HARTCOURT - Germany/Europe

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wow!

hartcourt auf der webseite gerade seinen business plan veröffentlicht!

quelle: http://www.hartcourt.com/english/ONEWS.asp?id=163

09/02/2008 BUSINESS PLAN

Dear Fellow Shareholders:



Hereby we make a brief description of the business plan to be implemented by the present executives:



Overview



The present management is focused on creating shareholder value by seeking higher margins business, initially in the Chinese educational training marketplace. Our ultimate goal is to generate revenue and profit for shareholders.



We have researched the business plan and conducted a feasibility study targeting the Chinese educational training marketplace. We think that the schools will increase the company’s net free cash flows, which should enhance shareholder value. We believe profit margins will be high. We feel the plan is solid and believe it addresses all the core aspects of the business strategy. We will carry out our school business acquisitions for the time being as Hartcourt’s core business.



Hartcourt will adopt an aggressive strategy to develop its educational operation assets by acquiring existing profitable schools and training institutions which usually generate good profit margins and excellent cash flows.



We believe China's education training market is one of the largest and fastest growing segments of China's economy. The business is attractive thanks to strong enrollment growth, repetitive tuition revenue nature and consolidation trend. Hartcourt is well positioned to take advantage of this opportunity and the strategy will deliver strong return to our shareholders.



On July 23 2008, we successfully completed the acquisition of Beijing Yanyuan which has substantial profit and market prospect. Beijing Yanyuan, as our first subsidiary, build a strong bridge between Peking University and us. With the close tie with Peking University, our further acquisition will be smoother. We believe we finished the first major step in our strategy to become a leader in the emerging for-profit, schools and training institution education sector in China.




We are very pleased that we successfully closed the first acquisition with real revenue which will be consolidated in our first quarter. We look forward to closing additional training institution and school deals in the future.



Through our early efforts of research in the education training market, we have acquired substantial knowledge of the education training market and the needs of its consumers. With the rapid acquisition of schools and training institutions, we can expand the business scale, and take advantage of our education market knowledge to leverage our experience and valuable resources to meet the needs of the education market.



Vision, Mission



Our strategic vision is to be a leading provider of education and training services in The People's Republic of China.



Our mission is to extend our position as the leading provider of education and training services including many profitable schools and training institutions in China, and expand our education businesses in China, by pursuing the following strategies:



Pursue selective strategic acquisitions and alliances, if and when attractive opportunities arise



China’s Education Markets

In 1986, the PRC government implemented a system of compulsory education that requires each child to have at least nine years of formal education. Chinese culture has historically placed a strong emphasis on education. As a result of the “one child” policy of the PRC government, Chinese families are generally willing to invest a substantial amount of their financial resources in their only child’s education. According to the Economist Intelligence Unit, the Chinese disposable income per capita increased at a compound annual growth rate, or CAGR, of 6.7% from 2002 to 2006 and is expected to increase at a CAGR of 8.3% from 2007 to 2011. With greater amounts of disposable income, Chinese families are spending an even higher percentage of their disposable income on their children’s education. Education expenditure as a percentage of GDP is expected to grow from 4.0% in 2005 to 4.5% in 2010, according to the China Education Human Resources Report of 2003.



China’s education market is large and growing rapidly as a result of favorable demographic and consumer spending trends and the increased importance placed on higher and professional education.



According to the Ministry of Education (MOE), 29 million students will reach college age in the next 5 years, a 40% increase and a US$36 billion market. While MOE-controlled universities and colleges still maintain dominant market share, the field is now open for private and foreign investment capital. In addition, MOE has set a timeline to privatize all vocational schools and educational institutions that offer degrees lower than Bachelor by 2010.

According to the China Statistical Yearbook (2007), in 2006, approximately 686 million people in China were between the ages of five and 39. Ongoing urbanization has increased the proportion of China’s population living in urban areas from 36.2% in 2000 to 43.9% in 2006, as stated in the China Statistical Yearbook (2007), and is expected to continue to increase. According to the National Bureau of Statistics of China, average per capita annual consumption expenditures in urban areas in China have increased, from approximately RMB4,998 ($712.8) in 2000 to approximately RMB8,697 ($1,240.3) in 2006. Consumption expenditure on education, cultural and recreational services accounted for 13.8% of total annual consumption expenditures per capita in urban households in 2006, the second largest category after food. We believe these demographic and consumer trends are making people in China increasingly willing to invest in higher and professional education.





China has one of the fastest growing economies in the world. As China’s economy continues to develop, its service industries are playing an increasingly important role. We believe this will increase opportunities in the education markets as people continue to seek advanced skills and professional licenses and certifications.



**Training Industry in China



Training industry is a very attractive industry. Until the end of 2006, the output value of training industry has reached RMB320 billion, and is rapidly increasing at the speed of 15-30% per year, while the profits have even gotten close to RMB160 billion. Compared to those in developed countries, training industry remains a primary industry in China. So the training industry in China has a huge market with big potential and wide prospects.

Meanwhile, training market in the mainland develops rapidly, increasing 10 times each year. In China, if a person of each household takes part in training once every five years, the training market will be as huge as TV market. But in fact, the seniors of foreign invested enterprises generally undergo training 5-7 times each year. Therefore, China's future training market will be much greater than TV market. Since there is such a market demand, there will be large capital involvement in the near future. There are 22322 private training institutions 9 million people take part in the training.

Going forward, the Company plans to focus on education training market in China to take advantage of the on-going demand of education training and growing potential population to be trained.



**Chinese Vocational Education



The vocational education in China has witnessed the best stage of development.
Firstly, the CPC Central Committee and State Department pay unprecedented attention to vocational education, regarding vocational education as an important foundation for national economic and social development, strategically focusing on education work, and come up with funds to fully support the development of vocational education. During the "11th Five-Year Plan" period, the government puts RMB10 billion into fundamental capacity building projects. Meanwhile, 10 billion from central finance, 4 billion from local finance are allocated each year, to establish and improve the financial assistance system for vocational school students. All is reflected that the government has paid an unprecedented national attention to vocational education.



Secondly, the scale of the vocational education is the biggest in history. In 2007, the enrollment of middle vocational schools is 8.1 million people, accounting for 49% of total enrollment of high schools enrollment of high vocational schools is 2.83 million people, accounting for about 50% of the enrollment and students on campus of the normal high education institutes.



Vocational education is the most important part of our whole business plan. We will build our own accrediting institution to focus on this growing market.





**Private Primary and Secondary Schools



The market for private primary and secondary schools in China is growing rapidly. We believe that private primary and secondary schools will play an increasingly important role in providing quality education in China, particularly to the children of the emerging middle class. Parents in China, as in the rest of the world, are continuously searching for the best educational solutions for their children. By acquiring or partnering with leading established institutions, we believe the private primary and secondary school business represents a compelling business opportunity for us. According to the World Bank Study, between 2002 and 2005, China accounted for approximately 70% of global primary and secondary enrollment growth.



As a result of this market opportunity, we acquired Beijing Yanyuan(60% equity interests) which mainly cooperates with primary and secondary schools through its unique program and famous brand. We believe this market opportunity is attractive, complements our existing sources of revenue and also provides us with opportunities to realize the whole sound business plan.





The Management Team



Victor Zhou, CEO
Mr. Zhou has extensive experience in IPO, asset management, private equity investment, security trading and investment, operation & management in China. Mr. Zhou has rich social resources in education business and MOE, which can smooth the acquisition of schools.

Rachel Zhang, CFO
Ms Zhang has extensive experience in financial analysis, operation and office administration. She received her Masters Degree in Accountancy from Baruch College.



Board of Directors



Dr. Wilson Li, President of Shenzhen Capital Group
Chairman of the Board of Directors
Dr. Li has extensive experience in fund management, risk control, investment & international business.

Victor Zhou, CEO
Mr. Zhou has extensive experience in IPO, asset management, private equity investment, security trading and investment, operation & management in China. Mr. Zhou has rich social resources in education business and MOE.

STEPHEN TANG, Chairman of Mega Pacific Capital Inc
Mr. Tang has over 30 years of experience in senior management of financial services companies.

Zhenyu Hu, President of Beijing Yanyuan Rapido Education Company (subsidiary of Hartcourt)
Mr. Hu has considerable background and knowledge in education and training area. He is the editor of the magazine "Successful Way," and the director of the Science Park of Peking University. Mr. Hu is also a well-known speaker in the education and training areas.

George Xu, partner of G&D Law Firm
Mr. Xu has been engaged in the practice of law for 17 years. He is a registered lawyer in China, and is a qualified securities legal adviser under Chinese law. He has considerable experience in establishing joint ventures and advising companies on acquisitions in China.

Our Board consisted of 5 professional members with rich work experiences, will lead Hartcourt to grow a leading education group.



Business Strategy

We intend to leverage our competitive advantages to achieve our goal of becoming China’s leading brand in education training by pursuing the following strategies:



Our strategy consists of the following key elements:



Expand the penetration of existing program services. We plan to take advantage of our rich experience and social resources to expand the penetration of the services of our acquired subsidiary by helping them to increase enrollment in their programs. We are actively targeting new schools and training institutions with substantial profit.



Hartcourt successfully completed the acquisition of Beijing Yanyuan Rapido on July 23 2008. Founded by the Science Park of Peking University, Beijing Yanyuan is a well-known training institution. Beijing Yanyuan offers a program to help students rapidly improve their school grades. The program has proved to be effective.

Given its mature strong brand and wide education market, Beijing Yanyuan started a new business strategy to expand the market share through cooperation with more schools from this year. This business strategy can establish a highly scalable and adaptable business model using its program and experienced management team.



As a first trial, Beijing Yanyuan signed a cooperation agreement with 2 partner schools, one located in Henan province, and the other in Shandong province.

Beijing Yanyuan will receive 40% - 60% tuition fees charged by school partners from enrolled students as the service and brand income, the ratio will be different based on the region and style of school partners.



For the academic year starting September 2008, about 1,000 students have been enrolled with the two school partners under Beijing yanyuan’ cooperation. The tuition charged will be showed from the financial report of our second quarter.



Using our substantial social resources, we will help Beijing yanyuan to cooperate with more school partners in the coastal and relatively more affluent regions of China, which include approximately 150 cities that exhibit strong enrollment potential.



We will also inject the unique program into our target schools which will be acquired by us in the future so that the profit can be increased due to higher tuition fees from the students enrolled.



We will make strategic acquisitions and establish a network of education training institution initially in key cities, and across China to leverage our education resources and increase income scale. We plan to seek acquisition opportunities that are complementary to our existing business plan.



We will focus on building our brand name and our reputation in education business. We believe that building our brand and reputation will allow us to attract new schools and students to our current business lines.

We will continue to acquire new schools and training institutions in cities that exhibit strong enrollment potential.



We select new locations based on various factors, including demographics and the number of schools in, and the economic condition of, the particular region.



This strategic move bolsters our position in the education business and constitutes a great stride towards our goal of becoming a leading for-profit education group in China.



Then the tuition the school collects will represent the key revenue sources and faculty compensation will be the key operation expenses, hence the profit margin. Hartcourt will find and acquire the target schools after evaluating the courses and the market, and put together strong faculty teams, incentive plans and strategic expansion programs.



Accordingly, we decided that Hartcourt should position itself to be a first mover to take advantage of this opportunity. To that end, we are adopting four objectives:

1. acquire the existing vocational schools that we evaluate to be good

2. build a comprehensive nexus of all acquired institutions, with core themes and distribution schemes

3. hire local experienced educators and put together sound operation plans

4. develop the solid relationship with the corporate world to improve the employment rate of our graduates.



We remain optimistic about the future success of the Company and our ability to deliver value to our shareholders. We have the commitment and talents, an engaged and insightful Board, a well-researched business strategy and a value-added execution program.



Conclusion



In this business plan, Hartcourt’s goal is to acquire at least 6 educational subsidiaries with substantial profit within two years and about 12 schools within four years. Also, Hartcourt will build an accrediting institution, which can serve Hartcourt’s vocational school students as well as external students.



Proposed acquisition financing



We will acquire target schools and pay for the acquisition by stock, or stock + cash, or cash according to different style of acquisition targets and different stage of company development.

Accompanying profit growth of company and stronger balance sheet in the future, we will acquire more schools using cash.



Looking forward



With the major hindrance behind us and aggressive restructuring and acquisition under way, we believe Hartcourt can lead the way in delivering exceptional growth, value and opportunity to our shareholders in Fiscal 2009 and beyond.