[Letterhead of Ambow Education Holding Ltd.]
May 31, 2013
Larry Spirgel
Dean Suehiro
Robert Littlepage
Reid Hooper
Celeste M. Murphy
Division of Corporate Finance
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549-7010
Re: Ambow Education Holding Ltd.
Form 20-F for Fiscal Year Ended December 31, 2011
Filed May 29, 2012
Comment Letter Dated May 17, 2013
File No. 001-34824
Dear Mr. Spirgel, Mr. Suehiro, Mr. Littlepage, Mr. Hooper and Ms. Murphy:
I refer to your letter to Ms. Jin Huang, dated May 17, 2013, relating to Ambow Education Holding Ltd.’s (“Ambow” or the “Company”) annual report on Form 20-F for the fiscal year ended December 31, 2011, filed with the U.S. Securities and Exchange Commission (the “Commission”) on May 29, 2012 (the “2011 Form 20-F”).
Set forth below are the Company’s responses to the comments contained in the letter dated May 17, 2013 from the staff of the Commission (the “Staff”) (the numbered paragraphs below correspond to the paragraphs of the Staff’s comment letter, which have been retyped below in bold for your ease of reference).
Form 20-F for Fiscal Year Ended December 31, 2011
Organizational Structure, page 45
1. We note your responses to comments 1-3. Specifically, we note your organizational chart provided as Annex A to your response letter dated May 2, 2013, provides a straight line representing both equity interests in the tutoring centers in the form companies and sponsorship interests in private schools. Please revise your organizational chart to use a separate marking that clearly distinguishes between equity interest for companies and sponsorship interest for private schools. Further, we note your response to comments 2 and 3 indicating that a sponsorship interest under the Law of Promoting Private Education is “substantially similar and functional equivalent” to the equity interest under the PRC Company Law. As noted in our prior comment 2 in our letter dated April 4, 2013, please revise your disclosure to clearly distinguish between equity interests under the PRC Company Law and sponsorship interests under the Law of Promoting Private Education.
In response to the Staff’s comment, the Company will include the revised organizational chart as Annex A attached hereto in an amendment to the 2011 Form 20-F.
In addition, the Company will include the following disclosure in an amendment to the 2011 Form 20-F:
“Sponsorship interest under the Law of Promoting Private Education is substantially similar to equity interest under the PRC Company Law. Minor differences are illustrated in the following perspectives:
(1) right to receive return on investment
Shareholders of companies are entitled to dividends for their investment, while not all sponsors of private schools can claim returns on their investment in the private schools. Under the Law of Promoting Private Education, the sponsors of a private school may decide whether to require reasonable returns or not on their contributions to the private school, and accordingly private schools can be classified into schools whose sponsors require reasonable returns (hereinafter each a “RRR School”) and schools whose sponsors do not require reasonable returns (hereinafter each a “NRRR School”). Sponsors of a RRR School are entitled to receive profit distribution from the school while sponsors of a NRRR School cannot.
(2) the portion of after-tax profits available for distribution
The proportion of after-tax profits that can be distributed by a company to its shareholders is different from that can be distributed by a RRR school to its sponsors. Under the PRC Company Law, a company is required to allocate 10% of its after-tax profits to statutory reserve funds before making dividends to its shareholders while, under the Law for Promoting Private Education, a RRR School is required to allocate no less than 25% of its annual net profit to its development fund and make allocation for mandatory expenses as required by applicable laws and regulations.”
Note 1.d. VIE arrangements, page F-13
2. Please tell us the impact consolidation of Ambow Shida had on your financial position, financial performance and cash flows for the past two years.
The Company respectfully advises the Staff the impact consolidation of Ambow Shida had on the consolidated financial statements of the Company from following aspects:
· Financial position:
a. Consolidated cash and cash equivalent of Ambow Shida was approximately RMB280.1 million and RMB198.3 million as of December 31, 2010 and 2011, representing approximately 32.2 % and 42.1% of the consolidated cash and cash equivalent balance of the Company, respectively.
b. Consolidated financial statement of Ambow Shida shows an net liability balance of approximately RMB120.1 million and RMB155.4 million as of December 31, 2010 and 2011, while consolidated financial statement of the Company shows net asset of approximately RMB2,680.0 million and RMB2,711.6 million, respectively.
· Financial performance:
a. Consolidated net revenue of Ambow Shida was approximately RMB370.3 million and RMB426.9 million for the years ended December 31, 2010 and 2011, representing approximately 30.4% and 25.6% of the consolidated net revenue of the Company, respectively.
b. Consolidated financial statement of Ambow Shida shows net loss of approximately RMB34.8 million and RMB22.7 million for the years ended December 31, 2010 and 2011, while consolidated financial statement of the Company shows net profit of approximately RMB66.3 million and RMB21.2 million, respectively.
· Cash flow:
a. Consolidated net operation inflow of Ambow Shida was RMB159.3 million and RMB165.1 million for the years ended December 31, 2010 and 2011, representing 34.9% and 55.6% of the consolidated net operating cash inflow of the Company, respectively.
b. Consolidated total net cash changes of Ambow Shida was an inflow of RMB217.1 million and an outflow of RMB81.8 million for the years ended December 31, 2010 and 2011, representing 47.3% and 20.5% of the consolidated total net cash changes of the Company, respectively.
3. Please describe to us the history of how the shareholders of Ambow Shida came to own their shares. In your response, explain at a minimum the following:
a. Whether the three shareholders have always owned the shares;
b. If not, who owned the shares prior their gaining ownership;
c. When did they obtain ownership and whether they paid any consideration to get ownership; and
d. Who nominated them to be nominee shareholders.
(1) Ambow Shida was established on July 30, 2004 by Ambow Technology Company Limited, or Ambow Technology, Jianguo Xue, Xiaogang Feng, Xuejun Xie and Beijing Normal University Tech-Zone Technology Development Co., Ltd. on behalf of us. All the registered capital of Ambow Shida was provided by Ambow Online through Ambow Technology. The equity structure of Ambow Shida at establishment was set out below:
Name of Investors |
| Capital Contribution |
| Equity Percentage |
|
Jianguo Xue |
| 300,000 |
| 10 | % |
Xiaogang Feng |
| 150,000 |
| 5 | % |
Xuejun Xie |
| 300,000 |
| 10 | % |
Ambow Technology Company Limited |
| 1,800,000 |
| 60 | % |
Beijing Normal University Tech-Zone Technology Development Co., Ltd. |
| 450,000 |
| 15 | % |
Total |
| 3,000,000 |
| 100 | % |
(2) In order to simplify the equity structure and strengthen management, we instructed Xiaogang Feng and Ambow Technology to transfer all his and its equity interests in Ambow Shida of 5% and 60%, respectively, to Xuejun Xie. After the aforesaid equity transfer which was completed in May 2005, the equity structure of Ambow Shida was as follows:
Name of Investors |
| Capital Contribution (RMB) |
| Equity |
|
Jianguo Xue |
| 300,000 |
| 10 | % |
Xuejun Xie |
| 2,250,000 |
| 75 | % |
Beijing Normal University Tech-Zone Technology Development Co., Ltd. |
| 450,000 |
| 15 | % |
Total |
| 3,000,000 |
| 100 | % |
(3) For the purpose of further simplifying equity structure and management, we instructed Beijing Normal University Tech-Zone Technology Development Co., Ltd. to transfer all of its equity interest in Ambow Shida of 15% to Xuejun Xie. After the aforesaid equity transfer which was completed in December 2008, the equity structure of Ambow Shida was as follows:
Name of Investors |
| Capital Contribution (RMB) |
| Equity Interest |
|
Jianguo Xue |
| 300,000 |
| 10 | % |
Xuejun Xie |
| 2,700,000 |
| 90 | % |
Total |
| 3,000,000 |
| 100 | % |
Jianguo Xue and Xuejun Xie are nominee shareholders nominated by us. All the equity transfers were conducted in our direction. No consideration was paid during all equity interest transfers above.
4. Please expand your disclosures to describe all relationships with the VIE shareholders, including their nominee relationship and employment relationship.
In response to the Staff’s comment, the Company will include the following disclosure in an amendment to the 2011 Form 20-F:
Except as disclosed in the following table, we have no relationships with our VIE shareholders:
Name |
| Beneficial |
| Contractual Arrangement (share pledge |
| Employment |
Yisi Gu |
| 0.48% |
| Contractual arrangement that provides us with effective control over Suzhou Wenjian |
| Our Senior Vice President and Chief Technology Officer |
|
|
|
|
|
|
|
Xuejun Xie |
| 0.90% |
| Contractual arrangement that provides us with effective control over Ambow Shida, Ambow Shanghai, Ambow Sihua and Suzhou Wenjian |
| Our Vice President, Human Resources and Administration and Director |
|
|
|
|
|
|
|
Jianguo Xue |
| 0.53% |
| Contractual arrangement that provides us with effective control over Ambow Shida |
| Our Vice President, Sales |
|
|
|
|
|
|
|
Xiaogang Feng |
| nil |
| Contractual arrangement that provides us with effective control over Ambow Shanghai, Ambow Sihua and Suzhou Wenjian |
| Our Vice President, Public Relations and Meger and Acquisition |
* For more details of such contractual arrangement, please refer to “Item 4 — Information on the Company — C. Organizational Structure — Agreements that provide effective control over our VIEs and their respective subsidiaries”
5. Please tell us whether any other individual (e.g., Dr. Huang) or entity can replace these individuals as nominee shareholders of Ambow Shida.
The Company respectfully advises the Staff that, pursuant to the call option agreement among AECL, Xuejun Xie and Jianguo Xue, AECL shall have sole discretion to decide when to exercise the option to replace existing individuals with other persons or entities suitable to be nominee shareholders of Ambow Shida. We nominated Xuejun Xie and Jianguo Xue as shareholders of Ambow Shida because they have been senior offers of the Company.
6. We note that the VIE shareholders are also employees of the Ambow Education Holding Ltd. Please tell us whether Dr. Huang as Chief Executive Officer has the unilateral ability to terminate their employment. If not, explain to us who must approve their termination.
The Company respectfully advises the Staff that Dr. Huang as Chief Executive Officer has no unilateral ability to terminate their employment. A majority of the directors are entitled to approve their termination.
7. Please disclose the amount of cash disaggregated by currency denomination as of the most recent balance sheet dates in each jurisdiction in which your affiliated entities are domiciled. For entities within China, disclose the amount of cash held by VIEs separately from the amount of cash held by other entities.
In response to the Staff’s comment, the Company will include the following disclosure in its financial statements in an amendment to the 2011 Form 20-F:
The following table sets forth a breakdown of our cash and cash equivalents by currency denomination and jurisdiction as of December 31, 2011:
|
| Currency in million |
| ||
Jurisdiction |
| USD |
|
|
|
Cayman Island |
| 1.1 |
|
|
|
Hong Kong |
| 0.3 |
|
|
|
Non-VIEs in China |
| 1.8 |
|
|
|
Total USD |
| 3.2 |
|
|
|
|
|
|
| RMB |
|
VIEs in China |
|
|
| 402.6 |
|
Non-VIEs in China |
|
|
| 48.3 |
|
Total RMB |
|
|
| 450.9 |
|
**********
Should you have any additional questions or require additional information, please do not hesitate to contact me, Ms. Jin Huang (jin.huang@ambow.com; telephone: +86.10.6206.8001; Fax: +86.10.6206.8100), or our attorney, Ms. Shuang Zhao (shuang.zhao@shearman.com; telephone: +852.2978.8002; fax: +852.2978.8099).
| Sincerely yours, | |
|
| |
| /s/ Jin Huang | |
| Name: | Jin Huang |
| Title: | President and Chief Executive Officer |