Acquisition

Pearson PLC
31 July 2000



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PEARSON PLC TO ACQUIRE NATIONAL COMPUTER SYSTEMS, INC. (NCS) FOR $2.5 BILLION
TO CREATE WORLD LEADING INTEGRATED EDUCATION COMPANY


* Cash tender offer of $73 per share for the entire issued share capital of
NCS, (NASDAQ: NLCS) recommended by the NCS Board.  This values the company at
$2.5 billion (£1.7 billion) and represents a premium of 26% to the NCS closing
price on Friday 28 July, 2000.

* Acquisition to be financed through a 3 for 11 rights issue of 170 million
new Pearson shares at £10 per share to raise approximately £1.7 billion.

* NCS is one of the leading commercial testing and educational services
companies in the United States.  It operates in some of the fastest growing
sectors of the US education market and has delivered annual average compound
revenue and earnings growth of 20% and 24% respectively since 1995.

* Acquisition of NCS will transform Pearson Education, creating a world
leading integrated education company, combining strong market positions in
educational content, online learning, assessment and enterprise applications
for US schools and professional accreditation.

* The combined business will be well placed to create new market opportunities
through developing customised learning in which testing and curriculum work
together.  

* The new business will connect schools and homes, enabling parents to play a
more active role in the education of their children. It will enhance the
products and services it can offer to parents as customers and accelerate the
development of Pearson's online Learning Network.

* Integration of the businesses is expected to deliver $50 million of annual
cost savings by the end of 2002. 

* Acquisition of NCS is expected to create significant value for Pearson
shareholders and enhance adjusted earnings per share in 2001.

Marjorie Scardino, chief executive of Pearson, said:

'NCS is a superb company in its own right with a record of delivering
consistently high levels of innovation and growth. Together, we can transform
our business into one that can reach further and grow faster.  We will be
strong in content, technology and testing, the three factors that are driving
the education revolution around the world.'

'Together, we can create the 'intelligent classroom', where teaching is
customised so that each child learns in his own way, at his own speed, with
constant assessment, feedback and help. Together we can take the next great
leap in education - adding applications and testing to curriculum and changing
the way we teach and learn.'

'We have financed the recent development of Pearson through a programme of
disposals and the assumption of additional debt.  The rights issue we are
announcing today will enable us to complete the acquisition of NCS and
strengthen our balance sheet for the future.'

 Russ Gullotti, chairman, president and chief executive Officer of NCS, added:

'NCS and Pearson make an outstanding strategic fit.  Both companies have a
strong presence in the education market, and the core products and skills of
the two businesses are remarkably complementary, but without direct overlap. 
The acquisition of NCS by Pearson allows for the kind of presence needed for
both of us to continue our strong growth and maintain our market leadership
positions.'


ENQUIRIES: + 44 (0) 207 411 2310

Marjorie Scardino, chief executive
John Makinson, finance director
John Fallon, communications director


Pearson is being advised by Goldman Sachs in relation to the acquisition of
NCS.  Goldman Sachs and Cazenove & Co. are acting as joint underwriters and
brokers to the rights issue.

INFORMATION ON NCS

NCS provides software, services, systems, applications and Internet-based
technologies for the collection, management and interpretation of data in
education. Since 1995, NCS's revenues have grown at a compound annual rate of
20% and earnings at a compound rate of 24%. For the year ended 29 January
2000, as calculated under US GAAP, NCS had consolidated revenues of $630
million (£391 million), operating profit of $70 million (£43 million),
earnings of $43 million (£27 million) and shareholders' funds of $276 million
(£171 million).  It has an equity market capitalisation of $1.9 billion (£1.3
billion), based on NCS's closing share price of $58.13 on 28 July 2000.

NCS is the largest commercial processor of student assessment tests for
kindergarten to 12th grade (K-12) education in the US, scoring some 40 million
tests a year across the US.  It is involved at all stages of the process, from
test design to delivery, processing and reporting results.  NCS is also the
largest single provider of student curriculum, instructional and financial
management software to schools.  These tools help teachers and administrators
to keep attendance records, grades, test scores and to manage state curriculum
requirements.  It has software in some 40,000 of the 110,000 schools in the US
and has been adding thousands of new schools a year to its client base.  It is
responsible for large amounts of school data, including managing the schedules
of over 16 million students.

NCS is making extensive use of electronic and Internet-based technologies to
extend its market penetration and offer innovative products and services to
its customers in the education field.  For example, NCS's ParentCONNECTxp
software product connects parents and teachers, enabling parents to become
more involved in their child's academic and classroom performance.  

In large scale data management, NCS develops, markets and manages complex data
collection, processing and reporting services and products targeted for
certain key applications in the large scale data management market.

NCS was founded in 1962, is headquartered in Eden Prairie, Minnesota and
employs nearly 5,000 people.

INFORMATION ON PEARSON EDUCATION

Pearson Education is one of the world's largest providers of curriculum
materials in print, electronic and online formats. Pearson Education was
formed in November 1998 through the acquisition of the Simon & Schuster
education business and its subsequent merger with Addison Wesley Longman
(AWL). In 1999, its first full year of operation, pro forma revenues of
Pearson Education increased by 10% to $2.7 billion (£1.7 billion), with
operating profits of $411 million (£257 million) for that year. In the six
months ended 30 June 2000, Pearson Education increased underlying revenues by
17% to £647 million and reduced seasonal first half losses by 32% to £26
million.

In early September, Pearson will launch its online Learning Network, which
will comprise four vertically integrated networks serving the K-12, Higher
Education, Professional Development and Lifelong Learning markets.

STRATEGIC RATIONALE FOR THE ACQUISITION

The combination of Pearson Education and NCS will create a world leading
integrated education company.  Pearson believes that the combined company will
be able to capitalise on the trends that are driving growth in education
markets.  These trends are the demand for a more highly skilled and better
educated workforce; the opportunities for customised and interactive learning
created by the Internet; the move to greater accountability in education
through testing and assessment; and an increasing focus by government and
education authorities on improving the quality of education.  The new company
will, for the first time, link the worlds of curriculum, assessment and data
management.  As a result, the combined business will be well placed to create
new market opportunities through developing customised learning in which
testing and curriculum work together.  The key benefits of the acquisition
are:

Integrating educational programmes.  The combination of curricular content,
testing, and educational applications creates opportunities to provide
schools, universities and colleges and professional and training organisations
with a comprehensive range of education solutions, encompassing curricular and
training programmes, assessment and testing and educational services
(including student curriculum, instructional and financial management
software).

Customising learning.  Combining NCS's assessment tools with Pearson's
curricular content will help create customised learning programmes
individually tailored for each student, which will be a competitive advantage
of the combined business.

Extending customer reach.  The scale and reach of Pearson's sales forces will
be used to market NCS's instruction management software, assessment tools and
school administrative software to K-12 school districts to supplement NCS's
own direct sales force.

Accelerating the development of new online products.  Integrating Pearson's
Computer Curriculum Corporation and NCS's NovaNet online businesses will
create a leading electronic end-to-end learning solutions company.

Developing a new market, with parents as customers.  NCS's ParentCONNECTxp and
related products will enable Pearson to reach parents, creating new
opportunities for its educational publishing business. It will also
dramatically extend the scale and reach of Pearson's Learning Network,
enabling it to reach directly a much bigger audience of parents and students.
This will both accelerate its time to market and reduce marketing and related
costs.

Moving into new professional markets.  Pearson's strong positions in both
professional publishing and corporate training will enable NCS to capitalise
on its testing and assessment skills to meet the growing demand for
accreditation in a wide range of professions and disciplines.

Broadening international reach.  With major educational publishing operations
in some 30 countries around the world and a number of strategic alliances,
Pearson will enable NCS to accelerate the growth of its international
assessment, testing and enterprise solutions operations. 

Achieving cost savings of $50 million per year.  Although this combination is
driven primarily by new opportunities, Pearson will be able to generate
savings in a number of areas by the end of 2002, including economies of scale
and avoiding the duplication of investments in similar areas of education.

MANAGEMENT

On completion of the transaction, NCS will become part of Pearson Education,
with Peter Jovanovich continuing as CEO of the enlarged business.  Russ
Gullotti, chairman, president and CEO of NCS announced earlier this year that,
due to health reasons, he planned to step down from his position by June 2001.
 Mr Gullotti will play a key role in the integration of the two companies.  A
new CEO of NCS, reporting to Peter Jovanovich, will be appointed in due
course.

FINANCING OF THE ACQUISITION

Pearson will finance the tender offer for NCS by means of a rights issue at
£10 per share to raise some £1.7 billion before expenses.  £1.5 billion of the
rights issue is to be underwritten by Goldman Sachs International and Cazenove
& Co. in order to ensure that funds are available at completion of the
acquisition.  In the unlikely event that the remaining £200 million is not
taken up, Pearson will satisfy the remaining consideration for NCS through
existing bank facilities. The overall cost of the underwriting is expected to
be 0.5% of the underwritten portion of the rights issue.  

Up to 170,500,067 new Pearson shares in aggregate will be offered on the basis
of 3 new Pearson shares for each 11 existing Pearson shares to Pearson
shareholders (other than certain overseas shareholders) on the register at the
close of business on the record date (28 July 2000).  Based on the middle
market closing price of 2010 pence per share on 28 July 2000 and the proposed
issue price of £10 per share of the new Pearson shares and having adjusted for
the proposed interim dividend of 9.2 pence per share, the theoretical
ex-rights price of the Pearson shares is 1786 pence.

The rights issue is conditional upon admission of the new Pearson shares to
the official list of the UK Listing Authority and to trading on the London
Stock Exchange becoming effective.  The rights issue is not conditional upon
either the acquisition of NCS or the underwriting agreement between Goldman
Sachs International, Cazenove & Co. and Pearson becoming unconditional.  The
Directors of Pearson believe that the acquisition of NCS has a high
probability of becoming unconditional.  In the unlikely event that the
acquisition is not completed, Pearson will consider the return of a
substantial proportion of the funds raised from the rights issue in an
appropriate and tax efficient manner.



Full take-up of entitlements under the rights issue would result in the issue
of 170,500,067 new Pearson shares, representing approximately 21% of the
issued ordinary share capital of Pearson, as enlarged by the rights issue. 
The new Pearson shares will be issued credited as fully paid and will rank
pari passu in all respects with the existing issued Pearson shares, except
that they will not rank for the interim dividend of 9.2 pence per Pearson
share in respect of the year ending 31 December 2000.

It is anticipated that the documents in relation to the rights issue will be
posted to Pearson shareholders in the week beginning Monday, 7 August 2000. 
Assuming posting on 7 August, 2000, listing of the new Pearson shares will
become effective and dealings in them will commence, nil paid, on 8 August
2000.

NCS TENDER OFFER

The acquisition of NCS will be effected by a tender offer which is
conditional, inter alia, upon the tender of at least a majority of the
outstanding shares of NCS and certain regulatory approvals.  The tender offer
is expected to commence on 7 August 2000 and close some time in September.

Under the terms of the merger agreement between Pearson and NCS, Pearson is
entitled to a break up fee of $98 million if the acquisition does not complete
in certain circumstances.

INTERIM RESULTS

The interim results of Pearson were released today in a separate announcement.

GENERAL

Goldman Sachs International, which is regulated in the United Kingdom by the
Securities and Futures Authority Limited, has approved the contents of this
announcement solely for the purposes of Section 57 of the Financial Services
Act 1986.

Goldman Sachs International is acting for Pearson and no-one else in
connection with the proposed acquisition of NCS and the rights issue and will
not be responsible to anyone other than Pearson for providing the protections
afforded to customers of Goldman Sachs International or for providing advice
in relation to the proposed acquisition of NCS and the rights issue.

Cazenove & Co., who are regulated in the United Kingdom by the Securities and
Futures Authority Limited, are acting for Pearson and no-one else in
connection with the rights issue and will not be responsible to anyone other
than Pearson for providing the protections afforded to customers of Cazenove &
Co. or for providing advice in relation to the rights issue.

The conversion of US Dollars to Sterling has been made at an exchange rate of
$:£ of 1.61, except for conversion of market capitalisations which have been
made at an exchange rate of 1.50.

This announcement is not an offer of securities for sale in the United States.
 Such securities may not be offered or sold in the United States absent
registration or an exemption from registration.  Any public offering of such
securities to be made in the United States would be made by means of a
prospectus that would be obtained from Pearson and that would contain detailed
information about Pearson.

Certain statements made in this announcement are forward looking statements. 
Such statements are based on current expectations and are subject to a number
of risks and uncertainties that could cause actual results and performance to
differ materially from any expected future results or performance, express or
implied, by the forward looking statements.  Pearson assumes no responsibility
to update any of the forward looking statements contained herein.


NOTES TO EDITORS

BACKGROUND TO THE US EDUCATION MARKET

The Knowledge Economy

The acquisition of NCS is consistent with Pearson's commitment to the
education business and a stated strategy to strengthen further its position.

Pearson's recent acquisition of the Family Education Network and the
announcement of the new online Learning Network form one part of this
strategy.  The Learning Network's focus is on taking education into the home. 
Accordingly it operates in a consumer rather than institutional market and is
focused on home-based as opposed to school-based learning.  

In the US, there are some 52 million children from 23 million families in K-12
education, in approximately 110,000 schools.  These are divided into over
14,000 districts employing more than 3 million teachers. 

Pearson expects the core K-12 textbook market in the US to grow by around 10%
this year, driven by increased enrolments and government spending which has
increased as a result of the perceived need to develop the US as a 'knowledge
economy'.  It is estimated that the K-12 and higher education textbook markets
in the US are already worth $7 billion annually. 

Technology 

Technology is now a core element of school life, from administration to the
curriculum itself.  US schools spent $3.4 billion on instructional technology
last year, a figure that is expected to reach $6.8 billion in 2003.  It is
estimated that spending on Internet products alone was $1.3 billion last year
and that this will grow at 50% per annum over the next three years.

The proportion of schools with Internet access rose from 34% in 1994 to 96% in
1999, with 51% of individual classrooms connected to the Internet. It is
estimated that by 2003, every US school and 90% of classrooms will have direct
Internet access. The Web is ideally suited for project and team based
learning, as the Internet becomes the delivery vehicle to help bring parents,
students, teachers and administrators together to improve learning outcomes. 
The Internet is also growing increasingly important in delivering web-based
lesson plans and supplemental material for teachers.

Accountability

The US K-12 market is in a state of change, with schools increasingly being
held directly accountable for improving students' performance at all levels. 
Test scores are used to evaluate teacher, school and district performance.

NCS

NCS is the largest commercial processor of student assessment tests for
kindergarten to 12th grade (K-12) education in the US, scoring some 40 million
tests a year across the US.  It is involved at all stages of the process, from
test design to delivery, processing and reporting results.  NCS is also the
largest single provider of student curriculum, instructional and financial
management software to schools.  These tools help teachers and administrators
to keep attendance records, grades, test scores and to manage state curriculum
requirements.  It has software in some 40,000 of the 110,000 schools in the US
and has been adding thousands of new schools a year to its client base. It is
responsible for large amounts of school data, including managing the schedules
of over 16 million students.

NCS is making extensive use of electronic and Internet-based technologies to
extend its market penetration and offer innovative products and services to
its customers in the education field.  For example, NCS's ParentCONNECTxp
software product connects parents and teachers, enabling parents to become
more involved in their child's academic and classroom performance.  Through an
integrated suite of administrative, grade book and curriculum software,
parents are able to check on the records they really care about -their child's
grades, assignments, discipline and attendance records - in a secure
environment.  They can also communicate with their child's teachers through
e-mail.

Through NovaNET, NCS's e-learning service, students can access learning tools
outside the traditional classroom.  This on-line learning system offers over
10,000 hours of self-paced interactive and customisable curriculum for
secondary and adult learners.  It allows educators to reach students in
locations such as homes and workplaces, as well as schools. 

In large scale data management, NCS offers complex project management services
including software development, database management, document imaging, network
services, forms processing and management, call centres, data distribution,
network and systems security, help desk, Internet connectivity and training. 
Its major customer is the US Department of Education, accounting for more than
$60 million of annual revenues.  NCS also offers outsourcing services for
commercial and government agencies. It has long term contracts with a number
of government agencies, including the Department of Labor, Internal Revenue
Service, Office of Personnel Management, US Postal Service and the Veterans
Administration. For the US Census Bureau, NCS operated one of four data
capture sites for the 2000 Census, receiving, processing and managing more
than one million English and Spanish language forms daily during the spring of
this year.

PEARSON EDUCATION 

Pearson Education is one of the leading US school publishers, (kindergarten to
12th grade) with a comprehensive range of textbooks, supplementary, and
electronic education programmes. The premier elementary
(www.scottforesman.com) and secondary imprints (www.phschool.com) publish some
of the very best school programmes covering subjects such as reading,
literature, math, science and social studies. Pearson Education is a leading
publisher of online assessment and digital courseware through the Computer
Curriculum Corporation (www.ccclearn.com), the Waterford Early Reading
Programme and the KnowZone (www.kz.com). Pearson Education also publishes
supplementary learning materials for both elementary (www.pearsonlearning.com)
and secondary schools (www.globefearon.com). 

Pearson Education is by far the leading higher education publisher in the US,
with imprints such as Addison Wesley Longman, Allyn & Bacon (www.abacon.com)
and Prentice Hall (www.prenhall.com). Over 1,000 of Pearson Education's
college textbooks have an interactive companion website with online study
guides designed to reinforce text concepts, and chat rooms and bulletin boards
to facilitate interaction and communication between students and faculty. An
increasing number of programmes are delivered through online course management
systems that provide a powerful set of easy-to-use tools that allow professors
to create sophisticated web-based courses.

The professional and technology group publishes over 1,000 computer and
technology titles a year (imprints include Macmillan USA, Que, Sams, Prentice
Hall, Cisco Press, Adobe Press, New Riders, Peachpit Press and Addison Wesley)
and are complemented by an online presence (www.informit.com), which aims to
be the leading vertical portal for accomplished and aspiring IT professionals.
More people learn English as a second language with Pearson Education
programmes (www.longman-elt.com) than those of any other publisher. 

FT Knowledge (www.ftknowledge.com) is a provider of distance learning,
business education and management development. It specialises in providing
learning and development that is highly relevant to the needs of businesses
and the people that work within them.

THE LEARNING NETWORK

The Learning Network aims to be the place to go for online learning and
education in the US. Launching in September, it will comprise four vertically
integrated networks serving the K-12, Higher Education, Professional
Development and Lifelong Learning markets.  The Learning Network aims to build
on Pearson Education's strengths in curriculum content to create the
Internet's premier education source. 

Pearson has a strategic alliance with America Online for the Learning Network
to be a premier supplier of educational content and online learning tools to
users of several AOL brands. Pearson recently acquired Family Education
Network (FEN), an online K-12 network for parents, teachers, and students
which provides education content on the AOL service. In order to accelerate
the development of the Learning Network, Pearson has announced a number of
other strategic investments and alliances in online education businesses
including Classroom Connect, SCORE! Learning, Copernicus Education Gateway and
Blackboard.


For further information:

John Fallon              Pearson plc              + 44 (0) 20 7411 2310