DIRECTORS’ REMUNERATION REPORT SHARE OPTIONS AND INTERESTS IN SHARES Options over shares in Reed Elsevier PLC and Reed Elsevier NV have been granted to executive directors and other senior executives under the Reed Elsevier Group plc 1993 Share Option Scheme (the "1993 Scheme"). Approximately 1,500 executives were granted options under the 1993 Scheme during 2003. The terms of the 1993 Scheme were approved by the shareholders of Reed Elsevier PLC and Reed Elsevier NV at their respective Annual General Meetings in 1993. The 1993 Scheme has granted options at the market price at the date of grant, which are normally exercisable between three and ten years from the date of grant. Since 1999 all options granted under the 1993 Scheme have been subject to the performance condition that the compound growth at constant exchange rates in adjusted EPS in the three years immediately preceding vesting must exceed the compound growth in the average of the UK and Dutch retail price indices by a minimum of 6%.  Options over shares in Reed Elsevier PLC and Reed Elsevier NV have been granted, at the market price at the date of grant, under the Reed Elsevier Group plc Senior Executive Long Term Incentive Scheme (the “2000 LTIP”). Implementation of the 2000 LTIP was approved by shareholders of Reed Elsevier PLC and Reed Elsevier NV at their respective Annual General Meetings in April 2000. The terms of the 2000 LTIP permitted a one off grant of options to be made to executive directors and a limited number of key employees responsible for reshaping the business, executing the strategy for growth announced in February 2000 and producing a sustainable improvement in shareholder value. 38 key executives have been granted options under the 2000 LTIP. All grants were approved by the Committee, and may only be exercised during the period 1 January 2005 and 31 December 2005, and then only if 20% per annum compound total shareholder return is achieved, together with individual performance targets. In accordance with the terms of the grants proposed to be made under the 2003 LTIS in 2004, acceptance of an award under the 2003 LTIS by any individual will automatically terminate any award under the 2000 LTIP. The performance conditions applicable to the 1993 Scheme and the LTIP were chosen in order to provide an appropriate balance between operational focus and producing a sustainable improvement in shareholder value over the longer term. Options have also been granted over shares in Reed Elsevier PLC under the Reed Elsevier Group plc UK SAYE Option Scheme, in which all eligible UK employees are invited to participate. The SAYE Scheme grants options at a maximum discount of 20% to the market price at the time of grant, and are normally exercisable after the expiry of three or five years from the date of grant. No performance targets attach to options granted under this scheme as it is an all employee scheme. Approximately 1,600 employees participated in the SAYE Scheme during 2003. REED ELSEVIER ANNUAL REPORTS & FINANCIAL STATEMENTS 2003 35