Group fails to protect the Group’s intellectual property rights, the Group’s brand and business may suffer.” Competition The Group primarily competes with offline, classroom-based education service providers. Additionally, the Group expects to face competition as a result of new entrants to the adult online education market and the adult personal interest learning market in China, including established education service providers that had not previously offered such courses. The Group competes with the Group’s competitors for student enrollments and engagement, high-quality faculty members, sales and marketing effectiveness, among other things. We believe that the principal competitive factors in China’s adult online education market and adult personal interest learning market include the following: •brand awareness and reputation; •scope of course offerings; •course pricing; •interactive, engaging and customized learning experience; •teaching quality and level of academic and administrative student support; •ease of deployment and use of the course delivery format; and •expertise in sales and marketing, and student acquisition and retention; and •proven track record of performance. We believe the Group competes favorably on the basis of these factors. The Group’s ability to remain competitive will depend, to a great extent, upon the Group’s ability to consistently deliver high-quality course offerings and acquire, support and retain students. Some of the Group’s present and future competitors may have longer operating histories, larger teams of teaching faculty and supporting staff and greater financial, technical, marketing and other resources. For a discussion of risks relating to competition, see “Item 3. Key Information—3.D. Risk Factors—Risks Related to the Group’s Business—The Group faces intense competition in the Group’s industry, which could divert student to the Group’s competitors, lead to pricing pressure and loss of market share, and significantly reduce the Group’s gross billings and net revenues.” Data Privacy and Security We believe data security is critical to the Group’s business operation because data is the foundation of the Group’s competitive advantages. The Group has internal rules and policy to govern how the Group may use and share personal information, as well as protocols, technologies and systems in place to ensure that such information will not be accessed or disclosed improperly. Users must acknowledge the terms and conditions of the user agreement before using the Group’s products, under which they consent to the Group’s collection, use and disclosure of their data in compliance with applicable laws and regulations. From an internal policy perspective, the Group limits access to the servers that store user and internal data on a “need-to-know” basis. The Group also adopts a data encryption system intended to ensure the secured storage and transmission of data, and prevent any unauthorized member of the public or third parties from accessing or using the Group’s data in any unauthorized manner. Furthermore, the Group implements comprehensive data masking of user data for the purpose of fending off potential hacking or security attacks. Insurance The Group does not maintain any liability insurance or property insurance policies covering students, equipment and facilities for injuries, death or losses due to fire, earthquake, flood or any other disaster. Consistent with customary industry practice in China, the Group does not maintain business interruption insurance, nor does it maintain key-man insurance. Licenses and Approvals See “Item 3. Key Information—Licenses and Approvals” for details. 65 Regulation Regulations Relating to Foreign Investment Restrictions According to the latest Special Administrative Measures for the Entry of Investment (Negative List), or the Negative List, promulgated by the Ministry of Commerce, or MOFCOM and the National Development and Reform Commission, or NDRC, effective on November 1, 2024, foreign investors shall not engage in the prohibited activities listed in the Negative List. Pursuant to the latest Negative List, the provision of value-added telecommunications services falls in the category of restricted activities and, with a few exceptions, the percentage of foreign ownership cannot exceed 50% (except for e-commerce, domestic multi-party communication, store-and-forward and call center). The latest negative list further provides that domestic companies engaged in foreign investment prohibited business and intend to offer and list securities in overseas markets shall obtain approval from relevant government authorities. The PRC Foreign Investment Law On March 15, 2019, the Standing Committee of the National People’s Congress published the Foreign Investment Law, or the FIL, which became effective on January 1, 2020. The FIL is expected to replace the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations. The existing foreign-invested enterprises established prior to the effective of the FIL may keep their corporate forms within five years. Pursuant to the FIL, “foreign investors” means natural person, enterprise, or other organization of a foreign country, “foreign-invested enterprises” (FIEs) means any enterprise established under PRC law that is wholly or partially invested by foreign investors and “foreign investment” means any foreign investor’s direct or indirect investment in mainland China, including: (i) establishing FIEs in mainland China either individually or jointly with other investors; (ii) obtaining stock shares, stock equity, property shares, other similar interests in Chinese domestic enterprises; (iii) investing in new projects in mainland China either individually or jointly with other investors; and (iv) making investment through other means provided by laws, administrative regulations, or State Council provisions. The FIL stipulates that China implements the management system of pre-establishment national treatment plus a negative list to foreign investment and the government generally will not expropriate foreign investment, except under special circumstances, in which case it will provide fair and reasonable compensation to foreign investors. Foreign investors are barred from investing in prohibited industries on the negative list and must comply with the specified requirements when investing in restricted industries on that list. When a license is required to enter a certain industry, the foreign investor must apply for one, and the government must treat the application the same as one by a domestic enterprise, except where laws or regulations provide otherwise. In addition, foreign investors or FIEs are required to file information reports and foreign investment shall be subject to the national security review. On December 26, 2019, the Supreme People’s Court of the PRC promulgated the Interpretation of the Supreme People’s Court on Several Issues Concerning the Application of the Foreign Investment Law of the PRC, effective as of January 1, 2020, pursuant to which “investment contracts” shall mean the relevant agreements formed as a result of direct or indirect investments in the PRC by foreign investors, i.e. foreign natural persons, foreign enterprises or other foreign organizations, including contracts for establishment of foreign investment enterprises, share transfer contracts, equity transfer contracts, contracts for transfer of property or other similar interests, contracts for newly-built projects, etc. Where a party concerned claims that an investment contract is invalid for investing in prohibited industries as stipulated in the Negative List for foreign investment access or due to violation of specified administrative measures in restricted industries, the People’s Court shall support such claim. On December 26, 2019, the State Council published the Implementation Rules of Foreign Investment Law, which came into effect on January 1, 2020. The Implementation Rules of Foreign Investment Law restates certain principles of the FIL and further provides, among others, (i) an FIE’s investment within the territory of PRC is also subject to the FIL and the Implementation Rules of Foreign Investment Law; (ii) an FIE may, within five years following January 1, 2020, choose to amend its legal form or the corporate governance and complete amendment registration, or to keep its original legal form or the corporate governance; (iii) the provisions regarding the transfer of equity interests, distribution of profits and remaining assets as stipulated in the contracts among the joint venture parties of an existing FIE may survive the FIL after such FIE amends its legal form or the corporate governance in accordance with relevant applicable laws. On December 19, 2020, the NDRC and the MOFCOM jointly promulgated the Measures on the Security Review of Foreign Investment, effective on January 18, 2021, which sets forth provisions concerning the security review mechanism on foreign investment, including the types of investments subject to review, review scopes and procedures, among others. The Office of the Working Mechanism of the Security Review of Foreign Investment, or the Office of the Working Mechanism will be established under the NDRC, who will carry out routine work of security review on foreign investment. Foreign investor or relevant parties in China must declare the security review to the Office of the Working Mechanism prior to (i) the investments in the military industry, military industrial supporting and other fields relating to the security of national defense, and investments in areas surrounding military facilities and military industry facilities; and (ii) 66 investments in important agricultural products, important energy and resources, important equipment manufacturing, important infrastructure, important transport services, important cultural products and services, important information technology and internet products and services, important financial services, key technologies and other important fields relating to national security, and obtain control in the target enterprise. Control exists when the foreign investor (i) holds over 50% equity interests in the target, (ii) has voting rights that can materially impact on the resolutions of the board of directors or shareholders meeting of the target even when it holds less than 50% equity interests in the target, or (iii) has material impact on target’s business decisions, human resources, accounting and technology, etc. On December 30, 2019, MOFCOM and the SAMR, jointly issued the Measures for Reporting of Foreign Investment Information, which came into effect on January 1, 2020. Since January 1, 2020, for foreign investors carrying out investment activities directly or indirectly in the PRC, foreign investors or foreign-invested enterprises shall submit investment information through certain system operated by SAMR. Foreign investors or foreign-invested enterprises shall disclose their investment information by submitting reports for their establishments, modifications and cancellations and their annual reports. If a foreign-invested enterprise investing in the PRC has finished submitting its reports for its establishment, modifications and cancellation and its annual reports, the relevant information will be shared by the competent market regulation department to the competent commercial department, and does not require such foreign-invested enterprise to submit the reports separately. M&A Regulations and Overseas Listings The MOFCOM, the State Assets Supervision and Administration Commission, the SAT, the SAMR, the CSRC and SAFE jointly adopted the M&A Rules. The M&A Rules establish procedures and requirements that could make some acquisitions of PRC companies by foreign investors more time-consuming and complex, including requirements in some instances that the MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise where any of the following situations exist: (i) the transaction involves an important industry in China, (ii) the transaction may affect national “economic security,” or (iii) the PRC domestic enterprise has a well-known trademark or historical Chinese trade name in China. Complying with the requirements of the M&A Rules to complete acquisitions of PRC companies by foreign investors could be time-consuming, and any required approval processes, including obtaining approval from the MOFCOM, may delay or inhibit the ability to complete such transactions. On July 6, 2021, General Office of the State Council of the PRC together with another authority jointly promulgated the Opinions on Strictly Cracking Down on Illegal Securities Activities, or the Securities Activities Opinions, which called for the enhanced administration and supervision of overseas-listed China-based companies, proposed to revise the relevant regulation governing the overseas issuance and listing of shares by such companies and clarified the responsibilities of competent domestic industry regulators and government authorities. On February 17, 2023, with the approval of the State Council, the CSRC released the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies, or the Overseas Listing Trial Measures, and five supporting guidelines, effective on March 31, 2023. According to the Overseas Listing Trial Measures, (1) domestic companies that seek to offer or list securities overseas, either in direct or indirect means, are required to report and file required documents with the CSRC; domestic companies that have been listed on a foreign stock exchange prior to the effective date of the Overseas Listing Trial Measures are required to file with the CSRC within three working days of the completion of fund raising activities on the same overseas capital market and shall make required filing immediately after submitting application for their listing or offering securities in other overseas capital markets; if a domestic company fails to complete the filing procedure or conceals any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties, such as order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines; (2) if the issuer meets both of the following conditions, the overseas offering and listing shall be determined as an indirect overseas offering and listing by a domestic company: (i) any of the revenue, net profit, total assets or net assets of the domestic companies of the issuer in the most recent accounting year accounts for more than 50% of the corresponding figure in the issuer’s audited consolidated financial statements for the same period; (ii) its major operational activities are carried out in China or its main places of business are located in China, or the senior managers in charge of operation and management of the issuer are mostly Chinese citizens or are domiciled in China; (3) where a domestic company seeks to indirectly offer and list securities in an overseas market, the issuer shall designate a major domestic operating entity responsible for all filing procedures with the CSRC, and where an issuer makes an application for initial public offering and listing in an overseas market, the issuer shall submit filings with the CSRC within three business days after such application is submitted. On the same day, the CSRC also held a press conference for the release of the Overseas Listing Trial Measures and issued the Notice on Administration for the Filing of Overseas Offering and Listing by Domestic Companies, which, among others, clarifies that (1) domestic companies that have been listed on a foreign stock exchange prior to the effective date of the Overseas Listing Trial Measures are not required to go through the filing procedure immediately but may be required to go through the filing procedure if future fund raising activities are involved; (2) a six-month transition period will be granted to domestic companies which, prior to the effective date of the Overseas Listing Trial Measures, have already obtained the approval from overseas regulatory authorities or stock exchanges (such as the completion of hearing in the 67 market of Hong Kong or the completion of registration in the market of the United States), but have not completed the indirect overseas listing; if domestic companies fail to complete the overseas listing within such six-month transition period, they shall file with the CSRC according to the requirements; and (3) the CSRC will solicit opinions from relevant regulatory authorities and complete the filing of the overseas listing of companies with contractual arrangements which duly meet the compliance requirements, and support the development and growth of these companies by enabling them to utilize two markets and two kinds of resources. On February 24, 2023, the CSRC jointly with other government authorities issued the Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies, or the Overseas Listing Archives Rules, effective on March 31, 2023, as a supporting rule to the Overseas Listing Trial Measures. Pursuant to the Overseas Listing Archives Rules, domestic companies that seek to offer or list securities overseas directly or indirectly, and securities companies and securities related service providers providing services to such domestic companies shall establish confidentiality and archives administration system, adopt requisite measures to perform the responsibilities of confidentiality and archives administration, and shall not divulge state secrets and state agencies’ work secrets, or harm state and public interests. The Overseas Listing Archives Rules provide, among others, that before providing or disclosing any document or material which involve state secrets or state agencies’ work secrets, domestic companies shall apply to the competent government authorities for approval and file with the secrecy administration authorities for record. Regulation Relating to Value-added Telecommunications Services Licenses for Value-Added Telecommunications Services The PRC Regulations on Telecommunications, or the Telecommunications Regulations, which was latest amended and came into effect on February 6, 2016, regulate telecommunications activities in China. The Telecommunications Regulations divide the telecommunications services into two categories, namely “infrastructure telecommunications services” and “value-added telecommunications services.” Pursuant to the Telecommunications Regulations, operators of value-added telecommunications services must first obtain a Value-added Telecommunications Business Operating License, or VAT License, from the Ministry of Industry and Information Technology, or MIIT, or its provincial level counterparts. On July 3, 2017, the MIIT promulgated the Administrative Measures on Telecommunications Business Operating Licenses, which set forth more specific provisions regarding the types of licenses required to operate value-added telecommunications services, the qualifications and procedures for obtaining such licenses and the administration and supervision of such licenses. According to the Catalog of Classification of Telecommunication Businesses, or the 2016 MIIT Catalog, which published by MIIT on December 28, 2015 and took effect on March 1, 2016 and were amended on June 6, 2019, internet information services, which include information release and delivery services, information search and query services, information community platform services, information real-times interactive services, and information protection and processing services, are classified as a category of value-added telecommunication services. The Administrative Measures on Internet Information Services, or ICP Measures, also promulgated by the PRC State Council on September 25, 2000 and most recently amended on December 6, 2024, set forth more specific rules on the provision of ICP services. According to ICP Measures, any company that engages in the provision of commercial ICP services shall obtain a sub-category VAT License for Internet Information Services, or ICP License, from the relevant government authorities before providing any commercial internet content services within the PRC, and when the ICP services involve areas of news, publication, and education, and if required by law or relevant regulations, specific approval from the respective regulatory authorities must be obtained prior to applying for the ICP License from the MIIT or its provincial level counterpart. Pursuant to the above-mentioned regulations, “commercial ICP services” generally refers to provision of specific information content, web page construction and other services through internet for profit making purpose. Operating the Group’s online platform to provide information and services to students may be classified as commercial ICP services. In addition to the Telecommunications Regulations and the other regulations set forth above, the provision of commercial internet information services on mobile internet apps is regulated by the Administrative Provisions on Mobile Internet Applications Information Services, which was promulgated by the Cyberspace Administration of China, or the CAC, on June 14, 2022 and came into effect on August 1, 2022. The providers of mobile internet applications are subject to requirements under these provisions, including acquiring the qualifications and complying with other requirements provided by laws and regulations and being responsible for information security. The Group currently, through subsidiaries of the VIEs, holds ICP Licenses. On July 21, 2023, the MIIT issued a Notice on the Filing of Mobile Internet Apps, according to which, app operators shall complete the filing procedure with the provincial communications administration where it is domiciled through the “National Management System for the Basic Internet Resources”. Any failure of such filing shall cause app operators prohibited from engaging in relevant apps internet information services. Network access service providers, distribution platforms and smart terminal manufacturers shall not provide network access, distribution, pre-installation and other services for apps that have not completed the filing procedures. A transition period from September 2023 to March 2024 will be granted to the apps that have carried out business before the promulgation of this Notice, or the Existing Apps, 68 within which Existing Apps shall conduct and complete the apps filling. Foreign Investment in Value-Added Telecommunication Services The Regulations on Administration of Foreign-Invested Telecommunications Enterprises, or the FITE Regulations, which took effect on January 1, 2002 and latest amended on March 29, 2022, are the key regulations that regulate foreign direct investment in telecommunications companies in China. The FITE Regulations stipulate that, except as otherwise provided by relevant laws and regulations, the foreign investor of a telecommunications enterprise is prohibited from holding more than 50% of the equity interest in a foreign-invested enterprise that provides value-added telecommunications services. After the MOFCOM and NDRC amended the Catalog in March 2015, MIIT also issued the Circular on Removing the Restrictions on Shareholding Ratio Held by Foreign Investors in Online Data Processing and Transaction Processing (Operating E-commerce) Business on June 19, 2015, which amended the relevant provision in FITE Regulations by allowing foreign investors to own more than 50% of the equity interest in an operator of e-commerce business. However, foreign investors continue to be prohibited from holding more than 50% of the equity interest in a provider of other categories of value-added telecommunications services except for e-commerce, domestic multi-party communication, store-and-forward, and call center. On April 8, 2024, the MIIT issued the Circular on Pilot Work of Expanding the Opening Up of Value-Added Telecommunications Services, pursuant to which, the foreign ownership limits on several services, including (i)Internet Data Center, (ii)Content Delivery Networks, (iii)Internet Access Services, (iv)online data processing and transaction, (v) information publishing platform and delivery services (except Internet news and information, online publishing, online audio-visual, Internet culture business), and (vi) information protection and processing services in designated pilot areas, are eliminated. However, this Circular are newly promulgated, there are substantial uncertainties as to its interpretation, application and enforcement. To comply with the above-mentioned foreign ownership restrictions, the Group operates its online platform in China through the VIEs and their subsidiaries, all of the shareholders of the VIEs are PRC domestically funded entities, and the VIEs are controlled by Wuhan Zhibo, our PRC subsidiary, through a series of contractual arrangements. The VIEs hold the domain names, trademarks and facilities necessary for daily operations of the Group’s online platforms in compliance with the MIIT Circular 2006. Based on our PRC legal counsel’s understanding of the current PRC law, rules and regulations, the contractual arrangements among Wuhan Zhibo, the VIEs and the VIEs’ shareholders and subsidiaries are valid, binding and enforceable under PRC laws and regulations currently in effect. However, we were further advised by our PRC legal counsel that there are uncertainties with respect to the interpretation and application of existing or future PRC laws and regulations and thus there is no assurance that Chinese governmental authorities would take a view consistent with the opinions of our PRC legal counsel. Regulation Relating to Private Education Education Law of the PRC On March 18, 1995, the PRC National People’s Congress promulgated the Education Law of the PRC, or the Education Law, which was further amended on August 27, 2009, on December 29, 2018 and on April 29, 2021, stipulates that the government formulates plans for the development of education, establishes and operates schools and other types of educational institutions, and in principle, enterprises, institutions, social organizations and individuals are encouraged to operate schools and other types of educational organizations. Comparing to the version of Education Laws that was amended and came into effect on 2009, which provided that no organization or individual may establish or operate a school or any other educational institution for commercial purposes, the current Education Law narrowed the provision prohibiting the establishment or operation of schools or other educational institutions for commercial purposes to only restricting a school or other educational institution founded with governmental funds or donated assets in the amended Education Law. On April 20, 2022, Standing Committee of the National People’s Congress, or the SCNPC, adopted the amended Vocational Education Law of the PRC, or the Amended Vocational Education Law, which became effective on May 1, 2022 and replace the previous Vocational Education Law of the PRC adopted in 1996. The Amended Vocational Education Law specifies that the vocational education is as important as regular education and that the state encourages the development of various levels and forms of vocational education, the extensive and equal participation of social forces in vocational education and the international communication and the cooperation in vocational education, and strives to improve vocational education recognition. The Amended Vocational Education Law also provides the establishment and improvement of the vocational education system, deepening cooperation between enterprises and schools, and the improvement of the vocational education guarantee system and measures. 69 The Law for Promoting Private Education and its Implementing Rules The Law for Promoting Private Education of the PRC became effective on September 1, 2003 and was last amended on December 29, 2018, and the Implementation Rules for the Law for Promoting Private Education became effective on April 1, 2004. The Decision of the Standing Committee of the National People’s Congress on Amending the Law for Promoting Private Education of the PRC, or the Amendment, has been promulgated by Order No. 55 of the President of the PRC on November 7, 2016 and came into force on September 1, 2017. Under the Amendment, sponsors of private schools may choose to establish non-profit or for-profit private schools at their own discretion. Nonetheless, school sponsors are not allowed to establish for-profit private schools that are engaged in compulsory education. In other words, the schools engaged in compulsory education should retain their non-profit status after the Amendment comes into force. The Amendment further establishes a new classification system for private schools to be classified by whether they are established and operated for profit-making purposes. On April 7, 2021, the State Council published the amendment to the Regulations on the Implementation of the Law for Promoting Private Education of the PRC, or Amended Implementing Rules, which became effective on September 1, 2021. The Amended Implementing Rules stipulates that online education activities using internet technology are encouraged by the regulatory authorities and shall comply with laws and regulations related to internet management. A private school using internet technology to conduct education activities shall obtain an appropriate private school operating permit and shall establish and implement internet security management systems and take technical security measures. Upon discovery of any information whose release or transmission is prohibited by applicable laws or regulations, the private school shall immediately cease the transmission of that information and take further remedial actions, such as deleting that information, to prevent it from spreading. Records pertaining to the situation shall be kept and reported to the appropriate authorities. The Amended Implementing Rules further stipulates that any entities or individuals shall not control any schools providing compulsory education or any non-profit schools providing pre-school education through merger, acquisition or contractual arrangements. A private school providing compulsory education shall not conduct any transaction with any related party. Any other private school conducting any transaction with any related party shall follow the principles of openness, fairness and impartiality, fix the price reasonably and regulate the decision-making, and shall not damage the state interests, the interests of the school or the rights and interests of the teachers and students. A private school shall establish an information disclosure system for related party transactions and relevant government authorities shall enhance the supervision on the agreements entered into between non-profit private schools and its related party and shall review such transactions on an annual basis. On December 29, 2016, the State Council issued the Several Opinions of the State Council on Encouraging the Operation of Education by Social Forces and Promoting the Healthy Development of Private Education, or the State Council Opinions, which requires to ease the access to the operation of private schools and encourages social forces to enter the education industry. The State Council Opinions also provides that each level of the people’s governments shall increase their support to the private schools in terms of financial investment, financial support, autonomy policies, preferential tax treatments, land policies, fee policies, autonomy operation, protecting the rights of teachers and students etc. Further, the State Council Opinions require each level of the people’s governments to improve its local policies on government support to for-profit and non-profit private schools by ways of preferential tax treatments etc. In addition, under the State Council Opinions, private schools shall strengthen its construction of the Chinese Communist Party, or the CCP, and further the theoretical system of Socialism with Chinese Characteristics by introducing such system into textbooks and teaching programs. The construction of the CCP’s organizations by the private schools as well as the CCP’s leadership to private schools shall constitute an important part of such schools’ annual inspection. On December 30, 2016, the MOE, Ministry of Civil Affairs, State Administration for Industry and Commerce (the predecessor of the State Administration for Market Regulation), the Ministry of Human Resources and Social Welfare and the State Commission Office of Public Sectors Reform jointly issued the Implementation Rules on the Classification Registration of Private Schools to reflect the new classification system for private schools as set out in the Amendment. Generally, if a private school established before promulgation of the Amendment chooses to register as a non-profit school, it shall amend its articles of association, continue its operation and complete the new registration process. If such private school chooses to register as a for-profit school, it shall conduct financial liquidation process, have the property rights of its assets such as lands, school buildings and net balance being authenticated by relevant government authorities, pay up relevant taxes, apply for a new private school operating permit, re-register as for-profit school and continue its operation. Specific provisions regarding the above registrations are yet to be introduced by people’s governments at the provincial level. On December 30, 2016, the MOE, State Administration for Industry and Commerce and the Ministry of Human Resources and Social Welfare jointly issued the Implementation Rules on the Supervision and Administration of For-profit Private Schools, pursuant to which the establishment, division, merger and other material changes of a for-profit private school shall first be approved by the education authorities or the authorities in charge of labor and social welfare, and then be registered with the competent branch of State Administration for Industry and Commerce. In addition, it also provides that for-profit private training institutes shall be analogically governed by these Implementation Rules on the Supervision 70 and Administration of For-profit Private Schools. On July 24, 2021, the General Office of State Council and the General Office of Central Committee of the Communist Party of China jointly promulgated the Opinions on Further Alleviating the Burden of Homework and After-School Tutoring for Students in Compulsory Education, or the Alleviating Burden Opinion, which mainly aims to alleviate the burden of excessive homework and the burden of after-school training on students in the compulsory education stage and sets out a series of operating requirements on after-school tutoring institutions. Uncertainties exist with respect to the interpretation and application of the existing and future laws and regulations governing online private education industry, as well as how the local government would promulgate implementing rules relating to the specific requirements applicable to online education service providers like the Group. See “Item 3. Key Information—3.D. Risk Factors—Risks Related to the Group’s Business—The Group faces risks associated with the lack of a private school operating permit for online education services as well as uncertainties surrounding PRC laws and regulations governing the education industry in general, including the Law for Promoting Private Education and its Implementation Rules.” Regulations on Online and Distance Education The MOE, jointly with certain other PRC government authorities, promulgated the Opinions on Guiding and Regulating the Orderly and Healthy Development of Educational Mobile Apps on August 10, 2019, or the Opinions on Educational Apps, which requires, among others, mobile apps that provide services for school teaching and management, student learning and student life, or home-school interactions, with school faculty, students or parents as the main users, and with education or learning as the main application scenarios, or the Educational Apps, be filed with competent provincial regulatory authorities for education before the end of 2019. The Opinions on Educational Apps also requires, among others, that before filing, the Educational App’s provider obtain the ICP License or complete the ICP filing and obtain the certificate and the grade evaluation report for graded protection of cybersecurity. On November 11, 2019, MOE issued the Administrative Measures on Filing of Educational Mobile Apps, which requires, among others, that educational mobile app providers shall file their educational mobile apps and that filings of existing educational mobile apps shall be completed before January 31, 2020. If the filing requirements are violated and not rectified in a timely manner, the MOE or its local counterparts may revoke the filing of such educational mobile app, blacklist such provider, report such provider to the education system, and prohibit such provider from submitting any filings for six months. The MOE established a public channel that can be used to submit complaints with respect to educational apps and set a penalty points system based on the severity of the complaints. For serious complaints substantiated by relevant government authorities, an appropriate number of penalty points is recorded for the relevant educational app provider, and remedial measures also may be required. In the event that an educational app provider receives 12 or more penalty points within 12 months or certain types of serious complaints, the MOE may revoke such provider’s filing, blacklist such provider, remove its educational app from the app store, publicize the complaint or prohibit such provider from submitting any filings for six months. Complaints can be made against both educational app providers and users regarding a variety of matters including failure to file or obtain relevant permits; illegal or inappropriate information; inappropriate collection and use of personal information; and violation of relevant requirements for primary and secondary schools and online after-school training programs. Regulations Relating to Internet Culture Activities On February 17, 2011, the Ministry of Culture, or MOC, promulgated the Interim Administrative Provisions on Internet Culture, or the Internet Culture Provisions, which became effective on April 1, 2011 and was further amended on December 15, 2017. The Internet Culture Provisions require ICP services providers engaging in commercial “internet culture activities” to obtain an Internet Culture Business Operating License from the MOC. “Internet cultural activities” is defined in the Internet Culture Provisions as an act of provision of internet cultural products and related services, which includes (i) the production, duplication, importation, and broadcasting of the internet cultural products; (ii) the online dissemination whereby cultural products are posted on the internet or transmitted via the internet to end-users, such as computers, fixed-line telephones, mobile phones, television sets and games machines, for online users’ browsing, use or downloading; and (iii) the exhibition and comparison of the internet cultural products. In addition, “internet cultural products” is defined in the Internet Culture Provisions as cultural products produced, broadcast and disseminated via the Internet, which mainly include internet cultural products specially produced for the Internet, such as online music entertainment, online games, online shows and plays (programs), online performances, online works of art and online cartoons, and internet cultural products produced from cultural products such as music entertainment, games, shows and plays (programs), performances, works of art, and cartoons through certain techniques and duplicating those to internet for dissemination. On May 14, 2019, the General Office of MOC promulgated the Notice on Adjusting the Scope of Internet Culture Business Operating License and Further Standardize the Approval Work, which provides that online music, online shows and plays, online performances, online works of art, online cartoons, displays and games are the activities that fall in the scope of internet culture business operating license, and further clarifies that educational live streaming activities are not deemed as online performances. Nevertheless, it remains unclear whether the local PRC government authorities would 71 adopt a different practice. In addition, it remains uncertain whether the PRC government authorities would issue more explicit interpretation and rules or promulgate new laws and regulations. Regulations Relating to Online Publishing On February 4, 2016, the SAPPRFT (currently reformed into the State Administration of Press and Publication (National Copyright Bureau) under the Propaganda Department of the Central Committee of the Communist Party of China) and the MIIT jointly issued the Administrative Provisions on Online Publishing Services, or the Online Publishing Provisions, which came into effect as of March 10, 2016. According to the Online Publishing Provisions, all online publishing services provided within the territory of China are subject to the Online Publishing Provisions, and an Internet Publishing License shall be obtained to provide online publishing services. Pursuant to the Online Publishing Provisions, “online publishing services” refer to providing online publications to the public through information networks; and “online publications” refer to digital works with publishing features such as having been edited, produced or processed and are made available to the public through information networks, including: (i) written works, pictures, maps, games, cartoons, audio/video reading materials and other original digital works containing useful knowledge or ideas in the field of literature, art, science or other fields; (ii) digital works of which the content is identical to that of any published book, newspaper, periodical, audio/video product, electronic publication or the like; (iii) network literature databases or other digital works, derived from any of the aforesaid works by selection, arrangement, collection or other means; and (iv) other types of digital works as may be determined by the SAPPRFT. As the scope of online publication is broad, certain contents the Group posts on its website, such as video-audio clips and course materials, may be deemed as online publications. Nevertheless, it remains unclear whether the local PRC government authorities would adopt a different practice. In addition, it remains uncertain whether the PRC government authorities would issue more explicit interpretation and rules or promulgate new laws and regulations. Regulations on Television Program Industry Television program productions and distribution businesses are mainly regulated by Regulations on Administration of Radio and Television, which came into effect on August 11, 1997 and was last amended on December 6, 2024, and the Administrative Regulations on Production and Operation of Radio and Television Program which came into effect on August 20, 2004 and was last amended on June 3, 2025. Pursuant to these regulations, television programs can only be produced by television stations at the municipal level or above or entities with a License for the Production and Operation of Radio and Television Program. Any entity producing and operating radio and television program without the License for the Production and Operation of Radio and Television Program will be subject to the confiscation of tools, equipment of producing radio and television program and a fine of more than 10 thousand RMB and less than 50 thousand RMB by competent local branch of SAPPRFT. Regulations Relating to Publication Distribution Under the Administrative Measures for the Publication Market, or Publication Market Measures, which was jointly promulgated by the SAPPRFT and the MOFCOM on May 31, 2016 and became effective on June 1, 2016, any enterprise or individual who engages in publication distribution activities shall obtain permission from SAPPRFT or its local counterpart. “Publication” is defined as “books, newspapers, periodicals, audio-visual products, and electronic publications,” and “distributing” is defined as “general distribution, wholesale, retail, rental, exhibition and other activities,” respectively, in the Publication Market Measures. Any enterprise or individual that engages in retail of publications shall obtain a Publication Business Operating License issued by the local counterpart of SAPPRFT at the county level. In addition, any enterprise or individual that holds a Publication Business Operating License shall file with the relevant local counterpart of SAPPRFT that granted such license to it within 15 days since it begins to carry out any online publication distribution business. Regulations Relating to Online Transmission of Audio-Visual Programs The Measures for the Administration of Publication of Audio-Visual Programs through Internet or Other Information Network, or the Audio-Visual Measures, promulgated by the SAPPRFT, on July 6, 2004 and put into effect on October 11, 2004, apply to the activities relating to the opening, broadcasting, integration, transmission or download of audio-visual programs using internet or other information network. Under the Audio-Visual Measures, to engage in the business of transmitting audio-visual programs, a license issued by SAPPRFT is required, and “audio-visual programs (including audio-visual products of films and televisions)” is defined as the audio-visual programs consisting of movable pictures or sounds that can be listened to continuously, which are shot and recorded using video cameras, vidicons, recorders and other audio-visual equipment for producing programs. Foreign invested enterprises are not allowed to carry out such business. On April 13, 2005, the State Council promulgated the Certain Decisions on the Entry of the Non-state-owned Capital into the Cultural Industry. On July 6, 2005, five PRC governmental authorities, including the SAPPRFT, jointly adopted the Several Opinions on Canvassing Foreign Investment into the Cultural Sector. According to these regulations, non-state-owned capital and foreign investors are not allowed to engage in the business of transmitting audio-visual programs through 72 information networks. However, the Audio-Visual Measures was repealed according to the Administrative Provisions on Audio-Visual Program Service through Special Network and Directed Transmission that was promulgated by the SAPPRFT on May 4, 2016, effective as of June 1, 2016 and last amended on March 23, 2021. The SAPPRFT and the MIIT jointly promulgated the Administrative Provisions on Internet Audio-Visual Program Service, or the Audio-Visual Program Provisions, on December 20, 2007, which came into effect on January 31, 2008 and was latest amended on August 28, 2015. Under the Audio-Visual Program Provisions, “internet audio-visual program services” is defined as activities of producing, redacting and integrating audio-visual programs, providing them to the general public via internet, and providing service for other people to upload and transmit audio-visual programs, and providers of internet audio-visual program services are required to obtain a License for Online Transmission of Audio-Visual Programs issued by SAPPRFT, or complete certain registration procedures with SAPPRFT. Providers of internet audio-visual program services must be either state-owned or state-controlled entities, and the business to be carried out by such providers must satisfy the overall planning and guidance catalog for internet audio-visual program service determined by SAPPRFT. On March 17, 2010, SAPPRFT promulgated the Provisional Implementation of the Tentative Categories of Internet Audio-Visual Program Services, or the Categories, which clarified the scope of Internet audio-visual programs services, which was amended on March 10, 2017. According to the Categories, there are four categories of Internet audio-visual program services which are further divided into seventeen sub-categories. The third sub-category to the second category covers the making and editing of certain specialized audio-visual programs concerning, among other things, educational content, and broadcasting such content to the general public online. However, there are still significant uncertainties relating to the interpretation and implementation of the Audio-Visual Program Provisions, in particular, the scope of “internet audio-visual programs.” Regulations Relating to Internet Live Streaming Services On November 4, 2016, the CAC issued Administrative Regulation on Internet Live Streaming Services, effective from December 1, 2016, according to which, “internet live streaming” refers to the activities of continuously releasing real-time information to the public based on the Internet in forms such as videos, audios, images and texts, and “internet live-streaming service providers” refers to the operators that provide Internet live-streaming platform service. In addition, the internet live-streaming service providers shall take various measures during operation of its services, such as examining and verifying the authenticity of the identification information and file such information for records. On July 12, 2017, the CAC issued a Notice on Development of the Filing Work for Enterprises Providing Internet Live Streaming Services, which provides that all the companies providing internet live streaming services shall file with the local authority since July 15, 2017, otherwise the CAC or its local counterparts may impose administrative sanctions on such companies. Pursuant to the Circular on Tightening the Administration of Internet Live Streaming Services jointly issued by the MIIT, the Ministry of Culture and Tourism and several other government agencies on August 1, 2018, live streaming services providers are required to file with the local public security authority within 30 days after it commences the service online. Regulations on Tourism Tourism Law of the PRC, which was promulgated by the Standing Committee of the NPC and most recently amended on October 26, 2018, provides that, among other things, to engage in the businesses of tourism, a travel agency shall obtain approval from the tourism authorities, and the specific conditions shall be met. Regulations on Travel Agencies promulgated by the State Council, revised on November 29, 2020, and the implementation rules of Regulations on Travel Agencies, provide that, among other things, travel agent shall mean any entity that engages in the business of attracting, organizing, and receiving tourists, providing tourism services for tourists and operating domestic, outbound or border tourism; the aforementioned business shall include but not limit to arranging for transport services, arranging for accommodation services, providing services for tour guides or team leaders, providing services of tourism consultation and tourism activities design. Regulations Relating to Internet Information Security and Privacy Protection The PRC Constitution states that PRC law protects the freedom and privacy of communications of citizens and prohibits infringement of these rights. In recent years, PRC government authorities have enacted laws and regulations on internet use to protect personal information from any unauthorized disclosure. Pursuant to the Decision on Strengthening the Protection of Online Information issued by the Standing Committee of the National People’s Congress on December 28, 2012 and the Order for the Protection of Telecommunication and Internet User Personal Information issued by the MIIT in July 16, 2013, any collection and use of user personal information must be subject to the consent of the user, abide by the principles of legality, rationality and necessity and be within the specified purposes, methods and scopes. Pursuant to the Ninth Amendment to the Criminal Law issued by the Standing Committee of the National People’s Congress in 73 August 2015, which became effective in November 2015, any internet service provider that fails to fulfill the obligations related to internet information security administration as required by applicable laws and refuses to rectify upon orders, shall be subject to criminal penalty for the result of (i) any dissemination of illegal information in large scale; (ii) any severe effect due to the leakage of the client’s information; (iii) any serious loss of criminal evidence; or (iv) other severe situation, and any individual or entity that (i) sells or provides personal information to others in a way violating the applicable law, or (ii) steals or illegally obtains any personal information, shall be subject to criminal penalty in severe situation. According to the Interpretation of the Supreme People’s Court and the Supreme People’s Procuratorate on Several Issues Concerning the Application of Law in Handling Criminal Cases of Infringing Personal Information of Citizens, if a business operator collects personal information of citizens by purchasing, accepting or exchanging, or collects personal information of citizens in the course of performing their duties and providing services in violation of relevant provisions of the State (including Law on the Protection of Consumer Rights and Interests) and meet one of the following standards, such operator shall be considered breaching criminal law and such operator and its responsible personnel shall undertake the criminal liabilities: (i) illegal acquisition, sale or provision of more than 50 pieces of track information, communication content, credit information, property information; (ii) illegal acquisition, sale, or provision of more than 500 pieces of accommodation information, communication records, health, physiological information, trading information, and other personal information may affect the safety of personal and property; (iii) illegal acquisition, sale, or provision of more than 5000 pieces of personal information other than the information mentioned in the preceding (i) and (ii); (iv) the profits generated from using the illegally collected and acquired personal information is more than fifty thousand RMB; and (v) resale of the personal information collected in the course of performing their duties and providing service and the amount of resold personal information reaches 50% of the prescribed standard mentioned in (i) or (ii), as applicable. Pursuant to the PRC Cyber Security Law issued by the Standing Committee of the National People’s Congress, last amended on October 28, 2025 and effective on January 1, 2026, “personal information” refers to all kinds of information recorded by electronic or otherwise that can be used to independently identify or be combined with other information to identify individuals’ personal information including but not limited to: individuals’ names, dates of birth, ID numbers, biologically identified personal information, addresses and telephone numbers, etc. The Cyber Security Law also provides that: (i) to collect and use personal information, network operators shall follow the principles of legitimacy, rightfulness and necessity, disclose rules of data collection and use, clearly express the purposes, means and scope of collecting and using the information, and obtain the consent of the persons whose data is gathered; (ii) network operators shall neither gather personal information unrelated to the services they provide, nor gather or use personal information in violation of the provisions of laws and administrative regulations or the scopes of consent given by the persons whose data is gathered; and shall dispose of personal information they have saved in accordance with the provisions of laws and administrative regulations and agreements reached with users; (iii) network operators shall not divulge, tamper with or damage the personal information they have collected, and shall not provide the personal information to others without the consent of the persons whose data is collected. However, if the information has been processed and cannot be recovered and thus it is impossible to match such information with specific persons, such circumstance is an exception. In addition, the Office of the Central Cyberspace Affairs Commission, the MIIT, the Ministry of Public Security, and the SAMR jointly issued an Announcement of Launching Special Crackdown Against Illegal Collection and Use of Personal Information by Apps on January 23, 2019 to implement special rectification works against mobile Apps that collect and use personal information in violation of applicable laws and regulations, where business operators are prohibited from collecting personal information irrelevant to their services, or forcing users to give authorization in a disguised manner. On November 28, 2019, the National Internet Information Office, the MIIT, the Ministry of Public Security and the SAMR further jointly issued a notice to classify and identify illegal collection and use of personal information. According to the Civil Code of China, which became effective on January 1, 2021, a natural person has the right of privacy and the personal information of a natural person will be protected in accordance with law. Information processors may not divulge or tamper with the personal information collected or stored by them and may not illegally provide any natural person’s personal information to others without the consent of such natural person. Pursuant to the Notice on Promulgation of the Rules on the Scope of Necessary Personal Information for Common Types of Mobile Internet Applications, which was promulgated by the CAC, the MIIT and certain other government authorities on March 12, 2021 to be effective on May 1, 2021, “necessary personal information” refers to the personal information necessary for ensuring the normal operation of an app’s basic functional services, without which the app cannot achieve its basic functional services. For learning and education apps, the basic functional services are “online tutoring, online classes, etc.” and the necessary personal information is mobile phone numbers of registered users. The SAMR promulgated the Measures for the Supervision and Administration of Online Transactions, which was last amended on March 18, 2025 and effective on May 1, 2025. The measures require that online transaction operators shall not force customers, whether or not in a disguised manner, to consent to the collection and use of information not directly related to their business activities by means of one-off general authorization, default authorization, bundling with other authorizations, or the suspension of installation and use. Otherwise, such online transaction operator may be subject to fines and consequences under related laws and regulations, including without limitation suspension of business for rectification and revocation of permits and licenses. On June 10, 2021, the SCNPC promulgated the Data Security Law of the PRC, which came into effect on September 74 1, 2021. The Data Security Law provides for data security and privacy obligations on entities and individuals carrying out data activities. The Data Security Law also introduces a data classification and hierarchical protection system based on the importance of data in economic and social development, as well as the degree of harm it will cause to national security, public interests, or legitimate rights and interests of individuals or organizations when such data are tampered with, destroyed, leaked, or illegally acquired or used. The appropriate level of protection measures is required to be taken for each respective category of data. For example, a processor of important data shall designate the personnel and the management body responsible for data security, carry out risk assessments for its data processing activities and file the risk assessment reports with the competent authorities. In addition, the Data Security Law provides a national security review procedure for those data activities which may affect national security and imposes export restrictions on certain data and information. No entity or individual within the territory of the PRC may provide foreign judicial or law enforcement authorities with the data stored within the territory of the PRC without the approval of the competent PRC authorities. On July 30, 2021, the State Council promulgated the Regulations on Critical Information Infrastructure Security Protection, which came into effect on September 1, 2021. The regulations provide that, among others, critical information infrastructure, or the CII, means important network facilities and information systems in important industries such as public communications and information services, energy, transportation, water conservancy, finance, public services, e-government, defense technology industry and others that may seriously harm national security, national economy, people’s livelihood and public interests once damaged, disabled or its data disclosed. Operators shall, base on leveled system for cybersecurity protection, adopt technical protection measures and other necessary measures to deal with cybersecurity security events, defend against cyber-attack and criminal activities, to ensure the safe and stable operation of CII, maintain data integrity, confidentiality, and availability pursuant to relevant laws, regulations and the mandatory requirements of national standards. Moreover, the competent supervisory departments of relevant important industries abovementioned shall organize the recognition of the CII and promptly notify the operators and Public Security Department of The State Council of the results of the identification. On August 20, 2021, the SCNPC promulgated the Personal Information Protection Law, which became effective on November 1, 2021. The Personal Information Protection Law aims at protecting the personal information rights and interests, regulating the processing of personal information, ensuring the orderly and free flow of personal information in accordance with the law, and promoting the reasonable use of personal information. Personal information refers to any recorded information related to identified or identifiable natural persons, though it excludes anonymized information. The Personal Information Protection Law also specified the rules for handling sensitive personal information, which includes biometrics, religious beliefs, specific identities, medical health, financial accounts, trails and locations, and personal information of teenagers under fourteen years old and other personal information, which, upon leakage or illegal usage, may easily infringe the personal dignity or harm of safety of livelihood and property. Personal information handlers shall bear responsibility for their personal information handling activities, and adopt necessary measures to safeguard the security of the personal information they handle. Otherwise, the personal information handlers will be ordered for rectification or suspension or termination of provision of services, confiscation of illegal income, subject to fines or other penalties. On January 4, 2022, the CAC published the Revised Cybersecurity Review Measures, which became effective on February 15, 2022 and repealed the Cybersecurity Review Measures promulgated on April 13, 2020. The Revised Cybersecurity Review Measures provide that a critical information infrastructure operator purchasing network products and services, and platform operators carrying out data processing activities, which affect or may affect national security, shall apply for cybersecurity review and that a platform operator with more than one million users’ personal information aiming to list abroad must apply for cybersecurity review. On January 4, 2022, the CAC published the Administrative Provisions on Internet Information Service Algorithm Recommendation on its website, or the Algorithm Recommendation Provisions, which became effective on March 1, 2022 and raise certain new compliance requirements on internet information service providers using algorithm recommendation technology. Specifically, the Algorithm Recommendation Provisions require that such service providers shall provide users with options that are not specific to their personal characteristics, or provide users with convenient options to cancel algorithmic recommendation services. On July 7, 2022, the CAC promulgated the Security Assessment Measures for Outbound Data Transfer, or the Outbound Data Transfer Measures, which became effective on September 1, 2022. The Outbound Data Transfer Measures provide that a data processor providing data abroad in the following situations shall report security assessment for its outbound data transfer to the CAC: (i) a data processor provides important data abroad; (ii) a critical information infrastructure operator or a data processor processing the personal information of more than one million individuals provides personal information abroad; (iii) a data processor, who has cumulatively provided personal information of 100,000 individuals or sensitive personal information of 10,000 individuals abroad since January 1 of the previous year, provides personal information abroad; and (iv) other circumstances prescribed by the CAC for which report for security assessment for outbound data transfers is required. According to the Guidelines on Security Assessment Report for Outbound Data Transfer promulgated by the CAC, outbound data transfer means (i) a data processor transfers or stores the data collected or generated during its operation within the PRC abroad, (ii) data collected and generated by a data processor is stored within the PRC while offshore institutions or individuals are able to inquire, retrieve, download and obtain such data; and (iii) other outbound data transfer activities prescribed by the CAC. 75 On March 22, 2024, the CAC published the Provisions on Promoting and Regulating Cross-bound Data Flows, which streamline and provide clarity to the governance framework for outbound data transfer. According to this Provisions, the data processors shall identify and declare important data in accordance with relevant provisions. If the data have not been informed or publicly announced as important data by relevant authorities or region, data processors are not required to report security assessment for its outbound data transfer as important data. This Provisions also establish specific exemptions for the outbound data transfer. For instance, data collected and generated in international trade, transnational transportation, academic cooperation, global manufacturing and marketing, which does not contain personal information or important data, is now exempted from compliance requirement of outbound data transfer, such as, security assessment for outbound data transfer, the execution of standard contracts for outbound personal information transfer, or the authentication process for personal information protection. In addition, Pilot Free Trade Zones are granted to formulate data negative lists at their own discretion, where data processors may provide overseas parties with any data not included in the negative list without security assessment. On September 24, 2024, the State Council promulgated the Regulations on the Management of Network Data Security, or the Network Data Regulation, which came into effect on January 1, 2025. The Network Data Regulation serves as a comprehensive implementing regulation for the compliance requirements set out by the Cybersecurity Law, Data Security Law, and Personal Information Protection Law. The Network Data Regulation introduces several key obligations, including requiring network data handlers to specify the purpose and method of personal information processing, as well as the types of personal information involved, before any personal information is handled. It clarifies definitions for important data, outlines the obligations of those handling important data, and establishes broader contractual requirements for data sharing between data handlers. It remains to be seen how this regulation will be interpreted and implemented, and to what extent it will affect our operations. Provisions on Talent Market Administration Provisions on Talent Market Administration promulgated by Ministry of Human Resources and Social Security on April 30, 2015 and last amended on December 31, 2019, provides that “job agencies”, which means the organizations specializing in the provision of intermediary services or other related services for the employers and job seekers, either as their core business or as a sideline, shall obtain the approval and the Job Agency Service License from the personnel administration department of the local government before it engages in the business of providing intermediary job services; the Internet information service providers engaged in Internet-based intermediary job services, either as their core business or as a sideline, must apply for the License. Whoever violates Provisions on Talent Market Administration and establishes a job agency or engages in job intermediary services without approval from the labor administrative department of the relevant government shall be ordered to stop the business by the labor administrative department of the relevant government at or above the county level, and be currently given a fine of up to RMB10,000; where there are illegal gains, the perpetrator may be imposed a fine of up to three times the value of the illegal gains, subject to a maximum of RMB30,000. Regulations Relating to Intellectual Property Rights Copyright and Software Registration The Standing Committee of National People’s Congress of PRC adopted the Copyright Law in 1990 and last amended it on November 11, 2020, which became effective on June 1, 2021. The amended Copyright Law extends copyright protection to Internet activities, products disseminated over the Internet and software products, audio-visual works and any other intellectual achievements which comply with the characteristics of the works. In addition, there is a voluntary registration system administered by the China Copyright Protection Center. The amended Copyright Law also requires registration of a copyright pledge. To address the problem of copyright infringement related to the content posted or transmitted over the Internet, the National Copyright Administration and the MIIT jointly promulgated the Measures for Administrative Protection of Copyright Related to Internet. In order to further implement the Computer Software Protection Regulations promulgated by the State Council on December 20, 2001 and amended on January 30, 2013, the State Copyright Bureau issued the Computer Software Copyright Registration Procedures on February 20, 2002, which apply to software copyright registration, license contract registration and transfer contract registration. Patents The Standing Committee of National People’s Congress adopted the Patent Law of the People’s Republic of China, pursuant to which a patentable invention, utility model or design must meet three conditions: novelty, inventiveness and practical applicability. Patents cannot be granted for scientific discoveries, rules and methods for intellectual activities, methods used to diagnose or treat diseases, animal and plant breeds or substances obtained by means of nuclear transformation. The Patent Office under the State Intellectual Property Office is responsible for receiving, examining and approving patent applications. The Patent Law was latest amended on October 17, 2020 which came into effect on June 1, 2021, pursuant to which a patent is valid for a twenty-year term for an invention and a utility model, and a fifteen-year 76 term for a design, all starting from the application date. Except under certain specific circumstances provided by law, any third party user must obtain consent or a proper license from the patent owner to use the patent, or else the use will constitute an infringement of the rights of the patent holder. Domain Name Pursuant to the Administrative Measures for Internet Domain Names, which was promulgated by the MIIT, domain names are registered on a “first-come, first-served” basis. The domain names registered or used by an organization or individual shall not contain any contents prohibited by laws and administrative regulations. A domain name registration applicant shall provide the domain name registration service agency with truthful, accurate and complete identity information on the domain name holder. Trademark Trademarks are protected by the PRC Trademark Law and the Implementation Regulation of the PRC Trademark Law. The Trademark Office of National Intellectual Property Administration handles trademark registrations and grants a term of ten years to registered trademarks which may be renewed for consecutive ten-year periods upon request by the trademark owner. Trademark license agreements must be filed with the Trademark Office for record. The PRC Trademark Law has adopted a “first-to-file” principle with respect to trademark registration. Where a trademark for which a registration has been made is identical or similar to another trademark which has already been registered or been subject to a preliminary examination and approval for use on the same kind of or similar commodities or services, the application for registration of such trademark may be rejected. Any person applying for the registration of a trademark may not prejudice the existing right first obtained by others, nor may any person register in advance a trademark that has already been used by another party and has already gained a “sufficient degree of reputation” through such party’s use. On April 23, 2019, the Standing Committee of the National People’s Congress promulgated the latest amendment of Trademark Law, which came into effect on November 1, 2019. Compared to the currently effective Trademark Law, the latest amendment of Trademark Law additionally provides that, among other things, (i) an application for registration of a malicious trademark not for use shall be rejected and (ii) those who apply for trademark registration maliciously shall be given administrative penalties of warning or fines according to the circumstances; those who file trademark lawsuits maliciously shall be punished by the people’s court according to applicable laws. On May 28, 2020, the National People’s Congress promulgated the Civil Code, which took effect on January 1, 2021. Under the Civil Code, if an offender intentionally infringes upon the intellectual property rights of others and the circumstance is severe, the infringed party shall have the right to request for the corresponding punitive compensation. Regulations on Foreign Exchange Foreign Currency Exchange Pursuant to the Foreign Currency Administration Rules, as amended, and various regulations issued by SAFE and other relevant PRC government authorities, RMB is freely convertible to the extent of current account items, such as trade related receipts and payments, interest and dividends. Capital account items, such as direct equity investments, loans and repatriation of investment, unless expressly exempted by laws and regulations, still require prior approval from SAFE or its local counterparts for conversion of RMB into a foreign currency, such as U.S. dollars, and remittance of the foreign currency outside of the PRC. Payments for transactions that take place within the PRC must be made in RMB. Foreign currency revenues received by PRC companies may be repatriated into China or retained outside of China in accordance with requirements and terms specified by SAFE. According to the Circular on Administration of Foreign Exchange on Further Promoting the Facilitation of Cross-border Trade and Investment promulgated by SAFE on October 23, 2019, which was amended by SAFE Notice on Further Deepening the Reform to Facilitate Cross-border Trade and Investment on December 4, 2023, non-investment FIEs are allowed to make domestic equity investment with their capital funds provided that the existing negative list for foreign investment are complied with and the projects invested thereby in China are true and comply with applicable laws and regulations. Dividend Distribution Wholly foreign-owned enterprises and Sino-foreign equity joint ventures in the PRC may pay dividends only out of their accumulated profits, if any, as determined in accordance with PRC accounting standards and regulations. Additionally, these foreign-invested enterprises may not pay dividends unless they set aside at least 10% of their respective accumulated profits after tax each year, if any, to fund certain reserve funds, until such time as the accumulative amount of such fund reaches 50% of the enterprise’s registered capital. In addition, these companies also may allocate a portion of their after-tax profits based on PRC accounting standards to employee welfare and bonus funds at their discretion. These reserves are not distributable as cash dividends. 77 Regulations Relating to Foreign Exchange Registration of Overseas Investment by PRC Residents SAFE Circular on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or Circular 37, issued by SAFE and effective in July 4, 2014, regulates foreign exchange matters in relation to the use of special purpose vehicles, or SPVs, by PRC residents or entities to seek offshore investment and financing and conduct round trip investment in China. Under Circular 37, a SPV refers to an offshore entity established or controlled, directly or indirectly, by PRC residents or entities for the purpose of seeking offshore financing or making offshore investment, using legitimate domestic or offshore assets or interests, while “round trip investment” refers to the direct investment in China by PRC residents or entities through SPVs, namely, establishing foreign-invested enterprises to obtain the ownership, control rights and management rights. Circular 37 requires that, before making contribution into an SPV, PRC residents or entities are required to complete foreign exchange registration with the SAFE or its local branch. SAFE Circular 37 further provides that option or share-based incentive tool holders of a non-listed SPV can exercise the options or share incentive tools to become a shareholder of such non-listed SPV, subject to registration with SAFE or its local branch. PRC residents or entities who have contributed legitimate domestic or offshore interests or assets to SPVs but have yet to obtain SAFE registration before the implementation of Circular 37 shall register their ownership interests or control in such SPVs with SAFE or its local branch. An amendment to the registration is required if there is a material change in the SPV registered, such as any change of basic information (including change of such PRC residents, name and operation term), increases or decreases in investment amount, transfers or exchanges of shares, or mergers or divisions. Failure to comply with the registration procedures set forth in Circular 37, or making misrepresentation on or failure to disclose controllers of foreign-invested enterprise that is established through round-trip investment, may result in restrictions on the foreign exchange activities of the relevant foreign-invested enterprises, including payment of dividends and other distributions, such as proceeds from any reduction in capital, share transfer or liquidation, to its offshore parent or affiliate, and the capital inflow from the offshore parent, and may also subject relevant PRC residents or entities to penalties under PRC foreign exchange administration regulations. On February 13, 2015, SAFE further promulgated the Circular on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment, or SAFE Circular 13, which took effect on June 1, 2015. This SAFE Circular 13 has amended SAFE Circular 37 by requiring PRC residents or entities to register with qualified banks rather than SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing. SAFE Circular 13 further provides that annual inspection of inbound foreign direct investments and outbound overseas direct investments is canceled. Instead, relevant entities or individuals, as the case may be, shall register data and information with respect to their inbound foreign direct investments and outbound overseas direct investment interests with SAFE. Regulations on Stock Incentive Plans Pursuant to the Notice on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly Listed Company, or Circular 7, issued by SAFE in February 2012, employees, directors, supervisors and other senior management participating in any stock incentive plan of an overseas publicly listed company who are PRC citizens or who are non-PRC citizens residing in China for a continuous period of not less than one year, subject to a few exceptions, are required to register with SAFE through a domestic qualified agent, which could be a PRC subsidiary of such overseas listed company, and complete certain other procedures. If the Group fails to complete the SAFE registrations, such failure may subject the Group to fines and legal sanctions and may also limit our ability to contribute additional capital into our wholly foreign-owned subsidiary in China and limit such subsidiary’s ability to distribute dividends to us. In addition, the State Administration for Taxation has issued certain circulars concerning employee share options or restricted shares. Under these circulars, the employees working in the PRC who exercise share options or are granted restricted shares will be subject to PRC individual income tax. The PRC subsidiaries of such overseas listed company have obligations to file documents related to employee share options or restricted shares with relevant tax authorities and to withhold individual income taxes of those employees who exercise their share options. If the employees fail to pay or the PRC subsidiaries fail to withhold their income taxes according to relevant laws and regulations, the PRC subsidiaries may face sanctions imposed by the tax authorities or other PRC government authorities. Regulations on Foreign Debt A loan made by a foreign entity as direct or indirect shareholder in an FIE is considered to be foreign debt in China and is regulated by various laws and regulations, including the Regulation of the People’s Republic of China on Foreign Exchange Administration, the Interim Provisions on the Management of Foreign Debts, the Statistical Monitoring of Foreign Debts Tentative Provisions, and the Administrative Measures for Registration of Foreign Debts. Under these rules and regulations, a shareholder loan in the form of foreign debt made to a PRC entity does not require the prior approval of SAFE. However, such foreign debt must be registered with and recorded by SAFE or its local branches within 15 business days after entering into the foreign debt contract. Pursuant to these rules and regulations, the maximum amount of the aggregate of (i) the outstanding balance of foreign debts with a term not longer than one year, and (ii) the accumulated 78 amount of foreign debts with a term longer than one year, of an FIE shall not exceed the difference between its registered total investment and its registered capital, or Total Investment and Registered Capital Balance. On January 12, 2017, PBOC promulgated Notice of the People’s Bank of China on Issues Concerning Macro Prudential Management of Full Scale Cross-border Financing or PBOC Circular 9. According to PBOC Circular 9, PBOC established a cross-broader financing regulation system based on the capital or net assets of the micro main body under macro prudential rules, and the legal entities and financial institutions established in PRC including the branches of foreign banks registered in China but excluding government financing vehicles and real estate enterprise, may carry out cross-border financing of foreign currency in accordance with relevant regulations of such system. PBOC Circular 9 provides that, among other things, the outstanding amount of the foreign currency for the entities in cross-border financing shall be limited to the Upper Limit of the Risk Weighted Balance of such entity, which shall be calculated according to the formula provided in PBOC Circular 9; the enterprise shall, after signing the contract for cross-border financing, but not later than three business days before the withdrawal of the borrowing funds, file with the local branches of SAFE for the cross-border financing through SAFE’s capital project information system. PBOC Circular 9 also provides that during the one-year period started from January 11, 2017, foreign-invested enterprises may choose one method to carry out cross-broader financing in foreign currency either according to PBOC Circular 9 or according to the Interim Provisions on the Management of Foreign Debts. After the end of such one-year period, the method of foreign-invested enterprises to carry out cross-broader financing in foreign currency will be determined by PBOC and SAFE. To date, though the one-year period has expired, no further regulations or guidance promulgated by PBOC and SAFE in this regard. On January 5, 2023, the NDRC promulgated the Administrative Measures for the Review and Registration of Medium and Long-Term Foreign Debts of Enterprises, or the Foreign Debts Measures, which became effective on February 10, 2023. Pursuant to the Foreign Debts Measures, PRC enterprises are not allowed to raise medium and long-term foreign debts unless and until they have completed the review and registration process and obtained the review and registration certificate issued by NDRC. Also, the Foreign Debts Measures require PRC enterprises to register with NDRC prior to making a material amendment to a medium and long-term foreign debts transaction and to submit related information to NDRC within 10 business days after each drawdown of the medium and long-term foreign debts. Regulations on Tax PRC Enterprise Income Tax Law The Enterprise Income Tax Law enacted by the National People’s Congress, or the PRC EIT Law, applies a uniform 25% enterprise income tax rate to both foreign-invested enterprises and domestic enterprises, except where tax incentives are granted to special industries and projects. Enterprises qualified as “High and New Technology Enterprises” are entitled to a 15% enterprise income tax rate rather than the 25% uniform statutory tax rate. The preferential tax treatment continues as long as an enterprise can retain its “High and New Technology Enterprise” status. Enterprise income tax for qualified small profit enterprises shall be at a reduced tax rate of 20%. Under the PRC EIT Law and its implementation regulations, dividends generated from the business of a PRC subsidiary after January 1, 2008 and payable to its foreign investor may be subject to a withholding tax rate of 10% if the PRC tax authorities determine that the foreign investor is a non-resident enterprise, unless there is a tax treaty with China that provides for a preferential withholding tax rate. Distributions of earnings generated before January 1, 2008 are exempt from PRC withholding tax. Under the PRC EIT Law, an enterprise established outside China with “de facto management bodies” within China is considered a “resident enterprise” for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income. The Circular Regarding the Determination of Chinese-Controlled Offshore Incorporated Enterprises as PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies issued by the SAT, in April 2009 regarding the standards used to classify certain Chinese-invested enterprises controlled by Chinese enterprises or Chinese enterprise groups and established outside of China as “resident enterprises,” or the SAT Circular 82, clarified that dividends and other income paid by such PRC “resident enterprises” will be considered PRC-source income and subject to PRC withholding tax, currently at a rate of 10%, when paid to non-PRC enterprise shareholders. The SAT Circular 82 also subjects such PRC “resident enterprises” to various reporting requirements with the PRC tax authorities. Under the implementation regulations to the PRC EIT Law, a “de facto management body” is defined as a body that has material and overall management and control over the manufacturing and business operations, personnel and human resources, finances and properties of an enterprise. In addition, the SAT Circular 82 specifies that certain PRC-invested overseas enterprises controlled by a Chinese enterprise or a Chinese enterprise group in the PRC will be classified as PRC resident enterprises if the following are located or resided in the PRC: (i) senior management personnel and departments that are responsible for daily production, operation and management; (ii) financial and personnel decision making bodies; (iii) key properties, accounting books, the company seal, and minutes of board meetings and shareholders’ meetings; and (iv) half or more of the senior management or directors who have the voting rights. Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, the withholding tax rate in respect to the payment of dividends by a PRC enterprise to a Hong Kong enterprise may be reduced to 5% from a standard rate of 10% if the Hong Kong enterprise directly holds at least 25% of the PRC enterprise and certain other conditions are satisfied. Pursuant to the Notice 79 of the State Administration of Taxation on the Issues concerning the Application of the Dividend Clauses of Tax Agreements, or SAT Circular 81, a Hong Kong resident enterprise must meet the following conditions, among others, in order to apply the reduced withholding tax rate: (i) it must be a company; (ii) it must directly own the required percentage of equity interests and voting rights in the PRC resident enterprise; and (iii) it must have directly owned such required percentage in the PRC resident enterprise throughout the 12 months prior to receiving the dividends. The SAT promulgated the Administrative Measures for Non-resident Taxpayers to Enjoy Treatment under Treaties, or SAT Circular 35, which became effective on January 1, 2020. SAT Circular 35 provides that non-resident enterprises are not required to obtain preapproval from the relevant tax authority in order to enjoy the reduced withholding tax. Instead, non-resident enterprises and their withholding agents may, by self-assessment and on confirmation that the prescribed criteria to enjoy the tax treaty benefits are met, directly apply the reduced withholding tax rate, and file necessary forms and supporting documents when performing tax filings, which will be subject to post-tax filing examinations by the relevant tax authorities. Accordingly, Sunlands HK may be able to benefit from the 5% withholding tax rate for the dividends it receives from Wuhan Zhibo if it satisfies the conditions prescribed under SAT Circular 81 and other relevant tax rules and regulations. However, according to SAT Circular 81 and SAT Circular 35, if the relevant tax authorities consider the transactions or arrangements the Group has are for the primary purpose of enjoying a favorable tax treatment, the relevant tax authorities may adjust the favorable withholding tax in the future. On February 3, 2015, the SAT issued the Announcement of the State Administration of Taxation on Several Issues Concerning the Enterprise Income Tax on Indirect Property Transfer by Non-resident Enterprises, or SAT Bulletin 7, extends its tax jurisdiction to transactions involving the transfer of taxable assets through offshore transfer of a foreign intermediate holding company. Pursuant to SAT Bulletin 7, where a non-resident enterprise indirectly transfers properties such as equity in PRC resident enterprises without any justifiable business purposes and aiming to avoid the payment of enterprise income tax, such indirect transfer must be reclassified as a direct transfer of equity in PRC resident enterprise. To assess whether an indirect transfer of PRC taxable properties has reasonable commercial purposes, all arrangements related to the indirect transfer must be considered comprehensively and factors set forth in SAT Bulletin 7 must be comprehensively analyzed in light of the actual circumstances. In addition, SAT Bulletin 7 has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public securities market. On October 17, 2017, the SAT issued the Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source, or SAT Bulletin 37, which came into effect on December 1, 2017. The SAT Bulletin 37 further clarifies the practice and procedure of the withholding of non-resident enterprise income tax. Where non-resident investors were involved in our private equity financing, if such transactions were determined by the tax authorities to lack reasonable commercial purpose, we and our non-resident investors may become at risk of being required to file a return and taxed under SAT Bulletin 7 and/or SAT Bulletin 37 and we may be required to expend valuable resources to comply with SAT Bulletin 7 and/or SAT Bulletin 37 or to establish that we should not be held liable for any obligations under SAT Bulletin 7 and/or SAT Bulletin 37. PRC Value-added Tax (“VAT”) in lieu of Business Tax (the “VAT Pilot Program”) On March 23, 2016, the Ministry of Finance and the SAT issued the Circular on Comprehensively Promoting the Pilot Program of the Collection of Value-added Tax in Lieu of Business Tax. Effective from May 1, 2016, the PRC tax authorities collect VAT in lieu of Business Tax on a trial basis within the territory of China, and in industries such as construction industries, real estate industries, financial industries, and living service industries. On April 4, 2018, the Ministry of Finance and the SAT issued the Notice on the Adjustment of the Value Added Tax Rate, pursuant to which the Value Added Tax Rate of part of the taxable action is adjusted to decline. On March 20, 2019, the Ministry of Finance, the SAT and the General Administration of Customs jointly issued the Notice on the Policy Concerning Deepening the Reform of Value Added Tax, or Notice 39, which became effective on April 1, 2019. The Notice 39 further changed the Value Added Tax rate of 16% and 10% into 13% and 9%. Regulations Relating to Employment and Social Insurance The Group is subject to laws and regulations governing the Group’s relationship with employees, including wage and hour requirements, working and safety conditions, and social insurance, housing funds and other welfare. The compliance with these laws and regulations may require substantial resources. Pursuant to the PRC Labor Law effective as of January 1, 1995 (as amended on December 29, 2018) and the PRC Labor Contract Law effective as of January 1, 2008 (as amended on December 28, 2012), a written labor contract shall be executed by employer and an employee when the employment relationship is established, and an employer is under an obligation to sign an unlimited-term labor contract with any employee who has worked for the employer for ten consecutive years. Further, if an employee requests or agrees to renew a fixed-term labor contract that has already been entered into twice consecutively, the resulting contract must have an unlimited term, with certain exceptions. The employer must also pay severance to an employee in nearly all instances where a labor contract, including a contract with an unlimited term, is terminated or expires. All employers must compensate their employees equal to at least the local minimum wage standards. All employers are required to establish a system for labor safety and sanitation, strictly abide by state rules and 80 standards and provide employees with appropriate workplace safety training. In addition, the government has continued to introduce various new labor-related regulations after the Labor Contract Law. Among other things, new annual leave requirements mandate that annual leave ranging from 5 to 15 days is available to nearly all employees and further require that the employer compensate an employee for any annual leave days the employee is unable to take in the amount of three times his daily salary, subject to certain exceptions. Moreover, all PRC enterprises are generally required to implement a standard working time system of eight hours a day and forty hours a week, and if the implementation of such standard working time system is not appropriate due to the nature of the job or the characteristics of business operation, the enterprise may implement a flexible working time system or comprehensive working time system after obtaining approvals from the relevant authorities. In addition, employers in China are obliged to pay contributions to the social insurance plan and the housing fund plan for their employees, and such contribution amount payable shall be calculated based on the employee actual salary in accordance with the relevant regulations. According to the Notice on the Reduction or Exemption of Enterprises’ Social Security Contributions in Phases jointly promulgated by the Ministry of Human Resources and Social Security, the Ministry of Finance and the SAT on February 20, 2020, with effect from February 2020, with certain exceptions, based on the epidemic impact and the fund threshold, small, medium and micro enterprises and the enterprises in Hubei may be exempted from contributions to the basic pension insurance, unemployment insurance, and work injury insurance, with the exemption period not exceed five months; and contributions to such three social security contribution items by other social security participating organizations (excluding State agencies and institutions) such as large enterprises may be reduced by 50% by, with the reduction period not exceed three months. According to the relevant implementation policies in Beijing, the contributions to the basic pension insurance, unemployment insurance, and work injury insurance of large enterprise shall be reduced by 50% from February 2020 to April 2020, and the contributions of small, medium and micro enterprises will be exempted from February 2020 to June 2020. On June 22, 2020, the Ministry of Human Resources and Social Security, the Ministry of Finance and the SAT jointly promulgated a follow-up notice regarding the reduction or exemption of enterprises’ social security contributions. This notice provides that, among other things, the exemption period for small, medium and micro enterprises to contribute to the basic pension insurance, unemployment insurance, and work injury insurance shall last till the end of December 2020 and the reduction period for the large enterprises (excluding State agencies and institutions) to contribute to the basic pension insurance, unemployment insurance, and work injury insurance outside Hubei shall last till the end of June 2020 while the exemption period for the large enterprises within Hubei to contribute to the basic pension insurance, unemployment insurance, and work injury insurance shall last till the end of June 2020. The enterprises with serious difficulties in production and operation due to COVID-19 may continue to postpone the payment of social insurance premiums until the end of December 2020, and there will be no overdue fine during the period of suspension. 4.C. Organizational Structure The following chart illustrates the Group’s organizational structure, including our significant subsidiaries as “significant” is defined under Section 1-02 of Regulation S-X under the Securities Act and certain other subsidiaries and certain VIE as of the date of this annual report. 81 ———— Equity interest ------------ Contractual arrangements See “Item 3. Key Information—Contractual Arrangements with Consolidated VIEs and Their Shareholders” for details of the contractual arrangements with the VIEs. 4.D. Property, Plants and Equipment The Group’s current principal executive offices are located at Building 6, Chaolai Science Park, No. 36 Chuangyuan Road, Chaoyang District, Beijing, the People’s Republic of China. The Group maintains offices in Beijing, China, with an aggregate of approximately 8,583 square meters. These facilities currently accommodate the Group’s management headquarters, as well as the sales and marketing, course and educational content development, and general and administrative activities. The Group also maintains offices in Wuhan, China, with an aggregate of approximately 17,721 square meters, to support part of the Group’s sales and marketing activities. In addition, the Group maintains offices in Guangzhou, China, with an aggregate of approximately 1,880 square meters, to support the sales and marketing activities as well as general and administrative activities. The Group leases all of the facilities that the Group currently occupies from independent third parties. We believe that the facilities that the Group currently leases are adequate to meet the Group’s needs for the foreseeable future.