C H L Davis was appointed a director in September 1999. His service contract, which is dated 19 July 1999, is subject to English law and provides for a notice period of twelve months.  A Prozes was appointed a director in August 2000. His service contract, which is dated 5 July 2000, is subject to New York law and provides that, in the event of termination without cause by the company, twelve months’ base salary would be payable. P Tierney was appointed a director on 8 April 2003. His service contract, which is dated 19 November 2002, is subject to New York law and provides that, in the event of termination without cause by the company, twelve months' base salary will be payable. The notice periods in respect of individual directors have been reviewed by the Committee. The Committee believes that as a general rule for future contracts, the notice period should be twelve months, and that the directors should, subject to practice within the country in which the director is based, be required to mitigate their damages in the event of termination. The Committee will, however, have regard to local market conditions so as to ensure that the terms offered are appropriate to recruit and retain key executives operating in a global business.  Executive directors may, subject to the approval of the Chairman and the Chief Executive Officer, serve as non-executive directors on the boards of up to two non-associated companies (of which only one may be to the board of a major company). The Committee believes that Reed Elsevier can benefit from the broader experience gained by executive directors in such appointments. Directors may retain remuneration arising from such non-executive directorships. During the year CHL Davis was appointed a non-executive director of GlaxoSmithKline plc and received a fee of £28,848 during the year from that company in such capacity. The remuneration of the non-executive directors is determined by the boards of Reed Elsevier Group plc, Reed Elsevier PLC and Reed Elsevier NV, with the aid of external professional advice from Towers Perrin. Non-executive directors receive an annual fee and are reimbursed expenses incurred in attending meetings. They do not receive any performance related bonuses, pension provisions, share options or other forms of benefit. During 2003 the boards initiated a review of the fees paid to the non-executive directors compared against the fees paid to non-executive directors of other leading multinational companies operating in global markets. With effect from 1 May 2003 the fees paid to the non-executive directors (other than the Chairman) who serve on the boards of Reed Elsevier Group plc, Reed Elsevier PLC and Reed Elsevier NV were reviewed for the first time since 1999 and were increased to £45,000/ € 65,000. The respective Chairmen of the Remuneration Committee and Audit Committee also receive an additional fee of £7,000/ € 12,000 in respect of those additional duties. The non-executive directors serve under letters of appointment, and do not have contracts of service. The emoluments of the directors of Reed Elsevier PLC and Reed Elsevier NV (including any entitlement to fees or emoluments from either Reed Elsevier Group plc or Elsevier Reed Finance BV) were as follows: No compensation payments have been made for loss of office or termination in 2002 and 2003. Details of share options exercised by the directors over shares in Reed Elsevier PLC and Reed Elsevier NV during the year are shown on pages 36 and 37. The aggregate notional pre-tax gain made by the directors on the exercise of share options during the year was £5,201,190/ € 7,541,726 (2002: £306,843/ € 487,880). 32 REED ELSEVIER ANNUAL REPORTS & FINANCIAL STATEMENTS 2003 (a) Aggregate emoluments EMOLUMENTS OF THE DIRECTORS REMUNERATION OF NON-EXECUTIVE DIRECTORS EXTERNAL APPOINTMENTS £000 € 000 2003 2002 2003 2002 Salaries and fees 3,473 3,022 5,035 4,805 Benefits 93 91 134 145 Annual performance-related bonuses 2,254 1,453 3,269 2,310 Pension contributions 243 267 352 425 Pension to former director 213 231 307 368 Payment to former directors 95 – 139 – Total 6,371 5,064 9,236 8,053 DIRECTORS’ REMUNERATION REPORT