To Our Shareholders

William J. Pesce and Peter Booth WileyAs Wiley approaches its bicentennial in 2007, we are pleased to report that our Company reached another significant milestone in fiscal year 2006: revenue of $1 billion. By virtually all measures, it was a landmark year, with Wiley achieving record revenue, operating income, and earnings per share. Full-year revenue increased 7% to $1,044 million, or 8% excluding foreign currency effects. Operating income of $153 million advanced 8%, or 9% excluding foreign currency effects. Earnings per diluted share of $1.61 rose 10%, excluding certain tax adjustments noted below.

Once again, the Company generated strong free cash flow in fiscal year 2006, which we used to buy back 2.8 million shares of Class A common stock; acquire publishing assets in several transactions aggregating to $31 million; pay out $21 million in cash dividends to shareholders; and pay down $33 million in debt.

The Company recorded a tax benefit of approximately $7.5 million, or $0.12 per diluted share in the first quarter of fiscal year 2006 and reduced income taxes due on the fiscal year 2005 repatriation of earnings from its European subsidiaries. The tax benefit offsets a tax charge of $7.5 million recorded in the fourth quarter of fiscal year 2005, neither of which had a cash impact to the Company. A $6.8 million tax benefit, or $0.11 per diluted share, related to the settlement of certain tax matters, was also reported for the full year ending April 30, 2006.

Building on Wiley’s Strengths

The strong year-on-year revenue and operating income growth was driven by all of Wiley’s global businesses, Professional/Trade; Scientific, Technical, and Medical; and Higher Education.

Professional/Trade (P/T): With leading positions in targeted consumer and professional categories, Wiley’s P/T business possesses an impressive collection of global brands, including For Dummies, Frommer’s, Betty Crocker, Pillsbury, CliffsNotes, J.K. Lasser, Jossey-Bass, Pfeiffer, Wrox, Webster’s New World, and Sybex, among others.

Revenue growth of our U.S. P/T business accelerated throughout fiscal year 2006, culminating in a strong fourth quarter. Revenue for the full year advanced 9% to $380 million, while the fourth quarter’s revenue reached a record $106 million. Direct contribution to profit was up 5% for the year. The improvement in top-line results was partially offset by higher cost of sales due to product mix. Global P/T revenue increased 9%.

Growth was driven by all of Wiley’s global businesses, Professional/Trade; Scientific, Technical, and Medical; and Higher Education.

Virtually all of P/T’s publishing categories and sales channels contributed to the strong results, with standout performances by the technology, business, finance, leadership, and architectural programs, as well as global rights and Web site advertising. The Sybex acquisition and the popularity of the Su Doku For Dummies series by Andrew Heron and Edmund James helped to deliver the record-setting results. Best-sellers during the year also included Greenblatt/The Little Book That Beats the Market; Weight Watchers New Complete Cookbook; Betty Crocker Cookbook; Biggs/Hedgehogging; Lencioni/Five Dysfunctions of a Team and Silos, Politics, and Turf Wars; and Masterson/Automatic Wealth.

The expansion of Wiley Europe’s portfolio opened new markets and customer groups. The technology channel exhibited strong growth throughout the year with a series of agreements with major telecommunications corporations. A new series, Frommer’s Day by Day, and the first Podcast successfully extended this key brand in the U.K. The power of the For Dummies brand was evidenced by the publication of a six-figure print run of a custom mini-book for the World Cup, Winning on Betfair For Dummies. The German For Dummies program published 51 new titles and 49 reprints during the year. Wiley Canada added to its indigenous P/T program by becoming a key publisher in the regional real estate markets, adding a number of new titles in real estate investing, home inspection, property management, tax, and other subcategories.

Wiley Professional/Trade titles

P/T strengthened its competitive position during the year by adding to its impressive collection of brands and franchises. Acquisitions completed during the fiscal year included substantially all the publishing assets of Sybex Inc., a global technology publisher; Fernhurst Books, a best-selling list of manuals and guides on sailing, boating, and other nautical sports; and the remaining outstanding shares of Wiley Asia’s joint venture, Wiley Dreamtech (India) Private Ltd. The latter is an important step in the Company’s plans to grow our presence in India’s rapidly growing markets by extending our sales and marketing reach and building local publishing capabilities. Wiley acquired a majority interest in Dreamtech in 2001 as part of our highly successful acquisition of Hungry Minds, Inc.

P/T also forged partnerships to meet new and existing needs in markets around the globe, branching out into rapidly growing areas such as certification and teacher training. More than 800 articles were adapted from For Dummies text for licensing with Yahoo Tech, a new Web site that provides consumers advice and information on technology. Another agreement with Microsoft® was signed to license content from seven of Wiley’s top cookbooks. We are partnering with the Institute of Financial Planners of Hong Kong to create a suite of learning materials for students seeking Certified Financial Planner certification, to be distributed through the Institute. Wiley is also working with CFA Institute, a global organization of investment practitioners and educators that awards the Chartered Financial Analyst designation, as its exclusive publishing partner for a series of finance books for both university and professional markets. The first seven titles of the Securities and Investment Institute series were published.

Scientific, Technical, and Medical (STM): STM is increasingly an online business through Wiley InterScience, a profitable global enterprise through which researchers, librarians, students, and professionals access our journals, major reference works, books, and databases. STM’s products and services are also available in print.

Wiley Science, Technical and MEdical titlesWiley’s U.S. STM business delivered consistently excellent results throughout fiscal year 2006, growing revenue over prior year by 8% to $206 million. Direct contribution to profit also rose by 8% for the year.

Subscription and non-subscription revenue from journal backfiles, advertising, and commercial reprints contributed significantly to these results. The reference book program completed its second year of strong growth driven by strong title output and global market strength. STM also benefited from recent acquisitions of Dialysis and Transplantation, a medical journal, and InfoPOEMs, a provider of evidence-based medicine content that is delivered online at the critical point of care.

Global STM revenue increased 7% with books and journals, online and in print, performing well in virtually all regions and markets. Wiley Europe’s new journals small (an interdisciplinary journal on nanoscience and nanotechnology); ChemMedChem; and the Biotechnology Journal all performed well. Chemistry – An Asian Journal, published through an alliance between Wiley-VCH, the German Chemical Society, and several major Asian chemical societies, gained traction during the year as new societies signed on, including The Singapore National Institute of Chemistry and the Chemical Society Located in Taipei.

Wiley InterScience (, reached a milestone with more than one million journal articles available online. Launched commercially in January 1999, Wiley InterScience is a leading international resource for quality content promoting discovery across the spectrum of scientific, technical, medical, and professional endeavors. Wiley InterScience has built its reputation by regularly adding new content and functionality; offering sophisticated search and navigation capabilities; and providing robust online manuscript submission and management tools.

Today, Wiley InterScience features must-have content from more than 2,500 journals, books, reference works, databases, laboratory manuals, and the Cochrane Library, which is the world’s best-known resource for evidence-based medicine. More than half of Wiley’s journals on Wiley InterScience are digitized back to Volume 1, Issue 1 as part of the journal backfile initiative. When the initiative is completed in 2007, in conjunction with Wiley’s bicentennial, Wiley InterScience will be one of the largest archives of its kind, with content dating back to 1799 and over 1.5 million articles of scientific and scholarly research.

The value of this growing body of literature to the global research community can be quantified in the concurrent increase in the number of users, as well as the number of manuscripts submitted for publication. In fiscal year 2006, STM in the U.S. received approximately 9% more journal manuscripts and published 8% more journal pages than the previous year. During the fourth quarter, over 16 million visits to Wiley InterScience were recorded, representing a 30% increase over the same period in the previous year. In addition, more people gained access to Wiley InterScience by taking advantage of alternate purchasing programs, such as Pay-Per-View, which began offering individual article sales this year from the growing backfile collection. At the end of the fiscal year, Wiley participated with Microsoft in the launch of the Windows Live Academic Search pilot, which improves the search capabilities of journal content from Wiley and ten other major STM publishers.

The Cochrane Library, an evidence-based medicine collection available in print and online, finished the year strongly, reflecting Wiley’s ability to increase revenue through the Company’s multiple sales channels. To extend Wiley’s product offering in evidence-based medicine, Wiley Europe and Duodecim Medical Publications Limited of Helsinki, Finland, announced an expanded agreement to grant Wiley the exclusive publishing, sales, and distribution rights of its English-language version of Evidence-Based Medicine Guidelines (EBM Guidelines), available for delivery via the Internet and through Personal Digital Assistant devices.

Important publications included the inaugural issue of a pharmaceutical-company sponsored Chinese-language digest version of Hepatology; the Physics and Astronomy Backfile, which includes the oldest journal published by Wiley, Annalen der Physik, founded in 1799; the first issues of the Journal of Hospital Medicine; and the redesigned Annals of Neurology. Also released were the second edition of Encyclopedia of Inorganic Chemistry, edited by R. Bruce King; the new 18th edition of the Merck Manual; and the 8th edition of The Wiley Registry of Mass Spectral Data.

Higher Education: Wiley is a leader in courses in the sciences, engineering, computer science, mathematics, business and accounting, statistics, geography, hospitality, and the culinary arts, with a growing presence in modern languages, psychology, and education. The higher education market is increasingly becoming an online business as instructors and students are making greater use of the Web and WileyPLUS, our multi-format suite of teaching and learning materials.

Wiley Higher Education TitlesThe Company’s U.S. Higher Education business increased 4% to $156 million in fiscal year 2006. Higher Education’s direct contribution to profit for the year improved $2 million over the prior year period.

The mathematics, life sciences, engineering, and computer science programs performed well during the quarter and year, with strong showings by Tortora/Derrickson/Principles of Anatomy and Physiology, 11e; Black/Microbiology, 6e; Voet/Voet/Pratt/Fundamentals of Biochemistry, 2e; Hughes-Hallett/Calculus, 4e; Anton/Bivens/Davis/Calculus, 8e; Munson/Young/Okiishi/Fundamentals of Fluid Mechanics, 5e; and Horstmann/Big Java, 2e.

Global Higher Education revenue was up 5% during the year. Strong performances in Canada, Asia, and Australia contributed to these results.

WileyPLUS continued to gain traction during fiscal year 2006, as more students and faculty around the world chose to use its customizable multi-format content and suite of teaching and learning tools to help them do homework, study for tests, assess coursework, and administer classes. During the fiscal year, the number of adoptions and units sold worldwide increased significantly over the previous year. Considerable success was achieved in Canada with the sale of WileyPLUS, demonstrating the product’s global appeal. The number of titles available with WileyPLUS in Canada more than doubled from fiscal year 2005, giving the sales force opportunity to sell it into more course areas.

Wiley has developed a wider array of products at varied price points. The Company is now offering about 90 titles in Wiley Desktop Editions, which are in downloadable e-text format, for students who want lower-priced versions of textbooks. Desktop Editions are produced in partnership with VitalSource Technologies, Inc.

Soon after the end of the fiscal year, Wiley became Microsoft’s sole publishing partner worldwide for all Microsoft Official Academic Course (MOAC) materials, for use in the increasing number of college courses that train and certify students in Microsoft technologies. Wiley will collaborate with Microsoft on a new co-branded series of textbook and e-learning products, and will sell existing MOAC titles. All titles will be marketed globally and available in several languages. With Microsoft’s position as the world’s leading software company and Wiley’s global presence in higher education, the alliance is an ideal strategic fit.

The Company also extended its global alliance with the National Geographic Society (NGS) to create new products sold exclusively with Wiley textbooks and WileyPLUS. We will incorporate NGS’s superb images, maps, videos, and text into our groundbreaking new Wiley Visualizing series of higher education textbooks and digital teaching and learning materials in a unique way that enhances the learning process.

Past, Present, And Future: A Steady Course

We began this Annual Report with a reference to 1996, when the current wave of communications technology innovations was beginning to swell, to showcase Wiley’s steady navigation through a period of rapid change. A decade ago, we were quick to see what was on the horizon. As a result of careful planning and skillful execution, Wiley delivered record-setting results throughout the decade. The Company is now well-positioned for the next set of challenges and opportunities. The initial section of this report presents some of the Company’s current initiatives.

Wiley- Encyclopedia of Inorganic ChemistryLooking ahead, we see great opportunities for innovation and growth at the nexus of technological, demographic, and market forces. We are capitalizing on these opportunities through new interactions with customers.

Next year, Wiley will celebrate 200 years of publishing. Wiley has thrived because of our competitive strengths, including highly regarded global brands and must-have content; our ability to adapt and innovate to serve customers better; and an effective blend of long-term vision and operational excellence.

Wiley’s greatest strength, however, is our unique culture, which enables us to attract and retain an extraordinary team of committed and creative colleagues. The strength of Wiley’s culture has been validated in many ways over the past year. In a recent survey, to which 97% of our colleagues around the world responded, they identified commitment, trust and respect, and teamwork as characteristics that distinguish Wiley. In addition, for the second consecutive year, Wiley was recognized by FORTUNE magazine in its list of 100 Best Companies to Work For. For the first time, Canadian Business magazine named Wiley Canada to its 2006 list of the Best Workplaces in Canada. Wiley Australia was once again named Secondary Publisher of the year by the Australian Publishers Association and Higher Education Publisher of the year by the Australian Campus Booksellers Association. Wiley Australia was also awarded for the fifth consecutive year the “Employer of Choice for Women” citation by the Federal Government’s Equal Opportunity in the Workplace Agency.

We are proud of our Company’s success and look forward, with enthusiasm and confidence, to reaching new heights next year and beyond.


William J. Pesce -signature

William J. Pesce
President and Chief Executive Officer

Peter Booth Wiley
Chairman of the Board

©2006 John Wiley & Sons, Inc. All Rights Reserved.