1. Pearson Interim Results 31 July 2000

2. Interim results to 30 June 2000 Acquisition Announcement

3. Record performances Investing for growth Delivering on the internet

4. Record performances Investing faster Delivering faster

5. Record performances £m Sales1,545+18% Operating profit * 156+17% Pre-tax profit123n/a Earnings per share (p) - pre internet enterprises10.0+41% - post internet enterprises(0.6)n/a Dividend per share (p)9.2+7% 2000 Half year * before goodwill, internet enterprises and other items

6. Internet at the heart of Pearson £m H1H1Full year 200019991999 Online delivery603590 Online channels301550 Composite 140110375 education products

7. Investing faster… Net H1 investment £84m FT internet enterprises –stable costs, rising revenues –profit two years ahead of plan Learning Network –speed, reach, depth –launch in September … delivering faster

8. The integrated learning company

9. Results

10. Profit & Loss £m Sales1,5451,306 Operating profit156133 before Internet enterprises(84)(7) Goodwill(72)(63) Other items(11)(17) Total operating profit/(loss)(11)46 2000 Half year 1999 Half year

11. Sales growth Continuing operations before internet enterprises £m Total growth Portfolio changes Foreign exchange Underlying growth 17% 12% 225 54 10 161

12. FT Group408330+24% Pearson Education647554+10% Penguin 326263+9% Pearson TV164159+3% Continuing operations1,5451,306+12% 2000 Half year 1999 Half year Underlying Change Outstanding sales growth £m

13. Operating profit growth Continuing operations £m Total growth Portfolio changes Foreign exchange Other Underlying growth 32% 33% 36 6 3 4 37

14. FT Group109 86 29% Pearson Education(26)(38)27% Penguin 33 31 16% Pearson TV32 33 - 3% Continuing operations148 11233% Discontinued operations8 21 Total operating profit * 156 13333% * before goodwill, internet enterprises and other items 2000 Half year 1999 Half year Underlying Change Underlying profits rise by a third £m

15. Accelerated internet investment Six months to June 2000 £m FT Group1664 Learning Network-19 Pearson Television-1 1684 Sales Net Investment

16. Profit enhanced by Lazard sale £m Operating profit/(loss)(11) 46 Non-operating items218 5 Profit before interest207 51 Net finance costs(84)(71) Profit/(loss) before tax123(20) Taxation(32)(18) Profit/(loss) after tax91(38) Minorities(3)(3) Profit/(loss) for the half year88(41) 2000 Half year 1999 Half year

17. NCS tax opportunity Tax rate held at 25% Likely benefit from NCS transaction

18. Adjusted earnings Pre internet enterprises10.07.1 After internet enterprises(0.6)6.3 Interim dividend9.28.6 2000 Half year 1999 Half year Before goodwill, exceptional and non operating items Pre internet eps up 41% pence per share

19. Working capital phasing £m Operating profit 156 133 (pre goodwill and other items) Partnerships and associates29(2) Working capital increase(286)(129) Net tangible fixed assets(58)(37) Depreciation42 41 Other movements13(14) Operating cash flow * (104)(8) *before effect of integration costs 2000 Half year 1999 Half year

20. Performance

22. 109 86 69 2000 1999 1998 Operating profit half year 2000 392 1998 335 1999 328 Sales half year £m Pre internet enterprises

23. Operating profits £m FT Newspaper5034+47% FT Interactive Data2615+73% FT Business3(1) Les Echos 1613+23% FT joint ventures(9)(1) Associates48-50% 9068+32% Recoletos1918+6% 10986+27% 2000 Half year 1999 Half year Change Pre internet enterprises

24. Growing circulation June sales (thousands)

25. Increasing ad revenues £m Jan - June

26. FT.com growth H1 revenue growth 300% 75% visit at least twice per week Averages 8 pages per user per day CPM ad rates of £40 – £100

27. 6/996/00 0 25 50 75 100 Million page views per month FT business portals

28. 6/996/00 0 25 50 75 100 Million page views per month FT business portals

29. FT Group internet revenues Advertising Subscriptions Syndication/licensing e-commerce

30. Generating returns FT.com 19992000200120022003 0 Revenues Costs £

31. Strong performance in local currency –sales up 18% –operating profit up 12% #2 Spanish internet portal Flotation planned

33. 232 263 2000 1998 1999 2000 1999 31 1998 16 £m 294 i Operating profit half year Sales half year Pre Dorling Kindersley 37 i

34. New York Times5834 Sunday Times3122 More Bestsellers 2000 Half year 1999 Half year

35. 326 232 263 2000 1998 1999 2000 33 1999 31 1998 16 £m Operating profit half year Sales half year Post Dorling Kindersley

36. DK integration

37. March 00 April 00 May 00 June 00 July 00 Oct 00 Nov 00 Jan 01 May 01 Offer accepted Warehousing reorganised Brand group established to exploit content across Pearson New DK Operating Board DKFL closure Combined UK Sales & Marketing Finance systems merged Office integration DEAL CLOSED May 02 Consolidated supply chain

39. London listed company worth £16 bn Jan London listing  200 - 150 - 100 - 50 - 0 - FebMarApr 2000 MayJunJul  Deal announced €

40. The value of television £0.3bn £3.5bn Net value created £3.8 bn Net realisation since 1990 Value of RTL stake Net value created £3.8 bn Net realisation since 1990 Value of RTL stake

42. 2000 647 1998 180 1999 554 2000 (26) 1999 (38) 1998 (19) £m Losses half year Sales half year Pre internet enterprises

43. Pearson Education £m Sales US School222187+19% Higher Ed & Professional215178+21% International197169+17% Discontinued212 Pearson Education636546+16% FT Knowledge118 647554 2000 Half year 1999 Half year Change

44. On track for full year JanFebMarAprMayJunJulAugSepOctNovDec % of Total Year 0% 25% 75% 50% 100% -25% -50% -75% Revenue Operating Profit Cash Flow

45. Launch

55. Acquisition

56. The vision The integrated learning company

57. The vision Creates the “intelligent” classroom Connects schools and homes

58. The vision

59. The company Education +25% growth Assessmen t K-12applications Projects for education customers Accreditati0n Data management

60. #1 in assessment Scores, processes and reports 40% of all K-12 standardised tests Leads in internet-based tests, delivery systems Leader in assessment technology

61. #1 in school applications Software and systems to manage schools, students, curricula and teaching 40,000 schools out of 100,000 10,000 hours of on-line content Bank of 40,000 questions

62. #1 in key data management niches Leveraging education skills and equipment Leader in moving paper processes to web Leading supplier to US Dept of Education

63. 20% compound revenue growth $m * market estimates

64. 25% compound earnings growth EPS($) * market estimates

65. The combination Customised school learning products Larger sales force Greater international reach

66. The combination Professional accreditation products Larger sales force Greater international reach

67. The combination The school home connection

70. Transaction

71. Deal highlights Cash tender offer at $73 per share –26% premium over Friday’s closing price Values NCS at $2.5 bn $98m break-up fee Completion expected early September

72. Valuation 2000 * 1999 Multiples of: Revenue3.33.9 EBITDA20.323.6 EPS4961 *consensus of analysts estimates

73. Added value Revenue opportunities Cost reductions of $50m by 2002 Integration costs of $50m

74. Impact on Pearson Enhances adjusted earnings in first year Strengthens earnings quality and visibility Superior cash conversion Financial ratios protected by funding

75. The rights issue 3 for 11 at £10 to meet acquisition cost Discount structure will –reduce issue costs –create bonus element Backstop underwriting to ensure completion Synchronised with US listing process

76. Pro forma balance sheet £m Goodwill3,0184,529 Fixed assets453500 Working capital1,1601,101 Other net assets86701 Net trading assets4,7176,831 Shareholders’ funds1,8313,963 Provisions and minorities343300 Net debt2,5432,568 Capital employed4,7176,831 2000 Half year Post Acquisition * *post NCS and RTL transactions

77. The next “new new thing” Transforming Pearson Education

80. 326 232 263 2000 1998 1999 2000 33 1999 31 1998 16 £m 294 * i 37 * i Operating profit half year Sales half year * pre Dorling Kindersley Print only