OPERATING AND FINANCIAL REVIEW PARENT COMPANIES Reed Elsevier PLC Reed Elsevier NV 2003 2002 % 2003 2002 % £m £m change € m € m change Reported profit attributable 169 89 90% 242 144 68% Adjusted profit attributable 394 361 9% 540 542 – Average exchange rate  € :£ 1.45 1.59 1.45 1.59 Reported earnings per share 13.4p 7.0p 91% € 0.31 € 0.18 72% Adjusted earnings per share 31.2p 28.5p 9% € 0.69 € 0.69 – Dividend per share 12.0p 11.2p 7% € 0.30 € 0.30 – The results of Reed Elsevier PLC reflect its shareholders’ 52.9% economic interest in the Reed Elsevier combined businesses. The results of Reed Elsevier NV reflect its shareholders’ 50% economic interest in the Reed Elsevier combined businesses. The respective economic interests of the Reed Elsevier PLC and Reed Elsevier NV shareholders take account of Reed Elsevier PLC’s 5.8% interest in Reed Elsevier NV. Both parent companies gross equity account for their respective interests in the Reed Elsevier combined businesses. Adjusted figures, excluding the amortisation of goodwill and intangible assets, exceptional items and related tax effects, are presented as additional performance measures and are reconciled to the reported figures in the notes to the respective financial statements. Profit and loss Dividends Adjusted earnings per share, measured before the effect of amortisation of goodwill and intangible assets and exceptional items, for Reed Elsevier PLC were 31.2p, up 9% on the previous year, and for Reed Elsevier NV were € 0.69, unchanged from 2002. The difference in percentage change is entirely attributable to the impact of currency movements on the translation of reported results. At constant rates of exchange, the adjusted earnings per share of both companies would have shown an increase of 10% over the previous year.  After their share of the charge in respect of goodwill and intangible asset amortisation and of the exceptional items, the  reported earnings per share of Reed Elsevier PLC after tax credit equalisation and Reed Elsevier NV were 13.4p and  € 0.31 respectively, compared to 7.0p and  € 0.18 in 2002. Dividends to Reed Elsevier PLC and Reed Elsevier NV shareholders are equalised at the gross level, including the benefit of the UK attributable tax credit of 10% received by certain Reed Elsevier PLC shareholders. The exchange rate used for each dividend calculation – as defined in the Reed Elsevier merger agreement – is the spot euro/sterling exchange rate, averaged over a period of five business days commencing with the tenth business day before the announcement of the proposed dividend.  The Board of Reed Elsevier PLC has proposed a final dividend of 8.7p, giving a total dividend of 12.0p for the year, up 7% on 2002. The Boards of Reed Elsevier NV, in accordance with the dividend equalisation arrangements, have proposed a final dividend of  € 0.22. This results in a total dividend of  € 0.30 for the year, the same as in 2002. The difference in dividend growth rates reflects the impact of the significant appreciation of the euro against sterling since the prior year dividend declaration dates. Dividend cover for Reed Elsevier PLC, using adjusted earnings before the amortisation of goodwill and intangible assets and exceptional items and related tax effects, was 2.6 times and for Reed Elsevier NV was 2.3 times. Measured for the combined businesses on a similar basis, dividend cover was 2.4 times, unchanged from 2002. REED ELSEVIER ANNUAL REPORTS & FINANCIAL STATEMENTS 2003 21