EDU, B-, 8

fiscal year ended May 31, 2006

private education services in China.

Post-IPO shrs:35mmADSs

Beijing, China

2004

2005

2006

IPO Mkt

Revenue ($mm)

ratios

ratios

$96.0

Cap (mm)

Gross Profit %

56.8%

57.5%

58.3%

$424

Income ($mm)

$6.2

@$12

Net income %

11.8%

22.1%

6.5%

VALUATION RATIOS*

Price /

Price /

Price /

% offered

*May 31 fiscal

Cap (mm)

Sales

Earnings

BookValue

TangibleBV

in IPO

$424

4.4

68

3.4

3.4

21%

SCORECARD

Mgt

Market

Market Do-

Proprie-

Total

1-5, 5 is high

Growth

mination

tary

rating

20 is perfect

2

3

2

1

8

ADS offering: each ADS represents four common shares.

Preferential income tax treatment

. According to The Implementation Rules for the Law for Promoting Private Education

(2004), private schools that do not require reasonable returns enjoy the same preferential

tax treatment as public schools, while the preferential tax treatment policies applicable to

private schools requiring reasonable returns shall be separately formulated by the

relevant authorities under the State Council.

. To date, however, no separate regulations or policies have been promulgated by the

relevant authorities in this regard. In practice, tax treatments for private schools vary

across different cities in China.

. In some cities, private schools are subject to a 33% standard enterprise income tax,

while in other cities, private schools are subject to a 2% tax on gross receipts in lieu of

the 33% standard enterprise income tax or may be exempted from enterprise income tax.

In addition, some of our PRC subsidiaries and other affiliated entities currently also enjoy

certain preferential tax treatment.

. Preferential tax treatments granted to EDI by local governmental authorities are subject

to review and may be adjusted or revoked at any time in the future. The discontinuation

of any preferential tax treatments currently available to us, especially those schools in

major cities, will cause our effective tax rate to increase, which will increase our income

tax expenses and in turn decrease our net income.

Business

. Largest provider of private educational services in China based on the number of

program offerings, total student enrollments and geographic presence.

. Offers a wide range of educational programs, services and products consisting primarily

of English and other foreign language training, test preparation courses for major

admissions and assessment tests in the United States, the PRC and Commonwealth

countries, primary and secondary school education, development and distribution of

educational content, software and other technology, and online education.

Market Opportunity

Target market

. Primarily targets students between the ages of five and 29 living in urban areas in

China. According to China Statistical Yearbook (2005) published by the National Bureau

of Statistics of China, in 2004, approximately 457 million people in China were between

the ages of five and 29. In 2004,

. China had eight cities each with a population of over four million, 50 cities each with a

population of over one million and 131 cities each with a population of over 500,000,

according to China Demographics Yearbook (2005) published by the National Bureau of

Statistics of China.

Market size

. The size of the education market in China was approximately RMB580 billion (US$72

billion) in 2004, of which the size of the English language training market was

approximately RMB15 billion (US$1.9 billion) and is expected to grow to approximately

RMB30 billion (US$3.7 billion) in 2010,

. At a CAGR of 12.3%, according to China Education and Training Industry Research

Report (2005-2006) published by Beijing Heading Century Consulting Co., Ltd., a third

party consulting and market research firm.

. The demand for English language training is primarily driven by China’s accelerating

integration into the global economy, which has resulted in increasing career opportunities

for native Chinese speakers who are able to communicate effectively in English.

. The belief that English language proficiency is essential for career development and

advancement is gaining increasing acceptance in China.

Students overseas

. In addition, over 100,000 Chinese students traveled overseas each year to enroll in

higher education programs since 2002, according to China Statistical Yearbook (2005)

. To gain admission into colleges, graduate schools and professional schools in the

United States and many other countries, applicants typically must take admissions and

assessment tests conducted in English, such as TOEFL, IELTS, GRE, GMAT, LSAT and

SAT. English proficiency is also tested as a major subject for admission to colleges and

graduate schools in China.

. As urban citizens in China are increasingly recognizing that higher education leads to

greater rewards in terms of income and career opportunities, there is strong demand for

test preparation courses for admissions and assessment tests required by higher

educational institutions in China and abroad.

Public versus private schools in China

Public schools in China are generally required to use government-approved curricula. In

contrast, private schools in China, while also heavily regulated, have greater flexibility to

teach additional subjects and emphasize specific subjects, such as English language

"New Oriental" brand

. Provides educational services under the "New Oriental" brand, which is the best brand

in China’s English language education market according to a report published in June

2005 by the Social Survey Institute of China, or SSIC, a leading social survey and

research firm in China.

. EDU believes its "New Oriental" brand is the leading consumer brand in China’s private

education sector, as evidenced by awards EDU received from many national print and

online media sources in China, including the "Most Influential Education Brand in 2005"

from Southern China Metropolitan Daily, a newspaper with nationwide circulation, and the

"2004 Top Ten Largest Private Educational Organizations in China" from China Fortune,

one of the leading finance journals in China .

Enrollments & delivery

. Since inception in 1993, has had over three million cumulative student enrollments.

. In the fiscal year ended May 31, 2006, EDU had over 872,000 student enrollments,

including 497,000 student enrollments in EDU’s language training programs and 375,000

student enrollments in our test preparation courses.

. Delivers educational programs, services and products to students through an extensive

physical network of 25 schools, 111 learning centers and 13 bookstores operated by

EDU as of May 31, 2006, over 5,000 third-party bookstores and approximately 1,700

teachers in 24 cities, as well as through EDU’s virtual online network, which has two

million registered users.

. In the fiscal year ended May 31, 2006, generated approximately two-thirds of revenues

from four cities in China: Beijing, Shanghai, Guangzhou and Wuhan, each of which has a

population of over four million.

Growth plan

. EDU opened 10 new schools in fiscal year 2006 and plans to open six to eight new

schools in fiscal year 2007 depending on local market conditions of the new markets

EDU plans to enter.

. Expects to incur capital expenditures ranging from approximately RMB1.0 million to

RMB4.0 million per new school depending primarily on the size and geographic location

of the school.

. In addition, has offered and plans to continue offering an increasing number and a

greater variety of smaller classes, such as "Pop Kids" English classes for kindergarten

through sixth grade students with 10 to 25 students per class and higher-end "Elite

English" classes for adults and children of high-income families with one to 10 students

per class.

. Has launched a new computerized enrollment system to timely track course enrollment

and other relevant operating data in EDU’s schools in Beijing and plans to roll out the

system across the school network by the end of fiscal year 2007.

EDU’s competitive advantage

EDU believes that its primary competitive advantages are the well-known "New Oriental"

brand, innovative and inspirational instruction methods and the breadth and quality of

programs, services and products.

Competition

. The private education sector in China is rapidly evolving, highly fragmented and

competitive. However, none of EDU’s competitors focuses on as broad a spectrum of

programs, products and services as EDU provides. Instead, competitors focus on

targeted markets, both in terms of the particular segments of students they aim to attract

and the local markets in which they operate.

. For example, EDU faces nationwide competition for EDU’s IELTS preparation courses

from Global IELTS School, which offers IELTS preparation courses in many cities in

China.

. EDU faces regional competition for its English for children program from several

competitors that focus on children’s English language training in specific regions,

including English First.

. EDU faces competition for its "Elite English" program primarily from Wall Street Institute

and English First, both of which offer English language training courses for adults in

many cities in China.

. Wall Street Institute began providing high-end English language training courses to

adults in major cities several years before EDI entered this market and enjoys a first

mover advantage.

Internet competition

. The increasing use of the Internet and advances in Internet- and computer-related

technologies, such as web video conferencing and online testing simulators, are

eliminating geographic and cost-entry barriers to providing private educational services.

. As a result, many of EDU’s international competitors that offer online test preparation

and language training courses, such as The Princeton Review, Inc. and Kaplan, Inc. may

be able to more effectively penetrate the China market.

. Many of these international competitors have strong education brands, and students

and parents in China may be attracted to the offerings of international competitors based

in the country that the student wishes to study in or in which the selected language is

widely spoken.

. In addition, many smaller companies are able to use the Internet to quickly and cost

effectively offer their programs, services and products to a large number of students with

less capital expenditure than previously required.

Use of $80.7mm in IPO proceeds

• US$18.5 million to repay all outstanding indebtedness;

• Up to US$20 million to expand EDU’s network of schools and learning centers and

improve existing facilities; and

• Balance to fund working capital and for other general corporate purposes, which may

include strategic acquisitions of businesses that could complement EDU existing

capabilities and business