Pearson Affordable Learning FundOverview

PALF is a venture fund investing in start-ups that deliver financial returns and high quality education

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PALF Long-term Objectives

PALF invests in companies that:

• Demonstrate sustainable business models that can generate market financial returns over 5-10 years

• Relentless focus on efficacy and learner outcomes

• Target bottom-of-the pyramid/ lower income consumer markets

• Have scalable, proven models and credible management teams

Long-term, we want to provide millions of the world’s poorest children with quality education

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Long Term Objectives

• To help provide millions of the poorest children in the world with a quality education, in a profitable and scalable manner

• To demonstrate to governments and donors that low-cost private education can help educate the poor in a cost-effective way

PALF operates at the intersection of three types of investors, integrating the best of each approach

Longer horizons and intense social impact metric reporting Focus on maximising social impact

Focus on financial sustainability and financial metricsMaximise profits and scale

Provide services in regions that are currently underservedEmerging market experience

Impact investing

Private equity / venture capital

in education

Emerging markets investing

Pearson Affordable Learning

Fund

We provide additional value through our deep education expertise and relentless focus on efficacy

Since PALF was established, we have:

1 Established Pearson as a leader in the affordable education sector

2 Developed a portfolio of seven investments serving over 20,000 children in South Africa, Ghana, India and the Philippines

Established the Edupreneur Accelerator program in India and scaled the program to launch in South Africa

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4 Catalyzing the global affordable learning agenda and enhancing Pearson’s knowledge and learning

PALF has built a diverse portfolio of seven affordable education investments serving over 20,000 children

DESCRIPTIONINVESTMENT

Omega Schools, Ghana • LCPS chain in Africa (K-10) serving 19,000+ children in 40 schools

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Sudiksha, India • Chain of low fee 22 preschools and a winner of the Edupreneurs India program

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APEC (Ayala JV), Philippines

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• LCPS chain with 12 schools in urban Manila, developed through a JV with Philippine’s largest telecom

Avanti Learning Centres, India

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• After-school labs for university entrance exam preparation; >40% of Avanti’s students placed in the top 1%

eAdvance, South Africa

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• Blended-learning LCPS with 2 schools in Johannesburg; efficacy results show Gr. 2 students performing above avg. SA Gr. 3 student after 1 year

Zaya Labs, India

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• Blended learning school-in-a-box solution embedded in 30 schools

Experifun, India

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• Science kit learning solution and a winner of the Edupreneurs India program

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Domain Expertise

Business Expertise

Network Access

Talent Recruitment

Good Governance

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Sharing Learnings

across Portfolio

Five Techniques

for Portfolio Support

Approach to Portfolio Support

Post-investment, PALF actively adds value to the portfolio through a six step systematic approach

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• Focused on education entrepreneurs in the emerging market providing higher quality education to the lower income

• Delivers an education-focused curriculum over 3 months with tailored education mentors

• Run by two education start-up veterans with experience in Silicon Valley and India

World’s only accelerator that is…

Edupreneur Program Progress

• Two programs launched thus far in India (2013) and South Africa (2014)

• 25 education companies from 7 countries across Sub-Saharan Africa and India

• Seed investments made in Edupreneur India co-winners Experifun and Sudiksha by PALF and Village Capital

Edupreneur Accelerator Program3

We are also catalyzing affordable education through partnerships, recruiting talent and working with gov’ts

Building pipeline through new partnerships and increasing scope

Recruiting strong talent to the affordable education space

Developing stronger government relationships

Key Actions Detail

• Expanded our investment scope to include earlier stage investments and partner with promising entrepreneurs earlier

• Designed the Edupreneurs programme in India/ South Africa to incubate a new cohort of ventures

• Developed key regulatory and government relationships

• Worked with the World Bank to help guide their comprehensive research on low cost private schools regulations research, starting with Ghana

• Backed strong talent early through the establishment of a new JV in the Philippines

• Leveraged our global network to find strong entrepreneurs (e.g., formal partnership with Ashoka) in the education sector

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We’ve documented key learnings over the last two years in a published ‘Lessons Learned’ paper

The importance of a holistic approach

1 Focus on local costs and incentives

2 Efficacy requires systems

3 Investing in relationships pays

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Value of good governance

5PALF is a talent pipeline

6Investments require a long time horizon

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Insights don’t have market boundaries

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• Pedagogy, technology & system change must all be used to achieve access, scale and quality in education

• Working with low-income pop-ulations requires a focus on local costs

• PALF system-atically embed efficacy in our companies

• Creating good governance adds significant value for early-stage ventures

PALF Lessons Learned

• Attracting and retaining great talent requires a bold yet achievable vision

• Venture investments will have a long time return horizon and require a tailored valuation approach

• Gaining insights in emerging markets is relevant for Pearson global businesses

• Investing heavily in on-the-ground support pays dividends

PALF has grown into a diverse team with deep investment and education expertise and experience

Sir Michael Barber

• Chief Education Advisor

• Chairs PALF Investment Committee

Katelyn Donnelly

• PALF Managing Director

• Sits on the Board of most PALF investments

Ember Melcher

• Background: affordable education in India

• Focus: Edupreneurs

Jacob Kestner

• Background: teaching education strategy

• Focus: Leader of SE Asia Portfolio/Pipeline

Arvind Nagarajan

• Background: strategy and venture capital

• Focus: Leader of Latam & S Asia Portfolio/Pipeline

Yiming Ma

• Background: corp. finance and strategy

• Focus: Leader of Sub-Saharan Africa Portfolio/Pipeline

Gregg Alpert

• Background: Pearson Catalyst Mgr

• Focus: Edupreneurs, technology expertise

Pearson Legal: Graeme Baldwin, Deputy General Counsel/ SVP

Pearson Corporate Finance: Soren Koren, SVP

Greg Blair, Analyst

Pearson Regional Leaders: Fathima Dada, MD of Pearson Inside Services/ Direct Delivery

Riaan Jonck, CEO of Pearson South Africa

Amar Kumar

• 15% time:S Asia portfolio

Nived Dinesh

• Pearson India

• Focus: S Asia pipeline

PALF Leadership

Core PALF Team

Broader PALF

Ecosystem in Pearson

As of Jan. 2015, PALF has grown into a $65M venture fund, the world’s largest pure investor in affordable education

Expand to new geographies

Invest in new business models

Scaling faster and growing bigger

Expansion strategies

In January 2015, Pearson committed an additional $50M to PALF following PALF’s success with its initial $15M venture fund

Strategy for PALF

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We want to grow our portfolio to include investments in Latin America and other emerging markets

We are looking to expand our portfolio into new business models such as higher ed & vocational

We are searching for more and larger deals to provide more high-quality affordable education to all!

Appendix

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PALF INVESTMENT COMMITTEE MEETING

PALF Investment Committee comprising of Pearson’s most senior leaders approve all investment and concept notes

Sir Michael Barber (Chair)

•Chief Education Advisor, Pearson PLC

PALF Investment Committee Members

John Fallon

•Chief Executive Officer Pearson PLC

Phillip Hoffman

•Head of Corporate Finance and Strategy

Tamara Minick-Scokalo

•Head of Growth Markets, Pearson PLC

Luke Swanson

•Transformation Director, Pearson PLC

• Portfolio: APEC

• Located in Manila, Philippines• Chain of low cost, employability-focused secondary schools• Now at 12 schools and over 1,000 students• Partnership between Ayala and Pearson• $35 a month• Curriculum is focused on real world skills and English literacy

• Portfolio: Avanti Learning Centres

• Located in Mumbai, India• High quality science education company with 600 students in 9

learning centres and 4 schools across India• 15,000 applicants for 450 seats in 2014; ¼ the cost of competition• 3x revenue growth year on year. $5Bn industry in India• >40% of Avanti’s student place in the top 1% in college entrance

exams

• Portfolio: Omega Schools

• Located in Accra, Ghana• Started with 10 schools summer of

2011 now at 38 schools and over 20,000 students

• Cashless, daily fee system – accountability from parents

• Workbooks, not textbooks• iPad data and student information

systems • All costs localised

• Portfolio: eAdvance

• Located in Johannesburg, South Africa• Blended learning model pioneered by

Rocketship Education• Currently 2 Spark Schools with over

350 students• Plan to reach 64 schools and over

60,000 students• First private African primary school

network to implement blended learning model

• Portfolio: Zaya Labs

• Located in Mumbai, India• Holistic blended learning solution

provider for primary schools• In over 30 schools and reaching

1,500 students this year• Provide schools with “LabKit” and

“ClassCloud” to ensure online and offline learning in low-income settings

• $5/student/month

• Portfolio: Sudiksha

• Located in Hyderabad, India• Edupreneurs India 2013 co-winner• Network of 22 pre-schools across

Andhra Pradesh and Hyderabad, with 92 employees and teachers

• Utilises local, unemployed women as teachers and employees

• Tuition-fee model of $8 per month per student

• The company’s main customers are the parents of urban, poor children from ages 2-6 years old who cannot afford traditional pre-school education

• Portfolio: Experifun

• Located in Bangalore, India• Edupreneurs India 2013 co-winner• Low-cost, interactive science learning

products, called Caboodle, aimed at improving science learning at the 6-10 grade level

• Pilot programs launched in 15 schools• The company sells to LCPS serving

poor students, in two forms; a teacher kit and student kit through one-time sale model with an average sale value of 1L to 1.5L INR.

• Pearson Portfolio company: Bridge International

• Located in Nairobi, Kenya• Now at 300 schools and over

100,000 students• Cashless, mobile money

payment• $5 a month• Teaching curriculum is all on

tablets• Academy-in-a-box