Reed Elsevier Indispensable Global Information Science & Medical Legal Education Business ANNUAL REPORTS and FINANCIAL STATEMENTS 2002

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Reed Elsevier Indispensable Global Information Science & Medical Legal Education Business ANNUAL REPORTS and FINANCIAL STATEMENTS 2002 140350 FC/BC 27/2/03 8:43 pm Page 1 Reed Elsevier Reed Elsevier www.reedelsevier.com Indispensable global information Science & Medical Legal Education Business ANNUAL REPORTS AND FINANCIAL STATEMENTS 2002 ANNUAL REPORTS AND FINANCIAL STATEMENTS CHEMWEB>BIOMEDNET>BIOCHIMICA ET BIOPHYSICA ACTA>EVOLVE>MDL INFORMATION SYSTEMS>SCIRUS>EXCERPTA MEDICA>THE LANCET>ELSEVIER>GRAY’S ANATOMY>SCIENCEDIRECT> ACADEMIC PRESS> CHURCHILL LIVINGSTONE>L’ANNEE BIOLOGIQUE>MOSBY>WB SAUNDERS>BRAIN RESEARCH>ONCOLOGY TODAY>TETRAHEDRON LETTERS>VASCULAR SURGERY>SCIRUS >PDXMD>CELL>JOURNAL OF THE AMERICAN COLLEGE OF CARDIOLOGY>NEUROSCIENCE>THE LANGUAGE OF MEDICINE>ENCYCLOPEDIA OF THE HUMAN BRAIN>VIRTUAL CLINICAL EXCURSION>EMBASE> EI>CHEMICAL PHYSICS LETTERS>POLYMER>NEURON>JOURNAL OF CHROMATOGRAPHY A>ACTA PSYCHOLOGICA>MD CONSULT> AMERICAN JOURNAL OF CARDIOLOGY>COMPUTER NETWORKS >DEVELOPMENTAL BIOLOGY>FEBS LETTERS>HOMEOPATHY>NEUROIMAGE>PHYSICA A>SPEECH COMMUNICATION>WATER RESEARCH> ZEOLITES>MATERIALS TODAY>RISKWISE>BUTTERWORTHS TOLLEY> MATTHEW BENDER> SHEPARD’S IN PRINT> MARTINDALE HUBBELL>LEXISNEXIS AT LEXIS.COM>MALAYAN LAW JOURNAL>LEXISNEXIS AT NEXIS.COM >CONOSUR>LEXPOLONICA>NIMMER ON COPYRIGHT>DEPALMA>MBO VERLAG>COLLIER>LITEC>PEOPLEWISE>EDITIONS DU JURIS CLASSEUR> ECLIPSE>MEALEY PUBLICATIONS>LEXISNEXIS COUNTRY ANALYSIS>CHECKCITE>LEXISONE>THE ADVERTISING RED BOOKS>HALSBURY’S LAWS Reed Elsevier > > > > > > > > DICTIONARY OF CORPORATE AFFILIATIONS ORAC VERLAG FACTLANE LEGISOFT INFOLIB LE BOTTIN ADMINISTRATIF CARTER ON CONTRACT ANNUAL REPORTS AND FINANCIAL STATEMENTS 2002 AUSTRALIAN ENCYCLOPEDIA OF FORMS AND PRECEDENTS>LE BOTTIN DE COMMUNE ET DE L’INTERCOMMUNALITE>LA SEMAINE JURIDIQUE For the Reed Elsevier Combined Businesses, Reed Elsevier PLC and Reed Elsevier NV >POLY GESTION AVOCAT>LAWNOW>LOCAL GOVERNMENT REPORTER>AUSTRALIAN CORPORATION LAW>BUTTERWORTHS COMPANY LAW CASES> LA DOCUMENTATION ORGANIQUE>TELECOMMUNICATIONS LAW>LEGAL EXPRESS>LAW IN CONTEXT>BUTTERWORTHS CORE TEXTS>E-MARKETPLACE>LEGAL EXPRESS>LAWCOMMERCE >NATIONAL FRAUD CENTER>LEXISNEXIS LITIGATION SUPPORT BY DOLPHINSEARCH>RIGBY>HEINEMANN>HARCOURT SCHOOLS PUBLISHERS>GINN>GREENWOOD>HOLT, RINEHART AND WINSTON> STECK-VAUGHN>THE PSYCHOLOGICAL CORPORATION>WECHSLER TEST>HI.COM.AU>WECHSLER INTELLIGENCE SERIES>STANFORD ACHIEVEMENT TEST>HARCOURT EDUCATIONAL MEASUREMENT >ILOLI>METRO SERIES>ALLEZ VIENS>HORIZONS>TROPHIES>WISC>TREASURY OF LITERATURE>VAMOS DE FIESTA>MATH ADVANTAGE>STORIES IN TIME>HARCOURT CIENCIAS>YOUR HEALTH> ART EXPRESS>HEINEMANN EXPLORE>MYPRIMARY.CO.UK>EASYTEACH>HEINEMANN LIBRARY>DARTMATHS>PRACTICAL MATHEMATICS>HARCOURT INTERACTIVE TECHNOLOGY>VEN CONMIGO >ELEMENTS OF LANGUAGE>GO.HRW.COM>HOLT RESEARCHER>HOLT SCIENCE SPECTRUM>ESTRADO>HOLT SCIENCE & TECHNOLOGY>MODERN CHEMISTRY>KOMM MITT>HOLT ONLINE SCIENCE> SELF IMAGE PROFILES>BOEHM-3 PRESCHOOL>WILSON SYNTAX SCREENING TESTING>SELF IMAGE PROFILES>THE WHALE RIDER>BARRIE PUBLISHING>CNI.COM>FARMERS WEEKLY >SCIENCE BY INVESTIGATION>ELECTRONIC DESIGN NEWS>RESTAURANTS & INSTITUTIONS>BROADCASTING & CABLE>COMPUTER WEEKLY>COMMUNITY CARE>ESTATES GAZETTE>MARDEV> MIPCOM>BIZZ>FEM BUSINESS>WORLD TRAVEL MARKET>MIDEM>BATIMAT>BOOKEXPO>INFOSECURITY>ZIBB.NL>VARIETY>STRATEGIES>NEW SCIENTIST>DOCTOR>KELLY’S DIRECTORIES>RATI.COM >TOTALJOBS.COM>KOMPASS>CMD>BANKERS ALMANAC>AUSTRALIAN DOCTOR>ELSEVIER THEMA>HOTELYMPIA>KELLYSEARCH>DESIGN NEWS>BOERDERIJ>PLAYTHINGS>E-LOGIC>TRACOM> PUBLISHERS WEEKLY>FURNITURE TODAY>MULTICHANNEL NEWS>INTERIOR DESIGN>BUILDINGTEAM.COM>WIRELESS WEEK>ELSEVIER>BELEGGERS BELANGEN>PACKAGING DIGEST >SURGICAL PRODUCTS>IL BAGNO>INSTALLATORE ITALIANO>TECNO>FINESTRA>VETRO>TC NEWS>BLU & ROSSO>ARCHITEKTUR>VIE DE FAMILLE>CODE CIVIL>ARTE Y CEMENTO>PISCINAS> 140350 IFC_11Reed 27/2/03 8:39 pm Page IFC1 Contents 01 Financial highlights 02 Review of operations and financial performance 12 Structure and corporate governance 16 Directors’ remuneration report Reed Elsevier combined financial statements 26 Accounting policies 28 Combined financial statements 32 Notes to the combined financial statements 54 Independent auditors’ report Reed Elsevier PLC annual report and financial statements 56 Financial highlights 57 Directors’ report 59 Accounting policies 60 Financial statements 64 Notes to the financial statements 70 Independent auditors’ report Reed Elsevier NV annual report and financial statements 72 Five year financial summary 73 The Supervisory Board’s report 73 The Executive Board’s report 74 Financial statements 77 Accounting policies 78 Notes to the financial statements 81 Auditors’ report 81 Other information Additional information for US investors 84 Reed Elsevier combined businesses 89 Reed Elsevier PLC 91 Reed Elsevier NV 93 Principal operating locations In April 2002, Reed International P.L.C. changed its name to Reed Elsevier PLC and Elsevier NV changed its name to Reed Elsevier NV. The operating company that owns the publishing and information businesses, previously named Reed Elsevier plc, changed its name to Reed Elsevier Group plc. This document contains Annual Reports information and the Financial Statements in respect of the Reed Elsevier combined businesses and the two parent companies, Reed Elsevier PLC and Reed Elsevier NV. This, together with the separate summary document Reed Elsevier Annual Review and Summary Financial Statements 2002, forms the Annual Reports and Financial Statements of Reed Elsevier PLC and Reed Elsevier NV for the year ended 31 December 2002 and the two documents should be read together. 140350 IFC_11Reed27/2/038:39pmPage1 € £ sterling Financial highlights euro ex st r and items exceptional assets, theamortisationofgoodwillandintangible before stated andare measures additional performance business usedbytheReedElsevier are Thesefigures figures. flow andcash profit ‘adjusted’ to The financialhighlightsrefer earningspershare Adjusted REED ELSEVIERPLC P ended31December theyear Results for TURNOVER REED ELSEVIERCOMBINED ended31December theyear Results for elated tax effects. A reconciliation between the reported figures and adjusted figures is provided in the notes to thefinanci to inthenotes isprovided figures andadjusted figures betweenthereported Areconciliation effects. tax elated ARENT COMPANIES atements. Adjusted pre-tax profit is presented for total operations; other highlights relate to continuing operations, which operations, continuing to otherhighlightsrelate operations; total for ispresented profit pre-tax Adjusted atements. 98 99 00 01 98 99 00 01 98 99 00 01 clude the consumer publishing businesses soldin publishingbusinesses clude theconsumer 1998. 26.40p €4,708m £3,163m 24.40p €5,153m £3,390m 23.30p €6,180m £3,768m 26.10p €7,342m £4,560m 02 02 02 28.50p €7,982m £5,020m F REED ELSEVIERPLC OPERATING PROFIT OPERATING ADJUSTED ull year dividend ull year 98 99 00 01 98 99 00 01 98 99 00 01 15.00p €1,210m £813m 10.00p €1,204m £792m 10.00p €1.301m £793m 10.50p €1,594m £990m 02 02 02 11.20p €1,801m £1,133m Adjusted earningspershare Adjusted REED ELSEVIERNV C OPERATING ADJUSTED ASH FLOW ASH FLOW 98 99 00 01 98 99 00 01 98 99 00 01 €0.60 €1,203m £808m €0.57 €1,186m £780m €0.59 €1,271m £775m REED ELSEVIER ANNUAL REPORTS & FINANCIAL STATEMENTS 2002 REED ELSEVIERANNUALREPORTS&FINANCIALSTATEMENTS €0.64 €1,620m £1,006m 02 02 02 €0.69 €1,606m £1,010m F REED ELSEVIERNV PRE-TAX PROFIT PRE-TAX ADJUSTED ull year dividend ull year 98 99 00 01 98 99 00 01 98 99 00 01 €0.39 €1,150m £773m €0.27 €1,079m £710m €0.28 €1,132m £690m € € al 0.30 1,365m £848m es as 02 02 02 €0.30 €1,474m £927m 1 140350 IFC_11Reed 27/2/03 8:39 pm Page 2 Review of operations and financial performance This review provides a commentary on the operating and financial performance of the Reed Elsevier combined businesses for the year ended 31 December 2002. In addition, it describes other financial aspects of the combined businesses including treasury policies. The review also includes information on the financial performance and dividends of the parent companies and on the finance activities of the Elsevier Reed Finance BV group. The combined financial statements encompass the businesses of Reed Elsevier Group plc and Elsevier Reed Finance BV, together with their parent companies, Reed Elsevier PLC and Reed Elsevier NV (the “Reed Elsevier combined businesses” or “Reed Elsevier”). Financial information is presented in both sterling and euros. REVIEW OF OPERATIONS % change 2002 2001 2002 2001 at constant £m £m €m €m currencies Turnover Science & Medical 1,295 1,024 2,059 1,649 29% Legal 1,349 1,330 2,145 2,141 5% Education 993 579 1,579 932 78% Business 1,383 1,627 2,199 2,620 –14% Total 5,020 4,560 7,982 7,342 13% Adjusted operating profit Science & Medical 429 344 682 554 26% Legal 287 267 456 430 10% Education 183 132 291 212 45% Business 234 247 372 398 –4% Total 1,133 990 1,801 1,594 17% Adjusted figures are used by Reed Elsevier as additional performance measures and are stated before amortisation of goodwill and intangible assets and exceptional items. The Review of Operations refers to adjusted operating profit performance. Adjusted figures are used by Reed Elsevier as additional performance measures and are stated before amortisation of goodwill and intangible assets and exceptional items. Reported operating results, including amortisation of goodwill and intangible assets, are discussed further below in the Financial Review, and are reconciled to the adjusted figures in the notes to the combined financial statements. Unless otherwise indicated, all percentage movements in the following commentary refer to constant currency rates, using 2001 full
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