UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 20-F

(Mark One)

¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

or

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2012.

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to         

or

¨ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report         

Commission file number: 001-33728

NOAH EDUCATION HOLDINGS LTD.

(Exact Name Of Registrant As Specified In Its Charter)

N/A

(Translation Of Registrant’s Name Into English)

Cayman Islands

(Jurisdiction Of Incorporation or Organization)

Unit F, 33rd Floor, NEO Tower A

Che Gong Miao

Futian District, Shenzhen

Guangdong Province 518040, People’s Republic of China

(Address of Principal Executive Offices)

Dora Li, Chief Financial Officer

Tel: +86-755-8288-9100

E-mail: lidm@noaheducation.com

Fax: +86-755-8288-9123

Unit F, 33rd Floor, NEO Tower A

Che Gong Miao

Futian District, Shenzhen

Guangdong Province 518040, People’s Republic of China

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Ordinary shares, par value US$0.00005 per share	The New York Stock Exchange*

*Not for trading, but only in connection with the listing on The New York Stock Exchange of American depositary shares, each representing one ordinary share.

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report. 37,631,782 ordinary shares, par value US$0.00005 per share, as of June 30, 2012.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes  ¨    No   x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes x    No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes x    No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer ¨    Accelerated Filer ¨    Non-Accelerated Filer x

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP x

International Financial Reporting Standards as issued by the International Accounting Standards Board ¨    Other ¨

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.    Item 17 ¨    Item 18 ¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ¨    No x

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes ¨    No ¨

TABLE OF CONTENTS

INTRODUCTION	1
FORWARD-LOOKING STATEMENTS	1

PART I 3

Item 1.	Identity of Directors, Senior Management and Advisers	3
Item 2.	Offer Statistics and Expected Timetable	3
Item 3.	Key Information	3
Item 4.	Information on the Company	25
Item 4A.	Unresolved Staff Comments	38
Item 5.	Operating and Financial Review and Prospects	39
Item 6.	Directors, Senior Management and Employees	53
Item 7.	Major Shareholders and Related Party Translations	60
Item 8.	Financial Information	62
Item 9.	The Offer and Listing	63
Item 10.	Additional Information	64
Item 11.	Quantitative and Qualitative Disclosures About Market Risk	76
Item 12.	Description of Securities Other than Equity Securities	77

PART II 78

Item 13.	Defaults, Dividend Arrearages and Delinquencies	78
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	78
Item 15.	Controls and Procedures	78
Item 16A.	Audit Committee Financial Expert	79
Item 16B.	Code of Ethics	79
Item 16C.	Principal Accountant Fees and Services	80
Item 16D.	Exemptions from the Listing Standards for Audit Committees	80
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	80
Item 16F.	Change in Registrant’s Certifying Accountant	80
Item 16G.	Corporate Governance	81
Item 16H.	Mine Safety Disclosure	81

PART III 81

Item 17.	Financial Statements	81
Item 18.	Financial Statements	81
Item 19.	Exhibits	81

INTRODUCTION

In this annual report, unless the context otherwise requires:

· Noah,” “we,” “us,” “our company,” and “our,” refer to Noah Education Holdings Ltd., its predecessor and its subsidiaries and affiliated entities;

· “China” or “PRC” refers to the People’s Republic of China, excluding, solely for the purpose of this annual report, Taiwan, Hong Kong and Macau;

· “shares” or “ordinary shares” refers to our ordinary shares, par value US$0.00005 per share;

· “ADSs” refers to our American depositary shares, each of which represents one ordinary share;

· “U.S. GAAP” refers to general accepted accounting principles in the United States;

· “fiscal 2010,” “fiscal 2011” and “fiscal 2012” refers to our fiscal years ended June 30, 2010, 2011 and 2012, respectively;

· all references to “RMB” or “Renminbi” are to the legal currency of China and all references to “$,” “dollars,” “US$” and “U.S. dollars” are to the legal currency of the United States; and

· all discrepancies in any table between the amounts identified as total amounts and the sum of the amounts listed therein are due to rounding.

References to a “year” or “quarter” are to a calendar year or quarter, unless otherwise indicated. References in this annual report to a “fiscal year” are to our fiscal year ended or ending June 30.

We and a selling shareholder completed the initial public offering of 11,324,198 ADSs on October 24, 2007. On October 19, 2007, we listed our ADSs on The New York Stock Exchange under the symbol “NED.”

FORWARD-LOOKING STATEMENTS

This annual report contains forward-looking statements that reflect our current expectations and views of future events. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements relate to events involving known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results performance or achievements expressed or implied by the forward-looking statements.

In some cases, these forward-looking statements can be identified by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “potential,” “continue,” “likely to” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, among other things, statements relating to:

· our anticipated growth strategies;

· our acquisition and divestiture strategy, and our ability to successfully integrate past or future acquisitions with our existing operations;

· our future business development, results of operations and financial condition;

· expected changes in our revenues and certain cost or expense items;

· our ability to attract customers and leverage our brands;

· our ability to manage growth;

· trends and competition in the private education industry; and

· fluctuations in general economic and business conditions in China.

You should read thoroughly this annual report and the documents that we refer to in this annual report with the understanding that our actual future results may be materially different from and worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements. Other sections of this annual report include additional factors which could adversely impact our business and financial performance. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. The forward-looking statements made in this annual report relate only to events or information as of the date on which the statements are made in this annual report. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

2

PART I

Item 1.    Identity of Directors, Senior Management and Advisers

Not Applicable.

Item 2.    Offer Statistics and Expected Timetable

Not Applicable.

Item 3.     Key Information

A.Selected Financial Data

The following selected consolidated statement of operations data for the fiscal years ended June 30, 2010, 2011 and 2012 and balance sheet data as of June 30, 2011 and 2012 have been derived from our audited consolidated financial statements included elsewhere in this annual report beginning on page F-1. The selected consolidated statement of operations data for the fiscal year ended June 30, 2009 and the balance sheet data as of June 30, 2009 and 2010 have been derived from our audited consolidated financial statements not included in this annual report. Our consolidated financial statements are prepared and presented in accordance with U.S. GAAP. You should read the selected consolidated financial data in conjunction with our consolidated financial statements and related notes and “Item 5. Operating and Financial Review and Prospects” included elsewhere in this annual report. Our historical results do not necessarily indicate expected future results.

We derived most of our revenues from our electronic learning product, or ELP, business in the fiscal year ended June 30, 2008. Following the disposal of our ELP business in June 2011, the ELP business was reclassified to discontinued operation for the fiscal year ended June 30, 2011. The comparative figures for the fiscal years ended June 30, 2009 and 2010 were retrospectively reclassified to discontinued operation. Financial information for the fiscal year ended June 30, 2008 is not included in this annual report as such information cannot be recast and provided without unreasonable effort or expense.

3

	Year Ended June 30,
	2009			2010			2011			2012
	(RMB)			(RMB)			(RMB)			(RMB)			(US$)
	(in thousands, except share, per share and per ADS data)
Continuing operations
Net revenue		4,707			39,898			93,475			163,022			25,660
Cost of revenue(1)		(3,967	)		(18,494	)		(43,326	)		(86,377	)		(13,596	)
Gross profit		740			21,404			50,149			76,645			12,064
Research and development expenses(1)		—			(1,879	)		(2,212	)		(3,103	)		(488	)
Selling and marketing expenses(1)		—			(3,391	)		(3,979	)		(6,097	)		(960	)
General and administrative expenses(1)		(21,735	)		(42,170	)		(65,469	)		(86,725	)		(13,651	)
Other operating expenses		(48	)		(2,862	)		(10,572	)		(2,059	)		(324	)
Impairment loss on goodwill		—			—			—			(57,394	)		(9,034	)
Other operating income		—			279			5,512			17,447			2,746
Operating loss		(21,043	)		(28,619	)		(26,571	)		(61,286	)		(9,647	)
Derivative gain		5,807			—			—			—			—
Impairment loss on investment		—			—			(4,409	)		(809	)		(127	)
Interest income		5,308			9,134			1,880			1,402			221
Investment income		15,257			2,824			11,022			18,683			2,941
Other non-operating income (expenses)		6,204			5,962			(1,180	)		4,762			749
Profit /(loss) before income tax		11,533			(10,699	)		(19,258	)		(37,248	)		(5,863	)
Income tax expenses		—			(164	)		(6,220	)		(10,431	)		(1,642	)
Net income (loss) from continuing operations		11,533			(10,863	)		(25,478	)		(47,679	)		(7,505	)
Net income (loss) from discontinued operations		85,457			16,523			(382,515	)		—			—
Net income (loss)		96,990			5,660			(407,993	)		(47,679	)		(7,505	)
Less: net income attributable to non-controlling interests		—			—			(3,344	)		(5,879	)		(925	)
Net income (loss) attributable to shareholders of Noah Education Holdings Ltd.		96,990			5,660			(411,337	)		(53,558	)		(8,430	)
Net income (loss) per share(2)
From continuing and discontinued operations
Basic		2.66			0.15			(11.16	)		(1.47	)		(0.23	)
Diluted		2.66			0.15			(11.16	)		(1.47	)		(0.23	)
From continuing operations
Basic		0.32			(0.28	)		(0.78	)		(1.47	)		(0.23	)
Diluted		0.31			(0.28	)		(0.78	)		(1.47	)		(0.23	)
From discontinued operations
Basic		2.34			0.43			(10.38	)		—			—
Diluted		2.31			0.42			(10.38	)		—			—
Weighted average ordinary shares outstanding
Basic		36,447			38,327			36,856			36,519			36,519
Diluted		37,069			39,201			37,091			36,588			36,588

4

	As of June 30,
	2009			2010			2011			2012
	(RMB)			(RMB)			(RMB)			(RMB)			(US$)
	(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents		493,911			506,728			405,875			501,773			78,982
Total assets		1,327,019			1,376,166			887,512			876,988			138,043
Total current liabilities		(133,697	)		(149,799	)		(63,453	)		(79,732	)		(12,550	)
Ordinary Shares		15			15			15			15			2
Additional paid-in capital		1,029,778			1,049,366			1,042,786			1,046,863			164,783
Accumulated other comprehensive loss		(93,632	)		(88,951	)		(119,329	)		(124,039	)		(19,525	)
Accumulated income (loss)		250,934			256,594			(154,313	)		(207,871	)		(32,720	)
Total shareholders’ equity of Noah Education Holdings Ltd.		1,187,094			1,217,024			769,159			714,968			112,540

(1) Share-based compensation expenses are included in our cost of revenue and operating expenses as follows:

	Year Ended June 30,
	2009		2010		2011		2012
	RMB		RMB		RMB		(RMB)		(US$)
	(in thousands)
Share-based compensation included in:
Cost of revenue		240		296		297		—		—
Research and development expenses		3,198		2,645		2,421		—		—
Sales and marketing expenses		2,453		1,980		1,793		—		—
General and administrative expenses		2,282		5,475		6,927		2,760		434

(2) Each ADS represents one ordinary share.

Exchange Rate Information

Our business is primarily conducted in China and substantially all of our revenues are denominated in RMB. This annual report contains translations of RMB amounts into U.S. dollars at specific rates solely for the convenience of the readers. The conversion of RMB into U.S. dollars in this annual report is based on the noon buying rate in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. Unless otherwise noted, all translations from RMB to U.S. dollars in this annual report were made at a rate of RMB6.3530 to US$1.00, the noon buying rate in effect as of June 30, 2012. We make no representation that any RMB or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or RMB, as the case may be, at any particular rate, or at all. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of RMB into foreign exchange and through restrictions on foreign trade. On October 19, 2012, the noon buying rate was RMB6.2533 to US$1.00.

The following table sets forth information concerning exchange rates between the RMB and the U.S. dollars for the periods indicated. These rates are provided solely for your convenience and are no necessarily the exchange rates that we used in this annual report or will use in the preparation of our future periodic reports or any other information to be provided to you. The source of these rates is Federal Reserve Statistical Release.

5

	Noon Buying Rate
	(RMB per US$1.00)
Period	Period End	Average(1)	Low	High
Fiscal Year ended June 30, 2008	6.8591	7.7219	7.6181	6.8591
Fiscal Year ended June 30, 2009	6.8302	6.8271	6.8842	6.7800
Fiscal Year ended June 30, 2010	6.7815	6.8273	6.8358	6.7815
Fiscal Year ended June 30, 2011	6.4635	6.6271	6.8102	6.4628
Fiscal Year ended June 30, 2012	6.3530	6.3540	6.2790	6.4720
2012
April	6.2790	6.3043	6.3150	6.2790
May	6.3684	6.3242	6.3684	6.3052
June	6.3530	6.3633	6.3703	6.3530
July	6.3610	6.3717	6.3879	6.3487
August	6.3484	6.3593	6.3484	6.3738
September	6.2848	6.3200	6.2848	6.3489
October (through October 19)	6.2533	6.2732	6.2501	6.2877

(1) Annual averages are calculated from month-end rates. Monthly averages are calculated using the average of the daily rates during the relevant period.

B.Capitalization and Indebtedness

Not Applicable.

C.Reasons for the Offer and Use of Proceeds

Not Applicable.

D.Risk Factors

Risks Related to Our Business and Our Industry

Our business is difficult to evaluate because we have limited experience operating as a full-service provider of educational services.

Historically, our core businesses have been developing and marketing interactive multimedia learning materials mainly to complement prescribed textbooks used in China’s primary and secondary school curriculum. We started providing English language training services for children in 2009 after we had acquired 100% of the equity interest in the Little New Star Education Group. In 2010, we launched early childhood, primary and secondary education services after we had completed the acquisition of 70% of the equity interest in Wentai Education. In 2012, we further expanded our kindergarten network by acquiring an 80% equity interest in Shanghai Yuanbo Education Information and Consulting Corporation Ltd., or Yuanbo Education, a PRC company focusing on early childhood education services in the Yangtze Delta region. Although our kindergartens, primary and secondary schools as well as English language training centers have proven to be profitable, we have less experience responding quickly to changes, competing successfully and maintaining and expanding our brand in the private education service industry. Consequently, we have a limited operating history on which you may base your evaluation of our business and prospects as a full-service provider of educational services.

Our business depends on strong brands, and if we are not able to maintain and enhance our brand awareness, our business, financial condition and results of operations may be harmed.

Our brands are integral to our sales and marketing efforts and we believe that market awareness of our “Noah,” “Little New Star”, “Wentai” and “Qingan” brands have contributed significantly to the success of our business. Maintaining and enhancing these brands are critical to our ability to maintain a competitive advantage. If the value of our brands or image is diminished or if our brands do not continue to be attractive to parents, students and educators, our business, financial condition and results of operations may be materially and adversely affected. Our continued success in maintaining and enhancing our brands and image depends, to a large extent, on our ability to satisfy customer needs by maintaining quality of service across our operations, as well as our ability to respond to competitive pressures. If we are unable to do so, our sales and growth may decline, which could in turn adversely affect our results of operations. We have incurred significant brand promotion expenses to date, but we cannot guarantee that our marketing efforts will be successful in further promoting our brands to remain competitive. Our business may also be adversely affected if our public image or reputation are diminished, whether due to unsatisfactory services or otherwise.

6

Third parties may bring intellectual property infringement claims against us in the future.

We may be subject to claims by educational institutions and organizations, content providers and publishers, competitors and others on the ground of intellectual property rights infringement, defamation, negligence or other legal theories based on the content of the materials that we or our teachers author and/or distribute as course materials. We cannot assure you that materials used for our education services will not be alleged to infringe the copyright of third parties. We cannot assure you that all our employees and contractors will strictly comply with our policy prohibiting them from infringing the copyright of third parties. As a result, we could be sued and become liable for the intellectual property infringement and other actions of our employees or contractors. Any claims against us, with or without merit, could be time-consuming and costly to defend or litigate, divert our management’s attention and resources or result in the loss of goodwill associated with our brands. If a lawsuit against us is successful, we may be required to pay substantial damages and/or enter into royalty or license agreements that may not be based upon commercially reasonable terms, or we may be unable to enter into such agreements at all. Our insurance may not cover potential claims of this type or may not be adequate to indemnify us for all the liability that could be imposed. In the future, we may increasingly be subject to intellectual property infringement claims as we expand education services that we offer, as the number of services and competitors in our markets grows, as we enter into new markets and as our services receive more attention and publicity.

Our intellectual property rights may not prevent our competitors from using the content of our educational materials, which could weaken our competitive position and harm our business and results of operations.

Our success depends in large part on the protection of the content of our educational materials. We rely, and plan to continue to rely, on a combination of patents, copyrights, trademarks, trade secrets, confidentiality provisions and licensing arrangements to establish and protect our proprietary rights. The contractual arrangements and other steps we have taken to protect our intellectual property, however, may not prevent misappropriation of our intellectual property or deter independent third-party development of similar educational materials. Some of our educational materials have limited intellectual property protection and, as a consequence, we may not have the legal right to prevent others from reverse copying and using these materials in competitive services. In addition, monitoring the unauthorized use of our intellectual property is costly, and any dispute or other litigation, regardless of outcome, may be costly and time-consuming and may divert our management and key personnel from our business operations. If we fail to protect or to enforce our intellectual property rights successfully, our rights could be diminished and our competitive position could suffer, which could harm our business and results of operations.

Preventing intellectual property infringement, particularly in China, is difficult, costly and time-consuming and continued unauthorized use of our intellectual property by unrelated third parties may damage our reputation and brands. Historically, China has not protected intellectual property rights to the same extent as the United States, and infringement of intellectual property rights continues to pose a serious risk of doing business in China. Furthermore, the application of laws governing intellectual property rights in China and abroad is uncertain and evolving, and could involve substantial risks to us. If we are unable to adequately protect our trademarks, copyrights and other intellectual property rights, we may lose these rights and our business may suffer materially.

Uncertainty and adverse changes in the economy could have a material adverse impact on our business and operating results.

The global financial markets have experienced significant disruptions since 2007, and most of the world’s major economies remain in or are emerging from recession. There remains considerable uncertainty regarding the long-term effects of the expansionary monetary and fiscal policies adopted by the central banks and financial authorities of the world’s leading economies, including those of the United States and China. Uncertainty or adverse changes in the economy could lead to a significant decline in discretionary consumer spending, which, in turn, could result in a decline in the demand for our services. As a result of the economic downturn in China and internationally, overall consumer spending in China may slow down. Any decrease in demand for our services could have a material adverse impact on our operating results and financial condition. Uncertainty and adverse changes in the economy could also increase costs associated with developing our services, increase the cost and decrease the availability of potential sources of financing, and increase our exposure to material losses from our investments, any of which could have a material adverse impact on our financial condition and operating results.

7

We may not be able to successfully execute our strategy of expanding into new geographical markets in China.

We plan to continue to expand our business into new geographical areas in China. As China is a large and diverse market, consumer trends and demands may vary significantly by region. Our experience in the markets in which we currently operate may not be applicable in the smaller towns or other regions of China and our current business model may fail in those areas. Additionally, when we enter new markets, we may face intense competition from companies with greater experience or established presence in the targeted geographical areas and competition from other companies with similar expansion targets. As we expand into new markets, we may have to commence costly advertising campaigns, which may not be successful or which may reduce or eliminate the impact of any sales, or which may cause us to experience a net loss in the new markets.

Failure to execute our growth strategies of education services may have a material adverse effect on our business and prospects.

Our growth strategies include expanding and diversifying our education services to enhance our branding as an education company. Because we have limited experience in operating English training for children services and managing kindergartens and schools, our curriculum, lesson design and operating plan are not fully tested, and may fail to attract or retain students. Additionally, public perception of our brands may be impacted by the results of our entry into, and our operation of, education services. If we fail to successfully execute these growth strategies, the prospects of our business may be materially and adversely affected.

We may not be able to manage our growth and continue to integrate new expansion into our operations, which could adversely affect our business and results of operations.

We have experienced substantial growth since we commenced our operation in education services. This growth has placed, and will continue to place, substantial demands on our managerial, operational, technological and other resources. In July 2010, we acquired a 70% equity interest in Shenzhen Wentai Education Industry Development Co., Ltd., or Wentai Education, a PRC company focusing on early childhood, primary and secondary education services in China. In July 2011, we acquired an 80% equity interest in Yuanbo Education, a PRC company focusing on early childhood education services in the Yangtze Delta region. In August 2012, Yuanbo Education entered into a series of agreements to acquire a 100% equity interest in four kindergartens and one early childhood learning center from Dai Dai Kang Enterprise Management Co., Ltd., or DDK Consulting. In addition, in August 2012, Yuanbo Education also entered into a series of agreements to acquire a 100% equity interest in Hangzhou Xiaoxiao Kids Art and Education Consulting Co., Ltd., or Xiaoxiao Consulting, a PRC company which operates six kindergartens and one children’s arts and music training center in Zhejiang province. The two transactions are expected to close by November 2012, subject to regulatory approvals and other customary closing conditions. We may continue to expand our operations through acquisitions of additional businesses, products or technologies. However, we may not be able to identify, acquire or profitably manage additional businesses or successfully integrate any acquired businesses, products or technologies without substantial expenses, delays or other operational or financial challenges. Furthermore, acquisitions may involve a number of additional risks, including the diversion of management’s attention, failure to retain key personnel, unanticipated events or circumstances and legal liabilities, some or all of which could have a material adverse effect on our business, results of operations and financial condition. In addition, acquired businesses, products or technologies, if any, may not achieve anticipated revenues and profitability. Acquisitions could also result in potentially dilutive issuances of equity securities. Our failure to manage our expansion, through internal growth or acquisitions, could have a material adverse effect on our business, results of operations and financial condition.

Our success depends on the continuing efforts of our senior management team and other key personnel and our business may be harmed if we lose their services.

Our future success depends heavily upon the continuing services of the members of our senior management team, in particular our chairman, chief strategy officer and acting chief executive officer, Mr. Dong Xu. Although we entered into employment agreements with our executive officers and these employment agreements are automatically extended for successive one-year terms upon expiration of the initial three-year term, these agreements are not guarantees that we can retain the services of these executives during the contracted term. If one or more of our senior executives or other key personnel are unable or unwilling to continue in their present positions, we may not be able to replace them easily or at all, and our business may be disrupted and our financial condition and results of operations may be materially and adversely affected. Competition for experienced management personnel in the private education sector is intense, the pool of qualified candidates is very limited, and we may not be able to retain the services of our senior executives or key personnel, or attract and retain high-quality senior executives or key personnel in the future. In addition, if any member of our senior management team or any of our other key personnel joins a competitor or forms a competing company, we may lose key professionals and staff members. Each of employment agreements that our executive officers entered into with us contains non-competition provisions. If any disputes arise between any of our senior executives or key personnel and us, it may be difficult to enforce these agreements against these individuals.

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We face significant competition in each service we offer and each geographic market in which we operate, and if we fail to compete effectively, our revenues and profitability may be adversely affected.

The private education sector in China is rapidly evolving, highly fragmented and competitive, and we expect competition in this sector to persist and intensify. We face competition in each service we offer and each geographic market in which we operate. For example, our main competitors in children’s English training markets include Shanghai University ONLY Education Group, Global Kids English of Global Education & Technology Group, New Oriental Pop Kids English and Beijing Juren Education Group. Our main competitors in education services market include ChinaCast Education Corporation, ChinaEdu Corporation, TAL Education Group and Xueda Education Group.

Our student enrollments may decrease due to intense competition. Some of our competitors may have more resources than we do. These competitors may be able to devote greater resources than we can to the development, promotion and sale of their programs, services and products and respond more quickly than we can to changes in student needs, testing materials, admissions standards or new technologies. In addition, we face competition from many different smaller sized organizations that focus on some of our targeted markets, and they may be able to respond more promptly to changes in student preferences in these markets. In addition, the increasing use of the Internet and advances in Internet- and computer-related technologies, such as web video conferencing and online testing simulators, are eliminating geographic and cost-entry barriers to providing private education services. As a result, many of our international competitors that offer online English training courses may be able to more effectively penetrate the China market. Many of these international competitors have strong education brands, and students and parents in China may be attracted to the offerings of international competitors in which the selected language is widely spoken. Moreover, many smaller companies are able to use the Internet to quickly and cost-effectively offer their programs, services and products to a large number of students with less capital expenditure than previously required. We may have to reduce course fees or increase spending in response to competition in order to retain or attract students or pursue new market opportunities. As a result, our revenues and profitability may decrease. We cannot assure you that we will be able to compete successfully against current or future competitors. If we are unable to maintain our competitive position or otherwise respond to competitive pressures effectively, our revenues and profitability may be adversely affected.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud, and investor confidence and the market price of our ADSs may be adversely impacted.

We are subject to reporting obligations under the U.S. securities laws. Section 404 of the Sarbanes-Oxley Act of 2002 and related rules require a public company to include a management report on the company’s internal control over financial reporting in its annual report, which contains management’s assessment of the effectiveness of the company’s internal control over financial reporting. In addition, an independent registered public accounting firm must audit and report on the effectiveness of a public company’s internal control over financial reporting except where the public company is a non-accelerated filer.

Our management has concluded that our internal control over financial reporting was effective as of June 30, 2012. Our independent registered public accounting firm does not audit and report on the effectiveness of our internal control over financial reporting as we are a non-accelerated filer. See “Item 15. Control and Procedures.” However, we may fail to maintain effective internal control over financial reporting and our management and our independent registered public accounting firm may not be able to conclude that we have effective internal control over financial reporting at a reasonable assurance level in the future. This could in turn result in the loss of investor confidence in the reliability of our financial statements and negatively impact the trading price of our ADSs. Furthermore, we have incurred and anticipate that we will continue to incur considerable costs, management time and other resources in an effort to comply with Section 404 and other requirements of the Sarbanes-Oxley Act.

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If we are not able to continue to attract students to enroll in our courses at commercially viable fee levels, our revenues may decline and we may not be able to maintain our profitability.

The success of our education services depends on the number of students enrolling in our courses and the amount of fees that they are willing to pay. Therefore, our ability to continue to attract students to enroll in our courses at commercially viable fee levels is critical to the continued success and growth of our business. This in turn depends on several factors, including our ability to develop new programs and enhance existing programs to respond to changes in market trends and student demands, expand our geographic reach, manage our growth while maintaining the consistency of our teaching quality, effectively market our programs to a broader base of prospective students and respond to competitive pressures. Any inability to maintain or increase student enrollments or fee levels could hurt our revenue or profitability.

We depend on our dedicated and capable faculty, and if we are not able to continue to hire, train and retain qualified teachers, we may not be able to maintain consistent teaching quality in our training centers, kindergartens and schools and our brand, business and operating results may be materially and adversely affected.

Our teachers are critical to maintaining the quality of our programs and services and maintaining our brand and reputation, as they interact with our students on a daily basis. We must continue to attract qualified teachers who have a strong command of our subject areas and meet our specifications. We also seek to hire teachers who are capable of delivering innovative and inspirational instruction. There are a limited number of teachers in China with the necessary experience to teach our courses and we must provide competitive compensation packages to attract and retain qualified teachers. In addition, criteria such as commitment and dedication are difficult to ascertain during the recruitment process. We must also provide continuous training to our teachers so that they can stay abreast of changes in student demands, admissions and assessment tests, admissions standards and other key trends necessary to effectively teach their respective courses. We may not be able to hire, train and retain enough qualified teachers to keep pace with our anticipated growth while maintaining consistent teaching quality across our training centers, kindergartens and schools in different geographic locations. Shortages of qualified teachers or decreases in the quality of our instructors, whether actual or perceived in one or more of our markets, may have a material and adverse effect on our business.

We may not be able to renew leases or control rent increases at our existing training center, kindergarten or school locations or to obtain leases at premium locations for new training centers, kindergartens and schools at reasonable prices.

Most of our training centers, kindergartens and schools are located on leased premises. At the end of a lease term, we may be required to relocate. If we are able to negotiate a new lease at the existing location or an extension of the existing lease, the rent may increase significantly and our business operations and profitability may be adversely affected. Some leases are subject to renewal at fair market value, which could involve substantial rent increases, or are subject to renewal with scheduled rent increases, which could result in rents being above fair market value. We compete with numerous other English training services and education services providers for sites in the highly competitive market for retail real estate. As a result, we may not be able to obtain new leases or renew existing ones on acceptable terms or at all, which could adversely affect our business.

A liability claim against us due to injuries suffered by our students or other people at our facilities could adversely affect our reputation and our financial results.

We could be held liable for accidents that occur at our training centers, kindergartens, schools and other facilities. In the event of personal injuries or other accidents suffered by students or others, we could face claims alleging that we were negligent, provided inadequate supervision or were otherwise liable for the injuries. Although we have purchased liability insurance for all our kindergartens and primary and secondary schools, we currently do not have any liability insurance for our training centers or any business disruption insurance for our business. A successful liability claim against us due to injuries suffered by our students or other people at our facilities could adversely affect our reputation and our financial results. Even if unsuccessful, such a claim could cause unfavorable publicity, require substantial cost to defend and divert the time and attention of our management. In addition, any outbreak of fire or similar calamities at our premises may result in the breakdown of our facilities and disruption of our business against which we are not insured.

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If we are required to impair our goodwill or other amortizable intangible assets, our financial condition and results of operations would be adversely affected.

We are required under U.S. GAAP to review our amortizable intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill is required to be tested for impairment annually or more frequently if facts and circumstances warrant a review. We typically performs our annual goodwill impairment test at year-end. During the fourth quarter of fiscal 2012, as a result of the effects of weakening market conditions on our forecasts and a sustained, significant decline in our market capitalization to a level lower than its net book value, we concluded that impairment triggering events existed and performed a goodwill impairment analysis. We determined the fair values of Little New Star Education and Wentai Education were less than the carrying value and recognized an impairment charge of RMB57.4 million (US$9.0 million) for the year ended June 30, 2012. We could record impairments in the future if there are changes in the long-term fundamentals of our business, in general market conditions or in the regulatory landscape that could prevent us from recovering the carrying value of our goodwill or other amortizable intangible assets. The economic conditions affecting the PRC economy, and how that may impact the fundamentals of our business, may have a negative impact on the fair values of the assets in our reporting units.

Risks Related to Our Corporate Structure

If the PRC government finds that the agreements that establish the structure for operating our online business and primary and secondary education services do not comply with applicable PRC laws and regulations, we could be subject to severe penalties.

The PRC government extensively regulates the Internet and compulsory education industries, including foreign ownership of, and the licensing and permit requirements pertaining to, companies doing business in these industries. We are a Cayman Islands corporation and a foreign legal person under the PRC laws. As a result of the foreign ownership restriction in the PRC Internet industry, we conduct part of our business through the www.littlestar.com.cn website through contractual arrangements with a Chinese entity called Changsha Leisen Education Software Co., Ltd, or Leisen Education. Leisen Education is our consolidated affiliated entity directly owned by our founder. We have been and expect to continue to be dependent on Leisen Education to operate our online business. In addition, the PRC laws currently do not permit PRC-foreign cooperative schools to engage in compulsory education. Accordingly, Wentai Education, our wholly owned subsidiary in China, is currently ineligible to directly operate or manage primary and secondary schools which are in compulsory education system. We depend on our consolidated affiliated entity, Shenzhen Wentai Investment Co. Ltd., or Wentai Investment, to operate primary and secondary education services in China.

We do not have any equity interest in Leisen Education or Wentai Investment but receive their economic benefits through various contractual arrangements, including agreements on provision of loans, provision of services, license of software, and certain corporate governance and shareholder rights matters. In addition, we have entered into agreements with Leisen Education, Wentai Investment and each of the respective shareholders of Leisen Education and Wentai Investment which provide us with a substantial ability to control Leisen Education and Wentai Investment.

If we, Leisen Education, Wentai Investment or any of their subsidiaries are found to be in violation of any existing or future PRC laws or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion in dealing with such violations, including, without limitation:

· revoking the business and operating licenses of Leisen Education, Wentai Investment or our PRC subsidiaries and affiliated entities;

· discontinuing or restricting the operations of any related-party transactions among our PRC subsidiaries and affiliated entities;

· imposing fines, confiscating the income of Leisen Education, the income of Wentai Investment or our income, or imposing other requirements with which we or our PRC subsidiaries and affiliated entities may not be able to comply;

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· shutting down the servers of Leisen Education or blocking our websites; or

· requiring us or our PRC subsidiaries and affiliated entities to restructure our ownership structure or operations.

The imposition of any of these penalties could result in a material and adverse effect on our ability to conduct our business and our financial condition and results of operations.

We rely on contractual arrangements with Leisen Education, Wentai Investment and their shareholders for our online operations and primary and secondary education services business, which may not be as effective in providing operational control as direct ownership.

We rely on contractual arrangements with Leisen Education, Wentai Investment and their shareholders to operate our online business and primary and secondary education services in China. For a description of these contractual arrangements, see “Item 4. Information on the Company — C. Organizational Structure — Contractual Arrangements with Leisen Education and Its Shareholder,” “Item 4. Information on the Company — C. Organizational Structure — Contractual Arrangements with Wentai Investment and Its Shareholders,” “Item 7. Major Shareholders and Related Party Translations — B. Related Party Transactions—Contractual Arrangements with Leisen Education and Its Shareholder” and “Item 7. Major Shareholders and Related Party Translations — B. Related Party Transactions—Contractual Arrangements with Wentai Investment and Its Shareholders.” These contractual arrangements may not be as effective in providing us with control over Leisen Education or Wentai Investment as direct ownership. If we had direct ownership of Leisen Education or Wentai Investment, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of Leisen Education or Wentai Investment, which in turn could effect changes, subject to any applicable fiduciary obligations, at the management level. However, under the current contractual arrangements, as a legal matter, if Leisen Education, Wentai Investment or any of their shareholders fails to perform its or his respective obligations under these contractual arrangements, we may have to incur substantial costs and resources to enforce such arrangements, and rely on legal remedies under the PRC laws, including seeking specific performance or injunctive relief, and claiming damages, which may not be effective. For example, if the shareholders of Leisen Education or Wentai Investment were to refuse to transfer their equity interest in Leisen Education or Wentai Investment to us or our designee when we exercise the option pursuant to these contractual arrangements, or if they were otherwise to act in bad faith towards us, then we may have to take legal action to compel them to fulfill their contractual obligations. In addition, we may not be able to renew these contracts with Leisen Education, Wentai Investment and/or their shareholders.

Many of these contractual arrangements are governed by the PRC laws and provide for the resolution of disputes through arbitration in the PRC. Accordingly, these contracts would be interpreted in accordance with the PRC laws and any disputes would be resolved in accordance with the PRC legal procedures. The legal environment in the PRC is not as developed as in other jurisdictions such as the United States. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements. In the event we are unable to enforce these contractual arrangements, we may not be able to exert effective control over our affiliated entities, our ability to conduct our business may be negatively affected or we may not be able to conduct the business of our online operations or primary and secondary education services at all.

Mr. Dong Xu may have potential conflicts of interest with us, which may adversely affect our business.

The sole shareholder of Leisen Education and the 70% shareholder of Wentai Investment, Mr. Dong Xu, is a beneficial owner and the chairman of the board of our company. Conflicts of interests between his duties to our company and his ownership interests in Leisen Education and Wentai Investment may arise. We cannot assure you that when conflicts of interest arise, Mr. Dong Xu will act in the best interests of our company or that conflicts of interests will be resolved in our favor. In addition, Mr. Dong Xu may breach or cause Leisen Education or Wentai Investment to breach or refuse to renew the existing contractual arrangements that allow us to effectively control Leisen Education and Wentai Investment, and receive economic benefits from them. Other than relying on the duties of loyalty owed to us by Mr. Dong Xu, who is also our chairman, chief strategy officer and acting chief executive officer, and the irrevocable power of attorney executed to appoint the individual designated by us to be his respective attorney-in-fact, we currently do not have any measures or policies to address these potential conflicts of interest. In the event of any such conflict of interest, we would have to rely on legal remedies under the PRC laws. These remedies may not always be effective, particularly in light of uncertainties in the PRC legal system. If we cannot resolve any conflicts of interest or disputes between us and Mr. Dong Xu, we would have to rely on the uncertainty of legal proceedings, which could result in disruption of our business.

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Our ability to operate private schools may be subject to significant limitations or may otherwise be materially and adversely affected by changes in PRC laws and regulations.

The principal regulations governing private education in China are The Law for Promoting Private Education (2003) and The Implementation Rules for the Law for Promoting Private Education (2004). Under these regulations, a private school may elect to be a school that does not require reasonable returns or a school that requires reasonable returns. As of June 30, 2012, all of our schools elected as schools that require reasonable returns.

At the end of each fiscal year, every private school is required to allocate a certain amount to its development fund for the construction or maintenance of the school or procurement or upgrade of educational equipment. In the case of a private school that requires reasonable returns, this amount shall be no less than 25% of annual net income of the school, while in the case of a private school that does not require reasonable returns, this amount shall be equivalent to no less than 25% of the annual increase in the net assets of the school, if any. A private school that requires reasonable returns must publicly disclose such election and additional information required under the regulations. A private school shall consider factors such as the school’s tuition, ratio of the funds used for education-related activities to the course fees collected, admission standards and educational quality when determining the percentage of the school’s net income that would be distributed to the investors as reasonable returns. However, none of the current PRC laws and regulations provides a formula or guidelines for determining “reasonable returns.” In addition, none of the current PRC laws and regulations sets forth different requirements or restrictions on a private school’s ability to operate its education business based on such school’s status as a school that requires reasonable returns or a school that does not require reasonable returns.

Our schools are registered as schools that require reasonable returns. The current PRC laws and regulations governing private education may be amended or replaced by new laws and regulations that (1) impose significant limitations on the ability of our schools to operate their business, charge course fees or make payments to related parties for services received, (2) specify the formula for calculating “reasonable returns,” (3) change the preferential tax treatment policies applicable to private schools, or (4) restrict a private school’s ability to make payments to related parties for services. We cannot predict the timing and effects of any such amendments or new laws and regulations. Changes in PRC laws and regulations governing private education or otherwise affecting our schools’ operations could materially and adversely affect our business prospects and results of operations. For example, if the PRC government imposes additional limitations on private schools’ ability to operate their business or restricts private schools from making payments to related parties for services, our ability to receive service fees from our affiliated schools may be limited or we may have to reorganize our group structure.

On July 29, 2010, the PRC central government promulgated the Outline of China’s National Plan for Medium- and Long-Term Education Reform and Development, which for the first time announced the policy that the government will implement a reform to divide private education entities into two categories: (1) for-profit private education entities and (2) not-for-profit private education entities. To implement the outline, the Ministry of Education promulgated the Implementation Opinions of Ministry of Education on Encouraging and Guiding the Entry of Private Capitals in the Fields of Education and Promoting the Healthy Development of Private Education on June 18, 2012. According to the opinion, not-for-profit private education entities are subject to the same policy as public schools. Although the opinion requires the education administrative departments actively cooperate with and harmonize the relevant departments to formulate the preferential tax policies for for-profit private education entities, it is not clear whether for-profit private education entities will be subject to income tax. However, this outline is still new and further law or regulation may be promulgated to implement the outline. If upon the implementation of this reform, our schools choose to be for-profit private education entities, they may be subject to income tax at the rate of 25% and other taxes as if they were enterprises; if our schools choose to be not-for-profit private education entities, our contractual arrangements with Leisen Education and Wentai Investment and their schools and subsidiaries may be subject to more stringent scrutiny. As a result, implementation of this reform policy may adversely affect our results of operations.

Contractual arrangements we have entered into among our subsidiaries and Leisen Education or Wentai Investment may be subject to scrutiny by the PRC tax authorities, and a finding that we, Leisen Education or Wentai Investment owes additional taxes could substantially reduce our consolidated net income and the value of your investment.

Under the PRC laws, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities. We could face material and adverse tax consequences if the PRC tax authorities determine that the contractual arrangements, including contracts for the transfer of certain assets, among our wholly owned subsidiaries in China and Leisen Education or Wentai Investment do not represent an arm’s-length price and adjust Leisen Education’s or Wentai Investment’s income in the form of a transfer pricing adjustment. A transfer pricing adjustment could, among other things, result in a reduction, for PRC tax purposes, of expense deductions recorded by Leisen Education or Wentai Investment, which could in turn increase its tax liabilities. In addition, the PRC tax authorities may impose late payment fees and other penalties to our affiliated entities for under-paid taxes. Our consolidated net income may be materially and adversely affected if our affiliated entities’ tax liabilities increase or if they are found to be subject to late payment fees or other penalties.

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If the custodians or authorized users of our controlling non-tangible assets, including chops and seals, fail to fulfill their responsibilities, or misappropriate or misuse these assets, our business and operations could be materially and adversely affected.

Under PRC law, legal documents for corporate transactions, including agreements and contracts such as the leases and sales contracts that our business relies on, are executed using the chop or seal of the signing entity or with the signature of a legal representative whose designation is registered and filed with the relevant local branch of the SAIC. We generally execute legal documents by affixing chops or seals, rather than having the designated legal representatives sign the documents.

In order to maintain the physical security of our chops, we generally have them stored in secured locations accessible only to the department heads of the legal, administrative or finance departments. The use of chops must be approved by the relevant departments or subsidiaries. Our designated legal representatives generally do not have access to the chops. Although we monitor our employees, including the designated legal representatives of our PRC subsidiaries, the procedures may not be sufficient to prevent all instances of abuse or negligence. There is a risk that our employees or designated legal representatives could abuse their authority, for example, by binding the relevant subsidiary with contracts against our interests, as we would be obligated to honor these contracts if the other contracting party acts in good faith in reliance on the apparent authority of our chops or signatures of our legal representatives. If any designated legal representative obtains control of the chop in an effort to obtain control over the relevant entity, we would need to have a shareholder or board resolution to designate a new legal representative and to take legal action to seek the return of the chop, apply for a new chop with the relevant authorities, or otherwise seek legal remedies for the legal representative’s misconduct. If any of the designated legal representatives obtains and misuses or misappropriates our chops and seals or other controlling intangible assets for whatever reason, we could experience disruption to our normal business operations. We may have to take corporate or legal action, which could involve significant time and resources to resolve while distracting management from our operations. 

The regulation of Internet website operators is relatively new and subject to interpretation, and our operation of online education programs could be adversely affected if we are deemed to have violated applicable laws and regulations.

The interpretation and application of existing Chinese laws and regulations, the stated positions of the main governing authority, the Ministry of Industry and Information Technology, and the possibility of adopting new laws or regulations have created significant uncertainties regarding the legality of the businesses and activities of Chinese companies with Internet operations. In particular, according to the Internet Information Services Administrative Measures promulgated by the State Council on September 25, 2000, the activities of Internet content providers are regulated by various Chinese government authorities including, the Ministry of Education, the General Administration of Press and Publication and the Ministry of Culture, depending on the specific activities conducted by the Internet content provider. Based on our verbal consultation with relevant government authorities, including the Hunan Branch of the Ministry of Culture, the Hunan Branch of the Ministry of Industry and Information Technology and the Hunan Branch of the General Administration of Press and Publication, Leisen Education is not required to obtain the Internet culture license, the value-added telecommunications business license or the online publication license for its online services. However, we cannot assure you that Leisen Education will not be required to obtain such licenses for its online services in the future. Failure to comply with applicable Chinese Internet regulations, including engaging in business activities prior to obtaining the requisite licenses, could subject us to severe penalties, including fines and/or other restrictions imposed upon us, or even orders of cessation of Leisen Education’s operations.

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If the PRC authorities determine that we do not have the requisite licenses or permits to provide English training services and education services, we may have to cease the operations of English training centers, kindergartens and schools and suffer a setback to our growth strategy.

We currently operate English training centers through a wholly foreign owned enterprise, Changsha Little New Star Animation Digital Technology Co., Ltd., or Animation Digital, which we wholly own through another 100% subsidiary incorporated in Hong Kong, Global Ring Limited. We also operate kindergartens through Animation Digital, Wentai Education, Wentai Investment and Yuanbo Education and operate primary and secondary schools through Wentai Investment. The PRC laws currently do not permit Chinese-foreign cooperative schools to engage in compulsory education. Based on the results of oral inquiries with the relevant education authorities and advice from our PRC legal counsel, we believe that our English training centers, kindergartens and primary and secondary schools are not Chinese-foreign cooperative schools that fall within the ambit of these regulations because they are operated by PRC-registered domestic entities. However, we cannot assure you that other PRC education authorities may interpret the regulations otherwise, in which event, we may have to cease the operations of our English training centers, kindergartens and primary and secondary schools until we obtain the necessary permits, which may not be forthcoming. If we must cease operating training centers, kindergartens and schools, we will not be able to execute our strategy to become China’s leading brand in supplemental education services, and our growth may suffer as a result.

If our franchisees fail to operate their training centers successfully, our results of operations may be materially and adversely affected.

As of the date of this annual report, we provide supplemental English training services to children through 13 directly-owned training centers in Changsha and Datong and over 500 franchised training centers across China. We are dependent on franchisees to open new training centers as part of our growth strategy. Franchisees may not have access to the financial resources they need in order to open new training centers due to the unavailability of credit or other factors beyond their control. Any significant inability on the part of franchisees to obtain necessary financing on acceptable terms, or at all, could slow our planned growth.

Franchisees are independent operators and are responsible for the profitability and financial viability of their training centers. They have a significant amount of flexibility in running their operations. Their employees are not our employees. While these franchisees are required to use the standardized curriculum and adopt the standardized operating procedures in their training centers, we do not control the operations of these franchised training centers, and the quality of franchised training center operations may be diminished by any number of factors beyond our control. Consequently, franchisees may not successfully operate training centers in a manner consistent with our standards and requirements. While we ultimately can take action to terminate franchisees that do not comply with the standards contained in our franchise agreements or our standardized operating procedures, we may not be able to identify problems and take action quickly enough and, as a result, our image and reputation may suffer, and our franchise revenues could decline. If a substantial number of our franchisees fail to operate their training centers successfully, or incur excessive indebtedness, or decide not to renew their franchise agreements with us, our results of operations may be materially and adversely affected.

If a substantial number of our franchisees cannot or will not continue their business relationships with us when their franchise agreements with us expire, our business would suffer.

Our franchise agreements typically have a three-year term, and our franchisees may not be willing or able to renew their franchise agreements with us. For example, franchisees may decide not to renew due to low student enrollments, high real estate costs, or may be unable to renew due to the failure to secure lease renewals. In order for a franchisee to renew its franchise agreement with us, it typically must pay a franchise renewal fee, and, in many cases, renew its property lease with its landlord. If a substantial number of our franchisees cannot or will not renew their franchise agreements with us, our results of operations and financial condition would suffer.

The audit report included in this annual report is prepared by auditors that are not inspected by the United States Public Company Accounting Oversight Board, or the PCAOB, and, as such, our investors are deprived of the benefits of such inspection.

Our independent registered public accounting firm that issues the audit reports included in this annual reports is required by the laws of the United States to undergo regular inspections by the PCAOB to assess its compliance with the laws of the United States and professional standards. Due to the fact that we have substantial operations within PRC, the PCAOB is currently unable to conduct inspections of the work of our auditors as it relates to those operations without the approval of the Chinese authorities. As a result, our auditors are not currently inspected fully by the PCAOB. Inspections of other firms that the PCAOB has conducted outside China have identified deficiencies in those firms’ audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality. The lack of PCAOB inspections in China prevents the PCAOB from regularly evaluating our auditors’ audits and their quality control procedures, which makes it more difficult for investors to evaluate the effectiveness of our auditors’ audit procedures or quality control procedures as compared to auditors outside of China that are subject to PCAOB inspections. As a result, investors may be deprived of the benefits of PCAOB inspections, which may cause them to lose confidence in our reported financial information and procedures and the quality of our financial statements.

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Risks Related to Doing Business in China

Adverse changes in economic and political policies of the PRC government could have a material adverse effect on the overall economic growth of China, which could adversely affect our business.

Substantially all of our business operations are conducted in China. Accordingly, our results of operations, financial condition and prospects are subject to a significant degree to economic, political and legal developments in China. China’s economy differs from the economies of most developed countries in many respects, including with respect to the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. While the PRC economy has experienced significant growth in the past thirty years, growth has been uneven across different regions and among various economic sectors of China. The PRC government has implemented various measures to encourage economic development and guide the allocation of resources. While some of these measures benefit the overall PRC economy, they may also have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations that are applicable to us.

The PRC economy has been transitioning from a planned economy to a more market-oriented economy. Although the PRC government has implemented measures since the late 1970s emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the PRC government. In addition, the PRC government continues to play a significant role in regulating industry development by imposing industrial policies. The PRC government also exercises significant control over China’s economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. These actions, as well as future actions and policies of the PRC government, could materially affect our liquidity and access to capital and our ability to operate our business.

Regulation and censorship of information disseminated over the Internet in China may adversely affect our business and reputation and subject us to liability for information displayed on our websites.

The PRC government has adopted regulations governing Internet access and the distribution of news and other information over the Internet. Under these regulations, Internet content providers and Internet publishers are prohibited from posting or displaying over the Internet content that, among other things, violates the PRC laws, impairs the national dignity of China, or is reactionary, obscene, superstitious, fraudulent or defamatory. Failure to comply with these requirements may result in the revocation of licenses to provide Internet content and other licenses, and the closure of the concerned websites. Although none of our websites has been closed, failure to comply with such requirements has resulted in the closure of other companies’ websites in the past. The website operator may also be held liable for such censored information displayed on or linked to the websites. If any of our websites, including those used for our online education business, are found to be in violation of any such requirements, we may be penalized by relevant authorities, and our operations or reputation could be adversely affected.

Uncertainties with respect to the PRC legal system could adversely affect us.

We conduct our business primarily through our subsidiaries and affiliated entities in China. Our operations in China are governed by the PRC laws. Our subsidiaries are generally subject to laws applicable to foreign investments in China and, in particular, laws applicable to wholly foreign-owned enterprises. The PRC legal system is based on written statutes. Prior court decisions may be cited for reference but have limited precedential value.

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Since 1979, PRC legislation and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China. However, China has not developed a fully integrated legal system and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. In particular, because these laws and regulations are relatively new, and because of the limited volume of published decisions and their nonbinding nature, the interpretation and enforcement of these laws and regulations involve uncertainties. In addition, the PRC legal system is based in part on government policies and internal rules (some of which are not published on a timely basis or at all) that may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention. 

You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in China based on United States or other foreign laws against us, our management or the experts named in this annual report.

We conduct substantially all of our operations in China and substantially all of our assets are located in China. In addition, all of our senior executive officers reside within China. As a result, it may not be possible to effect service of process within the United States or elsewhere outside China upon our senior executive officers, including with respect to matters arising under U.S. federal securities laws or applicable state securities laws. Moreover, our PRC counsel has advised us that the PRC does not have bilateral treaties with the United States or many other countries providing for the reciprocal recognition and enforcement of judgment of courts. In addition, you may find it difficult to bring an original action in the Cayman Islands or China to enforce liabilities based upon the U.S. federal securities laws against us, our senior management or any non-U.S. expert named in this annual report.

Governmental control of currency conversion may affect the value of your investment.

The PRC government imposes controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all of our revenues in RMB. Shortages in the availability of foreign currency may restrict the ability of our PRC subsidiaries and our affiliated entities to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their foreign currency denominated obligations. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from trade-related transactions, can be made in foreign currencies without prior approval from the State Administration of Foreign Exchange, or the SAFE, by complying with certain procedural requirements. However, approval from appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of our ADSs.

Regulations relating to offshore investment activities by PRC residents may limit our ability to acquire PRC companies and could adversely affect our business, financial condition and results of operations.

In October 2005, the SAFE promulgated a regulation known as Circular No. 75 that states that if PRC residents use assets or equity interests in their PRC entities as capital contributions to establish offshore companies or inject assets or equity interests of their PRC entities into offshore companies to raise capital overseas, they must register with local SAFE branches with respect to their overseas investments in offshore companies. They must also file amendments to their registrations if their offshore companies experience material events involving capital variation, such as changes in share capital, share transfers, mergers and acquisitions, spin-off transactions, long-term equity or debt investments or guarantee. Under this regulation, failure to comply with the registration procedures set forth in such regulation may result in restrictions being imposed on the foreign exchange activities of the relevant PRC entity, including the payment of dividends and other distributions to its offshore parent, as well as restrictions on the capital inflow from the offshore entity to the PRC entity. We have requested our current shareholders and/or beneficial owners who are PRC residents to register with the local SAFE branch as required under the Circular No. 75. While we believe our shareholders have complied with existing SAFE registration procedures, any future failure by any of our shareholders who is a PRC resident, or controlled by a PRC resident, to comply with relevant requirements under this regulation could subject our company to fines or sanctions imposed by the PRC government, including restrictions on our subsidiaries’ ability to pay dividends or make distributions to us and our ability to increase our investment in or to provide loans to our subsidiaries.

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On December 25, 2006, the People’s Bank of China promulgated the Measures for Administration of Individual Foreign Exchange. The SAFE promulgated Implementation Rules for those measures on January 5, 2007 and the Notice of the State Administration of Foreign Exchange on Issues concerning the Foreign Exchange Administration of Domestic Individuals Participation in Equity Incentive Plans of Overseas Listed Companies on February 15, 2012. According to these new foreign exchange regulations, PRC citizens who are granted shares or share options by a company listed on an overseas stock market under its employee share option or share incentive plan are required to register with the SAFE or its local counterparts by following certain procedures. We and our employees who are PRC citizens and individual beneficiary owners or have been granted share options may be subject to these rules. The failure of our PRC individual beneficiary owners and holders of share options to complete their SAFE registrations according to the requirements of local counterparts of the SAFE or the new foreign exchange rules may subject these PRC citizens to fines and legal sanctions and may also limit our ability to contribute additional capital into our PRC subsidiaries, limit our PRC subsidiaries’ ability to distribute dividends to us or otherwise materially and adversely affect our business.

We rely principally on dividends and other distributions on equity paid by our wholly owned subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our subsidiaries and affiliated entities to make payments to us could have a material adverse effect on our ability to conduct our business.

We are a holding company, and we rely principally on dividends from our wholly owned subsidiaries in China and on service, license and other fees paid to our subsidiaries by Leisen Education and Wentai Investment for our cash requirements, including any debt we may incur. Current PRC regulations permit our subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, each of our subsidiaries and affiliated entities in China are required to set aside at least 10% of its after-tax profits, if any, to fund a statutory reserve whenever dividends are declared by these subsidiaries and affiliated entities until such reserve reaches 50% of its registered capital, and to further set aside a portion of its after-tax profits to fund the employee welfare fund at the discretion of the board. These reserves are not distributable as cash dividends. Furthermore, if our subsidiaries and affiliated entities in China incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments to us. In addition, the PRC tax authorities may require us to adjust our taxable income under the contractual arrangements we currently have in place in a manner that would materially and adversely affect our subsidiaries’ ability to pay dividends and other distributions to us.

Furthermore, under the PRC enterprise income tax law and the implementing rules that became effective on January 1, 2008, dividends generated from the business of our PRC subsidiaries after January 1, 2008 and payable to us may be subject to a withholding tax rate of 10% if the PRC tax authorities subsequently determine that the Company is a non-resident enterprise, unless there is a tax treaty with China that provides for a different withholding arrangement. According to the relevant treaties between China and Hong Kong, 5% withholding tax is applied to the dividends distributed to Hong Kong investors by PRC enterprises if such Hong Kong investors hold no less than 25% of equity interest in such PRC enterprises. So we expect that 10% or 5% withholding tax will apply to dividends distributed by our subsidiaries in China to their non-PRC shareholders, as the case may be, but this treatment will depend on the status of their non-PRC shareholders as non-resident enterprises. Any limitation on the ability of our subsidiaries and affiliated entities to distribute dividends or other payments to us could materially and adversely limit our ability to make investments or acquisitions that could be beneficial to our businesses, pay dividends, or otherwise fund and conduct our business.

If we were deemed a “resident enterprise” by PRC tax authorities, we could be subject to tax on our global income and our non-PRC shareholders could be subject to certain PRC taxes.

Under the PRC enterprise income tax law that became effective on January 1, 2008, an enterprise established outside of the PRC with “de facto management bodies” within the PRC is considered a “resident enterprise” and will be subject to the PRC enterprise income tax at the rate of 25% on its global income. The implementing rules of the PRC enterprise income tax law define “de facto management” as “substantial and overall management and control over the production and operations, personnel, accounting, and properties” of the enterprise. If we were to be considered a “resident enterprise” by the PRC tax authorities, our global income would be subject to tax under the PRC enterprise income tax law at the rate of 25% and, to the extent, we were to generate a substantial amount of income outside of PRC in the future, we would be subject to additional taxes. Because substantially all of our management are currently located in China, we and our offshore subsidiaries may be considered PRC resident enterprises and therefore be subject to the PRC enterprise income tax at the rate of 25% on our worldwide income. This may increase our tax expenses and adversely affect our results of operations. In addition, if we were to be considered a “resident enterprise,” the dividends we pay to our non-PRC enterprise shareholders would be subject to withholding tax and our non-PRC enterprise shareholders would be subject to a 10% income tax on any gains they would realize from the transfer of their shares, if such income were sourced from within the PRC. According to our PRC counsel, as of the date of this annual report, no final interpretations on the implementation of the “resident enterprise” designation with respect to an enterprise established outside China and ultimately controlled by PRC individuals are available. Moreover, any such designation, when made by PRC tax authorities, will be determined based on the facts and circumstances of individual cases. As a result, after consulting our PRC counsel, we cannot determine the likelihood of our being designated a “resident enterprise” as of the date of this annual report.

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PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds of the offering to make loans or additional capital contributions to our PRC operating subsidiaries and affiliated entities.

In using the proceeds of our initial public offering in the manner described in “Item 14. Material Modifications to the Rights of Security Holders — E. Use of Proceeds,” as an offshore holding company of our PRC operating subsidiaries and affiliated entities, we may make loans to our PRC subsidiaries and consolidated affiliated entities, or we may make additional capital contributions to our PRC subsidiaries. Any loans to our PRC subsidiaries or consolidated PRC affiliated entities are subject to PRC regulations and approvals. For example:

· loans by us to our wholly owned subsidiaries in China, each of which is a foreign-invested enterprise, to finance their activities cannot exceed statutory limits and must be registered with the SAFE or its local counterpart; and

· loans by us to Leisen Education and Wentai Investment, each of which is a domestic PRC entity, must be approved by the relevant government authorities and must also be registered with the SAFE or its local counterpart.

We may also decide to finance our subsidiaries by means of capital contributions. These capital contributions must be approved by the PRC Ministry of Commerce or its local counterpart. Because Leisen Education and Wentai Investment are domestic PRC entities, we are not likely to finance their activities by means of capital contributions due to regulatory issues relating to foreign investment in domestic PRC entities, as well as the licensing and other regulatory issues discussed in the “Item 4. Information on the Company — B. Business Overview — Regulation” section of this annual report. We cannot assure you that we will be able to obtain these government registrations or approvals on a timely basis, if at all, with respect to future loans or capital contributions by us to our subsidiaries, Leisen Education or Wentai Investment. If we fail to receive such registrations or approvals, our ability to use the proceeds of our initial public offering and to capitalize our PRC operations may be negatively affected, which could adversely and materially affect our liquidity and our ability to fund and expand our business. 

Expiration of, or changes to, tax benefits or incentives could materially and adversely affect our operating results.

Our subsidiaries and affiliated entities in China enjoy tax exemptions, tax concessions and reduced income tax rates. See “Item 5. Operating and Financial Review and Prospects — A. Operating Results — Our Results of Operations — Other Income Statement Items and Net Income — Provision for Income Taxes” for a description of the tax benefits that apply to us. The PRC enterprise income tax law that became effective on January 1, 2008 applies a uniform 25% enterprise income tax rate to both foreign invested enterprises and domestic enterprises. Companies are required to transition to the new enterprise income tax rate during a five-year transition period. Any enterprise that was granted certain concessions will continue to enjoy such tax concessions until expiration of the tax preferences under the old income tax law, regulations and other relevant provisions. Our Chinese subsidiaries currently also enjoy government subsidies in the form of value added tax refunds for the promotion of development in the software industry. Any expiration or changes in PRC tax benefits or incentives would reduce our after-tax profitability and materially and adversely affect our operating results.

19

Fluctuation in the value of the RMB may have a material adverse effect on your investment.

The value of the RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the RMB to the U.S. dollar, and the RMB appreciated more than 20% against the U.S. dollar over the following five years. In June 2010, the PRC government announced that it would increase Renminbi exchange rate flexibility and since that time the Renminbi has gradually appreciated against the U.S. dollar. However, it remains unclear how this flexibility might be implemented. There remains significant international pressure on the PRC government to adopt a more flexible currency policy, which could result in greater fluctuation of the Renminbi against the U.S. dollar. Our revenues and costs are mostly denominated in the RMB and a significant portion of our financial assets are also denominated in RMB. We rely entirely on dividends and other fees paid to us by our subsidiaries and affiliated entities in China, which are denominated in RMB. Any significant revaluation of the RMB may materially and adversely affect our cash flows, revenues, earnings and financial position, and the value of, and any dividends payable on, our ADSs in U.S. dollars. For example, an appreciation of the RMB against the U.S. dollar would make any new RMB-denominated investments or expenditures more costly to us, to the extent that we need to convert U.S. dollars into the RMB for such purposes. An appreciation of the RMB against the U.S. dollar would also result in foreign currency translation losses for financial reporting purposes when we translate our U.S. dollar denominated financial assets into the RMB as the RMB is our reporting currency.

The approval of the China Securities Regulatory Commission, or the CSRC, may have been required in connection with our initial public offering in October 2007 under a recently adopted PRC regulation. The regulation also establishes more complex procedures for acquisitions conducted by foreign investors which could make it more difficult to pursue growth through acquisitions.

On August 8, 2006, six PRC regulatory agencies: the PRC Ministry of Commerce, the State Assets Supervision and Administration Commission, or SASAC, the State Administration for Taxation, the State Administration for Industry and Commerce, the CSRC, and the SAFE; jointly promulgated the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, which became effective on September 8, 2006 and was partially revised by the Ministry of Commerce on June 22, 2009. These regulations require offshore special purpose vehicles, or SPVs, that are controlled by PRC companies or residents and that have been formed for the purpose of seeking a public listing on an overseas stock exchange through acquisitions of PRC domestic companies to obtain CSRC approval prior to publicly listing their securities on an overseas stock exchange. The interpretation and application of these regulations remain unclear, and we cannot assure you that our initial public offering in October 2007 did not require approval from the CSRC, and if it did, how long it would take us to obtain the approval. The CSRC has declined to officially clarify the applicability of the regulations to us and our initial public offering. On the other hand, if CSRC approval had been required for our initial public offering, our failure to have obtained or our delay in obtaining the CSRC approval for the initial public offering would subject us to sanctions imposed by the CSRC and other PRC regulatory agencies. These sanctions could include fines and penalties on our operations in China, restriction or limitation on our ability to pay dividend outside of China, and other forms of sanctions that may cause a material and adverse effect on our business, results of operations and financial conditions.

According to our PRC counsel, our initial public offering did not require the approval of the CSRC under their interpretations of the existing regulations on the applicability of the new regulations because we completed our reorganization before the effective date of the new rules. We cannot assure you, however, that new rules and regulations or relevant interpretations will not be issued which may require retroactively that we obtain an approval from the CSRC in connection with our initial public offering. If this were to occur, our failure to have obtained or the delay in obtaining the CSRC approval for the initial public offering would subject us to sanctions imposed by the CSRC and other PRC regulatory agencies. These sanctions could include fines and penalties on our operations in China, restriction or limitation on our ability to pay dividends outside of China, and other forms of sanctions that may cause a material and adverse effect on our business, results of operations and financial conditions.

The regulations also established additional procedures and requirements that are expected to make merger and acquisition activities by foreign investors more time-consuming and complex, including requirements in some instances that the Ministry of Commerce be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise, or that the approval from the Ministry of Commerce be obtained in circumstances where overseas companies established or controlled by PRC enterprises or residents acquire affiliated domestic companies. We may grow our business in part by acquiring other companies offering complementary services such as tutoring and test preparation. Complying with the requirements of the regulations to complete such transactions could be time-consuming, and any required approval processes, including Ministry of Commerce approval, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.

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If any of our PRC subsidiaries, affiliated entities and their subsidiaries becomes the subject of a bankruptcy or liquidation proceeding, we may lose the ability to use and enjoy those assets, which could reduce the size of our operations and materially and adversely affect our business, ability to generate revenue and the market price of our ADSs.

To comply with the PRC laws relating to foreign ownership restrictions, we currently conduct our online operations and primary and secondary education services business in China through contractual arrangements with Leisen Education, Wentai Investment and their shareholders. As part of these arrangements, each of Leisen Education and Wentai Investment holds some of the assets that are important to the operation of our business. If Leisen Education or Wentai Investment goes bankrupt and all or part of its assets become subject to liens or rights of third-party creditors, we may be unable to continue some or all of our business activities, which could materially and adversely affect our business, financial condition and results of operations. If Leisen Education or Wentai Investment undergoes a voluntary or involuntary liquidation proceeding, its shareholders or unrelated third-party creditors may claim rights to some or all of these assets, thereby hindering our ability to operate our business, which could materially and adversely affect our business, our ability to generate revenue and the market price of our ADSs.

We face risks related to health epidemics and other outbreaks, which could result in reduced attendance or temporary closure of our training centers, kindergartens and schools.

Our business could be adversely affected by the effects of Influenza A(H1N1), or swine flu, avian flu, SARS or other epidemics or outbreaks. China reported a number of cases of SARS in April 2004. In last three years, there have been reports on the occurrences of avian flu in various parts of China, including a few confirmed human cases and deaths. In April 2009, an outbreak of swine flu occurred in Mexico and the United States and spread globally. Any prolonged occurrence or recurrence of swine flu, avian flu, SARS or other adverse public health developments in China or any of the major markets in which we do business may have a material adverse effect on our business and operations. We have not adopted any written preventive measures or contingency plans to combat any future outbreak of swine flu, avian flu, SARS or any other epidemic. These occurrences could cause cancellations or deferments of student enrollments and require the temporary closure of our training centers, kindergartens and schools, thus severely disrupting our business operations and adversely affecting our results of operations.

Risks Related to Our ADSs

We believe we were a passive foreign investment company, or PFIC, for our taxable year ended June 30, 2012, which could result in adverse U.S. federal income tax consequences to U.S. holders of our ADSs or ordinary shares.

Based on the market price of our ADSs and the value and composition of our assets, we believe we were a PFIC for United States federal income tax purposes for our taxable year ended June 30, 2012. In addition, it is also possible one or more of our subsidiaries were also PFICs for such years. A non-U.S. corporation will be considered a PFIC for any taxable year if either (1) at least 75% of its gross income for such year is passive income or (2) at least 50% of the value of its assets (based on an average of the quarterly values of the assets during such year) is attributable to assets that produce or are held for the production of passive income (the “asset test”). In general, the total value of our assets for purposes of the asset test will be determined based on the market price of our ADSs and ordinary shares. In addition, a separate determination must be made each taxable year as to whether we are a PFIC (after the close of each taxable year). Furthermore, we believe there is a significant risk we will be a PFIC for our current taxable year ending June 30, 2013 unless our share value increases and/or we invest a substantial amount of the cash and other passive assets we hold in assets that produce active income. Because we believe we were a PFIC for our taxable year ended June 30, 2012, certain adverse U.S. federal income tax consequences could apply to U.S. persons that own our ADSs or ordinary shares with respect to any “excess distribution” received from us and any gain from a sale or other disposition of the ADSs or ordinary shares. See “Item 10. Additional Information — E. Taxation — United States Federal Income Taxation — Passive Foreign Investment Company.”

21

The market price for our ADSs has been volatile and may continue to fluctuate significantly.

The market price for our ADSs has been volatile, and we expect will continue to be, subject to significant fluctuations in response to factors such as actual or anticipated fluctuations in our quarterly results of operations, changes in financial estimates by securities research analysts, changes in the economic performance or market valuations of other education companies, announcements by us or our competitors of material acquisitions, strategic partnerships, joint ventures or capital commitments, fluctuations of exchange rates between RMB and the U.S. dollar, intellectual property litigation, release of lock-up or other transfer restrictions on our outstanding shares or ADSs, and economic or political conditions in China. In addition, the performance, and fluctuation in market prices, of other companies with business operations located mainly in China that have listed their securities in the United States may affect the volatility in the price of and trading volumes of our ADSs. Furthermore, the securities market has from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. In particular, economic downturns may contribute to the securities market experiencing extreme price and trading volume volatility. These market fluctuations may also materially and adversely affect the market price of our ADSs.

We may need additional capital, and the sale of additional ADSs or other equity securities could result in additional dilution to our shareholders.

We believe that our current cash and cash equivalents and anticipated cash flow from operations will be sufficient to meet our anticipated cash needs for the near future. We may, however, require additional cash resources to finance our continued growth or other future developments, including any investments or acquisitions we may decide to pursue. The amount and timing of such additional financing needs will vary principally depending on the timing of new product launches, investments and/or acquisitions, and the amount of cash flow from our operations. If our resources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity securities could result in additional dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations.

Our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties, including:

· investors’ perception of, and demand for, securities of electronic learning product providers;

· conditions of the U.S. and other capital markets in which we may seek to raise funds;

· our future results of operations, financial condition and cash flows;

· PRC governmental regulation of foreign investment in education in China;

· economic, political and other conditions in China; and

· PRC governmental policies relating to foreign currency borrowings.

We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all. If we fail to raise additional funds, we may need to sell debt or additional equity securities or to reduce our growth to a level that can be supported by our cash flow. Without additional capital, we may not be able to:

· further develop or enhance our services and products;

· acquire necessary technologies, products or businesses;

· expand operations in China;

· hire, train and retain employees;

· market our programs, services and products; or

· respond to competitive pressures or unanticipated capital requirements.

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Our corporate actions are substantially controlled by our officers, directors, principal shareholders and their affiliated entities.

As of August 31, 2012, our executive officers, directors, principal shareholders and their affiliated entities beneficially owned approximately 64.6% of our outstanding shares. These shareholders, if they acted together, could exert substantial influence over matters requiring approval by our shareholders, including electing directors and approving mergers or other business combination transactions and they may not act in the best interests of other minority shareholders. This concentration of ownership may also discourage, delay or prevent a change in control of our company, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our company and might reduce the price of our ADSs. These actions may be taken even if they are opposed by our other shareholders.

Substantial future sales or the perception of sales of our ADSs in the public market could cause the price of our ADSs to decline.

Sales of our ADSs or ordinary shares in the public market, or the perception that these sales could occur, could cause the market price of our ADSs to decline. As of August 31, 2012, we had 37,618,182 ordinary shares outstanding (which include 1,048,316 ordinary shares issued to The Bank of New York Mellon, our depositary, in June 2008 to facilitate our future issuance of ADSs upon the exercise of options under our share incentive plan but are excluded from the balance sheet herein for accounting purposes), of which 14,826,996 ordinary shares were represented by 14,826,996 ADSs. In addition, options to purchase 936,216 ordinary shares of our company were outstanding as of June 30, 2012. All ADSs are freely transferable without additional registration requirements under the Securities Act of 1933, or the Securities Act. Ordinary shares not represented by ADSs are also available for sale subject to the volume and other restrictions as applicable under Rule 144 and Rule 701 under the Securities Act.

Our business is subject to fluctuations caused by seasonality or other factors beyond our control, which may cause our operating results to fluctuate from quarter to quarter. This may result in volatility and adversely affect the price of our ADSs.

We have experienced, and expect to continue to experience, seasonal fluctuations in our revenues and results of operations, primary due to seasonal changes in student enrollments. Enrollments in our English training courses tend to peak during summer and winter semester breaks, which occur in the third and the first calendar quarters, respectively. On the contrary, our kindergartens, primary and secondary schools operate throughout the year except for the summer and winter breaks. We invest in general administration, teaching resources, marketing and advertising, and research and development throughout the year. We expect quarterly fluctuations in our revenue and results of operations to continue. These fluctuations could result in volatility and adversely affect the price of our ADSs. As our revenue grows, these seasonal fluctuations may become more pronounced.

Our historical financial condition and results of operations are not necessarily indicative of future performance and are difficult to forecast.

Our historical financial condition and results of operations may not meet the expectations of public market analysts or investors, which could cause the price of our ADSs to decline. In addition to the seasonal fluctuations described above, our revenues, expenses and results of operations may vary from quarter to quarter and from year to year in response to a variety of other factors beyond our control, including:

· general economic conditions in China and PRC regulations or actions pertaining to the provision of our products and services;

· natural disasters or geopolitical events, such as epidemics, war or threat of war;

· changes in consumers’ spending patterns;

· our ability to control cost of revenues and operating expenses; and

· non-recurring charges incurred in connection with acquisitions or other extraordinary transactions or unexpected circumstances.

Due to these factors, we believe that quarter-to-quarter comparisons of our results of operations may not be indicative of our future performance and you should not rely on them to predict the future performance of our ADSs. In addition, our past results may not be indicative of future performance because of our new businesses.

23

You may not have the same voting rights as the holders of our ordinary shares and may not receive voting materials in time to be able to exercise your right to vote.

Except as described in this annual report and in the deposit agreement, holders of our ADSs will not be able to exercise voting rights attaching to the shares evidenced by our ADSs on an individual basis. Holders of our ADSs will appoint the depositary or its nominee as their representative to exercise the voting rights attaching to the shares represented by the ADSs. You may not receive voting materials in time to instruct the depositary to vote, and it is possible that you, or persons who hold their ADSs through brokers, dealers or other third parties, will not have the opportunity to exercise a right to vote. Upon our written request, the depositary will mail to you a shareholder meeting notice which contains, among other things, a statement as to the manner in which your voting instructions may be given.

You may not be able to participate in rights offerings and may experience dilution of your holdings as a result.

We may from time to time distribute rights to our shareholders, including rights to acquire our securities. Under the deposit agreement for the ADSs, the depositary will not offer those rights to ADS holders unless both the rights and the underlying securities to be distributed to ADS holders are either registered under the Securities Act, or exempt from registration under the Securities Act with respect to all holders of ADSs. We are under no obligation to file a registration statement with respect to any such rights or underlying securities or to endeavor to cause such a registration statement to be declared effective. In addition, we may not be able to take advantage of any exemptions from registration under the Securities Act. Accordingly, holders of our ADSs may be unable to participate in our rights offerings and may experience dilution in their holdings as a result.

You may be subject to limitations on transfer of your ADSs.

Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deem it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason.

Certain judgments obtained against us by our shareholders may not be enforceable.

We are incorporated in the Cayman Islands, and conduct substantially all of our operations in China through our wholly owned subsidiaries and affiliated entities in China. All of our officers reside outside the United States and some or all of the assets of those persons are located outside of the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the Cayman Islands or in China in the event that you believe that your rights have been infringed under the securities laws or otherwise. Even if you are successful in bringing an action of this kind, the respective laws of the Cayman Islands and China may render you unable to enforce a judgment against our assets or the assets of our directors and officers. There is no statutory recognition in the Cayman Islands of judgments obtained in the United States, although the courts of the Cayman Islands will generally recognize and enforce a non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits.

We are a Cayman Islands company and, because judicial precedent regarding the rights of shareholders is more limited under Cayman Islands law than under U.S. law, you may have less protection of your shareholder rights than you would under U.S. law.

Our corporate affairs are governed by our memorandum and articles of association and by the Companies Law (2011 Revision) and the common law of the Cayman Islands. The rights of shareholders to take legal action against our directors and us, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, which has persuasive, but not binding, authority on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedents in the United States. In particular, the Cayman Islands has a less developed body of securities laws as compared to the United States, and provides significantly less protection to investors. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action before the federal courts of the United States.

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As a result of all of the above, our public shareholders may have more difficulty in protecting their interests through actions against our management, directors or major shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States.

Our articles of association contain anti-takeover provisions that could have a material adverse effect on the rights of holders of our ordinary shares and ADSs.

Our articles of association contain provisions limiting the ability of others to acquire control of our company or cause us to engage in change-of-control transactions. These provisions could have the effect of depriving our shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transaction. For example, our board of directors has the authority, without further action by our shareholders, to issue preference shares in one or more series and to fix their designations, powers, preferences, privileges, and relative participating, optional or special rights and the qualifications, limitations or restrictions, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the rights associated with our ordinary shares, in the form of ADSs or otherwise. Preference shares could be issued quickly with terms calculated to delay or prevent a change in control of our company or make removal of management more difficult. If our board of directors decides to issue preference shares, the price of our ADSs may fall and the voting and other rights of the holders of our ordinary shares and ADSs may be materially and adversely affected.

Item 4.    Information on the Company

A.History and Development of the Company

In 1999, our founders, Dong Xu, Xiaotong Wang and Benguo Tang, formed Shenzhen Noah Industrial Co., Ltd., or Noah Industrial, which focused on the design, production and distribution of translation devices. On April 8, 2004, our founders formed our company, Noah Education Holdings Ltd., in Cayman Islands to acquire the assets of Noah Industrial and to focus on the development, marketing and distribution of education content. At the same time, Baring Asia II Holdings (22) Limited and Alpha Century Assets Limited invested a total of US$16 million in our company. In March 2007, Lehman Brothers Commercial Corporation Asia Limited, or Lehman Brothers, became one of our substantial shareholders through the purchase of ordinary and preference shares from certain of our existing shareholders. We also issued a warrant for our ordinary shares to Lehman Brothers in connection with the transaction, which expired in April 2009. On February 24, 2010, we executed a block trade to repurchase 656,400 ADSs from Lehman Brothers at US$4.00 per share, for a total consideration of US$2,625,600. In conjunction with this trade, multiple institutional buyers also purchased from Lehman Brothers an aggregate of 1,273,600 ADSs at US$4.00 per share, for an additional consideration of US$5,094,400. Because of these trades, Lehman Brothers ceased to hold any equity interest in our company. The repurchase of ADSs from Lehman Brothers was funded by our then available working capital, and was motivated by our awareness that Lehman Brothers had been liquidating its equity stake in our company.

On October 19, 2007, we listed our ADSs on The New York Stock Exchange under the symbol “NED.” We completed the initial public offering of 11,324,198 ADSs, each representing one ordinary share, on October 24, 2007.

In July 2009, we acquired 100% of the equity interest in the Little New Star Education Group, which mainly comprised Animation Digital and Leisen Education, through a series of transactions, including the acquisition of 100% equity interest in Animation Digital through acquiring its sole shareholder Global Ring and the acquisition of the 100% equity interest in Leisen Education by Shenzhen Zhi Yuan Noah Internet Co., Ltd., or Noah Zhi Yuan. The total consideration of the acquisition of the Little New Star Education Group was RMB 53.0 million (US$8.3 million) in cash and 2,647,743 ordinary shares of Noah Education Holdings Ltd. In February 2010, we completed our strategic investment in Franklin Electronic Publishers, Incorporated, or Franklin Electronic Publishers, a Pennsylvania corporation specializing in electronic handheld information, in which we purchased approximately 20% equity interests in Franklin at a total consideration of US$3.0 million. In July 2010, we completed the acquisition of 70% equity interests in Wentai Education, a PRC company focusing on early childhood, primary and secondary education services in China, at a total consideration of RMB126 million (US$ 19.8 million). In July 2011, we acquired an 80% interest in Yuanbo Education, a PRC company focused on early childhood education services in the Yangtze Delta region, for a total consideration of RMB94.866 million (US$14.9 million).

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In fiscal 2011, we sold our electronic learning product, or ELP, business and certain target assets to First Win Technologies Ltd., or First Win, a company wholly owned by Mr. Benguo Tang, one of our founders and former president and chief operating officer, for the U.S. dollar equivalent of RMB100.0 million (US$15.7 million). First Win has been responsible for the operation of the ELP business since April 1, 2011, including earnings or losses during the period between signing and closing. The sale of the ELP business will enable us to focus more attention on pursuing growth opportunities in the more stable and higher-margin education services business.

In August 2012, Yuanbo Education entered into a series of agreements to acquire a 100% equity interest in four kindergartens and one early childhood learning center from DDK Consulting for a total consideration of RMB14.5 million (US$2.3 million). In addition, in August 2012, Yuanbo Education also entered into a series of agreements to acquire a 100% equity interest in Xiaoxiao Consulting, which operates six kindergartens and one children’s arts and music training center in Zhejiang province, for a total consideration of RMB33.6 million (US$5.3 million). The two transactions are expected to close by November 2012, subject to regulatory approvals and other customary closing conditions.

We conduct our business operations in China through our subsidiaries affiliated entities. Our principal executive offices are located at Unit F, 33rd Floor, NEO Tower A, Che Gong Miao, Futian District, Shenzhen, Guangdong Province 518040, People’s Republic of China. Our telephone number at this address is +86-755-8288-9100. Our registered office in the Cayman Islands is located at the offices of Maples Corporate Services Limited, P.O. Box 309, Ugland House, Grand Cayman KYI-1104, Cayman Islands. Our agent for service of process in the United States is CT Corporation System, located at 111 Eighth Avenue, New York, New York 10011.

B.Business Overview

Overview

We are a provider of private education services in China. We operate and manage high-end private kindergartens, private primary and secondary schools, and offer supplemental English training services for children aged between 2 and 18. Historically, we have been a leading provider of interactive education content in China. We developed and marketed interactive multimedia learning materials mainly to complement prescribed textbooks used in China’s primary and secondary school curriculum, covering subjects such as English, Chinese, mathematics, physics, chemistry, biology, geography, political science and history. Our electronic learning products, or ELPs, included handheld digital learning devices, handheld kids’ learning devices and E-dictionaries. In June 2011, we sold our ELP business and certain target assets to First Win. First Win has been responsible for the operation of the ELP business since April 1, 2011, including earnings or losses during the period between signing and closing.

In July 2007, we began to offer after-school tutoring programs to tap into the supplemental education market based on our experience and brand. In the past couple of years, we operated after-school tutoring centers in Chengdu, Chongqing and Beijing. To improve our operation efficiency, we discontinued the operations of our tutoring centers and ceased to operate after-school tutoring services under the “Noah” brand in the fiscal year ended June 30, 2010. In July 2009, we acquired 100% of the equity interest in the Little New Star Education Group, which provides English language training services to children through its 13 directly-owned training centers and over 500 franchised training centers across China. The professional teaching team in directly-owned training centers consisted of approximately 80 teachers. In July 2010, we completed the acquisition of 70% of the equity interest in Wentai Education, a PRC company focusing on early childhood, primary and secondary education services in China. As of June 30, 2012, Wentai Education operated and managed six kindergartens. Wentai Investment, our consolidated affiliated entity, directly operated and managed two secondary schools and operated and managed five kindergartens, one primary school and ten secondary schools through its 78%-owned subsidiary, Zhongda Foundation Education Investment Management Co., Ltd., or Zhongda Foundation, in Guangdong Province as of June 30, 2012. Wentai Education and Wentai Investment had approximately 650 teachers and staff and had a total student enrollment of over 7,000 in the fiscal year ended June 30, 2012. In July 2011, we acquired an 80% equity interest in Yuanbo Education, a PRC company focused on early childhood education services in the Yangtze Delta region. As of June 30, 2012, Yuanbo Education operated 17 kindergartens in the economically developed and prosperous Yangtze Delta region under the brand name Qingan. Its management team retains a 20% equity interest in Yuanbo Education. In August 2012, Yuanbo Education entered into a series of agreements to acquire a 100% equity interest in four kindergartens and one early childhood learning center from DDK Consulting for a total consideration of RMB14.5 million (US$2.3 million). In addition, in August 2012, Yuanbo Education also entered into a series of agreements to acquire a 100% equity interest in Xiaoxiao Consulting, which operates six kindergartens and one children’s arts and music training center in Zhejiang province, for a total consideration of RMB33.6 million (US$5.3 million). The two transactions are expected to close by November 2012, subject to regulatory approvals and other customary closing conditions. We plan to combine our English language training services and early childhood, primary and secondary education services and to develop a comprehensive education services business.

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Our net revenue was RMB39.9 million, RMB93.5 million and RMB163.0 million (US$25.7 million) in the fiscal years ended June 30, 2010, 2011 and 2012, respectively. In the fiscal year ended June 30, 2010, we had a net income of RMB5.7 million and a net income attributable to the Company of RMB5.7 million. In the fiscal year ended June 30, 2011, we had a net loss of RMB408.0 million and a net loss attributable to the Company of RMB411.3 million. In the fiscal year ended June 30, 2012, we had a net loss of RMB47.9 million (US$7.5 million) and a net loss attributable to the Company of RMB53.8 million (US$8.5 million).

Our ELP Business

Historically, ELP business was our principal business and primarily consisted of content and services and content delivery platforms. Due to the increasing competition from more versatile mobile devices such as tablet computers and smart phones, the traditional ELP business incurred losses during the past few quarters. In light of the fundamental changes in the market, disruptions to our distribution network, and our intention to focus more heavily on its education services business, we considered various strategic alternatives for the ELP business, retained an independent financial advisor to assist it in soliciting and evaluating bids for the ELP business and established a special committee to continue to evaluate the strategic alternatives relating to the ELP business, including, among others, the closure of the ELP business.

In March 2011, we entered into a stock purchase agreement to sell our ELP business and certain target assets to First Win at a consideration of RMB100.0 million (US$15.7 million), which is subject to certain adjustments. In June 2011, the stock purchase agreement was amended to simplify the purchase price adjustment mechanism. The sale was completed in June 2011. We received the initial installment of the U.S. dollar equivalent of RMB40 million (US$6.3 million) in April 2011, the second installment of RMB17.5 million (US$2.8 million) in July 2011 and the final installment of RMB30.0 million (US$4.7 million) in October 2011. First Win has assumed responsibility for the operation of the ELP business since April 1, 2011, including earnings or losses of the ELP business during the interim period between signing and closing.

Our Education Services

With the sale of our ELP business, we have intended to focus more attention on pursuing growth opportunities in the more stable and higher-margin education services business. In addition to the attractive margin and high visibility nature of the education services industry, this fast-growing market in China remains highly fragmented and underpenetrated. Our current education services portfolio, which consists of Little New Star Education, segment focusing on English language training for children, Wentai Education, segment focusing on high-end kindergartens, primary and secondary schools, and Yuanbo Education, segment focusing on premium pre-school segment, has demonstrated impressive growth and we have intended to leverage this momentum in order to fuel growth and expand this business. We believe we will continue to leverage the breadth and depth of senior management experience we have in education services and to build on our successful track record of profitably expanding within these segments.

English Language Training Services

In July 2009, we acquired 100% of the equity interest in the Little New Star Education Group, a leading provider of English training services for children in China, founded in 1992 and based in Changsha, Hunan Province. As of the date of this annual report, we operated a nationwide training network of the Little New Star Education Group, which consisted of 13 directly-owned training centers in Changsha and Datong and over 500 franchised training centers across China and provides English training to children. The professional teaching team in directly-owned training centers consisted of approximately 80 teachers. We plan to use our nationwide distribution channels and sales and marketing expertise in China to expand the English training services for children.

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Kindergartens

As of June 30, 2012, our kindergarten network consisted of 34 kindergartens, two of which are in the process of finalizing their licenses and did not contribute to our revenue in fiscal 2012. Our kindergartens had a total student enrollment of over 9,100 and approximately 1,100 teachers and staff members.

As of June 30, 2012, Wentai Education operated and managed six kindergartens. Wentai Investment, our consolidated affiliated entity, operated and managed five kindergartens through its 78%-owned subsidiary, Zhongda Foundation. As of June 30, 2012, Wentai Education and Wentai Investment had approximately 3,200 students enrolled in the kindergartens they operated. Classes at Wentai Education and Wentai Investment are taught bilingually in Chinese and English.

As of June 30, 2012, Yuanbo Education operated 17 kindergartens with a total student enrollment of approximately 5,000 in the economically developed and prosperous Yangtze Delta region under the brand name “Qingan”. It targets children under the age of six, and has the competitive advantage of offering world-class courses from Taiwan, Germany, Italy and Canada. Its management team, which has successfully grown the company since its establishment in 2001, retains a 20% equity interest in Yuanbo Education.

As of June 30, 2012, the Little New Star Education Group also operated and managed four kindergartens in Changsha with a total student enrollment of over 900.

In August 2012, Yuanbo Education entered into a series of agreements to acquire a 100% equity interest in four kindergartens and one early childhood learning center from DDK Consulting and a 100% equity interest in Xiaoxiao Consulting, which operates six kindergartens and one children’s arts and music training center. As of June 30, 2012, DDK Consulting had a total student enrollment of 1,200 and over 150 staff members. Xiaoxiao Consulting had a total student enrollment of 1,300 and over 200 staff members. The two transactions are expected to close by November 2012, subject to regulatory approvals and other customary closing conditions.

Primary and Secondary Schools

Wentai Investment, our consolidated affiliated entity, directly operated and managed two secondary schools, and operated and managed another two secondary schools and one primary school in four cities in Guangdong Province through Zhongda Foundation, its 78%-owned subsidiary. As of June 30, 2012, Wentai Investment had a total student enrollment of approximately 4,000 and over 370 teachers and staff members.

Research and Development

Our competitive advantage in technology was key to our past success. We intend to continue to focus a significant amount of our resources on our research and development effort for our education services business. Currently, our research and development effort is focused on developing premium English teaching methodologies and teaching materials for children aged between 3 and 12. We expect to sustain our research and development efforts in developing and enhancing our school and kindergarten information management systems in the future.

Our research and development expenses were RMB1.9 million, RMB2.2 million and RMB3.1 million (US$0.5 million) for the fiscal years ended June 30, 2010, 2011 and 2012, respectively.

Marketing and Brand Promotion

To enhance our brand recognition and attract customers for our supplemental English training services, we have advertising arrangements with Chinese national and local consumer media outlets, such as newspapers (including school newspapers), campus billboards and leading Internet portals to promote our brands across China.

Competition

Our main competitors in the children’s English training market include Shanghai University ONLY Education Group, Global Kids English of Global Education & Technology Group, New Oriental Pop Kids English and Beijing Juren Education Group. Our main competitors in the early childhood, primary and secondary education services market include ChinaCast Education Corporation, ChinaEdu Corporation, TAL Education Group and Xueda Education Group.

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Intellectual Property

Our “Noah,” “Little New Star,” “Wentai” and “Qingan” brands and other intellectual property rights contribute to our competitive advantage in the interactive education content industry, English language training for children services and education services in China. As of the date of this annual report, we had a total of 79 registered trademarks and 10 trademarks pending registration in China, including “Noah” and “Little New Star.” We have registered our primary domain name www.noaheducation.com and 44 additional domain names, including 10 domain names registered under the Little New Star Education Group, such as www.littlestar.com.cn and www.jmlittlestar.com.cn, seven domain names registered under Wentai Education, such as www.wentaiedu.com, and three domain names registered under Yuanbo education, such as www.qingankid.com. As of the date of this annual report, we held nine domestic patents, and had two pending patent applications. We have also obtained copyright protections for our key proprietary software and teaching materials.

To protect our brands and our intellectual property, we rely on a combination of trademark, trade secret and copyright laws in China and impose procedural and contractual confidentiality and invention assignment obligations on our employees, contractors and others. While we cannot assure you that our efforts will deter others from misappropriating our intellectual property rights, we will continue to protect our intellectual property rights in order to maintain our competitive position.

Regulation

Internet-Related Regulations

Through Leisen Education, we operate Internet websites in China as part of our business. Under applicable PRC laws, the operation of Internet websites could be regarded as engaging in an Internet value-added telecommunication business, which is subject to restrictions on foreign ownership and requires a value-added telecommunication business license to be obtained. Under the PRC Catalog for the Guidance of Foreign Investment Industries promulgated by the Ministry of Commerce, Noah Education Holdings Ltd., as a foreign enterprise, are restricted from providing Internet information service involving education and publication. Under the PRC Provisions on the Administration of Telecommunications Enterprises with Foreign Investment promulgated by the State Council, the maximum foreign ownership in a telecommunication enterprise that is engaged in the value-added telecommunication must not be more than 50%. Based on our verbal consultation with the Hunan Branch of the Ministry of Industry and Information Technology, Leisen Education is not required to obtain the value-added telecommunication business license for its online services.

In addition, Leisen Education may be regarded to be engaging in Internet education information services, which are subject to the supervision and administrative control of the Ministry of Culture and the General Administration of Press and Publication and require both an internet culture license and an online publication license to be obtained. Based on our verbal consultation with the Hunan Branch of the Ministry of Culture and the Hunan branch of the General Administration of Press and Publication, Leisen Education is not required to obtain such licenses for its online services.

Regulations on Private Schools

The PRC Law for Promoting Private Education and its implementation rules regulate the establishment and administration of private schools, defined as schools established by social organizations or individuals with non-government funds. Private schools providing programs leading to certifications, pre-school education, tutoring programs and other academic courses must be approved by the education authorities, and private schools providing vocational training must be approved by authorities in charge of labor and social welfare. A duly approved private school will be granted a permit for operating a private school, and must be registered with the Ministry of Civil Affairs or its local counterparts as a privately run non-enterprise institution.

The PRC Regulations on Operating Chinese-foreign Schools and its implementation rules govern Chinese-foreign cooperation in operating schools or training programs. These regulations and rules encourage substantive cooperation between overseas educational organizations with relevant qualifications and experience in providing high-quality education and Chinese educational organizations to jointly operate various types of schools in the PRC, particularly in the areas of higher education and vocational training. Chinese-foreign cooperative schools are not permitted, however, to engage in compulsory education and military, police, political and other kinds of education that are of a special nature in the PRC. Permits for Chinese-foreign Cooperation in Operating Schools must be obtained from the relevant education authorities or the authorities that regulate labor and social welfare in the PRC. We currently operate English training centers through a wholly foreign owned enterprise, Animation Digital, which we wholly own through another 100% subsidiary incorporated in Hong Kong, Global Ring Limited. We also operate and manage kindergartens through Animation Digital, Wentai Education, Wentai Investment and Yuanbo Education, and operates and manages primary and secondary schools through our consolidated affiliated entity, Wentai Investment, over which our 70%-owned subsidiary Wentai Education has effective control through contractual arrangements. Based on the results of oral inquiries with the relevant education authorities and advice from our PRC legal counsel, we believe that our English training centers, kindergartens and primary and secondary schools are not Chinese-foreign cooperative schools that fall within the ambit of these regulations because they are operated by a PRC-registered domestic entity. However, we cannot assure you that other PRC education authorities may interpret the regulations otherwise, in which event, we may have to cease the operations of English training centers, kindergartens and primary and secondary schools until we obtain the necessary permits. See “Item 3. Key Information — D. Risk Factors — Risks Related to Our Corporate Structure — If the PRC authorities determine that we do not have the requisite licenses or permits to provide English training services and education services, we may have to cease the operations of English training centers, kindergartens and schools and suffer a setback to our growth strategy.”

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Regulations on Commercial Franchise Operations

The Administrative Measures on Foreign Investment in Commercial Sector became effective on June 1, 2004. According to this regulation, a foreign-invested commercial enterprise must fulfill the following requirements: (i) compliance with the minimum registered capital requirement for a PRC company under the PRC Company Law, (ii) compliance with the registered capital and total investment of foreign-invested enterprise requirements under other PRC laws; and (iii) the term of operation generally not exceeding 30 years in the case of a foreign-invested commercial enterprise established anywhere in China other than in central and western China or 40 years in the case of a foreign-invested commercial enterprise established in central and western China. A foreign-invested commercial enterprise intending to open stores must fulfill the following requirements: (i) if the foreign-invested commercial enterprise is new and files an application for its own establishment concurrently with its filing of an application for opening a store, the filer must comply with relevant regulations regarding city development and urban commercial development; and (ii) if the foreign-invested commercial enterprise is already established and files for the opening of a store, the filer must have completed the joint annual examination for a foreign-invested enterprises and must have fully paid up its registered capital. In addition, a foreign-invested commercial enterprise may franchise third parties to open stores, subject to governmental approval.

Animation Digital has been engaging in franchise operations since 2003. After our acquisition of the Little New Star Education Group, Animation Digital became a foreign-invested commercial enterprise. To open a franchised training center, Animation Digital must either have completed the joint annual examination for a foreign-invested enterprise and must have fully paid up its registered capital or must have franchised a third party to open the store, subject to governmental approval.

The Regulations on the Administration of Commercial Franchises, or the Regulations, were adopted by the State Council on February 6, 2007 and became effective on May 1, 2007. The Administrative Measures on the Information Disclosure of Commercial Franchises and the Administrative Measures for Archival Filing of Commercial Franchise formulated by the Ministry of Commerce in accordance with the Regulations became effective on April 1, 2012 and February 1, 2012, respectively. These regulations apply to enterprises engaging in commercial franchise operations in the PRC.

According to the Regulations, franchisors engaging in franchise operations (i) must have a mature business model and the ability to provide continuous operational guidance, technical support and business training, and (ii) must have at least two directly operated stores that have been in operation for more than one year. For enterprises, engaging in the franchise operations before the promulgation of the Regulations, like Animation Digital, (ii) in the preceding sentence is not applicable.

According to the Regulations, within 15 days from execution of the first franchise contract, franchisors must file the contract with the Ministry of Commerce or its counterparts.

Animation Digital filed our franchise contracts with the Ministry of Commerce via the electronic registration system of the Ministry of Commerce on September 18, 2008.

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Under the Regulations, a franchisor is required to provide to prospective franchisees, at least 30 days before the execution of any franchise agreement, a copy of the franchise agreement and a written document containing certain specified information relating to the franchise operation.

Regulations on Foreign Currency Exchange

Under the Foreign Currency Administration Rules promulgated in 1996 and revised in 2008 and various regulations issued by State Administration of Foreign Exchange, or SAFE, and other relevant PRC government authorities, Renminbi is convertible into other currencies for the purpose of current account items, such as trade related receipts and payments, interest and dividend. The conversion of Renminbi into other currencies and remittance of the converted foreign currency outside China for the purpose of capital account items, such as direct equity investments, loans and repatriation of investment, requires the prior approval from SAFE or its local office. Payments for transactions that take place within China must be made in Renminbi. Unless otherwise approved, PRC companies must repatriate foreign currency payments received from abroad. Foreign-invested enterprises may retain foreign exchange in accounts with designated foreign exchange banks subject to a cap set by SAFE or its local office. Unless otherwise approved, domestic enterprises must convert all of their foreign currency proceeds into Renminbi.

On October 21, 2005, SAFE issued the Notice on Issues Relating to the Administration of Foreign Exchange in Fund-raising and Reverse Investment Activities of Domestic Residents Conducted via Offshore Special Purpose Companies, which became effective as of November 1, 2005. According to the notice, a special purpose company, or SPV, refers to an offshore company established or indirectly controlled by PRC residents for the special purpose of carrying out financing of their assets or equity interest in PRC domestic enterprises. Prior to establishing or assuming control of an SPV, each PRC resident, whether a natural or legal person, must complete the foreign exchange registration procedures for overseas investment with the relevant local SAFE branch. The notice applies retroactively. As a result, PRC residents who have established or acquired control of these SPVs that previously made onshore investments in China were required to complete the relevant overseas investment foreign exchange registration procedures by March 31, 2006. These PRC residents must also amend the registration with the relevant SAFE branch in the following circumstances: (1) the PRC residents have completed the injection of equity investment or assets of a domestic company into the SPV; (2) the overseas funding of the SPV has been completed; (3) there is a material change in the capital of the SPV. Under the rules, failure to comply with the foreign exchange registration procedures may result in restrictions being imposed on the foreign exchange activities of the violator, including restrictions on the payment of dividends and other distributions to its offshore parent company, and may also subject the violators to penalties under the PRC foreign exchange administration regulations.

On May 20, 2011, SAFE issued the Notice on Operating Instructions Relating to the Administration of Foreign Exchange in Fund-raising and Reverse Investment Activities of Domestic Residents Conducted via Offshore Special Purpose Companies, the notice simplified the foreign exchange registration procedures and became effective as of July 1, 2011. According to the notice, PRC individual residents are allowed to establish SPVs before completing relevant foreign exchange registration procedures for overseas investment with the relevant local SAFE branch. But the SPVs are prohibited to conduct offshore financing, change share structure or make return on investment prior to such foreign exchange registration. In the following circumstances, PRC individual residents are required to conduct alteration of the foreign exchange registration within time limit: (1) SPVs go through alteration of financing; (2) direct establishment or indirect control of enterprises offshore by registered SPVs; or (3) PRC individual residents obtain incomes from capital variation of SPVs. With regard to other alterations of SPVs, the alteration of the foreign exchange registration may be completed during the yearly inspection period of foreign invested enterprises. The notice also sets forth applicable conditions and main inspection points for retroactive registration in detail.

On December 25, 2006, the People’s Bank of China promulgated the “Measures for the Administration of Individual Foreign Exchange,” and on January 5, 2007, the SAFE further promulgated the implementation rules on those measures. Both became effective on February 1, 2007. On February 15, 2012, the SAFE promulgated the Notice of the State Administration of Foreign Exchange on Issues concerning the Foreign Exchange Administration of Domestic Individuals Participation in Equity Incentive Plans of Overseas Listed Companies. According to these regulations, PRC citizens who are granted shares or share options by a company listed on an overseas stock market according to its employee share option or share incentive plan are required, through the PRC subsidiary of such overseas listed company or any other qualified PRC agent, to register with the SAFE and to complete certain other procedures related to the share option or other share incentive plan. Foreign exchange income received from the sale of shares or dividends distributed by the overseas listed company may be remitted into a foreign currency account of such PRC citizen or be exchanged into Renminbi. Our PRC citizen employees who have been granted share options are subject to the Individual Foreign Exchange Rules.

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Regulations on Dividend Distribution

The principal regulations governing dividend distributions by wholly foreign owned enterprises include:

· The Wholly Foreign Owned Enterprise Law (1986), as amended;

· The Wholly Foreign Owned Enterprise Law Implementing Rules (1990), as amended;

Under these regulations, wholly foreign owned enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. Additionally, these foreign-invested enterprises are required to set aside a certain amount of their accumulated profits each year, if any, to fund certain reserve funds. These reserves are not distributable as cash dividends except in the event of liquidation and cannot be used for working capital purposes.

Regulation on Overseas Listing

On August 8, 2006, six PRC regulatory agencies, namely, the PRC Ministry of Commerce, the State Assets Supervision and Administration Commission, the State Administration for Taxation, SAIC, CSRC, and SAFE, jointly adopted the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, which became effective on September 8, 2006 and was partially revised by Ministry of Commerce on June 22, 2009. The new regulations require, among other things, that offshore SPVs, formed for overseas listing purposes through acquisitions of PRC domestic companies controlled by PRC companies or individuals, obtain the approval of the CSRC prior to publicly listing their securities on an overseas stock exchange.

While the application of the new regulations remains unclear, we believe, based on the advice of our PRC counsel, that CSRC approval is not required in the context of our initial public offering in October 2007 based on their interpretation of the new regulations and other existing regulations. See “Item 3. Key Information — D. Risk Factors — Risks Related to Doing Business in China — The approval of the China Securities Regulatory Commission, or the CSRC, may have been required in connection with our initial public offering in October 2007 under a recently adopted PRC regulation. The regulation also establishes more complex procedures for acquisitions conducted by foreign investors which could make it more difficult to pursue growth through acquisitions.”

Regulations on Shareholder Loans

A shareholder loan made by foreign investors as shareholders to their subsidiaries in China, which accordingly are foreign-invested enterprises, or FIEs, is considered foreign debt, which is subject to a number of PRC laws, including the Foreign Exchange Control Regulation which was promulgated in 1997 and revised in 2008, the Interim Measures on Foreign Debt of 2003, the Statistical Monitoring of Foreign Debts Tentative Provisions of 1987 and its Implementing Rules of 1998, the Administration of the Settlement, Sale and Payment of Foreign Exchange Provision of 1996. Under the provisions, these FIEs must register with the local branches of SAFE within 15 days from the date on which the loan agreements for the foreign debt are executed. Under these regulations, in connection with foreign debt registration, it is required that the registered capital of the related foreign investment entity is fully paid up in accordance with the investment contract or its articles of association. In addition, the total amount of the accumulated foreign debt borrowed by an FIE is not allowed to exceed the difference between the total investment and the registered capital of the FIE. Total investment of an FIE is the total amount of capital that can be used for the operation of the FIE, as approved by the Ministry of Commerce or its local counterpart. Registered capital of an FIE is the total amount of capital contributions made to the FIE by its foreign holding company or owners, as approved by the Ministry of Commerce or its local counterpart and registered at the State Administration for Industry and Commerce or its local counterpart.

Regulations on Copyright

Under the PRC Copyright Law, the Regulation on the Implementation of the PRC Copyright Law, and the PRC Measures for the Administrative Protection of Internet Copyright, promulgated by the National Copyright Administration jointly with the Ministry of Industry and Information Technology in 2005, generally, copyright is protected for 50 years from the date of first publication of the work. A non-copyright holder may use another author’s work in accordance with licensing agreements agreed with the copyright holder.

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Regulations on Patents

Registration and application of patents relating to inventions, utility models and designs may be made at the Administrative Department of Patent under the State Council (State Intellectual Property Office) in accordance with the PRC Patent Law and its implementation rules. The duration of a patent for inventions is 20 years and the duration of a patent for utility models and designs is ten years, each from the date of filing. Any contract on licensing the use of a patent concluded between the patent holder and the user must be submitted to the State Intellectual Property Office for filing within three months of the date the contract became effective.

Regulations on Trademarks

The PRC Trademark Law and its implementation regulations provide protection to holders of registered trademarks and trade names. The Trademark Office under the authority of the SAIC handles trademark registrations, which have ten-year terms. Registered trademark license agreements must be filed with the Trademark Office or its regional offices.

C.Organizational Structure

We conduct our business operations in China through our subsidiaries in China, as well as through our contractual arrangements with an affiliated entity and its shareholders.

Our significant subsidiaries, as of the date of this annual report, include:

· Global Ring Limited, or Global Ring;

· Trump Global Limited;

· Bright Sound Limited;

· Win Bright Creation Limited;

· Chengdu Shidai Noah Education Software Co. Ltd., or Chengdu Shidai;

· Chengdu Shidai Noah Information Technology Co. Ltd.;

· Noah Education Technology (Shenzhen) Co., Ltd., or Noah Education;

· Shenzhen Wentai Education Industry Development Co., Ltd., or Wentai Education

· Changsha Mei Wen Education Investment Management (Service) Co., Ltd.;

· Shenzhen New Noah Education Investment Development Co., Ltd.;

· Shanghai Yuanbo Education Information and Consulting Corporation Ltd.;

· Bright Sound Electronic Technology (Shenzhen) Co., Ltd., or Bright Sound;

· Changsha Little New Star Animation Digital Technology Co., Ltd., or Animation Digital;

· Changsha High-Tech Development Zone Xinya Co., Ltd.; and

· Changsha Little New Star Stationery Development Co., Ltd.

The affiliated entities, on which we rely to carry out certain of our operations in China, include:

· Changsha Leisen Education Software Co. Ltd., or Leisen Education;

· Shenzhen Wentai Investment Co., Ltd., or Wentai Investment; and

· Zhongda Foundation Education Investment Management Co., Ltd., or Zhongda Foundation

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The following diagram illustrates our corporate structure as of the date of this annual report.

(1) Animation Digital has entered into contractual arrangements with Leisen Education and Dong Xu, the only shareholder of Leisen Education, to obtain effective control over the operation of Leisen Education. Dong Xu is our founder, chairman, chief strategy officer and acting chief executive officer. Contractual arrangements consist of an equity pledge agreement, a call option agreement, a loan agreement, a power of attorney, a software development and maintenance agreement, an exclusive technology supporting and consulting service agreement and a content providing agreement.

(2) Wentai Education has entered into contractual arrangements with Shenzhen Wentai Investment Co., Ltd., or Wentai Investment, and Dong Xu and Qicai Du, the only shareholders of Wentai Investment, to obtain effective control over the operation of Wentai Investment. Contractual arrangements consist of an equity pledge agreement, a call option agreement, a loan agreement, an operation and management agreement, service agreements and powers of attorney.

(3) Comprise Changsha Wangxian Diai Baobei Bilingual Kindergarten, Changsha Noah Shanlin Diai Baobei Kindergarten, Huizhou Foreign Language Kindergarten and Shenzhen Nanshan District Chunmiao Kindergarten.

(4) Comprise Huizhou Foreign Language School and Guangzhou Zengcheng District Lihucheng Foreign Language School.

(5) The two secondary schools are Foshan Nanhai District Zhongshan University Foreign Language School and Dongguan Zhongda Foreign Language School. The primary school is Guangzhou Baiyun District Zhongda Lanshan Foreign Language Primary School. The six kindergartens are Foshan Nanhai District Zhongshan University Foreign Language Kindergarten, Foshan Nanhai District Zhongda Siji Huacheng Foreign Language Kindergarten, Guangzhou Baiyun District Zhongda Lanshan Foreign Language Kindergarten, Guangzhou Luogang District Zhongda Vanke City (International) Kindergarten, Zengcheng Lihucheng Zhongshan University Foreign Language Kindergarten and Dongguan Zhongda Kindergarten.

(6) Comprise Shanxi Datong Little New Star Foreign Language School, Changsha Tianxin District Little New Star School and Changsha Tianxin District New Star English Training School.

(7) Comprise Changsha Furong District Nan Ming Yuan Little New Star Kindergarten, Changsha Mei Lin Shui Jun Kindergarten, Changsha Kaifu District Golden Seashore Little New Star Kindergarten and Changsha Tianxin District Huasheng Little New Star Kindergarten.

(8) Comprise Jiaxing Qing An Kindergarten, Wuxi City Binhu District Qing An Little Cambridge Kindergarten, Jiaxing City Nanhu District Qing An Little Cambridge Kindergarten, Jiaxing Qing An Xiu Cheng Kindergarten, Shaoxing City Yuecheng District Victoria Kindergarten, Haining City Qing An Kindergarten, Jiaxing Qing An Little Harvard Kindergarten, Shanghai Jinshan District Private Litter Harvard Kindergarten, Jiaxing City Xiuzhou Experimental Kindergarten, Deqing County Green-city Qing An Kindergarten, Haiyan County Qing An Yijia Garden Kindergarten, Tongxiang City Qing An Happy Kids Kindergarten, Wuxi City Binhu District Qinxin Experimental Kindergarten, Tongxiang City Huali Kindergarten, Tongxiang City Qing An Little Oxford Kindergarten, Jiaxing Qing An Qingha-Sites Kindergarten and Yellow Mountain City Tunxi District Bigui Garden Qing An Kindergarten.

The PRC laws currently impose different levels of restrictions or prohibitions on investment of foreign and private capital in the Internet industry, including media content production and distribution. See “Item 4. Information on the Company — B. Business Overview — Regulation — Internet-Related Regulations.” Our subsidiaries in China, which are considered as foreign-invested entities, are limited in their abilities to engage in operations in the Internet industry. Accordingly, we conduct the Internet-related aspects of our business through the www.littlestar.com.cn website through contractual arrangements with Leisen Education, which is the vehicle that holds or has applied for the requisite licenses and permits. We depend on Leisen Education to operate our online business. We have also entered into contractual arrangements with Leisen Education and its shareholder, a PRC citizen, that enable us to:

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· exercise effective control over Leisen Education;

· receive a substantial portion of the economic benefits from Leisen Education in consideration for the services provided by our subsidiary, Animation Digital; and

· have an exclusive option to purchase all or part of the equity interests in Leisen Education to the extent permitted by the PRC laws.

We expect to continue to depend on Leisen Education to operate our online business unless and until we are permitted under the PRC laws to directly own and operate Internet-related businesses without constraints.

The PRC laws do not permit PRC-foreign cooperative schools to engage in compulsory education. See “Item 4. Information on the Company — B. Business Overview — Regulation — Regulations on Private Schools.” We are a foreign legal person under the PRC laws. Wentai Education, our wholly owned subsidiary in China, is currently ineligible to directly operate or manage primary and secondary schools which are in compulsory education system. Accordingly, we depend on our consolidated affiliated entity, Wentai Investment, to operate primary and secondary education services in China. We have entered into contractual arrangements with Wentai Investment and its shareholders, two PRC citizens, that enable us to:

· exercise effective control over Wentai Investment;

· receive a substantial portion of the economic benefits from Wentai Investment in consideration for the services provided by our subsidiary, Wentai Education; and

· have an exclusive option to purchase all or part of the equity interests in Wentai Investment to the extent permitted by the PRC laws.

We expect to continue to depend on Wentai Investment to operate our primary and secondary education services unless and until we are permitted under the PRC laws to directly own and operate compulsory education businesses without constraints.

In the opinion of our PRC legal counsel:

· the ownership structures of Leisen Education and our subsidiaries in China comply in all material respects with all existing PRC laws and regulations;

· the contractual arrangements among our PRC subsidiaries, Leisen Education and its shareholder governed by the PRC laws are valid, binding and enforceable, and will not result in any violation of the PRC laws currently in effect; and

· the business operations of our subsidiaries in China and Leisen Education comply in all material respects with the existing PRC laws.

We have been advised by our PRC legal counsel, however, that there are substantial uncertainties regarding the interpretation and application of current and future PRC laws. Accordingly, the PRC regulatory authorities may in the future take a view that is contrary to the above opinion of our PRC legal counsel. We have been further advised by our PRC counsel that if the PRC government finds that the agreements that establish the structure for operating our PRC Internet related businesses and primary and secondary schools do not comply with PRC government restrictions on foreign investment in the Internet and compulsory education industries, we could be subject to severe penalties including being prohibited from continuing operation. See “Item 3. Key Information — D. Risk Factors — Risks Related to Our Corporate Structure.”

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Contractual Arrangements with Leisen Education and Its Shareholder

Our relationships with Leisen Education and its shareholder are governed by a series of contractual arrangements. In July 2009, we acquired 100% of the equity interest in the Little New Star Education Group, which mainly comprised Animation Digital and Leisen Education, through a series of transactions, including the acquisition of 100% equity interest in Animation Digital through acquiring its sole shareholder Global Ring and Noah Zhi Yuan’s acquisition of the 100% equity interest in Leisen Education. We derived economic benefits from Leisen Education through our effective control over Noah Zhi Yuan resulting from the contractual arrangement. In June 2011, we terminated our contractual arrangement with Noah Zhi Yuan due to the spin-off of our ELP business, and Animation Digital entered into new contractual arrangements with Leisen Education and its shareholder. Under the PRC laws, each of Leisen Education and Animation Digital is an independent legal person and neither of them is exposed to liabilities incurred by the other party. Other than pursuant to the contractual arrangements between Leisen Education and Animation Digital, Leisen Education does not transfer any other funds generated from its operations to Animation Digital.

Agreements that Provide Effective Control over Our Affiliated Entity

Equity Pledge Agreement. Pursuant to the equity pledge agreement between Animation Digital and Mr. Dong Xu, the shareholder of Leisen Education, who pledged all of his equity interest in Leisen Education to Animation Digital to guarantee the performance of Leisen Education’s obligations under the software development and maintenance agreement, the exclusive technology supporting and consulting service agreement and the content providing agreement. If Leisen Education or Mr. Dong Xu breaches its respective contractual obligations, Animation Digital, as pledgee, will be entitled to certain rights, including the right to sell the pledged equity interests. Mr. Dong Xu agreed not to transfer, sell, pledge, dispose of or otherwise create any new encumbrance on his equity interest in Leisen Education without the prior written consent of Animation Digital.

Option Agreement. Under the option agreement between Mr. Dong Xu and Animation Digital, Mr. Dong Xu irrevocably granted Animation Digital or its designated person an exclusive option to purchase, to the extent permitted under PRC law, all or part of the equity interests in Leisen Education within ten years upon the effectiveness of the option agreement. The exercise price for purchasing all of the share capital of Leisen Education is RMB 2,788,727.39 which is equal to the loan granted to Mr. Xu by Animation Digital. Animation Digital may exercise the option at any time or times at its sole discretion. Without Animation Digital's prior written consent, Mr. Dong Xu shall not transfer or otherwise dispose of any equity interests in Leisen Education or allow Leisen Education to declare any dividends. The Option Agreement shall not be unilaterally terminated by Mr. Dong Xu without Animation Digital's prior consent.

Loan Agreement. Pursuant to the loan agreement between Animation Digital and Mr. Dong Xu, Animation Digital agreed to grant a loan of RMB 2,788,727.39 to Mr. Dong Xu for his investment in the share capital of Leisen Education. Mr. Dong Xu is not required to make any interest payment to Animation Digital. Without Animation Digital's prior consent, Mr. Dong Xu shall not pledge his equity interests in Leisen Education to any third party. Mr. Dong Xu agreed to repay the loan upon the receipt of the repayment notification of Animation Digital at any time. The loan can be repaid only with the proceeds from transfer of the Mr. Dong Xu’s equity interest in Leisen Education to Animation Digital.

Power of Attorney. Mr. Dong Xu, the sole shareholder of Leisen Education, has executed a power of attorney to any employee of Animation Digital designated by Animation Digital to irrevocably authorize such person to vote as his attorney-in-fact on all of the matters of Leisen Education requiring shareholder approval. The term of this power of attorney is ten years from the date thereof.

Agreements that Transfer Economic Benefits to Us

Software Development and Maintenance Agreement. Pursuant to the software development and maintenance agreement between Animation Digital and Leisen Education, Animation Digital has the exclusive and irrevocable right to develop software related to the website owned and operated by Leisen Education, and to provide subsequent software maintenance and management services to Leisen Education. The software developed by Animation Digital thereunder remains the property of Animation Digital, but is exclusively licensed to Leisen Education. Leisen Education agrees to pay annual service fees of 40% of its total annual operating revenue to us. The term of this agreement is ten years from the date thereof and will be automatically renewed for one year if no party puts forward written objection in the term.

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Exclusive Technology Supporting and Consulting Service Agreement. Pursuant to the exclusive technology supporting and consulting service agreement between Animation Digital and Leisen Education, Animation Digital has the exclusive and irrevocable right to provide to Leisen Education technology supporting and consulting services related to the business operations of Leisen Education. Any and all intellectual property created by Animation Digital in connection with services provided to Leisen Education under the agreement remains the property of Animation Digital. Leisen Education agrees to pay annual service fees of 40% of its total annual operating revenue to us. The term of this agreement is ten years from the date thereof and will be automatically renewed for one year if no party puts forward written objection in the term.

Content Providing Agreement. Pursuant to the content providing agreement between Animation Digital and Leisen Education, Animation Digital has the exclusive and irrevocable right to provide to Leisen Education the content needed for the website owned and operated by Leisen Education. Any and all intellectual properties created by Animation Digital in connection with services provided to Leisen Education under the agreement remains the property of Animation Digital. Leisen Education agrees to pay annual service fees of 10% of its total annual operating revenue to us. The term of this agreement is ten years from the date thereof and will be automatically renewed for one year if no party puts forward written objection in the term.

Contractual Arrangements with Wentai Investment and Its Shareholders

Our relationships with Wentai Investment and its shareholders are governed by a series of contractual arrangements. Under PRC laws, each of the shareholder of Wentai Investment and Wentai Education is an independent legal person or individual and neither of them is exposed to liabilities incurred by the other party. Other than pursuant to the contractual arrangements between Wentai Investment and Wentai Education, Wentai Investment does not transfer any other funds generated from its operations to Wentai Education.

Agreements that Provide Effective Control over Wentai Investment

Equity Pledge Agreement. Pursuant to the equity pledge agreement dated April 23, 2010 between Wentai Education and the shareholders of Wentai Investment, namely Mr. Dong Xu and Mr. Qicai Du, each shareholder pledged all of his equity interest in Wentai Investment to Wentai Education to guarantee the performance of service agreements by Wentai Investment and its schools that they had entered into with Wentai Education. Separately, Wentai Education has entered into an equity pledge agreement with Wentai Investment on April 23, 2010, pursuant to which Wentai Investment pledged all of its 67% equity interest in Zhongda Foundation to Wentai Education for the same purpose. If Wentai Investment or any of its shareholders breaches its respective contractual obligations under the equity pledge agreements, Wentai Education, as pledgee, will be entitled to certain rights, including the right to dispose of the pledged equity interests. Wentai Investment and its shareholders agreed not to transfer, sell, pledge, dispose of or otherwise create any new encumbrance on their equity interests in Zhongda Foundation and Wentai Investment, respectively, without the prior written consent of Wentai Education.

Option Agreement. Under the option agreement dated April 23, 2010 between the shareholders of Wentai Investment and Wentai Education, the shareholders of Wentai Investment irrevocably granted Wentai Education or its designated person an exclusive option to purchase, to the extent permitted under PRC law, all or part of the equity interests in Wentai Investment within 20 years upon the effectiveness of the option agreement. The exercise price for purchasing all of the share capital of Wentai Investment is RMB30.0 million. Wentai Education may exercise the option at any time or times at its sole discretion. Without Wentai Education's prior written consent, the shareholders of Wentai Investment shall not transfer, pledge or otherwise dispose of any equity interests in Wentai Investment or allow Wentai Investment to declare any dividends. The Option Agreement shall not be unilaterally terminated by the shareholders of Wentai Investment without Wentai Education's prior consent.

Loan Agreement. Pursuant to the loan agreement between Wentai Education and the shareholders of Wentai Investment, dated March 12, 2010, Wentai Education agreed to lend RMB21 million to Mr. Dong Xu and RMB9 million to Mr. Qicai Du for their investment in the share capital of Wentai Investment. The loan is interest-free and with a term of 20 years. Without Wentai Education's prior consent, Mr.  Xu and Mr.  Du shall not pledge their equity interests in Wentai Investment to any third party. Mr. Dong Xu and Mr. Qicai Du agreed to repay the loan upon the receipt of the repayment notification of Wentai Education at any time. The loan can be repaid only with the proceeds from transfer of the Mr. Dong Xu and Mr. Qicai Du’s equity interest in Wentai Investment to Wentai Education.

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Operation and Management Agreement. Pursuant to the operation and management agreement dated April 23, 2010 among Wentai Education, Wentai Investment and the shareholders of Wentai Investment, Mr. Dong Xu and Mr. Qicai Du, Wentai Education will provide policy directions and instructions on Wentai Investment’s daily operations and financial management. The shareholders of Wentai Investment must designate the candidates recommended by Wentai Education as their representatives on Wentai Investment’s board of directors, and Wentai Investment must appoint such candidates. Wentai Investment must also appoint any candidate nominated by Wentai Education to be its senior executive. In addition, Wentai Education agrees to guarantee Wentai Investment’s performance under any business agreements or arrangements with any third party. Moreover, Wentai Investment agrees that without the prior consent of Wentai Education, Wentai Investment will not engage in any transactions that could materially affect the assets, liabilities, rights or operations of Wentai Investment and Zhongda Foundation, including, without limitation, incurrence or assumption of any indebtedness, sale or purchase of any assets or rights, incurrence of any encumbrance on any of its assets or intellectual property rights in favor of a third party or transfer of any agreements relating to its business operation to any third party. The term of this agreement is twenty years from the date thereof and will be automatically renewed for twenty years unless otherwise terminated in writing by Wentai Education in the last three months of the term.

Power of Attorney. Mr. Dong Xu and Mr. Qicai Du, the only shareholders of Wentai Investment, have each executed a power of attorney to any person designated by Wentai Education to irrevocably authorize such person to vote as his attorney-in-fact on all of the matters of Wentai Investment requiring shareholder approval. The term of each of these powers of attorney is twenty years from the date thereof.

Agreements that Transfer Economic Benefits to Us

Service Agreement. Pursuant to the service agreement dated October 28, 2010 between Wentai Education and Wentai Investment, Wentai Investment agreed to pay Wentai Education an annual service fee of 95% of its annual net income. Pursuant to service agreements between Wentai Education and schools held by Wentai Investment or Zhongda Foundation, each of the schools agreed to pay Wentai Education an annual service fee of 17% of its total annual revenues. Wentai Investment and these schools irrevocably and exclusively retain Wentai Education as their provider of support and advisory services on education management. Any intellectual property developed during the performance of the agreements remain the property of Wentai Education. The term of the service agreements is 20 years from the date thereof and will be automatically renewed for one year if no party puts forward written objection in the term.

D.Property, Plant and Equipment

Our headquarters are located in Shenzhen, Guangdong Province, China, where we own approximately 1,400 square meters of office space. We also own approximately 17,000 square meters of premises in Chengdu Hi-tech Industrial Development Zone for research use.

The Little New Star Education Group owns approximately 2,594 square meters of office and classroom space in Changsha, Hunan Province. As of June 30, 2012, the Little New Star Education Group leased an aggregate over 10,000 square meters of office and classroom space in Changsha and Datong.

Wentai Education and Wentai Investment own approximately 4,100 square meters of office and dormitory space in Shenzhen and Dongguan. As of June 30, 2012, Wentai Education and Wentai Investment leased an aggregate of approximately 131,000 square meters of office, classroom and dormitory space in Dongguan, Huizhou, Foshan, Guangzhou, Changsha and Shenzhen.

As of the date of this annual report, Yuanbo Education leased an aggregate of over 55,000 square meters of office, classroom and dormitory space in Jiaxing, Shanghai, Wuxi, Shaoxing, Haining, Tongxiang and Huangshan.

Item 4A. Unresolved Staff Comments

None.

Item 5.    Operating and Financial Review and Prospects

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this annual report on Form 20-F. This discussion and analysis may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Item 3. Key Information—D. Risk Factors” or in other parts of this annual report on Form 20-F.

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A.Operating Results

Overview

Our net revenue was RMB39.9 million, RMB93.5 million and RMB163.0 million (US$25.7 million) in the fiscal years ended June 30, 2010, 2011 and 2012, respectively. In the fiscal year ended June 30, 2010, we had a net income of RMB5.7 million and a net income attributable to the Company of RMB5.7 million. In the fiscal year ended June 30, 2011, we had a net loss of RMB408.0 million and a net loss attributable to the Company of RMB411.3 million. In the fiscal year ended June 30, 2012, we had a net loss of RMB47.9 million (US$7.5 million) and a net loss attributable to the Company of RMB53.8 million (US$8.5 million).

Acquisitions

In July 2009, we acquired 100% of the equity interest in the Little New Star Education Group, which was mainly comprised of Animation Digital and Leisen Education, through a series of transactions, including the acquisition of 100% equity interest in Animation Digital through acquiring its sole shareholder Global Ring and Noah Zhi Yuan’s acquisition of the 100% equity interest in Leisen Education. The total consideration of the acquisition of the Little New Star Education Group was RMB53.0 million (US$8.3 million) in cash and 2,647,743 ordinary shares of Noah Education Holdings Ltd. As of the date of this annual report, we have fully paid the consideration. The Little New Star Education Group operates a nationwide training network to provide English training to children, which consists of 13 directly-owned training centers in Changsha and Datong and over 500 franchised training centers across China. As of June 30, 2012, the Little New Star Education Group had approximately 4,700 student enrollments in directly-owned training centers and kindergartens. The professional teaching team in directly-owned training centers and kindergartens consisted of approximately 180 teachers.

In March, April and June 2010, our wholly-owned subsidiary, Noah Education, entered into a series of agreements to acquire Wentai Education. In July 2010, we completed the acquisition of a 70% equity interest in Wentai Education through a series of transactions, including the acquisition of a 40% equity interest in Wentai Education for a total consideration of RMB36.0 million (US$5.7 million), as well as contribution of RMB30.0 million (US$4.7 million) to Wentai Education’s registered capital and contribution of RMB60.0 million (US$9.4 million) to Wentai Education’s capital reserves for an additional 30% equity interest. As of the date of this annual report, we have paid RMB36.0 million (US$5.7 million) to Wentai Education’s former shareholders and have contributed RMB90.0 million (US$14.2 million) to Wentai Education’s capital.

In April, May and July 2011, Noah Education entered into a series of agreements to acquire Yuanbo Education. In July 2011, we completed the acquisition of an 80% interest in Yuanbo Education through a series of transactions, including the acquisition of a 67.2% equity interest in Yuanbo Education for a total consideration of approximately RMB48.6 million (US$7.6 million), as well as contribution of approximately RMB8.96 million (US$1.4 million) to Yuanbo Education’s registered capital and contribution of approximately RMB37.3 million (US$5.9 million) to Yuanbo Education’s capital reserves for an additional 12.8% equity interest. As of the date of this annual report, we have paid RMB33.6 million (US$5.3 million) to Yuanbo Education’s former shareholders and have contributed RMB46.3 million (US$7.3 million) to Yuanbo Education’s capital. We will pay the remaining consideration of RMB15.0 million (US$2.4 million) in fiscal 2013 and 2014 according to the terms and conditions set forth in the investment agreement.

In August 2012, Yuanbo Education entered into an investment agreement, an equity transfer agreement and a supplementary agreement to the investment agreement to acquire a 100% equity interest in four kindergartens and one early childhood learning center from DDK Consulting, for a total consideration of RMB14.5 million (US$2.3 million). The transaction is expected to close by November 2012, subject to regulatory approvals and other customary closing conditions. As of the date of this annual report, we have paid RMB1.5 million (US$0.2 million) to the former shareholders of DDK Consulting and will pay the remaining consideration of RMB13.0 million (US$2.1 million) in fiscal years 2013 and 2014 according to the terms and conditions set forth in the supplementary agreement to investment agreement, such as satisfaction of certain financial criteria during a specified period.

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In August 2012, Yuanbo Education entered into an investment agreement and an equity transfer agreement to acquire a 100% equity interest in Xiaoxiao Consulting for a total consideration of RMB33.6 million (US$5.3 million). The transaction is expected to close by November 2012, subject to regulatory approvals and other customary closing conditions. As of the date of this annual report, we have paid RMB3.4 million (US$0.5 million) to the former shareholder of Xiaoxiao Consulting and will pay the remaining consideration of RMB30.2 million (US$4.8 million) in fiscal years 2013, 2014 and 2015 according to the terms and conditions set forth in the investment agreement, such as satisfaction of certain financial criteria during specified periods.

Divestiture

In March 2011, we entered into a stock purchase agreement to sell our ELP business and certain target assets to First Win for a consideration of RMB100.0 million (US$15.7 million), which is subject to certain adjustments. In June 2011, the stock purchase agreement was amended to simplify the purchase price adjustment mechanism. The sale was completed in June 2011.

We received the initial installment of the U.S. dollar equivalent of RMB40 million (US$6.3 million) in April 2011, the second installment of RMB17.5 million (US$2.8 million) in July 2011 and the final installment of RMB30.0 million (US$4.7 million) in October 2011. We have released the shares pledged by Mr. Tang as security for his payment obligations under the stock purchase agreement. First Win has assumed responsibility for the operation of the ELP business since April 1, 2011, including earnings or losses of the ELP business during the interim period between signing and closing.

Factors Affecting Our Results of Operations

Market Demand

In 1986, the PRC government began requiring each child to have at least nine years of compulsory formal education. Chinese culture’s emphasis on education and the PRC government’s one-child policy have generally resulted in Chinese families investing a substantial amount of their financial resources in their only child’s education. According to a report published by Sohu.com in January 2010, demand for kindergarten and primary education has experienced a sharp rise. Approximately 46% of the respondents said that they would send their children into private schools, while less than 20% of the respondents have totally ruled out private schools. Expenditure on pre-school and primary education has become a major household spending category in China. The report shows that over half of the families surveyed spend over RMB500 per month on pre-school education, and approximately 25% of families spend an average of over RMB1,000. With respect to children studying in primary and secondary schools, family spending on after-school classes increases as children advance in formal schooling. Approximately 40% of families spending on after-school classes spend an average of over RMB1,000 on those classes compared to 26% spending RMB500 to RMB1,000 and 13% spending less than RMB200.

Education Services Rendered

We commenced business in 1999 focusing on the design, production and distribution of translation devices. In July 2004, we substantially completed our reorganization and began focusing on developing and delivering interactive education content. In June 2011, we divested our ELP business in order to focus more attention on pursuing growth opportunities in the more stable and higher-margin education services business. We operate and manage high-end kindergartens and primary and secondary schools, and provide English language training services to children aged between three to 12 through our directly owned and franchised training centers. As of June 30, 2012, our kindergarten network consisted of 34 kindergartens with a total student enrollment of over 9,100 and approximately 1,100 teachers and staff members. Wentai Investment, our consolidated affiliated entity, operated and managed four secondary schools and one primary school with a total student enrollment of approximately 4,000 and approximately 370 teachers and staff members. Our supplemental English language training services are conducted through our 13 directly-owned training centers in Changsha and Datong and over 500 franchised training centers across China. In August 2012, Yuanbo Education entered into a series of agreements to acquire a 100% equity interest in four kindergartens and one early childhood learning center from DDK Consulting and a 100% equity interest in Xiaoxiao Consulting, which operates six kindergartens and one children’s arts and music training center. The two transactions are expected to close by November 2012, subject to regulatory approvals and other customary closing conditions. We plan to combine our English language training services and early childhood, primary and secondary education services and to develop a comprehensive education services business.

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We recognize revenues from tuition fees for enrollment in our English training to children and in kindergartens, private primary and secondary schools. Tuition fees are generally paid in advance by students. The prepaid tuition fees are recorded as deferred revenue upon receiving the upfront cash payments, and recognized as revenue ratably over the course of the tuition programs. We also generate revenue by franchising schools under the brand name of Little New Star. Initial franchise fee represents provision of initial setup services. Initial franchise fee is recognized as revenue upon the opening of the schools as the initial franchising fees are non-refundable and we does not have significant continuing obligations related to the initial franchising fee after the schools are opened. We provide continuing supporting services to the franchise schools, including marketing and advertising services. The continuing support fee is received upfront and the revenue is deferred and evenly recognized over the life period of the continuing supporting service agreement. Our teaching materials consist of textbooks and assisting teaching books. We consider our customers to be the franchised school operators and do not sell directly to end-users. Revenue from teaching materials is generally recognized when goods are delivered and title has passed to the franchised school operators and collectability is reasonably assured. No refund or return is allowed upon delivery of teaching materials to the franchised schools. The most significant factors that directly affect our revenues are the number of student enrollments and the amount of tuition fees. The number of student enrollments is affected by the market demand, the effectiveness of our marketing and brand promotion, the demographic composition of the cities where we have kindergartens, schools and training centers, our ability to respond to competitive pressure, as well as seasonal factors. We determine tuition fees primarily based on the market demand, the targeted market, the geographic location, cost of services, and the tuition fees charged by our competitors for the same or similar programs.

Seasonality

Enrollments in our English training courses tend to peak during summer and winter semester breaks, which occur in the third and the first calendar quarters, respectively. On the contrary, our kindergartens, primary and secondary schools operate throughout the year except for the summer and winter breaks.

Economic Environment

China’s high-growth, fragmented and underpenetrated education services market continues to offer a wealth of opportunities to generate healthy margins, high visibility and recurring cash flow. We therefore believe the after-school and private education market has the potential to grow significantly in the long-term. As such, we will continue to leverage our extensive industry experience and strong cash balance to pursue organic and acquisitive growth within this space.

Our Results of Operations

Net Revenue, Cost of Revenue and Gross Profit

The following table sets forth our net revenue, cost of revenue and gross profit for the periods indicated, and the amount and percentage change between periods.

	Year Ended June 30,
	2010			2010 to 2011 Change		2011			2011 to 2012 Change		2012
	(RMB)			(%)		(RMB)			(%)		(RMB)			(US$)
	(in thousands, except percentages)
Continuing operations(1)
Net revenue		39,898			134.3		93,475			74.4		163,022			25,660
Cost of revenue		(18,494	)		134.3		(43,326	)		99.4		(86,377	)		(13,596	)
Gross profit		21,404			134.3		50,149			52.8		76,645			12,064

(1) Following the disposal of our ELP business in June 2011, the ELP business was reclassified to discontinued operation for the fiscal year ended June 30, 2011 and the comparative figures for the fiscal year ended June 30, 2010 was retrospectively reclassified to discontinued operation. For a detailed description of the disposal, see “Item 7. Major Shareholders and Related Party Transactions – Transactions with Benguo Tang.”

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The following table sets forth our net revenue, cost of revenue and gross profit, as a percentage of net revenue, for the periods indicated.

	Year Ended June 30,
	2010		2011		2012
		(%)		(%)		(%)
Continuing operations(1)
Net revenue		100.0		100		100
Cost of revenue		46.4		46.3		53.0
Gross profit		53.6		53.7		47.0

(1) Following the disposal of our ELP business in June 2011, the ELP business was reclassified to discontinued operation for the fiscal year ended June 30, 2011 and the comparative figures for the fiscal year ended June 30, 2010 was retrospectively reclassified to discontinued operation. For a detailed description of the disposal, see “Item 7. Major Shareholders and Related Party Transactions – Transactions with Benguo Tang.”

We operate and manage our business in three operating segments, Little New Star Education, Wentai Education and Yuanbo Education. Little New Star segment mainly provides English language training services to children through its directly-owned training centers and franchised training centers based in Changsha. Wentai segment mainly focuses on providing early childhood, primary and secondary education services in the PRC. Yuanbo segment mainly focuses on providing early childhood education service in the PRC.

The table below sets forth the revenue from our three operating segments in the periods indicated.

	Year Ended June 30,
	2010		2011		2012
	(RMB)		(RMB)		(RMB)		(US$)
	(in thousands)
Little New Star		39,898		41,591		48,028		7,560
Wentai		-		51,884		80,684		12,700
Yuanbo		-		-		34,310		5,400
Total Revenue		39,898		93,475		163,022		25,660

The table below sets forth the revenue from our product groups in the periods indicated.

	Year Ended June 30,
	2010		2011		2012
	(RMB)		(RMB)		(RMB)		(US$)
	(in thousands)
Supplemental English Training		36,069		33,135		35,922		5,654
Kindergartens		3,829		25,958		82,140		12,929
Primary and Secondary Schools		—		34,382		44,960		7,077
Total Revenue		39,898		93,475		163,022		25,660

Net Revenue. Our net revenue represents the invoiced value of our goods sold and services rendered, net of value added taxes, or VAT, and business taxes. We are subject to a VAT rate of 13% on the invoiced value of teaching materials sold and a rate of 17% on the invoiced value of electronic learning devices sold. In addition, we are subject to a 3% business tax on gross revenue generated from services rendered by the Little New Star Education through its training schools. Our kindergartens are also subject to a 5% business tax on gross receipts minus a certain portion exempt from business tax as permitted by the PRC tax laws.

Our ELP business was disposed of in June 2011 and is reclassified as a discontinued operation. As a result, our revenue in fiscal 2010 and fiscal 2011 has been recast to remove the net revenue generated from the ELP business.

Net revenue increased by 74.4% from RMB93.5 million in fiscal 2011 to RMB163.0 million(US$25.7 million) in fiscal 2012 primarily due to the organic and acquisitive growth from kindergartens of Little New Star Education and Yuanbo Education and incremental revenue from the newly opened school operated by Wentai Education.

Net revenue of continuing operation increased by 134.3% from RMB39.9 million in fiscal 2010 to RMB93.5 million in fiscal 2011. The increase was primarily due to revenue contribution from Wentai Education which we acquired in July 2010.

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Cost of Revenue. Cost of revenue consists primarily of labor cost, rental expenses, depreciation and maintenance costs for related equipment, and other operating expenses that are directly attributable to rendering of our operations.

Our ELP business was disposed of in June 2011 and is classified as a discontinued operation. Our cost of revenue in fiscal 2010 and fiscal 2011 has been recast to remove the cost of revenue incurred by the ELP business.

Cost of revenue increased by 99.4% from RMB43.3 million in fiscal 2011 to RMB86.4 million (US$13.6 million) in fiscal 2012 primarily due to incremental cost attributable to the operation of kindergartens owned by Yuanbo Education and the newly opened schools during fiscal 2012.

Cost of revenue of continuing operation increased by 134.3% from RMB18.5 million in fiscal 2010 to RMB43.3 million in fiscal 2011 primarily due to incremental revenue increase realized by Wentai Education which was not present in fiscal 2010.

Operating Expenses

The following table sets forth our operating expenses for the periods indicated and the amount and percentage change between periods.

	Year Ended June 30,
	2010		2010 to 2011 change		2011		2011 to 2012 change			2012
	(RMB)		(%)		(RMB)		(%)			(RMB)		(US$)
	(in thousands, except percentages)
Continuing operations(1)
Research and development expenses		1,879		17.7		2,212		40.3			3,103		488
Sales and marketing expenses		3,391		17.4		3,979		53.2			6,097		960
General and administrative expenses		42,170		55.3		65,469		32.5			86,725		13,651
Other operating expenses		2,862		269.4		10,572		(80.5	)		2,059		324
Impairment loss on goodwill		—		—		—		—			57,394		9,034
Total operating expenses		50,302		63.5		82,232		89.0			155,378		24, 457

(1) Following the disposal of our ELP business in June 2011, the ELP business was reclassified to discontinued operation for the fiscal year ended June 30, 2011 and the comparative figures for the fiscal year ended June 30, 2010 was retrospectively reclassified to discontinued operation. For a detailed description of the disposal, see “Item 7. Major Shareholders and Related Party Transactions – Transactions with Benguo Tang.”

Research and Development Expenses. Research and development expenses consist primarily of remuneration for R&D staff, share-based compensation, depreciation and maintenance expenses relating to R&D equipment and R&D material costs. The 40.3% increase in research and development expenses in fiscal 2012 compared to fiscal 2011 was primarily due to our increasing efforts in developing teaching materials. The 17.7% increase in research and development expenses in fiscal 2011 compared to fiscal 2010 was primarily due to increases in remuneration for R&D staff.

Sales and Marketing Expenses. Sales and marketing expenses consist primarily of advertising costs, remuneration for staff involved in selling and marketing efforts, depreciation, share-based compensation and travel and entertainment expenses. The 53.2% increase in sales and marketing expenses in fiscal 2012 compared to fiscal 2011 was primarily due to increased spending on advertising and promotional activities by Little New Star and Wentai Education to enhance our brand image. As a percentage of net revenue, sales and marketing expenses decreased to 3.7% in fiscal 2012 from 4.3% in fiscal 2011, primarily due to the increase in revenue. The 17.4% increase in sales and marketing expenses in fiscal 2011 compared to fiscal 2010 was primarily due to the RMB0.5 million sales and marketing expenses attributable to Wentai Education. As a percentage of net revenue, sales and marketing expenses decreased to 4.3% in fiscal 2011 from 8.5% in fiscal 2010, primarily due to lower expenditure on advertising and marketing in connection with our education services business.

General and Administrative Expenses. General and administrative expenses consist primarily of employee remuneration, share-based compensation, professional fees, insurance, payroll taxes and benefits, general office expenses and depreciation. The 32.5% increase in general and administrative expenses in fiscal 2012 compared to fiscal 2011 was primarily attributable to incremental expenses of approximately RMB14.0 million associated with the operation of kindergartens by Yuanbo Education and the newly opened school which were not presented in fiscal 2011, as well as an impairment charge on intangible assets of RMB3.0 million incurred in fiscal 2012. The 55.3% increase in general and administrative expenses in fiscal 2011 compared to fiscal 2010 was primarily attributable to a general and administrative expense of RMB18.2 million incurred by Wentai Education, an increase in employee remuneration of RMB3.0 million for the Little New Star Education Group and increases in share-based compensation and travel expenses.

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Impairment loss on goodwill. During the fourth quarter of fiscal 2012, as a result of the effects of weakening market conditions on our forecasts and a sustained, significant decline in our market capitalization to a level lower than our net book value, we concluded that impairment triggering events existed and performed a goodwill impairment analysis. We estimated the fair values of each of our three segments and reporting units, Little New Star Education, Wentai Education and Yuanbo Education, using discounted cash flows under the income approach. We determined the fair value of Yuanbo Education exceeded their carrying amounts by more than 10%. Therefore, no goodwill impairment was recognized on Yuanbo Education. We determined the fair values of Little New Star Education and Wentai Education were less than the carrying value. Accordingly, we compares the implied fair values of Little New Star Education and Wentai Education to their carrying values. To determine their implied fair values, we allocated the fair values of Little New Star Education and Wentai Education to all of their assets and liabilities, including any unrecognized intangible assets. As a result, we recognized an impairment charge of RMB57.4 million (US$9.0 million) for the year ended June 30, 2012.

Other Operating Expenses. Other operating expenses in fiscal 2012 primarily consisted of write-off of doubtful other receivables from third parties. Other operating expenses in fiscal 2011 consisted primarily of legal and professional fees of RMB8.7 million associated with the sale of the ELP business. Other operating expenses in the fiscal year ended June 30, 2010 primarily consisted of a penalty of approximately RMB2.4 million paid to the local government due to the failure of one of our PRC subsidiaries to comply with the capital use requirements.

Other Income Statement Items and Net Income

The following table sets forth other income statement items and net income for the periods indicated, and the amount and percentage change between periods.

	Year Ended June 30,
	2010			2010 to 2011 change			2011			2011 to 2012 change			2012
	(RMB)			%			(RMB)			%			(RMB)			(US$)
	(in thousands, except percentages)
Continuing Operations(1)
Net revenue		39,898			134.3			93,475			74.4			163,022			25,660
Cost of revenue		(18,494	)		134.3			(43,326	)		99.4			(86,377	)		(13,596	)
Gross profit		21,404			134.3			50,149			52.8			76,645			12,064
Total operating expenses		(50,302	)		63.5			(82,232	)		87.2			(155,378	)		(24, 457)
Other operating income		279			1,875.6			5,512			215.5			17,447			2,746
Operating loss		(28,619	)		(7.2	)		(26,571	)		(125.4	)		(61,286	)		(9,647	)
Impairment loss on investment		—	*					(4,409	)		(81.7	)		(809	)		(127	)
Interest income		9,134			(79.4	)		1,880			(25.4	)		1,402			221
Investment income		2,824			290.3			11,022			69.5			18,683			2,941
Other non-operating income (expenses)		5,962			(119.8	)		(1,180	)		(446.5	)		4,762			749
Loss before income tax		(10,699	)		80.0			(19,258	)		91.4			(37,248	)		(5,863	)
Income tax expenses		(164	)		3,692.1			(6,220	)		67.7			(10,431	)		(1,642	)
Net loss from continuing operations		(10,863	)		134.5			(25,478	)		85.6			(47,679	)		(7, 505)
Net income (loss) from discontinued operation		16,523			(2,415.1	)		(382,515	)		—			—			—
Net income (loss) attributable to shareholders of Noah Education Holdings Ltd.		5,660			(7,367.4	)		(411,337	)		(87.1	)		(53,558	)		(8,430	)

* Not meaningful

(1) Following the disposal of our ELP business in June 2011, the ELP business was reclassified to discontinued operation for the fiscal year ended June 30, 2011 and the comparative figures for the fiscal year ended June 30, 2010 was retrospectively reclassified to discontinued operation. For a detailed description of the disposal, see “Item 7. Major Shareholders and Related Party Transactions – Transactions with Benguo Tang.”

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The following table sets forth other income statement items and net income as a percentage of net revenue for the periods indicated.

	Year Ended June 30,
	2010			2011			2012
		(%)			(%)			(%)
Continuing Operations(1)
Net revenue		100.0			100.0			100.0
Gross profit		53.6			53.6			47.0
Total operating expenses		(126.1	)		(88.0	)		(95.3	)
Other operating income		0.7			5.9			10.7
Operating loss		(71.7	)		(28.4	)		(37.6	)
Impairment loss on investment		—			(4.7	)		(0.5	)
Interest income		22.9			2.0			0.9
Investment income		7.1			11.8			11.5
Other non-operating income (expenses)		14.9			(1.3	)		2.9
Loss before income tax		(26.9	)		(20.6	)		(22.8	)
Income tax expenses		(0.4	)		(6.7	)		(6.4	)
Net loss from continuing operations		(27.2	)		(27.3	)		(29.2	)
Net income (loss) from discontinued operations		41.4			(409.2	)		—

(1) Following the disposal of our ELP business in June 2011, the ELP business was reclassified to discontinued operation for the fiscal year ended June 30, 2011 and the comparative figures for the fiscal year ended June 30, 2010 was retrospectively reclassified to discontinued operation. For a detailed description of the disposal, see “Item 7. Major Shareholders and Related Party Transactions – Transactions with Benguo Tang.”

Other Operating Income. Other operating income primarily consists of (1) rental income, (2) government subsidies in relation to refund of VAT to encourage development in the software industry and to encourage private education services, and (3) income from other enhancement programs, such us summer or winter camp, provided by us. Other operating income increased by 216.5% in fiscal 2012 from fiscal 2011 primarily because of increases in rental income and income from summer courses. Other operating income increased by 1,875.6% in fiscal 2011 from fiscal 2010 primarily because of increases in government subsidies and income from other enhancement programs.

Impairment Loss on Investment. We had an impairment loss on investment of RMB0.8 million in fiscal year 2012, reflecting a decline in the fair value of our investment in Series B Preferred B Shares of Franklin Electronic Publisher Inc, as compared with a loss of RMB4.4 million in fiscal year 2011.

Interest Income. Interest income represents interest income from our bank deposits. The 25.4% decrease in interest income in fiscal 2012 was primarily due to a decrease in cash deposit in banks and lower interest rates. The 79.4% decrease in interest income in fiscal 2011 was primarily due to a decrease in cash deposit in banks and lower interest rates on our cash deposit.

Investment Income. Investment income primarily consists of returns from investments with bank financial products and the gain or loss on trading investments. The 69.5% increase in investment income in fiscal 2012 was primarily due to a higher return on financial products during the investment period. The 290.3% increase in investment income in fiscal 2011 was primarily due to increased returns from investment in bank financial products.

Other Non-Operating Income. Other non-operating income consists of foreign exchange gains due to the depreciation of the US dollar and rebates and subsidies received from The Bank of New York Mellon in connection with its appointment as depositary of the ADSs.

Provision for Income Taxes. We are incorporated in the Cayman Islands. Under current law, we are not subject to income or capital gains tax in the Cayman Islands. In addition, dividend payments are not subject to withholding tax in the Cayman Islands. Our British Virgin Islands subsidiary, Bright Sound Limited, is not subject to income or capital gains tax under current law. In addition, dividend payments by Bright Sound are not subject to withholding tax in the British Virgin Islands. Our subsidiaries incorporated in Hong Kong are subject to a profits tax rate of 16.5% of their assessable profits. Payment of dividends by subsidiaries incorporated in Hong Kong is not subject to withholding tax in Hong Kong.

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Our subsidiaries and our variable interest entities in China are subject to income tax at the current rate of 25%. However, some of our subsidiaries and our variable interest entities enjoy lower enterprise income tax rates because of preferential tax treatments. For example, Noah Education enjoyed a preferential tax rate of 22% and 24% in 2010 and 2011, respectively.

The PRC enterprise income tax law that became effective on January 1, 2008 applies a uniform 25% enterprise income tax rate to both foreign invested enterprises and domestic enterprises. Companies are required to transition to the new enterprise income tax rate during a five-year transition period. Any enterprise that was granted certain concessions will continue to enjoy such tax concessions until expiration of the tax preferences under the old income tax law, regulations and other relevant provisions. Furthermore, the PRC enterprise income tax law also provides that a “resident enterprise,” which includes an enterprise established outside of China with “de facto management bodies” located in China, will be subject to PRC income tax. According to the enterprise income tax law, the term “de facto management bodies” therein refers to those bodies that exercise substantial and overall management and control over the production, operation, personnel, accounting and properties of enterprises. However, the enterprise income tax law does not clearly provide which conducts will be regarded as substantial and overall management and control. Because substantially all of our management are currently located in China, we and our offshore subsidiaries may be considered PRC resident enterprises and therefore be subject to the PRC enterprise income tax at the rate of 25% on our worldwide income. This may increase our tax expenses and adversely affect our results of operations. In addition, the new tax law eliminates the exemption of enterprise income tax on dividends derived by foreign investors from foreign invested enterprises and imposes on PRC enterprises an obligation to withhold tax on dividend distributions to foreign investors. Unless the relevant tax treaties entered into by China otherwise provide, under the new tax law, 10% withholding tax is applied to the dividends distributed to foreign investors by PRC enterprises, provided that such foreign investors have not been regarded as resident enterprises by the PRC taxation authorities. According to the relevant treaties between China and Hong Kong, 5% withholding tax is applied to the dividends distributed to Hong Kong investors by PRC enterprises if such Hong Kong investors hold no less than 25% of equity interest in such PRC enterprises. So we expect that 10% or 5% withholding tax will apply to dividends distributed by our subsidiaries in China to their non-PRC shareholders, as the case may be, but this treatment will depend on the status of their non-PRC shareholders as non-resident enterprises.

Our effective tax rate for the fiscal year ended June 30, 2010, 2011 and 2012 was 1.5%, 32.3% and 28.3%, respectively.

Net Loss

As a result of the forgoing factors, we had a net loss of RMB10.9 million, RMB25.5 million and RMB47.7 million (US$7.5 million) for the fiscal years ended June 30, 2010, 2011 and 2012, respectively.

Net Income (Loss) from Discontinued Operations

In June 2011, we disposed of our ELP business for a consideration of RMB100.0 million (US$15.7 million subject to certain adjustments. We recorded a net loss of RMB382.5 million from discontinued operations in fiscal 2011, which comprised:

· an RMB149.3 million loss from discontinued operations for the period through the date of disposal;

· an RMB162.7 million impairment loss on account receivables;

· an RMB82.4 million impairment loss on inventory; and

· an RMB11.9 million gain on disposal of discontinued operations.

Our net income from discontinued operations was RMB16.5 million in fiscal 2010.

Critical Accounting Policies

Our consolidated financial information has been prepared in accordance with generally accepted accounting principles in the United States, which require us to make judgments, estimates and assumptions that affect (1) the reported amounts of our assets and liabilities, (2) the disclosure of our contingent assets and liabilities at the end of each fiscal period and (3) the reported amounts of revenues and expenses during each fiscal period. We continually evaluate these estimates based on our own historical experience, knowledge and assessment of current business and other conditions, our expectations regarding the future based on available information and reasonable assumptions, which together form our basis for making judgments about matters that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates. Some of our accounting policies require a higher degree of judgment than others in their application.

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When reviewing our financial statements, you should consider (1) our selection of critical accounting policies, (2) the judgment and other uncertainties affecting the application of those policies, and (3) the sensitivity of reported results to changes in conditions and assumptions. We believe the following accounting policies involve the most significant judgment and estimates used in the preparation of our financial statements.

Goodwill

The excess of the purchase price over the fair value of net assets acquired is recorded on the consolidated balance sheet as goodwill. Goodwill is not amortized, but is tested for impairment at the reporting unit level at least on an annual basis at the balance sheet date or more frequently if certain indicators arise.

Goodwill impairment is tested using a two-step approach. The first step compares the fair value of each reporting unit to its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and the second step is not required. If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of goodwill to the carrying value of the reporting unit's goodwill. The implied fair value of goodwill is determined in a manner similar to accounting for a business combination with allocation of the assessed fair value determined in the first step to the assets and liabilities of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. This allocation process is only performed for the purpose of evaluating goodwill impairment and does not result in an entry to implied fair value of goodwill.

We typically perform our annual goodwill impairment test at year-end. During the fourth quarter of fiscal 2012, as a result of the effects of weakening market conditions on our forecasts and a sustained, significant decline in our market capitalization to a level lower than our net book value, we concluded that impairment triggering events existed and performed a goodwill impairment analysis.

We have three operating segments and three reporting units, namely, Little New Star Education, Wentai Education and Yuanbo Education. We estimated the fair values of our reporting units using discounted cash flows under the income approach. Use of the income approach requires significant management judgment and estimates, including key assumptions used in forecasts of future operating results, discount rates, and expected future growth rates.

Business Combinations

Business combinations are recorded using the acquisition method of accounting. On July 1, 2009, we adopted a new accounting pronouncement with prospective application which made certain changes to the previous authoritative literature on business combinations. From July 1, 2009, the assets acquired, the liabilities assumed, and any non-controlling interest of the acquiree at the acquisition date, if any, are measured at their fair values as of that date. Goodwill is recognized and measured as the excess of the total consideration transferred plus the fair value of any non-controlling interest of the acquiree, if any, at the acquisition date over the fair values of the identifiable net assets acquired. Previously, any non-controlling interest was reflected at historical cost. Common forms of the consideration made in acquisitions include cash and common equity instruments. Consideration transferred in a business combination is measured at the fair value as of the date of acquisition. For shares issued in a business combination, we have estimated the fair value as of the date of acquisition.

Where the consideration in an acquisition includes contingent consideration, the payment of which depends on the achievement of certain specified conditions post-acquisition, from July 1, 2009 the contingent consideration is recognized and measured at its fair value at the acquisition date and if recorded as a liability, it is subsequently carried at fair value with changes in fair value reflected in the consolidated statements of operations. For business acquired in the periods prior to July 1, 2009, contingent consideration was not recorded until the contingency was resolved.

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Holding Company Structure

We are a holding company with no material operations of our own. We conduct our operations primarily through our subsidiaries in China. As a result, our ability to pay dividends and to finance any debt we may incur depends upon dividends paid by our subsidiaries. If our subsidiaries or any newly formed subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, our subsidiaries are permitted to pay dividends to us only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Under the PRC laws, each of our subsidiaries is required to set aside at least 10% of its after-tax profits whenever dividends are declared by the subsidiaries, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital, and each of our subsidiaries with foreign investment is also required to further set aside a portion of its after-tax profits to fund the employee welfare fund at the discretion of the board. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation of these subsidiaries.

Recently Issued Accounting Pronouncements

On June 16, 2011, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, which revised the manner in which entities present comprehensive income in their financial statements. The new guidance removes the presentation options in ASC 220, Comprehensive Income, and requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. The ASU does not change the items that must be reported in other comprehensive income. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, with early adoption permitted. At this time, there is no impact expected to our financial statements as a result of the change in presentation and we will adopt the new presentation in our fiscal year 2013 filings.

On December 23, 2011, the FASB issued ASU 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05, which defers certain provisions of ASU 2011-05 including the indefinite deferral until further deliberation of the requirement for entities to present reclassification adjustments out of accumulated other comprehensive income by component in both the statement in which net income is presented and the statement in which other comprehensive income is presented (for both interim and annual financial statements). The FASB also decided that during the deferral period, entities would be required to comply with all existing requirements for reclassification adjustments in ASC 220, which indicates that “an entity may display reclassification adjustments on the face of the financial statement in which comprehensive income is reported, or it may disclose reclassification adjustments in the notes to the financial statements.” The effective date for public entities is for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011. In light of this deferral, we will continue to disclose certain reclassifications out of accumulated other comprehensive income as proscribed by the existing literature and we will adopt the other provisions of ASU 2011-05 within our fiscal year 2013 filings.

On July 27, 2012, the FASB issued ASU 2012-02, Intangibles - Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment, which amended the guidance in ASC 350-30 on testing indefinite-lived intangible assets, other than goodwill, for impairment. The FASB issued the ASU in response to feedback on ASU 2011-08 which amended the goodwill impairment testing requirements by allowing an entity to perform a qualitative impairment assessment before proceeding to the two-step impairment test. Similarly, under ASU 2012-02, an entity testing an indefinite-lived intangible asset for impairment has the option of performing a qualitative assessment before calculating the fair value of the asset. If the entity determines, on the basis of qualitative factors, that the fair value of the indefinite-lived intangible asset is not more likely than not (i.e., a likelihood of more than 50%) impaired, the entity would not need to calculate the fair value of the asset. The ASU did not revise the requirement to test indefinite-lived intangible assets annually for impairment. In addition, the ASU does not amend the requirement to test these assets for impairment between annual tests if there is a change in events or circumstances; however, it does revise the examples of events and circumstances that an entity should consider in interim periods. ASU 2012-02 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted and we plan to adopt this ASU as part of our fiscal 2013 annual impairment test. We do not expect to have any impact to our financial statements as a result of adopting this provision.

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B.Liquidity and Capital Resources

Cash Flows and Working Capital

Our principal sources of liquidity are our cash and cash equivalents, which comprise primarily of the proceeds from our initial public offering, as well as the cash flow generated from our operations. As of June 30, 2012, we had cash and cash equivalents of RMB501.8 million (US$79.0 million), compared to RMB405.9 million as of June 30, 2011.

The following table sets forth a summary of our cash flows for the periods indicated.

	Year Ended June 30,
	2010	2011	2012
	(RMB)	(RMB)	(RMB)	(US$)
	(in thousands)
Net cash (used in)/provided by operating activities	(104,125)	(26,410)	43,219	6,803
Net cash (used in)/provided by investing activities	156,848	(49,007)	55,817	8,786
Net cash (used in)/provided by financing activities	(35,192)	(19,518)	368	58
Net increase (decrease) in cash and cash equivalents	17,531	(94,935)	99,404	15,647
Effect of exchange rate changes on cash and cash equivalents	(4,714)	(5,918)	(3,506)	(552)
Cash and cash equivalents at beginning of period	493,911	506,728	405,875	63,887
Cash and cash equivalents at end of period	506,728	405,875	501,773	78,982

Operating Activities

Net cash provided by operating activities was RMB43.2 million (US$6.8 million) in fiscal 2012 compared to net cash used in operating activities of RMB26.4 million in fiscal 2011, primarily driven by increased tuition fees and franchised fees collected from our kindergarten and school operations in fiscal 2012. Our net revenue increased by 74.4% from RMB93.5 million in fiscal 2011 to RMB163.0 million (US$25.7 million) in fiscal 2012. Cash generated from other operating income also increased by 215.4% from RMB5.5 million to RMB17.4 million (US$2.7 million). Our cost of revenue and cash operating expenses increased by 63.6% from RMB90.1 million to RMB147.4 million (US$23.2 million). However, our other payables and accruals decreased RMB10.0 million (US$1.6 million) primarily due to payment of consideration for the acquisition of Little New Star Education and Wentai Education of RMB6.1 million (US$1.0 million) and payment of taxes of RMB1.5 million (US$0.2 million). In addition, our prepaid expenses and other current assets increased RMB5.9 million (US$0.9 million) due to advances associated with construction of new schools and kindergartens.

Net cash used in operating activities was RMB26.4 million in fiscal 2011 compared to net cash used in operating activities of RMB104.1 million in fiscal 2010, primarily resulting from cash paid to ELP products suppliers in fiscal 2011 prior to the divestment of our ELP business. Our net revenue increased by 134.3% from RMB39.9 million in fiscal 2010 to RMB93.5 million in fiscal 2011, while our cost of revenue and cash operating expense only increased by 60.0% from RMB56.3 million to RMB90.1 million. However, our accounts payables decreased RMB63.4 million due to cash paid to ELP products suppliers in fiscal 2011 prior to the divestment of our ELP business, and other payables and accruals decreased RMB26.7 million due to the payment of consideration for the acquisition of Little New Star Education of RMB20.6 million.

We believe cash generated from our operating activities is affected by various factors, such as the number of student enrollments, the amount of course fees and our operating costs and expenses. See “—Factors Affecting Our Results of Operations.”

Investing Activities

Net cash provided by investing activities was RMB55.8 million (US$8.8 million) in fiscal 2012 compared to net cash used in investing activities of RMB49.0 million in fiscal 2010. Net cash provided by our investing activities in fiscal 2012 primarily resulted from the final installment of proceeds of RMB47.5 million related to our disposal of the ELP business, decrease in held-to-maturity investment of RMB29.5 million and decrease in short-term fixed deposits of RMB32.0 million, partially offset by payment for acquisition of Yuanbo Education of RMB25.1 million and purchases of property, plant and equipment of RMB27.1 million.

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Net cash used in investing activities was RMB49.0 million in fiscal 2011 compared to net cash provided by investing activities of RMB156.8 million in fiscal 2010. Net cash used in our investing activities in fiscal 2011 primarily resulted from acquisition of Wentai Education of RMB35.3 million and purchase of held-to-maturity investment of RMB44.0 million.

We fund our capital expenditures primarily using cash generated from our operating activities and net proceeds received from our initial public offering. See “—Capital Expenditures.”

Financing Activities

Net cash provided by financing activities was RMB0.4 million (US$0.1 million) in fiscal 2012 compared to net cash used in financing activities of RMB19.5 million in fiscal 2011. Net cash provided by our financing activities in fiscal 2012 primarily resulted from proceeds of RMB1.6 million (US$0.2 million) from the exercise of options by our employees in fiscal 2012.

Net cash used in financing activities was RMB19.5 million in fiscal 2011 compared to net cash used in financing activities of RMB35.2 million in fiscal 2010. Net cash used in our financing activities in fiscal 2011 primarily resulted from repurchase of our ADSs of RMB18.4 million in fiscal 2011.

Restrictions on Cash Dividends

We are a holding company incorporated in the Cayman Islands. We rely on dividends from our subsidiaries in China to fund our payment of dividends, if any, to our shareholders. Current PRC regulations permit our subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, each of our subsidiaries in China is required to set aside a certain amount of its accumulated after-tax profits each year, if any, to fund certain statutory reserves. These reserves may not be distributed as cash dividends. The total amount of the restricted capital and reserves as of June 30, 2011 and 2012 amounted to RMB494.1 million and RMB583.7 million (US$91.9 million), respectively. Further, if our subsidiaries in China incur debt on their own behalf, the instruments governing the debt may restrict their ability to pay dividends or make other payments to us. Furthermore, the PRC enterprise income tax law that became effective on January 1, 2008 eliminates the exemption of enterprise income tax on dividend derived by foreign investors from foreign invested enterprises and imposes on our subsidiaries in China an obligation to withhold tax on dividend distributions to their non-PRC shareholders, provided that such non-PRC shareholders are not classified as resident enterprises.

Borrowings

As of the June 30, 2012, we did not have any short-term or long-term borrowings.

Capital Expenditures

In the fiscal year ended June 30, 2012, our capital expenditures mainly included (1) RMB25.1 million (US$4.0 million) paid as consideration for the acquisition of Yuanbo Education and (2) RMB27.3 million (US$4.3 million) used to purchase property, plant and equipment.

We expect our capital expenditures in the fiscal year ended June 30, 2013 to include (1) payment for the remaining cash consideration of RMB7.3 million (US$1.1 million) for the acquisition of Yuanbo Education, (2) RMB35.5 million (US$5.6 million) for the acquisition of DDK Consulting and Xiaoxiao Consulting and (3) RMB25.0 million (US$3.9 million) to acquire fixed assets.

We fund our capital expenditures primarily using cash generated from our operating activities and net proceeds received from our initial public offering. We believe that our current cash and cash equivalents and anticipated cash flow from operations will be sufficient to meet our anticipated cash needs, including our cash needs for working capital and capital expenditures for at least the next 12 months. We may, however, require additional cash due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If our existing cash is insufficient to meet our requirements, we may seek to sell additional equity securities, debt securities or borrow from lending institutions. We cannot assure you that financing will be available in the amounts we need or on terms acceptable to us, if at all. The sale of additional equity securities, including convertible debt securities, would dilute our shareholders. The incurrence of debt would divert cash for working capital and capital expenditures to service debt obligations and could result in operating and financial covenants that restrict our operations and our ability to pay dividends to our shareholders. If we are unable to obtain additional equity or debt financing as required, our business operations and prospects may suffer.

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C.Research and Development, Patents and Licenses, Etc.

Our competitive advantage in technology was key to our past success. We intend to continue to focus a significant amount of our resources on our research and development effort for our education services business. Currently, our research and development effort is focused on developing premium English teaching methodologies and teaching materials for children aged between 3 and 12. We expect to expand our research and development efforts in developing and enhancing our school and kindergarten information management systems in the future.

Our research and development expenses were RMB1.9 million, RMB2.2 million and RMB3.1 million (US$0.5 million) for the fiscal years ended June 30, 2010, 2011 and 2012, respectively.

D.Trend Information

Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the period from July 1, 2011 to June 30, 2012 that are reasonably likely to have a material adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.

E.Off-Balance Sheet Arrangements

We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity, or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us. Tabular Disclosure of Contractual Obligations

The following table sets forth our contractual obligations and commercial commitments as of June 30, 2012:

	Payment Due by June 30,
	Total		2013		2014		2015		2016		2017		Thereafter
	(in thousands of RMB)
Operating lease obligations		66,472		8,328		7,509		5,561		5,405		5,035		34,634
Management fee		107,112		5,006		5,182		3,213		2,899		5,212		85,600
Total		173,584		13,334		12,691		8,774		8,304		10,247		120,234

Other than the contractual obligations and commercial commitments set forth above, we did not have any other long-term debt obligations, operating lease obligations, capital commitments, purchase obligations or other long-term liabilities as of June 30, 2012.

F.Safe Harbor

This annual report contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historical facts are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements.

You can identify these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “is expected to,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “is/are likely to” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include:

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· our anticipated growth strategies;

· our future business development, results of operations and financial condition;

· expected changes in our revenues and certain cost and expense items;

· our ability to expand our content, attract customers and leverage our brands;

· our ability to manage growth;

· trends and competition in the interactive educational content industry; and

· fluctuations in general economic and business conditions in China.

You should read thoroughly this annual report and the documents that we refer to herein with the understanding that our actual future results may be materially different from and/or worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements. Other sections of this annual report include additional factors which could adversely impact our business and financial performance. Moreover, we operate in an evolving environment. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. The forward-looking statements made in this annual report relate only to events or information as of the date on which the statements are made in this annual report. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Item 6.    Directors, Senior Management and Employees

A.Directors and Senior Management

The following table sets forth information regarding our executive officers and directors as of the date of this annual report.

Name	Age	Position/Title
Dong Xu	46	Chairman, Chief Strategy Officer and Acting Chief Executive Officer
Xiaotong Wang	50	Director
Qicai Du	55	Director
Xiao Chen	49	Independent Director
Conrad Kwong Yue Tsang	40	Independent Director
Benzhong Wang	73	Independent Director
Shengli Zheng	69	Independent Director
Dora Li	44	Chief Financial Officer
Tianming Du	62	Vice President
Xu Qin	36	Company Secretary and Vice President

Mr. Dong Xu is a founder of our company and serves as the chairman of our board. Mr. Xu has served as our chief strategy officer since April 1, 2011 and our acting chief executive officer since January 1, 2012. Mr. Xu is also the founder, 100% owner of Leisen Education and 70% owner of Wentai Investment. Mr. Xu served as our chief executive officer from April 2004 to March 2011. In April 2004, Mr. Xu helped form our company to market and distribute advanced interactive educational content. From 1999 to 2004, Mr. Xu was an executive officer of Noah Industrial, which focused on the design, production and distribution of translation devices. From 1995 to 1999, Mr. Xu served as vice president of sales of Tibet Medicine Company. From 1991 to 1995, Mr. Xu served as a manager of the Shenzhen Branch of Chengdu Enwei Group. He has a bachelor’s degree in engineering physics and an EMBA degree from Tsinghua University, China.

Mr. Xiaotong Wang is a founder of our company and serves as a member of our board of directors. Outside our group, Mr. Wang also serves as a director of Shenzhen Shitiku Internet Technology Co., Ltd. and Noah Industrial. In April 2004, Mr. Wang helped form our company to market and distribute advanced interactive educational content. From 1999 to 2004, Mr. Wang was an executive officer of Noah Industrial, which focused on the design, production and distribution of translation devices. From 1996 to 1998, Mr. Wang served as a vice general manager of Hubei Xiangfan Tianhui Medical Instrument Company Limited. Prior to that, Mr. Wang served as a senior engineer and manager in Yimeida Electronic Co., Ltd. and was primarily responsible for electronic products and software. Mr. Wang has a master’s degree in precision instruments from Tianjin University, China.

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Mr. Qicai Du has served as a member of our board since January 1, 2012. He has also served as the general manager of Wentai Education since 2002 and the general manager and vice president of Zhongda Foundation since 2008. Mr. Du was the founder of Wentai Education and possesses experience in investment management in education business. Mr. Du obtained a bachelor’s degree in education in 1982 and a master’s degree in education in 1987 from South China Normal University.

Dr. Xiao Chen has served as our independent director since June 2007. Dr. Chen is currently a professor at the Department of Accounting, School of Economics and Management, Tsinghua University, China, where he served in various capacities since 1997. Dr. Chen’s research interests include accounting and capital markets, corporate governance, international taxation, taxation and business strategy, and business valuation. Dr. Chen is a board member of the China Accounting Society and the China Taxation Society. He currently serves as an independent director for China First Chemical Holdings Ltd., a company listed on the Hong Kong Stock Exchange, and Changyou.com Ltd., a NASDAQ-listed company. Dr. Chen received a bachelor in engineering degree in engineering from the Wuhan Institute of Chemical Engineering, China, a master in management engineering degree from the University of Science and Technology of China, and a Ph.D. in economics from Tulane University.

Mr. Conrad Kwong Yue Tsang has served as our independent director since October 2007. Mr. Tsang is currently a managing director with Baring Private Equity Asia, where he has led or participated in seventeen of the firm’s investments primarily in Greater China since joining the firm in 2000. He is currently the Vice Chairman of Hong Kong Venture Capital and Private Equity Association. Mr. Tsang also currently serves on the boards of Minsheng Education, Kangda International Holding Limited, and Towona Media Holding Company Limited. From 1998 to 1999, Mr. Tsang was with the Equity Research Department of Merrill Lynch (Asia Pacific) Limited, covering the regional media and Hong Kong retail sectors. Prior to that, he was with Peregrine Fixed Income Limited. Mr. Tsang received his master’s degree in management studies from the University of Oxford, United Kingdom. He graduated from Imperial College of Science, Technology and Medicine, University of London, United Kingdom with a first class honors degree in electrical and electronic engineering.

Mr. Benzhong Wang has served as our independent director since October 2008. Mr. Wang’s current roles include director at the Chinese Society of Education, which he has held since 2007, director at China Educational Technology Association since 2004, chairman of the National High School Principal Association, and vice president of the China Education Society’s National Research Center for Computer Education and honorary chairman at the Society’s Primary and Secondary School Information Technology Professional Committee since 1982. He was the principal and legal representative of the Beijing Concord College of Sino-Canada (BCCSC). Prior to joining BCCSC, Mr. Wang held various positions at The Experimental High School affiliated with Beijing Normal University since 1963. Mr. Wang has a bachelor’s degree in mathematics from Beijing Normal University.

Mr. Shengli Zheng has served as our independent director since October 2008. Mr. Zheng had over 15 years of experience in teaching and research at the Department of Computer Science, Peking University, China until 1984. Mr. Zheng is currently a professor at the Law School, secretary general of the Intellectual Property Law Faculty and director of the Law and Order Research Center at Peking University in China. Mr. Zheng is also the managing president of the Intellectual Property Association of China Colleges and an international arbitrator at the arbitration center of World Intellectual Property Organization. Mr. Zheng has a bachelor’s degree in atmospheric physics from Peking University, China.

Ms. Dora Li has served as our chief financial officer since April 1, 2011. Ms. Li served as our vice president of finance from September 2009 to March 2011. Ms. Li served as our acting chief financial officer and chief financial officer from June 2008 to August 2009 and joined us as financial controller in December 2007. Previously, Ms. Li was the financial controller and the head of investor relations of China GrenTech, a NASDAQ-listed company. From 1999 through 2007, Ms. Li was a senior finance manager at Conair Corp., a Fortune 500 company, in Connecticut. Ms. Li holds a bachelor of arts degree from the Beijing Second Foreign Language Institute, China, and a master of business administration from Thunderbird School of Global Management in Glendale, Arizona. She is a certified master financial manager from the American Academy of Financial Management and is also a member of the Institute of Management Accountants.

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Mr. Tianming Du has served as our vice president since July 2009 when we completed the acquisition of 100% equity interest in the Little New Star Education Group. The Little New Star Education Group was founded by Mr. Du in 1992. From November 2005 to July 2009, Mr. Du was the chairman of the Little New Star Education Group. Mr. Du has a bachelor’s degree in education from Hunan Normal University.

Ms. Xu Qin has served as our vice president and our board secretary since April 2011. Ms. Qin served as our mergers and acquisitions director from May 2010 to April 2011. Previously, Mr. Qin was an investment manager at Invengo Information Technology Co., Ltd. and a vice general manager of Shenzhen Invengo Venture Capital Co., Ltd. from February 2008 to May 2010. From January to October 2007, she was a visiting scholar at the University of York, United Kingdom. From February 2002 to February 2004, she was an industry analyst at United Securities Research Institute. Mr. Qin holds a doctorate degree in management science and engineering from Tianjin University, China.

Employment Agreements

We have entered into a three-year employment agreement with each of our executive officers, renewable for successive one-year terms. We may terminate an executive officer’s employment for cause, at any time, without notice or remuneration, for certain acts of the officer, including, but not limited to, a conviction or plea of guilty to a felony, negligent or dishonest acts to our detriment or misconduct or a failure to perform agreed duties. An executive officer may, upon advance written notice, terminate his or her employment if there is a material and substantial reduction in his or her authority, duties and responsibilities and such resignation is approved by our board of directors. Furthermore, we may, upon advance written notice, terminate an executive officer’s employment at any time without cause. Each executive officer is entitled to certain benefits upon termination, including severance pay, if we terminate the employment without cause or if he or she resigns upon the approval of our board of directors. The amount of severance pay for an executive officer depends on the length of his or her employment.

The executive officers have also agreed to disclose in confidence to us all inventions, designs and trade secrets which they conceive, develop or reduce to practice during their employment with us and to assign all right, title and interest in them to us, and assist us in obtaining patents, copyrights and other legal rights for these inventions, designs and trade secrets. In addition, each executive officer has agreed to be bound by non-competition and non-solicitation restrictions during the term of his or her employment and one year following the termination of such employment agreement. Specifically, each executive officer has agreed not to (i) approach our clients, customers or contacts or other persons or entities introduced to the executive officer for the purpose of doing business with such person or entities that will harm our business relationships with these persons or entities; (ii) assume employment with or provide services as a director for any of our competitors, or engage, whether as principal, partner, licensor or otherwise, in any business which is in competition with our business; or (iii) seek directly or indirectly, to solicit the services of any employee who is employed by us on or after the date of the executive officer’s termination, or in the year preceding such termination.

B.Compensation

For the fiscal year ended June 30, 2012, we paid an aggregate of approximately RMB5.4 million (US$0.8 million) in cash to our executive officers. We started to pay cash compensation to our non-executive directors in January 2009. As of June 30, 2012, we paid approximately RMB0.4 million (US$0.1 million) in cash compensation to our non-executive directors.

Share Incentives

2007 Share Incentive Plan, 2008 Share Incentive Plan and 2011 Share Incentive Plan. In June 2007, we adopted our 2007 share incentive plan, or 2007 plan, which provides for the issuance of options to purchase up to 1,073,672 shares (or 2,147,344 shares), or 10% of our ordinary shares then outstanding. In December 2008, we adopted our 2008 share incentive plan, or 2008 plan, which provides for the issuance of options to purchase up to 5% of our ordinary shares then outstanding. In April 2011, we adopted our 2011 share incentive plan, or 2011 plan, which provides for the issuance of all awards (including incentive share options) to purchase up to 5% of our ordinary shares then outstanding.

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Types of Awards. The types of awards we may grant under our 2007 plan, 2008 plan and 2011 plan include the following:

· options to purchase our ordinary shares;

· restricted shares, which represent non-transferable ordinary shares, that may be subject to repurchase, restrictions on transferability and other restrictions; and

· restricted share units, which represent the right to receive our ordinary shares at a specified date in the future, which may be subject to repurchase.

Awards may be designated in the form of ADSs instead of ordinary shares. If we designate an award in the form of ADSs, the number of shares issuable under the 2007 plan, 2008 plan and 2011 plan will be adjusted to reflect the ratio of ADSs to ordinary shares.

Eligibility . We may grant awards to employees, directors and consultants of our company or any of our related entities, which include our subsidiaries or any entities in which we hold a substantial ownership interest. However, we may grant options that are intended to qualify as incentive stock options, or ISOs, only to our employees and employees of our majority-owned subsidiaries.

Plan Administration. The compensation committee of our board of directors, or a committee designated by the compensation committee, will administer the 2007 plan, 2008 plan and 2011 plan. However, awards made to our independent directors, must be approved by the entire board of directors. The compensation committee or the full board of directors, as appropriate, will determine the individuals who will receive grants, the types of awards to be granted and terms and conditions of each award grant, including any vesting or repurchase restrictions.

Award Agreement. Awards granted under our 2007 plan, 2008 plan and 2011 plan will be evidenced by an award agreement that will set forth the terms, conditions and limitations for each award. In addition, in the case of options, the award agreement may also specify whether the option constitutes an ISO or a non-qualifying stock option.

Acceleration of Awards upon Corporate Transactions. The outstanding awards will accelerate upon occurrence of a change-of-control corporate transaction where the successor entity does not assume our outstanding awards under the 2007 plan, 2008 plan and 2011 plan. In such event, each outstanding award will become fully vested and immediately exercisable, and the transfer restrictions on the awards will lapse. If the successor entity assumes or replaces our outstanding awards and later terminates the grantee’s service without cause within 12 months of the change-of-control transaction, the outstanding awards will automatically become fully vested and exercisable.

Exercise Price and Term of Awards. In general, the plan administrator determines the exercise price of an award and sets forth the price in the award agreement. The exercise price may be a fixed or variable price related to the fair market value of our ordinary shares. However, ISOs may not be granted to any individual if the fair market value of the shares underlying such ISOs that are exercisable in any calendar year exceeds US$100,000 or other limitations imposed by law. Also, if we grant an ISO to an employee, who, at the time of that grant, owns shares representing more than 10% of the voting power of all classes of our share capital, the exercise price cannot be less than 110% of the fair market value of our ordinary shares on the date of that grant.

The term of each award will be stated in the award agreement. The term of an award will not exceed ten years from the date of the grant, except that five years is maximum term of an ISO granted to an employee who holds more than 10% of the voting power of our share capital.

Amendment and Termination. Our board of directors may at any time amend, suspend or terminate the 2007 plan, 2008 plan and 2011 plan. Amendments to the 2007 plan, 2008 plan and 2011 plan are subject to shareholder approval to the extent required by law, or stock exchange rules or regulations. Additionally, shareholder approval will be specifically required to increase the number of shares available for issuance under the 2007 plan, 2008 plan and 2011 plan or to extend the term of an option beyond ten years. Unless terminated earlier, the 2007 plan, 2008 plan and 2011 plan will expire and no further awards may be granted after the tenth anniversary of the shareholder approval of the 2007 plan, 2008 plan and 2011 plan.

The following table summarizes, as of the date of this annual report, the outstanding options granted under our 2007 plan, 2008 plan and 2011 plan to several of our directors and executive officers and to other individuals as a group. The options in the following table have a term of five years to exercise from the date of grant.

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Name	Ordinary Shares Underlying Options Granted	Exercise Price (US$/Share)	Date of Grant	Date of Expiration of Vesting Period
Dong Xu	180,000	2.60	March 2, 2009	December 31, 2011
Xiao Chen	2,000	6.142	June 30, 2007	June 30, 2010
Dora Li	8,000	5.56	January 18, 2008	December 31, 2010
	38,500	2.60	March 2, 2009	December 31, 2011
Xu Qin	10,000	4.00	May 5, 2010	December 31, 2012
Other individuals as a group	476,104	1.4720	June 30, 2007	December 31, 2008
	94,162	5.56	January 18, 2008	December 31, 2010
	127, 450	2.60	March 2, 2009	December 31, 2011

C.Board Practices

Board of Directors

Our board of directors currently consists of seven directors. A director is not required to hold any shares in the company by way of qualification. A director may vote with respect to any contract or transaction in which he or she is materially interested provided the nature of the interest is disclosed prior to its consideration and any vote on such contract or transaction. The directors may exercise all the powers of the company to borrow money, mortgage its undertaking, property and uncalled capital, and issue debentures or other securities whenever outright or as security for any debt, liability or obligation of the company or of any third party.

Cayman Islands law does not require our directors to be independent. We comply with the New York Stock Exchange requirement that our board comprises a majority of independent directors.

Committees of the Board of Directors

We have established three committees under the board of directors: the audit committee, the compensation committee and the corporate governance and nominating committee, and have adopted a charter for each of the three committees. Each committee’s members and functions are described below.

Audit Committee. Our audit committee consists of Dr. Xiao Chen, Mr. Benzhong Wang and Mr. Conrad Kwong Yue Tsang, all of whom satisfy the “independence” requirements of Section 303A of the Corporate Governance Rules of the New York Stock Exchange and Rule 10A-3 under the Securities Exchange Act of 1934, as amended. Dr. Chen is the chair of our audit committee and qualifies as an “audit committee financial expert” as defined in Item 16A of Form 20-F. The purpose of the audit committee is to assist our board of directors with its oversight responsibilities regarding: (1) the integrity of our financial statements, (2) our compliance with legal and regulatory requirements, (3) the independent auditor’s qualifications and independence, and (4) the performance of our internal audit function and independent auditor. The audit committee will be responsible for, among other things:

· appointing the independent auditors and pre-approving all audit and non-audit services permitted to be performed by the independent auditors;

· reviewing with the independent auditors any audit problems or difficulties and management’s response;

· reviewing and approving all proposed related party transactions, as defined in Item 404 of Regulation S-K under the Securities Act;

· discussing the annual audited financial statements with management and the independent auditors;

· reviewing major issues as to the adequacy of our internal controls and any special audit steps adopted in light of material control deficiencies; and

· meeting separately and periodically with management and the independent auditors.

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In the fiscal year ended June 30, 2012, our audit committee held four meetings and passed two resolutions by unanimous written consent.

Compensation Committee. Our compensation committee consists of Mr. Benzhong Wang, Dr. Xiao Chen and Mr. Conrad Kwong Yue Tsang, all of whom satisfy the “independence” requirements of Section 303A of the Corporate Governance Rules of the New York Stock Exchange. Mr. Benzhong Wang is the chair of our compensation committee. The purpose of the compensation committee is, among other things, to discharge the responsibilities of our board of directors relating to compensation of our directors and executive officers, including reviewing and evaluating and, if necessary, revising the compensation plans, policies and programs of the company adopted by our management. Our chief executive officer may not be present at any committee meeting during which his compensation is deliberated. The compensation committee will be responsible for, among other things:

· reviewing and evaluating at least annually and, if necessary, revising the compensation policies adopted by our management;

· reviewing and evaluating at least annually the performance, and determining the compensation, of our chief executive officer;

· reviewing and approving our chief executive officer’s employment agreement and amendments thereto, and severance arrangement, if any;

· reviewing all annual bonus, long-term incentive compensation, share option, employee pension and welfare benefit plans; and

· reviewing and approving director and executive officer indemnification and insurance matters, and any employee loans in an amount equal to or greater than US$120,000.

In the fiscal year ended June 30, 2012, our compensation committee did not hold any meetings nor pass any resolutions by unanimous written consent.

Corporate Governance and Nominating Committee. Our corporate governance and nominating committee consists of Mr. Conrad Kwong Yue Tsang, Mr. Shengli Zheng and Mr. Benzhong Wang, all of whom satisfy the “independence” requirements of Section 303A of the Corporate Governance Rules of the New York Stock Exchange. Mr. Tsang is the chair of our corporate governance and nominating committee. The purpose of this committee is to assist our board of directors in discharging the board’s responsibilities regarding, among other things, identification and recommendation of qualified candidates as members of our board and its committees, and annual review of the composition of our board and its committees. The nominating and corporate governance committee will be responsible for, among other things:

· recommending to our board of directors for nomination or appointment by the board such candidates as the committee has found to be well qualified and willing and ready to be elected or reelected to serve as our members of our board or its committees or to fill any vacancies on our board or its committees, respectively;

· reviewing annually the composition of our board of directors and its committees in light of the characteristics of independence, qualification, experience and availability of the board members;

· developing and recommending to our board of directors a set of corporate governance guidelines and principles applicable to the company; and

· monitoring of compliance with the company’s code of business conduct and ethics, including reviewing the adequacy and effectiveness of our internal rules and procedures to ensure compliance with applicable laws and regulations.

In the fiscal year ended June 30, 2012, our corporate governance and nominating committee did not hold any meetings nor pass any resolutions by unanimous written consent.

Duties of Directors

Under Cayman Islands law, our directors have a duty of loyalty to act honestly in good faith with a view to our best interests. Mr. Dong Xu, who is our director and founder, is also the direct shareholder of Leisen Education and Wentai Investment. His ownership in Leisen Education and Wentai Investment may present potential conflicts of interest. See “Item 3. Key Information — D. Risk Factors — Risks Related to Our Corporate Structure — Mr. Dong Xu may have potential conflicts of interest with us, which may adversely affect our business.” We rely on his duty of loyalty towards us as our director. As an added measure to address such potential conflicts of interest, Mr. Dong Xu is obligated to execute irrevocable powers of attorney to appoint the individual designated by us to be his respective attorney-in-fact. We currently do not have any other measure or policy to address these potential conflicts of interest.

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Our directors also have a duty to exercise the skill they actually possess and such care and diligence that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care to us, our directors must ensure compliance with our memorandum and articles of association. A shareholder has the right to seek damages if a duty owed by our directors is breached.

Terms of Directors and Officers

Our officers are elected by and serve at the discretion of the board of directors. Our directors are not subject to a term of office and hold office until their resignation, death or incapacity or until their respective successors have been elected and qualified in accordance with our shareholders agreement and our articles of association. A director will be removed from office automatically if, among other things, the director (i) becomes bankrupt or makes any arrangement or composition with his creditors; or (ii) dies or is found by our company to be or becomes of unsound mind.

Communications with our independent directors

Our board of directors has adopted procedures for all interested parties to directly communicate their concerns or inquiries to our independent directors. All interested parties may make their concerns known to the presiding director Mr. Conrad Tsang via email at conradtsang@bpepasis.com or the presiding director disclosed on our website www.noaheducation.com.

D.Employees

We had 951 and 1,354 employees as of June 30, 2010 and 2011, respectively. As of June 30, 2012, we had 2,129 employees, including 1,454 full time teachers, 630 general and administrative staffs, and 30 part-time teachers.

We offer our employees merit-based bonuses based on the overall performance of our company, the performance of the department and the individual. Our employees are not covered by any collective bargaining agreement. We consider our relations with our employees to be good.

We are required by applicable PRC regulations to contribute for our employees certain amounts, based on our employees’ aggregate salaries, to a pension contribution plan, a medical insurance plan, a housing fund, an unemployment insurance plan, a personal injury insurance plan and a maternity insurance plan. In the past, we made insufficient contributions to these funds and plans because of our misunderstanding of the complex rules and regulations, which were not applied uniformly across the cities in which we had employees. Although we have not been challenged by the relevant government authorities, we subsequently determined that our contributions were insufficient. We have since set aside provisions in the amount of RMB8.2 million, RMB2.4 million and RMB2.7 million (US$0.4 million) as of June 30, 2010, 2011 and 2012, respectively, to cover the shortfall in past contributions. We have made the required payments in compliance with the applicable laws and regulations since July 2007.

E.Share Ownership

The following table sets forth information with respect to the beneficial ownership of our ordinary shares as of August 31, 2012, by:

· each of our directors and executive officers; and

· each person known to us to own beneficially more than 5% of our ordinary shares.

As of August 31, 2012, there were 37,618,182 ordinary shares outstanding, which include 1,048,316 ordinary shares issued to The Bank of New York Mellon, our depositary, in June 2008 to facilitate our future issuance of ADSs upon the exercise of options under our share incentive plan but are excluded from the balance sheet herein for accounting purposes. Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, we have included shares that the person has the right to acquire within 60 days of August 31, 2012, including through the exercise of any option, warrant or other right or the conversion of any other security. These shares, however, are not included in the computation of the percentage ownership of any other person.

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	Shares Beneficially Owned
	Number	%
Directors and Executive Officers(1):
Dong Xu(2)	8,258,200	22.0
Xiaotong Wang(3)	4,292,260	11.4
Qicai Du(4)	1,427,104	3.8
Xiao Chen(5)	*	*
Conrad Kwong Yue Tsang(6)	3,364,669	8.9
Dora Li(7)	*	*
Xu Qin(8)	*	*
All Directors and Executive Officers as a Group	17,400,733	46.3
Principal Shareholders:
Jointly Gold Technologies Ltd.(9)	8,258,200	22.0
First Win Technologies Ltd.(10)	5,268,268	14.0
Global Wise Technologies Ltd.(11)	4,292,260	11.4
Baring Asia II Holdings (22) Limited(12)	3,364,669	8.9
Sunshine Nation Limited(13)	2,647,743	7.0

* Less than 1% of our total issued and outstanding shares

(1) The business address of our directors and executive officers, except for Mr. Conrad Tsang, is c/o Noah Education Holdings Ltd., Unit F, 33rd Floor, NEO Tower A, Che Gong Miao, Futian District, Shenzhen, Guangdong Province, People’s Republic of China.

(2) Includes 7,416,810 ordinary shares and 661,390 ADSs, representing 661,390 ordinary shares, held by Jointly Gold Technologies Ltd., a British Virgin Islands limited liability company affiliated with Mr. Xu. These shares also include 180,000 ordinary shares issuable upon exercise of options held by Mr. Xu that will be vested as of October 31, 2012.

(3) Includes 3,713,710 ordinary shares and 578,550 ADSs, representing 578,550 ordinary shares, held by Global Wise Technologies Ltd., a British Virgin Islands limited liability company affiliated with Mr. Wang.

(4) Includes 1,427,104 ADSs, representing 1,427,104 ordinary shares.

(5) Represents ordinary shares issuable upon exercise of options held by Mr. Chen that will be vested as of October 31, 2012.

(6) Includes 3,364,669 ordinary shares held by Baring Asia II Holdings (22) Limited, a company incorporated in the British Virgin Islands. Mr. Tsang is a board representative of Baring Asia II Holdings (22) Limited. Mr. Tsang disclaims beneficial ownership of all of our shares held by the investment entities affiliated with Baring Asia II Holdings (22) Limited except to the extent of his pecuniary interest therein. The business address of Mr. Tsang is 3801, Two International Finance Centre, Central, Hong Kong.

(7) Represents ordinary shares issuable upon exercise of options held by Ms. Li that will be vested as of October 31, 2012.

(8) Represents ordinary shares issuable upon exercise of options held by Mr. Qin that will be vested as of October 31, 2012.

(9) Jointly Gold Technologies Ltd., a company incorporated in the British Virgin Islands, is affiliated with Mr. Dong Xu. The registered address of Jointly Gold Technologies Ltd. is Akara Bldg., 24 Decastro Street, Wickhams Cay I, Road Town, Tortola British Virgin Islands.

(10) First Win Technologies Ltd., a company incorporated in the British Virgin Islands, is affiliated with Mr. Benguo Tang. The registered address of First Win Technologies Ltd. is Akara Bldg., 24 Decastro Street, Wickhams Cay I, Road Town, Tortola British Virgin Islands.

(11) Global Wise Technologies Ltd., a company incorporated in the British Virgin Islands, is affiliated with Mr. Xiaotong Wang. The registered address of Global Wise Technologies Ltd. is Akara Bldg., 24 Decastro Street, Wickhams Cay I, Road Town, Tortola British Virgin Islands.

(12) Includes 3,364,669 ordinary shares held by Baring Asia II Holdings (22) Limited, which is incorporated solely for the purpose of holding shares in our company for the benefit of the entities that comprise The Baring Asia Private Equity Fund II, or Fund II. The voting and investment power over the shares owned by Baring Asia II Holdings (22) Limited is exercised by the investment committee of Baring Asia Fund II (GP) LP, the sole general partner of Fund II. This investment committee is comprised of Jean Eric Salata, Gordon Shaw Sun Kan and Christopher Brotchie, each of whom disclaims beneficial ownership of all of our shares held by Baring Asia II Holdings (22) Limited, except to the extent of their pecuniary interest therein. The address of Baring Asia II Holdings (22) Limited is P.O. Box 431, 13-15 Victoria Road, St. Peter Port, Guernsey, Channel Islands, GY1 3XD, United Kingdom.

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(13) Sunshine Nation Limited is a company incorporated in the British Virgin Islands. The registered address of Sunshine Nation Limited is Akara Building, 24 De Castro Street, Wickhams Cay I, Road Town, Tortola, British Virgin Islands. Ms. Siyuan Du is the sole owner and director of Sunshine Nation Limited.

As of August 31, 2012, The Bank of New York Mellon, the depositary for our ADS program, was our only U.S. record holder, holding 39.4% of our total outstanding ordinary shares, which include 1,048,316 ordinary shares issued to The Bank of New York Mellon in June 2008 to facilitate our future issuance of ADSs upon the exercise of options under our share incentive plan.

None of our existing shareholders have different voting rights from other shareholders. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.

Item 7.    Major Shareholders and Related Party Translations

A.Major Shareholders

Please refer to “Item 6. Directors, Senior Management and Employees—E. Share Ownership.”

B.Related Party Transactions

Contractual Arrangements with Leisen Education and Its Shareholder

The PRC laws currently restrict foreign ownership in the Internet industry in China. We are a Cayman Islands holding corporation and a foreign legal person under the PRC laws. Accordingly, we are currently ineligible to apply for the required Internet licenses and permits in China. We conduct our online business in China through contractual arrangements with Leisen Education and its shareholder. Leisen Education is our consolidated affiliated entity directly owned by Mr. Dong Xu. We have been and expect to continue to be dependent on Leisen Education to operate our online business until we qualify for direct ownership of an online business in China. We have entered into contractual arrangements with Leisen Education, pursuant to which we provide services to Leisen Education in exchange for payments from them. In addition, we have entered into agreements with Leisen Education and its shareholder which provide us with the substantial ability to control Leisen Education and its future subsidiaries. For a description of these contractual arrangements, see “Item 4. Information on the Company — C. Organizational Structure — Contractual Arrangements with Leisen Education and Its Shareholder.”

Contractual Arrangements with Wentai Investment and Its Shareholders

The PRC Regulations on Operating Chinese-foreign Schools and its implementation rules govern Chinese-foreign cooperation in operating schools or training programs. These regulations and rules encourage substantive cooperation between overseas educational organizations with relevant qualifications and experience in providing high-quality education and Chinese educational organizations to jointly operate various types of schools in the PRC, particularly in the areas of higher education and vocational training. Chinese-foreign cooperative schools are not permitted, however, to engage in compulsory education and military, police, political and other kinds of education that are of a special nature in the PRC. We conduct our primary and secondary education services business in China through contractual arrangements with Wentai Investment and its shareholders. Wentai Investment is our consolidated affiliated entity directly owned by Mr. Dong Xu and Mr. Qicai Du. We expect to depend on Wentai Investment to operate our primary and secondary schools until we qualify for direct ownership of a compulsory education business in China. We have entered into contractual arrangements with Wentai Investment, pursuant to which we provide services to Wentai Investment and schools operated by Wentai Investment in exchange for payments from them. In addition, we have entered into agreements with Wentai Investment and each of its shareholders which provide us with the substantial ability to control Wentai Investment and its future subsidiaries. For a description of these contractual arrangements, see “Item 4. Information on the Company — C. Organizational Structure — Contractual Arrangements with Wentai Investment and Its Shareholders.”

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Transactions with Benguo Tang

In March 2011, we entered into a stock purchase agreement to sell our ELP business and certain target assets to First Win, a company wholly owned by Mr. Benguo Tang, one of our founders and our former president and chief operating officer, at a consideration of RMB100.0 million (US$15.7 million), which is subject to certain adjustments. In June 2011, the stock purchase agreement was amended to simplify the purchase price adjustment mechanism. The sale was completed in June 2011.

Pursuant to the stock purchase agreement in March 2011 (the “Definitive Agreement”), the purchaser will acquire the ELP business and assets (excluding the English and Chinese versions of the “Noah” trademark, cash held by the ELP subsidiaries and our office facilities in Chengdu and Shenzhen) (the “Target Assets”) for RMB100.0 million (US$15.7 million) (the “Purchase Price”). Under the Definitive Agreement, the Purchase Price will be paid to us in three installments: (i) 40% of the Purchase Price will be paid on or before April 12, 2011; (ii) 30% of the Purchase Price will be paid within three months after the date of the first payment, subject to consummation of the closing of the purchase and sale of the target assets; and (iii) the remaining 30% of the Purchase Price will be paid at the later of (x) six months after the date of the first payment and (y) the substantial completion of the restructuring to carve out the Target Assets. The purchase and sale of the target assets will close upon the completion of certain restructuring steps with respect to certain of our subsidiaries that are involved in the ELP business and the purchaser will be responsible for the operation of the ELP business from April 1, 2011, including earnings or losses during the period between signing and closing. In light of the spin-off of our ELP business, we sold our equity interests in Well Profit Creation Limited and its subsidiaries, namely, Noah Education Development (Chengdu) Co., Ltd., Chengdu Zhiyuan Noah Education Technology Co. Ltd., Chengdu Innovative Noah Electronic Co., Ltd., Innovative Noah Electronic (Shenzhen) Co., Ltd., New Noah Technology (Shenzhen) Co., Ltd., to First Win. We also terminated our contractual arrangements with Noah Zhi Yuan.

We received the initial installment of the U.S. dollar equivalent of RMB40 million (US$6.3 million) in April 2011, the second installment of RMB17.5 million (US$2.8 million) in July 2011 and the final installment of RMB30.0 million (US$4.7 million) in October 2011. We have released the shares pledged by Mr. Tang as security for his payment obligations under the stock purchase agreement. First Win has assumed responsibility for the operation of the ELP business since April 1, 2011, including earnings or losses of the ELP business during the interim period between signing and closing.

Equity Compensation Plan

See “Item 6. Directors, Senior Management and Employees — B. Compensation — Share Incentives.”

Advances to Related Parties

From time to time, we make advances to employees for travel and related expenses incurred in connection with business activities undertaken on our behalf. As of June 30, 2010, 2011 and 2012, amounts due from directors and officers were RMB0.4 million, nil and nil, respectively.

Employment Agreements

See “Item 6. Directors, Senior Management and Employees — A. Directors and Senior Management — Employment Agreements.”

Related Party Transaction Policy

We adopted an audit committee charter and a related party transaction policy that require the audit committee to review all related party transactions on an ongoing basis and all such transactions to be approved by the committee.

C.Interests of Experts and Counsel

Not applicable.

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Item 8. Financial Information

A.Consolidated Statements and Other Financial Information

See “Item 18. Financial Statements.”

Legal Proceedings

In fiscal 2010 and fiscal 2011, our subsidiaries that operated the ELP business have been subject to several intellectual property legal proceedings. We were not involved in any legal or administrative proceedings in fiscal 2012.

We are currently not a party to any material legal or administrative proceedings, and we are not aware of threatened material legal or administrative proceedings against us. We may from time to time become a party to various legal or administrative proceedings arising in the ordinary course of our business.

Dividend Policy

On May 9, 2005, we declared a cash dividend of RMB16 million to holders of our ordinary shares and preference shares in proportion to their respective share ownership, on an as converted basis, of RMB12.3 million and RMB3.7 million, respectively. On December 22, 2006, we declared a cash dividend of RMB76 million to holders of our ordinary shares and preference shares in proportion to their respective share ownership, on an as converted basis, of RMB58.3 million and RMB17.7 million, respectively. On December 19, 2008, we declared a cash dividend of US$0.56 per ordinary shares for fiscal 2008 to shareholders as of December 31, 2008, amounted totally to RMB137.5 million, of which RMB51.3 million was out of our retained earnings and the remaining RMB86.2 million out of our addition-paid-in capital.

We are a holding company incorporated in the Cayman Islands. We rely on dividends from our subsidiaries in China to fund our payment of dividends, if any, to our shareholders. Current PRC regulations permit our subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, each of our subsidiaries in China is required to set aside a certain amount of its accumulated after-tax profits each year, if any, to fund certain statutory reserves. These reserves may not be distributed as cash dividends. Further, if our subsidiaries in China incur debt on their own behalf, the instruments governing the debt may restrict their ability to pay dividends or make other payments to us. Furthermore, the PRC enterprise income tax law that became effective on January 1, 2008 eliminates the exemption of enterprise income tax on dividend derived by foreign investors from foreign invested enterprises and imposes on our subsidiaries in China an obligation to withhold tax on dividend distributions to their non-PRC shareholders, provided that such non-PRC shareholders are not classified as resident enterprises.

Our board of directors has complete discretion as to whether to distribute dividends, subject to the approval of our shareholders. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant. Our board of directors has no intention to distribute any dividends in the near future.

If we pay any dividends, the depositary will pay you the dividends it receives on our ordinary shares, after deducting its fees and expenses. Cash dividends on our ordinary shares, if any, will be paid in U.S. dollars.

B.Significant Changes

Except as disclosed elsewhere in this annual report, we have not experienced any significant changes since the date of our audited consolidated financial statements included in this annual report.

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Item 9.    The Offer and Listing

A.Offer and Listing Details

The following table provides the high and low trading prices for our ADSs on The New York Stock Exchange for the periods indicated since our initial public offering.

	Sales Price
	High	Low
Yearly High and Low
Fiscal year ended June 30, 2008 (from October 19, 2007)	23.70	4.76
Fiscal year ended June 30, 2009	5.91	1.85
Fiscal year ended June 30, 2010	6.16	3.50
Fiscal year ended June 30, 2011	3.75	1.73
Fiscal year ended June 30, 2012	2.59	1.00
Quarterly High and Low
Fiscal quarter ended September 30, 2010	3.75	1.73
Fiscal quarter ended December 31, 2010	2.68	1.85
Fiscal quarter ended March 31, 2011	2.26	1.87
Fiscal quarter ended June 30, 2011	2.78	1.82
Fiscal quarter ended September 30, 2011	2.59	1.57
Fiscal quarter ended December 31, 2011	2.59	1.00
Fiscal quarter ended March 31, 2012	2.28	1.50
Fiscal quarter ended June 30, 2012	1.64	1.02
Fiscal quarter ended September 30, 2012	1.49	1.11
Monthly Highs and Lows
April 2012	1.64	1.35
May 2012	1.50	1.09
June 2012	1.47	1.02
July 2012	1.45	1.20
August 2012	1.36	1.11
September 2012	1.49	1.26
October 2012 (through October 26)	1.45	1.19

B.Plan of Distribution

Not applicable.

C.Markets

Our ADSs, each representing one ordinary share, have been listed on The New York Stock Exchange since October 19, 2007 under the symbol “NED.”

D.Selling Shareholders

Not applicable.

E.Dilution

Not applicable.

F.Expenses of the Issue

Not applicable.

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Item 10. Additional Information

A.Share Capital

 Not applicable.

B.Memorandum and Articles of Association

We are a Cayman Islands company and our affairs are governed by our memorandum and articles of association and the Companies Law (2011 Revision) of the Cayman Islands, which is referred to as the Companies Law below.

As of the date of this annual report, our authorized share capital consists of 1,000,000,000 ordinary shares at the par value of US$0.00005 each. The following are summaries of material provisions of our currently effective amended and restated memorandum and articles of association and the Companies Law insofar as they relate to the material terms of our ordinary shares.

Ordinary Shares

General. All of our outstanding ordinary shares are fully paid and non-assessable. Certificates representing the ordinary shares are issued in registered form. Our shareholders who are nonresidents of the Cayman Islands may freely hold and vote their shares.

Dividends. The holders of our ordinary shares are entitled to such dividends as may be declared by our board of directors from funds lawfully available therefor.

Voting Rights. Voting at any shareholders’ meeting is by show of hands unless a poll is demanded. On a show of hands, every shareholder will have one vote, and on a poll, every shareholder shall have one vote for each share registered in his name in the register of members. A poll may be demanded by our chairman or any shareholder holding not less than 10% of the paid up voting share capital giving a right to vote at the meeting, present in person or by proxy.

A quorum required for a meeting of shareholders consists of shareholders present in person or by proxy or, if a corporation or other non-natural person, by its duly authorized representative, holding at least one third of the issued voting share capital. Shareholders’ meetings may be (but are not required to be) held annually and may also be convened by our board of directors on its own initiative or upon a request to the directors by shareholders holding in aggregate not less than one-third of our voting share capital. Advance notice of at least 14 days is required for the convening of our annual general meeting and other shareholders’ meetings.

An ordinary resolution to be passed by the shareholders requires the affirmative vote of a simple majority of the votes attaching to the ordinary shares cast in a general meeting, while a special resolution requires the affirmative vote of no less than two-thirds of the votes attaching to the ordinary shares cast in a general meeting. A special resolution is required for important matters such as an amendment to our memorandum and articles of association and a change of name. Holders of the ordinary shares may effect certain changes by ordinary resolution, including altering the amount of our authorized share capital, sub-dividing our existing shares, consolidating and dividing all or any of our share capital into shares of larger amount than our existing shares, and cancelling any unissued shares.

Transfer of Shares. Subject to the restrictions of our memorandum and articles of association, as applicable, any of our shareholders may transfer all or any of his or her ordinary shares by an instrument of transfer in the usual or common form or any other form approved by our board.

Our board of directors may, in its sole discretion, decline to register any transfer of any ordinary share which is not fully paid up or on which we have a lien. If our directors refuse to register a transfer they must, within two months after the date on which the instrument of transfer was lodged, send to each of the transferor and the transferee notice of such refusal. The registration of transfers may, on 14 days’ notice being given by advertisement in such one or more newspapers or by electronic means, be suspended and the register closed at such times and for such periods as our board of directors may from time to time determine, provided, however, that the registration of transfers shall not be suspended nor the register closed for more than 30 days in any year.

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Liquidation . On a return of capital on winding up or otherwise (other than on conversion, redemption or purchase of shares), proceeds from disposition of assets lawfully available for distribution among the holders of ordinary shares must be distributed among the holders of the ordinary shares on a pro rata basis.

Calls on Shares and Forfeiture of Shares. Our board of directors may from time to time make calls upon shareholders for any amounts unpaid on their shares in a notice served to such shareholders at least 14 days prior to the specified time and place of payment. The shares that have been called upon and remain unpaid within the specified time are subject to forfeiture.

Redemption of Shares. Subject to the provisions of the Companies Law, we may issue shares on terms that are subject to redemption, at our option or at the option of the holders, on such terms and in such manner as the directors may, before the issue of shares, determine.

Variations of Rights of Shares. All or any of the special rights attached to any class of shares may, subject to our articles of association, be varied either with the written consent of the holders of a majority of the issued shares of that class or with the sanction of a special resolution passed at a general meeting of the holders of the shares of that class.

Inspection of Books and Records. Holders of our ordinary shares will have no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders or our corporate records. However, we will provide our shareholders with annual audited financial statements. See “Item 10. Additional Information — H. Documents on Display.”

Limitations on the Rights to Own Shares: There are no limitations on the right to own our shares.

Disclosure of Shareholder Ownership: There are no provisions in our proposed amended and restated memorandum and articles of association governing the ownership threshold above which shareholder ownership must be disclosed.

Differences in Corporate Law

The Companies Law is modeled after that of the United Kingdom but does not follow recent United Kingdom statutory enactments. In addition, the Companies Law differs from laws applicable to Delaware corporations and their shareholders. Set forth below is a summary of the significant differences between the provisions of the Companies Law applicable to us and the laws applicable to companies incorporated in Delaware and their shareholders.

Mergers and Similar Arrangements. The Companies Law permits mergers and consolidations between Cayman Islands companies and between Cayman Islands companies and non-Cayman Islands companies. For these purposes:

· a “merger” means the merging of two or more constituent companies and the vesting of their undertaking, property and liabilities in one of such companies as the surviving company; and

· a “consolidation” means the combination of two or more constituent companies into a consolidated company and the vesting of the undertaking, property and liabilities of such companies to the consolidated company.

In order to effect such a merger or consolidation, the directors of each constituent company must approve a written plan of merger or consolidation, which must then be authorized by a special resolution of each constituent company, and such other authorization, if any, as may be specified in such constituent company’s articles of association.

The plan of merger or consolidation must be filed with the Registrar of Companies together with a declaration as to the solvency of the consolidated or surviving company, a list of the assets and liabilities of each constituent company and an undertaking that a copy of the certificate of merger or consolidation will be given to the members and creditors of each constituent company and published in the Cayman Islands Gazette. Dissenting shareholders have the right to be paid the fair value of their shares if they follow the required procedures, subject to certain exceptions. The fair value of the shares will be determined by the Cayman Islands court if it cannot be agreed among the parties. Court approval is not required for a merger or consolidation which is effected in compliance with these statutory procedures.

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In addition, there are statutory provisions that facilitate the reconstruction and amalgamation of companies, provided that the arrangement is approved by a majority in number of each class of shareholders and creditors with whom the arrangement is to be made, and who must in addition represent three-fourths in value of each such class of shareholders or creditors, as the case may be, that are present and voting either in person or by proxy at a meeting, or meetings, convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands. While a dissenting shareholder has the right to express to the court the view that the transaction ought not to be approved, the court can be expected to approve the arrangement if it determines that:

· the statutory provisions as to majority vote have been met;

· the shareholders have been fairly represented at the meeting in question;

· the arrangement is such that a businessman would reasonably approve; and

· the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Law.

When a take-over offer is made and accepted by holders of 90.0% of the shares within four months, the offerer may, within a two month period, require the holders of the remaining shares to transfer such shares on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands but this is unlikely to succeed unless there is evidence of fraud, bad faith or collusion.

If the arrangement and reconstruction is thus approved, the dissenting shareholder would have no rights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of Delaware corporations, providing rights to receive payment in cash for the judicially determined value of the shares.

Shareholders’ Suits. The Cayman Islands courts can be expected to follow English case law precedents. The Cayman Islands courts have applied and followed common law principles that permit a minority shareholder to commence a class action against the company or a derivative action in the name of the company to challenge (a) an act that is outside the company’s corporate powers or that is illegal, (b) an act constituting a fraud against the minority where the wrongdoers are themselves in control of the company, and (c) an action requiring a resolution passed by a qualified or special majority that has not been obtained.

We are not aware of any reported class action or derivative action having been brought in a Cayman Islands court. In principle, we will normally be the proper plaintiff and a derivative action may not be brought by a minority shareholder. However, based on English authorities, which would in all likelihood be of persuasive authority in the Cayman Islands, exceptions to the foregoing principle apply in circumstances in which:

· a company is acting or proposing to act illegally or ultra vires;

· the act complained of, although not ultra vires, could be effected duly if authorized by more than a simple majority vote which has not been obtained; and

· those who control the company are perpetrating a “fraud on the minority.”

Directors’ Fiduciary Duties. Under Delaware corporate law, a director of a Delaware corporation has a fiduciary duty to the corporation and its shareholders. This duty has two components, the duty of care and the duty of loyalty. The duty of care requires that a director act in good faith, with the care that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform himself of, and disclose to shareholders, all material information reasonably available regarding a significant transaction. The duty of loyalty requires that a director must act in a manner he or she reasonably believes to be in the best interests of the corporation. A director must not use his or her corporate position for personal gain or advantage. This duty prohibits self-dealing by a director and mandates that the best interests of the corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder not shared by the shareholders generally. In general, actions of a director are presumed to have been made on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the corporation. However, this presumption may be rebutted by evidence of a breach of one of the fiduciary duties. Should such evidence be presented concerning a transaction by a director, the director must prove the procedural fairness of the transaction and that the transaction was of fair value to the corporation.

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As a matter of Cayman Islands law, a director of a Cayman Islands company is in the position of a fiduciary with respect to the company, and therefore it is considered that he or she owes the following duties to the company—a duty to act bona fide in the best interests of the company, a duty not to make a profit out of his or her position as director (unless the company permits him or her to do so) and a duty not to put himself or herself in a position where the interests of the company conflict with his or her personal interests or his or her duty to a third party. A director of a Cayman Islands company owes to the company a duty to act with skill and care. It was previously considered that a director need not exhibit in the performance of his or her duties a greater degree of skill than may reasonably be expected from a person of his or her knowledge and experience. However, there are indications that the courts are moving towards an objective standard with regard to the required skill and care.

Under our memorandum and articles of association, directors who are in any way, whether directly or indirectly, interested in a contract or proposed contract with our company are required to declare the nature of their interest at a meeting of the board of directors. Following such declaration, a director may vote in respect of any contract or proposed contract notwithstanding his interest.

Shareholder Action by Written Resolution. Under the Delaware General Corporation Law, a corporation may eliminate the right of shareholders to act by written consent by amendment to its certificate of incorporation. Under Cayman Islands law, a corporation may eliminate the ability of shareholders to approve corporate matters by way of written resolution signed by or on behalf of each shareholder who would have been entitled to vote on such matters at a general meeting without a meeting being held. Our memorandum and articles of association allow shareholders to act by written resolutions.

Shareholder Proposals. Under the Delaware General Corporation Law, a shareholder has the right to put any proposal before the annual meeting of shareholders, provided it complies with the notice provisions in the governing documents. A special meeting may be called by the board of directors or any other person authorized to do so in the governing documents, but shareholders may be precluded from calling special meetings.

Cumulative Voting. Under the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless the corporation’s certificate of incorporation specifically provides for it. Cumulative voting potentially facilitates the representation of minority shareholders on a board of directors since it permits the minority shareholder to cast all the votes to which the shareholder is entitled for a single director, which increases the shareholder’s voting power with respect to electing such director. As permitted under Cayman Islands law, our memorandum and articles of association do not provide for cumulative voting.

Removal of Directors. Under the Delaware General Corporation Law, a director of a corporation with a classified board may be removed only for cause with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Under our memorandum and articles of association, directors can be removed by the passing of a special resolution.

Transactions with Interested Shareholders. The Delaware General Corporation Law contains a business combination statute applicable to Delaware public corporations whereby, unless the corporation has specifically elected not to be governed by such statute by amendment to its certificate of incorporation, it is prohibited from engaging in certain business combinations with an “interested shareholder” for three years following the date on which such person becomes an interested shareholder. An interested shareholder generally is one which owns or owned 15% or more of the target’s outstanding voting shares within the past three years. This has the effect of limiting the ability of a potential acquirer to make a two-tiered bid for the target in which all shareholders would not be treated equally. The statute does not apply if, among other things, prior to the date on which such shareholder becomes an interested shareholder, the board of directors approves either the business combination or the transaction that resulted in the person becoming an interested shareholder. This encourages any potential acquirer of a Delaware public corporation to negotiate the terms of any acquisition transaction with the target’s board of directors.

Cayman Islands law has no comparable statute. As a result, we cannot avail ourselves of the types of protections afforded by the Delaware business combination statute. However, although Cayman Islands law does not regulate transactions between a company and its significant shareholders, it does provide that such transactions entered into must be bona fide in the best interests of the company and not with the effect of perpetrating a fraud on the minority shareholders.

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Dissolution; Winding Up. Under the Delaware General Corporation Law, unless the board of directors approves the proposal to dissolve, dissolution must be approved by shareholders holding 100% of the total voting power of the corporation. Only if the dissolution is initiated by the board of directors may it be approved by a simple majority of the corporation’s outstanding shares. The Delaware General Corporation Law allows a Delaware corporation to include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions initiated by the board of directors. Under our memorandum and articles of association, if our company is wound up, the liquidator of our company may distribute the assets only by the vote of holders of a majority of our outstanding shares being entitled to vote in person or by proxy at a shareholder meeting.

Variation of Rights of Shares. Under the Delaware General Corporation Law, a corporation may vary the rights of a class of shares with the approval of a majority of the outstanding shares of such class, unless the certificate of incorporation provides otherwise. Under Cayman Islands law and our memorandum and articles of association, if our share capital is divided into more than one class of shares, we may vary the rights attached to any class only with the vote of holders of a majority of the shares of such class entitled to vote in person or by proxy at a shareholder meeting.

Amendment of Governing Documents. Under the Delaware General Corporation Law, a corporation’s governing documents may be amended with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Our memorandum and articles of association may only be amended with the sanction of a special resolution passed at a general meeting of holders of shares of that class or with the sanction of the holders of a majority of the issued shares of that class.

Inspection of Books and Records. Under the Delaware General Corporation Law, any shareholder of a corporation may for any proper purpose inspect or make copies of the corporation’s stock ledger, list of shareholders and other books and records. Holders of our shares will have no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders or our corporate records. However, we intend to provide our shareholders with annual reports containing audited financial statements.

Anti-Takeover Provisions in Our Memorandum and Articles of Association. Some provisions of our memorandum and articles of association may discourage, delay or prevent a change of control of our company or management that shareholders may consider favorable, including provisions that authorize our board of directors to issue preference shares in one or more series and to designate the price, rights, preferences, privileges and restrictions of such preference shares without any further vote or action by our shareholders.

However, under Cayman Islands law, our directors may only exercise the rights and powers granted to them under our memorandum and articles of association for a proper purpose and for what they believe in good faith to be in the best interests of our company.

Rights of Non-Resident or Foreign Shareholders. There are no limitations imposed by Cayman Islands law or by our memorandum and articles of association on the rights of non-resident or foreign shareholders to hold or exercise voting rights on our shares. In addition, there are no provisions in our memorandum and articles of association governing the ownership threshold above which shareholder ownership must be disclosed.

Indemnification . Cayman Islands law does not limit the extent to which a company’s articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime.

Under our memorandum and articles of association, we may indemnify our directors and officers against costs, charges, expenses, judgments losses, damages or liabilities sustained by such persons in connection with actions or proceedings to which they are party or are threatened to be made a party by reason of their acting as our directors or officers, other than as a result of such person’s actual fraud or willful default.

We have entered into indemnification agreements with our directors and executive officers to indemnify them to the fullest extent permitted by applicable law and our articles of association, from and against all costs, charges, expenses, liabilities and losses incurred in connection with any litigation, suit or proceeding to which such director is or is threatened to be made a party, witness or other participant, except in certain situations involving gross negligence or misconduct, or deliberate and purposeful dishonesty or fraud.

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Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us under the foregoing provisions, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and therefore is unenforceable.

Registration Rights

Pursuant to the restated and amended shareholders agreement dated March 7, 2007, we have granted certain registration rights to holders of our remittable securities, which mean ordinary shares issued to or to be issued to our Series A preference shareholders. Set forth below is a description of the registration rights granted under the agreement.

Demand Registration Rights. At any time commencing six months after our initial public offering, holders of at least 5% of all our issued and outstanding share capital on a fully diluted and as converted basis have the right to demand that we file a registration statement covering the offer and sale of their securities. We, however, are not obligated to effect a demand registration (1) after we have already effected three demand registrations, (2) during the period beginning on the 60th business day prior to our good faith estimate of the filing date of, and ending on the 180th business day after the effective date of, a public offering of our securities initiated by us, (3) if the securities to be registered can be registered on Form F-3, (4) less than 30% of registrable securities are requested for registration, or (5) within 6 months preceding the request we effected a registration as requested or on Form F-3, or in which holders of registrable securities may participate pursuant to provisions for piggyback registration. We have the right to defer filing of a registration statement for up to 90 days if we provide the requesting holders a certificate signed by either our president or chief executive officer stating that in the good faith judgment of our board of directors that filing of a registration statement will be seriously detrimental to us and our shareholders for such registration statement to be in effect at such time, but we cannot exercise the deferral right more than once in any 12-month period and we cannot register any securities for the account of ourselves or any other shareholder during such 90-day period.

Piggyback Registration Rights. If we propose to file a registration statement for a public offering of our securities other than, among other things, pursuant to an F-3 registration statement or other than relating to a stock option plan or a corporate reorganization, then we must offer holders of registrable securities an opportunity to include in the registration all or any part of their registrable securities. The underwriters of any underwritten offering will have the right to limit the number of shares having registration rights to be included in the registration statement.

Form F-3 Registration Rights. When we are eligible for use of Form F-3, holders of our registrable securities then outstanding have the right to request that we file a registration statement under Form F-3. We are not obligated to file a registration statement on Form F-3 (1) if we have, within the six month period preceding the date of such request, already effected one registration, (2) if Form F-3 is not available for the offering by holders of registrable securities, or (3) if holders of registrable securities propose to sell such securities at an aggregate price of less than US$1 million. We have the right to defer filing of a registration statement for up to 90 days if we provide the requesting holders a certificate signed by either our president or chief executive officer stating that in the good faith judgment of the board of directors that filing of a registration statement will be seriously detrimental to us and our shareholders for such registration statement to be in effect at such time, but we cannot exercise the deferral right more than once in any 12-month period and we cannot register any securities for the account of ourselves or any other shareholder during such 90-day period.

Expenses of Registration. We will pay all expenses, other than underwriting discounts and commissions, relating to any demand, piggyback or F-3 registration.

C.Material Contracts

We have not entered into any material contracts other than in the ordinary course of business and other than those described in “Item 4. Information on the Company” or elsewhere in this annual report.

D.Exchange Controls

See “Item 4. Information on the Company — B. Business Overview — Regulation — Regulations on Foreign Exchange” and “— Regulations on Dividend Distribution.”

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E.Taxation

The following summary of the material Cayman Islands and United States federal income tax consequences of an investment in our ADSs or ordinary shares is based upon laws and relevant interpretations thereof in effect as of the date of this annual report, all of which are subject to change. This summary does not deal with all possible tax consequences relating to an investment in our ADSs or ordinary shares, such as the tax consequences under state, local and other tax laws.

Cayman Islands Taxation

The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the Government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or brought within the jurisdiction of the Cayman Islands. There are no exchange control regulations or currency restrictions in the Cayman Islands.

People’s Republic of China Taxation

Under the PRC enterprise income tax law and the implementing rules, dividends, interests, rents, and royalties payable by a foreign-invested enterprise in China to its foreign investor who is a non-resident enterprise, as well as gains on transfers of shares of a foreign-invested enterprise in the PRC by such a foreign investor, will be subject to a 10% withholding tax, unless such non-resident enterprise’s jurisdiction of incorporation has a tax treaty with China that provides for a reduced rate of withholding tax. The Cayman Islands, where the Company is incorporated, does not have such a tax treaty with China. Therefore, if the Company is considered a non-resident enterprise for purposes of the PRC enterprise income tax law, a 10% withholding tax will be imposed on dividends paid to the Company by its subsidiaries in China. In such a case, there will be no PRC withholding tax on dividends paid by the Company to investors that are not PRC legal or natural persons or on any gain realized on the transfer of ADSs or shares by such investors. However, PRC income tax will apply to dividends paid by the Company to investors that are PRC legal or natural persons and to any gain realized by such investors on the transfer of ADSs or shares.

Under the PRC enterprise income tax law, an enterprise established outside of the PRC with “de facto management bodies” within the PRC is considered a “resident enterprise” and are subject to the PRC enterprise income tax at the rate of 25% on its global income. The implementing rules of the PRC enterprise income tax law define “de facto management” as “substantial and overall management and control over the production and operations, personnel, accounting, and properties” of the enterprise. It remains unclear how the PRC tax authorities will interpret such a broad definition. If we were to be considered a “resident enterprise” by the PRC tax authorities, our global income would be subject to tax under the PRC enterprise income tax law at the rate of 25% and, to the extent we were to generate substantial amount of income outside of PRC in the future, we would be subject to additional taxes. Because substantially all of our management are currently located in China, we and our offshore subsidiaries may be considered PRC resident enterprises and therefore be subject to the PRC enterprise income tax at the rate of 25% on our worldwide income. Notwithstanding the foregoing provision, the PRC enterprise income tax law also provides that, if a resident enterprise directly invests in another resident enterprise, the dividends received by the investing resident enterprise from the invested enterprise are exempted from income tax, subject to certain conditions. Therefore, if we are classified as a resident enterprise, the dividends received from our PRC subsidiary may be exempted from income tax. However, it remains unclear how the PRC tax authorities will interpret the PRC tax resident treatment of an offshore company, having ownership interest in a PRC enterprise.

Moreover, under the PRC enterprise income tax law, a withholding tax at the rate of 10% is applicable to dividends payable to investors that are “non-resident enterprises,” which do not have an establishment or place of business in China, or which have such establishment or place of business but the relevant income is not effectively connected with the establishment or place of business, to the extent such interest or dividends have their sources within China unless such non-resident enterprises can claim treaty protection. As such, these non-resident enterprises would enjoy a reduced withholding tax from treaty. Similarly, any gain realized on the transfer of ADSs or shares by such investors is also subject to a 10% withholding tax if such gain is regarded as income derived from sources within the PRC. If the Company is considered a PRC resident enterprise, it is unclear whether the dividends the Company pays with respect to the Company’s ordinary shares or ADSs, or the gain you may realize from the transfer of the Company’s ordinary shares or ADSs, would be treated as income derived from sources within the PRC and be subject to PRC withholding tax.

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United States Federal Income Taxation

The following discussion describes the material U.S. federal income tax consequences to U.S. Holders (as defined below) under present law of an investment in the ADSs or ordinary shares. This summary applies only to investors that hold the ADSs or ordinary shares as capital assets and that have the U.S. dollar as their functional currency. This discussion is based on the tax laws of the United States as in effect on the date of this annual report and on U.S. Treasury regulations in effect, as of the date of this annual report, as well as judicial and administrative interpretations thereof available on or before such date. All of the foregoing authorities are subject to change, which change could apply retroactively and could affect the tax consequences described below.

The following discussion does not deal with the tax consequences to any particular investor or to persons in special tax situations such as:

· banks;

· financial institutions;

· insurance companies;

· broker dealers;

· traders that elect to mark to market;

· tax-exempt entities;

· persons liable for alternative minimum tax;

· persons holding an ADS or ordinary share as part of a straddle, hedging, conversion or integrated transaction;

· persons that actually or constructively own 10% or more of our voting stock;

· U.S. expatriates;

· persons holding ADSs or ordinary shares through partnerships or other pass-through entities; or

· persons who acquired ADSs or ordinary shares pursuant to the exercise of any employee share option or otherwise as compensation.

U.S. HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS ABOUT THE APPLICATION OF THE U.S. FEDERAL TAX RULES TO THEIR PARTICULAR CIRCUMSTANCES AS WELL AS THE STATE AND LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF ADSs OR ORDINARY SHARES.

The discussion below of the U.S. federal income tax consequences to “U.S. Holders” will apply if you are the beneficial owner of ADSs or ordinary shares and you are, for U.S. federal income tax purposes,

· an individual who is a citizen or resident of the United States;

· a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) organized under the laws of the United States, any State or the District of Columbia;

· an estate whose income is subject to U.S. federal income taxation regardless of its source; or

· a trust that (1) is subject to the supervision of a court within the United States and the control of one or more U.S. persons or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.

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If you are a partner in a partnership (or other entity taxable as a partnership for U.S. federal income tax purposes) that holds ADSs or ordinary shares, your tax treatment generally will depend on your status and the activities of the partnership.

The discussion below assumes that the representations contained in the deposit agreement are true and that the obligations in the deposit agreement and any related agreement will be complied with in accordance with the terms. If you hold ADSs, you should be treated as the holder of the underlying ordinary shares represented by those ADSs for U.S. federal income tax purposes.

The U.S. Treasury has expressed concerns that parties to whom ADSs are pre-released may be taking actions that are inconsistent with the claiming, by U.S. Holders of ADSs, of foreign tax credits for U.S. federal income tax purposes. Such actions would also be inconsistent with the claiming of the reduced rate of tax applicable to dividends received by certain non-corporate U.S. Holders, as described below. Accordingly, the availability of the reduced tax rate for dividends received by certain non-corporate U.S. Holders could be affected by future actions that may be taken by the U.S. Treasury or parties to whom ADSs are pre-released.

Passive Foreign Investment Company

Based on the market price of our ADSs and the value and composition of our assets, we believe we were a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for our taxable year ended June 30, 2012. A non-U.S. corporation is considered a PFIC for any taxable year if either:

· at least 75% of its gross income for such taxable year is passive income, or

· at least 50% of the value of its assets (based on an average of the quarterly values of the assets during a taxable year) is attributable to assets that produce or are held for the production of passive income (the “asset test”).

We will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which we own, directly or indirectly, at least 25% (by value) of the stock. In applying this rule, however, it is not clear whether the contractual arrangements between us and our affiliated entities will be treated as ownership of stock.

A separate determination must be made each taxable year as to whether we are a PFIC (after the close of each taxable year). Because the value of our assets for purposes of the asset test will generally be determined by reference to the market price of our ADSs, our PFIC status will depend in large part on the market price of our ADSs, which may fluctuate significantly. Based on the market price of our ADSs and our retention of a significant amount of cash and cash equivalents during the taxable year ended June 30, 2012, we believe we were a PFIC for such year. In addition, we believe there is a significant risk we will be a PFIC for the current taxable year ending June 30, 2013 and for future taxable years, unless the market price of our ADSs increases or we reduce the amount of cash and other passive assets we hold relative to the amount of non-passive assets we hold.

If we are a PFIC for any year during which you hold ADSs or ordinary shares, we generally will continue to be treated as a PFIC with respect to you for all succeeding years during which you hold ADSs or ordinary shares. However, if we cease to be a PFIC, you may avoid some of the adverse effects of the PFIC regime by making a deemed sale election with respect to the ADSs or ordinary shares, as applicable. If such election is made, you will be deemed to have sold our ADSs or ordinary shares you hold at their fair market value and any gain from such deemed sale would be subject to the consequences described in the following paragraph. After the deemed sale election, your ADSs or ordinary shares with respect to which the deemed sale election was made would not be treated as shares in a PFIC and you would not be subject to the rules described below with respect to any “excess distribution” you receive from us or any gain from an actual sale or other disposition of the ADSs or ordinary shares. The rules dealing with deemed sale elections are very complex. You are strongly encouraged to consult your tax advisor as to the possibility and consequences of making a deemed sale election if we cease to become a PFIC and such election becomes available to you.

For each taxable year we are treated as a PFIC with respect to you, you will be subject to special tax rules with respect to any “excess distribution” you receive and any gain you realize from a sale or other disposition (including a pledge) of the ADSs or ordinary shares, unless you make a “mark-to-market” election as discussed below. Distributions you receive in a taxable year that are greater than 125% of the average annual distributions you received during the shorter of the three preceding taxable years or your holding period for the ADSs or ordinary shares will be treated as an excess distribution. Under these special tax rules, if you receive any excess distribution or realize any gain from a sale or other disposition of the ADSs or ordinary shares:

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· the excess distribution or gain will be allocated ratably over your holding period for the ADSs or ordinary shares,

· the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we were a PFIC, will be treated as ordinary income, and

· the amount allocated to each other year will be subject to the highest tax rate in effect for that year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year.

The tax liability for amounts allocated to years prior to the year of disposition or “excess distribution” cannot be offset by any net operating losses for such years, and gains (but not losses) realized on the sale of the ADSs or ordinary shares cannot be treated as capital, even if you hold the ADSs or ordinary shares as capital assets.

If we are treated as a PFIC with respect to you for any taxable year, to the extent any of our subsidiaries are also PFICs, you will be deemed to own shares in such lower-tier PFICs that are directly or indirectly owned by us in the proportion that the value of the ADSs or ordinary shares you own bears to the value of all of our ADSs or ordinary shares, and you may be subject to the rules described in the preceding two paragraphs with respect to the shares of such lower-tier PFICs you would be deemed to own. It is possible one or more of our subsidiaries were PFICs for the taxable year ended June 30, 2012. You should consult your tax advisors regarding the application of the PFIC rules to any of our subsidiaries.

Alternatively, a U.S. Holder of “marketable stock” (as defined below) in a PFIC may make a mark-to-market election for such stock of a PFIC to elect out of the tax treatment discussed above. If you make a mark-to-market election for the ADSs or ordinary shares, you will include in income for each year we are treated as a PFIC an amount equal to the excess, if any, of the fair market value of the ADSs or ordinary shares as of the close of your taxable year over your adjusted basis in such ADSs or ordinary shares. You are allowed a deduction for the excess, if any, of the adjusted basis of the ADSs or ordinary shares over their fair market value as of the close of the taxable year. However, deductions are allowable only to the extent of any net mark-to-market gains on the ADSs or ordinary shares included in your income for prior taxable years. Amounts included in your income under a mark-to-market election, as well as gain on the actual sale or other disposition of the ADSs or ordinary shares, are treated as ordinary income. Ordinary loss treatment also applies to the deductible portion of any mark-to-market loss on the ADSs or ordinary shares, as well as to any loss realized on the actual sale or disposition of the ADSs or ordinary shares, to the extent the amount of such loss does not exceed the net mark-to-market gains previously included for such ADSs or ordinary shares. Your basis in the ADSs or ordinary shares will be adjusted to reflect any such income or loss amounts. If you make a valid mark-to-market election, the tax rules that apply to distributions by corporations which are not PFICs would apply to distributions by us, except the lower applicable tax rate for qualified dividend income would not apply.

The mark-to-market election is available only for “marketable stock,” which is stock that is traded in other than de minimis quantities on at least 15 days during each calendar quarter (“regularly traded”) on a qualified exchange or other market, as defined in applicable U.S. Treasury regulations. We expect the ADSs will continue to be listed on the New York Stock Exchange and, consequently, provided the ADSs are regularly traded, if you are a holder of ADSs the mark-to-market election would be available to you if we are a PFIC, as we believe we were for our taxable year ended June 30, 2012. If any of our subsidiaries are or become PFICs, the mark-to-market election will not be available with respect to the shares of such subsidiaries that are treated as owned by you. Consequently, you could be subject to the PFIC rules with respect to income of the lower-tier PFICs the value of which already had been taken into account indirectly via mark-to-market adjustments.

In certain circumstances, a U.S. Holder of stock in a PFIC can make a “qualified electing fund election” to mitigate some of the adverse tax consequences of holding stock in a PFIC by including in income its share of the corporation’s income on a current basis. However, we do not currently intend to prepare or provide the information that would enable you to make a qualified electing fund election.

Unless otherwise provided by the U.S. Treasury, each U.S. shareholder of a PFIC is required to file an annual report containing such information as the U.S. Treasury may require.

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YOU ARE STRONGLY URGED TO CONSULT YOUR TAX ADVISORS REGARDING THE IMPACT OF OUR PFIC STATUS (INCLUDING OUR PFIC STATUS IN YEARS PRIOR TO OUR TAXABLE YEAR ENDED JUNE 30, 2012) ON YOUR INVESTMENT IN OUR ADSs AND ORDINARY SHARES AS WELL AS APPLICATION OF THE PFIC RULES TO YOUR INVESTMENT IN ADSs OR ORDINARY SHARES.

Taxation of Dividends and Other Distributions on the ADSs or Ordinary Shares

Subject to the passive foreign investment company rules discussed above, the gross amount of all our distributions to you with respect to the ADSs or ordinary shares will be included in your gross income as dividend income on the date of receipt by the depositary, in the case of ADSs, or by you, in the case of ordinary shares, but only to the extent that the distribution is paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). To the extent the amount of the distribution exceeds our current and accumulated earnings and profits, it will be treated first as a tax-free return of your tax basis in your ADSs or ordinary shares, and to the extent the amount of the distribution exceeds your tax basis, the excess will be taxed as capital gain. We do not intend to calculate our earnings and profits under U.S. federal income tax principles. Therefore, a U.S. Holder should expect a distribution will generally be treated as a dividend even if that distribution would otherwise be treated as a non-taxable return of capital or as capital gain under the rules described above. The dividends will not be eligible for the dividends-received deduction allowed to corporations in respect of dividends received from other U.S. corporations.

With respect to non-corporate U.S. Holders, including individuals, for taxable years beginning before January 1, 2013, dividends may be “qualified dividend income” which is taxed at the lower applicable capital gains rate provided (1) the ADSs or ordinary shares, as applicable, are readily tradable on an established securities market in the United States, or, in the event we are deemed to be a “PRC resident enterprise” under PRC tax law, we are eligible for the benefits of the income tax treaty between the United States and the PRC, (2) we are not a passive foreign investment company (as discussed above) for either our taxable year in which the dividend was paid or the preceding taxable year, and (3) certain holding period requirements are met. Common or ordinary shares, or ADSs representing such shares, are considered for purpose of clause (1) above to be readily tradable on an established securities market in the United States if they are listed on the New York Stock Exchange. As discussed above in “—Passive Foreign Investment Company,” we believe we were a PFIC for the taxable year ended June 30, 2012. You should consult your tax advisors regarding the availability of the lower rate for dividends paid with respect to our ADSs or ordinary shares, including the effects of any change in law.

Dividends will constitute foreign source income for foreign tax credit limitation purposes. If the dividends are qualified dividend income (as discussed above), the amount of the dividend taken into account for purposes of calculating the foreign tax credit limitation will be limited to the gross amount of the dividend, multiplied by the reduced rate divided by the highest rate of tax normally applicable to dividends. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends distributed by us with respect to ADSs or ordinary shares generally will constitute “passive category income” but could, in the case of certain U.S. Holders, constitute “general category income.” If PRC withholding taxes apply to dividends paid to you with respect to the ADSs or ordinary shares, you may be able to obtain a reduced rate of PRC withholding taxes under the income tax treaty between the United States and the PRC if certain requirements are met. In addition, subject to certain conditions and limitations, PRC withholding taxes on dividends may be treated as foreign taxes eligible for credit against your U.S. federal income tax liability.

Taxation of Disposition of ADSs or Ordinary Shares

Subject to the passive foreign investment company rules discussed above, you will recognize taxable gain or loss on any sale, exchange or other taxable disposition of an ADS or ordinary share equal to the difference between the amount realized (in U.S. dollars) for the ADS or ordinary share and your tax basis (in U.S. dollars) in the ADS or ordinary share. The gain or loss will be capital gain or loss. If you are a non-corporate U.S. Holder, including an individual, who has held the ADS or ordinary share for more than one year, you generally will be eligible for reduced tax rates for such long-term capital gains. The deductibility of capital losses is subject to limitations. As discussed above in “—Passive Foreign Investment Company,” we believe we were a PFIC for the taxable year ended June 30, 2012. Therefore, the United States federal income tax consequences of a sale or other disposition could be materially different. See “—Passive Foreign Investment Company” above.

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Any such gain or loss you recognize generally will be treated as U.S. source income or loss. However, in the event we are deemed to be a Chinese “resident enterprise” under PRC tax law, we may be eligible for the benefits of the income tax treaty between the United States and the PRC. Under that treaty, if PRC tax were to be imposed on any gain from the disposition of the ADSs or ordinary shares, the gain may be treated as PRC source income. U.S. Holders should consult their tax advisors regarding the creditability of any PRC tax.

Information Reporting and Backup Withholding

Dividend payments with respect to ADSs or ordinary shares and proceeds from the sale, exchange or redemption of ADSs or ordinary shares may be subject to information reporting to the Internal Revenue Service and possible U.S. backup withholding. Backup withholding will not apply, however, to a U.S. Holder who furnishes a correct taxpayer identification number and makes any other required certification or who is otherwise exempt from backup withholding. U.S. Holders who are required to establish their exempt status generally must provide such certification on Internal Revenue Service Form W-9. U.S. Holders should consult their tax advisors regarding the application of the U.S. information reporting and backup withholding rules.

Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against your U.S. federal income tax liability, and you may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the Internal Revenue Service and furnishing any required information.

Additional Reporting Requirements

Certain U.S. Holders who are individuals are required to report information relating to an interest in our ADSs or ordinary shares, subject to certain exceptions (including an exception for ADSs or ordinary shares held in accounts maintained by certain financial institutions). U.S. Holders should consult their tax advisors regarding the effect, if any, of these rules on their ownership and disposition of the ADSs and ordinary shares.

F.Dividends and Paying Agents

Not applicable.

G.Statement by Experts

Not applicable.

H.Documents on Display

We previously filed with the SEC a registration statement on Form F-1 (File No. 333-146267) and a prospectus under the Securities Act with respect to the ordinary shares represented by the ADSs. We also filed with the SEC a related registration statement on Form F-6 (File Number 333-146283) with respect to the ADSs.

We are subject to the periodic reporting and other informational requirements. Under the Securities Exchange Act of 1934, the Exchange Act, we are required to file reports and other information with the SEC. Specifically, we are required to file annually a Form 20-F: (1) within six months after the end of each fiscal year, which is December 31, for fiscal years ending before December 15, 2011; and (2) within four months after the end of each fiscal year for fiscal years ending on or after December 15, 2011. Copies of reports and other information, when so filed, may be inspected without charge and may be obtained at prescribed rates at the public reference facilities maintained by the Securities and Exchange Commission at Judiciary Plaza, 100 F Street, N.E., Washington, D.C. 20549, and at the regional office of the Securities and Exchange Commission located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. The public may obtain information regarding the Washington, D.C. Public Reference Room by calling the Commission at 1-800-SEC-0330. The SEC also maintains a web site at http:// www.sec.gov that contains reports, proxy and information statements, and other information regarding registrants that make electronic filings with the SEC using its EDGAR system.

As a foreign private issuer, we are exempt from the rules of the Exchange Act prescribing the furnishing and content of quarterly reports and proxy statements, and our executive officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.

75

In accordance with NYSE Rules 203.01, we will post this annual report on Form 20-F on our website at http://www.noaheduation.com. In addition, we will provide hardcopies of our annual report free of charge to shareholders and ADS holders upon request.

I.Subsidiary Information

For a listing of our subsidiaries, see “Item 4. Information on the Company— C. Organizational Structure.”

Item 11.  Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

Our exposure to interest rate risk primarily relates to interest income generated by excess cash invested in demand deposits and liquid investments with original maturities of three months or less. Such interest-earning instruments carry a degree of interest rate risk. We have not used any derivative financial instruments to manage our interest rate risk exposure. We have not been exposed nor do we anticipate being exposed to material risks due to changes in interest rates. However, our future interest expense may increase due to changes in market interest rates.

Foreign Exchange Risk

Substantially all of our revenues and most of our expenses are denominated in RMB. Our exposure to foreign exchange risk primarily relates to cash and cash equivalents denominated in U.S. dollars as a result of our past issuances of preferred shares through a private placement and proceeds from our initial public offering. We do not believe that we currently have any significant direct foreign exchange risk and have not hedged exposures denominated in foreign currencies or any other derivative financial instruments. Although in general, our exposure to foreign exchange risks should be limited, the value of your investment in our ADSs will be affected by the foreign exchange rate between U.S. dollars and RMB because the value of our business is effectively denominated in RMB while the ADSs will be traded in U.S. dollars.

The value of the RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in China’s political and economic conditions. The conversion of RMB into foreign currencies, including U.S. dollars, has been based on rates set by the People’s Bank of China. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the RMB to the U.S. dollar, and the RMB appreciated more than 20% against the U.S. dollar over the following five years. In June 2010, the PRC government announced that it would increase Renminbi exchange rate flexibility and since that time the Renminbi has gradually appreciated against the U.S. dollar. However, it remains unclear how this flexibility might be implemented. There remains significant international pressure on the PRC government to adopt a more flexible currency policy, which could result in greater fluctuation of the Renminbi against the U.S. dollar. By way of example, assuming we had converted a U.S. dollar denominated cash balance of US$1.0 million as of June 30, 2012 into Renminbi at the exchange rate of US$1.00 for RMB6.3530 as of June 29, 2012, such a cash balance would have been RMB6.35 million. Assuming a further 1.0% appreciation of the Renminbi against the U.S. dollar, such a cash balance would have decreased to RMB6.29 million as of June 30, 2012.

We have not used any forward contracts or currency borrowings to hedge our exposure to foreign currency exchange risk.

Inflation

According to the National Bureau of Statistics of China, China’s overall national inflation rate, as represented by the general consumer price index, was approximately -0.7% , 3.3% and 5.4% in calendar year 2009, 2010 and 2011. We have not in the past been materially affected by any such inflation, but we can provide no assurance that we will not be affected in the future.

Item 12.  Description of Securities Other than Equity Securities

A.Debt Securities

Not applicable.

76

B.Warrants and Rights

Not applicable.

C.Other Securities

Not applicable.

D.American Depositary Shares

According to our Deposit Agreement with our ADS depositary, The Bank of New York Mellon, the depositary collects its fees for issuance and cancellation of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deduction from cash distributions, or by directly billing investors, or by charging the book-entry system accounts of participants acting for them. The depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.

Persons depositing or withdrawing shares must pay:	For:
$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)	•	Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property; or
	•	Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates
$.02 (or less) per ADS	•	Any cash distribution to you
A fee equivalent to the fee that would be payable if securities distributed to you had been shares and the shares had been deposited for issuance of ADSs	•	Distribution of securities distributed to holders of deposited securities that are distributed by the depositary to ADS holders
$.02 (or less) per ADSs per calendar year	•	Depositary services
Registration or transfer fees	•	Transfer and registration of shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw shares
Expenses of the depositary	•	Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement); or
	•	Converting foreign currency to U.S. dollars
Taxes and other governmental charges the depositary or the custodian have to pay on any ADS or share underlying an ADS, for example, stock transfer taxes, stamp duty or withholding taxes	•	As necessary
Any charges incurred by the depositary or its agents for servicing the deposited securities	•	As necessary

The fees described above may be amended from time to time.

The depositary has agreed to waive certain fees incurred by us that are related to establishment and maintenance of the American Depositary Receipts program. In fiscal 2012, the depositary waived total fees of US$131,500.

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PART II

Item 13.  Defaults, Dividend Arrearages and Delinquencies

None.

Item 14.  Material Modifications to the Rights of Security Holders and Use of Proceeds

A.–D.      Material Modifications to the Rights of Security Holders

See “Item 10. Additional Information” for a description of the rights of securities holders, which remain unchanged.

E.             Use of Proceeds

On October 24, 2007, we completed our initial public offering of ADSs sold by us and a selling shareholder. In the initial public offering, we registered and sold 10,202,641 ADSs (including over-allotment options), representing 10,202,641 ordinary shares, at US$14.00 per ADS. The aggregate price of the offering amount registered and sold was approximately US$142.8 million, of which we received net proceeds of approximately US$132.7 million. We did not receive any of the proceeds from the sale of ADSs by the selling shareholder. We used the net proceeds received from our initial public offering during the fiscal year ended June 30, 2012 as follows:

· approximately US$4.0 million to fund our expansion into the education services business such as acquiring children’s English language training business and early childhood, primary and secondary education services business;

· approximately US$0.5 million to fund research and development efforts; and

· approximately US$0.04 million to repurchase ADSs from the open market in fiscal 2012.

None of the net proceeds from our initial public offering were paid directly or indirectly to directors or officers of our company or their associates, persons owning 10% or more of our equity securities or our affiliates. Proceeds from our initial public offering that have yet to be applied have been invested in bank deposits.

Item 15.  Controls and Procedures

Disclosure Controls and Procedures

As required by Rule 13a-15 under the Exchange Act, our management has carried out an evaluation, with the participation and under the supervision of our acting chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this annual report. Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating and implementing possible controls and procedures. Based on such evaluation, our acting chief executive officer and chief financial officer have concluded that, as of the end of the period covered by this annual report, our disclosure controls and procedures were effective at a reasonable assurance level.

Management’s Annual Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting for our company, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

78

Management has conducted an assessment, including testing of the design and the effectiveness of our internal control over financial reporting as of June 30, 2012. In making its assessment, management used the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this assessment, management concluded that our internal control over financial reporting was effective as of June 30, 2012.

Changes in Internal Control over Financial Reporting

In July 2010, we completed the acquisition of a 70% equity interest in Wentai Education through a series of transactions. In July 2011, we completed the acquisition of an 80% equity interest in Yuanbo Education. Both Wentai Education and Yuanbo Education are young, private companies with limited accounting and other resources with which to adequately address their internal controls and procedures. Following the acquisitions of Wentai Education and Yuanbo Education, we took steps to improve their internal control over financial reporting, including hiring additional accounting staff, training their new and existing staff and augmenting their financial information technology systems.

There were no changes in our internal controls over financial reporting that occurred during the period covered by this annual report that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Item 16A. Audit Committee Financial Expert

Our board of directors has determined that Dr. Xiao Chen, an independent director (under the standards set forth in Section 303A of the Corporate Governance Rules of the New York Stock Exchange and Rule 10A-3 under the Exchange Act) and a member of our audit committee, is an audit committee financial expert.

Item 16B. Code of Ethics

Our board of directors has adopted a code of ethics that applies to our directors, officers, employees and agents, including certain provisions that specifically apply to our chief executive officer, chief financial officer, chief operating officer, chief technology officer, vice presidents and any other persons who perform similar functions for us. We have filed our code of business conduct and ethics as an exhibit to our registration statement on Form F-1 (No. 333-146267) and posted the code on our website www.noaheducation.com. We hereby undertake to provide to any person, without charge, a copy of our code of business conduct and ethics within ten working days after we receive such person’s written request.

79

Item 16C. Principal Accountant Fees and Services

The following table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered by Deloitte Touche Tohmatsu, our independent registered public accounting firm, for the periods indicated.

	For the Year Ended June 30,
	2010		2011		2012
	(in thousands of US$)
Audit fees (1)		450		500		350
Audit-related fees (2)		—		—		—
Tax fees (3)		21		—		—
All other fees (4)		—		—		29

(1) “Audit fees” means the aggregate fees billed in each of the fiscal years listed for professional services rendered by our independent registered public accounting firm for the audit of our annual financial statements that are normally provided in connection with statutory and regulatory filings or engagements for those fiscal years.

(2) “Audit-related fees” means the aggregate fees billed in each of the fiscal years listed for assurance and related services by our independent registered public accounting firm that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit fees.”

(3) “Tax fees” means the aggregate fees billed in each of the fiscal years listed for professional services rendered by our independent registered public accounting firm for tax compliance, tax advice, and tax planning.

(4) “All other fees” means the aggregate fees billed in each of the fiscal years listed for products and services provided by our independent registered public accounting firm, other than the services reported in the other categories.

The policy of our audit committee is to pre-approve all audit and non-audit services provided by our independent registered public accounting firm, including audit services, audit-related services, tax services and other services as described above, other than those for de minimis services which are approved by the Audit Committee prior to the completion of the audit.

Item 16D. Exemptions from the Listing Standards for Audit Committees

Not applicable.

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The table below is a summary of the ADSs repurchased by us as of June 30, 2012.

Period	Total Number of ADSs Purchased(1)	Average Price Paid Per ADS(2)		Total Number of ADSs Purchased as Part of Publicly Announced Plans	Approximate Dollar Value of ADSs that May Yet Be Purchased Under the Plans
September 1, 2011 to September 30, 2011(3)	12,595	US$	1.82	12,595	US$	14,886,530
June 1, 2012 to June 30, 2012	13,600	US$	1.27	13,600	US$	14,869,313
Total	26,195	US$	1.53	26,195	US$	14,869,313

(1) All the ADSs were purchased in the open market.

(2) Each of our ADSs represents one ordinary share.

(3) On June 10, 2011, our board of directors approved a share repurchase plan to repurchase up to US$15 million of our ADSs in the open market through June 10, 2013.

The ADSs repurchased in the fiscal 2012, representing 26,195 ordinary shares, have been cancelled.

Item 16F. Change in Registrant’s Certifying Accountant

Not applicable.

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Item 16G. Corporate Governance

We believe that there are no significant differences between our corporate governance practices and those of U.S. domestic companies under the listing standards of the New York Stock Exchange.

Item 16H. Mine Safety Disclosure

Not applicable.

PART III

Item 17.  Financial Statements

We have elected to provide financial statements pursuant to Item 18.

Item 18.  Financial Statements

The consolidated financial statements of Noah Education Holdings Ltd., its subsidiaries and its variable interest entities are included at the end of this annual report.

Item 19.  Exhibits

Exhibit Number	Description of Document
1.1	Amended and Restated Memorandum and Articles of Association of the Registrant (incorporated by reference to Exhibit 1.1 from our annual report on Form 20-F (File No. 001-33728) filed with the Commission on November 20, 2009)
2.1	Registrant’s Specimen American Depositary Receipt (incorporated by reference to Exhibit 4.1 from our F-1 registration statement (File No. 333-146267), as amended, initially filed with the Commission on September 24, 2007)
2.2	Registrant’s Specimen Certificate for Ordinary Shares (incorporated by reference to Exhibit 4.2 from our F-1 registration statement (File No. 333-146267), as amended, initially filed with the Commission on September 24, 2007)
2.3	Form of Deposit Agreement among the Registrant, the depositary and holders of the American Depositary Receipts (incorporated by reference to Exhibit 4.3 from our F-1 registration statement (File No. 333-146267), as amended, initially filed with the Commission on September 24, 2007)
4.1	2007 Share Incentive Plan (incorporated by reference to Exhibit 3 of Form 6-K furnished with the Commission on December 19, 2008)
4.2	2008 Share Incentive Plan (incorporated by reference to Exhibit 4 of Form 6-K furnished with the Commission on December 19, 2008)
4.3	2011 Share Incentive Plan (incorporated by reference to Exhibit 99.1 of Form S-8 filed with the Commission on June 17, 2011)
4.4	Form of Indemnification Agreement with the Registrant’s directors (incorporated by reference to Exhibit 10.3 from our F-1 registration statement (File No. 333-146267), as amended, initially filed with the Commission on September 24, 2007)
4.5	Form of Employment Agreement with Executive Officers (incorporated by reference to Exhibit 10.4 from our F-1 registration statement (File No. 333-146267), as amended, initially filed with the Commission on September 24, 2007)
4.6	English Translation of Purchase & Sale Contract for Commercial House dated February 20, 2009 between Chengdu Hi-tech Real Estate Co., Ltd. and Chengdu Shidai Noah Information Technology Co., Ltd. (incorporated by reference to Exhibit 4.19 from our annual report on Form 20-F (File No. 001-33728) filed with the Commission on November 20, 2009)

81

Exhibit
Number Description of Document

4.7	English Translation of Purchase & Sale Contract for Commercial House dated February 20, 2009 between Chengdu Hi-tech Real Estate Co., Ltd. and Chengdu Shidai Noah Information Technology Co., Ltd. (incorporated by reference to Exhibit 4.20 from our annual report on Form 20-F (File No. 001-33728) filed with the Commission on November 20, 2009)
4.8	English Translation of Purchase & Sale Contract for Commercial House dated February 20, 2009 between Chengdu Hi-tech Real Estate Co., Ltd. and Chengdu Shidai Noah Education Software Co. Ltd. (incorporated by reference to Exhibit 4.21 from our annual report on Form 20-F (File No. 001-33728) filed with the Commission on November 20, 2009)
4.9	English Translation of Purchase & Sale Contract for Commercial House dated February 20, 2009 between Chengdu Hi-tech Real Estate Co., Ltd. and Chengdu Shidai Noah Education Software Co. Ltd. (incorporated by reference to Exhibit 4.22 from our annual report on Form 20-F (File No. 001-33728) filed with the Commission on November 20, 2009)
4.10	Share Purchase Agreement dated May 22, 2009 between Sunshine Nation Limited, Tianming Du, Liangdong Du, Siyuan Du and the Registrant (incorporated by reference to Exhibit 4.23 from our annual report on Form 20-F (File No. 001-33728) filed with the Commission on November 20, 2009)
4.11	English Translation of Equity Acquisition Agreement dated May 22, 2009 between Tianmin Du, Liangdong Du, Changsha Xingchen Enterprise Management & Consultation Co., Ltd and Global Ring Limited (incorporated by reference to Exhibit 4.24 from our annual report on Form 20-F (File No. 001-33728) filed with the Commission on November 20, 2009)
4.12	English Translation of Equity Transfer Agreement dated May 22, 2009 between Tianmin Du, Liangdong Du, Changsha Xingchen Enterprise Management & Consultation Co., Ltd. and Shenzhen Zhi Yuan Noah Internet Co., Ltd. (incorporated by reference to Exhibit 4.25 from our annual report on Form 20-F (File No. 001-33728) filed with the Commission on November 20, 2009)
4.13	English Translation of Investment Agreement dated March 12, 2010, First Supplemental Agreement dated March 17, 2010 and Second Supplemental Agreement dated June 30, 2010 between Noah Education, Qicai Du, Yuzhang He, Xing Liang, Ming Yin and Shenzhen Wentai Education Industry Development Co., Ltd. (incorporated by reference to Exhibit 4.20 from our annual report on Form 20-F (File No. 001-33728) filed with the Commission on October 29, 2010)
4.14	English Translation of Equity Transfer and Capital Increase Agreement dated April 9, 2010 between Noah Education, Shenzhen Jinyinhe Investment Co., Ltd., Qicai Du, Yuzhang He, Xing Liang, Ming Yin and Shenzhen Wentai Education Industry Development Co., Ltd. (incorporated by reference to Exhibit 4.21 from our annual report on Form 20-F (File No. 001-33728) filed with the Commission on October 29, 2010)
4.15	English Translation of Services Agreement, dated October 28, 2010, between Wentai Education and Wentai Investment (incorporated by reference to Exhibit 4.22 from our annual report on Form 20-F (File No. 001-33728) filed with the Commission on October 29, 2010)
4.16	English Translation of Equity Pledge Agreement, dated April 23, 2010, between Wentai Education, Dong Xu and Qicai Du (incorporated by reference to Exhibit 4.23 from our annual report on Form 20-F (File No. 001-33728) filed with the Commission on October 29, 2010)
4.17	English Translation of Equity Pledge Agreement, dated April 23, 2010, between Wentai Education and Wentai Investment (incorporated by reference to Exhibit 4.24 from our annual report on Form 20-F (File No. 001-33728) filed with the Commission on October 29, 2010)
4.18	English Translation of Call Option Agreement, dated April 23, 2010, between Wentai Education, Dong Xu and Qicai Du (incorporated by reference to Exhibit 4.25 from our annual report on Form 20-F (File No. 001-33728) filed with the Commission on October 29, 2010)
4.19	English Translation of Loan Agreement, dated March 12, 2010, between Wentai Education, Dong Xu and Qicai Du (incorporated by reference to Exhibit 4.26 from our annual report on Form 20-F (File No. 001-33728) filed with the Commission on October 29, 2010)

82

Exhibit
Number Description of Document

4.20	English Translation of Form of Services Agreement between Wentai Education and Schools (incorporated by reference to Exhibit 4.27 from our annual report on Form 20-F (File No. 001-33728) filed with the Commission on October 29, 2010)
4.21	English Translation of Power of Attorney, dated April 23, 2010, by Xu Dong and Qicai Du in favor of Wentai Education in respect of Wentai Investment (incorporated by reference to Exhibit 4.28 from our annual report on Form 20-F (File No. 001-33728) filed with the Commission on October 29, 2010)
4.22	English Translation of Power of Attorney, dated April 23, 2010, by Wentai Investment in favor of Wentai Education in respect of Zhongda Foundation (incorporated by reference to Exhibit 4.29 from our annual report on Form 20-F (File No. 001-33728) filed with the Commission on October 29, 2010)
4.23	English Translation of Operation and Management Agreement, dated April 23, 2010, among Wentai Education, Wentai Investment, Xu Dong and Qicai Du (incorporated by reference to Exhibit 4.30 from our annual report on Form 20-F (File No. 001-33728) filed with the Commission on October 29, 2010)
4.24	English Translation of Software Development and Maintenance Agreement, dated June 8, 2011, between Animation Digital and Leisen Education(incorporated by reference to Exhibit 4.24 from our annual report on Form 20-F (File No. 001-33728) filed with the Commission on November 30, 2011)
4.25	English Translation of Exclusive Technology Supporting and Consulting Service Agreement, dated June 8, 2011, between Animation Digital and Leisen Education(incorporated by reference to Exhibit 4.25 from our annual report on Form 20-F (File No. 001-33728) filed with the Commission on November 30, 2011)
4.26	English Translation of Content Services Agreement, dated June 8, 2011, between Animation Digital and Leisen Education (incorporated by reference to Exhibit 4.26 from our annual report on Form 20-F (File No. 001-33728) filed with the Commission on November 30, 2011)
4.27	English Translation of Equity Pledge Agreement, dated June 8, 2011 between Animation Digital and Dong Xu (incorporated by reference to Exhibit 4.27 from our annual report on Form 20-F (File No. 001-33728) filed with the Commission on November 30, 2011)
4.28	English Translation of Call Option Agreement, dated June 8, 2011 between Animation Digital and Dong Xu (incorporated by reference to Exhibit 4.28 from our annual report on Form 20-F (File No. 001-33728) filed with the Commission on November 30, 2011)
4.29	English Translation of Loan Agreement, dated June 8, 2011 between Animation Digital and Dong Xu (incorporated by reference to Exhibit 4.29 from our annual report on Form 20-F (File No. 001-33728) filed with the Commission on November 30, 2011)
4.30	English Translation of Power of Attorney by Dong Xu in favor of Animation Digital in respect of Leisen Education (incorporated by reference to Exhibit 4.30 from our annual report on Form 20-F (File No. 001-33728) filed with the Commission on November 30, 2011)
4.31	Amended and Restated Stock Purchase Agreement dated June 8, 2011 by and among First Win, Noah and Benguo Tang (incorporated by reference to Exhibit 4.31 from our annual report on Form 20-F (File No. 001-33728) filed with the Commission on November 30, 2011)
4.32	English Translation of Equity Transfer and Capital Increase Agreement dated April 13, 2011 by and among Noah Education, Yuanbo Education, Li Cao and Rongda Liu (incorporated by reference to Exhibit 4.32 from our annual report on Form 20-F (File No. 001-33728) filed with the Commission on November 30, 2011)
4.33	English Translation of Investment Agreement dated April 13, 2011 by and among Noah Education, Yuanbo Education, Li Cao and Rongda Liu(incorporated by reference to Exhibit 4.33 from our annual report on Form 20-F (File No. 001-33728) filed with the Commission on November 30, 2011)

83

Exhibit
Number Description of Document

4.34	English Translation of the First Supplementary Agreement to Investment Agreement dated May 18, 2011 by and among Noah Education, Yuanbo Education, Li Cao, Zhengan Chen and Rongda Liu(incorporated by reference to Exhibit 4.34 from our annual report on Form 20-F (File No. 001-33728) filed with the Commission on November 30, 2011)
4.35	English Translation of the Second Supplementary Agreement to Investment Agreement dated July 22, 2011 by and among Noah Education, Yuanbo Education, Li Cao, Zhengan Chen and Rongda Liu(incorporated by reference to Exhibit 4.35 from our annual report on Form 20-F (File No. 001-33728) filed with the Commission on November 30, 2011)
4.36*	English Translation of Investment Agreement dated August 2, 2012 by and among Yuanbo Education, DDK consulting, Zhejiang Fengming Chemical Fiber Co., Ltd, Daoyue Sun, Guoping Dong, Changlin Fei and Tongxiang Fengming Fukang Cultural and Industrial Investment Co., Ltd.
4.37*	English Translation of Equity Transfer Agreement dated August 2, 2012 by and among Yuanbo Education, Zhejiang Fengming Chemical Fiber Co., Ltd, Daoyue Sun, Guoping Dong and Changlin Fei
4.38*	English Translation of Supplementary Agreement to Investment Agreement dated August 29, 2012 by and among Yuanbo Education, DDK consulting, Zhejiang Fengming Chemical Fiber Co., Ltd., Daoyue Sun, Guoping Dong, Changlin Fei, Tongxiang Fengming Fukang Cultural and Industrial Investment Co., Ltd., Daidaikang Mickey Kindergarten, Daidaikang Nanhu New District Kindergarten, Daidaikang Nobel Kindergarten, Daidaikang American English Kindergarten and Daidaikang Lvdu Early learning Center
8.1*	Subsidiaries of the Registrant
11.1	Code of Business Conduct and Ethics of the Registrant (incorporated by reference to Exhibit 99.1 from our F-1 registration statement (File No. 333-146267), as amended, initially filed with the Commission on September 24, 2007)
12.1*	CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
12.2*	CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
13.1*	CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
13.2*	CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
15.1*	Consent of Deloitte Touche Tohmatsu
101.INS**	XBRL Instance Document
101.SCH**	XBRL Taxonomy Extension Scheme Document
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF**	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB**	XBRL Taxonomy Extension Label Linkbase Document
101.PRE**	XBRL Taxonomy Extension Presentation Linkbase Document

* Filed with this annual report on Form 20-F

** XBRL (eXtensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

84

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf. 

Noah Education Holdings Ltd.
By:	/s/ Dong Xu
	Name: Dong Xu Title: Acting Chief Executive Officer

Date: October 31, 2012

85

NOAH EDUCATION HOLDINGS LTD.

Report of Independent Registered Public Accounting Firm

and Consolidated Financial Statements

For the years ended June 30, 2010, 2011 and 2012

NOAH EDUCATION HOLDINGS LTD. 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2010, 2011 AND 2012

	Page(s)
Report of Independent Registered Public Accounting Firm	F-1
Consolidated Balance Sheets as of June 30, 2011 and 2012	F-2
Consolidated Statements of Income for the years ended June 30, 2010, 2011 and 2012	F-3
Consolidated Statements of Shareholders' Equity and Comprehensive Income for the years ended June 30, 2010, 2011 and 2012	F-4
Consolidated Statements of Cash Flows for the years ended June 30, 2010, 2011 and 2012	F-5
Notes to the Consolidated Financial Statements	F-6 - F-63
Schedule 1 - Noah Education Holdings Ltd. - condensed financial information as of June 30, 2011 and 2012 and for the years ended June 30, 2010, 2011 and 2012	F-64 - F-68

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Noah Education Holdings Ltd.:

We have audited the accompanying consolidated balance sheets of Noah Education Holdings Ltd., its variable interest entities and subsidiaries (the "Company") as of June 30, 2012 and 2011, and the related consolidated statements of income, shareholders' equity and comprehensive income, and cash flows for each of the three years in the period ended June 30, 2012. Our audits also included the financial statement schedule listed in the Index. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and financial statement schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Noah Education Holdings Ltd. its variable interest entities and subsidiaries as of June 30, 2012 and 2011, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2012, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein.

Our audits also comprehended the translation of Renminbi amounts into United States dollar amounts and, in our opinion, such translation has been made in conformity with the basis stated in Note 2(d). Such United States dollar amounts are presented solely for the convenience of readers in the United States of America.

/s/ Deloitte Touche Tohmatsu

Deloitte Touche Tohmatsu

Hong Kong

October 31, 2012

F-1

NOAH EDUCATION HOLDINGS LTD.

Consolidated Balance Sheets

		As of June 30,
	NOTES	2011			2012			2012
		RMB			RMB			US$
Assets
Current assets
Cash and cash equivalents			405,874,701			501,772,653			78,982,001
Short-term bank deposits			32,000,000			-			-
investments	4		50,003,441			20,503,441			3,227,364
Accounts receivable, net of allowance of doubtful debts of nil and RMB583,753 as of June 30, 2011 and 2012, respectively	5		1,668,007			750,854			118,189
Related party receivables	20		47,532,200			-			-
Inventories	6		6,197,967			5,451,811			858,147
Prepaid expenses and other current assets	7		12,583,468			19,798,366			3,116,381
Total current assets			555,859,784			548,277,125			86,302,082
Investments	4		12,943,200			17,761,427			2,795,754
Property, plant and equipment, net	8		171,920,948			184,477,616			29,037,874
Intangible assets, net	9		39,019,235			68,815,388			10,831,951
Goodwill	2(l)		103,025,561			56,738,812			8,931,027
Deposits for acquisitions of subsidiaries			4,000,000			-			-
Deposits for property, plant and equipment			743,243			618,519			97,359
Deferred tax assets			-			298,831			47,038
Total assets			887,511,971			876,987,718			138,043,085
Liabilities and Shareholders' Equity
Current liabilities
Accounts payables (including accounts payables of the consolidated variable interest entities ("VIEs") without recourse to the Company of RMB2,787,205 and RMB1,704,882 as of June 30, 2011 and 2012, respectively)			2,835,594			1,778,569			279,957
Other payables and accruals (including other payables, accruals of the consolidated VIEs without recourse to the Company of RMB7,188,735 and RMB11,543,149 as of June 30, 2011 and 2012, respectively)	12		34,236,817			27,925,392			4,395,623
Advances from customers (including advances from customers of the consolidated VIEs without recourse to the Company of RMB224,523 and RMB427,071 as of June 30, 2011 and 2012, respectively)			227,516			431,748			67,960
Income tax payables (including income tax payables of the consolidated VIEs without recourse to the Company of RMB3,597,881 and RMB7,030,809 as of June 30, 2011 and 2012, respectively)			5,732,080			14,217,785			2,237,964
Deferred revenue (including deferred revenue of the consolidated VIEs without recourse to the Company of RMB7,210,725 and RMB13,020,663 as of June 30, 2011 and 2012, respectively)			20,420,720			28,105,992			4,424,050
Contingent consideration payable	10		-			7,272,337			1,144,709
Total current liabilities			63,452,727			79,731,823			12,550,263
Non-current liabilities
Deferred tax liabilities			4,589,541			7,585,920			1,194,069
Deferred revenue			5,327,152			3,864,580			608,308
Other liabilities			-			1,102,801			173,588
Total non-current liabilities			9,916,693			12,553,301			1,975,965
Total liabilities			73,369,420			92,285,124			14,526,228
Commitments and contingencies	21
Shareholders' Equity
Ordinary Shares, US$0.00005 par value; 1,000,000,000 shares authorized as of June 30, 2011 and 2012; 36,427,851 and 36,569,866 shares issued and outstanding as of June 30, 2011 and 2012, respectively	13		14,799			14,843			2,336
Additional paid-in capital			1,042,785,726			1,046,863,605			164,782,560
Accumulated other comprehensive loss			(119,328,924	)		(124,039,206	)		(19,524,510	)
Accumulated losses			(154,312,678	)		(207,870,563	)		(32,720,062	)
Total Noah Education Holdings Ltd. shareholders' equity			769,158,923			714,968,679			112,540,324
Non-controlling interests			44,983,628			69,733,915			10,976,533
Total equity			814,142,551			784,702,594			123,516,857
Total liabilities and shareholders' equity			887,511,971			876,987,718			138,043,085

F-2

NOAH EDUCATION HOLDINGS LTD.

CONSOLIDATED STATEMENTS OF INCOME

	NOTES	2010			2011			2012			2012
		RMB			RMB			RMB			US$
Continuing operations
Net revenue			39,897,671			93,474,859			163,022,321			25,660,683
Cost of revenue			(18,493,517	)		(43,325,518	)		(86,377,388	)		(13,596,315	)
Gross profit			21,404,154			50,149,341			76,644,933			12,064,368
Research and development expenditures			(1,878,735	)		(2,212,193	)		(3,103,168	)		(488,457	)
Selling and marketing expenses			(3,390,773	)		(3,979,909	)		(6,096,483	)		(959,623	)
General and administrative expenses			(42,170,339	)		(65,468,504	)		(86,725,310	)		(13,651,080	)
Other operating expenses	15		(2,861,943	)		(10,571,986	)		(2,059,054	)		(324,107	)
Impairment loss on goodwill			-			-			(57,393,867	)		(9,034,136	)
Other operating income	16		278,595			5,512,172			17,446,516			2,746,186
Operating loss			(28,619,041	)		(26,571,079	)		(61,286,433	)		(9,646,849	)
Impairment loss on investment	4		-			(4,409,508	)		(809,270	)		(127,384	)
Interest income	2(r)		9,134,152			1,880,147			1,402,253			220,723
Investment income	4		2,823,770			11,022,226			18,682,916			2,940,802
Other non-operating income (expenses)	17		5,962,349			(1,179,859	)		4,762,338			749,621
Loss before income tax			(10,698,770	)		(19,258,073	)		(37,248,196	)		(5,863,087	)
Income tax expenses	18		(164,400	)		(6,219,458	)		(10,430,402	)		(1,641,807	)
Net loss from continuing operations			(10,863,170	)		(25,477,531	)		(47,678,598	)		(7,504,894	)
Net income (loss) from discontinued operations	11		16,522,995			(382,515,241	)		-			-
Net income (loss)			5,659,825			(407,992,772	)		(47,678,598	)		(7,504,894	)
Less: net income attributable to non-controlling interest			-			(3,344,272	)		(5,879,287	)		(925,435	)
Net income (loss) attributable to the Noah Education Holdings Ltd. shareholders			5,659,825			(411,337,044	)		(53,557,885	)		(8,430,329	)
Net income (loss) per share	19
From continuing and discontinued operations
Basic			0.15			(11.16	)		(1.47	)		(0.23	)
Diluted			0.15			(11.16	)		(1.47	)		(0.23	)
From continuing operations
Basic			(0.28	)		(0.78	)		(1.47	)		(0.23	)
Diluted			(0.28	)		(0.78	)		(1.47	)		(0.23	)
From discontinued operation
Basic			0.43			(10.38	)		-			-
Diluted			0.42			(10.38	)		-			-
Weighted average ordinary shares outstanding
Basic			38,327,047			36,856,451			36,519,353			36,519,353
Diluted			39,201,389			37,091,472			36,588,077			36,588,077

F-3

NOAH EDUCATION HOLDINGS LTD. 

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME

	Noah Education Holdings Ltd. shareholders																					Comprehensive income (loss)
																						Attributable
										Accumulated												to Noah			Attributable
							Additional			other			Accumulated			Non-						Education			to
	Ordinary shares						paid-in			comprehensive			income			Controlling						Holding Ltd.			non-controlling
	Share			Amount			capital			loss			(losses)			interest			Total			shareholders			interests		Total
				RMB			RMB			RMB			RMB			RMB			RMB			RMB			RMB		RMB
As of July 1, 2009		35,589,120			14,504			1,029,778,033			(93,632,438	)		250,934,118			-			1,187,094,217
Issue of shares (note 13)		2,647,743			905			37,384,095			-			-			-			37,385,000
Share repurchase (note 13)		(1,394,300	)		(477	)		(38,698,132	)		-			-			-			(38,698,609	)
Exercise of share options (note 13)		771,138			263			10,506,239			-			-			-			10,506,502
Net income		-			-			-			-			5,659,825			-			5,659,825			5,659,825			-		(5,659,825	)
Share-based compensation (note 14)		-			-			10,395,821			-			-			-			10,395,821
Cumulative translation adjustment, net of tax		-			-			-			(4,714,440	)		-			-			(4,714,440	)		(4,714,440	)		-		(4,714,440	)
Unrealized gain on available-for-sale investment, net of tax		-			-			-			9,395,254			-			-			9,395,254			9,395,254			-		9,395,254
As of June 30, 2010		37,613,701			15,195			1,049,366,056			(88,951,624	)		256,593,943			-			1,217,023,570			10,340,639			-		10,340,639
Issue of shares as employee compensation (note 13)		150,000			49			2,429,120			-			-			-			2,429,169
Share repurchase (note 13)		(1,375,478	)		(458	)		(18,404,391	)		-			-			-			(18,404,849	)
Exercise of share options (note 13)		39,628			13			386,445			-			-			-			386,458
Net income (loss)		-			-			-			-			(411,337,044	)		3,344,272			(407,992,772	)		(411,337,044	)		3,344,272		(407,992,772	)
Share-based compensation		-			-			9,008,496			-			-			-			9,008,496
Cumulative translation adjustment, net of tax		-			-			-			(36,155,598	)		-			-			(36,155,598	)		(36,155,598	)		-		(36,155,598	)
Unrealized loss on available-for-sale investment, net of tax		-			-			-			(12,523,254	)		-			-			(12,523,254	)		(12,523,254	)		-		(12,523,254	)
Disposal of subsidiaries		-			-			-			18,301,552			-			-			18,301,552			18,301,552			-		18,301,552
Acquisition of subsidiaries (note 10)		-			-			-			-			430,423			41,639,356			42,069,779
As of June 30, 2011		36,427,851			14,799			1,042,785,726			(119,328,924	)		(154,312,678	)		44,983,628			814,142,551			(441,714,344	)		3,344,272		(438,370,072	)
Share repurchase (note 13)		(26,195	)		(9	)		(254,502	)		-			-			-			(254,511	)
Exercise of share options (note 13)		168,210			53			1,572,375			-			-			-			1,572,428
Net income (loss)		-			-			-			-			(53,557,885	)		5,879,287			(47,678,598	)		(53,557,885	)		5,879,287		(47,678,598	)
Share-based compensation (note 14)		-			-			2,760,006			-			-			-			2,760,006
Cumulative translation adjustment, net of tax		-			-			-			(3,899,857	)		-			-			(3,899,857	)		(3,899,857	)		-		(3,899,857	)
Unrealized loss on available-for-sale investment, net of tax		-			-			-			(810,425	)		-			-			(810,425	)		(810,425	)		-		(810,425	)
Acquisition of subsidiaries (note 10)		-			-			-			-			-			19,821,000			19,821,000
Dividends to non-controlling interest		-			-			-			-			-			(950,000	)		(950,000	)
As of June 30, 2012		36,569,866			14,843			1,046,863,605			(124,039,206	)		(207,870,563	)		69,733,915			784,702,594			(58,268,167	)		5,879,287		(52,388,880	)
As of June 30, 2012 (US$)					2,336			164,782,560			(19,524,509	)		(32,720,063	)		10,976,533			123,516,857			(9,171,756	)		925,435		(8,246,321	)

The accompanying notes form an integral part of these consolidated financial statements.

F-4

NOAH EDUCATION HOLDINGS LTD. 

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years ended June 30,
	2010			2011			2012			2012
	RMB			RMB			RMB			US$
Cash flows from operating activities:
Net income (loss)		5,659,825			(407,992,772	)		(47,678,598	)		(7,504,894	)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Amortization of intangible assets		6,895,938			8,268,550			4,703,847			740,414
Depreciation of property, plant and equipment		10,827,312			17,244,752			23,222,390			3,655,342
Allowance for doubtful debts (net)		21,262,662			162,710,320			583,753			91,886
Write-down of excess and obsolete inventories		9,667,136			84,504,513			-			-
Loss on disposal of property, plant and equipment		696,290			1,327,093			60,395			9,507
Impairment loss on intangible assets		264,227			942,678			3,000,000			472,218
Impairment loss on goodwill		-			-			57,393,867			9,034,136
Share-based compensation		10,395,821			11,437,616			2,760,006			434,441
Gain on trading investments, net		(868,255	)		(653,861	)		-			-
Gain on disposal of Electronic Learning Products ("ELP") business (note 11)		-			(11,936,125	)		-			-
Impairment loss on other investment (note 4)		-			4,409,508			1,890,270			297,540
Change in fair value of contingent consideration payable (note 10)		-			-			(58,665	)		(9,234	)
Gain on disposal of a subsidiary		-			-			(302,004	)		(47,537	)
Changes in current assets and liabilities:
Trading investments		3,354,018			6,147,040			-			-
Accounts receivable		(158,332,518	)		111,403,206			333,400			52,479
Related party receivables		190,423			165,218			-			-
Inventories		(399,894	)		26,858,112			671,497			105,698
Prepaid expenses and other current assets		187,521			39,486,852			(5,952,494	)		(936,958	)
Deferred tax assets		808,067			2,189,542			195,050			30,702
Accounts payables		(5,572,429	)		(63,378,727	)		(1,057,025	)		(166,382	)
Other payables and accruals		(14,806,402	)		(26,721,883	)		(9,996,010	)		(1,573,432	)
Advances from customers		2,831,761			1,174,529			204,232			32,147
Deferred revenue		4,449,056			750,752			6,331,587			996,629
Income tax payables		(564,214	)		5,420,618			8,485,705			1,335,700
Deferred tax liabilities		(1,071,396	)		(167,801	)		(1,572,771	)		(247,564	)
Net cash provided by (used in) operating activities		(104,125,051	)		(26,410,270	)		43,218,432			6,802,838
Cash flows from investing activities:
Acquisition of property, plant and equipment		(20,361,429	)		(18,132,076	)		(27,139,743	)		(4,271,957	)
Acquisition of intangible assets		(7,825,000	)		(3,631,976	)		-			-
Acquisition of the Little New Star Education Group (note 10)		(4,485,215	)		-			-			-
Acquisition of the Wentai Education Group (note 10)		-			(35,283,311	)		(697,611	)		(109,808	)
Acquisition of Yuanbo Education Group (note 10)		-			-			(25,097,061	)		(3,950,427	)
Settlement of related party receivables		-			-			47,532,200			7,481,851
Disposal of ELP business (note 11)		-			28,041,081			-			-
Disposal of a subsidiary		-			-			(280,403	)		(44,137	)
Deposits for acquisitions of subsidiaries		(4,200,000	)		(4,000,000	)		-			-
Purchase of held-to-maturity investments		-			(44,000,000	)		-			-
Redemption of held-to-maturity investments		-			-			29,500,000			4,643,476
Increase in investments		(20,480,700	)		-			-			-
Decrease in short-term bank deposits		214,200,000			28,000,000			32,000,000			5,036,990
Net cash provided by (used in) investing activities		156,847,656			(49,006,282	)		55,817,382			8,785,988
Cash flows from financing activities:
Proceeds from issuance of ordinary shares, net of issuance costs		-			49			-			-
Proceeds from exercise of shares options		10,506,502			386,458			1,572,428			247,510
Shares repurchase		(38,698,609	)		(18,404,849	)		(254,511	)		(40,062	)
Dividend paid to non-controlling shareholders		-			-			(950,000	)		(149,536	)
Repayment of short term borrowings		(7,000,000	)		(1,500,000	)		-			-
Net cash provided by (used in) financing activities		(35,192,107	)		(19,518,342	)		367,917			57,912
Net increase (decrease) in cash and cash equivalents		17,530,498			(94,934,894	)		99,403,731			15,646,738
Effect of exchange rate changes on cash and cash equivalents		(4,714,440	)		(5,917,929	)		(3,505,779	)		(551,830	)
Cash and cash equivalents at the beginning of year		493,911,466			506,727,524			405,874,701			63,887,093
Cash and cash equivalents at the end of year		506,727,524			405,874,701			501,772,653			78,982,001
Supplemental disclosure of cash flow information:
Income tax (refund) paid		(803,368	)		513,598			3,328,263			523,888
Non-cash investing and financing activities:
Acquisition of LNS through issue of shares		37,385,000			-			-			-
Acquisition of LNS through settlement of deposits paid		21,581,952			-			-			-
Acquisition of Wentai Education Group through settlement of deposits paid		-			4,200,000			-			-
Acquisition of Yuanbo Education Group through settlement of deposit paid		-			-			4,000,000			629,624

The accompanying notes form an integral part of these consolidated financial statements.

F-5

NOAH EDUCATION HOLDINGS LTD. 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. Company information

Noah Education Holdings Ltd. (the "Company"), its subsidiaries and variable interest entities ("VIEs") (hereinafter collectively referred to as the "Group") is engaged in the business of providing kindergarten education, primary and secondary education, and after-class English language learning service in the People's Republic of China (the "PRC").

Before June 8, 2011, the Group was also engaged in Electronic Learning Products ("ELP") business, which provided interactive electronic educational materials, developing and providing content targeting primarily Chinese elementary, middle and high school students in the PRC with content focused on interactive, multimedia learning materials that complement the Chinese national and local school curricula, covering subjects such as English, Chinese, physics, chemistry, geography and history. Such ELP business was discontinued with effect from June 8, 2011 (See note 11).

VIE arrangements

Current PRC laws and regulations place certain restrictions on foreign investment in and ownership of online operations and primary and secondary educational services business. Accordingly, the Group conducts its operations in China principally through contractual arrangements among its PRC subsidiaries, two PRC affiliated entities and the equity shareholders of these PRC affiliated entities, who are PRC nationals. The contractual arrangements include a series of contracts entered into between the Group's PRC subsidiaries and the equity shareholders of these PRC affiliated entities, including loan agreements, equity pledge agreements, irrevocable powers of attorney, exclusive purchase option agreements, software development and maintenance agreement, technology supporting and consulting, service agreements, operation and management agreement and content providing agreement. Through these contractual arrangements, the Group is entitled to: (1) receive service fees from the subsidiaries of these PRC affiliated entities; (2) exercise all of the voting powers of the owners of these PRC affiliated entities; (3) receive dividends declared by these PRC affiliated entities and their subsidiaries and (4) acquire all the equity interests of these PRC affiliated entities and their subsidiaries once PRC laws permit. As the Company is the sole primary beneficiary of these VIEs, the Company consolidates them into its consolidated financial statements.

To comply with PRC laws and regulations relating to foreign ownership restrictions, the Group currently conducts its primary and secondary education services business and online operations in China through contractual arrangements with Shenzhen Wentai Investment Co., Ltd. ("Wentai Investment") and Changsha Leisen Education Software Co., Ltd. ("Leisen Education"), respectively, (collectively referred as the "Two PRC Affiliated Entities") and the equity holders of the Two PRC Affiliated Entities, who are PRC nationals. To provide the Company effective control over the Two PRC Affiliated Entities, and the ability to receive substantially all of the economic benefits of the Two PRC Affiliated Entities and their subsidiaries, a series of contractual arrangements were entered between Leisen Education, Wentai Investment and their respective direct equity holders.

F-6

NOAH EDUCATION HOLDINGS LTD. 

1. Company information - continued

Contractual arrangements with Leisen Education and its Shareholders

The Company's relationships with Leisen Education and its shareholders are governed by a series of contractual arrangements. Under PRC laws, each of Leisen Education and Changsha Little New Star Animation Digital Technology Co., Ltd ("Animation Digital") is an independent legal person and neither of them is exposed to liabilities incurred by the other party. Other than pursuant to the contractual arrangements between Leisen Education and Animation Digital, Leisen Education does not transfer any other funds generated from its operations to Animation Digital.

Agreements that provide effective control over Leisen Education

Equity Pledge Agreement. Pursuant to the equity pledge agreement between Animation Digital and Mr. Dong Xu, the shareholder of Leisen Education, who pledged all of his equity interest in Leisen Education to Animation Digital to guarantee the performance of Leisen Education's obligations under the software development and maintenance agreement, the exclusive technology supporting and consulting service agreement and the content providing agreement. If Leisen Education or Mr. Dong Xu breaches its respective contractual obligations, Animation Digital, as pledgee, will be entitled to certain rights, including the right to sell the pledged equity interests. Mr. Dong Xu agreed not to transfer, sell, pledge, dispose of or otherwise create any new encumbrance on his equity interest in Leisen Education without the prior written consent of Animation Digital.

Option Agreement. Under the option agreement between Mr. Dong Xu and Animation Digital, Mr. Dong Xu irrevocably granted Animation Digital or its designated person an exclusive option to purchase, to the extent permitted under PRC law, all or part of the equity interests in Leisen Education within ten years upon the effectiveness of the option agreement. The exercise price for purchasing all of the share capital of Leisen Education is RMB2.8 million which is equal to the loan granted to Mr. Xu by Animation Digital. Animation Digital may exercise the option at any time or times at its sole discretion. Without Animation Digital's prior written consent, Mr. Dong Xu shall not transfer or otherwise dispose of any equity interests in Leisen Education or allow Leisen Education to declare any dividends. The Option Agreement shall not be unilaterally terminated without Animation Digital's prior consent.

F-7

NOAH EDUCATION HOLDINGS LTD. 

1. Company information - continued

Contractual arrangements with Leisen Education and its Shareholders - continued

Agreements that provide effective control over Leisen Education - continued

Loan Agreement. Pursuant to the loan agreement between Animation Digital and Mr. Dong Xu, Animation Digital agreed to grant a loan of RMB2.8 million to Mr. Dong Xu for his investment in the share capital of Leisen Education. Mr. Dong Xu is not required to make any interest payment to Animation Digital. Without Animation Digital's prior consent, Mr. Dong Xu shall not pledge his equity interests in Leisen Education to any third party. Mr. Dong Xu agreed to repay the loan upon the receipt of the repayment notification of Animation Digital at any time. The loan can be repaid only with the proceeds from transfer of the Mr. Dong Xu’s equity interest in Leisen Education to Animation Digital.

Power of Attorney. Mr. Dong Xu, the sole shareholder of Leisen Education, has executed a power of attorney to any person designated by Animation Digital to irrevocably authorize such person to vote as his attorney-in-fact on all of the matters of Leisen Education requiring shareholder approval. The term of each of this power of attorney is ten years from the date thereof.

Agreements that transfer economic benefits to the Company

Software Development and Maintenance Agreement. Pursuant to the software development and maintenance agreement between Animation Digital and Leisen Education, Animation Digital has the exclusive and irrevocable right to develop software related to the website owned and operated by Leisen Education, and to provide subsequent software maintenance and management services to Leisen Education. The software developed by Animation Digital thereunder remains the property of Animation Digital, but is exclusively licensed to Leisen Education. Leisen Education agrees to pay annual service fees of 40% of its total annual operating revenue to us. The term of this agreement is ten years from the date thereof and will be automatically renewed for one year if no party puts forward written objection in the term.

F-8

NOAH EDUCATION HOLDINGS LTD. 

1. Company information - continued

Contractual arrangements with Leisen Education and its Shareholders - continued

Agreements that transfer economic benefits to the Company - continued

Exclusive Technology Supporting and Consulting Service Agreement. Pursuant to the exclusive technology supporting and consulting service agreement between Animation Digital and Leisen Education, Animation Digital has the exclusive and irrevocable right to provide to Leisen Education technology supporting and consulting services related to the business operations of Leisen Education. Any and all intellectual property created by Animation Digital in connection with services provided to Leisen Education under the agreement remains the property of Animation Digital. Leisen Education agrees to pay annual service fees of 40% of its total annual operating revenue to us. The term of this agreement is ten years from the date thereof and will be automatically renewed for one year if no party puts forward written objection in the term.

Content Providing Agreement. Pursuant to the content providing agreement between Animation Digital and Leisen Education, Animation Digital has the exclusive and irrevocable right to provide to Leisen Education the content needed for the website owned and operated by Leisen Education. Any and all intellectual properties created by Animation Digital in connection with services provided to Leisen Education under the agreement remains the property of Animation Digital. Leisen Education agrees to pay annual service fees of 10% of its total annual revenue to the Company. Leisen Education agrees to pay annual service fees of 10% of its total annual operating revenue to us. The term of this agreement is ten years from the date thereof and will be automatically renewed for one year if no party puts forward written objection in the term.

Contractual arrangements with Wentai Investment and its Shareholders

The Company's relationships with Wentai Investment and its shareholders are governed by a series of contractual arrangements. Under PRC laws, each of the shareholder of Wentai Investment and Shenzhen Wentai Education Industry Development Co., Ltd. ("Wentai Education") is an independent legal person and neither of them is exposed to liabilities incurred by the other party. Other than pursuant to the contractual arrangements between Wentai Investment and Wentai Education, Wentai Investment does not transfer any other funds generated from its operations to Wentai Education.

F-9

NOAH EDUCATION HOLDINGS LTD. 

1. Company information - continued

Contractual arrangements with Wentai Investment and its Shareholders - continued

Agreements that provide effective control over Wentai Investment

Equity Pledge Agreement. Pursuant to the equity pledge agreement dated April 23, 2010 between Wentai Education and the shareholders of Wentai Investment, namely Mr. Dong Xu and Mr. Qicai Du, each shareholder pledged all of his equity interest in Wentai Investment to Wentai Education to guarantee the performance of service agreements by Wentai Investment and its schools that they had entered into with Wentai Education. Separately, Wentai Education has entered into an equity pledge agreement with Wentai Investment on April 23, 2010, pursuant to which Wentai Investment pledged all of its 67% equity interest in Guangzhou Zhongda Foundation Education Investment Management Co., Ltd. ("Zhongda Foundation") to Wentai Education for the same purpose. If Wentai Investment or any of its shareholders breaches its respective contractual obligations under the equity pledge agreements, Wentai Education, as pledgee, will be entitled to certain rights, including the right to dispose of the pledged equity interests. Wentai Investment and its shareholders agreed not to transfer, sell, pledge, dispose of or otherwise create any new encumbrance on their equity interests in Zhongda Foundation and Wentai Investment, respectively, without the prior written consent of Wentai Education.

F-10

NOAH EDUCATION HOLDINGS LTD. 

1. Company information - continued

Contractual arrangements with Wentai Investment and its Shareholders - continued

Agreements that provide effective control over Wentai Investment - continued

Option Agreement. Under the option agreement dated April 23, 2010 between the shareholders of Wentai Investment and Wentai Education, the shareholders of Wentai Investment irrevocably granted Wentai Education or its designated person an exclusive option to purchase, to the extent permitted under PRC law, all or part of the equity interests in Wentai Investment within 20 years upon the effectiveness of the option agreement. The exercise price for purchasing all of the share capital of Wentai Investment is RMB 30 million which is the registered capital of Wentai Investment. Wentai Education may exercise the option at any time or times at its sole discretion. Without Wentai Education's prior written consent, the shareholders of Wentai Investment shall not transfer, pledge or otherwise dispose of any equity interests in Wentai Investment or allow Wentai Investment to declare any dividends. The Option Agreement shall not be unilaterally terminated without Wentai Education's prior consent.

Loan Agreement. Pursuant to the loan agreement between Wentai Education and the shareholders of Wentai Investment, dated March 12, 2010, Wentai Education agreed to lend RMB21 million to Mr. Dong Xu and RMB9 million to Mr. Qicai Du for their investment in the share capital of Wentai Investment. The loan is interest-free and with a term of 20 years. Without Wentai Education's prior consent, Mr. Xu and Mr. Du shall not pledge their equity interests in Wentai Investment to any third party. Mr. Dong Xu and Mr. Qicai Du agreed to repay the loan upon the receipt of the repayment notification of Wentai Education at any time. The loan can be repaid only with the proceeds from transfer of the Mr. Dong Xu and Mr. Qicai Du’s equity interest in Wentai Investment to Wentai Education.

F-11

NOAH EDUCATION HOLDINGS LTD. 

1. Company information - continued

Contractual arrangements with Wentai Investment and its Shareholders - continued

Agreements that provide effective control over Wentai Investment - continued

Operation and Management Agreement. Pursuant to the operation and management agreement dated April 23, 2010 among Wentai Education, Wentai Investment and the shareholders of Wentai Investment, Mr. Dong Xu and Mr. Qicai Du, Wentai Education will provide policy directions and instructions on Wentai Investment's daily operations and financial management. The shareholders of Wentai Investment must designate the candidates recommended by Wentai Education as their representatives on Wentai Investment's board of directors, and Wentai Investment must appoint such candidates. Wentai Investment must also appoint any candidate nominated by Wentai Education to be its senior executive. In addition, Wentai Education agrees to guarantee Wentai Investment's performance under any business agreements or arrangements with any third party. Moreover, Wentai Investment agrees that without the prior consent of Wentai Education, Wentai Investment will not engage in any transactions that could materially affect the assets, liabilities, rights or operations of Wentai Investment and Zhongda Foundation, including, without limitation, incurrence or assumption of any indebtedness, sale or purchase of any assets or rights, incurrence of any encumbrance on any of its assets or intellectual property rights in favor of a third party or transfer of any agreements relating to its business operation to any third party. The term of this agreement is twenty years from the date thereof and will be automatically renewed for twenty years unless otherwise terminated in writing by Wentai Education.

Power of Attorney. Mr. Dong Xu and Mr. Qicai Du, the only shareholders of Wentai Investment, have each executed a power of attorney to any person designated by Wentai Education to irrevocably authorize such person to vote as his attorney-in-fact on all of the matters of Wentai Investment requiring shareholder approval. The term of each of these powers of attorney is twenty years from the date thereof.

Agreements that Transfer Economic Benefits to the Company

Service Agreement. Pursuant to the service agreement dated October 28, 2010 between Wentai Education and Wentai Investment, Wentai Investment agreed to pay Wentai Education an annual service fee of 95% of its annual net income. Pursuant to service agreements between Wentai Education and schools held by Wentai Investment or Zhongda Foundation, each of the schools agreed to pay Wentai Education an annual service fee of 17% of its total annual revenues. Wentai Investment and these schools irrevocably and exclusively retain Wentai Education as their provider of support and advisory services on education management. Any intellectual property developed during the performance of the agreements remain the property of Wentai Education. The term of the service agreements is 20 years from the date thereof and will be automatically renewed for one year if no party puts forward written objection in the term.

F-12

NOAH EDUCATION HOLDINGS LTD. 

1. Company information - continued

These contractual arrangements allow the Group to effectively control the Two PRC Affiliated Entities and their subsidiaries and to derive substantially all of the economic benefits from them. Accordingly, the Group treats the Two PRC Affiliated Entities as VIEs and because the Group is the primary beneficiary of the Two PRC Affiliated Entities, the Group has consolidated the financial results of the Two PRC Affiliated Entities and their subsidiaries.

However, there are certain risks related to the VIEs arrangements, which include but are not limited to the following:

· If the ownership structure and contractual arrangements are found to be in violation of any existing or future PRC laws or regulations, the Group could be subject to severe penalties;

· The Group rely on contractual arrangements with the VIEs and its equity holders for substantially all of its China operations, which may not be as effective as direct ownership in providing operational control; and

· The Group may have to incur significant cost to enforce, or may not be able to effectively enforce, the contractual arrangements with the VIEs and their equity holders in the event of a breach or non-compliance by the VIEs or their equity holders.

In June 2009, the Financial Accounting Standards Board ("FASB") issued an authoritative pronouncement to amend the accounting rules for VIEs. The amendments effectively replace the quantitative-based risks-and-rewards calculation for determining which reporting entity, if any, has a controlling financial interest in a variable interest entity with an approach focused on identifying which reporting entity has (1) the power to direct the activities of a variable interest entity that most significantly affect the entity's economic performance and (2) the obligation to absorb losses of, or the right to receive benefits from, the entity. Additionally, an enterprise is required to assess whether it has an implicit financial responsibility to ensure that a variable interest entity operates as designed when determining whether it has the power to direct the activities of the variable interest entity that most significantly impact the entity's economic performance. The new guidance also requires additional disclosures about a reporting entity's involvement with variable interest entities and about any significant changes in risk exposure as a result of that involvement. The Company adopted the new guidance for the year ended June 30, 2011.

The Company, through the contractual arrangements, has (1) the power to direct the activities of the VIEs that most significantly affect the VIEs' economic performance and (2) the right to receive benefits from the VIEs.

F-13

NOAH EDUCATION HOLDINGS LTD. 

1. Company information - continued

The VIEs are principally engaged in the provision of online operations and primary and secondary educational services in the PRC. The financial information of the Company's VIEs and VIEs' subsidiaries as of June 30, 2011 and 2012 and for the years ended June 30, 2010, 2011 and 2012 is as follows.

	As of June 30,
	2011		2012
	RMB		RMB
Total assets		147,887,140		135,661,665
Total liabilities		83,743,672		80,308,583

	Year ended June 30,
	2010			2011			2012
	RMB			RMB			RMB
Net revenue		20,408,152			68,275,955			83,276,644
Net income		11,253,040			18,073,609			15,690,361
Net cash provided by (used in) operating activities		1,944,389			(1,900,731	)		37,236,822
Net cash used in investing activities		(10,855	)		(3,555,083	)		(27,763,365	)

The Group's consolidated assets do not include any collateral for Leisen Education's and Wentai Investment's obligations.

There was no pledge or collateral of the assets either in Leisen Education or Wentai Investment. Creditors of Leisen Education have no recourse to the general credit of Animation Digital or the Company, which is the primary beneficiary of Leisen Education. Creditors of Wentai Investment have no recourse to the general credit of Wentai Education or the Company, which is primary beneficiary of Wentai Investment.

F-14

NOAH EDUCATION HOLDINGS LTD. 

2. Summary of significant accounting policies

(a) Basis of presentation

The accompanying consolidated financial statements of the Group have been prepared in accordance with generally accepted accounting principles in the United States of America ("US GAAP").

(b) Basis of consolidation

The consolidated financial statements include the financial statements of the Company, its subsidiaries and its VIEs. The Company's subsidiaries have entered into contractual arrangements with the VIEs and its shareholder, which enables the Company to (1) have power to direct activities that most significantly affects the economic performance of the VIEs, and (2) receive the economic benefits of the VIEs that could be significant to the VIEs. Accordingly, the Company is considered the primary beneficiary of the VIEs and has consolidated the VIEs' financial results of operations, assets and liabilities in the Company have consolidated financial statements. All inter-company transactions and balances have been eliminated upon consolidation.

(c) Use of estimates

The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

On an ongoing basis, the Group evaluates its estimates, including valuation allowance of deferred tax assets and valuation of goodwill and intangible assets. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

(d) Foreign currency translation

The functional currency of the Company is the United States dollar ("US$"). Assets and liabilities are translated at the exchange rates prevailing on the balance sheet date. Equity accounts are translated at historical exchange rates and revenues, expenses gains and losses are translated using the average rate for the year. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate component of other comprehensive income or loss in the consolidated statement of shareholders' equity and comprehensive income. The Group has chosen the Renminbi ("RMB") as its reporting currency.

The functional currency of the Company's subsidiaries is RMB. Transactions in other currencies are recorded in RMB at the rates of exchange prevailing on the dates of the transactions. Monetary assets and liabilities denominated in other currencies are translated into RMB at rates of exchange in effect at the balance sheet dates. Exchange gains and losses are recorded in the consolidated statements of operations.

The translations of RMB amounts as of and for the year ended June 30, 2012 into US$ are included solely for the convenience of the reader and were calculated at the rate of US$1.00 = RMB6.3530, representing the noon buying rate in the City of New York for cable transfers of RMB, as certified for customs purposes by the Federal Reserve Bank of New York, on June 30, 2012. This convenience translation is not intended to imply that the RMB amounts could have been, or could be, converted, realized or settled into US$ at that rate or at any other rate.

F-15

NOAH EDUCATION HOLDINGS LTD. 

(e) Cash and cash equivalents

Cash and cash equivalents consist of cash on hand and highly liquid short-term deposits which are unrestricted as to withdrawal and use, and which have maturities of three months or less from the date of deposit.

(f) Short-term bank deposits

Short-term bank deposits are cash in bank which have maturities of more than three months but less than one year from the date of deposit.

(g) Investments

Investments represent the Group's investments in equity securities and or unlisted investment fund, and are classified as trading investments, held-to-maturity investment, available-for-sale investment or investments at cost. Investments in equity securities that have readily determinable fair values not classified as trading securities or as held-to-maturity securities are classified as available-for-sale securities. Investments in unlisted investment fund are classified as held-to-maturity and measured at amortised cost only if the Group has the positive intent and ability to hold those investments fund to maturity. Investments classified as trading investments are recorded at fair value with unrealized holding gains and losses recorded in the net income. The fair value of the Group's investments classified as trading is based on the quoted market price on the last business day of the fiscal year. Available-for-sale investment is recorded at fair value with unrealized changes in fair value recorded in the accumulative other comprehensive income. The fair value of Group's available-for-sale investment is determined by applying combination of income and market approach, based on a number of unobservable input.

For unlisted investment fund classified as held-to-maturity measured at amortised cost, the Group needs to determine whether a decline in fair value below the amortized cost basis is other than temporary. If the decline in fair value is judged to be other than temporary, the cost basis of the unlisted investment fund shall be written down to fair value as a new cost basis and the amount of the written down shall be included in earnings.

The Group's investments in non-marketable equity securities for which the Group does not have the ability to exercise significant influence or control are accounted for using the cost method. Dividends and other distributions of earnings from investees, if any, are included in income when declared. The Group periodically evaluates the carrying value of investments accounted for under the cost method of accounting and any impairment is included in the consolidated statements of operations.

(h) Inventories

Inventories are stated at the lower of cost and market value. Cost is calculated using the weighted average method. The Group estimates the write-down of excessive, slow moving and obsolete inventories as well as inventory whose carrying value is in excess of market value.

F-16

NOAH EDUCATION HOLDINGS LTD. 

2. Summary of significant accounting policies - continued

(i) Property, plant and equipment, net

Property, plant and equipment are stated at cost less accumulated depreciation and any identified impairment loss.

Depreciation is calculated on a straight-line basis over the following estimated useful lives after taking into account the residual values. Estimated useful lives are:

Buildings	20 years
Leasehold improvements	Shorter of term of the lease or 5 years
Office equipment	5 years
Computer equipment	3 - 5 years
Motor vehicles	5 years

The asset's residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

The Group reassesses annually the residual values and the useful life of the property, plant and equipment and if the expectation differs from the original estimate, such difference will impact the depreciation in the year in which such estimate has been changed.

(j) Intangible assets

Acquired intangible assets includes patents, trademarks, licenses, mini lamb video series, franchises agreement, non-competition agreement, preferential leasing contracts and copyrights are measured initially at cost and amortized on as straight-line basis over their estimated useful lives.

The Company is currently amortizing its acquired intangible assets with definite lives over periods ranging from 1 to 19 years.

Intangible assets with indefinite useful lives are carried at cost less any subsequent accumulated impairment losses.

An impairment loss of nil, RMB942,678 and RMB3,000,000 (US$472,218) on intangible assets was recognized for continuing operations during the years ended June 30, 2010, 2011 and 2012, respectively.

(k) Impairment of long-lived assets

The Group reviews property, plant, and equipment and certain identifiable intangibles, excluding goodwill, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of these assets is measured by comparison of its carrying amount to future undiscounted cash flows the assets are expected to generate. If property, plant, and equipment and certain identifiable intangibles are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds its fair market value.

No impairment of property, plant and equipment was recognized for the years ended June 30, 2010, 2011 and 2012.

F-17

NOAH EDUCATION HOLDINGS LTD. 

2. Summary of significant accounting policies - continued

(l) Goodwill

The excess of the purchase price over the fair value of net assets acquired is recorded on the consolidated balance sheet as goodwill. Goodwill is not amortized, but is tested for impairment at the reporting unit level at least on an annual basis at the balance sheet date or more frequently if certain indicators arise.

Goodwill impairment is tested using a two-step approach. The first step compares the fair value of each reporting unit to its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and the second step is not required. If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of goodwill to the carrying value of the reporting unit's goodwill. The implied fair value of goodwill is determined in a manner similar to accounting for a business combination with allocation of the assessed fair value determined in the first step to the assets and liabilities of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. This allocation process is only performed for the purpose of evaluating goodwill impairment and does not result in an entry to implied fair value of goodwill.

The Group typically performs its annual goodwill impairment test at year-end. During the fourth quarter of fiscal 2012, as a result of the effects of weakening market conditions on the Group's forecasts and a sustained, significant decline in the Group's market capitalization to a level lower than its net book value, the Group concluded that impairment triggering events existed and performed a goodwill impairment analysis.

The Group has three operating segments and three reporting units, Little New Star, Wentai and Yuanbo. The Group estimated the fair values of its reporting units using discounted cash flows under the income approach. Use of the income approach requires significant management judgment and estimates, including key assumptions used in forecasts of future operating results, discount rates, and expected future growth rates.

The Group determined the fair value of Yuanbo significantly exceeded their carrying amounts. Therefore, no goodwill impairment was recognized on Yuanbo. The Group determined the fair values of Little New Star and Wentai were less than the carrying value. Accordingly, the Group performed the second step of the impairment test to determine the implied fair value of goodwill, which required the Group to allocate the fair values of Little New Star and Wentai determined in step one to all of the assets and liabilities, including any unrecognized intangible assets, of Little New Star and Wentai. As a result, the Group recognized an impairment charge of RMB57.4 million (US$9.0 million) for the year ended June 30, 2012. Accumulated goodwill impairment were nil and RMB57.4 million (US$9.0 million) as of June 30, 2011 and 2012, respectively.

F-18

NOAH EDUCATION HOLDINGS LTD. 

2. Summary of significant accounting policies - continued

(l) Goodwill - continued

The change in the carrying amount of goodwill by segments for the years ended June 30, 2011 and 2012 is as follows:

	Little
	New Star			Wentai			Yuanbo		Total
	RMB			RMB			RMB		RMB
Balances as of July 1, 2010		56,597,146			-			-		56,597,146
Additions from business acquisition (note 10.2(a) & (b))		-			46,428,415			-		46,428,415
As of June 30, 2011 and July 1, 2011		56,597,146			46,428,415			-		103,025,561
Additions from business acquisition (note 10.3)		-			-			11,107,118		11,107,118
Impairment on goodwill		(44,707,404	)		(12,686,463	)		-		(57,393,867	)
As of June 30, 2012		11,889,742			33,741,952			11,107,118		56,738,812
Balance as of June 30, 2012 (US$)		1,871,516			5,311,184			1,748,327		8,931,027

The gross amount and accumulated impairment losses by segment as of June 30, 2011 and 2012 are as follows:

	Little
	New Star		Wentai		Yuanbo		Total
	RMB		RMB		RMB		RMB
June 30, 2011
Goodwill, gross		56,597,146		46,428,415		-		103,025,561
Accumulated impairment loss		-		-		-		-
Balance as of June 30, 2011		56,597,146		46,428,415		-		103,025,561

	Little
	New Star			Wentai			Yuanbo		Total
	RMB			RMB			RMB		RMB
June 30, 2012
Goodwill, gross		56,597,146			46,428,415			11,107,118		114,132,679
Accumulated impairment loss		(44,707,404	)		(12,686,463	)		-		(57,393,867	)
Balance as of June 30, 2012		11,889,742			33,741,952			11,107,118		56,738,812
Balance as of June 30, 2012 (US$)		1,871,516			5,311,184			1,748,327		8,931,027

F-19

NOAH EDUCATION HOLDINGS LTD. 

2. Summary of significant accounting policies - continued

(m) Fair value of financial instruments

The Group's financial instruments consist primarily of cash and cash equivalents, short-term bank deposits, accounts receivables, related party receivables, investments, other current assets, accounts payable and other payables. The fair values of these financial instruments approximate their carrying amounts due to the short-term nature of these instruments.

Trading investments are recorded at its fair value, with reference to quoted prices in active markets.

The available-for-sale investment is recorded at its fair value, categorized into Level 3, derived from valuation techniques as discussed below.

Fair Value Hierarchy

The Company follows a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument's categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. There are three levels of inputs that may be used to measure fair value:

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

F-20

NOAH EDUCATION HOLDINGS LTD. 

2. Summary of significant accounting policies - continued

(m) Fair value of financial instruments - continued

Fair Value Hierarchy - continued

Financial Assets and Liabilities

Financial assets and liabilities measured at fair value on a recurring basis and investments are as follows:

			Fair Value Measurements
			at Reporting Date Using
			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable
	June 30,		Identical Assets		Inputs		Inputs
	2012		(Level 1)		(Level 2)		(Level 3)
	RMB		RMB		RMB		RMB
Assets:
Investments (note 4)		31,432,868		0		-		31,432,868
Liabilities:
Contingent consideration payable (note 10.3)		7,272,337		-		-		7,272,337

			Fair Value Measurements
			at Reporting Date Using
			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable
	June 30,		Identical Assets		Inputs		Inputs
	2011		(Level 1)		(Level 2)		(Level 3)
	RMB		RMB		RMB		RMB
Assets:
Investments (note 4)		62,946,641		-		-		62,946,641

Nonfinancial Assets

As discussed in Note 9, the Group recorded a charge for the impairment of intangible assets of RMB942,678 and RMB3,000,000 for year ended June 30, 2011 and 2012, respectively. As discussed in Note 2(l), the Group recorded a charge for the impairment of goodwill of nil and RMB57,393,867 for year ended June 30, 2011 and 2012, respectively. The fair value of the intangible assets and goodwill, was determined using level 3 inputs and the valuation techniques discussed in Note 9 and Note 2(l), respectively.

There were no impairment charges recorded for other long-lived assets and other indefinite-lived intangible assets for the year ended June 30, 2011 and 2012.

F-21

NOAH EDUCATION HOLDINGS LTD. 

2. Summary of significant accounting policies - continued

(n) Revenue recognition

Revenue is only recognized when persuasive evidence of an arrangement exists, delivery has occurred provided that there are no significant post delivery obligations to the customers, the sale price is fixed or determinable, and collection is reasonably assured. If the arrangement is subject to customer acceptance, the revenue is deferred and recognized until acceptance occurs.

The Group generates its revenues from the following:

(i) Tuition fee income

The Group provides private education services to private kindergartens, primary and secondary school students and English Language training to kids. The prepaid tuition fees are recorded as deferred revenue upon receiving the upfront cash payments, and recognized as revenue ratably over the course of the tuition programs.

(ii) Franchising fee

The Group generates revenue by franchising schools under the brand name of Little New Star. Initial franchise fee represents provision of initial setup services. Initial franchising fee is recognized as revenue upon the opening of the schools as the initial franchising fees are non-refundable and the Group does not have significant continuing obligations related to the initial franchising fee after the schools are opened.

(iii) Continuing support fee

The Group provides continuing supporting services to the franchise schools including marketing and advertising services. The continuing support fee is received upfront and the revenue is deferred and evenly recognized over the life period of the continuing supporting service agreement.

(iv) Teaching materials

The Group's teaching materials consist of textbooks and assisting teaching books and software. The Group considers its customers to be the franchised school operators and does not sell directly to end-users. Revenue from teaching materials is generally recognized when goods are delivered and title has passed to the franchised school operators and collectability is reasonably assured. No refund or return is allowed upon delivery of teaching materials to the franchised schools.

The Company's subsidiaries are subject to value added tax ("VAT") of 17% on revenue from electronic learning devices and 13% on revenue from teaching materials or business tax ("BT") of 5% on the revenue earned for services rendered in the PRC.

F-22

NOAH EDUCATION HOLDINGS LTD. 

2. Summary of significant accounting policies - continued

(o) Software development costs

Costs related to research and development are generally charged to expense as incurred. Capitalization of development costs for software to be sold or marketed begins when a product's technological feasibility has been established. In most instances, the Group's products are released soon after technological feasibility has been established. Therefore, costs incurred subsequent to achievement of technological feasibility are usually not significant, and generally all software development costs have been immediately expensed.

The Group expenses all internal software and website development costs that are incurred in connection with the planning and implementation phases of development and costs that are associated with repair or maintenance of the existing websites or the development of software and websites content. Costs incurred during the application development stage are capitalized if material. All website and software development costs have been expensed as incurred as there were no significant costs incurred for development of internal software and website during the application development stage.

(p) Advertising costs

The Group expenses advertising costs as incurred.

Advertising costs of RMB336,804, RMB761,674 and RMB2,648,482 (US$416,887) were incurred and recognized in selling and marketing expenses for the years ended June 30, 2010, 2011 and 2012, respectively for continuing operations.

(q) Cost of revenue

Cost of sale of teaching materials consists primarily of cost of raw materials and other related incidental expenses which are directly attributable to the production of the course material designated to the training courses provided by the schools.

Cost of revenue for tuition fee income mainly consists primarily of labour cost, rental expenses, depreciation and other related cost to rendering these services.

(r) Interest income

Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial recognition.

Interest income of RMB9,134,152, RMB1,880,147 and RMB1,402,253 (US$220,723) were recognized for the years ended June 30, 2010, 2011 and 2012, respectively.

F-23

NOAH EDUCATION HOLDINGS LTD. 

2. Summary of significant accounting policies - continued

(s) Operating leases

Leases where substantially all the rewards and risks of ownership of assets remain with the leasing company are accounted for as operating leases. Rentals payable under operating leases are charged to the statements of operations on a straight-line basis over the term of the relevant lease.

(t) Retirement benefit costs

The employees of the Group are members of state-managed retirement benefit schemes operated by the local governments. The Group is required to contribute a specified percentage of their payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Group with respect to the retirement benefit scheme is to make the specified contributions. The total costs charged to the consolidated statements of income were RMB4,738,917, RMB6,169,297, and RMB10,628,770 (US$1,673,032) for the years ended June 30, 2010, 2011 and 2012, respectively, representing contributions payable to this scheme for the corresponding period.

(u) Government subsidies

The Group receives government subsidies to encourage school operation, as well as VAT refund to encourage development in software, which amounted to nil, RMB1,038,507 and RMB1,796,503 (US$282,780) for the years ended June 30, 2010, 2011 and 2012, respectively. The Company recorded the government subsidies as other operating income when all conditions to qualify for the receipt of the government subsidies have been met.

(v) Income taxes

Deferred income taxes are recognized for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, net of operating loss carry forwards and credits, by applying enacted statutory tax rates applicable to future years. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.

The Group recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Group records interest related to unrecognized tax benefits and penalties, if any, in income tax expenses.

F-24

NOAH EDUCATION HOLDINGS LTD. 

2. Summary of significant accounting policies - continued

(w) Share-based compensation

The Company measures the cost of employee services received in exchange for share-based compensation at the grant date fair value of the award. The fair value of stock options granted is determined using the Black-Scholes valuation model. The fair value of shares granted is determined as the market price of the shares at grant date.

The Company recognizes the compensation costs, net of a forfeiture rate, on a straight-line basis over the requisite service period for each separately vesting portion of the award.

(x) Comprehensive income (loss)

Comprehensive income (loss) is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. During the periods presented, comprehensive income is reported in the consolidated statement of shareholder's equity and comprehensive income (loss).

Accumulated other comprehensive income (loss) consists of the following:

	As of June 30,
	2011			2012			2012
	RMB			RMB			US$
Foreign currency translation, net of tax of nil and nil		(116,200,924	)		(120,100,781	)		(18,904,578	)
Unrealized loss on available- for-sales investments, net of tax of nil and nil		(3,128,000	)		(3,938,425	)		(619,931	)
Total		(119,328,924	)		(124,039,206	)		(19,524,509	)

(y) Net income (loss) per share

Basic net income (loss) per share is computed by dividing net income (loss) attributable to Noah Education Holdings Ltd's shareholders by the weighted average number of common shares outstanding during the year. Diluted net income (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted into common shares. The Company's dilutive securities consist of outstanding share options. Certain common share equivalents (e.g. share options) are excluded from calculation of diluted net income (loss) per share as their effect is anti-dilutive.

(z) Dividend

Dividends are recognized when declared.

F-25

NOAH EDUCATION HOLDINGS LTD. 

2. Summary of significant accounting policies - continued

(aa) Concentration of credit risk

The Group places its cash and cash equivalents with financial institutions with high-credit ratings and quality. The Group has invested in financial products with a small number of financial institutions and these financial institutions also have high-credit ratings and quality.

The Group conducts credit evaluations of customers. The Group establishes an allowance for doubtful debts based upon estimates, factors surrounding the credit risk of specific customers and other information. As a result of the Group's credit evaluation, allowance for doubtful debts was nil and RMB583,753 (US$91,886) as of June 30, 2011 and 2012, respectively. As of June 30, 2011 and 2012, there were 2 customers with total trade receivables balances, net of allowance, of RMB1,529,876 and RMB647,707 (US$101,952) who accounted for 10% or more of the Group's accounts receivable, respectively.

(ab) Business combinations

Business combinations are recorded using the acquisition method of accounting. On July 1, 2009, the Group adopted a new accounting pronouncement with prospective application which made certain changes to the previous authoritative literature on business combinations. From July 1, 2009, the assets acquired, the liabilities assumed, and any non-controlling interest of the acquiree at the acquisition date, if any, are measured at their fair values as of that date. Goodwill is recognized and measured as the excess of the total consideration transferred plus the fair value of any non-controlling interest of the acquiree, if any, at the acquisition date over the fair values of the identifiable net assets acquired. Previously, any non-controlling interest was reflected at historical cost. Common forms of the consideration made in acquisitions include cash and common equity instruments. Consideration transferred in a business combination is measured at the fair value as of the date of acquisition. For shares issued in a business combination, the Group has estimated the fair value as of the date of acquisition.

Where the consideration in an acquisition includes contingent consideration, the payment of which depends on the achievement of certain specified conditions post-acquisition, from July 1, 2010 the contingent consideration is recognized and measured at its fair value at the acquisition date and if recorded as a liability, it is subsequently carried at fair value with changes in fair value reflected in the consolidated statements of operations. For business acquired in the periods prior to July 1, 2009, contingent consideration was not recorded until the contingency was resolved.

(ac) Non-controlling interests

Non-controlling interests have been reported as the component of equity in the consolidated balance sheets and consolidated statements of changes of equity and comprehensive income for all periods presented.

F-26

NOAH EDUCATION HOLDINGS LTD. 

3. Recently issued accounting pronouncements

Adopted

On December 17, 2010, the Financial Accounting Standards Board ("FASB") issued ASU 2010-28, Intangibles - Goodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts (a consensus of the FASB Emerging Issues Task Force), which (1) does not prescribe a specific method of calculating the carrying value of a reporting unit in the performance of step 1 of the goodwill impairment test and (2) requires entities with a zero or negative carrying value to assess, considering qualitative factors such as but not limited to those listed in ASC 350-20-35-30 whether it is more likely than not that a goodwill impairment exists. If an entity concludes that it is more likely than not that an impairment of goodwill exists, the entity must perform step 2 of the goodwill impairment test. These provisions are effective for impairment tests performed during the fourth quarter in our current fiscal year. During that impairment test, if any of our reporting units have a zero or negative carrying value, we will assess, on the basis of current facts and circumstances, whether it is more likely than not that an impairment of our goodwill exists. If so, we will perform step 2 of the goodwill impairment test and record the impairment charge, if any, as a cumulative-effect adjustment through beginning retained earnings. At this time, there is no impact on our financial statements as a result of adopting this provision.

On September 15, 2011, the FASB issued ASU 2011-08, Intangibles - Goodwill and Other (Topic 350):Testing Goodwill for Impairment, which gave entities testing goodwill for impairment the option of performing a qualitative assessment before calculating the fair value of a reporting unit in Step 1 of the goodwill impairment test. If entities determine, on the basis of qualitative factors, that the fair value of a reporting unit is more likely than not less than the carrying amount, the two-step impairment test would be required. Otherwise, further testing is not needed. The ASU was effective for all entities for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption was permitted and the Company implemented this guidance in our fiscal 2012 impairment test performed during the fourth quarter. The adoption did not have any impact to our financial statements as a result of adopting this provision.

Not yet adopted

On June 16, 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, which revised the manner in which entities present comprehensive income in their financial statements. The new guidance removes the presentation options in ASC 220, Comprehensive Income, and requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. The ASU does not change the items that must be reported in other comprehensive income. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, with early adoption permitted. At this time, there is no impact expected to our financial statements as a result of the change in presentation and the Company will adopt the new presentation in our fiscal year 2013 filings.

F-27

NOAH EDUCATION HOLDINGS LTD. 

3. Recently issued accounting pronouncements - continued

Not yet adopted - continued

On December 23, 2011, the FASB issued ASU 2011-12, "Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05, " which defers certain provisions of ASU 2011-05 including the indefinite deferral until further deliberation of the requirement for entities to present reclassification adjustments out of accumulated other comprehensive income by component in both the statement in which net income is presented and the statement in which other comprehensive income is presented (for both interim and annual financial statements). The FASB also decided that during the deferral period, entities would be required to comply with all existing requirements for reclassification adjustments in ASC 220, which indicates that "an entity may display reclassification adjustments on the face of the financial statement in which comprehensive income is reported, or it may disclose reclassification adjustments in the notes to the financial statements." The effective date for public entities is for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011. In light of this deferral, we will continue to disclose certain reclassifications out of accumulated other comprehensive income as proscribed by the existing literature and we will adopt the other provisions of ASU 2011-05 within our fiscal year 2013 filings.

On July 27, 2012, the FASB issued ASU 2012-02, "Intangibles - Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment" which amended the guidance in ASC 350-30 on testing indefinite-lived intangible assets, other than goodwill, for impairment. The FASB issued the ASU in response to feedback on ASU 2011-08 which amended the goodwill impairment testing requirements by allowing an entity to perform a qualitative impairment assessment before proceeding to the two-step impairment test. Similarly, under ASU 2012-02, an entity testing an indefinite-lived intangible asset for impairment has the option of performing a qualitative assessment before calculating the fair value of the asset. If the entity determines, on the basis of qualitative factors, that the fair value of the indefinite-lived intangible asset is not more likely than not (i.e., a likelihood of more than 50 percent) impaired, the entity would not need to calculate the fair value of the asset. The ASU did not revise the requirement to test indefinite-lived intangible assets annually for impairment. In addition, the ASU does not amend the requirement to test these assets for impairment between annual tests if there is a change in events or circumstances; however, it does revise the examples of events and circumstances that an entity should consider in interim periods. ASU 2012-02 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted and the Company plans to adopt this ASU as part of its fiscal 2013 annual impairment test. The Company does not expect to have any impact to our financial statements as a result of adopting this provision.

F-28

NOAH EDUCATION HOLDINGS LTD. 

4. investments

The Group's investments are classified into:

	As of June 30,
	2011		2012		2012
	RMB		RMB		US$
Current:
Held-to-maturity investments (at cost less impairment)		50,003,441		20,503,441		3,227,364
Non-current:
Available-for-sale investment (at fair value) (Level 3)		10,525,471		9,715,046		1,529,206
Other investment (at cost less impairment)		2,417,729		8,046,381		1,266,548
		12,943,200		17,761,427		2,795,754
		62,946,641		38,264,868		6,023,118

Trading investments

All of the trading investment of the Company were disposed during the year ended June 30, 2011. Gain on trading investments has been included in investment income in the consolidated statements of income and is consisted of the following:

	Years ended June 30,
	2010		2011		2012		2012
	RMB		RMB		RMB		US$
Realized gain		-		653,861		-		-
Unrealized gain		868,255		-		-		-
Total		868,255		653,861		-		-

Held-to-maturity investments

As of June 30, 2011 and 2012, the Group's held-to-maturity investments represent investments in unlisted investment fund which have maturities of one year or less from the date of purchase and measured at cost less any identified impairment.

For the years ended June 30, 2010, 2011 and 2012, the Group has recognized the investment income from the held-to-maturity investments of RMB2,823,770, RMB11,022,226 and RMB18,682,916 (US$2,940,802), respectively.

F-29

NOAH EDUCATION HOLDINGS LTD.

4. investments - continued

Available-for-sale investments

As of June 30, 2011 and 2012, the Group's available-for-sale investment at fair value represents investment in Series A Preferred Stock of Franklin and the estimation of fair value is determined by using a combination of income and market approach. Under the income approach, it uses cash flow projections based on the forecast covering a five-year period and a terminal value at the end of the fifth year with a discount rate of 19% and 15% determined based on the weighted average cost of capital for year ended June 30, 2011 and 2012, respectively. Cash flow projections during the budget period for the investment are based on the expected gross margins during the budget period. Budgeted gross margins were determined based on past performance and the management's expectations for the market development.

The market approach is performed by utilizing the trading multiples including the market value of invested capital over sales and market value of invested capital over gross profit as of June 30, 2011 and 2012.

The fair value of available-for-sale was determined using the midpoint of the values from the two approaches above after applying 11% and 15% marketability discount, for year ended June 30, 2011 and 2012, respectively, based on restricted stock studies having considered the size and profitability of the investment. There has been no transfer between Level 1 and Level 2.

	Available-for-sale
	investment
	RMB
Balance as at June 30, 2010 and July 1, 2010		23,048,725
Unrealized loss (note)		(12,523,254	)
Balance as at June 30, 2011		10,525,471
Unrealized loss (note)		(810,425	)
Balance as at June 30, 2012 (RMB)		9,715,046
Balance as at June 30, 2012 (US$)		1,529,206

Note: Unrealized loss on available-for-sale investment at fair value has been included in the accumulated other comprehensive income in the consolidated statements of shareholders' equity and comprehensive income.

F-30

NOAH EDUCATION HOLDINGS LTD.

4. investments - continued

Other investment

As of June 30, 2011 and 2012, the Group's other investment at cost less impairment represents investment in Series B Preferred Stock of Franklin and call option to acquire 20% equity interest in Yuanbo Education (as defined in note 10). The Group estimates the fair value of the investment in Series B Preferred Stock of Franklin and call option to assess impairment by utilizing income approach through the application of option-pricing method. The valuation technique is based on a number of estimates and assumptions, including the appropriate discount rates, volatility and dividend yield. For the years ended June 30, 2012, the Group recorded an impairment loss of RMB1,081,000 (US$107,156), which was included in other operating expense of the consolidated statement of income, on the call option. For the years ended June 30, 2011 and 2012, the Group recorded an impairment loss of RMB4,409,508 and RMB809,270 (US$127,384), which was included in impairment loss on investment of the consolidated statement of income, on investment in Series B Preferred Stock of Franklin.

5. Accounts receivables, net of allowance

	As of June 30,
	2011		2012			2012
	RMB		RMB			US$
Accounts receivables		1,668,007		1,334,607			210,075
Less: allowance for doubtful debts		-		(583,753	)		(91,886	)
		1,668,007		750,854			118,189

The movements of the allowance for doubtful debts during the years are as follow:

	As of June 30,
	2011			2012		2012
	RMB			RMB		US$
Balance at the beginning of year		27,796,553			-		-
Additions		172,297,787			583,753		91,886
Recovered		(9,587,467	)		-		-
Disposal of subsidiaries		(190,506,873	)		-		-
Balance at the end of year		-			583,753		91,886

In determining whether allowance for doubtful debts is required, the Group takes into consideration the ageing status and the likelihood of collection. Following the identification of doubtful debts, the responsible sales personnel discuss with the relevant customers and report on the recoverability. Specific allowance is only made for accounts receivables that are unlikely to be collected.

F-31

NOAH EDUCATION HOLDINGS LTD.

6. Inventories

Inventories consist of the following:

	As of June 30,
	2011		2012		2012
	RMB		RMB		US$
Raw materials		66,428		40,865		6,432
Work-in-progress		77		-		-
Finished goods		6,131,462		5,410,946		851,715
Inventories, net		6,197,967		5,451,811		858,147

RMB9,667,136 and RMB84,504,513 of excess and obsolete inventories were written down to lower of cost or market value and included in the cost of revenue from discontinued operation in the years ended June 30, 2010 and 2011, respectively.

No inventory was written down for continuing operations in the year ended June 30, 2010, 2011 and 2012.

7. Prepaid expenses and other current assets

Prepaid expenses and other current assets consist of the following:

	As of June 30,
	2011		2012		2012
	RMB		RMB		US$
Subsidy receivables		551,509		-		-
VAT recoverable		439,332		36,881		5,805
Advances to suppliers		341,621		233,835		36,807
Staff advances		1,550,623		9,506,022		1,496,304
Interest receivable		3,311		274,178		43,157
Rental deposits and prepayments		2,779,234		4,187,801		659,185
Others		6,917,838		5,559,649		875,123
		12,583,468		19,798,366		3,116,381

F-32

NOAH EDUCATION HOLDINGS LTD.

8. Property, plant and equipment, net

Property, plant and equipment consisted of the following:

	As of June 30,
	2011			2012			2012
	RMB			RMB			US$
Buildings		136,785,227			136,815,777			21,535,617
Leasehold improvements		29,784,879			62,206,509			9,791,675
Office equipment		37,865,189			56,561,134			8,903,059
Computer equipment		875,639			1,590,335			250,328
Motor vehicles		8,413,853			12,765,415			2,009,352
		213,724,787			269,939,170			42,490,031
Less: accumulated depreciation and amortization		(41,803,839	)		(85,461,554	)		(13,452,157	)
Property, plant and equipment, net		171,920,948			184,477,616			29,037,874

Depreciation expenses related to property, plant and equipment were RMB7,946,558, RMB14,276,414, and RMB23,222,390 (US$3,655,342) for the years ended June 30, 2010, 2011 and 2012, respectively for continuing operation.

As of June 30, 2012, the Group has entered into several commitments for capital expenditure for property, plant and equipment, which are expected to be disbursed during the year ending June 30, 2013 (note 21).

9. Intangible assets, net

	As of June 30,
	2011			2012			2012
	RMB			RMB			US$
Cost:
Patents, trademark and licenses		17,170,000			37,070,000			5,835,038
Copyrights, mini lamb video and franchises agreement		21,700,000			21,700,000			3,415,709
Non-competition agreement		5,000,000			5,000,000			787,030
Preferential leasing contracts		-			17,600,000			2,770,345
Total		43,870,000			81,370,000			12,808,122
Accumulative amortization and impairment:
Patents, trademarks and licenses		(1,980,764	)		(4,355,489	)		(685,580	)
Copyrights, mini lamb video and franchises agreement		(1,870,001	)		(3,450,000	)		(543,051	)
Non-competition agreement		(1,000,000	)		(3,900,000	)		(613,883	)
Preferential leasing contracts		-			(849,123	)		(133,657	)
Total		(4,850,765	)		(12,554,612	)		(1,976,171	)
Intangible assets, net		39,019,235			68,815,388			10,831,951

F-33

NOAH EDUCATION HOLDINGS LTD.

9. Intangible assets, net - continued

Amortization is computed using the straight-line method over the intangible assets' economic lives, (trademark with indefinite useful life acquired is not subject to amortization), as the following:

Patents and licenses	1 - 10 years
Copyrights, mini lamb video and franchises agreement	15 years
Non-competition agreement	10 years
Preferential leasing contracts	19 years

Amortization expenses were RMB3,883,436, RMB5,059,546, and RMB4,703,847 (US$740,414) for the years ended June 30, 2010, 2011 and 2012, respectively for continuing operations which was recorded in general and administrative expenses.

The Group estimates the fair value of the intangible assets through internal analysis, which utilizes income approach through the application of discounted cash flow method. The valuation technique is based on a number of estimates and assumptions, including the projected future cash inflow from the intangible assets, appropriate discount rates and long-term growth rates. For the year ended June 30, 2010, 2011 and 2012, the Group recorded an impairment loss of nil, RMB942,678 and RMB3,000,000 (US$472,218) on its intangible assets for the continuing operations, respectively, in connection with the assessment of mini lamb video and non-competition agreement, as follows:

	Years ended June 30,
	2010		2011		2012		2012
	RMB		RMB		RMB		US$
Research and development expenditures		-		792,049		-		-
General and administrative expenses		-		150,629		3,000,000		472,218
		-		942,678		3,000,000		472,218

The following table represents the total estimated amortization expense of intangible assets for each of the next five years:

	RMB		US$
Year ending June 30,
-2013		4,407,626		693,787
-2014		4,407,626		693,787
-2015		4,170,404		656,446
-2016		4,150,959		653,386
-2017		4,150,959		653,386

F-34

NOAH EDUCATION HOLDINGS LTD.

10. Acquisitions

10.1 Acquisition in year ended June 30, 2010

Acquisition of LNS

On July 2, 2009, the Group acquired a 100% equity interest in LNS, a Changsha-based private education service provider specialises in providing English language training for kids. The purpose of this acquisition was to develop the Group into a more comprehensive supplemental education services provider for children aged 3-19 in the Peoples' Republic of China.

The purchase consideration of the acquisition includes cash consideration of RMB53,000,000 and 2,647,743 ordinary non-registered shares of the Company subject to a transfer restriction term ("Restricted Shares") that each one third of the these shares cannot be transferred until the second, third and fourth anniversary of July 2, 2009. The cash consideration is agreed to be payable by installments through to January 2011. The fair value of these Restricted Shares approximates to RMB37,385,000 as determined on the basis of latest 20-day weighted average closing price of the Company's shares by applying a put-option-discount model to derive the discount rate applicable to the value of the Restricted Shares on July 2, 2009.

The Group incurred approximately RMB2,309,000 costs in relation to this acquisition and was recognized in the consolidated statement of operations for the year ended July 30, 2010.

F-35

NOAH EDUCATION HOLDINGS LTD.

10. Acquisitions - continued

10.1 Acquisition in year ended June 30, 2010 - continued

Acquisition of LNS - continued

The Company accounted for this business combination using the acquisition method of accounting. The following table summarizes the consideration paid for the acquisition and the amounts of the assets acquired and liabilities assumed recognized based on their fair values as of the acquisition date.

	At
	acquisition			Amortization
	date			period
	RMB'000
Consideration
Cash consideration
- deposit paid in fiscal 2009		21,582
- paid in fiscal 2010		10,844
- other payables in fiscal 2010		20,574
Share consideration		37,385
Fair value of total consideration transferred		90,385
Recognized amounts of identifiable assets acquired and liabilities assumed
Identifiable intangible assets
- Copyrights, mini lamb video and franchises agreement		12,000			15 years
- Non-competition agreement		5,000			10 years
- Trademark		7,000			Indefinite
Cash and cash equivalent		6,359
Account receivables		54
Inventories		6,134
Other current assets		902
Fixed assets		15,792
Short term borrowings		(7,000	)
Account payables		(2,140	)
Advance from customers		(3,664	)
Income tax payables		(394	)
Other current liabilities		(3,444	)
Deferred tax asset		926
Deferred tax liabilities		(3,737	)
		33,788
Goodwill		56,597
Total identifiable net assets		90,385
Net cash outflow arising on acquisition in fiscal 2010
Cash consideration paid		10,844
Cash and cash equivalents acquired		(6,359	)
		4,485

F-36

NOAH EDUCATION HOLDINGS LTD.

10. Acquisitions - continued

10.1 Acquisition in year ended June 30, 2010 - continued

Acquisition of LNS - continued

The intangible assets comprise of copyrights, mini lamb video, franchises agreement, non-competition agreement, which all Amortized over a period of 10 to 15 years, and LNS trademark with indefinite useful lives not subject to Amortization.

The fair value at acquisition date has been arrived at on the basis of a valuation carried out on that date by an independent qualified professional valuer not connected with the Group.

The amount of goodwill resulting from the purchase price allocation represents the premium paid for potential synergies expected to be generated from the acquisition. None of the goodwill recognized was expected to be deductible for income tax purposes.

The accompanying consolidated financial statements include the accounts of the acquired business as of June 30, 2010 and the operating results since the date of the acquisition, approximately RMB39,898,000 of revenue and RMB8,730,000 of net income of LNS have been included in the consolidated income statements for the year ended June 30, 2010.

10.2 Acquisition in year ended June 30, 2011

(a) Acquisition of Wentai Education

On March 12, 2010, Noah Education Technology (Shenzhen) Co., ("NETS") entered into an investment agreement with Wentai Education and shareholders of Wentai Education for the share transfer and capital injection in Wentai Education (the "Acquisition") with the purpose to grow into education services business. The Wentai Education is a private education service provider based in Guangzhou which is specialized in providing full time English-featured education of schools and kindergartens. Pursuant to the agreement, the former shareholders transferred 40% of the shares of Wentai Education to a designated company named Shenzhen Jinyinhe Investment Co., Ltd ("Shenzhen Jinyinhe") which will then transfer these 40% shares to NETS immediately. The consideration paid for this share transfer is RMB36,000,000, with RMB25,000,000 paid before July 12, 2010, RMB1,000,000 paid before September 1, 2010 and remaining RMB10,000,000 payable upon request after the first two payments. After the share transfer, the acquirer, NETS, injected the capital into the Wentai Education, NETS, was obliged to pay RMB90,000,000 as capital injection into the Wentai Education, with RMB30,000,000 allocating into issued share capital and RMB60,000,000 into capital reserve of Wentai Education. Pursuant the agreement, the payment of RMB90,000,000 in total should be completed before July 1, 2010 and the shareholding of NETS in Wentai Education was further increased from 40% to 70% upon the successful payment. Therefore, control was presumed to be existed and two kindergartens will be brought into the Group at acquisition date.

F-37

NOAH EDUCATION HOLDINGS LTD.

10. Acquisitions - continued

10.2 Acquisition in year ended June 30, 2011 - continued

(a) Acquisition of Wentai Education - continued

The Group incurred approximately RMB920,000 (US$135,663) costs in relation to this acquisition and was recognized in the consolidated statement of operations for the year ended June 30, 2010.

On March 12, 2010, Xu Dong, who acts as the director of NETS, entered into a loan agreement with Wentai Education. Pursuant to this loan agreement, Wentai Education will lend RMB21,000,000 to Xu Dong and RMB9,000,000 to one of the shareholders of Wentai Education named Du Qi Cai to set up a new entity named Wentai Investment for the purpose to acquire 67% shareholdings of Zhongda Foundation, a company principally engages in elementary education. Both loan amounts are interest-free with a repayment period of 20 years. Meanwhile, Xu Dong and Du Qi Cai have to pledge their investment in Wentai Investment to Wentai Education with reference to the term and clause of the loan agreement in return. Such arrangement is to comply with PRC laws and regulations that restrict foreign ownership of companies operating elementary education business in the PRC. Upon acquisition of the 67% shareholdings, Xu Dong will transfer all the risks and rewards associated with the Wentai Investment to NETS. Based on these contractual agreements, Wentai Investment should be considered as a VIE as the equity investors do not have the characteristics of a controlling financial interest and NETS is the primary beneficiary of Wentai Investment. Accordingly, the Group shall consolidate the financial results and financial position of Wentai Investment under FASB ASC 810 once the control was obtained.

The initial deposits of RMB4,200,000 was paid at June 30, 2010 as disclosed in the consolidated balance sheets and the purchase consideration of RMB25,000,000 and RMB90,000,000 were made on July 29, 2010, also the acquisition date.

The transaction has been approved by both companies' board of directors and completed during the year ended June 30, 2011.

F-38

NOAH EDUCATION HOLDINGS LTD.

10. Acquisitions - continued

10.2 Acquisition in year ended June 30, 2011 - continued

(a) Acquisition of Wentai Education - continued

The Company accounted for this business combination using the acquisition method of accounting. The following table summarizes the consideration paid for the acquisition and the amounts of the assets acquired and liabilities assumed recognized based on their fair values as of the acquisition date, as well as the fair value at the acquisition date of the non-controlling interest in Wentai Education.

	At
	acquisition			Amortization
	date			period
	RMB'000
Consideration
Cash consideration
- deposit paid in fiscal 2010		4,200
- paid in fiscal 2011		120,800
- other payables in fiscal 2011		1,000
Fair value of total consideration transferred		126,000
Recognized amounts of identifiable assets acquired and liabilities assumed
Identifiable intangible assets
- Patents, trademark and licenses		17,170			1-10 years
Cash and cash equivalents		110,619
Other receivables		6,003
Other current assets		4,276
Property, plant and equipment, net		28,965
Deferred revenue - current		(12,802	)
Other current liabilities		(12,121	)
Long-term bank borrowings		(1,500	)
Deferred tax liabilities		(1,812	)
Total identifiable net assets		138,798
Non-controlling interests		(41,639	)
Goodwill		28,841
		126,000
Net cash outflow arising on acquisition in fiscal 2011
Cash consideration paid		120,800
Cash and cash equivalents acquired		(110,619	)
		10,181

F-39

NOAH EDUCATION HOLDINGS LTD.

10. Acquisitions - continued

10.2 Acquisition in year ended June 30, 2011 - continued

(a) Acquisition of Wentai Education - continued

The fair value at acquisition date has been arrived at on the basis of a valuation carried out on that date by an independent qualified professional valuer not connected with the Group.

The amount of goodwill resulting from the purchase price allocation represents the premium paid for potential synergies expected to be generated from the acquisition. None of the goodwill recognized was expected to be deductible for income tax purposes.

The fair value of the other receivables was approximately RMB6,003,000. In the opinion of the directors of the Company, the balance had good credit quality with reference to the past settlement history, no provision was suggested.

The fair value of the non-controlling interest was estimated by applying the income approach and the market approach. This fair value measurement is based on significant inputs that are not observable in the market and thus represents a Level 3 measurement. Key assumptions include of a discount rate of 14.1%, a terminal value based on long-term sustainable growth rates of 3%, and adjustments because of the lack of control or lack of marketability that market participants would consider when estimating the fair value of the non-controlling interest.

The following pro forma information of Wentai Education summarized the effect of the acquisition, as if the acquisition had occurred as of July 1, 2009 and July 1, 2010. This pro forma financial information is presented for information purposes only. It is based on historical information and does not purport to represent the actual results that may have occurred had the Group consummated the acquisitions on July 1, 2009 and July 1, 2010, nor is it necessarily indicative of future results of operations of the consolidated enterprises.

			Net income
	Revenues		(loss)
	RMB		RMB
The amount attributable to Wentai Education in the Group's consolidated statement of operations for the year ended June 30, 2011	49,893,223		7,857,010
Supplemental pro forma for year ended June 30, 2010 (unaudited)		88,060,596		(3,028,404	)
Supplemental pro forma for year ended June 30, 2011 (unaudited)		91,483,890		(29,170,237	)

F-40

NOAH EDUCATION HOLDINGS LTD.

10. Acquisitions - continued

10.2 Acquisition in year ended June 30, 2011 - continued

(b) Acquisition of Changsha Kindergartens

In addition, on January 27, 2011, and February 25, 2011, Wentai Education signed an investment agreement, an amendment to investment agreement, and an asset transfer Agreement with four individual independent counterparties (together "Original Shareholders"), to acquire 100% interest in four kindergartens owned by the Original Shareholders in Changsha, PRC at a consideration of RMB25,800,000.

The four kindergartens include Changsha Kaifu District Di-Ai Baby Science and Art Due Language Kindergarten, Changsha Yuelu District Di-Ai Baby Science and Art Due Language Kindergarten, Changsha Wangcheng County Di-Ai Baby Science and Art Due Language Kindergarten and Changsha County Noah Forest Di-Ai Baby Science and Art Due Language Kindergarten (collectively referred to as "Changsha Kindergartens").

The Company accounted for this business combination using the acquisition method of accounting. The following table summarizes the consideration paid for the acquisition and the amounts of the assets acquired and liabilities assumed recognized based on their fair values as of the acquisition date.

	At
	acquisition
	date
	RMB'000
Consideration
Cash consideration
- paid in fiscal 2011		25,102
- other payables in fiscal 2011 (Note)		698
Fair value of total consideration transferred		25,800
Recognized amounts of identifiable assets acquired and liabilities assumed
Other receivables		8,485
Other current assets		237
Property, plant and equipment, net		7,327
Other payables		(3,195	)
Other current liabilities		(4,361	)
Deferred tax liabilities		(280	)
		8,213
Goodwill		17,587
		25,800
Net cash outflow arising on acquisition:
Cash consideration paid in fiscal 2011		25,102

Note: The consideration payable approximately of RMB698,000 was settled in year ended June 30, 2012.

F-41

NOAH EDUCATION HOLDINGS LTD.

10. Acquisitions - continued

10.2 Acquisition in year ended June 30, 2011 - continued

(b) Acquisition of Changsha Kindergartens - continued

The fair value at acquisition date has been arrived at on the basis of a valuation carried out on that date by an independent qualified professional valuer not connected with the Group.

The amount of goodwill resulting from the purchase price allocation represents the premium paid for potential synergies expected to be generated from the acquisition. None of the goodwill recognized was expected to be deductible for income tax purposes.

The fair value of the other receivables was approximately RMB8,485,000. In the opinion of the directors of the Company, the balance had good credit quality with reference to the past settlement history, no provision was suggested.

The following pro forma information of Changsha Kindergartens summarized the effect of the acquisition, as if the acquisition had occurred as of July 1, 2009 and July 1, 2010. This pro forma financial information is presented for information purposes only. It is based on historical information and does not purport to represent the actual results that may have occurred had the Group consummated the acquisitions on July 1, 2009 and July 1, 2010, nor is it necessarily indicative of future results of operations of the consolidated enterprises.

			Net income
	Revenues		(loss)
	RMB		RMB
The amount attributable to Changsha Kindergarten in the Group's consolidated statement of operations for the year ended June 30, 2011	1,990,968		348,436
Supplemental pro forma for year ended June 30, 2010 (unaudited)		88,060,596		(3,028,404	)
Supplemental pro forma for year ended June 30, 2011 (unaudited)		93,474,859		(28,821,803	)

F-42

NOAH EDUCATION HOLDINGS LTD.

10. Acquisitions - continued

10.3 Acquisition in year ended June 30, 2012

Acquisition of Shanghai Yuanbo Education Information and Consulting Corporation Ltd.

During the year ended June 30, 2011, the Group has signed a definitive agreement to acquire an 80% interest in Shanghai Yuanbo Education Information and Consulting Corporation Ltd. ("Yuanbo Education"), a company focused on early childhood education services in the Yangtze Delta region, for a total consideration of RMB94,866,000.

The total consideration of RMB94,866,000 comprises:

(1) Consideration with call option

Consideration of RMB79,866,000 which included a call option to acquire the remaining 20% of equity interest in cash or by shares of the Company from Yuanbo Education original shareholders with an exercise period from April 13, 2016 to December 31, 2016 at an exercise price of seven times of fiscal year 2016 Yuanbo Education's profit after tax. The fair value of such option is RMB7,913,000 at acquisition date which is included in investments on the consolidated balance sheets.

(2) Contingent consideration payable

RMB15,000,000 which will be paid equally in two years on Yuanbo Education's audited financial results as of the fiscal year ended June 30, 2012 and June 30, 2013, subject to a contingent adjustment determined by the earnings before interest, taxes and depreciation and allowance ("EBITDA") of that fiscal year. Details as follows:

2012 EBITDA: Target amount RMB6.9 million

· If actual EBITDA is less than 1.25 times target amount, payment will be adjusted to zero;

· If actual EBITDA is greater than 1.25 times target amount but less than 1.50 times target amount, payment will be adjusted to RMB7,170,000* [(EBITDA/7,170,000-1)-25%]/25%;

· If actual EBITDA is greater than 1.50 times target amount, the payment will be adjusted to RMB7,170,000+[(EBITDA/7,170,000-1)-50%]*25%*2012 net profit.

F-43

NOAH EDUCATION HOLDINGS LTD.

10. Acquisitions - continued

10.3 Acquisition in year ended June 30, 2012 - continued

Acquisition of Shanghai Yuanbo Education Information and Consulting Corporation Ltd. - continued

(2) Contingent consideration payable - continued

2013 EBITDA: Target amount RMB11.3 million

· If actual EBITDA is less than 1.25 times target amount, payment will be adjusted to zero;

· If actual EBITDA is greater than 1.25 times target amount but less than 1.50 times target amount, payment will be adjusted to RMB7,830,000* [(EBITDA/11,250,000-1)-25%]/25%;

· If actual EBITDA is greater than 1.50 times target amount, the payment will be adjusted to RMB7,830,000*[(EBITDA/11,250,000-1)-50%]*25%*2013 net profit.

The fair value of the contingent consideration at acquisition date is RMB7,331,002. The fair value changes in contingent consideration payable is included in the other operating income on the Consolidated Statements of Income. The movement of the contingent consideration payable during the year is as follows:

	RMB
Fair value at acquisition date		7,331,002
Decrease in fair value during the year		(58,665	)
Fair value as of June 30, 2012		7,272,337
Fair value as of June 30, 2012 (US$)		1,144,709

The transaction was completed on July 31, 2011. The acquisition of Yuanbo Education is recorded in fiscal year ended June 30, 2012 accordingly.

F-44

NOAH EDUCATION HOLDINGS LTD.

10. Acquisitions - continued

10.3 Acquisition in year ended June 30, 2012 - continued

Acquisition of Shanghai Yuanbo Education Information and Consulting Corporation Ltd. - continued

The Company accounted for this business combination using the acquisition method of accounting. The following table summarizes the consideration paid for the acquisition and the amounts of the assets acquired and liabilities assumed recognized based on their fair values as of the acquisition date, as well as the fair value at the acquisition date of the noncontrolling interest in Yuanbo Education.

	At
	acquisition			Amortization
	date			period
	RMB'000
Consideration
Cash Consideration
- deposit paid in fiscal 2011		4,000
- cash paid in fiscal 2012		75,866
Contingent consideration payable		7,331
Less: call option value		(7,913	)
Fair value of total consideration transferred		79,284
Recognized amounts of identifiable assets acquired and liabilities assumed
Identifiable intangible assets
- Patents, trademark and licenses		19,900			1-10 years
- Preferential leasing contracts		17,600			19 years
Cash and cash equivalents		50,769
Property, plant and equipment, net		8,882
Other receivables		1,210
Other payables and other current liabilities		(6,282	)
Deferred tax liabilities		(4,081	)
		87,998
Non-controlling interest		(19,821	)
Goodwill		11,107
Consideration		79,284
Net cash arising from acquisition:
- cash consideration paid in fiscal 2012		75,866
- cash and cash equivalent acquired		(50,769	)
		25,097

F-45

NOAH EDUCATION HOLDINGS LTD.

10. Acquisitions - continued

10.3 Acquisition in year ended June 30, 2012 - continued

Acquisition of Shanghai Yuanbo Education Information and Consulting Corporation Ltd. - continued

The fair value at acquisition date has been arrived at on the basis of a valuation carried out on that date by Shanghai FairPro Consulting Co., Ltd., independent qualified professional valuer not connected with the Group.

The amount of goodwill resulting from the purchase price allocation represents the premium paid for potential synergies expected to be generated from the acquisition. None of the goodwill recognized was expected to be deductible for income tax purposes.

The fair value of the other receivables was approximately RMB1,210,000. In the opinion of the directors of the Company, the balance had good credit quality with reference to the past settlement history, no provision was suggested.

The contingent consideration arrangement requires the Group to pay the selling shareholder of Yuanbo Education based on the EBITDA of Yuanbo in fiscal 2012 and 2013 as detailed above, up to a maximum amount of RMB15,000,000 (undiscounted). The potential undiscounted amount of all future payments that acquirer could be required to make under the contingent consideration arrangement is between RMB0 to RMB15,000,000. The fair value of the contingent consideration arrangement of RMB7,331,002 at acquisition date was estimated by applying the income approach. That measure is based on significant inputs that are not observable in the market. Key assumptions include a discount rate of 6.4% and a probability-adjusted level of EBITDA in Yuanbo Education approximately between RMB9,457,000 and RMB20,825,000. The fair value of the contingent consideration arrangement of RMB7,272,337 as of June 30, 2012 was estimated by applying the income approach. That measure is based on significant inputs that are not observable in the market. Key assumptions include a discount rate of 6.4% and a probability-adjusted level of EBITDA in Yuanbo Education approximately between RMB8,594,000 and RMB10,313,000.

The fair value of the call option to acquire remaining 20% equity in Yuanbo acquisition from the selling shareholder as detailed above of RMB7,913,000 at acquisition date was estimated by applying Black Scholes model. The estimated exercise price is determined based on the financial projection and the price earnings multiple as stated in the sales and purchase agreement considering the projection represent the best estimation of management. Risk free rate based on 5 year zero coupon PRC government bond of 3.71% and volatility at the average normalized industry volatility with look back period commensurate with the term of the option of 52% was selected for the valuation.

F-46

NOAH EDUCATION HOLDINGS LTD.

10. Acquisitions - continued

10.3 Acquisition in year ended June 30, 2012 - continued

Acquisition of Shanghai Yuanbo Education Information and Consulting Corporation Ltd. - continued

The fair value of the non-controlling interest in Yuanbo Education, a private entity, was estimated by applying the income approach and the market approach. This fair value measurement is based on significant inputs that are not observable in the market and thus represents a Level 3 measurement as described in ASC 820-10-35. Key assumptions include a discount rate of 22%, a terminal value based on long-term sustainable growth rates of 4%), financial multiples of entities deemed to be similar to Yuanbo Education, and adjustments because of the lack of control or lack of marketability that market participants would consider when estimating the fair value of the non-controlling interest in Yuanbo Education.

The following pro forma information of Yuanbo Education summarized the effect of the acquisitions, as if the acquisitions had occurred as of July 1, 2010 and July 1, 2011. This pro forma financial information is presented for information purposes only. It is based on historical information and does not purport to represent the actual results that may have occurred had the Group consummated the acquisitions on July 1, 2010 and July 1, 2011, nor is it necessarily indicative of future results of operations of the consolidated enterprises.

			Net income
	Revenues		(loss)
	(unaudited)		(unaudited)
	RMB		RMB
The amount attributable to Yuanbo Education in the Group's consolidated statement of operations for the year ended June 30, 2012		34,310,588		5,094,435
Supplemental pro forma for year ended June 30, 2011		126,790,026		(26,609,909	)
Supplemental pro forma for year ended June 30, 2012		163,022,321		(53,750,093	)

F-47

NOAH EDUCATION HOLDINGS LTD.

11. Discontinued operations

On March 28, 2011 and June 8, 2011, the Group entered into a definitive agreement and amended and restated stock purchase agreement with First Win Technologies Ltd. and Mr. Tang Ben Guo, one of Noah's founders and the former President and Chief Operating Officer of the Company (collectively reported to as the "Definitive Agreement") to sell ELP business of the Group and operating assets to First Win Technologies Ltd. (the "Purchaser"), a company wholly owned by Mr. Tang Ben Guo, at consideration of RMB100,000,000. Upon certain adjustments to the consideration pursuant to the Definitive Agreement, the net cash consideration was RMB87,532,200 (the "Purchase Price") and the closing date was June 8, 2011.

Upon the completion of the transaction, the Purchaser acquired the ELP business and net operating assets (excluding the English and Chinese versions of the "Noah" trademark, cash held by the ELP subsidiaries and the Company's office facilities in Chengdu and Shenzhen) (the "Target Assets") from the Company.

Under the Definitive Agreement, the Purchase Price is paid to the Company in three installments: (i) 40% of the Purchase Price will be paid on or before April 12, 2011; (ii) 30% of the Purchase Price will be paid within three months after the date of the first payment, subject to consummation of the closing of the purchase and sale of the Target Assets; and (iii) the remaining 30% of the Purchase Price will be paid at the later of (a) six months after the date of the first payment and (b) the substantial completion of the restructuring to carve out the Target Assets.

In accordance with ASC 360-10, the result of ELP business have been excluded from continuing operations and reported as discontinued operations for the year ended June 30, 2011 and prior periods.

The income (loss) from discontinued operations for the relevant periods is analyzed as follow:

	2010			2011			2012		2012
	RMB			RMB			RMB		US$
Net revenue	640,390,206			211,532,854			-		-
Cost of revenue		(350,260,106	)		(242,264,157	)		-		-
Gross profit		290,130,100			(30,731,303	)		-		-
Total operating expenses		(316,726,676	)		(374,518,905	)		-		-
Gain on disposal of ELP business		-			11,936,125			-		-
Other operating income		41,350,601			13,078,951			-		-
Income tax (expenses) benefits		1,768,970			(2,280,109	)		-		-
Net income (loss) from discontinued operations		16,522,995			(382,515,241	)		-		-

F-48

NOAH EDUCATION HOLDINGS LTD.

11. Discontinued operations - continued

The net assets of the discontinued operations at the date of disposal were as follows:

	RMB
Bank balances and cash	11,958,919
Notes receivable	200,000
Accounts receivable, net		42,994,974
Prepaid expenses and other current assets		30,010,567
Inventories		31,177,645
Property, plant and equipment, net		8,180,075
Intangible assets, net		1,698,108
Accounts payables		(16,108,694	)
Advances from customers		(10,751,418	)
Other payables and accruals		(11,810,287	)
Income tax payables		(17,689	)
Net assets		87,532,200
Satisfied by:
Cash		87,532,200
Net cash inflow arising on disposal
Total cash consideration		87,532,200
Less:   Bank balances and cash disposed of		(11,958,919	)
Related party receivables (note 20)		(47,532,200	)
		28,041,081

F-49

NOAH EDUCATION HOLDINGS LTD.

12. Other payables and accruals

Other payables and accruals consisted of the following:

	As of June 30,
	2011		2012		2012
	RMB		US$		RMB
Other payables for acquisition of Wentai Education		1,697,611		1,000,000		157,406
Other payables to ex-shareholders of LNS and Wentai Education		6,075,692		950,000		149,536
Accrued social welfare payments		2,399,976		1,201,089		189,059
Accrued salaries		2,661,785		6,271,585		987,185
Accrued bonus		-		2,391,722		376,471
Accrued consultation fee		734,352		906,992		142,766
Accrued professional fee for the disposal of ELP business		6,819,730		-		-
Accrued audit fee		1,102,608		1,473,552		231,946
Receipts in advance		6,515,763		8,146,138		1,282,251
Deposits for franchise		634,940		744,940		117,258
Other tax payable		3,616,873		2,157,119		339,542
Others		1,977,487		2,682,255		422,203
		34,236,817		27,925,392		4,395,623

13. Capital structure

During the years ended June 30, 2010, 2011 and 2012, 771,138, 39,628, and 168,210 ordinary shares were issued respectively as a result of exercises of share options by employees.

During the years ended June 30, 2010, 2011 and 2012, the Company repurchased and cancelled 1,394,300, 1,375,478, and 26,195 ordinary shares respectively.

The Company issued 2,647,743 ordinary shares for acquisition of 100% interest in LNS during the year ended June 30, 2010.

The Company issued 150,000 ordinary shares to Jerry He, the former Chief Executive Officer of the Company, during the year ended June 30, 2011 (see note 14).

Relevant PRC laws and regulations permit payments of dividends by the PRC subsidiaries and affiliated companies only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations (see note 22).

In addition, since a significant amount of the Group's future revenues will be denominated in RMB, the existing and any future restrictions on currency exchange may limit the Group's ability to utilize revenues generated in RMB to fund the Group's business activities outside of the PRC, if any, or expenditures denominated in foreign currencies.

F-50

NOAH EDUCATION HOLDINGS LTD.

14. Share-based compensation

On June 30, 2007, the Company adopted a new share incentive plan (the "2007 Share Incentive Plan"). Under the 2007 Share Incentive Plan, the Company may grant its employees, directors and consultants various types of awards including options to purchase ordinary shares of the Company, restricted shares or restricted share units. Up to 10% of the Company's outstanding ordinary shares will be reserved for issuance under the 2007 Share Incentive Plan. The term of each award under the 2007 Share Incentive Plan will be specified in the respective award agreement. For option awards, they are generally granted with an exercise price that cannot be less than the fair market value of the Company's share at the date of grant or at other prices as approved by the Compensation Committee of the Board. During the year ended June 30, 2008, 669,177 options were granted under the 2007 Share Incentive Plan. The following represents the vesting periods of these options that remain outstanding as of June 30, 2012:

Granted in fiscal 2008

Exercise price	Number of options Outstanding	Vesting period
US$
5.56	102,162	30% vested from the date of grant to December 31, 2008; 30% vested from January 1, 2009 to December 31, 2009; the remaining 40% vested from January 1, 2010 to December 31, 2010

On December 18, 2008, the Company adopted a new share incentive Plan (the "2008 Share Incentive Plan"). Under the 2008 Share Incentive Plan, the Company may grant its employees, directors and consultants various types of awards including options to purchase ordinary shares of the Company, restricted shares or restricted share units. Up to 5% of the Company's outstanding ordinary shares will be reserved for issuance under the 2008 Share Incentive Plan. The term of each award under the 2008 Share Incentive Plan will be specified in the respective award agreement. For option awards, they are generally granted with an exercise price that cannot be less than the fair market value of the Company's share at the date of grant or at other prices as approved by the Compensation Committee of the Board. 1,279,000 options were granted during the year ended June 30, 2009 under the 2008 Share Incentive Plan. During the year ended June 30, 2010, 420,000 options were granted under the 2008 Share Incentive Plan. The following represents the vesting periods of these options that remain outstanding as of June 30, 2012:

Granted in fiscal 2009

Exercise price	Number of options Outstanding	Vesting period
US$
2.6	345,950	30% vested from the date of grant to December 31, 2009; 30% vested from January 1, 2010 to December 31, 2010; the remaining 40% vested from January 1, 2011 to December 31, 2011

Granted in fiscal 2010

Exercise price	Number of options Outstanding	Vesting period
US$
4.0	10,000	30% vested from the date of grant to December 31, 2010; 30% vested from January 1, 2011 to December 31, 2011; the remaining 40% will vest from January 1, 2012 to December 31, 2012.

F-51

NOAH EDUCATION HOLDINGS LTD.

14. Share-based compensation - continued

The options are granted under the following provisions: if the option holders terminated their services with the Group, the right to vest in the options granted will terminate effective as of the earlier of (i) when the written notice of termination of service is provided, or (ii) the date the option holders are no longer actively employed and physically present on the premises of the Group; once the options are vested, the option may be exercised in whole or in part, and must be exercised prior to the earlier of (i) one year following the termination of service with the Group by reason of death or disability; (ii) 90 days following the option holders' active employment or service with the Group for any reason other than death or disability; (iii) the fifth anniversary after each respective vesting date. If the termination of service is by reason of cause, the right to exercise the option will terminate concurrently with the termination of service; and the shares acquired upon exercise of the option cannot be sold or transferred during the 180-day period following the effective date of the Company's initial public offering.

The termination of the Equity Compensation Plan and the adoption of the 2008 Share Incentive Plan were accounted for as a modification.

Details of the option movements are included in the tables below.

The Company did not have other share-based compensation arrangements.

Share options activity

The Company's share option activities for the years ended June 30, 2010, 2011 and 2012 are set out below:

				Weighted		Weighted				Weighted
				averaged		average				average		Weighted
				exercise		remaining		Aggregate		intrinsic		average
	Options			price		contractual		intrinsic		value per		grant date
	outstanding			per share		life		value		share		fair value
				US$				US$		US$		US$
Outstanding at July 1, 2009		3,172,468					3
Granted pursuant to the 2008 Share Incentive Plan		420,000			4.5914				39,000		0.09	2.22
Forfeited during the year		(408,359	)		3.9641				-		-	1.86
Exercised		(771,138	)		2.0095				2,298,502		2.98	2.80
Outstanding at June 30, 2010		2,412,971					2
Forfeited during the year		(388,022	)		3.2166				-		-	1.67
Exercised		(39,628	)		1.4720				26,452		0.67	3.46
Outstanding at June 30, 2011		1,985,321					1
Forfeited during the year		(880,895	)		4.2470				-		-	1.98
Exercised		(168,210	)		1.4720				-		-	3.64
Outstanding at June 30, 2012		936,216					-
Vested and expected to vest
As of June 30, 2012		934,216			3.1231
As of June 30, 2011		1,713,821			3.5156
Exercisable
As of June 30, 2012		932,216			3.1298
As of June 30, 2011		1,566,321			3.5185

F-52

NOAH EDUCATION HOLDINGS LTD.

14. Share-based compensation - continued

As of June 30, 2012, there was approximately RMB990,243 (US$155,870) of unrecognized compensation cost related to non-vested share options granted under the 2008 Share Incentive Plans, and is expected to be recognized in coming year. The total fair value of options vested during the years ended June 30, 2010, 2011 and 2012 was RMB10,395,821, RMB5,916,516, and RMB2,858,488 (US$449,943), respectively. For the year ended June 30, 2010, 2011 and 2012, the Company received RMB10,506,502, RMB386,458 and RMB1,572,428 (US$247,510) for exercises of options, respectively.

Apart from the Share Incentive Plans, the Company issued 150,000 ordinary shares to Jerry He, the former Chief Executive Officer of the Company with a grant date market value of US$2.44 per share, during the year ended June 30, 2011 at par value of US$0.00005 per share in exchange of employee services received. Share-based compensation of RMB2,429,120, which was measured as the difference between the market price of the shares at issuance date over the par value was recognized accordingly.

The total share-based compensation expenses in relation to options and shares granted recognized in the statements of operations for the years ended June 30, 2010, 2011 and 2012 was RMB10,395,821, RMB11,437,616, and RMB2,760,006 (US$434,441), respectively.

15. Other operating expenses

	Years ended June 30,
	2010		2011		2012		2012
	RMB		RMB		RMB		US$
Continuing operations
Professional fee for disposal of ELP business		-		8,685,023		-		-
Fines		2,367,000		-		-		-
Impairment loss on other investment		-		-		1,081,000		170,156
Others		494,943		1,886,963		978,054		153,951
Total other operating expenses		2,861,943		10,571,986		2,059,054		324,107

16. Other operating income

	Years ended June 30,
	2010		2011		2012		2012
	RMB		RMB		RMB		US$
Continuing operations
Subsidy income		-		1,038,507		1,796,503		282,780
Rental income		-		787,060		8,539,236		1,344,127
Training camps and interest groups income		-		3,317,820		5,819,793		916,070
Other operating income		278,595		368,785		988,980		155,672
Gain on disposal of a subsidiary		-		-		302,004		47,537
		278,595		5,512,172		17,446,516		2,746,186

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NOAH EDUCATION HOLDINGS LTD.

17. Other non-operating income (expenses)

	Years ended June 30,
	2010		2011			2012		2012
	RMB		RMB			RMB		US$
Continuing operations
Unrealized exchange gain (loss)		4,475,420		(2,717,886	)		2,129,423		335,184
Others		1,486,929		1,538,027			2,632,915		414,435
		5,962,349		(1,179,859	)		4,762,338		749,619

18. Income tax expenses

The Company is incorporated in the Cayman Islands but has its principal operations in the PRC through its PRC subsidiaries.

Cayman Islands and British Virgin Islands

The Company and Bright Sound Limited were incorporated in the Cayman Islands and BVI, respectively, and are not subject to the income tax. In addition, upon payments of dividends by the Company to its shareholders, no Cayman Islands or BVI withholding tax will be imposed.

PRC

Prior to January 1, 2008, pursuant to the PRC income tax laws, the Company's subsidiaries and VIE are generally subject to Foreign Enterprise Income Taxes ("FEIT") at a statutory rate of 33%. Some of these subsidiaries are located in the Shenzhen Special Economic Zone and under PRC income taxes laws, they are subject to a preferential tax rate of 15%. In addition, some of the Company's subsidiaries are under PRC income tax laws entitled to a two years tax exemption followed by three years with a 50% reduction in the tax rate, commencing the first profitable year, after offsetting all unexpired tax losses carried forward from its first profit making year of operations (the "2-plus-3 Income Tax Holiday").

NETS and Bright Sound Electronic Technology (Shenzhen) Co., Ltd. ("BSTS") were established in the Shenzhen Special Economic Zone. They are entitled to 2-plus-3 Income Tax Holiday.

On January 1, 2008, the new PRC income tax laws became effective. The new law applies an uniform 25% enterprise income tax rate to both foreign invested enterprises and domestic enterprises. The new law provides a five-year transition period from its effective date for those enterprises which were established before the promulgation date of the new tax law and which were entitled to a preferential tax treatment such as a reduced tax rate or a tax holiday. That is, the subject tax rate will be 22%, 24% and 25% for calendar years 2010, 2011 and 2012 thereafter, respectively for NETS and BSTS. In addition, under the new law, preferential tax treatment for key software enterprise tax benefit has been removed.

NETS and BSTS were exempted from FEIT for both calendar years ended December 31, 2007 and 2008 as 2009 was the first profit making year. And they were entitled to a 50% income tax relief for the calendar year ended December 31, 2009 (that is, a tax rate of 10% for the calendar year ended December 31, 2009). The 2-plus-3 Income Tax Holiday will then end in the calendar year 2011 for NETS and BSTS.

F-54

NOAH EDUCATION HOLDINGS LTD.

18. Income tax expenses - continued

PRC - continued

Chengdu Shidai Noah Education Software Co., Ltd. ("CDSD") was established in Chengdu High-Tech Economic Zone. They are recognized as key software companies and are entitled to exemption from FEIT for the 2-plus-3 Income Tax Holiday. However, CDSD is still required to make the FEIT payments, and subsequently apply for tax refund pursuant to the Key Software Enterprise Tax Benefit after the 2-plus-3 Income Tax Holiday expired. CDSD was exempted from FEIT for calendar year ended December 31, 2008 as 2008 was the first profit making year.

The other PRC subsidiaries are subject to the uniform income tax rate of 25%.

The Company's other subsidiaries in the PRC have minimal operations, and the Group had minimal operations in jurisdictions other than the PRC.

Uncertainties exist with respect to how the PRC's current income tax law applies to the Company's overall operations, and more specifically, with regard to tax residency status. The new tax law includes a provision specifying that legal entities organized outside of the PRC will be considered residents for PRC income tax purposes if their place of effective management or control is within PRC. The Implementation Rules to the new tax law provide that non-resident legal entities will be considered PRC residents if substantial and overall management and control over the manufacturing and business operations, personnel, accounting, properties, etc. occurs within the PRC. Additional guidance is expected to be released by the PRC government in the near future that may clarify how to apply this new tax law to taxpayers. It is more-likely-than-not that the Company may be considered as a PRC tax resident. However, the Company was at a loss position as of the reporting periods. Therefore, the Company did not expect material PRC income tax exposure even it was characterized as a PRC tax resident.

For other legal entities organized outside of the PRC, the Company does not believe that they should be treated as residents for the new tax law's purposes. If any of these entities were characterized as a PRC tax resident, the impact would adversely affect the Company's operation.

Aggregate undistributed earnings of the Company's subsidiaries in the PRC that are available for distribution to the Company of approximately RMB257,298,185 (approximately US$40,500,265) at June 30, 2012 are considered to be indefinitely reinvested, and accordingly, no provision has been made for the PRC dividend withholding taxes that would be payable upon the distribution of those amounts to the Company. In an announcement formally made on February 22, 2008, the PRC authorities clarified that the distributions made out of undistributed earnings that arose prior to January 1, 2008 would not give rise to withholding tax.

Under US GAAP, deferred tax liability should be accounted for in respect of the undistributed earnings of the Company's financial interest in VIE affiliates and domestic subsidiaries. The Company believes that it is more likely than not that there is no deferred tax liability resulting from the undistributed earnings because the Company has means available under the PRC tax law to recover the investment in its consolidated VIE in a tax free manner.

F-55

NOAH EDUCATION HOLDINGS LTD.

18. Income tax expenses - continued

The following table sets forth current income tax expenses of the Company's PRC subsidiaries, which were included in the consolidated statements for the periods presented:

	Years ended June 30,
	2010		2011		2012			2012
	RMB		RMB		RMB			US$
Current tax		164,400		5,981,945		11,813,969			1,859,589
Deferred tax (credit)		-		237,513		(1,383,567	)		(217,782	)
		164,400		6,219,458		10,430,402			1,641,807

A reconciliation of income tax expense to the amount computed by applying the current tax rate to the loss before income taxes in the consolidated statements of operations were as follows:

	Years ended June 30,
	2010			2011			2012			2012
	RMB			RMB			RMB			US$
Loss before income tax		(10,698,770	)		(19,258,073	)		(37,248,196	)		(5,863,088	)
Tax at the domestic income tax rate of 25%		(2,674,693	)		(4,814,518	)		(9,312,049	)		(1,465,772	)
Tax effect of income that are not taxable:
Allowance for research and development		(206,432	)		(156	)		(1,399	)		(220	)
Other non-taxable income		-			(6,115	)		(1,128,524	)		(177,636	)
Tax effect of expenses that are not deductible:
Impairment loss of goodwill		-			-			14,348,467			2,258,534
Other non-deductible expenses		5,111			2,042,464			1,873,323			294,872
Effect of tax holidays and tax concessions:
Preferential tax treatment		(2,864,990	)		-			-			-
2-plus-3 Income Tax Holiday		-			(1,756,754	)		(1,290,674	)		(203,160	)
Change in valuation allowance		3,965,647			5,119,999			2,883,211			453,834
Effect of changes in enacted tax law and rates		-			(73,969	)		-			-
Underprovision in prior years		-			-			1,374,610			216,372
Effect of loss of the Company and subsidiaries not subject to tax in other jurisdictions		1,966,423			5,051,879			2,117,135			333,250
Others		(26,666	)		656,628			(433,698	)		(68,267	)
		164,400			6,219,458			10,430,402			1,641,807

F-56

NOAH EDUCATION HOLDINGS LTD.

18. Income tax expenses - continued

The aggregate amount and per share effect of the tax holidays and tax concessions are as follows:

	Years ended June 30,
	2010		2011		2012		2012
	RMB		RMB		RMB		US$
The aggregate effect		2,864,990		1,756,754		1,290,674		203,160
Per share effect - basic		0.07		0.05		0.04		0.006
Per share effect - diluted		0.07		0.05		0.04		0.006

The Group has made its assessment of the level of tax authority for each tax position (including the potential application of interest and penalties) based on the technical merits, and has measured the unrecognized tax benefits associated with the tax positions. Based on the evaluation by the Group, it is concluded that there are no significant uncertain tax positions or unrecognized tax benefit which would favorably affect the effective income tax rate in future periods. The Group does not anticipate any significant increases or decrease to its liabilities for unrecognized tax benefit within the next twelve months. The Group classifies interest and/or penalties related to income tax matters in income tax expense. The tax positions for the years 2007 to 2012 may be subject to examination by the PRC tax authorities.

Significant components of deferred tax assets and liabilities:

	Years ended June 30,
	2011			2012			2012
	RMB			RMB			US$
Tax loss carried forwards		24,721,823			21,015,447			3,307,956
Future deductible expenditure		8,243,306			8,243,306			1,297,545
Fair value change of property, plant and equipment		-			298,831			47,038
Allowance for doubtful debts		3,694,485			2,481,580			390,616
Total deferred tax assets		36,659,614			32,039,164			5,043,155
Less: valuation allowance		(36,659,614	)		(31,740,333	)		(4,996,117	)
Total net deferred tax assets (non-current)		-			298,831			47,038
Deferred tax liabilities:
Property, plant and equipment and intangible assets (non-current)		4,589,541			7,585,920			1,194,069

Movement of valuation allowances:

	As of June 30,
	2010		2011			2012			2012
	RMB		RMB			RMB			US$
At the beginning of year		38,549,999		57,861,224			36,659,614			5,770,441
Current year addition		19,311,225		12,495,012			2,883,211			453,835
Tax loss expired		-		-			(7,802,492	)		(1,228,159	)
Disposal of ELP business		-		(33,696,622	)		-			-
At the end of year		57,861,224		36,659,614			31,740,333			4,996,117

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NOAH EDUCATION HOLDINGS LTD.

18. Income tax expenses - continued

Valuation allowances have been provided on the deferred tax assets because the Company believes that it is not more likely than not that the assets will be utilized. As of June 30, 2011 and 2012, valuation allowances were provided for the deferred tax assets relating to the future benefit of net operating loss carry forward as the management determines that the utilization of those net operating loss carry forward not more likely than not. If events occur in the future that allow the Group to realize more of its deferred tax assets than the presently recorded amount, an adjustment to the valuation allowances will increase income when those events occur. Tax losses carry forward in the amount of approximately RMB55,339,193, RMB24,721,823, and RMB21,015,447 (US$3,307,956) incurred in the years ended June 30, 2010, 2011 and 2012 respectively, will expire in the years ended June 30, 2014, 2015 and 2016, respectively.

19. Net income (loss) per share

The following table sets forth the computation of basic and diluted income (loss) per share for the years indicated:

	As of June 30,
	2010		2011		2012
Weighted average ordinary shares outstanding used in computing basic income per share		38,327,047		36,856,451		36,519,353
Plus incremental weighted average ordinary shares from assumed exercise of share options using the treasury stock method		874,342		235,021		68,724
Shares used in calculating diluted income per share		39,201,389		37,091,472		36,588,077

	Year ended June 30,
	2010			2011			2012			2012
	RMB			RMB			RMB			US$
Net income (loss) per share:
From continuing and discontinued operations
Basic		0.15			(11.16	)		(1.47	)		(0.23	)
Diluted		0.15			(11.16	)		(1.47	)		(0.23	)
From continuing operations
Basic		(0.28	)		(0.78	)		(1.47	)		(0.23	)
Diluted		(0.28	)		(0.78	)		(1.47	)		(0.23	)
From discontinued operations
Basic		0.43			(10.38	)		-			-
Diluted		0.42			(10.38	)		-			-

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NOAH EDUCATION HOLDINGS LTD.

19. Net income (loss) per share - continued

The Company had securities which could potentially dilute basic income per share in the future, but which were excluded from the computation of diluted net income per share in the periods presented, as their effects would have been anti-dilutive. Such outstanding securities consist of the following:

	As of June 30,
	2010		2011		2012
Share options		889,597		1,502,621		936,216

20. Related party balances and transactions

The balances and transactions with these related parties for the years ended June 30, 2010, 2011 and 2012 are as follows:

Name of related party	Relationship with the group
First Win Technologies Ltd.	Company controlled by Tang Ben Guo

(1) Balances with its related parties

		As of June 30,
	Name of related party	2011		2012		2012
		RMB		RMB		US$
Related party receivables	First Win Technologies Ltd.		47,532,200		-		-

The amount is unsecured, interest free and are repayable on demand. It represents third installment of consideration receivable from First Win Technologies Ltd. for disposal of ELP business as disclosed in note 11. The balance was fully settled on December 31, 2011.

(2) As set out in note 1, Animation Digital and Wentai Education granted loans in the amounts of RMB2.8 million and RMB30 million to the shareholders of Leisen Education and Wentai Investment, respectively, who are also shareholders of the Company, to fund the capital contributions to Leisen Education and Wentai Investment. These loans were eliminated with the capital of Leisen Education and Wentai Investment during consolidation.

(3) Other than the disposal of ELP business to First Win Technologies Ltd. at consideration of RMB87,532,000 during fiscal 2011 as disclosed in note 11 to the consolidated financial statements there is no significant related party transaction for the years ended June 30, 2010, 2011 and 2012.

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NOAH EDUCATION HOLDINGS LTD.

21. Commitments and contingencies

Commitments

As of June 30, 2012, the Company had commitments under non-cancelable operating leases for office facilities, contracts for marketing expenses and acquisition agreement for Yuanbo Education Group. Future payments at June 30, 2012, by year end are as follows:

	Operating
	lease
	for office		Management
	facilities		fee		Total		Total
					RMB		USD
2013		8,328,732		5,005,671		13,334,403		2,098,914
2014		7,508,857		5,182,187		12,691,044		1,997,646
2015		5,560,947		3,213,363		8,774,310		1,381,129
2016		5,404,217		2,899,432		8,303,649		1,307,044
2017		5,035,059		5,212,136		10,247,195		1,612,969
Thereafter		34,634,211		85,599,618		120,233,829		18,925,520
		66,472,023		107,112,407		173,584,430		27,323,222

The Group incurred rental expenses under operating leases of RMB7,152,204, RMB7,949,877 and RMB8,405,919 (US$1,323,142) for the years ended June 30, 2010, 2011 and 2012, respectively.

Other contingency

The Group has not made adequate social welfare payments as required under applicable PRC labor laws. Accrual for the amounts under-paid has been made in the reported periods and amounted to RMB2,399,976 and RMB2,711,985 (US$426,883) as of June 30, 2011 and 2012, respectively. However, accrual for the penalties that may be imposed by the relevant PRC government authorities has not been made in the financial statements as management considered that it is not probable the relevant PRC government authorities will impose any penalty at all. Should the PRC government decide to assess penalty, the amount is estimated to be approximately RMB3,318,000 and RMB1,181,265 (US$185,938) as of June 30, 2011 and 2012, respectively.

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NOAH EDUCATION HOLDINGS LTD.

22. Statutory reserves

The Group's subsidiaries incorporated in the PRC are required to make appropriations of retained earnings set at certain percentage of after-tax profit determined in accordance with PRC accounting standards and regulations ("PRC GAAP") to statutory surplus reserve and statutory public welfare fund whenever dividends are declared by these PRC subsidiaries.

The statutory surplus reserve can be used to increase the registered capital and eliminate future losses of the companies. It cannot be distributed to shareholders except in the event of a solvent liquidation of the companies. The Group's subsidiaries are required to appropriate 10% of their profit after income tax calculated in accordance with the PRC accounting standard and system to the statutory surplus reserve until the balance reaches 50% of their respective registered capital, where further appropriation, will be at their directors' recommendation. The statutory surplus reserve balance as of June 30, 2011 and 2012, were RMB1,028,031 and RMB1,226,074 (US$192,991), respectively.

The statutory welfare public reserve can only be used for the collective benefits and facilities of the employees. The Group's subsidiaries are required to appropriate certain of their profit after income tax calculated in accordance with the PRC accounting standard and system to the statutory welfare public reserve. The percentage of appropriation will be at their directors' recommendation. No appropriation was made during the report periods.

These reserves represents appropriations of retained earnings determined according to PRC law and may not be distributable.

In addition to these reserves, the registered capital of the Company's PRC subsidiaries are also restricted. The total amount of the restricted capital and reserves as of June 30, 2011 and 2012 amounted to RMB494,127,942 and RMB583,717,842 (US$91,880,677), respectively.

23. Segment information

Operating segments are defined as components of an enterprise that engage in business activities for which separate information is available and evaluated by the chief operating decision maker.

The Group operates and manages its business in three operating segments, Little New Star, Wentai and Yuanbo. Little New Star segment mainly provides English language training services to children through its directly-owned training centers and franchised training centers based in Changsha. Wentai segment mainly focusing on providing early childhood, primary and secondary education services in the PRC. Yuanbo segment mainly focusing on providing early childhood education service in the PRC.

The Group's chief operating decision maker ("CODM") has been identified as Chief Executive Officer and the senior management, including the President, Vice Presidents and Chief Finance Officer, who reviews operating result of respective operating segments separately to allocate resources and assess performance of the Group.

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NOAH EDUCATION HOLDINGS LTD.

23. Segment information - continued

	Little New Star									Wentai								Yuanbo							Corporate									Consolidated
	For the year ended June 30,									For the year ended June 30,								For the year ended June 30,							For the year ended June 30,									For the year ended June 30,
	2010			2011			2012			2010		2011			2012			2010		2011		2012			2010			2011			2012			2010			2011			2012
	RMB			RMB			RMB			RMB		RMB			RMB			RMB		RMB		RMB			RMB			RMB			RMB			RMB			RMB			RMB
Net revenue - external		39,897,671			41,590,668			48,027,719			-		51,884,191			80,684,016			-		-		34,310,586			-			-			-			39,897,671			93,474,859			163,022,321
Cost of revenue		(18,493,517	)		(16,866,904	)		(19,139,829	)		-		(26,458,614	)		(45,158,120	)		-		-		(22,079,439	)		-			-			-			(18,493,517	)		(43,325,518	)		(86,377,388	)
Gross profits		21,404,154			24,723,764			28,887,890			-		25,425,577			35,525,896			-		-		12,231,147			-			-			-			21,404,154			50,149,341			76,644,933
Other operating expenses		(12,549,389	)		(15,049,188	)		(20,578,190	)		-		(15,073,206	)		(25,673,256	)		-		-		(7,700,376	)		(37,473,806	)		(46,598,026	)		(83,979,544	)		(50,023,195	)		(76,720,420	)		(137,931,366	)
Non-operating expenses		34,289			(5,862,932	)		466,067			-		2,553,039			5,478,323			-		-		2,847,473			17,885,982			10,622,899			15,246,374			17,920,271			7,313,006			24,038,237
Income tax expenses		(164,400	)		(1,519,494	)		(1,933,520	)		-		(4,699,964	)		(4,744,925	)		-		-		(2,225,145	)		-			-			(1,526,812	)		(164,400	)		(6,219,458	)		(10,430,402	)
Net income (loss) from continuing operations		8,724,654			2,292,150			6,842,247			-		8,205,446			10,586,038			-		-		5,153,099			(19,587,824	)		(35,975,127	)		(70,259,982	)		(10,863,170	)		(25,477,531	)		(47,678,598	)
Acquisition of property, plant and equipment		(2,106,918	)		(4,813,177	)		(3,308,698	)		-		(7,814,626	)		(13,235,170	)		-		-		(7,440,136	)		(11,574,791	)		(10,463,955	)		(3,155,739	)		(13,681,709	)		(23,091,758	)		(27,139,743	)
Acquisition of intangible assets		(2,700,000	)		-			-			-		-			-			-		-		-			(1,425,773	)		(1,545,725	)		-			(4,125,773	)		(1,545,725	)		-
Acquisition of available-for-sale investment		-			-			-			-		-			-			-		-		-			(20,480,700	)		-			-			(20,480,700	)		-			-
Amortization of intangible assets		1,369,709			1,500,292			1,480,000			-		1,980,764			2,160,835			-		-		1,063,012			2,513,727			1,578,490			-			3,883,436			5,059,546			4,703,847
Depreciation of property, plant and equipment		1,218,480			1,599,769			2,360,147			-		4,415,819			8,733,918			-		-		3,462,667			6,728,078			8,260,826			8,665,658			7,946,558			14,276,414			23,222,390
Allowance for doubtful debts		-			-			53,000			-		-			-			-		-		-			-			-			530,753			-			-			583,753
Loss on disposal of property, plant and equipment		-			-			55,956			-		-			-			-		-		-			-			-			4,439			-			-			60,395
Impairment loss on intangible assets		-			-			3,000,000			-		-			-			-		-		-			-			942,678			-			-			942,678			3,000,000
Segment assets		80,584,593			88,820,441			74,168,991			-		178,855,208			180,687,091			-		-		121,087,317			731,268,850			619,836,322			501,044,319			811,853,443			887,511,971			876,987,718
Segment liabilities		19,872,084			22,871,555			22,997,214			-		31,421,494			41,214,161			-		-		10,831,078			39,345,869			19,076,371			17,242,672			59,217,953			73,369,420			92,285,125

There were no inter-segment sales for the years ended June 30, 2010, 2011 and 2012.

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NOAH EDUCATION HOLDINGS LTD.

23. Segment information - continued

Geographical disclosures: the Group mainly operates in the PRC and in 2010, 2011 and 2012, no single country other than the mainland China accounted for 10% or more of the Company's consolidated net revenue. In addition, all the identifiable assets of the Company are located in the PRC.

Major customers: there are no single customers who contributed for 10% or more of the Group's net revenue for the years ended June 30, 2010, 2011 and 2012.

Product groups: Included in the discontinued operations, the Group previously sold specialty handheld electronic learning devices, which included digital learning devices and e-dictionaries, that were similar in nature, had similar production process, had similar type of customers and utilized the same distribution method, as discrete financial information was not available for the Group's operations of prepaid cards and software; they are considered to be service lines instead of segment.

Apart from electronic learning devices, the Group also provides education services, which include supplement English Training, kindergartens and primary and secondary schools. As discrete financial information was not available for the Group's operations of these products groups, they are considered to be services lines instead of segment.

Revenue from these product groups or services lines are as follows:

	Years ended June 30,
	2010		2011		2012		2012
	RMB		RMB		RMB		US$
Discontinued operations
Electronic learning devices		640,390,206		204,712,282		-		-
Software		-		6,820,572		-		-
		640,390,206		211,532,854		-		-
Continuing operations
Supplemental English Training		36,068,515		33,134,682		35,922,056		5,654,345
Kindergartens		3,829,156		25,957,961		82,139,664		12,929,272
Primary and Secondary Schools		-		34,382,216		44,960,601		7,077,066
		39,897,671		93,474,859		163,022,321		25,660,683
		680,287,877		305,007,713		163,022,321		25,660,683

24. Subsequent events

In August 2012, Yuanbo Education, one of the brands operated by Noah, has signed definitive agreements to acquire 100% interest of Dai Dai Kang Enterprise Management Consulting Co., Ltd., and Hangzhou Xiaoxiao Kids Art and Education Consulting Co., Ltd., for a total consideration of RMB48.1million (US$7.6 million). The transactions are expected to close by early November 2012, and will be subject to customary closing conditions, including regulatory approvals.

F-63

NOAH EDUCATION HOLDINGS LTD.

SCHEDULE 1

NOAH EDUCATION HOLDINGS LIMITED

BALANCE SHEETS

	As of June 30,
	2011			2012			2012
	RMB			RMB			US$
Assets
Current assets
Cash and cash equivalents		67,509,322			47,996,131			7,554,877
Amounts due from subsidiaries		137,550,433			188,283,453			29,636,936
Amounts due from a related party		47,532,200			-			-
Prepaid expenses and other current assets		954,470			432,509			68,079
Total current assets		253,546,425			236,712,093			37,259,892
Investments in subsidiaries		516,032,897			472,757,114			74,414,782
Investments		12,943,200			10,929,427			1,720,357
Total assets		782,522,522			720,398,634			113,395,031
Liabilities and Shareholders' Equity
Current Liabilities
Other payables and accruals		8,856,690			2,380,545			374,712
Deferred revenue		1,386,631			1,355,198			213,316
Total current liabilities		10,243,321			3,735,743			588,028
Non-current Liability
Deferred revenue		3,120,278			1,694,212			266,679
Total liabilities		13,363,599			5,429,955			854,707
Shareholders' Equity
Ordinary shares, US$0.00005 par value; 1,000,000,000 shares authorized as of June 30, 2011 and 2012; 36,427,851 and 36,569,866 shares issued and outstanding as of June 30, 2011 and 2012 respectively		14,799			14,843			2,336
Additional paid-in capital		1,042,785,726			1,046,863,605			164,782,560
Accumulated other comprehensive loss		(119,328,924	)		(124,039,206	)		(19,524,510	)
Accumulated losses		(154,312,678	)		(207,870,563	)		(32,720,062	)
Total shareholders' equity		769,158,923			714,968,679			112,540,324
Total liabilities and shareholders' equity		782,522,522			720,398,634			113,395,031

F-64

NOAH EDUCATION HOLDINGS LTD.

SCHEDULE 1

(Continued)

NOAH EDUCATION HOLDINGS LIMITED

STATEMENTS OF INCOME

	Years ended June 30,
	2010			2011			2012			2012
	RMB			RMB			RMB			US$
General and administrative expenses		(15,757,634	)		(16,074,443	)		(9,291,827	)		(1,462,589	)
Other operating expenses		-			(9,225,574	)		(465,856	)		(73,328	)
Operating loss		(15,757,634	)		(25,300,017	)		(9,757,683	)		(1,535,917	)
Investment income (loss)		1,135,078			(3,397,269	)		(809,270	)		(127,384	)
Interest income		669			674			176,203			27,735
Non-operating income		5,597,938			1,538,027			1,470,767			231,508
Loss on disposal of ELP business		-			(486,628,367	)		-			-
Loss before income tax		(9,023,949	)		(513,786,952	)		(8,919,983	)		(1,404,058	)
Income tax expenses		-			-			-			-
Loss after tax		(9,023,949	)		(513,786,952	)		(8,919,983	)		(1,404,058	)
Share of net profits (loss) of subsidiaries, net of taxes		14,683,774			102,449,908			(44,637,902	)		(7,026,271	)
Net income (loss)		5,659,825			(411,337,044	)		(53,557,885	)		(8,430,329	)

F-65

NOAH EDUCATION HOLDINGS LTD.

SCHEDULE 1

(Continued)

NOAH EDUCATION HOLDINGS LIMITED

STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME

										Accumulated
							Additional			Other			Accumulated			Total
	Ordinary shares						paid-in			comprehensive			Income			shareholders'			Comprehensive
	Share			Amount			capital			(losses)			loss			Equity			income (loss)
				RMB			RMB			RMB			RMB			RMB			RMB
As of July 1, 2009		35,589,120			14,504			1,029,778,033			(93,632,438	)		250,934,118			1,187,094,217
Issue of shares		2,647,743			905			37,384,095			-			-			37,385,000
Share repurchase		(1,394,300	)		(477	)		(38,698,132	)		-			-			(38,698,609	)
Exercise of share options		771,138			263			10,506,239			-			-			10,506,502
Net income		-			-			-			-			5,659,825			5,659,825			5,659,825
Share-based compensation		-			-			10,395,821			-			-			10,395,821
Cumulative translation adjustment, net of tax		-			-			-			(4,714,440	)		-			(4,714,440	)		(4,714,440	)
Unrealized gain on available-for-sale investment, net of tax		-			-			-			9,395,254			-			9,395,254			9,395,254
As of June 30, 2010		37,613,701			15,195			1,049,366,056			(88,951,624	)		256,593,943			1,217,023,570			10,340,639
Issue of shares as employee compensation		150,000			49			2,429,120			-			-			2,429,169
Share repurchase		(1,375,478	)		(458	)		(18,404,391	)		-			-			(18,404,849	)
Exercise of share options		39,628			13			386,445			-			-			386,458
Net loss		-			-			-			-			(411,337,044	)		(411,337,044	)		(411,337,044	)
Share-based compensation		-			-			9,008,496			-			-			9,008,496
Cumulative translation adjustment, net of tax		-			-			-			(36,155,598	)		-			(36,155,598	)		(36,155,598	)
Unrealized loss on available-for-sale investment, net of tax		-			-			-			(12,523,254	)		-			(12,523,254	)		(12,523,254	)
Disposal of subsidiaries		-			-			-			18,301,552			-			18,301,552
Acquisition of subsidiaries		-			-			-			-			430,423			430,423			18,301,552
As of June 30, 2011		36,427,851			14,799			1,042,785,726			(119,328,924	)		(154,312,678	)		769,158,923			(441,714,344	)
Issue of shares as employee compensation
Share repurchase		(26,195	)		(9	)		(254,502	)		-			-			(254,511	)
Exercise of share options		168,210			53			1,572,375			-			-			1,572,428
Net loss		-			-			-			-			(53,557,885	)		(53,557,885	)		(53,557,885	)
Share-based compensation		-			-			2,760,006			-			-			2,760,006
Cumulative translation adjustment, net of tax		-			-			-			(3,899,857	)		-			(3,899,857	)		(3,899,857	)
Unrealized loss on available-for-sale investment, net of tax		-			-			-			(810,425	)		-			(810,425	)		(810,425	)
As of June 30, 2012		36,569,866			14,843			1,046,863,605			(124,039,206	)		(207,870,563	)		714,968,679			(58,268,167	)
As of June 30, 2012 (US$)					2,336			164,782,560			(19,524,509	)		(32,720,063	)		112,540,324			(9,171,756	)

F-66

NOAH EDUCATION HOLDINGS LTD.

SCHEDULE 1

(Continued)

NOAH EDUCATION HOLDINGS LIMITED

STATEMENTS OF CASH FLOWS

	Years ended June 30,
	2010			2011			2012			2012
	RMB			RMB			RMB			US$
Cash flows from operating activities:
Net income (loss)		5,659,825			(411,337,044	)		(53,557,885	)		(8,430,329	)
Adjustments to reconcile net income to net cash used in operating activities:
Share of net (loss) profits of subsidiaries		(14,683,774	)		(102,449,908	)		44,637,902			7,026,271
Gain on trading investments, net		(868,255	)		(653,861	)		-			-
Impairment loss on other investment		-			4,409,508			809,270			127,384
Share-based compensation		10,395,821			11,437,616			2,760,006			434,441
Loss on disposal of ELP business		-			486,628,367			-			-
Changes in current assets and liabilities:
Trading investments		3,354,018			6,147,040			-			-
Prepaid expenses and other current assets		(2,640,603	)		2,110,219			521,961			82,160
Other payables and accruals		(493,509	)		(14,016,572	)		(6,476,145	)		(1,019,384	)
Deferred revenue		(1,459,299	)		(1,727,027	)		(1,457,499	)		(229,419	)
Net cash used in operating activities		(735,776	)		(19,451,662	)		(12,762,390	)		(2,008,876	)
Cash flows from investing activities:
Deposit for investment		18,581,952			-			-			-
Amount paid for acquisition of Little New Star Education Group		(33,000,000	)		-			-			-
Repayment from subsidiaries		76,831,395			(270,609	)		-			-
Disposal of subsidiaries		-			40,000,000			-			-
Acquisition of held-to-maturity investments		(20,480,700	)		-			-			-
Net cash provided by investing activities		41,932,647			39,729,391			-			-
Cash flows from financing activities:
Proceeds from issuance of ordinary shares, net of issuance costs		-			49			-			-
Proceeds from exercise of share options		10,506,502			386,458			1,572,428			247,510
Shares repurchase		(38,698,609	)		(18,404,849	)		(254,511	)		(40,062	)
Net cash (used in) provided by financing activities		(28,192,107	)		(18,018,342	)		1,317,917			207,448
Net increase (decrease) in cash and cash equivalents		13,004,764			2,259,387			(11,444,473	)		(1,801,428	)
Effect of exchange rate changes on cash and cash equivalents		(10,309,175	)		(8,040,649	)		(8,068,718	)		(1,270,064	)
Cash and cash equivalents at the beginning of year		70,594,995			73,290,584			67,509,322			10,626,369
Cash and cash equivalents at the end of year		73,290,584			67,509,322			47,996,131			7,554,877

F-67

NOAH EDUCATION HOLDINGS LTD.

SCHEDULE 1

(Continued)

NOAH EDUCATION HOLDINGS LIMITED

NOTE TO SCHEDULE 1

Schedule 1 has been provided pursuant to the requirements of Rule 12-04(a) and 4-08(e)(3) of Regulation S-X, which require condensed financial information as to financial position, changes in financial position and results and operations of a parent company as of the same dates and for the same periods for which audited consolidated financial statements have been presented when the restricted net assets of the consolidated and unconsolidated subsidiaries together exceed 25 percent of consolidated net assets as of end of the most recently completed fiscal year. As of June 30, 2011 and 2012, RMB494,127,942 and RMB583,717,942 (US$91,880,677) of the restricted capital and reserves are not available for distribution, respectively, and as such, the condensed financial information of the Company has been presented for the years ended June 30, 2010, 2011 and 2012.

F-68