The Reed Elsevier Pension Income Plan (PIP) and Salary Investment Plan (SIP)

1. The Reed Elsevier Pension Income Plan (PIP) and Salary Investment Plan (SIP)

2. Today’s Purpose • Discuss the changes for PIP for 2002 • Explain how PIP works • Review when you can receive benefits • Tell you about other information resources to help you plan for your future

3. Building Your Future... + + + Other Sources Social Security PIP SIP = Total Retirement Security

4. PIP QUIZ In today’s dollars, about how much can a worker age 45 now making $50,000 per year expect to receive from Social Security at Social Security Retirement age? A) $3,000 B) $2,500 C) $2,000 D) $1,500

5. PIP Highlights • Your benefit grows as an account balance • Your account earns annual interest credits • The company adds pay credits each year based on your total pay each year • Your account balance can continue to grow with interest credits after you leave until you take your benefits • Benefits will become fully vested after 5 years • 100% Company paid

6. What’s New • Three months service for eligibility • Vested benefit is payable as an annuity in monthly installments at retirement or as a lump sum • SIP rollover accepted at retirement • 2% automatic increase becoming an optional form

7. PIP: How It Works Interest Credit Pay Credit Opening Account Balance + +

8. Opening Account Balance Opening Account Balance Interest Credit Opening Account Balance Pay Credit + +

9. Interest Credit • Added to your account at the end of each year • 2001 rate is 6.23%; the rate for 2002 is 5.19% • Based on the average of 5-year and 10-year Treasury notes, but not less than 5% • Interest credits continue until you take your benefits Interest Credit Opening Account Balance Pay Credit + +

10. Interest Credit: Example Opening Account Balance on January 1, 2002 Interest Credit Rate for 2002 Interest Credit on December 31, 2002 $10,000 x 5.19% $519 Interest Credit Pay Credit Opening Account Balance + + $519 $10,000

11. Pay Credit Opening Account Balance Interest Credit Pay Credit + +

12. Basic Pay Credit • Add age and service to get total number of “points” • Divide points by 10 • Apply percentage to annual pay Pay Credit % + Age = ÷ = Points Service 10 Interest Credit Opening Account Balance Pay Credit + +

13. Pay Credit: Example Age Years of Cash Balance Service Total Points Pay Credit Annual Pay Annual Pay Credit Added to your account on December 31 40 + 10 50 ÷10 5.0% $50,000 x 5.0% $2,500 Opening Account Balance Interest Credit Pay Credit + + $2,500 $10,000 $519

14. Adding It Together: Example Age: 40 Service: 10 years Salary: $50,000 Pay Credit: 5.0% Account balance on January 1, 2002 $10,000 Interest credit (5.19%) on December 31 + $ 519 Pay credit on December 31 + $2,500 Account balance on December 31, 2002 $13,019 Interest Credit Opening Account Balance Pay Credit + + $519 $2,500 $10,000

15. Account balance on January 1, 2003 $13,019 Interest credit (5.19%) on December 31 + $676 Pay credit on December 31, 2003 + $2,704 Account balance on December 31, 2003 $16,399 Watch How Your PIP Account Grows Age: 41 Service: 11 years Salary: $52,000 Pay Credit: 5.2% Interest Credit Opening Account Balance Pay Credit + + $676 $2,704 $13,019

16. Special Circumstances Additional Pay Credit Midcareer Adjustment +

17. Special Circumstances: Mid-career Adjustment • Eligible if began accruing benefits after age 35 • Treated as though hired at 35 • Results in added points toward pay credit Example: Age joined Plan, 10 years ago Mid-career Adjustment Age Now Service Now Total Points Divided by 10 Pay Credit Midcareer Adjustment 41 - 35 6 + 51 + 10 67 ÷ 10 6.7%

18. Special Circumstances: Additional Pay Credit For Pay Over Social Security Wage Base Additional Pay Credit (max: 6%) Basic Pay Credit Social Security Wage Base ($84,900 in 2002) Your Pay Additional Pay Credit Midcareer Adjustment +

19. When You Can Receive Benefits Eligible to receive benefits: Normal Retirement • At age 65 with 5 years of vesting service Early Retirement • As early as age 55 with 10 years of vesting service, 5 years participation in PIP Vested Benefit at age 55 with 5 years of service Pension paid as a monthly annuity or a lump sum

20. Benefit Example • Assume 40 year old employee with 10 years of service with an opening account balance of $10,000. She will work to age 65 and retire. • Total pay in 2002 is $50,000. She will receive 4% annual increases. Salary does not exceed social security wage base. • Assumed Interest Credit of 5% (PIP). • Annual benefit at age 65 under PIP is $28,000.

21. Account Balance Projections

22. PIP QUIZ What proportion of my income might I need in retirement? A) 50% B) 75% C) 100% D) Depends on the size of my boat!

23. Planning for Retirement Consider all of the ways you can plan to build your future • PIP • SIP • Social Security • Other sources of income Total Retirement Income Social Security Other Sources SIP PIP = + + +

24. Additional Resources for Information • Call the Reed Elsevier Retirement Center at 1-800-575-8469 between 8am and 6pm (ET), Monday through Friday • PIP highlights brochure • Retirement Plan Website • Annual pension statement • Summary Plan Description

25. PIP Websitehttps://dbconnect.towers.com/reed

26. This program provides some of the features of the Reed Elsevier US Retirement Plan (PIP). For more detailed information about the plan, you should read the Summary Plan Description of the PIP, which is available by calling 1-800-575-8469. Neither this presentation about PIP nor the Summary Plan Description, however, takes the place of the applicable plan documents. Should any questions ever arise about eligibility or the nature and extent of your benefits from the PIP, the formal language of the plan documents as construed and interpreted by Reed Elsevier Inc. will govern. Reed Elsevier Inc. reserves the right to modify or terminate this plan at any time.

27. Questions, Anyone?