INTERNATIONAL OPPORTUNITIES FOR PUBLISHING COMPANIES

Prepared by The Parthenon Group

for the Content in Context Conference 2012, Washington

On-the-Ground Education Sector Projects Completed by Parthenon

Parthenon Completes More Than 150 AssignmentsEach Year, In Over 60 Countries Globally

0

20

40

60

80

100%

Latin America

Brazil

Mexico

Argentina

Chile

Colombia

GCC

Kuwait

Egypt

United Arab

Emirates

Saudi Arabia

Bahrain

Oman

Qatar

Asia

Singapore

Korea

Thailand

Hong Kong

Vietnam

Taiwan

Malaysia

Indonesia

Southern

Hemisphere

Aus

tral

ia

South

Africa

Indi

a/

C

hin

a

Ch

ina

Indi

a

Eu

rop

e

Turk

ey

Sw

itzer

lan

d

Legacy market Company-pay driven market

Regulation-constrained

market

The profit pool is shifting to direct delivery. Regulations and affordability create distortions and opportunities in the market (eg., size of the UAE vs India)

Some Context: Private International and Premium Bilingual Schools Market

Publishing

Only one $B+ education company (Laureate) focuses on emerging

markets

$1B

Direct delivery has grown to the extent that most $1B+ education companies are no longer publishers

Of the ~20 Education Companies With More Than $1B in Annual Revenues, 7 Companies Are Publishers

International Opportunities for Publishers: Two Business Models

Leveraging IP for Blended Learning

$180M

Acquisition for Direct Delivery

EMPGI/HMH Case Study: Leveraging Content, Technology And Pedagogical Expertise To Create Value

$180M

Growing Affluence and the Enhanced Social Status Associated with Foreign Education Are Key Drivers

2005

372M

2006

376M

2007

381M

2008

385M

2009

HH <

$10K

HH >

$10K

389M

Number of Chinese Households by Income Bracket, 2005-09

“Historically, very wealthy Chinese families have relied on cars and properties as status symbols … increasingly, foreign education for their children allows them to do this”

– CounselorLeading Study Abroad Agent

HH

Income

Decile 10

%

Ed

ucat

ion

sp

end

pe

r

child

pe

r

HH

9.4%

HH

Income

Decile 9

7.5%

HH

Income

Decile 8

6.4%

HH

Income

Decile 7

5.6%

HH

Income

Decile 6

4.9%

HH

Income

Decile 5

4.3%

HH

Income

Decile 4

3.7%

HH

Income

Decile 3

3.1%

HH

Income

Decile 2

2.4%

HH

Income

Decile 1

1.3%

$0.8K$28K $1.7K$2K$3K$4K$5K$6K$8K$11K

Avg. HH

Income of

Decile

Affluent Households in China Spend an Average ~9.5% of Their Tax Adjusted Disposable Income on Education

The growing number of affluent households will result in increased education spend

Average educationspend per child 7%

China Leads on Household Income Spend on Education as Percent of HH Income by Country

China

Ed.

S

pend

as

Per

cent

of

H

H

Inco

me

7.0%

Gulf Cooperation

Council

(e.g. UAE, Oman,

Saudi Arabia )

7.0%

Indonesia

6.8%

Singapore

6.0%

India

5.3%

High propensity of a household to spend on education is a strong driver for growth of the private education market

Education Spend as Percent of HH Expenditure vs. GDP per Capita Growth, 1994-2007

Ed Spend as % of

HH Expenditure

GDP Per Capita

Growth

1995 1996 1997 1998 1999 2000 2001 2002 20031994

Education is a highly defensive consumer spending item in China protecting the industry from potential downturns in the economy

20%

10%

0%

Study Abroad Market in China Has Grown at ~27% Historically—U.S. Has Shown the Highest Growth Among

Destination Countries

2000

Overseas Students

39K

2007

UK

US

Australia

Europe & Asia

Canada

129K

2010E

UK

US

Australia

Europe & Asia

Canada

261K

( '00-'07 )

19%

CAGR

42%

19%

11%

29%

32%

( '07-'10E )

27%

CAGR

~60% of students enrolling abroad do so in English language speaking countries driving demand for quality out-of-school ELT learning

Employees with Greater Proficiency in English Can Achieve Higher Income Levels in China and Progress to Senior

Positions

Fluent

$16K

Good

$11K

Average

$9K

Estimated Average Salary Levels Achieved By Level of English Proficiency

As employers become increasingly aware of the importance of graduates ‘working’ in English, providers such as RISE with an immersive approach from an early age

will benefit

Chinese Public K12 Schools Provide Limited Number of Hours of English Compared to Other Countries in Asia

India

6 Hrs.

Malaysia

5 Hrs.

Thailand

5 Hrs.

Hong Kong

5 Hrs.

China

~3-4

Hrs.

Japan

3 Hrs.

Inadequate provision and quality of English in Chinese public and private schools has created opportunity for private out-of-school ELT providers like RISE

China’s Private Sector Education Market Is Forecast to Grow to an 8% CAGR by 2015

2007

$XB

2008

$XB

2009

$XB

2010

$XB

2011F

$XB

2012F

$XB

2013F

$XB

2014F

$XB

2015F

$XB

8%

( '07-'09 )

CAGR

8%

( '10-'15F )

CAGR

Chinese Private Education Market, 2007-15F

Historical Forecast

The Private Out-of-school Pre-K12 ELT Market Has Grown at 15% CAGR Since 2007 and Is Forecast to Grow at 12%

CAGR by 2015

$XB

$XB

Other PrivateEducation

$XB

2007 2010 2015F

PrivateELT

Market15%

8%

('07-'10)8%

CAGR

12%

8%

('10-'15F)8%

CAGR

1.5% 1.9% 2.2%ELT Market Share

The private out-of-school Pre-K12 ELT market has historically gained share of the overall private education market and is forecast to continue doing so, making it one

of the most attractive verticals to invest in

The Chinese Pre-K12 ELT Market Is Forecast to Grow at 12% by 2015—Branded Chinese Out-of-school

ELT Market Will Continue to Gain Share

2007

$XB

2010

$XB

2011F

$XB

2012F

$XB

2013F

$XB

2014F

$XB

2015F

UnbrandedCompetitors

PremiumBranded

Competitors

$XB

11%

30%

('07-'10)15%

CAGR

7%

21%

('10-'15F)12%

CAGR

22M 31M 34M 37M 39M 42M 45MEnrolment

19% 27% 30% 33% 36% 38% 41%Premium BrandedScale CompetitorsShare

The RISE Value Proposition Provides a Perfect Synthesis of Consumer Needs and Desired Outcome, Educational Content

and Delivery, and the Integration of Technology

Education Technology

Consumer

As a Leading Operator in the Fast Growing Chinese Education Sector There Are Substantial Opportunities to Expand in to Adjacent Segments

Other Private K12 Schools

After School Tutoring

Private Sino-Foreign K12 Schools

Overseas Agent Counseling

Overseas Test Preparation

Adult ELT

Pre-K to12 ELT

Private Higher Education

Chinese Private Education Market Size, 2011

Sustainable Growth

Professionalization

Profitability

Regulatory Ease

The Chinese private education market is large, fast growing and supported by a number of favorable underlying characteristics

Chinese Education: Underlying Market Characteristics

High Synerg

y

Low Synerg

y

RISE Has an Extensive Network Across China, Serving Nearly 35,000 Students in 2011

Number of RISE Centres, August 2011

RISE currently has 20 self-owned centers and 82 partner/franchisee centers forecast to grow to 153 SOLC and partner/franchise centers by 2012

Strong Satisfaction Has Led to Parents Becoming Advocatesof the RISE Product and Driving Enrolment Growth

2008

Brand

Internet

Word of Mouth

Newspaper

2009

Brand

Internet

Outdoor

Word of Mouth

Newspaper

2010

Brand

Internet

Outdoor

Word of Mouth

Newspaper

RISE Enrolment by Marketing Channel, 2008 - 10

Parent’s satisfaction with RISE product has translated in to ~40% of enrolments coming from word-of-mouth marketing

About The Parthenon Group’s Education Practice

Parthenon has served as an advisor to the education sector since our inception in 1991. Our Education Practice – the first of its kind across management consulting firms – has an explicit mission and vision to be the leading strategy advisor to the global education industry. To achieve this, we invest significantly in dedicated management and team resources to ensure that our global expertise extends across public sector and non-profit education providers, foundations, for-profit companies and service providers, and investors. Parthenon has deep experience and a track record of consistent success in working closely with universities, colleges, states, districts, and leading educational reform and service organizations across the globe.

Learn more about our Education practice at www.parthenon.com/industries/education

Karan KhemkaPartner

karank@parthenon.com+ 91-22-67442500

For regular updates on events, research, and reports

@Parthenon_GroupFollow Karan for thought-provoking observations and ideas on education

@karan_khemka