1. Pearson Merrill Lynch TMT Conference Pearson  Merrill Lynch TMT Conference Rona Fairhead 3 June 2003

2. School 27% Higher Education 18% Professional 19% FT Group 17% Penguin 19%

3. Financial priorities  Deliver steady earnings growth  Improve cash generation  Improve return on invested capital

4. Working Capital £0.8bn Working Capital £0.8bn Net Fixed Assets £0.5bn Net Fixed Assets £0.5bn divided by Operating Margin 11% Operating Margin 11% Net Sales £4.3bn Net Sales £4.3bn Cash Tax Effect £0.1bn 15% Cash Tax Effect £0.1bn 15% less Goodwill £5.7bn Goodwill £5.7bn Return on invested capital plus Returns (NOPLAT) £0.4bn Returns (NOPLAT) £0.4bn ROIC 6.0% ROIC 6.0% Invested Capital £7bn Operating Assets £1.3bn Operating Assets £1.3bn Operating Profit £0.5bn Operating Profit £0.5bn

5. Working Capital £0.8bn Working Capital £0.8bn Net Fixed Assets £0.5bn Net Fixed Assets £0.5bn divided by Operating Margin 11% Operating Margin 11% Net Sales £4.3bn Net Sales £4.3bn Cash Tax Effect £0.1bn 15% Cash Tax Effect £0.1bn 15% less plus Goodwill £5.7bn Goodwill £5.7bn Return on invested capital Returns (NOPLAT) £0.4bn Returns (NOPLAT) £0.4bn ROIC 6.0% ROIC 6.0% Invested Capital £7bn £1.3bn Operating Assets £1.3bn Operating Profit£0.5bn £0.5bn

6. Average working capital 2002 av w/c 2001 2002 2002 at constant sales improvement £m £m£m£m£m% penguin / pearson ed % sales 1,09231.9%1,09030.3%1,039535% ft group % sales (35)(4.4)%(38)(5.2)%(41)617% group 1,05725.0%1,05224.4%1,029283%

7. Return on invested capital Working Capital £0.8bn Working Capital £0.8bn Net Fixed Assets £0.5bn Net Fixed Assets £0.5bn divided by Operating Margin 11% Operating Margin 11% Net Sales £4.3bn Net Sales £4.3bn Cash Tax Effect £0.1bn 15% Cash Tax Effect £0.1bn 15% less plus Goodwill £5.7bn Goodwill £5.7bn Operating Assets £1.3bn Operating Assets £1.3bn Returns (NOPLAT) £0.4bn Returns (NOPLAT) £0.4bn ROIC 6.0% ROIC 6.0% Invested Capital £7bn Operating Profit£0.5bn £0.5bn

8. Cash flow through transformation £m200220012000199919981997 operating free cash flow 30523615929826643 non-operating(46)(27)(79)(93)(11)(21) acquisitions & disposals 806(23)(2,017)361(2,020)(182) Integration(44)(69)(61)(110)(23)— dividends * (182)(183)(144)(133)(119)(116) equity6201,9591834727 other(5)(7)(6)(8)(6)(6) net movement of funds 840(53)(189)333(1,566)(255) *includes dividends to minorities

9. Our position  The world’s most international business newspaper and website  Leading national business newspapers in France, Germany, Spain, South Africa  50% stake in The Economist  Leading provider of financial data FT and FT.com 31% Other publishing 14% IDC 34% Recoletos 20% 2002 revenues : £726m

10. Industry drivers  Short-term: –corporate confidence & earnings –job losses in financial community  Long-term: –appetite for high quality, international business information –connections between political, economic & business news –value in niche audience of leaders in business, finance, politics

11. Agenda  Modest investment in UK, US, Asia  Tight cost controls, lower internet losses  Further progress at IDC and Recoletos

14. Agenda  Modest investment in UK, US, Asia  Tight cost controls, lower internet losses  Further progress at IDC and Recoletos

15. Our position  The world’s pre-eminent English language publisher  #1 or #2 in the US, UK, Australia, NZ, India and Canada  The leading illustrated reference publisher  With Pearson Education, the world’s largest book publisher Penguin US 57% Penguin UK & ROW 24% Dorling Kindersley 19% 2002 revenues : £838m

16. Industry drivers  Steady growth  Bestseller performance  Faster-growing categories  Benefits of scale

17. The world’s largest book company SOURCE: ANNUAL REPORTS, ANALYST REPORTS NOTE: 2001 MEDIAN GBP / USD EXCHANGE RATE = 1.45 Estimated 2001 book revenues ($m) Harcourt / Reed New Corp (Harper Collins) Holtzbrinck Scholastic Bertelsmann McGraw Hill Pearson Houghton Mifflin

18. Agenda  Sales growth ahead of the market  Margin improvement as DK’s progress continues  Further scale opportunities with Pearson Education

19. Our position  The world’s leading education company  #1 in US School, US Higher Education and outside the US  Leading in publishing, testing and technology School 42% Professional * 30% Higher Educatio n 28% 2002 revenues : £2,756m * FTK revenues included in Professional

20. School: industry drivers  Short-term: –the adoption cycle –state budgets  Long-term: –standards movement drives spending on: textbookstextbooks testingtesting student informationstudent information

21. Source: National Conference of State Legislatures Estimates * of FY 2004 ** budget shortfalls, $m 0-400 401-800 801-1,500 1,501-3,000 3,000-10,000 10,001-20,000 *As of April 2003 **Most state fiscal years end June 30th

22. School: industry drivers  Short-term: –the adoption cycle –state budgets  Long-term: –The knowledge economy –standards movement drives spending on: curriculumcurriculum testingtesting student informationstudent information

23. ELHI spending 1981 = 100 Instructional material GDP Enrolment

24. School: our position US Publishing 50% US Testing and Software 27% International and ELT 23% 2002 revenues : £1,151m  #1 US school publisher  The integrated school company: #1 in publishing, testing and technology  World’s #1 publisher in English Language Teaching

25. 2002 revenues : £1,151m Adoption States Open Territories Residual Sales New Adoptions

26. School: agenda  Grow ahead of the market in ’03; protect margins in ’04  Prepare for rebound in adoption cycle in ’05/ ’06  Use testing and software to help states meet NCLB requirements

27. Higher Education: our position  34% US market share  20%+ US margins US Higher Education 80% International Higher Education 20% 2002 revenues : £775m

28. Higher education: industry drivers  Short-term: –authors –publication cycle  Long-term: –the value of a college education –demographics –integration of technology –customisation –benefits of scale

29. Higher Education: agenda  Further share gains  Build on lead in technology  Increase lead in custom publishing

30. Professional: our position Technology Publishing 20% 2002 revenues : £784m Government Solutions 44% Other 22% Professional Assessment 14%  #1 technology publisher worldwide  Leading provider of testing and HR services to US federal government  Developing business in professional testing and certification

31. Professional: industry drivers  Short-term: –technology downturn –government contracts can be ‘spiky’ (e.g. TSA contract in ’02) –start-up costs in professional testing business  Long-term: –licensing/ accreditation of professionals –US federal government outsourcing –technology recovery

32. Professional: agenda  Develop pipeline of government contracts  Maintain margins in technology publishing  Build professional testing business

33. The fundamentals  Attractive markets  Leading positions  Valuable brands  Benefits of scale... annual progress in earnings, cash and returns