Some Questions and Answers on the Rights Issue

1. What is a rights issue?
2. What do I do with the Provisional Allotment Letter?
3. How do I know if I'm eligible to participate in the Rights Issue?
4. If I bought shares between 28 July and 10 August 2000 (the date of commencement of trading in the nil paid rights) will I be eligible to participate in the Rights Issue?
5. What do I do if I have sold all or part of my Pearson Shares before 10 August 2000?
6. How many rights am I entitled to?
7. What do I do if I think my holding of Pearson Shares (as shown in Box 1 of the PAL) is incorrect?
8. What happens if the number of Pearson Shares I hold is not exactly divisible by 11? Am I entitled to fractions of shares?
9. Will I be taxed if I take up or sell my rights or if my rights are sold on my behalf?
10. I understand that there is a period when there is trading in the nil paid rightsnwhat does this mean?
11. Are the new Pearson Shares to be issued under the Rights Issue entitled to the interim dividend?
12. When does dealing in the new Pearson Shares (fully paid) start?
13. What if I want to sell the new Pearson Shares I've paid for?
14. When will I receive my new share certificate?
15. Do I need to comply with the Money Laundering Regulations (as set out in paragraph 2(b) of Part 3)?
16. What about Pearson Shares to which I am entitled under a Pearson Share Plan?
17. What should I do if I live outside the UK?
18. What do I do if I have any further queries about the Rights Issue or the enclosed documents?
19. What do I do if I have any questions relating to my existing holdings?


1. What is a rights issue?

Rights issues are a way for companies to raise money. They do this by issuing shares and giving their existing shareholders a right of first refusal, in proportion to their existing shareholdings. For example, a 1 for 3 rights issue means that a shareholder is entitled to buy one new share for every three currently held. This Rights Issue is 3 for 11: that is, an offer of three new shares for every eleven held.

New shares are typically offered in a rights issue at a discount to the current share price (i.e., less than the current share price). Because of this discount, the right to buy the new shares is potentially valuable. If shareholders don't want to buy the shares, they can sell their rights in the market. This is referred to as dealing "nil paid".

The company will make arrangements for rights to be sold in the market on behalf of those shareholders who don't take up their entitlements, if a premium can be obtained over the issue price and the costs of sale.

2. What do I do with the Provisional Allotment Letter?

With this document, Qualifying Shareholders (other than certain Overseas Shareholders) will have received a Provisional Allotment Letter (a "PAL"). This shows:

in Box 1: how many Pearson Shares you held on 28 July 2000 (the Record Date for the Rights Issue);

in Box 2: how many new Pearson Shares you are entitled to;

in Box 3: how much you need to pay if you want to take up your rights in full.

If you want to take up your rights in full, all you need to do is send the PAL, together with your cheque for the full amount shown in Box 3, to the address shown on the front of the PAL to arrive before 3.00 p.m. on 1 September 2000. You can use the enclosed reply-paid envelope within the UK. Refer to paragraph 2 of Part 3 for full instructions on how to accept and pay.

If you don't want to take up your rights, you don't need to do anything. If you don't return your PAL by 3.00 p.m. on 1 September 2000, we have made arrangements under which Goldman Sachs International and Cazenove will try on your behalf to find people to take up your rights by 5 September 2000, so long as they can achieve a premium over the Issue Price and the related expenses. You will be sent a cheque for any net proceeds (having deducted any expenses incurred).

If you want to take up some, but not all of your rights, you should complete Form X (the form of renunciation) on the back of the PAL and send it, together with your payment for the amount you want to subscribe, to the address shown on the front of the PAL. You can use the enclosed reply-paid envelope within the UK. Refer to paragraph 2 of Part 3 of this document for full instructions on how to accept and pay. You may be able to sell the shares for which you have not subscribed (see paragraph 6 of Part 3 of this document), or they may be sold on your behalf if you have not taken them up by 3.00 p.m. on 1 September 2000 (see above).


3. How do I know if I'm eligible to participate in the Rights Issue?

If you have received a PAL with this document then you should be eligible to participate in the Rights Issue (as long as you haven't sold your Pearson Shares).

If you haven't received a PAL with this document, this probably means you are not eligible to take up any new Pearson Shares. However, see question 4 below.

Refer to question 6 below in relation to the number of new Pearson Shares to which you are entitled.

4. If I bought shares between 28 July and 10 August 2000 (the date of commencement of trading in the nil paid rights) will I be eligible to participate in the Rights Issue?

If you bought Pearson Shares through the London Stock Exchange on or before 9 August 2000, but were not registered as the holder of those Pearson Shares at the Record Date for the Rights Issue (28 July 2000), you should still be eligible to participate in the Rights Issue. Please consult your broker, or whoever arranged your share purchase, to ensure you claim your entitlement.

You will not be entitled to nil paid rights in respect of any Pearson Shares acquired through the London Stock Exchange on or after 10 August 2000.

5. What do I do if I have sold all or part of my Pearson Shares before 10 August 2000?

If you've sold or transferred all or part of your Pearson Shares, you should sign Form X on the reverse side of the PAL and send it to the purchaser or transferee, or to the bank, stockbroker or other agent through whom you made the sale or transfer. If you've sold all of your Pearson Shares, you should also send this document with the PAL.

6. How many rights am I entitled to?

Box 2 of the PAL shows the number of new Pearson Shares you are entitled to acquire, if you're a Qualifying Shareholder. All Qualifying Shareholders (except certain Overseas Shareholders) will be sent a PAL and a copy of this Rights Issue prospectus.

7. What do I do if I think my holding of Pearson Shares (as shown in Box 1 of the PAL) is incorrect?

If you've bought or sold Pearson Shares since 28 July 2000, your transaction won't have reached the register of members before the record date for the Rights Issue. See questions 4 and 5 above for what you should do in this case.

Otherwise, if you're concerned about the figure in Box 1, please call the Shareholder Helpline (0870 600 0632).

8. What happens if the number of Pearson Shares I hold is not exactly divisible by 11? Am I entitled to fractions of shares?

Your entitlement is calculated by dividing your holding of Pearson Shares by 11 and multiplying the result by 3. If the result is not a whole number, you cannot receive a new Pearson Share in respect of the fractional amount but you will still have an entitlement to it. The new Pearson Shares representing the collective fractional entitlements of all shareholders will be sold during the nil paid trading period and you should receive a cheque for the amount of any net proceeds in respect of your fraction seven business days after the sale.


9. Will I be taxed if I take up or sell my rights or if my rights are sold on my behalf?

If you are a UK resident, you won't have to pay UK tax when you take up your rights, although the Rights Issue will affect the amount of UK tax you pay when you sell your Pearson Shares. However, you may be subject to capital gains tax on any proceeds you receive from the sale of your rights (unless, generally, the proceeds do not exceed ,3,000).

Further information for Qualifying Shareholders who are resident in the UK is contained in paragraph 8 of Part 9 of this document. Qualifying Shareholders who are in any doubt as to their tax position, or who are resident outside the UK, should consult an independent professional adviser without delay.

10. I understand that there is a period when there is trading in the nil paid rightsnwhat does this mean?

Between 10 August and 1 September 2000, the rights will trade "nil paid" and the Pearson Shares will trade "ex" (without) the entitlement to the rights. This means that during this period, you can either purchase Pearson Shares (which will not carry any entitlement to participate in the Rights Issue) or you can trade in the nil paid rights.

If you buy nil paid rights, you're buying an entitlement to take up the new Pearson Shares, subject to you paying for them in accordance with the terms of the Rights Issue. The seller will need to forward you his PAL for you to complete and return, with your cheque, by 3.00 p.m. on 1 September 2000, in accordance with the instructions on the PAL.

If you sell or transfer all or some of your nil paid rights, you will need to complete Form X, the form of renunciation, on the back of the PAL and send it to the broker or other agent through whom you arranged the sale.

11. Are the new Pearson Shares to be issued under the Rights Issue entitled to the interim dividend?

No.

12. When does dealing in the new Pearson Shares (fully paid) start?

Dealings in the new Pearson Shares (fully paid) will start on 4 September 2000.

13. What if I want to sell the new Pearson Shares I've paid for?

Pending delivery of share certificates, you'll receive a receipted PAL which will be your document of title for the new Pearson Shares. Until 18 September 2000, provided the new Pearson Shares have been paid for, you can transfer the shares by completing Form X, the form of renunciation, on the reverse of the PAL in accordance with the instructions set out above the form. See paragraph 4 of Part 3 of this document for more details.

14. When will I receive my new share certificate?

Share certificates for the new Pearson Shares should be posted by 2 October 2000.

15. Do I need to comply with the Money Laundering Regulations (as set out in paragraph 2(b) of Part 3)?

You don't need to follow these procedures if you're subscribing less than ,9,590 for the new Pearson Shares; or if you pay for them by a cheque drawn on an account in your own name. Otherwise, you should comply with the other requirements described in paragraph 2(b) of Part 3 of this document.

16. What about Pearson Shares to which I am entitled under a Pearson Share Plan?

Participants in the Pearson Share Plans will be advised separately of adjustments to their rights or as to any entitlement to participate in the Rights Issue, as described in paragraph 11 of Part 3 of this document.


17. What should I do if I live outside the UK?

Shareholders resident outside the UK should refer to paragraph 13 of Part 3 of this documentnparticularly those resident in Canada, France, the Netherlands, South Africa or the Republic of Ireland. Your ability to take up rights to new Pearson Shares may be affected by the laws of the country in which you live and you should take professional advice as to any formalities you need to observe.

18. What do I do if I have any further queries about the Rights Issue or the enclosed documents?

You should contact the Shareholder Helpline on 0870 600 0632 between 9.00 a.m. and 5.00 p.m, Monday to Friday (calls charged at local rate). The helpline can't advise you on the merits of the Acquisition or the Rights Issue, nor can it give you financial advice, but it can help you think through the options available to you, explain which forms you need to fill in and how to fill them in correctly.

19. What do I do if I have any questions relating to my existing holdings?

If you have questions about your current holdings, for example, if your name or address details on the PAL are incorrect, please contact the Shareholder Helpline on 0870 600 0632 between 9.00 a.m. and 5.00 p.m., Monday to Friday (calls charged at local rate).

Your attention is drawn to the further terms and conditions of the Rights Issue in Part 3 of this document and in the Provisional Allotment Letters.