Ladies and gentlemen, thank you for standing by and welcome to the TAL Education Group’s F4Q 2013 and F2013 Earnings Conference Call. (Operator instructions.) I must advise you that this conference is being recorded today, Tuesday, the 23rd of April, 2013. I would now like to hand the conference over to your first speaker for today, Ms. Mei Li, Investor Relations Manager. Thank you, please go ahead.

Thank you all for joining us today for TAL Education Group’s F4Q and F2013 earnings conference call. The F4Q and F2013 earnings release was distributed earlier today and you may find a copy on the company’s IR website or through the news wires. During this call we will hear from Chief Financial Officer Mr. Joseph Kauffman. Following his prepared remarks Mr. Kauffman will be available to answer your questions. Before we continue, please note that the discussions today will contain forward-looking statements made under the Safe Harbor Provisions of the US Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include but are not limited to those outlined in public filings with the SEC. For more information about these risks and uncertainties, please refer to our filings with the SEC. Also our earnings release and this call includes discussions of certain non-GAAP financial measures. Please refer to our earnings release which contains a reconciliation of the non-GAAP measures to the most directly comparable GAAP measures. I would now like to turn the call over to Mr. Joseph Kauffman.

Thank you, Mei, and thank you all for joining us on our earnings conference call for F4Q and F2013. Before I go through the quarter and full year numbers I would like to represent the entire TAL management team in sending our warmest wishes to all of our teachers, employees, parents and students who have been affected by the earthquake disaster that ravaged several areas in Sichuan over the weekend. Particularly in our hearts and minds at this time are the family members of our teachers, employees, parents and students in our Chongqing and Chengdu schools. We’ve decided to donate RMB 1 million to the victims of the earthquake to support reconstruction work and get education back on track after the disaster and we will include Ya’an in our existing annual teaching assistance program. We’ll monitor the situation and decide on further assistance programs if needed. Moving to the quarter, we are pleased to report F4Q results with revenues in line with our guidance. Net revenues increased by 14.2% year over year to $59.6 million US, near the high end of our guidance. Revenue growth was supported by a 9.7% increase in enrollments. In Beijing, we continued to operate in a challenging environment due to the change in policy on the use of exam and competition results for selection at key junior high schools. We saw the impact from the change in Beijing policy not only on small classes but also on our one-on-one business in Beijing, which is positioned largely as a cross-sell offering to our small classes. Revenue growth was also affected as we mentioned last quarter by the late timing of Chinese New Year that reduced the number of classes scheduled in F4Q ending February 28th. In Shanghai on the other hand we saw growth momentum returning…

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. (Operator instructions.) Our first question comes from the line of Fei Fang from Goldman Sachs. Please ask your question now. Fei Fang – Goldman Sachs : Hi, Joe and Mei. Thanks for a great quarter. My first question is about the network expansion. So the total number of centers have further declined from F3Q, so how do we think about the revenue impact on spring and summer courses? And also among the new 30 centers that you plan to add, what rollout schedule should we expect? Then I have a follow-up question, thanks.

Sure, Fei. In terms of discrete learning centers, they did decline but I said on previous calls that we wanted to add 100 incremental classrooms in the second half of the year and we beat that handily by adding over 130 classrooms during that period. So in terms of overall capacity, we actually saw gains in the quarter though we were kind of opportunistic in looking at certain learning centers that would be more economic to close where we added capacity to other learning centers. So I think that that’s probably the best way to go about getting growth and profitability in the business. In terms of expansion for next year, we’re still on track. We’re focused on at least 30 new centers in our existing 15 cities led by small class. We’ll also likely move in to four new cities at the tail end of this coming fiscal year – likely in the January, 2014 timeframe. Fei Fang – Goldman Sachs : Understood, thanks. My second question is can management give guidance on the dividend [spend] for F2014?

As I said on previous calls, it’s early to be able to say anything about a dividend at this point and whether or not there will even be a dividend in F2014. We’ll continue to look at ways to give back to shareholders; it’s just in terms of efficiency and the amount that actually ends up in shareholders’ hands, we need to make sure we’re being efficient about our dividend policies. So we tend to dividend out a greater amount maybe less frequently than a smaller amount more frequently because of fees and other things that lead to it not being an efficient way to do it if the payout ratio is too low. So we’ll continue to evaluate that and see what makes sense in terms of giving back to shareholders. I’ll probably be able to give a better update on that in the October timeframe. Fei Fang – Goldman Sachs : Great, thanks Joe, very helpful.

Thank you for your questions. The next question comes from the line of Philip Wan from Morgan Stanley. Please ask your question now. Philip Wan – Morgan Stanley: Hi Joe and Li. Thanks for taking the question. My first quick question is about the bird flu in China. Are you seeing any impact such as lower enrollments or class (inaudible) because of this flu? And then I have a follow-up question, thank you.

Sure. Up to now we’re not aware of any impact from the bird flu. Obviously Shanghai was more effected. I just got off the phone with a school out there and we haven’t seen hardly any impact at all from the bird flu up till now. Now, we’re taking all the right precautions so when students and parents come into our center the first thing we have them do is wash their hands and have them sterilize; and we are also making sure to sanitize all of our desks and chairs and classrooms to make sure that we’re doing everything we can to take the best precautions. But we haven’t seen any impact to our business at this point. Philip Wan – Morgan Stanley: Great, thank you. And then I would like to drill down a little bit more on the margins, just a couple moving parts. First of all I wonder if you could comment on the potential margin impacts from them separately in terms of accelerating [the new businesses], the new content initiatives that you mentioned in the prepared remarks as well as the existing projects including developing platforms and Mobby. Thank you.

Sure. Well, I can address the new businesses part of that question. The new businesses, I said in previous quarters that we expected to spend about $7 million US but have the $7 million operating loss in those businesses last year in F2013. It ended up being about $6.5 million. In terms of this year it’s likely to be more like $7.5 million. So what we’ve seen is that Mobby and online courses have become more profitable as I mentioned in my prepared remarks, but we’re continuing to invest behind EDUU because we see that as really helpful for us in getting into these new markets. We’ve gotten great growth out of new markets and EDUU has been really effective of setting that awareness ahead of when we come in with learning centers. So we think that’s an effort worth spending more on and investing behind, and a true competitive barrier for us in our business that’s not so easy to replicate. And we’re also setting aside some budget for potential new business models within the online area that would fit into that new business area that would be a loss for next year. In terms of the other aspects that you talked about, the learning centers, I mean 30 learning centers – we’ve talked in the past about the average capital expenditures being around $100,000 US for those learning centers. So you can use that as kind of a back of the envelope in terms of the impact of the learning center expansion. Now, there are people costs and other costs on top of that as well but that gives you a sense at least in terms of the capital expenditure. And then the IT systems-related stuff is primarily being done in-house. So where we’ll see the impact is more in headcount and incremental G&A costs on the people side rather than going out and hiring a third-party vendor. I think we will have some consulting fees but they will be less than RMB 5 million I would say in terms of the IT implementation. But we do still have some carryover in terms of the systems that we put in last year, so the EHR system, the OA system, etc. you have some carryover from last year. So hopefully that gives you a little bit of color, Philip, in terms of the granularity you were looking for on the investments. Philip Wan – Morgan Stanley: Alright, that’s very helpful. Lastly, could you comment on the pricing trends? I recall that you planned to increase price for the summer session this year – is that still happening? And then also how should we look at the ASP growth going forward? Thank you.

Sure. Yes, we still intend to take a price increase for our small class business beginning in the summer term. It will vary by market and we may not take a price increase in all markets but I would say the breadth of the price increase will cover more cities than it did in last year. And the price increase should at least be 10% or more, and more in certain markets; and as is typical we’ll offer coupons to returning students in the first semester or two – usually two – so you won’t get that full price increase right away. In the one-on-one business we’re also looking at opportunities to take price increases in some of our better-performing markets, and have already taken a price increase in Guangzhou and Shenzhen. We were able to take a price increase of 20% because we didn’t actually take a price increase last year for the one-on-one business. So that’s what we’re looking at in terms of pricing. It’ll vary by market but we do expect to take price increases again this year, and the idea is to have a moderate rate of center expansion and a moderate rate of price increases each year. It’s hard for me to be able to set an exact number but I expect it’ll again be less than 10% as it was in the most recent year. Philip Wan – Morgan Stanley: Alright, that’s very helpful.

Thank you for your questions. Your next questions come from the line of Ella Ji from Oppenheimer. Please ask your questions. Ella Ji – Oppenheimer & Co.: Good evening, Joe and Mei, and congratulations, good quarter. My first question is with regards to your network expansion. Correct me if I’m wrong, but I think [last quarter you mentioned] a plan for the first half of the next fiscal year. And I think this time it’s going to extend to the entire fiscal year. I wonder if you can explain whether you made any strategic changes with regard to your network expansion.

Sure, Ella. No, we haven’t. As I said last quarter we’ll start with the equivalent of 30 learning centers in the first half of the year and then we’ll see how things go, and based on the ramp up and the utilization levels we’ll look at expanding more in the second half of the year. So that’s still on track; I’m just being conservative in terms of what the outcome would be in the second half of the year after we look at the ramp up in the first half of the year. Ella Ji – Oppenheimer & Co.: So it’s likely that it just represents [utilization level, that] by doing well you may see the [total count target]?

Absolutely. That’s how we look at it. We look at utilization levels, those metrics that we’ve talked about on previous calls and if things are trending in the right direction there’s no reason why we wouldn’t add more centers in the second half of the year. And of course, in response to Fei’s question I also mentioned that we would be going into four new cities in January of 2014, the tail end of this fiscal year, and that will require at least one new learning center in each of those cities as well. Ella Ji – Oppenheimer & Co.: Okay, great. And then I know that [performance outside of Shanghai] was very terrific but I wonder if you can talk about [the margins for this business] as far as what you’ve entered for more than a year. How are their margins comparing to Shanghai?

It’s not particularly clear so I’ll try to respond as best I can based on what I heard. What I heard was kind of about margins in cities outside of Beijing and Shanghai that we’ve entered for more than one year versus Beijing and Shanghai. And actually there’s not a clear relationship. So we have cities that experience better margins than Shanghai that are cities outside of Shanghai. I haven’t been breaking down by city but typically what happens is that it has more to do with the stage of development in that invest and harvest cycle. So when we get really high utilization levels, which we do have in some of our markets, they will have better profitability than the Shanghai and even in Beijing in some quarters. So it really has to do with what stage we’re in. If we only have one center and then we add a second center, and we’re just ramping up in that second center well then you may not have as high profitability. If you’re just in one center and that thing is super high utilization then you’re going to have higher profitability than any of the other cities. So there are aspects of differences in ASP levels between different cities, but really what we found especially over the last year is that if we can really focus on the key operational metrics like utilization we can overcome some of those disparities between cities. Ella Ji – Oppenheimer & Co.: Okay, great. That’s very helpful. And then my last question is with regards to the continuation of your (inaudible) movements. You mentioned a broader offering [on the internet] and a cross-selling opportunity into English. I wonder if you can provide details with regards to how you are going to approach these opportunities.

Sure. In terms of English that’s always been an important cross-sell for our business. In our more developed markets like Beijing it’s historically been 20% revenue contribution and that’s largely from cross-sell. And parents that come for us for math and the sciences, if we have English timed at the right time – after those classes are finished and right across the hall – parents will come to us for convenience, especially these days, rather than fight the traffic in Beijing to necessarily go somewhere else. So that’s always been a part of what we’re doing. In terms of the investment, we’re investing more behind making sure that the outcomes that are achieved in English are good – so aligning that with the English curriculum here in China, making sure it helps students with how they will test and how they will perform in the local domestic market. So I would say that’s the difference in our positioning probably versus other English players and it’s the area where we’re investing. In terms of technology in the classroom, I think that’s what I heard as the other part of your question – again, it wasn’t particularly clear. But the technology we’re implementing, part of it is to make it more convenient for parents to be able to register online and through mobile devices which I think will ultimately help us in being able to reduce the cost structure around registration centers throughout our network in addition to creating convenience for parents. So that’s one whole area that’s more customer-facing and helping convenience for our parents. The other area is in assessment. So we’re looking to be able to use technology to help better place kids into different sections, different levels of difficulty within our various math and science curriculums. And then the third is continuing to upgrade the interactivity of our ICS or Intelligent Classroom System in the classroom using whiteboards and technology to just make the classes all that more interesting. So those would be some of the more customer-oriented technology initiatives that we have planned for this coming year. Ella Ji – Oppenheimer & Co.: Okay, great. That’s very helpful, thanks.

Thank you. Your next questions come from the line of [Titia] Bing from Jefferies. Please ask your question. [Titia Bing] – Jefferies : Hello, I have a few questions. First of all, I want to confirm that you just mentioned the ASP growth will be less than 10% in F2014. And the other question is more on the margins – given that we are going into the investment phase again and will focus on small classes and at the same time scaling back from lower-margin one-on-one classes. Net-net do you think, what will be the impact on the gross profit margin and operating profit margin? And lastly, just some housekeeping questions: what was the revenue contribution from one-on-one and online businesses, and the (inaudible) by enrollment? Thank you.

Okay. Sure, I’ll try to address each of those questions. In terms of the ASP, yeah – that’s part of our strategy. So rather than going through these massive invest and harvest cycles and massive differences in pricing year by year where you take a huge 20% or 30% price increase one year and then don’t raise price the next we’re trying to go into a more moderate pricing and more moderate investment harvesting cycles. So just like this year, the overall ASP increase for the year was 7% plus, high single-digits, that’s what we would expect for next year. So the short answer to your first question is yes. In terms of margins, as you know I don’t give margin guidance but I can give some color as follows: I mentioned we’ll be investing in center expansion, new content initiatives, further IT systems following a year of harvest. That’ll create margin pressure in this year of investment, so just as you saw margin expansion in a harvesting year like last year you’ll see margin pressure here. But as I said, we’re looking at more moderate flows in investment/harvest cycles. So it’s not possible to completely avoid that nature of our business because you do have centers that need to ramp up, you need to continue to invest [behind their strengths] including people, content, technology. But we’re looking for the difference in the margin pressure in years between investing and harvesting to be less. And I also talked about how we’ve delayed some P&L impact from F2013 into F2014 so you have renovation expenses, depreciation of the new headquarters building, additional renovation of the office space that we’re in now, etc., that’ll come into F2014. So I’m not going to give you a specific number but in terms of kind…

Thank you for your questions. Your next questions come from the line of Chao Wang from Merrill Lynch. Please ask your questions. Chao Wang – Merrill Lynch: Hi, good evening. Thanks for taking the questions. Firstly as a follow-up on the cross-sell, do you expect more direct competition with [Nuen] going mainly in high school English courses? Or in other words, in terms of your product, of product quality how do you differentiate with them? Thank you.

Sure. We lead with math and sciences, so Xueersi (inaudible) studying math and sciences come to Xueersi. So that’s our positioning in the market. We also happen to believe that we offer a very good English product. We also use McGraw-Hill content, we also use interactive whiteboards; we also train to New Concept English, Cambridge Young Learners and a lot of the other test metrics in the market. So you know, we’re just trying to add additional valued services to our existing customers and that convenience of being able to go to us right after a math and sciences offering and have something that’s a comparable offering I think will be attractive as it has been in the past. If I had to say anything else I would say, as I mentioned in the previous remarks we’re geared more toward the domestic market and doing well with testing within the domestic market where some of our competitors may have more of a study abroad orientation or preparing for a study abroad eventual experience depending on what grade level we’re talking about – I mean that varies for our competitor by grade level so I don’t want to generalize. But if you put me on the spot and asked me how I would make the comparison that would probably be how I’d do it. Chao Wang – Merrill Lynch: Thank you. Secondly, regarding the [entailment] can you briefly introduce the related business? And also can we expect any further [entailment] in the future? Thank you.

Sure. That was an asset purchase we made as essentially a license which would allow us to do that admissions counseling business. So that business is helping kids to find the right college or university for them abroad. We had bought a license because they’re in limited supply, essentially made an acquisition that allowed us to get that license as an asset with the intent to go into that business. And now that it doesn’t look like we’ll necessarily go into that business for the foreseeable future we decided to write down that asset. So our view is that there is a ton of opportunity within the K-12 market and we’re continuing to focus on our strengths in that market, continue to block and tackle and go into these new markets and execute well and stay focused. Chao Wang – Merrill Lynch: Thank you.

Thank you for your questions. Your last question comes from the line of Mark Marostica from Piper Jaffray. Please ask your question. Mark Marostica – Piper Jaffray: Thank you. Question on Beijing and I’d like to get a sense for the trend line for Beijing throughout the quarter and thus far in F1Q from an enrollment perspective – what exactly you’ve been implementing to help offset the negative headwinds from the policy change that we talked about. And then how parents are receiving those changes as well. And then as a follow-up question, you mentioned Shanghai had some nice performance which perhaps you can touch on the reasons for the strong performance in Shanghai. Thanks.

Yeah, sure. In terms of Beijing we’re still seeing some decline in enrollments in the spring term as we did in the winter and fall terms. That said, we are implementing a lot of those content- and assessment-oriented initiatives that I talked about before. Making sure that the right students are in the right classes I think is really important. We do have a leveling system and making sure that that leveling system is executed well through a refined assessment system I think has already been able to demonstrate increased satisfaction among our parents and students. And then making the classes even more interactive through the focus on Intelligent Classroom System, creating an environment where kids can get up and not be in their seats the whole time; get up to the front of the classroom, work with the whiteboards, work with the teachers in an interactive environment – so those are a couple of the areas where we’re focusing some of our initiatives along with what I mentioned on the call, which is focusing on the broader sciences. As students graduate with us from primary school into junior high and high school the physics, the chemistry, the biology – these are all really important areas and we’re investing more of our resources into building out that curriculum. And we think we’ve gotten some very good responses from parents in terms of some of the specific initiatives we’re doing especially in the sciences and using some of that multimedia technology in that area as well. That would be how I’d answer the first part of your question, and then in terms of Shanghai that’s just another example of what happens when you focus on the right things in the business. So starting about a year ago we didn’t look at expansion of learning centers; we focused on utilization of our existing learning centers, improving the utilization of our teachers; making sure that they’re being compensated well, that their classes were full which allowed them to be compensated better and also allowed for a better classroom environment which is better for the students and more gratifying for the teachers; making sure that we’re providing the right kind of training and that we’re building a really stable teaching force. And you know, it takes several months to see the benefits from that but we’re starting to see that now and that’s just the nature of our business. We’ve seen it in Shanghai, in Guangzhou and a number of our markets and there’s nothing to substitute for just having discipline and focusing on the right areas of our business. Mark Marostica – Piper Jaffray: Okay, great. Thank you, I’ll turn it over.

Thank you for your questions. Ladies and gentlemen, that does conclude the conference call for today. Thank you for your participation. You may now disconnect the lines.