The total remuneration package

Each element of the remuneration package is designed to achieve specific objectives, as described in the table below. The combination of elements creates a unified and balanced reward mix. The value of the reward package is only maximised through the integrated delivery of short and longer term performance. Reward for the delivery of business results is connected with reward for value flowing to shareholders. The incentive arrangements are structured in such a way that reward cannot be maximised through inappropriate short term risk-taking.

The key elements of the reward package for executive directors are summarised below:

Summary of remuneration elements for executive directors

Element Purpose Performance period Performance measure
Salary Positions the role and individual appropriately within the relevant market for executive talent Not applicable Reflects the sustained value of an executive’s skills, experience and contribution compared with the relevant talent market
Annual Incentive Plan (AIP) Provides focus on the delivery of annual financial targets/budgets

Motivates the achievement of annual strategic milestones that create a platform for future performance		 One year Annual targets for: revenue, profit, cash flow conversion rate and key performance objectives
Bonus Investment Plan (BIP) Encourages personal investment in and ongoing holding of Reed Elsevier shares promoting greater alignment with shareholders

Supports retention of key talent		 Three years Vesting subject to achievement of Adjusted EPS hurdle and continued employment

There is no retesting of the performance condition
Executive Share Option Scheme (ESOS) Provides focus on longer term share price growth

Rewards sustained delivery and quality of earnings growth		 Three years On grant – Adjusted EPS growth over the three-year performance period prior to grant and individual performance

On vesting – Adjusted EPS growth over the three-year performance period post-grant

There is no retesting of the performance condition
Long Term Incentive Plan (LTIP) Drives value creation via the delivery of sustained earnings growth and superior returns for shareholders Three years Vesting subject to Adjusted EPS growth and Total Shareholder Return measured relative to industry peers

There is no retesting of the performance condition
Retirement benefits Positioned to ensure broad competiveness with local country practice Not applicable Terms and vesting are specific to individual with reference to relevant country practice

Each of these remuneration elements is described in greater detail in the remainder of this section.