COMBINED FINANCIAL STATEMENTS For the year ended 31 December 2003 2003 2002 2003 2002 Note £m £m € m € m Net cash inflow from operating activities before exceptional items 11 1,163 1,154 1,686 1,835 Payments relating to exceptional items charged to operating profit  6 (98) (119) (142) (190) Net cash inflow from operating activities 1,065 1,035 1,544 1,645 Dividends received from joint ventures 15 14 13 20 21 Interest and similar income received 17 25 25 40 Interest and similar charges paid  (194) (230) (282) (366) Returns on investments and servicing of finance (177) (205) (257) (326) Taxation before exceptional items (182) (154) (264) (245) Exceptional items 6 36 20 52 32 Taxation (146) (134) (212) (213) Purchase of tangible fixed assets (155) (163) (225) (259) Purchase of fixed asset investments 15 (7) (5) (10) (8) Proceeds from sale of tangible fixed assets 6 6 10 9 Exceptional proceeds from disposal of fixed asset investments 6 19 118 28 188 Capital expenditure and financial investment (137) (44) (197) (70) Acquisitions 11 (258) (184) (374) (293) Exceptional net proceeds/(costs) from disposal of businesses 6 77 (12) 112 (19) Acquisitions and disposals (181) (196) (262) (312) Equity dividends paid to shareholders of the parent companies (292) (273) (423) (434) Cash inflow before changes in short term investments and financing 146 196 213 311 Increase in short term investments 11 (165) (55) (240) (88) Financing 11 (86) (69) (125) (109) (Decrease)/increase in cash 11 (105) 72 (152) 114 Combined cash flow statement  Adjusted figures 2003 2002 2003 2002 Note £m £m € m € m Adjusted operating cash flow 10 1,028 1,010 1,491 1,606 Adjusted operating cash flow conversion 87% 89% 87% 89% Reed Elsevier businesses focus on adjusted operating cash flow as a key cash flow measure. Adjusted operating cash flow is measured after dividends from joint ventures, tangible fixed asset spend and proceeds from the sale of tangible fixed assets but before exceptional payments and proceeds, and is reconciled to the reported figures in note 10 to the combined financial statements. Adjusted operating cash flow conversion expresses adjusted operating cash flow as a percentage of adjusted operating profit. REED ELSEVIER ANNUAL REPORTS & FINANCIAL STATEMENTS 2003 43 Short term investments include deposits of under one year if the maturity or notice period exceeds 24 hours, commercial paper investments and interest bearing securities that can be realised without significant loss at short notice.