1. Pearson results presentation Pearson  results presentation 3 March 2003

2. Financial highlights £m 20022001 headline change underlyin g change Sales4,3204,225 + 2% + 6% Operating profit 493426+16%+18% Operating free cash flow 305236+29% Adjusted earnings per share 30.3p21.4p+42%  Made earnings, cash, ROIC goals  Gained market share  Expect annual progress

3. 2003 Further significant growth  earnings  cash  returns Annual progress beyond

4. Pearson financial performance Pearson  financial performance

5. Financial headlines  Underlying sales growth despite FT downturn  Margins improved  Good progress on cash and returns  Balance sheet strengthened

6. Financial reporting Improved clarity  Portfolio changes largely complete  Post-internet basis  Reconciliation pack  Improved segmental analysis

7. Sales £m 2002 2001 headline change underlying change Education2,7562,604+6%+11% FT group 726801 - 9% - 8% Penguin838820+2%+5% Total sales 4,3204,225+2%+6%

8. Operating profits £m 2002 2001 headline change underlying change Education326274+19%+22% FT group 8072+11% + 8% Penguin8780 + 9% +11% Continuing operations 493426+16%+18% Televisionsold37—— Operating profits 493463 + 6% +18% BEFORE GOODWILL, INTEGRATION COSTS AND NON-OPERATING ITEMS

9. Education £m20022001 headline change underlying change Sales School1,1511,266 - 9% - 5% Higher Education 775721+7% + 13% Professional784558+41% + 48% Total2,7102,545+6% + 11% FTK4659 - 22% - 18% Total2,7562,604+6% + 11%

10. Education £m20022001 headline change underlying change Operating profit School140167 - 16% - 15% Higher Education 142127+12%+17% Professional8180+1%+8% Sub total 363374 - 3% 0% FTK(12)(23)—— Internet(25)(77)—— Total326274+19%+22%

11. Education Segmental sales & margin mix 2001 50% 28% 22% 2002 School Higher Ed Professional 42% 29% 13% 17% 14% 12% 18% 10% School Professional Higher Ed Note: 2002 includes £20m of back office costs and £11m additional pension charge Operating profit margins

12. FT Group £m20022001 headline change underlying change Sales FT newspaper 202250 - 19% Other FT publishing (Les Echos & FT Business) 102138 - 26% - 14% Recoletos148150 - 1% - 4% IDC226212+7%+7% Internet enterprises 4851 - 6% - 5% Total726801 - 9% - 8%

13. FT Group £m20022001 headline change underlying change Operating profit FT newspaper 131 - 97% - 92% Other FT publishing (Les Echos & FT Business) 1321 - 38% - 39% Associates & joint ventures (3)(10)—— Recoletos2923+26%+21% IDC7467+10%+12% Internet enterprises (34)(60)—— Total8072+11%+8%

14. Penguin Group £m 2002 2001 headline change underlying change Sales8388202%5% Operating profit 87809%11%

15. Adjusted earnings per share £m20022001var Headline change Operating profit (incl RTL for ’01) 493463+30+6% Interest(94)(169)+75— Taxation(131)(100) - 31 — Profit after tax 268194+74+38% Minorities(27)(24) - 3 — Adjusted profit 241170+71+42% Adjusted earnings per share 30.3p21.4p+8.9p+42% Dividend per share 23.4p22.3p+1.1p+5% 2001 restated for frs19 before goodwill, integration costs and non-operating items

16. $ sensitivity 5¢ change for full year = approximately 1p EPS impact 20022001 Average full year rate 1.511.44

17. P&L - statutory £m20022001var Operating profit (incl RTL for ’01) 493463+30 Goodwill(340)(436)+96 Integration costs (10)(74)+64 Total operating profit / (loss) 143(47)+190 Non-operating items (37)(220)+183 Finance costs (131)(169)+38 Taxation(64)33 - 97 Minorities(22)(20) -2-2-2-2 Loss(111)(423)+312 Loss per share (13.9)p(53.2)p+39.3p 2001 RESTATED FOR FRS19

18. Falling integration costs £m2002200120001999 Simon & Schuster ——995 NCS7294— DK34527— Total 10 10744095 Cash impact 446961110

19. Operating free cash flow £m20022001var Operating profit 493463+30 Working capital (4)(7)+3 Net tangible fixed assets (124)(136)+12 Depreciation122125 - 3 Other movements (32)(8) - 24 Operating cash flow * 455437+18 Cash conversion % 92%94% - 2% Operating tax paid (46)(44) - 2 Operating finance charges (104)(157)+53 Operating free cash flow 305236+69 * operations before integration costs

20. Average working capital 2002 av w/c 2001 2002 2002 at constant sales improvement £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%

21. Balance sheet £m20022001var Intangible assets 3,6104,193 - 583 Tangible assets 503542 - 39 Operating working capital 811894 - 83 Other net assets 5690 - 685 Net trading assets 4,9296,319 - 1,390 Shareholders’ funds 3,3383,797 - 459 Deferred tax (174)(272)+98 Provisions165239 - 74 Minorities192176+16 Net debt 1,4082,379 - 971 Capital employed 4,9296,319 - 1,390 2001 RESTATED FOR FRS19

22. Current pension position Actuarial Status – Funded Schemes  UK £1bn defined benefit £43m surplus in 2001 17% contribution level agreed  RoW mainly US and Canada £60m defined benefit

23. Current pension position Actuarial Status 200120022003e £mUKRoWTotalUKRoWTotalUKRoWTotal Regular charge 152540183654193958 (surplus)/ deficit amort. (5)(5)0055 Full P&L impact 102535183654243963 Cash impact —2525383674254166 The P&L charge excludes the cost of post retirement benefit costs (2002 : £5m, 2001 : £4m)

24. Impact of pension accounting 2002 2002 2003E 2003E £m SSAP24FRS17SSAP24FRS17 Operating charge (54)(53)(63)(58) Interest benefit / (charge) -4-(5) Profit before tax (54)(49)(63)(63) £m20012002 Net liability after tax (frs 17) UK51149 RoW (mainly us) 2225 Total net liability after tax (frs 17) 73174

25. Return on invested capital Operating profit less Cash tax Net operating assets plus Gross goodwill

26. Return on invested capital £m20022001 Return: Operating profit Less cash tax (15%) 493 (74) 463 (69) 419394 Invested capital:Goodwill Intangibles (net) Amortisation / reserves 3,642 2,029 4,850 2,227 5,6717,077 Operating assets Tangible fixed assets Operating working capital Other 503 811 (9) 542 894 71 1,3051,507 Total invested capital 6,9768,584 Return on invested capital 6.0%4.6%

27. 2003 financial priorities  Deliver steady earnings growth  Improve cash generation  Maintain balance sheet strength  Improve return on invested capital

28. Pearson  Agenda  Outlook

29. Total sales £4,320m School 27% Higher Education 18% Professional 19% AgendaOutlook

30.  Grow share across our markets pre-school through professional  AGENDA  OUTLOOK  Expand our range of products content and services £m20022001 underlying % Sales School1,1511,266(5)% Professional78455848% Higher education 77572113% Total2,7102,54511%

31. School 27% Higher Education 18% Professional 19%  AGENDA  OUTLOOK FT Group 17% Penguin 19%

32. School  AGENDA  OUTLOOK£m20022001 U/L change Sales1,1511,266 - 5% Profit140167 - 15%  Gain share profitably in publishing  Make leadership in online learning pay  Build on leadership in testing

33. Adoption opportunities Change in value of new adoptions ’o2/’03 $m Pearson estimates of changes in: a) value of adoption opportunities b) value of adoptions in which Pearson is competing School  AGENDA  OUTLOOK Pearson Total 2002 -100 -220 2003 +30 +140

34.  Gain share profitably in publishing ’02: Sustained share in open territories; gained in adoption $ competed for 0.5% dip in total market share; 18% margins ’03: Competitive in more subjects; targeting more adoption $ Hold ground in open territories Strong showing in key adoptions School  AGENDA  OUTLOOK

35.  Make our leadership in online learning pay ’02: Sales down 10%; losses reduced Software development sustained; operating costs cut ’03: Concert launched; first sales made business profitable School  AGENDA  OUTLOOK

36.  Build on leadership in testing ’02: 3% growth (after 13% in ’01) Major contracts renewed; new contracts signed ’03: Benefits of new contracts start to kick in winning our share of NCLB revenues School  AGENDA  OUTLOOK

37.  Protect margins in technology publishing  Make corporate training profitable  Expand certification contracts  Exploit surge in government spending Professional  AGENDA  OUTLOOK£M20022001 U/L change Sales784558+48% Profit8180+8%

38.  Protect margins in technology publishing ’02: US revenues down 12%; 20% decline in ’01 Double-digit margins held; 1% market share gain ’03: Hold margins Consider prospects Professional  AGENDA  OUTLOOK

39.  Make corporate training profitable ’02: Unprofitable operations sold ’03: Other divisions integrated Within FT & Government Solutions Professional  AGENDA  OUTLOOK

40.  Expand certification contracts ’02: Investment in testing centres ’03: First full year of centres, new contracts Professional  AGENDA  OUTLOOK

41.  Exploit surge in federal testing and training ’02: TSA contract won; task complete in 6 months further $300m new contracts signed ’03: $1 billion contracted through 2007 strong pipeline Professional  AGENDA  OUTLOOK

42. Driving NCS ahead of acquisition model NCS Pearson profits $ million  AGENDA  OUTLOOK

43.  Keep growing market share  Use technology to increase adoptions and sell-through  Widen lead in custom publishing Higher Education  AGENDA  OUTLOOK£m20022001 U/L change Sales775721+13% Profit142127+17%

44. ’02:Pearson up 14%; industry up 8% No integration activity; Addison Wesley revamp paying off ’03:Another strong publishing schedule; further share gains Technology improving retention rates Further growth in custom publishing Higher Education  AGENDA  OUTLOOK

45. 2003:  US school grows again  Professional faces tough revenue comparisons  Higher Ed outperforms its market  Margins benefit from revenue mix and management action  AGENDA  OUTLOOK

46. FT Group 17% AgendaOutlook

47. £m20022001 U/L change Sales726801 - 8% Profit8072+8%  Control costs  Make online investments pay  Build the FT’s reach and brand  Develop Recoletos and IDC  AGENDA  OUTLOOK

48.  Control costs ’02:FT costs down £80m lower than 2000 ’03:Cost savings fund modest investment  AGENDA  OUTLOOK

49.  Make on-line investments pay ’02:FT.com revenues up 9%; broke even in Q4 On-line businesses fully integrated ’03:Subscriptions add revenue Users add reach  AGENDA  OUTLOOK

50.  Build our reach and brand ’02:Circulation down 5% Readership, ad share and quality maintained FT.com audience up 30% to 3.5 million ’03:Defend and extend leadership in UK and Europe Add subscribers in US Establish ourselves in Asia  AGENDA  OUTLOOK

51.  Develop Recoletos ’02:Tight cost control Successful revamp of Marca ’03:Focus on core markets Sustain profit momentum  AGENDA  OUTLOOK

52.  Develop IDC ’02:95% customer renewal rates MLSPS integrated New products launched ’03:Tend the business Make the most of Comstock - integration - real-time pricing  AGENDA  OUTLOOK IDC 31% FT Group revenues

53. 2003:  No sign of an advertising recovery  Tight cost controls  Phased, incremental investment planned  Further profits growth at Recoletos  IDC to deliver double digit revenue and earnings growth  AGENDA  OUTLOOK

54. AgendaOutlook Penguin 19%

55. £m20022001 U/L change Sales8388205% Profit878011%  AGENDA  OUTLOOK  Sustain bestseller performance  Make DK profitable  Consolidate functions  Work capital harder

56.  Sustain bestseller performance ’02:Most #1’s in US; 10 year best in UK ’03:New and old books, new imprints  AGENDA  OUTLOOK

57.  Make DK profitable ’02:£15m profit improvement, 5% margin ’03:Further benefits from integration Publishing revitalised Major education programmes  AGENDA  OUTLOOK

58.  Consolidate functions  AGENDA  OUTLOOK

59. Pearson: 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) Harcourst / Reed New Corp (Harper Collins) Holtzbrinck Scholastic Bertelsmann McGraw Hill Pearson  AGENDA  OUTLOOK Houghton Mifflin

60.  Consolidate functions ’02:Integration in Australia, Canada US business services, IT operations UK, US data centres ’03:UK business services Global software and IT outsourcing £30m in ’02 £20m in ’03 Break even in ’04 £20m annual cost savings from ’05  AGENDA  OUTLOOK

61.  Ahead of our market Sales growth Margin growth  AGENDA  OUTLOOK 2003:

62. 2003:  Significant earnings growth  Further progress in free cash flow  Improved return on invested capital