The total remuneration package

Executive Share Option Scheme (ESOS)

The Executive Share Option Scheme is designed to provide focus on longer term share price growth and reward the sustained delivery and quality of earnings growth.

How the ESOS works

Annual grants of options are made over shares in Reed Elsevier PLC and Reed Elsevier NV at the market price on the date of grant. The size of the total grant pool available for all participants is determined by the compound annual growth in Adjusted EPS over the three years prior to grant. The maximum target grant pool for all participants is defined with reference to share usage during the base year as follows:

Adjusted EPS
growth per annum
2008 & 2009 ESOS grants		 2007 & 2006 grants Target Grant Pool
Less than 8% Less than 6% 50%
8% or more 6% or more 75%
10% or more 8% or more 100%
12% or more 10% or more 125%
14% or more 12% or more 150%

ESOS awards to executive directors are subject to an annual individual maximum of three times salary. The awards to individual directors are subject to the following three performance criteria:

Test 1 On grant The size of the Target Grant Pool determined as above.
Test 2 On grant Individual performance prior to grant.
Test 3 On vesting Compound Adjusted EPS growth during the three years following grant of at least 8% per annum (6% p.a. for 2006 and 2007 ESOS awards). There is no retesting of the performance condition.

ESOS awards made in 2008 to the executive directors are disclosed in the share tables in Share-based awards. Adjusted EPS performance over the three years ended 31 December 2007 was 11.4% p.a. and exceeded the performance condition to vest the 2005 ESOS awards.

At the date of this report, the Committee determined that the performance condition in respect of the 2006-2008 cycle of the ESOS had been met. Therefore, subject to continued employment through the vesting date, the 2006 ESOS awards will vest on 13 March 2009.

Options are exercisable between three and ten years from the date of grant (except for defined categories of approved leavers). In the event of a change of control, the Committee would make an assessment of progress against targets at the time the change of control occurs.