FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Joint Report of Foreign Issuer

Pursuant to Rule 13a-16 or 15d-16 of
The Securities Exchange Act of 1934

Information furnished as at 28 July 2005

REED ELSEVIER PLC (Registrant)	REED ELSEVIER NV (Registrant)
1-3 Strand	Radarweg 29
London WC2N 5JR	1043 NX Amsterdam
United Kingdom	The Netherlands
(Address of principal executive office)	(Address of principal executive office)

(Indicate by check mark whether the registrant furnishes or will furnish annual reports under cover of Form 20-F or Form 40-F).

Form 20-F  þ Form 40-F  o

(Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)

Yes o No þ

SIGNATURES

Pursuant to the requirement of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized.

REED ELSEVIER PLC
Registrant REED ELSEVIER NV
Registrant

By:	/s/  L. DIXON Name:  L. Dixon Title:    Deputy Secretary	By:	/s/  L. DIXON Name:  L. Dixon Title:    Authorised Signatory
Date:	28 July 2005	Date:	28 July 2005

NEWS RELEASE

ISSUED ON BEHALF OF REED ELSEVIER PLC AND REED ELSEVIER NV

28 JULY 2005

REED ELSEVIER: HIGHLIGHTS OF 2005 INTERIM RESULTS

POSITIVE START TO THE YEAR

• Revenues up 6%, adjusted pre-tax profits and earnings per share up 5% at constant exchange rates

• Good underlying performance across business; momentum in revenue and profit growth building for second half

• Strong subscription renewals and growing online sales at Elsevier

• Further revenue growth momentum at LexisNexis from product and marketing investment

• Good performance in winning state textbook adoptions at Harcourt Education; well placed for strong second half sales season

• Continuing improvement at Reed Business; rapid online growth and exhibitions performing well

• Good contribution from recent acquisitions

• Sustained investment in building online business

• Seasonality in Education and Health Sciences accelerates growth in second half

• On track to deliver 2005 organic revenue growth of at least 5% and double digit growth in adjusted earnings per share at constant currencies

REED ELSEVIER

									Change at
									constant
	2005		2004		2005		2004		currencies
	£m		£m		€m		€m		%
Revenue		2,368		2,263		3,457		3,349		+6	%
Reported profit before taxation		255		256		372		379		+4	%
Adjusted profit before taxation		395		387		577		573		+5	%

Adjusted figures are presented as additional performance measures and are stated before amortisation of acquired intangible assets and acquisition integration costs.

PARENT COMPANIES

	Reed Elsevier PLC							Reed Elsevier NV
															Change at
															currencies
					Change							Change			constant
	2005		2004		%			2005		2004		%			%
Reported earnings per share		5.1p		7.5p		-32	%	€	0.13	€	0.18		-28	%		-26	%
Adjusted earnings per share		12.3p		12.0p		+3	%	€	0.27	€	0.27		0	%		+5	%
Dividend per share		3.7p		3.4p		+9	%	€	0.092	€	0.090		+2	%

Sir Crispin Davis, Chief Executive Officer of Reed Elsevier, commented:

“The first half of 2005 sees Reed Elsevier in good health and firmly on track to deliver on our 2005 goals, with momentum building in our revenue and profit growth. Our businesses are performing well in their respective markets and the sustained investment programme is now making a real difference. Particularly pleasing has been the acceleration in growth in LexisNexis and the continuing recovery and rapid growth in online services in Reed Business. Harcourt Education is well positioned for a strong second half and Elsevier should also see an acceleration in growth with the Health Sciences publishing programme. We continue to target above market revenue growth, with at least 5% organic revenue growth, and double digit earnings per share growth at constant currencies for 2005 and beyond.”

FINANCIAL HIGHLIGHTS 01

FOR THE SIX MONTHS ENDED 30 JUNE 2005

REED ELSEVIER COMBINED BUSINESSES

								£						€			%
Year ended 31 December					Six months ended 30 June						Six months ended 30 June
																	Change at
2004	2004				2005			2004			2005			2004			constant
£m	€m				£m			£m			€m			€m			currencies
				Reported figures
4,812		7,074		Revenue		2,368			2,263			3,457			3,349			+6	%
766		1,126		Operating profit		317			320			463			474			+2	%
631		928		Profit before taxation		255			256			372			379			+4	%
2,532		3,570		Net borrowings		2,913			2,678			4,340			3,990
				Adjusted figures
4,812		7,074		Revenue		2,368			2,263			3,457			3,349			+6	%
1,066		1,567		Operating profit		461			451			673			668			+5	%
934		1,373		Profit before taxation		395			387			577			573			+5	%
1,013		1,490		Operating cash flow		219			213			320			315			+2	%
22%		22	%	Operating margin		19	%		20	%		19	%		20	%
95%		95	%	Operating cash flow conversion		48	%		47	%		48	%		47	%
8.1		8.1		Interest cover (times)		7.0			7.0			7.0			7.0

Adjusted figures are presented as additional performance measures and are stated before the amortisation of acquired intangible assets, acquisition integration costs, gains on disposals and movements on deferred tax balances not expected to crystallise in the near term. Reconciliations between the reported and adjusted figures are provided in the notes to the combined financial information.

PARENT COMPANIES

Reed Elsevier
PLC	NV			Reed Elsevier PLC				Reed Elsevier NV
						£				€		%
Year ended 31 December				Six months ended 30 June				Six months ended 30 June
												Change at
2004	2004			2005		2004		2005		2004		constant
£m	€m			£m		£m		€m		€m		currencies
235		338	Reported profit attributable		65		95		98		142		-26	%
363		505	Adjusted profit attributable		156		152		215		213		+5	%
1.83		1.24	Average exchange rate US$: £/€		1.87		1.82		1.28		1.23
18.6p	€	0.43	Reported earnings per share		5.1p		7.5p	€	0.13	€	0.18		-26	%
28.7p	€	0.64	Adjusted earnings per share		12.3p		12.0p	€	0.27	€	0.27		+5	%
13.0p	€	0.33	Dividend per share		3.7p		3.4p	€	0.092	€	0.090

The Reed Elsevier combined businesses encompass the businesses of Reed Elsevier Group plc and Elsevier Reed Finance BV, together with their two parent companies, Reed Elsevier PLC and Reed Elsevier NV (the “Reed Elsevier combined businesses”). 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.

Following a regulation adopted by the European Parliament, the Reed Elsevier combined businesses and the two parent companies now prepare their financial statements in accordance with International Financial Reporting Standards (IFRS) with effect from the 2005 financial year. Comparative amounts in the Interim Statement for the six months ended 30 June 2004 and the year ended 31 December 2004 have been restated in accordance with Reed Elsevier’s accounting policies under IFRS.

The percentage change at constant currencies refers to the movements at constant exchange rates, using 2004 full year average rates.

REPORT OF THE CHAIRMAN AND THE CHIEF EXECUTIVE OFFICER 02

The first half of 2005 sees Reed Elsevier in good health and firmly on track to deliver on our 2005 goals, with momentum building in our revenue and profit growth.

The Elsevier science and medical business has seen strong subscription renewals and growing online sales, and the book publishing programme is well positioned for the important second half. The LexisNexis legal business is performing increasingly well with good growth in online services both in the US and internationally. Harcourt Education has performed well in school textbook adoptions and is on track to deliver a strong performance in the second half when the majority of school sales take place. Reed Business has seen a continuing improvement in underlying revenue growth with strong growth in the online business and a good performance in exhibitions.

Throughout the period the focus has been on bringing to market innovative new online services, expanding our content and information base, winning new customers globally, and broadening our product range to meet the growing needs of our customers in an increasingly digital world.

Financial Results

Revenue momentum in the business has continued to build through a combination of improving markets, the success of new product initiatives, sales and marketing investment, and good growth in acquired businesses. Total revenues in the six months to 30 June 2005 were up 6% at constant exchange rates. Underlying revenue growth, excluding current and prior year acquisitions and disposals, was 3% and this will accelerate strongly in the second half reflecting the momentum in the business and the seasonal bias in growth. Reed Elsevier remains on track to deliver on 7% overall revenue growth and at least 5% organic revenue growth for 2005, up from the 3% achieved in 2004 and the flat performance in 2003.

Adjusted operating profits were up 5% at constant currencies reflecting a slightly lower underlying operating margin in the first half due to the timing of revenue growth, particularly in education and health sciences, and of continuing investment. Adjusted pre-tax profits were up 5% after net interest expense, and adjusted earnings per share were also up 5% at constant currencies. Given the seasonality and growth momentum in the business, Reed Elsevier remains on track to deliver on our goal for the year of double digit growth in adjusted earnings per share at constant currencies.

The financial results are reported this year under International Financial Reporting Standards (IFRS) for the first time, with the comparative periods restated accordingly. Explanations of the effects of this and the derivation of our new benchmark adjusted figures are set out in the operating and financial review and summary financial information. The adoption of IFRS has little impact on growth rates when compared to the UK GAAP previously applied.

At reported exchange rates, total revenues were £2,368m/€3,457m, up 5% when reported in sterling and up 3% in euros, and adjusted earnings per share were up 3% for Reed Elsevier PLC at 12.3p and flat for Reed Elsevier NV at €0.27.

The equalised interim dividends declared by the respective boards are 3.7p, up 9%, for Reed Elsevier PLC and €0.092, up 2%, for Reed Elsevier NV. The difference in dividend growth rates reflects movements in the sterling-euro exchange rate since last year’s interim dividend declaration. In February, the boards announced a more progressive dividend policy that, subject to the effects of currency movements on dividend equalisation, is expected to align more closely increases in full year dividends with adjusted earnings growth.

Business Performance

Reed Elsevier has a marked seasonal bias in growth in revenues, profits and cash to the second half of the year reflecting in particular the phasing of educational sales and health sciences book publishing, as well as the effect this year of cycling of non annual trade exhibitions. The good performance in the first half provides clear momentum for the much stronger second half growth.

The Elsevier science and medical business has had a satisfactory first half with strong subscription renewals, expanded book publishing and good growth in online sales. Underlying revenues were up 4% at constant currencies. Stronger growth is expected in the second half in particular from new book publishing and growing backlist sales in Health Sciences with its seasonal second half bias. The organic revenue growth target for Elsevier for the year is 5% at constant currencies.

The LexisNexis business has seen good growth in the first half with the payback coming through from the sustained investment in new publishing, online product and sales and marketing initiatives worldwide, and the expansion in total practice workflow solutions and risk management. Revenues were up 13% at constant currencies including the contribution of recent acquisitions, with the Seisint risk management business acquired last year performing well. Excluding these acquisitions, organic revenue growth was 6%, reflecting strong performances both in the US and internationally. The revenue growth target for LexisNexis for the year is to achieve organic growth of at least 5%.

The Harcourt Education business has had a good start to the year with strong wins in US state textbook adoption opportunities, which will come through as sales in the second half, and good growth in open territories and testing. Revenue growth at constant currencies of 4%, or flat excluding current and prior year acquisitions, is unrepresentative of the year as a whole since the vast majority of sales and profits are generated in the second half. Harcourt’s organic revenue growth target for the year remains 9-10%, on the assumption that the legislative delays in funding Texas adoptions will be resolved.

Reed Business has seen a continuing improvement in its underlying revenue growth, driven by strong online sales and exhibitions. Overall markets continue to recover, although this varies by geography and sector. The publishing and information businesses saw strong growth in online revenues partially offset by

REPORT OF THE CHAIRMAN AND THE CHIEF EXECUTIVE OFFICER 03

advertising weakness in continental Europe and in US manufacturing. A good performance in the exhibitions business was held back in the first half by the cycling out of a number of non annual shows, although there is some reverse effect in the second half. Revenue growth was 3% at constant currencies and Reed Business is targeting organic growth of 4-5% for the year. The operating and financial review describes the performances of our businesses in greater detail.

Business Progress

The first six months has seen a continued focus on executing well on our investment and market initiatives.

In Elsevier, the focus within Science & Technology has been on further adding value to our core academic customers through increased output, with articles published up 4%, new online services and features to improve customer productivity, and better customer service and relationships. The Scopus database service, developed in close cooperation with the scientific community, is being well received in the market with over 500 trial customers. We are expanding distribution of our electronic products globally in areas such as China as well as securing major new contracts and renewals, such as the recently announced contract to provide all our scientific content online to every university in the Netherlands. We are also developing more flexible customised offerings to expand further into corporate research markets and smaller and mid-sized institutions.

Within Health Sciences, we continue to expand our content and new publishing as well as introducing new online services, such as iConsult for the practitioner market and new modules for the Evolve online platform for the US medical education market. Outside the US, we continue to grow well with new and better offerings and through greater focus on sales and marketing execution. We expect to complete shortly the recently announced acquisition of MediMedia MAP which will give us leading positions in the French, Spanish and Italian medical publishing markets and we expect strong growth from market demand and through innovation.

Within LexisNexis, the focus has been on building online workflow tools and total practice solutions, expanding online services internationally, and integrating Seisint and our risk management business. The success of our strategy is seen in the acceleration of growth in LexisNexis. There is growing demand for online productivity tools from law firms and businesses: Totalsearch provides customers with a single interface to combine searches of their data with our materials and information from the web; Applied Discovery greatly improves the speed and efficiency of the legal discovery process; and client development tools help law firms identify business development opportunities and market more effectively to existing and potential clients. Internationally, the roll out of the global legal platform has brought compelling functionalities to market. The integration of Seisint is progressing well with product integration on the Seisint platform and the combining of product development and sales and marketing activities within a single management structure.

In Harcourt Education, the focus has been on the new publishing for the strong textbook adoption calendar over the next few years and to build the supplemental front list, exploiting new editorial processes to customise programmes more effectively to specific state requirements. Good progress has also been made in the development of the Stanford Learning First interim assessment product in which there is significant market interest. In the first half, Harcourt expanded its diagnostic assessment portfolio with the integration of Ordinate which provides language proficiency assessment through automated speech pattern analysis.

Within Reed Business, the focus has been on expanding our online services to the business communities we serve, through webzines, recruitment sites, search and subscription information and data services. In UK publishing, online revenues now account for over one third of revenues with continued development of sector specific recruitment sites and expansion of the Kellysearch service for sourcing industrial components and in providing more specialised search offerings. Additionally, Reed Business has continued to invest in new titles and exhibitions and in upgrading formats, and to accelerate its growth in China and other developing markets through launch and alliance.

Board changes

At the Annual General Meetings in April, Jan Hommen was appointed to the boards and succeeded Morris Tabaksblat as Chairman. We want to take this opportunity to thank Morris for his enlightened leadership and wise counsel over his six years as Chairman. Reed Elsevier has much to thank him for. At the same time, John Brock retired as a non executive director and Strauss Zelnick was appointed. We thank John for the valuable contribution he made to the boards in a period of significant business change, and welcome Strauss to the boards.

Outlook

The first half has been encouraging. Our businesses are performing well in their respective markets and the sustained investment programme is making a real difference. Particularly pleasing has been the acceleration in growth in LexisNexis and the continuing recovery and rapid growth in online services in Reed Business. Harcourt Education is well positioned for a strong second half and Elsevier should also see an acceleration in growth with the Health Sciences publishing programme.

The transition of the business from print publishing to online services is continuing but by no means complete. Reed Elsevier is however now firmly established in the digital world and the burgeoning demand for high quality, web-delivered, focused information and solutions is very promising for our future.

We continue to target above market revenue growth, with 7% revenue growth and at least 5% organic revenue growth, and double digit adjusted earnings per share growth at constant currencies for 2005 and beyond.

Jan Hommen	Sir Crispin Davis
Chairman	Chief Executive Officer

OPERATING AND FINANCIAL REVIEW 04

OPERATING REVIEW

									£							€			%
Year ended 31 December					Six months ended 30 June							Six months ended 30 June
																			Change at
2004	2004					2005			2004				2005			2004			constant
£m	€m					£m			£m				€m			€m			currencies
				Revenue
1,363		2,004		Elsevier			644			631				940			934			+5	%
1,292		1,899		LexisNexis			683			614				997			909			+13	%
868		1,276		Harcourt Education			366			359				534			531			+4	%
1,289		1,895		Reed Business			675			659				986			975			+3	%
4,812		7,074		Total			2,368			2,263				3,457			3,349			+6	%
				Adjusted operating profit
445		654		Elsevier			189			198				277			293			0	%
287		422		LexisNexis			151			122				220			181			+25	%
157		231		Harcourt Education			15			23				22			34			-33	%
194		285		Reed Business			118			118				172			175			+1	%
(17)		(25	)	Unallocated items			(12	)		(10	)			(18	)		(15	)
1,066		1,567		Total			461			451				673			668			+5	%

Adjusted operating profit figures are stated before amortisation of acquired intangible assets and acquisition integration costs. The comparative 2004 figures have been restated to conform to the IFRS accounting basis now adopted.

In reviewing performance, Reed Elsevier refers to adjusted figures. In the past these figures have been stated before the amortisation of goodwill and intangible assets, exceptional items and related tax effects. Within the new IFRS environment, the definition of adjusted figures has been amended. The commentary in this Operating Review refers to the adjusted figures as now defined.

The principal difference between our benchmark measure of adjusted operating profit as previously defined and now is the inclusion of non cash charges for incremental pensions costs under IFRS and share option expense. Additionally, restructuring costs, other than in respect of acquisition integration, are also now included within our adjusted figures.

Adjusted figures are thus now stated before amortisation of acquired intangible assets and acquisition integration costs, and, in respect of earnings, reflect a tax rate that excludes the effects of movements in deferred taxation assets and liabilities that are not expected to crystallise in the near term. Profit and loss on disposals are non operating items and, as before, excluded from the adjusted figures.

Reported operating results, including amortisation of acquired intangible assets and acquisition integration costs, are analysed in note 2 to the combined financial information and discussed further below in the Financial Review, and are reconciled to the adjusted figures in note 4 to the combined financial information.

Unless otherwise indicated, all percentage movements in the following commentary refer to performance at constant exchange rates, using 2004 full year average rates, and are stated before the amortisation of acquired intangible assets and acquisition integration costs.

ELSEVIER

				£						€			%
	Six months ended 30 June						Six months ended 30 June
													Change
	2005			2004			2005			2004			at constant
	£m			£m			€m			€m			currencies
Revenue
Science & Technology		381			391			556			579			+4	%
Health Sciences		263			240			384			355			+8	%
		644			631			940			934			+5	%
Adjusted operating profit		189			198			277			293			0	%
Adjusted operating margin		29.3	%		31.4	%		29.3	%		31.4	%	-1.7pts

OPERATING AND FINANCIAL REVIEW 05

The Elsevier science and medical business has had a satisfactory first half with strong subscription renewals, expanded book publishing and good growth in online sales. Underlying revenues were up 4% at constant currencies. Stronger growth is expected in the second half in particular from new book publishing and growing backlist sales in Health Sciences with its seasonal second half bias.

Revenues were 4% higher and adjusted operating profits flat at constant exchange rates in the first half, excluding minor acquisitions and disposals. Revenue growth will accelerate in the second half reflecting the seasonal bias of the Health Sciences book publishing programme. The adjusted operating margins were lower than in the prior first half reflecting revenue and cost phasing, higher restructuring costs and the higher operating costs from new product and sales initiatives. For the year as a whole, underlying operating margins should be similar or slightly ahead of the prior year, with the stronger revenue growth and investment balanced by tight cost management.

The Science & Technology division saw underlying revenue growth of 4% at constant exchange rates. Subscription renewals are strong, and on track to reach the 96% level targeted, and good growth was seen through widening distribution and in online secondary databases. There has also been continued good take up of e-only contracts which now account for 40% of journal subscriptions by value. ScienceDirect is performing well with the number of research articles now exceeding 7 million and usage up over 25% year on year. The Scopus database service has been well received in the market with over 500 customer trials now in place.

The Health Sciences division saw underlying growth of 5%, with good growth in US book sales, particularly to the expanding nursing and allied healthcare sectors, and in pharmaceutical industry marketing revenues. Growth in online sales is being driven by the investment in the Consult series of information tools for the practitioner market, electronic journals and in the expanding scope of the Evolve medical e-education platform. The recently announced acquisition of MC Strategies will further strengthen our offering in the growing online continuing education and training segment. Outside the US, the businesses are continuing to expand their local book and journal publishing programmes. An acceleration of growth is expected in the second half from the new book publishing programme and continuing strong backlist sales.

In May we announced the acquisition for €270m (£185m) of MediMedia MAP. Through highly respected imprints, including Masson and Doyma, MediMedia MAP provides medical books, journals and reference information to medical practitioners principally in France, Spain, and Italy. It also publishes the US based Netter collection of medical illustrations which is sold worldwide. The business is a leader in its markets and fits well within the Health Sciences division. Strong growth is expected from expanded publishing and marketing programmes, and investment in online services. The acquisition is expected to complete shortly.

The second half should see an acceleration in revenue growth with strong new publishing and growing online sales. Operational gearing in the business and tight cost management is expected to deliver similar or slightly improved margins for the year as a whole. Organic revenue growth of 5% is targeted for 2005 and beyond.

LEXISNEXIS

				£						€			%
	Six months ended 30 June						Six months ended 30 June
													Change
	2005			2004			2005			2004			at constant
	£m			£m			€m			€m			currencies
Revenue
LexisNexis North America		511			455			746			674			+15	%
International		172			159			251			235			+6	%
		683			614			997			909			+13	%
Adjusted operating profit		151			122			220			181			+25	%
Adjusted operating margin		22.1	%		19.9	%		22.1	%		19.9	%	+2.2pts

The LexisNexis business has seen good growth in the first half with the payback coming through from the sustained investment in new publishing, online product and sales and marketing initiatives worldwide, and the expansion in total practice workflow solutions and risk management. Revenues were up 13% at constant currencies including the contribution of recent acquisitions, with the Seisint risk management business acquired last year performing well. Organic revenue growth was 6% with strong performances both in the US and internationally.

Revenues and adjusted operating profits were up 13% and 25% respectively at constant exchange rates, or 6% and 11% before current and prior year acquisitions and disposals. LexisNexis North America saw revenues up 15% at constant exchange rates including the contribution of Seisint acquired in the second half of last year and other recent acquisitions, or 5% excluding these. This compares with 3% organic revenue growth for the 2004 financial year. Outside the US, the International businesses grew revenues, before minor acquisitions and disposals, by 6%. The adjusted profit growth reflects the operational gearing in the business, tight cost control and some benefit of cost

OPERATING AND FINANCIAL REVIEW 06

phasing, including restructuring. The improvement in adjusted operating margin in the first half also reflects the favourable mix effect from recent acquisitions and disposals.

In North American Legal, revenues grew by 8% at constant exchange rates, or 4% before acquisitions, driven by good sales growth in the large law firm market with expanded differentiated content and the continuing success of electronic discovery and other total practice workflow solutions. The Martindale Hubbell legal directories business continues to perform well with growing demand for the expanding series of client development tools for law firms. In US Corporate and Federal, revenues grew 29% at constant exchange rates, or 8% before acquisitions, up from 4% organic growth in the prior year. This has been driven by a strong performance in risk management, continuing improvement in the corporate, federal and academic information business following new product and marketing initiatives, and higher volumes for the US patent and trademark office. The Seisint risk management business, acquired in September 2004, is performing well and on track to deliver the planned 20% sales growth for the year. Adjusted operating profits for LexisNexis North America were up 27% at constant exchange rates, or 13% before acquisitions.

The LexisNexis International business outside North America saw underlying revenue growth of 6%, with strong growth in Europe, southern Africa and Latin America. New publishing in legal, tax and accounting, good growth in online news and business information, and the continued success from the roll out of the global legal platform all contributed well. The utility of the new platform is attracting new subscribers and good growth from existing customers, with online revenues now accounting for over a quarter of International revenues. Underlying adjusted operating profits were up 7% despite continuing investment due to the operational gearing of the good revenue growth and tight cost control.

The second half should see continuing revenue momentum from LexisNexis with good progress from product and marketing initiatives and a strong contribution from recent acquisitions. Organic revenue growth of at least 5% is targeted for 2005 and beyond.

HARCOURT EDUCATION

				£						€			%
	Six months ended 30 June						Six months ended 30 June
													Change
	2005			2004			2005			2004			at constant
	£m			£m			€m			€m			currencies
Revenue
Harcourt Education
US Schools & Testing		329			323			480			478			+4	%
International		37			36			54			53			+3	%
		366			359			534			531			+4	%
Adjusted operating profit		15			23			22			34			-33	%
Adjusted operating margin		4.1	%		6.4	%		4.1	%		6.4	%	-2.3pts

The Harcourt Education business has had a good start to the year with strong wins in US state textbook adoptions opportunities, which will come through as sales in the second half, and good growth in open territories and testing. Revenue growth at constant currencies of 4%, or flat excluding current and prior year acquisitions, is unrepresentative of the year as a whole since the vast majority of sales and profits are generated in the second half.

Revenues increased by 4% at constant exchange rates, or were flat against the prior first half excluding Saxon and other recent acquisitions. The majority of education sales take place in the June to September months ahead of the new academic year and the flat underlying first half performance reflects earlier call off of product last year, particularly in Florida. The market growth this year is expected to be particularly strong given the significant increase in state textbook adoptions, and good growth in revenues is expected in the second half. Adjusted operating profits were 33% lower than in the prior first half at constant exchange rates reflecting the traditionally very low margin in the first half and the higher sales and marketing costs ahead of this year’s larger adoption opportunities.

The Harcourt US K-12 business has performed well in the 2005 state adoptions, gaining the leading overall market share across the core academic curriculum for the fifth consecutive year which will come through in second half sales. Underlying first half revenues were 2% lower than in the prior first half due to the later product call off by individual states and school districts. Legislative delays in Texas in approving schools funding for the upcoming academic year has also pushed back product delivery. There are significant efforts within the Texas state leadership to resolve the funding delays and it is presumed that these efforts will be successful.

With nearly all state district adoptions now awarded, Harcourt has a clear no. 1 position in the elementary market with particular successes in reading, Florida social studies, English as a second language in Texas, and health in Texas and South Carolina. In the secondary market, Harcourt is positioned no. 2 in

OPERATING AND FINANCIAL REVIEW 07

new state adoptions with good success in literature and language arts and strong positions in world languages, science and health. The secondary schools business has also seen strong growth in open territories with good wins in federally funded Reading First programmes. The supplemental business is seeing good growth from the new publishing introduced over the last two years to align programmes with the requirements of the No Child Left Behind Act, although overall growth is expected to be modest this year with the run off of backlist sales of prior product. The Saxon supplemental math publisher acquired last year is performing on plan with investment in new programmes for the surge in math adoptions over the next few years. Adjusted operating profits for the US K-12 business were 34% lower at constant exchange rates reflecting the lower revenues in the first half and the sales and marketing costs ahead of the strong sales growth to be reflected in the second half.

The Harcourt Assessment business saw revenues up 6% at constant exchange rates, or 5% before acquisitions, with good growth from US state testing contracts. The clinical testing business saw revenues level off in the US after two very strong years following major product releases, whilst local editions of these programmes drove good growth in international markets. Harcourt Assessment’s performance in new state contract bids has been mixed with a win in Michigan offset by losses in Connecticut and Oklahoma. The contract bid pipeline is however strong and Harcourt will be seeking to exploit its major product strengths whilst ensuring adequate financial returns. The Stanford Learning First interim assessment product is developing well with continuing investment in curriculum subject coverage, aligned to specific state standards, and in the online platform. The modules released to date have been well received in the market. Adjusted operating profits were 4% lower at constant exchange rates reflecting investment in the newly acquired Ordinate business, or 6% ahead excluding acquisitions.

The Harcourt Education International business, principally the UK, Australia and southern Africa, saw underlying revenues 2% ahead in the less significant first half. The UK schools business was flat whilst good growth was seen in South Africa. Operating margins in the first half were slightly negative compared with slightly positive in the prior first half, and are unrepresentative of the year with movements exaggerated by the strong seasonal weighting of revenues and operating profits to the second half.

The Harcourt Education business is well positioned for a strong performance this year, with good market growth as the adoption cycle turns up and the success of new publishing. Organic revenue growth of 9-10% is targeted for 2005, on the assumption that the legislative delays in funding Texas adoptions will be resolved, and operating margins should improve year on year with the operational gearing in the business. Organic revenue growth of 6-7% is targeted over the three years 2005-2007 taking into account the adoption cycle.

REED BUSINESS

				£						€			%
	Six months ended 30 June						Six months ended 30 June
													Change
	2005			2004			2005			2004			at constant
	£m			£m			€m			€m			currencies
Revenue
Reed Business Information
US		159			163			232			241			0	%
UK		124			116			181			172			+8	%
Continental Europe		132			133			193			197			-2	%
Asia Pacific		18			15			26			22			+13	%
Reed Exhibitions		242			232			354			343			+4	%
		675			659			986			975			+3	%
Adjusted operating profit		118			118			172			175			+1	%
Adjusted operating margin		17.5	%		17.9	%		17.5	%		17.9	%	-0.4pts

OPERATING AND FINANCIAL REVIEW 08

Reed Business has seen a continuing improvement in its underlying revenue growth, driven by strong online sales and exhibitions. Overall markets continue to recover, although this varies by geography and sector. The publishing and information businesses saw strong growth in online revenues partially offset by advertising weakness in continental Europe and in US manufacturing. A good performance in the exhibitions business was held back in the first half by the cycling out of a number of non annual shows, although there is some reverse effect in the second half. Revenue growth was 3% at constant currencies.

Revenues and adjusted operating profits increased by 3% and 1% respectively at constant exchange rates, despite the cycling out of non annual shows in the first half. The magazine and information publishing business saw underlying revenue growth of 2% with strong growth in online sales, which now account for 18% of total revenues, moderated by advertising weakness in continental Europe and in US manufacturing titles. The exhibitions business grew revenues 4%. Underlying operating margins would have been ahead despite increased investment but for the cycling out of contribution from joint venture exhibitions.

In the US, Reed Business Information saw flat revenues with good growth in media and electronics titles offset by a continuing decline in the US manufacturing titles. Online advertising and search is growing rapidly although the manufacturing sector in particular is seeing print revenues decline as new product news migrates to the web. Investment in new online services and marketing, as well as in geographic extension through launch of highly regarded titles in China and Japan, is expected to accelerate growth. Adjusted operating profits were 6% lower due to additional restructuring costs, or up 2% before this, as continued cost actions funded increased investment.

In the UK, Reed Business Information underlying revenues and adjusted operating profits were up 10% and 28% respectively, driven by strongly growing online revenues in recruitment and search. Particularly good growth was seen in the aerospace, science, property and construction sectors. Print display markets remain subdued as growth in marketing budgets moves online. The strong profit growth follows the revenue growth and tight cost control, and will in part fund additional online investment in the second half.

In Continental Europe, Reed Business Information saw underlying revenues and operating profits 4% and 5% lower respectively, reflecting the continued economic weakness in The Netherlands, France and Germany. The developing online services, as well as the focus on market share performance and yield management, has mitigated but not offset declines in advertising volumes and tuition. In Asia Pacific, underlying revenue growth was 9% with strong performances in Japan and Singapore.

At Reed Exhibitions, revenues were 4% ahead, or 9% before the effect of the net cycling out of non annual shows in the first half and some rephasing of shows from the second half. Good growth was seen in the US, Japan and in the international Midem portfolio of shows. Adjusted operating profits were 4% ahead held back by the adverse cycling, including a number of joint ventures which contribute to operating profits but not to revenues. For the year as a whole, the first half impact of cycling on revenues partly reverses as there are a number of biennial shows, such as Batimat in France, which take place in the second half.

The second half is expected to see a steady pick up in growth in the magazine and information publishing businesses whilst the exhibitions business will see some reversal of the show cycling that held back the first half. Organic revenue growth of 4-5% is targeted for 2005, with at least 5% revenue growth targeted in later years, given a reasonable market environment. Operating margins will benefit from the stronger revenue growth and continued tight cost control.

FINANCIAL REVIEW

REED ELSEVIER COMBINED BUSINESSES

PROFIT AND LOSS

Revenues increased by 5% expressed in sterling to £2,368m, and by 3% expressed in euros to €3,457m. At constant exchange rates, revenues were 6% higher, or 3% excluding acquisitions and disposals.

Adjusted figures

Adjusted operating profits, i.e. before the amortisation of acquired intangible assets and acquisition integration costs, were up 2% expressed in sterling at £461m, and up 1% expressed in euros at €673m. At constant exchange rates, adjusted operating profits were up 5%, or 1% excluding acquisitions and disposals. The adjusted operating margin at 19.5 was 0.4 percentage points lower compared to the prior first half, reflecting the timing of revenues and costs within Harcourt Education in particular and within Elsevier. These will reverse in the second half.

Net finance costs, at £66m/€96m, were £2m/€1m higher than in the corresponding first half and included a £3m/€4m net credit arising on the mark-to-market of non-qualifying hedges and undesignated instruments under IAS39 which applies from 1 January 2005. The financing cost of

OPERATING AND FINANCIAL REVIEW 09

acquisitions and higher short term interest rates were balanced by the benefits of free cashflow and favourable exchange translation effects.

Adjusted profits before tax, i.e. before amortisation of acquired intangible assets, acquisition integration costs and gains on disposals, were £395m/€577m, up 2% compared to the prior first half expressed in sterling and 1% expressed in euros. At constant exchanges, adjusted profits before tax were up 5%.

The effective tax rate on adjusted earnings was unchanged at 25.3%. The effective tax rate on adjusted earnings excludes the effect of movements in deferred taxation assets and liabilities that are not expected to crystallise in the near term, and more closely aligns with cash tax costs. Adjusted operating profits and taxation are also grossed up for the equity share of taxes in joint ventures.

The adjusted profit attributable to shareholders of £294m/€429m was up 2% compared to the prior first half expressed in sterling and up 1% expressed in euros. At constant exchange rates, adjusted profit attributable to shareholders was up 5%.

Reported figures

The amortisation charge in respect of acquired intangible assets amounted to £131m/€191m, up £15m/€19m on the comparative period, principally as a result of last year’s Saxon and Seisint acquisitions.

Acquisition integration costs amounted to £8m/€12m (2004: £10m/€15m). Non operating items comprised a £4m/€5m net gain (2004: nil) on disposal of businesses, investments and other fixed assets.

The reported profit before tax for the Reed Elsevier combined businesses, including amortisation of acquired intangible assets, acquisition integration costs and gains on disposals, was £255m/€372m, which compares with £256m/€379m, restated under IFRS, in the 2004 first half. The small movement reflects an improved underlying operating performance offset by higher amortisation from acquired intangible assets and currency translation effects from a weaker US dollar.

The reported tax charge of £120m/€175m, compares with a charge of £64m/€95m in the prior first half. The increase reflects movements in deferred tax balances in relation to unrealised exchange differences on long term inter-affiliate lending that is eliminated within the combined financial information.

The reported attributable profit of £134m/€196m compares with a reported attributable profit of £191m/€283m in the first half of 2004, reflecting most particularly the swing in non cash deferred tax balances referred to above.

Cash flows and debt
Adjusted operating cash flow, i.e. before acquisition integration costs, was £219m/€320m, £6m/€5m higher than in the prior first half. The substantial majority of Reed Elsevier annual operating cash flows arises in the second half of the year due to the timing of subscription and other advance receipts and working capital movements. The Harcourt Education businesses have a significant cash outflow in the first half of each year as product is produced and expenses incurred ahead of the peak sales period in June through September, and after which there is substantial cash inflow in the second half. The rate of conversion of adjusted operating profits into cash flow in the first half of 48% (2004: 47%) reflects this. In the twelve months to 30 June 2005, the adjusted operating cash flow conversion rate was 95% (2004 full year: 95%].

Capital expenditure included within adjusted operating cash flow was £80m/ €117m (2004: £91m/€135m) including £42m/€61m in respect of capitalised development costs included within intangible assets. Spend on acquisitions was £62m/€91m. An amount of £37m/€54m was capitalised as acquired intangible assets and £32m/€47m as goodwill. Acquisition integration spend in respect of these and other recent acquisitions amounted to £12m/€18m. Disposal proceeds amounted to £14m/€20m.

Free cash flow – after interest and taxation but before acquisitions and disposals and dividends – was £64m/€94m (2004: £44m/€65m), reflecting the seasonal working capital requirements of the business. Dividends paid in the first half, relating to the 2004 final dividend, amounted to £244m/€356m (2004: £220m/€326m). Due to the phasing of operating cash flows and dividend payments, the free cash flow for the year arises in the second half.

Net borrowings at 30 June 2005 were £2,913m/€4,340m, an increase of £381m/€770m since 31 December 2004, reflecting dividends and acquisition spend less free cash flow in the first half, and adverse foreign exchange translation effects due to the significant strengthening of the US dollar between the beginning and end of the period.

These currency translation effects increased net debt expressed in sterling by £141m and in euros by €421m. Net debt is stated including a fair value adjustment to increase gross debt by £217m/€323m under IFRS which is largely offset by the corresponding fair value of derivatives used to hedge the related debt instruments.

PARENT COMPANIES
For the parent companies, Reed Elsevier PLC and Reed Elsevier NV, adjusted earnings per share, i.e. before the amortisation of acquired intangible assets, acquisition integration costs, gains on disposals and movements in deferred tax balances not expected to crystallise in the near future, were respectively up 3% at 12.3p (2004: 12.0p) and flat at €0.27 (2004: €0.27). The difference in percentage change is entirely attributable to the impact of currency movements on the translation of reported results and the effects of rounding. At constant rates of exchange, the adjusted earnings per share of both companies would have shown an increase of 5% over the prior first half.

The reported earnings per share for Reed Elsevier PLC shareholders was 5.1p (2004: 7.5p) and for Reed Elsevier NV shareholders was €0.13 (2004: €0.18).

The equalised interim dividends are 3.7p per share for Reed Elsevier PLC, an increase of 9% compared to the prior first half, and €0.092 per share for Reed Elsevier NV, up 2% on the prior first half. The difference in dividend growth rates reflects the impact of the strengthening of the euro against sterling since last year’s interim dividend declaration.

OPERATING AND FINANCIAL REVIEW 10

ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS

Reed Elsevier now prepares financial statements under International Financial Reporting Standards (IFRS), with effect from the 2005 financial year. The 2004 financial statements have been restated under IFRS, adopting a 1 January 2004 transition date, other than in respect of IAS39 – Financial Instruments for which the transition date is 1 January 2005. The Annual Reports and Financial Statements 2004 set out the accounting policies adopted under IFRS, the principal differences to the UK GAAP previously applied, and the restatement of the 2004 financial statements.

The required changes in Reed Elsevier accounting policies in adopting IFRS are in six major areas:

• Goodwill and intangible assets – goodwill is no longer amortised and intangible assets are generally amortised over shorter periods

• Employee benefits – pension costs and defined benefit scheme assets and liabilities are measured based on market values; the amount of any surplus or deficit is recognised in full in the balance sheet

• Share based remuneration – the fair value of share options, determined at date of grant, is expensed over the vesting period

• Financial instruments – with effect from 1 January 2005, all derivative financial instruments are measured at fair value; hedge accounting is only permissible where effectiveness criteria are met

• Deferred taxation – full provision is made for nearly all differences between the balance sheet amounts of assets and liabilities and their corresponding tax bases

• Dividends – accrual is made for dividends only when they have been formally declared by the directors

A reconciliation of the results reported for the six months ended 30 June 2005 under IFRS with those that would have been reported under the UK GAAP previously applicable is given in note 5 to the combined financial information.

FORWARD LOOKING STATEMENTS

The Interim Statement contains forward looking statements within the meaning of Section 27A of the US Securities Act 1933, as amended, and Section 21E of the US Securities Exchange Act 1934, as amended. These statements are subject to a number of risks and uncertainties and actual results and events could differ materially from those currently being anticipated as reflected in such forward looking statements. The terms ‘expect’, ‘should be’, ‘will be’ and similar expressions identify forward looking statements. Factors which may cause future outcomes to differ from those foreseen in forward looking statements include, but are not limited to: general economic conditions in Reed Elsevier’s markets; exchange rate fluctuations; customers’ acceptance of our products and services; the actions of competitors; legislative, fiscal and regulatory developments; changes in law and legal interpretations affecting Reed Elsevier’s intellectual property rights and internet communications; and the impact of technological change.

COMBINED INCOME STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2005 11

							£						€
Year ended 31 December							Six months ended 30 June						Six months ended 30 June
2004			2004				2005			2004			2005			2004
£m			€m				£m			£m			€m			€m
	4,812			7,074		Revenue		2,368			2,263			3,457			3,349
	(1,733	)		(2,548	)	Cost of sales		(876	)		(821	)		(1,279	)		(1,215	)
	3,079			4,526		Gross profit		1,492			1,442			2,178			2,134
	(2,330	)		(3,426	)	Operating expenses		(1,183	)		(1,135	)		(1,727	)		(1,679	)
	749			1,100		Operating profit before joint ventures		309			307			451			455
	17			26		Share of result of joint ventures		8			13			12			19
	766			1,126		Operating profit		317			320			463			474
	(132	)		(194	)	Finance costs		(66	)		(64	)		(96	)		(95	)
	(3	)		(4	)	Profit/(loss) on disposals		4			–			5			–
	631			928		Profit before tax		255			256			372			379
	(170	)		(250	)	Tax		(120	)		(64	)		(175	)		(95	)
	461			678		Net profit for the period		135			192			197			284
						Attributable to:
	459			675		Parent companies’ shareholders		134			191			196			283
	2			3		Minority interests		1			1			1			1
	461			678		Net profit for the period		135			192			197			284

Adjusted profit figures are presented in note 4 as additional performance measures.

COMBINED CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2005 12

							£						€
Year ended 31 December							Six months ended 30 June						Six months ended 30 June
2004			2004				2005			2004			2005			2004
£m			€m				£m			£m			€m			€m
						Cash flows from operating activities
	1,154			1,696		Cash generated from operations		277			284			404			420
	(146	)		(215	)	Interest paid		(68	)		(70	)		(99	)		(103	)
	16			24		Interest received		8			11			12			16
	(209	)		(307	)	Tax paid		(93	)		(107	)		(136	)		(158	)
	815			1,198		Net cash from operating activities		124			118			181			175
						Cash flows from investing activities
	(647	)		(951	)	Acquisitions		(62	)		(151	)		(91	)		(223	)
	2			3		Proceeds from sale of businesses		7			–			10			–
	(82	)		(120	)	Purchases of property, plant and equipment		(38	)		(33	)		(56	)		(49	)
	4			7		Proceeds from disposal of property, plant and equipment		2			2			3			3
	(110	)		(162	)	Expenditure on internally developed intangible assets		(42	)		(58	)		(61	)		(86	)
	(13	)		(19	)	Purchases of available-for-sale investments		(2	)		(5	)		(3	)		(7	)
	10			15		Proceeds from disposal of available-for-sale investments		7			–			10			–
	17			25		Dividends received from joint ventures		8			8			12			12
	(819	)		(1,202	)	Net cash used in investing activities		(120	)		(237	)		(176	)		(350	)
						Cash flows from financing activities
	(309	)		(454	)	Dividends paid to shareholders of the parent companies		(244	)		(220	)		(356	)		(326	)
	(82	)		(120	)	Increase/(decrease) in borrowings		201			(24	)		294			(35	)
	21			31		Proceeds on issue of ordinary shares		16			11			23			16
	(29	)		(43	)	Purchase of treasury shares		(3	)		(23	)		(4	)		(34	)
	(399	)		(586	)	Net cash used in financing activities		(30	)		(256	)		(43	)		(379	)
	(403	)		(590	)	Decrease in cash and cash equivalents		(26	)		(375	)		(38	)		(554	)
						Movement in cash and cash equivalents
	638			906		At start of period		225			638			317			906
	(403	)		(590	)	Decrease in cash and cash equivalents		(26	)		(375	)		(38	)		(554	)
	(10	)		1		Effect of foreign exchange rate changes		1			(10	)		19			25
	225			317		At end of period		200			253			298			377

Adjusted operating cash flow figures are presented in note 4 as additional performance measures.

COMBINED STATEMENT OF RECOGNISED INCOME AND EXPENSE
FOR THE SIX MONTHS ENDED 30 JUNE 2005 13

							£						€
Year ended 31 December							Six months ended 30 June						Six months ended 30 June
2004			2004				2005			2004			2005			2004
£m			€m				£m			£m			€m			€m
	461			678		Net profit for the period		135			192			197			284
	(121	)		(196	)	Exchange differences on translation of foreign operations		107			(13	)		288			94
	(74	)		(109	)	Actuarial losses on defined benefit pension schemes		(143	)		(32	)		(209	)		(46	)
	–			–		Losses on cash flow hedges		(4	)		–			(6	)		–
	12			18		Tax on items recognised directly in equity		34			6			50			9
	(183	)		(287	)	Net (expense)/income recognised directly in equity		(6	)		(39	)		123			57
	–			–		Transfer to net profit from cash flow hedge reserve		(12	)		–			(18	)		–
	–			–		Transition adjustment on adoption of IAS39		26			–			37			–
	278			391		Total recognised net income for the period		143			153			339			341
						Attributable to:
	276			388		Parent companies’ shareholders		142			153			338			341
	2			3		Minority interests		1			–			1			–
	278			391				143			153			339			341

COMBINED SHAREHOLDERS’ EQUITY RECONCILIATION
FOR THE SIX MONTHS ENDED 30 JUNE 2005

							£						€
Year ended 31 December							Six months ended 30 June						Six months ended 30 June
2004			2004				2005			2004			2005			2004
£m			€m				£m			£m			€m			€m
	276			388		Total recognised net income attributable to the parent companies’ shareholders		142			153			338			341
	(309	)		(454	)	Dividends declared		(244	)		(220	)		(356	)		(326	)
	21			31		Issue of ordinary shares, net of expenses		16			11			23			16
	(29	)		(43	)	Increase in shares held in treasury		(3	)		(23	)		(4	)		(34	)
	59			87		Increase in share based remuneration reserve		26			24			38			36
	18			9		Net (decrease)/increase in combined shareholders’ equity		(63	)		(55	)		39			33
	1,646			2,337		Combined shareholders’ equity at the beginning of the period		1,664			1,646			2,346			2,337
	1,664			2,346		Combined shareholders’ equity at the end of the period		1,601			1,591			2,385			2,370

COMBINED BALANCE SHEET
AS AT 30 JUNE 2005 14

							£						€
As at 31 December							As at 30 June						As at 30 June
2004			2004				2005			2004			2005			2004
£m			€m				£m			£m			€m			€m
						Assets
						Non-current assets
	2,611			3,682		Goodwill		2,778			2,436			4,139			3,630
	2,835			3,997		Intangible assets		2,884			2,865			4,297			4,269
	60			86		Investments in joint ventures		60			60			89			89
	50			71		Available-for-sale investments		48			45			72			67
	292			411		Property, plant and equipment		303			290			452			432
	235			331		Deferred tax assets		274			209			408			311
	6,083			8,578				6,347			5,905			9,457			8,798
						Current assets
	541			763		Inventories and pre-publication costs		610			563			909			839
	1,103			1,555		Trade and other receivables		1,276			989			1,901			1,474
	225			317		Cash and cash equivalents		200			253			298			377
	1,869			2,635				2,086			1,805			3,108			2,690
	7,952			11,213		Total assets		8,433			7,710			12,565			11,488
						Liabilities
						Current liabilities
	1,791			2,525		Trade and other payables		1,554			1,479			2,316			2,205
	1,051			1,482		Borrowings		780			1,127			1,162			1,679
	299			422		Taxation		303			292			451			435
	3,141			4,429				2,637			2,898			3,929			4,319
						Non-current liabilities
	1,706			2,405		Borrowings		2,545			1,804			3,792			2,688
	198			279		Taxation		192			219			286			326
	857			1,208		Deferred tax liabilities		928			855			1,382			1,273
	321			453		Retirement benefit obligations		467			268			696			399
	52			73		Provisions		50			64			75			96
	3,134			4,418				4,182			3,210			6,231			4,782
	6,275			8,847		Total liabilities		6,819			6,108			10,160			9,101
	1,677			2,366		Net assets		1,614			1,602			2,405			2,387
						Equity
						Capital and reserves
	191			269		Combined share capitals		189			189			282			282
	1,805			2,545		Combined share premiums		1,776			1,752			2,646			2,610
	(66	)		(93	)	Combined shares held in treasury		(69	)		(60	)		(103	)		(89	)
	(122	)		(175	)	Translation reserve		(15	)		(13	)		113			94
	–			–		Hedging reserve		20			–			30			–
	(144	)		(200	)	Other combined reserves		(300	)		(277	)		(583	)		(527	)
	1,664			2,346		Combined shareholders’ equity		1,601			1,591			2,385			2,370
	13			20		Minority interests		13			11			20			17
	1,677			2,366		Total equity		1,614			1,602			2,405			2,387

Approved by the boards of Reed Elsevier PLC and Reed Elsevier NV, 27 July 2005.

COMBINED FINANCIAL INFORMATION
NOTES TO THE COMBINED FINANCIAL INFORMATION 15

1 Basis of preparation

The Reed Elsevier combined financial information (“the combined financial information”) represents the combined interests of the Reed Elsevier PLC and Reed Elsevier NV shareholders and encompasses the businesses of Reed Elsevier Group plc and Elsevier Reed Finance BV and their respective subsidiaries, associates and joint ventures, together with the two parent companies, Reed Elsevier PLC and Reed Elsevier NV (“the combined businesses”).

Following a regulation adopted by the European Parliament, the combined financial information has been prepared in accordance with International Financial Reporting Standards (IFRS). The Reed Elsevier accounting policies under IFRS are set out in the Reed Elsevier Annual Reports and Financial Statements 2004 on pages 119 to 122. The combined financial information has been prepared in accordance with those accounting polices and with IAS34 – Interim Financial Reporting. Reed Elsevier has elected to adopt the amendments to IAS19 – Employee Benefits, issued in December 2004, in advance of their effective date of 1 January 2006, and has elected to present actuarial gains and losses arising on defined benefit pension schemes in the Statement of Recognised Income and Expense. The Reed Elsevier accounting policies under IFRS assume EU endorsement of the amendments to IAS19, and remain subject to change for any new standards or guidance that may become applicable for the 2005 financial year.

The transition date for the application of IFRS is 1 January 2004. The comparative figures for 30 June 2004 and 31 December 2004 have been restated to reflect the transition to IFRS and reconciliations of net income and equity from previous GAAP to IFRS are presented in note 5. IAS39 – Financial Instruments: Recognition and Measurement is applicable from the 2005 financial year with a transition date of 1 January 2005 and accordingly no restatement of prior period comparatives has been made in respect of IAS39. An explanation of the principal differences between IFRS and previous GAAP, insofar as they relate to Reed Elsevier, is given in the Operating and Financial Review on pages 4 to 10.

The combined financial information for the six months ended 30 June 2005 and the comparative amounts to 30 June 2004 are unaudited but have been reviewed by the auditors. The combined financial information for the year ended 31 December 2004 as reported under IFRS has been abridged from the Reed Elsevier Annual Reports and Financial Statements 2004. The combined financial statements prepared in accordance with IFRS for the year ended 31 December 2004 have received an unqualified audit report.

2 Segment analysis

Revenue

					£				€
Year ended 31 December					Six months ended 30 June				Six months ended 30 June
2004		2004			2005		2004		2005		2004
£m		€m			£m		£m		€m		€m
				Business segment
	1,363		2,004	Elsevier		644		631		940		934
	1,292		1,899	LexisNexis		683		614		997		909
	868		1,276	Harcourt Education		366		359		534		531
	1,289		1,895	Reed Business		675		659		986		975
	4,812		7,074	Total		2,368		2,263		3,457		3,349
				Geographical origin
	2,656		3,904	North America		1,307		1,236		1,908		1,829
	846		1,244	United Kingdom		393		394		574		583
	503		739	The Netherlands		249		253		363		374
	545		801	Rest of Europe		270		260		394		385
	262		386	Rest of World		149		120		218		178
	4,812		7,074	Total		2,368		2,263		3,457		3,349
				Geographical market
	2,779		4,085	North America		1,347		1,294		1,966		1,915
	545		801	United Kingdom		259		261		378		386
	202		297	The Netherlands		97		95		142		141
	725		1,066	Rest of Europe		354		345		517		510
	561		825	Rest of World		311		268		454		397
	4,812		7,074	Total		2,368		2,263		3,457		3,349

COMBINED FINANCIAL INFORMATION
NOTES TO THE COMBINED FINANCIAL INFORMATION 16

Adjusted operating profit

							£						€
Year ended 31 December							Six months ended 30 June						Six months ended 30 June
2004			2004				2005			2004			2005			2004
£m			€m				£m			£m			€m			€m
						Business segment
	445			654		Elsevier		189			198			277			293
	287			422		LexisNexis		151			122			220			181
	157			231		Harcourt Education		15			23			22			34
	194			285		Reed Business		118			118			172			175
	1,083			1,592		Subtotal		473			461			691			683
	(29	)		(43	)	Corporate costs		(18	)		(16	)		(27	)		(24	)
	12			18		Unallocated net pension credit		6			6			9			9
	1,066			1,567		Total		461			451			673			668
						Geographical origin
	539			792		North America		202			190			295			281
	159			234		United Kingdom		69			70			101			104
	189			278		The Netherlands		92			101			134			149
	138			203		Rest of Europe		69			70			101			104
	41			60		Rest of World		29			20			42			30
	1,066			1,567		Total		461			451			673			668

Adjusted operating profit figures are presented as additional performance measures. They are stated before the amortisation of acquired intangible assets and acquisition integration costs and are reconciled to the reported figures in note 4. The unallocated net pension credit of £6m/€9m (2004 interim: £6m/€9m) comprises the expected return on pension scheme assets of £74m/€108m (2004 interim: £70m/€104m) less interest on pension scheme liabilities of £68m/€99m (2004 interim: £64m/€95m).

Operating profit

							£						€
Year ended 31 December							Six months ended 30 June						Six months ended 30 June
2004			2004				2005			2004			2005			2004
£m			€m				£m			£m			€m			€m
						Business segment
	402			591		Elsevier		166			178			242			263
	188			276		LexisNexis		95			83			139			123
	67			99		Harcourt Education		(22	)		(19	)		(32	)		(27	)
	126			185		Reed Business		90			88			131			130
	783			1,151		Subtotal		329			330			480			489
	(29	)		(43	)	Corporate costs		(18	)		(16	)		(26	)		(24	)
	12			18		Unallocated pension credit		6			6			9			9
	766			1,126		Total		317			320			463			474
						Geographical origin
	315			462		North America		92			90			134			133
	129			190		United Kingdom		55			57			80			84
	182			268		The Netherlands		90			101			132			150
	102			150		Rest of Europe		53			52			77			77
	38			56		Rest of World		27			20			40			30
	766			1,126		Total		317			320			463			474

Share of post-tax results of joint ventures of £8m/€12m (2004 interim: £13m/€19m) included in operating profit comprises £2m/€3m (2004 interim: £3m/€4m) relating to LexisNexis and £6m/€9m (2004 interim: £10m/€15m) relating to Reed Business.

COMBINED FINANCIAL INFORMATION
NOTES TO THE COMBINED FINANCIAL INFORMATION 17

3 Combined cash flow statement

Reconciliation of operating profit to net cash inflow from operating activities

							£						€
Year ended 31 December							Six months ended 30 June						Six months ended 30 June
2004			2004				2005			2004			2005			2004
£m			€m				£m			£m			€m			€m
	749			1,100		Operating profit before joint ventures		309			307			451			455
	255			375		Amortisation of acquired intangible assets		131			116			191			172
	55			81		Amortisation of internally developed intangible assets		29			26			42			38
	71			104		Depreciation of property, plant and equipment		40			32			58			47
	59			87		Share based remuneration		26			24			38			36
	440			647		Total non cash items		226			198			329			293
	(35	)		(51	)	Movement in working capital		(258	)		(221	)		(376	)		(328	)
	1,154			1,696		Cash generated from operations		277			284			404			420

Reconciliation of net borrowings

												£
Year ended				Cash &						Derivative		Six months ended 30 June
31 December				cash						financial
2004				equivalents			Borrowings			instruments		2005			2004
£m				£m			£m			£m		£m			£m
	(2,372	)	Net borrowings at the beginning of the period		225			(2,757	)		–		(2,532	)		(2,372	)
	(403	)	Decrease in cash and cash equivalents		(26	)		–			–		(26	)		(375	)
	82		(Increase)/decrease in borrowings		–			(201	)		–		(201	)		24
	(321	)	Change in net borrowings resulting from cash flows		(26	)		(201	)		–		(227	)		(351	)
	(2	)	Borrowings in acquired businesses		–			(1	)		–		(1	)		–
	(11	)	Inception of finance leases		–			(7	)		–		(7	)		(6	)
	–		Fair value adjustments		–			(217	)		212		(5	)		–
	174		Effect of foreign exchange rate changes		1			(142	)		–		(141	)		51
	(2,532	)	Net borrowings at the end of the period		200			(3,325	)		212		(2,913	)		(2,678	)

												€
Year ended				Cash &						Derivative		Six months ended 30 June
31 December				cash						financial
2004				equivalents			Borrowings			instruments		2005			2004
€m				€m			€m			€m		€m			€m
	(3,368	)	Net borrowings at the beginning of the period		317			(3,887	)		–		(3,570	)		(3,368	)
	(590	)	Decrease in cash and cash equivalents		(38	)		–			–		(38	)		(554	)
	120		(Increase)/decrease in borrowings		–			(294	)		–		(294	)		35
	(470	)	Change in net borrowings resulting from cash flows		(38	)		(294	)		–		(332	)		(519	)
	(3	)	Borrowings in acquired businesses		–			(1	)		–		(1	)		–
	(16	)	Inception of finance leases		–			(9	)		–		(9	)		(9	)
	–		Fair value adjustments		–			(323	)		316		(7	)		–
	287		Effect of foreign exchange rate changes		19			(440	)		–		(421	)		(94	)
	(3,570	)	Net borrowings at the end of the period		298			(4,954	)		316		(4,340	)		(3,990	)

Derivative financial instruments included above in net borrowings are reported within trade and other receivables/payables and comprise fair value hedges of fixed rate borrowings through interest rate and cross-currency swaps.

Term debt of $990m was raised during the period, the proceeds of which were used to refinance short term borrowings.

COMBINED FINANCIAL INFORMATION
NOTES TO THE COMBINED FINANCIAL INFORMATION 18

4 Adjusted figures

Reed Elsevier uses adjusted figures as key performance measures. Adjusted figures are stated before amortisation of acquired intangible assets, acquisition integration costs, profit/loss on disposals, related tax effects and movements in deferred taxation assets and liabilities that are not expected to crystallise in the near term. Adjusted operating profits are also grossed up to exclude the equity share of taxes in joint ventures.

Adjusted operating cash flow is measured after dividends from joint ventures and net capital expenditure but before payments in relation to acquisition integration costs.

							£						€
Year ended 31 December							Six months ended 30 June						Six months ended 30 June
2004			2004				2005			2004			2005			2004
£m			€m				£m			£m			€m			€m
	766			1,126		Operating profit		317			320			463			474
						Adjustments:
	255			375		Amortisation of acquired intangible assets		131			116			191			172
	38			56		Acquisition integration costs		8			10			12			15
	7			10		Reclassification of tax on joint ventures		5			5			7			7
	1,066			1,567		Adjusted operating profit		461			451			673			668
	631			928		Profit before tax		255			256			372			379
						Adjustments:
	255			375		Amortisation of acquired intangible assets		131			116			191			172
	38			56		Acquisition integration costs		8			10			12			15
	7			10		Reclassification of tax on joint ventures		5			5			7			7
	3			4		(Profit)/loss on disposals		(4	)		–			(5	)		–
	934			1,373		Adjusted profit before tax		395			387			577			573
	459			675		Profit attributable to parent companies’ shareholders		134			191			196			283
						Adjustments:
	288			423		Amortisation of acquired intangible assets		145			130			211			192
	29			43		Acquisition integration costs		7			9			10			13
	2			3		(Profit)/loss on disposals		(3	)		–			(4	)		–
	(91	)		(134	)	Deferred tax adjustment		11			(42	)		16			(62	)
	687			1,010		Adjusted attributable profit		294			288			429			426
	1,154			1,696		Cash generated from operations		277			284			404			420
	17			25		Dividends received from joint ventures		8			8			12			12
	(82	)		(120	)	Purchase of property, plant and equipment		(38	)		(33	)		(56	)		(49	)
	4			7		Proceeds from sale of property, plant and equipment		2			2			3			3
	(110	)		(162	)	Expenditure on internally developed intangible assets		(42	)		(58	)		(61	)		(86	)
	30			44		Payments in relation to acquisition integration costs		12			10			18			15
	1,013			1,490		Adjusted operating cash flow		219			213			320			315

COMBINED FINANCIAL INFORMATION	19
NOTES TO THE COMBINED FINANCIAL INFORMATION

5 Reconciliations to previous GAAP

The combined financial information has been prepared in accordance with International Financial Reporting Standards (IFRS). The adoption of these standards has resulted in changes to the accounting policies previously applied under UK GAAP for the 2004 financial year. The effects of differences to previous GAAP on net profit and combined shareholders’ equity, insofar as they relate to Reed Elsevier, are summarised below.

Reconciliation of profit

											£						€
Year ended 31 December								Six months ended 30 June						Six months ended 30 June
2004			2004					2005			2004			2005			2004
£m			€m					£m			£m			€m			€m
	305			448		Net profit under previous GAAP			120			112			176			166
						Adjustments:
	151			223		Acquired goodwill and intangible assets	(i)		68			77			99			114
	(27	)		(40	)	Pensions	(ii)		(17	)		(14	)		(25	)		(21	)
	(48	)		(71	)	Share based remuneration	(iii)		(19	)		(24	)		(28	)		(36	)
	80			118		Deferred taxation	(iv)		(20	)		41			(29	)		61
	–			–		Financial instruments	(v)		3			–			4			–
	461			678		Net profit under IFRS			135			192			197			284

Reconciliation of shareholders’ equity

											£						€
As at 31 December								As at 30 June						As at 30 June
2004			2004					2005			2004			2005			2004
£m			€m					£m			£m			€m			€m
	2,267			3,196		Shareholders’ equity under previous GAAP			2,399			2,435			3,574			3,628
						Adjustments:
	215			303		Acquired goodwill and intangible assets	(vi)		301			77			448			115
	(405	)		(571	)	Pensions	(vii)		(569	)		(351	)		(848	)		(523	)
	(643	)		(907	)	Deferred taxation	(viii)		(625	)		(640	)		(931	)		(954	)
	–			–		Financial instruments	(v)		20			–			30			–
	248			350		Equity dividends	(ix)		93			88			139			131
	(18	)		(25	)	Other			(18	)		(18	)		(27	)		(27	)
	1,664			2,346		Shareholders’ equity under IFRS			1,601			1,591			2,385			2,370

(i)	Lower net amortisation charge under IFRS due to the non-amortisation of acquired goodwill and indefinite lived intangible assets, partially offset by higher amortisation of acquired intangible assets over shorter periods under IFRS.
(ii)	Additional net pension expense under IAS19 based on market conditions at the start of the period.
(iii)	Additional share option expense.
(iv)	Movements in deferred tax balances, principally in respect of acquired intangible assets, pensions and exchange differences on long-term inter-affiliate lending.
(v)	Mark-to-market adjustments on financial instruments.
(vi)	Higher carrying value of acquired goodwill and intangible assets due to lower amortisation and gross up for deferred tax liabilities on acquisitions since the IFRS transition date of 1 January 2004.
(vii)	Recognition of net pension obligations based on market conditions at the balance sheet date.
(viii)	Deferred taxation provision for nearly all differences between balance sheet amounts of assets and liabilities and their corresponding tax bases.
(ix)	Dividends not recognised until formally declared.

As at the IFRS transition date of 1 January 2004, shareholders’ equity was £788m/€1,119m lower under IFRS than under previous GAAP due to additional deferred tax liabilities of £686m/€974m, additional net pension obligations of £310m/€440m and other additional liabilities of £18m/€26m, partly offset by reversal of proposed dividends of £226m/€321m.

COMBINED FINANCIAL INFORMATION	20
NOTES TO THE COMBINED FINANCIAL INFORMATION

Reconciliations of adjusted profit figures to the adjusted profit figures as previously defined are set out below.

							£									€
	Six months ended 30 June 2005									Six months ended 30 June 2005
	Adjusted			Adjusted			Adjusted			Adjusted			Adjusted			Adjusted
	operating			pre-tax			attributable			operating			pre-tax			attributable
	profit			profit			profit			profit			profit			profit
	£m			£m			£m			€m			€m			€m
Adjusted figures under previous GAAP		506			437			327			739			639			477
Adjustments:
Additional pension expense		(17	)		(17	)		(13	)		(25	)		(25	)		(19	)
Additional share option expense		(19	)		(19	)		(15	)		(28	)		(28	)		(22	)
Restructuring costs		(9	)		(9	)		(7	)		(13	)		(13	)		(10	)
Financial instruments		–			3			2			–			4			3
Adjusted figures under IFRS		461			395			294			673			577			429

							£									€
	Six months ended 30 June 2004									Six months ended 30 June 2004
	Adjusted			Adjusted			Adjusted			Adjusted			Adjusted			Adjusted
	operating			pre-tax			attributable			operating			pre-tax			attributable
	profit			profit			profit			profit			profit			profit
	£m			£m			£m			€m			€m			€m
Adjusted figures under previous GAAP		497			433			319			736			641			472
Adjustments:
Additional pension expense		(14	)		(14	)		(10	)		(21	)		(21	)		(15	)
Additional share option expense		(24	)		(24	)		(15	)		(35	)		(35	)		(22	)
Restructuring costs		(8	)		(8	)		(6	)		(12	)		(12	)		(9	)
Adjusted figures under IFRS		451			387			288			668			573			426

							£									€
	Year ended 31 December 2004									Year ended 31 December 2004
	Adjusted			Adjusted			Adjusted			Adjusted			Adjusted			Adjusted
	operating			pre-tax			attributable			operating			pre-tax			attributable
	profit			profit			profit			profit			profit			profit
	£m			£m			£m			€m			€m			€m
Adjusted figures under previous GAAP		1,159			1,027			760			1,704			1,510			1,117
Adjustments:
Additional pension expense		(27	)		(27	)		(17	)		(40	)		(40	)		(25	)
Additional share option expense		(48	)		(48	)		(41	)		(71	)		(71	)		(60	)
Restructuring costs		(18	)		(18	)		(15	)		(26	)		(26	)		(22	)
Adjusted figures under IFRS		1,066			934			687			1,567			1,373			1,010

Reconciliations of adjusted operating cash flows to the adjusted figures as previously defined are set out below.

										£						€
Year ended 31 December							Six months ended 30 June						Six months ended 30 June
2004			2004				2005			2004			2005			2004
£m			€m				£m			£m			€m			€m
	1,050			1,544		Adjusted operating cash flow as previously defined		236			237			345			351
	(37	)		(54	)	Restructuring costs		(17	)		(24	)		(25	)		(36	)
	1,013			1,490		Adjusted operating cash flow		219			213			320			315

COMBINED FINANCIAL INFORMATION	21
NOTES TO THE COMBINED FINANCIAL INFORMATION

6 Exchange translation rates

In preparing the combined financial information the following exchange rates have been applied:

Year ended
31 December 2004					Income statement				Balance sheet
Income		Balance			30 June		30 June		30 June		30 June
statement		sheet			2005		2004		2005		2004
	1.47		1.41	Euro to sterling		1.46		1.48		1.49		1.49
	1.83		1.93	US dollars to sterling		1.87		1.82		1.80		1.81
	0.80		0.73	Euro to US dollars		0.78		0.81		0.83		0.82
	1.24		1.37	US dollars to euro		1.28		1.23		1.21		1.21

REED ELSEVIER PLC	22
SUMMARY FINANCIAL INFORMATION

Basis of preparation
The Reed Elsevier PLC share of the Reed Elsevier combined results has been calculated on the basis of the 52.9% economic interest of the Reed Elsevier PLC shareholders in the Reed Elsevier combined businesses, after taking account of the results arising in Reed Elsevier PLC and its subsidiary undertakings. The summary financial information has been prepared on the basis of the accounting policies of the Reed Elsevier combined businesses as set out on pages 119 to 122 of the Reed Elsevier Annual Reports and Financial Statements 2004, which, following a regulation adopted by the European Parliament, are now in accordance with International Financial Reporting Standards (IFRS). The comparative figures for 30 June 2004 and 31 December 2004 have been restated to reflect the transition to IFRS. Reed Elsevier PLC’s 52.9% economic interest in the net assets of the combined businesses is shown in the balance sheet as interests in joint ventures, net of the assets and liabilities reported as part of Reed Elsevier PLC and its subsidiary undertakings.

The Reed Elsevier accounting policies under IFRS assume EU endorsement of certain recent amendments to standards and remain subject to change for any new standards or guidance that may become applicable for the 2005 financial year.

The interim figures for the six months ended 30 June 2005 and the comparative amounts to 30 June 2004 are unaudited but have been reviewed by the auditors. The summary financial information for the year ended 31 December 2004 as reported under IFRS has been abridged from the Reed Elsevier Annual Reports and Financial Statements 2004, which have been filed with the UK Registrar of Companies. The financial statements prepared in accordance with IFRS for the year ended 31 December 2004 have received an unqualified audit report.

Consolidated income statement

Year ended
31 December				Six months ended 30 June
2004				2005			2004
£m				£m			£m
	(2	)	Administrative expenses		–			–
	(8	)	Effect of tax credit equalisation on distributed earnings		(6	)		(6	)
	247		Share of results of joint ventures		72			99
	237		Operating profit		66			93
	3		Investment income		1			2
	240		Profit before tax		67			95
	(5	)	Tax		(2	)		–
	235		Profit attributable to ordinary shareholders		65			95

Earnings per ordinary share (EPS)

Year ended
31 December			Six months ended 30 June
2004			2005		2004
pence			pence		pence
	18.6p	Basic earnings per share		5.1p		7.5p
	18.5p	Diluted earnings per share		5.1p		7.5p
	28.7p	Adjusted earnings per share		12.3p		12.0p

Adjusted earnings per share is based upon the Reed Elsevier PLC shareholders’ 52.9% economic interest in the adjusted profit attributable of the Reed Elsevier combined businesses, which is reconciled to the reported figures in note 4 to the combined financial information.

Dividends
The directors of Reed Elsevier PLC have recommended an interim dividend of 3.7p per ordinary share (2004 interim: 3.4p per ordinary share). During the period the 2004 final dividend of 9.6p per ordinary share was paid.

REED ELSEVIER PLC	23
SUMMARY FINANCIAL INFORMATION

Summary consolidated cash flow statement

Year ended
31 December				Six months ended 30 June
2004				2005			2004
£m				£m			£m
	(2	)	Cash generated from operations		–			(1	)
	3		Interest received		3			2
	(1	)	Tax paid		(3	)		–
	153		Dividends received from joint ventures		120			111
	(153	)	Equity dividends paid		(120	)		(110	)
	11		Proceeds on issue of ordinary shares		8			4
	(11	)	Increase in net funding balances to joint ventures		(8	)		(6	)
	–		Change in cash and cash equivalents		–			–

Consolidated statement of recognised income and expense

Year ended
31 December				Six months ended 30 June
2004				2005			2004
£m				£m			£m
	235		Net profit for the period		65			95
	(97	)	Share of joint ventures’ net expense recognised directly in equity		(4	)		(21	)
	–		Share of joint ventures’ transfer to net profit from cash flow hedge reserve		(6	)		–
	–		Share of joint ventures’ transition adjustment on adoption of IAS39		14			–
	138		Total recognised net income for the period		69			74

Reconciliation of shareholders’ equity

Year ended
31 December				Six months ended 30 June
2004				2005			2004
£m				£m			£m
	138		Total recognised net income for the period		69			74
	(153	)	Equity dividends declared		(120	)		(110	)
	11		Issue of ordinary shares, net of expenses		8			4
	(15	)	Increase in shares held in treasury		(2	)		(12	)
	31		Increase in share based remuneration reserve		14			13
	(3	)	Equalisation adjustments		(2	)		2
	9		Net (decrease)/increase in shareholders’ equity		(33	)		(29	)
	871		Shareholders’ equity at the beginning of the period		880			871
	880		Shareholders’ equity at the end of the period		847			842

REED ELSEVIER PLC	24
SUMMARY FINANCIAL INFORMATION

Summary consolidated balance sheet

As at
31 December			As at 30 June
2004			2005		2004
£m			£m		£m
		Assets
		Non-current assets
	334	Investment in joint ventures		294		296
		Current assets
	595	Amounts due from joint ventures		601		590
	929	Total assets		895		886
		Liabilities
		Current liabilities
	1	Payables		1		–
	36	Amounts owed to joint ventures		36		36
	12	Taxation		11		8
	49	Total liabilities		48		44
	880	Net assets/shareholders’ equity		847		842

Approved by the board of directors, 27 July 2005.

Reconciliations to previous GAAP
The Reed Elsevier PLC summary financial information has been prepared in accordance with International Financial Reporting Standards (IFRS). The adoption of these standards has resulted in changes to the accounting policies previously applied under UK GAAP.

The effects of differences between IFRS and previous GAAP on net income and shareholders’ equity, insofar as they relate to Reed Elsevier PLC, are summarised below.

Reconciliation of profit

Year ended
31 December			Six months ended 30 June
2004			2005			2004
£m			£m			£m
	152	Net profit under previous GAAP		61			57
		Adjustments:
	83	Share of IFRS adjustments in joint ventures		8			42
	–	Equalisation		(4	)		(4	)
	235	Net profit for the period under IFRS		65			95

Reconciliation of shareholders’ equity

As at
31 December				As at 30 June
2004				2005			2004
£m				£m			£m
	1,199		Shareholders’ equity under previous GAAP		1,269			1,288
			Adjustments:
	(439	)	Share of IFRS adjustments in joint ventures		(469	)		(489	)
	120		Dividends		47			43
	880		Shareholders’ equity under IFRS		847			842

The IFRS adjustments in respect of the combined financial information are set out in note 5 thereto.

REED ELSEVIER NV	25
SUMMARY FINANCIAL INFORMATION

Basis of preparation
The Reed Elsevier NV share of the Reed Elsevier combined results has been calculated on the basis of the 50% economic interest of the Reed Elsevier NV shareholders in the Reed Elsevier combined businesses, after taking account of the results arising in Reed Elsevier NV. The summary financial information has been prepared on the basis of the accounting policies of the Reed Elsevier combined businesses as set out on pages 119 to 122 of the Reed Elsevier Annual Reports and Financial Statements 2004, which, following a regulation adopted by the European Parliament, are now in accordance with International Financial Reporting Standards (IFRS). The comparative figures for 30 June 2004 and 31 December 2004 have been restated for the transition to IFRS. Reed Elsevier NV’s 50% economic interest in the net assets of the combined businesses is shown in the balance sheet as interests in joint ventures, net of the assets and liabilities reported as part of Reed Elsevier NV.

The Reed Elsevier accounting policies under IFRS assume EU endorsement of certain recent amendments to standards, and remain subject to change for any new standards or guidance that may become applicable for the 2005 financial year.

The interim figures for the six months ended 30 June 2005 and the comparative amounts to 30 June 2004 are unaudited but have been reviewed by the auditors. The summary financial information for the year ended 31 December 2004 as reported under IFRS has been abridged from the Reed Elsevier Annual Reports and Financial Statements 2004. The financial statements prepared in accordance with IFRS for the year ended 31 December 2004 have received an unqualified audit report.

Group income statement

Year ended
31 December				Six months ended 30 June
2004				2005			2004
€m				€m			€m
	(3	)	Administrative expenses		(1	)		(1	)
	339		Share of results of joint ventures		97			142
	336		Operating profit		96			141
	2		Investment income		2			1
	338		Profit before tax		98			142
	–		Tax		–			–
	338		Profit attributable to ordinary shareholders		98			142

Earnings per ordinary share (EPS)

Year ended
31 December			Six months ended 30 June
2004			2005		2004
€			€		€
€	0.43	Basic earnings per share	€	0.13	€	0.18
€	0.43	Diluted earnings per share	€	0.13	€	0.18
€	0.64	Adjusted earnings per share	€	0.27	€	0.27

Adjusted earnings per share is based upon the Reed Elsevier NV shareholders’ 50% economic interest in the adjusted profit attributable of the Reed Elsevier combined businesses, which is reconciled to the reported figures in note 4 to the combined financial information.

Dividends

The directors of Reed Elsevier NV have declared an interim dividend of €0.092 per ordinary share (2004 interim: €0.090 per ordinary share). During the period, the 2004 final dividend of €0.24 per ordinary share was paid.

REED ELSEVIER NV 26

SUMMARY FINANCIAL INFORMATION

Summary group cash flow statement

Year ended
31 December				Six months ended 30 June
2004				2005			2004
€m				€m			€m
	(3	)	Cash generated from operations		(1	)		(1	)
	1		Interest received		1			1
	(5	)	Tax received/(paid)		1			(1	)
	220		Dividends received from joint ventures		120			170
	(229	)	Equity dividends paid		(177	)		(162	)
	14		Proceeds on issue of ordinary shares		10			11
	20		Decrease/(increase) in net funding balances to joint ventures		25			(1	)
	18		Change in cash and cash equivalents		(21	)		17

Group statement of recognised income and expense

Year ended
31 December				Six months ended 30 June
2004				2005			2004
€m				€m			€m
	338		Net profit for the period		98			142
	(144	)	Share of joint ventures’ net income/(expense) recognised directly in equity		61			29
	–		Share of joint ventures’ transfer to net profit from cash flow hedge reserve		(9	)		–
	–		Share of joint ventures’ transition adjustment on adoption of IAS39		19			–
	194		Total recognised net income for the period		169			171

Reconciliation of group shareholders’ equity

Year ended
31 December				Six months ended 30 June
2004				2005			2004
€m				€m			€m
	194		Total recognised net income for the period		169			171
	(229	)	Equity dividends declared		(177	)		(162	)
	14		Issue of ordinary shares, net of expenses		10			11
	(22	)	Increase in shares held in treasury		(2	)		(17	)
	44		Increase in share based remuneration reserve		19			18
	3		Equalisation adjustments		1			(5	)
	4		Net increase in shareholders’ equity		20			16
	1,169		Shareholders’ equity at the beginning of the period		1,173			1,169
	1,173		Shareholders’ equity at the end of the period		1,193			1,185

REED ELSEVIER NV 27

SUMMARY FINANCIAL INFORMATION

Summary group balance sheet

As at
31 December			As at 30 June
2004			2005		2004
€m			€m		€m
		Assets
		Non-current assets
	1,183	Investment in joint ventures		1,249		1,180
		Current assets
	30	Amounts due from joint ventures		5		50
	7	Receivables		6		6
	25	Short term investments		4		24
	1,245	Total assets		1,264		1,260
		Liabilities
		Current liabilities
	3	Payables		1		1
	4	Taxation		5		9
	7			6		10
		Non-current liabilities
	7	Debenture loans		7		7
	58	Taxation		58		58
	65			65		65
	72	Total liabilities		71		75
	1,173	Net assets/shareholders’ equity		1,193		1,185

Signed by the boards of directors, 27 July 2005.

Reconciliations to previous GAAP

The Reed Elsevier NV summary financial information has been prepared in accordance with International Financial Reporting Standards (IFRS). The adoption of these standards has resulted in changes to the accounting policies previously applied which, as permitted by Article 362.1 of Book 2 Title 9 of the Netherlands Civil Code, were in accordance with UK GAAP.

The effects of differences between IFRS and previous GAAP on net income and shareholders’ equity, insofar as they relate to Reed Elsevier NV, are summarised below.

Reconciliation of profit

Year ended
31 December			Six months ended 30 June
2004			2005		2004
€m			€m		€m
	223	Net profit under previous GAAP		87		82
		Adjustments:
	115	Share of IFRS adjustments in joint ventures		11		60
	338	Net profit for the period under IFRS		98		142

REED ELSEVIER NV 28

SUMMARY FINANCIAL INFORMATION

Reconciliation of shareholders’ equity

As at
31 December				As at 30 June
2004				2005			2004
€m				€m			€m
	1,598		Shareholders’ equity under previous GAAP		1,788			1,814
			Adjustments:
	(602	)	Share of IFRS adjustments in joint ventures		(663	)		(696	)
	177		Dividends		68			67
	1,173		Shareholders’ equity under IFRS		1,193			1,185

The IFRS adjustments in respect of the combined financial information are set out in note 5 thereto.

ADDITIONAL INFORMATION FOR US INVESTORS 29

Summary financial information in US dollars
The summary financial information is a simple translation of the Reed Elsevier combined financial information into US dollars at the rates of exchange set out in note 6 to the combined financial information. The financial information provided below is prepared in accordance with accounting principles as used in the preparation of the Reed Elsevier combined financial information. It does not represent a restatement under US Generally Accepted Accounting Principles (“US GAAP”) which would be different in some significant respects.

Income statement

Year ended
31 December			Six months ended 30 June
2004			2005		2004
US$m			US$m		US$m
	8,806	Revenue		4,428		4,119
	1,402	Operating profit		593		582
	1,155	Profit before tax		477		466
	844	Net profit for the period		252		349
	1,951	Adjusted operating profit		862		821
	1,709	Adjusted profit before tax		739		704
	1,257	Adjusted attributable profit		550		524
US$		Basic earnings per American Depositary Share (ADS)	US$		US$
	1.36	Reed Elsevier PLC (Each ADS comprises four ordinary shares)		0.38		0.55
	1.07	Reed Elsevier NV (Each ADS comprises two ordinary shares)		0.33		0.44
		Adjusted earnings per American Depositary Share (ADS)
	2.10	Reed Elsevier PLC (Each ADS comprises four ordinary shares)		0.92		0.87
	1.59	Reed Elsevier NV (Each ADS comprises two ordinary shares)		0.69		0.66

Adjusted earnings per American Depository Share is based on Reed Elsevier PLC shareholders’ 52.9% and Reed Elsevier NV’s 50% respective share of the adjusted profit attributable of the Reed Elsevier combined businesses. Adjusted figures are presented as additional performance measures and are reconciled to the reported figures at their sterling and euro amounts in note 4 to the combined financial information.

Cash flow statement

Year ended
31 December				Six months ended 30 June
2004				2005			2004
US$m				US$m			US$m
	1,491		Net cash from operating activities		232			215
	(1,499	)	Net cash used in investing activities		(225	)		(432	)
	(730	)	Net cash used in financing activities		(56	)		(466	)
	(738	)	Decrease in cash and cash equivalents		(49	)		(683	)
	1,854		Adjusted operating cash flow		410			388
	95	%	Adjusted operating cash flow conversion		48	%		47	%

Balance sheet

As at
31 December			As at 30 June
2004			2005		2004
US$m			US$m		US$m
	11,740	Non-current assets		11,424		10,688
	3,607	Current assets		3,755		3,267
	15,347	Total assets		15,179		13,955
	6,062	Current liabilities		4,747		5,245
	6,048	Non-current liabilities		7,527		5,810
	12,110	Total liabilities		12,274		11,055
	3,237	Net assets/combined shareholders’ equity		2,905		2,900

ADDITIONAL INFORMATION FOR US INVESTORS 30

Summary of the principal differences between IFRS and US GAAP
Reed Elsevier now prepares financial statements under International Financial Reporting Standards (IFRS), with effect from the 2005 financial year. The 2004 financial statements have been restated under IFRS, adopting a 1 January 2004 transition date, other than in respect of IAS39 – Financial Instruments for which the transition date is 1 January 2005. The Annual Report and Financial Statements 2004 set out the principal differences, insofar as they relate to Reed Elsevier, between US GAAP and UK GAAP then applicable and between that previous UK GAAP and IFRS.

IFRS differ in certain significant respects to US GAAP. The effects on net income attributable to shareholders and combined shareholders’ equity of material differences to US GAAP are set out below.

							£						€
Year ended 31 December							Six months ended 30 June						Six months ended 30 June
2004			2004				2005			2004			2005			2004
£m			€m				£m			£m			€m			€m
	459			675		Net income as reported (IFRS)		134			191			196			283
						US GAAP adjustments:
	3			4		Intangible assets		1			–			1			–
	(3	)		(4	)	Pensions		(35	)		(3	)		(51	)		(4	)
	32			47		Derivative financial instruments		7			27			10			40
	(75	)		(110	)	Deferred taxation		(13	)		(52	)		(19	)		(77	)
	2			3		Other		3			1			5			1
	418			615		Net income under US GAAP		97			164			142			243

							£						€
As at 31 December							As at 30 June						As at 30 June
2004			2004				2005			2004			2005			2004
£m			€m				£m			£m			€m			€m
	1,664			2,346		Shareholders’ equity as reported (IFRS)		1,601			1,591			2,385			2,370
						US GAAP adjustments:
	1,378			1,943		Goodwill and intangible assets		1,439			1,439			2,144			2,144
	482			680		Pensions		596			520			888			775
	12			17		Derivative financial instruments		–			(40	)		–			(60	)
	(123	)		(173	)	Deferred taxation		(166	)		(144	)		(247	)		(215	)
	16			22		Other		10			16			15			24
	3,429			4,835		Shareholders’ equity under US GAAP		3,480			3,382			5,185			5,038

Net income and shareholders’ equity in the 2004 financial year under US GAAP have been restated for the adoption of SFAS123(R) – Share-Based Payment, which requires an expense to be recorded based on the fair value at the date of grant, and related deferred tax effects. Shareholders’ equity under US GAAP has been restated for 30 June 2004 to reflect a reclassification from intangible assets to goodwill of amounts arising under US GAAP in relation to deferred taxation. Net income under US GAAP for 2004 is £31m/€45m lower (2004 interim: £9m/€14m higher) than the amounts previously reported. Shareholders’ equity under US GAAP for 2004 is £56m/€79m higher (2004 interim: £158m/€234m higher) than the amounts previously reported.

NOTES FOR EDITORS 31

Reed Elsevier is a world leading publisher and information provider and its principal operations are in North America and Europe. Its two parent companies — Reed Elsevier PLC and Reed Elsevier NV — are listed on the London and Amsterdam Stock Exchanges respectively, and also on the New York Stock Exchange. The returns to their respective shareholders are equalised in terms of dividend and capital rights. ‘Reed Elsevier’ and ‘the combined businesses’ comprise Reed Elsevier PLC and Reed Elsevier NV plus their two jointly owned companies, Reed Elsevier Group plc and Elsevier Reed Finance BV, and their respective subsidiaries and joint ventures.

The Interim Statement 2005 is being posted to Reed Elsevier PLC shareholders on 28 July 2005. Copies of the Interim Statement 2005 will be available to shareholders in Reed Elsevier NV on request. Copies of the Interim Statement are available to the public from the respective companies:

Reed Elsevier PLC	Reed Elsevier NV
1-3 Strand London WC2N 5JR United Kingdom	Radarweg 29 1043 NX Amsterdam The Netherlands

Copies of all recent announcements, including this Interim Statement, and additional information on Reed Elsevier can be found on the Reed Elsevier Home Page on the World Wide Web:

http://www.reedelsevier.com

Independent review report
to Reed Elsevier PLC and Reed Elsevier NV

Introduction
We have been instructed by the boards of Reed Elsevier PLC and Reed Elsevier NV to review the combined financial information of Reed Elsevier PLC, Reed Elsevier NV, Reed Elsevier Group plc and Elsevier Reed Finance BV and their respective subsidiaries, associates and joint ventures (together “the combined businesses”) for the six months ended 30 June 2005 which comprises the combined income statement, combined cash flow statement, combined statement of recognised income and expense, reconciliation of shareholders’ equity, combined balance sheet and related notes 1 to 6. We have also reviewed the summary financial information of Reed Elsevier PLC for the six months ended 30 June 2005 which comprises the consolidated income statement, summary consolidated cash flow statement, consolidated statement of recognised income and expense, reconciliation of shareholders’ equity, summary consolidated balance sheet and the earnings per share and dividend notes, and the summary financial information of Reed Elsevier NV for the six months ended 30 June 2005 which comprises the group income statement, summary group cash flow statement, group statement of recognised income and expense, reconciliation of group shareholders’ equity, summary group balance sheet and the earnings per share and dividend notes. We have read the other information contained in the interim report and considered whether it contains any apparent mis-statements or material inconsistencies with the financial information.

This report is made solely to Reed Elsevier PLC and Reed Elsevier NV in accordance with Bulletin 1999/4 issued by the Auditing Practices Board. Our work has been undertaken so that we might state to Reed Elsevier PLC and Reed Elsevier NV those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than Reed Elsevier PLC and Reed Elsevier NV, for our review work, for this report, or for the conclusions we have formed.

Directors’ responsibilities
The Reed Elsevier Interim Statement, including the financial information contained therein, is the responsibility of, and has been approved by, the directors of Reed Elsevier PLC and Reed Elsevier NV. The directors of Reed Elsevier PLC and Reed Elsevier NV are responsible for preparing the Reed Elsevier Interim Statement in accordance with the Listing Rules of the UK Financial Services Authority and, in respect of the combined businesses the requirements of International Accounting Standard 34: “Interim Financial Reporting” which require that the accounting policies and presentation applied to the interim figures are consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed.

International Financial Reporting Standards
The next annual financial statements of Reed Elsevier PLC, Reed Elsevier NV and the combined businesses will be prepared in accordance with International Financial Reporting Standards as adopted for use in the EU. The interim report of the combined businesses has been prepared in accordance with IAS34, and the requirements of International Financial Reporting Standard 1, “First Time Adoption of International Financial Reporting Standards” relevant to interim reports. The interim summary financial information of Reed Elsevier PLC and Reed Elsevier NV has been prepared in accordance with the recognition and measurement criteria of IFRS and the disclosure requirements of the Listing Rules of the UK Financial Services Authority.

Review work performed
We conducted our review in accordance with the guidance in Bulletin 1999/4 issued by the United Kingdom Auditing Practices Board. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with International Standards on Auditing (UK, Ireland and the Netherlands) and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information.

Review conclusion
On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2005.

Deloitte & Touche LLP	Deloitte Accountants BV
Chartered Accountants	Amsterdam
London	27 July 2005
27 July 2005

Investor information
Financial calendar

2005
28 July	PLC	Announcement of interim results for the six months to 30 June 2005
	NV
29 July	NV	Record date – 2005 interim dividend, Reed Elsevier NV ordinary shares
1 August	NV	Ex-dividend date – 2005 interim dividend, Reed Elsevier NV ordinary shares
2 August	NV	Ex-dividend date – 2005 interim dividend, Reed Elsevier NV ADRs
3 August	PLC	Ex-dividend date – 2005 interim dividends, Reed Elsevier PLC ordinary shares and ADRs
4 August	NV	Record date – 2005 interim dividend, Reed Elsevier NV ADRs
5 August	PLC	Record date – 2005 interim dividends, Reed Elsevier PLC ordinary shares and ADRs
26 August	PLC	Payment date – 2005 interim dividends, Reed Elsevier PLC and Reed Elsevier NV ordinary shares
	NV
2 September	PLC	Payment date – 2005 interim dividends, Reed Elsevier PLC and Reed Elsevier NV ADRs
	NV
17 November	PLC	Trading update issued in relation to the 2005 financial year
	NV
2006
16 February	PLC	Announcement of Preliminary Results for the year to 31 December 2005
	NV
18 April	PLC	Annual General Meeting – Reed Elsevier PLC, London
19 April	NV	Annual General Meeting – Reed Elsevier NV, Amsterdam
27 July	PLC	Announcement of interim results for the six months to 30 June 2006
	NV

Listings

London Stock Exchange	Euronext Amsterdam	New York Stock Exchange
Reed Elsevier PLC (REL)	Reed Elsevier NV (REN)	Reed Elsevier PLC (RUK) – CUSIP No. 758205108
Ordinary shares	Ordinary shares	Each ADR represents four ordinary shares
		Reed Elsevier NV (ENL) – CUSIP No. 758204101
		Each ADR represents two ordinary shares

Contacts

Reed Elsevier PLC	Reed Elsevier NV	Reed Elsevier PLC Registrar
1-3 Strand	Radarweg 29	Computershare Investor Services PLC
London WC2N 5JR	1043 NX Amsterdam	PO Box 82
United Kingdom	The Netherlands	The Pavilions
Tel: +44 (0) 20 7930 7077	Tel: +31 (0) 20 485 2434	Bridgwater Road
Fax: +44 (0) 20 7166 5799	Fax: +31 (0) 20 618 0325	Bristol BS99 7NH
		United Kingdom
Auditors		Tel: +44 (0) 870 702 0019
Deloitte & Touche LLP	Deloitte Accountants B.V.	www.computershare.co.uk
Hill House	Orlyplein 50
1 Little New Street	1043 DP Amsterdam	Reed Elsevier PLC and Reed Elsevier NV ADR Depositary
London EC4A 3TR	The Netherlands	The Bank of New York
United Kingdom		Investor Relations
		PO Box 11258
Stockbrokers		Church Street Station
JP Morgan Cazenove Limited	ABN AMRO Bank NV	New York
20 Moorgate	Gustav Mahlerlann 10	NY10286-1258
London EC2R 6DA	1082 PP Amsterdam	Tel: +1 888 269 2377
United Kingdom	The Netherlands	www.adrbny.com
		For further investor information visit:
		www.reedelsevier.com
		This statement is being mailed to shareholders of Reed Elsevier PLC on 28 July 2005 and will be available to the shareholders of Reed Elsevier NV upon request. Copies are available to the public from the registered offices of the respective companies shown above. Reed Elsevier PLC has given e-mail notification to those shareholders who have requested it of the availability of the Interim Statement on the Reed Elsevier website.