SEC Company Response from TAL Education Group (TAL) (CIK 0001499620) (TAL) — Apr 15, 2013
TAL Education Group (TAL) (CIK 0001499620)
Date: April 15, 2013 · CIK: 0001499620 · Accession: 0001104659-13-029282
AI Filing Summary & Sentiment
File numbers found in text: 001-34900
Referenced dates: February 28, 2013
Letter
VIA EDGAR Securities and Exchange Commission Re: TAL Education Group (the “Company”) Form 20-F for the Fiscal Year Ended February 29, 2012 (the “2012 Form 20-F”) Filed On June 27, 2012 (File No. 001-34900)
Dear Mr. Spirgel, Mr. Pacho and Ms. Adams:
This letter sets forth the Company’s responses to the comments contained in the letter dated February 28, 2013 from the staff (the “Staff”) of the Securities and Exchange Commission (the “SEC”) regarding the Company’s 2012 Form 20-F. The Staff’s comments are repeated below and are followed by the Company’s responses thereto. All capitalized terms used but not defined in this letter shall have the meanings ascribed to such terms in the 2012 Form 20-F.
Form 20-F for the Fiscal Year Ended February 29,
2012 Risk factors, page 5
We rely on contractual arrangements..., page 17
1. Disclose, if true, that the assets of the VIE are not secured on behalf of the WFOE, and describe the risk that the assets of the VIE may be transferred or encumbered by the shareholders of the VIE and the amounts owed by the VIE under the contractual agreements may not be collateralized.
The Company acknowledges to the Staff that the assets of Beijing Xueersi Network Technology Co., Ltd. (“Xueersi Network”), Beijing Xueersi Education Technology Co., Ltd. (“Xueersi Education”), and Beijing Dongfangrenli Science & Commerce Co., Ltd.(“Beijing Dongfangrenli” and, together with Xueersi Network and Xueersi Education, the “VIEs”) are not secured on the behalf of TAL Education Technology (Beijing) Co., Ltd. (“TAL Beijing”), the Company’s wholly owned PRC subsidiary. Rather, each of the shareholders of the VIEs has unconditionally and irrevocably pledged all of his respective equity interests in the VIEs to TAL Beijing under the applicable equity pledge agreement to guarantee the performance of the obligations of the VIEs under the exclusive business cooperation agreements that the VIEs have entered into with TAL Beijing. The Company can exercise its rights under the equity pledge agreements through TAL Beijing, including selling all equity interests in the VIEs.
In response to the Staff’s comment, the Company respectfully advises the Staff that in its next Form 20-F, it will expand the relevant risk factor currently on page 17 of the 2012 Form 20-F as follows (the added portions are in italics and underlined):
“We rely on contractual arrangements with our Consolidated Affiliated Entities for our China operations, which may not be as effective in providing operational control as direct ownership.
We have relied and expect to continue to rely on contractual arrangements with our Consolidated Affiliated Entities to operate our education business. For a description of these contractual arrangements, see “Item 4.C—Information on the Company—Organizational Structure—Contractual Arrangements with Our Consolidated Affiliated Entities.” These contractual arrangements may not be as effective in providing us with control over our Consolidated Affiliated Entities as direct ownership. If we had direct ownership of the Consolidated Affiliated Entities, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of these entities, which in turn could effect changes, subject to any applicable fiduciary obligations, at the management level. However, under the current contractual arrangements, we rely on the performance by our Consolidated Affiliated Entities and their respective shareholders of their obligations under the contracts to exercise control over and receive economic benefits from our Consolidated Affiliated Entities.
We have entered into equity pledge agreements with Xueersi Education, Xueersi Network and Beijing Dongfangrenli and their respective shareholders to guarantee the performance of the obligations of our Consolidated Affiliated Entities under the exclusive business service agreements they have entered into with us. In the registration forms submitted to the local branch of the State Administration for Industry and Commerce for the pledges over the equity interests under the equity pledge agreements, the amount of registered equity interests pledged to TAL Beijing, our wholly owned subsidiary, was RMB10,000,000, RMB3,000,000 and RMB1,000,000 for Xueersi Education, Xueersi Network and Beijing Dongfangrenli, respectively, which represents 100% of their respective registered capital. The equity pledge agreements with the shareholders of the Variable Interest Entities provide that the pledged equity interest shall constitute continuing security for any and all of the indebtedness, obligations and liabilities under all of the principal service agreements and the scope of pledge shall not be limited by the amount of the registered capital of the Variable Interest Entities. However, it is possible that a PRC court may take the position that the amount listed on the equity pledge registration forms represents the full amount of the collateral that has been registered and perfected. If this is the case, the obligations that are supposed to be secured in the equity pledge agreements in excess of the amount listed on the equity pledge registration forms could be determined by the PRC court as unsecured debt, which takes last priority among creditors.
In addition, we have not entered into agreements with our Variable Interest Entities that pledge the assets of our Consolidated Affiliated Entities for the benefit of us or our wholly owned subsidiaries. Consequently, the assets of our Consolidated Affiliated Entities are not secured on behalf of our wholly owned subsidiary, and the amounts owed by our Consolidated Affiliated Entities are not collateralized. As a result, if our Consolidated Affiliated Entities fail to pay any amount due to us under, or otherwise breach, the exclusive business service agreements, we will not be able to directly seize the assets of our Consolidated Affiliated Entities. If the nominee shareholders of the Variable Interest Entities do not act in the best interests of the Company when conflicts of interest arise, or if they act in bad faith towards us, they may attempt to cause the Company’s Consolidated Affiliated Entities to transfer or encumber the assets of the Consolidated Affiliated Entities without our authorization. In such a scenario, we may choose to exercise our option under the call option agreements to force the shareholders of the Variable Interest Entities to transfer their respective equity interests in the Variable Interest Entities to a PRC person designated by us, and we may need to resort to litigation in the PRC courts to force such an equity interests transfer and prevent the transfer or encumbrance of the VIE’s assets without our authorization. However, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements.
Therefore, our contractual arrangements with our Consolidated Affiliated Entities may not be as effective in ensuring our control over our China operations as direct ownership would be.”
Organizational Structure, page 58
2. We note in notes (1) and (2) that the VIE shareholders are beneficial owners of TAL Group. Please quantify their ownership percentages in each VIE and TAL Group.
The Company respectfully advises the Staff that, in its future Form 20-Fs, it will revise its corporate structure chart which appears in Item 4.C of the Form 20-F to reflect the above information, in the manner as set forth in Exhibit I attached hereto.
3. Please identify the legal representative of each entity inside China and describe the rights of the legal representative in comparison to the rights assigned to TAL Beijing through the power of attorney.
The Company respectfully advises the Staff that the legal representative of each entity of the Company inside China is set forth below:
No.
Name of Entity
Legal Representative
1.
TAL Beijing
Bangxin Zhang
2.
Huanqiu Zhikang
Bangxin Zhang
3.
Yidu Huida
Baorong Fan
4.
Xueersi Education
Baorong Fan
5.
Xueersi Network
Baorong Fan
6.
Beijing Dongfangrenli
Yachao Liu
7.
Beijing Haidian School
Baorong Fan
8.
Beijing Dongcheng School
Wenhui Zhuang
9.
Beijing Xicheng School
Baorong Fan
10.
Beijing Lejiale School
Yachao Liu
11.
Beijing Chaoyang School
Baorong Fan
12.
Beijing Shijingshan School
Baorong Fan
13.
Hexi Xueersi School
Baorong Fan
14.
Shanghai Changning School
Guoding Li
15.
Shanghai Minhang School
Guoding Li
16.
Wuhan Jianghan School
Yachao Liu
17.
Wuhan Jiang’an School
Baorong Fan
18.
Taiyuan Yingze School
Baorong Fan
19.
Chongqing Shapingba School
Baorong Fan
20.
Tianjin Education
Yachao Liu
21.
Shanghai Lehai
Baorong Fan
22.
Shanghai Education
Baorong Fan
23.
Shanghai Network
Baorong Fan
24.
Guangzhou Education
Zhiyong Liu
25.
Shenzhen Education
Jiangwei Ma
26.
Zhikang
Yachao Liu
27.
Hangzhou Education
Baorong Fan
28.
Nanjing Education
Baorong Fan
29.
Xi’an Network
Baorong Fan
30.
Chengdu Education
Baorong Fan
31.
Suzhou Network
Baorong Fan
Wenhui Zhuang joined the Company in 2007 and is the Company’s Beijing deputy school principal, Zhiyong Liu joined the Company in 2005 and is the Company’s Guangzhou school principal, Jiangwei Ma joined the Company in 2006 and is the general manager of the Company’s Zhikang one-on-one business line and previously served as the Company’s Shenzhen school principal. Guoding Li joined the Company in 2010 and is one of the school principals of the Company’s Shanghai school. For the new cities the Company entered between 2008-2010, the Company’s senior management believed it was most practical to have the school principal who was running the operations also be the legal representative. In Shanghai, the school principal who was running the operations did not have a Shanghai residence permit, which was a requirement of the Shanghai education ministry in order to be the legal representative; accordingly, the Company hired Guoding Li in order to fulfill this regulation. As the Company expanded its operations more rapidly in 2010 and 2011, it hired Baorong Fan as a full-time legal representative to fulfill the role of legal representative in the new cities the Company entered in those years as well as new districts entered in existing cities.
The Company respectfully advises the Staff that the legal representative of a PRC company, being the chairman of the board or the general manager of the PRC company (as set forth in the company’s articles of association), is the authorized signatory for the PRC company. As a result, the legal representative of a PRC company has the apparent authority to sign contracts on behalf of such PRC company. However, under PRC law, the legal representative can only make decisions relating to a company with authorization of the company’s board. If a legal representative fails to obtain the appropriate approval before signing an agreement on behalf of the company, the legal representative is legally liable for any damages suffered by such company pursuant to Article 66 of the PRC General Principles of Civil Law. If the legal representative of the PRC company is a director, then such legal representative may be removed by such company’s shareholders, and if the legal representative of the PRC company is a general manager, such legal representative may be removed by the company’s board. Pursuant to the irrevocable powers of attorney executed by the shareholders of the VIEs, the legal representatives of the VIEs may be removed at the sole discretion of TAL Beijing.
Through the irrevocable powers of attorney granted by the shareholders of the VIEs, all the VIE shareholders’ rights have been assigned to TAL Beijing, which include the rights to dividends, participate in and vote at shareholders’ meetings, and nominate, appoint and remove directors. Pursuant to the powers of attorney, TAL Beijing is able to nominate, appoint and remove the directors of the VIEs. The directors so appointed are legal representatives or are able to appoint the legal representative of the VIEs, who have the apparent authority to sign contracts on behalf of the VIEs. Therefore, through the power of attorney, the legal representative of a VIE may be removed at the sole discretion of TAL Beijing.
Liquidity and Capital Resources, page 80
4. We note from your disclosures on page 80 that you “will in the future consolidate the results of Beijing Dongfangrenli.” According to the list of subsidiaries on page F-9 and related disclosures in note one of your financial statements; it appears that you already consolidate the results of Beijing Dongfangrenli. Please explain this inconsistency in disclosure.
The Company respectfully advises the Staff that it concluded it was appropriate to consolidate Beijing Dongfangrenli as of February 29, 2012; however, through that date the entity did not have any material operations to be included for the periods presented.
Dividend Distributions, page 83
5. We note your disclosure that you had $188.6 million in cash and cash equivalents, $10.3 million in bank term deposits and no bank borrowings as of February 29, 2012. Please disclose the amounts held in entities outside of the PRC and inside the PRC further disaggregated to show amounts held by the PRC VIEs and outside the VIEs. In addition, describe the costs that would be incurred to transfer cash within each level of the corporate structure.
The Company respectfully advises the Staff that its cash and cash equivalents and its bank term deposits inside and outside of the PRC as of February 29, 2012 are as follows:
Cash and cash
Cash and cash
Total Cash and
equivalents In
equivalents In
cash
Term deposits In
Term deposits in
Total Term
RMB
USD
equivalents
RMB
USD
deposits
(In thousands)
Entities outside of the PRC
$
100,055
$
$
100,753
$
$
$
PRC VIE
48,556
—
48,556
10,328
10,328
Outside of VIE
38,584
39,271
—
—
—
Entities inside of the PRC
87,140
87,827
10,328
—
10,328
Total
$
187,195
$
1,385
$
188,580
$
10,328
$
$
10,328
The Company respectfully advises the Staff that, when TAL Beijing receives cash from the VIEs for the service provided and self-developed software products sold, the primary cost would be business taxes (including surcharges) of 5.6% and a value-added tax of 17%. The value-added tax burden is lessened due to the Company having a value-added tax refund under applicable PRC law.
In addition, TAL Beijing is subject to a 10% (in special cases 5% if Xueersi Hong Kong, our Hong Kong intermediate holding company, qualifies as the beneficial owner based on the PRC’s treaty with Hong Kong) withholding tax in the PRC if they were to pay dividends to Xueersi Hong Kong. There is no withholding tax for transfers of cash from Xueersi Hong Kong to our Cayman Islands holding company.
6. We note from your disclosure on page F-16 that you have current assets of $143,015,383 at February 29, 2012 exclusive of the amounts at the VIEs. Please address the following:
a. Disclose how much of the cash amounts relate to proceeds from the initial public offering or other offerings.
The Company respectfully advises the Staff that, as of February 29, 2012, US$95.3 million of the Company’s cash and cash equ
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CORRESP 1 filename1.htm TAL Education Group 18/F, Hesheng Building 32 Zhongguancun Avenue, Haidian District Beijing 100080 People’s Republic of China April 15, 2013 VIA EDGAR Larry Spirgel, Assistant Director Carlos Pacho, Senior Assistant Chief Accountant Christine Adams, Senior Staff Accountant Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549 Re: TAL Education Group (the “Company”) Form 20-F for the Fiscal Year Ended February 29, 2012 (the “2012 Form 20-F”) Filed On June 27, 2012 (File No. 001-34900) Dear Mr. Spirgel, Mr. Pacho and Ms. Adams: This letter sets forth the Company’s responses to the comments contained in the letter dated February 28, 2013 from the staff (the “Staff”) of the Securities and Exchange Commission (the “SEC”) regarding the Company’s 2012 Form 20-F. The Staff’s comments are repeated below and are followed by the Company’s responses thereto. All capitalized terms used but not defined in this letter shall have the meanings ascribed to such terms in the 2012 Form 20-F. Form 20-F for the Fiscal Year Ended February 29, 2012 Risk factors, page 5 We rely on contractual arrangements..., page 17 1. Disclose, if true, that the assets of the VIE are not secured on behalf of the WFOE, and describe the risk that the assets of the VIE may be transferred or encumbered by the shareholders of the VIE and the amounts owed by the VIE under the contractual agreements may not be collateralized. The Company acknowledges to the Staff that the assets of Beijing Xueersi Network Technology Co., Ltd. (“Xueersi Network”), Beijing Xueersi Education Technology Co., Ltd. (“Xueersi Education”), and Beijing Dongfangrenli Science & Commerce Co., Ltd.(“Beijing Dongfangrenli” and, together with Xueersi Network and Xueersi Education, the “VIEs”) are not secured on the behalf of TAL Education Technology (Beijing) Co., Ltd. (“TAL Beijing”), the Company’s wholly owned PRC subsidiary. Rather, each of the shareholders of the VIEs has unconditionally and irrevocably pledged all of his respective equity interests in the VIEs to TAL Beijing under the applicable equity pledge agreement to guarantee the performance of the obligations of the VIEs under the exclusive business cooperation agreements that the VIEs have entered into with TAL Beijing. The Company can exercise its rights under the equity pledge agreements through TAL Beijing, including selling all equity interests in the VIEs. In response to the Staff’s comment, the Company respectfully advises the Staff that in its next Form 20-F, it will expand the relevant risk factor currently on page 17 of the 2012 Form 20-F as follows (the added portions are in italics and underlined): “We rely on contractual arrangements with our Consolidated Affiliated Entities for our China operations, which may not be as effective in providing operational control as direct ownership. We have relied and expect to continue to rely on contractual arrangements with our Consolidated Affiliated Entities to operate our education business. For a description of these contractual arrangements, see “Item 4.C—Information on the Company—Organizational Structure—Contractual Arrangements with Our Consolidated Affiliated Entities.” These contractual arrangements may not be as effective in providing us with control over our Consolidated Affiliated Entities as direct ownership. If we had direct ownership of the Consolidated Affiliated Entities, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of these entities, which in turn could effect changes, subject to any applicable fiduciary obligations, at the management level. However, under the current contractual arrangements, we rely on the performance by our Consolidated Affiliated Entities and their respective shareholders of their obligations under the contracts to exercise control over and receive economic benefits from our Consolidated Affiliated Entities. We have entered into equity pledge agreements with Xueersi Education, Xueersi Network and Beijing Dongfangrenli and their respective shareholders to guarantee the performance of the obligations of our Consolidated Affiliated Entities under the exclusive business service agreements they have entered into with us. In the registration forms submitted to the local branch of the State Administration for Industry and Commerce for the pledges over the equity interests under the equity pledge agreements, the amount of registered equity interests pledged to TAL Beijing, our wholly owned subsidiary, was RMB10,000,000, RMB3,000,000 and RMB1,000,000 for Xueersi Education, Xueersi Network and Beijing Dongfangrenli, respectively, which represents 100% of their respective registered capital. The equity pledge agreements with the shareholders of the Variable Interest Entities provide that the pledged equity interest shall constitute continuing security for any and all of the indebtedness, obligations and liabilities under all of the principal service agreements and the scope of pledge shall not be limited by the amount of the registered capital of the Variable Interest Entities. However, it is possible that a PRC court may take the position that the amount listed on the equity pledge registration forms represents the full amount of the collateral that has been registered and perfected. If this is the case, the obligations that are supposed to be secured in the equity pledge agreements in excess of the amount listed on the equity pledge registration forms could be determined by the PRC court as unsecured debt, which takes last priority among creditors. 2 In addition, we have not entered into agreements with our Variable Interest Entities that pledge the assets of our Consolidated Affiliated Entities for the benefit of us or our wholly owned subsidiaries. Consequently, the assets of our Consolidated Affiliated Entities are not secured on behalf of our wholly owned subsidiary, and the amounts owed by our Consolidated Affiliated Entities are not collateralized. As a result, if our Consolidated Affiliated Entities fail to pay any amount due to us under, or otherwise breach, the exclusive business service agreements, we will not be able to directly seize the assets of our Consolidated Affiliated Entities. If the nominee shareholders of the Variable Interest Entities do not act in the best interests of the Company when conflicts of interest arise, or if they act in bad faith towards us, they may attempt to cause the Company’s Consolidated Affiliated Entities to transfer or encumber the assets of the Consolidated Affiliated Entities without our authorization. In such a scenario, we may choose to exercise our option under the call option agreements to force the shareholders of the Variable Interest Entities to transfer their respective equity interests in the Variable Interest Entities to a PRC person designated by us, and we may need to resort to litigation in the PRC courts to force such an equity interests transfer and prevent the transfer or encumbrance of the VIE’s assets without our authorization. However, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements. Therefore, our contractual arrangements with our Consolidated Affiliated Entities may not be as effective in ensuring our control over our China operations as direct ownership would be.” Organizational Structure, page 58 2. We note in notes (1) and (2) that the VIE shareholders are beneficial owners of TAL Group. Please quantify their ownership percentages in each VIE and TAL Group. The Company respectfully advises the Staff that, in its future Form 20-Fs, it will revise its corporate structure chart which appears in Item 4.C of the Form 20-F to reflect the above information, in the manner as set forth in Exhibit I attached hereto. 3 3. Please identify the legal representative of each entity inside China and describe the rights of the legal representative in comparison to the rights assigned to TAL Beijing through the power of attorney. The Company respectfully advises the Staff that the legal representative of each entity of the Company inside China is set forth below: No. Name of Entity Legal Representative 1. TAL Beijing Bangxin Zhang 2. Huanqiu Zhikang Bangxin Zhang 3. Yidu Huida Baorong Fan 4. Xueersi Education Baorong Fan 5. Xueersi Network Baorong Fan 6. Beijing Dongfangrenli Yachao Liu 7. Beijing Haidian School Baorong Fan 8. Beijing Dongcheng School Wenhui Zhuang 9. Beijing Xicheng School Baorong Fan 10. Beijing Lejiale School Yachao Liu 11. Beijing Chaoyang School Baorong Fan 12. Beijing Shijingshan School Baorong Fan 13. Hexi Xueersi School Baorong Fan 14. Shanghai Changning School Guoding Li 15. Shanghai Minhang School Guoding Li 16. Wuhan Jianghan School Yachao Liu 17. Wuhan Jiang’an School Baorong Fan 18. Taiyuan Yingze School Baorong Fan 19. Chongqing Shapingba School Baorong Fan 20. Tianjin Education Yachao Liu 21. Shanghai Lehai Baorong Fan 22. Shanghai Education Baorong Fan 23. Shanghai Network Baorong Fan 24. Guangzhou Education Zhiyong Liu 25. Shenzhen Education Jiangwei Ma 26. Zhikang Yachao Liu 27. Hangzhou Education Baorong Fan 28. Nanjing Education Baorong Fan 29. Xi’an Network Baorong Fan 30. Chengdu Education Baorong Fan 31. Suzhou Network Baorong Fan 4 Wenhui Zhuang joined the Company in 2007 and is the Company’s Beijing deputy school principal, Zhiyong Liu joined the Company in 2005 and is the Company’s Guangzhou school principal, Jiangwei Ma joined the Company in 2006 and is the general manager of the Company’s Zhikang one-on-one business line and previously served as the Company’s Shenzhen school principal. Guoding Li joined the Company in 2010 and is one of the school principals of the Company’s Shanghai school. For the new cities the Company entered between 2008-2010, the Company’s senior management believed it was most practical to have the school principal who was running the operations also be the legal representative. In Shanghai, the school principal who was running the operations did not have a Shanghai residence permit, which was a requirement of the Shanghai education ministry in order to be the legal representative; accordingly, the Company hired Guoding Li in order to fulfill this regulation. As the Company expanded its operations more rapidly in 2010 and 2011, it hired Baorong Fan as a full-time legal representative to fulfill the role of legal representative in the new cities the Company entered in those years as well as new districts entered in existing cities. The Company respectfully advises the Staff that the legal representative of a PRC company, being the chairman of the board or the general manager of the PRC company (as set forth in the company’s articles of association), is the authorized signatory for the PRC company. As a result, the legal representative of a PRC company has the apparent authority to sign contracts on behalf of such PRC company. However, under PRC law, the legal representative can only make decisions relating to a company with authorization of the company’s board. If a legal representative fails to obtain the appropriate approval before signing an agreement on behalf of the company, the legal representative is legally liable for any damages suffered by such company pursuant to Article 66 of the PRC General Principles of Civil Law. If the legal representative of the PRC company is a director, then such legal representative may be removed by such company’s shareholders, and if the legal representative of the PRC company is a general manager, such legal representative may be removed by the company’s board. Pursuant to the irrevocable powers of attorney executed by the shareholders of the VIEs, the legal representatives of the VIEs may be removed at the sole discretion of TAL Beijing. Through the irrevocable powers of attorney granted by the shareholders of the VIEs, all the VIE shareholders’ rights have been assigned to TAL Beijing, which include the rights to dividends, participate in and vote at shareholders’ meetings, and nominate, appoint and remove directors. Pursuant to the powers of attorney, TAL Beijing is able to nominate, appoint and remove the directors of the VIEs. The directors so appointed are legal representatives or are able to appoint the legal representative of the VIEs, who have the apparent authority to sign contracts on behalf of the VIEs. Therefore, through the power of attorney, the legal representative of a VIE may be removed at the sole discretion of TAL Beijing. 5 Liquidity and Capital Resources, page 80 4. We note from your disclosures on page 80 that you “will in the future consolidate the results of Beijing Dongfangrenli.” According to the list of subsidiaries on page F-9 and related disclosures in note one of your financial statements; it appears that you already consolidate the results of Beijing Dongfangrenli. Please explain this inconsistency in disclosure. The Company respectfully advises the Staff that it concluded it was appropriate to consolidate Beijing Dongfangrenli as of February 29, 2012; however, through that date the entity did not have any material operations to be included for the periods presented. Dividend Distributions, page 83 5. We note your disclosure that you had $188.6 million in cash and cash equivalents, $10.3 million in bank term deposits and no bank borrowings as of February 29, 2012. Please disclose the amounts held in entities outside of the PRC and inside the PRC further disaggregated to show amounts held by the PRC VIEs and outside the VIEs. In addition, describe the costs that would be incurred to transfer cash within each level of the corporate structure. The Company respectfully advises the Staff that its cash and cash equivalents and its bank term deposits inside and outside of the PRC as of February 29, 2012 are as follows: Cash and cash Cash and cash Total Cash and equivalents In equivalents In cash Term deposits In Term deposits in Total Term RMB USD equivalents RMB USD deposits (In thousands) Entities outside of the PRC $ 100,055 $ 698 $ 100,753 $ 0 $ 0 $ 0 PRC VIE 48,556 — 48,556 10,328 10,328 Outside of VIE 38,584 687 39,271 — — — Entities inside of the PRC 87,140 687 87,827 10,328 — 10,328 Total $ 187,195 $ 1,385 $ 188,580 $ 10,328 $ 0 $ 10,328 The Company respectfully advises the Staff that, when TAL Beijing receives cash from the VIEs for the service provided and self-developed software products sold, the primary cost would be business taxes (including surcharges) of 5.6% and a value-added tax of 17%. The value-added tax burden is lessened due to the Company having a value-added tax refund under applicable PRC law. 6 In addition, TAL Beijing is subject to a 10% (in special cases 5% if Xueersi Hong Kong, our Hong Kong intermediate holding company, qualifies as the beneficial owner based on the PRC’s treaty with Hong Kong) withholding tax in the PRC if they were to pay dividends to Xueersi Hong Kong. There is no withholding tax for transfers of cash from Xueersi Hong Kong to our Cayman Islands holding company. 6. We note from your disclosure on page F-16 that you have current assets of $143,015,383 at February 29, 2012 exclusive of the amounts at the VIEs. Please address the following: a. Disclose how much of the cash amounts relate to proceeds from the initial public offering or other offerings. The Company respectfully advises the Staff that, as of February 29, 2012, US$95.3 million of the Company’s cash and cash equ