Report of the Audit Committees AUDIT COMMITTEES COMMITTEE MEMBERSHIP COMMITTEE ACTIVITIES REED ELSEVIER ANNUAL REPORTS & FINANCIAL STATEMENTS 2003 27 The Committees typically hold meetings five times a year: around January, February, June, August and December, and report on these meetings to the respective boards at the next board meetings. The principal business of these meetings includes: The Committees have explicit authority to investigate any matters within their terms of reference and have access to all resources and information that they may require for this purpose. The Committees are entitled to obtain legal and The Reed Elsevier Group plc Audit Committee fulfils this role in respect of the publishing and information operating business. The functions of an audit committee in respect of the financing activities are carried out by the supervisory board of Elsevier Reed Finance BV. The Reed Elsevier PLC and Reed Elsevier NV Audit Committees fulfil their roles from the perspective of the parent companies and both committees have access to the reports to and the work of the Reed Elsevier Group plc Audit Committee and the Elsevier Reed Finance BV supervisory board in this respect.  The Committees report to the respective boards on their activities identifying any matters in respect of which they consider that action or improvement is needed and making recommendations as to the steps to be taken. Appointments to the Committees are made on the recommendation of the Nominations Committee and are for periods of up to three years, extendable by no more than two additional three-year periods, so long as the member continues to be independent. Details of the remuneration policy in respect of members of the Committees and the remuneration paid to members for the year ended 31 December 2003 are set out in the Directors’ Remuneration Report on pages 29 to 38. During the 2003 financial year, until April 2003, Rolf Stomberg, Roelof Nelissen and Steven Perrick served on the Committees, all being non executive directors and, other than Mr Perrick, independent. Mr Stomberg is the senior independent non executive director and his biographical details are set out in the Reed Elsevier Annual Review. Mr Nelissen has served on a number of supervisory boards and is a former chairman of the managing board of ABN AMRO. Mr Perrick is a partner in Freshfields Bruckhaus Deringer in the Netherlands, an international firm of advisers which provides legal advice to Reed Elsevier. Lord Sharman (61), a chartered accountant, spent his professional career at KPMG and now serves as non- executive chairman of Aegis Group plc and Securicor plc and is a member of the supervisory board of ABN-AMRO and a non-executive director of BG Group plc. He was elected UK senior partner of KPMG in 1994 and served as Chairman of KPMG Worldwide between 1997 and 1999. John Brock (55) is chief executive officer of Interbrew SA and formerly chief operating officer of Cadbury Schweppes plc. David Reid (57), a chartered accountant, was until December 2003 executive deputy chairman of Tesco PLC, with responsibility for strategy, business development and international operations; he was previously its finance director and is its non-executive chairman designate. The main role and responsibilities of the Committees in relation to the respective companies are set out in written terms of reference and include: The Committees each comprise at least three independent non-executive directors, at least one of which has significant, recent and relevant financial experience. The current members of each of the Committees are: Lord Sharman (Chairman of the Committees), John Brock and David Reid (appointed April 2003).  The report meets the requirements of The Combined Code of Corporate Governance, issued by the UK Financial Services Authority. This report has been prepared by the Audit Committees of Reed Elsevier PLC and Reed Elsevier NV, in conjunction with the Audit Committee of Reed Elsevier Group plc, (the “Committees”) and has been approved by the respective boards. other independent professional advice and have the authority to approve all fees payable to such advisers. A copy of the terms of reference of each Audit Committee is published on the Reed Elsevier website (www.reedelsevier.com). (i) to monitor the integrity of the financial statements of the company, and any formal announcements relating to the company’s financial performance, reviewing significant financial reporting judgements contained in them; (ii) to review the company’s internal financial controls and the company’s internal control and risk management systems; (iii) to monitor and review the effectiveness of the company’s internal audit function; (iv) to make recommendations to the board, for it to put to the shareholders for their approval in general meetings, in relation to the appointment, re-appointment and removal of the external auditor and to approve the remuneration and terms of engagement of the external auditor; (v) to review and monitor the external auditor’s independence and objectivity and the effectiveness of the audit process, taking into consideration relevant professional and regulatory requirements; and (vi) to develop and recommend policy on the engagement of the external auditor to supply non-audit services, taking into account relevant ethical guidance regarding the provision of non-audit services by the external audit firm, and to monitor compliance. - January: review of critical accounting policies and practices, and significant financial reporting issues and judgements made in connection with the annual financial