Citigroup European Citigroup European Media ConferenceMedia Conference

12 September 200512 September 2005

Pearson today

2004 revenues: £3.7bn

By region By business

School29%

US 68%

Asia 7%

UK 15%

Europe 8%

Rest of world2%

Higher Education20%

FT Group16%

Professional14%

Penguin21%

Our advantage

• Growth markets

• Leading brands

• Scale and efficiency

• Steady investment in content and services

• New geographic markets; new market segments

Strong start to 2005

• Sales up 10%; good growth in all parts

• Operating profit up strongly

• Balance sheet stronger

• Continuing dividend growth

Our School advantage

Content Assessment Reporting Data/Services Platform

PearsonPearsonPearsonPearson

McGraw-Hill

Harcourt (Reed)

Houghton Mifflin

Significant Some

Healthy adoption opportunities2005-2007

90%+90%+75%90%Pearson participation

160170100100Reading / literature

707038040Other

17017010050Science

620

170

40

2006E

750900500TotalTotalTotalTotal

13021010Social studies

220110300Math

2007E2005E2004$m

Source: Pearson estimates

-12%

-8%

-4%

0%

4%

8%

12%

The funding environmentYear-on-year changes in quarterly state tax revenues

2001 2002 2003 2004 2005

Source: US Census Bureau

The funding environmentAnnual expenditure per child, $000s

Source: US Dept of Education, NCESNote: middle alternative projections as at 2001/02 dollars, not inflation adjusted

8.08.3

8.4 8.5 8.78.8

2005 2006 2007 2008 2009 2010

The policy environment

• Standards movement a priority

• Materials and assessment required for achievement

• Schools looking for operational improvements

• Technology taking hold

Outlook

• Adoption cycle strong

• Funding environment healthy

• Policy supports materials, testing and technology

Our college advantage% change in gross sales vs. prior year

0%

2%

4%

6%

8%

10%

12%

14%

1999 2000 2001 2002 2003 2004

Pearson Education

Rest of industry

Source: Management Practice Data

A growing college populationTotal enrolment in all degree-granting institutions(’000’s)

Source: US Department of Education, NCES

16,67916,887 17,020

17,16817,374

17,541

2005 2006 2007 2008 2009 2010

Growth in workforce education

Our international advantageSales ($bn)

1.2

0.50.4

0.2

PearsonEducation

ThomsonLearning

McGraw-Hill

Harcourt(Reed)

Note: Education revenues from outside the US.

Penguin’s advantage

Penguin’s advantage

Penguin’s advantage

Novel ideas

• Growth in UK commercial fiction

Novel ideas

• Growth in UK commercial fiction

• Successful new imprints

Novel ideas

• Growth in UK commercial fiction

• Successful new imprints

• Mass market innovation

The FT’s advantage

• Global brand

• Lower costs

• Premium content

• Niche audience

• Leading online service

Good news: readershipRegular readers in Europe

Source: Europe 2005Universe: 10.157m Sample: 11,002

1.3%

1.4%

1.7%

5.5%

6.7%

Print Online

Financial Times

IHT

Wall Street JournalEurope

USA Today

The Economist

1.5%

2.1%

1.2%

3.1%

8.2%

Growth in international newsTotal circulation, millions

0

100

200

300

400

500

99 00 01 02 03 04 05 06 07 08 09 10 11 12

Source: World Association of Newspapers / ZenithOptimedia

China, India & RoW

EU

Japan

USA

IDC’S advantageRevenues & margins

00 01 02 03 04 H1 05

$375m

$443m$485m

$340m

25.4%

$314m

29.8% 31.2% 30.5% 30.6% 30.0%

$273m

as reported under US GAAP