2002 £m		2001 £m		2000 £m
Net cash inflow from operating activities:
Continuing activities		5,023		5,410		5,609
Discontinued activities		234		477		240
Total net cash inflow from operating activities		5,257		5,887		5,849
Dividends from associates and joint ventures		2		10		5
Net cash outflow for returns on investments and servicing of finance		(1,695	)	(727	)	(163	)
Taxation paid		(562	)	(669	)	(1,311	)
Net cash outflow for capital expenditure and financial investment		(1,354	)	(8,442	)	(3,752	)
Net cash inflow (outflow) for acquisitions and disposals		5,785		(13,754	)	(6,405	)
Equity dividends paid		-		(1,432	)	(1,364	)
Cash inflow (outflow) before management of liquid resources and financing		7,433		(19,127	)	(7,141	)
Management of liquid resources		(1,864	)	(480	)	1,236
Net cash inflow (outflow) from financing		(5,479	)	19,735		5,959
Increase in cash in the year		90		128		54
Decrease (increase) in net debt in the year		13,930		(18,942	)	(6,582	)

Net cash inflow from operating activities of £5,257 million in the 2002 financial year compares with £5,887 million in the 2001 financial year and £5,849 million in the 2000 financial year. Net cash inflow from continuing operating activities amounted to £5,023 million, £5,410 million and £5,609 million in the 2002, 2001 and 2000 financial years, respectively. Special and deficiency contributions to the main pension fund, described below, of £600 million in the 2002 financial year, £300 million in the 2001 financial year and £230 million in the 2000 financial year were paid, consequently reducing the net cash inflow by these amounts.

Tax paid in the 2002 financial year totalled £562 million compared with £669 million in the 2001 financial year and £1,311 million paid in the 2000 financial year. The lower tax paid in the 2002 and 2001 financial years was due to the lower profits earned in the 2002 and 2001 financial years.

The net cash outflow of £1,354 million for capital expenditure and financial investment in the 2002 financial year included £4,069 million of capital expenditure on plant and equipment, offset by £2,645 million received on the sale of tangible fixed assets. These proceeds included £2,380 million from the property sale and leaseback transaction completed in December 2001, described above. Net cash outflow of £8,442 million for capital expenditure and financial investment in the 2001 financial year was principally for capital expenditure on plant and equipment of £4,756 million and £4,208 million invested in mmO2's third-generation mobile licences. The net cash outflow of £3,752 million in the 2000 financial year was principally for capital expenditure on plant and equipment.

The net cash inflow from disposals less acquisitions in the 2002 financial year totalled £5,785 million. Cash proceeds from disposals amounted to £6,916 million and principally comprised £3,075 million from the sale of the investment in Japan Telecom and J-Phone, £1,838 million from the sale of the Yell directories business and £1,084 million from the sale of our investment in Airtel. The principal cash outflow for acquisitions was the completion of the purchase of a minority interest in Esat Digifone in April 2001 for £869 million.

In the 2001 financial year, the group made significant acquisitions and the net cash outflow on these totalled £13,754 million in that year. This included £11,438 million invested in Viag Interkom, including acquisition of its licences, £1,233 million in Telfort, £1,176 million in completing the Esat Telecom Group acquisitions, offset by £464 million received principally on the disposal of sunrise communications. The net cash outflow on acquisitions of £6,405 million in the 2000 financial year was principally £3,014 million on the acquisition of the minority interest in BT Cellnet, £1,254 million invested jointly with AT&T in Japan Telecom and £659 million in Canadian interests, jointly owned with AT&T.

There were no equity dividends paid in the 2002 financial year, as explained above. Equity dividends paid in the 2001 financial year totalled £1,432 million, compared with £1,364 million in the 2000 financial year. Subject to shareholder approval, we will resume paying equity dividends in September 2002 with the payment of the final dividend for the 2002 financial year which will amount to £173 million.

The resulting cash inflow for the 2002 financial year, before management of liquid resources and financing, of £7,433 million was mainly applied in repaying short-term borrowings and investing in short-term investments, with total borrowings of £12,006 million being repaid. In the 2001 financial year, the significant cash outflow of £19,127 million was funded by issuing substantial amounts of long-term debt instruments and drawing on medium-term notes programmes. In December 2000, £6,909 million was raised through the issue of four series of US dollar notes totalling $10 billion, with maturities between three and thirty years. In February 2001, £6,038 million was received through the issue of six series of euro and sterling notes totalling €9.7 billion, with maturities between two and sixteen years. In April 2000, a twenty-five year £250 million index-linked Eurobond was issued.

In the 2000 financial year, there was a net cash outflow of £7,141 million which was partly funded by the issue of new long-term financial instruments, principally two US dollar Eurobonds totalling US$1.2 billion and a £600 million Eurobond. In that year, we also drew on commercial paper programmes under which approximately £4.9 billion was outstanding at 31 March 2000 and used the group's existing short-term investments.

The cash inflow for the 2002 financial year resulted in net debt reducing to £13,701 million whilst in the 2001 financial year the cash outflow resulted in net debt increasing to £27,942 million at 31 March 2001. In the previous financial year, the cash outflow for the year resulted in net debt increasing to £8,700 million at 31 March 2000.

In the 2002 financial year, the group repaid borrowings totalling £12,006 million and no new long-term debt was raised. This was in part due to the success of the company's rights issue which closed in June 2001. We issued 1,976 million new shares for a total consideration of £5,876 million, net of expenses. As part of the demerger arrangements, £440 million was received from mmO2; additionally mmO2 assumed £60 million of the group's external net debt.

In the 2001 financial year, the group borrowed £14,552 million in long-term loans and repaid £225 million in long-term debt. This was in accordance with our intention, expressed at the end of the 2000 financial year, to refinance a significant part of our commercial paper borrowings with medium or longer-term debt when market conditions allowed and also to raise further significant finance in the 2001 financial year to meet the financing needs of the UK third-generation mobile licence, won in April 2000, increased capital expenditure and acquisitions of interests in subsidiaries, joint ventures and associates and their additional funding requirements.

In April 2000, BT issued a £250 million 3.5% index-linked Eurobond repayable in 2025. In December 2000, we issued four series of notes comprising US$2.8 billion 8.625% thirty-year notes, US$3.0 billion 8.125% ten-year notes, US$3.1 billion 7.625% five-year notes and US$1.1 billion three-year floating rate notes. In February 2001, we issued six series of notes comprising £700 million 7.5% sixteen-year notes, €2.25 billion 6.875% ten-year notes, €3.0 billion 6.125% six-year notes, £400 million 7.125% six-year notes, €1.75 billion 5.625% three-year notes and €1.0 billion two-year floating rate notes. Loans repaid during the year totalling £225 million were mainly in respect of the Esat Telecom acquisition.

In the 2000 financial year, the group borrowed £1,473 million in long-term loans and repaid £587 million in long-term debt. In May 1999, BT issued a £600 million 5.75% Eurobond repayable in 2028 and, in October 1999, a US$1.0 billion 6.75% five-year Eurobond. In August 1999, BT repaid a US$200 million Eurobond on maturity which was refinanced by a further ten-year US$200 million Eurobond. On the acquisition of Esat, BT assumed approximately £550 million of debt, based on Esat's 31 December 1999 balance sheet.

In the 2003 financial year, £2,195 million of debt falls due which we anticipate we will fund out of our existing short-term investments. We expect that the short-term investments and cash balance of £4,739 million will fall during the 2003 financial year as debt matures and seasonal cash outflows occur.

We expect to see a continued improvement in the financial position of BT and are seeking to obtain a single A rating from all the major rating agencies.