106 REED ELSEVIER ANNUAL REPORTS & FINANCIAL STATEMENTS 2003 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. Adjusted operating cash flow conversion expresses adjusted operating cash flow as a percentage of adjusted operating profit. Adjusted figures are used by Reed Elsevier as additional performance measures and are stated before the amortisation of goodwill and intangible assets and exceptional items. The summary financial information is a simple translation of the Reed Elsevier combined financial statements into US dollars at the stated rates of exchange. The financial information provided below is prepared under UK GAAP as used in the preparation of the Reed Elsevier combined financial statements. It does not represent a restatement under US GAAP which would be different in some significant respects. ADDITIONAL INFORMATION FOR US INVESTORS > REED ELSEVIER COMBINED BUSINESSES Summary financial information in US dollars Basis of preparation Profit and loss account Cash flow statement For the year ended 31 December 2003 2003 2002 US$m US$m Net cash inflow from operating activities 1,736 1,553 Dividends received from joint ventures 23 20 Returns on investments and servicing of finance (289) (308) Taxation (including US$59m (2002: US$30m) exceptional net inflow) (238) (201) Capital expenditure and financial investment (223) (66) Acquisitions and disposals (295) (294) Equity dividends paid to shareholders of the parent companies (476) (410) Cash inflow before changes in short term investments and financing 238 294 Increase in short term investments (269) (83) Financing (140) (103) (Decrease)/increase in cash (171) 108 Adjusted operating cash flow 1,676 1,515 Adjusted operating cash flow conversion 87% 89% For the year ended 31 December 2003 2003 2002 US$m US$m Net sales 8,028 7,530 Operating profit 1,077 760 Profit before tax 846 434 Profit attributable 544 272 Adjusted operating profit 1,920 1,700 Adjusted profit before tax 1,646 1,391 Adjusted profit attributable to parent companies’ shareholders 1,213 1,023 Exchange rates for translation 2003 2002 US$ US$ Sterling Profit and loss and cash flow 1.63 1.50 Balance sheet 1.78 1.60 Euro Profit and loss and cash flow 1.124 0.943 Balance sheet 1.254 1.046