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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 
 FORM 20-F
 
  o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES
EXCHANGE ACT OF 1934
 or
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the fiscal year ended June 30, 2010.
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 For the transition period from  to
 or
 o
    
    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.
   (Translation Of Registrants Name Into English)
  (Jurisdiction Of Incorporation or Organization)
 
 (Address of Principal Executive Offices)
 
 (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 RegisteredOrdinary 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)
 39,607,755 ordinary shares, par
value US$ 0.00005 per share, as of June 30, 2010.
 Yes o No þ
 o þ
 þ o
 o o
  Large Accelerated Filer o
    
    Accelerated Filer þ
    
    Non-Accelerated Filer o
  þ
 o
 o
 o o
 o þ
  o o




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##### 



TABLE OF CONTENTS
 INTRODUCTION
    
    
    1FORWARD-LOOKING STATEMENTS
    
    
    1PART I
    
    
    3Item 1. Identity of Directors, Senior Management and Advisers
    
    
    3Item 2. Offer Statistics and Expected Timetable
    
    
    3Item 3. Key Information
    
    
    3Item 4. Information on the Company
    
    
    25Item 4A. Unresolved Staff Comments
    
    
    45Item 5. Operating and Financial Review and Prospects
    
    
    45Item 6. Directors, Senior Management and Employees
    
    
    66Item 7. Major Shareholders and Related Party Translations
    
    
    75Item 8. Financial Information
    
    
    77Item 9. The Offer and Listing
    
    
    79Item 10. Additional Information
    
    
    80Item 11. Quantitative and Qualitative Disclosures About Market Risk
    
    
    93Item 12. Description of Securities Other than Equity Securities
    
    
    93PART II
    
    
    94Item 13. Defaults, Dividend Arrearages and Delinquencies
    
    
    94Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    
    94Item 15. Controls and Procedures
    
    
    95Item 16A. Audit Committee Financial Expert
    
    
    96Item 16B. Code of Ethics
    
    
    96Item 16C. Principal Accountant Fees and Services
    
    
    96Item 16D. Exemptions from the Listing Standards for Audit Committees
    
    
    97Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
    
    
    97Item 16F. Change in Registrants Certifying Accountant
    
    
    97Item 16G. Corporate Governance
    
    
    97PART III
    
    
    98Item 17. Financial Statements
    
    
    98Item 18. Financial Statements
    
    
    98Item 19. Exhibits
    
    
    99Exhibit 4.20Exhibit 4.21Exhibit 4.22Exhibit 4.23Exhibit 4.24Exhibit 4.25Exhibit 4.26Exhibit 4.27Exhibit 4.28Exhibit 4.29Exhibit 4.30Exhibit 8.1Exhibit 12.1Exhibit 12.2Exhibit 13.1Exhibit 13.2Exhibit 15.1




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INTRODUCTION
  
    
    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 2008, fiscal 2009 and fiscal 2010 refers to our fiscal years ended June
30, 2008, 2009 and 2010, 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.
    
 FORWARD-LOOKING STATEMENTS
   
    
    our anticipated growth strategies;
 
    
    our future business development, results of operations and financial condition;
 
    
    expected changes in our revenues and certain cost or expense items;
 
    
    our ability to expand our content, attract customers and leverage our brands;
  1




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
    
    our ability to manage growth;
 
    
    trends and competition in the interactive educational content industry; and
 
    
    fluctuations in general economic and business conditions in China.
    2




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PART I
 
 Item 1. Identity of Directors, Senior Management and Advisers
  
 Item 2. Offer Statistics and Expected Timetable
  
 Item 3. Key Information
 Selected Financial Data
  Year Ended June 30,2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    US$(in thousands, except share, per share and per ADS data)Consolidated Statement of Operations Data:Net revenue
    
    
    393,039
    
    
    
    555,225
    
    
    
    651,935
    
    
    
    671,146
    
    
    
    680,288
    
    
    
    100,315Cost of revenue(1)
    
    
    (174,584
    )
    
    
    (266,566
    )
    
    
    (318,788
    )
    
    
    (326,401
    )
    
    
    (368,754
    )
    
    
    (54,376
    )Gross profit
    
    
    218,455
    
    
    
    288,659
    
    
    
    333,147
    
    
    
    344,745
    
    
    
    311,534
    
    
    
    45,939Research and development expenses(1)
    
    
    (20,345
    )
    
    
    (43,487
    )
    
    
    (52,667
    )
    
    
    (56,302
    )
    
    
    (52,731
    )
    
    
    (7,776
    )Sales and marketing expenses(1)
    
    
    (179,869
    )
    
    
    (172,540
    )
    
    
    (197,430
    )
    
    
    (210,693
    )
    
    
    (219,495
    )
    
    
    (32,367
    )General and administrative expenses(1)
    
    
    (16,508
    )
    
    
    (24,676
    )
    
    
    (44,260
    )
    
    
    (58,499
    )
    
    
    (91,774
    )
    
    
    (13,533
    )Other operating expenses
    
    
    (311
    )
    
    
    (20,910
    )
    
    
    (3,132
    )
    
    
    (158
    )
    
    
    (3,028
    )
    
    
    (447
    )Total operating expenses
    
    
    (217,034
    )
    
    
    (261,612
    )
    
    
    (297,489
    )
    
    
    (325,652
    )
    
    
    (367,028
    )
    
    
    (54,122
    )Other operating income
    
    
    24,725
    
    
    
    40,023
    
    
    
    44,101
    
    
    
    45,576
    
    
    
    41,629
    
    
    
    6,139Operating income (loss)
    
    
    26,147
    
    
    
    67,070
    
    
    
    79,759
    
    
    
    64,669
    
    
    
    (13,865
    )
    
    
    (2,045
    )Derivative gain (loss)
    
    
    2,667
    
    
    
    (55
    )
    
    
    (1,868
    )
    
    
    5,807
    
    
    
    
    
    
    
    Interest income
    
    
    952
    
    
    
    2,306
    
    
    
    13,644
    
    
    
    5,308
    
    
    
    9,134
    
    
    
    1,347Investment income
    
    
    
    
    
    
    
    
    
    
    11,057
    
    
    
    15,257
    
    
    
    2,824
    
    
    
    416Interest expense
    
    
    (162
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other non-operating income
    
    
    
    
    
    
    
    
    
    
    42,708
    
    
    
    6,204
    
    
    
    5,962
    
    
    
    879Income before income taxes
    
    
    29,604
    
    
    
    69,321
    
    
    
    145,300
    
    
    
    97,245
    
    
    
    4,055
    
    
    
    598Income tax (expenses) credit
    
    
    (2,969
    )
    
    
    (2,892
    )
    
    
    (1,101
    )
    
    
    (255
    )
    
    
    1,605
    
    
    
    237Net income
    
    
    26,635
    
    
    
    66,428
    
    
    
    144,199
    
    
    
    96,990
    
    
    
    5,660
    
    
    
    835Preference share dividends
    
    
    
    
    
    
    (17,705
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deemed dividend
    
    
    (1,516
    )
    
    
    (2,653
    )
    
    
    (379
    )
    
    
    
    
    
    
    
    
    
    
    Net income attributable to ordinary shareholders
    
    
    25,119
    
    
    
    46,070
    
    
    
    143,820
    
    
    
    96,990
    
    
    
    5,660
    
    
    
    835Net income per ordinary shareBasic
    
    
    0.90
    
    
    
    2.32
    
    
    
    4.03
    
    
    
    2.66
    
    
    
    0.15
    
    
    
    0.02Diluted
    
    
    0.88
    
    
    
    2.15
    
    
    
    3.93
    
    
    
    2.62
    
    
    
    0.14
    
    
    
    0.02Net income per ADS(2)Basic
    
    
    0.90
    
    
    
    2.32
    
    
    
    4.03
    
    
    
    2.66
    
    
    
    0.15
    
    
    
    0.02Diluted
    
    
    0.88
    
    
    
    2.15
    
    
    
    3.93
    
    
    
    2.62
    
    
    
    0.14
    
    
    
    0.02Weighted average number of ordinary shares used
in per share calculations:Basic
    
    
    21,473,442
    
    
    
    21,473,442
    
    
    
    33,153,982
    
    
    
    36,446,790
    
    
    
    38,327,047
    
    
    
    38,327,047Diluted
    
    
    21,473,442
    
    
    
    22,906,684
    
    
    
    34,056,315
    
    
    
    37,069,492
    
    
    
    39,201,389
    
    
    
    39,201,389Cash dividends per ordinary share
    
    
    
    
    
    
    2.7145
    
    
    
    
    
    
    
    3.8249
    
    
    
    
    
    
    
    Cash dividends per preference share
    
    
    
    
    
    
    2.7145
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  3




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As of June 30,2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    US$(in thousands)Consolidated Balance Sheet Data:Cash and cash equivalents
    
    
    59,958
    
    
    
    77,367
    
    
    
    260,223
    
    
    
    493,911
    
    
    
    506,728
    
    
    
    74,722Total assets
    
    
    313,090
    
    
    
    329,710
    
    
    
    1,362,871
    
    
    
    1,327,019
    
    
    
    1,376,166
    
    
    
    202,929Total current liabilities
    
    
    77,736
    
    
    
    90,723
    
    
    
    64,392
    
    
    
    133,697
    
    
    
    149,799
    
    
    
    22,089Warrants
    
    
    
    
    
    
    4,934
    
    
    
    5,830
    
    
    
    
    
    
    
    
    
    
    
    Ordinary Shares
    
    
    9
    
    
    
    9
    
    
    
    15
    
    
    
    15
    
    
    
    15
    
    
    
    2Additional paid-in capital
    
    
    32,572
    
    
    
    48,738
    
    
    
    1,169,619
    
    
    
    1,029,778
    
    
    
    1,049,366
    
    
    
    154,740Accumulated other comprehensive
income (loss)
    
    
    (2,482
    )
    
    
    (5,498
    )
    
    
    (89,949
    )
    
    
    (93,632
    )
    
    
    (88,952
    )
    
    
    (13,117
    )Retained earnings
    
    
    77,396
    
    
    
    61,429
    
    
    
    205,248
    
    
    
    250,934
    
    
    
    256,594
    
    
    
    37,837Total shareholders equity
    
    
    107,495
    
    
    
    104,678
    
    
    
    1,284,933
    
    
    
    1,187,094
    
    
    
    1,217,024
    
    
    
    179,462
 
 (1)
    
    Share-based compensation expenses are included in our cost of revenue and operating expenses
as follows: Year Ended June 30,2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010(RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (US$)(in thousands)Share-based compensation included in:Cost of revenue
    
    
    
    
    
    
    376
    
    
    
    228
    
    
    
    240
    
    
    
    296
    
    
    
    44Research and development expenses
    
    
    
    
    
    
    9,444
    
    
    
    4,175
    
    
    
    3,198
    
    
    
    2,645
    
    
    
    390Sales and marketing expenses
    
    
    
    
    
    
    4,386
    
    
    
    14,846
    
    
    
    2,453
    
    
    
    1,980
    
    
    
    292General and administrative expenses
    
    
    
    
    
    
    624
    
    
    
    1,095
    
    
    
    2,282
    
    
    
    5,475
    
    
    
    807
 
  Exchange Rate Information
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Noon Buying Rate(RMB per US$ 1.00)PeriodPeriod
    
    End
    
    
    Average(1)
    
    
    Low
    
    
    High2005
    
    
    8.0702
    
    
    
    8.1826
    
    
    
    8.2765
    
    
    
    8.07022006
    
    
    7.8041
    
    
    
    7.9579
    
    
    
    8.0702
    
    
    
    7.80412007
    
    
    7.2946
    
    
    
    7.5806
    
    
    
    7.8127
    
    
    
    7.29462008
    
    
    6.8225
    
    
    
    6.9193
    
    
    
    7.2946
    
    
    
    6.78002009
    
    
    6.8259
    
    
    
    6.8295
    
    
    
    6.8470
    
    
    
    6.81762010April
    
    
    6.8247
    
    
    
    6.8256
    
    
    
    6.8275
    
    
    
    6.8229May
    
    
    6.8305
    
    
    
    6.8275
    
    
    
    6.8310
    
    
    
    6.8245June
    
    
    6.7815
    
    
    
    6.8184
    
    
    
    6.8323
    
    
    
    6.7815July
    
    
    6.7735
    
    
    
    6.7762
    
    
    
    6.7807
    
    
    
    6.7709August
    
    
    6.8069
    
    
    
    6.7873
    
    
    
    6.8069
    
    
    
    6.7670September
    
    
    6.6905
    
    
    
    6.7396
    
    
    
    6.8102
    
    
    
    6.6869October (through October 22)
    
    
    6.6585
    
    
    
    6.6665
    
    
    
    6.6912
    
    
    
    6.6397
 
 (1)
    
    Annual averages are calculated from month-end rates. Monthly averages are calculated using
the average of the daily rates during the relevant period. Capitalization and Indebtedness
  Reasons for the Offer and Use of Proceeds
  Risk Factors
 Risks Related to Our Business and Our Industry
 Our limited operating history makes it difficult to evaluate our business, future prospects and
results of operations.
  If we fail to accurately predict or adapt to changing consumer preferences and technological
advances in interactive education content and delivery platforms, our business could be adversely
affected.
   5




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If we are unable to continue to attract users to purchase our content and our DLDs without a
significant decrease in price, our revenues may decline and we may not be able to maintain our
profitability.
  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.
  We license a substantial portion of our content from third parties, and our licenses may expire or
not be renewed.
  If we cannot maintain good relationships with teachers in our Teachers Alliance, our content
development ability may diminish and our content sales may suffer.
   6




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We are subject to securities class action lawsuits alleging that we misrepresented or failed to
disclose in our initial public offering registration statement that the increases in the costs of
raw materials were negatively impacting our gross margin. If the class action lawsuits are
successful, they may have an adverse effect on our financial condition and operating results.
 Seidel v. Noah Education
Holdings, Ltd. et al Schapiro v. Noah Education
Holdings, Ltd. et al. Sebik v. Noah Education Holdings, Ltd. et
al.
  Third parties have brought intellectual property infringement claims against us in the past, and
may bring similar claims in the future.
 ,
   7




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Any error in the solutions to the practice questions in our searchable database and our courseware
titles could damage our reputation.
  Our intellectual property rights may not prevent our competitors from using our technologies or
similar technologies to develop competing products, which could weaken our competitive position and
harm our business and results of operations.
   Capacity constraints or system disruptions to, or security risks in, our computer systems or
websites could damage our reputation and limit our ability to increase content sales.
  Uncertainty and adverse changes in the economy could have a material adverse impact on our business
and operating results.
   8




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We may not be able to successfully execute our strategy of expanding into new geographical markets
in China.
  Failure to execute our growth strategies of online content distribution, English training services
for children and education services may have a material adverse affect on our business and
prospects.
  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.
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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.
  If we are unable to compete effectively with existing or new competitors, our sales and market
share could decline.
  We have no control over our third-party distributors. If we are unable to manage our relationships
with them effectively, or they do not include our products in their product portfolio for any other
reasons, we may not be able to sell our products as effectively as before and our sales and
revenues may decline.
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We rely on a limited number of manufacturers to produce our finished products, and our reputation
and results of operations could be harmed if they fail to produce quality products in a timely and
cost-effective manner and in sufficient quantities.
  Increases in our component or manufacturing costs could reduce our gross margins.
  If we do not correctly anticipate demand for particular products, we could incur additional costs,
experience manufacturing delays, damage relationships with distributors or lose new sales
opportunities.
   Any defects in our products, or our failure to comply with applicable safety standards, could
result in delayed shipments or rejection of our products and damage to our reputation, and could
expose us to regulatory or other legal action.
   11




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If we are liable for a substantial amount of past due social welfare payments for which we have not
made a provision, our financial condition may be materially and 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.
   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.
  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.
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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,
kindergarten and schools at reasonable prices.
  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.
  Risks Related to Our Corporate Structure
 If the PRC government finds that the agreements that establish the structure for operating our
online business do not comply with applicable PRC laws and regulations, we could be subject to
severe penalties.
 www.noahedu.com
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
    
    revoking the business and operating licenses of Noah Zhi Yuan, 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 Noah Zhi Yuan, 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;
 
    
    shutting down the servers of Noah Zhi Yuan or blocking our websites; or
 
    
    requiring us or our PRC subsidiaries and affiliated entities to restructure our
ownership structure or operations.
  We rely on contractual arrangements with Noah Zhi Yuan, 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.
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The beneficial owners of Noah Zhi Yuan may have potential conflicts of interest with us.
  Contractual arrangements we have entered into among our subsidiaries and Noah Zhi Yuan or Wentai
Investment may be subject to scrutiny by the PRC tax authorities, and a finding that we, Noah Zhi
Yuan or Wentai Investment owe additional taxes could substantially reduce our consolidated net
income and the value of your investment.
  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.
    15




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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.
  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.
   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.
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Uncertainties with respect to the PRC legal system could adversely affect us.
   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.
  Governmental control of currency conversion may affect the value of your investment.
  Recent 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.
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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.
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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.
  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.
  
    
    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 Noah Zhi Yuan 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.
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Expiration of, or changes to, tax benefits or incentives could materially and adversely affect our
operating results.
  Fluctuation in the value of the RMB may have a material adverse effect on your investment.
  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.
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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.
  We face risks related to health epidemics and other outbreaks.
  Risks Related to Our ADSs
 We believe it is likely that we were a passive foreign investment company, or PFIC, for our taxable
year ended June 30, 2010, and we believe that we were a PFIC for our taxable year ended June 30,
2009, which could result in adverse U.S. federal income tax consequences to U.S. holders of our
ADSs or ordinary shares.
   21




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##### Table of Contents



The market price for our ADSs has been volatile and may continue to fluctuate significantly.
  We may need additional capital, and the sale of additional ADSs or other equity securities could
result in additional dilution to our shareholders.
   
    
    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.
  
    
    further develop or enhance our services and products;
 
    
    acquire necessary technologies, products or businesses;
  22




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##### Table of Contents




    
    expand operations in China;
 
    
    hire, train and retain employees;
 
    
    market our programs, services and products; or
 
    
    respond to competitive pressures or unanticipated capital requirements.
 Our corporate actions are substantially controlled by our officers, directors, principal
shareholders and their affiliated entities.
  Substantial future sales or the perception of sales of our ADSs in the public market could cause
the price of our ADSs to decline.
  Our business is subject to seasonal fluctuations, which may cause our results of operations to
fluctuate from quarter to quarter. This may result in volatility and adversely affect the price of
our ADSs.
  Our historical financial condition and results of operations are not necessarily indicative of
future performance and are difficult to forecast.
  
    
    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;
  23




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##### Table of Contents




    
    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.
  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.
  You may not be able to participate in rights offerings and may experience dilution of your holdings
as a result.
  You may be subject to limitations on transfer of your ADSs.
  Certain judgments obtained against us by our shareholders may not be enforceable.
   24




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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 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.
  
 Item 4. Information on the Company
 History and Development of the Company
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Business Overview
 Overview
  www.noahedu.com
   26




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##### Table of Contents



i i i
   Our ELPs
 Our Content and Services
   
    
    Basic English Language Training Courseware Titles. As of June 30, 2010, we had
developed over 27,620 English language learning courseware, each based on a different
series of textbooks. These titles constitute approximately half of our basic courseware
titles. Of these, the titles developed for primary and secondary students are organized
by semester and correspond to the English language curriculum typically taught in
primary and secondary schools. The titles developed for college students and
professionals are designed as preparation courses for standardized English aptitude
tests. Test scores are used as measurements for English proficiency in a variety of
situations where English proficiency is considered a prerequisite, including college
graduation, entrance to masters degree programs,
employment opportunities or job promotions. For the year 2010, approximately 50% of
our downloadable courseware titles were English language courseware titles.
  27




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##### Table of Contents




    
    Mathematics Courseware Titles. We have been increasingly focused on the development
of mathematic courseware titles in recent years as schools in China have historically
placed strong emphasis on mathematics education. In addition to the courseware titles
related to the regular mathematics curriculum, we have also developed DLDs focusing on
advanced level practice questions and solutions for the International Mathematics
Olympics to meet the demand of those students who want to be more competitive in their
mathematics skills.
 
    
    Chinese-As-A-Foreign Language Courseware.We have witnessed an increasing number of
non-native Chinese speakers in China and around the world who are interested in
learning Chinese as a foreign language. We plan to leverage our expertise in language
training courseware development and offer Chinese language study courseware to capture
growth opportunities in this area.
 
    
    Other Basic Education Courseware Titles. Our other basic courseware titles cover
standard subjects, other than English, that are typically taught in primary and
secondary schools in China. These include Chinese, physics, chemistry, biology,
geography, political science and history. These titles are organized by semester and by
subject. Under each subject, there may be several versions to reflect differences in
curriculum adopted by school systems in different cities and provinces.
 
    
    Practice Question Database. In July 2007, we brought to market what we believe to
be the first searchable practice question database on DLDs, which then contained
approximately 300,000 and now contain 600,000 practice questions. These questions
initially focus on the subjects of mathematics, physics and chemistry. Each practice
question contains 24 searchable fields and links to solutions and related questions and
courseware titles. In January 2010, we started to offer student laptops NP5800 and
NP6000 as part of our DLD offerings, which cover nine academic subjects, including over
600,000 searchable test questions in mathematics, physics and chemistry in practice
question databases, and host 5,000 sample compositions and nearly 24,000 e-books. They
also feature innovative functions, including our newly developed graphic calculator
technology, Pocket English and Riverdeep Fun Mathematics.
 
    
    Dictionaries. We have licensed and compiled over 253 dictionaries, including 26
dictionaries related to the English language, eight dictionaries related to Japanese
language, ten dictionaries related to other foreign languages and over 200 professional
dictionaries on subjects including medicine, law and engineering. Portions of these
dictionaries are presented with colorful interactive animations, dialogues and
explanatory graphics.
 
    
    Online Tutoring Sessions. Our users can log-on to our website and post questions
regarding their homework. We ensure that a teacher from our Teachers Alliance is
available to answer the posted questions and, historically, a majority of the questions
posted have been answered. Other students can participate in the exchange and post
their answers as well.
   
    
    Planning. Our planning team is responsible for the planning and coordination of the
courseware curricula with the assistance of our Teachers Alliance. Once the planning
for the
entire courseware is completed, the task of designing the teaching plan for each
courseware title is assigned to individual teachers from our Teachers Alliance.
  28




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
    
    Compiling. The writers on our compiling team write the script for the multimedia
presentations based on the completed teaching plan. Our artists and production crew,
led by our directors, create the sound effect, artwork, animation, video and other
multimedia elements required in the script.
 
    
    Programming. The programming team assembles the multimedia elements into a
completed courseware title according to the production script, using a simple
programming language supported by our proprietary NP-iTECH software.
  Our Content Delivery Platforms
 i i
   www.noahedu.com
    29




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Our Educational Programs
 English Language Training Services
  Kindergartens, Primary and Secondary Schools
  After-school Tutoring Programs
  Research and Development
 i
 i i i i
 i i
  30




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
    
    In May 2006, we brought to market what we believe to be the first color DLDs.
The open architecture allowed our color DLDs to be built on an interchangeable
platform with our black-and-white DLDs. It also allows easy integration with
web-based and wireless-based technologies and future add-ons.
 
    
    In July 2007, we introduced to the market what we believe to be the first
searchable practice question database on DLDs. Our searchable practice question
database is built on our proprietary and innovative vertical search technology. Our
vertical search technology allows faster and more precise searches in the handheld
environment through extensive indexing of the information in the database and high
integration with the operating system.
 
    
    In January 2008, we incorporated graphic calculators into our DLDs. We believe
we are the first in China to have developed the technology for incorporation into
handheld devices. The calculator is capable of drawing graphs for functions,
geometry and other types of mathematics problems, as well as presenting the effects
graphically of input variations. Furthermore, it allows students to manipulate
algebra equations and program certain scientific calculations.
 
    
    In August 2008, we incorporated Simulated Laboratory of Physics and Chemistry,
or SLPC, into our DLDs. It is designed and developed for high school students to
learn physics and chemistry. Students can use SLPC to simulate experiments and
design new experiments based on their study needs and progress. It is a
user-friendly and interactive in classroom study platform and is also an
exploratory tool for students to test new ideas. It puts a lab into students
handheld devices and is called pocket laboratory.
 
    
    In June 2009, we brought our new generation of KLD, NE260 and NE280 to the
market with Vertical Search Technology. Vertical Search Technology is a search
engine designed for a specific field. It integrates information in certain fields
from webpage database, extract data based on certain pieces of a phrase, then
process the data and revert the information back to users. The search results are
more relevant, accurate and in-depth than those from a general search engine. We
believe Vertical Search Technology is one of the best search engines in handheld
DLDs. It can search across books, problem sets, encyclopedia, subjects and other
resources.
 
    
    In January 2010, we introduced NE350, a new KLD model with a unique two-in-one
design. NE350 inherited all the technologies from previous generation and contains
a pullout side-tray which contains a DLD insert. We also introduced NE5800 and
NE6000 student laptops to the market. These student laptops feature enhanced
vertical search technology, which enables students to explore knowledge from
webpage databases, searchable subject databases, problem sets and sample
examinations. They also include teaching videos from teachers in top schools in
Beijing, covering nine subjects in parallel with school curricula.
  
    
    Learning with fun: It aims to enable users to learn through entertainment. It
increases users study interest and motivation through scenario simulation, games and
interactive practice problem sets. Users can learn by online or off-line games, using
handheld devices or internet. It provides users with a happy, easy and fun learning
environment.
 
    
    E-book: This technology will digitalize paper books, and hold thousands of books in
a handheld device. Users can zoom in and out, click on pictures, text, titles and other
elements to read, talk, make notes and search.
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
    
    Semanteme-based processing: Semanteme-based processing can be the foundation of
knowledge database. It stores the information in a network structure. When applied in
teaching and learning and combined with database technology, semanteme-based processing
technology can help the users to search and learn through induction, and measure their
progress over time.
 
    
    Inter-connectivity: With the advance of wireless technology, such as WIFI, GRPS, SG,
it is believed that handheld learning devices will be connected to Internet wirelessly
in the near future. In the next year or so, Noah will develop more learning devices and
contents for Internet users, wirelessly or through LAN. Our Internet portal will become
a center for our customers, providing learning subject search, book search, homework
tutoring, study groups or communities, content updates and upgrades, student
performance tracking and other services.
  Our Sales Network
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Marketing and Brand Promotion
   Advertisements
 Seminars and Workshops
 Fan Club, Online Chat Room and Social Activities
 Charitable Events
 Access Noah
 Raw Material Supplies and Manufacturing Arrangements
     33




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Customer Support and Service
  Competition
   Intellectual Property
 i www.noahedu.com www.littlestar.com.cn www.jmlittlestar.com.cn
    34




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Regulation
 Internet-Related Regulations
    
    
    Noah Zhi Yuan is required to obtain and has obtained approvals from competent
education administrative authorities under the PRC Interim Provisions on the
Administration of Education Website and Online School, for offering certain education
content online.
 
    
    Noah Zhi Yuan is required to obtain and has obtained a value-added
telecommunications business license issued by the Ministry of Industry and Information
Technology in accordance with the PRC Telecommunication Rules. This license is valid
from May 15, 2009 to May 15, 2014.
 
    
    Noah Zhi Yuan operates an electronic bulletin board service on the Internet, but no
special administrative approvals have been required since July 9, 2010, when the PRC
State Council promulgated a decision to repeal the previous special approval
requirements.
 
    
    Noah Zhi Yuan is required to obtain and has obtained an Internet culture license
from the Ministry of Culture in accordance with the PRC Interim Provisions on the
Administration of Internet Culture. This license is valid from January 2009 to January
2012.
 
    
    Under the PRC Provisional Regulation on Administration of Internet Publication, Noah
Zhi Yuan is required to obtain the approval from the General Administration of Press
and Publication for any Internet publication activities. Noah Zhi Yuans application
for this license was rejected in September 2008. Noah Zhi Yuan has submitted the
application for this license with supplemental materials in October 2010, and the
application is still pending as of the date of this annual report.
 Regulations on Private Schools
   35




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Regulations on Commercial Franchise Operations
      36




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Regulations on Foreign Currency Exchange
     37




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Regulations on Dividend Distribution
  
    
    The Wholly Foreign Owned Enterprise Law (1986), as amended;
 
    
    The Wholly Foreign Owned Enterprise Law Implementing Rules (1990), as amended;
  Regulation on Overseas Listing
   Regulations on Shareholder Loans
  Regulations on Copyright
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Regulations on Patents
  Regulations on Trademarks
  Organizational Structure
   
    
    Global Ring Limited, or Global Ring;
 
    
    Well Profit Creation Limited;
 
    
    Bright Sound Limited;
 
    
    Win Bright Creation Limited;
 
    
    Noah Education Development (Chengdu) Co., Ltd.;
 
    
    Chengdu Shidai Noah Education Software Co. Ltd., or Chengdu Shidai;
 
    
    Chengdu Zhiyuan Noah Education Technology Co. Ltd., or Chengdu Zhiyuan;
 
    
    Chengdu Innovative Noah Electronic Co., Ltd.;
 
    
    Chengdu Shidai Noah Information Technology Co. Ltd.;
 
    
    Innovative Noah Electronic (Shenzhen) Co., Ltd., or Innovative Noah;
 
    
    Noah Education Technology (Shenzhen) Co., Ltd., or Noah Education;
 
    
    Shenzhen Wentai Education Industry Development Co., Ltd., or Wentai Education
 
    
    Shenzhen New Noah Education Investment Development Co., Ltd.;
 
    
    New Noah Technology (Shenzhen) Co., Ltd., or New Noah;
 
    
    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.
  39




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##### Table of Contents




    
    Shenzhen Zhi Yuan Noah Internet Co., Ltd., or Noah Zhi Yuan.;
 
    
    Changsha Leisen Education Software Co. Ltd.
 
    
    Shenzhen Wentai Investment Co., Ltd. or Wentai Investment; and
 
    
    Zhongda Foundation Education Investment Management Co., Ltd., or Zhongda Foundation
Education
   40




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41




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(1)
    
    Noah Education Technology (Shenzhen) Co., Ltd. has entered into contractual arrangements with
Shenzhen Zhi Yuan Noah Internet Co., Ltd., or Noah Zhi Yuan, and Dong Xu and Benguo Tang, the only
shareholders of Noah Zhi Yuan, to obtain effective control over the operation of Shenzhen Zhi Yuan.
Dong Xu and Benguo Tang are our founders and Mr. Xu is also our chairman and chief executive
officer. Contractual arrangements consist of an equity pledge agreement, an 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)
    
    Shenzhen Wentai Education Industry Development Co., Ltd. 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, an option
agreement, a loan agreement, an operation and management agreement, service agreements and powers of
attorney.(3)
    
    Comprise Chengdu New Noah School, Beijing Haidian New Noah School and Chongqing New Noah
School. In August 2008, we transferred our equity interest in Beijing Haidian New Noah School to
Jierui School. We are in the process of changing the registration with the PRC government
authorities.(4)
    
    Represents Beijing Xicheng New Noah School. In August 2008, we transferred our equity interest
in Beijng Xicheng New Noah School to Jierui School. We are in the process of changing the
registration with the PRC government authorities.(5)
    
    Comprise Huizhou Foreign Language Kindergarten and Shenzhen Nanshan District Chunmiao
Kindergarten.(6)
    
    Represents Huizhou Foreign Language School.(7)
    
    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 four 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 and Guangzhou Luogang District Zhongda Vake City (International) Kindergarten.(8)
    
    Comprise Shanxi Datong Little New Star Foreign Language School, Changsha Tianxin District
Little New Star School, Changsha Tianxin District New Star English Training School and Xiangtan
Yuetang District Little New Star English School.(9)
    
    Comprise Changsha Furong District Nan Ming Yuan Little New Star Kindergarten and Changsha Mei
Lin Shui Jun Kindergarten. www.noahedu.com
 
    
    exercise effective control over Noah Zhi Yuan;
 
    
    receive a substantial portion of the economic benefits from Noah Zhi Yuan in
consideration for the services provided by our subsidiary, Noah Education; and
 
    
    have an exclusive option to purchase all or part of the equity interests in Noah Zhi
Yuan to the extent permitted by PRC law.
   
    
    the ownership structures of Noah Zhi Yuan and our subsidiaries in China comply in
all material respects with all existing PRC laws and regulations;
 
    
    the contractual arrangements among our PRC subsidiaries, Noah Zhi Yuan and its
shareholders governed by PRC law are valid, binding and enforceable, and will not
result in any violation of PRC laws or regulations currently in effect; and
 
    
    the business operations of our subsidiaries in China and Noah Zhi Yuan comply in all
material respects with existing PRC laws and regulations.
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Contractual Arrangements with Noah Zhi Yuan and Its Shareholders
  Agreements that Provide Effective Control over Our Affiliated Entity
 Equity Pledge Agreement
 Option Agreement
 Loan Agreement
 Power of Attorney
 Agreements that Transfer Economic Benefits to Us
 Software Development and Maintenance Agreement www.noahedu.com
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Exclusive Technology Supporting and Consulting Service Agreement
 Content Providing Agreement www.noahedu.com
 Contractual Arrangements with Wentai Investment and Its Shareholders
  Agreements that Provide Effective Control over Wentai Investment
 Equity Pledge Agreement
 Option
Agreement.
 Loan Agreement
 Operation and Management
Agreement.
  44




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##### Table of Contents



Power of Attorney
 Agreements that Transfer Economic Benefits to Us
 Service Agreement
 Property, Plant and Equipment
    
 Item 4A. Unresolved Staff Comments
  
 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 .
 Operating Results
 Overview
   45




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Acquisitions
    Factors Affecting Our Results of Operations
 Market Demand
   46




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Product Mix, Content Offering and Services Rendered
      47




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##### Table of Contents



Branding
  Seasonality
  Economic Environment
  Our Results of Operations
 Net Revenue, Cost of Revenue and Gross Profit
  Year Ended June 30,2008 to
    
    
    
    
    
    
    2009 to2009
    
    
    
    
    
    
    2010Percentage
    
    
    
    
    
    
    Percentage2008
    
    
    change
    
    
    2009
    
    
    change
    
    
    2010(RMB)
    
    
    %
    
    
    (RMB)
    
    
    %
    
    
    (RMB)
    
    
    (US$)(in thousands, except percentages)Net revenue
    
    
    651,935
    
    
    
    2.9
    
    
    
    671,146
    
    
    
    1.4
    
    
    
    680,288
    
    
    
    100,315Cost of revenue
    
    
    (318,788
    )
    
    
    2.4
    
    
    
    (326,401
    )
    
    
    13.0
    
    
    
    (368,754
    )
    
    
    (54,376
    )Gross profit
    
    
    333,147
    
    
    
    3.5
    
    
    
    344,745
    
    
    
    (9.6
    )
    
    
    311,534
    
    
    
    45,939
  Year EndedJune 30,2008
    
    
    2009
    
    
    2010(%)
    
    
    (%)
    
    
    (%)Net revenue
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Cost of revenue
    
    
    48.9
    
    
    
    48.6
    
    
    
    54.2Gross profit
    
    
    51.1
    
    
    
    51.4
    
    
    
    45.8
  48




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Year Ended June 30,2008
    
    
    2009
    
    
    2010(RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (US$)(in thousands)Electronic learning products
    
    
    644,957
    
    
    
    664,746
    
    
    
    639,136
    
    
    
    94,247Prepaid premium cards
    
    
    1,252
    
    
    
    175
    
    
    
    
    
    
    
    Software
    
    
    3,864
    
    
    
    1,517
    
    
    
    
    
    
    
    School
    
    
    1,862
    
    
    
    4,708
    
    
    
    1,255
    
    
    
    185Little New Star
    
    
    
    
    
    
    
    
    
    
    39,898
    
    
    
    5,883Total Revenue
    
    
    651,935
    
    
    
    671,146
    
    
    
    680,288
    
    
    
    100,315
  Year Ended June 30,2008
    
    
    2009
    
    
    2010(RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (US$)(in thousands)DLDs
    
    
    515,314
    
    
    
    380,139
    
    
    
    238,834
    
    
    
    35,218KLDs
    
    
    
    
    
    
    156,422
    
    
    
    278,709
    
    
    
    41,098E-dictionaries
    
    
    129,643
    
    
    
    128,185
    
    
    
    121,594
    
    
    
    17,930
  Year Ended June 30,2008
    
    
    2009
    
    
    2010DLDs
    
    
    589,016
    
    
    
    506,017
    
    
    
    337,071KLDs
    
    
    
    
    
    
    376,324
    
    
    
    563,986E-dictionaries
    
    
    630,241
    
    
    
    720,119
    
    
    
    567,737
 Net Revenue
 Year Ended June 30,2008
    
    
    2009
    
    
    2010(RMB)
    
    
    (%)
    
    
    (RMB)
    
    
    (%)
    
    
    (RMB)
    
    
    (%)(in thousands, except for percentages)Sales discounts
    
    
    39,384
    
    
    
    6.0
    
    
    
    58,387
    
    
    
    8.7
    
    
    
    47,137
    
    
    
    6.9
    %Sales returns
    
    
    1,450
    
    
    
    0.2
    
    
    
    3,702
    
    
    
    0.6
    
    
    
    22,104
    
    
    
    3.2
    %Net revenue
    
    
    651,935
    
    
    
    100.0
    
    
    
    671,146
    
    
    
    100.0
    
    
    
    680,288
    
    
    
    100.0
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Cost of Revenue.
  50




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##### Table of Contents



Operating Expenses
  Year Ended June 30,2008 to
    
    
    
    
    
    
    2009 to2009
    
    
    
    
    
    
    2010Percentage
    
    
    
    
    
    
    Percentage2008
    
    
    change
    
    
    2009
    
    
    change
    
    
    2010(RMB)
    
    
    %
    
    
    (RMB)
    
    
    %
    
    
    (RMB)
    
    
    (US$)(in thousands, except percentages)Research and
development expenses
    
    
    52,667
    
    
    
    6.9
    
    
    
    56,302
    
    
    
    (6.3
    )
    
    
    52,731
    
    
    
    7,776Sales and marketing
expenses
    
    
    197,430
    
    
    
    6.7
    
    
    
    210,693
    
    
    
    4.2
    
    
    
    219,495
    
    
    
    32,367General and
administrative expenses
    
    
    44,260
    
    
    
    32.2
    
    
    
    58,499
    
    
    
    56.9
    
    
    
    91,774
    
    
    
    13,533Other operating expenses
    
    
    3,132
    
    
    
    (94.9
    )
    
    
    158
    
    
    
    1,816.5
    
    
    
    3,028
    
    
    
    447Total operating expenses
    
    
    297,489
    
    
    
    9.5
    
    
    
    325,652
    
    
    
    12.7
    
    
    
    367,028
    
    
    
    54,122
 Research and Development Expenses
 Sales and Marketing Expenses.
 General and Administrative Expenses.
 Other Operating Expenses.
  51




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Other Income Statement Items and Net Income
  Year Ended June 30,2008 to
    
    
    
    
    
    
    2009 to2009
    
    
    
    
    
    
    2010Percentage
    
    
    
    
    
    
    Percentage2008
    
    
    change
    
    
    2009
    
    
    change
    
    
    2010(RMB)
    
    
    %
    
    
    (RMB)
    
    
    %
    
    
    (RMB)
    
    
    (US$)(in thousands, except percentages)Net revenue
    
    
    651,935
    
    
    
    2.9
    
    
    
    671,146
    
    
    
    1.4
    
    
    
    680,288
    
    
    
    100,315Gross profit
    
    
    333,147
    
    
    
    3.5
    
    
    
    344,745
    
    
    
    (9.6
    )
    
    
    311,534
    
    
    
    45,939Total operating
expenses
    
    
    (297,489
    )
    
    
    9.5
    
    
    
    (325,652
    )
    
    
    12.7
    
    
    
    (367,028
    )
    
    
    (54,122
    )Other operating
income
    
    
    44,101
    
    
    
    3.3
    
    
    
    45,576
    
    
    
    (8.7
    )
    
    
    41,629
    
    
    
    6,139Operating income
(loss)
    
    
    79,759
    
    
    
    (18.9
    )
    
    
    64,669
    
    
    
    (121.4
    )
    
    
    (13,865
    )
    
    
    (2,045
    )Derivative (loss)
gain
    
    
    (1,868
    )
    
    
    410.9
    
    
    
    5,807
    
    
    
    *
    
    
    
    
    
    
    
    Interest income
    
    
    13,644
    
    
    
    (61.1
    )
    
    
    5,308
    
    
    
    72.1
    
    
    
    9,134
    
    
    
    1,347Investment income
    
    
    11,057
    
    
    
    38.0
    
    
    
    15,257
    
    
    
    (81.5
    )
    
    
    2,824
    
    
    
    416Other non-operating
income
    
    
    42,708
    
    
    
    (85.5
    )
    
    
    6,204
    
    
    
    (3.9
    )
    
    
    5,962
    
    
    
    879Income before
income taxes
    
    
    145,300
    
    
    
    (33.1
    )
    
    
    97,245
    
    
    
    (95.8
    )
    
    
    4,055
    
    
    
    598Income tax
(expenses) credit
    
    
    (1,101
    )
    
    
    (76.9
    )
    
    
    (255
    )
    
    
    (729.4
    )
    
    
    1,605
    
    
    
    237Net income
    
    
    144,199
    
    
    
    (32.7
    )
    
    
    96,990
    
    
    
    (94.2
    )
    
    
    5,660
    
    
    
    835
 
 *
    
    Not meaningful  Year EndedJune 30,2008
    
    
    2009
    
    
    2010(%)
    
    
    (%)
    
    
    (%)Net revenue
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Gross profit
    
    
    51.1
    
    
    
    51.4
    
    
    
    45.8Total operating expenses
    
    
    45.6
    
    
    
    48.5
    
    
    
    54.0Other operating income
    
    
    6.7
    
    
    
    6.8
    
    
    
    6.1Operating income (loss)
    
    
    12.2
    
    
    
    9.6
    
    
    
    (2.0
    )Derivative gain (loss)
    
    
    (0.3
    )
    
    
    0.9
    
    
    
    Interest income
    
    
    2.1
    
    
    
    0.8
    
    
    
    1.3Investment income
    
    
    1.7
    
    
    
    2.3
    
    
    
    0.4Other non-operating income
    
    
    6.6
    
    
    
    0.9
    
    
    
    0.9Income before income taxes
    
    
    22.3
    
    
    
    14.5
    
    
    
    0.6Income tax (expenses) credit
    
    
    0.2
    
    
    
    *
    
    
    
    0.2Net income
    
    
    22.1
    
    
    
    14.5
    
    
    
    0.8
 
 *
    
    Less than 0.1%  52




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Other Operating Income (Loss)
 Derivative Gain (Loss).
 Interest Income.
 Investment Income.
 Other Non-Operating Income.
 Provision for Income Taxes.
    53




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##### Table of Contents



Critical Accounting Policies
   Revenue Recognition
  Revenue Recognition Software Revenue Recognition
  54




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55




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##### Table of Contents



Inventory Obsolescence
  Allowance for Doubtful Accounts
  Share-Based Compensation
    56




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##### Table of Contents



Number ofOrdinaryShares
    
    
    Option
    
    
    
    
    
    
    Fair valueUnderlying
    
    
    Exercise
    
    
    Fair Value of
    
    
    ofOptions
    
    
    Price Per
    
    
    Options at
    
    
    ordinaryGrant Date
    
    Granted
    
    
    Share
    
    
    Date of Grant
    
    
    shares
    
    
    Type of ValuationOctober 2006
(terminated on June
30, 2007)
    
    
    1,011,874
    
    
    US$
    1.4720
    
    
    US$
    3.375
    
    
    US$
    4.755
    
    
    RetrospectiveJune 2007 (as
replacement
options)
    
    
    888,324
    
    
    US$
    1.4720
    
    
    US$
    3.375
    
    
    US$
    4.755
    
    
    RetrospectiveJune 2007 (as
replacement
options)
    
    
    76,438
    
    
    
    
    
    
    US$
    4.74
    
    
    US$
    5.885
    
    
    ContemporaneousJune 2007
    
    
    339,536
    
    
    US$
    1.4720
    
    
    US$
    4.535
    
    
    US$
    5.885
    
    
    ContemporaneousJune 2007
    
    
    38,732
    
    
    US$
    1.4720
    
    
    US$
    4.375
    
    
    US$
    5.885
    
    
    ContemporaneousJune 2007
    
    
    126,412
    
    
    US$
    3.8719
    
    
    US$
    2.995
    
    
    US$
    5.885
    
    
    ContemporaneousJune 2007
    
    
    2,000
    
    
    US$
    6.1420
    
    
    US$
    1.990
    
    
    US$
    5.885
    
    
    ContemporaneousJune 2007
    
    
    2,000
    
    
    US$
    6.1420
    
    
    US$
    1.990
    
    
    US$
    5.885
    
    
    ContemporaneousJanuary 2008
    
    
    667,177
    
    
    US$
    5.56
    
    
    US$
    2.11
    
    
    US$
    5.56
    
    
    ContemporaneousMarch 2009
    
    
    1,259,500
    
    
    US$
    2.60
    
    
    US$
    1.39
    
    
    US$
    2.95
    
    
    ContemporaneousMay 5, 2009
    
    
    3,000
    
    
    US$
    2.60
    
    
    US$
    1.61
    
    
    US$
    3.19
    
    
    ContemporaneousMay 13, 2009
    
    
    10,000
    
    
    US$
    2.60
    
    
    US$
    1.62
    
    
    US$
    3.20
    
    
    ContemporaneousMay 18, 2009
    
    
    1,500
    
    
    US$
    2.60
    
    
    US$
    1.89
    
    
    US$
    3.54
    
    
    ContemporaneousJune 15, 2009
    
    
    3,000
    
    
    US$
    2.60
    
    
    US$
    2.14
    
    
    US$
    3.84
    
    
    ContemporaneousJune 29, 2009
    
    
    2,000
    
    
    US$
    2.60
    
    
    US$
    2.16
    
    
    US$
    3.87
    
    
    ContemporaneousJuly 1, 2009
    
    
    80,000
    
    
    US$
    3.88
    
    
    US$
    1.73
    
    
    US$
    3.88
    
    
    ContemporaneousJuly 21, 2009
    
    
    30,000
    
    
    US$
    2.60
    
    
    US$
    1.41
    
    
    US$
    3.90
    
    
    ContemporaneousDecember 23, 2009
    
    
    300,000
    
    
    US$
    5.00
    
    
    US$
    2.35
    
    
    US$
    5.00
    
    
    ContemporaneousMay 5, 2010
    
    
    10,000
    
    
    US$
    4.00
    
    
    US$
    1.88
    
    
    US$
    4.00
    
    
    Contemporaneous
    57




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##### Table of Contents



Business Combinations
  Business Combination Business combination
  58




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##### Table of Contents



Holding Company Structure
  Recent Accounting Pronouncements
 Revenue Recognition (Topic 605) -
Multiple-Deliverable Revenue Arrangements Revenue Recognition-Multiple-Element Arrangements
 Software (Topic 985)  Certain Revenue
Arrangements that Include Software Elements
  59




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##### Table of Contents



Accounting for Transfers of Financial Assets
 Amendments to FASB Interpretation No. 46(R),
Consolidations (Topic 810)  Improvements to Financial Reporting by Enterprises Involved with
Variable Interest Entities
 Improving Disclosures About Fair Value
Measurements
 Compensation  Stock Compensation (Topic 718);
Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the
Market in Which the Underlying Equity Security Trades
  60




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##### Table of Contents



Revenue Recognition  Milestone Method
(Topic 605)
 Receivables (Topic 310): Disclosures about the Credit
Quality of Financing Receivables and the Allowance for Credit Losses
 Liquidity and Capital Resources
 Cash Flows and Working Capital
   Year Ended June 30,2008
    
    
    2009
    
    
    2010(RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (US$)(in thousands)Net cash provided by (used in) operating activities
    
    
    (29,370
    )
    
    
    82,441
    
    
    
    (108,415
    )
    
    
    (15,987
    )Net cash provided by (used in) investing activities
    
    
    (756,863
    )
    
    
    350,652
    
    
    
    156,848
    
    
    
    23,129Net cash provided by (used in) financing activities
    
    
    970,787
    
    
    
    (199,320
    )
    
    
    (35,192
    )
    
    
    (5,189
    )Effect of exchange rate changes on cash and cash
equivalents
    
    
    (1,698
    )
    
    
    (85
    )
    
    
    (424
    )
    
    
    (63
    )Net increase in cash and cash equivalents
    
    
    184,554
    
    
    
    233,775
    
    
    
    13,240
    
    
    
    1,952Cash and cash equivalents at beginning of period
    
    
    77,367
    
    
    
    260,223
    
    
    
    493,911
    
    
    
    72,832Cash and cash equivalents at end of period
    
    
    260,223
    
    
    
    493,911
    
    
    
    506,728
    
    
    
    74,722
  61




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Operating Activities
   Investing Activities
   Financing Activities
    62




---



##### Table of Contents



Restrictions on Cash Dividends
  Borrowings
  Capital Expenditures
    Research and Development, Patents and Licenses, Etc.
 i
 i i i i
  63




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##### Table of Contents



i
    
    
    Learning with fun: It aims to enable users to learn through entertainment. It
increases users study interest and motivation through scenario simulation, games and
interactive practice problem sets. Users can learn by online or off-line games, using
handheld devices or internet. It provides users with a happy, easy and fun learning
environment.
 
    
    E-book: This technology will digitalize paper books, and hold thousands of books in
a handheld device. Users can zoom in and out, click on pictures, text, titles and other
elements to read, talk, make notes and search.
 
    
    Semanteme-based processing: Semanteme-based processing can be the foundation of
knowledge database. It stores the information in a network structure. When applied in
teaching and learning and combined with database technology, semanteme-based processing
technology can help the users to search and learn through induction, and measure their
progress over time.
 
    
    Inter-connectivity: With the advance of wireless technology, such as WIFI, GRPS, SG,
it is believed that handheld learning devices will be connected to Internet wirelessly
in the near future. In the next year or so, Noah will develop more learning devices and
contents for Internet users, wirelessly or through LAN. Our Internet portal will become
a center for our customers, providing learning subject search, book search, homework
tutoring, study groups or communities, content updates and upgrades, student
performance tracking and other services.
 
    
    Open operating system: To expand the functions and applications of our handheld
devices, we began to adopt open operating systems, such as LINUX, in 2007 and plan to
introduce products based on Android in 2011.
   64




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##### Table of Contents



Trend Information
  Off-Balance Sheet Arrangements
  Tabular Disclosure of Contractual Obligations
  Payment Due by June 30,Total
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2015
    
    
    Thereafter(RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (RMB)
    
    
    (RMB)(In thousands)Operating lease
obligations
    
    
    21,864
    
    
    
    7,847
    
    
    
    4,454
    
    
    
    3,751
    
    
    
    2,272
    
    
    
    698
    
    
    
    2,842Purchase obligations
    
    
    79,128
    
    
    
    79,128
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Acquisition of
Wentai Education Group
    
    
    126,000
    
    
    
    126,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Marketing expenses
    
    
    4,814
    
    
    
    4,814
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    231,806
    
    
    
    217,789
    
    
    
    4,454
    
    
    
    3,751
    
    
    
    2,272
    
    
    
    698
    
    
    
    2,842
  Safe Harbor
   
    
    our anticipated growth strategies;
 
    
    our future business development, results of operations and financial condition;
  65




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##### Table of Contents




    
    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.
   
 Item 6. Directors, Senior Management and Employees
 Directors and Senior Management
  Name
    
    Age
    
    Position/TitleDong Xu
    
    
    44
    
    
    Chairman and Chief Executive OfficerJerry He
    
    
    36
    
    
    Chief Financial Officer and Executive Vice PresidentBenguo Tang
    
    
    45
    
    
    Director, President and Chief Operating OfficerXiaotong Wang
    
    
    48
    
    
    DirectorXiao Chen
    
    
    47
    
    
    Independent DirectorConrad Kwong Yue Tsang
    
    
    38
    
    
    Independent DirectorBenzhong Wang
    
    
    71
    
    
    Independent DirectorShengli Zheng
    
    
    67
    
    
    Independent DirectorTianming Du
    
    
    60
    
    
    Vice PresidentDora Li
    
    
    42
    
    
    Vice President, Finance and Financial ControllerMing Ouyang
    
    
    34
    
    
    Vice President, Content DevelopmentWei Zheng
    
    
    50
    
    
    Vice President, Research and Development
 Mr. Dong Xu
 Mr. Jerry He
  66




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##### Table of Contents



Mr. Benguo Tang
 Mr. Xiaotong Wang
 Dr. Xiao Chen
 Mr. Conrad Kwong Yue Tsang
 Mr. Benzhong Wang
 Mr. Shengli Zheng
  67




---



##### Table of Contents



Mr. Tianming Du
 Ms. Dora Li
 Mr. Ming Ouyang
 Mr. Wei Zheng i
 Employment Agreements
    68




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##### Table of Contents



Compensation
  Share Incentives
 2006 Equity Compensation Plan
  2007 Share Incentive Plan and 2008 Share Incentive Plan
 Types of Awards
 
    
    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.
  Eligibility
 Plan Administration
 Award Agreement
  69




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##### Table of Contents



Acceleration of Awards upon Corporate Transactions
 Exercise Price and Term of Awards
  Amendment and Termination
  Ordinary SharesUnderlying
    
    
    Exercise Price
    
    
    
    
    
    
    Date of ExpirationName
    
    Options Granted
    
    
    (US$/Share)
    
    
    Date of Grant
    
    of Vesting PeriodDong Xu
    
    
    180,000
    
    
    
    2.60
    
    
    March 2, 2009
    
    December 31, 2011Jerry He
    
    
    80,000
    
    
    
    3.88
    
    
    July 2, 2009
    
    December 31, 2011300,000
    
    
    
    5.00
    
    
    December 23,2009
    
    December 31, 2012Xiao Chen
    
    
    2,000
    
    
    
    6.142
    
    
    June 30, 2007
    
    June 30, 2010Dora Li
    
    
    8,000
    
    
    
    5.56
    
    
    January 18, 2008
    
    December 31, 201055,000
    
    
    
    2.60
    
    
    March 2, 2009
    
    December 31, 2011Ming Ouyang
    
    
    20,184
    
    
    
    1.472
    
    
    June 30, 2007
    
    December 31, 200815,000
    
    
    
    5.56
    
    
    January 18, 2008
    
    December 31, 201035,000
    
    
    
    2.60
    
    
    March 2, 2009
    
    December 31, 2011Wei Zheng
    
    
    173,256
    
    
    
    1.472
    
    
    June 30, 2007
    
    December 31, 200860,650
    
    
    
    
    
    
    June 30, 2007
    
    October 24, 200738,000
    
    
    
    5.56
    
    
    January 18, 2008
    
    December 31, 2010100,000
    
    
    
    2.60
    
    
    March 2, 2009
    
    December 31, 2011Other individuals as a group
    
    
    447,620
    
    
    
    1.4720
    
    
    June 30, 2007
    
    December 31, 2008445,177
    
    
    
    5.56
    
    
    January 18, 2008
    
    December 31, 2010769,000
    
    
    
    2.60
    
    
    March 2, 2009
    
    December 31, 201110,000
    
    
    
    4.00
    
    
    May 5, 2010
    
    December 31, 2012
  70




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##### Table of Contents



Board Practices
 Board of Directors
   Committees of the Board of Directors
  Audit Committee
 
    
    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.
  Compensation Committee
 
    
    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;
  71




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##### Table of Contents




    
    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.
  Corporate Governance and Nominating Committee
 
    
    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.
  Duties of Directors
    72




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Terms of Directors and Officers
  Communications with our independent directors
  Employees
    Share Ownership
  
    
    each of our directors and executive officers; and
 
    
    each person known to us to own beneficially more than 5% of our ordinary shares.
   73




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##### Table of Contents



Shares Beneficially OwnedNumber
    
    
    %Directors and Executive Officers (1):Dong Xu (2)
    
    
    8,177,200
    
    
    
    
    
    
    
    21.0Jerry He (3)
    
    
    *
    
    
    
    
    
    
    
    *Benguo Tang (4)
    
    
    5,268,268
    
    
    
    
    
    
    
    13.6Xiaotong Wang (5)
    
    
    4,292,260
    
    
    
    
    
    
    
    11.1Xiao Chen (6)
    
    
    *
    
    
    
    
    
    
    
    *Conrad Kwong Yue Tsang (7)
    
    
    3,364,669
    
    
    
    
    
    
    
    8.47Dora Li (8)
    
    
    *
    
    
    
    
    
    
    
    *Ming Ouyang (9)
    
    
    *
    
    
    
    
    
    
    
    *Wei Zheng (10)
    
    
    *
    
    
    
    
    
    
    
    *All Directors and Executive Officers as a Group
    
    
    21,561,770
    
    
    
    
    
    
    
    55.5Principal Shareholders:Jointly Gold Technologies Ltd. (11)
    
    
    8,078,200
    
    
    
    
    
    
    
    20.8First Win Technologies Ltd. (12)
    
    
    5,268,268
    
    
    
    
    
    
    
    13.6Global Wise Technologies Ltd. (13)
    
    
    4,292,260
    
    
    
    
    
    
    
    11.0Baring Asia II Holdings (22) Limited (14)
    
    
    3,364,669
    
    
    
    
    
    
    
    8.5Sunshine Nation Limited (15)
    
    
    2,647,743
    
    
    
    
    
    
    
    6.8
 
 *
    
    Less than 1%(1)
    
    The business address of our directors and executive officers, except for Mr. Conrad Tsang, is
c/o Noah Education Holdings Ltd., 10th, Floor B Building, Futian Tianan Hi-Tech Venture Park,
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 99,000 ordinary shares issuable upon
exercise of options held by Mr. Xu that will be vested as of October 31, 2010.(3)
    
    Represents ordinary shares issuable upon exercise of options held by Mr. He that will be
vested as of October 31, 2010.(4)
    
    Includes 4,711,208 ordinary shares and 557,060 ADSs, representing 557,060 ordinary shares,
held by First Win Technologies Ltd., a British Virgin Islands limited liability company
affiliated with Mr. Tang.(5)
    
    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.(6)
    
    Represents ordinary shares issuable upon exercise of options held by Mr. Chen that will be
vested as of October 31, 2010.(7)
    
    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 39th Floor, One
International Finance Centre, 1 Harbor View Street, Central, Hong Kong.(8)
    
    Represents ordinary shares issuable upon exercise of options held by Ms. Li that will be
vested as of October 31, 2010.(9)
    
    Represents ordinary shares issuable upon exercise of options held by Mr. Ouyang that will be
vested as of October 31, 2010.(10)
    
    Represents ordinary shares issuable upon exercise of options held by Mr. Zheng that will be
vested as of October 31, 2010.(11)
    
    Jointly Gold Technologies Ltd., a company incorporated in the British Virgin Islands, is
affiliated with 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.(12)
    
    First Win Technologies Ltd., a company incorporated in the British Virgin Islands, is
affiliated with 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.(13)
    
    Global Wise Technologies Ltd., a company incorporated in the British Virgin Islands, is
affiliated with 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.(14)
    
    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.(15)
    
    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.  74




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##### Table of Contents



Item 7. Major Shareholders and Related Party Translations
 Major Shareholders
  Related Party Transactions
  Contractual Arrangements with Noah Zhi Yuan and Its Shareholders
  Contractual Arrangements with Wentai Investment and Its Shareholders
   75




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##### Table of Contents



Private Placements
  Shareholders Agreement
  Legal Reorganization
   
    
    provide any similar services to any third party, or engage in any other business,
 
    
    purchase equipment, materials or stationary of more than RMB 300,000,
 
    
    employ any person unless it is necessary to carry out the business as appointed by
New Noah and Industrial Noah,
 
    
    enter into any loan or financing arrangement beyond US$ 100,000, or
 
    
    gift, lease, sell or license software products not developed for New Noah and
Innovative Noah.
  76




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Transactions with Noah Zhi Yuan
  Equity Compensation Plan
  Advances to Related Parties
  Employment Agreements
  Related Party Transaction Policy
  Interests of Experts and Counsel
  
 Item 8. Financial Information
 Consolidated Statements and Other Financial Information
  Legal Proceedings
 Seidel v. Noah Education
Holdings, Ltd. et al Schapiro v. Noah Education
Holdings, Ltd. et al. Sebik v. Noah Education Holdings, Ltd. et
al.
  77




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##### Table of Contents



Dividend Policy
   78




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##### Table of Contents



Significant Changes
  
 Item 9. The Offer and Listing
 Offer and Listing Details
  Sales PriceHigh
    
    
    LowYearly High and LowFiscal year ended June 30, 2008 (from October 19, 2007)
    
    
    23.70
    
    
    
    4.76Fiscal year ended June 30, 2009
    
    
    5.91
    
    
    
    1.85Fiscal year ended June 30, 2010
    
    
    6.16
    
    
    
    3.50Quarterly High and LowFiscal quarter ended September 30, 2008
    
    
    5.91
    
    
    
    3.45Fiscal quarter ended December 31, 2008
    
    
    4.27
    
    
    
    1.85Fiscal quarter ended March 31, 2009
    
    
    3.55
    
    
    
    2.30Fiscal quarter ended June 30, 2009
    
    
    4.78
    
    
    
    2.88Fiscal quarter ended September 30, 2009
    
    
    5.42
    
    
    
    3.50Fiscal quarter ended December 31, 2009
    
    
    6.16
    
    
    
    4.31Fiscal quarter ended March 31, 2010
    
    
    5.47
    
    
    
    3.96Fiscal quarter ended June 30, 2010
    
    
    5.44
    
    
    
    3.58Fiscal quarter ended September 30, 2010
    
    
    3.75
    
    
    
    1.73Monthly Highs and LowsApril 2010
    
    
    5.44
    
    
    
    4.15May 2010
    
    
    4.37
    
    
    
    3.81June 2010
    
    
    4.32
    
    
    
    3.58July 2010
    
    
    3.75
    
    
    
    2.52August 2010
    
    
    2.94
    
    
    
    1.80September 2010
    
    
    2.72
    
    
    
    1.73October 2010 (through October 28)
    
    
    2.68
    
    
    
    1.99
  79




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##### Table of Contents



Plan of Distribution
  Markets
  Selling Shareholders
  Dilution
  Expenses of the Issue
  
 Item 10. Additional Information
 Share Capital
  Memorandum and Articles of Association
   Ordinary Shares
 General
 Dividends
 Voting Rights
  80




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##### Table of Contents



Transfer of Shares
  Liquidation
 Calls on Shares and Forfeiture of Shares
 Redemption of Shares
 Variations of Rights of Shares
 Inspection of Books and Records 3⁄4
 Limitations on the Rights to Own Shares
 Disclosure of Shareholder Ownership
 Differences in Corporate Law
   81




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##### Table of Contents



Mergers and Similar Arrangements
 
    
    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.
  
    
    a special resolution of the shareholders of each constituent company voting together
as one class, if the shares to be issued to each shareholder in the consolidated or
surviving company will have the same rights and economic value as the shares held in
the relevant constituent company; or
 
    
    a shareholder resolution of each constituent company passed by a majority in number
representing 75% in value of the shareholders voting together as one class.
   
    
    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.
    82




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##### Table of Contents



Shareholders Suits.
  
    
    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.
   Shareholder Action by Written Resolution
  83




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Shareholder Proposals
 Cumulative Voting
 Removal of Directors
 Transactions with Interested Shareholders
  Dissolution; Winding Up
 Variation of Rights of Shares
 Amendment of Governing Documents
  84




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##### Table of Contents



Inspection of Books and Records
 Anti-Takeover Provisions in Our Memorandum and Articles of Association
  Rights of Non-Resident or Foreign Shareholders
 Indemnification
    Registration Rights
  Demand Registration Rights th th
  85




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##### Table of Contents



Piggyback Registration Rights
 Form F-3 Registration Rights
 Expenses of Registration
 Material Contracts
  Exchange Controls
  Taxation
  Cayman Islands Taxation
   86




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##### Table of Contents



Peoples Republic of China Taxation
    United States Federal Income Taxation
   
    
    banks;
 
    
    financial institutions;
 
    
    insurance companies;
  87




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##### Table of Contents




    
    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.
  
    
    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.
     88




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##### Table of Contents



Passive Foreign Investment Company
  
    
    at least 75% of its gross income 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).
   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.
  
    
    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.
   89




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##### Table of Contents



de minimis
   YOU ARE STRONGLY URGED TO CONSULT YOUR TAX ADVISORS REGARDING THE IMPACT OF OUR PFIC STATUS 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
   90




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##### Table of Contents



Taxation of Disposition of ADSs or Ordinary Shares
   Reporting and Backup Withholding
    91




---



##### Table of Contents



Dividends and Paying Agents
  Statement by Experts
  Documents on Display
  http:// www.sec.gov
  http://www.noahedu.com.cn
 Subsidiary Information
   92




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##### Table of Contents



Item 11. Quantitative and Qualitative Disclosures About Market Risk
 Interest Rate Risk
  Foreign Exchange Risk
    Inflation
  
 Item 12. Description of Securities Other than Equity Securities
 Debt Securities
  Warrants and Rights
  Other Securities
   93




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##### Table of Contents



American Depositary Shares
  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 youA 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 servicesRegistration 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 sharesExpenses of the depositary
    
        Cable, telex and facsimile transmissions (when
expressly provided in the deposit agreement); or    Converting foreign currency to U.S. dollarsTaxes 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 necessaryAny charges incurred by the depositary or its agents for 
servicing the deposited securities
    
        As necessary
   
 PART II
 
 Item 13. Defaults, Dividend Arrearages and Delinquencies
  
 Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
 Material Modifications to the Rights of Security Holders
   94




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##### Table of Contents



Use of Proceeds
  
    
    approximately US$ 4.3 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$ 7.7 million to fund research and development efforts; and
 
    
    approximately US$ 5.7 million to repurchase ADSs from the open market in the
fiscal year ended June 30, 2010.
  
 Item 15. Controls and Procedures
 Disclosure Controls and Procedures
  Managements Annual Report on Internal Control over Financial Reporting
     95




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##### Table of Contents



Attestation Report of the Registered Public Accounting Firm
  Changes in Internal Control over Financial Reporting
   
 Item 16A. Audit Committee Financial Expert
  
 Item 16B. Code of Ethics
 www.noahtech.com.cn
 
 Item 16C. Principal Accountant Fees and Services
  For the Year Ended June 30,2009
    
    
    2010(in thousands of US$)Audit fees (1)
    
    
    325
    
    
    
    450Audit-related fees(2)
    
    
    50
    
    
    
    Tax fees (3)
    
    
    29
    
    
    
    21All other fees (4)
    
    
    
    
    
    
    
 
 (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.  96




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##### Table of Contents



(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. de minimus
 
 Item 16D. Exemptions from the Listing Standards for Audit Committees
  
 Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
  ApproximateTotal Number of
    
    
    Dollar Value ofADSs Purchased
    
    
    ADSs that MayTotal Number of
    
    
    Average Price
    
    
    as Part of Publicly
    
    
    Yet Be PurchasedPeriod
    
    ADSs Purchased
    
    
    Paid Per ADS(1)
    
    
    Announced Plan(2)
    
    
    Under the Plan(1)February 1, 2010 
February 28, 2010
(3)
    
    
    656,400
    
    
    US$
    4.00
    
    
    
    0
    
    
    US$
    0May 19, 2010  May
28, 2010
(4)
    
    
    250,516
    
    
    US$
    4.07
    
    
    
    250,516
    
    
    US$
    8,981,485.6June 1, 2010  June
30, 2010
(4)
    
    
    475,084
    
    
    US$
    4.10
    
    
    
    475,084
    
    
    US$
    7,032,691.8Total
    
    
    1,382,000
    
    
    US$
    4.05
    
    
    
    725,600
    
    
    US$
    7,032,691.8
 
 (1)
    
    Each of our ADSs represents one ordinary share.(2)
    
    The repurchase plan was publicly announced on May 12, 2010 and provides for the repurchase of
up to US$ 10 million of our ADSs in the open market. The plan was approved by our board of
directors on May 12, 2010 and will expire on May 12, 2011.(3)
    
    We purchased 656,400 ADSs of our company from Lehman Brothers before the U.S. market opened
on February 24, 2010 in a block trade in an attempt to stop the liquidation sale of our ADSs
by Lehman Brothers from further affecting our ADS price.(4)
    
    All the ADSs were purchased in the open market.  
 Item 16F. Change in Registrants Certifying Accountant
  
 Item 16G. Corporate Governance
   97




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##### Table of Contents



PART III
 
 Item 17. Financial Statements
  
 Item 18. Financial Statements
   98




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##### Table of Contents



Item 19. Exhibits
 ExhibitNumber
    
    Description of Document1.1
    
    
    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
    
    
    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)4.4
    
    
    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)4.5
    
    
    English Translation of Software Development and Maintenance Agreement, dated June 8,
2007, between Noah Education and Noah Zhi Yuan (incorporated by reference to Exhibit
10.5 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 Exclusive Technology Supporting and Consulting Service
Agreement, dated June 8, 2007, between Noah Education and Noah Zhi Yuan (incorporated
by reference to Exhibit 10.6 from our F-1 registration statement (File
No. 333-146267), as amended, initially filed with the Commission on September 24,
2007)4.7
    
    
    English Translation of Content Services Agreement, dated June 8, 2007, between Noah
Education and Noah Zhi Yuan (incorporated by reference to Exhibit 10.7 from our F-1
registration statement (File No. 333-146267), as amended, initially filed with the
Commission on September 24, 2007)4.8
    
    
    English Translation of Equity Pledge Agreement, dated June 8, 2007, between Noah
Education, Dong Xu and Benguo Tang (incorporated by reference to Exhibit 10.8 from
our F-1 registration statement (File No. 333-146267), as amended, initially filed
with the Commission on September 24, 2007)4.9
    
    
    English Translation of Option Agreement, dated June 8, 2007, between Noah Education,
Dong Xu and Benguo Tang (incorporated by reference to Exhibit 10.9 from our F-1
registration statement (File No. 333-146267), as amended, initially filed with the
Commission on September 24, 2007)4.10
    
    
    English Translation of Loan Agreement, dated June 8, 2007, between Noah Education,
Dong Xu and Benguo Tang (incorporated by reference to Exhibit 10.10 from our F-1
registration statement (File No. 333-146267), as amended, initially filed with the
Commission on September 24, 2007)4.11
    
    
    English Translation of Power of Attorney, dated June 8, 2007, by Dong Xu in favor of
Noah Education in respect of Noah Zhi Yuan (incorporated by reference to Exhibit
10.11 from our F-1 registration statement (File No. 333-146267), as amended,
initially filed with the Commission on September 24, 2007)4.12
    
    
    English Translation of Power of Attorney, dated June 8, 2007, by Benguo Tang in favor
of Noah Education in respect of Noah Zhi Yuan (incorporated by reference to Exhibit
10.12 from our F-1 registration statement (File No. 333-146267), as amended,
initially filed with the Commission on September 24, 2007)
  99




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##### Table of Contents



ExhibitNumber
    
    Description of Document4.13
    
    
    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)4.14
    
    
    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)4.15
    
    
    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)4.16
    
    
    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)4.17
    
    
    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)4.18
    
    
    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)4.19
    
    
    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)4.20
    *
    
    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.4.21
    *
    
    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.4.22
    *
    
    English Translation of Service Agreement, dated October 28, 2010, between Wentai
Education and Wentai Investment4.23
    *
    
    English Translation of Equity Pledge Agreement, dated April 23, 2010, between Wentai
Education, Dong Xu and Qicai Du4.24
    *
    
    English Translation of Equity Pledge Agreement, dated April 23, 2010, between Wentai
Education and Wentai Investment4.25
    *
    
    English Translation of Option Agreement, dated April 23, 2010, between Wentai
Education, Dong Xu and Qicai Du4.26
    *
    
    English Translation of Loan Agreement, dated March 12, 2010, between Wentai
Education, Dong Xu and Qicai Du4.27
    *
    
    English Translation of Form of Service Agreement between Wentai Education and Schools4.28
    *
    
    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 Investment4.29
    *
    
    English Translation of Power of Attorney, dated April 23, 2010, by Wentai Investment
in favor of Wentai Education in respect of Zhongda Foundation4.30
    *
    
    English
Translation of Operation and Management Agreement, dated April 23, 2010, among
Wentai Education, Wentai Investment, Xu Dong and Qicai Du
  100




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##### Table of Contents



ExhibitNumber
    
    Description of Document8.1
    *
    
    Subsidiaries of the Registrant11.1
    
    
    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 200212.2
    *
    
    CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 200213.1
    *
    
    CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 200213.2
    *
    
    CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 200215.1
    *
    
    Consent of Deloitte Touche Tohmatsu
 *
    
    Filed with this annual report on Form 20-F  101




---



##### Table of Contents



SIGNATURES
  Noah Education Holdings Ltd.By:
    /s/ Dong XuName:
    Dong XuTitle:
    Chairman and Chief Executive Officer   102




---



##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.Report of Independent Registered Public Accounting Firmand Consolidated Financial StatementsFor the years ended June 30, 2008, 2009 and 2010




---



##### 



NOAH EDUCATION HOLDINGS LTD.
 FOR THE YEARS ENDED JUNE 30, 2008, 2009 AND 2010
 Page(s)Report of Independent Registered Public Accounting Firm
    
    
    F-1 - F-3Consolidated Balance Sheets as of June 30, 2009 and 2010
    
    
    F-4Consolidated Statements of Operations for the years ended June 30, 2008, 2009 and 2010
    
    
    F-5Consolidated Statements of Shareholders Equity and Comprehensive Income for the years ended June 30, 2008, 2009 and 2010
    
    
    F-6Consolidated Statements of Cash Flows for the years ended June 30, 2008, 2009 and 2010
    
    
    F-7Notes to the Consolidated Financial Statements
    
    
    F-8 - F-50Schedule 1  condensed financial statements as of June 30, 2009 and 2010 and for the years ended June 30, 2008, 2009 and 2010
    
    
    F-51 - F-55




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  Internal Control  Integrated Framework
     F - 1




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 Internal
Control  Integrated Framework
   
  F - 2




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
     Internal Control  Integrated
Framework
   
  F - 3




---



##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 
 CONSOLIDATED BALANCE SHEETS
 As of June 30,NOTES
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    US$AssetsCurrent assetsCash and cash equivalents
    
    
    
    
    
    
    493,911,466
    
    
    
    506,727,524
    
    
    
    74,722,041Short-term bank deposits
    
    
    
    
    
    
    274,200,000
    
    
    
    60,000,000
    
    
    
    8,847,600Investments
    
    
    4
    
    
    
    7,978,942
    
    
    
    5,493,179
    
    
    
    810,024Accounts receivables, net of allowance
    
    
    5
    
    
    
    181,653,129
    
    
    
    318,776,507
    
    
    
    47,006,784Related party receivables
    
    
    19
    
    
    
    627,626
    
    
    
    437,203
    
    
    
    64,470Inventories
    
    
    6
    
    
    
    151,872,803
    
    
    
    148,738,237
    
    
    
    21,932,941Prepaid expenses and other current assets
    
    
    7
    
    
    
    69,039,625
    
    
    
    69,754,383
    
    
    
    10,285,982Deferred tax assets
    
    
    
    
    
    
    13,207
    
    
    
    131,362
    
    
    
    19,371Total current assets
    
    
    
    
    
    
    1,179,296,798
    
    
    
    1,110,058,395
    
    
    
    163,689,213Investments
    
    
    4
    
    
    
    
    
    
    
    29,875,954
    
    
    
    4,405,508Property, plant and equipment, net
    
    
    8
    
    
    
    119,619,947
    
    
    
    144,249,822
    
    
    
    21,271,079Intangible assets, net
    
    
    9
    
    
    
    4,461,760
    
    
    
    29,126,595
    
    
    
    4,295,008Goodwill
    
    
    10
    
    
    
    
    
    
    
    56,597,146
    
    
    
    8,345,815Deposits for investment
    
    
    
    
    
    
    21,581,952
    
    
    
    4,200,000
    
    
    
    619,332Deferred tax assets
    
    
    
    
    
    
    2,058,180
    
    
    
    2,058,180
    
    
    
    303,499Total assets
    
    
    
    
    
    
    1,327,018,637
    
    
    
    1,376,166,092
    
    
    
    202,929,454Liabilities and Shareholders EquityCurrent liabilitiesAccounts payables
    
    
    
    
    
    
    82,560,888
    
    
    
    79,128,081
    
    
    
    11,668,227Other payables and accruals
    
    
    11
    
    
    
    45,809,825
    
    
    
    55,019,736
    
    
    
    8,113,210Advances from customers
    
    
    
    
    
    
    3,308,173
    
    
    
    9,804,405
    
    
    
    1,445,758Income tax payables
    
    
    
    
    
    
    499,471
    
    
    
    329,151
    
    
    
    48,537Deferred revenue
    
    
    
    
    
    
    1,518,203
    
    
    
    5,517,159
    
    
    
    813,560Total current liabilities
    
    
    
    
    
    
    133,696,560
    
    
    
    149,798,532
    
    
    
    22,089,292Non-current liabilitiesDeferred tax liabilities
    
    
    
    
    
    
    
    
    
    
    2,666,030
    
    
    
    393,133Deferred revenue
    
    
    
    
    
    
    6,227,860
    
    
    
    6,677,960
    
    
    
    984,732Total non-current liabilities
    
    
    
    
    
    
    6,227,860
    
    
    
    9,343,990
    
    
    
    1,377,865Total liabilities
    
    
    
    
    
    
    139,924,420
    
    
    
    159,142,522
    
    
    
    23,467,157Commitments and contingencies
    
    
    20Shareholders EquityOrdinary Shares, US$0.00005 par value;
1,000,000,000 shares authorised as
of June 30, 2009 and 2010; 35,589,120 and
37,613,701 shares issued and outstanding as
of June 30, 2009 and 2010 respectively
    
    
    12
    
    
    
    14,504
    
    
    
    15,195
    
    
    
    2,241Additional paid-in capital
    
    
    
    
    
    
    1,029,778,033
    
    
    
    1,049,366,056
    
    
    
    154,739,520Accumulated other comprehensive loss
    
    
    
    
    
    
    (93,632,438
    )
    
    
    (88,951,624
    )
    
    
    (13,116,808
    )Retained earnings
    
    
    
    
    
    
    250,934,118
    
    
    
    256,593,943
    
    
    
    37,837,344Total shareholders equity
    
    
    
    
    
    
    1,187,094,217
    
    
    
    1,217,023,570
    
    
    
    179,462,297Total liabilities and shareholders equity
    
    
    
    
    
    
    1,327,018,637
    
    
    
    1,376,166,092
    
    
    
    202,929,454
   F - 4




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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 NOTES
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Net revenue
    
    
    
    
    
    
    651,934,602
    
    
    
    671,145,679
    
    
    
    680,287,877
    
    
    
    100,315,251Cost of revenue (a)
    
    
    
    
    
    
    (318,787,904
    )
    
    
    (326,400,700
    )
    
    
    (368,753,623
    )
    
    
    (54,376,410
    )Gross profit
    
    
    
    
    
    
    333,146,698
    
    
    
    344,744,979
    
    
    
    311,534,254
    
    
    
    45,938,841Research and development expenditures (a)
    
    
    
    
    
    
    (52,666,685
    )
    
    
    (56,301,924
    )
    
    
    (52,731,069
    )
    
    
    (7,775,724
    )Sales and marketing expenses (a)
    
    
    
    
    
    
    (197,430,136
    )
    
    
    (210,692,882
    )
    
    
    (219,494,698
    )
    
    
    (32,366,688
    )General and administrative expenses (a)
    
    
    
    
    
    
    (44,259,888
    )
    
    
    (58,498,799
    )
    
    
    (91,774,452
    )
    
    
    (13,533,061
    )Other operating expenses
    
    
    14
    
    
    
    (3,131,763
    )
    
    
    (158,466
    )
    
    
    (3,028,249
    )
    
    
    (446,546
    )Total operating expenses
    
    
    
    
    
    
    (297,488,472
    )
    
    
    (325,652,071
    )
    
    
    (367,028,468
    )
    
    
    (54,122,019
    )Other operating income
    
    
    15
    
    
    
    44,100,827
    
    
    
    45,575,781
    
    
    
    41,629,196
    
    
    
    6,138,641Operating income (loss)
    
    
    
    
    
    
    79,759,053
    
    
    
    64,668,689
    
    
    
    (13,865,018
    )
    
    
    (2,044,537
    )Derivative (loss) gain
    
    
    
    
    
    
    (1,868,238
    )
    
    
    5,807,511
    
    
    
    
    
    
    
    Interest income
    
    
    
    
    
    
    13,643,761
    
    
    
    5,307,899
    
    
    
    9,134,152
    
    
    
    1,346,922Investment income
    
    
    
    
    
    
    11,057,176
    
    
    
    15,257,412
    
    
    
    2,823,770
    
    
    
    416,393Other non-operating income
    
    
    16
    
    
    
    42,708,114
    
    
    
    6,203,615
    
    
    
    5,962,349
    
    
    
    879,208Income before income taxes
    
    
    
    
    
    
    145,299,866
    
    
    
    97,245,126
    
    
    
    4,055,253
    
    
    
    597,986Income taxes (expenses) benefits
    
    
    17
    
    
    
    (1,101,395
    )
    
    
    (254,883
    )
    
    
    1,604,572
    
    
    
    236,610Net income
    
    
    
    
    
    
    144,198,471
    
    
    
    96,990,243
    
    
    
    5,659,825
    
    
    
    834,596Deemed dividend
    
    
    
    
    
    
    (379,092
    )
    
    
    
    
    
    
    
    
    
    
    Net income attributable to ordinary
shareholders
    
    
    
    
    
    
    143,819,379
    
    
    
    96,990,243
    
    
    
    5,659,825
    
    
    
    834,596Net income per shareBasic
    
    
    18
    
    
    
    4.03
    
    
    
    2.66
    
    
    
    0.15
    
    
    
    0.02Diluted
    
    
    18
    
    
    
    3.93
    
    
    
    2.62
    
    
    
    0.14
    
    
    
    0.02Weighted average ordinary shares outstandingBasic
    
    
    
    
    
    
    33,153,982
    
    
    
    36,446,790
    
    
    
    38,327,047
    
    
    
    38,327,047Diluted
    
    
    
    
    
    
    34,056,315
    
    
    
    37,069,492
    
    
    
    39,201,389
    
    
    
    39,201,389
  Year ended June 30,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Share-based compensation expenses
during the related period included in =Cost of revenue
    
    
    228,400
    
    
    
    240,079
    
    
    
    295,940
    
    
    
    43,639Research and development expenditures
    
    
    4,174,846
    
    
    
    3,198,310
    
    
    
    2,644,871
    
    
    
    390,013Sales and marketing expenses
    
    
    14,846,359
    
    
    
    2,452,724
    
    
    
    1,979,759
    
    
    
    291,935General and administrative expenses
    
    
    1,095,032
    
    
    
    2,282,348
    
    
    
    5,475,251
    
    
    
    807,38120,344,637
    
    
    
    8,173,461
    
    
    
    10,395,821
    
    
    
    1,532,968
   F - 5




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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY AND COMPREHENSIVE INCOME
 AccumulatedAdditional
    
    
    other
    
    
    
    
    
    
    TotalOrdinary shares
    
    
    paid-in
    
    
    comprehensive
    
    
    Retained
    
    
    shareholders
    
    
    ComprehensiveShare
    
    
    Amount
    
    
    capital
    
    
    income (loss)
    
    
    earnings
    
    
    equity
    
    
    incomeRMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMBAs of July 1, 2007
    
    
    21,473,442
    
    
    
    8,888
    
    
    
    48,737,939
    
    
    
    (5,497,826
    )
    
    
    61,428,933
    
    
    
    104,677,934
    
    
    
    63,412,440Issue of ordinary shares pursuant
to initial public offering
    
    
    10,202,641
    
    
    
    3,809
    
    
    
    1,067,015,352
    
    
    
    
    
    
    
    
    
    
    
    1,067,019,161
    
    
    
    Direct offering expenses
    
    
    
    
    
    
    
    
    
    
    (90,480,425
    )
    
    
    
    
    
    
    
    
    
    
    (90,480,425
    )
    
    
    Conversion of preference shares
to ordinary shares
    
    
    6,521,962
    
    
    
    2,698
    
    
    
    129,753,248
    
    
    
    
    
    
    
    
    
    
    
    129,755,946
    
    
    
    Share repurchase
    
    
    (143,484
    )
    
    
    (49
    )
    
    
    (5,833,952
    )
    
    
    
    
    
    
    
    
    
    
    (5,834,001
    )
    
    
    Exercise of share options
    
    
    8,640
    
    
    
    3
    
    
    
    82,183
    
    
    
    
    
    
    
    
    
    
    
    82,186
    
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    144,198,471
    
    
    
    144,198,471
    
    
    
    144,198,471Share-based compensation
    
    
    
    
    
    
    
    
    
    
    20,344,637
    
    
    
    
    
    
    
    
    
    
    
    20,344,637
    
    
    
    Cumulative translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (84,451,629
    )
    
    
    
    
    
    
    (84,451,629
    )
    
    
    (84,451,629
    )Deemed distribution to shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (379,092
    )
    
    
    (379,092
    )
    
    
    As of June 30, 2008
    
    
    38,063,201
    
    
    
    15,349
    
    
    
    1,169,618,982
    
    
    
    (89,949,455
    )
    
    
    205,248,312
    
    
    
    1,284,933,188
    
    
    
    59,746,842Share repurchase
    
    
    (2,585,138
    )
    
    
    (883
    )
    
    
    (62,461,110
    )
    
    
    
    
    
    
    
    
    
    
    (62,461,993
    )
    
    
    Exercise of share options
    
    
    111,057
    
    
    
    38
    
    
    
    661,926
    
    
    
    
    
    
    
    
    
    
    
    661,964
    
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    96,990,243
    
    
    
    96,990,243
    
    
    
    96,990,243Share-based compensation
    
    
    
    
    
    
    
    
    
    
    8,173,461
    
    
    
    
    
    
    
    
    
    
    
    8,173,461
    
    
    
    Cumulative translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,682,983
    )
    
    
    
    
    
    
    (3,682,983
    )
    
    
    (3,682,983
    )Dividend to ordinary shareholders
(US$0.56 per share)
    
    
    
    
    
    
    
    
    
    
    (86,215,226
    )
    
    
    
    
    
    
    (51,304,437
    )
    
    
    (137,519,663
    )
    
    
    As of June 30, 2009
    
    
    35,589,120
    
    
    
    14,504
    
    
    
    1,029,778,033
    
    
    
    (93,632,438
    )
    
    
    250,934,118
    
    
    
    1,187,094,217
    
    
    
    93,307,260Issue of shares (note 12)
    
    
    2,647,743
    
    
    
    905
    
    
    
    37,384,095
    
    
    
    
    
    
    
    
    
    
    
    37,385,000
    
    
    
    Share repurchase (note 12)
    
    
    (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
    
    
    
    5,659,825Share-based compensation
    
    
    
    
    
    
    
    
    
    
    10,395,821
    
    
    
    
    
    
    
    
    
    
    
    10,395,821
    
    
    
    Cumulative translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,714,440
    )
    
    
    
    
    
    
    (4,714,440
    )
    
    
    (4,714,440
    )Unrealised gain on available-for-sale
investment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,395,254
    
    
    
    
    
    
    
    9,395,254
    
    
    
    9,395,254As of June 30, 2010
    
    
    37,613,701
    
    
    
    15,195
    
    
    
    1,049,366,056
    
    
    
    (88,951,624
    )
    
    
    256,593,943
    
    
    
    1,217,023,570
    
    
    
    10,340,639As of June 30, 2010 (US$)
    
    
    
    
    
    
    2,241
    
    
    
    154,739,520
    
    
    
    (13,116,807
    )
    
    
    37,837,343
    
    
    
    179,462,297
    
    
    
    1,524,831
   F - 6




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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Years ended June 30,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Cash flows from operating activities:Net income
    
    
    144,198,471
    
    
    
    96,990,243
    
    
    
    5,659,825
    
    
    
    834,596Adjustments to reconcile net income to net
cash provided by (used in) operating activities:Amortisation of intangible assets
    
    
    5,115,148
    
    
    
    5,779,198
    
    
    
    6,895,938
    
    
    
    1,016,875Depreciation of property, plant and equipment
    
    
    3,021,971
    
    
    
    4,901,623
    
    
    
    10,827,312
    
    
    
    1,596,595Allowance for doubtful debts
    
    
    11,184,045
    
    
    
    1,459,142
    
    
    
    21,262,662
    
    
    
    3,135,392Write-down of excess and obsolete inventories
    
    
    9,764,368
    
    
    
    2,131,102
    
    
    
    9,667,136
    
    
    
    1,425,516Loss on disposal of property, plant and equipment
    
    
    3,009
    
    
    
    13,187
    
    
    
    696,290
    
    
    
    102,675Impairment loss on intangible assets
    
    
    
    
    
    
    
    
    
    
    264,227
    
    
    
    38,963Share-based compensation
    
    
    20,344,637
    
    
    
    8,173,461
    
    
    
    10,395,821
    
    
    
    1,532,968Derivative loss (gain)
    
    
    1,868,238
    
    
    
    (5,807,511
    )
    
    
    
    
    
    
    Loss (gain) on trading investments, net
    
    
    852,373
    
    
    
    1,428,850
    
    
    
    (868,255
    )
    
    
    (128,033
    )Unrealised exchange difference
    
    
    (83,724,258
    )
    
    
    (3,620,484
    )
    
    
    (4,290,296
    )
    
    
    (632,648
    )Changes in current assets and liabilities:Trading investments
    
    
    (13,727,590
    )
    
    
    3,467,425
    
    
    
    3,354,018
    
    
    
    494,583Accounts receivable
    
    
    (77,684,005
    )
    
    
    (11,384,547
    )
    
    
    (158,332,518
    )
    
    
    (23,347,713
    )Related party receivables
    
    
    (56,849
    )
    
    
    78,462
    
    
    
    190,423
    
    
    
    28,080Inventories
    
    
    (5,540,415
    )
    
    
    (69,110,434
    )
    
    
    (399,894
    )
    
    
    (58,968
    )Prepaid expenses and other current assets
    
    
    (27,458,039
    )
    
    
    (11,034,028
    )
    
    
    187,521
    
    
    
    27,652Deferred tax assets
    
    
    1,083,786
    
    
    
    83,085
    
    
    
    808,067
    
    
    
    119,158Accounts payables
    
    
    (13,134,766
    )
    
    
    47,733,636
    
    
    
    (5,572,429
    )
    
    
    (821,710
    )Other payables and accruals
    
    
    2,439,154
    
    
    
    14,441,414
    
    
    
    (14,806,402
    )
    
    
    (2,183,352
    )Advances from customers
    
    
    (13,174,167
    )
    
    
    482,643
    
    
    
    2,831,761
    
    
    
    417,571Deferred revenue
    
    
    5,237,786
    
    
    
    (3,448,578
    )
    
    
    4,449,056
    
    
    
    656,058Income tax payables
    
    
    17,607
    
    
    
    (316,440
    )
    
    
    (564,214
    )
    
    
    (83,199
    )Deferred tax liabilities
    
    
    
    
    
    
    
    
    
    
    (1,071,396
    )
    
    
    (157,986
    )Net cash (used in) provided by operating activities
    
    
    (29,369,496
    )
    
    
    82,441,449
    
    
    
    (108,415,347
    )
    
    
    (15,986,927
    )Cash flows from investing activities:Acquisition of property, plant and equipment
    
    
    (3,925,188
    )
    
    
    (96,829,444
    )
    
    
    (20,361,429
    )
    
    
    (3,002,496
    )Acquisition of intangible assets
    
    
    (5,028,528
    )
    
    
    (3,736,744
    )
    
    
    (7,825,000
    )
    
    
    (1,153,875
    )Acquisition of the Little New Star Education Group (LNS),
net of cash acquired of RMB6,359,000 (note 10)
    
    
    
    
    
    
    
    
    
    
    (4,485,215
    )
    
    
    (661,390
    )Deposits for investment
    
    
    (910,000
    )
    
    
    (21,581,952
    )
    
    
    (4,200,000
    )
    
    
    (619,332
    )Disposal of property, plant and equipment
    
    
    557
    
    
    
    
    
    
    
    
    
    
    
    (Increase) decrease in held-to-maturity investments
    
    
    (747,000,000
    )
    
    
    747,000,000
    
    
    
    
    
    
    
    Increase in investments
    
    
    
    
    
    
    
    
    
    
    (20,480,700
    )
    
    
    (3,020,084
    )(Increase) decrease in short-term bank deposits
    
    
    
    
    
    
    (274,200,000
    )
    
    
    214,200,000
    
    
    
    31,585,932Net cash (used in) provided by investing activities
    
    
    (756,863,159
    )
    
    
    350,651,860
    
    
    
    156,847,656
    
    
    
    23,128,755Cash flows from financing activities:Proceeds from issuance of ordinary shares,
net of issuance costs
    
    
    976,538,736
    
    
    
    
    
    
    
    
    
    
    
    Proceeds from exercise of shares options
    
    
    82,186
    
    
    
    661,964
    
    
    
    10,506,502
    
    
    
    1,549,289Shares repurchase
    
    
    (5,834,001
    )
    
    
    (62,461,993
    )
    
    
    (38,698,609
    )
    
    
    (5,706,497
    )Dividend paid to ordinary and preference shareholders
    
    
    
    
    
    
    (137,519,663
    )
    
    
    
    
    
    
    Repayment of short term borrowings of LNS (note 10)
    
    
    
    
    
    
    
    
    
    
    (7,000,000
    )
    
    
    (1,032,220
    )Net cash provided by (used in) financing activities
    
    
    970,786,921
    
    
    
    (199,319,692
    )
    
    
    (35,192,107
    )
    
    
    (5,189,428
    )Effect of exchange rate changes on cash and
cash equivalents
    
    
    (1,698,532
    )
    
    
    (85,011
    )
    
    
    (424,144
    )
    
    
    (62,545
    )Net increase in cash and cash equivalents
    
    
    184,554,266
    
    
    
    233,773,617
    
    
    
    13,240,202
    
    
    
    1,952,400Cash and cash equivalents at the beginning of year
    
    
    77,367,126
    
    
    
    260,222,860
    
    
    
    493,911,466
    
    
    
    72,832,186Cash and cash equivalents at the end of year
    
    
    260,222,860
    
    
    
    493,911,466
    
    
    
    506,727,524
    
    
    
    74,722,041Supplemental disclosure of cash flow information:Income taxes paid (refund)
    
    
    
    
    
    
    488,238
    
    
    
    (803,368
    )
    
    
    (118,465
    )Non-cash investing and financing activities:Deemed distribution to shareholders
    
    
    (379,092
    )
    
    
    
    
    
    
    
    
    
    
    Derivative (loss) gain
    
    
    (1,868,238
    )
    
    
    5,807,511
    
    
    
    
    
    
    
    Acquisition of property, plant and equipment
funded through other payables and accruals
    
    
    
    
    
    
    9,833,622
    
    
    
    
    
    
    
    Acquisition of LNS through issue of shares
    
    
    
    
    
    
    
    
    
    
    37,385,000
    
    
    
    5,512,792Acquisition of LNS through settlement of deposits for
investment
    
    
    
    
    
    
    
    
    
    
    21,581,952
    
    
    
    3,182,475
   F - 7




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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 1.
    
    Company information
   Place ofestablishment
    
    Percentage ofName of subsidiary
    
    and operation
    
    ownership
    
    
    Principal activitiesBeijing Haidian New Noah School (BJS)
    
    PRC
    
    
    100
    %
    
    After-class tutoring servicesBeijing Noah Zhi Yuan Education Consulting
Co. Ltd. (BJNZY)
    
    PRC
    
    
    100
    %
    
    After-class tutoring servicesBeijing Xicheng New Noah School (BXNNS)
    
    PRC
    
    
    100
    %
    
    After-class tutoring servicesBright Sound Electronic Technology
(Shenzhen) Co., Ltd. (BSTS)
    
    PRC
    
    
    100
    %
    
    Research and development, and
distribution of software for
electronic learning productsBright Sound Limited
    
    British Virgin 

Islands 
(BVI)
    
    
    100
    %
    
    Investment holdingChangsha Furong District Nan Ming Yuan
Little New Star Kindergarten (CSNMK)
    
    PRC
    
    
    100
    %
    
    Kindergarten educationChangsha Hightech Development Zone
Xinya Co., Ltd. (CSXY)
    
    PRC
    
    
    100
    %
    
    Research and development, and
distribution of software contentsChangsha Leiseng Education Software
Co., Ltd. (CSLS)
    
    PRC
    
    
    100
    %
    
    Sales of English training materials
to primary schools and franchiseesChangsha Little New Star Animation Digital
Technology Co., Ltd. (CSADT)
    
    PRC
    
    
    100
    %
    
    Sales of English training materials
to kindergartens, franchisees and
developing franchised-schoolsChangsha Little New Star Stationary
Development Co., Ltd. (CSSD)
    
    PRC
    
    
    100
    %
    
    Sales of English training materials
to primary schools and franchiseesChangsha Mei Lin Shui Jun Kindergarten
(CSMLK)
    
    PRC
    
    
    100
    %
    
    Kindergarten educationChangsha Tianxin District Little New Star
School (CSTXS)
    
    PRC
    
    
    100
    %
    
    After-class tutoring servicesChangsha Tianxin District New Star English
Training School (CSNSC)
    
    PRC
    
    
    100
    %
    
    After-class tutoring servicesChengdu Innovative Noah Electronic
Co., Ltd. (CINE)
    
    PRC
    
    
    100
    %
    
    Distribution of electronic
learning products
  F - 8




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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 1.
    
    Company information continued
 Place ofestablishment
    
    Percentage ofName of subsidiary
    
    and operation
    
    ownership
    
    
    Principal activitiesChengdu New Noah School (CDS)
    
    PRC
    
    
    100
    %
    
    After-class tutoring servicesChengdu Shidai Noah Education Software
Co., Ltd. (CDSD)
    
    PRC
    
    
    100
    %
    
    Research and development, and
distribution of software for
electronic learning productsChengdu Shidai Noah Information
Technology Co., Ltd. (CDSDT)
    
    PRC
    
    
    100
    %
    
    Research and development, and
distribution of software for
electronic learning productsChengdu Zhiyuan Noah Education
Technology Co., Ltd. (CDZY)
    
    PRC
    
    
    100
    %
    
    Research and development, and
distribution of software contentsChongqing New Noah School (CQS)
    
    PRC
    
    
    100
    %
    
    After-class tutoring servicesGlobal Ring Limited
    
    Hong Kong
(HK)
    
    
    100
    %
    
    Investment holdingInnovative Noah Electronic (Shenzhen)
Co., Ltd. (INES)
    
    PRC
    
    
    100
    %
    
    Manufacture and distribution
of electronic learning productsNew Noah Technology (Shenzhen) Co., Ltd.
(NNTS)
    
    PRC
    
    
    100
    %
    
    Research and development, and
distribution of software for
electronic learning productsNoah Education Development
(Chengdu) Co., Ltd. (NEDCD)
    
    PRC
    
    
    100
    %
    
    Provision of educational services,
research and development and
distribution of softwareNoah Education Technology (Shenzhen)
Co., Ltd. (NETS)
    
    PRC
    
    
    100
    %
    
    Research and development, and
distribution of software contentsShanxi Datong Little New Star Foreign
Language School (DTS)
    
    PRC
    
    
    100
    %
    
    After-class tutoring servicesShenzhen New Noah Education Investment
Development Co., Ltd. (SNNEI)
    
    PRC
    
    
    100
    %
    
    Provision of educational services,
research and development, and
distribution of softwareShenzhen Zhi Yuan Noah Internet Co., Ltd.
(Zhi Yuan)
    
    PRC
    
    No direct ownership;
VIE
    
    
    Provision of online services for
downloading software and
coursewareWell Profit Creation Limited (WPC)
    
    HK
    
    
    100
    %
    
    Investment holdingWin Bright Creation Limited (WBC)
    
    HK
    
    
    100
    %
    
    Investment holdingXiangtan Yuetang District Little New Star
English School (XTS)
    
    PRC
    
    
    100
    %
    
    After-class tutoring services
   F - 9




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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 1.
    
    Company information continued
    2.
    
    Summary of significant accounting policies
 (a)
    
    Basis of presentation
  (b)
    
    Basis of consolidation
  (c)
    
    Use of estimates
    F - 10




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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 2.
    
    Summary of significant accounting policies continued
 (d)
    
    Foreign currency translation
    (e)
    
    Cash and cash equivalents
  (f)
    
    Short-term bank deposits
  (g)
    
    Investments
   F - 11




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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 2.
    
    Summary of significant accounting policies continued
 (g)
    
    Investments  continued
  (h)
    
    Inventories
  (i)
    
    Property, plant and equipment, net
   Buildings
    
    20 yearsLeasehold improvements
    
    Shorter of term of the lease or 5 yearsMachinery
    
    3-5 yearsOffice equipment
    
    5 yearsComputer equipment
    
    3-5 yearsMotor vehicles
    
    5 years
   (j)
    
    Intangible assets
     F - 12




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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 2.
    
    Summary of significant accounting policies continued
 (k)
    
    Impairment of long-lived assets
   (l)
    
    Goodwill
   RMB
    
    
    US$Balance as of July 1, 2009
    
    
    
    
    
    
    Goodwill acquired during the year (note 10)
    
    
    56,597,146
    
    
    
    8,345,815Balance as of June 30, 2010
    
    
    56,597,146
    
    
    
    8,345,815
  F - 13




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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 2.
    
    Summary of significant accounting policies continued
 (m)
    
    Fair value of financial instruments
    Fair Value Hierarchy
     (n)
    
    Revenue recognition
   F - 14




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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 2.
    
    Summary of significant accounting policies continued
 (n)
    
    Revenue recognition  continued
  (i)
    
    Electronic learning devices
       F - 15




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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 2.
    
    Summary of significant accounting policies continued
 (n)
    
    Revenue recognition  continued
 (ii)
    
    Prepaid premium cards
  (iii)
    
    Software
   (iv)
    
    Tuition fee income
  (v)
    
    Franchising fee
   F - 16




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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 2.
    
    Summary of significant accounting policies continued
 (n)
    
    Revenue recognition  continued
 (vi)
    
    Continuing support fee
  (vii)
    
    Teaching materials
   (o)
    
    Software development costs
   (p)
    
    Advertising costs
   F - 17




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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 2.
    
    Summary of significant accounting policies continued
 (q)
    
    Cost of revenue
   (r)
    
    Operating leases
  (s)
    
    Retirement benefit costs
  (t)
    
    Government subsidies
   F - 18




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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 2.
    
    Summary of significant accounting policies continued
 (u)
    
    Income taxes
   (v)
    
    Share-based compensation
   (w)
    
    Comprehensive income
  (x)
    
    Segment Information
  (y)
    
    Net income per share
   F - 19




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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 2.
    
    Summary of significant accounting policies continued
 (z)
    
    DividendDividends are recognised when declared.
 (aa)
    
    Concentration of credit risk
   (ab)
    
    Business combinations
  Business combination
  F - 20




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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
   3.
    
    Recently issued accounting pronouncements
 Revenue Recognition (Topic 605) -
Multiple-Deliverable Revenue Arrangements Revenue Recognition-Multiple-Element Arrangements
  F - 21




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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 3.
    
    Recently issued accounting pronouncements continued
 Software (Topic 985)  Certain Revenue
Arrangements that Include Software Elements Software-Revenue Recognition
 Transfers and Servicing (Topic 860) -
Accounting for Transfers of Financial Assets (ASU 2009-16)
 Amendments to FASB Interpretation No. 46(R) Consolidations (Topic 810)  Improvements to Financial Reporting by Enterprises Involved
with Variable Interest Entities (ASU 2009-17)
  F - 22




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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 3.
    
    Recently issued accounting pronouncements continued
 Improving Disclosures About Fair Value
Measurements (ASU 2010-06)
 Compensation  Stock Compensation (Topic 718);
Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of
the Market in Which the Underlying Equity Security Trades FASB
Accounting Standards Codification
  F - 23




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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 3.
    
    Recently issued accounting pronouncements continued
 Revenue Recognition  Milestone
Method (Topic 605)
 Receivables (Topic 310): Disclosures about the Credit
Quality of Financing Receivables and the Allowance for Credit Losses
 4.
    
    Investments
  As of June 30,2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    US$Current:Trading investments (at fair value)
    
    
    7,978,942
    
    
    
    5,493,179
    
    
    
    810,024Non-current:Available-for-sale investment (at fair value)
    
    
    
    
    
    
    23,048,725
    
    
    
    3,398,765Investment (at cost less impairment)
    
    
    
    
    
    
    6,827,229
    
    
    
    1,006,743
    
    
    
    29,875,954
    
    
    
    4,405,508
  F - 24




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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 4.
    
    Investments continued
  Years ended June 30,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Realised gain
    
    
    
    
    
    
    399,408
    
    
    
    
    
    
    
    Unrealised (loss) gain
    
    
    (852,373
    )
    
    
    (1,828,258
    )
    
    
    868,255
    
    
    
    128,033Total
    
    
    (852,373
    )
    
    
    (1,428,850
    )
    
    
    868,255
    
    
    
    128,033
       F - 25




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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 4.
    
    Investments continued
  Available-for-saleinvestmentRMB
    
    
    USDAcquisition during the year
    
    
    13,653,471
    
    
    
    2,013,341Unrealised gain (note)
    
    
    9,395,254
    
    
    
    1,385,424Balance as at June 30, 2010
    
    
    23,048,725
    
    
    
    3,398,765
 Note:
    
    Unrealised gain 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.  5.
    
    Accounts receivable, net of allowance
 As of June 30,2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    US$Accounts receivable
    
    
    189,890,294
    
    
    
    346,573,060
    
    
    
    51,105,664Notes receivable
    
    
    250,000
    
    
    
    
    
    
    
    Less: allowance for doubtful debts
    
    
    (8,487,165
    )
    
    
    (27,796,553
    )
    
    
    (4,098,880
    )181,653,129
    
    
    
    318,776,507
    
    
    
    47,006,784
  As of June 30,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Balance at the beginning of year
    
    
    1,966,611
    
    
    
    13,150,656
    
    
    
    8,487,165
    
    
    
    1,251,517Additions
    
    
    11,184,045
    
    
    
    1,459,142
    
    
    
    21,262,662
    
    
    
    3,135,392Write-offs
    
    
    
    
    
    
    (5,517,524
    )
    
    
    (1,953,274
    )
    
    
    (288,029
    )Recovered
    
    
    
    
    
    
    (605,109
    )
    
    
    
    
    
    
    Balance at the end of year
    
    
    13,150,656
    
    
    
    8,487,165
    
    
    
    27,796,553
    
    
    
    4,098,880
  F - 26




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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 5.
    
    Accounts receivable, net of allowance continued
  6.
    
    Inventories
  As of June 30,2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    US$Raw materials
    
    
    34,589,373
    
    
    
    32,024,762
    
    
    
    4,722,371Work-in-progress
    
    
    35,812,049
    
    
    
    26,645,575
    
    
    
    3,929,157Finished goods
    
    
    81,471,381
    
    
    
    90,067,900
    
    
    
    13,281,413Inventories, net
    
    
    151,872,803
    
    
    
    148,738,237
    
    
    
    21,932,941
  7.
    
    Prepaid expenses and other current assets
  As of June 30,2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    US$Subsidy receivables
    
    
    43,476,111
    
    
    
    22,025,225
    
    
    
    3,247,840VAT recoverable
    
    
    9,092,696
    
    
    
    23,947,768
    
    
    
    3,531,338Advances to suppliers
    
    
    6,931,395
    
    
    
    10,424,981
    
    
    
    1,537,268Prepaid advertising expenses
    
    
    3,025,019
    
    
    
    1,075,383
    
    
    
    158,575Staff advances
    
    
    1,249,410
    
    
    
    1,301,939
    
    
    
    191,984Interest receivable
    
    
    1,018,776
    
    
    
    206,536
    
    
    
    30,456Rental deposits
    
    
    972,782
    
    
    
    931,516
    
    
    
    137,361Advances to the Board Secretary of
the Company
    
    
    152,713
    
    
    
    170,000
    
    
    
    25,068Deposits for shares buy back
    
    
    
    
    
    
    1,738,511
    
    
    
    256,361Advances to branches employees
    
    
    1,356,126
    
    
    
    2,208,199
    
    
    
    325,621Others
    
    
    1,764,597
    
    
    
    5,724,325
    
    
    
    844,11069,039,625
    
    
    
    69,754,383
    
    
    
    10,285,982
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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 8.
    
    Property, plant and equipment, net
  As of June 30,2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    US$Buildings
    
    
    111,304,359
    
    
    
    127,746,992
    
    
    
    18,837,572Leasehold improvements
    
    
    1,483,194
    
    
    
    13,310,028
    
    
    
    1,962,697Machinery
    
    
    875,814
    
    
    
    684,345
    
    
    
    100,914Office equipment
    
    
    8,270,308
    
    
    
    12,062,466
    
    
    
    1,778,731Computer equipment
    
    
    4,764,883
    
    
    
    5,685,573
    
    
    
    838,395Motor vehicles
    
    
    4,939,542
    
    
    
    6,868,682
    
    
    
    1,012,856131,638,100
    
    
    
    166,358,086
    
    
    
    24,531,165Less: accumulated depreciation
    
    
    (12,018,153
    )
    
    
    (22,108,264
    )
    
    
    (3,260,086
    )Property, plant and equipment, net
    
    
    119,619,947
    
    
    
    144,249,822
    
    
    
    21,271,079
   9.
    
    Intangible assets, net
 As of June 30,2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    US$Patents, trademarks and licenses
    
    
    8,376,548
    
    
    
    9,070,803
    
    
    
    1,337,581Copyrights, mini lamb video
and franchises agreement
    
    
    
    
    
    
    21,700,000
    
    
    
    3,199,882Non- competition agreement
    
    
    
    
    
    
    5,000,000
    
    
    
    737,3008,376,548
    
    
    
    35,770,803
    
    
    
    5,274,763Less: accumulative amortisation
    
    
    (3,914,788
    )
    
    
    (6,644,208
    )
    
    
    (979,755
    )Intangible assets, net
    
    
    4,461,760
    
    
    
    29,126,595
    
    
    
    4,295,008
  Patents, trademarks and licenses
    
    1 - 10 yearsCopyrights, mini lamb video and franchises agreement
    
    15 yearsNon-competition agreement
    
    10 years
  F - 28




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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 9.
    
    Intangible assets, net  continued
 During the year ended June 30, 2010, the Group acquired RMB24,000,000 intangible assets,
consist of copyrights, mini lamb video, franchises agreement and non-competition agreement,
through acquisition of LNS (note 10). In addition, approximately RMB4,020,000 patents were
expired and fully amortised during the year.
 Amortisation expenses were RMB5,115,148, RMB5,779,198 and RMB6,895,938 (US$1,015,467) for
the years ended June 30, 2008, 2009 and 2010, respectively. The following table represents
the total estimated amortisation expense of intangible assets for each of the next five
years:
 RMB
    
    
    US$Year ending June 30,- 2011
    
    
    3,700,077
    
    
    
    545,613- 2012
    
    
    1,817,994
    
    
    
    268,081- 2013
    
    
    1,619,066
    
    
    
    238,747- 2014
    
    
    1,417,100
    
    
    
    208,966- 2015
    
    
    1,450,667
    
    
    
    213,915
 10.
    
    Acquisitions10.1
    
    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 RMB 53,000,000
(USD7,815,380) 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 RMB 37,385,000 (USD5,512,792) 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 (USD340,485) costs in relation to this
acquisition and was recognised in the consolidated statement of operations for the year
ended July 30, 2010.
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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 10.
    
    Acquisition continued10.1
    
    Acquisition of LNS  continued
 The following table summarizes the fair values of the assets and liabilities assumed by the
Group on the date of acquisition of the business:
 Carrying value
    
    
    
    
    
    
    Fair valueat acquisition
    
    
    Fair value
    
    
    at acquisitiondate
    
    
    adjustment
    
    
    dateRMB000
    
    
    RMB000
    
    
    RMB000Cash and cash equivalent
    
    
    6,359
    
    
    
    
    
    
    
    6,359Account receivables
    
    
    54
    
    
    
    
    
    
    
    54Inventories
    
    
    5,875
    
    
    
    259
    
    
    
    6,134Other current assets
    
    
    2,686
    
    
    
    (1,784
    )
    
    
    902Short term borrowings
    
    
    (7,000
    )
    
    
    
    
    
    
    (7,000
    )Account payables
    
    
    (2,140
    )
    
    
    
    
    
    
    (2,140
    )Advance from customers
    
    
    (3,664
    )
    
    
    
    
    
    
    (3,664
    )Income tax payables
    
    
    (394
    )
    
    
    
    
    
    
    (394
    )Other current liabilities
    
    
    (3,444
    )
    
    
    
    
    
    
    (3,444
    )Fixed assets
    
    
    15,163
    
    
    
    629
    
    
    
    15,792Intangible assets
    
    
    4,705
    
    
    
    19,295
    
    
    
    24,000Deferred tax asset
    
    
    
    
    
    
    926
    
    
    
    926Deferred tax liabilities
    
    
    
    
    
    
    (3,737
    )
    
    
    (3,737
    )18,200
    
    
    
    
    
    
    
    33,788Goodwill
    
    
    
    
    
    
    
    
    
    
    56,597Consideration
    
    
    
    
    
    
    
    
    
    
    90,385
 The intangible assets comprise of copyrights, mini lamb video, franchises agreement,
non-competition agreement, which all amortised over a period of 10 to 15 years, and LNS
trademark with indefinite useful lives not subject to amortisation.
 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 RMB 39,898,000 (US$5,883,359)of revenue and RMB 8,730,000 (US$1,287,326)of net
income of LNS have been included in the consolidated income statements for the year ended
June 30, 2010.
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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 10.
    
    Acquisition continued
 10.2
    
    Acquisition ofShenzhen Wentai Education Industry Development Co., Ltd. (Wentai Education)
 On March 12, 2010, 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 Guangdong-based private education service provider which is
specialized in providing full time English-featured education of schools and kindergartens.
Pursuant to the agreement, the former shareholders will firstly transfer 40% of the
shareholdings in Wentai Education to a designated company named Shenzhen Jinyinhe Investment
Co., Ltd (Shenzhen Jinyinhe) and Shenzhen Jinyinhe will then transfer the 40% NETS
immediately. The consideration paid for this share transfer is RMB36,000,000, with RMB
25,000,000 payable before July 12, 2010, RMB 1,000,000 payable before September 1, 2010 and
remaining RMB 10,000,000 payable upon request after the first two payments. After the share
transfer, the acquirer NETS will inject the capital into the Wentai Education. NETS is
obliged to pay RMB90,000,000 as capital injection in the Wentai Education, with RMB
30,000,000 allocating into issued share capital and RMB 60,000,000 into capital reserve of
Wentai Education. Pursuant the agreement, the payment of RMB 90,000,000 in total should be
completed before July 1, 2010 and the shareholding of NETS in Wentai Education will be
further increased from 40% to 70% upon the successful payment. Therefore, control is
presumed to be existed and two kindergartens will be brought into the Group at acquisition
date.
 The Group incurred approximately RMB920,000 (USD135,663) costs in relation to this
acquisition and was recognised in the consolidated statement of operations for the year
ended July 30, 2010.
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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 10.
    
    Acquisition continued10.2
    
    Acquisition ofWentai Education  continued
 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 Shenzhen Wentai Investment Co., Ltd. (Wentai
Investment) for the purpose to acquire 67% shareholdings of Zhongda Foundation Education
Investment Management Co., Ltd. (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 is 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 substantially
completed in the first quarter of fiscal year 2011. Further details of change in control in
Wentai Education are set out in Note 23.
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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 10.
    
    Acquisition continued10.2
    
    Acquisition ofWentai Education  continued
 The following table summarizes the unaudited fair values of the assets and liabilities,
determined based on provisional estimation, assumed by the Group as at year ended June 30,
2010:
 Carryingvalue at
    
    
    
    
    
    
    Fair value atacquisition
    
    
    Fair value
    
    
    acquisitiondate
    
    
    adjustment
    
    
    dateRMB000
    
    
    RMB000
    
    
    RMB000Cash and cash equivalents
    
    
    110,619
    
    
    
    
    
    
    
    110,619Other receivables
    
    
    6,003
    
    
    
    
    
    
    
    6,003Other Current assets
    
    
    4,276
    
    
    
    
    
    
    
    4,276Fixed assets, net
    
    
    25,688
    
    
    
    3,277
    
    
    
    28,965Intangible assets, net
    
    
    13,200
    
    
    
    3,970
    
    
    
    17,170Deferred revenue  current
    
    
    (12,802
    )
    
    
    
    
    
    
    (12,802
    )Other current liabilities
    
    
    (12,121
    )
    
    
    
    
    
    
    (12,121
    )Long-term bank borrowings
    
    
    (1,500
    )
    
    
    
    
    
    
    (1,500
    )Deferred tax liabilities
    
    
    
    
    
    
    (1,812
    )
    
    
    (1,812
    )133,363
    
    
    
    
    
    
    
    138,798Minority interest
    
    
    
    
    
    
    
    
    
    
    (41,639
    )Goodwill
    
    
    
    
    
    
    
    
    
    
    28,841126,000
 The following pro forma information of LNS and Wentai Education summarised the effect of the
acquisitions, as if the acquisitions had occurred as of July 1, 2008 and July 1, 2009. 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, 2008 and July 1, 2009, nor is
it necessarily indicative of future results of operations of the consolidated enterprises.
 Pro formaYear ended
    
    
    Year endedJune 30, 2009
    
    
    June 30, 2010(unaudited)
    
    
    (unaudited)Revenue
    
    
    727,312,020
    
    
    
    728,450,802Net income
    
    
    108,543,330
    
    
    
    13,494,591Income per share  basic
    
    
    2.98
    
    
    
    0.35Income per share  diluted
    
    
    2.93
    
    
    
    0.34
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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 11.
    
    Other payables and accruals
 Other payables and accruals consisted of the following:
 As of June 30,2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    US$Other payables for acquisition of LNS
    
    
    
    
    
    
    20,573,668
    
    
    
    3,033,793Accrued social welfare payments
    
    
    7,202,858
    
    
    
    8,248,213
    
    
    
    1,216,282Accrued salaries
    
    
    3,027,189
    
    
    
    4,932,436
    
    
    
    727,337Accrued bonus
    
    
    4,383,685
    
    
    
    4,589,417
    
    
    
    676,755VAT payable
    
    
    4,474,115
    
    
    
    2,635,680
    
    
    
    388,657Accrued consultation fee
    
    
    1,337,799
    
    
    
    2,027,825
    
    
    
    299,023Accrued advertising expenses
    
    
    7,933,728
    
    
    
    1,854,492
    
    
    
    273,463Accrued audit fee
    
    
    2,459,398
    
    
    
    1,828,623
    
    
    
    269,649Other payables to freight charges
    
    
    1,345,679
    
    
    
    1,297,127
    
    
    
    191,274Receipt in advance for summer camp
    
    
    
    
    
    
    1,060,300
    
    
    
    156,352Accrued expenses
    
    
    1,794,626
    
    
    
    983,554
    
    
    
    145,035Deposits for franchise
    
    
    
    
    
    
    628,320
    
    
    
    92,652Payable for acquisitions of property,
plant and equipment
    
    
    9,833,622
    
    
    
    
    
    
    
    Others
    
    
    2,017,126
    
    
    
    4,360,081
    
    
    
    642,93845,809,825
    
    
    
    55,019,736
    
    
    
    8,113,210
 12.
    
    Capital structure
 Upon the incorporation of the Company in April 2004, 600,000,000 ordinary shares were
authorised and 21,473,442 were issued at par value of US$0.00005 per share.
 Pursuant to the sale and purchase agreement dated March 16, 2007, the ordinary shareholders
and holders of the convertible preference shares agreed to sell 903,952 ordinary shares and
1,628,114 convertible preference shares, respectively, to Lehman Brothers Commercial
Corporation Asia Limited (Lehman Brothers) at considerations of US$5,000,000 and
US$10,000,000, respectively. In addition, warrants were also granted by the Company to
Lehman Brothers to purchase additional ordinary shares (Warrant Shares) that is equal to
(i) US$7,500,000 divided by (ii) the exercise price which is defined in the sale and
purchase agreement as the higher of (a) average market closing price of the Companys shares
for the 20 consecutive trading days immediately prior to the exercise date and (b) the par
value of the ordinary shares, rounded up to the nearest US$0.0005. The warrants are
exercisable at any time during the one year period commencing six months after an initial
public offering. The warrants may be net settled and have certain antidilution provisions.
 As these warrants were granted to Lehman Brothers as part of a transaction between the
ordinary shareholders and holders of the convertible preference shares, and the Company did
not received any proceeds or services in exchange for the warrants, the fair value of the
warrants of RMB4,879,307 at issuance were charged to retained earnings as deemed dividend to
the ordinary shareholders and holders of convertible preference shares of the Company. The
fair value, of the warrants was determined using the Binomial option pricing model. All the
warrants expired on April 18, 2009. In February 2010, 656,400 ordinary shares were brought
back from Lehman Brothers and cancelled.
  F - 34




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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 12.
    
    Capital structure continued
 Upon the completion of the Companys initial public offering, the Companys authorized
ordinary shares were raised to 1,000,000,000 at par value of US$0.00005 per share approved
by a special resolution passed on October 5, 2007. In October 2007, all convertible
preference shares were automatically converted into 6,521,962 ordinary shares. In addition,
as part of the initial public offering, the Company issued 10,202,641 ordinary shares. The
gross proceeds received were RMB1,067,019,161 (US$155,562,561) and the related issuance
costs were RMB90,480,425 (US$13,191,297).
 On November 11, 2008, a cash dividend of RMB137,519,663 (equivalent to US$20,121,099) was
declared by the Company to its holders of ordinary shares.
 During the year ended June 30, 2008, 2009 and 2010, 8,640, 111,057 and 771,138 ordinary
shares were issued respectively as a result of exercises of share options by employees.
 In addition to the 656,400 shares bought back from Lehman Brothers during the year ended
June 30, 2010, the Company repurchased and cancelled 737,900 (2009: 2,585,138 and 2008:
143,484) ordinary shares.
 As disclosed in Note 10, the Company issued 2,647,743 ordinary shares for acquisition of
100% interest in LNS.
 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 21).
 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.
 13.
    
    Share-based compensation
 In October 2006, the Company authorised an equity compensation plan (the Equity
Compensation Plan) that provides for the issuance of options to purchase up to 1,473,442
ordinary shares, representing 5% equity interest in the Company, at the time of
establishment of the plan, on a fully diluted basis. Pursuant to this Equity Compensation
Plan, 1,473,442 ordinary shares were issued and held by Master Topful Limited (Master
Topful). On October 26, 2006, Master Topful entered into agreements with certain employees
of the Group to grant options to purchase 1,011,874 ordinary shares at an exercise price of
US$1.4720 per share. These awards have a vesting period in which, for 438,238 options, 52%
will vest from the grant date to December 31, 2006, another 38% will vest from January 1,
2007 to December 31, 2007, and the remaining 10% will vest from January 1, 2008 to December
31, 2008; and for the remaining 573,636 options, 30% will vest from the grant date to
December 31, 2006, another 30% will vest from January 1, 2007 to December 31, 2007, and the
remaining 40% will vest from January 1, 2008 to December 31, 2008. The employees cannot
sell or transfer the options prior to the completion of the Companys initial public
offering. Under certain circumstances, the Company can repurchase those shares from these
employees at the original purchase price.
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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 13.
    
    Share-based compensation continuedOn June 30, 2007, the Company terminated the Equity Compensation Plan, and adopted a new share incentive plan
(the 2007 Share Incentive Plan). The 1,473,442 shares issued and held by Master Topful were repurchased by the Company.
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 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. Concurrent with the termination of the
Equity Compensation Plan, 1,471,442 options were granted on June 30, 2007 under the 2007 Share Incentive Plan. 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, 2010:
 Number of optionsExercise price
    
    Outstanding
    
    Vesting periodUS$Granted in 20071.4720
    
    358,844
    
    30% will vest from the date of grant to December 31, 2007; 40% will vest from January 1, 2008 to December 31, 2008; the remaining 30% will vest upon a successful initial public offering1.4720
    
    339,536
    
    Vest upon a successful initial public offering1.4720
    
    24,492
    
    30% will vest from the date of grant to December 31, 2007; 30% will vest from January 1, 2008 to December 31, 2008; the remaining 40% will vest from January 1, 2009 to December 31, 20096.1420
    
    4,000
    
    30% will vest from the date of grant to June 30, 2008; 30% will vest from July 1, 2008 to June 30, 2009; the remaining 40% will vest from July 1, 2009 to June 30, 2010Granted in 20085.56
    
    407,749
    
    30% will vest from the date of grant to December 31, 2008; 30% will vest from January 1, 2009 to December 31, 2009; the remaining 40% will vest from January 1, 2010 to December 31, 2010
  F - 36




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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 13.
    
    Share-based compensation continued
 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, 2010:
 Granted in 2009
 Number of optionsExercise price
    
    Outstanding
    
    Vesting periodUS$2.6
    
    888,350
    
    30% will vest from the date of grant to December 31, 2009; 30% will vest from January 1, 2010 to December 31, 2010; the remaining 40% will vest from January 1, 2011 to December 31, 2011.
 Granted in 2010
 Number of optionsExercise price
    
    Outstanding
    
    Vesting periodUS$2.6
    
    80,000
    
    30% will vest from the date of grant to December 31, 2009; 30% will vest from January 1, 2010 to December 31, 2010; the remaining 40% will vest from January 1, 2011 to December 31, 2011.5.0
    
    300,000
    
    30% will vest from the date of grant to December 31, 2010; 30% will vest from January 1, 2011 to December 31, 2011; the remaining 40% will vest from January 1, 2012 to December 31, 2012.4.0
    
    10,000
    
    30% will vest from the date of grant to December 31, 2010; 30% will vest from January 1, 2011 to December 31, 2011; the remaining 40% will vest from January 1, 2012 to December 31, 2012.
  F - 37




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NOAH EDUCATION HOLDINGS LTD.
 13.
    
    Share-based compensation continuedThe 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. As a
result of the modification, an additional compensation cost of RMB795,544 (US$117,311) was recognised in 2007.Details of the option movements are included in the tables below.The Company did not have other share-based compensation arrangements.Share options activityThe Companys share option activities for the years ended June 30, 2008, 2009 and 2010 are set out below:
 Weighted
    
    
    Weighted
    
    
    
    
    
    Weightedaverage
    
    
    averaged
    
    
    
    
    
    average
    
    
    Weightedexercise
    
    
    remaining
    
    Aggregate
    
    
    intrinsic
    
    
    averageOptions
    
    
    price
    
    
    contractual
    
    intrinsic
    
    
    value per
    
    
    grant dateoutstanding
    
    
    per share
    
    
    life
    
    value
    
    
    share
    
    
    fair valueUS$
    
    
    
    
    US$
    
    
    US$
    
    
    US$At July 1, 2007
    
    
    1,471,442
    
    
    
    1.6080
    
    
    5
    
    
    6,293,851
    
    
    
    4.28
    
    
    
    Granted pursuant to the
2007 Share Incentive Plan
    
    
    669,177
    
    
    
    5.5617
    
    
    4
    
    
    
    
    
    
    
    
    
    
    2.11Forfeited during the year
    
    
    (37,866
    )
    
    
    1.9334
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.23Exercised
    
    
    (8,640
    )
    
    
    1.4720
    
    
    
    
    
    28,365
    
    
    
    
    
    
    
    3.38Outstanding at June 30, 2008
    
    
    2,094,113Granted pursuant to the
2008 Share Incentive Plan
    
    
    1,279,000
    
    
    
    2.6000
    
    
    4
    
    
    456,265
    
    
    
    0.36
    
    
    
    1.39Forfeited during the year
    
    
    (89,588
    )
    
    
    4.9125
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.31Exercised
    
    
    (111,057
    )
    
    
    1.4720
    
    
    
    
    
    266,254
    
    
    
    2.40
    
    
    
    3.38Outstanding at June 30, 2009
    
    
    3,172,468Granted pursuant to the
2008 Share Incentive Plan
    
    
    420,000
    
    
    
    4.5914
    
    
    4
    
    
    39,000
    
    
    
    0.09
    
    
    
    2.22Forfeited during the year
    
    
    (408,359
    )
    
    
    3.9641
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.86Exercised
    
    
    (771,138
    )
    
    
    2.0095
    
    
    
    
    
    2,298,502
    
    
    
    2.98
    
    
    
    2.80Outstanding at June 30, 2010
    
    
    2,412,971Vested and expected to vest
As of June 30, 2010
    
    
    1,639,060
    
    
    
    3.4892As of June 30, 2009
    
    
    1,673,309
    
    
    
    3.5334ExercisableAs of June 30, 2010
    
    
    1,220,149
    
    
    
    3.4799As of June 30, 2009
    
    
    1,429,200
    
    
    
    3.5083
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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 13.
    
    Share-based compensation continuedAs of June 30, 2010, there was approximately RMB12,725,838 (US$1,876,552) of unrecognised compensation cost related
to non-vested share options granted under the 2007 and 2008 Share Incentive Plans, and is expected to be recognised
over the weighted-average period of 2 years. The total fair value of options vested during the years ended June 30,
2008, 2009 and 2010 was RMB20,344,637, RMB8,173,461 and RMB10,395,821 (US$1,532,968), respectively. For the year
ended June 30, 2010, the Company received RMB3,848,079 (US$567,438) for exercises of options.The fair value of each option granted is estimated on the date of grant using the Black-Scholes option pricing model
with the following assumptions:
 June 30, 2008
    
    June 30, 2009
    
    June 30, 2010Risk-free interest rate
    
    2.39% to 4.89%
    
    1.31% to 1.60%
    
    0.46% to 1.57%Expected option life
    
    3.5 years to 3.98 years
    
    3.75 years to 3.92 years
    
    0.47 year to 3.92 yearsExpected volatility
    
    39.95% to 46.31%
    
    58.45%
    
    72.88% to 77.15%Expected dividend
    
    0%
    
    0%
    
    0%
 The risk-free interest rate is based on the yields of the US Treasury bond as of the
grant date with maturity closest to the relevant option expiry date. The expected option
life has been assumed to be exercised evenly throughout the option life. Expected volatility
is derived by reference to the average annualized standard deviations of the continuously
compounded rates of return on the share prices of listed comparable companies.
 14.
    
    Other operating expenses
 Years ended June 30,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Donation
    
    
    3,000,000
    
    
    
    
    
    
    
    
    
    
    
    Fines
    
    
    
    
    
    
    
    
    
    
    2,367,000
    
    
    
    349,038Others
    
    
    131,763
    
    
    
    158,466
    
    
    
    661,249
    
    
    
    97,508Total other operating expenses
    
    
    3,131,763
    
    
    
    158,466
    
    
    
    3,028,249
    
    
    
    446,546
 15.
    
    Other operating income
 Years ended June 30,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Subsidy income
    
    
    39,913,661
    
    
    
    43,360,888
    
    
    
    37,640,235
    
    
    
    5,550,429Other operating income (Note)
    
    
    4,187,166
    
    
    
    2,214,893
    
    
    
    3,988,961
    
    
    
    588,21244,100,827
    
    
    
    45,575,781
    
    
    
    41,629,196
    
    
    
    6,138,641
 Note:
    
    Other operating income mainly comprised of sales of miscellaneous accessories and
write-off of long-aged advances from customers.  F - 39




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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 16.
    
    Other non-operating income
 Years ended June 30,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Unrealised exchange gain
    
    
    41,574,303
    
    
    
    3,042,036
    
    
    
    4,475,420
    
    
    
    659,945Others
    
    
    1,133,811
    
    
    
    3,161,579
    
    
    
    1,486,929
    
    
    
    219,26342,708,114
    
    
    
    6,203,615
    
    
    
    5,962,349
    
    
    
    879,208
 17.
    
    Income tax expenses (benefits)
 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 and VIE 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).
 INES, NNTS, NETS and 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 18%, 20%, 22%, 24% and 25% for calendar years
2008, 2009, 2010, 2011 and 2012, respectively for INES, NNTS, NETS and BSTS. In addition,
under the new law, preferential tax treatment for key software enterprise tax benefit has
been removed.
 INES and NNTS were entitled to a 50% income tax relief for the calendar years ended December
31, 2007 and 2008 as 2007 was the fourth year since the first profit making year (that is, a
tax rate of 7.5% and 9% for the calendar years ended December 31, 2007 and 2008
respectively). Starting from the calendar year of 2009, INES and NNTS are subject to a tax
rate of 20%.
  F - 40




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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 17.
    
    Income tax expenses (benefits) continuedNETS 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.BJS, CDS, BJNZY, BXNNS and CQS are established subsequent to the promulgation of the new tax law and as such, they are subject to
the uniform income tax rate of 25%.CDSD and CDZY were established in Chengdu High-Tech Economic Zone. They are recognised as key software companies and are entitled
to exemption from FEIT for the 2-plus-3 Income Tax Holiday. However, CDSD and CDZY are 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. Both CDSD and CDZY were exempted from FEIT for calendar year ended December 31, 2008 as 2008 was the first profit making
year.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. Despite the present uncertainties resulting from the limited PRC tax
guidance on the issue, the Company does not believe that its legal entities organized outside of the PRC should be treated as
residents for the new tax laws purposes. If one or more of the Companys legal entities organized outside of the PRC were
characterized as PRC tax residents, the impact would adversely affect the Companys results of operation.Aggregate undistributed earnings of the Companys subsidiaries and VIE in the PRC that are available for distribution to the
Company of approximately RMB465,000,000 (approximately US$69,000,000) at June 30, 2010 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.
  F - 41




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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 17.
    
    Income tax expenses (benefits) continuedThe following table sets forth current income tax expenses (benefits) of the Companys PRC subsidiaries and VIE, which were
included in the consolidated statements for the periods presented:
 Years ended June 30,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Current tax
    
    
    17,608
    
    
    
    171,798
    
    
    
    (1,367,582
    )
    
    
    (201,664
    )Deferred tax
    
    
    1,083,787
    
    
    
    83,085
    
    
    
    (236,990
    )
    
    
    (34,946
    )1,101,395
    
    
    
    254,883
    
    
    
    (1,604,572
    )
    
    
    (236,610
    )
 A reconciliation of income tax expense (benefits) to the amount computed by applying the current tax rate to the income before
income taxes in the consolidated statements of operations were as follows:
 Years ended June 30,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Income before income taxes
    
    
    145,299,866
    
    
    
    97,245,126
    
    
    
    4,055,253
    
    
    
    597,986Tax at the domestic income tax rate of 25%
    
    
    40,748,688
    
    
    
    24,311,282
    
    
    
    1,013,813
    
    
    
    149,497Tax effect of income that are not taxable:Allowance for research and development
    
    
    (2,970,336
    )
    
    
    (3,076,898
    )
    
    
    (9,054,092
    )
    
    
    (1,335,116
    )Derivative gain
    
    
    
    
    
    
    (1,451,878
    )
    
    
    
    
    
    
    Other non-taxable income
    
    
    
    
    
    
    (816,130
    )
    
    
    (585,708
    )
    
    
    (86,369
    )Tax effect of expenses that are not deductible:Share-based compensation expenses
    
    
    1,943,731
    
    
    
    1,148,507
    
    
    
    2,038,404
    
    
    
    300,583Certain employees benefits
    
    
    612,491
    
    
    
    
    
    
    
    
    
    
    
    Other non-deductible expenses
    
    
    721,968
    
    
    
    188,236
    
    
    
    417,897
    
    
    
    61,623Tax effect of intercompany transactions
that are not (taxable) deductible
    
    
    (9,628,803
    )
    
    
    11,604,484
    
    
    
    (4,880,430
    )
    
    
    (719,668
    )Effect of tax holidays and tax concessions:Preferential tax treatment
    
    
    (10,130,397
    )
    
    
    (12,182,410
    )
    
    
    288,825
    
    
    
    42,5902-plus-3 Income Tax Holiday
    
    
    (15,335,879
    )
    
    
    (18,003,975
    )
    
    
    (13,496,018
    )
    
    
    (1,990,123
    )Change in valuation allowance
    
    
    12,174,535
    
    
    
    6,804,482
    
    
    
    19,311,225
    
    
    
    2,847,633Non-taxable VAT refund
    
    
    (5,592,637
    )
    
    
    (6,524,172
    )
    
    
    (134,499
    )
    
    
    (19,833
    )Effect of changes in enacted tax law
and rates
    
    
    (11,884,938
    )
    
    
    (5,798,705
    )
    
    
    3,041,089
    
    
    
    448,439Overprovision in prior year
    
    
    
    
    
    
    
    
    
    
    (1,688,624
    )
    
    
    (249,004
    )Utilization of deductible temporary difference
not recognised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Effect of loss of the Company and
subsidiaries not subject to tax in other
jurisdictions
    
    
    442,972
    
    
    
    4,037,471
    
    
    
    2,061,593
    
    
    
    304,003Others
    
    
    
    
    
    
    14,589
    
    
    
    61,953
    
    
    
    9,1351,101,395
    
    
    
    254,883
    
    
    
    (1,604,572
    )
    
    
    (236,610
    )
  F - 42




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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 17.
    
    Income tax expenses continuedThe aggregate amount and per share effect of the tax holidays and tax concessions are as follows:
 Years ended June 30,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$The aggregate effect
    
    
    25,466,276
    
    
    
    30,186,385
    
    
    
    13,207,193
    
    
    
    1,947,533Per share effect  basic
    
    
    0.77
    
    
    
    0.83
    
    
    
    0.34
    
    
    
    0.05Per share effect  diluted
    
    
    0.74
    
    
    
    0.81
    
    
    
    0.34
    
    
    
    0.05
 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 unrecognised 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 unrecognised 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 unrecognised tax benefit within the next twelve
months. The Group classifies interest and/or penalties related to income tax matters in
income tax expense. As of June 30, 2010, there is a net interest of RMB1,259,565 consisting
of tax refund of RMB1,935,031 offsetting with additional tax assessment of RMB675,466
related to uncertain tax positions. The tax positions for the years 2006 to 2010 may be
subject to examination by the PRC tax authorities.Significant components of deferred tax assets:
 Years ended June 30,2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    US$Tax loss carried forwards
    
    
    31,699,575
    
    
    
    38,993,011
    
    
    
    5,749,909Future deductible expenditure
    
    
    
    
    
    
    6,947,159
    
    
    
    1,024,428Allowance for excess and obsolete inventories
    
    
    6,786,813
    
    
    
    9,203,597
    
    
    
    1,357,162Allowance for doubtful debts
    
    
    2,121,791
    
    
    
    4,906,999
    
    
    
    723,586Deferred revenue
    
    
    13,207
    
    
    
    
    
    
    
    Total deferred tax assets
    
    
    40,621,386
    
    
    
    60,050,766
    
    
    
    8,855,086Less: valuation allowance
    
    
    (38,549,999
    )
    
    
    (57,861,224
    )
    
    
    (8,532,216
    )Total net deferred tax assets
    
    
    2,071,387
    
    
    
    2,189,542
    
    
    
    322,870
 Movement of valuation allowances:
 As of June 30,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$At the beginning of year
    
    
    19,570,982
    
    
    
    31,745,517
    
    
    
    38,549,999
    
    
    
    5,684,583Current year addition
    
    
    12,174,535
    
    
    
    6,804,482
    
    
    
    19,311,225
    
    
    
    2,847,633At the end of year
    
    
    31,745,517
    
    
    
    38,549,999
    
    
    
    57,861,224
    
    
    
    8,532,216
 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, 2009 and 2010, 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
RMB29,843,732, RMB52,005,652 and RMB55,339,193 (US$8,160,317), incurred in the years ended
June 30, 2008, 2009 and 2010, respectively, will expire in the years ending June 30, 2012,
2013 and 2014, respectively.
  F - 43




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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 18.
    
    Net income per share
 The following table sets forth the computation of basic and diluted income per share for the years indicated:
 As of June 30,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Net income
    
    
    144,198,471
    
    
    
    96,990,243
    
    
    
    5,659,825
    
    
    
    834,596Deemed dividend on issuance of preference shares
    
    
    (379,092
    )
    
    
    
    
    
    
    
    
    
    
    Amounts allocated to preference shares for
participating rights to dividends
    
    
    (10,278,093
    )
    
    
    
    
    
    
    
    
    
    
    Income attributable to holders of ordinary shares
 basic
    
    
    133,541,286
    
    
    
    96,990,243
    
    
    
    5,659,825
    
    
    
    834,596Amount allocated to preference shares for
participating rights to dividends
    
    
    10,278,093
    
    
    
    
    
    
    
    
    
    
    
    Amount reallocated to preference shares for
participating rights to dividends
    
    
    (10,042,717
    )
    
    
    
    
    
    
    
    
    
    
    Income attributable to holders of ordinary shares
 diluted
    
    
    133,776,662
    
    
    
    96,990,243
    
    
    
    5,659,825
    
    
    
    834,596Weighted average ordinary shares outstanding used
in computing basic income per share
    
    
    33,153,982
    
    
    
    36,446,790
    
    
    
    38,327,047
    
    
    
    38,327,047Plus incremental weighted average ordinary shares
from assumed exercise of share options using the
treasury stock method
    
    
    902,333
    
    
    
    622,702
    
    
    
    874,342
    
    
    
    874,342Shares used in calculating diluted income per share
    
    
    34,056,315
    
    
    
    37,069,492
    
    
    
    39,201,389
    
    
    
    39,201,389Basic earnings per share
    
    
    4.03
    
    
    
    2.66
    
    
    
    0.15
    
    
    
    0.02Diluted earnings per share
    
    
    3.93
    
    
    
    2.62
    
    
    
    0.14
    
    
    
    0.02
 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 30,2008
    
    
    2009
    
    
    2010Warrants
    
    
    218,064
    
    
    
    
    
    
    
    Share options
    
    
    
    
    
    
    1,903,017
    
    
    
    889,597
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NOAH EDUCATION HOLDINGS LTD.
 19.
    
    Related party balances and transactions
 The Company has entered into a number of transactions with related parties. The balances
and transactions with these related parties for the years ended June 30, 2008, 2009 and 2010
are as follows:
 Name of related party
    
    Relationship with the GroupXu Dong
    
    Chairman, director and shareholderWang Xiao Tong
    
    Director and shareholderTang Ben Guo
    
    Director and shareholderRick Chen (note 1)
    
    Executive Vice PresidentOuyang Ming
    
    Vice President, Content DevelopmentXiao Xian Quan
    
    Director, Chief Operating Officer and Vice Presidents, SalesDora Li
    
    Vice President, Finance and Finance ControllerLiu Yi
    
    Vice President, Sales and Marketing
 Note 1:
    
    Rick Chen resigned on August 1, 2010.(1)
    
    Balances with its related parties As of June 30,Name of related party
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    US$Related party receivables
    
    Xu Dong
    
    
    55,000
    
    
    
    47,980
    
    
    
    7,075Wang Xiao Tong
    
    
    
    
    
    
    
    
    
    
    Tang Ben Guo
    
    
    9,233
    
    
    
    5,000
    
    
    
    737Rick Chen
    
    
    21,098
    
    
    
    
    
    
    
    Ouyang Ming
    
    
    203,488
    
    
    
    115,446
    
    
    
    17,024Xiao Xian Quan
    
    
    324,345
    
    
    
    268,777
    
    
    
    39,634Dora Li
    
    
    462
    
    
    
    
    
    
    
    Liu Yi
    
    
    14,000
    
    
    
    
    
    
    
    627,626
    
    
    
    437,203
    
    
    
    64,470
 The amounts are unsecured, interest free and are repayable on demand.
 (2)
    
    There is no related party transaction for the years ended June 30, 2008, 2009
and 2010.  F - 45




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NOAH EDUCATION HOLDINGS LTD.
 20.
    
    Commitments and contingenciesCommitments
 As of June 30, 2010, the Company had commitments under non-cancelable operating leases for
office facilities, contracts for marketing expenses and acquisition agreement for Wentai
Education Group. Future minimum lease payments at June 30, 2010, by year end are as
follows:
 Operating
    
    
    
    
    
    
    Acquisitionleases for
    
    
    Marketing
    
    
    of Wentaioffice facilities
    
    
    expenses
    
    
    Education Group
    
    
    Total
    
    
    TotalRMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    US$2011
    
    
    7,846,779
    
    
    
    4,813,954
    
    
    
    126,000,000
    
    
    
    138,660,733
    
    
    
    20,446,9122012
    
    
    4,453,590
    
    
    
    
    
    
    
    
    
    
    
    4,453,590
    
    
    
    656,7262013
    
    
    3,750,848
    
    
    
    
    
    
    
    
    
    
    
    3,750,848
    
    
    
    553,1002014
    
    
    2,272,366
    
    
    
    
    
    
    
    
    
    
    
    2,272,366
    
    
    
    335,0832015
    
    
    698,203
    
    
    
    
    
    
    
    
    
    
    
    698,203
    
    
    
    102,957Thereafter
    
    
    2,841,542
    
    
    
    
    
    
    
    
    
    
    
    2,841,542
    
    
    
    419,01421,863,328
    
    
    
    4,813,954
    
    
    
    126,000,000
    
    
    
    152,677,282
    
    
    
    22,513,792
 The Group incurred rental expenses under operating leases of RMB5,793,608, RMB7,427,482
and RMB7,152,204 (US$1,054,664) for the years ended June 30, 2008, 2009 and 2010,
respectively.Significant legal proceedings
 In October 2008, a securities class action lawsuit, entitled Seidel v. Noah Education
Holdings Ltd. et al. was filed in the United States District Court for the Southern District
of New York against the Company in connection with the Companys October 2007 initial public
offering. The plaintiffs in this case allege that the registration statement of the
Companys October 2007 initial public offering purported to warn about the potential impact
of increases in component costs, but failed to disclose that the Group was then experiencing
increased raw material costs. The plaintiffs allege federal securities law violations and
seek unspecified damage. In November 2008, two additional securities class action lawsuits,
entitled Schapiro v. Noah Education Holdings Ltd. et al. and Sebik v. Noah Education
Holdings Ltd. et al. were filed in the United States District Court for the Southern
District of New York against the Company with substantially the same allegation. The court
has consolidated these complaints into a single action and the consolidated complaint added
a new allegation, claiming the registration statement of the Companys October 2007 initial
public offering failed to disclose that one model of the DLD devices did not include a
recycling warning sticker required under the PRC laws (the 2008 Legal Case). As of the
date of this report, the Company agreed a settlement with the plaintiffs and details of
which is set out in note 24.
  F - 46




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NOAH EDUCATION HOLDINGS LTD.
 20.
    
    Commitments and contingencies continuedSignificant legal proceedings continued
 In October 2005 and December 2006, Beijing Renai Education Institution (Beijing Renai)
commenced two separate proceedings at the Beijing First Intermediate Peoples Court against
INES for alleged infringement of Beijing Renais copyright in its textbooks and recorded
pronunciations of English words used by INES on its website. Beijing Renai withdrew its
first claim in December 2006 and its second claim in February 2007. In July 2007, Beijing
Renai commenced two new legal proceedings at the Beijing Haidian District Peoples Court
and the Anhui Province Hefei City Intermediate Peoples Court against INES on substantially
the same grounds and claimed RMB500,000 as compensation. The judgments of the legal
proceedings were delivered in May 2008 and July 2008, and INES was ordered to settle
compensation of approximately RMB165,000 and RMB63,000 to Beijing Renai. In September
2008, INES appealed the judgment of Anhui Province Hefei City Intermediate Peoples Court to
Anhui Province Higher Peoples Court. In June 2009, the appellate court issued the final
judgment ordering INES to pay settlement compensation of approximately RMB62,000 to Beijing
Renai, which has been fully settled during fiscal year 2010. In January 2009, INES
appealed the judgment of Beijing Haidian District Peoples Court to the appellate court,
Beijing First Intermediate Peoples Court and the second instance started in July 2009. In
December 2009, the case was settled by compensation of approximately RMB452,360 paid to
Beijing Renai in January 2010. In August 2009, Beijing Renai commenced a new legal
proceeding at the Beijing Haidian Distrct Peoples Court against INES on substantially the
same grounds and claimed RMB 1,000,000 as compensation. The judgment of the legal
proceeding was delivered in March 2010 and INES was ordered to settle compensation of
approximately RMB100,000. Upon receiving this judgment, in the same month, INES appealed
the judgment of Beijing Haidian District Peoples Court to the appellate court, Beijing
First Intermediate Peoples Court and the case remains pending as of the date of this
report. Accruals of RMB100,000 has been made as of June 30, 2010 regarding this case.
 In November 2008 and January 2009, Shenzhen Wanhong Technology Development Co., Ltd.,
(Shenzhen Wanhong) commenced two separate legal proceedings at the Shenzhen Intermediate
Peoples Court and Jinan Intermediate Peoples Court against INES and NNTS for alleged
infringement of Shenzhen Wanhongs patent right. In March 2009, judgment from the Shenzhen
Intermediate Peoples Court was delivered. INES and NNTS was order to settle compensation
of approximately RMB514,000. INES and NNTS appealed to Guangdong Province Higher Peoples
Court and final judgment was issued in September 2009 dismissing all the claims of Shenzhen
Wanhong. In October 2009, Shenzhen Wanhong submitted the petition for retrial to Guangdong
Province Higher Peoples Court to reconsider the final judgment issued in September 2009.
In January 2010, the request for reconsideration was approved and the judgment by Guangdong
Province Higher Peoples Court was subject to be reexamined. In relation to the case filed
at Jinan Intermediate Peoples Court and Guangdong Province Higher Peoples Court, INES and
NNTS requested the Patent Reexamination Board of the State Intellectual Property Office to
reexamine Shenzhen Wanhongs patent and declare it invalid. As a result of the
reexamination, the Patent Reexamination Board invalidated Shenzhen Wanhongs patent.
Shenzhen Wanghong consequently filed an administrative action against the Patent
Reexamination Board at Beijing First Intermediate Peoples Court. In January 2010, the
judgment of the administrative action was delivered and the Shenzhen Wanhongs patent
remained invalid. In March 2010, Shenzhen Wanhong appealed the judgment of Beijing First
Intermediate Peoples Court to the appellate court, Beijing Higher Peoples Court and the
second instance commenced in July 2010. As of the date of this report, the validity of
Shenzhen Wanhongs patent right has not been determined and the case filed at Jinan
Intermediate Peoples Court and Guangdong Province Higher Peoples Court remain pending.
  F - 47




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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 20.
    
    Commitments and contingencies continuedOther contingencyThe Company 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 RMB7,202,858 and
RMB8,248,213 (US$1,216,282) as of June 30, 2009 and 2010,
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 RMB5,618,000 (US$828,000) as of June
30, 2010 (RMB5,047,000 as of June 30, 2009).
 21.
    
    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. During the year ended June 30, 2005, the Group made total
appropriations to these statutory reserves of approximately RMB5,000,000. The statutory
surplus reserve balance at June 30, 2009 and 2010, were RMB5,000,000 and RMB5,597,894
(US$825,465), 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 at June 30, 2009
and 2010 amounted to RMB921,999,899 and RMB931,984,994(US$137,430,509), respectively.
  F - 48




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NOAH EDUCATION HOLDINGS LTD.
 22.
    
    Segment information
 Prior to July 1, 2009, the Group operated in one operating segment, focused primarily on the
development, manufacture and sale of specialty handheld digital learning devices and
content. The Group also provided after-class tuition programs to primary and secondary
school students that were not significant enough to be considered a separate segment. These
programs are no longer offered (collectively refer to electronic learning products or the
ELP Products). Upon completion of the acquisition of the LNS, the Group began to provide
education services by offering English language training program to kids (the Education
Services).
 The Groups chief operating decision maker (CODM) has been identified as the Chief
Executive Officer and senior management, including the President, Vice Presidents and Chief
Finance Officer. The CODM reviews the operating results of ELP Products and Education
Services separately to allocate resources and assess performance of the Group.
 The financial information as reviewed by the Groups CODM is as follows:
 ELD Products
    
    
    Education Services
    
    
    ConsolidatedFor the year ended June 30,
    
    
    For the year ended June 30,
    
    
    For the year ended June 30,2008
    
    
    2009
    
    
    2010
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2008
    
    
    2009
    
    
    2010Net revenue  external
    
    
    651,934,602
    
    
    
    671,145,679
    
    
    
    640,390,206
    
    
    
    
    
    
    
    
    
    
    
    39,897,671
    
    
    
    651,934,602
    
    
    
    671,145,679
    
    
    
    680,287,877Cost of revenue
    
    
    (318,787,904
    )
    
    
    (326,400,700
    )
    
    
    (350,260,105
    )
    
    
    
    
    
    
    
    
    
    
    (18,493,518
    )
    
    
    (318,787,904
    )
    
    
    (326,400,700
    )
    
    
    (368,753,623
    )Gross profits
    
    
    333,146,698
    
    
    
    344,744,979
    
    
    
    290,130,101
    
    
    
    
    
    
    
    
    
    
    
    21,404,153
    
    
    
    333,146,698
    
    
    
    344,744,979
    
    
    
    311,534,254Research and development
expenditures
    
    
    (52,666,685
    )
    
    
    (56,301,924
    )
    
    
    (50,852,334
    )
    
    
    
    
    
    
    
    
    
    
    (1,878,735
    )
    
    
    (52,666,685
    )
    
    
    (56,301,924
    )
    
    
    (52,731,069
    )Sales and marketing expenses
    
    
    (197,430,136
    )
    
    
    (210,692,882
    )
    
    
    (216,103,925
    )
    
    
    
    
    
    
    
    
    
    
    (3,390,773
    )
    
    
    (197,430,136
    )
    
    
    (210,692,882
    )
    
    
    (219,494,698
    )General and administrative
expenses
    
    
    (44,259,888
    )
    
    
    (58,498,799
    )
    
    
    (84,552,689
    )
    
    
    
    
    
    
    
    
    
    
    (7,221,763
    )
    
    
    (44,259,888
    )
    
    
    (58,498,799
    )
    
    
    (91,774,452
    )Other operating expenses
    
    
    (3,131,763
    )
    
    
    (158,466
    )
    
    
    (2,925,136
    )
    
    
    
    
    
    
    
    
    
    
    (103,113
    )
    
    
    (3,131,763
    )
    
    
    (158,466
    )
    
    
    (3,028,249
    )Other operating income
    
    
    44,100,827
    
    
    
    45,575,781
    
    
    
    41,584,201
    
    
    
    
    
    
    
    
    
    
    
    44,995
    
    
    
    44,100,827
    
    
    
    45,575,781
    
    
    
    41,629,196Derivative (loss) gain
    
    
    (1,868,238
    )
    
    
    5,807,511
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,868,238
    )
    
    
    5,807,511
    
    
    
    Interest income
    
    
    13,643,761
    
    
    
    5,307,899
    
    
    
    9,103,707
    
    
    
    
    
    
    
    
    
    
    
    30,445
    
    
    
    13,643,761
    
    
    
    5,307,899
    
    
    
    9,134,152Investment income
    
    
    11,057,176
    
    
    
    15,257,412
    
    
    
    2,823,770
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,057,176
    
    
    
    15,257,412
    
    
    
    2,823,770Other non-operating income
    
    
    42,708,114
    
    
    
    6,203,615
    
    
    
    5,958,505
    
    
    
    
    
    
    
    
    
    
    
    3,844
    
    
    
    42,708,114
    
    
    
    6,203,615
    
    
    
    5,962,349Income taxes (expenses) benefits
    
    
    (1,101,395
    )
    
    
    (254,883
    )
    
    
    1,768,972
    
    
    
    
    
    
    
    
    
    
    
    (164,400
    )
    
    
    (1,101,395
    )
    
    
    (254,883
    )
    
    
    1,604,572Net income (loss)
    
    
    144,198,471
    
    
    
    96,990,243
    
    
    
    (3,064,828
    )
    
    
    
    
    
    
    
    
    
    
    8,724,653
    
    
    
    144,198,471
    
    
    
    96,990,243
    
    
    
    5,659,825Acquisition of property,
plant and equipment
    
    
    (3,925,188
    )
    
    
    (96,829,444
    )
    
    
    (18,041,717
    )
    
    
    
    
    
    
    
    
    
    
    (2,319,712
    )
    
    
    (3,925,188
    )
    
    
    (96,829,444
    )
    
    
    (20,361,429
    )Acquisition of intangible assets
    
    
    (5,028,528
    )
    
    
    (3,736,744
    )
    
    
    (5,125,000
    )
    
    
    
    
    
    
    
    
    
    
    (2,700,000
    )
    
    
    (5,028,528
    )
    
    
    (3,736,744
    )
    
    
    (7,825,000
    )Acquisition of AFS investment
    
    
    
    
    
    
    
    
    
    
    (20,480,700
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,480,700
    )Acquisition of equity investment
    
    
    (910,000
    )
    
    
    (21,581,952
    )
    
    
    (8,685,215
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (910,000
    )
    
    
    (21,581,952
    )
    
    
    (8,685,215
    )Amortisation of intangible assets
    
    
    5,115,148
    
    
    
    5,779,198
    
    
    
    5,526,229
    
    
    
    
    
    
    
    
    
    
    
    1,369,709
    
    
    
    5,115,148
    
    
    
    5,779,198
    
    
    
    6,895,938Depreciation of property, plant
and equipment
    
    
    3,021,971
    
    
    
    4,901,623
    
    
    
    9,608,832
    
    
    
    
    
    
    
    
    
    
    
    1,218,480
    
    
    
    3,021,971
    
    
    
    4,901,623
    
    
    
    10,827,312Allowance for doubtful debts
    
    
    11,184,045
    
    
    
    1,459,142
    
    
    
    21,262,662
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,184,045
    
    
    
    1,459,142
    
    
    
    21,262,662Write-down of excess and
obsolete inventories
    
    
    9,764,368
    
    
    
    2,131,102
    
    
    
    9,667,136
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,764,368
    
    
    
    2,131,102
    
    
    
    9,667,136Loss on disposal of property,
plant
and equipment
    
    
    3,009
    
    
    
    13,187
    
    
    
    483,496
    
    
    
    
    
    
    
    
    
    
    
    212,794
    
    
    
    3,009
    
    
    
    13,187
    
    
    
    696,290Impairment loss on
intangible assets
    
    
    
    
    
    
    
    
    
    
    264,227
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    264,227Segment assets
    
    
    n/a
    
    
    
    1,327,018,637
    
    
    
    1,295,581,499
    
    
    
    n/a
    
    
    
    
    
    
    
    80,584,593
    
    
    
    n/a
    
    
    
    1,327,018,637
    
    
    
    1,376,166,092Segment liabilities
    
    
    n/a
    
    
    
    139,924,420
    
    
    
    139,270,438
    
    
    
    n/a
    
    
    
    
    
    
    
    19,872,084
    
    
    
    n/a
    
    
    
    139,924,420
    
    
    
    159,142,522
  F - 49




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##### Table of Contents



NOAH EDUCATION HOLDINGS LTD.
 22.
    
    Segment information  continued
 Geographical disclosures:the Company mainly operates in the PRC and in 2008, 2009 and 2010,
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
Companys net revenue for the years ended June 30, 2008, 2009 and 2010.Product groups:the Company sells specialty handheld electronic learning devices, which include digital
learning devices and e-dictionaries, that are similar in nature, have similar production process, have
similar type of customers and utilize the same distribution method, as discrete financial information is
not available for the Companys operations of prepaid cards and software; they are considered to be
service lines instead of segment. Revenue from these product groups are as follows:
 For the years ended June 30,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Electronic learning devices
    
    
    644,957,464
    
    
    
    664,745,790
    
    
    
    639,760,165
    
    
    
    94,339,035Prepaid premium cards
    
    
    1,251,406
    
    
    
    175,284
    
    
    
    
    
    
    
    Software
    
    
    3,864,279
    
    
    
    1,517,094
    
    
    
    
    
    
    
    650,073,149
    
    
    
    666,438,168
    
    
    
    639,760,165
    
    
    
    94,339,035Tuition fee income
    
    
    1,861,453
    
    
    
    4,707,511
    
    
    
    40,527,712
    
    
    
    5,976,216651,934,602
    
    
    
    671,145,679
    
    
    
    680,287,877
    
    
    
    100,315,251
 23.
    
    Subsequent event
 1.
    
    On March 12, 2010, NETS entered into an investment agreement with Wentai
Education and shareholders of Wentai Education for 70% equity interest in Wentai
Education through share transfer and capital injection as disclosed in Note 10.2. The
Acquisition consideration was paid at July 29, 2010, also the acquisition date, and the
transfer and registration procedures of the acquisition of Wentai Education were
completed on August 1, 2010. Accordingly, the controlling interest in Wentai Education
was substantially obtained as at July 29, 2010.2.
    
    On September 9, 2010, the Company signed a memorandum of understanding,
agreeing to settle the 2008 Legal Case for $1.75 million which will be fully covered by
the Companys insurance policy. In exchange, the plaintiffs have agreed to dismiss the
2008 Legal Case and drop their appeal of the courts ruling in Companys favor. The
settlement is still subject to the courts preliminary and final approvals and notice
to the class members whereas the settlement has been made by insurance up to Oct 1,
2010. The settlement has not been approved or become final as of the date of this
report.
  F - 50




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##### Table of Contents



SCHEDULE 1
 
 As of June 30,2009
    
    
    2010RMB
    
    
    RMBAssetsCurrent assetsCash and cash equivalents
    
    
    70,594,995
    
    
    
    73,290,584Amounts due from subsidiaries
    
    
    788,271,786
    
    
    
    711,440,391Trading investments
    
    
    7,978,942
    
    
    
    5,493,179Prepaid expenses and other current assets
    
    
    424,086
    
    
    
    3,064,689Total current assets
    
    
    867,269,809
    
    
    
    793,288,843Investments in subsidiaries
    
    
    312,732,885
    
    
    
    423,396,394Deposit for investment
    
    
    18,581,952
    
    
    
    Investments
    
    
    
    
    
    
    29,875,954Total assets
    
    
    1,198,584,646
    
    
    
    1,246,561,191Liabilities and Shareholders EquityCurrent LiabilitiesOther payables and accruals
    
    
    3,797,194
    
    
    
    23,303,685Deferred revenue
    
    
    1,465,375
    
    
    
    1,465,460Total current liabilities
    
    
    5,262,569
    
    
    
    24,769,145Non-current LiabilityDeferred revenue
    
    
    6,227,860
    
    
    
    4,768,476Total liabilities
    
    
    11,490,429
    
    
    
    29,537,621Shareholders EquityOrdinary shares, US$0.00005 par value; 1,000,000,000 shares
authorised as of June 30, 2009 and 2010; 35,589,120 and
37,613,701 shares issued and outstanding as of June 30, 2009
and 2010 respectively
    
    
    14,504
    
    
    
    15,195Additional paid-in capital
    
    
    1,029,778,033
    
    
    
    1,049,366,056Accumulated other comprehensive loss
    
    
    (93,632,438
    )
    
    
    (88,951,624
    )Retained earnings
    
    
    250,934,118
    
    
    
    256,593,943Total shareholders equity
    
    
    1,187,094,217
    
    
    
    1,217,023,570Total liabilities and shareholders equity
    
    
    1,198,584,646
    
    
    
    1,246,561,191
  F - 51




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##### Table of Contents



SCHEDULE 1
 
 Years ended June 30,2008
    
    
    2009
    
    
    2010RMB
    
    
    RMB
    
    
    RMBGeneral and administrative expenses
    
    
    (7,445,427
    )
    
    
    (14,638,999
    )
    
    
    (15,757,634
    )Other operating expenses
    
    
    
    
    
    
    (14,596
    )
    
    
    Other operating income (loss)
    
    
    49,872,230
    
    
    
    (3,883,766
    )
    
    
    5,597,938Operating (loss) income
    
    
    42,426,803
    
    
    
    (18,537,361
    )
    
    
    (10,159,696
    )Derivative (loss) gain
    
    
    (1,868,238
    )
    
    
    5,807,511
    
    
    
    Other non-operating income
    
    
    1,133,811
    
    
    
    3,161,579
    
    
    
    Investment (loss) income
    
    
    (810,067
    )
    
    
    (934,649
    )
    
    
    1,135,078Interest income
    
    
    11,062,762
    
    
    
    324,807
    
    
    
    669Income (loss) before income taxes
    
    
    51,945,071
    
    
    
    (10,178,113
    )
    
    
    (9,023,949
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    Income (loss) after tax
    
    
    51,945,071
    
    
    
    (10,178,113
    )
    
    
    (9,023,949
    )Share of net profits of subsidiaries, net of taxes
    
    
    92,253,400
    
    
    
    107,168,356
    
    
    
    14,683,774Net income
    
    
    144,198,471
    
    
    
    96,990,243
    
    
    
    5,659,825Preference stock dividend
    
    
    
    
    
    
    
    
    
    
    Deemed dividend
    
    
    (379,092
    )
    
    
    
    
    
    
    Net income attributable to ordinary shareholders
    
    
    143,819,379
    
    
    
    96,990,243
    
    
    
    5,659,825
  F - 52




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##### Table of Contents



SCHEDULE 1
 
 AccumulatedAdditional
    
    
    other
    
    
    
    
    
    
    TotalOrdinary shares
    
    
    paid-in
    
    
    comprehensive
    
    
    Retained
    
    
    shareholders
    
    
    ComprehensiveShare
    
    
    Amount
    
    
    capital
    
    
    (Loss) Income
    
    
    earnings
    
    
    equity
    
    
    incomeRMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMBAs at June 30, 2007
    
    
    21,473,442
    
    
    
    8,888
    
    
    
    48,737,939
    
    
    
    (5,497,826
    )
    
    
    61,428,933
    
    
    
    104,677,934
    
    
    
    63,412,440Issue of ordinary shares pursuant
to initial public offering
    
    
    10,202,641
    
    
    
    3,809
    
    
    
    1,067,015,352
    
    
    
    
    
    
    
    
    
    
    
    1,067,019,161
    
    
    
    Direct offering expenses
    
    
    
    
    
    
    
    
    
    
    (90,480,425
    )
    
    
    
    
    
    
    
    
    
    
    (90,480,425
    )
    
    
    Conversion of preference shares
to ordinary shares
    
    
    6,521,962
    
    
    
    2,698
    
    
    
    129,753,248
    
    
    
    
    
    
    
    
    
    
    
    129,755,946
    
    
    
    Share repurchase
    
    
    (143,484
    )
    
    
    (49
    )
    
    
    (5,833,952
    )
    
    
    
    
    
    
    
    
    
    
    (5,834,001
    )
    
    
    Exercise of share options
    
    
    8,640
    
    
    
    3
    
    
    
    82,183
    
    
    
    
    
    
    
    
    
    
    
    82,186
    
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    144,198,471
    
    
    
    144,198,471
    
    
    
    144,198,471Share-based compensation
    
    
    
    
    
    
    
    
    
    
    20,344,637
    
    
    
    
    
    
    
    
    
    
    
    20,344,637
    
    
    
    Cumulative translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (84,451,629
    )
    
    
    
    
    
    
    (84,451,629
    )
    
    
    (84,451,629
    )Deemed distribution to
shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (379,092
    )
    
    
    (379,092
    )
    
    
    As at June 30, 2008
    
    
    38,063,201
    
    
    
    15,349
    
    
    
    1,169,618,982
    
    
    
    (89,949,455
    )
    
    
    205,248,312
    
    
    
    1,284,933,188
    
    
    
    59,746,842Share repurchase
    
    
    (2,585,138
    )
    
    
    (883
    )
    
    
    (62,461,110
    )
    
    
    
    
    
    
    
    
    
    
    (62,461,993
    )
    
    
    Exercise of share options
    
    
    111,057
    
    
    
    38
    
    
    
    661,926
    
    
    
    
    
    
    
    
    
    
    
    661,964
    
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    96,990,243
    
    
    
    96,990,243
    
    
    
    96,990,243Share-based compensation
    
    
    
    
    
    
    
    
    
    
    8,173,461
    
    
    
    
    
    
    
    
    
    
    
    8,173,461
    
    
    
    Cumulative translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,682,983
    )
    
    
    
    
    
    
    (3,682,983
    )
    
    
    (3,682,983
    )Dividend to ordinary shareholders
    
    
    
    
    
    
    
    
    
    
    (86,215,226
    )
    
    
    
    
    
    
    (51,304,437
    )
    
    
    (137,519,663
    )
    
    
    As at June 30, 2009
    
    
    35,589,120
    
    
    
    14,504
    
    
    
    1,029,778,033
    
    
    
    (93,632,438
    )
    
    
    250,934,118
    
    
    
    1,187,094,217
    
    
    
    93,307,260Issue 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
    
    
    
    5,659,825Share-based compensation
    
    
    
    
    
    
    
    
    
    
    10,395,821
    
    
    
    
    
    
    
    
    
    
    
    10,395,821
    
    
    
    Cumulative translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,714,440
    )
    
    
    
    
    
    
    (4,714,440
    )
    
    
    (4,714,440
    )Unrealised gain on
available-for-sale
investment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,395,254
    
    
    
    
    
    
    
    9,395,254
    
    
    
    9,395,254As at June 30, 2010
    
    
    37,613,701
    
    
    
    15,195
    
    
    
    1,049,366,056
    
    
    
    (88,951,624
    )
    
    
    256,593,943
    
    
    
    1,217,023,570
    
    
    
    103,647,899
  F - 53




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##### Table of Contents



SCHEDULE 1
 
 Years ended June 30,2008
    
    
    2009
    
    
    2010RMB
    
    
    RMB
    
    
    RMBCash flows from operating activities:Net income
    
    
    144,198,471
    
    
    
    96,990,243
    
    
    
    5,659,825Adjustments to reconcile net income to net cash
provide by (used in) operating activities:Share of net profits of subsidiaries
    
    
    (92,253,400
    )
    
    
    (107,168,356
    )
    
    
    (14,683,774
    )Derivative loss (gain)
    
    
    1,868,238
    
    
    
    (5,807,511
    )
    
    
    Loss (gain) on trading investments, net
    
    
    852,373
    
    
    
    1,428,850
    
    
    
    (868,255
    )Share based compensation
    
    
    825,865
    
    
    
    1,384,373
    
    
    
    3,501,096Unrealised exchange difference
    
    
    (137,927,681
    )
    
    
    263,282
    
    
    
    (2,893,637
    )Changes in current assets and liabilities:Trading investments
    
    
    (13,727,590
    )
    
    
    3,467,425
    
    
    
    3,354,018Prepaid expenses and other current assets
    
    
    (2,932,746
    )
    
    
    2,588,623
    
    
    
    (2,640,603
    )Other payables and accruals
    
    
    (4,006,766
    )
    
    
    488,686
    
    
    
    (493,509
    )Deferred revenue
    
    
    9,186,294
    
    
    
    (1,493,059
    )
    
    
    (1,459,299
    )Net cash provided by (used in) operating activities
    
    
    (93,916,942
    )
    
    
    (7,857,444
    )
    
    
    (10,524,138
    )Cash flows from investing activities:Deposit for investment
    
    
    
    
    
    
    (18,581,952
    )
    
    
    18,581,952Amount paid for acquisition of LNS
    
    
    
    
    
    
    
    
    
    
    (33,000,000
    )Capital injections in subsidiaries
    
    
    (22,649,638
    )
    
    
    
    
    
    
    (Advances to) repayment from subsidiaries
    
    
    (848,185,373
    )
    
    
    275,001,695
    
    
    
    76,831,395Acquisition of investments
    
    
    
    
    
    
    
    
    
    
    (20,480,700
    )Net cash provided by (used in) investing activities
    
    
    (870,835,011
    )
    
    
    256,419,743
    
    
    
    41,932,647Cash flows from financing activities:Proceeds from issuance of ordinary shares,
net of issuance costs
    
    
    976,538,736
    
    
    
    
    
    
    
    Proceeds from exercise of share options
    
    
    82,186
    
    
    
    661,964
    
    
    
    10,506,502Shares repurchase
    
    
    (5,834,001
    )
    
    
    (62,461,993
    )
    
    
    (38,698,609
    )Dividend paid to ordinary and preference
shareholders
    
    
    
    
    
    
    (137,519,663
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    970,786,921
    
    
    
    (199,319,692
    )
    
    
    (28,192,107
    )Effect of exchange rate changes on cash and
cash equivalents
    
    
    (1,698,532
    )
    
    
    (85,011
    )
    
    
    (520,813
    )Net increase in cash and cash equivalents
    
    
    6,034,968
    
    
    
    49,242,607
    
    
    
    3,216,402Cash and cash equivalents at the beginning of year
    
    
    17,100,963
    
    
    
    21,437,399
    
    
    
    70,594,995Cash and cash equivalents at the end of year
    
    
    21,437,399
    
    
    
    70,594,995
    
    
    
    73,290,584
  F - 54




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##### Table of Contents



SCHEDULE 1
 
   F - 55