PEARSON PLC (PSO) Business

Pearson plc, (Pearson or the Group) is a worldwide learning company with its principal operations in the education, assessment and certifications markets. The Group provides digital content, learning experiences, assessments, qualifications and data in the learning market. We are increasingly adapting our business model to go direct to consumers to meet our customers at the point of their learning need. It creates and manages intellectual property, which it promotes and sells to its customers under well-known brand names. The Group delivers its content in a variety of forms and through a variety of channels, with emphasis on digital services. It also provides test development, processing and scoring services to governments, educational institutions, corporations and professional bodies around the world. It provides content across the curriculum and a range of education services including teacher development, educational software and system-wide solutions and owns and operates virtual schools. Though it has a presence in numerous countries around the world, today its largest markets are North America (72% of 2022 sales) and Europe (including the UK) (16% of 2022 sales).

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The Group’s primary segments for management and reporting are as follows:

• Assessment & Qualifications — Pearson VUE, US Student Assessment, Clinical Assessment, UK GCSE and A Levels and International academic qualifications and associated courseware including the English-speaking Canadian and Australian K-12 businesses;

• Virtual Learning — Virtual Schools and Online Program Management;

• English Language Learning — Pearson Test of English, Institutional Courseware and English Online Solutions;

• Workforce Skills — BTEC, GED, TalentLens, Faethm, Credly, Pearson College and Apprenticeships; and

• Higher Education — US, Canadian and International Higher Education Courseware businesses.

Pearson was incorporated and registered in 1897 under the laws of England and Wales as a limited company and re-registered under the UK Companies Act as a public limited company in 1981. The Group conducts its operations primarily through its subsidiaries and other affiliates. Its principal executive offices are located at 80 Strand, London WC2R 0RL, United Kingdom (telephone: +44 20 7010 2000) and its website address is https://plc.pearson.com/. The Company is registered in England and Wales under the company number 00053723. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is http://www.sec.gov.

Business Overview

See the information set out in the following sections of the Pearson Annual Report and Accounts 2022, which are included within Exhibit 15.3:

• “At a glance” on pages 2 to 5;

• “Highlights” on page 6;

• “Chair’s note” on pages 7 to 9;

• “CEO’s review” on pages 10 to 11;

• “Our strategy” on pages 12 to 15;

• “Our business model” on pages 16 to 17;

• “Financial review” on pages 20 to 25; and

• “Stakeholder engagement” on pages 26 to 29.

See pages 215 to 219 of the Pearson Annual Report and Accounts 2022, which are included within Exhibit 15.3, for a full reconciliation of the alternative performance measures to the equivalent statutory measure.

Recent developments

See the information set out in the following sections of the Pearson Annual Report and Accounts 2022, which are included within Exhibit 15.3:

• Note 30 “Business combinations” of the financial statements on pages 193 to 194;

• Note 31 “Disposals and business closures” of the financial statements on pages 194 to 195;

• Note 32 “Held for sale” of the financial statements on page 196; and

• Note 37 “Events after the balance sheet date” of the financial statements on page 200.

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The Group’s strategy

See the information set out in the following sections of the Pearson Annual Report and Accounts 2022, which are included within Exhibit 15.3:

• “Our strategy” on pages 12 to 15.

Operating divisions

See the information set out in the following sections of the Pearson Annual Report and Accounts 2022, which are included within Exhibit 15.3:

• Note 2 “Segment information” of the financial statements on page 148 for a description of each segment, and which businesses are included in each operating segment;

• “At a glance” on pages 2 to 5;

• “Our strategy” on pages 12 to 15;

• See “Item 5. Operating and Financial Review and Prospects — Results of Operations — Year Ended December 31, 2022 compared to year ended December 31, 2021 — Sales and operating profit by division” for a discussion of developments during 2022 with respect to each segment; and

• See “Item 5. Operating and Financial Review and Prospects — Results of Operations — Year Ended December 31, 2021 compared to year ended December 31, 2020 — Sales and operating profit by division” for a discussion of developments during 2021 with respect to each segment.

Operating cycles

The Group determines a normal operating cycle separately for each entity/cash generating unit with distinct economic characteristics. The “normal operating cycle” for each of the Group’s businesses is primarily based on the expected period over which content or services will generate cash flows.

The Higher Education courseware market is primarily driven by an adoption cycle, with colleges and professors typically refreshing their courses and selecting revised programs on a regular basis, often in line with the release of new content or new technology offerings. The Company renews its product development assets to reflect new content and capabilities which enhance the attractiveness of its offering to both educators and learners.

Analysis of historical data shows that the typical life cycle of Higher Education content is up to 5 years but varies by product. In addition to content, the Group also develops technology platforms for products and the life cycle for these platforms can be in excess of the 5 years cycle for content. Again, the operating cycle for content and platforms mirrors the market cycle.

Historically for a major content refresh a development phase of typically 12 to 18 months for Higher Education precedes the period during which the Company receives and delivers against orders for the products it has developed for the program.

The operating cycles in respect of the Group’s professional and clinical content are more specialized in nature as they relate to educational or heavy reference products released into smaller markets (e.g. the financial training and IT sectors). Nevertheless, in these markets, there is still a regular cycle of product renewal, in line with demand which management monitor. Typically, the life cycle is 5 years for Professional content and 7 years for Clinical content. Elsewhere in the Group, operating cycles are typically less than one year.

Competition

The Group’s businesses operate in highly competitive markets. The Group faces competitive threats both from large media players and from smaller businesses, online and mobile portals and operators in the digital arena that provide alternative sources of content. Alternative distribution channels, e.g. digital format, the

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internet, online retailers, growing delivery platforms (e.g. e-readers or tablets), pose both threats and opportunities to traditional publishing business models, potentially impacting both sales volumes and pricing.

In Assessment & Qualifications, the Group competes with other companies offering test development and administration including Cambium, Data Recognition Corp (DRC), Educational Testing Service (ETS), and NWEA, and others. The Professional Certification business competes with Prometric globally and a number of other smaller players in local markets. The Clinical Assessment business competes with MHS and WPS. The UK qualifications business competes with AQA and OCR in general qualifications, as well as a number of smaller players.

In Virtual Learning, the Group competes with companies such as Stride in virtual schools and 2U Inc. in Online Program Management, alongside smaller niche players that specialize in a particular academic discipline or focus on a learning technology.

In Institutional English Language Learning, the Group competes with Oxford University Press, Macmillan and other publishers. In High Stakes Assessments, Pearson Test of English Academic competes with alternative tests including iELTS and TOEFL. In the online language learning market, the Group competes with Duolingo, Babbel and Busuu, as well as a number of smaller players.

In Workforce Skills, the vocational qualifications business competes with City and Guilds globally alongside smaller niche and local market providers, our assessments businesses compete with HiSET in high school equivalency and SHL in skills and ability testing, and our enterprise data, technology and learning businesses compete with Learning platforms such as Guild, talent management platforms such as Eightfold.ai, and data services such as Emsi.

In Higher Education, the Group competes with other publishers and creators of educational materials and services. These companies include publishers such as Cengage Learning and McGraw-Hill Education.

Competition is based on the ability to deliver quality products and services that address the specified curriculum needs and appeal to the student, organizations, school boards, educators, employers and government officials making purchasing decisions.

Intellectual property

The Group’s principal intellectual property assets consist of its:

• trademarks and other rights via its brands (including corporate and business unit brands and imprints, as well as product and service brands);

• copyrights for its textbook and related educational content and software code; and

• patents and trade secrets related to the innovative methods deployed in its key technologies.

The Group believes it has taken reasonable legal steps to protect its key brands in its major markets and copyright in its content and has taken appropriate steps to develop a comprehensive patent program to ensure appropriate protection of emerging inventions that are critical to its new business strategies.

Licenses, patents and contracts

The Group is not dependent upon any particular licenses, patents or new manufacturing processes that are material to its business or profitability. Notwithstanding the foregoing, the Group’s education business is dependent upon licensed rights since most textbooks and digital learning tools include content and/or software that is licensed to it by third parties (or assigned subject to royalty arrangements). In addition, some software products in various business lines rely upon patents licensed from third parties.

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The Group is not materially dependent upon any particular contracts with suppliers or customers, including contracts of an industrial, commercial or financial nature. The Group’s revenue is diversified, no individual customer comprised more than 3% of revenue in 2022.

Raw materials

Paper remains the principal raw material used by the Group although its use is declining given the shift to digital products. The Group purchases most of its paper through its global outsourcing partner LSC Communications located in the United States. The Group has not experienced and does not anticipate difficulty in obtaining adequate supplies of paper for its operations, with sourcing available from numerous suppliers. While local prices fluctuate depending upon local market conditions, the Group has not experienced extensive volatility in fulfilling paper requirements. In the event of a sharp increase in paper prices, the Group has a number of alternatives to minimize the impact on its operating margins, including modifying the grades of paper used in production and passing on price increases to customers.

Government regulation

The manufacture of certain products in various markets is subject to governmental regulation relating to the discharge of materials into the environment. Operations are also subject to the risks and uncertainties attendant to doing business in numerous countries. Some of the countries in which the Group conducts these operations maintain controls on the repatriation of earnings and capital and restrict the means available for hedging potential currency fluctuation risks. The operations that are affected by these controls, however, are not material. Accordingly, these controls have not significantly affected the Group’s international operations. Regulatory authorities may have enforcement powers that could have an impact. The Group believes, however, that in light of the nature of its business the risk of these sanctions does not represent a material threat.

Climate change

See the information set out in the following sections of the Pearson Annual Report and Accounts 2022, which are included within Exhibit 15.3:

• “Sustainability” on pages 30 to 38; and

• “Task Force on Climate-related Financial Disclosures” on pages 39 to 41.

Legal proceedings

The Group and its subsidiaries are from time to time the subject of legal proceedings incidental to the nature of its and their operations. These may include private litigation or arbitrations, governmental proceedings and investigations by regulatory bodies.

On August 16, 2021 Pearson reached a settlement with the SEC concerning Pearson’s public disclosures in July 2019 relating to a data breach that had occurred in 2018 in connection with AIMSweb 1.0, a web-based software for entering and tracking students’ academic performance (that was retired in July 2019 in accordance with a previously scheduled retirement plan). The settlement included findings that Pearson violated Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933, as amended, Section 13(a) of the Securities Exchange Act of 1934, as amended, and certain of the rules thereunder respecting accurate and not misleading reporting and the maintenance of disclosure controls and procedures, the entry of an administrative cease-and-desist order, and the payment of a civil penalty of $1.0 million. Under the settlement, Pearson neither admitted nor denied the findings set forth in the SEC’s order. The issues occurred in 2018 and 2019, since which time a series of improvements have been made in relation to data privacy, cyber security and communications.

In addition, see the information set out in the following section of the Pearson Annual Report and Accounts 2022, which is included within Exhibit 15.3:

• Note 34 “Contingencies, other liabilities and commitments” of the financial statements on page 198.

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Organizational structure

Pearson plc is a holding company which conducts its business primarily through subsidiaries and other affiliates throughout the world. Below is a list of its significant subsidiaries as at December 31, 2022, including name, country of incorporation or residence, proportion of ownership interest and, if different, proportion of voting power held.

Name Country of incorporation/residence Percentageinterest/voting Pearson Education Inc. United States (Delaware) 100% Pearson Education Ltd. England and Wales 100% NCS Pearson Inc United States (Minnesota) 100%

For recent developments with regards to acquisitions and disposals of entities within the Group, see the information set out in the following sections of the Pearson Annual Report and Accounts 2022, which are included within Exhibit 15.3:

• Note 30 “Business combinations” of the financial statements on pages 193 to 194;

• Note 31 “Disposals and business closures” of the financial statements on pages 194 to 195;

• Note 32 “Held for sale” of the financial statements on page 196; and

• Note 37 “Events after the balance sheet date” of the financial statements on page 200.

Property, plant and equipment

The Group’s headquarters are located at leasehold premises in London, England. As at December 31, 2022 it owned or leased approximately 700 properties, including approximately 576 testing/teaching centers in over 55 countries worldwide, the majority of which are located in the United Kingdom and the United States.

The properties owned and leased by the Group consist mainly of offices, distribution centers and computer testing / teaching centers. In some cases properties leased by the Group are then sublet to third parties.

The vast majority of printing is carried out by third party suppliers. The Group operates a small digital print operation as part of its Pearson Assessment & Testing businesses which provides short-run and print-on-demand products, typically custom client applications.

The Group owns the following principal properties at December 31, 2022:

General use of property Location Area in square feet Office Iowa City, Iowa, USA* 312,760 Warehouse/Office Cedar Rapids, Iowa, USA 205,000 Testing Owatonna, Minnesota, USA 128,000 Office/Warehouse Hadley, Massachusetts, USA* 85,570

* Properties are recorded as held for sale at December 31, 2022

The Group leased the following principal properties at December 31, 2022:

General use of property Location Area in square feet Office Hudson, New York, USA* 311,473 Office Westminster, London, UK* 282,923 Office Hoboken, New Jersey, USA* 216,273 Office Bloomington, Minnesota, USA* 147,159 Warehouse/Office Cedar Rapids, Iowa, USA 119,682 Office San Antonio, Texas, USA* 117,063

* Properties have either been fully or partially sublet or are being marketed for sublet.

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Capital Expenditure

See “Item 5. Operating and Financial Review and Prospects — Liquidity and Capital Resources” for description of the Company’s capital expenditure.