TCS CAPITAL PRESENTATION TO SPECIAL COMMITTEE OF XUEDA BOARD OF DIRECTORS

MAY 2015 (UPDATED)

DISCLAIMER This report is prepared by TCS Capital Management LLC (TCS Capital, or TCS) and is not intended to constitute investment advice. TCS Capital has a significant ownership position in Xuedas equity and has received no compensation for this report. The information in this report has been compiled by TCS, and while it has been obtained from sources deemed to be reliable, no guarantee is made with respect to its accuracy. TCS Capital accepts no liability whatsoever for any direct, indirect, consequential or other loss arising from any use of this presentation and/or further communication in relation to this document. Use of this presentation is at your own risk. You should do your own research and due diligence before making any investment decision with respect to securities covered herein. Following publication of any report, TCS intends to continue transacting in the securities covered herein, and may be long, short, or neutral at any time. This is not an offer to sell or a solicitation of an offer to buy any security, nor shall any security be offered or sold to any person, in any jurisdiction in which such offer would be unlawful under the securities laws of such jurisdiction. The information contained herein is presented "as is," without warranty of any kind whether express or implied. TCS makes no representation, express or implied, as to the accuracy, timeliness, or completeness of any such information or with regard to the results to be obtained from its use. All expressions of opinion are subject to change without notice, and TCS does not undertake to update or supplement this report or any of the information contained herein.

In April 2015, Insight Investment Company proposed to buy Xueda for $3.38/share. Disturbingly, Xuedas CEO and the other co-founders subsequently joined Insights bid.

At $3.38/share, Insights offer implies NEGATIVE VALUE for Xuedas business. In essence, the Insight consortium is trying to buy Xueda from public shareholders for less than the value of the Companys actual cash on hand.

It is our belief that the bidders are using Insight, which is a Shenzhen-listed shell, as a vehicle to squeeze out minority shareholders and list Xueda on the Chinese domestic stock exchange where public companies often benefit from unusually high market valuations.

To appropriately value Xueda equity, the Board, at a minimum, must include both the net cash on Xuedas balance sheet and the value of the Companys business operations.

Xueda had approximately $4/share in net cash as of 3/31/2015 (including long-term investments and excluding dividends), which is materially above the Insight offer of $3.38/share.

In addition, we believe Xuedas business is growing and profitable, with over $340m of revenue. We have calculated, based on our conservative estimates, that Xuedas ongoing operations have substantial value of at least $3-$4 per share.

The Insight proposal is not only below Xuedas cash balance, but it attributes ZERO value for the Companys substantial business operations, which we believe are entering a period of renewed growth and profitability.

We believe it would be unprecedented for a board of directors to approve a transaction at such a low price.

Transaction Background

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After a long period of poor execution, we believe that Xuedas business has begun to stabilize, but that its market valuation remains depressed.

Recent Xueda Stock Performance

Company receives Insight proposal.

Management meets investors on US roadshow with upbeat presentation.

Management joins Insight group; Special Committee formed.

Company impacted by double-

discounting; cuts full-year guidance.

4Q/2013 results released; 2014 guidance below

expectations.

Company lowers guidance again;

stock trades below cash value.

Revenue growth slows to 1.6% in

Q1/2014.

CEO buys shares from original private equity

investors.

Financial performance stabilizes, but stock still trades below cash value.

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Xueda Financial Summary

Source: Company public filings and TCS estimates. Note: all currencies in USD. Excludes interest earned on excess capital in historical and future periods (assumed capital is returned to shareholders). Our margin targets are below Company medium term targets of 29% GM and 5% operating margin. (1) Represents 2015 normalized for impact of over-discounting in 2014/2015 periods.

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After a challenging period of weak financial results triggered by management missteps, Xueda has recently shown improved revenue and profit margins.

To estimate the Companys 2015 revenue and profitability, we believe it is reasonable to assume that the business begins to return to the historical/normalized growth and profitability that preceded the double-discounting period.

2012 2013 2014 2015E 2016E 2017E 2015 PF (1)

Average Enrollment (000s) 58.2 65.4 69.2 71.2 74.1 76.3 71.2% Growth 12.4% 5.7% 3.0% 4.0% 3.0% 3.0%

ARPS $5,037 $5,306 $4,892 $4,819 $5,011 $5,112 $5,200% Growth 5.3% (7.8%) (1.5%) 4.0% 2.0%

Revenue $293.2 $347.0 $338.3 $343.2 $371.2 $390.0 $370.4% Growth 18.4% (2.5%) 1.5% 8.2% 5.1% 9.5%

Gross Profit 73.5 107.1 83.7 82.0 94.7 103.4 103.7% Growth 45.7% (21.8%) (2.0%) 15.4% 9.2%% Gross Margin 25.1% 30.9% 24.7% 23.9% 25.5% 26.5% 28.0%

Adj. EBITDA $15.1 $40.7 $8.7 $12.0 $24.0 $30.0 $25.9% Growth 169.5% (78.8%) 38.7% 100.0% 25.0%% Margin 5.2% 11.7% 2.6% 3.5% 6.5% 7.7% 7.0%

Adj EBITDA $15.1 $40.7 $8.7 $12.0 $24.0 $30.0 $25.9Capex (19.1) (10.5) (11.3) (8.0) (8.0) (8.0) (8.0)Interest 0.0 0.0 0.0 0.0 0.0 0.0 0.0Change in Working Capital 36.0 8.1 (7.2) 3.0 4.0 4.0 3.0Taxes (2.9) (8.3) (3.7) (1.1) (3.0) (4.0) (3.2)Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0Free Cash Flow $29.1 $30.0 ($13.6) $5.9 $17.0 $22.0 $17.7

Market Enterprise Net Cash as % Revenue Revenue Growth Adj. EBITDA TEV / EBITDAPeer Company Stock Price Cap. Value of Mkt Cap 2014 2015E 2016E 2015E 2016E 2014 2015E 2016E 2014 2015E 2016E

TAL Education $36.19 $2,877 $2,611 9.2% $434 $582 $761 34.1% 30.8% $86 $119 $166 30.5x 21.9x 15.7xTarena 12.25 711 543 23.6% 136 184 239 35.3% 29.9% 30 41 61 18.1x 13.2x 8.9xNew Oriental 23.85 3,759 2,450 34.8% 1,192 1,341 1,549 12.5% 15.5% 223 232 282 11.0x 10.6x 8.7xChina Distance 15.81 571 456 20.1% 97 118 149 21.6% 26.3% 28 32 43 16.6x 14.4x 10.6xGuangdong Qtone Education 24.84 5,313 5,283 0.6% 31 112 210 256.3% 88.6% 7 36 75 705.7x 145.2x 70.6x

Average (Ex. Xueda, Qtone) 22.0% 25.9% 25.6% 19.0x 15.0x 11.0xMedian (Ex. Xueda, Qtone) 21.9% 27.9% 28.1% 17.3x 13.8x 9.7x

Xueda (Offer Price)(1) $3.38 $212 ($29) 116.4% $338 $370 $389 9.5% 5.0% $9 $26 $31 -3.3x -1.1x -0.9x

XUE Implied PriceXueda (Avg of '15E Peers)(1) $10.15 $637 $390 45.1x 15.0x 12.8xXueda (8x '15E EBITDA)(1) $7.24 454 207 24.0x 8.0x 6.8x

USD in Millions. Comparable company estimates based on consensus numbers and Bloomberg data. Stock prices as of 5/26/15. (1) Xuedas 2015E and 2016E Revenue and EBITDA adjusted for impact of double-discounting in 2014/15 periods.

Valuation Public Trading Comparables The following slides use common valuation techniques with publicly available information to show a range of

potential values for Xuedas business.

The average publicly-traded Chinese education company trades at a multiple of 15x 2015 estimated EBITDA. Using this average multiple would imply a value of $10/share for Xueda.

Note that we have excluded below education companies that are listed on the Chinese domestic stock exchange. These companies often trade at extraordinary valuation multiples. For example, Guangdong Qtone Education trades at 47x 2015E EV/sales and 145x 2015E EBITDA.

Because Xueda is growing more slowly than its peers, we conservatively use an 8x multiple of 2015 estimated EBITDA. We also adjusted revenue and EBITDA to exclude the one-time impact of the recent double-discounting to reflect what we believe to be the true earnings power of the enterprise, which would imply a fair value of more than $7/share for Xueda.

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(1) (1) (1) (1)

Based on Bloomberg data and company public disclosures. (1) Assumes Xuedas 2015E EBITDA is adjusted for impact of double-discounting in 2014/15 periods.

Valuation Precedent Transactions

We believe Xueda can also be valued using the multiples of comparable M&A transactions.

Using the multiples of recent Chinese digital/education transactions, Xuedas implied fair value would be more than $7/share based on 8x forward EBITDA.(1)

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Market Enterprise TEV/Forward CompletionTarget Company Acquirer Capitalization Value EBITDA Date

Alibaba.com Alibaba Group (Parent) $8,843 $8,584 20.2x 6/21/2012ChinaEDU Rainbow Education 66 27 2.8x 4/24/2014Focus Media Private Equity Consortium 3,699 2,869 8.2x 5/23/2013Giant Interactive Baring Private Equity / Consortium 2,964 2,333 8.5x 7/21/2014Jiayuan Vast Profit 161 91 9.1x Offer under reviewNoah Education Consortium 107 21 3.0x 7/31/2014Perfect World Consortium 1,023 548 5.8x 2H2015Shanda Games Consortium 1,928 1,743 8.3x 2H2015Tudou Holdings Youku 1,050 925 (10x sales) 8/23/2012

Xueda Implied PriceAverage 8.2x $7.34Median 8.2x $7.34

Conclusions on Valuation

Insights proposal implies a NEGATIVE VALUE for Xuedas business and does not reflect the full value of Xuedas cash on hand.

To value the Company appropriately, the Board must consider the value of the Companys business and the net cash on its balance sheet.

Our conservative, in-depth analysis shows that Xuedas on-going business is at least $3-$4/share based on comparable publicly-traded company valuations and transaction precedents. In addition, the Company has $4/share in cash which must be included in the aggregate valuation.

As a result, we believe a fair value for the Company is at least $7/share.

Other important considerations:

We believe the Company has ample capacity to buy-out its minority shareholders at $7/share (requiring $185 million cash outlay) or to alternatively consider a large special dividend or tender offer -- a result that would maximize value for all shareholders (not just the co-founders and Insight).

In addition, for the benefit of all shareholders, we recommend that the Board immediately undertake a thorough evaluation of strategic alternatives, including a comprehensive auction process targeting other industry buyers who could pay a substantially higher price for the Company.

It is also important to note that the Board only has six directors three of whom are co-founders. We do not believe the Board has adequate independent representation.

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TCS CAPITAL PRESENTATION TO SPECIAL COMMITTEE OF XUEDA BOARD OF DIRECTORS MAY 2015(UPDATED)DISCLAIMERThis report is prepared by TCS Capital Management LLC (TCS Capital, or TCS) and is not intended to constitute investment advice. TCS Capital has a significant ownership position in Xuedas equity and has received no compensation for this report. The information in this report has been compiled by TCS, and while it has been obtained from sources deemed to be reliable, no guarantee is made with respect to its accuracy. TCS Capital accepts no liability whatsoever for any direct, indirect, consequential or other loss arising from any use of this presentation and/or further communication in relation to this document.Use of this presentation is at your own risk. You should do your own research and due diligence before making any investment decision with respect to securities covered herein. Following publication of any report, TCS intends to continue transacting in the securities covered herein, and may be long, short, or neutral at any time. This is not an offer to sell or a solicitation of an offer to buy any security, nor shall any security be offered or sold to any person, in any jurisdiction in which such offer would be unlawful under the securities laws of such jurisdiction. The information contained herein is presented "as is," without warranty of any kind whether express or implied. TCS makes no representation, express or implied, as to the accuracy, timeliness, or completeness of any such information or with regard to the results to be obtained from its use. All expressions of opinion are subject to change without notice, and TCS does not undertake to update or supplement this report or any of the information contained herein.Slide Number 3Slide Number 4Slide Number 5Slide Number 6Slide Number 7Slide Number 8