Reed Elsevier complies with the best practice in matters of corporate governance. Full details of the structure, corporate governance and internal control processes of Reed Elsevier PLC, Reed Elsevier NV, Reed Elsevier Group plc and Elsevier Reed Finance BV are set out on pages 12–15 of the Annual Reports and Financial Statements 2002, available online at www.reedelsevier.com

Reed Elsevier has implemented an ongoing process for identifying, evaluating and managing the significant risks faced by the respective businesses.

We have an established framework of procedures and internal controls, set out in a group Policies and Procedures Manual, with which the management of each business is required to comply. Group businesses are required to maintain systems of internal control, which are appropriate to the nature and scale of their activities and address all significant operational and financial risks that they face. The board of Reed Elsevier Group plc has adopted a schedule of matters that must be brought to them.

Each business group has identified and evaluated its major risks, the controls in place to manage those risks and the level of residual risk accepted. Risk management and control procedures are embedded into the operations of the business and include the monitoring of progress in areas for improvement that come to management and board attention. The major risks identified include business continuity, protection of IT systems and data, challenges to intellectual property rights, management of strategic and operational change, evaluation and integration of acquisitions, the recruitment and retention of personnel, and business reputation. The Strategy Committee considers major strategic risks to the businesses.

The Reed Elsevier Group plc Audit Committee receives regular reports on the management of material risks and reviews these reports with executive management. The Audit Committee also receives regular reports from both internal and external auditors on internal control matters. In addition, each business group is required, at the end of the financial year, to review the effectiveness of its internal controls and report its findings on a detailed basis to the management of Reed Elsevier Group plc. These reports are summarised and submitted to the Audit Committee of Reed Elsevier Group plc as part of the annual review of effectiveness. The Chairman of the Audit Committee reports to the board on any significant internal control matters arising.