1
Filed Pursuant to Rule 424(b)(5)
Registration Nos. 333-13188, 333-13188-01, 333-13188-02

PROSPECTUS SUPPLEMENT
(To Prospectus dated April 17, 2001)

[REED & ELSEVIER LOGO]

REED ELSEVIER CAPITAL INC.

$550,000,000 6.125% Notes due 2006

$550,000,000 6.750% Notes due 2011

E500,000,000 5.750% Notes due 2008

FULLY AND UNCONDITIONALLY GUARANTEED JOINTLY AND SEVERALLY BY

REED INTERNATIONAL P.L.C. AND ELSEVIER NV
- --------------------------------------------------------------------------------

This is an offering by Reed Elsevier Capital Inc. of an aggregate of
$550,000,000 6.125% notes due 2006 (the "U.S. Dollar 6.125% Notes"), an
aggregate of $550,000,000 6.750% notes due 2011 (the "U.S. Dollar 6.750% Notes,"
and together with the U.S. Dollar 6.125% Notes, the "U.S. Dollar Notes") and an
aggregate of E500,000,000 5.750% notes due 2008 (the "Euro Notes," and together
with the U.S. Dollar Notes, the "Notes"). The Notes will be unsecured senior
obligations of Reed Elsevier Capital Inc. and will be fully and unconditionally
guaranteed jointly and severally by Reed International P.L.C. and Elsevier NV
(the "Guarantees").

Interest on the U.S. Dollar 6.125% Notes and the U.S. Dollar 6.750% Notes will
be payable semi-annually on February 1 and August 1 of each year, beginning on
February 1, 2002.

Interest on the Euro Notes will be payable annually on July 31 of each year,
beginning on July 31, 2002.

Reed Elsevier Capital Inc. may redeem each of the U.S. 6.125% Dollar Notes and
the U.S. Dollar 6.750% Notes, in whole or in part, at any time at the
"make-whole" redemption prices described under the heading "Description of the
Notes and the Guarantees -- Optional Redemption of U.S. Dollar Notes" on page
S-87 of this prospectus supplement.

Reed Elsevier Capital Inc. may redeem all, but not part, of the Notes upon the
occurrence of certain tax events at the redemption prices described under the
heading "Description of the Notes and the Guarantees -- Optional Redemption for
Tax Reasons" on page S-88 of this prospectus supplement.

Reed Elsevier Capital Inc. has applied to list the Notes on the Luxembourg Stock
Exchange and the U.S. Dollar Notes on The New York Stock Exchange in accordance
with their respective rules.

SEE "RISK FACTORS" ON PAGE S-13 FOR A DISCUSSION OF CERTAIN FACTORS THAT YOU
SHOULD CONSIDER BEFORE INVESTING IN THE NOTES.

U.S. DOLLAR U.S. DOLLAR
6.125% NOTES 6.750% NOTES EURO NOTES
----------------------- ----------------------- -----------------------
PER NOTE TOTAL PER NOTE TOTAL PER NOTE TOTAL
-------- ------------ -------- ------------ -------- ------------

Public Offering Price.............. 99.957% $549,763,500 99.577% $547,673,500 99.578% E497,890,000
Commissions........................ 0.350% $ 1,925,000 0.450% $ 2,475,000 0.400% E 2,000,000
Proceeds to Reed Elsevier Capital
Inc. (before expenses)........... 99.607% $547,838,500 99.127% $545,198,500 99.178% E495,890,000

None of the Securities and Exchange Commission, any state securities commission,
the Luxembourg Stock Exchange, The New York Stock Exchange nor any foreign
governmental agency has approved or disapproved of these securities or
determined if this prospectus supplement or the accompanying prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.

The U.S. Dollar Notes are expected to be delivered in book-entry form only to
purchasers through The Depository Trust Company, Clearstream Banking, societe
anonyme, Luxembourg and the Euroclear System, and the Euro Notes are expected to
be delivered in book-entry form only to purchasers through Clearstream Banking,
societe anonyme, Luxembourg and the Euroclear System, in all cases, on or about
July 31, 2001.
- --------------------------------------------------------------------------------
JOINT BOOK-RUNNERS
LEHMAN BROTHERS SALOMON SMITH BARNEY UBS WARBURG
---------------------------
CO-MANAGERS (U.S. DOLLAR NOTES)
BARCLAYS CAPITAL DEUTSCHE BANC ALEX. BROWN JPMORGAN
---------------------------
CO-MANAGERS (EURO NOTES)
BARCLAYS CAPITAL DEUTSCHE BANK JPMORGAN
July 25, 2001
2

TABLE OF CONTENTS

PROSPECTUS SUPPLEMENT

PAGE
----

About This Prospectus Supplement............................ S-3
Exchange Rates.............................................. S-5
Cautionary Statement Concerning Forward-Looking
Statements................................................ S-6
Prospectus Supplement Summary............................... S-7
Risk Factors................................................ S-13
Use Of Proceeds............................................. S-16
Description Of Our Business................................. S-17
Capitalization.............................................. S-36
Ratio Of Earnings To Fixed Charges.......................... S-37
Selected Financial Data..................................... S-38
Reed Elsevier............................................. S-38
Reed International........................................ S-40
Elsevier.................................................. S-42
Harcourt.................................................. S-44
Unaudited Pro Forma Financial Information................... S-45
Reed Elsevier............................................. S-45
Reed International........................................ S-56
Elsevier.................................................. S-62
Operating And Financial Review And Prospects................ S-67
Management.................................................. S-80
Description Of The Notes And The Guarantees................. S-83
Underwriting................................................ S-94
Offering Restrictions....................................... S-95
Legal Matters............................................... S-96
Experts..................................................... S-96
Where You Can Find More Information......................... S-97
Information Incorporated By Reference....................... S-97
Listing And General Information............................. S-98

PROSPECTUS

PAGE
----

About this Prospectus....................................... 2
Enforceability of Civil Liabilities......................... 2
Where You Can Find More Information......................... 3
Incorporation of Certain Documents by Reference............. 3
Reed Elsevier............................................... 5
Ratio of Earnings to Fixed Charges.......................... 6
Use of Proceeds............................................. 6
Description of the Debt Securities and Guarantees........... 6
Taxation.................................................... 25
Plan of Distribution........................................ 35
Legal Matters............................................... 36
Experts..................................................... 36

S-2
3

ABOUT THIS PROSPECTUS SUPPLEMENT

This document is in two parts. The first part is the prospectus supplement,
which describes the specific terms of the Notes and the Guarantees being offered
and certain other matters relating to us and our financial condition. The second
part, the accompanying prospectus, gives more general information about debt
securities and guarantees that may be offered from time to time, some of which
does not apply to the Notes and the Guarantees being offered. Generally, when we
refer to the prospectus, we are referring to both parts of this document
combined. If the description of the Notes and the Guarantees in the prospectus
supplement differs from the description of debt securities and guarantees in the
accompanying prospectus, you should rely on the information in the prospectus
supplement.

You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We have
not, and the underwriters have not, authorized any other person to provide you
with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. You should assume that the
information appearing in this prospectus supplement is accurate only as of the
date on the front cover of this prospectus supplement. Our business, financial
condition, results of operations and prospects may have changed since that date.
This prospectus supplement and the accompanying prospectus may only be used in
connection with the offering of the Notes and the Guarantees offered hereby.

We accept full responsibility for the accuracy of the information contained
in this prospectus supplement and confirm, having made all reasonable inquiries,
that to the best of our knowledge and belief there are no other facts the
omission of which would make any statement herein misleading in any material
respect.

The Luxembourg Stock Exchange takes no responsibility for the contents of
this document, makes no representation as to its accuracy or completeness and
expressly disclaims any liability whatsoever for any loss however arising from
or in reliance upon the whole or any part of the contents of this prospectus
supplement and the accompanying prospectus.

A portion of the Notes offered hereby is being offered and sold outside the
United States.

This prospectus supplement does not constitute an offer to sell, or a
solicitation of an offer to buy, any of the securities offered hereby by any
person in any jurisdiction in which it is unlawful for such person to make such
an offering or solicitation. The offer or sale of the Notes may be restricted by
law in some jurisdictions, and you should inform yourself about, and observe,
any of those restrictions. See "Offering Restrictions" on page S-95 of this
prospectus supplement.

In this prospectus supplement:

- "Reed International" refers to Reed International P.L.C.;

- "Elsevier" refers to Elsevier NV;

- "Reed Elsevier Capital" refers to Reed Elsevier Capital Inc.;

- "guarantors" refers to Reed International and Elsevier;

- "Reed Elsevier," "we," "us" and "our" collectively refer to Reed
International, Elsevier, Reed Elsevier plc, Elsevier Reed Finance BV and
their respective subsidiaries, including Reed Elsevier Capital, and
associates and joint ventures; and

- "Harcourt" refers to Harcourt General, Inc.

S-3
4

Reed Elsevier is not a legal entity but a collective reference to the separate
legal entities of Reed Elsevier. We refer to the combined businesses of Reed
Elsevier as the "combined businesses" in this prospectus supplement, and the
financial statements of the combined businesses are referred to as the "combined
financial statements." The combined financial statements are contained in our
joint annual report on Form 20-F for the fiscal year ended December 31, 2000,
filed on March 13, 2001, (the "2000 Annual Report on Form 20-F") and are
incorporated by reference in this prospectus supplement. See "Information
Incorporated by Reference" on page S-97 of this prospectus supplement.

In this prospectus supplement, references to "dollars," "$," "cents" and
"c" are to U.S. currency, references to "pounds sterling," "sterling," "L,"
"pence" or "p" are to U.K. currency and references to "euro" and "E" are to the
currency of the European Economic and Monetary Union. For the fiscal year 1999,
Elsevier adopted the euro as its primary currency for the presentation of
financial information and the declaration of dividends.

STABILIZATION

IN CONNECTION WITH THIS OFFERING, LEHMAN BROTHERS INC., SALOMON SMITH
BARNEY INC. AND UBS WARBURG LLC OR THEIR RESPECTIVE AFFILIATES MAY OVERALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE FOR THE NOTES
AT LEVELS WHICH MIGHT NOT OTHERWISE PREVAIL. IN ANY JURISDICTION WHERE THERE CAN
BE ONLY ONE STABILIZING AGENT, LEHMAN BROTHERS INTERNATIONAL (EUROPE) OR ITS
AFFILIATES SHALL EFFECT ANY SUCH TRANSACTIONS. NONE OF THE TRANSACTIONS
DESCRIBED IN THIS PARAGRAPH ARE REQUIRED, AND, IF THEY ARE UNDERTAKEN, THEY MAY
BE DISCONTINUED AT ANY TIME.

S-4
5

EXCHANGE RATES

The following table illustrates, for the periods and dates indicated,
certain information concerning the noon buying rate for pounds sterling
expressed in U.S. dollars per L1.00. Noon buying rates have not been used in the
preparation of the Reed Elsevier combined financial statements or the Reed
International consolidated financial statements.

YEAR ENDED DECEMBER 31, PERIOD END AVERAGE(1) HIGH LOW
- ----------------------- ---------- ---------- ----- -----
(U.S. DOLLARS PER L1.00)

1996.................................................. $1.71 $1.56 $1.71 $1.49
1997.................................................. 1.64 1.64 1.70 1.58
1998.................................................. 1.66 1.66 1.71 1.61
1999.................................................. 1.62 1.62 1.68 1.55
2000.................................................. 1.49 1.52 1.65 1.40

MONTH
- ------------------------------------------------------------
HIGH LOW
----- -----

July 2001 (through July 25, 2001)........................... $1.43 $1.40
June 2001................................................... 1.42 1.37
May 2001.................................................... 1.44 1.41
April 2001.................................................. 1.45 1.42
March 2001.................................................. 1.47 1.42
February 2001............................................... 1.48 1.44
January 2001................................................ 1.50 1.46

- ---------------
(1) The average of the noon buying rates on the last day of each month during
the relevant period.

The following table illustrates, for the periods and dates indicated,
certain information concerning the noon buying rate for the euro expressed in
U.S. dollars per E1.00. Noon buying rates have not been used in the preparation
of the Elsevier financial statements.

YEAR ENDED DECEMBER 31, PERIOD END AVERAGE(1) HIGH LOW
- ------------------------------------------------------ ---------- --------- ----- -----
(U.S. DOLLARS PER E1.00)(2)

1996.................................................. $1.28 $1.30 $1.37 $1.26
1997.................................................. 1.08 1.12 1.28 1.03
1998.................................................. 1.17 1.10 1.21 1.06
1999.................................................. 1.01 1.07 1.18 1.00
2000.................................................. 0.94 0.92 1.03 0.83

MONTH
- -----
HIGH LOW
----- -----

July 2001 (through July 25, 2001)........................... $0.88 $0.84
June 2001................................................... 0.86 0.84
May 2001.................................................... 0.89 0.85
April 2001.................................................. 0.90 0.88
March 2001.................................................. 0.93 0.88
February 2001............................................... 0.94 0.91
January 2001................................................ 0.95 0.92

- ---------------
(1) The average of the noon buying rates on the last day of each month during
the relevant period.

(2) Euro rates for periods prior to the 1999 financial year have been stated
using the relevant Dutch guilder rates, translated at the official
conversion rate of Dfl2.20371 per E1.00, which was fixed as of January 1,
1999.

S-5
6

CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS

This prospectus supplement, the prospectus and the documents incorporated
by reference in this prospectus supplement and the accompanying prospectus
contain certain statements that may be deemed to be "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Statements that are not historical facts, including statements about our beliefs
and expectations, are forward-looking statements. These statements are based on
current plans, estimates and projections, and therefore you should not place too
much reliance on them. Forward-looking statements speak only as of the date they
are made, and we undertake no obligation to update any of them in light of new
information or future events. Forward-looking statements involve inherent risks
and uncertainties. Although we believe the expectations expressed in the
forward-looking statements are based on reasonable assumptions within the bounds
of our knowledge of our business, we caution you that a number of important
factors could cause actual results or outcomes to differ materially from those
expressed in any forward-looking statement. These factors include, but are not
limited to, the following:

- our financial condition;

- our results of operations;

- our competitive position;

- the features and functions of and markets for the products and services
we offer;

- our business plans and strategies;

- our ability to integrate our operations and the acquired businesses of
Harcourt;

- the effect on our business of the failure to realize synergies or other
anticipated benefits of the acquisition of Harcourt;

- liabilities within Harcourt of which we are not aware;

- general economic and business conditions;

- exchange rate fluctuations;

- the impact of technological change, including the impact of electronic or
other distribution formats, on our businesses;

- competitive factors in the industries in which we operate;

- customer acceptance of our products and services;

- changes in law and legal interpretation affecting our intellectual
property rights and how business is done through the Internet;

- legislative, fiscal and regulatory developments and political risks;

- requirements or actions of antitrust authorities;

- changes in the seasonal and cyclical nature of the markets for our
products and services;

- changes in public funding of academic institutions and spending by
academic institutions; and

- other risks referenced from time to time in the filings of Reed
International and Elsevier with the U.S. Securities and Exchange
Commission (the "SEC").

S-6
7

PROSPECTUS SUPPLEMENT SUMMARY

This summary highlights selected information included in this prospectus
supplement and the accompanying prospectus and may not contain all of the
information that is important to you. To understand us and the sale of the Notes
fully, you should read carefully this prospectus supplement, the prospectus and
the documents incorporated by reference in this prospectus supplement.

BACKGROUND

We are one of the world's leading publishers and information providers. Our
activities include scientific, legal, educational and business publishing. Our
principal operations are in North America and Europe. For the year ended
December 31, 2000, we had total turnover of approximately L3.8 billion
(approximately $5.7 billion) and an average of approximately 28,900 employees.

We came into existence on January 1, 1993 when Reed International and
Elsevier contributed their businesses to two jointly owned companies, Reed
Elsevier plc, a U.K. registered company which owns our publishing and
information businesses, and Elsevier Reed Finance BV, a Dutch registered company
which owns our finance activities. Reed International and Elsevier have retained
their separate legal and national identities and are publicly held companies
with separate stock exchange listings in London, Amsterdam and New York. Reed
Elsevier Capital is incorporated in the state of Delaware and is a wholly-owned
indirect subsidiary of Reed Elsevier plc, which is jointly owned by Reed
International and Elsevier.

Reed International and Elsevier each holds a 50% interest in Reed Elsevier
plc. Reed International holds a 39% interest in Elsevier Reed Finance BV, with
Elsevier holding a 61% interest. Reed International additionally holds an
indirect equity interest in Elsevier, reflecting the arrangements entered into
between Reed International and Elsevier at the time of the merger, which
determined the equalization ratio whereby one Elsevier ordinary share is, in
broad terms, intended to confer equivalent economic interests to 1.538 Reed
International ordinary shares. The equalization ratio is subject to change to
reflect share splits and similar events that affect the number of outstanding
ordinary shares of either Reed International or Elsevier.

Under the equalization arrangements, Reed International shareholders have a
52.9% economic interest in Reed Elsevier, and Elsevier shareholders (other than
Reed International) have a 47.1% economic interest in Reed Elsevier. Holders of
ordinary shares in Reed International and Elsevier have substantially equivalent
dividend and capital rights with respect to their ordinary shares.

OPERATIONS

We derive our turnover principally from subscriptions, advertising sales,
circulation and copy sales and exhibition fees. In 2000, 39% of our turnover was
derived from subscriptions, 24% from advertising sales, 17% from circulation and
copy sales, 10% from exhibition fees and 10% from other sources.

We operate in four principal segments.

SCIENCE AND MEDICAL. This segment provides scientific information to
research libraries and scientists through journals, books and CD-ROMs and its
ScienceDirect family of Internet-based products. Additionally, this segment
operates a worldwide network of medical publishing and communications businesses
that provide customized information to healthcare professionals, medical
societies and pharmaceutical companies, as well as a range of medical,
biotechnology and clinical titles. For the year ended December 31, 2000, segment
turnover was L693 million.

LEGAL. The businesses within this segment serve important legal, tax,
business and reference markets around the world. Key brands include LexisNexis,
a provider of information to legal, corporate and government markets, Matthew
Bender, a leading U.S. publisher of legal analysis and case law, Martindale-
Hubbell, a U.S. publisher of legal directories, and Butterworths Tolley, a U.K.
legal publisher. For the year ended December 31, 2000, segment turnover was
L1,201 million.

S-7
8

EDUCATION. This segment provides materials to teachers in the United
Kingdom, the United States and other English speaking markets and supplies
targeted professional and academic market segments in the United Kingdom and the
United States. For the year ended December 31, 2000, segment turnover was L202
million.

BUSINESS. The businesses within this segment are business magazine and
information companies, operating mainly in the United States and Europe, and a
worldwide exhibitions business with a leading position in the United States,
Asia and Europe. Products within this segment include titles such as Variety,
Interior Design and Computer Weekly and vertical portals such as
manufacturing.net, tvinsite.com, e-insite, variety.com and wirelessweek.com.
Additionally, through Reed Exhibition Companies, this segment organizes events
in 29 countries, including National Hardware Show, National Manufacturing Week
and Professional Golfers Association Merchandise Show. For the year ended
December 31, 2000, segment turnover was L1,672 million.

THE HARCOURT ACQUISITION

On July 12, 2001, we acquired Harcourt for $4.45 billion and on July 13,
2001 sold the Harcourt Higher Education business and the Corporate and
Professional Services businesses (other than educational and clinical testing)
to The Thomson Corporation for pre-tax proceeds of $2.06 billion. We refer
throughout this document to the sale of these businesses to The Thomson
Corporation as the "on-sale to The Thomson Corporation." Following the on-sale
to The Thomson Corporation, we have acquired Harcourt's Scientific, Technical
and Medical ("STM") businesses and its U.S. K-12 (kindergarten to grade 12)
Schools Education and Testing businesses which have an implied value of
approximately $4.5 billion, taking into account corporate net debt, taxes
payable on the on-sale proceeds and the assumption of corporate and other
liabilities.

The Harcourt STM businesses will be integrated into the Science and Medical
segment and are expected to bring high quality scientific and technical journals
and a leading global position in medical publishing. The combined business is
positioned across the scientific, technical and medical spectrum, and offers a
range of Internet information services. Total revenue for the Harcourt STM
businesses for the year ended October 31, 2000 was $688 million.

The Harcourt K-12 Schools Education and Testing businesses will become a
part of the Education segment. Total revenue for these businesses was $990
million for the year ended October 31, 2000. The Harcourt K-12 Schools Education
businesses are leaders in U.S. educational publishing. The Harcourt testing
businesses provide testing and performance measuring services for educational
and clinical use.

PRINCIPAL EXECUTIVE OFFICES

Reed International's principal executive offices are located at 25 Victoria
Street, London, SW1H 0EX, United Kingdom (telephone number +44-20-7222-8420).
Elsevier's principal executive offices are located at Van de Sande
Bakhuyzenstraat 4, 1061 AG Amsterdam, The Netherlands (telephone number
+31-20-515-9341). Reed Elsevier Capital's principal executive offices are
located at 1105 North Market Street, Suite 942, Wilmington, DE 19801 (telephone
number +1-302-427-9299).

S-8
9

THE OFFERING

Issuer........................ Reed Elsevier Capital

Notes Offered................. $550,000,000 total principal amount of U.S.
Dollar 6.125% Notes due 2006

$550,000,000 total principal amount of U.S.
Dollar 6.750% Notes due 2011

E500,000,000 total principal amount of 5.750%
Euro Notes due 2008

Maturity Dates................ August 1, 2006 for U.S. Dollar 6.125% Notes

August 1, 2011 for U.S. Dollar 6.750% Notes

July 31, 2008 for Euro Notes

Interest Payment Dates........ February 1 and August 1 of each year, beginning
on February 1, 2002 for U.S. Dollar 6.125%
Notes

February 1 and August 1 of each year, beginning
on February 1, 2002 for U.S. Dollar 6.750%
Notes

July 31 of each year, beginning on July 31,
2002 for Euro Notes

Ranking....................... The Notes will be senior unsecured obligations
of Reed Elsevier Capital. The Notes will rank
equally in right of payment with all of the
existing and future senior unsecured
indebtedness of Reed Elsevier Capital.

Guarantors.................... Reed International and Elsevier

Guarantees.................... Reed International and Elsevier will
unconditionally and irrevocably guarantee the
Notes on a joint and several basis. The
Guarantees will rank equally with all of the
existing and future senior unsecured
indebtedness of Reed International and
Elsevier.

Optional Redemption of U.S.
Dollar Notes.................. Reed Elsevier Capital may redeem each of the
U.S. Dollar 6.125% Notes and the U.S. Dollar
6.750% Notes, in whole or in part, at any time
at the "make-whole" redemption prices described
under the heading "Description of the Notes and
the Guarantees -- Optional Redemption of U.S.
Dollar Notes" on page S-87 of this prospectus
supplement.

Optional Redemption of Notes
for Tax Reasons............... Reed Elsevier Capital may redeem all, but not
part, of the Notes upon the occurrence of
certain tax events at the redemption prices
described under the heading "Description of the
Notes and the Guarantees -- Optional Redemption
for Tax Reasons" on page S-88 of this
prospectus supplement.

Use of Proceeds............... The net proceeds of this offering are estimated
to be approximately $1,528 million (after
deducting underwriting discounts and
transaction expenses). We intend to use the net
proceeds primarily for the repayment of
commercial paper and other short term
borrowings put in place to fund the Harcourt
acquisition.

Governing Law................. State of New York

S-9
10

Trustee....................... The Chase Manhattan Bank

Paying and Transfer Agent
(U.S. Dollar Notes)........... The Chase Manhattan Bank

Paying and Transfer Agent
(Euro Notes)................ The Chase Manhattan Bank, London Branch

Clearance and Settlement...... U.S. Dollar Notes will be cleared through The
Depository Trust Company, Clearstream Banking,
societe anonyme, Luxembourg and the Euroclear
System. Euro Notes will be cleared through
Clearstream Banking, societe anonyme,
Luxembourg and the Euroclear System.

Listing....................... We have applied to list the Notes on the
Luxembourg Stock Exchange and the U.S. Dollar
Notes on The New York Stock Exchange in
accordance with their respective rules.

Luxembourg Listing Agent...... Kredietbank S.A. Luxembourgeoise

Luxembourg Paying and Transfer
Agent....................... Chase Manhattan Bank Luxembourg S.A.

S-10
11

SUMMARY UNAUDITED PRO FORMA FINANCIAL DATA

We are providing the following unaudited pro forma financial information to
give you information on what the results of operations and summary financial
position of Reed Elsevier might have looked like had the acquisition of
Harcourt, the on-sale to The Thomson Corporation and the sale of the Notes
occurred on an earlier date. This information is provided for illustrative
purposes only and does not show what the results of operations or financial
position of Reed Elsevier would have been if the acquisition of Harcourt, the
on-sale to The Thomson Corporation and the sale of the Notes had actually
occurred on the dates assumed. This information also does not indicate what the
future operating results or financial position of Reed Elsevier will be. See
"Reed Elsevier Unaudited Pro Forma Combined Financial Information" on page S-45
of this prospectus supplement.

BASIS OF PREPARATION -- REED ELSEVIER UNAUDITED PRO FORMA COMBINED FINANCIAL
INFORMATION

General. This information has been prepared in accordance with U.K. and
Dutch GAAP, which differ in certain significant respects from U.S. GAAP.
Harcourt's financial position and results of operations have been adjusted to
conform materially to Reed Elsevier's accounting policies under U.K. and Dutch
GAAP and translated into pounds sterling, as set forth in Note 3 to the Reed
Elsevier Unaudited Pro Forma Combined Financial Information on page S-50 of this
prospectus supplement.

The differences between U.K. and Dutch GAAP and U.S. GAAP which are most
relevant to Reed Elsevier are set forth in Note 4 to the Reed Elsevier Unaudited
Pro Forma Combined Financial Information on page S-53 of this prospectus
supplement.

Reed Elsevier will account for the acquisition of Harcourt using the
acquisition method of accounting under U.K. and Dutch GAAP and using the
purchase method of accounting under U.S. GAAP. The unaudited pro forma combined
financial information has been prepared on this basis.

Unaudited Pro Forma Combined Income Statement Data. This assumes that the
acquisition of Harcourt, the on-sale to The Thomson Corporation and the sale of
the Notes took place on January 1, 2000, the first day of the financial period
presented in the unaudited pro forma combined financial information.

The unaudited pro forma combined income statement data for the year ended
December 31, 2000 combines the audited profit and loss account of Reed Elsevier
for that period and the unaudited pro forma income statement of Harcourt for the
year ended October 31, 2000, as adjusted to conform materially to Reed
Elsevier's accounting policies under U.K. and Dutch GAAP, after giving pro forma
effect to the acquisition of Harcourt, the on-sale to The Thomson Corporation
and the sale of the Notes.

Unaudited Pro Forma Combined Balance Sheet Data. This assumes that the
acquisition of Harcourt, the on-sale to The Thomson Corporation and the sale of
the Notes took place on December 31, 2000.

The unaudited pro forma combined balance sheet data as of December 31, 2000
combines the audited combined balance sheet of Reed Elsevier at that date and
the unaudited pro forma balance sheet of Harcourt as of October 31, 2000, as
adjusted to conform materially to Reed Elsevier's accounting policies under U.K.
and Dutch GAAP, after giving pro forma effect to the acquisition of Harcourt,
the on-sale to The Thomson Corporation and the sale of the Notes.

S-11
12

REED ELSEVIER UNAUDITED PRO FORMA
COMBINED INCOME STATEMENT DATA

YEAR ENDED
DECEMBER 31,
-----------------
2000 2000(1)
------ -------
(IN MILLIONS)

U.K. AND DUTCH GAAP
Turnover.................................................. L4,916 $6,920
Operating profit including joint ventures................. 388 546
Profit on ordinary activities before taxation............. 256 360
Profit for the period..................................... 50 70
Adjusted operating profit(2).............................. 1,047 1,474
Adjusted profit before taxation(2)........................ 824 1,160
Adjusted profit attributable(2)........................... 595 838

U.S. GAAP
Net income for the period................................. 90 127

- ---------------
(1) For the convenience of the reader, pounds sterling amounts as of December
31, 2000 have been translated into U.S. dollars using the noon buying rate
on June 29, 2001 of $1.4077 per L1.00.

(2) U.K. and Dutch GAAP allow the presentation of alternative earnings measures.
Adjusted profit figures, which exclude the amortization of goodwill and
intangible assets, exceptional items and related tax effects, are presented
as additional performance measures. U.S. GAAP does not permit the
presentation of alternative earnings measures.

REED ELSEVIER UNAUDITED PRO FORMA
COMBINED BALANCE SHEET DATA

YEAR ENDED
DECEMBER 31,
------------------
2000 2000(1)
------- -------
(IN MILLIONS)

U.K. AND DUTCH GAAP
Total assets.............................................. L 9,711 $13,670
Net debt.................................................. 3,233 4,551
Combined shareholders' funds.............................. 3,041 4,281

U.S. GAAP
Combined shareholders' funds.............................. 3,717 5,232

S-12
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RISK FACTORS

You should carefully consider the following risks before making a decision
to invest in the Notes. Additional risks not presently known to us or that we
currently deem immaterial may also impair our business.

RISKS RELATING TO OUR BUSINESS

WE OPERATE IN A HIGHLY COMPETITIVE ENVIRONMENT THAT IS SUBJECT TO RAPID CHANGE
AND WE MUST CONTINUE TO INVEST AND ADAPT TO REMAIN COMPETITIVE.

Our science and medical, business, legal and education businesses operate
in highly competitive markets. These markets continue to change in response to
technological innovations and other factors. We cannot predict with certainty
the changes that may occur and the effect of those changes on the
competitiveness of our businesses. In particular, the means of delivering our
products, and the products themselves, may be subject to rapid technological
change. We cannot predict whether technological innovations will, in the future,
make some of our products wholly or partially obsolete. We may be required to
invest significant resources to further adapt to the changing market and
competitive environment.

WE CANNOT ASSURE YOU WHETHER, OR WHEN, OUR SUBSTANTIAL INVESTMENT IN OUR
INTERNET INITIATIVES WILL PRODUCE RETURNS.

We are investing significant amounts to develop and promote our Internet
initiatives and electronic platforms. The provision of products and services
through these media is very competitive and we may experience difficulties
developing this aspect of our businesses due to a variety of factors, many of
which are beyond our control. These factors may include:

- the acceptance of our Internet initiatives and electronic platforms by
our customers;

- competition from comparable and new technologies; and

- the public's acceptance and continued use of the Internet and electronic
media.

In addition, as a consequence of our Internet and other technological
initiatives, we are becoming more dependent on the successful performance and
operation of the Internet and our systems.

WE CANNOT ASSURE YOU THAT THERE WILL BE CONTINUED DEMAND FOR OUR PRODUCTS AND
SERVICES.

Our businesses are dependent on the continued acceptance by our customers
of our products and services and the prices which we charge for our products and
services. We cannot predict whether there will be changes in the market in the
future which will affect the acceptability of products, services and prices to
our customers.

CHANGES IN GOVERNMENT FUNDING OF ACADEMIC INSTITUTIONS OR SPENDING BY ACADEMIC
INSTITUTIONS MAY ADVERSELY AFFECT OUR EDUCATION AND SCIENTIFIC AND MEDICAL
BUSINESSES.

Our education business receives substantial public funds for its products
and services. Our science and medical business supplies scientific information
principally to academic institutions. Any decrease or elimination of government
funding or a decrease in academic spending could negatively impact our
businesses.

S-13
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WE MAY BE UNABLE TO IMPLEMENT AND EXECUTE OUR STRATEGIC PLANS IF WE CANNOT
MAINTAIN HIGH QUALITY MANAGEMENT.

The implementation and execution of our strategic plans depend on the
availability of high quality management resources across all our businesses. We
cannot predict that in the future these resources will be available.

A SIGNIFICANT PORTION OF OUR REVENUE IS DERIVED FROM ADVERTISING.

Approximately 24% of our revenue is derived from advertising.
Traditionally, spending by companies on advertising and other marketing
activities has been cyclical with companies spending significantly less on
advertising in times of economic slowdown or recession. Accordingly, our results
could be adversely affected by a reduction of advertising revenues that would
likely result upon the occurrence of an economic slowdown or recession.

OUR INTELLECTUAL PROPERTY RIGHTS MAY NOT BE ADEQUATELY PROTECTED UNDER CURRENT
LAWS IN SOME JURISDICTIONS, WHICH MAY ADVERSELY AFFECT OUR RESULTS AND OUR
ABILITY TO GROW.

Our products are largely comprised of intellectual property content
delivered through a variety of media, including journals, books, CD-ROMs and the
Internet. We rely on trademark, copyright and other intellectual property laws
to establish and protect our proprietary rights in these products. However, we
cannot assure you that our proprietary rights will not be challenged, limited,
invalidated or circumvented. Despite trademark and copyright protection, third
parties may be able to copy, infringe or otherwise profit from our proprietary
rights without our authorization. These unauthorized activities may be
facilitated by the Internet.

In addition, the lack of Internet-specific legislation relating to
trademark and copyright protection creates an additional challenge for us in
protecting our proprietary rights to content delivered through the Internet and
electronic platforms.

FLUCTUATIONS IN EXCHANGE RATES MAY AFFECT OUR REPORTED RESULTS.

Our financial statements are expressed in pounds sterling and euros and
are, therefore, subject to movements in exchange rates on the translation of the
financial information of businesses whose operational currencies are other than
our reporting currencies. The United States is our most important market outside
of Europe, and, accordingly, significant fluctuations in U.S. dollar/sterling
and U.S. dollar/euro exchange rates could significantly affect our reported
results from year to year. In addition, in some of our businesses we incur costs
in currencies other than those in which revenues are earned. The relative
movements between the exchange rates in the currencies in which costs are
incurred and the currencies in which revenues are earned can significantly
affect the profits of those businesses.

RISKS RELATING TO THE ACQUISITION OF HARCOURT

INTEGRATING OUR OPERATIONS AND THE ACQUIRED BUSINESSES OF HARCOURT MAY PROVE TO
BE DISRUPTIVE AND COULD RESULT IN THE COMBINED BUSINESSES FAILING TO MEET OUR
EXPECTATIONS.

We have acquired Harcourt's STM businesses and its U.S. K-12 Schools
Education and Testing businesses and expect the acquisition will result in
increased revenue and profit growth. We cannot be sure that we will realize
these anticipated benefits in full or at all. Achieving the expected benefits
and synergies of the acquisition will depend, in part, upon whether the
operations and the personnel of Harcourt can be integrated in an efficient and
effective manner with our existing businesses. The process of integrating two
formerly separately operated businesses may be disruptive to both businesses,
may take longer than we anticipate and may cause an interruption of our
business. The performance of the

S-14
15

combined businesses may not meet our expectations if integration is not
successful or if the process is prolonged.

THERE MAY BE CONTINGENT AND OTHER LIABILITIES WITHIN HARCOURT OF WHICH WE ARE
NOT AWARE.

We have acquired Harcourt by means of a tender offer followed by the merger
of one of our wholly-owned subsidiaries into Harcourt, pursuant to which
Harcourt became wholly-owned by us. As a result, we indirectly acquired all of
Harcourt's known and unknown liabilities, regardless of whether they are
directly associated with the businesses that we have retained.

Harcourt could have liabilities or its business could be subject to risks
of which we are currently unaware that could have a material adverse effect on
our business, financial position and results of operations.

S-15
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USE OF PROCEEDS

We estimate that the net proceeds from this offering will be approximately
$1,528 million (after deducting underwriting discounts and transaction
expenses). In estimating such net proceeds, the proceeds from the offering of
the Euro Notes have been translated into U.S. dollars using the applicable
currency swap rate of $0.88 per E1.00. The U.S. Dollar Notes and the Euro Notes
are being offered pursuant to separate underwriting agreements and the sale of
the U.S. Dollar Notes is not conditioned upon the sale of the Euro Notes and the
sale of the Euro Notes is not conditioned upon the sale of the U.S. Dollar
Notes.

We expect to use the proceeds primarily for the repayment of commercial
paper and other short term borrowings put in place to fund the acquisition of
Harcourt. Those borrowings have maturities ranging from overnight to 60 days and
a mixture of interest rates ranging from LIBOR plus 5 basis points to LIBOR plus
50 basis points. Certain of the underwriters participating in this offering are
dealers on our commercial paper program and may receive proceeds from the
repayment of commercial paper which is being repaid with proceeds from this
offering.

S-16
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DESCRIPTION OF OUR BUSINESS

REED ELSEVIER

Turnover is derived principally from subscriptions, advertising sales,
circulation and copy sales and exhibition fees. In 2000, 39% of our turnover was
derived from subscriptions, 24% from advertising sales, 17% from circulation and
copy sales, 10% from exhibition fees and 10% from other sources.

Subscription sales are defined as turnover derived from the periodic
distribution or update of a product which is often prepaid, while circulation
and copy sales include all other turnover from the distribution of a product,
usually on cash or credit terms. The level of publishing-related advertising
sales has historically been tied closely to the economic cycle with changes in
the profit performance of advertisers, business confidence and other economic
factors having a high correlation with changes in the size of the market.
Subscription sales and circulation and copy sales have tended to be more stable
than advertising sales through economic cycles.

Both subscription and circulation and copy sales include the electronic
distribution of products and subscription and transactional sales of online
services. In 2000, approximately 25% of our turnover was derived from electronic
information products, and approximately 12% was Internet sourced.

The following table shows our turnover by business segment and on the basis
of geographic origin and markets and our adjusted operating profit, which is
stated before the amortization of goodwill and intangible assets and exceptional
items, by business segment and on the basis of its geographic origin, in each of
the three years ended December 31, 2000:

TURNOVER ADJUSTED OPERATING PROFIT(1)(2)
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------------------------ ------------------------------------
1998 1999 2000 1998 1999 2000
------------ ------------ ------------ ---------- ---------- ----------
(IN MILLIONS, EXCEPT PERCENTAGES)

BUSINESS SEGMENT(3)
Science & Medical............... L 622 19% L 652 19% L 693 19% L223 27% L231 29% L252 32%
Legal........................... 948 30 1,087 32 1,201 32 291 36 282 36 237 30
Education....................... 159 5 181 5 202 5 31 4 34 4 40 5
Business........................ 1,434 45 1,470 44 1,672 44 268 33 245 31 264 33
------ --- ------ --- ------ --- ---- --- ---- --- ---- ---
Continuing operations........... 3,163 99 3,390 100 3,768 100 813 100 792 100 793 100
Discontinued operations(4)...... 28 1 -- -- -- -- -- -- -- -- -- --
------ --- ------ --- ------ --- ---- --- ---- --- ---- ---
Total........................... L3,191 100% L3,390 100% L3,768 100% L813 100% L792 100% L793 100%
====== === ====== === ====== === ==== === ==== === ==== ===
GEOGRAPHIC ORIGIN(5)(6)
North America................... L1,663 52% L1,836 54% L2,098 56% L390 48% L359 45% L335 42%
United Kingdom.................. 692 22 698 21 734 19 204 25 191 24 191 24
The Netherlands................. 383 12 391 11 399 11 128 16 135 17 136 17
Rest of Europe.................. 293 9 307 9 356 9 76 9 87 11 102 13
Rest of the World............... 132 4 158 5 181 5 15 2 20 3 29 4
------ --- ------ --- ------ --- ---- --- ---- --- ---- ---
Continuing operations........... 3,163 99 3,390 100 3,768 100 813 100 792 100 793 100
Discontinued operations(4)...... 28 1 -- -- -- -- -- -- -- -- -- --
------ --- ------ --- ------ --- ---- --- ---- --- ---- ---
Total........................... L3,191 100% L3,390 100% L3,768 100% L813 100% L792 100% L793 100%
====== === ====== === ====== === ==== === ==== === ==== ===

S-17
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TURNOVER
YEAR ENDED DECEMBER 31,
------------------------------------------
1998 1999 2000
------------ ------------ ------------
(IN MILLIONS, EXCEPT PERCENTAGES)

GEOGRAPHIC MARKET(5)(6)
North America................... L1,726 54% L1,906 56% L2,152 57%
United Kingdom.................. 483 15 484 14 521 14
The Netherlands................. 222 7 237 7 234 6
Rest of Europe.................. 407 13 418 13 478 13
Rest of the World............... 325 10 345 10 383 10
------ --- ------ --- ------ ---
Continuing operations........... 3,163 99 3,390 100 3,768 100
Discontinued operations(4)...... 28 1 -- -- -- --
------ --- ------ --- ------ ---
Total........................... L3,191 100% L3,390 100% L3,768 100%
====== === ====== === ====== ===

- ---------------
(1) U.K. and Dutch GAAP allow the presentation of alternative earnings measures.
Adjusted operating profit is shown before the amortization of goodwill and
intangible assets and exceptional items. Reed Elsevier businesses focus on
adjusted profits as an additional performance measure; see Note 1 to the
combined financial statements in the 2000 Annual Report on Form 20-F
incorporated by reference in this prospectus supplement. U.S. GAAP does not
permit the presentation of alternative earnings measures.

(2) Exceptional items are significant items within Reed Elsevier's ordinary
activities which, under U.K. and Dutch GAAP, are required to be disclosed
separately due to their size or incidence. Net exceptional items charged to
operating profit totalled L115 million (loss) in the year ended December 31,
2000, L239 million (loss) in the year ended December 31, 1999, and L79
million (loss) in the year ended December 31, 1998. See "Operating and
Financial Review and Prospects -- Reed Elsevier" and Note 8 to the combined
financial statements in the 2000 Annual Report on Form 20-F incorporated by
reference in this prospectus supplement for a further description of these
items.

(3) The Education business, previously reported within the Legal segment, was
presented separately for the first time in 2000 in anticipation of the
acquisition of Harcourt. Comparatives have been restated accordingly. The
Scientific segment has been renamed Science & Medical to reflect business
strategy.

(4) Discontinued operations are presented in accordance with U.K. and Dutch
GAAP, and comprise IPC Magazines and the consumer book publishing operations
which were the final elements of the Consumer segment sold in 1998.

(5) The analysis by geographic origin attributes turnover and adjusted operating
profit to the territory where the product originates. The analysis by
geographic market attributes turnover on the basis of the destination
market.

(6) Our geographic markets are North America, the United Kingdom, The
Netherlands, the Rest of Europe (excluding the United Kingdom and The
Netherlands) and the Rest of the World (other than North America, the United
Kingdom, The Netherlands and the Rest of Europe).

Our businesses compete for circulation and marketing expenditures in
scientific and medical, legal, educational and business markets. The bases of
competition include, for readers and users of the information, the quality and
variety of the editorial content, the quality of the software to derive added
value from the information, the timeliness and the price of the products and,
for advertisers, the quality and the size of the audiences targeted.

S-18
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The following table shows the main business units by reference to business
segment and geographical location.

BUSINESS SEGMENT

GEOGRAPHICAL LOCATION(6)

NORTH AMERICA UNITED KINGDOM THE NETHERLANDS REST OF EUROPE
------------- -------------- --------------- --------------

SCIENCE & Elsevier Science Elsevier Science Elsevier Science Elsevier Science, Republic of Ireland
MEDICAL Excerpta Medica Communications The Lancet Excerpta Medica Editions Scientifiques et Medicales
MDL Information Systems Academic Press Communications Elsevier, France
Cell Press Harcourt Publishers Beilstein, Germany
Endeavor International
Academic Press
Harcourt Health Sciences

LEGAL LexisNexis U.S. Butterworths Tolley Editions du Juris-Classeur, France(2)
North American Legal Publishing(2) Verlag Orac, Austria(2)
Markets(1) LexisNexis Europe(2) Dott. A. Giuffre Editore, Italy
Corporate and Federal Markets (40%)(2)
Martindale Hubbell Stampfli Verlag, Switzerland
(40%)(2)
Wydawnictwa Prawnicze PWN, Poland
(50%)(2)

EDUCATION Harcourt School Publishers Heinemann Ginn
Holt, Rinehart and Winston Butterworth-Heinemann
Steck-Vaughn
Rigby
Greenwood-Heinemann
The Psychological Corporation
Harcourt Educational
Measurement

BUSINESS Cahners Business Information Reed Business Information Elsevier Business Elsevier Business Information,
CMD Group Reed Exhibition Companies(3) Information(4) Belgium(4)
Cahners Travel Group(5) OAG Worldwide(5) Elsevier Informacion Profesional,
ICIS-LOR Spain(4)
Schnell Publishing Company Reed Elsevier Deutschland,
Reed Exhibition Companies(3) Germany(4)
OAG Worldwide(5) Editions Prat, France(4)
Groupe Strategies, France(4)
Reed Midem Organisation, France(3)

REST OF THE WORLD
-----------------

SCIENCE & Elsevier Science, Japan
MEDICAL Excerpta Medica
Communications, Japan
LEGAL Butterworths, Australia(2)
Butterworths, South East
Asia(2)
Butterworths, South Africa
(50.01%)(2)
LexisNexis International
Latin America, Argentina &
Chile(2)
EDUCATION Rigby-Heinemann, Australia
BUSINESS Reed Business Information
Australia
Reed Exhibitions, Japan(3)
Reed Exhibitions,
Singapore(3)
Reed Exhibitions, Australia(3)

- ---------------
(1) This business includes Michie, Matthew Bender and Shepard's.
(2) These businesses form part of LexisNexis International.
(3) These businesses form part of Reed Exhibition Companies.
(4) These businesses form part of Elsevier Business Information.
(5) In 2000, we announced that we planned to divest a number of businesses,
including OAG Worldwide and Cahners Travel Group. These sales are well
advanced.
(6) All businesses are 100% owned unless otherwise stated.

S-19
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SCIENCE & MEDICAL

YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
------------- % CHANGE AT ------------ % CHANGE AT
1998 1999 CONSTANT RATES(1) 2000 CONSTANT RATES(2)
----- ----- ------------------ ------------ ------------------
(IN MILLIONS, EXCEPT PERCENTAGES)

Turnover
Elsevier Science................ L513 L534 5% L592 12%
Medical Businesses.............. 109 118 6% 101 (15)%
---- ---- ---- ---- ---
L622 L652 5% L693 7%
==== ==== ==== ==== ===
Adjusted operating profit(3)...... L223 L231 5% L252 12%
==== ==== ==== ==== ===
Adjusted operating margin......... 35.9% 35.4% (0.5) pts 36.4% 1.0pts
==== ==== ==== ==== ===

- ---------------
(1) Represents percentage change over 1998 at constant rates of exchange, which
have been calculated using the average exchange rates for the 1998 financial
year; see the tables titled "Turnover" and "Adjusted Operating Profit" on
page S-68 of this prospectus supplement for percentage changes at actual
rates of exchange.

(2) Represents percentage change over 1999 at constant rates of exchange, which
have been calculated using the average exchange rates for the 1999 financial
year; see the tables titled "Turnover" and "Adjusted Operating Profit" on
page S-68 of this prospectus supplement for percentage changes at actual
rates of exchange.

(3) U.K. and Dutch GAAP allow the presentation of alternative earnings measures.
Adjusted operating profit is presented as an additional performance measure
and is shown before amortization of goodwill and intangible assets and
exceptional items. U.S. GAAP does not permit the presentation of alternative
earnings measures.

The Science & Medical (formerly Scientific) segment of Reed Elsevier
comprises worldwide scientific, technical and medical publishing and
communications businesses.

The Science & Medical strategy is to extend its leading global position in
providing high quality scientific, technical and medical information solutions
to research scientists and information professionals. We believe that the prime
driver of growth will be the ScienceDirect family of Internet products, where
electronic access, inter-linked content and search capacity offer added value to
users.

Elsevier Science. Elsevier Science is a leading international publisher of
scientific information with headquarters in The Netherlands and operations
located around the globe. Within the Science & Medical segment, Elsevier
Science's scientific information businesses contributed approximately 85% of our
total turnover in 2000. Through a number of imprints, including Elsevier,
Pergamon, Excerpta Medica and North Holland, Elsevier Science supplies
scientific information through journals, books, CD-ROMs and online to research
libraries, scientists and professional markets serving an increasingly wide
range of research fields. We believe that Elsevier Science is valuable to the
scientific community through the publication of more than 1,200 subscription
based journals with more than 150,000 new research articles published each year,
focused on the life sciences, chemistry and physical sciences. These
peer-reviewed publications are an essential conduit for the dissemination of
authoritative research findings. Other publishing programs include econometrics,
statistics, geology, computer sciences, management and psychology.

During 2000, we signed approximately 300 ScienceDirect online contracts,
including contracts with groups of universities in Germany, The Netherlands, the
United States, China and Brazil. As of April 2001, approximately 55% of journal
subscriptions by value included ScienceDirect, and usage has grown from 5
million page views per month at the beginning of 2000 to 18 million in May 2001.

As of May 2001, ScienceDirect held approximately 1.4 million research
articles and is a comprehensive source of full text scientific research. More
research is added daily from our 1,200 scientific journals, and in 2000, we
announced our intention to incorporate all articles that were published before
1995 into the ScienceDirect electronic offering. This substantial undertaking
will take approximately five years to complete. The ScienceDirect content will
be further enhanced by the inclusion of major reference works; the first major
reference work on ScienceDirect was Comprehensive Clinical Psychology.

S-20
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Our focus has also been on expanding the ScienceDirect product line with
subject specific products, such as PhysicsDirect, PharmaDirect and
EngineeringDirect. Specific subject area homepages have also been created.
PhysicsDirect provides access to approximately 50 physics journals, as well as
the Inspec and Compendex databases, with subject specific navigational tools.
Embase.com combines the leading Embase and Medline database into one searchable
thesaurus, with full text links to some 1,400 journals. BioMedNet Reviews is a
subscription based web service providing access to the Elsevier Science
biomedical review journals.

The Chemistry Preprint Server was launched in August 2000. This service for
the chemistry community provides rapid communication and is a freely available
and permanent web archive for unreviewed research articles in the field of
chemistry. In the pharmaceutical area, we have added to the scope of our service
through the acquisition of the Afferent advanced drug screening software.

In parallel with expanding the ScienceDirect product line, we have worked
to improve the functionality and ease of use of ScienceDirect, for instance, by
giving individual users personalization through e-mail alerts, customized
searches and the tracking of search histories. In order to link ScienceDirect
with peer reviewed content of other publishers and other web information, a
scientific Internet search engine, Scirus.com, was launched in 2000. Scirus.com
allows for simultaneous searches through more than 50 million web pages as well
as ScienceDirect's content. The acquisition of Endeavor, a provider of digital
library systems, is expected to enable our customers to integrate our electronic
offerings into solutions which address the requirements of their institutions.

The migration from print to electronic services, backed by a doubling of
the sales force and customer service, is broadening access to our information.
Through contracts with university groups and our individual sales efforts, we
are now able to reach usage groups not traditionally part of our customer
base -- for example, smaller academic institutions.

Among Elsevier Science's most widely known and largest journals are: Cell,
Brain Research, Neuroscience and Biochimica et Biophysica Acta in the life
sciences, the Journal of the American College of Cardiologists and Annals of
Thoracic Surgery in the medical sciences, Tetrahedron and Journal of
Chromatography in chemistry, Physics Letters and Solid State Communications in
the physical sciences, Journal of Financial Economics in economics, and
Artificial Intelligence in the computer sciences field. Elsevier Science also
publishes secondary material in the form of supporting bibliographic data,
indexes and abstracts, and tertiary layers of information in the form of review
and reference works, including the Trends and Current Opinion series and
Encyclopaedia of Neuroscience. In addition, Elsevier Science publishes
conference proceedings, letters, journals for rapid communications, handbooks,
bulletins, magazines, dictionaries, newsletters, and sponsored publications.

Elsevier Science offers a number of secondary databases, available
electronically online or on CD-ROM. These include: EMBASE, covering
pharmaceutical and biomedical sciences, Compendex, covering all the engineering
disciplines, Geobase, focusing on geoscience and related areas, Beilstein
Database, providing online access to approximately eight million chemical
structures with linked descriptions of the properties, reactions, preparations,
citations and links to the pharmaceutical research tools of MDL Information
Systems, and Elsevier BIOBASE, a biological science database. Elsevier Science
also maintains such highly specialized databases as World Textiles and FLUIDEX.

In the scientific publishing business, journal subscriptions are usually
paid annually in advance. In 2000, subscriptions accounted for approximately 76%
of Elsevier Science's turnover, circulation and copy sales for 9% of turnover
and other sources for 15% of turnover. In 2000, approximately 43% of Elsevier
Science's turnover was derived from North America, 33% from Europe, and the
remaining 24% from the Rest of the World.

Much of the pre-press production of the scientific businesses is undertaken
in-house. An electronic production system is used to deliver the full text of
journal articles in whichever format the customer requires: online, on CD-ROM,
or in print. Electronic files of all journals are fed into our digital storage
facility (the "Electronic Warehouse"), which in turn stores content and makes it
available as required for

S-21
22

delivery to customers. Printing is primarily sourced through a variety of
unaffiliated printers located in cost effective printing centers, mainly in
Europe. As part of our ongoing efforts to upgrade our systems infrastructure, we
are rolling out an electronic workflow program from author submission and peer
review to pre-press and the Electronic Warehouse. The order processing of
subscriptions to scientific journals is, to a large extent, handled through
independent subscription agents. Electronic delivery is directly fulfilled
principally through ScienceDirect.

Competition with Elsevier Science is generally on a title by title basis.
Leading competing titles are generally published by learned societies such as
the American Chemical Society, the Institute of Electrical and Electronics
Engineers and the American Institute of Physics in the United States and the
Royal Society of Chemistry in the United Kingdom.

Medical Businesses. The Science & Medical segment also operates a
worldwide network of medical publishing and communications businesses. The
medical businesses within the Science & Medical segment comprise Excerpta Medica
Communications, Editions Scientifiques et Medicales Elsevier and The Lancet, and
together these businesses contributed approximately 15% of the Science & Medical
segment's turnover in 2000. In June 2000, we sold the Springhouse business,
focused on the nursing community, for $105 million.

Excerpta Medica Communications ("EMC") publishes customized information to
healthcare professionals, medical societies and pharmaceutical companies
worldwide. Consistent with the global structure of its main clients, EMC
fulfills the needs of pharmaceutical companies' international and domestic
marketing operations through its offices in The Netherlands, Germany, Italy,
France, Spain, the United States, Japan, Hong Kong and Australia. Activities
include educational and promotional scientific information delivered via medical
symposia, traditional print media, audio-visual and computer-based programs. EMC
works closely with pharmaceutical companies to provide worldwide marketing
platforms for new drugs. In 2000, approximately 89% of EMC's turnover was
derived from sponsored projects and 11% from subscriptions. In the same period,
approximately 37% of turnover came from North America, 30% from Europe and 33%
from the Rest of the World.

Editions Scientifiques et Medicales Elsevier ("ESME") based in Paris,
publishes a range of medical, biotechnology and clinical titles, including the
renowned Encyclopedie Medico Chirurgicale. In 2000, ESME launched Spanish and
English language treatises of Encyclopedie Medico Chirurgicale. In 2000, ESME's
circulation and copy sales accounted for approximately 52% of total turnover,
with a further 8% from advertising, 29% from subscriptions and 11% from other
sources.

The Lancet is one of the world's most respected medical journals, covering
all aspects of human health and is sold through subscription in over 75
countries. The Lancet celebrated its 175th year of publication with the launch
of The Lancet Oncology, the first of a series of journals with review
information on specific diseases. In 2000, subscriptions accounted for 86% of
total turnover, advertising for 14% of total turnover.

The medical publishing field is highly fragmented. There is regional
competition from a number of publishers and service providers in the United
States, such as The Thomson Corporation, American Medical Association,
Massachusetts Medical Society (New England Journal of Medicine), Medi Media,
Adis Press and Lippincott-Raven (Wolters Kluwer), Advanstar and IMS (Cognizant).

Harcourt Scientific Technical and Medical Businesses. We have acquired
Harcourt's STM businesses and its U.S. K-12 Schools Education and Testing
businesses in a transaction valued at approximately $4.5 billion.

The Harcourt STM businesses comprise high quality scientific and technical
journals and a leading global position in medical publishing. The combined
business is positioned across the scientific, technical and medical spectrum,
and offers a range of Internet information services.

S-22
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The Harcourt STM businesses are comprised of two principal businesses,
Academic Press and Harcourt Health Sciences:

- Academic Press publishes 174 peer-reviewed journals, with particular
focus on life, physical, social and computer sciences. Academic Press
also publishes reference works and databases. The IDEAL system provides
Academic Press content online and holds over 95,000 scientific research
articles.

- Harcourt Health Sciences is a leader in healthcare and medical publishing
measured by revenues. Through a range of imprints, including Mosby,
Churchill Livingstone, Harcourt and WB Saunders, Harcourt Health Sciences
publishes approximately 8,500 clinical reference works and 250 journals
and handbook series, covering the full spectrum of primary medical
research, clinical practice and allied healthcare. Through MD Consult,
Harcourt Health Sciences provides proprietary and licensed clinical
information to physicians and other healthcare professionals.

Total revenue for these Harcourt STM businesses for the year ended October
31, 2000 was $688 million.

During 2001, two divisions will be created within the Science & Medical
segment, covering Science & Technology and Health Sciences. The immediate
priorities are to:

- integrate the Elsevier Science and Academic Press businesses;

- use the combined science content and navigation tools to develop new,
customized online information services;

- integrate the worldwide medical businesses; and

- reorganize medical publishing around key clinical disciplines and expand
the availability of online information services and solutions.

In Science & Technology, the combination of the brands and content of
Academic Press and Elsevier Science is expected to create a business with a
breadth and depth of scientific information across the major scientific
disciplines. The ScienceDirect online platform is scalable and the service will
be extended across the Academic Press content.

In Health Sciences, the acquisition of Harcourt Health Sciences will
represent an opportunity in a complementary area for Science & Medical. We
believe that Science & Medical's clinical medicine journals, medical databases
and the medical communications businesses fit well with Harcourt Health
Sciences. The Harcourt Health Sciences prestigious reference works and handbook
series across clinical disciplines are expected to provide opportunities for the
development of navigational tools for online information services. MD Consult is
an entry point into online services for practicing clinicians and is expected to
be leveraged through the application of Science & Medical's online publishing
skills and increased investment to create additional Internet services.

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LEGAL

YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
-------------- % CHANGE AT ------------ % CHANGE AT
1998 1999 CONSTANT RATES(1) 2000 CONSTANT RATES(2)
----- ------ ------------------ ------------ ------------------
(IN MILLIONS, EXCEPT PERCENTAGES)

Turnover
LexisNexis U.S................ L 741 L 854 13% L 947 4%
LexisNexis International...... 207 233 13% 254 11%
----- ------ ------- ------ -------
L 948 L1,087 13% L1,201 5%
===== ====== ======= ====== =======
Adjusted operating profit(3).... L 291 L 282 (5)% L 237 (19)%
===== ====== ======= ====== =======
Adjusted operating margin....... 30.7% 25.9% (4.8)pts 19.7% (6.2)pts
===== ====== ======= ====== =======

The Legal segment of Reed Elsevier serves important legal, tax, business
and reference markets around the world. The Education business, previously
reported within the Legal segment, was presented separately for the first time
in 2000 in anticipation of the acquisition of Harcourt. Comparatives have been
restated accordingly.

The Legal strategy is to serve important legal, tax, business and reference
markets around the world.

In 2000, we launched new and upgraded Internet products and services
including the core research services of lexis.com and nexis.com for the North
American Legal Markets division and the Corporate and Federal Markets division.
We have expanded our sales and marketing activities, and have been building our
global capability and presence through acquisition and alliance.

In recognition that our markets and customers are becoming increasingly
global, we are developing a global product and technology platform to serve as
an underpinning to link individual country offerings, and to enable our legal
content to be delivered to our customers around the globe. We also made the
important decision in 2000 to adopt LexisNexis as our global brand. This will be
implemented progressively across our international markets in 2001.

Acquisitions were made in 2000 in the United States, the United Kingdom,
Asia and Latin America to extend our global capability. LexisNexis International
added Eclipse, a leading publisher in U.K. employment law and related fields
which is an important growing area of law. In the Corporate and Federal Markets
division, we acquired the RiskWise group of companies which provides online
identity verification and fraud-risk solutions for the e-commerce industry and
complements our existing public record business.

LexisNexis U.S. LexisNexis U.S. is a provider of information to the legal,
corporate and government markets in hard copy, online and CD-ROM formats. It
operates principally in the United States. LexisNexis U.S. is organized into
three business units: North American Legal Markets, Corporate and Federal
Markets and Martindale Hubbell. In 2000, LexisNexis U.S. contributed
approximately 79% of the total turnover of the Legal segment.

The North American Legal Markets division is responsible for developing,
marketing and selling legal information products in electronic and hard copy
formats to legal firms and practitioners. In 2000,

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LexisNexis U.S. continued its investment in new products and services, in sales
and marketing, and in support activities, to better meet the changing needs and
expectations of legal and other professionals and to improve its competitive
position.

In the North American Legal Markets division, we met our goal in 2000 of
introducing a competitive Internet-based service mid year with the enhanced
lexis.com, and we continue to add content and functionality to improve and
differentiate our service. Content licenses were secured through long term
agreements with CCH and Tax Analysts, both leading publishers of tax material.
Case law summaries have now been added to the LexisNexis federal and state case
law collection. These summaries cover cases since 1995 and we are working to
include earlier years, having started with those cases most often accessed.
Navigation and printing functions have been improved for easier usability and
report products introduced to help customers analyze their research results more
efficiently.

Our most recent market research shows lexis.com to have parity preference
amongst law students, an improvement from a year ago and representing an
important milestone.

Customization has been a feature of 2000 both in product and in marketing
and sales programs. During the year we launched a range of tools under the
LexisNexis Customized e-Solutions brand, including: an enterprise-wide portal
powered by Plumtree Software and developed exclusively for law firms' knowledge
management needs; Custom Web Pages for easy access to specific forms and sources
on lexis.com; Intranet Solutions for firms in the initial stages of creating an
Intranet; and Practice Pages designed under the guidance of Matthew Bender
authors and editors for a customized approach to specific areas of practice. To
meet the needs of U.S. attorneys in small firms and single-lawyer practices, the
lexisONE.com service was launched in 2000 with free and fee-based research and
legal forms, as well as resources to help attorneys manage firm business, client
relationships and their careers.

Matthew Bender, a leading U.S. publisher of legal analysis and case law,
offers more than 500 publications in print and electronic formats and is sold to
subscribers in more than 160 countries. Its publications include California
Forms of Pleading and Practice, Collier on Bankruptcy, Immigration Law and
Procedure, Moore's Federal Practice, Nimmer on Copyright and Rabkin & Johnson's
Current Legal Forms.

Michie offers approximately 700 practice-enhancing titles, 400 Custom Legal
Publications and the Annotated Codes of 35 states and territories. In addition,
Michie is the official publisher of the United States Code Service and United
States Supreme Court Reports, Lawyers' Edition. Law school professors and
students have long relied on the Michie Contemporary Legal Education Series to
provide course materials, prepared by leading legal scholars.

Shepard's is the premier U.S. legal citation service, providing a
comprehensive mix of Federal and State jurisdictional and topical citator
services delivered online or in print or CD-ROM formats. "Shepardizing" is a
process for U.S. lawyers and involves checking the continuing authority of a
case or statutory reference in the light of subsequent legal changes.

The Corporate and Federal Markets division is responsible for developing,
marketing and selling the LexisNexis online service to corporations, businesses
and local, state and federal government agencies, and also manages news,
business, financial and public records content acquisition and enhancements. In
the Corporate and Federal Markets division, we launched the new flagship
product, nexis.com, in September 2000. This represents a major upgrade of our
online research service, adding much improved navigation, personalization and
search capabilities to our information databases. As in the North American Legal
Markets division, we are building customized solutions with our customers that
are both industry and function specific, such as insurance, media, sales
support, mergers and acquisitions and business intelligence, that integrate
searching across a customer's Intranet, LexisNexis and other information
sources, including the web. We have made alliances with major systems suppliers,
such as Siebel and Verity, who have embedded nexis.com in their products.

Martindale-Hubbell is a publisher of legal directories to the legal
profession in North America and internationally. Its flagship product, the
Martindale-Hubbell Law Directory, includes more than 900,000

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U.S. lawyer and law firm listings. There are also special Canadian and
International editions and an online directory of professional legal staff. The
Martindale-Hubbell Law Directory is available through hardbound print, CD-ROM
and online. Martindale-Hubbell also offers the Internet-based lawyers.com
service to small law offices to connect them with prospective clients. The
service, which is free to users, provides profiles of some 420,000 attorneys and
firms world-wide.

Other businesses within LexisNexis U.S. include: Lexis Document Services, a
provider of comprehensive searching and filing services to U.S. law firms and
asset-based lenders which provides service for 4,300 jurisdictions throughout
the United States and Canada; and Reed Technology & Information Services
("RTIS"), a provider of content management and information delivery systems.

LexisNexis Europe offers a wide range of LexisNexis online information
products in its European markets, including local-language Internet browser
products in Germany and France. In January 2000, the business was expanded
through the acquisition of FT Profile and a long term license agreement for
Financial Times content. Since January 2001, LexisNexis Europe has formed part
of LexisNexis International.

In 2000, approximately 66% of LexisNexis U.S.'s turnover came from
subscription sales, including online services, 10% from transactional sales of
online services, 9% from advertising (including directory listings), 5% from
circulation and copy sales and the remaining 10% from other sources. In the same
period approximately 96% of turnover came from North America and 4% from the
Rest of the World.

In the U.S. legal information and services markets, LexisNexis U.S.'s
principal competitor is West (The Thomson Corporation). The principal
competitors in the business information market include Dialog (The Thomson
Corporation) and Factiva (Dow Jones and Reuters).

LexisNexis International. LexisNexis International comprises the
Butterworths group of companies, Editions du Juris-Classeur in France, Verlag
Orac in Austria, Orac Publishers in the Czech Republic, 40% interests in Giuffre
in Italy and in Stampfli Verlag in Switzerland, 50% interests in Wydawnictwa
Prawnicze PWN, a Polish joint venture, HVG-Orac, a joint venture in Hungary, and
legal publishers in Latin America. In 2000, LexisNexis International contributed
21% of the total turnover of the Legal segment.

Butterworths operates in the United Kingdom (Butterworths Tolley
Publishing), Australia, New Zealand, South Africa, South East Asia, India,
Canada and the Republic of Ireland. Butterworths provides legal, tax and
regulatory materials in loose-leaf, book, CD-ROM and online formats.

Butterworths Tolley Publishing's most widely known publications are
Halsbury's Laws of England, The Encyclopaedia of Forms and Precedents, Simon's
Taxes and Butterworth's Company Law Service. An increasing amount of its
information is now available online, through the web-based Butterworths Lexis
Direct service. The integration of Butterworths Direct and Lexis has provided
access, via a single subscription, to a wide range of U.K., Commonwealth and
U.S. legal materials. Butterworths Lexis Direct is a U.K. leader in electronic
legal publishing both in terms of content and functionality and comprises
several services: Law Direct, a subscription based current awareness service;
All England Direct, comprising a 24-hour case reporting service, and the entire
All England Law Reports; and Halsbury's Law Direct, comprising the complete text
of the 56 volume set of the latest edition fully updated. During 2000,
customized services were added in specialist fields, such as Human Rights Direct
and EU Direct, and, in partnership with a leading legal training firm, CPD
Direct was launched, providing online training and professional development as
an online service.

Butterworths Tolley Publishing is a market leader in "first point of
reference" tax publishing in the United Kingdom, through its single volume
guides and its loose-leaf service, and complements Butterworths' position in
publishing for practitioners at the specialist end of the legal and tax markets
in the United Kingdom. Butterworths Tolley Publishing also produces several
CD-ROM and online products for tax, regulatory and business markets. The
expansion into regulatory publishing continued with the acquisition in January
2000 of Eclipse, a publisher of U.K. employment law and related material.

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In 2000, approximately 87% of Butterworths' turnover was derived from hard
copy sales, with 13% attributable to electronic products. In the same period,
approximately 60% of turnover came from the United Kingdom, 13% from Australia,
6% from Canada and the balance from the rest of the world. Printing is primarily
sourced through a variety of unaffiliated printers located in cost-effective
printing centers. Warehousing and distribution are largely outsourced. The
principal U.K. competitor in the legal field is Sweet & Maxwell (The Thomson
Corporation), with Commerce Clearing House (Wolters Kluwer) competing against
its tax publications.

Editions du Juris-Classeur ("EJC") is a French publisher of legal materials
in loose-leaf form, CD-ROM and online for lawyers and notaries. The
Juris-Classeur collection comprises some 400 regularly updated volumes covering
66 topics. Its 20 journals, including the leading weekly La Semaine Juridique,
also cover all the important areas of French legal practice. In 2000, the French
case law database, Juris-Data, was launched as an online service. EJC has its
own printing and warehousing facilities. In 2000, subscriptions comprised
approximately 75% of EJC's turnover, while circulation and copy sales comprised
approximately 20% of turnover, with 5% from other sources. EJC's major
competitors are Dalloz (Havas Vivendi) and Lamy (Wolters Kluwer).

Verlag Orac, the leading tax publisher and a leading law publisher in
Austria, publishes a comprehensive range of tax materials, including the
fortnightly Austrian Tax Newspaper and the monthly Journal of Accountancy.
Verlag Orac also has an equity holding in a Hungarian law publisher HVG-Orac
(50%) and now has full ownership of Orac Publishers in the Czech Republic.

Giuffre, in which Reed Elsevier has a 40% interest, publishes reference
materials in both hard copy and, increasingly, CD-ROM formats for the Italian
legal market. It also has a journals program.

Stampfli Verlag is a Swiss legal and tax publisher in which we have a 40%
interest.

Wydawnictwa Prawnicze PWN is a joint venture company which was established
in 1994 with PWN, Poland's leading academic publisher in which we have a 50%
interest.

LexisNexis International's Latin American businesses comprise legal
publishers in Argentina (Abeledo Perrot, Depalma and Jurisprudencia) and in
Chile (Publitecsa and Conusur). Publitecsa and Conusur were both acquired in
2000. They serve a range of markets including legal practitioners and academic
and student markets.

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EDUCATION

Turnover
Reed Educational & Professional
Publishing..................... L 159 L 181 12% L 202 9%
===== ===== ==== ===== ===
Adjusted operating profit(3)........ L 31 L 34 8% L 40 15%
===== ===== ==== ===== ===
Adjusted operating margin........... 19.5% 18.8% (0.7)pts 19.8% 1.0pts
===== ===== ==== ===== ===

The Education business was reported separately from the Legal segment for
the first time in 2000 in anticipation of the acquisition of Harcourt. Reed
Educational & Professional Publishing ("REPP") serves the educational markets of
the United Kingdom, the United States, Australia, New Zealand and South Africa,
as well as the international professional and academic sectors.

REPP aims to be the number one choice for the provision of materials to
teachers and of professional and academic knowledge and instruction in targeted
market segments. Four key elements underpin achievement of this aim: expansion
in the supplemental segment of the U.S. schools market; continued consolidation
in the U.K. schools market; development of electronic resources; and expansion
of electronic access.

Reed Educational & Professional Publishing. REPP operates through eight
main businesses: U.K. Schools comprising the Heinemann, Rigby and Ginn imprints;
Global Library and Butterworth-Heinemann based in the U.K.; Rigby and
Greenwood-Heinemann based in the United States; Rigby-Heinemann based in
Australia; Heinemann in South Africa; and Reed Publishing in New Zealand. U.K.
Schools is a publisher for the U.K. primary and secondary markets. Global
Library publishes reference material for school libraries and has operational
units in the United Kingdom, the United States and Australia.
Butterworth-Heinemann is an international publisher of professional information
and learning materials for higher education and professional markets. It has
publishing units in the United Kingdom, the United States and Australia. In the
United States, Rigby publishes supplemental materials for elementary school
literacy development. Greenwood-Heinemann publishes monograph and reference
lists and teachers' professional resources. The Australian business, Rigby
Heinemann, is a publisher of primary and secondary school books in Australia. In
South Africa, Heinemann is a publisher of school texts and in New Zealand, Reed
Publishing publishes text-books for the local market. 2000 also saw expansion of
the e-learning unit and the development of a number of electronic products such
as the Heinemann Explore reference product.

In 2000, approximately 51% of REPP's turnover was derived from North
America, 31% from the United Kingdom, 7% from Australia and the remaining 11%
from the rest of the world. Printing and binding are performed by unaffiliated
printers and in cost effective printing centers both in the country of origin
and around the world. REPP has its own warehouse and distribution facilities in
its principal territories. REPP's major U.K. competitors are Longman (Pearson),
Oxford University Press, Stanley Thornes (Wolters Kluwer) and Cambridge
University Press. In the United States, principal competitors include Wright
Group (Tribune), SRA/Open Court (McGraw Hill) and MCP (Pearson). University

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presses are considered to be competitors in the academic market. In Australia,
principal commercial competitors include Nelson, Macmillan, AWL and Jacaranda.

Harcourt Education and Testing Businesses. We have acquired Harcourt's STM
businesses and its U.S. K-12 Schools Education and Testing businesses in a
transaction valued at approximately $4.5 billion.

Harcourt is a leader in U.S. educational publishing and assessment markets,
providing print and multi-media teaching materials and tests.

- Harcourt School Publishers is a leading U.S. elementary (kindergarten to
grade 6) publisher with particular strength in the four major subject
areas of science, reading, math and social studies. The business has been
successful in state adoptions, particularly in the three largest adoption
states of Texas, Florida and California. In 2000, Harcourt's new reading
program was adopted for use in Texas and its science program was adopted
for use in Texas, Florida, California, North Carolina and West Virginia.

- Holt, Rinehart and Winston is a major U.S. secondary (grades 6 to 12)
publisher with a leading position in literature and language arts, the
largest middle and secondary school discipline. It also has a strong and
growing position in science and is developing new math and social studies
programs.

- Steck-Vaughn is a publisher of U.S. K-12, adult education and public
supplemental educational materials. The business is complementary to Reed
Elsevier's Rigby business.

- Harcourt Trade is a small niche U.S. publishing business including the
Harvest imprint.

In the Testing area, Harcourt has two principal businesses, Harcourt
Educational Measurement and The Psychological Corporation, which provide testing
and performance measurement services for educational and clinical use.

- Harcourt Educational Measurement provides a range of achievement,
aptitude and guidance educational testing services for measuring K-12
student progress, with products such as the Stanford Achievement Test.
Harcourt Educational Measurement develops and administers accountability
tests for students in all 50 U.S. states and is the exclusive contractor
in 20 states, including California and Florida.

- The Psychological Corporation provides practicing and research
psychologists with psychological, speech and occupational therapy
assessment tests for many aspects of human behavior, intelligence and
development.

Total revenue for these Harcourt Education and Testing businesses for the
year ended October 31, 2000 was $990 million.

The Education strategy focuses on growing share through innovation and
excellence in publishing development. The immediate priorities are to:

- maintain the current momentum in winning U.S. state adoptions, and to
follow this success through in open states;

- integrate the Steck-Vaughn and Rigby supplemental businesses and to
expand the publishing programs;

- step-up investment in new programs in secondary education, particularly
math;

- expand the scope and penetration of the testing business through
Internet-based delivery and services; and

- step up investment in the online publishing unit to develop new
interactive learning programs.

The primary objectives of accelerated investment in e-learning will be in
the migration of key course content, the development of supporting interactive
instructional material, the development of teacher and ancillary material, and
the strengthening of online library reference materials.

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BUSINESS

YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
--------------- % CHANGE AT ------------ % CHANGE AT
1998 1999 CONSTANT RATES(1) 2000 CONSTANT RATES(2)
------ ------ ------------------ ------------ ------------------
(IN MILLIONS, EXCEPT PERCENTAGES)

Turnover
Cahners Business Information..... L 531 L 542 (1)% L 665 15%
Reed Business Information........ 248 243 (2)% 270 11%
Elsevier Business Information.... 257 270 7% 278 11%
Reed Exhibition Companies........ 274 301 8% 358 18%
OAG Worldwide.................... 90 85 (6)% 72 (19)%
Other............................ 34 29 29
------ ------ ---- ------ -----
L1,434 L1,470 2% L1,672 12%
====== ====== ==== ====== =====
Adjusted operating profit(3)....... L 268 L 245 (9)% L 264 7%
====== ====== ==== ====== =====
Adjusted operating margin.......... 18.7% 16.7% (2.0)pts 15.8% (0.9)pts
====== ====== ==== ====== =====

The Business segment is comprised of business magazine and information
companies operating principally in the United States, the United Kingdom and
Europe and a worldwide exhibitions business.

The Business strategy is to be the first choice of business professionals
for information and decision support, marketing services and e-commerce
connectivity. We believe strong brands and market positions in key sectors,
built on high quality and online decision support information and premium
exhibition services, will attract audiences and deliver more effective
buyer-seller connections.

During 2000, the businesses were brought together in one global division
and the portfolio refocused on fewer, faster growing sectors through a program
of acquisitions and disposals. We have launched Internet portals in key sectors,
as well as new print magazines and exhibitions. The principal acquisitions were
CMD Group, e:Logic and Miller Freeman Europe. We have also been selling non-core
assets including the KG Saur reference business in Germany, a number of the
tuition businesses in The Netherlands and Belgium, and a range of titles in the
United States and Europe that did not fit our chosen sectors.

The sales of our travel publishing businesses, OAG Worldwide and Cahners
Travel Group, are well advanced and the Bowker bibliographic business is also to
be sold. These disposals have a dilutive impact on earnings but leave the
Business segment more focused.

Business Magazines and Information. The business magazine and information
businesses within the Business segment are made up of Cahners Business
Information, Reed Business Information and Elsevier Business Information.
Together these businesses contributed approximately 73% of the turnover of the
Business segment in 2000. In the U.S., business to business magazines are
primarily distributed on a "controlled circulation" basis, whereby the product
is delivered without charge to qualified buyers within a targeted industry group
based upon circulation lists developed and maintained by the publisher. In the
U.K., business magazines are distributed both on a "controlled circulation"
basis and a "paid circulation" basis, but in both cases are dependent on
advertising for a significant proportion of their revenues. As

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turnover is mainly derived from advertising, these businesses are sensitive to
economic conditions and advertiser expenditure in those countries. In The
Netherlands, however, a higher proportion of publications is sold by
subscription, thus such publications are generally more resilient through
economic cycles.

Cahners Business Information ("Cahners") is a leading publisher of business
information in the United States, with over 100 trade magazines and some 120 web
sites. Following the changes in portfolio, Cahners has been reorganized into
three market sector-focused divisions; Manufacturing and Electronics,
Construction and Retail, and Media to support its transformation from a
broad-based publisher of business-to-business magazines to a market sector
focused, media-neutral provider of critical information and marketing solutions
to business professionals. Cahners has launched vertical portals in a number of
key sectors, including e-insite in Electronics, manufacturing.net in
Manufacturing, and variety.com, tvinsite.com and wirelessweek.com in the
entertainment, television and telecommunication areas within Media. In
Construction, major development work has followed the CMD Group acquisition to
leverage its content into online services to address the construction industry
supply chain. Within the Manufacturing sector, we have migrated a joint venture
with i2 into a more straightforward licensing arrangement and have refocused the
web service on the design, automation and supply chain/logistics segments of
Manufacturing.

Launches have not been confined to Internet services. During 2000, Cahners
launched new magazines, including Broadband Week, which informs on broadband
networks, applications and content, and CommVerg, which addresses the converging
space of communications, computers and consumer electronics.

In May 2000, Cahners made the $300 million acquisition of CMD Group, an
international supplier of information to the construction industry. CMD Group
provides construction project information, both nationally and regionally in the
United States, as well as directories of building products and services and
construction cost data.

In June 2000, Cahners acquired e:Logic, a growing application service
provider of web development, design and delivery systems to media and Internet
companies, for $73 million. e:Logic provides Cahners with content management
technology and is supporting our strategy of building leading Internet portals.

Among the best known Cahners titles are Variety, Broadcasting & Cable,
Multichannel News, Publishers Weekly, EDN, Design News and Interior Design.
Cahners also publishes product tabloids which provide information primarily on
new products to managers and professionals in the industrial, processing,
medical, scientific and high technology fields. Cahners operates primarily in
the United States, with major publishing centers in New York, Boston, Chicago,
Los Angeles, Denver and Greensboro. Readership of its publications is expanding
beyond U.S. borders, reflecting both the potential of U.S. exports and the
increasing internationalization of the industries served.

Cahners leverages its knowledge of the business sectors it serves and the
extensive databases of business names and reader related demographics it has
collated through a broad range of products and services. These include websites,
direct mail, product news tabloids, newspapers, newsletters and custom published
supplements, as well as the feature publications which continue to serve as the
core of the portfolio.

In 2000, approximately 74% of Cahners' total turnover came from
advertising, 15% from subscriptions and circulation sales and 11% from other
sources. Cahners operates circulation management and fulfilment facilities in
Colorado and the Caribbean island of St. Kitts which identify, qualify and
maintain subscriber lists for substantially all of its titles. These lists
enable Cahners to serve its advertisers by creating highly targeted readerships
for its magazines. Much of the editorial pre-press production is performed
in-house. Paper and printing services are purchased on a coordinated basis with
other Reed Elsevier businesses in the United States. Distribution of magazines
is primarily through the U.S. postal service, supplemented by newsstand sales
through unaffiliated wholesalers.

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Reed Elsevier's U.S. business to business titles compete on an individual
basis with the publications of a number of publishers, including CMP Media
(United Business Media) in its electronics sectors and Advanstar, BPI/VNU,
Primedia, Penton Media, Hanley Wood and McGraw-Hill in other sectors.

Reed Business Information ("RBI"), the U.K. based business magazine and
directory publisher, has a portfolio of around 100 business magazines,
directories, market access products and online services. RBI publishes over 50
primary business magazine brands in some 20 market facing sectors. Its business
magazines include Computer Weekly, Farmers Weekly, Estates Gazette, Flight
International, New Scientist, Caterer & Hotelkeeper, Doctor, Commercial Motor
and Community Care. Its major directories are Kelly's, Kompass and The Bankers'
Almanac, and it also has online services which include Estates Gazette
Interactive, Air Transport Intelligence, Planet Science, ICIS-LOR and
totaljobs.com.

In the United Kingdom, RBI has continued to increase investment in
totaljobs.com, the online recruitment service, which has a leading position in
the United Kingdom with approximately 50,000 jobs carried as of December 2000.
Other initiatives include the 75/25 computerweekly.com joint venture with InterX
to combine RBI's brands, content and publishing expertise with InterX's
technical and product data services, the launch of E.Business Review and
increased frequency of Personnel Today.

In 2000, approximately 81% of RBI's turnover came from the United Kingdom,
8% from continental Europe, 7% from North America and 4% from the Rest of the
World. In the same year, approximately 66% of turnover was derived from
advertising, 14% from subscription sales, 10% from circulation sales and the
remaining 10% from other sources. RBI performs full computerized editorial
make-up in-house for all of its titles. Paper and printing services are
purchased from unaffiliated third parties, primarily on a co-ordinated basis
with other Reed Elsevier businesses in the United Kingdom. RBI's distribution is
generally through public postal systems, with newsstand distribution for some
titles through outside wholesalers. RBI competes directly with EMAP Business
Communications and United Business Media in a number of sectors in the United
Kingdom, and also with many smaller companies on an individual title by title
basis.

Elsevier Business Information ("EBI") comprises the business and reference
publishing operations in continental Europe, which operates in The Netherlands,
Belgium, Spain, Germany, France and Italy.

EBI in The Netherlands, is focused on 13 market segments. It publishes over
160 titles and is a leading business magazine and information publisher. Its
principal titles include Elsevier, the major current affairs weekly, Beleggers
Belangen and FEM in business and management, and Boerderij and Buiten in
agriculture. Its titles are predominantly subscription-based and revenue is
principally divided between subscriptions and advertising. Most titles are
published in the Dutch language. Through trade journals, product news tabloids,
directories, documentary systems, databases, newspapers and websites, EBI serves
markets which include agriculture, catering, construction, engineering, food,
fashion, horticulture, transportation, tourism and travel.

EBI's zibb.nl was launched in 2000 as a general business information portal
in The Netherlands.

The portfolio was extended by the acquisition in July 2000 of the Stammer
business in Italy, as part of the Miller Freeman Europe transaction, and by
other acquisitions in France, Spain and Germany. Disposal of the KG Saur
reference business has been completed and a number of the non-core Tuition
businesses have been, or are in the process of being, sold.

In 2000, approximately 36% of EBI's turnover was derived from advertising,
29% from magazine subscriptions, 16% from training, 10% from magazine
circulation and copy sales, and the remaining 9% from other sources including
sales of software. Printing and production is contracted out to third parties
and distribution is mainly through the Dutch postal system. EBI competes with a
number of companies on a title by title basis in individual market sectors, the
largest competitors being Wolters Kluwer and VNU. In the agricultural sector,
the main competition is from Oogst, an association journal.

EBI Belgium publishes 10 English language product news tabloids for the
international market. This business provides specialized information on new
products in the international electronic, laboratory, biotechnical and
industrial markets. The Spanish operations, Elsevier Informacion Profesional,
comprise

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Grupo Arte y Cemento, a publisher of product news tabloids, Construdatos, which
publishes market information on new building projects and Inese, which was
acquired in 2000.

Other constituents of EBI are Editions Prat, a publisher of mainly
loose-leaf information aimed at the fiscal, legal and administration sectors in
France; Groupe Strategies, which publishes the journal Strategies and other
information materials for the French advertising and communications industry;
Reed Elsevier Deutschland, which includes Artzliche Praxis, a prominent German
language medical journal and Institut Verlag, a supplier of information for the
construction industry.

Exhibitions. The exhibitions business contributed approximately 21% of the
turnover of the Business segment in 2000, and is the world's largest exhibitions
business, with a leading position in the United States, Asia and each major
European economy.

Reed Exhibition Companies ("REC") is an international event organizer, with
440 events in 29 countries, attracting over 150,000 exhibitors and approximately
9 million buyers annually. REC's events are concentrated in a number of industry
sectors of which the most important are: marketing and business services;
publishing; IT/communications; manufacturing; aerospace; leisure; electronics;
hospitality; travel; entertainment; and retail.

Many of REC's events are industry leaders, including National Hardware
Show, National Manufacturing Week, JCK International Jewellery Shows,
Professional Golfers Association (PGA) Merchandise Show, PGA International Golf
Show and Canadian Machine Tool Show in North America; Pakex, World Travel Market
and London Book Fair in the United Kingdom; MIDEM, MIPTV, MIPIM, Salon Nautique
and FIAC in France; Computer Faire in South Africa; AIMEX and Australian Gift
Fairs in Australia; International Jewellery Tokyo in Japan; Asian Aerospace and
Thai Metalex in South-East Asia; and the Nepcon and Travel series of
international events.

REC launched over 35 new shows in 2000, and a significant increase in
investment in show related websites, of which there are now over 250. These will
provide more accessible and focused pre- and post-event services, including
contact broking, to exhibitors and attendees.

In July 2000, Reed Elsevier acquired Miller Freeman Europe, a leading trade
exhibition organizer in Europe with operations in France, Spain, Italy, Germany
and Scandinavia, for L360 million. The portfolio has over 100 shows and 66
related websites and includes prestigious international and national domestic
events across a number of sectors, including building and construction, retail,
food and hospitality, and environmental services.

Acquisitions were also made in the U.S. food sector and alliances formed
with major exhibition halls in Berlin and Vienna.

Over 80% of REC's turnover is derived from exhibition participation fees,
with the balance attributable to conference fees, advertising in exhibition
guides, sponsorship fees and admission charges. With few exceptions, no capital
is employed in exhibition halls, the majority of which are leased on a short
term basis. In 2000, approximately 42% of REC's turnover came from North
America, 34% from continental Europe, 10% from the United Kingdom and the
remaining 14% from the Rest of the World. As some events are held other than
annually, turnover in any single year may be affected by the cycle of non-annual
exhibitions.

The exhibition industry has historically been extremely fragmented. Within
domestic markets, competition comes primarily from industry focused trade
associations and convention center and exhibition hall owners. The main U.S.
competitor is Miller Freeman, Inc. (VNU), although a number of hall owners are
increasingly seeking international presence.

OAG Worldwide. The sale of OAG Worldwide is well advanced.

S-33
34

ELSEVIER REED FINANCE BV

Elsevier Reed Finance BV ("ERF"), the Dutch resident parent company of the
ERF group, is directly owned by Reed International and Elsevier. ERF provides
treasury, finance and insurance services to the Reed Elsevier plc businesses
through its subsidiaries in Switzerland: Elsevier Finance SA ("EFSA"), Elsevier
Properties SA ("EPSA") and Elsevier Risks SA ("ERSA"). These three Swiss
companies are organized under one Swiss holding company, which is in turn owned
by ERF.

EFSA, EPSA and ERSA each focus on their own specific area of expertise.
EFSA is the principal treasury center for Reed Elsevier. It is responsible for
all aspects of treasury advice and support for Reed Elsevier plc's businesses
operating in continental Europe and certain other territories and undertakes
foreign exchange and derivatives dealing services for the whole of Reed
Elsevier. EFSA also provides Reed Elsevier plc businesses with financing for
acquisitions and product development and manages cash pools and investments.
EPSA is responsible for the exploitation of tangible and intangible property
rights while ERSA is responsible for insurance activities relating to risk
retention.

During 2000, loans to Reed Elsevier plc businesses in the United States of
$461 million were made, of which $200 million was to finance the acquisition of
the CMD Group. Additional loans to Reed Elsevier plc businesses in Europe of
E425 million were made, of which E413 million was to finance the purchase of the
Miller Freeman Europe businesses. To fund this additional lending and to provide
capacity to meet new lending requests, ERF raised $495 million by means of a
rights issue to which Elsevier subscribed and the funds were contributed to
EFSA. Furthermore, EFSA issued a 7-year bond in the Swiss domestic market, for
$300 million equivalent. Additionally, EFSA put in place a $3.0 billion U.S.
Commercial Paper program in December 2000, in anticipation of financing related
to the Harcourt acquisition.

EFSA continued to advise Reed Elsevier plc businesses on the treasury
implications of the introduction of the euro and all euro transfer programs are
progressing according to plan. EFSA also organized bank tenders in several
European countries, and implemented a number of cash-pooling arrangements within
Europe. The volume of foreign exchange dealt by EFSA during 2000 amounted to
approximately $3.8 billion equivalent. The average balance of cash under
management, on behalf of Reed Elsevier plc companies, was approximately $0.5
billion.

At the end of 2000, 87% of ERF's gross assets were held in U.S. dollars,
including U.S.$4.3 billion in loans to Reed Elsevier plc subsidiaries. The euro
currency block represented 12% of total assets.

Liabilities included $822 million in U.S. dollars and $423 million
equivalent in euro currencies, borrowed under the euro commercial paper program
and the Swiss domestic bond.

REED ELSEVIER CAPITAL

Reed Elsevier Capital is incorporated in the state of Delaware and is a
wholly-owned indirect subsidiary of Reed Elsevier plc, which is jointly-owned by
Reed International and Elsevier. Reed Elsevier Capital was incorporated in
Delaware in April 1995. It has no assets, operations, revenues or cash flows
other than those related to the issuance and repayment of securities guaranteed
by Reed International and Elsevier. Reed Elsevier Capital is authorized to issue
3,000 common shares, $1.00 par value, and 180 common shares are issued and
outstanding. Reed Elsevier Capital has $317 million of long-term debt, all of
which is guaranteed by Reed International and Elsevier. Reed Elsevier Capital
has no short-term debt or other borrowings. Reed Elsevier Capital does not
publish separate non-consolidated financial statements. Its principal executive
offices are located at 1105 North Market Street, Suite 942, Wilmington DE 19801.
The management of Reed Elsevier Capital is described on page S-80 of this
prospectus supplement.

S-34
35

LITIGATION

We are party to various legal proceedings, the ultimate resolutions of
which are not expected to have a material adverse effect on our financial
position or results of our operations other than as described below.

Reed Elsevier Inc. ("REI") has been named as one of several defendants in
action captioned Electronic Database Copyright Infringement Litigation, M.D.L.
Docket No. 1379, a federal multidistrict litigation which consolidates three
lawsuits, filed against REI in August and September, 2000, of copyright
infringement in federal district courts: The Authors Guild, Inc. v. The Dialog
Corporation et al., Laney et ano. v. Dow Jones & Company, Inc., et al., and
Posner et al. v. Gale Group Inc. These suits were brought by or on behalf of
freelance authors who allege that the defendants have infringed plaintiffs'
copyright by making plaintiffs' works available on databases operated by the
defendants. The plaintiffs are seeking to be certified as class representatives
of all similarly-situated freelance authors. The action was stayed pending
disposition by the United States Supreme Court of New York Times Company et al.
v. Tasini et al., No. 00-21, in which REI was a petitioner. On June 25, 2001,
the Supreme Court ruled against the petitioners, including REI, holding that the
publisher of a print collective work did not have a statutory right to republish
an article originally contributed to a print work in an electronic database
without the author's permission. No proceedings relating to the class
certification motions, or other proceedings of substance, have yet occurred.
Plaintiffs in each action seek actual damages, statutory damages and injunctive
relief. The Laney plaintiff also seeks an accounting for profits received. REI
believes it has strong substantive defenses to these actions and will vigorously
pursue them. It will also vigorously contest the motions for class
certification. REI has indemnity agreements from each of the content providers
that supplied articles to the relevant databases. REI could be adversely
affected in the event the plaintiffs are successful in their claims and full
recovery were not available under the indemnities.

S-35
36

CAPITALIZATION

The following table sets forth the capitalization of Reed Elsevier, as of
December 31, 2000:

- on an actual basis;

- on a pro forma basis to give effect to the acquisition of Harcourt and
the on-sale to The Thomson Corporation; and

- on a pro forma basis to give effect to the acquisition of Harcourt, the
on-sale to The Thomson Corporation and the sale of the Notes.

The table has been derived from the audited combined balance sheet of Reed
Elsevier as of December 31, 2000 and the unaudited pro forma consolidated
balance sheet of Harcourt as of October 31, 2000, adjusted to conform materially
to Reed Elsevier's accounting policies under U.K. and Dutch GAAP; see "Reed
Elsevier Unaudited Pro Forma Combined Financial Information" on page S-45 of
this prospectus supplement. You should read this table together with "Operating
and Financial Review and Prospects -- Reed Elsevier" and the combined financial
statements of Reed Elsevier in the 2000 Annual Report on Form 20-F and the
historical financial statements of Harcourt, each as incorporated by reference
in this prospectus supplement.

AS OF DECEMBER 31, 2000(1)
-----------------------------------------------------------
PRO FORMA PRO FORMA
AFTER THE AFTER THE
SALE OF THE SALE OF THE
PRO FORMA NOTES NOTES
AFTER THE AND THE AND THE
ACTUAL ACQUISITION(2) ACQUISITION(3) ACQUISITION(4)
-------- -------------- -------------- --------------
(in millions)

Short term borrowings............................. L 1,404 L2,125 L1,099 $1,547
Long term borrowings.............................. 623 1,482 2,508 3,530
------- ------ ------ ------
Total short and long term borrowings.............. 2,027 3,607 3,607 5,077
------- ------ ------ ------
Less cash and short term investments.............. (1,594) (374) (374) (526)
------- ------ ------ ------
Net borrowings(5)................................. 433 3,233 3,233 4,551
------- ------ ------ ------
Combined shareholders' equity(6)(7)
Combined share capitals......................... 185 185 185 260
Combined share premiums......................... 1,621 1,621 1,621 2,282
Combined retained earnings...................... 1,235 1,235 1,235 1,739
------- ------ ------ ------
Total combined shareholders' equity............. 3,041 3,041 3,041 4,281
------- ------ ------ ------
Total net borrowings and combined shareholders'
equity.......................................... L 3,474 L6,274 L6,274 $8,832
======= ====== ====== ======

- ---------------
(1) Except as disclosed below, there has been no material change in the
capitalization of Reed Elsevier since December 31, 2000.
(2) Shows the effect of the acquisition of Harcourt and the on-sale to The
Thomson Corporation, but not the sale of the Notes.
(3) Shows the effect of the acquisition of Harcourt, the on-sale to The Thomson
Corporation and the sale of the Notes. Net proceeds of approximately $1,528
million (L1,026 million translated at the closing rate on December 31, 2000
of $1.49 per L1.00) (after deducting underwriting discounts and transaction
expenses) are assumed to be realized from the sale of the Notes. In
estimating such net proceeds, the proceeds from the offering of the Euro
Notes have been translated into U.S. dollars using the applicable currency
swap rate of $0.88 per E1.00. However, the U.S. Dollar Notes and the Euro
Notes are being offered pursuant to separate underwriting agreements and the
sale of the U.S. Dollar Notes is not conditioned upon the sale of the Euro
Notes and the sale of the Euro Notes is not conditioned upon the sale of the
U.S. Dollar Notes.
(4) For the convenience of the reader, pounds sterling amounts as of December
31, 2000 have been translated into U.S. dollars using the noon buying rate
on June 29, 2001 of $1.4077 per L1.00.
(5) The above table does not take account of increases in actual and pro forma
net borrowings of approximately L110 million and approximately L250 million,
respectively, reflecting normal seasonal cash flows, including the payment
of dividends, acquisition spend less disposal proceeds, nontrading items and
exchange rate movements between December 31, 2000 and June 30, 2001 for Reed
Elsevier and between October 31, 2000 and June 30, 2001 for Harcourt.
(6) The above table does not take account of an increase in the combined share
capitals and share premiums of approximately L11 million between December
31, 2000 and June 30, 2001 as a result of the exercise of share options.
(7) The combined share capitals, as of December 31, 2000, combines the issued
share capital of Reed International (1,262,450,655 12.5 pence ordinary
shares) and the issued share capital of Elsevier (735,717,794 Euro 0.6
ordinary shares). Combined share capitals exclude the Elsevier R-shares held
by Reed International.

S-36
37

RATIO OF EARNINGS TO FIXED CHARGES(1)
(UNAUDITED)

The following table sets forth the ratio of earnings to fixed charges of
Reed Elsevier for the periods indicated. You should read this table together
with "Operating and Financial Review and Prospects -- Reed Elsevier" and the
combined financial statements of Reed Elsevier in the 2000 Annual Report on Form
20-F and the historical financial statements of Harcourt, each as incorporated
by reference in this prospectus supplement.

YEAR ENDED DECEMBER 31,
------------------------------------
1996 1997 1998 1999 2000
---- ---- ---- ---- ----

REED ELSEVIER (continuing operations)
In accordance with U.K. and Dutch GAAP.................. 4.7 0.7(5) 3.9 1.8 2.2
In accordance with U.K. and Dutch GAAP (adjusted
earnings basis)(2)................................... 6.5 7.1 7.3 6.2 5.4
In accordance with U.S. GAAP(3)......................... 6.0 1.3 0.8(6) 1.2 1.8
REED ELSEVIER (pro forma basis)(4)
In accordance with U.K. and Dutch GAAP................................................ 1.9
In accordance with U.K. and Dutch GAAP (adjusted earnings basis)(2)................... 3.8
In accordance with U.S. GAAP(3)....................................................... 1.7

- ---------------
(1) For the purpose of computing these ratios of earnings to fixed charges, the
term "earnings" means income before taxes and minority interests and fixed
charges, and the term "fixed charges" means interest on all indebtedness,
including capital leases and amortization of debt expense, plus one-third of
rental expense, plus preference dividends.

(2) U.K. and Dutch generally accepted accounting principles ("U.K. and Dutch
GAAP") allow the presentation of alternative earnings measures. Adjusted
earnings are presented as an additional performance measure and are shown
before amortization of goodwill and intangible assets and exceptional items.
U.S. generally accepted accounting principles ("U.S. GAAP") do not permit
the presentation of alternative earnings measures.

(3) The ratio of earnings to fixed charges under U.S. GAAP reflects the impact
of differences between U.K. and Dutch GAAP and U.S. GAAP on the measurement
of earnings. The most significant differences relate to the U.S. GAAP
requirements regarding the capitalization and amortization of goodwill and
intangible assets.

(4) The pro forma ratio of earnings to fixed charges for the year ended December
31, 2000 combines the earnings and fixed charges of Reed Elsevier for the
year ended December 31, 2000 and the earnings and fixed charges of Harcourt
for the year ended October 31, 2000, as adjusted to conform materially to
Reed Elsevier accounting policies under U.K. and Dutch GAAP after giving
effect to the acquisition of Harcourt, the on-sale to The Thomson
Corporation and the sale of the Notes. The pro forma ratio of earnings to
fixed charges is provided for illustrative purposes only and does not
purport to represent the actual ratio of earnings to fixed charges of Reed
Elsevier had the acquisition of Harcourt, the on-sale to The Thomson
Corporation and the sale of the Notes occurred on the dates assumed, nor is
it indicative of Reed Elsevier's future earnings or fixed charges.

(5) Earnings were insufficient to cover fixed charges by L36 million as a
consequence of the provision of L230 million in respect of the Reed Travel
Group recompense program and L250 million non-cash write down in intangible
asset values. Excluding the provision and write down, the ratio of earnings
to fixed charges was 4.7.

(6) Earnings were insufficient to cover fixed charges by L24 million after
giving effect to additional amortization of L266 million arising as a
consequence of a re-evaluation of the remaining asset lives of goodwill and
intangible assets under U.S. GAAP. Excluding the additional amortization,
the ratio of earnings to fixed charges was 3.0.

S-37
38

SELECTED FINANCIAL DATA

The following tables present selected financial data of Reed Elsevier, Reed
International, Elsevier and Harcourt for the periods specified.

REED ELSEVIER

The selected combined financial data for Reed Elsevier for the years ended
December 31, 1996, 1997, 1998, 1999 and 2000 set forth below has been extracted
or derived from the combined financial statements, which have been audited by
Deloitte & Touche, London and Deloitte & Touche, Amsterdam. You should read the
selected combined financial data for Reed Elsevier set forth below together with
the audited combined financial statements and accompanying notes of Reed
Elsevier in the 2000 Annual Report on Form 20-F for the financial year ended
December 31, 2000, incorporated by reference in this prospectus supplement.

The Reed Elsevier selected combined financial data reflects the combined
interests of both sets of shareholders of Reed International and Elsevier and
encompasses the businesses of Reed International, Elsevier, Reed Elsevier plc,
Elsevier Reed Finance BV and their respective subsidiaries, including Reed
Elsevier Capital, and associates and joint ventures.

COMBINED PROFIT AND LOSS ACCOUNT DATA

YEAR ENDED DECEMBER 31,(1)
----------------------------------------------------
1996 1997 1998 1999 2000 2000(2)
------ ------ ------ ------ ------ -------
(IN MILLIONS)

AMOUNTS IN ACCORDANCE WITH U.K. AND DUTCH GAAP:
Turnover
Continuing operations........................ L2,897 L2,987 L3,163 L3,390 L3,768 $5,304
Discontinued operations(3)................... 484 430 28 -- -- --
------ ------ ------ ------ ------ ------
L3,381 L3,417 L3,191 L3,390 L3,768 $5,304
====== ====== ====== ====== ====== ======
Adjusted operating profit (including joint
ventures)(4)
Continuing operations........................ L 787 L 812 L 813 L 792 L 793 $1,116
Discontinued operations(3)................... 69 73 -- -- -- --
Amortization of goodwill and intangible assets
(including joint ventures)................... (250) (289) (332) (373) (468) (659)
Exceptional items charged to operating
income(5).................................... -- (502) (79) (239) (115) (162)
------ ------ ------ ------ ------ ------
Operating profit including joint ventures...... 606 94 402 180 210 295
Non operating exceptional items(5)............. 24 54 682 7 85 120
------ ------ ------ ------ ------ ------
Profit before interest and taxes............... 630 148 1,084 187 295 415
Net interest expense........................... (51) (62) (40) (82) (103) (145)
------ ------ ------ ------ ------ ------
Profit before taxes and minority interests..... 579 86 1,044 105 192 270
Taxes.......................................... (212) (99) (271) (167) (159) (224)
Minority interests............................. (1) (1) (1) (1) -- --
------ ------ ------ ------ ------ ------
Profit/(loss) attributable to parent companies'
shareholders................................. L 366 L (14) L 772 L (63) L 33 $ 46
====== ====== ====== ====== ====== ======
Adjusted figures:(4)
Adjusted operating profit.................... L 856 L 885 L 813 L 792 L 793 $1,116
Adjusted profit before tax................... 805 823 773 710 690 971
Adjusted attributable profit................. 603 608 571 527 511 719

S-38
39

YEAR ENDED DECEMBER 31,(1)
----------------------------------------------------
1996 1997 1998 1999 2000 2000(2)
------ ------ ------ ------ ------ -------
(IN MILLIONS)

AMOUNTS IN ACCORDANCE WITH U.S. GAAP:
Continuing operations
Operating income............................. L 711 L 107 L 13 L 109 L 236 $ 332
Net income/(loss)............................ 450 3 (122) (73) 60 84
Discontinued operations
Net income from trading operations........... 43 40 (1) -- -- --
Gain on sales net of provisions.............. -- -- 521 -- -- --
------ ------ ------ ------ ------ ------
Net income from discontinued operations...... 43 40 520 -- -- --
------ ------ ------ ------ ------ ------
Net income/(loss).............................. L 493 L 43 L 398 L (73) L 60 $ 84
====== ====== ====== ====== ====== ======

COMBINED BALANCE SHEET DATA

AS OF DECEMBER 31,(1)
--------------------------------------------------------
1996 1997 1998 1999 2000 2000(2)
------ ------- ------- ------- ------- -------
(IN MILLIONS)

AMOUNTS IN ACCORDANCE WITH U.K. AND DUTCH
GAAP:
Total assets.............................. L5,176 L 5,211 L 5,760 L 5,272 L 7,428 $10,456
Long term obligations less current
portion................................. (717) (689) (520) (377) (623) (877)
Net borrowings............................ (196) (630) (962) (1,066) (433) (610)
Combined shareholders' funds(6)........... 2,063 1,692 2,130 1,855 3,041 4,281
AMOUNTS IN ACCORDANCE WITH U.S. GAAP:
Total assets.............................. L6,107 L 6,139 L 6,443 L 5,896 L 8,115 $11,423
Long term obligations less current
portion................................. (993) (1,291) (1,122) (772) (1,724) (2,427)
Combined shareholders' funds(6)........... 3,075 2,774 2,833 2,423 3,707 5,218

- ---------------
(1) The combined financial statements are prepared in accordance with accounting
policies that are in conformity with U.K. and Dutch GAAP, which differ in
certain significant respects from U.S. GAAP. The principal differences
between U.K. and Dutch GAAP and U.S. GAAP which are relevant to Reed
Elsevier are set forth in Note 30 to the combined financial statements in
the 2000 Annual Report on Form 20-F incorporated by reference in this
prospectus supplement.

(2) The noon buying rate as of June 29, 2001 has been used to provide a
convenience translation into U.S. dollars.

(3) Discontinued operations are presented in accordance with U.K. and Dutch
GAAP, and comprise IPC Magazines and the consumer book publishing operations
which were the final elements of the consumer segment sold in 1998.

(4) U.K. and Dutch GAAP allow the presentation of alternative earnings measures.
Adjusted figures, which exclude the amortization of goodwill and intangible
assets, exceptional items and related tax effects, are presented as
additional performance measures. U.S. GAAP does not permit the presentation
of alternative earnings measures.

(5) Exceptional items are significant items within Reed Elsevier's ordinary
activities which, under U.K. and Dutch GAAP, need to be disclosed separately
by virtue of their size or incidence. The items do not qualify as
extraordinary under U.S. GAAP and are considered a part of operating
results. Exceptional items charged to operating profit, under U.K. and Dutch
GAAP, are:

- in 2000 L77 million in respect of reorganization costs and L38 million in
respect of acquisition related costs;

- in 1999 L161 million in respect of reorganization costs and L78 million in
respect of Year 2000 compliance and acquisition related costs;

- in 1998 L79 million in respect of Year 2000 compliance and acquisition
related costs; and

- in 1997 L230 million in respect of the cost of programs to recompense
advertisers in relation to irregularities in circulation claims for
certain Reed Travel Group publications together with related expenses and
reorganization costs, L250 million in respect of a non-cash write down of
intangible assets related to Reed Travel Group and L22 million in respect
of Year 2000 compliance and acquisition related costs.

Non-operating exceptional items arise primarily from the net profit on
disposal of Springhouse, KG Saur and REZsolutions in 2000, of IPC Magazines
in 1998 and, in other years, from the disposal of other businesses and
surplus property interests.

For further details see Note 8 to the combined financial statements in the
2000 Annual Report on Form 20-F incorporated by reference in this prospectus
supplement.

(6) On December 5, 2000, following a joint international offering, Reed
International issued 113,700,000 new 12.5p ordinary shares at 625p each and
Elsevier issued 66,255,000 new E0.06 ordinary shares at E14.50 each. The
purpose of the offering was to finance the acquisition of Harcourt by Reed
Elsevier. The nominal value of the shares issued was L14.2 million and E4.0
million, respectively, and the net proceeds were L694 million and E933
million, respectively.

S-39
40

REED INTERNATIONAL

The selected consolidated financial data for Reed International for the
years ended December 31, 1996, 1997, 1998, 1999 and 2000 set forth below has
been extracted or derived from the consolidated financial statements of Reed
International, which have been audited by Deloitte & Touche, London. You should
read the selected financial data for Reed International set forth below together
with the audited consolidated financial statements and accompanying notes of
Reed International in the 2000 Annual Report on Form 20-F for the financial year
ended December 31, 2000, incorporated by reference in this prospectus
supplement.

The results and financial position of Reed International reflect the 52.9%
economic interest of Reed International's shareholders in Reed Elsevier, after
taking account of results arising in Reed International and its subsidiaries.
These have been accounted for on a gross equity basis.

YEAR ENDED DECEMBER 31,(1)
----------------------------------------------------
1996 1997 1998 1999 2000 2000(2)
------ ------ ------ ------ ------ -------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

AMOUNTS IN ACCORDANCE WITH U.K. GAAP:
Share of adjusted profit before tax(3).... L 426 L 435 L 409 L 376 L 365 $ 513
Share of amortization..................... (132) (153) (176) (197) (248) (349)
Share of exceptional items before
tax(4).................................. 13 (237) 319 (122) (15) (21)
Elsevier's share of U.K. tax credit on
distributed earnings.................... (18) (20) (12) (6) (6) (8)
------ ------ ------ ------ ------ ------
Profit on ordinary activities before
tax..................................... 289 25 540 51 96 135
------ ------ ------ ------ ------ ------
Tax on profit on ordinary activities...... (113) (52) (144) (90) (85) (120)
------ ------ ------ ------ ------ ------
Profit/(loss) attributable to ordinary
shareholders............................ L 176 L (27) L 396 L (39) L 11 $ 15
====== ====== ====== ====== ====== ======
Basic earnings/(loss) per Reed
International ordinary share............ 15.5p (2.4)p 34.7p (3.4)p 1.0p 1c
Diluted earnings/(loss) per Reed
International ordinary share............ 15.4p (2.4)p 34.6p (3.4)p 1.0p 1c
Gross dividends per Reed International
ordinary share(5)....................... 17.0p 18.25p 17.3p 11.1p 11.1p 16c
Total assets.............................. L1,247 L1,056 L1,292 L1,090 L1,745 $2,456
Long term obligations..................... (36) (36) (36) (36) (36) (51)
Shareholders' funds(6).................... 1,091 895 1,127 981 1,609 2,265
Adjusted figures:(3)
Adjusted profit before tax.............. 426 435 409 376 365 514
Adjusted profit attributable to ordinary
shareholders......................... 319 322 302 279 270 380
Adjusted earnings per Reed International
ordinary share....................... 28.1p 28.3p 26.4p 24.4p 23.3p 33c

AMOUNTS IN ACCORDANCE WITH U.S. GAAP:
Net income/(loss)......................... L 244 L 4 L 191 L (47) L 27 $ 38
Basic earnings/(loss) per Reed
International ordinary share............ 21.4p 0.4p 16.7p (4.1)p 2.3p 3c
Diluted earnings/(loss) per Reed
International ordinary share............ 21.4p 0.4p 16.7p (4.1)p 2.3p 3c
Total assets.............................. L1,673 L1,511 L1,544 L1,328 L2,009 $2,828
Long term obligations..................... (36) (36) (36) (36) (36) (51)
Shareholders' funds(6).................... 1,627 1,467 1,499 1,282 1,961 2,760

S-40
41

- ---------------
(1) The consolidated financial statements of Reed International are prepared in
accordance with accounting policies that are in conformity with U.K. GAAP,
which differs in certain significant respects from U.S. GAAP. The principal
differences between U.K. GAAP and U.S. GAAP which are relevant to Reed
International are set forth in Note 23 to the Reed International financial
statements in the 2000 Annual Report on Form 20-F incorporated by reference
in this prospectus supplement.

(2) The noon buying rate as of June 29, 2001 has been used to provide a
convenience translation into U.S. dollars.

(3) U.K. GAAP allows the presentation of alternative earnings measures. Share of
adjusted profit before tax is presented as an additional performance measure
and is shown before share of amortization of goodwill and intangible assets
and share of exceptional items. U.S. GAAP does not permit the presentation
of alternative earnings measures.

(4) Share of exceptional items before tax includes Reed International's share of
Reed Elsevier's exceptional items:

- in 2000 exceptional charges principally relate to the costs of a major
program of reorganization across Reed Elsevier businesses, commenced in
1999. Basic earnings per Reed International ordinary share under U.K. and
U.S. GAAP include 3.5p (loss) in respect of these items. Exceptional
gains, amounting to 3.9p per Reed International ordinary share, arose in
2000 in respect of the disposal of Springhouse, KG Saur and REZsolutions;

- in 1999 exceptional items principally relate to the costs of a major
program of reorganization across Reed Elsevier businesses. Costs include
employee severance, surplus leasehold property obligations and fixed asset
write-offs. Basic earnings per Reed International ordinary share under
U.K. and U.S. GAAP include 7.3p (loss) in respect of these items;

- in 1998 exceptional items principally relate to the gain on disposal of
IPC Magazines. Basic earnings per Reed International ordinary share under,
respectively, U.K. GAAP and U.S. GAAP includes 27.4p and 24.1p in respect
of this item. In addition, under U.S. GAAP, Reed Elsevier's goodwill and
intangible asset lives were re-evaluated and are amortized over shorter
periods resulting, from 1998, in a significantly higher amortization
charge; see Note 30 to the combined financial statements in the 2000
Annual Report on Form 20-F incorporated by reference in this prospectus
supplement. Basic earnings per Reed International ordinary share includes
12.3p (loss) under U.S. GAAP in respect of the non recurring element of
the incremental charge arising from this re-evaluation; and

- in 1997 exceptional items principally relate to the cost of programs to
recompense advertisers in relation to irregularities in circulation claims
for certain Reed Travel Group publications together with related expenses
and reorganization costs together with the non-cash write down of Reed
Travel Group intangible assets. Basic earnings per Reed International
ordinary share under, respectively, U.K. GAAP and U.S. GAAP includes 18.3p
(loss) and 21.6p (loss) in respect of these items.

(5) The amount of gross dividends per Reed International ordinary share shown
includes the U.K. tax credit available to certain Reed International
shareholders, including beneficial owners of Reed International American
Depositary Shares who are residents of the United States for the purposes of
the U.K. Tax Treaty but do not include any deduction on account of U.K.
withholding taxes, currently at the rate of 15% of the sum of the dividend
and the related tax credit in most cases.

(6) On December 5, 2000, Reed International issued 113,700,000 new 12.5p
ordinary shares at 625p each following a joint international offering by
Reed International and Elsevier. The purpose of the offering was to finance
the acquisition of Harcourt by Reed Elsevier. The nominal value for the
shares was L14.2 million and the net proceeds were L694 million.

S-41
42

ELSEVIER

The selected financial data for Elsevier for the years ended December 31,
1996, 1997, 1998, 1999 and 2000 set forth below has been extracted or derived
from the financial statements of Elsevier, which have been audited by Deloitte &
Touche, Amsterdam. You should read the selected financial data for Elsevier set
forth below together with the audited financial statements and accompanying
notes of Elsevier in the 2000 Annual Report on Form 20-F for the financial year
ended December 31, 2000, incorporated by reference in this prospectus
supplement.

The results and financial position of Elsevier reflect the 50% economic
interest of Elsevier's shareholders (including Reed International) in Reed
Elsevier. The interests are accounted for on a gross equity basis.

YEAR ENDED DECEMBER 31,(1)
---------------------------------------------------------
1996 1997 1998 1999 2000 2000(2)
------ ------ ------ ------ ------ -------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)}

AMOUNTS IN ACCORDANCE WITH DUTCH
GAAP:
Share of adjusted profit before
tax(3)............................. E 480 E 595 E 575 E 540 E 566 $ 480
Share of amortization................ (149) (209) (247) (284) (384) (326)
Share of exceptional items before
tax(4)............................. 14 (324) 449 (176) (25) (21)
Taxation............................. (127) (72) (203) (128) (130) (110)
------ ------ ------ ------ ------ ------
Profit/(loss) attributable to
ordinary shareholders.............. E 218 E (10) E 574 E (48) E 27 $ 23
====== ====== ====== ====== ====== ======
Basic earnings/(loss) per Elsevier
ordinary share..................... E 0.31 E(0.01) E 0.81 E(0.07) E 0.04 3c
Diluted earnings/(loss) per Elsevier
ordinary share..................... 0.31 (0.01) 0.81 (0.07) 0.03 3c
Gross dividends per Elsevier ordinary
share.............................. 0.34 0.43 0.39 0.27 0.28 24c
Total assets......................... 1,607 1,535 1,736 1,639 2,650 2,246
Long term borrowings, less current
portion............................ (10) (11) (11) (8) (6) (5)
Shareholders' funds(5)............... 1,385 1,282 1,512 1,493 2,448 2,074
Adjusted figures:(3)
Adjusted profit before tax......... 480 595 575 540 566 480
Adjusted profit attributable....... 360 440 425 401 419 355
Adjusted earnings per Elsevier
ordinary share.................. 0.51 0.62 0.60 0.57 0.59 50c

AMOUNTS IN ACCORDANCE WITH U.S. GAAP:
Net income/(loss).................... E 314 E 58 E 326 E (46) E 58 $ 49
Basic earnings/(loss) per Elsevier
ordinary share..................... 0.44 0.08 0.46 (0.06) 0.08 7c
Diluted earnings/(loss) per Elsevier
ordinary share..................... 0.44 0.08 0.46 (0.06) 0.08 7c
Total assets......................... 2,118 2,156 2,057 1,997 3,046 2,581
Long term borrowings, less current
portion............................ (10) (11) (11) (8) (6) (5)
Shareholders' funds(5)............... 2,065 2,102 2,012 1,951 2,984 2,529

- ---------------
(1) The financial statements of Elsevier are prepared in accordance with
accounting policies that are in conformity with Dutch GAAP, which differs in
certain significant respects from U.S. GAAP. The principal differences
between Dutch GAAP and U.S. GAAP which are relevant to Elsevier are set out
in Note 15 to the Elsevier financial statements in the 2000 Annual Report on
Form 20-F incorporated by reference in this prospectus supplement.

(2) The noon buying rate as of June 29, 2001 has been used to provide a
convenience translation into U.S. dollars.

S-42
43

(3) Dutch GAAP allows the presentation of alternative earnings measures. Share
of adjusted profit before tax is presented as an additional performance
measure and is shown before share of amortization of goodwill and intangible
assets and share of exceptional items. U.S. GAAP does not permit the
presentation of alternative earnings measures.

(4) Share of exceptional items before tax includes Elsevier's share of Reed
Elsevier's exceptional items:

- in 2000 exceptional charges principally relate to the costs of a major
program of reorganization across Reed Elsevier businesses, commenced in
1999. Basic earnings per Elsevier ordinary share under U.S. and Dutch GAAP
include E0.09 (loss) in respect of these items. Exceptional gains,
amounting to E0.10 per Elsevier ordinary share, arose in 2000 in respect
of the disposal of Springhouse, KG Saur and REZsolutions;

- in 1999 exceptional items principally relate to the costs of a major
program of reorganization across Reed Elsevier businesses, commenced in
1999. Costs include employee severance, surplus leasehold property
obligations and fixed asset write-offs. Basic earnings per Elsevier
ordinary share under U.S. and Dutch GAAP include E0.18 (loss) in respect
of these items;

- in 1998 exceptional items principally relate to the gain on disposal of
IPC Magazines. Basic earnings per Elsevier ordinary share under,
respectively, Dutch GAAP and U.S. GAAP includes E0.55 and E0.62 in respect
of this item. In addition, under U.S. GAAP, Reed Elsevier's goodwill and
intangible asset lives were re-evaluated and are amortized over shorter
periods resulting, from 1998, in a significantly higher amortization
charge; see Note 30 to the combined financial statements in the 2000
Annual Report on Form 20-F incorporated by reference in this prospectus
supplement. Basic earnings per Elsevier ordinary share includes E0.28
(loss) under U.S. GAAP in respect of the non-recurring element of the
incremental charge arising from this re-evaluation; and

- in 1997 exceptional items principally relate to the cost of programs to
recompense advertisers in relation to irregularities in circulation claims
for certain Reed Travel Group publications together with related expenses
and reorganization costs together with the non-cash write down of Reed
Travel Group intangible assets. Basic earnings per Elsevier ordinary share
under, respectively, U.S. GAAP and Dutch GAAP includes E0.48 (loss) and
E0.40 (loss) in respect of these items.

(5) On December 5, 2000, Elsevier issued 66,255,000 new ordinary shares at
E14.50 each following a joint international offering by Reed International
and Elsevier. The purpose of the offering was to finance the acquisition of
Harcourt by Reed Elsevier. The nominal value of the shares issued was E4.0
million and the net proceeds were E933 million.

S-43
44

HARCOURT

The selected consolidated financial data for Harcourt for the years ended
October 31, 1996, 1997, 1998, 1999 and 2000 set forth below has been extracted
or derived from the consolidated financial statements of Harcourt, which have
been audited by Deloitte & Touche LLP. You should read the selected financial
data for Harcourt set forth below together with the audited financial statements
of Harcourt for the years ended October 31, 1998, 1999 and 2000 incorporated by
reference in this prospectus supplement.

YEAR ENDED OCTOBER 31,(1)
----------------------------------------------
1996 1997 1998 1999 2000
------ ------ ------ ------ ------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

Revenue....................................... $1,215 $1,482 $1,862 $2,143 $2,408
Operating earnings/(loss)..................... 188 (184) 214 280 368
Investment and other income................... 27 29 5 12 27
Interest expense.............................. (54) (68) (86) (107) (106)
------ ------ ------ ------ ------
Earnings/(loss) from continuing operating
before income taxes and minority interest... 161 (223) 133 185 289
Income tax (expense)/benefit.................. (44) 25 (46) (69) (107)
Minority interest in net losses of
subsidiaries................................ -- -- 1 4 1
------ ------ ------ ------ ------
Earnings/(loss) from continuing operations.... 117 (198) 88 120 183
Earnings from discontinued operations, net.... 74 83 54 63 (103)
------ ------ ------ ------ ------
Net earnings/(loss)........................... $ 191 $ (115) $ 142 $ 183 $ 80
====== ====== ====== ====== ======
Total assets.................................. $2,315 $2,816 $3,390 $2,956 $3,080
Total long-term liabilities................... 567 1,186 1,704 1,601 1,481
Basic amounts per common share:
Continuing operations....................... 1.62 (2.81) 1.22 1.68 2.51
Discontinued operations..................... 1.04 1.17 0.77 0.89 (1.43)
------ ------ ------ ------ ------
Basic net earnings/(loss)................... $ 2.66 $(1.64) $ 1.99 $ 2.57 $ 1.08
====== ====== ====== ====== ======
Diluted amounts per common share:
Continuing operations....................... $ 1.60 $(2.81) $ 1.21 $ 1.67 $ 2.50
Discontinued operations..................... 1.02 1.17 0.75 0.88 (1.41)
------ ------ ------ ------ ------
Diluted net earnings/(loss)................... $ 2.62 $(1.64) $ 1.96 $ 2.55 $ 1.09
====== ====== ====== ====== ======
Dividends paid on common stock................ $ 0.69 $ 0.73 $ 0.77 $ 0.81 $ 0.84
====== ====== ====== ====== ======

- ---------------
(1) The financial statements of Harcourt are prepared in accordance with
accounting policies that are in conformity with U.S. GAAP.

S-44
45

UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following unaudited pro forma financial information gives pro forma
effect to the acquisition of Harcourt, the on-sale to The Thomson Corporation
and the sale of the Notes, for each of:

- Reed Elsevier;

- Reed International; and

- Elsevier.

The unaudited pro forma financial information assumes that the acquisition
of Harcourt, the on-sale to The Thomson Corporation and the sale of the Notes
take place simultaneously.

REED ELSEVIER UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION

INTRODUCTORY NOTE

The following unaudited pro forma combined financial information gives pro
forma effect to the acquisition of Harcourt, the on-sale to The Thomson
Corporation and the sale of the Notes. The unaudited pro forma combined
financial information has been prepared from, and should be read in conjunction
with, the respective historical financial information and related notes of Reed
Elsevier and Harcourt, which are incorporated by reference in this prospectus
supplement.

The unaudited pro forma combined financial information is provided for
illustrative purposes only and does not purport to represent what the actual
results of operations or the financial position of Reed Elsevier would have been
if the acquisition of Harcourt, the on-sale to The Thomson Corporation and the
sale of the Notes had actually occurred on the dates assumed, nor is it
necessarily indicative of Reed Elsevier's future operating results or combined
financial position.

The unaudited pro forma combined financial information has been prepared in
accordance with U.K. and Dutch GAAP, which differ in certain significant
respects from U.S. GAAP. Note 4 to the unaudited pro forma combined financial
information contains a summary of the principal differences between U.K. and
Dutch GAAP and U.S. GAAP, together with a reconciliation of unaudited pro forma
combined net income and pro forma combined shareholders' funds to U.S. GAAP.

Reed Elsevier will account for the acquisition of Harcourt using the
acquisition method of accounting under U.K. and Dutch GAAP and using the
purchase method of accounting, which is similar in effect, under U.S. GAAP. The
unaudited pro forma combined financial information has therefore been prepared
using the acquisition method of accounting.

Harcourt's historical financial statements have been prepared in accordance
with U.S. GAAP. For the purposes of presenting the unaudited pro forma combined
financial information, Harcourt's financial information has been adjusted to
conform materially with Reed Elsevier's accounting policies under U.K. and Dutch
GAAP. See Note 3 to the unaudited pro forma combined financial information for a
description of these adjustments.

The pro forma adjustments reflected in the accompanying unaudited pro forma
combined financial information reflect estimates and assumptions made by us that
we believe to be reasonable. The unaudited pro forma combined financial
information does not take into account any synergies, including cost savings, or
acquisition integration costs which are expected to be realized or incurred as a
result of the acquisition of Harcourt.

Reed Elsevier's pro forma financial information is presented in pounds
sterling and is also expressed in U.S. dollars, the latter being presented
solely for convenience and translated at the noon buying rate on June 29, 2001,
of $1.4077 to L1.00.

S-45
46

REED ELSEVIER UNAUDITED PRO FORMA COMBINED INCOME STATEMENT

YEAR ENDED DECEMBER 31, 2000

The following unaudited pro forma combined income statement for the year
ended December 31, 2000 is derived from Reed Elsevier's audited combined profit
and loss account for the year then ended and Harcourt's unaudited pro forma
income statement for the year ended October 31, 2000, adjusted to conform
materially to Reed Elsevier's accounting polices under U.K. and Dutch GAAP,
after giving pro forma effect to the acquisition of Harcourt, the on-sale to The
Thomson Corporation and the sale of the Notes as described in Notes 1 and 2
below. These adjustments have been determined as if the acquisition of Harcourt,
the on-sale to The Thomson Corporation, the issuance of equity to fund the
transaction and the sale of the Notes took place simultaneously on January 1,
2000, the first day of the financial period presented in the unaudited pro forma
financial information.

The table below has been prepared in accordance with U.K. and Dutch GAAP. A
reconciliation to U.S. GAAP is presented in Note 4 below.

PRO FORMA ACQUISITION ADJUSTMENTS(1)
REED --------------------------------------------- PRO FORMA
ELSEVIER HARCOURT ON-SALE TO AFTER ACQUISITION
YEAR ENDED YEAR ENDED THE YEAR ENDED
DECEMBER 31, OCTOBER 31, THOMSON OTHER DECEMBER 31,
2000 2000(3) CORPORATION(1) ADJUSTMENTS(1) 2000
------------ ----------- -------------- -------------- -----------------
(IN MILLIONS)

Turnover
Including share of turnover of
joint ventures................. L 3,836 L1,648 L(500)(1)(c) L -- L 4,984
Less: share of turnover of joint
ventures....................... (68) -- -- -- (68)
------- ------ ----- ---- -------
Total.............................. 3,768 1,648 (500) -- 4,916
Cost of sales...................... (1,332) (532) 134(1)(c) -- (1,730)
------- ------ ----- ---- -------
Gross profit....................... 2,436 1,116 (366) -- 3,186
Operating expenses:
Before amortization and
exceptional items.............. (1,659) (818) 322(1)(c) -- (2,155)
Amortization of goodwill and
intangible assets.............. (465) (99) 80(1)(c) 19(1)(d) (531)
(66)(1)(d)
Exceptional items................ (115) (10) -- -- (125)
------- ------ ----- ---- -------
Operating profit (before joint
ventures)........................ 197 189 36 (47) 375
Share of operating profit of joint
ventures......................... 13 -- -- -- 13
------- ------ ----- ---- -------
Operating profit including joint
ventures......................... 210 189 36 (47) 388
Non operating exceptional items:
Profit on sale of fixed asset
investments.................... 85 16 (10)(1)(c) -- 91
------- ------ ----- ---- -------
Profit on ordinary activities
before interest.................. 295 205 26 (47) 479
Net interest expense............... (103) (70) -- (45)(1)(e) (218)
------- ------ ----- ---- -------
Profit on ordinary activities
before taxation.................. 192 135 26 (92) 261
Tax on profit on ordinary
activities....................... (159) (70) 11(1)(f) 10(1)(f) (208)
------- ------ ----- ---- -------
Profit on ordinary activities after
taxation......................... 33 65 37 (82) 53
Minority interest and preference
dividends........................ -- 1 -- -- 1
------- ------ ----- ---- -------
Profit attributable to parent
companies' shareholders.......... L 33 L 66 L 37 L(82) L 54
======= ====== ===== ==== =======
Adjusted figures
Adjusted operating profit........ L 793 L 298 L (44) L -- L 1,047
Adjusted profit before
taxation....................... 690 228 (44) (45) 829
Adjusted profit attributable..... L 511 L 152 L (29) L(35) L 599
======= ====== ===== ==== =======

PRO FORMA PRO FORMA PRO FORMA
SALE OF YEAR ENDED YEAR ENDED
THE NOTES DECEMBER 31, DECEMBER 31,
ADJUSTMENTS(2) 2000 2000(5)
-------------- ------------ ------------
(IN MILLIONS)

Turnover
Including share of turnover of
joint ventures................. L-- L 4,984 $ 7,016
Less: share of turnover of joint
ventures....................... -- (68) (96)
--- ------- -------
Total.............................. -- 4,916 6,920
Cost of sales...................... -- (1,730) (2,435)
--- ------- -------
Gross profit....................... -- 3,186 4,485
Operating expenses:
Before amortization and
exceptional items.............. -- (2,155) (3,034)
Amortization of goodwill and
intangible assets.............. -- (531) (747)
Exceptional items................ -- (125) (176)
--- ------- -------
Operating profit (before joint
ventures)........................ -- 375 528
Share of operating profit of joint
ventures......................... -- 13 18
--- ------- -------
Operating profit including joint
ventures......................... -- 388 546
Non operating exceptional items:
Profit on sale of fixed asset
investments.................... -- 91 128
--- ------- -------
Profit on ordinary activities
before interest.................. -- 479 674
Net interest expense............... (5) (223) (314)
--- ------- -------
Profit on ordinary activities
before taxation.................. (5) 256 360
Tax on profit on ordinary
activities....................... 1 (207) (291)
--- ------- -------
Profit on ordinary activities after
taxation......................... (4) 49 69
Minority interest and preference
dividends........................ -- 1 1
--- ------- -------
Profit attributable to parent
companies' shareholders.......... L(4) L 50 $ 70
=== ======= =======
Adjusted figures
Adjusted operating profit........ L-- L 1,047 $ 1,474
Adjusted profit before
taxation....................... (5) 824 1,160
Adjusted profit attributable..... L(4) L 595 $ 838
=== ======= =======

Adjusted figures which exclude the amortization of goodwill and intangible
assets, exceptional items and related tax effects, are presented as additional
performance measures.

The notes to the unaudited pro forma combined financial information
are an integral part of these statements.
S-46
47

REED ELSEVIER UNAUDITED PRO FORMA COMBINED BALANCE SHEET

AS OF DECEMBER 31, 2000

The following unaudited pro forma combined balance sheet as of December 31,
2000 is derived from Reed Elsevier's audited combined balance sheet at that date
and Harcourt's unaudited pro forma consolidated balance sheet as of October 31,
2000, adjusted to conform materially to Reed Elsevier's accounting policies
under U.K. and Dutch GAAP, after giving pro forma effect to the acquisition of
Harcourt, the on-sale to The Thomson Corporation and the sale of the Notes as
described in Notes 1 and 2 below. These adjustments have been determined as if
the acquisition of Harcourt, the on-sale to The Thomson Corporation and the sale
of the Notes took place on December 31, 2000.

The table below has been prepared in accordance with U.K. and Dutch GAAP. A
reconciliation to U.S. GAAP is presented in Note 4 below.

PRO FORMA ACQUISITION ADJUSTMENTS(1)
------------------------------------------------- PRO FORMA
REED ELSEVIER HARCOURT AS ON-SALE TO AFTER ACQUISITION
AS OF OF THE AS OF
DECEMBER 31, OCTOBER 31, THOMSON OTHER DECEMBER 31,
2000 2000(3) CORPORATION(1) ADJUSTMENTS(1) 2000
------------- -------------- -------------- -------------- -----------------
(IN MILLIONS)

Fixed assets
Goodwill and intangible
assets..................... L 4,127 L 909 L (320)(1)(c) L (589)(1)(d) L 6,776
2,649(1)(b)
Tangible fixed assets........ 416 86 (28) -- 474
Investments.................. 153 69 -- (69)(1)(b) 153
------- ----- ------ ------- -------
4,696 1,064 (348) 1,991 7,403
------- ----- ------ ------- -------
Current assets
Assets held for resale....... -- -- 1,054 (1)(c (1,054)(1)(b) --
Stocks....................... 114 426 (60)(1)(c) -- 480
Debtors: amounts falling due
within one year............ 860 426 (114)(1)(c) (46)(1)(b) 1,126
Debtors: amounts falling due
after more than one year... 164 24 -- 36(1)(b) 224
Current asset investments.... -- -- -- 104(1)(b) 104
Cash and short term
investments(6)............. 1,594 20 -- (1,240)(1)(e) 374
------- ----- ------ ------- -------
2,732 896 880 (2,200) 2,308
------- ----- ------ ------- -------
Creditors: amounts falling due
within one year
Borrowings(6)................ (1,404) (12) -- (709)(1)(e) (2,125)
Trade creditors and other
current liabilities........ (1,975) (556) 101 (1)(c (154)(1)(b) (2,584)
------- ----- ------ ------- -------
(3,379) (568) 101 (863) (4,709)
------- ----- ------ ------- -------
Net current liabilities........ (647) 328 981 (3,063) (2,401)
------- ----- ------ ------- -------
Total assets less current
liabilities.................. 4,049 1,392 633 (1,072) 5,002
Creditors: amounts falling due
after more than one year
Borrowings(6)................ (623) (846) -- (13)(1)(b) (1,482)
Other creditors.............. (250) (107) 9 (1)(c 15(1)(b) (333)
Provisions for liabilities
and charges................ (128) (11) -- -- (139)
Minority interests........... (7) -- -- -- (7)
------- ----- ------ ------- -------
Net assets..................... L 3,041 L 428 L 642 L(1,070) L 3,041
======= ===== ====== ======= =======
Capital and reserves
Combined share capitals...... L 185 L 51 L -- L (51)(1)(b) L 185
Combined share premium
accounts................... 1,621 255 -- (255)(1)(b) 1,621
Combined reserves............ 1,235 122 642 (764)(1)(b) 1,235
------- ----- ------ ------- -------
Combined shareholders' funds... L 3,041 L 428 L 642 L(1,070) L 3,041
======= ===== ====== ======= =======

PRO FORMA PRO FORMA PRO FORMA
SALE OF AS OF AS OF
THE NOTES DECEMBER 31, DECEMBER 31,
ADJUSTMENTS(2) 2000 2000(5)
-------------- ------------ ------------
(IN MILLIONS)

Fixed assets
Goodwill and intangible
assets..................... L -- L 6,776 $ 9,539
Tangible fixed assets........ -- 474 667
Investments.................. -- 153 216
------- ------- -------
-- 7,403 10,422
------- ------- -------
Current assets
Assets held for resale....... -- --
Stocks....................... -- 480 676
Debtors: amounts falling due
within one year............ -- 1,126 1,585
Debtors: amounts falling due
after more than one year... -- 224 315
Current asset investments.... -- 104 146
Cash and short term
investments(6)............. -- 374 526
------- ------- -------
-- 2,308 3,248
------- ------- -------
Creditors: amounts falling due
within one year
Borrowings(6)................ 1,026 (1,099) (1,547)
Trade creditors and other
current liabilities........ -- (2,584) (3,637)
------- ------- -------
1,026 (3,683) (5,184)
------- ------- -------
Net current liabilities........ 1,026 (1,375) (1,936)
------- ------- -------
Total assets less current
liabilities.................. 1,026 6,028 8,486
Creditors: amounts falling due
after more than one year
Borrowings(6)................ (1,026) (2,508) (3,530)
Other creditors.............. -- (333) (469)
Provisions for liabilities
and charges................ -- (139) (196)
Minority interests........... -- (7) (10)
------- ------- -------
Net assets..................... L -- L 3,041 $ 4,281
======= ======= =======
Capital and reserves
Combined share capitals...... L -- L 185 $ 260
Combined share premium
accounts................... -- 1,621 2,282
Combined reserves............ -- 1,235 1,739
------- ------- -------
Combined shareholders' funds... L -- L 3,041 $ 4,281
======= ======= =======

The notes to the unaudited pro forma combined financial information are
an integral part of these statements.

S-47
48

NOTES TO REED ELSEVIER UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

1. PRO FORMA ACQUISITION ADJUSTMENTS

(a) The unaudited pro forma combined financial information has been
prepared on the basis of our acquisition of the entire issued share capital of
Harcourt and the on-sale to The Thomson Corporation of the Harcourt Higher
Education business and the Corporate and Professional Services businesses other
than educational and clinical testing.

The total purchase price comprises aggregate cash consideration of $4,476
million (L3,003 million) based on:

- the tender offer of $59.00 per share of common stock, or share
equivalent;

- the conversion of each share of Harcourt's Series A Stock into 1.31
shares of common stock;

- the payment of an amount equal to the difference between $59.00 per share
and the related exercise price in respect of all Harcourt common stock
options which will vest on completion; and

- $24 million (L16 million) of legal, tax, accounting, investment banking
and other professional fees in connection with the acquisition.

The consideration received for the on-sale to The Thomson Corporation was
$2,060 million (L1,382 million), less associated taxes estimated at $489 million
(L328 million).

The effective purchase price for the Harcourt equity less the estimated
post-tax proceeds from the on-sale to The Thomson Corporation and costs
associated with the acquisition, amounts to $2,905 million (L1,949 million) in
total.

In order to fund the purchase price, a placing of new shares in Reed
International and Elsevier was undertaken jointly in December 2000 and new
committed credit facilities were obtained. The committed credit facilities
include $6.5 billion (L4.4 billion) put in place in December 2000, subsequently
cancelled down to $4.86 billion (L3.26 billion). The placing of new ordinary
shares in the parent companies was completed on December 5, 2000. L1,240 million
of the net proceeds of the placing has been applied to fund the acquisition of
Harcourt in the unaudited pro forma combined financial information.

The balance of the acquisition funding (L709 million; $1,056 million),
excluding the refinancing of existing Harcourt debt, has been provided by short
term borrowings off commercial paper programs.

Commercial paper and other short term borrowings used to fund the
acquisition will be refinanced through the sale of the Notes.

For the purposes of the unaudited pro forma financial information, U.S.
dollar amounts relating to the acquisition and on-sale transaction referred to
above have been translated at $1.49 to L1.00 being the closing rate as of
December 31, 2000.

(b) The acquisition of the Harcourt businesses is accounted for using the
acquisition method of accounting under U.K. and Dutch GAAP, which is similar to
the purchase method of accounting under U.S. GAAP. The net assets acquired are
incorporated in the pro forma combined financial information at their
preliminary fair value to Reed Elsevier. Where the purchase price exceeds the
fair value of the net tangible and intangible assets acquired, the excess is
regarded as goodwill.

A preliminary allocation of the purchase consideration has been performed
for the purposes of the unaudited pro forma financial information based on
initial appraisal estimates and other valuation studies which are in process and
assumptions which we believe are reasonable based on the information currently
available. The final allocation is subject to the completion of these studies
and appraisals which is expected to take place within one year of the
acquisition date. The effect of a L100 million increase in the goodwill would be
to increase goodwill amortization expense by L2.5 million for the year ended
December 31, 2000 (See Note 1(d) below). A summary of the allocation of the
purchase consideration is shown below.

S-48
49

L MILLION
---------

Total purchase consideration................................ L 3,003
Less: preliminary fair value of net tangible and
intangible assets acquired (see below).................... (2,470)
-------
Goodwill.................................................... L 533
=======

Preliminary fair value adjustments principally relate to acquired
intangible assets, fixed asset investments, businesses held exclusively for
resale, corporate liabilities assumed on acquisition, term debt acquired and
deferred taxation. The book value of tangible fixed assets is assumed to
approximate fair value.

L MILLION
---------

Book value of net assets acquired........................... L 428
Preliminary fair value adjustments:
Elimination of existing goodwill and intangible assets.... (589)
Fair value of acquired intangible assets.................. 2,116
Fair value of businesses on-sold to The Thomson
Corporation............................................ 642
Fair value of fixed asset investments..................... 35
Fair value of acquired pension assets..................... 51
Fair value of tax benefits on exercise of share options... 20
Fair value of corporate liabilities assumed on
acquisition............................................ (154)
Fair value of term debt acquired.......................... (13)
Deferred tax.............................................. (66)
------
Preliminary fair value of net tangible and intangible assets
acquired.................................................. L2,470
======

The corporate liabilities assumed on acquisition principally comprise
liabilities in respect of change in control severance payments for Harcourt
executives and transaction fees.

Intangible assets principally comprise publishing rights, titles and
imprints.

(c) The pro forma financial information reflects the on-sale to The Thomson
Corporation. The pro forma impact of removing the related results of operations
for the year ended October 31, 2000 (L37 million loss) is reflected in the pro
forma income statement. The carrying values of the trading assets and
liabilities of the Harcourt Higher Education business and the Corporate and
Professional Services businesses other than educational and clinical testing
have been assigned a single fair value, representing the expected post-tax
proceeds of L1,054 million, which is reflected in the pro forma combined balance
sheet.

(d) Eliminates historical Harcourt amortization of goodwill and intangible
assets and replaces with amortization of goodwill and intangible assets arising
on the acquisition of the retained Harcourt businesses. A preliminary review of
the goodwill and intangible assets of the Harcourt businesses to be retained has
indicated that an expected useful life of approximately 40 years would be
appropriate for these assets. Accordingly, the maximum estimated useful life
under Reed Elsevier's accounting policy of amortizing goodwill and intangible
assets will be increased from 20 to 40 years. A 40 year amortization period has
been assumed for the Harcourt assets in preparing the pro forma financial
information.

(e) Accrues interest expense on L709 million of pro forma incremental
borrowings required to fund the acquisition of Harcourt after applying L1,240
million of the proceeds from the December 2000 equity issuance. The blended
financing rate on incremental borrowings after taking account of interest rate
hedges, but before taking account of the sale of the Notes (see Note 2 below),
is expected to be approximately 6.5%. The effect of a one-eighth percent
increase in interest rates would be to increase interest expense by L0.9 million
for the year ended December 31, 2000.

S-49
50

(f) Records the tax effects of the relevant pro forma adjustments arising
from the acquisition of Harcourt at the statutory rate of 40%. The pro forma
combined profit and loss account includes an allocation of tax on the profits of
the businesses held solely for sale, tax on interest and the tax effects of
other pro forma adjustments discussed above.

2. PRO FORMA NET PROCEEDS OF THE SALE OF THE NOTES

The unaudited pro forma combined financial information includes the sale of
$550,000,000 6.125% Notes due 2006, $550,000,000 6.750% Notes due 2011 and
E500,000,000 5.750% Notes due 2008. The net proceeds of approximately $1,528
million (L1,026 million translated at the closing rate on December 31, 2000 of
$1.49 per L1.00) (after deducting underwriting discounts and transaction
expenses) are assumed to be applied against outstanding short term borrowings.
In estimating such net proceeds, the proceeds from the offering of the Euro
Notes have been translated into U.S. dollars using the applicable currency swap
rate of $0.88 per E1.00. It is estimated that, based on current market interest
rates, the sale of the Notes will increase the blended financing rate on the
debt component of the funding by 50 basis points and will give rise to an
incremental L5 million interest charge on the debt component of the acquisition
funding. (See Note 1(e) above).

3. RESTATEMENT OF HARCOURT'S HISTORICAL FINANCIAL INFORMATION TO U.K. AND DUTCH
GAAP

(a) Harcourt historical financial information

(i) Harcourt Unaudited Consolidated Income Statement -- Year ended October
31, 2000

The following unaudited consolidated income statement for the year ended
October 31, 2000 is derived from Harcourt's audited consolidated income
statement for the year then ended, adjusted to conform materially to Reed
Elsevier's accounting policies under U.K. and Dutch GAAP.

U.K. AND U.K. AND
U.S. GAAP(3)(B) ADJUSTMENTS(3)(C) DUTCH GAAP DUTCH GAAP(3)(D)
--------------- ----------------- ---------- ----------------
(IN MILLIONS)

Turnover
Including share of turnover of joint
ventures................................ $ 2,408 $ -- $ 2,408 L1,648
Less: share of turnover of joint
ventures................................ -- -- -- --
------- ----- ------- ------
2,408 -- 2,408 1,648
Cost of sales................................ (778) -- (778) (532)
------- ----- ------- ------
Gross profit................................. 1,630 -- 1,630 1,116
Operating expenses:
Before amortization and exceptional
items................................... (1,195) -- (1,195) (818)
Amortization of goodwill and intangible
assets.................................. (67) (77) (144) (99)
Exceptional items.......................... -- (15) (15) (10)
------- ----- ------- ------
Operating profit (before joint ventures)..... 368 (92) 276 189
Share of operating profit in joint
ventures................................... -- -- -- --
------- ----- ------- ------
Operating profit including joint ventures.... 368 (92) 276 189
Non operating exceptional items:
Profit on sale of fixed asset
investments............................. 23 -- 23 16
------- ----- ------- ------
Profit on ordinary activities before
interest................................... 391 (92) 299 205
Net interest expense......................... (102) -- (102) (70)
------- ----- ------- ------
Profit on ordinary activities before
taxation................................... 289 (92) 197 135
Tax on profit on ordinary activities......... (107) 5 (102) (70)
------- ----- ------- ------
Profit on ordinary activities after
taxation................................... 182 (87) 95 65
Minority interest and preference dividends... 1 -- 1 1
------- ----- ------- ------
Profit from continuing operations............ $ 183 $ (87) $ 96 L 66
======= ===== ======= ======

Harcourt's historical financial information is presented on a continuing
operations basis and excludes losses from discontinued operations of $103
million (L71 million) under U.S. GAAP.

S-50
51

(ii) Harcourt Unaudited Consolidated Balance Sheet -- As of October, 31,
2000

The following unaudited consolidated balance sheet as of October 31, 2000
is derived from Harcourt's audited consolidated balance sheet at that date,
adjusted to conform materially to Reed Elsevier's accounting policies under U.K.
and Dutch GAAP.

U.K. AND U.K. AND
U.S. GAAP(3)(B) ADJUSTMENTS(3)(C) DUTCH GAAP DUTCH GAAP(3)(D)
--------------- ----------------- ---------- ----------------
(IN MILLIONS)

Fixed assets
Goodwill and intangible assets.... $ 1,402 $ (81) $ 1,321 L 909
Tangible assets................... 125 -- 125 86
Investments....................... 185 (85) 100 69
------- ----- ------- ------
1,712 (166) 1,546 1,064
------- ----- ------- ------
Current assets
Stocks............................ 618 -- 618 426
Debtors: amounts falling due
within one year................ 588 31 619 426
Debtors: amounts falling due after
more than one year............. 35 -- 35 24
Cash and short term investments... 29 -- 29 20
------- ----- ------- ------
1,270 31 1,301 896
Creditors: amounts falling due
within one year
Borrowings........................ (18) -- (18) (12)
Trade creditors and other current
liabilities.................... (821) 13 (808) (556)
------- ----- ------- ------
(839) 13 (826) (568)
------- ----- ------- ------
Net current assets.................. 431 44 475 328
------- ----- ------- ------
Total assets less current
liabilities....................... 2,143 (122) 2,021 1,392
Creditors: amounts falling due after
more than one year
Borrowings........................ (1,228) -- (1,228) (846)
Other creditors................... (155) -- (155) (107)
Provisions for liabilities and
charges........................... (16) -- (16) (11)
Minority interests.................. -- -- -- --
------- ----- ------- ------
Net assets.......................... $ 744 $(122) $ 622 L 428
======= ===== ======= ======
Capital and reserves
Share capital..................... $ 74 $ -- $ 74 L 51
Paid in capital................... 370 -- 370 255
Reserves.......................... 300 (122) 178 122
------- ----- ------- ------
Consolidated shareholders' funds.... $ 744 $(122) $ 622 L 428
======= ===== ======= ======

(b) Reclassification of Harcourt's historical financial statements

Reclassifications have been made to Harcourt's historical financial
information presented under U.S. GAAP to conform to Reed Elsevier's presentation
under U.K. and Dutch GAAP.

The principal income statement reclassifications relate to the presentation
of investment and other income as part of exceptional profit on sale of fixed
asset investments.

S-51
52

The principal balance sheet reclassifications relate to:

- reclassification of pre-publication costs from other assets to inventory;

- reclassification of other deferred charges and non-current assets to the
relevant U.K. and Dutch GAAP headings including borrowings, investments
and debtors: amounts falling due after more than one year; and

- reclassification of accumulated other comprehensive income to retained
reserves.

The historical Harcourt financial statements are prepared in accordance
with U.S. GAAP. The significant adjustments in restating the historical
consolidated financial statements of Harcourt to conform materially with Reed
Elsevier accounting policies under U.K. and Dutch GAAP are described below.

(i) Goodwill and other intangible assets

Under U.S. GAAP, the useful life for capitalized acquired goodwill and
intangible assets should not exceed 40 years. As described in Note 1(d) above,
under U.K. and Dutch GAAP as applied for the fiscal years ended December 31,
2000, Reed Elsevier amortized acquired goodwill and intangible assets over their
estimated useful lives up to a maximum period of 20 years. An adjustment has
been made to reflect the impact of differences in acquisition accounting
(including the capitalization of acquired in-process research and development
costs) under U.K. and Dutch GAAP and, with respect to the Harcourt Higher
Education business and Corporate and Professional Services businesses, to
conform estimated useful lives.

(ii) Acquisition accounting

Under U.S. GAAP, certain severance costs may be provided as part of
purchase accounting adjustments on acquisition. An adjustment is required under
U.K. and Dutch GAAP, so that such costs in relation to acquisitions are expensed
as incurred. Due to their size and incidence, under U.K. and Dutch GAAP those
costs are disclosed as exceptional items charged to operating profit.

(iii) Exceptional items

Exceptional items are material items within ordinary activities which under
U.K. and Dutch GAAP are required to be disclosed separately due to their size or
incidence. These items do not qualify as extraordinary under U.S. GAAP and are
considered a part of operating results.

(iv) Deferred taxation

Under U.K. and Dutch GAAP, Reed Elsevier provides in full for timing
differences using the liability method. Under U.S. GAAP, deferred taxation is
provided on all temporary differences under the liability method, subject to a
valuation allowance on deferred tax assets where applicable, in accordance with
Statement of Financial Accounting Standards ("SFAS") 109, Accounting for Income
Taxes.

(v) Investments

Under U.K. and Dutch GAAP, quoted investments held as fixed asset
investments are carried at the lower of cost or recoverable amount. Under U.S.
GAAP, available-for-sale investments are carried at market value with the
unrealized gain or loss from historical cost excluded from earnings and reported
in other comprehensive income and included as a separate line item in share
capital and reserves. An adjustment is required to restate available-for-sale
investments to the lower of cost or recoverable amount.

(d) Translation of Harcourt's financial statements

Harcourt presents its financial statements in U.S. dollars. The results of
Harcourt, adjusted to conform materially to Reed Elsevier's accounting policies
under U.K. and Dutch GAAP, have been translated into pounds sterling at the
average rate of $1.4609 to L1.00 for the year ended October 31, 2000.

S-52
53

The Harcourt balance sheet as of October 31, 2000 in U.S. dollars, adjusted
to conform materially to Reed Elsevier's accounting policies under U.K. and
Dutch GAAP, has been translated into pounds sterling at $1.4521 to L1.00 being
the closing rate as of October 31, 2000.

These translations should not be taken as assurances that the pounds
sterling amounts currently represent U.S. dollar amounts or could be converted
into U.S. dollars at the rate indicated or at any other rate, at any time.

4. RECONCILIATION OF UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION FROM
U.K. AND DUTCH GAAP TO U.S. GAAP

The unaudited pro forma combined financial statements are prepared in
accordance with U.K. and Dutch GAAP, which differ in certain significant
respects from U.S. GAAP. The differences which are material to restating the
unaudited pro forma net income and pro forma combined shareholders' funds to
U.S. GAAP are presented in the tables below. Certain of these differences are
described in Note 3(c) above. In addition, further differences in respect of
goodwill and intangible assets, deferred taxation, pensions and ordinary
dividends are described below.

A more complete explanation of accounting policies used by Reed Elsevier
and the differences between U.K. and Dutch GAAP and U.S. GAAP is set out in Note
30 to the combined financial statements incorporated by reference in this
prospectus supplement.

(a) Goodwill and intangible assets

In the 1998 fiscal year Reed Elsevier adopted the new U.K. accounting
standard Financial Reporting Standard ("FRS") 10: Goodwill and Intangible
Assets, and accordingly changed its accounting policy for goodwill and
intangible assets. Under this policy, for the fiscal years ended December 31,
1998 to December 31, 2000, goodwill and intangible assets were being amortized
through the profit and loss account over their estimated useful lives, up to a
maximum of 20 years. In view of this and the determination of appropriate
prudent asset lives, the remaining asset lives for U.S. GAAP purposes were
reviewed and determined consistently with those adopted for the new U.K. and
Dutch GAAP treatment. This re-evaluation of asset lives under U.S. GAAP
increased the periodic amortization charge for fiscal years since December 31,
1998, as the unamortized value of certain assets, which were previously
amortized over periods up to 40 years, were amortized over shorter periods.

As explained in Note 1(d) above, the goodwill and intangible assets arising
on the acquisition of the retained Harcourt businesses have been assumed to have
a useful life of 40 years under U.K. and Dutch GAAP.

Under the new U.S. accounting standard SFAS 142 Goodwill and other
Intangible Assets, no amortization has been charged on goodwill arising on the
acquisition of the retained Harcourt businesses for the purpose of the unaudited
pro forma financial information, whereas, under U.S. GAAP, intangible assets
acquired have been amortized over a 40 year period.

(b) Deferred Taxation

Under the U.S. accounting standard SFAS 109 Accounting for Income Taxes,
deferred tax liabilities or assets are recognized on business combinations for
differences arising between the fair value and related tax values of acquired
assets and liabilities. The most significant deferred tax liability arises on
acquired intangible assets for which amortization is not tax deductible. Under
the timing difference approach applied under U.K. and Dutch GAAP, no such
liability would be recognized.

Reed Elsevier accounts for pension costs under the rules set out in
Statement of Standard Accounting Practice ("SSAP") 24 Accounting for Pension
Costs. Its objectives and principles are broadly in line with those set out in
the U.S. accounting standard for pensions, SFAS 87, Employers' Accounting for
Pensions.
S-53
54

However, SSAP 24 is less prescriptive in the application of the actuarial method
and assumptions to be applied in the calculation of pension costs.

Under U.S. GAAP, pension plan assets are valued by reference to
market-related values at the date of the financial statements. Liabilities are
assessed using the rate of return obtainable on fixed or inflation-linked bonds.
Under U.K. GAAP, pension plan assets and liabilities are based on the results of
the latest actuarial valuation. Pension assets are valued at discounted present
value determined by expected future income. Liabilities are assessed using the
expected rate of return on plan assets.

(d) Ordinary dividends

Under U.K. and Dutch GAAP, dividends are provided for in the year in
respect of which they are proposed by the directors. Under U.S. GAAP, dividends
would not be provided for until they are formally declared by the directors.

(e) Adjusted earnings

Adjusted earnings measures are presented as permitted by U.K. and Dutch
GAAP as an additional performance measure. U.S. GAAP does not permit the
presentation of alternative earnings measures.

EFFECTS ON UNAUDITED PRO FORMA NET INCOME OF MATERIAL DIFFERENCES BETWEEN
U.K. AND DUTCH GAAP AND U.S. GAAP

YEAR ENDED
DECEMBER 31,
2000
-------------
(IN MILLIONS)

Pro forma net income under U.K. and Dutch GAAP from
continuing operations..................................... L 50
U.S. GAAP adjustments:
Amortization of goodwill and other intangibles............ (65)
Deferred taxation......................................... 85
Pensions.................................................. 22
Other items............................................... (2)
----
Pro forma net income under U.S. GAAP from continuing
operations................................................ L 90
====

EFFECTS ON UNAUDITED PRO FORMA COMBINED SHAREHOLDERS' FUNDS OF MATERIAL
DIFFERENCES BETWEEN U.K. AND DUTCH GAAP AND U.S. GAAP

AS OF
DECEMBER 31,
2000
-------------
(IN MILLIONS)

Pro forma combined shareholders' funds under U.K. and Dutch
GAAP...................................................... L 3,041
U.S. GAAP adjustments:
Goodwill and other intangibles............................ 1,450
Deferred taxation......................................... (1,049)
Pensions.................................................. 86
Other items............................................... 2
Ordinary dividends not declared in the period............. 187
-------
Pro forma combined shareholders' funds under U.S. GAAP...... L 3,717
=======

S-54
55

5. CONVENIENCE TRANSLATIONS

For the convenience of the reader, pounds sterling and pence amounts for
the year ended December 31, 2000 have been translated into U.S. dollars using
the noon buying rate on June 29, 2001 of $1.4077 per L1.00.

6. NET DEBT

Pro forma net debt as of December 31, 2000 is defined as external
borrowings less cash and short term investments and is presented after
application of the post tax proceeds from the on-sale to The Thomson Corporation
of L1,054 million ($1,571 million) to reduce borrowings.

CASH AND
SHORT
TERM
BORROWINGS INVESTMENTS NET DEBT
---------- ----------- --------
(IN MILLIONS)

Reed Elsevier...................................... L(2,027) L 1,594 L (433)
Harcourt........................................... (858) 20 (838)
------- ------- -------
(2,885) 1,614 (1,271)
Pro forma effective purchase price(1)(a)........... (709) (1,240) (1,949)
Adjustment to fair value of term debt
acquired(1)(b)................................... (13) -- (13)
------- ------- -------
Pro forma net debt................................. L(3,607) L 374 L(3,233)
======= ======= =======

S-55
56

REED INTERNATIONAL UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

INTRODUCTORY NOTE

The following unaudited pro forma consolidated financial information gives
pro forma effect to the acquisition of Harcourt, the on-sale to The Thomson
Corporation and the sale of the Notes. The unaudited pro forma consolidated
financial information has been prepared from, and should be read in conjunction
with, the respective historical financial information and the related notes of
Reed International, Reed Elsevier and Harcourt, which are incorporated by
reference in this prospectus supplement.

The unaudited pro forma consolidated financial information is provided for
illustrative purposes only and does not purport to represent what the actual
results of operations or the financial position of Reed International would have
been if the acquisition of Harcourt, the on-sale to The Thomson Corporation and
the sale of the Notes had actually occurred on the dates assumed, nor is it
necessarily indicative of Reed International's future operating results or
consolidated financial position.

The unaudited pro forma consolidated financial information has been
prepared in accordance with U.K. GAAP, which differs in certain significant
respects from U.S. GAAP. Note 3 below contains a summary of the principal
differences between U.K. GAAP and U.S. GAAP relevant to Reed International. A
reconciliation of unaudited pro forma net consolidated income, pro forma
earnings per share and pro forma consolidated shareholders' equity to U.S. GAAP
is included in Note 4 below.

Reed International accounts for its shareholders' 52.9% economic interest
in Reed Elsevier under the gross equity method. In the pro forma consolidated
financial information the results of operations and financial position of Reed
International have been adjusted to reflect its share of the pro forma
adjustments relating to the acquisition of Harcourt, the on-sale to The Thomson
Corporation and the sale of the Notes.

Reed International's pro forma financial information is presented in pounds
sterling and is also expressed in U.S. dollars, the latter being presented
solely for convenience and translated at the noon buying rate on June 29, 2001
of $1.4077 to L1.00.

S-56
57

REED INTERNATIONAL UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT

YEAR ENDED DECEMBER 31, 2000

The following pro forma consolidated income statement for the year ended
December 31, 2000 is derived from Reed International's audited consolidated
profit and loss account for the year then ended, after giving effect to the pro
forma adjustments relating to the acquisition of Harcourt, the on-sale to The
Thomson Corporation and the sale of the Notes. These adjustments have been
determined as if the acquisition of Harcourt, the on-sale to The Thomson
Corporation, the issuance of equity to fund the transaction and the sale of the
Notes took place simultaneously on January 1, 2000, the first day of the
financial period presented in the unaudited pro forma financial information. The
table below has been prepared in accordance with U.K. GAAP. A summary of the
principal differences between U.K. GAAP and U.S. GAAP is presented in Note 3
below and a reconciliation to U.S. GAAP is presented in Note 4 below.

REED
INTERNATIONAL PRO FORMA PRO FORMA PRO FORMA PRO FORMA
YEAR ENDED PRO FORMA YEAR ENDED SALE OF THE YEAR ENDED YEAR ENDED
DECEMBER 31, ACQUISITION DECEMBER 31, NOTES DECEMBER 31, DECEMBER 31,
2000 ADJUSTMENTS(1) 2000 ADJUSTMENTS(2) 2000 2000(6)
------------- -------------- ------------ -------------- ------------ ------------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

Turnover
Share of turnover of joint
ventures.................. L 1,994 L 607 L 2,601 L -- L 2,601 $ 3,661
Less: share of turnover of
joint ventures............ (1,994) (607) (2,601) -- (2,601) (3,661)
------- ------- ------- ------- -------- -------
-- -- -- -- -- --
Administrative expenses....... (1) -- (1) -- (1) (1)
------- ------- ------- ------- -------- -------
Operating loss before joint
ventures.................... (1) -- (1) -- (1) (1)
------- ------- ------- ------- -------- -------
Share of operating profit of
joint ventures:
Before amortization and
exceptional items......... 414 135 549 -- 549 772
Amortization of goodwill and
intangible assets......... (248) (35) (283) -- (283) (398)
Exceptional items........... (60) (6) (66) -- (66) (93)
------- ------- ------- ------- -------- -------
106 94 200 -- 200 281
------- ------- ------- ------- -------- -------
Operating profit including
joint ventures.............. 105 94 199 -- 199 280
Share of non operating
exceptional items of joint
ventures.................... 45 3 48 -- 48 68
Net interest including share
of net interest of joint
ventures.................... (54) (60) (114) (3) (117) (165)
------- ------- ------- ------- -------- -------
Profit on ordinary activities
before taxation............. 96 37 133 (3) 130 183
Tax on profit on ordinary
activities.................. (85) (26) (111) 1 (110) (155)
------- ------- ------- ------- -------- -------
Profit attributable to
ordinary shareholders....... 11 11 22 (2) 20 28
------- ------- ------- ------- -------- -------
Basic earnings per share...... 1.0p 0.7p 1.7p (0.1)p 1.6p 2c
======= ======= ======= ======= ======== =======
Diluted earnings per share.... 1.0p 0.7p 1.7p (0.1)p 1.6p 2c
======= ======= ======= ======= ======== =======
Adjusted earnings per
share(1)(5)................. 23.3p 1.8p 25.1p (0.1)p 25.0p 35c
======= ======= ======= ======= ======== =======
Average shares outstanding-
basic/adjusted(1)........... 1,156.4 103.6 1,260.0 -- 1,260.0 1,260.0
======= ======= ======= ======= ======== =======
Average shares outstanding-
diluted(1).................. 1,161.2 103.6 1,264.8 -- 1,264.8 1,264.8
======= ======= ======= ======= ======== =======

The notes to the unaudited pro forma consolidated financial information are
an integral part of these statements.
S-57
58

REED INTERNATIONAL UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

AS OF DECEMBER 31, 2000

The following pro forma consolidated balance sheet as of December 31, 2000
is derived from Reed International's audited consolidated balance sheet, after
giving pro forma effect to the acquisition of Harcourt, the on-sale to The
Thomson Corporation and the sale of the Notes. These adjustments have been
determined as if the acquisition of Harcourt, the on-sale to The Thomson
Corporation and the sale of the Notes took place simultaneously on December 31,
2000. The table below has been prepared in accordance with U.K. GAAP. A summary
of the principal differences between U.K. GAAP and U.S. GAAP is presented in
Note 3 below and a reconciliation to U.S. GAAP is presented in Note 4 below.

REED
INTERNATIONAL PRO FORMA PRO FORMA PRO FORMA PRO FORMA
AS OF PRO FORMA AS OF SALE OF THE AS OF AS OF
DECEMBER 31, ACQUISITION DECEMBER 31, NOTES DECEMBER 31, DECEMBER 31,
2000 ADJUSTMENTS(1) 2000 ADJUSTMENTS(2) 2000 2000(6)
------------- -------------- ------------ -------------- ------------ ------------
(IN MILLIONS)

Fixed assets
Investments in joint
ventures:............
Share of gross assets... L3,534 L 1,209 L 4,743 L-- L 4,743 $ 6,677
Share of gross
liabilities.......... (2,733) (1,209) (3,942) -- (3,942) (5,549)
------ ------- ------- -- ------- -------
Share of net assets..... 801 -- 801 -- 801 1,128
------ ------- ------- -- ------- -------
Current assets:
Debtors................. 513 -- 513 -- 513 722
Short term
investments.......... 431 -- 431 -- 431 607
Creditors: amounts falling
due within one year..... (100) -- (100) -- (100) (141)
------ ------- ------- -- ------- -------
Net current assets........ 844 -- 844 -- 844 1,188
------ ------- ------- -- ------- -------
Total assets less current
liabilities............. 1,645 -- 1,645 -- 1,645 2,316
Creditors: amounts falling
due after more than one
year.................... (36) -- (36) -- (36) (51)
------ ------- ------- -- ------- -------
Net assets................ L1,609 L -- L 1,609 L-- L 1,609 $ 2,265
====== ======= ======= == ======= =======
Capital and reserves
Share capital........... L 158 L -- L 158 L-- L 158 $ 222
Share premium account... 926 -- 926 -- 926 1,304
Capital redemption
reserve.............. 4 -- 4 -- 4 6
Profit and loss
account.............. 521 -- 521 -- 521 733
------ ------- ------- -- ------- -------
Consolidated shareholders'
funds................... L1,609 L -- L 1,609 L-- L 1,609 $ 2,265
====== ======= ======= == ======= =======

The notes to the unaudited pro forma consolidated financial information are
an integral part of these statements.
S-58
59

NOTES TO REED INTERNATIONAL UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
INFORMATION

1. PRO FORMA ACQUISITION ADJUSTMENTS

The pro forma effect on Reed Elsevier from the acquisition of Harcourt, the
on-sale to The Thomson Corporation and the sale of the Notes is described in the
Reed Elsevier Unaudited Pro Forma Combined Financial Information. Reed
International accounts for its shareholders' 52.9% economic interest in Reed
Elsevier under the gross equity method. The results of operations and the
financial position of Reed International have been adjusted to reflect its share
of the pro forma acquisition adjustments disclosed in the Reed Elsevier
Unaudited Pro Forma Combined Financial Information.

The Reed Elsevier Unaudited Pro Forma Combined Financial Information
records the acquisition of the Harcourt businesses using the acquisition method
of accounting under U.K. and Dutch GAAP, which is similar in effect to the
purchase method of accounting under U.S. GAAP, the excess of the fair value of
the consideration over the fair value of the net assets acquired being allocated
to goodwill.

Pro forma earnings per share have been calculated as if the joint equity
placing used in part to fund the acquisition of Harcourt had taken place on
January 1, 2000.

2. PRO FORMA PROCEEDS OF THE SALE OF THE NOTES

The pro forma effect of the sale of the Notes on Reed Elsevier is described
in the Reed Elsevier Unaudited Pro Forma Combined Financial Information. The
Reed International Unaudited Pro Forma Consolidated Income Statement and
Unaudited Pro Forma Consolidated Balance Sheet reflect its share of the pro
forma effect of the sale of the Notes.

3. SUMMARY OF DIFFERENCES BETWEEN U.K. GAAP AND U.S. GAAP

The unaudited pro forma consolidated financial statements are prepared in
accordance with U.K. GAAP, which differs in certain significant respects from
U.S. GAAP. The differences which are material to reconciling the Reed
International unaudited pro forma net income and pro forma consolidated
shareholders' equity to U.S. GAAP are summarized below and the reconciliations
are presented in Note 4 below.

(a) Impact of U.S. GAAP adjustments to pro forma combined financial statements

Reed International accounts for its shareholders' 52.9% economic interest
in Reed Elsevier, before the effect of tax credit equalization, by the gross
equity method in conformity with U.K. GAAP, which is similar to the equity
method used under U.S. GAAP. Using the equity method to present its net income
and shareholders' funds under U.S. GAAP, Reed International reflects its
shareholders' 52.9% share of the effects of differences between U.K. and Dutch
GAAP and U.S. GAAP relating to Reed Elsevier and the effect on tax credit
equalization of recognizing dividends, under U.S. GAAP, only if declared in the
period, as a single reconciling item. The most significant differences relate to
U.S. GAAP requirements in respect of the capitalization and amortization of
goodwill and other intangibles, deferred taxes and pensions. See Note 4 to the
Reed Elsevier Unaudited Pro Forma Combined Financial Information.

(b) Exceptional items

Exceptional items are material items within Reed International's ordinary
activities which under U.K. GAAP are required to be disclosed separately due to
their size or incidence. These items do not qualify as extraordinary under U.S.
GAAP and are considered a part of operating results.

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60

Under U.K. GAAP, dividends are provided for in the year in respect of which
they are proposed by the directors. Under U.S. GAAP, such dividends would not be
provided for until they are formally declared by the directors.

4. RECONCILIATION OF UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION FROM
U.K. GAAP TO U.S. GAAP

The tables below set forth the principal differences between the unaudited
pro forma consolidated financial information on a U.K. GAAP basis and on a U.S.
GAAP basis.

EFFECTS ON PRO FORMA NET INCOME OF MATERIAL DIFFERENCES
BETWEEN U.K. GAAP AND U.S. GAAP:

YEAR ENDED
DECEMBER 31,
2000
--------------
(IN MILLIONS,
EXCEPT PER
SHARE AMOUNTS)

Pro forma net income under U.K. GAAP........................ L20
U.S. GAAP adjustments:
Impact of U.S. GAAP adjustments to pro forma combined
financial statements................................... 23
---
Pro forma net income under U.S. GAAP........................ L43
===
Pro forma basic earnings per ordinary share under U.S.
GAAP...................................................... 3.4p
===
Pro forma diluted earnings per ordinary share under U.S.
GAAP...................................................... 3.4p
===

EFFECTS ON PRO FORMA SHAREHOLDERS' FUNDS OF MATERIAL DIFFERENCES
BETWEEN U.K. GAAP AND U.S. GAAP:

AS OF
DECEMBER 31,
2000
-------------
(IN MILLIONS)

Pro forma shareholders' funds under U.K. GAAP............... L1,609
U.S. GAAP adjustments:
Impact of U.S. GAAP adjustments to pro forma combined
financial statements................................... 269
Ordinary dividends not declared in the period............. 88
------
Pro forma shareholders' funds under U.S. GAAP............... L1,966
======

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5. ADJUSTED EARNINGS PER SHARE

Adjusted earnings per share is defined as basic earnings per share before
amortization of goodwill and intangible assets and exceptional items. A
reconciliation from basic to adjusted earnings per share is shown below.

PER SHARE
AMOUNTS
YEAR ENDED
DECEMBER 31,
2000
--------------
PENCE CENTS
----- -----

Basic earnings per share.................................... 1.6p 2c
Effect of tax credit equalization........................... 0.5p 1c
Amortization of goodwill and intangible assets.............. 22.4p 31c
Exceptional items........................................... 0.5p 1c
---- ---
Adjusted earnings per share................................. 25.0p 35c
==== ===

6. CONVENIENCE TRANSLATIONS

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ELSEVIER UNAUDITED PRO FORMA FINANCIAL INFORMATION

INTRODUCTORY NOTE

The following unaudited pro forma financial information gives pro forma
effect to the acquisition of Harcourt, the on-sale to The Thomson Corporation
and the sale of the Notes. The unaudited pro forma financial information has
been prepared from, and should be read in conjunction with the respective
historical financial information and the related notes of Elsevier, Reed
Elsevier and Harcourt, which are incorporated by reference in this prospectus
supplement.

The unaudited pro forma financial information is provided for illustrative
purposes only and does not purport to represent what the actual results of
operations or the financial position of Elsevier would have been if the
acquisition of Harcourt, the on-sale to The Thomson Corporation and the sale of
the Notes had actually occurred on the dates assumed, nor is it necessarily
indicative of Elsevier's future operating results or financial position.

The unaudited pro forma financial information has been prepared in
accordance with Dutch GAAP, which differs in certain significant respects from
U.S. GAAP. Note 3 below contains a summary of the principal differences between
Dutch GAAP and U.S. GAAP relevant to Elsevier. A reconciliation of unaudited pro
forma net income, pro forma earnings per share and pro forma shareholders'
equity to U.S. GAAP is included in Note 4 below.

Elsevier accounts for its shareholders' 50% economic interest in Reed
Elsevier under the gross equity method. In the pro forma financial information
the results of operations and financial position of Elsevier have been adjusted
to reflect its share of the pro forma adjustments relating to the acquisition of
Harcourt, the on-sale to The Thomson Corporation and the sale of the Notes.

Elsevier's pro forma financial information is presented in euros and is
also expressed in U.S. dollars, the latter being presented solely for
convenience and translated at the noon buying rate on June 29, 2001 of $0.8474
to E1.00.

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ELSEVIER UNAUDITED PRO FORMA INCOME STATEMENT

YEAR ENDED DECEMBER 31, 2000

The following pro forma income statement for the year ended December 31,
2000 is derived from Elsevier's audited profit and loss account for the year
then ended, after giving effect to the pro forma adjustments relating to the
acquisition of Harcourt, the on-sale to The Thomson Corporation and the sale of
the Notes. These adjustments have been determined as if the acquisition of
Harcourt, the on-sale to The Thomson Corporation, the issuance of equity to fund
the transaction and the sale of the Notes took place simultaneously on January
1, 2000, the first day of the financial period presented in the unaudited pro
forma financial information. The table below has been prepared in accordance
with Dutch GAAP. A summary of the principal differences between Dutch GAAP and
U.S. GAAP is presented in Note 3 below and a reconciliation to U.S. GAAP is
presented in Note 4 below.

ELSEVIER PRO FORMA PRO FORMA PRO FORMA PRO FORMA
YEAR ENDED PRO FORMA YEAR ENDED SALE OF THE YEAR ENDED YEAR ENDED
DECEMBER 31, ACQUISITION DECEMBER 31, NOTES DECEMBER 31, DECEMBER 31,
2000 ADJUSTMENTS(1) 2000 ADJUSTMENTS(2) 2000 2000(6)
------------ -------------- ------------ -------------- ------------ ------------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

Turnover
Share of turnover of joint
ventures................... E 3,091 E 940 E 4,031 E -- E 4,031 $ 3,416
Less: share of turnover of
joint ventures............. (3,091) (940) (4,031) -- (4,031) (3,416)
------- ------ ------- ------- ------- -------
-- -- -- -- -- --
Administrative expenses........ (3) -- (3) -- (3) (3)
------- ------ ------- ------- ------- -------
Operating loss before joint
ventures..................... (3) -- (3) -- (3) (3)
------- ------ ------- ------- ------- -------
Share of operating profit of
joint ventures:
Before amortization and
exceptional items.......... 654 208 862 -- 862 730
Amortization of goodwill and
intangible assets.......... (384) (54) (438) -- (438) (371)
Exceptional items............ (95) (8) (103) -- (103) (87)
------- ------ ------- ------- ------- -------
175 146 321 -- 321 272
------- ------ ------- ------- ------- -------
Operating profit including
joint ventures............... 172 146 318 -- 318 269
Share of non operating
exceptional items of joint
ventures..................... 70 5 75 -- 75 64
Net interest (including share
of net interest of joint
ventures).................... (85) (94) (179) (4) (183) (155)
------- ------ ------- ------- ------- -------
Profit on ordinary activities
before taxation.............. 157 57 214 (4) 210 178
Tax on profit on ordinary
activities................... (130) (40) (170) 1 (169) (143)
------- ------ ------- ------- ------- -------
Profit attributable to ordinary
shareholders................. 27 17 44 (3) 41 35
------- ------ ------- ------- ------- -------
Basic earnings per share....... E 0.04 E 0.01 E 0.05 E -- E 0.05 4c
======= ====== ======= ======= ======= =======
Diluted earnings per share..... E 0.03 E 0.01 E 0.04 E -- E 0.04 3c
======= ====== ======= ======= ======= =======
Adjusted earnings per
share(1)(5).................. E 0.59 E 0.04 E 0.63 E -- E 0.63 53c
======= ====== ======= ======= ======= =======
Average shares outstanding-
basic/adjusted(1)............ 714.4 60.8 775.2 -- 775.2 775.2
======= ====== ======= ======= ======= =======
Average shares
outstanding-diluted(1)....... 716.4 60.8 777.2 -- 777.2 777.2
======= ====== ======= ======= ======= =======

The notes to the unaudited pro forma financial information are
an integral part of these statements.
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64

ELSEVIER UNAUDITED PRO FORMA BALANCE SHEET

AS OF DECEMBER 31, 2000

The following pro forma balance sheet as of December 31, 2000 is derived
from Elsevier's audited balance sheet, after giving pro forma effect to the
acquisition of Harcourt, the on-sale to The Thomson Corporation and the sale of
the Notes. These adjustments have been determined as if the acquisition of
Harcourt, the on-sale to The Thomson Corporation and the sale of the Notes took
place simultaneously on December 31, 2000. The table below has been prepared in
accordance with Dutch GAAP. A summary of the principal differences between Dutch
GAAP and U.S. GAAP is presented in Note 3 below and a reconciliation to U.S.
GAAP is presented in Note 4 below.

ELSEVIER PRO FORMA PRO FORMA PRO FORMA PRO FORMA
AS OF PRO FORMA AS OF SALE OF AS OF AS OF
DECEMBER 31, ACQUISITION DECEMBER 31, THE NOTES DECEMBER 31, DECEMBER 31,
2000 ADJUSTMENTS(1) 2000 ADJUSTMENTS(2) 2000 2000(6)
------------ -------------- ------------ -------------- ------------ ------------
(IN MILLIONS)

Fixed assets
Investments in joint
ventures:
Share of gross assets.... E 5,010 E 1,839 E 6,849 E-- E 6,849 $ 5,804
Share of gross
liabilities............ (3,336) (1,839) (5,175) -- (5,175) (4,386)
------- ------- ------- -- ------- -------
Share of net assets........ 1,674 -- 1,674 -- 1,674 1,418
------- ------- ------- -- ------- -------
Current assets
Debtors.................... 5 -- 5 -- 5 4
Short term investments..... 971 -- 971 -- 971 823
------- ------- ------- -- ------- -------
976 -- 976 -- 976 827
Creditors: amounts falling
due within one year...... (154) -- (154) -- (154) (130)
------- ------- ------- -- ------- -------
Net current assets......... 822 -- 822 -- 822 697
------- ------- ------- -- ------- -------
Total assets less current
liabilities.............. 2,496 -- 2,496 -- 2,496 2,115
Creditors: amounts falling
due after more than one
year..................... (6) -- (6) -- (6) (5)
Provisions................. (42) -- (42) -- (42) (36)
------- ------- ------- -- ------- -------
Net assets................. E 2,448 E -- E 2,448 E-- E 2,448 $ 2,074
======= ======= ======= == ======= =======
Capital and reserves
Share capital.............. E 47 E -- E 47 E-- E 47 $ 40
Paid in surplus............ 1,328 -- 1,328 -- 1,328 1,125
Profit and loss account.... 1,073 -- 1,073 -- 1,073 909
------- ------- ------- -- ------- -------
Combined shareholders'
funds.................... E 2,448 E -- E 2,448 E-- E 2,448 $ 2,074
======= ======= ======= == ======= =======

The notes to the unaudited pro forma financial information are
an integral part of these statements.
S-64
65

NOTES TO ELSEVIER UNAUDITED PRO FORMA FINANCIAL INFORMATION

1. PRO FORMA ACQUISITION ADJUSTMENTS

The pro forma effect on Reed Elsevier from the acquisition of Harcourt, the
on-sale to The Thomson Corporation and the sale of the Notes is described in the
Reed Elsevier Unaudited Pro Forma Combined Financial Information. Elsevier
accounts for its shareholders' 50% economic interest in Reed Elsevier under the
gross equity method. The results of operations and the financial position of
Elsevier have been adjusted to reflect its share of the pro forma acquisition
adjustments disclosed in the Reed Elsevier Unaudited Pro Forma Combined
Financial Information.

Pro forma earnings per share have been calculated as if the joint equity
placing used in part to fund the acquisition of Harcourt had taken place on
January 1, 2000.

2. PRO FORMA PROCEEDS OF THE SALE OF THE NOTES

The pro forma effect of the sale of the Notes on Reed Elsevier is described
in the Reed Elsevier Unaudited Pro Forma Combined Financial Information. The
Elsevier Unaudited Pro Forma Income Statement and Unaudited Pro Forma Balance
Sheet reflect its share of the pro forma effect of the sale of the Notes.

3. SUMMARY OF DIFFERENCES BETWEEN DUTCH GAAP AND U.S. GAAP

The pro forma financial statements are prepared in accordance with Dutch
GAAP, which differs in certain significant respects from U.S. GAAP. The
differences which are material to reconciling Elsevier's unaudited pro forma net
income and pro forma shareholders' equity to U.S. GAAP are summarized below; the
reconciliation is presented in Note 4.

(a) Impact of U.S. GAAP adjustments to pro forma combined financial statements

Elsevier accounts for its shareholders' 50% economic interest in Reed
Elsevier, before the effect of tax credit equalization, by the gross equity
method in conformity with Dutch GAAP which is similar to the equity method used
under U.S. GAAP. Using the equity method to present its net income and
shareholders' funds under U.S. GAAP, Elsevier reflects its shareholders' 50%
share of the effects of differences between Dutch GAAP and U.S. GAAP relating to
Reed Elsevier and the effect on tax credit equalization of recognizing
dividends, under U.S. GAAP, only if declared in the period, as a single
reconciling item. The most significant differences relate to U.S. GAAP
requirements in respect of the capitalization and amortization of goodwill and
other intangibles, and of deferred taxes and pensions. See Note 4 to the Reed
Elsevier Unaudited Pro Forma Combined Financial Information.

(b) Exceptional items

Exceptional items are material items within Elsevier's ordinary activities
which under Dutch GAAP are required to be disclosed separately due to their size
or incidence. These items do not qualify as extraordinary under U.S. GAAP and
are considered a part of operating results.

Under Dutch GAAP, dividends are provided for in the year in respect of
which they are proposed by the directors. Under U.S. GAAP, such dividends would
not be provided for until they are formally declared by the directors.

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66

4. RECONCILIATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION FROM DUTCH GAAP
TO U.S. GAAP

The tables below set forth the principal differences between the unaudited
pro forma financial information on a Dutch GAAP basis and on a U.S. GAAP basis.

EFFECTS ON PRO FORMA NET INCOME OF MATERIAL DIFFERENCES BETWEEN
DUTCH GAAP AND U.S. GAAP:

YEAR ENDED
DECEMBER 31,
2000
--------------
(IN MILLIONS,
EXCEPT PER
SHARE AMOUNTS)

Pro forma net income under Dutch GAAP....................... E 41
U.S. GAAP adjustments:
Impact of U.S. GAAP adjustments to pro forma combined
financial statements...................................... 41
-----
Pro forma net income under U.S. GAAP........................ E 82
=====
Pro forma basic earnings per ordinary share under U.S.
GAAP...................................................... E0.11
Pro forma diluted earnings per ordinary share under U.S.
GAAP...................................................... E0.11

EFFECTS ON PRO FORMA SHAREHOLDERS' FUNDS OF MATERIAL DIFFERENCES BETWEEN
DUTCH GAAP AND US GAAP:

AS OF
DECEMBER 31,
2000
-------------
(IN MILLIONS)

Pro forma shareholders' funds under Dutch GAAP.............. E2,448
U.S. GAAP adjustments:
Impact of U.S. GAAP adjustments to pro forma combined
financial statements...................................... 404
Ordinary dividends not declared in the period............... 140
------
Pro forma shareholders' funds under U.S. GAAP............... E2,992
======

5. ADJUSTED EARNINGS PER SHARE

PER SHARE AMOUNTS
YEAR ENDED
DECEMBER 31, 2000
------------------
EURO CENTS
------ ------

Basic earnings per share.................................... E0.04 3c
Amortization of goodwill and intangible assets.............. 0.57 48c
Exceptional items........................................... 0.02 2c
----- --
Adjusted earnings per share................................. E0.63 53c
===== ==

6. CONVENIENCE TRANSLATIONS

For the convenience of the reader, euro amounts for the year ended December
31, 2000 have been translated into U.S. dollars using the noon buying rate on
June 29, 2001 of $0.8474 per E1.00.

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67

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

REED ELSEVIER

The following discussion is based on the combined financial statements for
the three years ended December 31, 2000 which have been prepared in accordance
with U.K. and Dutch GAAP which differ in certain significant respects from U.S.
GAAP as set forth in Note 30 to the combined financial statements in the 2000
Annual Report on Form 20-F incorporated by reference in this prospectus
supplement.

The following discussion should be read in conjunction with, and is
qualified by reference to, the combined financial statements incorporated by
reference in this prospectus supplement. Unless otherwise stated, identified
amounts relate to the total results of Reed Elsevier, including the results of
discontinued operations.

Reed Elsevier derives its turnover principally from subscription sales,
circulation and copy sales, advertising sales and exhibition fees.

TURNOVER BY SOURCE FOR CONTINUING OPERATIONS

YEAR ENDED DECEMBER 31,
-----------------------------------------------
1998 1999 2000
------------- ------------- -------------
(IN MILLIONS, EXCEPT PERCENTAGES)

Subscriptions............................... L1,138 36% L1,305 39% L1,457 39%
Circulation & copy.......................... 630 20 620 18 627 17
Advertising................................. 789 25 821 24 923 24
Exhibition fees............................. 278 9 307 9 363 10
Other....................................... 328 10 337 10 398 10
------ --- ------ --- ------ ---
Total....................................... L3,163 100% L3,390 100% L3,768 100%
====== === ====== === ====== ===

The relative movement in subscription sales largely reflects the
acquisition of subscription based businesses, customer migration from
transactional to subscription accounts and the relative impact of currency
translation. As a result of this and the impact of disposals, turnover from
circulation and copy sales has declined as a proportion of total turnover.

TURNOVER BY GEOGRAPHIC MARKET FOR CONTINUING OPERATIONS(1)

YEAR ENDED DECEMBER 31,
-----------------------------------------------
1998 1999 2000
------------- ------------- -------------
(IN MILLIONS, EXCEPT PERCENTAGES)

North America............................... L1,726 55% L1,906 56% L2,152 57%
United Kingdom.............................. 483 15 484 14 521 14
The Netherlands............................. 222 7 237 7 234 6
Rest of Europe.............................. 407 13 418 13 478 13
Rest of the World........................... 325 10 345 10 383 10
------ --- ------ --- ------ ---
Total....................................... L3,163 100% L3,390 100% L3,768 100%
====== === ====== === ====== ===

- ---------------

(1) Reed Elsevier's geographic markets are North America, the United Kingdom,
The Netherlands, the Rest of Europe (excluding the United Kingdom and The
Netherlands) and the Rest of the World (other than North America, the United
Kingdom, The Netherlands and the Rest of Europe).

The increase in the relative importance of the North American market to
Reed Elsevier largely reflects the impact of acquisitions. Acquisitions with
significant sales in North America were CMD Group, acquired in May 2000, and
Matthew Bender and the remaining 50% interest in Shepard's, both of which

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68

were acquired in August 1998. The relative movement in The Netherlands and the
Rest of Europe markets reflects the relative impact of currency translation and
disposals.

The cost profile of individual businesses within Reed Elsevier varies
widely and costs are controlled on an individual business unit basis. The most
significant cost item for Reed Elsevier as a whole is labor costs, which
includes all employment costs of employees as well as of temporary or contracted
staff. Labor costs represented 42%, 44% and 42% of Reed Elsevier's total costs,
before amortization of goodwill and intangible assets and exceptional items, of
the continuing operations in 2000, 1999 and 1998, respectively.

Acquired goodwill and intangible assets are capitalized and, in the three
years ended December 31, 2000, were systematically amortized over a maximum
period of 20 years.

The following table shows turnover and adjusted operating profit for each
of Reed Elsevier's business segments in each of the three years ended December
31, 2000, together with the percentage change in 2000 and 1999 at both actual
and constant exchange rates:

TURNOVER

% CHANGE
YEAR ENDED DECEMBER 31, ----------------- YEAR ENDED DECEMBER 31,
--------------------------------------------- ACTUAL CONSTANT ---------------------------------
1998 1999 RATES RATES(1) 2000
--------------------- --------------------- ------ -------- ---------------------------------
(IN MILLIONS, EXCEPT PERCENTAGES)

BUSINESS SEGMENT(3)
Science & Medical..... L 622 19% L 652 19% 5% 5% L 693 19%
Legal................. 948 30 1,087 32 15 13 1,201 32
Education............. 159 5 181 5 14 12 202 5
Business.............. 1,434 45 1,470 44 3 2 1,672 44
------ --- ------ --- -- -- ------ ---
Continuing
operations.......... 3,163 99 3,390 100 7 6 3,768 100
Discontinued
operations(4)....... 28 1 -- -- -- --
------ --- ------ --- -- -- ------ ---
Total................. L3,191 100% L3,390 100% 6% 5% L3,768 100%
====== === ====== === == == ====== ===

% CHANGE
-----------------
ACTUAL CONSTANT
RATES RATES(2)
------ --------

BUSINESS SEGMENT(3)
Science & Medical..... 6% 7%
Legal................. 10 5
Education............. 12 9
Business.............. 14 12
-- --
Continuing
operations.......... 11 9
Discontinued
operations(4).......
-- --
Total................. 11% 9%
== ==

ADJUSTED OPERATING PROFIT(5)(6)

BUSINESS SEGMENT(3)
Science & Medical..... L 223 27% L 231 29% 4% 5% L 252 32%
Legal................. 291 36 282 36 (3) (5) 237 30
Education............. 31 4 34 4 10 8 40 5
Business.............. 268 33 245 31 (9) (9) 264 33
------ --- ------ --- -- -- ------ ---
Continuing
operations.......... 813 100 792 100 (3) (3) 793 100
Discontinued
operations(4)....... -- -- -- -- -- --
------ --- ------ --- -- -- ------ ---
Total................. L 813 100% L 792 100% (3)% (3)% L 793 100%
====== === ====== === == == ====== ===

% CHANGE
-----------------
ACTUAL CONSTANT
RATES RATES(2)
------ --------

BUSINESS SEGMENT(3)
Science & Medical..... 9% 12%
Legal................. (16) (19)
Education............. 18 15
Business.............. 8 7
--- ---
Continuing
operations.......... (1) (1)
Discontinued
operations(4).......
--- ---
Total................. (1)% (1)%
=== ===

- ---------------
(1) Represents percentage change over 1998 at constant rates of exchange, which
have been calculated using the average exchange rates for the 1998 financial
year.

(2) Represents percentage change over 1999 at constant rates of exchange, which
have been calculated using the average exchange rates for the 1999 financial
year.

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69

(3) The Education business, previously reported within the Legal segment, was
presented separately for the first time in 2000. Comparatives have been
restated accordingly. The Scientific segment has been renamed Science &
Medical to reflect business strategy.

(4) Discontinued operations are presented in accordance with U.K. and Dutch
GAAP, and comprise IPC Magazines and the consumer book publishing
operations, which were the final elements of the Consumer segment, sold in
1998.

(5) Adjusted operating profit is shown before the amortization of goodwill and
intangible assets and exceptional items. Reed Elsevier businesses focus on
adjusted profit as an additional performance measure; see Note 1 to the
combined financial statements in the 2000 Annual Report on Form 20-F
incorporated by reference in this prospectus supplement.

(6) Exceptional items are significant items within Reed Elsevier's ordinary
activities which, under U.K. and Dutch GAAP, are required to be disclosed
separately due to their size or incidence. Net exceptional items charged to
operating profit totalled L115 million (loss) in the year ended December 31,
2000, L239 million (loss) in the year ended December 31, 1999 and L79
million (loss) in the year ended December 31, 1998. See Note 8 to the
combined financial statements in the 2000 Annual Report on Form 20-F
incorporated by reference in this prospectus supplement for a further
description of these items.

THE HARCOURT ACQUISITION

On July 12, 2001, we acquired Harcourt for $4.45 billion (L3.10
billion/E5.37 billion at exchange rates prevailing on October 27, 2000, the date
we announced the acquisition). On July 13, 2001, we sold to The Thomson
Corporation, for pre-tax proceeds of $2.06 billion, the Harcourt Higher
Education business and the Corporate and Professional Services businesses other
than educational and clinical testing.

We have acquired Harcourt's STM businesses and its U.S. K-12 (kindergarten
to grade 12) Schools Education and Testing businesses for an implied value of
approximately $4.5 billion, taking into account corporate net debt, taxes
payable on the on-sale proceeds and the assumption of corporate and other
liabilities. In the year ended October 31, 2000, these businesses had sales of
$1.7 billion; (STM -- 2000 $688 million, 1999 $633 million; Education and
Testing -- 2000 $990 million, 1999 $787 million); adjusted operating profits
(pre-amortization of goodwill and intangible assets) of $371 million
(STM -- 2000 $161 million, 1999 $138 million; Education and Testing -- 2000 $210
million, 1999 $159 million) and net assets of $1.1 billion (including $0.7
billion of goodwill and intangible assets) before corporate net debt of $1.2
billion.

In order to fund the acquisition, a placing of new shares in Reed
International and Elsevier was undertaken jointly in November 2000 and new
committed credit facilities were obtained. The placing of new ordinary shares in
the parent companies was completed on December 5, 2000. The committed credit
facilities include $6.5 billion (L4.4 billion) of new bank facilities put in
place in December 2000 subsequently cancelled down to $4.86 billion (L3.26
billion). The net proceeds of the placing totalled L1.3 billion through the
issue of 113.7 million ordinary shares in Reed International at 625 pence per
share and 66.26 million ordinary shares in Elsevier at E14.50 per share,
including the exercise of over-allotment options by the joint bookrunners. This
amount represented 9.9% of the ordinary share capitals of both parent companies.
The majority of the proceeds have been hedged into U.S. dollars.

Reed International has subscribed for additional R-shares in Elsevier,
which represent the cross-shareholding of Reed International in Elsevier, so as
to maintain Reed International's indirect equity interest at 5.8% on a fully
diluted basis. This reflects the respective economic interests of the
shareholders of Reed International and Elsevier in the combined businesses
represented by the equalization arrangements. The equalization ratio is
unaffected.

L1,240 million of the net proceeds of the placing has been applied to fund
the acquisition of Harcourt in the unaudited pro forma combined financial
information. The balance of the acquisition funding (L709 million, $1,056
million) has been provided by short term borrowings off commercial paper
programs. Commercial paper and other short term borrowings used to fund the
acquisition will be refinanced through the issuance of the Notes.

The blended financing rate on the debt component of the funding, inclusive
of the Harcourt public debt which may remain outstanding, and the cost of long
term debt including interest rate hedging undertaken, is expected to be
approximately 7.0% after taking account of the sale of the Notes.

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Pro forma combined net borrowings of the Reed Elsevier businesses (as of
December 31, 2000) and Harcourt (as of October 31, 2000), taking into account
the acquisition financing and the on-sale of businesses to The Thomson
Corporation, is approximately L3.2 billion.

RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2000
COMPARED TO THE YEAR ENDED DECEMBER 31, 1999

General. The reported profit before tax for the Reed Elsevier combined
businesses, including exceptional items and the amortization of goodwill and
intangible assets, was L192 million, which compares with a reported profit of
L105 million in 1999. The increase includes the favorable movement in
exceptional items with lower reorganization costs and the gain on disposals of
businesses. The reported attributable profit of L33 million compares with a
reported attributable loss of L63 million in 1999.

Turnover increased by 11% to L3,768 million. Excluding acquisitions and
disposals and currency translation, underlying revenue growth was 5%. The second
half continued the improving trend seen in the first, benefiting from the
positive impact of investments in our products and our sales and marketing
activities.

Excluding exceptional items and the amortization of goodwill and intangible
assets, adjusted operating profits were flat at L793 million. Operating margins
at 21.0% were 2.4 percentage points below the prior year principally reflecting
major investments in our products and our sales and marketing activities offset
by cost reductions achieved in production, distribution and support areas.
Excluding acquisitions and disposals and currency translation effects costs
increased by 6%.

The amortization charge for goodwill and intangible assets amounted to L468
million, up L95 million reflecting acquisitions made in 1999 and 2000, and
currency translation effects.

Exceptional items showed a pre-tax charge of L30 million, comprising L38
million of acquisition related costs, L77 million in respect of the major
restructuring program initiated in 1999, less L85 million profit on sale of
businesses. This compares with a net charge on exceptional items in 1999 of L232
million, of which L161 million related to restructuring. Restructuring charges
include costs in relation to employee severance, surplus leasehold property
obligations and fixed asset write offs.

Net interest expense, at L103 million, was L21 million higher than in the
previous year principally due to the financing of acquisitions completed in 2000
and currency translation. Net interest cover was 8 times adjusted operating
profit.

Adjusted profit before tax, which excludes the amortization of goodwill and
intangible assets and exceptional items, at L690 million, was 3% lower than in
previous years expressed in sterling, or 3% lower at constant exchange rates.

The total tax charge for the year was high as a proportion of profit before
tax principally due to non-tax deductible amortization and the non-recognition
of potential deferred tax assets. The effective tax rate on adjusted earnings
was slightly higher at 25.9% in 2000 compared to 25.6% in 1999. The adjusted
profit attributable to shareholders of L511 million compared to L527 million in
1999, 3% lower at constant exchange rates.

In 2000, the U.S. GAAP net profit was L60 million, compared with a net loss
of L73 million in 1999, a movement of L133 million. The movement reflects the
factors discussed above, together with year on year changes in the adjustments
required to reflect differences between U.K. and Dutch GAAP and U.S. GAAP. The
most significant differences relate to the capitalization and amortization of
goodwill and other intangibles, and deferred taxes; see Note 30 to the combined
financial statements in the 2000 Annual Report on Form 20-F incorporated by
reference in this prospectus supplement.

In the following commentary, unless otherwise indicated, all percentage
movements refer to constant currency rates, using 1999 full year average rates,
and are stated before amortization of goodwill and intangibles and exceptional
items. Percentage movements at actual exchange rates are shown in the tables
titled "Turnover" and "Adjusted Operating Profit" on page S-68 of this
prospectus supplement. In
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anticipation of the acquisition of Harcourt General's STM and Education and
Testing businesses, the Reed Educational & Professional Publishing business,
formerly reported within the Legal segment, was reported separately as an
Education segment, and comparatives were restated accordingly. The Scientific
segment was renamed Science & Medical.

Science & Medical. Turnover and adjusted operating profit in the Science &
Medical business increased by 7% and 12%, respectively, at constant rates of
exchange, or 8% and 12% excluding acquisitions and disposals. The sales growth
was driven by the stronger subscription renewals in the year and the increasing
contribution from Internet services. The previously adverse subscriber attrition
trends were reversed. Operating margins were slightly higher reflecting the
strong revenue growth, with the significant increase in investment, in new
product and sales and marketing initiatives, offset by cost savings in
production, distribution and back office functions. In addition to the positive
impact on subscription renewals, the Internet services contributed an additional
2 percentage points to sales growth. The new policy on pricing introduced for
the 2000 subscription year, moderating increases and the impact of currencies so
as to give more predictable journal pricing for customers, also contributed to
the stronger renewals and helped accelerate the migration from print to
electronic products.

The medical publishing and communications business in 2000 reported
turnover lower by 15% due to the disposal of Springhouse in June 2000.
Underlying sales were marginally ahead and adjusted operating profits up 22%
following reorganization of the sponsored communications business and after the
weak performance in France in 1999.

Operating profit in the Science & Medical business increased by L29 million
to L140 million in 2000. This reflected growth in adjusted operating profit and
a lower level of exceptional items charged to operating profit offset by higher
amortization of goodwill and intangible assets.

Legal. Turnover in the Legal business increased by 5%, or 3% excluding
acquisitions, and adjusted operating profit was down 19%. This reflects the
significant step up in investment, particularly at LexisNexis U.S., to deliver
upgraded products and services, and sales and marketing programs. The investment
was partly funded by the major cost savings program. Operating margins were
correspondingly lower, by 6.2 percentage points at 19.7%, from which they are
expected to recover as the investment pays off. At LexisNexis U.S., turnover
excluding acquisitions was up 2% while adjusted operating profits were 24% lower
reflecting the significant step up in investment.

In the North American Legal Markets division, online revenues grew 5% with
the second half growth showing a continuing improvement over the first. This was
partly offset by lower print and CD-ROM sales as business migrates online.
Online usage is growing as customers migrate to the upgraded functionalities and
services of the lexis.com platform which accounted for approximately 65% of
searches as of December 2000. The Martindale-Hubbell legal directory business
had another successful year.

In the Corporate and Federal Markets division, Nexis online revenues grew
by 4%, a major turnaround from the 4% decline seen the previous year, with a
particularly strong second half. The launch of the significantly upgraded
flagship product, nexis.com, is driving new sales and expansion of existing
customer accounts.

Across LexisNexis U.S. the major re-engineering program has continued to
deliver substantial cost savings, in excess of $90 million, with almost every
area re-engineered, including production, IT, administration and other support
services.

LexisNexis International businesses outside the United States (formerly the
Reed Elsevier Legal Division) reported turnover and adjusted operating profit up
11% and 2%, respectively, or 5% and 1% excluding acquisitions, reflecting solid
sales performance and a significant increase in new product and marketing
investment.

Operating profit in the Legal business decreased by L65 million to an
operating loss of L8 million in 2000. This reflected the decline in adjusted
operating profit together with an increase in the amortization

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of goodwill and intangibles reflecting acquisitions made during 2000 and
currency translation effects. Exceptional items charged to operating profit were
L77 million compared to L89 million in 1999.

Education. Reed Educational & Professional Publishing saw revenues and
adjusted operating profit increase by 9% and 15%, respectively. Rigby, the U.S.
supplementary business, had a particularly good year with revenues 37% ahead
driven by market share gains and a very successful launch of the new Rigby
literacy program. In U.K. Schools, sales in the Primary market were lower than
the prior year which benefited from exceptional, ring fenced government funding
for literacy materials. In Secondary, however, sales were up 23% on strong new
publishing programs addressing curriculum changes. The Australian schools
business also performed well.

Operating profit in the Education business was L19 million, against L20
million in 1999; higher adjusted operating profit being offset by higher
exceptional items charged to operating profit.

Business. Turnover and adjusted operating profit in the Business segment
increased by 12% and 7%, respectively, at constant rates of exchange. Excluding
acquisitions and disposals, the figures were 4% and 3%, respectively. Turnover
growth was held back by the unfavorable cycling of non-annual exhibitions and
lower revenues in the travel businesses being sold. Operating margins at 15.8%
were 0.9 percentage points lower reflecting the significant increase in
investment, although this is substantially funded by the cost saving program.

Cahners Business Information turnover and adjusted operating profits were
up 5% and 30%, respectively, before the impact of acquisitions. The Electronics,
Supply Chain, Retail and Entertainment sectors performed particularly well, with
Manufacturing flat and Cahners Travel Group lower. New product launches in both
print and Internet services added 2% to revenue growth. Operating margins
improved, despite a significant increase in new product investment, reflecting
the major restructuring program in the second half of 1999.

At Reed Business Information, turnover increased by 11%, or 7% excluding
acquisitions, with stronger growth and market share gains in display and
recruitment advertising in U.K. magazines and in Internet revenues. The
Computer, Personnel, Aerospace and Science sectors performed particularly well.
Underlying operating profits were 1% lower, reflecting the major increase in
investment, particularly totaljobs.com, the online recruitment service.

At Elsevier Business Information, turnover and adjusted operating profits
were up 11% and 5%, respectively, or 7% and 10% excluding acquisitions. Strong
performances were seen across the businesses in The Netherlands, Belgium, Spain
and France. In The Netherlands, the Business and Management, Personnel,
Healthcare and Retail sectors were particularly strong and buoyant advertising
demand was captured with the launch of supplements.

Turnover at Reed Exhibition Companies increased by 18% and adjusted
operating profit by 19%. Excluding acquisitions, revenue grew by 1% and adjusted
operating profit declined by 8% as several major non-annual shows in the United
Kingdom and United States did not take place in 2000. The decline in adjusted
operating profit also reflects the significant new show launch program, with
over 35 new shows launched, and a significant step up in investment in show
related websites, of which there are now over 250.

At OAG Worldwide, turnover declined by 19% due to portfolio rationalization
in anticipation of its impending sale and lower sales of the print product. The
sale of the business is well advanced.

Operating profit in the Business segment increased by L67 million to L59
million in 2000. The increase in amortization charges, relating to acquisitions
made in 2000 and 1999 were more than offset by higher adjusted operating profits
and lower exceptional charges to operating profit.

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RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999
COMPARED TO THE YEAR ENDED DECEMBER 31, 1998

General. The reported profit before tax for the Reed Elsevier combined
businesses, including exceptional items and the amortization of goodwill and
intangible assets, was L105 million, which compares with a reported profit of
L1,044 million in 1998. The decline reflects the net L835 million adverse
movement in exceptional items, higher amortization charges arising from
acquisitions and a weaker trading performance. The reported attributable loss of
L63 million compares with a reported attributable profit of L772 million in
1998.

Turnover increased by 6% to L3,390 million. Underlying revenue growth,
excluding the impact of acquisitions and disposals and currency translation
effects, was 3%.

Excluding exceptional items and the amortization of goodwill and intangible
assets, adjusted operating profits were down 3% to L792 million. Operating
margins at 23.4% were 2.1 percentage points below the prior year. Excluding
acquisitions and disposals and currency translation effects, revenue growth was
3% while costs increased by 5%, principally reflecting investment in people,
products and sales and marketing.

The amortization charge for goodwill and intangible assets amounted to L373
million, up L41 million reflecting acquisitions made in 1998 and 1999.

Exceptional items showed a pre tax charge of L232 million, being L161
million in respect of the major restructuring projects across the operating
businesses, L50 million in respect of the Year 2000 compliance program, L28
million on acquisition related costs, and L7 million profit on sale of fixed
asset investments. This compares with a net gain on exceptional items in 1998 of
L603 million which included a L692 million profit on the sale of IPC Magazines
and other businesses.

Net interest expense at L82 million, was L42 million higher than the
previous year due to the financing of the Matthew Bender and Shepard's
acquisitions completed in the second half of 1998. Net interest cover was 10
times adjusted operating profit.

Adjusted profit before tax, which excludes the amortization of goodwill and
intangible assets and exceptional items, at L710 million, was 8% lower than in
1998.

The total tax charge for the year was high as a proportion of profit before
tax principally due to the non-tax deductible amortization, the non-recognition
of potential deferred tax assets and taxes arising on restructuring related
business consolidation. The effective tax rate on adjusted earnings was slightly
lower at 25.6% in 1999 compared to 26% in 1998.

The adjusted profit attributable to shareholders of L527 million compared
to L571 million in 1998, a decline of 8% at constant exchange rates.

In 1999, the U.S. GAAP net loss was L73 million, compared with net loss of
L398 million in 1998, a reduction of L471 million. This reduction reflects the
factors discussed above together with the increased amortization charge
following the re-evaluation under U.S. GAAP of the useful lives of goodwill and
intangible assets in 1998, together with other year on year changes in
adjustments to reflect differences between U.K. and Dutch GAAP and U.S. GAAP.
The most significant differences relate to the capitalization and amortization
of goodwill and other intangible assets, and deferred taxes; see Note 30 to the
combined financial statements in the 2000 Annual Report on Form 20-F
incorporated by reference in this prospectus supplement.

In the following commentary, unless otherwise indicated, all percentage
movements refer to constant currency rates, using 1998 full year average rates,
and are stated before amortization of goodwill and intangibles and exceptional
items. Percentage movements at actual exchange rates are shown in the tables
titled "Turnover" and "Adjusted Operating Profit" on page S-68 of this
prospectus supplement.

Science & Medical. Turnover and adjusted operating profits in the Science
& Medical segment both increased by 5% at constant rates of exchange, or 2%
excluding acquisitions. Operating margins were slightly lower at 35.4%. Sales
growth at Elsevier Science of 5%, which included 3% benefit from
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acquisitions, was adversely affected by the impact on subscription renewals of
currency movements on library budgets, particularly in Japan and continental
Europe. Operating profits excluding acquisitions increased by 4%.

Progress was made during the year in the roll-out of ScienceDirect, the
web-based scientific information service, with approximately 25% of journal
subscription revenues covering both print journals and the ScienceDirect service
as of December 1999.

The medical publishing and communications businesses in 1999 reported
turnover growth of 6% at constant rates of exchange due to acquisitions.
Excluding acquisitions, turnover and adjusted operating profit fell by 1% and
12%, respectively, due to some weakness in the sponsored communications business
and in France.

Operating profit in the Science & Medical segment fell by L15 million to
L111 million. Increases in adjusted operating profits were offset by L29 million
of exceptional items charged to operating profit.

Legal. Turnover in the Legal segment increased by 13% while adjusted
operating profits declined by 5% at constant rates of exchange. Excluding the
effect of acquisitions, principally Matthew Bender and the remaining 50% of
Shepard's acquired in August 1998, turnover increased by 3% while adjusted
operating profits declined by 14%. This result reflected the combination of low
revenue growth at LexisNexis U.S. and continued investment spending, resulting
in operating margins 4.8 percentage points lower at 25.9% for the segment.

At LexisNexis U.S., turnover increased by 13%, whereas adjusted operating
profits were down 8% as significant additional investment was made in new
product development and in sales and marketing. Excluding acquisitions, turnover
was up 2% and adjusted operating profits down 18%. The North American Legal
Markets division had flat revenues with a good performance in the large law firm
market offset by weaker revenues in other markets. The print/CD-ROM legal
publishing business saw some loss of revenues, principally at Shepard's, due to
heavy promotion of a competing product and discounting of Shepard's by a
competitor as its license to the Shepard's content expired. The
Martindale-Hubbell legal directory business had an excellent year with revenues
12% ahead. In the Corporate and Federal Markets division, NEXIS revenues fell by
4%, reflecting pricing pressures across the industry.

LexisNexis International, comprising Reed Elsevier's legal businesses
outside the United States, saw turnover and adjusted operating profits up 13%
and 7%, respectively, including the benefit of small acquisitions in Austria,
Argentina, Australia and South Africa. Excluding these, adjusted operating
profit growth was 5% on sales up 7%, led by strong performances in the United
Kingdom, France and South East Asia.

Operating profit in the Legal segment decreased by L98 million to L57
million, reflecting increased amortization due to the impact of acquisitions in
1999 and 1998, and increased exceptional items charged to operating profit
principally attributable to reorganization costs.

Education. Turnover in the Education segment increased by 12% and adjusted
operating profit by 8% at constant exchange rates. Operating margins fell 0.7%
to 18.8%. The U.K. and U.S. Schools businesses both increased turnover by 15%,
driven by additional government funding for literacy materials and by increased
market share. Costs increased faster than turnover as investment was made in new
publishing programs to capture demand. The Butterworth-Heinemann businesses
reported a strong front-list in scientific, technical and medical markets.

Operating profit increased by L6 million to L20 million. This movement was
primarily attributable to the increase in adjusted operating profit.

Business. Turnover in the Business segment increased by 2% while adjusted
operating profit decreased by 9%, reflecting low underlying revenue growth,
particularly at Cahners, while costs rose. Excluding acquisitions, turnover was
up 1% and operating profits 11% lower. Operating margins at 16.7% were 2.0
percentage points lower than the prior year.

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Cahners Business Information's turnover was flat in 1999, before a 1%
reduction due to the net effect of disposals less acquisitions. Adjusted
operating profit at constant rates of exchange declined by 40% due to a 5%
increase in costs, largely reflecting the full year effect of prior year
investments made in the organization, which had anticipated much stronger
revenue growth. Growth in the Entertainment & Media, Building & Construction and
Retail sectors was offset by revenue declines in Manufacturing, Electronics and
Travel. Although the slowdown in turnover growth began in the second half of
1998, the degree to which this persisted into 1999 was unexpected. A major
restructuring of the business took place in the second half of 1999 to realign
the cost base.

At Reed Business Information turnover and adjusted operating profit
declined by 2% and 6%, respectively, at constant exchange rates. Weakness in
advertising demand, particularly in high margin recruitment advertising, in the
first half was recovered in the second half as the U.K. economy strengthened
with the exception of the important Computer sector which saw strong competition
both in print and online. Online services established around the core titles
continued to develop in 1999 with growth in subscriptions and advertising
support. The Healthcare, Property and Social Services sectors performed well.

Elsevier Business Information (excluding Elsevier Tuition activities) saw
underlying turnover and adjusted operating profit growth of 3% and 6%,
respectively, in 1999 at constant exchange rates, before several small
acquisitions in both 1999 and 1998, as advertising demand in Continental Europe
picked up during the year. In The Netherlands, turnover growth was driven by the
journal Elsevier and titles in the Human Resources, General Management and
Construction sectors, while improvements in profitability were reported in Spain
and France. The tuition activities in The Netherlands increased turnover and
adjusted operating profit by 8% at constant rates of exchange in 1999, driven by
growth from in-company and open training. During 1999 management and development
responsibility for this business was moved to Elsevier Business Information to
provide combined product focus on targeted customer groups.

Turnover at Reed Exhibitions companies was ahead by 8% while adjusted
operating profit rose by 11% at constant exchange rates, driven by growth in the
annual trade shows, particularly in North America, and the contribution of the
PGA golf equipment and accessories shows acquired in 1998. Thirty new shows were
launched in the year in North America, Europe and Asia, adding over 3 percentage
points to the growth in turnover. The impact of show cycling, i.e., of
non-annual shows, and acquisitions was broadly neutral in 1999.

At OAG Worldwide, adjusted operating profit increased by 18% in 1999 at
constant exchange rates, on turnover down 6%. During 1999 good progress was made
in stabilizing the business with certain activities terminated to increase
profitability, and plans developed to capitalize on the growing demand for
electronic products using OAG Worldwide data. Growth in electronic turnover was
offset by the continued shift of customers from print to online services. In
February 2000 the decision to divest OAG Worldwide was announced.

Operating profit in the Business segment fell by L116 million to an
operating loss of L8 million. This movement reflected the decline in adjusted
operating profit together with exceptional charges to operating profit.
Exceptional charges were principally attributable to restructuring costs.

EFFECT OF CURRENCY TRANSLATION

The combined financial statements are expressed in pounds sterling and are
therefore subject to the impact of movements in exchange rates on the
translation of the financial information of individual businesses whose
operational currencies are other than sterling. The principal exposures are the
U.S. dollar and the euro, both of which generally reflect Reed Elsevier's
business exposure to the United States and the Euro Zone, its most important
markets outside the United Kingdom.

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The currency profile of Reed Elsevier's adjusted profit before tax for
2000, taking account of the currencies of the interest on its borrowings and
cash over that period, is set forth below:

ADJUSTED PROFIT BEFORE TAX IN EACH CURRENCY AS A PERCENTAGE OF TOTAL ADJUSTED
PROFIT BEFORE TAX

U.S. DOLLARS POUNDS STERLING EURO OTHER TOTAL
- ------------ --------------- ---- ----- -----

33% 29% 31% 7% 100%
============ =============== ==== ===== =====

Currency translation differences increased Reed Elsevier's turnover by L86
million and decreased adjusted profit before tax by L1 million in 2000 compared
to 1999.

To help protect Reed International's and Elsevier's shareholders' funds
from the effect of currency movements, Reed Elsevier will, if deemed
appropriate, hedge the foreign exchange translation exposure by borrowing in
those currencies where significant translation exposure exists or by selling
forward surplus cash flow into one of the shareholders' currencies. Hedging of
foreign exchange translation exposure is undertaken only by the regional
centralized treasury departments and under policies agreed by the Boards of Reed
International and Elsevier. Borrowing in the operational currency of individual
businesses provides a structural hedge for the assets in those markets and for
the income realized from those assets. The currencies of Reed Elsevier's
borrowings, therefore, reflect two key objectives, namely to minimize funding
costs and to hedge currencies where it has significant business exposure.

Individual businesses within Reed Elsevier plc and Elsevier Reed Finance BV
are subject to foreign exchange transaction exposures caused by the effect of
exchange rate movements on their turnover and operating costs, to the extent
that such turnover and costs are not denominated in their operating currencies.
Individual businesses are encouraged to hedge their exposures internally at
market rates with the centralized treasury department within the Elsevier Reed
Finance BV group. To minimize hedging costs, these exposures are matched
whenever possible with offsetting exposures existing in other individual
businesses. When opportunities for such matching of exposures internally do not
exist, exposures may instead be hedged externally with third parties. Hedging of
foreign exchange transaction exposure is the only hedging activity undertaken by
the individual businesses. For further details see Note 24 to the combined
financial statements in the 2000 Annual Report on Form 20-F incorporated by
reference into this prospectus supplement.

EUROPEAN ECONOMIC AND MONETARY UNION

On January 1, 1999, the euro was introduced as the de facto currency of the
12 European countries now participating in European Economic and Monetary Union
(EMU). The Netherlands is a participant in EMU; the United Kingdom is not.

In 2002, the Dutch guilder, like the currencies of other participants, will
be fully replaced by the euro once euro-denominated notes and coins are
substituted. In the interim, the euro and the participating currencies coexist
and are inextricably linked by fixed conversion rates.

The implications for Reed Elsevier businesses have been initially low
relative to many other multinational European companies. Principally this is
because, with the significant exception of Elsevier Science, which already
publishes global prices, Reed Elsevier's businesses have limited cross border
trade. The most significant issue, therefore, is the timing of euro based
marketing and invoicing and the transfer to euro denominated business and
financial systems. In this respect, Reed Elsevier businesses have put in place
systems to accommodate the euro.

The profit and loss expense of moving to a euro currency environment has
not been significant and is not expected to be significant in the future. While
Reed Elsevier is continuing to evaluate the impact of the euro introduction over
time, based on currently available information, management does not believe that
the introduction of the euro will have a material adverse impact on the
financial condition or overall trends in results of operations.

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RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Statement of Financial Accounting Standards ("SFAS") 133: Accounting for
Derivative Instruments and Hedging Activities, was issued in June 1998 and, as
amended by SFAS 138, is effective for the financial year beginning January 1,
2001. The standard requires all derivative instruments to be valued at fair
value in the balance sheet. Changes in fair value are accounted for through the
profit and loss account or comprehensive income statement depending on a
derivative's designation and its effectiveness as a hedging instrument. On
implementation, a cumulative transition adjustment of L1 million (loss) to the
2000 U.S. GAAP net income and L86 million (loss) in other comprehensive income
was made. Under U.K. and Dutch GAAP derivative instruments are recorded at
appropriate historic cost amounts, with fair values shown as a disclosure item.

FRS 17, Retirement Benefits, was issued by the U.K. Accounting Standards
Board in November 2000. As under SFAS 87, plan assets and liabilities are
determined by, respectively, market-related values at the date of the financial
statements and by discounting plan obligations using a market derived discount
factor. Under FRS 17 actuarial gains and losses are recognized in full in the
balance sheet with movements recognized in the statement of total recognized
gains and losses. This will differ from current U.S. GAAP which does not require
the full recognition of actuarial gains and losses, and also requires the
amortization of actuarial gains and losses to be recognized in the profit and
loss account. The standard is required to be fully implemented in the 2003
financial year with disclosures of the impact required from 2001. The impact of
adopting the standard cannot be reasonably estimated at this time.

FRS 19, Deferred Tax, was issued by the U.K. Accounting Standards Board in
December 2000. FRS 19 requires deferred tax to be provided in full, except on
timing differences arising where non-monetary assets are revalued and where
there is no commitment to sell the asset and on the retained earnings of
subsidiaries, joint ventures or associates where there is no commitment to remit
such earnings. FRS 19 is required to be implemented in the 2002 financial year.
The standard is not expected to have a material impact on implementation.

The Financial Accounting Standards Board ("FASB") staff is in the process
of finalizing SFAS 141, Business Combinations and SFAS 142, Goodwill and Other
Intangible Assets. Board members voted by written ballot on June 29, 2001 and
were unanimously in support of these FASB statements which will be issued in the
second half of July 2001. The statement on business combinations will eliminate
the pooling-of-interests method and will address accounting for "negative
goodwill"; it will be effective for any business combination that is completed
after June 30, 2001. The statement on goodwill and intangible assets will state
that goodwill should not be amortized but should be tested for impairment at the
reporting unit level. SFAS 142 will be effective for fiscal years beginning
after December 15, 2001, except for goodwill and intangible assets acquired
after June 30, 2001 but before the statement is initially applied, in which
case, the goodwill and intangible assets would be accounted for in accordance
with the provisions of SFAS 142.

LIQUIDITY AND CAPITAL RESOURCES

Reed Elsevier businesses focus on adjusted operating cash flow as the key
cash flow measure. Reed Elsevier's adjusted operating cash flow before
exceptional items in 2000, 1999 and 1998 amounted to, respectively, L775
million, L780 million and L808 million. In each of these years the adjusted
operating cash flow conversion was, respectively, 98%, 98% and 99%. Adjusted
operating cash flow conversion expresses adjusted operating cash flow as a
percentage of adjusted operating profit. Adjusted operating cash flow is
measured after dividends from joint ventures, tangible fixed asset spend and
proceeds from the sale of fixed assets, but before exceptional payments and
proceeds.

Reed Elsevier generates significant cash flows as its principal businesses
do not require major fixed or working capital investments. Working capital
requirements are negative overall, due to the substantial proportion of revenues
received through subscription and similar advanced receipts, principally for
scientific journals and exhibition fees. Trading working capital amounted to
L479 million net liabilities at December 31, 2000 and L394 million net
liabilities at December 31, 1999. Subscriptions and other revenues in advance
represented L679 million and L583 million, respectively, of these totals.
Capital
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expenditure principally relates to computer equipment and, increasingly,
investment in systems infrastructure to support electronic publishing
activities. Total capital expenditures amounted to L141 million, L137 million
and L151 million in 2000, 1999 and 1998, respectively.

During 2000, Reed Elsevier paid a total of L952 million for acquisitions
and fixed asset investments, including net debt assumed of L48 million and L13
million deferred payments in respect of acquisitions made in prior years. All
payments were financed by net cash inflow from operating activities, available
cash resources and commercial paper borrowings. Exceptional net inflows of L90
million were received in 2000, comprising proceeds from sale of fixed asset
investments and property disposals less amounts paid in respect of
reorganization costs and acquisition related costs.

During 1999, Reed Elsevier paid a total of L166 million for acquisitions
and fixed asset investments including net L5 million deferred payments in
respect of acquisitions made in prior years. All payments were financed by net
cash inflow from operating activities, available cash resources and commercial
paper borrowings. Exceptional net outflows of L61 million were paid in 1999,
comprising amounts paid in respect of reorganization costs, acquisition related
costs, Year 2000 compliance and the Reed Travel Group recompense plans less
exceptional tax repayments.

Net borrowings at December 31, 2000 were L433 million, a reduction of L633
million compared to December 31, 1999, principally reflecting the proceeds from
the joint international share offering by Reed International and Elsevier in
December 2000, together with the free cash flow and exceptional receipts, less
spend on acquisitions.

Gross borrowings at December 31, 2000 amounted to L2,027 million,
denominated mostly in U.S. dollars and partly offset by cash balances of L1,594
million invested in short term deposits and marketable securities. Approximately
98% of cash balances were held in sterling, euros and U.S. dollars. A total of
46% of Reed Elsevier's gross borrowings were at fixed rates, including L516
million of floating rate debt fixed through the use of interest rate swaps. At
December 31, 2000, the fixed rate debt had a weighted average coupon of 6.6% and
an average remaining life of 7.7 years. The net interest expense also reflects
the interest yield differentials between short term cash investments and long
term fixed rate borrowings.

REED INTERNATIONAL AND ELSEVIER

The following discussion is based on the financial statements of Reed
International and Elsevier for the three years ended December 31, 2000. The
results of Reed International reflect its shareholders' 52.9% economic interest
in the Reed Elsevier combined businesses. The results of Elsevier reflect its
shareholders' 50% economic interest in the Reed Elsevier combined businesses.
The respective economic interests of the Reed International and Elsevier
shareholders take account of Reed International's interest in Elsevier. Both
parent companies equity account for their respective shares in the Reed Elsevier
combined businesses. The financial statements have been prepared in accordance
with, respectively, U.K. and Dutch GAAP, which differ in certain significant
respects from U.S. GAAP as set out in Note 23 to the Reed International
financial statements and Note 15 to the Elsevier financial statements in the
2000 Annual Report on Form 20-F incorporated by reference in this prospectus
supplement.

RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2000
COMPARED TO THE YEAR ENDED DECEMBER 31, 1999

Adjusted earnings per share for Reed International were 23.3p, a decline of
5% compared to the previous year. Adjusted earnings per share for Elsevier were
E0.59, an increase of 4% compared to the prior year. The difference in
percentage change is entirely attributable to the impact of the strengthening,
on average, of sterling against the euro in 2000. At constant rates of exchange,
the adjusted earnings per share of both companies would have shown a decline of
5% over the previous year.

After their share of the exceptional items and the charge in respect of
goodwill and intangible assets amortization, the reported earnings per share of
Reed International after tax credit equalization and Elsevier were 1.0p and
E0.04, compared to a loss per share in 1999 of 3.4p and E0.07, respectively.
S-78
79

Dividends to Reed International and Elsevier shareholders are equalized at
the gross level, including the benefit of the U.K. attributable tax credit of
10% (20% prior to April 1999) received by certain Reed International
shareholders. The exchange rate used for each dividend calculation -- as defined
in the Reed Elsevier merger agreement dated January 1, 1993 -- is the spot
euro/sterling exchange rate, averaged over a period of five business days
commencing with the tenth business day before the announcement of the proposed
dividend.

As announced in 2000, the 2000 interim dividend was reduced by one-third
and the final dividend adjusted upwards correspondingly to restore normal
proportions between the interim and final dividends following the dividend
reduction in 1999.

Reed International paid a final dividend of 6.9p, giving a total dividend
of 10.0p for 2000, the same as for 1999. Elsevier, in accordance with the
dividend equalization arrangements, paid a final dividend of E0.19. This
resulted in a total dividend of E0.28 for the year, 4% higher than in 1999. The
difference in percentage growth is attributable to currency movements.

Dividend cover for Reed International, using adjusted earnings, was 2.1
times. For Elsevier, the adjusted dividend cover was 2.1 times. Measured for the
combined businesses, dividend cover was 2.1 times compared with 1999 at 2.3
times.

RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999
COMPARED TO THE YEAR ENDED DECEMBER 31, 1998

Adjusted earnings per share for Reed International were 24.4p, a decline of
8% compared to the previous year. Adjusted earnings per share for Elsevier were
E0.57, a decline of 5%. The difference in the percentage change is entirely
attributable to the impact of the strengthening of sterling against the euro in
1999. At constant rates of exchange, the adjusted earnings per share of both
companies would have shown a decline of 8% over the previous year.

After their share of the exceptional items and the charge in respect of
goodwill and intangible assets amortization, the reported loss per share of Reed
International after tax credit equalization and Elsevier were 3.4p and E0.07,
compared to earnings per share in 1998 of 34.7p and E0.81, respectively.

Reed International paid a final dividend of 5.4p, giving a total dividend
of 10.0p for 1999, 33% lower than in 1998. Elsevier, in accordance with the
dividend equalization arrangements, paid a final dividend of E0.15 (Dfl 0.33),
reflecting a guilder/sterling exchange rate of Dfl 3.58 to L1. This resulted in
a total dividend of 0.27 (Dfl 0.59) for the year, 31% lower than in 1998. The
difference in percentage reductions was attributable to currency movements and
the change in the level of U.K. tax credit effective April 1999.

Dividend cover for Reed International, using adjusted earnings, was 2.4
times. For Elsevier, the adjusted dividend cover was 2.2 times. Measured for the
combined businesses, dividend cover was 2.3 times compared with 1998 at 1.6
times.

The reduction of approximately one-third in the equalized Reed
International and Elsevier dividends from the 1998 level reflects the adjustment
to dividend policy in support of the new Reed Elsevier strategy for
investment-led growth.

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MANAGEMENT

The directors and executive officers of each of Reed International,
Elsevier, Reed Elsevier plc, Elsevier Reed Finance BV and Reed Elsevier Capital
as of July 11, 2001 were:

REED ELSEVIER REED REED ELSEVIER
NAME (AGE) INTERNATIONAL ELSEVIER REED ELSEVIER PLC FINANCE BV CAPITAL
- ---------- -------------- -------------- ----------------- -------------- --------------

Cornelis Alberti (64) Managing
Director
Mark Armour (46) Chief Member of the Chief Financial Member of the Director and
Financial Executive Officer Supervisory Chief
Officer Board and Board Executive
Chief Officer
Financial
Officer

William Bechstein (36) Director

Willem Boellaard (70) Managing
Director

John Brock (53) Non-executive Member of the Non-executive
Director Supervisory Director(3)(4)
Board

Crispin Davis (52) Chief Member of the Chief Executive
Executive Executive Officer(4)
Officer(1) Board and
Chief
Executive
Officer(1)

Dien de Boer-Kruyt (56) Member of the Member of the
Supervisory Supervisory
Board Board

David Fontello (52) Director

Derk Haank (48) Executive Member of the Executive
Director Executive Director
Board

James Mulligan (68) Director

Roelof Nelissen (70) Non-executive Member of the Non-executive Chairman of
Director(2) Supervisory Director(2)(3) the
Board(2) Supervisory
Board

Steven Perrick (52) Non-executive Member of the Non-executive Member of the
Director(2)(1) Supervisory Director(2) Supervisory
Board(2)(1) Board

Andrew Prozes (55) Executive Member of the Executive
Director Executive Director
Board

Paul Richardson (41) Group Treasurer Director and
Chief
Financial
Officer

Dr. Rolf Stomberg (61) Non-executive Member of the Non-executive
Director(1) Supervisory Director(3)
Board(1)

Morris Tabaksblat (63) Non-executive Chairman of Non-executive
Chairman(1) the Chairman(4)
Supervisory
Board(1)

Gerard van de Aast (43) Executive Member of the Executive
Director Executive Director
Board

S-80
81

REED ELSEVIER REED REED ELSEVIER
NAME (AGE) INTERNATIONAL ELSEVIER REED ELSEVIER PLC FINANCE BV CAPITAL
- ---------- -------------- -------------- ----------------- -------------- --------------

David Webster (56) Non-executive Member of the Non-executive
Director(1) Supervisory Director(1)(4)
Board(1)

Stephen Cowden (48) Company General Counsel/
Secretary Company Secretary

Erik Ekker (52) Company Legal Director Company
Secretary (Continental Secretary
Europe)

- ---------------
(1) Member of the Joint Nominations Committee of the Boards of Reed
International and Elsevier.

(2) Member of the Audit Committees of the Boards of Reed International, Elsevier
and Reed Elsevier plc.

(3) Member of the Remuneration Committee of the Board of Reed Elsevier plc.

(4) Member of the Strategy Committee of the Board of Reed Elsevier plc.

A person described as a non-executive Director of Reed International or
Reed Elsevier plc or a member of the Supervisory Board of Elsevier is a director
not employed by such company.

Mr. Alberti has been Managing Director of Elsevier Reed Finance BV since
the merger. He was an Executive Director of Reed Elsevier plc from the merger
until December 1996. He joined Elsevier in 1978 and was a member of the
Executive Board of Elsevier from 1984 until 1999.

Mr. Armour was appointed Chief Financial Officer of Reed International and
Reed Elsevier plc in July 1996, having been Deputy Chief Financial Officer of
Reed Elsevier plc since February 1995. He was appointed Chief Financial Officer
of Elsevier in April 1999. He became a member of the Supervisory Board of
Elsevier Reed Finance BV in December 1998. He has been a Director and Chief
Executive Officer of Reed Elsevier Capital since November 1999. He was
previously a partner in Price Waterhouse.

Mr. Bechstein has been a Director of Reed Elsevier Capital since November
1999. He is a banker with Wilmington Trust Company.

Mr. Boellaard was appointed a Managing Director of Elsevier Reed Finance BV
in December 1998. He joined Reed International in 1990.

Mr. Brock was appointed a non-executive Director of Reed Elsevier plc and
Reed International and a member of the Supervisory Board of Elsevier in April
1999. He is Chief Operating Officer of Cadbury Schweppes plc.

Mr. Davis became Chief Executive Officer of Reed Elsevier plc, Reed
International and Elsevier in September 1999. He was previously Chief Executive
Officer of Aegis Group plc from 1994 to 1999.

Mrs. de Boer-Kruyt became a member of the Supervisory Board of Elsevier in
April 2000. She was appointed a member of the Supervisory Board of Elsevier Reed
Finance BV in July 2000. She is a non-executive Director of Sara Lee/DE,
Hollandske Beton Group and Internatio Muller.

Mr. Fontello has been a Director of Reed Elsevier Capital since May 1995.
He is a banker with Wilmington Trust Company.

Mr. Haank was appointed an Executive Director of Reed Elsevier plc and Reed
International in November 1999. He is Chief Executive Officer of Science &
Medical. He was Chief Executive Officer of Elsevier Business Information from
1996 to 1998. Mr. Haank was appointed a member of the Executive Board of
Elsevier in April 2000.

Mr. Mulligan has been a Director of Reed Elsevier Capital since April 1995.
He is a partner in Connolly Bove Lodge & Hutze LLP.

Mr. Nelissen was appointed a non-executive Director of Reed International
and Reed Elsevier plc in April 1999, having previously been a non-executive
Director of Reed Elsevier plc since the merger until

S-81
82

July 1998. He has been a member of the Supervisory Board of Elsevier since 1990.
He was appointed Chairman of the Supervisory Board of Elsevier Reed Finance BV
in April 1999. Mr. Nelissen is also a member of the Supervisory Board of ABN
AMRO Bank NV. He was formerly Chief Executive Officer of ABN AMRO and Finance
and Economics Minister of The Netherlands.

Mr. Perrick was appointed a member of the Supervisory Board of Elsevier in
April 1998, a non-executive Director of Reed Elsevier plc in June 1998, a
non-executive Director of Reed International in April 1999 and a member of the
Supervisory Board of Elsevier Reed Finance BV in April 2001. He was a member of
the Supervisory Board of Elsevier Reed Finance BV from July 1998 until August
1999. Mr. Perrick is a partner in the Amsterdam offices of the law firm
Freshfields Bruckhaus Deringer.

Mr. Prozes became an Executive Director of Reed Elsevier plc and Reed
International in August 2000 and a member of the Executive Board of Elsevier in
April 2001. He is Chief Executive Officer of Legal. Prior to joining Reed
Elsevier, Mr. Prozes was an Executive Vice President with the West Group, a part
of The Thomson Corporation, where he was also Chief Operating Officer of West's
on-line legal publishing business.

Mr. Richardson has been a Director and Chief Financial Officer of Reed
Elsevier Capital since April 1995. He was appointed Group Treasurer of Reed
Elsevier plc in May 1997.

Dr. Stomberg was appointed a non-executive Director of Reed International
and Reed Elsevier plc in January 1999 and a member of the Supervisory Board of
Elsevier in April 1999. Dr Stomberg is also Chairman of John Mowlem & Co plc,
Management Consulting Group PLC and Unipoly SA, Luxembourg.

Mr. Tabaksblat was appointed a member of the Supervisory Board of Elsevier
in April 1998 and a non-executive Director of Reed Elsevier plc in June 1998. He
became a non-executive Director and Chairman of Reed International in April
1999, when he was also appointed Chairman of the Supervisory Board of Elsevier
and Chairman of Reed Elsevier plc. Mr. Tabaksblat is Chairman of the Supervisory
Board of Aegon NV, Vice Chairman of the Supervisory Board of TPG Group NV, a
member of the Supervisory Board of VEBA AG, and Chairman of the European Round
Table of Industrialists. He was Chairman and Chief Executive Officer of Unilever
NV from 1994 to 1999.

Mr. van de Aast became an Executive Director of Reed Elsevier plc and Reed
International in December 2000 and a member of the Executive Board of Elsevier
in April 2001. He is Chief Executive Officer of Business. Prior to joining Reed
Elsevier, Mr. van de Aast was Vice President of Compaq's Europe, Middle East and
Africa business.

Mr. Webster has been a non-executive Director of Reed Elsevier plc since
the merger, a non-executive Director of Reed International since 1992 and a
member of the Supervisory Board of Elsevier since April 1999. He was
non-executive Chairman of Reed Elsevier plc from August 1998 until April 1999.
He is Chairman of Safeway plc.

Mr. Cowden, a U.K. lawyer, joined Reed Elsevier in December 2000 as General
Counsel, and was appointed Company Secretary of Reed Elsevier plc and Reed
International in February 2001. Prior to joining Reed Elsevier, Mr. Cowden was
Group Company Secretary of Glaxo Wellcome plc.

Mr. Ekker, a Dutch lawyer, has been Legal Director (Continental Europe) of
Reed Elsevier plc since 1993. He has been Company Secretary of Elsevier since
1989 and was appointed Company Secretary of Elsevier Reed Finance BV in March
1997. He joined Elsevier in 1977 as Legal Counsel.

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DESCRIPTION OF THE NOTES AND THE GUARANTEES

The following description of the terms and conditions of the Notes and the
Guarantees supplements and, to the extent inconsistent, replaces the more
general terms and conditions of our debt securities and guarantees contained in
the accompanying prospectus.

GENERAL

The Notes will constitute the senior unsecured debt obligations of Reed
Elsevier Capital and will rank equally with all of the existing and future
senior, unsecured and unsubordinated debt of Reed Elsevier Capital. The Notes
will be issued in registered form under the indenture, dated as of May 9, 1995
and amended as of the closing date, in denominations of $1,000 and whole
multiples of $1,000 for the U.S. Dollar Notes and E1,000, E10,000 and E100,000
for the Euro Notes. The Chase Manhattan Bank will serve as trustee and registrar
with respect to the Notes and paying agent and authenticating agent with respect
to the U.S. Dollar Notes. The Chase Manhattan Bank, London Branch will serve as
paying agent and authenticating agent with respect to the Euro Notes. As long as
the Notes are listed on the Luxembourg Stock Exchange, Kredietbank S.A. will be
the listing agent and Chase Manhattan Bank Luxembourg S.A. will be the paying
agent for the Notes in Luxembourg.

Reed Elsevier Capital may redeem some or all of the U.S. Dollar 6.125%
Notes and the U.S. Dollar 6.750% Notes at any time at the "make whole"
redemption prices described under the heading "Description of the Notes and the
Guarantees -- Optional Redemption of U.S. Dollar Notes" on page S-87 of this
prospectus supplement.

Reed Elsevier Capital may also redeem all, but not part, of the Notes upon
the occurrence of certain tax events at the redemption prices described under
the heading "Description of the Notes and the Guarantees -- Optional Redemption
for Tax Reasons" on page S-88 of this prospectus supplement.

The Notes do not provide for any sinking fund.

MATURITY/INTEREST

The U.S. Dollar 6.125% Notes will mature at par on August 1, 2006 and will
bear interest at a rate of 6.125% per annum from July 31, 2001. The U.S. Dollar
6.750% Notes will mature at par on August 1, 2011 and will bear interest at a
rate of 6.750% per annum from July 31, 2001. The Euro Notes will mature at par
on July 31, 2008 and will bear interest at a rate of 5.750% per annum from July
31, 2001.

Interest on the U.S. Dollar 6.125% Notes will be payable semi-annually on
February 1 and August 1 of each year, beginning February 1, 2002. The regular
record dates for the U.S. Dollar 6.125% Notes will be January 15 and July 15 of
each year, commencing January 15, 2002. Interest on the U.S. Dollar 6.750% Notes
will be payable semi-annually on February 1 and August 1 of each year, beginning
February 1, 2002. The regular record dates for the U.S. Dollar 6.750% Notes will
be January 15 and July 15 of each year, commencing January 15, 2002. Interest on
the Euro Notes will be payable annually on July 31 of each year, beginning July
31, 2002. The regular record date for the Euro Notes will be July 15 of each
year, commencing July 15, 2002. If any interest payment or maturity date of a
Note falls on a day which is not a Business Day, the related payment of
principal and interest will be made on the next succeeding Business Day with the
same force and effect as if made on the date such payment were due, and no
interest will accrue on the amount so payable for the period from and after such
interest payment or maturity date, as the case may be.

Interest on the U.S. Dollar 6.125% Notes and the U.S. Dollar 6.750% Notes
will be computed on the basis of a 360-day year of twelve 30-day months.
Interest on the Euro Notes will be computed on the basis of the "Actual/Actual
(ISMA)" Fixed Day Count Convention.

"Actual/Actual (ISMA)" Fixed Day Count Convention means:

-- in the case where the number of days in the relevant period from and
including the most recent interest payment date (or, if none, from and
including the original issue date of the Euro Notes) to
S-83
84

but excluding the relevant payment date (the "Accrual Period") is
equal to or shorter than the Determination Period (as defined below)
during which the Accrual Period ends, the number of days in such
Accrual Period divided by the product of (1) the number of days in
such Determination Period and (2) the number of Determination Periods
that would occur in one calendar year, assuming interest was to be
payable in respect of the whole of that year; or

-- in the case where the Accrual Period is longer than the Determination
Period during which the Accrual Period ends, the sum of:

- the number of days in such Accrual Period falling in the Determination
Period in which the Accrual Period begins divided by the product of
(x) the number of days in such Determination Period and (y) the number
of Determination Periods that would occur in one calendar year,
assuming interest was to be payable in respect of the whole of that
year; and

- the number of days in such Accrual Period falling in the next
Determination Period divided by the product of (x) the number of days
in such Determination Period and (y) the number of Determination
Periods that would occur in one calendar year, assuming interest was
to be payable in respect of the whole of that year.

"Business Day" for purposes of the U.S. Dollar Notes means:

-- any day other than Saturday or Sunday; or

-- any day other than a day on which banking institutions are authorized
or required by law or regulation (including any executive order) to
close in the City of New York.

"Business Day" for purposes of the Euro Notes means:

-- any day other than Saturday or Sunday;

-- any day other than a day on which the Trans-European Automated
Real-Time Gross Settlement Express Transfer (TARGET) System is closed;
or

-- any day other than a day on which banking institutions are authorized
or required by law or regulation (including any executive order) to
close in London.

"Determination Period" means the period from and including a Determination
Date to but excluding the next Determination Date (including, where either the
first or last interest payment date is not a Determination Date, the period
commencing on the first Determination Date prior to, and ending on the first
Determination Date falling after, such date).

"Determination Date" means each interest payment date.

PRIMARY DISTRIBUTION OF NOTES

The U.S. Dollar Notes will be issued as global notes registered in the name
of Cede & Co., as nominee for The Depository Trust Company ("DTC"). The Euro
Notes will be issued as global notes registered in the name of Chase Nominees
Limited, as nominee for The Chase Manhattan Bank, London Branch. The Chase
Manhattan Bank, London Branch, will hold the global notes for the Euro Notes and
accordingly act as common depositary for Clearstream Banking, societe anonyme,
Luxembourg ("Clearstream, Luxembourg"), and Euroclear Bank S.A./N.V., as
operator of the Euroclear system (or its successor) ("Euroclear").

You may hold book-entry interests in a global note through organizations
that participate, directly or indirectly, in the DTC, Clearstream, Luxembourg
and Euroclear systems, as applicable. Book-entry interests in the Euro Notes and
all transfers relating to the Euro Notes will be reflected only in the book-
entry records of Clearstream, Luxembourg and Euroclear. See "-- Book-Entry
Issuance" below.

S-84
85

CLEARANCE AND SETTLEMENT PROCEDURES -- DTC

DTC participants that hold U.S. Dollar Notes through DTC on behalf of
investors will follow the settlement practices applicable to United States
corporate debt obligations in DTC's Same-Day Funds Settlement System.

U.S. Dollar Notes will be credited to the securities custody accounts of
these DTC participants against payment in same-day funds, for payments in U.S.
dollars, on the settlement date.

CLEARANCE AND SETTLEMENT PROCEDURES -- EUROCLEAR AND CLEARSTREAM, LUXEMBOURG

We understand that investors that hold their Notes through Euroclear or
Clearstream, Luxembourg accounts will follow the settlement procedures that are
applicable to conventional eurobonds in registered form.

Notes will be credited to the securities custody accounts of Euroclear or
Clearstream, Luxembourg participants on the business day following the
settlement date, for value on the settlement date. They will be credited against
payment for value on the settlement date.

SECONDARY MARKET TRADING

Trading between DTC participants in respect of the U.S. Dollar Notes

We understand that secondary market trading between DTC participants will
occur in the ordinary way in accordance with DTC's rules. Secondary market
trading will be settled using procedures applicable to United States corporate
debt obligations in DTC's Same-Day Funds Settlement System.

If payment is made in U.S. dollars, settlement will be in same-day funds.

Trading between Euroclear and/or Clearstream, Luxembourg participants

We understand that secondary market trading between Euroclear and/or
Clearstream, Luxembourg participants will occur in the ordinary way following
the applicable rules and operating procedures of Euroclear and Clearstream,
Luxembourg. Secondary market trading will be settled using procedures applicable
to conventional eurobonds in registered form.

Trading between a DTC seller and a Euroclear or Clearstream, Luxembourg
purchaser in respect of the U.S. Dollar Notes

A purchaser of Notes that are held in the account of a DTC participant must
send instructions to Euroclear or Clearstream, Luxembourg at least one business
day prior to settlement. The instructions will provide for the transfer of the
Notes from the selling DTC participant's account to the account of the
purchasing Euroclear or Clearstream, Luxembourg participant. Euroclear or
Clearstream, Luxembourg, as the case may be, will then instruct the common
depositary for Euroclear or Clearstream, Luxembourg to receive the Notes either
against payment or free of payment.

The interests in the Notes will be credited to the respective clearing
system. The clearing system will then credit the account of the participant
following its usual procedures. Credit for the Notes will appear on the next
day, European time. Cash debit will be back-valued to, and the interest on the
Notes will accrue from, the value date, which would be the preceding day, when
settlement occurs in New York. If the trade fails and settlement is not
completed on the intended value date, the Clearstream, Luxembourg or Euroclear
cash debit will be valued instead on the actual settlement date.

Clearstream, Luxembourg participants and/or Euroclear participants will
need to make available to the respective clearing systems the funds necessary to
process same-day funds settlement. The most direct means of doing so is to
pre-position funds for settlement, either from cash on hand or existing lines of
credit, as they would for any settlement occurring within Clearstream,
Luxembourg or Euroclear. Under

S-85
86

this approach, they may take on credit exposure to Clearstream, Luxembourg or
Euroclear until the global securities are credited to their accounts one day
later.

As an alternative, if Clearstream, Luxembourg or Euroclear has extended a
line of credit to them, Clearstream, Luxembourg participants or Euroclear
participants can elect not to pre-position funds and allow that credit line to
be drawn upon to finance the settlement. Under this procedure, Clearstream,
Luxembourg participants or Euroclear participants purchasing global securities
would incur overdraft charges for one day, assuming they cleared the overdraft
when the global securities were credited to their accounts. However, interest on
the global securities would accrue from the value date. Therefore, in many cases
the investment income on the global securities earned during that one-day period
may substantially reduce or offset the amount of the overdraft charges, although
this result will depend on each Clearstream, Luxembourg participant's or
Euroclear participant's particular cost of funds.

Since the settlement is taking place during New York business hours in
respect of the U.S. Dollar Notes, DTC participants can employ their usual
procedures for sending global securities to the respective depositary for the
benefit of Clearstream, Luxembourg participants or Euroclear participants. The
sale proceeds will be available to the DTC seller on the settlement date. Thus,
to the DTC participant a cross-market transaction will settle no differently
than a trade between two DTC participants.

Trading between Clearstream, Luxembourg or Euroclear seller and DTC purchaser
in respect of the U.S. Dollar Notes

Due to time zone differences in their favor, Clearstream, Luxembourg
participants and/or Euroclear participants may employ their customary procedures
for transactions in which global securities are to be transferred by the
respective clearing system, through the respective depositary, to a DTC
participant. The seller will send instructions to Clearstream, Luxembourg or
Euroclear through a Clearstream, Luxembourg participant or Euroclear participant
at least one business day before settlement. In these cases, Clearstream,
Luxembourg or Euroclear will instruct the respective depositary, as appropriate,
to deliver the bonds to the DTC participant's account against payment. Payment
will include interest accrued on the global securities from and including the
last coupon payment date to and excluding the settlement date. The payment will
then be reflected in the account of the Clearstream, Luxembourg participant or
Euroclear participant the following day, and receipt of the cash proceeds in the
Clearstream, Luxembourg participant's or Euroclear participant's account would
be backvalued to the value date. The value date would be the day before the day
that settlement occurred in New York. Should the Clearstream, Luxembourg
participant or Euroclear participant have a line of credit with its respective
clearing system and elect to be in debit in anticipation of receipt of the sale
proceeds in its account, the back-valuation will extinguish any overdraft
charges incurred over the one-day period. If the trade fails and settlement is
not completed on the intended value date, receipt of the cash proceeds in the
Clearstream, Luxembourg participant's or Euroclear participant's account would
instead be valued on the actual settlement date. Finally, day traders that use
Clearstream, Luxembourg or Euroclear and that purchase global securities from
DTC participants for delivery to Clearstream, Luxembourg participants or
Euroclear participants should note that these trades would automatically fail on
the sale side unless affirmative action were taken. At least three techniques
should be readily available to eliminate this potential problem:

-- borrowing through Clearstream, Luxembourg or Euroclear for one day,
until the purchase side of the day trade is reflected in their
Clearstream, Luxembourg or Euroclear accounts, under the clearing
system's customary procedures;

-- borrowing the global securities in the U.S. from a DTC participant no
later than one day prior to settlement, which would give the global
securities sufficient time to be reflected in their Clearstream,
Luxembourg or Euroclear account in order to settle the sale side of
the trade; or

-- staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the DTC participant is at
least one day before the value date for the sale to the Clearstream,
Luxembourg participant or Euroclear participant.

S-86
87

GUARANTEES

Reed International and Elsevier have agreed unconditionally and irrevocably
to jointly and severally guarantee the due and punctual payment of the principal
of, and premium, if any, interest and additional amounts, if any, on the Notes
as and when the same shall respectively become due and payable, whether at the
stated maturity, upon redemption or when accelerated in accordance with the
provisions of the Notes and the indenture, and the punctual performance of all
other obligations of Reed Elsevier Capital thereunder. The Guarantees will be
direct, unconditional, unsubordinated and unsecured, joint and several
obligations of each of Reed International and Elsevier, without preference among
themselves, and will rank at least equally with all other existing and future
unsecured and unsubordinated obligations of Reed International and Elsevier,
subject, in the case of insolvency, to laws of general applicability relating to
or affecting creditors' rights.

The Guarantees may be enforced against either Reed International or
Elsevier, in the event of a default in payment with respect to the Notes issued
by Reed Elsevier Capital, without making prior demand upon, or seeking to
enforce remedies against, Reed Elsevier Capital, the other guarantor or other
persons. The Guarantees of Reed International and Elsevier will be endorsed on
each of the Notes issued by Reed Elsevier.

OPTIONAL REDEMPTION OF U.S. DOLLAR NOTES

The U.S. Dollar 6.125% Notes and the U.S. Dollar 6.750% Notes may each be
redeemed, at the option of Reed Elsevier Capital, at any time or from time to
time, on notice given not more than 60 days, if the U.S. Dollar 6.125% Notes or
the U.S. Dollar 6.750% Notes, as the case may be, are being redeemed in full, or
45 days, if the U.S. Dollar 6.125% Notes or the U.S. Dollar 6.750% Notes, as the
case may be, are being redeemed in part, nor less than 30 days prior to the date
of redemption at the greater of:

-- 100% of the principal amount and premium, if any, together with
accrued but unpaid interest, if any, to, but not including, the
redemption date of the U.S. Dollar 6.125% Notes or the U.S. Dollar
6.750% Notes, as the case may be, to be redeemed; and

-- the sum of the present values of the Remaining Scheduled Payments,
discounted, on a semi-annual basis, assuming a 360-day year consisting
of twelve 30-day months, at the Treasury Rate, plus 20 basis points,
in the case of the U.S. Dollar 6.125% Notes, and 25 basis points, in
the case of the U.S. Dollar 6.750% Notes.

"Remaining Scheduled Payments" means, with respect to each Note to be
redeemed, the remaining scheduled payments of the principal thereof and interest
thereon that would be due after the related redemption date but for such
redemption; provided, however, that, if such redemption date is not an interest
payment date with respect to such note, the amount of the next succeeding
scheduled interest payment thereon will be deemed to be reduced by that amount
of interest accrued thereon to such redemption date.

"Treasury Rate" means, with respect to any redemption date for the U.S.
Dollar 6.125% Notes or the U.S. Dollar 6.750% Notes, as the case may be:

-- the yield, under the heading which represents the average for the
immediately preceding week, appearing in the most recently published
statistical release designated "H.15(519)" or any successor
publication which is published weekly by the Board of Governors of the
Federal Reserve System and which establishes yields on actively traded
United States Treasury securities adjusted to constant maturity under
the caption "Treasury Constant Maturities" for the maturity
corresponding to the Comparable Treasury Issue; provided that if no
maturity is within three months before or after the maturity date for
the U.S. Dollar 6.125% Notes or the U.S. Dollar 6.750% Notes, as the
case may be, yields for the two published maturities most closely
corresponding to the Comparable Treasury Issue will be determined and
the Treasury Rate will be interpolated or extrapolated from those
yields on a straight line basis, rounding to the nearest month; or

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-- if that release, or any successor release, is not published during the
week preceding the calculation date or does not contain such yields,
the rate per annum equal to the semiannual equivalent yield to
maturity of the Comparable Treasury Issue, calculated using a price
for the Comparable Treasury Issue (expressed as a percentage of its
principal amount) equal to the Comparable Treasury Price for that
redemption date.

The Treasury Rate will be calculated on the third business day preceding
the redemption date.

"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the U.S. Dollar 6.125% Notes or the U.S. Dollar 6.750%
Notes, as the case may be, to be redeemed that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining term
of such U.S. Dollar 6.125% Notes or the U.S. Dollar 6.750% Notes, as the case
may be.

"Comparable Treasury Price" means with respect to any redemption date for
the Notes:

-- the average of four Reference U.S. Treasury Dealer Quotations for that
redemption date, after excluding the highest and lowest of such
Reference U.S. Treasury Dealer Quotations; or

-- if the trustee obtains fewer than four Reference U.S. Treasury Dealer
Quotations, the average of all quotations obtained by the trustee.

"Independent Investment Banker" means one of the Reference U.S. Treasury
Dealers, to be appointed by Reed Elsevier Capital in its sole discretion.

"Reference U.S. Treasury Dealer" means each of Lehman Brothers Inc.,
Salomon Smith Barney Inc. and UBS Warburg LLC and one other treasury dealer
selected by Reed Elsevier Capital and their respective successors, provided,
however, that if any of the foregoing shall cease to be a primary U.S.
Government securities dealer, which we refer to as a "Primary Treasury Dealer,"
Reed Elsevier Capital will substitute therefor another nationally recognized
investment banking firm that is a Primary Treasury Dealer.

"Reference U.S. Treasury Dealer Quotations" means with respect to each
Reference U.S. Treasury Dealer and any redemption date, the average, as
determined by the trustee, of the bid and asked prices for the Comparable
Treasury Issue, expressed in each case as a percentage of its principal amount,
quoted in writing to the Trustee by such Reference U.S. Treasury Dealer at 3:30
p.m., New York City time, on the third business day preceding such redemption
date.

OPTIONAL REDEMPTION FOR TAX REASONS

The Notes may be redeemed, at the option of Reed Elsevier Capital in whole,
but not in part, at 100% of the principal amount and premium, if any, together
with accrued but unpaid interest, if any, to, but not including, the redemption
date if, as a result of any change in, or amendment to, the laws of the
jurisdiction under which Reed Elsevier Capital, Reed International or Elsevier
is organized or the jurisdiction of residence of Reed Elsevier Capital, Reed
International or Elsevier for tax purposes, or any political subdivision or
taxing authority of or in that jurisdiction having power to tax, affecting
taxation, or any change in official position regarding application or
interpretation of those laws, regulations or rulings, including a holding by a
court of competent jurisdiction, which change, amendment, application or
interpretation becomes effective on or after the original issue date with
respect to Notes, Reed Elsevier Capital, Reed International or Elsevier, as the
case may be, would, on the occasion of the next payment of principal or interest
in respect of the Notes, be obligated, in making that payment, to pay additional
amounts as described in the accompanying prospectus on page 11 and that
obligation cannot be avoided by Reed Elsevier Capital, Reed International or
Elsevier, individually or together, taking reasonable measures available to
them.

The Notes may also be redeemed, at the option of Reed Elsevier Capital in
whole, but not in part, at the Special U.S. Dollar Redemption Price and the
Special Euro Redemption Price, as applicable, (as
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defined below), if, as a result of any change in, or amendment to, the U.S.
Internal Revenue Code of 1986, as amended, or any of its regulations, rulings or
official interpretations, which change or amendment is enacted or adopted and
becomes effective on or after the original issue date with respect to the Notes,
the deductibility or timing of interest payments on the Notes would be affected
in any manner which is then adverse to Reed Elsevier Capital and that effect
cannot be avoided by Reed Elsevier Capital, Reed International or Elsevier,
individually or together, taking reasonable measures available to them.

The "Special U.S. Dollar Redemption Price" will equal the principal amount
of the U.S. Dollar 6.125% Note and the U.S. Dollar 6.750% Note, as applicable,
to be redeemed, plus accrued and unpaid interest to, but not including, the
redemption date, plus the U.S. Dollar Redemption Premium.

The "U.S. Dollar Redemption Premium" equals the amount (but not less than
zero) obtained by subtracting:

-- the aggregate amount of the principal being redeemed on the redemption
date with respect to that U.S. Dollar Note from

-- the sum of the present values of the Remaining Scheduled Payments,
discounted on a semi-annual basis, assuming a 360-day year consisting
of twelve 30-day months, at the Treasury Rate.

The "Special Euro Redemption Price" will equal the principal amount of the
Euro Note to be redeemed, plus accrued and unpaid interest to, but not
including, the redemption, plus the Euro Redemption Premium.

The "Euro Redemption Premium" equals the amount (but not less than zero)
obtained by subtracting:

-- the aggregate amount of the principal being redeemed on the redemption
date with respect to that Euro Note from

-- the sum of the present values of the Remaining Scheduled Payments,
discounted on an annual basis (based on the actual number of days
elapsed divided by 365 or 366 as the case may be), at the Reference
Euro Dealer Rate.

"Reference Euro Dealer Rate" means with respect to the Reference Euro
Dealer and any redemption date, the midmarket annual yield to maturity, as
determined by the Reference Euro Dealer, of the 4.750% BUND due 4 July 2008, or
if, in the reasonable judgment of the Euro Reference Dealer, such security is no
longer appropriate, a security selected by the Euro Reference Dealer as having a
maturity comparable to the remaining term of the Euro Notes to be redeemed that
would be utilized, at the time of selection and in accordance with customary
financial practice, in pricing new issues of corporate debt securities of
comparable maturity to the remaining term of such Euro Notes, at 11:00 a.m.
(London time) on the fifth business day in London preceding such redemption
date, quoted in writing to the trustee by such Reference Euro Dealer.

"Reference Euro Dealer" means any of Lehman Brothers International
(Europe), Salomon Brothers International Limited, UBS AG, acting through its
business group UBS Warburg, or their respective successors, as selected by Reed
Elsevier Capital.

NOTICES

Notices will be mailed and will also be published in a leading daily
newspaper in The City of New York and in London, and, so long as the Notes are
listed on the Luxembourg Stock Exchange, in Luxembourg. We expect that
publication will be made in The City of New York in The Wall Street Journal, in
London in the Financial Times and in Luxembourg in the Luxembourg Wort. Any
notice shall be deemed to have been given on the date of mailing and publication
or, if published more than once, on the date of first publication.

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GOVERNING LAW

The Notes, the Guarantees and the indenture will be governed by, and
construed in accordance with, the laws of the State of New York.

BOOK-ENTRY ISSUANCE

The U.S. Dollar 6.125% Notes, U.S. Dollar 6.750% Notes and Euro Notes
issued by Reed Elsevier Capital will each be represented by one or more global
securities. The global securities for the U.S. Dollar Notes will be deposited
with and registered in the name of Cede & Co., as nominee for DTC. The global
security for the Euro Notes will be deposited with Chase Nominees Limited, as
nominee for The Chase Manhattan Bank, London Branch, common depositary for
Clearstream, Luxembourg and Euroclear. A global security may be exchanged in
whole but not in part for certificated securities only in the limited
circumstances described in the accompanying prospectus. Global securities may
not be exchanged in part for certificated securities.

The laws of some jurisdictions may require that some purchasers of Notes
take physical delivery of Notes in definitive form. These laws may impair the
ability of some purchasers to transfer or pledge book-entry interests in a
global security.

If a global security is exchanged in whole but not in part for certificated
securities as described in the accompanying prospectus, The Chase Manhattan
Bank, as trustee will keep the registration books for the Notes at its corporate
office and follow customary practices and procedures regarding those
certificated securities.

If we issue Notes in certificated form in whole but not in part under the
limited circumstances described in the accompanying prospectus, and the Notes
are listed on the Luxembourg Stock Exchange at that time, then holders of
certificated securities may transfer their Notes in whole upon the surrender of
the certificate to be transferred, together with a completed and executed
assignment form endorsed on the definitive Note, at the office of The Chase
Manhattan Bank, New York Branch, transfer agent for the U.S. Dollar Notes, The
Chase Manhattan Bank, London Branch, transfer agent for the Euro Notes, or at
the main office of Chase Manhattan Bank Luxembourg S.A., the transfer agent in
Luxembourg. Each time that we transfer or exchange a new Note in certificated
form for another Note in certificated form, and after the applicable transfer
agent receives a completed assignment form, we will make available for delivery
the new definitive Note at the office of the applicable transfer agent or at the
main office of Chase Manhattan Bank Luxembourg S.A., the transfer agent in
Luxembourg. Alternatively, at the option of the person requesting the transfer
or exchange, we will mail, at that person's risk, the new definitive Note to the
address of that person which is specified in the assignment form. In addition,
if we issue Notes in certificated form in whole but not in part and the Notes
are listed on the Luxembourg Stock Exchange at that time, then we will make
payments of principal and interest on the Notes to holders in whose names the
Notes in certificated form are registered at the close of business on the record
date for those payments. If the Notes are issued in certificated form, we will
make payments of principal against the surrender of these certificated Notes at
the office of the applicable paying agent or at the main office of Chase
Manhattan Bank Luxembourg S.A., the paying agent in Luxembourg. We will make
payments to holders of Notes by check delivered to the addresses of the holders
as their addresses appear on our register or by transfer to an account
maintained by that holder with a bank located in the United States.

The policies of DTC, Clearstream, Luxembourg and Euroclear, as the case may
be, will govern payments, transfers, exchange and other matters relating to the
investor's interest in Notes held by them.

We have no responsibility for any aspect of the actions of or the records
kept by DTC, Clearstream, Luxembourg or Euroclear or any of their direct or
indirect participants. We also do not supervise these systems in any way.

DTC, Clearstream, Luxembourg, Euroclear and their participants perform
these clearance and settlement functions under agreements they have made with
one another or with their customers. You

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should be aware that they are not obligated to perform or continue to perform
these procedures and may modify them or discontinue them at any time.

The description of the clearing systems in this section reflects our
understanding of the rules and procedures of DTC, Clearstream, Luxembourg and
Euroclear as they are currently in effect. These systems could change their
rules and procedures at any time.

The Depository Trust Company. DTC will keep a computerized record of its
participants whose clients have purchased interests in the U.S. Dollar Notes.
Each participant will then keep a record of its clients. Unless a global
security is exchanged in whole or in part for a certificated security, such
global security may not be transferred. DTC, its nominees and their successors
may, however, transfer a global security in whole to one another, and these
transfers are required to be recorded on the records of Reed Elsevier Capital or
a register to be maintained by The Chase Manhattan Bank, as trustee.

Book-entry interests in a global security will be shown on, and transfers
of such interests will be made only through, records maintained by DTC and its
participants. DTC has provided us with the following information: DTC is a
limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member
of the United States Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered under the provisions of Section 17A of the Securities Exchange Act of
1934 (the "Exchange Act"). DTC holds securities that its direct participants
deposit with DTC. DTC also records the settlements among direct participants of
securities transactions, such as transfers and pledges, in deposited securities
through computerized records for direct participants' accounts. This eliminates
the need to exchange certificated securities. Direct participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations.

DTC's book-entry system is also used by other organizations such as
securities brokers and dealers, banks and trust companies that work through a
direct participant. The rules that apply to DTC and its participants are on file
with the SEC.

DTC is owned by a number of its direct participants and by The New York
Stock Exchange, Inc., the American Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc.

When you purchase interests in U.S. Dollar Notes through the DTC system,
the purchases must be made by or through a direct participant, which will
receive credit for the interests on DTC's records. When you actually purchase
interests in the U.S. Dollar Notes, you will become their beneficial owner. Your
ownership interest will be recorded only on the direct or indirect participants'
records. DTC will have no knowledge of your individual ownership of interests.
DTC's records will show only the identity of the direct participants and the
amount of the U.S. Dollar Notes held by or through them. You will not receive a
written confirmation of your purchase or sale or any periodic account statement
directly from DTC. You should instead receive these from your direct or indirect
participant. As a result, the direct or indirect participants are responsible
for keeping accurate account of the holdings of their customers. The Chase
Manhattan Bank, as trustee will wire payments on the U.S. Dollar Notes issued by
Reed Elsevier Capital to DTC's nominee. Reed Elsevier Capital and The Chase
Manhattan Bank, as trustee will treat DTC's nominee as the owner of the global
securities representing the U.S. Dollar Notes for all purposes. Accordingly,
Reed Elsevier Capital, The Chase Manhattan Bank, as trustee and the applicable
paying agent will have no direct responsibility or liability to pay amounts due
on the global securities representing the U.S. Dollar Notes to you or any other
beneficial owners in that global security. Any redemption notices will be sent
by us or by the book-entry depositary to DTC, which will, in turn, inform the
direct participants (or the indirect participants), which will then contact you
as a beneficial holder.

It is DTC's current practice, upon receipt of any payment of principal or
interest, to proportionately credit direct participants' accounts on the payment
date based on their holdings. In addition, it is DTC's current practice to pass
through any consenting or voting rights to such participants by using an omnibus
proxy. Those participants will, in turn, make payments to and solicit votes from
you, the ultimate beneficial owner of U.S. Dollar Notes, based on their
customary practices. Payments to you will be the

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responsibility of the participants and not of DTC, the trustee or Reed Elsevier
Capital, Reed International or Elsevier.

Clearstream, Luxembourg and Euroclear. Clearstream, Luxembourg and
Euroclear will record the ownership interests of their participants in much the
same way as DTC.

Clearstream, Luxembourg advises that it is incorporated under the laws of
Luxembourg as a bank. Clearstream, Luxembourg will facilitate the clearance and
settlement of securities transactions between its customers through electronic
book-entry transfers between their accounts. Clearstream, Luxembourg will
provide to its customers, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. Clearstream, Luxembourg will interface
with domestic securities markets in over 30 countries through established
depository and custodial relationships. As a bank, Clearstream, Luxembourg is
subject to regulation by the Luxembourg Commission for the Supervision of the
Financial Sector, also known as the Commission de Surveillance du Secteur
Financier. Customers of Clearstream, Luxembourg are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. U.S. customers of Clearstream, Luxembourg are limited to
securities brokers and dealers and banks. Indirect access to Clearstream,
Luxembourg is also available to other institutions such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Clearstream, Luxembourg customer.

Euroclear advises that it was created in 1968 and that it will clear and
settle transactions between Euroclear participants through simultaneous
electronic book-entry delivery against payment, thereby eliminating the need for
physical movement of certificates and any risk from lack of simultaneous
transfers of securities and cash. Euroclear will provide various other services,
including securities lending and borrowing and interface with domestic markets
in several countries. Euroclear is operated by Euroclear Bank S.A./N.V., which
we refer to as the "Euroclear Operator," under contract with Euroclear Clearance
Systems, S.C., a Belgian cooperative corporation, which we refer to as the
"Cooperative." All operations are conducted by the Euroclear Operator, and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for Euroclear on behalf of Euroclear participants. Euroclear participants
include banks, including central banks, securities brokers and dealers and other
professional financial intermediaries and may include the underwriters. Indirect
access to Euroclear is also available to other firms that clear through or
maintain a custodial relationship with a Euroclear participant, either directly
or indirectly.

TAXATION -- UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

For a discussion of the United States federal income tax consequences to
you of the purchase, ownership and disposition of the Notes, please see
"Taxation -- United States Federal Income Tax Considerations," in the
accompanying prospectus. You should note, however, that recently enacted
legislation progressively reduces the rate of backup withholding tax over the
next five years. The 31 percent rate has been reduced to 30.5% for 2001
(gradually reducing to 28% by the year 2006). However, there is a sunset
provision in the legislation that provides that the rates set forth above shall
not apply to taxable years beginning after December 31, 2010 unless the United
States Congress passes legislation that restores the provisions before the
scheduled expiration date.

PRESCRIPTION

The indenture provides that, any money deposited with the trustee or any
paying agent, or then held by Reed Elsevier Capital or either Guarantor, in
trust for the payment of the principal of, premium, if any, additional amount,
if any, or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, additional amount, if any, or interest has
become due and payable shall be paid to Reed Elsevier Capital or either
Guarantor on its written request or (if then held by Reed Elsevier Capital or
either Guarantor) shall be discharged from such trust; and the holder of such
Note shall thereafter, as a secured creditor, look only to Reed Elsevier Capital
or either Guarantor for payment thereof,

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and all liability of the trustee or such paying agent with respect to such trust
money, and all liability of Reed Elsevier Capital or either Guarantor as trustee
thereof, shall thereupon cease; provided, however, that the trustee or such
paying agent, before being required to make any such repayment, may give notice
to the holder that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such
notification, any unclaimed balance of such money then remaining will be repaid
to Reed Elsevier Capital or a Guarantor, as the case may be. Moreover, under New
York State's statute of limitations, any legal action upon the Notes must be
commenced within six years after the payment thereof is due. Thereafter, the
Notes will become generally unenforceable.

TRUSTEE

In connection with the exercise of its duties the trustee will be
responsible for the interests of the holders of the Notes as a class and will
not be responsible for the consequences of the exercise of its duties for
individual noteholders.

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UNDERWRITING

Reed International, Elsevier and Reed Elsevier Capital have entered into an
underwriting agreement, dated July 25, 2001, with respect to the U.S. Dollar
Notes with underwriters for whom Lehman Brothers Inc., Salomon Smith Barney Inc.
and UBS Warburg LLC are acting as representatives, and an underwriting
agreement, dated July 25, 2001, with respect to the Euro Notes with underwriters
for whom Lehman Brothers International (Europe), Salomon Brothers International
Limited and UBS AG, acting through its business group UBS Warburg, are acting as
representatives. Subject to the terms and conditions set forth in the
underwriting agreements the underwriters have severally agreed to purchase the
principal amount of Notes set forth opposite their respective names:

PRINCIPAL PRINCIPAL
AMOUNT AMOUNT
OF U.S. DOLLAR OF U.S. DOLLAR
UNDERWRITERS 6.125% NOTES 6.750% NOTES
- ------------ -------------- --------------

Lehman Brothers Inc..................................... $165,000,000 $165,000,000
Salomon Smith Barney Inc................................ 165,000,000 165,000,000
UBS Warburg LLC......................................... 137,500,000 137,500,000
Barclays Capital Inc.................................... 27,500,000 27,500,000
Deutsche Banc Alex. Brown Inc........................... 27,500,000 27,500,000
J.P. Morgan Securities Inc.............................. 27,500,000 27,500,000
------------ ------------
Total......................................... $550,000,000 $550,000,000
============ ============

PRINCIPAL AMOUNT
UNDERWRITERS OF EURO NOTES
- ------------ ----------------

Lehman Brothers International (Europe)...................... E150,000,000
Salomon Brothers International Limited...................... 150,000,000
UBS AG, acting through its business group UBS Warburg....... 125,000,000
Barclays Bank PLC........................................... 25,000,000
Deutsche Bank AG London..................................... 25,000,000
J.P. Morgan Securities Ltd.................................. 25,000,000
------------
Total............................................. E500,000,000
============

The underwriting agreements provide that the obligation of the underwriters
to pay for and accept delivery of the Notes is subject to certain conditions,
including the delivery of certain legal opinions by their counsel. Under the
terms and conditions of each underwriting agreement, the underwriters are
committed to take and pay for all of the Notes covered by such underwriting
agreement if any are taken. However, the sale of the U.S. Dollar Notes is not
conditioned upon the sale of the Euro Notes and the sale of the Euro Notes is
not conditioned upon the sale of the U.S. Dollar Notes.

Subject to the conditions set forth in the underwriting agreements, each
underwriter has agreed to purchase the Notes set forth opposite its name in the
above tables at a discount from the price indicated on the cover page of this
prospectus supplement, and to offer the Notes to the public at the public
offering price set forth on the cover page of this prospectus supplement, and to
certain dealers at that price less a selling concession not in excess of 0.200%
of the principal amount of the U.S. Dollar 6.125% Notes and a selling concession
not in excess of 0.300% of the principal amount of the U.S. Dollar 6.750% Notes.
The underwriters may allow, and these dealers may reallow, a concession to
certain other dealers not in excess of 0.125% of the principal amount of the
U.S. Dollar 6.125% Notes and not in excess of 0.125% of the principal amount of
the U.S. Dollar 6.750% Notes. After the initial offering of the Notes, the
underwriters may from time to time vary the offering price and these
concessions.

In connection with this offering, Lehman Brothers Inc., Salomon Smith
Barney Inc. and UBS Warburg LLC or their respective affiliates (the "Stabilizing
Underwriters") may overallot or effect

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transactions which stabilize or maintain the market price for the Notes at
levels which might not otherwise prevail. In any jurisdiction where there can be
only one stabilizing agent, Lehman Brothers International (Europe) or its
affiliates shall effect any such transactions. Those transactions may include
stabilization transactions effected in accordance with Rule 104 of Regulation M
under the Securities Exchange Act of 1934, pursuant to which those underwriters
and affiliates may bid for or purchase Notes for the purpose of stabilizing the
market price. The Stabilizing Underwriters also may create a short position for
the account of the underwriters by selling more Notes in connection with this
offering than they are committed to purchase from us. In that case, the
Stabilizing Underwriters may purchase Notes in the open market following
completion of this offering to cover their short position. Any of the
transactions described in this paragraph may result in the maintenance of the
price of the Notes at a level above that which might otherwise prevail in the
open market. None of the transactions described in this paragraph are required,
and, if they are undertaken, they may be discontinued at any time.

Neither Reed International, Elsevier, Reed Elsevier Capital nor or any of
the underwriters makes any representation or prediction as to the direction or
magnitude of any effect that the transactions described above may have on the
price of the Notes. In addition, neither Reed International, Elsevier, Reed
Elsevier Capital nor any of the underwriters makes any representation that any
of the underwriters will engage in such transactions, or that such transactions,
once begun, will not be discontinued without notice.

Reed International, Elsevier and Reed Elsevier Capital will pay transaction
expenses, estimated to be approximately $1.0 million, not including the
underwriting discount.

Reed International, Elsevier and Reed Elsevier Capital have agreed to
indemnify the underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended.

Each underwriter has agreed that it will not offer, sell, or deliver any of
the Notes, directly or indirectly, or distribute any offering material relating
to the Notes, in or from any jurisdiction except under circumstances that will,
to the best of the underwriter's knowledge and belief, result in compliance with
the applicable laws and regulations.

The underwriters and their affiliates have from time to time, directly or
indirectly, provided investment and commercial banking or financial advisory
services to us, for which they have received customary fees and commissions, and
expect to provide these services to us in the future, for which they expect to
receive customary fees and commissions. Certain of the underwriters
participating in this offering are dealers under our commercial paper program,
and may receive proceeds from the repayment of commercial paper which is being
repaid with proceeds from this offering. This offering is being conducted
pursuant to NASD Conduct Rule 2710(c)(8).

OFFERING RESTRICTIONS

UNITED KINGDOM

Each underwriter has represented and agreed that:

(1) it has not offered or sold and, prior to the date six months after
the date of issuance of the Notes, will not offer or sell any Notes to
persons in the United Kingdom except to persons whose ordinary business
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted in and will not result
in an offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995;

(2) it has complied and will comply with all applicable provisions of
the Financial Services Act 1986 with respect to anything done by it in
relation to the Notes in, from or otherwise involving the United Kingdom;
and

(3) it has only issued or passed on and will only issue or pass on in
the United Kingdom any document received by it in connection with the
issuance of the Notes to a person who is of a kind
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described in Article 11(3) of the Financial Services Act 1986 Act
(Investment Advertisements) (Exemptions) Order 1996 (as amended) or is a
person to whom such document may otherwise lawfully be issued or passed on.

THE NETHERLANDS

The Euro Notes will be issued under the Euro-securities exemption pursuant
to Article 6 of the Exemption Regulation (Vrijstellinsregeling Wet Toezicht
Effectenverkeer) of December 21, 1995, as amended, of The Netherlands'
Securities Market Supervision Act 1995 (Wet Toezicht Effectenverkeer) and
accordingly each underwriter has represented and agreed that it has not publicly
promoted and will not publicly promote the offer or sale of the Euro Notes by
conducting a generalized advertising or cold-calling campaign within or outside
The Netherlands.

In The Netherlands, this document may only be distributed to individuals or
entities that trade or invest in securities in the course of their business or
profession ("professional investors") and will be filed with The Netherlands
Securities Board (Stichting Toezicht Effectenverkeer of STE). The U.S. Dollar
Notes referred to herein may not be publicly offered or sold to persons other
than professional investors unless and until a prospectus complying with the
requirements of The Netherlands' Securities Market Supervision Act 1995 (Wet
Toezicht Effectenverkeer) is recognized by The Netherlands Securities Board
(Stichting Toezicht Effectenverkeer of STE).

LEGAL MATTERS

The validity of the Notes and the Guarantees will be passed on for us by
Simpson Thacher & Bartlett, New York, New York. The underwriters are being
represented by Cravath, Swaine & Moore, New York, New York. Legal matters will
be passed upon by Freshfields Bruckhaus Deringer, English solicitors for Reed
International and Netherlands counsel to Elsevier, as to certain matters of
English law and Netherlands law, respectively.

EXPERTS

Our combined financial statements in our 2000 Annual Report on Form 20-F
incorporated by reference in this prospectus supplement have been audited by
Deloitte & Touche, Amsterdam, The Netherlands, independent auditors, and
Deloitte & Touche, London, United Kingdom, independent auditors, as stated in
their joint report, which is incorporated by reference in this prospectus
supplement, and have been so incorporated in reliance upon those firms' joint
report, given upon the authority of those respective firms as experts in
accounting and auditing.

The consolidated financial statements of Reed International in our 2000
Annual Report on Form 20-F incorporated by reference in this prospectus
supplement have been audited by Deloitte & Touche, London, United Kingdom,
independent auditors, as stated in their report, which is incorporated by
reference in this prospectus supplement, and have been so incorporated in
reliance upon that firm's report, given upon their authority as experts in
accounting and auditing.

The financial statements of Elsevier in our 2000 Annual Report on Form 20-F
incorporated by reference in this prospectus supplement have been audited by
Deloitte & Touche, Amsterdam, The Netherlands, independent auditors, as stated
in their report, which is incorporated by reference in this prospectus
supplement, and have been so incorporated in reliance upon that firm's report,
given upon their authority as experts in accounting and auditing.

The financial statements of Harcourt and related financial statement
schedule in its Annual Report on Form 10-K for the year ended October 31, 2000
incorporated by reference in this prospectus supplement have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports, which
are incorporated by reference in this prospectus supplement, and have been so
incorporated in reliance upon that firm's reports, given upon their authority as
experts in accounting and auditing.

S-96
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WHERE YOU CAN FIND MORE INFORMATION

Reed International, Elsevier and Harcourt are subject to the informational
requirements of the Exchange Act and therefore file reports and other
information with the SEC. You may obtain a copy of any filing Reed
International, Elsevier and Harcourt have made with the SEC directly from the
SEC. You may either:

- read and copy materials we file with the SEC at the SEC's public
reference rooms at:

450 Fifth Street, N.W. Seven World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, NY 10048 Suite 1400
Chicago, IL 60661

- visit the SEC's Internet site at http://www.sec.gov, which contains
reports, proxy and information statements and other information regarding
issuers that file electronically.

You can obtain more information about the SEC's public reference rooms by
calling the SEC at 1-800-SEC-0330.

You may also inspect and copy these materials at the offices of:

The New York Stock Exchange, Inc. Kredietbank S.A. Luxembourgeoise
20 Broad Street 43 Boulevard Royal
New York, NY 10005 L-2955 Luxembourg

The American Depositary Shares of Reed International and Elsevier and the
common shares of Harcourt are listed on The New York Stock Exchange.

INFORMATION INCORPORATED BY REFERENCE

Reed International, Elsevier and Harcourt are subject to the informational
requirements of the Exchange Act and therefore file reports and other
information with the SEC. The SEC allows us to incorporate by reference in this
prospectus supplement the information contained in those documents already filed
with the SEC. This means:

- incorporated documents are considered part of this prospectus supplement;

- we can disclose important information to you by referring you to those
documents;

- information in this prospectus supplement automatically updates and
supersedes information in earlier documents that are incorporated by
reference in this prospectus supplement; and

- information that we file in the future with the SEC that we incorporate
by reference in this prospectus supplement will automatically update and
supersede this prospectus supplement.

We incorporate by reference the documents listed below filed by Reed
International and Elsevier with the SEC under the Exchange Act:

- our 2000 Annual Report on Form 20-F, filed on March 31, 2001; and

- our Form 6-K, filed on July 16, 2001.

We also incorporate by reference the documents listed below filed by
Harcourt with the SEC under the Exchange Act:

- the financial statements included in Harcourt's annual report on Form
10-K for the fiscal year ended October 31, 2000; and

S-97
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- the financial statements included in Harcourt's quarterly reports on Form
10-Q for the periods ended January 31, 2001 and April 30, 2001.

We incorporate by reference each of the following documents that will be
filed with the SEC after the date of this prospectus supplement but before such
time as all of the Notes covered by the prospectus supplement have been sold:

- any joint annual report on Form 20-F filed by us pursuant to the Exchange
Act; and

- those portions of any joint report on Form 6-K filed by us pursuant to
the Exchange Act that indicate on its cover page those portions that will
be incorporated by reference in this prospectus supplement.

We have included or incorporated by reference in this prospectus supplement
information filed by Harcourt with the SEC. Harcourt is not affiliated with us
and was not involved in the preparation of such information and statements.
Accordingly, we cannot be sure that the information relating to Harcourt
contained or incorporated by reference in this prospectus supplement is accurate
or complete.

The documents incorporated by reference (excluding exhibits unless those
exhibits are specifically incorporated into the information that this prospectus
supplement incorporates) will be made available free of charge at the following
addresses:

Reed Elsevier Capital Inc. Kredietbank S.A. Luxembourgeoise
1105 North Market Street 43 Boulevard Royal
Suite 942 L-2955 Luxembourg
Wilmington, DE 19801

LISTING AND GENERAL INFORMATION

Application has been made to list the Notes on the Luxembourg Stock
Exchange and the U.S. Dollar Notes on The New York Stock Exchange in accordance
with their respective rules. In connection with the listing application, each of
Reed International, Elsevier and Reed Elsevier Capital has deposited its
respective article of association, certificate of incorporation and by-laws and
a legal notice relating to the issuance of the Notes with Registrar of the
District Court of Luxembourg (Greffier en Chef du Tribunal d'Arrondissement de
et a Luxembourg), where copies may be obtained upon request.

So long as any of the Notes are outstanding, copies of these documents,
together with this prospectus supplement, the accompanying prospectus, the
indenture and supplemental indentures, a copy of the global notes representing
the Notes and our current annual and six month interim reports, and all future
annual reports and six month interim reports, will be made available at the main
office of Kredietbank S.A. Luxembourgeoise in Luxembourg, our Luxembourg listing
agent, for the Notes in Luxembourg. Reed Elsevier reports its financial
information on an annual and semi-annual basis, as of December 31 and June 30,
respectively. Our annual reports on Form 20-F filed by Reed International and
Elsevier pursuant to the Exchange Act include the audited combined financial
statements of Reed Elsevier, the audited consolidated financial statements of
Reed International and the audited financial statements of Elsevier. Our six
month interim reports on Form 6-K filed by Reed International and Elsevier
pursuant to the Exchange Act include the six month unaudited combined financial
statements of Reed Elsevier, the six month unaudited consolidated financial
statements of Reed International and the six month unaudited financial
statements of Elsevier. Reed Elsevier Capital does not publish separate
non-consolidated financial statements.

In addition, copies of the documents incorporated by reference will be made
available free of charge at the main office of Kredietbank S.A. Luxembourgeoise.

The issuance of the Notes was authorized by the board of directors of Reed
Elsevier Capital on February 15, 2001 and July 25, 2001. The issuance of the
Guarantees was authorized by the board of

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directors of Reed International on October 10, 2000 and the executive board of
Elsevier on October 10, 2000 and February 19, 2001.

Except as disclosed in the prospectus supplement or the accompanying
prospectus, there has been no material adverse change in the financial position
of Reed Elsevier Capital, Reed International or Elsevier since December 31,
2000.

Except as disclosed in this prospectus supplement or the accompanying
prospectus, neither Reed Elsevier Capital, Reed International or Elsevier nor
any of their subsidiaries are involved in litigation, arbitration or
administrative proceedings relating to claims or amounts that are material in
the context of the offering of the Notes and the Guarantees, and they are not
aware of any material litigation, arbitration or administrative proceedings that
is pending or, to their knowledge, threatened.

The Notes have been accepted for clearance through the facilities of
Clearstream, Luxembourg and Euroclear and in the case of the U.S. Dollar Notes,
DTC, and have been assigned the following identification numbers:

The CUSIP number for the U.S. Dollar 6.125% Notes is 758202 AA 3, the
Common Code is 13353328 and the ISIN is US758202AA31. The CUSIP number for the
U.S. Dollar 6.750% Notes is 758202 AB 1, the Common Code is 13353344 and the
ISIN is US758202AB14.

The Common Code for the Euro Notes is 013345872 and the ISIN is
XS0133458728.

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PROSPECTUS

$5,000,000,000

[REED & ELSEVIER LOGO]
REED ELSEVIER CAPITAL INC.
DEBT SECURITIES
FULLY AND UNCONDITIONALLY GUARANTEED JOINTLY AND SEVERALLY BY

REED INTERNATIONAL P.L.C. ELSEVIER NV
- --------------------------------------------------------------------------------
THE ISSUER:

-- Reed Elsevier Capital Inc.

THE GUARANTORS:

-- Reed International P.L.C.

-- Elsevier NV

THE DEBT SECURITIES AND THE OFFERING:

-- This prospectus may be used to offer and sell, in one or more
offerings at various times, up to $5,000,000,000 of the debt
securities of Reed Elsevier Capital Inc.

-- The debt securities may be offered as separate series, in amounts,
prices and on terms to be determined at the time of the sale. When
Reed Elsevier Capital Inc. offers debt securities it will provide you
with a prospectus supplement describing the terms of the specific
issue of debt securities.

-- Reed Elsevier Capital Inc. may sell debt securities to or through one
or more underwriters for public offering and sale by them or may sell
debt securities to investors directly or through agents. These
underwriters or agents may include one or more of Lehman Brothers
Inc., Salomon Smith Barney Inc., Deutsche Banc Alex. Brown Inc.,
Goldman, Sachs & Co., UBS Warburg LLC or Chase Securities Inc. or a
group represented by one or more of those firms or by one or more
other firms.

-- You should read this prospectus and any prospectus supplement
carefully before you invest.

THE GUARANTEES:

-- The payment of principal, premium, if any, interest and additional
amounts, if any, on the debt securities will be fully and
unconditionally guaranteed jointly and severally by Reed International
P.L.C. and Elsevier NV.

- --------------------------------------------------------------------------------

Neither the Securities and Exchange Commission nor any state securities
commission or other regulatory body has approved or disapproved of these
securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.

April 17, 2001
101

ABOUT THIS PROSPECTUS

This prospectus is part of a registration statement that we filed with the
SEC utilizing a "shelf" registration process. Under this shelf process, we may
from time to time sell any combination of the debt securities described in this
prospectus in one or more offerings up to a total dollar amount of
$5,000,000,000.

We provide information to you about the debt securities in the following
two documents:

-- this prospectus, which contains general information, some of which may
not apply to your debt securities; and

-- the accompanying prospectus supplement, which describes the terms of
your debt securities and may also add, update or change information
contained in this prospectus.

If the terms of your debt securities vary between the accompanying prospectus
supplement and this prospectus, you should rely on the different information in
the prospectus supplement.

You should read both this prospectus and any prospectus supplement together
with the additional information described under the heading "Where You Can Find
More Information" to learn more about us and the debt securities we are
offering.

In this prospectus:

-- "Reed International" refers to Reed International P.L.C.;

-- "Elsevier" refers to Elsevier NV;

-- "Reed Elsevier Capital" refers to Reed Elsevier Capital Inc.;

-- "guarantors" refers to Reed International and Elsevier; and

-- "Reed Elsevier," "we," "us" and "our" collectively refers to Reed
International, Elsevier, Reed Elsevier plc and Elsevier Reed Finance
BV and their respective subsidiaries, including Reed Elsevier Capital,
and associates and joint ventures.

Reed Elsevier is not a legal entity but a collective reference to the separate
legal entities of Reed Elsevier. The businesses of all of the entities
comprising Reed Elsevier are collectively referred to in this prospectus as the
"combined businesses," and the financial statements of the combined businesses
are referred to as the "combined financial statements."

ENFORCEABILITY OF CIVIL LIABILITIES

Reed International is a public limited company incorporated in England and
Elsevier is a public limited company incorporated under the laws of The
Netherlands. Some of the directors and executive officers of Reed Elsevier
Capital and the guarantors are non-residents of the United States, and all or a
substantial portion of the assets of the guarantors and these persons are
located outside the United States. As a result, it may not be possible for
investors to effect service of process within the United States upon the
guarantors or these non-resident persons or to enforce against any of them in
U.S. courts judgments obtained in U.S. courts predicated upon the civil
liability provisions of the federal securities laws of the United States.

Reed International has been advised by its English solicitors, Freshfields
Bruckhaus Deringer, that there is doubt as to the enforceability in England in
original actions or in actions for enforcement of judgments of U.S. courts, of
civil liabilities predicated upon the federal securities laws of the United
States.

Elsevier has been advised by its Dutch counsel, Freshfields Bruckhaus
Deringer, that in the absence of an applicable convention between the United
States and The Netherlands, a judgment rendered by a U.S. court, whether or not
predicated upon the civil liability provisions of the federal securities laws of
the

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102

United States, will not be enforced by the courts of The Netherlands. In order
to obtain a judgment which is enforceable in The Netherlands, the claim must be
relitigated before a competent Netherlands court. A judgment rendered by a U.S.
court will, under current practice, be confirmed by a Netherlands court if it
finds that:

-- the judgment results from proceedings compatible with Netherlands
concepts of due process;

-- the judgment is final and conclusive; and

-- the judgment does not contravene the public policy of The Netherlands.

If the judgment is confirmed by a Netherlands court, that court will generally
grant the same claim without re-litigation on the merits, provided that the
court may mitigate the amount of damages awarded by a U.S. court. Each of Reed
International and Elsevier has consented to service of process in the Borough of
Manhattan, the City of New York, for claims based upon the indenture (as
described below under the heading "Description of the Debt Securities and
Guarantees"), the debt securities and the guarantees.

WHERE YOU CAN FIND MORE INFORMATION

Reed International and Elsevier are subject to the informational
requirements of the U.S. Securities Exchange Act of 1934, and therefore file
reports and other information with the SEC. No separate financial information on
Reed Elsevier Capital will be provided, as permitted by the rules and
regulations of the SEC. You can inspect and copy reports and other information
filed by Reed International and Elsevier. You may either:

-- read and copy materials filed with the SEC at the SEC's public
reference rooms at:

450 Fifth Street, N.W. Seven World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, NY 10048 Suite 1400
Chicago, IL 60661

-- visit the SEC's Internet site at http://www.sec.gov, which contains
reports, proxy and information statements and other information
regarding issuers that file electronically.

You can obtain more information about the SEC's public reference rooms by
calling the SEC at 1-800-SEC-0330.

You may also inspect and copy these materials at the offices of the New
York Stock Exchange, Inc., 20 Broad Street, New York, NY 10005. The American
Depositary Shares of Reed International and Elsevier are listed on the New York
Stock Exchange.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The SEC allows us to incorporate by reference in this prospectus the
information contained in those documents already filed with the SEC. This means:

-- incorporated documents are considered part of this prospectus;

-- we can disclose important information to you by referring you to those
documents;

-- information in this prospectus automatically updates and supersedes
information in earlier documents that are incorporated by reference in
this prospectus; and

-- information that we file in the future with the SEC that we
incorporate by reference in this prospectus will automatically update
and supersede this prospectus.

3
103

We incorporate by reference the documents listed below filed with the SEC
under the Exchange Act:

-- our joint annual report on Form 20-F for the fiscal year ended
December 31, 2000, filed on March 13, 2001.

We also incorporate by reference each of the following documents that will
be filed with the SEC after the date of this prospectus but before the time that
all of the debt securities covered by this prospectus have been sold:

-- any joint annual report on Form 20-F filed by us pursuant to the
Exchange Act; and

-- those portions of any joint report on Form 6-K filed by us pursuant to
the Exchange Act that indicate on the cover page those portions that
will be incorporated by reference in this prospectus.

You may request a copy of any filings referred to above (excluding exhibits
unless those exhibits are specifically incorporated into the information that
this prospectus incorporates), at no cost, by contacting us at the following
address:

Reed Elsevier Capital Inc.
1105 North Market Street
Suite 942
Wilmington, DE 19801
(302) 427-9299

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104

REED ELSEVIER

We are one of the world's leading publishers and information providers. Our
activities include scientific, legal, education and business publishing. Our
principal operations are in North America and Europe. For the year ended
December 31, 2000, we had total turnover of approximately L3.8 billion
(approximately $5.7 billion) and an average of approximately 28,900 employees.

Reed International and Elsevier each holds a 50% interest in Reed Elsevier
plc. Reed International holds a 39% interest in Elsevier Reed Finance BV, with
Elsevier holding a 61% interest. Reed International additionally holds an
indirect equity interest in Elsevier, reflecting the arrangements entered into
between Reed International and Elsevier at the time of the merger, which
determined the equalisation ratio whereby one Elsevier ordinary share is, in
broad terms, intended to confer equivalent economic interests to 1.538 Reed
International ordinary shares. The equalisation ratio is subject to change to
reflect share splits and similar events that affect the number of outstanding
ordinary shares of either Reed International or Elsevier.

Under the equalisation arrangements, Reed International shareholders have a
52.9% economic interest in Reed Elsevier, and Elsevier shareholders (other than
Reed International) have a 47.1% economic interest in Reed Elsevier. Holders of
ordinary shares in Reed International and Elsevier have substantially equivalent
dividend and capital rights with respect to their ordinary shares.

During 1999 Reed International, Elsevier and Reed Elsevier plc introduced a
unitary management structure comprising a single non-executive chairman, a sole
chief executive officer and, so far as practicable, the same directors for all
three companies. This was an evolution of the management structure in place
since the merger of the businesses of Reed International and Elsevier, under
which the day to day management of the jointly owned businesses of Reed Elsevier
plc had been under the control of an executive committee of the board of Reed
Elsevier plc.

Reed International's principal executive offices are located at 25 Victoria
Street, London, SW1H 0EX, United Kingdom (telephone number 011-44-20-7227-5681).
Elsevier's principal executive officers are located at Van de Sande
Bakhuyzenstraat 4, 1061 AG Amsterdam, The Netherlands (telephone number
011-31-20-515-9257). Reed Elsevier Capital's principal executive offices are
located at 1105 North Market Street, Suite 942, Wilmington, DE 19801 (telephone
number 302-427-9299).

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105

RATIO OF EARNINGS TO FIXED CHARGES(1)
(UNAUDITED)

The following table sets forth the ratio of earnings to fixed charges of
Reed Elsevier for the periods indicated. You should read this table together
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Reed Elsevier" and the combined financial statements of Reed
Elsevier incorporated by reference in this prospectus from our joint annual
report on Form 20-F for the fiscal year ended December 31, 2000.

YEAR ENDED DECEMBER 31,
------------------------------------
1996 1997 1998 1999 2000
---- ---- ---- ---- ----

REED ELSEVIER (continuing operations)
In accordance with U.K. and Dutch GAAP......... 4.7 0.7(4) 3.9 1.8 2.2
In accordance with U.K. and Dutch GAAP
(adjusted earnings basis)(2)................. 6.5 7.1 7.3 6.2 5.4
In accordance with U.S. GAAP(3)................ 6.0 1.3 0.8(5) 1.2 1.8

(4) Earnings were insufficient to cover fixed charges by L36 million arising as
a consequence of the provision of L230 million in respect of the Reed Travel
Group recompense programme and L250 million non-cash write down in
intangible asset values. Excluding the provision and write down, the ratio
of earnings to fixed charges was 4.7.

(5) Earnings were insufficient to cover fixed charges by L24 million after
giving effect to additional write downs of L266 million arising as a
consequence of a re-evaluation of the remaining asset lives of goodwill and
intangible assets under U.S. GAAP. Excluding the write down, the ratio of
earnings to fixed charges was 3.0.

USE OF PROCEEDS

The net proceeds from the sale of the debt securities will be used for
general corporate purposes, which may include acquisitions and repayment of
indebtedness.

DESCRIPTION OF THE DEBT SECURITIES AND GUARANTEES

The following description sets forth the material terms and provisions of
the debt securities to which any prospectus supplement may relate. The
particular terms of the debt securities offered by any prospectus supplement and
the extent, if any, to which the general provisions described below may apply to
the debt securities so offered will be described in the prospectus supplement
relating to those debt securities.

The debt securities and the guarantees will be issued under an indenture,
dated as of May 9, 1995, among Reed Elsevier Capital, Reed International,
Elsevier and The Chase Manhattan Bank, as trustee, as supplemented to date. A
copy of the indenture and any supplemental indentures are filed as exhibits to
the registration statement of which this prospectus is a part.

The following are summaries of the material provisions of the debt
securities, the guarantees and the indenture.

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106

GENERAL

The indenture does not limit the amount of the debt securities that can be
issued and provides that debt securities may be issued from time to time in one
or more series. Any debt securities issued under the indenture are collectively
referred to in this prospectus as debt securities. The particular terms of each
series of debt securities offered by a prospectus supplement will be described
in the prospectus supplement relating to that series.

Each debt security and all the related obligations of Reed Elsevier Capital
will constitute direct, unconditional, unsubordinated and unsecured obligations
of Reed Elsevier Capital, without any preference among themselves. The debt
securities will rank at least equally with all other unsecured and
unsubordinated obligations of Reed Elsevier Capital.

Please refer to the appropriate prospectus supplement for information
relating to the following:

-- the designation, aggregate principal amount and authorized
denominations of the series of debt securities;

-- the percentage or percentages of principal amount at which the debt
securities of the series will be issued;

-- the original issue date or dates or periods during which the debt
securities may be issued and the date or dates (or manner of
determining that date or dates), on which, or the range of dates
within which, the principal of (and premium, if any, on) the debt
securities of the series is payable and the record dates, if any, for
the determination of holders of debt securities of the series to whom
principal (and premium, if any) is payable;

-- the rate or rates (or the manner of calculating that rate or rates,
including any provisions for the increase or decrease of that rate or
rates upon the occurrence of specific events) at which the debt
securities of the series will bear interest, if any, or the discount,
if any, at which any discounted securities may be issued, the date or
dates from which that interest will accrue, the interest payment dates
on which that interest will be payable (or manner of determining those
dates) and the regular record date for the interest payable on any
debt securities on any interest payment date;

-- the place or places where the principal of (and premium, if any, on)
and interest, if any, on debt securities of the series will be payable
and the place or places where any debt securities of the series may be
surrendered for registration of transfer, any debt securities of the
series may be surrendered for exchange, and notices and demands to or
upon Reed Elsevier Capital or either guarantor, in respect of the debt
securities of the series, may be served;

-- the period or periods within which or manner of determining them, the
price or prices at which or manner of determining them, the currency
or currency unit in which, and the terms and conditions upon which,
debt securities of the series may be redeemed, in whole or in part, at
the option of Reed Elsevier Capital or otherwise;

-- the obligation (which may be fixed or contingent upon events), if any,
of Reed Elsevier Capital to redeem, purchase or repay debt securities
of the series pursuant to any sinking fund or analogous provisions or
at the option of a holder, and the period or periods within which or
manner of determining them, the price or prices at which or manner of
determining them, and the terms and conditions upon which, debt
securities of the series will be redeemed, purchased or repaid, in
whole or in part, pursuant to that obligation;

-- the currency, currencies or currency units in which the debt
securities will be denominated or in which payment of the principal of
and premium and interest on any of the debt securities will be issued
if other than U.S. dollars;

-- the denominations in which any debt securities of the series will be
issuable, if other than the denomination of $1,000 and any integral
multiples thereof;

7
107

-- if other than the entire principal amount, the portion of the
principal amount of debt securities of the series which will be
payable upon a declaration of acceleration of their stated maturity;

-- any additional events of default (as defined below under "-- Events of
Default"), or any additional covenants or agreements of Reed Elsevier
Capital or either guarantor, with respect to the debt securities of
the series, whether or not those events of default or covenants or
agreements are consistent with the terms of the indenture;

-- if a person other than The Chase Manhattan Bank is to act as trustee
for the debt securities of the series, and the name and location of
the corporate trust office of that trustee;

-- if a person other than The Chase Manhattan Bank is to act as principal
paying agent for the debt securities of the series and the name and
location of the principal office of that principal paying agent and,
if other than that principal paying agent, the identity of the
registrar for the debt securities of the series;

-- if other than the terms of the indenture described below under
"-- Satisfaction and Discharge," provisions for the satisfaction and
discharge of the indenture with respect to the debt securities of the
series;

-- the date as of which any global security representing outstanding debt
securities of the series will be dated if other than the date of
original issuance of the first debt security of the series to be
issued;

-- if applicable, the fact that the terms of the indenture described
under "-- Payment of Additional Amounts" and
"-- Redemption -- Optional Redemption for Tax Reasons" below will not
apply with respect to the debt securities of the series;

-- whether the debt securities of the series will be issued in whole or
in part in the form of a global security or securities and, in that
case, the depositary for that global security or securities;

-- whether any legends will be stamped or imprinted on all or a portion
of the debt securities of the series, and the terms and conditions
upon which any of those legends may be removed;

-- the form of the debt securities of the series (including the terms and
conditions of that series of debt securities); and

-- any other terms of the series (which terms shall not be inconsistent
with the provisions of the indenture). (Section 301).

All debt securities of any one series need not be issued at the same time
and, unless otherwise provided, a series may be reopened for issuance of
additional debt securities of that series. (Section 301).

Some of the debt securities may be issued as discounted securities
(providing that upon their redemption or acceleration of their stated maturity
an amount less than their stated principal amount will become due and payable)
to be sold at a substantial discount below their stated principal amount. Any
U.S. federal income tax consequences, U.K. tax consequences, Netherlands tax
consequences and other special considerations applicable to any discounted
securities will be described in the applicable prospectus supplement.

UNLESS OTHERWISE INDICATED IN THE PROSPECTUS SUPPLEMENT RELATING TO THE
DEBT SECURITIES OF A SERIES, THE PROVISIONS OF THE INDENTURE AND THE DEBT
SECURITIES DO NOT AFFORD HOLDERS OF THE DEBT SECURITIES PROTECTION IN THE EVENT
OF A HIGHLY LEVERAGED OR OTHER TRANSACTION, IF ANY, INVOLVING REED ELSEVIER
CAPITAL OR EITHER GUARANTOR WHICH MIGHT ADVERSELY AFFECT THE HOLDERS OF THE DEBT
SECURITIES.

DENOMINATIONS, REGISTRATION AND TRANSFER

The debt securities of a series will only be issuable as registered
securities. Debt securities of a series may be issuable in the form of one or
more global securities, as described under "-- Global Debt Securities" below.
(Section 201). Unless otherwise provided in the prospectus supplement with
respect to the debt securities of a series, debt securities will be issued only
in denominations or integral multiples of $1,000. (Section 302).
8
108

Registered securities of any series will be exchangeable for other
registered securities of any authorized denomination of a like series and of a
like aggregate principal amount with like terms and conditions. (Section 305).
Registered securities (other than a global security) may be presented for
registration of transfer (with the form of transfer duly executed) at the office
of the registrar or at the office of any transfer agent designated by Reed
Elsevier Capital for that purpose with respect to any series of debt securities
and referred to in the applicable prospectus supplement, without service charge
and upon payment of any taxes and other governmental charges as described in the
indenture. (Section 305). That transfer or exchange will be effected after the
registrar or transfer agent, as the case may be, is satisfied with the documents
of title and identity of the person making the request. (Section 305). Reed
Elsevier Capital has initially appointed the principal paying agent as the
registrar under the indenture. (Section 305). If a prospectus supplement refers
to any transfer agents (in addition to the registrar) initially designated by
Reed Elsevier Capital with respect to any series of debt securities, Reed
Elsevier Capital may at any time rescind the designation of that transfer agent
or approve a change in the location through which that transfer agent acts,
except that Reed Elsevier Capital will be required to maintain a transfer agent
in each place of payment for each series. Reed Elsevier Capital may at any time
designate additional transfer agents with respect to any series of debt
securities.

In the event of any redemption of the debt securities of a series in part,
Reed Elsevier Capital will not be required to:

-- issue, register the transfer of, or exchange any debt security of that
series during a period beginning at the opening of business 15 days
before the day of the mailing of a notice of redemption of debt
securities of that series selected for redemption and ending at the
close of business on the day of mailing of the relevant notice of
redemption; or

-- register the transfer of or exchange any debt security selected for
redemption as a whole or in part, except the unredeemed portion of any
debt security being redeemed in part. (Section 305).

GLOBAL DEBT SECURITIES

The debt securities of a series may be issued in whole or in part in the
form of one or more global securities that will be deposited with, or on behalf
of, the depositary identified in the prospectus supplement relating to that
series. Unless and until a global security is exchanged in whole or in part for
debt securities in definitive registered form, a global security representing
all or a portion of the debt securities of a series may not be transferred
except as a whole by the depositary for that series to its nominee or vice versa
or by a nominee to another nominee of that depositary or in either case to a
successor of that depositary or a nominee of that successor. (Section 305).

The specific terms of the depositary arrangement with respect to a series
of debt securities will be described in the prospectus supplement relating to
that series. Reed Elsevier Capital anticipates that the following provisions
will apply to all depositary arrangements.

Upon the issuance of a global security, the depositary or its nominee will
credit the accounts of persons held with it with the respective principal
amounts of the debt securities represented by that global security. Those
accounts will be designated by the underwriters or agents with respect to those
debt securities or by Reed Elsevier Capital if those debt securities are offered
and sold directly by Reed Elsevier Capital. Ownership of beneficial interests in
a global security will be limited to persons that have accounts with the
depositary or its nominee ("participants") or persons that may hold interests
through participants. Ownership of beneficial interests in global securities
will be shown on, and the transfer of that ownership will be effected only
through, records maintained by the depositary or its nominee (with respect to
interests of participants) and on the records of participants (with respect to
interests of persons other than participants). THE LAWS OF SOME JURISDICTIONS
REQUIRE THAT CERTAIN PURCHASERS OF SECURITIES TAKE PHYSICAL DELIVERY OF THOSE
SECURITIES IN DEFINITIVE FORM. THOSE LIMITS AND THOSE LAWS MAY IMPAIR THE
ABILITY TO TRANSFER BENEFICIAL INTERESTS IN A GLOBAL SECURITY.

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So long as the depositary, or its nominee, is the registered owner of a
global security, it will be considered the sole owner or holder of the debt
securities represented by that global security for all purposes under the
indenture. Except as provided below, owners of beneficial interests in global
securities will not be entitled to have debt securities of the series registered
in their names, will not receive or be entitled to receive physical delivery of
securities of that series in definitive form and will not be considered the
owners or holders of those global securities under the indenture.

Any payments of principal, premium, interest and additional amounts, if
any, on debt securities registered in the name of a depositary or its nominee
will be made to it as the registered owner of the global security representing
those debt securities. (Section 307). None of Reed Elsevier Capital, the
guarantors, the trustee, any principal paying agent or the registrar for those
debt securities will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of a global security for those debt securities or for maintaining,
supervising or reviewing any records relating to those beneficial ownership
interests. (Section 308).

Reed Elsevier Capital and the guarantors expect that the depositary or its
nominee, upon receipt of any payment of principal, premium or interest on a debt
security, will credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of the debt securities of that series as shown on the records of that depositary
or its nominee. (Section 307). Reed Elsevier Capital and the guarantors also
expect that payments by participants to owners of beneficial interests in that
global security held through those participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of those participants.

Beneficial interests in global securities are exchangeable for debt
securities in definitive registered form in denominations and integral multiples
of $1,000 if:

-- the depositary notifies Reed Elsevier Capital that it is unwilling or
unable to continue as the holder of the global securities or ceases to
be a clearing agency registered under the Exchange Act or announces an
intention permanently to cease business or in fact does cease business
and a successor to the depositary registered as a clearing agency
under the Exchange Act is not appointed by Reed Elsevier Capital
within 90 days of this notification or announcement;

-- Reed Elsevier Capital in its discretion at any time determines that
global securities should be exchanged (in whole, but not in part) for
definitive securities; or

-- there occurs an event of default as described below under "-- Events
of Default."

Any debt security that is exchangeable in the circumstances described above
is exchangeable for definitive debt securities issuable in authorized
denominations and registered in those names as the depositary will direct.
(Section 305).

GUARANTEES

The guarantors have agreed unconditionally and irrevocably to jointly and
severally guarantee the due and punctual payment of the principal of, premium
(if any), interest and all other amounts in respect of the debt securities as
and when they will become due and payable, whether at the stated maturity, upon
redemption or when accelerated in accordance with the provisions of the debt
securities and the indenture, and the punctual performance of all other
obligations of Reed Elsevier Capital under the debt securities and the
indenture. (Section 1301). The guarantees will be direct, unconditional,
unsubordinated and (subject to the provisions of the guarantees and the
indenture) unsecured, joint and several obligations of each of the guarantors,
without preference among themselves, and will rank at least equally with all
other unsecured and unsubordinated obligations of the guarantors, subject, in
the case of insolvency, to laws of general applicability relating to or
affecting creditors' rights. (Section 1301).

The guarantees will provide that they may be enforced against either of the
guarantors, in the event of a default in payment with respect to the debt
securities issued by Reed Elsevier Capital, without making prior demand upon or
seeking to enforce remedies against Reed Elsevier Capital, the other guarantor
or

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other persons. The guarantees of the guarantors will be endorsed on each of the
debt securities issued by Reed Elsevier Capital.

PAYMENT OF ADDITIONAL AMOUNTS

All payments of principal, premium (if any) and interest in respect of the
debt securities or the guarantees will be made free and clear of, and without
withholding or deduction for, any taxes, assessments, duties or governmental
charges of whatever nature imposed, levied or collected by or within a Relevant
Taxing Jurisdiction (as defined below), unless that withholding or deduction is
required by law.

The indenture provides that if withholding or deduction is required by law,
then Reed Elsevier Capital, Reed International or Elsevier, as the case may be,
will pay to the holder of any debt security additional amounts as may be
necessary in order that every net payment of principal of (and premium, if any,
on) and interest, if any, on that debt security after deduction or other
withholding for or on account of any present or future tax, assessment, duty or
other governmental charge of any nature whatsoever imposed, levied or collected
by or on behalf of the jurisdiction under the laws of which Reed Elsevier
Capital, Reed International or Elsevier, as the case may be, is organized (or
any political subdivision or taxing authority of or in that jurisdiction having
power to tax), or any jurisdiction from or through which any amount is paid by
Reed Elsevier Capital, Reed International or Elsevier, as the case may be (or
any political subdivision or taxing authority of or in that jurisdiction having
power to tax) (each a "Relevant Taxing Jurisdiction"), will not be less than the
amount provided for in any debt security to be then due and payable; provided,
however, that Reed Elsevier Capital, Reed International or Elsevier, as the case
may be, will not be required to make any payment of additional amounts for or on
account of:

-- any tax, assessment or other governmental charge which would not have
been imposed but for:

- the existence of any present or former connection between that holder
(or between a fiduciary, settlor, beneficiary, member of, shareholder
of, or possessor of a power over that holder, if that holder is an
estate, trust, partnership or corporation or any person other than the
holder to which that debt security or any amount payable on that debt
security is attributable for the purpose of that tax, assessment or
charge) and a Relevant Taxing Jurisdiction, including without
limitation, that holder (or fiduciary, settlor, beneficiary, member,
shareholder or possessor or person other than the holder) being or
having been a citizen or resident of a Relevant Taxing Jurisdiction
being or having been present or engaged in a trade or business in a
Relevant Taxing Jurisdiction, or having or having had a permanent
establishment in a Relevant Taxing Jurisdiction; or

- the presentation of a debt security (where presentation is required) for
payment on a date more than 30 days after the date on which payment
became due and payable or the date on which payment was duly provided
for, whichever occurred later except to the extent that the holder would
have been entitled to additional amounts on presenting that debt
security for payment on or before the thirtieth day;

-- any estate, inheritance, gift, sale, transfer or personal property
tax, assessment or other governmental charge of a similar nature;

-- any tax, assessment or other governmental charge that is imposed or
withheld by reason of the failure by that holder or any other person
mentioned in the first bullet above to comply with a request of Reed
Elsevier Capital, Reed International or Elsevier, as the case may be,
addressed to that holder or that other person to provide information
concerning the nationality, residence or identity of that holder or
that other person, or to make any declaration or other similar claim
or reporting requirement, which is in either case required by a
statute, treaty or regulation of the Relevant Taxing Jurisdiction, as
a precondition to exemption from or reduction of that tax, assessment
or other governmental charge;

-- any tax, assessment or other governmental charge imposed by reason of
that holder's past or present status as a passive foreign investment
company, a controlled foreign corporation, a personal holding

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company or foreign personal holding company with respect to the United
States, or as a corporation which accumulates earnings to avoid United
States federal income tax;

-- any tax, assessment or other governmental charge imposed on interest
received by:

- a 10% shareholder (as defined in Section 871(h)(3)(B) of the United
States Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations that may be promulgated thereunder) of Reed Elsevier
Capital; or

- a controlled foreign corporation with respect to Reed Elsevier Capital
within the meaning of the Code;

-- any tax, assessment or other governmental charge that is imposed on a
payment to an individual resident of a member state of the European
Union and is required to be made pursuant to any European Union
directive on the taxation of savings income implementing the
conclusions of the ECOFIN Council meeting of November 26-27, 2000 or
any law implementing or complying with, or introduced to conform to,
that directive;

-- any debt security that is presented for payment by or on behalf of an
individual resident of a member state of the European Union who would
have been able to avoid any withholding or deduction by presenting the
relevant debt security to another paying agent in a member state of
the European Union; or

-- any combination of the seven above items,

nor will additional amounts be paid with respect to:

-- any tax, assessment or governmental charge that is payable other than
by deduction or withholding from payments on the debt securities; or

-- any payment to any holder which is a fiduciary or a partnership or
other than the sole beneficial owner of that debt security to the
extent a beneficiary or settlor with respect to that fiduciary or a
member of that partnership or the beneficial owner would not have been
entitled to those additional amounts had it been the holder of that
debt security. (Section 1008).

REDEMPTION

GENERAL. The debt securities of a series may provide for mandatory
redemption by Reed Elsevier Capital or the guarantors or redemption at the
election of Reed Elsevier Capital or the guarantors.

Prior to the giving of any notice of redemption of any series of debt
securities, Reed Elsevier Capital will deliver to the trustee a written opinion
of independent legal counsel of recognized standing in the appropriate
jurisdiction who is reasonably acceptable to the trustee, Reed Elsevier Capital
and the guarantors stating that Reed Elsevier Capital is entitled to effect the
redemption, together with an officers' certificate of Reed Elsevier Capital and
each of the guarantors setting forth a statement of facts showing that the
conditions precedent, if any, to the right to redeem have occurred. (Section
1102).

Unless otherwise provided in the applicable prospectus supplement, notice
of a redemption will be given not less than 30 nor more than 60 days prior to
the date fixed for redemption, if any, in accordance with the provisions
described under "-- Notices" below and pursuant to the terms of the indenture.
(Section 1104). Notice having been given, those debt securities will become due
and payable on the redemption date and will be paid at the applicable redemption
price at the place or places of payment and in the manner specified in those
debt securities. (Section 1106).

Following the redemption date, if moneys for the redemption of the debt
securities called for redemption have been made available, as provided in those
debt securities, on the redemption date, those debt securities will cease
bearing interest, and the only right of the holders of those debt securities
will be to receive payment of the applicable redemption price specified in those
debt securities. (Sections 1105 and 1106).

In the event of a partial redemption of debt securities of a series of like
terms and conditions, the debt securities to be redeemed will be selected by the
trustee pursuant to the provisions of the indenture. (Section 1103).

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Reference is made to the applicable prospectus supplement relating to each
series of debt securities which are discounted securities for the particular
provisions relating to redemption of those discounted securities.

OPTIONAL REDEMPTION FOR TAX REASONS. All of the debt securities of any
series may be redeemed, at the option of Reed Elsevier Capital, at 100% of the
principal amount (or, in the case of discounted securities, that lesser amount
as may be provided for) and premium, if any, together with accrued but unpaid
interest, if any, to the redemption date if, as a result of any change in, or
amendment to, the laws of a Relevant Taxing Jurisdiction, or any change in
official position regarding application or interpretation of those laws,
regulations or rulings (including a holding by a court of competent
jurisdiction), which change, amendment, application or interpretation becomes
effective on or after the original issue date with respect to those debt
securities or another date as may be specified in the applicable prospectus
supplement, Reed Elsevier Capital, Reed International or Elsevier, as the case
may be, would, on the occasion of the next payment of principal or interest in
respect of the debt securities, be obligated, in making that payment, to pay
additional amounts and that obligation cannot be avoided by Reed Elsevier
Capital, Reed International or Elsevier, individually or together, as the case
may be, taking reasonable measures available to it. (Section 1108).

All of the debt securities constituting any series may also be redeemed, at
the option of Reed Elsevier Capital at the Special Redemption Price (as defined
below), if, as a result of any change in, or amendment to, the U.S. Internal
Revenue Code of 1986, as amended, or any of its regulations, rulings or official
interpretations, which change or amendment is enacted or adopted and becomes
effective on or after the original issue date with respect to those debt
securities or another date as may be specified in the applicable prospectus
supplement, the deductibility or timing of interest payments on the debt
securities would be affected in any manner which is then adverse to Reed
Elsevier Capital and that effect cannot be avoided by Reed Elsevier Capital,
Reed International or Elsevier, individually or together, taking reasonable
measures available to it. (Section 1108).

The "Special Redemption Price" will equal the principal amount of the debt
security to be redeemed (or, in the case of discounted securities, that lesser
amount as may be provided for with respect to those debt securities), plus
accrued and unpaid interest to the redemption date, plus the Redemption Premium.

The "Redemption Premium" at any time with respect to any debt security
means the amount (but not less than zero) obtained by subtracting:

-- the aggregate amount of the principal being redeemed on that
redemption date with respect to that debt security (or, in the case of
discounted securities, that lesser amount as may be provided for with
respect to those debt securities) from:

-- the sum of the Present Values on the redemption date of:

- the aggregate amount of principal being redeemed (assuming principal was
paid at stated maturity); and

- each amount of interest (other than accumulated interest payable on the
next interest payment date) which would have been payable on the amount
of that principal being redeemed (assuming principal was paid at stated
maturity and interest payments pursuant to the terms of the debt
securities were paid when due). (Section 1108).

"Present Value," for any amount of principal or interest, will be computed
on a semiannual basis at a discount rate equal to the Treasury Yield. The
"Treasury Yield" will be determined by reference to the most recent Federal
Reserve Statistical Release H.15 (519), Selected Interest Rates, or any
successor publication ("H.15 (519)") which has become available prior to the
redemption date (or, if H.15 (519) is no longer published, any publicly
available source of similar market data), and will be the most recent yield on
actively traded U.S. Treasury securities adjusted to a constant maturity equal
to, in the case of principal, the time (the "time to maturity") between the
redemption date and the date that the principal payment would otherwise have
become due, and in the case of interest which would have been payable on the
amount of that principal being redeemed, the then remaining weighted average
life to maturity of those interest payments. (Section 1108). If the time to
maturity or the weighted average life to maturity

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of those interest payments (so computed), as the case may be, is not equal to
the constant maturity of a U.S. Treasury security for which a yield is given,
the Treasury Yield will be obtained by a linear interpolation (calculated to the
nearest one-twelfth of a year) from the yields of U.S. Treasury securities for
which those yields are given, except that if the weighted average life to
maturity (so computed) is less than one year, the yield on actively traded U.S.
Treasury securities adjusted to a constant maturity of one year will be used.
(Section 1108).

REPURCHASE

Subject to applicable law (including U.S. federal securities law), Reed
Elsevier Capital, either guarantor or any subsidiary of either guarantor (as
defined below under "-- Covenants of Reed Elsevier Capital and the Guarantors")
may at any time repurchase debt securities of any series in any manner and at
any price. Debt securities of a series repurchased by Reed Elsevier Capital,
either guarantor or any subsidiary of either guarantor may be held, resold or
surrendered by that purchaser through Reed Elsevier Capital, to the trustee or
any paying agent appointed by Reed Elsevier Capital with respect to those debt
securities for cancellation.

PAYMENT AND PAYING AGENTS

Unless otherwise indicated in an applicable prospectus supplement, payment
of principal of (and premium, if any, on) and interest, if any, on debt
securities (other than a global security) will be made at the office of that
paying agent or paying agents as Reed Elsevier Capital or the guarantors may
designate from time to time, except that, at the option of Reed Elsevier
Capital, payment of any interest may be made:

-- by check mailed or delivered to the address of the person entitled to
that interest at the address that appears in the register for debt
securities of any series; or

-- by wire transfer to an account maintained with a bank located in the
United States by the person entitled to that interest as specified in
that securities register.

Unless otherwise indicated in an applicable prospectus supplement, payment
of any installment of interest on debt securities will be made to the person in
whose name that debt security is registered at the close of business on the
regular record date for that interest payment; provided, however, that interest,
if any, payable at maturity will be payable to the person to whom the principal
is payable.

Unless otherwise indicated in an applicable prospectus supplement, The
Chase Manhattan Bank will act as the paying agent for each series of debt
securities.

Unless otherwise indicated in an applicable prospectus supplement, the
principal office of the paying agent in The City of New York will be designated
as the sole paying agency of Reed Elsevier Capital and the guarantors for
payments with respect to debt securities. Any other paying agents outside the
United States and any other paying agents in the United States initially
designated by Reed Elsevier Capital or either guarantor, as the case may be, for
the debt securities of a series will be named in the related prospectus
supplement. Reed Elsevier Capital or either guarantor may at any time appoint
additional paying agents, rescind the appointment of any paying agent or approve
a change in the office through which any paying agent acts, except that Reed
Elsevier Capital and each guarantor will be required to maintain a paying agent
in each place of payment for a series.

All moneys paid by Reed Elsevier Capital or either guarantor to the trustee
or any paying agent for the debt securities of any series, or then held by Reed
Elsevier Capital or either guarantor, in trust for the payment of principal of
(and premium, if any, on) and interest, if any, on any debt security or in
respect of any other additional payments which remain unclaimed at the end of
two years after that principal (and premium, if any), and interest, if any, or
additional payments will have become due and payable will (subject to applicable
laws) be repaid to Reed Elsevier Capital or either guarantor, as the case may
be, on issuer request or guarantor request or (if then held by Reed Elsevier
Capital or either guarantor) will be discharged from that trust; and the holder
of that debt security will thereafter, as an unsecured general creditor, look
only to Reed Elsevier Capital (or to each guarantor pursuant to its guarantees)
for payment. (Section 1003).

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EVENTS OF DEFAULT

An "event of default" with respect to each series of debt securities means
any one of the following events:

-- Reed Elsevier Capital defaults in payment or prepayment of all or any
part of the principal of any debt security or any prepayment charge or
interest (which default, in the case of interest only, has continued
for a period of 30 days or more) on the debt securities when they have
become due and payable, whether at stated maturity, by acceleration,
by notice of redemption or otherwise;

-- except as provided in the preceding paragraph, Reed Elsevier Capital
or either guarantor fails to perform or observe any of its obligations
under the indenture or the guarantees (other than an obligation
included in the indenture solely for the benefit of any series of debt
securities other than that series) or the debt securities of that
series and that failure continues for a period of more than 60 days
after the date on which there has been given, by registered or
certified mail, to Reed Elsevier Capital and each guarantor by the
trustee or to Reed Elsevier Capital, each guarantor and the trustee by
the holders of at least 25% in aggregate principal amount of the
outstanding debt securities of that series a written notice specifying
the default or breach and requiring it to be remedied;

-- the maturity of any Indebtedness (as defined below) of Elsevier
Capital or either guarantor in an aggregate principal amount of at
least U.S.$20,000,000 (or the equivalent in another currency) has been
accelerated because of a default or any of that Indebtedness in an
aggregate principal amount of at least U.S.$20,000,000 (or the
equivalent in another currency) has not been paid at final maturity
(as extended by any applicable grace period) and, with respect to Reed
Elsevier Capital in any case described in this paragraph, the
obligations of Reed Elsevier Capital under that series of debt
securities have not been assumed during the 90-day period following
that acceleration or non-payment by another Component Company (as
defined below) all of whose voting stock is directly or indirectly
owned by the guarantors;

-- Reed Elsevier Capital has:

- applied for or consented to the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself or
of all or a substantial part of its property;

- made a general assignment for the benefit of its creditors;

- commenced a voluntary case under the U.S. federal Bankruptcy Code;

- filed a petition seeking to take advantage of any other law providing
for the relief of debtors;

- acquiesced in writing to any petition filed against it in an involuntary
case under the Bankruptcy Code;

- admitted in writing its inability to pay its debts generally as those
debts become due;

- taken any action under the laws of its jurisdiction of incorporation
analogous to any of the foregoing; or

- taken any requisite corporate action for the purpose of effecting any of
the foregoing;

-- a proceeding or case has been commenced, without the application or
consent of Reed Elsevier Capital in any court of competent
jurisdiction, seeking:

- the liquidation, reorganization, dissolution, winding up, or composition
or readjustment of Reed Elsevier Capital's debts;

- the appointment of a trustee, receiver, custodian, liquidator or the
like in respect of Reed Elsevier Capital or in respect of all or any
substantial part of its assets; or

- similar relief, under any law providing for the relief of debtors;

and that proceeding or case has continued undismissed, or unstayed and in
effect, for 90 days; or an order for relief has been entered in an
involuntary case under the Bankruptcy Code against Reed Elsevier Capital
and that order remains undismissed, or unstayed and in effect, for 90
days; or action under the laws of the jurisdiction of incorporation of
Reed Elsevier Capital analogous to any

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of the foregoing has been taken with respect to Reed Elsevier Capital and
has continued undismissed, or unstayed and in effect, for 90 days; and in
any case described in this paragraph, the obligations of Reed Elsevier
Capital under that series of debt securities have not been assumed during
that 90-day period by another Component Company wholly owned by the
guarantors;

-- either:

- an order for the winding up of either of the guarantors is made and is
not set aside within 90 days of the date of that order or pursuant to an
appeal lodged within 90 days of the date of that order, except an order
for the winding up of either of the guarantors in connection with a
transaction not otherwise prohibited under "-- Covenants of Reed
Elsevier Capital and the Guarantors -- Consolidation, Merger,
Amalgamation, Sale, Lease or Conveyance of Assets" below;

- an effective resolution is passed for the winding up of either of the
guarantors, except a resolution passed for the winding up of either of
the guarantors in connection with a transaction not otherwise prohibited
under "-- Covenants of Reed Elsevier Capital and the Guarantors --
Consolidation, Merger, Amalgamation, Sale, Lease or Conveyance of
Assets" below;

- either of the guarantors ceases to pay its debts or ceases to carry on a
major part of its business, except any cessation by either of the
guarantors in connection with a transaction not otherwise prohibited
under "-- Covenants of Reed Elsevier Capital and the
Guarantors -- Consolidation, Merger, Amalgamation, Sale, Lease or
Conveyance of Assets" below;

- an encumbrancer takes possession, or any administrative or other
receiver or any manager is appointed, of the whole or any substantial
part of the undertaking or assets of either of the guarantors;

- a distress or execution is levied or enforced upon or sued out against
all or any substantial part of the property of either of the guarantors,
and, in each case, is not discharged within 90 days; or

- Reed International is deemed unable to pay its debts within the meaning
of Section 123 of the Insolvency Act 1986, an English statute, or
Elsevier is unable to pay its debts within the meaning of Article 1 of
The Netherlands Bankruptcy Code of September 30, 1893;

-- either:

- the guarantees with respect to either of the guarantors cease to be in
full force and effect for any reason whatsoever and new guarantees with
respect to the guarantors of substantially the same scope as the
guarantees have not come into effect or the debt securities have not
been redeemed in full or funds have not been set aside for redemption;
or

- either of the guarantors contests or denies in writing the validity or
enforceability of any of its obligations under the guarantees; or

-- any other event of default provided with respect to the debt
securities of that series. (Section 501).

If an event of default with respect to any particular series of debt
securities occurs and is continuing, the trustee for the debt securities of that
series or the holders of at least 25% in aggregate principal amount of the
outstanding debt securities of that series may exercise any right, power or
remedy permitted by law and will have, in particular, without limiting the
generality of the foregoing, the right to declare the entire principal amount
(or, in the case of discounted securities, that lesser amount as may be provided
for with respect to those debt securities) of (including premium, if any, on)
all the debt securities of that series to be due and payable immediately, by a
notice in writing to Reed Elsevier Capital and each guarantor (and to the
trustee if given by holders), and upon that declaration of acceleration that
principal or that lesser amount, as the case may be, including premium, if any,
together with any accrued interest and all other amounts owing will become
immediately due and payable, without presentment, demand, protest or notice of
any kind, all of which have been expressly waived by Reed Elsevier Capital and
each guarantor. (Section 502). However, at any time after that declaration of
acceleration has been made, but before a judgment or decree for payment of the
money due has been obtained by the trustee for the debt securities of any
series, the holders of a majority in aggregate principal amount of the
outstanding debt

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securities of that series may, under certain circumstances, rescind and annul
that acceleration. (Section 502).

Holders of debt securities of any series may not enforce the indenture, the
debt securities or the guarantees, except as described in the preceding
paragraph; provided, that each holder of debt securities will have the right to
institute suit for the enforcement of payment of the principal of (and premium,
if any, on) and interest, if any, on those debt securities on their respective
stated maturities as provided in the indenture. (Section 507). The trustee may
require indemnity satisfactory to it before it enforces the indenture, the debt
securities or the guarantees. (Section 514). Subject to certain limitations,
holders of a majority in aggregate principal amount of the outstanding debt
securities of any series may direct the trustee in its exercise of any trust or
power. (Section 512). Reed Elsevier Capital and each guarantor will furnish the
trustee with an annual certificate of certain of its officers certifying, to the
best of their knowledge, whether Reed Elsevier Capital or each guarantor is, or
has been, in default and specifying the nature and status of that default.
(Section 1004). The indenture provides that the trustee will, within 90 days
after the occurrence of a default with respect to the debt securities, give to
the holders of the debt securities notice of any default, known to it, unless
that default has been cured or waived; provided, that the trustee may withhold
from holders of debt securities of any series notice of any continuing default
(except a default in payment) if it determines in good faith that the
withholding of that notice is in the interest of the holders. (Section 602).

COVENANTS OF REED ELSEVIER CAPITAL AND THE GUARANTORS

Reed Elsevier Capital and each guarantor have also agreed that, so long as
any of the debt securities are outstanding, it or they, as the case may be, will
comply with the obligations set forth below.

PAYMENT OF PRINCIPAL, PREMIUM (IF ANY) AND INTEREST. Reed Elsevier Capital
will duly and punctually pay the principal of, premium, if any, interest, if
any, and all other amounts due on the debt securities in accordance with their
terms and the terms of the indenture. (Section 1001).

OWNERSHIP OF REED ELSEVIER CAPITAL. The guarantors will, either
individually or together, at all times own, directly or indirectly, all of the
voting stock of Reed Elsevier Capital. (Section 1006).

CONSOLIDATION, MERGER, AMALGAMATION, SALE, LEASE OR CONVEYANCE OF
ASSETS. Neither Reed Elsevier Capital nor either of the guarantors will,
directly or indirectly, consolidate, merge or amalgamate with, or sell, lease or
otherwise dispose of substantially all its assets to any other person unless:

-- no event of default and no event which, after the giving of notice or
lapse of time or both, would become an event of default, will exist
immediately before and immediately after that transaction;

-- either:

- Reed Elsevier Capital or either guarantor is the survivor of that
transaction; or

- if Reed Elsevier Capital or either guarantor is not the survivor, the
survivor is:

- in the case of a transaction involving Reed Elsevier Capital, a
Component Company, all of whose voting stock is directly or indirectly
owned by the guarantors and which is incorporated and existing under
the laws of the United States or one of the States and that Component
Company expressly assumes, by a supplemental indenture that is
executed and delivered to the trustee, in form reasonably satisfactory
to that trustee, Reed Elsevier Capital's obligations under the debt
securities, or

- in the case of a transaction involving either of the guarantors, a
person which expressly assumes, by a supplemental indenture that is
executed and delivered to the trustee for each series of debt
securities, in form reasonably satisfactory to each of those trustees,
with any amendments or revisions necessary to take account of the
jurisdiction in which that corporation or other person is organized
(if other than the United Kingdom, in the case of Reed International,
or The Netherlands, in the case of Elsevier), the applicable
guarantor's obligations under the guarantees; and

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-- Reed Elsevier Capital or either guarantor has delivered to the trustee
a certificate signed by two duly authorized officers of Reed Elsevier
Capital or either guarantor and an opinion of counsel stating that the
consolidation, merger, amalgamation, sale, lease or conveyance and the
supplemental indenture evidencing the assumption by a Component
Company or person comply with the indenture and that all conditions
precedent provided for in the indenture relating to that transaction
have been complied with. (Section 801).

Upon any consolidation, amalgamation or merger, or any conveyance, transfer
or lease, the successor Component Company or person will succeed to, and be
substituted for, and may exercise every right and power of, Reed Elsevier
Capital or either guarantor under the indenture with the same effect as if that
successor subsidiary or person has been named as Reed Elsevier Capital or either
guarantor, and thereafter, except in the case of a lease, the predecessor
obligor will be relieved of all obligations and covenants under the indenture,
the debt securities or the related guarantees. (Section 802).

The guarantors may cause any Component Company, all of whose voting stock
is directly or indirectly owned by the guarantors, which is a corporation
organized and existing under the laws of the United States or one of the States
to be substituted for Reed Elsevier Capital, and to assume the obligations of
Reed Elsevier Capital (or any corporation which has previously assumed the
obligations of Reed Elsevier Capital) for the due and punctual payment of the
principal of (and, premium, if any, on) and interest, if any, on the debt
securities and the performance of every covenant of the indenture and the debt
securities on the part of Reed Elsevier Capital to be performed or observed;
provided, that:

-- that Component Company will expressly assume those obligations by a
supplemental indenture, executed by that Component Company and
delivered to the trustee for each series of debt securities, in form
reasonably satisfactory to that trustee, and, if that Component
Company assumes those obligations, each guarantor will, in that
supplemental indenture, confirm that its guarantees as guarantor will
apply to that Component Company's obligations under the debt
securities and the indenture, as so modified by that supplemental
indenture; and

-- immediately after giving effect to that assumption of obligations, no
event of default with respect to any series of debt securities and no
event which, after notice or lapse of time or both, would become an
event of default, with respect to any series of debt securities will
have occurred and be continuing. (Section 803).

Upon that assumption of obligations, that Component Company will succeed
to, and be substituted for, and may exercise every right and power of, Reed
Elsevier Capital under the indenture with respect to the debt securities with
the same effect as if that Component Company had been named as the "issuer"
under the indenture, and the former issuer, or any successor corporation which
will therefore have become Reed Elsevier Capital in the manner prescribed in the
indenture, will be released from all liability as obligor upon the debt
securities. (Section 803).

If the guarantors cause any Component Company all of whose voting stock is
directly or indirectly owned by them to be substituted for Reed Elsevier Capital
in accordance with the terms and conditions of the debt securities, that
substitution may constitute a deemed sale or exchange of the debt securities for
U.S. federal income tax purposes. As a result, the holder of a debt security may
recognize taxable gain or loss and may be required to include in income
different amounts during the remaining term of that debt security than would
have been included absent that substitution. If that substitution occurs,
holders should consult their tax advisors regarding the tax consequences.

LIMITATIONS ON LIENS. The guarantors will not, nor will they permit any
Restricted Company to, create or assume after the date specified for a series of
debt securities in the applicable prospectus supplement any Lien securing
Indebtedness other than:

-- Liens securing Indebtedness for which either of the guarantors or any
Restricted Company is contractually obligated on that date;

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-- Liens securing Indebtedness incurred in the ordinary course of
business of either of the guarantors or any Restricted Company;

-- Liens securing Indebtedness incurred in connection with the financing
of receivables of either of the guarantors or any Restricted Company;

-- Liens on Property acquired or leased after that date securing
Indebtedness in amounts not exceeding the acquisition cost of that
Property (provided that the Lien is created or assumed within 360 days
after that acquisition or lease);

-- in the case of real estate owned on or acquired after that date which,
on or after that date, is improved, Liens on that real estate and/or
improvements securing Indebtedness in amounts not exceeding the cost
of those improvements;

-- Liens on Property acquired after that date securing Indebtedness
existing on that Property at the time of that acquisition (provided
that the Lien has not been created or assumed in contemplation of that
acquisition);

-- Liens securing Indebtedness of a corporation at the time it becomes a
subsidiary of a Component Company (provided that the Lien has not been
created or assumed in contemplation of that corporation becoming a
subsidiary of a Component Company);

-- rights of set-off over deposits of either of the guarantors or any
Restricted Company held by financial institutions;

-- Liens on Property of either of the guarantors or any Restricted
Company in favor of any governmental authority of any jurisdiction
securing the obligation of that guarantor or that Restricted Company
pursuant to any contract or payment owed to that entity pursuant to
applicable laws, regulations or statutes;

-- Liens securing industrial revenue, development or similar bonds issued
by or for the benefit of either of the guarantors or any Restricted
Company, provided that those industrial revenue, development or
similar bonds are nonrecourse to either guarantor or that Restricted
Company;

-- Liens in favor of either of the guarantors or of any other Component
Company; and

-- extensions, renewals, refinancings or replacements of any Liens
referred to above; provided, that the outstanding principal amount of
the obligation secured thereby at any time is not increased above the
outstanding principal amount at any previous time and so long as any
extension, renewal, refinancing or replacement of any Liens is limited
to the property originally encumbered. (Section 804).

Notwithstanding the provisions set forth above either of the guarantors or
any Restricted Company may create or assume any Lien securing Indebtedness which
would otherwise be subject to the foregoing restrictions provided that either:

-- after giving effect to the Liens, Indebtedness secured by those Liens
(not including Indebtedness secured by Liens permitted above) then
outstanding does not exceed 15 percent of Adjusted Total of Capital
and Reserves (as defined below); or

-- at the time the Lien is created or assumed, the debt securities or the
obligations of that guarantor which has created or assumed, or the
obligations of both guarantors if the Lien is created or assumed by a
Restricted Company, that Lien pursuant to its guarantees are equally
and ratably secured with that Indebtedness for so long as that
Indebtedness is secured. (Section 804).

LIMITATION ON SALE AND LEASEBACK TRANSACTIONS. The guarantors will not,
and will not cause or permit any Restricted Company to, engage in any sale and
leaseback transaction (other than a sale and

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leaseback transaction involving any property acquired after the date specified
for a series of debt securities in the applicable prospectus supplement) unless:

-- either of the guarantors or any Restricted Company would be entitled
(other than pursuant to the exceptions under "-- Limitations on Liens"
above) to secure Indebtedness equal to the amount realized upon the
sale or transfer involved in that transaction without securing the
debt securities or the guarantees; or

-- an amount equal to the fair value, as determined in good faith by the
board of directors or the executive board of either guarantor or any
Restricted Company, of the leased property is applied or definitively
committed within 360 days of the effective date of the sale and
leaseback transaction to:

- the acquisition or construction of property other than current assets;

- the repayment of the debt securities pursuant to their terms; or

- the repayment of Indebtedness of either guarantor or any Restricted
Company (other than Indebtedness owed to that guarantor or to any other
Component Company and other than Indebtedness the payment of principal
of or interest on which is contractually subordinated to the prior
payment of principal of or interest on the debt securities). (Section
805).

For the purpose of these covenants and the events of default the following
terms have the following respective meanings:

"Adjusted Total of Capital and Reserves" means:

-- the amount for the time being paid up on the issued share capital of
Reed International and Elsevier; and

-- the amounts standing to the credit of the reserves of Reed Elsevier
(being the elements of combined shareholders' funds other than the
paid up issued share capital of Reed International and Elsevier,
including the balance standing to the credit of profit and loss
account) as shown in the last audited combined financial statements of
Reed Elsevier after making those adjustments as in the opinion of Reed
International's and Elsevier's auditors may be appropriate, including
adjustments to take account of any alterations to those reserves
resulting from any distributions or any issues of share capital
whether for cash or other consideration (including any transfers to
share premium account) or any payments up by capitalization from
reserves of share capital theretofore not paid up or any reductions of
paid up share capital or share premium account which may have taken
place since the date of those balance sheets, less any amounts
included in the reserves and appearing on those audited combined
financial statements as being reserved or set aside for future
taxation assessable by reference to profits earned down to the date to
which those balance sheets are made up.

"Component Company" means any one of Reed International, Elsevier, Reed
Elsevier plc, Elsevier Reed Finance BV and their respective direct and indirect
subsidiaries (or the successor to any of those companies).

"Indebtedness," with respect to any person, means:

-- any obligation of that person for borrowed money;

-- any obligation incurred for all or any part of the purchase price of
Property or for the cost of Property constructed or of improvements on
the Property, other than accounts payable included in current
liabilities and incurred in respect of Property purchased in the
ordinary course of business;

-- any obligation under capitalized leases (as determined in accordance
with U.K. GAAP) of that person; and

-- any direct or indirect guarantees of that person of any obligation of
the type described in the preceding three paragraphs of any other
person.

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"Lien" means any security interest, mortgage, pledge, lien, charge,
encumbrance, lessor's interest under a capitalized lease or analogous instrument
in, of or on any Property.

"person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision or any other entity.

"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible, including, without
limitation, share capital.

"Restricted Company" means any Component Company, other than one of the
guarantors, substantially all of the physical properties of which are located,
or substantially all of the operations of which are conducted, within the United
States, the United Kingdom or The Netherlands. "Restricted Company" does not
include any Component Company which is principally engaged in leasing or
financing installment receivables or which is principally engaged in financing
the operations of one or more Component Companies (which includes only those
Component Companies in which more than 50% of the capital stock having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions is at the time directly or indirectly owned by the
guarantors).

"subsidiary," with respect to any person, means any corporation or other
entity of which a majority of the capital stock or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions is at the time directly or indirectly
owned by that person. (Section 101).

SATISFACTION AND DISCHARGE

Except as may otherwise be set forth in the prospectus supplement relating
to the debt securities of any particular series, the indenture provides that
Reed Elsevier Capital will be discharged from its obligations under the debt
securities of that series (with certain exceptions) at any time prior to the
stated maturity or redemption of those debt securities when:

-- Reed Elsevier Capital has irrevocably deposited with or to the order
of the trustee for the debt securities of that series, in trust:

- sufficient funds in U.S. dollars to pay and discharge the entire
indebtedness on all of the outstanding debt securities of that series
for unpaid principal (and premium, if any) and interest, if any, to the
stated maturity, or redemption date, as the case may be; or

- that amount of U.S. Government Obligations (as defined below) as will,
together with the predetermined and certain income to accrue on all of
the outstanding debt securities (without consideration of any
reinvestment), be sufficient to pay and discharge when due the principal
(and premium, if any) and interest, if any, to the stated maturity or
any redemption date, as the case may be; or

- that amount equal to the amount referred to in the above two paragraphs
in any combination of U.S. dollars or U.S. Government Obligations;

-- Reed Elsevier Capital or any guarantor has paid or caused to be paid
all other sums payable with respect to the debt securities of that
series;

-- Reed Elsevier Capital has delivered to the trustee for the debt
securities of that series an opinion of counsel to the effect that:

- Reed Elsevier Capital has received from, or there has been published by,
the U.S. Internal Revenue Service a ruling; or

- since the date of the indenture there has been a change in applicable
U.S. federal income tax law

in either case to the effect that, and based upon an opinion of counsel
which confirm that, the beneficial owners of debt securities of that
series will not recognize income, gain or loss for
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U.S. federal income tax purposes as a result of that discharge and will be
subject to U.S. federal income tax on the same amount and in the same
manner and at the same time as would have been the case if that discharge
had not occurred; and certain other conditions are met. (Section 401).

Upon a discharge, the holders of the debt securities of that series will no
longer be entitled to the benefits of the terms and conditions of the indenture,
the debt securities and the guarantees, if any, except for certain provisions,
including registration of transfer and exchange of those debt securities and
replacement of mutilated, destroyed, lost or stolen debt securities of that
series, and will look for payment only to those deposited funds or obligations.
(Section 401).

"U.S. Government Obligations" means non-callable:

-- direct obligations (or certificates representing an ownership interest
in those obligations) of the United States for which its full faith
and credit are pledged; or

-- obligations of a person controlled or supervised by, and acting as an
agency or instrumentality of, the United States, the timely payment of
which is unconditionally guaranteed as a full faith and credit
obligation of the United States. (Section 101).

SUPPLEMENTAL INDENTURES

The indenture contains provisions permitting Reed Elsevier Capital, each
guarantor and the trustee for the debt securities of any or all series:

-- without the consent of any holders of debt securities issued under the
indenture, to enter into one or more supplemental indentures to, among
other things, cure any ambiguity or inconsistency or to make any
change that does not have a materially adverse effect on the rights of
the holders of debt securities of any particular series; and

-- with the consent of the holders of not less than a majority in
aggregate principal amount of the outstanding debt securities of each
series of debt securities then outstanding and affected by the
supplemental indenture, to enter into one or more supplemental
indentures for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of the indenture or of
modifying in any manner the rights of the holders of those debt
securities under the indenture.

However, no supplemental indenture may, without the consent of the holder
of each outstanding debt security affected by the supplemental indenture:

-- change the stated maturity of the principal of, or any installment of
principal of or interest on, any debt security, or reduce the
principal amount or the rate of interest, if any, or any premium or
principal payable upon the redemption of that debt security, or change
any obligation of Reed Elsevier Capital to pay additional amounts
thereon or reduce the amount of the principal of a discounted security
that would be due and payable upon a declaration of acceleration of
the stated maturity, or change any place of payment where any debt
security or any interest is payable, or impair the right to institute
suit for the enforcement of any such payment on or after the stated
maturity or the date any such payment is otherwise due and payable
(or, in the case of redemption, on or after the redemption date);

-- reduce the percentage in aggregate principal amount of outstanding
debt securities of any particular series, the consent of whose holders
is required for any supplemental indenture, or the consent of whose
holders is required for any waiver of compliance with certain
provisions of the indenture or certain defaults and their consequences
provided for in the indenture;

-- change any obligation of Reed Elsevier Capital and each guarantor to
maintain an office or agency in the places and for the purposes
specified in the indenture;

-- modify certain of the provisions of the indenture pertaining to the
waiver by holders of debt securities of past defaults, supplemental
indentures with the consent of holders of debt securities
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and the waiver by holders of each debt security of certain covenants,
except to increase any specified percentage in aggregate principal
amount required for any actions by holders of debt securities or to
provide that certain other provisions of the indenture cannot be
modified or waived without the consent of the holder of each debt
security affected; or

-- change in any manner adverse to the interests of the holders of any
outstanding debt securities the terms and conditions of the
obligations of each guarantor in respect of the due and punctual
payment of the principal (or, if the context so requires, lesser
amount in the case of discounted securities) of (and premium, if any)
and interest, if any, on or any additional amounts or any sinking fund
payments provided in respect of that debt security. (Section 902).

WAIVERS

The holders of not less than a majority in aggregate principal amount of
the outstanding debt securities of a series of debt securities issued under the
indenture and affected thereby may, on behalf of the holders of those debt
securities of that series, waive compliance by Reed Elsevier Capital or any
guarantor with certain restrictive provisions of the indenture as pertain to the
corporate existence of Reed Elsevier Capital and that guarantor, the maintenance
of certain agencies by Reed Elsevier Capital and that guarantor or to the
covenants described under "-- Covenants of Reed Elsevier Capital and the
Guarantors" above. The holders of not less than a majority in aggregate
principal amount of the outstanding debt securities of any particular series
may, on behalf of the holders of all the debt securities of that series, waive
any past default under the indenture with respect to that series and its
consequences, except a default in the payment of the principal of (and premium,
if any, on) and interest, if any, on any debt security of that series or with
respect to a covenant or a provision which under the indenture cannot be
modified or amended without the consent of the holder of each outstanding debt
security of that series affected. (Section 513).

FURTHER ISSUANCES

Reed Elsevier Capital may from time to time, without notice to or the
consent of the holders of the debt securities of a series, create and issue
under the indenture further debt securities ranking equally with those debt
securities in all respects (or in all respects except for the payment of
interest accruing prior to the issue date of those further debt securities or
except for the first payment of interest following the issue date of those
further debt securities), and those further debt securities will be consolidated
and form a single series with those debt securities and will have the same terms
as to status, redemption or otherwise as those debt securities.

NOTICES

Notices to holders of debt securities of a series will be given by mail to
the addresses of holders as they appear in the applicable security register for
that series.

TITLE

Reed Elsevier Capital, any trustees and any agent of Reed Elsevier Capital
or any trustees may treat the registered owner of any debt security as its
absolute owner (whether or not that debt security is overdue and notwithstanding
any notice to the contrary) for the purpose of making payment and for all other
purposes.

GOVERNING LAW

The indenture, the debt securities and the guarantees will be governed by,
and construed in accordance with, the laws of the State of New York.

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CONSENT TO SERVICE

Reed Elsevier Capital and each of the guarantors has designated and
appointed Henry Z. Horbaczewski, Reed Elsevier Inc., at 125 Park Avenue, 23rd
floor, in the Borough of Manhattan, The City of New York, New York 10017 as its
authorized agent upon which process may be served in any suit or proceeding
arising out of or relating to the debt securities, the guarantees or the
indenture which may be instituted in any federal or New York State court located
in the Borough of Manhattan, City and State of New York, and has submitted (for
the purposes of any suit or proceeding) to the jurisdiction of any court in that
area in which any suit or proceeding is instituted. Each of Reed International
and Elsevier has agreed, to the fullest extent that it lawfully may do so, that
final judgment in any suit, action or proceeding brought in a court will be
conclusive and binding upon it and may be enforced in the courts of the United
Kingdom and The Netherlands, as the case may be (or any other courts to the
jurisdiction of which it is subject).

Notwithstanding the foregoing, any actions arising out of or relating to
the debt securities, the guarantees or the indenture may be instituted by the
trustees or the holder of any debt security of a series in any competent court
in the United Kingdom, The Netherlands or other competent jurisdiction.

CONCERNING THE TRUSTEE

The indenture provides that, except during the continuance of an event of
default, the trustee will have no obligations other than the performance of
those duties as are specifically set forth in the indenture. If an event of
default has occurred and is continuing, the trustee will use the same degree of
care and skill in its exercise of the rights and powers vested in it by the
indenture as a prudent person would exercise under the circumstances in the
conduct of that person's own affairs. (Section 601).

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TAXATION

UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

The following is a summary of certain U.S. federal income tax consequences
to you of the purchase, ownership and disposition of debt securities as of the
date hereof. Except where noted, this summary deals only with debt securities
that are held as capital assets and does not deal with taxpayers subject to
special rules such as:

-- a dealer in securities or currencies;

-- a financial institution;

-- an insurance company;

-- a tax exempt organization;

-- a person holding debt securities as part of a hedging, integrated or
conversion transaction, constructive sale or straddle;

-- a trader in securities that has elected the mark-to-market method of
accounting for its securities;

-- a person liable for alternative minimum tax; or

-- a U.S. person whose "functional currency" is not the U.S. dollar.

In addition, it does not represent a detailed description of the U.S.
federal income tax consequences applicable to you if you are subject to special
treatment under the U.S. federal income tax laws (including if you are a
"controlled foreign corporation," "passive foreign investment company" or
"foreign personal holding company").

The discussion below is based upon the provisions of the U.S. Internal
Revenue Code of 1986, as amended (the "Code"), and regulations, rulings and
judicial decisions as of the date of this prospectus. Those authorities may be
changed, perhaps retroactively, so as to result in U.S. federal income tax
consequences different from those discussed below. The discussion below assumes
that all debt securities issued under the program will be classified for U.S.
federal income tax purposes as indebtedness of the issuer and you should note
that in the event of an alternative characterization, the tax consequences would
differ from those discussed below. We will summarize any special U.S. federal
income tax considerations relevant to a particular issue of the debt securities
in the applicable prospectus supplement.

If a partnership holds our debt securities, the tax treatment of a partner
will generally depend upon the status of the partner and the activities of the
partnership. If you are a partner of a partnership holding our debt securities,
you should consult your tax advisors.

If you are considering the purchase of the debt securities, you should
consult your own tax advisors concerning the federal income tax consequences to
you and any consequences arising under the laws of any other taxing
jurisdiction.

CONSEQUENCES TO U.S. HOLDERS

The following is a summary of certain U.S. federal income tax consequences
that will apply to you if you are a U.S. Holder of the debt securities.

Certain consequences to "Non-U.S. Holders" of the debt securities, that are
beneficial owners of debt securities that are not U.S. Holders, are described
under "-- Non-U.S. Holders" below.

"U.S. Holder" means a beneficial owner of a debt security that is:

-- a citizen or resident of the United States;

-- a corporation or partnership created or organized in or under the laws
of the United States or any political subdivision of the United
States;
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-- an estate the income of which is subject to U.S. federal income
taxation regardless of its source; or

-- a trust that (1) is subject to the supervision of a court within the
United States and the control of one or more U.S. persons or (2) has a
valid election in effect under applicable U.S. Treasury Regulations to
be treated as a U.S. person.

PAYMENTS OF INTEREST. Except as set forth below, interest on a debt
security will generally be taxable to you as ordinary income at the time it is
paid or accrued in accordance with your method of accounting for tax purposes.

ORIGINAL ISSUE DISCOUNT. If you own debt securities issued with original
issue discount ("OID"), you will be subject to special tax accounting rules, as
described in greater detail below. You generally must include OID in gross
income in advance of the receipt of cash attributable to that income. However,
you generally will not be required to include separately in income cash payments
received on the debt securities, even if denominated as interest, to the extent
those payments do not constitute qualified stated interest, as defined below.
Notice will be given in the applicable prospectus supplement when we determine
that a particular debt security will be an original issue discount debt
security.

A debt security with an issue price that is less than the "stated
redemption price at maturity" (the sum of all payments to be made on the debt
security other than "qualified stated interest") generally will be issued with
OID if that difference is at least 0.25% of the stated redemption price at
maturity multiplied by the number of complete years to maturity. The "issue
price" of each debt security in a particular offering will be the first price at
which a substantial amount of that particular offering is sold to the public.
The term "qualified stated interest" means stated interest that is
unconditionally payable in cash or in property, other than debt instruments of
the issuer, and meets all of the following conditions:

-- it is payable at least once per year;

-- it is payable over the entire term of the debt security; and

-- it is payable at a single fixed rate or, subject to certain
conditions, based on one or more interest indices.

We will give you notice in the applicable prospectus supplement when we
determine that a particular debt security will bear interest that is not
qualified stated interest.

If you own a debt security issued with de minimis OID, which is discount
that is not OID because it is less than 0.25% of the stated redemption price at
maturity multiplied by the number of complete years to maturity, you generally
must include the de minimis OID in income at the time payments, other than
qualified stated interest, on the debt securities are made in proportion to the
amount paid. Any amount of de minimis OID that you have included in income will
be treated as capital gain.

Certain of the debt securities may contain provisions permitting them to be
redeemed prior to their stated maturity at our option and/or at your option.
Original issue discount debt securities containing those features may be subject
to rules that differ from the general rules discussed herein. If you are
considering the purchase of original issue discount debt securities with those
features, you should carefully examine the applicable prospectus supplement and
should consult your own tax advisors with respect to those features since the
tax consequences to you with respect to OID will depend, in part, on the
particular terms and features of the debt securities.

If you own original issue discount debt securities with a maturity upon
issuance of more than one year, you generally must include OID in income in
advance of the receipt of some or all of the related cash payments using the
"constant yield method" described in the following paragraph. This method takes
into account the compounding of interest. The accruals of OID on an original
issue discount debt security will generally be less in the early years and more
in the later years.

The amount of OID that you must include in income if you are the initial
U.S. Holder of an original issue discount debt security is the sum of the "daily
portions" of OID with respect to the debt security for each day during the
taxable year or portion of the taxable year in which you held that debt security
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("accrued OID"). The daily portion is determined by allocating to each day in
any "accrual period" a pro rata portion of the OID allocable to that accrual
period. The accrual period for an original issue discount debt security may be
of any length and may vary in length over the term of the debt security,
provided that each accrual period is no longer than one year and each scheduled
payment of principal or interest occurs on the first day or the final day of an
accrual period. The amount of OID allocable to any accrual period is an amount
equal to the excess, if any, of:

-- the debt security's adjusted issue price at the beginning of the
accrual period multiplied by its yield to maturity, determined on the
basis of compounding at the close of each accrual period and properly
adjusted for the length of the accrual period, over

-- the aggregate of all qualified stated interest allocable to the
accrual period.

OID allocable to a final accrual period is the difference between the
amount payable at maturity, other than a payment of qualified stated interest,
and the adjusted issue price at the beginning of the final accrual period. The
"adjusted issue price" of a debt security at the beginning of any accrual period
is equal to its issue price increased by the accrued OID for each prior accrual
period, determined without regard to the amortization of any acquisition or bond
premium, as described below, and reduced by any payments made on the debt
security (other than qualified stated interest) on or before the first day of
the accrual period. Under these rules, you will have to include in income
increasingly greater amounts of OID in successive accrual periods. We are
required to provide information returns stating the amount of OID accrued on
debt securities held of record by persons other than corporations and other
exempt holders.

Floating rate debt securities are subject to special OID rules. In the case
of an original issue discount debt security that is a floating rate debt
security, both the "yield to maturity" and "qualified stated interest" will be
determined solely for purposes of calculating the accrual of OID as though the
debt security will bear interest in all periods at a fixed rate generally equal
to the rate that would be applicable to interest payments on the debt security
on its date of issue or, in the case of certain floating rate debt securities,
the rate that reflects the yield to maturity that is reasonably expected for the
debt security. Additional rules may apply if

-- the interest on a floating rate debt security is based on more than
one interest index; or

-- the principal amount of the debt security is indexed in any manner.

You should refer to the discussion below under "Foreign Currency Debt
Securities" for additional rules applicable to original issue discount debt
securities that are denominated in or determined by reference to a specified
currency other than the U.S. dollar. The discussion above generally does not
address debt securities providing for contingent payments that do not constitute
qualified stated interest. You should carefully examine the applicable
prospectus supplement regarding the U.S. federal income tax consequences of the
holding and disposition of any debt securities providing for contingent payments
that do not constitute qualified stated interest.

You may elect to treat all interest on any debt security as OID and
calculate the amount includible in gross income under the constant yield method
described above. For purposes of this election, interest includes stated
interest, acquisition discount, OID, de minimis OID, market discount, de minimis
market discount and unstated interest, as adjusted by any amortizable bond
premium or acquisition premium. You must make this election for the taxable year
in which you acquired the debt security, and you may not revoke the election
without the consent of the U.S. Internal Revenue Service ("IRS"). You should
consult with your own tax advisors about this election.

SHORT-TERM DEBT SECURITIES. In the case of debt securities having a term
of one year or less, all payments, including all stated interest, will be
included in the stated redemption price at maturity and will not be qualified
stated interest. As a result, you will generally be taxed on the discount
instead of stated interest. The discount will be equal to the excess of the
stated redemption price at maturity over the issue price of a short-term debt
security, unless you elect to compute this discount using tax basis instead of
issue price. In general, individual and certain other cash method U.S. Holders
of short-term debt securities

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are not required to include accrued discount in their income currently unless
they elect to do so, but may be required to include stated interest in income as
the income is received. U.S. Holders that report income for U.S. federal income
tax purposes on the accrual method and certain other U.S. Holders are required
to accrue discount on short-term debt securities (as ordinary income) on a
straight-line basis, unless an election is made to accrue the discount according
to a constant yield method based on daily compounding. If you are not required,
and do not elect, to include discount in income currently, any gain you realize
on the sale, exchange or retirement of a short-term debt security will generally
be ordinary income to you to the extent of the discount accrued by you through
the date of sale, exchange or retirement. In addition, if you do not elect to
currently include accrued discount in income you may be required to defer
deductions for a portion of your interest expense with respect to any
indebtedness attributable to the short-term debt securities.

MARKET DISCOUNT. If you purchase a debt security, other than an original
issue discount debt security, for an amount that is less than its stated
redemption price at maturity, or, in the case of an original issue discount debt
security, its adjusted issue price, the amount of the difference will be treated
as "market discount" for U.S. federal income tax purposes, unless that
difference is less than a specified de minimis amount. Under the market discount
rules, you will be required to treat any payment, other than qualified stated
interest, on, or any gain on the sale, exchange, retirement or other disposition
of, a debt security as ordinary income to the extent of the market discount that
you have not previously included in income and are treated as having accrued on
the debt security at the time of its payment or disposition. In addition, you
may be required to defer, until the maturity of the debt security or its earlier
disposition in a taxable transaction, the deduction of all or a portion of the
interest expense on any indebtedness attributable to the debt security.

Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the debt security, unless
you elect to accrue on a constant interest method. You may elect to include
market discount in income currently as it accrues, on either a ratable or
constant interest method, in which case the rule described above regarding
deferral of interest deductions will not apply. Your election to include market
discount in income currently, once made, applies to all market discount
obligations acquired by you on or after the first taxable year to which your
election applies and may not be revoked without the consent of the IRS. You
should consult your own tax advisor before making this election.

ACQUISITION PREMIUM, AMORTIZABLE BOND PREMIUM. If you purchase an original
issue discount debt security for an amount that is greater than its adjusted
issue price but equal to or less than the sum of all amounts payable on the debt
security after the purchase date other than payments of qualified stated
interest, you will be considered to have purchased that debt security at an
"acquisition premium." Under the acquisition premium rules, the amount of OID
that you must include in gross income with respect to the debt security for any
taxable year will be reduced by the portion of the acquisition premium properly
allocable to that year.

If you purchase a debt security (including an original issue discount debt
security) for an amount in excess of the sum of all amounts payable on the debt
security after the purchase date other than qualified stated interest, you will
be considered to have purchased the debt security at a "premium" and, if it is
an original issue discount debt security, you will not be required to include
any OID in income. You generally may elect to amortize the premium over the
remaining term of the debt security on a constant yield method as an offset to
interest when includible in income under your regular accounting method. In the
case of instruments that provide for alternative payment schedules, bond premium
is calculated by assuming that (1) you will exercise or not exercise options in
a manner that maximizes your yield, and (2) we will exercise or not exercise
options in a manner that minimizes your yield (except that we will be assumed to
exercise call options in a manner that maximizes your yield). If you do not
elect to amortize bond premium, that premium will decrease the gain or increase
the loss you would otherwise recognize on disposition of the debt security. Your
election to amortize premium on a constant yield method will also apply to all
debt obligations held or subsequently acquired by you on or after the first day
of the first

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taxable year to which the election applies. You may not revoke the election
without the consent of the IRS. You should consult your own tax advisor before
making this election.

SALE, EXCHANGE AND RETIREMENT OF DEBT SECURITIES. Your tax basis in a debt
security will, in general, be your cost for that debt security, increased by
OID, market discount or any discount with respect to a short-term debt security
that you previously included in income, and reduced by any amortized premium and
any cash payments on the debt security other than qualified stated interest.
Upon the sale, exchange, retirement or other disposition of a debt security, you
will recognize gain or loss equal to the difference between the amount you
realize upon the sale, exchange, retirement or other disposition (less an amount
equal to any accrued qualified stated interest that you did not previously
include in income, which will be taxable as such) and the adjusted tax basis of
the debt security. Except as otherwise described herein with respect to:

-- certain short-term debt securities;

-- market discount;

-- gain or loss attributable to changes in exchange rates as discussed
below with respect to foreign currency debt securities; or

-- contingent payment debt instruments, which this summary generally does
not discuss,

that gain or loss will be capital gain or loss. Capital gains of individuals
derived in respect of capital assets held for more than one year are eligible
for reduced rates of taxation. The deductibility of capital losses is subject to
limitations.

EXTENDIBLE DEBT SECURITIES, RENEWABLE DEBT SECURITIES AND RESET DEBT
SECURITIES. If so specified in an applicable prospectus supplement relating to
a debt security, we may have the option to extend the maturity of a debt
security. In addition, we may have the option to reset the interest rate, the
spread or the spread multiplier.

The U.S. federal income tax treatment of a debt security with respect to
which such an option has been exercised is unclear and will depend, in part, on
the terms established for such debt securities by us pursuant to the exercise of
the option. You may be treated for federal income tax purposes as having
exchanged your debt securities for new debt securities with revised terms. If
this is the case, you would realize gain or loss equal to the difference between
the issue price of the new debt securities and your tax basis in the old debt
securities.

If the exercise of the option is not treated as an exchange of old debt
securities for new debt securities, you will not recognize gain or loss as a
result of such exchange.

The presence of such options may also affect the calculation of OID, among
other things. Solely for purposes of the accrual of OID, if we issue a debt
security and have an option or combination of options to extend the term of the
debt security, we will be presumed to exercise such option or options in a
manner that minimizes the yield on the debt security. Conversely, if you are
treated as having a put option, such an option will be presumed to be exercised
in a manner that maximizes the yield on the debt security. If we exercise such
option or options to extend the term of the debt security, or your option to put
does not occur (contrary to the assumptions made), then solely for purposes of
the accrual of OID, the debt security will be treated as reissued on the date of
the change in circumstances for an amount equal to its adjusted issue price on
that date. You should carefully examine the applicable prospectus supplement and
should consult your own tax advisor regarding the U.S. federal income tax
consequences of the holding and disposition of such debt securities.

FOREIGN CURRENCY DEBT SECURITIES

PAYMENTS OF INTEREST. If you receive interest payments made in a foreign
currency and you use the cash basis method of accounting, you will be required
to include in income the U.S. dollar value of the amount received, determined by
translating the foreign currency received at the "spot rate" for such

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foreign currency on the date such payment is received regardless of whether the
payment is in fact converted into U.S. dollars. You will not recognize exchange
gain or loss with respect to the receipt of such payment.

If you use the accrual method of accounting, you may determine the amount
of income recognized with respect to such interest in accordance with either of
two methods. Under the first method, you will be required to include in income
for each taxable year the U.S. dollar value of the interest that has accrued
during such year, determined by translating such interest at the average rate of
exchange for the period or periods during which such interest accrued. Under the
second method, you may elect to translate interest income at the spot rate on:

-- the last day of the accrual period;

-- the last day of the taxable year if the accrual period straddles your
taxable year; or

-- on the date the interest payment is received if such date is within
five days of the end of the accrual period.

Upon receipt of an interest payment on such debt security (including, upon
the sale of such debt security, the receipt of proceeds which include amounts
attributable to accrued interest previously included in income), you will
recognize ordinary gain or loss in an amount equal to the difference between the
U.S. dollar value of such payment (determined by translating the foreign
currency received at the "spot rate" for such foreign currency on the date such
payment is received) and the U.S. dollar value of the interest income you
previously included in income with respect to such payment.

ORIGINAL ISSUE DISCOUNT. OID on a debt security that is also a foreign
currency debt security will be determined for any accrual period in the
applicable foreign currency and then translated into U.S. dollars, in the same
manner as interest income accrued by a holder on the accrual basis, as described
above. You will recognize exchange gain or loss when OID is paid (including,
upon the sale of such debt security, the receipt of proceeds which include
amounts attributable to OID previously included in income) to the extent of the
difference between the U.S. dollar value of the accrued OID (determined in the
same manner as for accrued interest) and the U.S. dollar value of such payment
(determined by translating the foreign currency received at the "spot rate" for
such foreign currency on the date such payment is received). For these purposes,
all receipts on a debt security will be viewed:

-- first, as the receipt of any stated interest payments called for under
the terms of the debt security;

-- second, as receipts of previously accrued OID (to the extent thereof),
with payments considered made for the earliest accrual periods first;
and

-- third, as the receipt of principal.

MARKET DISCOUNT AND BOND PREMIUM. The amount of market discount on foreign
currency debt securities includible in income will generally be determined by
translating the market discount determined in the foreign currency into U.S.
dollars at the spot rate on the date the foreign currency debt security is
retired or otherwise disposed of. If you have elected to accrue market discount
currently, then the amount which accrues is determined in the foreign currency
and then translated into U.S. dollars on the basis of the average exchange rate
in effect during such accrual period. You will recognize exchange gain or loss
with respect to market discount which is accrued currently using the approach
applicable to the accrual of interest income as described above.

Bond premium on a foreign currency debt security will be computed in the
applicable foreign currency. If you have elected to amortize the premium, the
amortizable bond premium will reduce interest income in the applicable foreign
currency. At the time bond premium is amortized, exchange gain or loss, which is
generally ordinary gain or loss, will be realized based on the difference
between spot rates at such time and the time of acquisition of the foreign
currency debt security.

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If you elect not to amortize bond premium, you must translate the bond
premium computed in the foreign currency into U.S. dollars at the spot rate on
the maturity date and such bond premium will constitute a capital loss which may
be offset or eliminated by exchange gain.

SALE, EXCHANGE OR RETIREMENT. Your tax basis in a foreign currency debt
security will be the U.S. dollar value of the foreign currency amount paid for
such foreign currency debt security determined at the time of your purchase. If
you purchased the foreign currency debt security with previously owned foreign
currency, you will recognize exchange gain or loss at the time of the purchase
attributable to the difference at the time of purchase, if any, between your tax
basis in the foreign currency and the fair market value of the debt security in
U.S. dollars on the date of purchase. Such gain or loss will be ordinary income
or loss.

For purposes of determining the amount of any gain or loss you recognize on
the sale, exchange, retirement or other disposition of a foreign currency debt
security, the amount realized on such sale, exchange, retirement or other
disposition will be the U.S. dollar value of the amount realized in foreign
currency (other than amounts attributable to accrued but unpaid interest not
previously included in your income which will be taxable as ordinary income),
determined at the time of the sale, exchange, retirement or other disposition.

You may also recognize exchange gain or loss attributable to the movement
in exchange rates between the time of purchase and the time of disposition
(including the sale, exchange, retirement or other disposition) of a foreign
currency debt security. Such gain or loss will be treated as ordinary income or
loss. The realization of such gain or loss will be limited to the amount of
overall gain or loss realized on the disposition of a foreign currency debt
security.

If a foreign currency debt security is denominated in one of certain
hyperinflationary currencies, generally:

-- exchange gain or loss would be realized with respect to movements in
the exchange rate between the beginning and end of each taxable year
(or such shorter period) the debt security was held, and

-- such exchange gain or loss would be treated as an addition or offset,
respectively, to the accrued interest income on, and an adjustment to
the holder's tax basis in, the foreign currency debt security.

Your tax basis in foreign currency received as interest on (or OID with
respect to), or received on the sale, exchange, retirement or other disposition
of, a foreign currency debt security will be the U.S. dollar value thereof at
the spot rate at the time you receive such foreign currency. Any gain or loss
recognized by you on a sale, exchange or other disposition of foreign currency
will be ordinary income or loss and will not be treated as interest income or
expense, except to the extent provided in Treasury Regulations or administrative
pronouncements of the IRS.

DUAL CURRENCY DEBT SECURITIES. If so specified in an applicable prospectus
supplement relating to a foreign currency debt security, we may have the option
to make all payments of principal and interest scheduled after the exercise of
such option in a currency other than the specified currency. The U.S. federal
income tax treatment of dual currency debt securities is uncertain. Treasury
Regulations currently in effect do not address the tax treatment of dual
currency debt securities.

An IRS announcement states that the IRS is considering issuing proposed
regulations that would:

-- apply the principles contained in regulations governing contingent
debt instruments to dual currency debt securities in the "predominant
currency" of the dual currency debt securities, and

-- apply the rules discussed above with respect to foreign currency debt
securities with OID for the translation of interest and principal into
U.S. dollars.

The IRS states that these concepts are still under consideration. If you
are considering the purchase of dual currency debt securities, you should
carefully examine the applicable prospectus supplement and

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should consult your own tax advisors regarding the U.S. federal income tax
consequences of the holding and disposition of such debt securities.

If we exercise the option described above, you may be considered to have
exchanged your debt security denominated in the specified currency for a debt
security denominated in the optional payment currency. If the exercise is
treated as a taxable exchange, you will recognize gain or loss if any, equal to
the difference between your basis in the debt security denominated in the
specified currency and the value of the debt security denominated in the
optional payment currency. If the exercise of the option is not treated as an
exchange, you will not recognize gain or loss and your basis in the debt
security will be unchanged.

INDEXED DEBT SECURITIES

The tax treatment of a U.S. Holder of an indexed debt security will depend
on factors including the specific index or indices used to determine indexed
payments on the debt security and the amount and timing of any contingent
payments of principal and interest. Persons considering the purchase of indexed
debt securities should carefully examine the applicable prospectus supplement
and should consult their own tax advisors regarding the U.S. federal income tax
consequences of the holding and disposition of such debt securities.

CONSEQUENCES TO NON-U.S. HOLDERS

The following is a summary of certain U.S. federal income and estate tax
consequences that will apply to you if you are a Non-U.S. Holder of debt
securities.

U.S. FEDERAL WITHHOLDING TAX. U.S. federal withholding tax will not apply
to any payment of principal or interest, including OID, on debt securities
provided that:

-- you do not actually or constructively own 10% or more of the total
combined voting power of all classes of our voting stock within the
meaning of the Code and U.S. Treasury Regulations;

-- you are not a controlled foreign corporation that is related to us
through stock ownership;

-- you are not a bank whose receipt of interest on the debt securities is
described in section 881(c)(3)(A) of the Code; and

-- either (1) you provide your name and address on an IRS Form W-8BEN (or
successor form), and certify, under penalty of perjury, that you are
not a U.S. person or (2) you hold your debt security through certain
foreign intermediaries or certain foreign partnerships, and you
satisfy the certification requirements of applicable Treasury
Regulations.

Special certification rules apply to certain non-U.S. Holders that are entities
rather than individuals.

If you cannot satisfy the requirements described above, payments of
premium, if any, and interest, including OID, made to you will be subject to the
30% U.S. federal withholding tax, unless you provide us with a properly
executed:

-- IRS Form W-8BEN (or successor form) claiming an exemption from, or
reduction in, withholding under the benefit of a tax treaty; or

-- IRS Form W-8ECI (or successor form) stating that interest paid on the
debt securities is not subject to withholding tax because it is
effectively connected with your conduct of a trade or business in the
United States.

U.S. federal withholding tax generally will not apply to any gain that you
realize on the sale, exchange, retirement or other disposition of debt
securities.

U.S. FEDERAL INCOME TAX. If you are engaged in a trade or business in the
United States and premium, if any, or interest, including OID, on the debt
securities is effectively connected with the conduct of that trade or business,
you will be subject to U.S. federal income tax on that interest and OID
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on a net income basis (although exempt from the 30% withholding tax) in the same
manner as if you were a U.S. Holder. In addition, if you are a foreign
corporation, you may be subject to a branch profits tax equal to 30% (or lower
applicable treaty rate) of your earnings and profits for the taxable year,
subject to adjustments.

You will generally not be subject to U.S. federal income tax on the
disposition of a debt security unless:

-- the gain is effectively connected with your conduct of a trade or
business in the United States; or

-- you are an individual who is present in the United States for 183 days
or more in the taxable year of that disposition, and certain other
conditions are met.

U.S. FEDERAL ESTATE TAX. Your estate will not be subject to U.S. federal
estate tax on debt securities beneficially owned by you at the time of your
death, provided that (1) you do not own 10% or more of the total combined voting
power of all classes of our voting stock, within the meaning of the Code and
U.S. Treasury Regulations, and (2) interest on those debt securities would not
have been, if received at the time of your death, effectively connected with the
conduct by you of a trade or business in the United States.

INFORMATION REPORTING AND BACKUP WITHHOLDING

U.S. HOLDERS. In general, information reporting requirements will apply to
certain payments of principal, interest, OID and premium paid on debt securities
and to the proceeds of sale of a debt security made to you (unless you are an
exempt recipient such as a corporation). A 31% backup withholding tax will apply
to such payments if you fail to provide a taxpayer identification number, a
certification of exempt status, or fail to report in full dividend and interest
income.

NON-U.S. HOLDERS. In general, information reporting and backup withholding
will not apply to payments that we make to you provided that we do not have
actual knowledge that you are a U.S. person and we have received from you the
statement described above under "-- U.S. Federal Withholding Tax."

In addition, information reporting and backup withholding will not apply to
the proceeds of the sale of a debt security made within the United States or
conducted through certain U.S. related financial intermediaries, if the payor
receives the statement described above and does not have actual knowledge that
you are a U.S. person or you otherwise establish an exemption.

Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against your U.S. federal income tax liability provided the
required information is furnished to the IRS.

UNITED KINGDOM AND NETHERLANDS TAX CONSIDERATIONS

The following summaries are based on the current law and practice of the
United Kingdom and The Netherlands, which are subject to changes that could
prospectively or retrospectively or adversely affect the stated tax
consequences. PROSPECTIVE HOLDERS OF DEBT SECURITIES WHO MAY BE IN ANY DOUBT AS
TO THEIR RESPECTIVE TAX POSITIONS SHOULD CONSULT THEIR OWN PROFESSIONAL
ADVISORS.

UNITED KINGDOM TAX CONSIDERATIONS

Although the position is not clear, we believe, based on a consideration of
the reported cases, that any payments of interest made by Reed International
under its guarantee will not be subject to United Kingdom withholding tax.
However, if there is a United Kingdom withholding tax liability, then, assuming
each beneficial owner of a debt security is a person who satisfies the relevant
conditions for exemption from United Kingdom tax under any applicable income tax
treaty and provided Reed International has received a direction to pay gross
from the United Kingdom Financial Intermediaries and Claims Office, all payments
to be made by Reed International under the guarantee may be made free and clear
of and without deductions for or on account of any taxes, levies, imposts,
duties, charges, assessments, fees or withholdings of any kind under the laws of
the United Kingdom. No direction will be given by the United
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Kingdom Financial Intermediaries and Claims Office unless relevant forms have
been completed by the relevant holder of a debt security and certified by the
appropriate tax office applicable to the holder. See "Description of the Debt
Securities and Guarantees -- Payment of Additional Amounts" above for a
description of the circumstances under which Reed International would be
required to pay additional amounts.

NETHERLANDS TAX CONSIDERATIONS

All payments by Reed Elsevier Capital or Elsevier, as guarantor, as the
case may be, of principal of and interest on the debt securities may be made
free of withholding or deduction of, for or on account of any taxes of whatever
nature imposed, levied, withheld or assessed by The Netherlands or any political
subdivision or taxing authority of The Netherlands.

EUROPEAN UNION TAX CONSIDERATIONS

The European Union is currently considering proposals for a new directive
regarding the taxation of savings income of residents of member states of the
European Union. It is proposed that, subject to some important conditions being
met, member states of the European Union will be required to provide to the tax
authorities of another member state information regarding payments of interest
or other similar income paid by a person, including a paying agent, within its
jurisdiction to an individual resident in that other member state, subject to
the right of certain member states to opt instead for a withholding system for a
transitional period in relation to those payments. In addition, these proposals
are not yet final, and therefore may be subject to further amendment and/or
clarification.

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PLAN OF DISTRIBUTION

Reed Elsevier Capital may sell all or part of the debt securities from time
to time on terms determined at the time those debt securities are offered for
sale to or through underwriters or through selling agents, and also may sell
those debt securities directly to other purchasers. The names of those
underwriters or selling agents used in connection with the offer and sale of any
series of debt securities will be set forth in the applicable prospectus
supplement.

The distribution of the debt securities may be effected from time to time
in one or more transactions at a fixed price or prices, which may be changed, or
at market prices prevailing at the time of sale, at prices related to those
prevailing market prices or at negotiated prices. If underwriters are used in
the sale of debt securities, debt securities will be acquired by the
underwriters for their own account and may be resold from time to time in one or
more transactions. Those debt securities may be offered to the public either
through underwriting syndicates represented by managing underwriters or
underwriters without a syndicate. Unless otherwise set forth in the prospectus
supplement, the obligations of the underwriters to purchase those debt
securities will be subject to certain conditions precedent, and the underwriters
will be obligated to purchase all of those debt securities if any of those debt
securities are purchased.

In connection with the sale of debt securities, underwriters may receive
compensation from Reed Elsevier Capital or from purchasers of debt securities
for whom they may act as agents, in the form of discounts, concessions or
commissions. Underwriters may sell debt securities to or through dealers, and
such dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agents. Underwriters, dealers and agents that participate
in the distribution of debt securities may be deemed to be underwriters, and any
discounts or commissions received by them from Reed Elsevier Capital and any
profit on the resale of debt securities by them may be deemed to be underwriting
discounts and commissions, under the Securities Act. Any compensation received
from Reed Elsevier Capital will be described in the prospectus supplement.

Underwriters, dealers, selling agents and other persons may be entitled,
under agreements which may be entered into with Reed Elsevier Capital, to
indemnification by Reed Elsevier Capital against certain civil liabilities,
including liabilities under the Securities Act. Underwriters, dealers, selling
agents and other persons may be customers of, engage in transactions with, or
perform services for us in the ordinary course of business.

Each series of debt securities will be a new issue of securities with no
established trading market. In the event that debt securities of a series
offered by this prospectus are not listed on a national securities exchange,
certain broker-dealers may make a market in the debt securities, but will not be
obligated to do so and may discontinue any market making at any time without
notice. No assurance can be given that any broker-dealer will make a market in
the debt securities of any series or as to the liquidity of the trading market
for the debt securities.

In order to facilitate the offering of the debt securities, any
underwriters or agents involved in the offering of debt securities may engage in
transactions that stabilize, maintain or otherwise affect the price of the debt
securities or any other debt securities the prices of which may be used to
determine payments on those debt securities. Specifically, the underwriters or
agents may overallot in connection with the offering, creating a short position
in debt securities for their own account. In addition, to cover overallotments
or to stabilize the price of debt securities or other securities, the
underwriters or agents may bid for, and purchase, debt securities or any other
securities in the open market. Finally, in any offering of debt securities
through a syndicate of underwriters, the underwriting syndicate may reclaim
selling concessions allotted to an underwriter or a dealer for distributing any
debt securities in the offering if the syndicate repurchases previously
distributed securities in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the debt securities above independent market
levels. The underwriters or agents, as the case may be, are not required to
engage in these activities, and may end any of these activities at any time.

35
135

LEGAL MATTERS

Certain legal matters relating to the debt securities and the guarantees
will be passed upon for Reed Elsevier Capital, Reed International and Elsevier
by Simpson Thacher & Bartlett and for the underwriters by Cravath, Swaine &
Moore. Simpson Thacher & Bartlett and Cravath, Swaine & Moore will rely upon the
opinions of Freshfields Bruckhaus Deringer, English solicitors for Reed
International and Netherlands counsel to Elsevier, as to all matters of English
law and Netherlands law, respectively.

EXPERTS

Our combined financial statements and related financial statement schedule
in our 2000 annual report incorporated by reference in this prospectus have been
audited by Deloitte & Touche, Amsterdam, The Netherlands, independent auditors,
and Deloitte & Touche, London, United Kingdom, independent auditors, as stated
in their joint report, which is incorporated by reference in this prospectus,
and have been so incorporated in reliance on those firms' joint report, given
upon the authority of those respective firms as experts in accounting and
auditing.

The consolidated financial statements of Reed International in our 2000
annual report incorporated by reference in this prospectus have been audited by
Deloitte & Touche, London, United Kingdom, independent auditors, as stated in
their report, which is incorporated by reference in this prospectus, and have
been so incorporated in reliance on that firm's report, given upon their
authority as experts in accounting and auditing.

The financial statements of Elsevier in our 2000 annual report incorporated
by reference in this prospectus have been audited by Deloitte & Touche,
Amsterdam, The Netherlands, independent auditors, as stated in their report,
which is incorporated by reference in this prospectus, and have been so
incorporated in reliance on that firm's report, given upon their authority as
experts in accounting and auditing.

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136

PRINCIPAL EXECUTIVE OFFICES OF THE ISSUER

Reed Elsevier Capital Inc.
1105 North Market Street
Suite 942
Wilmington, Delaware 19801

PRINCIPAL EXECUTIVE OFFICES OF THE GUARANTORS

Reed International P.L.C. Elsevier N.V.
25 Victoria Street Van de Sande Bakhuyzenstraat 4
London SW1H 0EX 1061 AG Amsterdam
England The Netherlands

TRUSTEE

The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001

PRINCIPAL PAYING AND TRANSFER AGENT

With respect to the U.S. Dollar Notes With respect to the Euro Notes
The Chase Manhattan Bank The Chase Manhattan Bank, London Branch
450 West 33rd Street Trinity Tower
New York, New York 10001 9 Thomas More Street
London, E1W 1YT

LUXEMBOURG LISTING AGENT LUXEMBOURG PAYING AND
Kredietbank S.A. Luxembourgeoise TRANSFER AGENT
43 Boulevard Royal Chase Manhattan Bank Luxembourg S.A.
L-2955 Luxembourg 5 Rue Plaetis
L-2338 Luxembourg

LEGAL ADVISORS

To the Issuer and the
Guarantors
as to U.S. law as to English law as to Dutch law
Simpson Thacher &
Bartlett Freshfields Bruckhaus Deringer Freshfields Bruckhaus Deringer
425 Lexington Avenue 65 Fleet Street Apollolaan 151
New York, New York 10017 London EC4Y 1HS, United Kingdom 1077 AR Amsterdam
The Netherlands
To the Underwriters
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019

INDEPENDENT AUDITORS

Deloitte & Touche LLP Deloitte & Touche LLP
Hill House, 1 Little New Street Gustav Mahlerlaan 10
London EC4A 3TR, United Kingdom 1082 PP Amsterdam, The Netherlands

137

$550,000,000 6.125% Notes due 2006
$550,000,000 6.750% Notes due 2011
E500,000,000 5.750% Notes due 2008

[REED & ELSEVIER LOGO]

REED ELSEVIER CAPITAL INC.

FULLY AND UNCONDITIONALLY GUARANTEED JOINTLY AND SEVERALLY BY
REED INTERNATIONAL P.L.C. AND ELSEVIER NV

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PROSPECTUS SUPPLEMENT

JULY 25, 2001
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LEHMAN BROTHERS SALOMON SMITH BARNEY UBS WARBURG