GEO Nov 09 Pearson

Operating Global Plans in the Current Economic Climate

Gabbi StoppShare Plans Manager, Pearson plc

Agenda

• Our global share plans

• The current economic climate

• Challenges posed by global expansion

• Our experiences: South Africa, Australia, China & USA

• Predictions for 2010…and beyond

Our global share plans

• International SAYE ‘WorldWide Save For Shares’ - 70 countries, 18,000 eligible

• Long Term Incentive Plan – restricted shares and cash/stock settled SARs in 50 countries, 1800+ participants

• Bonus deferral plan – Annual Bonus Share Matching Plan

• International corporate nominee – ‘ShareStore’

The current economic climate

• Within Pearson: pay freeze still in place, flexible & part-time working, redundancies… few business units still suffering, others doing better than expected

• Share plans industry: provider consolidation, cost rationalisation, service levels

• Globally: ‘two-speed’ recovery or ‘double-dip’ recession?

Challenges posed by global expansion

• Education business expanding outside of UK and US

• LTIP awards smaller but more widely spread

• Greater number of countries = greater tax & legal due diligence & compliance costs

• Mobile employees

• Multiple languages & time zones

• Cultural issues

• Does ‘one size’ really fit all?

South Africa – preparing for kick-off?

• ‘BEES’ – pros and cons

• Navigating securities laws and exchange controls

• Appetite for employee share ownership – considerable

• 58% WWSFS (global SAYE) take-up this year (up from 15% in 2008)

Australia – hurdles to be cleared

• Local filings for class order relief (old news)

• Tax & reporting (new news)

• Held off making our annual LTIP award earlier this year until proposed regulations were sufficiently clear

• Now satisfied that our time-vesting & leaver provisions meet the definition of ‘significant risk of forfeiture’

China - taking the bull by the horns…

• Wall Street English – recent $145m acquisition of English language teaching schools for adults in China

• Still an ‘emerging’ market?

• Population of about 1.3bn, 40% aged 33 or younger

• How we operate our WWSFS and LTIP plans currently

• Is it now worth tackling SAFE regs?

USA – avoiding ‘red tape’ and filings

• Massive market for our education business

• 60% of our annual sales and profits generated in US $

• Schools publishing market declined 18% in first half of 09

• Higher education publishing market grew by 26%

• Navigating securities laws, s409A, FBAR

Predictions for 2010…and beyond

• New 50% top rate of income tax will affect more people than expected

• Tax avoidance–type plans & structures – a red herring?

• Accelerated vesting…but for whom?

• Bonus deferrals – salary deferrals too?

• Regulatory ‘overspill’ from bankers’ bonuses

• Growing appetite for employee share ownership,

especially Asia and, longer term, Africa