Pearson Pearson Citigroup Smith Barney Citigroup Smith Barney 4th Annual European 4th Annual European Media ConferenceMedia Conference

18 September 200318 September 2003

School 27%

Higher Education 18%

Professional 19%FT Group 17%

Penguin 19%

Financial priorities Financial priorities

Deliver steady earnings growthDeliver steady earnings growth

Improve cash generationImprove cash generation

Improve return on invested capitalImprove return on invested capital

Outlook 2003 Outlook 2003

Steady growth at Penguin, Higher Ed, IDCSteady growth at Penguin, Higher Ed, IDC

Strong competitive performance in flat US School marketStrong competitive performance in flat US School market

Professional affected by TSA; underlying business Professional affected by TSA; underlying business growinggrowing

Advertising and technology markets still tough; Advertising and technology markets still tough; further cost actionsfurther cost actions

Looking ahead . . . Looking ahead . . .

Steady growth in Penguin, Higher Ed, IDCSteady growth in Penguin, Higher Ed, IDC

Slow adoption year in ’04; strong rebound in ’05/ ’06Slow adoption year in ’04; strong rebound in ’05/ ’06

School operations benefit from No Child Left BehindSchool operations benefit from No Child Left Behind

Business newspapers highly geared to ad recoveryBusiness newspapers highly geared to ad recovery

Our agendaOur agenda

Attractive marketsAttractive markets

Leading positionsLeading positions

Efficiency gainsEfficiency gains

IDC counters ad cycle in business information IDC counters ad cycle in business information

0-3% growth in consumer publishing0-3% growth in consumer publishing– Faster growth in niche categoriesFaster growth in niche categories

5-7% growth in K-16 publishing5-7% growth in K-16 publishing– Faster growth in testing, software, ELTFaster growth in testing, software, ELT

Attractive markets Attractive markets

FY ’03FY ’03 FY ’04FY ’04

TRAININGTRAINING $384m$384m $390m$390m

DATA ANALYSISDATA ANALYSIS $384m$384m $385m$385m

READING FIRSTREADING FIRST $994m$994m $1,005m$1,005m

TEACHER PROFESSIONAL DEVELOPMENTTEACHER PROFESSIONAL DEVELOPMENT $2,930m$2,930m $2,850m$2,850m

US School: No Child Left BehindUS School: No Child Left Behind

Attractive markets Attractive markets

Rising demand for English as a 2Rising demand for English as a 2ndnd language language

Surge in Federal government testing and trainingSurge in Federal government testing and training

Trend to customisation Trend to customisation

Growth in children’s publishingGrowth in children’s publishing

18

35

45

62

85

1998 1999 2000 2001 2002

18

35

45

62

85

1998 1999 2000 2001 2002

Higher Education: growth in custom Higher Education: growth in custom Sales $mSales $m

Our agendaOur agenda

Attractive marketsAttractive markets

Leading positionsLeading positions

Efficiency gainsEfficiency gains

Leading positionsLeading positions

#1 in K-16 education publishing#1 in K-16 education publishing

#1 or #2 in English language markets #1 or #2 in English language markets worldwideworldwide

#1 in education testing & software#1 in education testing & software

#1 in international education#1 in international education

The leading international and national The leading international and national business newspapersbusiness newspapers

US School: #1 in new adoptionsUS School: #1 in new adoptions

subjectsubjectopportunity opportunity

(est)(est)market share market share

(est)(est)

secondary social studiessecondary social studies $200m$200m 23%23%

secondary literaturesecondary literature $110m$110m 40% +40% +

elementary social studieselementary social studies $100m$100m 58%58%

elementary readingelementary reading $80m$80m 30% +30% +

total competed fortotal competed for $585m$585m 35%35%

total – all adoptionstotal – all adoptions $690m$690m 30%30%

0%

2%

4%

6%

8%

10%

12%

14%

1999 2000 2001 2002 H1 2003

Pearson EducationRest of industry

% change in Higher Ed gross sales vs. prior year% change in Higher Ed gross sales vs. prior year

US College: still beating the marketUS College: still beating the market

SOURCE: MANAGEMENT PRACTICE DATASOURCE: MANAGEMENT PRACTICE DATA

+8.6%+8.6%

+0.3%+0.3%

1996 1997 1998 1999 2000 2001 2002

UKUK

EuropeEurope

AsiaAsia

USAUSA

The FT’s international expansionThe FT’s international expansionCirculation ’000sCirculation ’000s

332332353353

414414

467467 478478459459

302302

Our agendaOur agenda

Attractive marketsAttractive markets

Leading positionsLeading positions

Efficiency gainsEfficiency gains

Managing costs aggressivelyManaging costs aggressively

Driving down working capitalDriving down working capital

Integrating Pearson Education and PenguinIntegrating Pearson Education and Penguin

Efficiency gains Efficiency gains

The world’s largest book companyThe world’s largest book company

Source: annual reports, analyst reportsSource: annual reports, analyst reportsNote: 2001 median GBP / USD exchange rate = 1.45Note: 2001 median GBP / USD exchange rate = 1.45

Estimated 2001 book revenues ($m)Estimated 2001 book revenues ($m)

869

959

988

1,000

1,828

1,858

2,322

4,188

Harcourt / Reed Harcourt / Reed

News CorpNews Corp(Harper(HarperCollins)Collins)

HoltzbrinckHoltzbrinck

ScholasticScholastic

BertelsmannBertelsmann

McGraw HillMcGraw Hill

PearsonPearson

Houghton MifflinHoughton Mifflin

Attractive marketsAttractive markets

Leading positionsLeading positions

Efficiency gainsEfficiency gains

. . . . . . to deliver steady annual to deliver steady annual progress in earnings, cash and progress in earnings, cash and returnsreturns