Reuters: Annual Report and Form 20-F 2002
Washington, D.C. 20549
   (Mark One) 
For the fiscal year ending December 31, 2002
For the transition period from _______________ to ______________
Commission file number                              333-08354   

 Reuters Group PLC
(Exact Name of Registrant as Specified in Its Charter)


(Translation of Registrant’s Name Into English)


(Jurisdiction of Incorporation or Organization)

85 Fleet Street, London EC4P 4AJ, England
(Address of Principal Executive Offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act: None
Securities registered or to be registered pursuant to Section 12(g) of the Act: Ordinary Shares of 25p each
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
  Ordinary Shares of 25p each ……….1,432,523,249
Founders Share of £1 ………………………………1
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 
Yes ___X ___ No _______
Indicate by check mark which financial statement item the registrant has elected to follow
  Item 17 ___X___ Item 18 ______
  Contents Navigation - click below to link to areas of this site
Financial highlights/Five year summary/Three year Reuters customer segments and Instinet revenue summary
Selected financial data
Company information
Directors' report
Directors and senior executives
Corporate governance
Remuneration report
Statement of directors' responsibilities
Operating and financial review
Consolidated profit and loss account
Consolidated statement of total recognised gains and losses
Notes on the consolidated profit and loss account
Consolidated cash flow statement
Notes on the consolidated cash flow statement
Consolidated balance sheet
Reconciliation of movements in shareholders' funds
Notes on the consolidated balance sheet
Balance sheet of Reuters Group PLC
Notes on the balance sheet of Reuters Group PLC
Accounting policies
Summary of differences between UK and US Generally Accepted Accounting Principles (GAAP)
Notes on summary of differences between UK and US Generally Accepted Accounting Principles (GAAP)
Information for shareholders
Summary of 2002 and 2001 revenue by quarter
Eleven year consolidated financial summary
Cross reference guide to Form 20-F
Financial diary for 2003
Where to find us


– Page 1 –
Reuters Group

Revenue 3,575 3,885 (8%)
Normalised operating profit 171 383 (56%)
Operating (loss)/profit (144) 302  
Normalised profit before tax 89 304 (71%)
(Loss)/profit before tax (493) 158  
(Loss)/profit after tax (516) 51  
Return on equity (58.4%) 4.6%  
Free cash flow 40 443  
Net (debt)/funds (66) 138  


Basic (loss)/earnings per ordinary share (29.0p) 3.3p  
Diluted (loss)/earnings per share (29.0p) 3.2p  
(Loss)/earnings per ADS*‡ (US$2.80) US$0.32  
Dividends per ordinary share 10.0p 10.0p  
Dividends per ADS* 60.0p 60.0p  

* Each American Depositary Share (ADS) represents six ordinary shares.

‡ A nominal exchange rate of US$1.61 = £1 has been used for convenience.


Reuters Group reconciliation of operating profit and profit before tax to normalised operating profit and normalised profit before tax


Operating (loss)/profit (144) 302  

Add: Amortisation of goodwill and other intangible assets of subsidiaries 107 81  32%
  Impairment of goodwill of subsidiaries 208  

Normalised operating profit 171 383 (56%)
Share of joint ventures and associates (losses)/investment income (62) (70) (11%)
Net interest payable (20) (9)  

Normalised profit before tax 89 304 (71%)
Amortisation of goodwill and other intangible assets of subsidiaries, joint ventures and associates (118) (93) 26%
Impairment of goodwill of subsidiaries (208)  
Net losses on investments (256) (53)  

(Loss)/profit before tax (493) 158  


Revenue 2,992 3,042 (2%)
Normalised operating profit 281 222 26%
Operating profit 195 155 26%
Normalised profit before tax 194 128 51%
(Loss)/profit before tax (123) 9  
Free cash flow 214 169 27%

This report comprises the annual report of Reuters Group PLC in accordance with the United Kingdom requirements and its annual report on Form 20-F in accordance with the requirements of the United States Securities and Exchange Commission (SEC) for 2002. In addition, the Form 20-F will contain certificates pursuant to section 302 of the Sarbanes-Oxley Act of 2002 signed by the Chief Executive Officer and Finance Director, with respect to Reuters Group PLC. Reference is made to the Form 20-F cross reference guide on pages 82-83 hereof. Only (i) the information in this document that is referenced in the Form 20-F cross reference guide, and (ii) the Exhibits, shall be deemed to be filed with the SEC for any purpose, including incorporation by reference into any other documents filed by Reuters Group PLC pursuant to the Securities Act of 1933, as amended, which purport to incorporate by reference this Form 20-F. Any information herein which is not referenced in the Form 20-F cross reference guide, or the Exhibits themselves, shall not be deemed to be so incorporated by reference.

Normalised profits and earnings exclude amortisation of goodwill and other intangible assets, impairment charges and gains/losses on the disposal of subsidiaries and fixed asset investments. Underlying growth is calculated excluding acquisitions and disposals and the impact of currency fluctuations.

As used in this report, 'Reuters Group' and 'Group' refer to Reuters Group PLC and its consolidated subsidiaries including Instinet Group Incorporated (Instinet). The 'company' refers to the parent Reuters Group PLC. 'Reuters' refers to Reuters Group excluding Instinet.

The consolidated financial statements of Reuters Group included in this report are presented in pounds sterling (£). On 31 December 2002, the Noon Buying Rate in New York City for cable transfers in foreign currencies as announced for customs purposes by the Federal Reserve Bank of New York (Noon Buying Rate) was US$1.61 = £1; on 24 February 2003 the Noon Buying Rate was US$1.59 = £1. For additional information on exchange rates between the pound sterling and the US dollar, see exchange rates on page 78.

Reuters Group consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United Kingdom (UK GAAP). UK GAAP differ in certain respects from accounting principles generally accepted in the United States (US GAAP). The material differences between UK GAAP and US GAAP relevant to Reuters Group are explained on pages 65-66.

This report contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 with respect to Reuters Group's financial condition, results of operations and business and management strategy, plans and objectives for the Group. For a discussion of risks associated with these statements see 'Risk factors' on pages 34-35 .

Reuters, the sphere logo and Reuters product names referred to in the report are trade marks or registered trade marks of the Reuters Group of companies around the world. Other trade marks of third parties are used in this report for the purpose of identification only.

– Page 2 –
Five year summary
Three year Reuters customer segments and Instinet revenue summary


– Page 3 –

The selected financial information set out below is derived, in part, from the consolidated financial statements. The selected data should be read in conjunction with the financial statements and related notes, as well as the operating and financial review.

The consolidated financial statements are prepared in accordance with UK GAAP, which differ in certain respects from US GAAP. For a summary of the principal differences between UK and US GAAP and related information, see pages 65-70 of this report.

Consolidated profit and loss account
year ended 31 December

  Notes 2002 2001 2000 1999 1998
  below £m (except per share data)

Amounts in accordance with UK GAAP:            
Revenue   3,575 3,885 3,592 3,125 3,032
Operating (loss)/profit   (144) 302 411 549 550
(Loss)/profit on ordinary activities before taxation   (493) 158 657 632 580
(Loss)/profit on ordinary activities after taxation   (516) 51 521 436 408
Basic (loss)/earnings per ordinary share   (29.0p) 3.3p 37.1p 30.9p 28.4p
Diluted (loss)/earnings per ordinary share   (29.0p) 3.2p 36.5p 30.4p 28.3p
Basic (loss)/earnings per ADS   (173.8p) 19.7p 222.8p 185.7p 170.3p
Diluted (loss)/earnings per ADS   (173.8p) 19.3p 219.1p 183.1p 169.7p
Dividends declared per ordinary share (including UK tax credit) 1 11.1p 11.1p 17.8p 16.3p 16.5p
Dividends declared per ADS (including UK tax credit): 1          
  Expressed in UK currency   66.7p 66.7p 106.7p 97.7p 98.8p
  Expressed in US currency 2 105.2c 95.6c 157.7c 154.6c 159.6c
Weighted average number of ordinary shares (in millions)   1,395 1,404 1,404 1,409 1,438

Amounts in accordance with US GAAP:            
Revenue   3,771 4,045 3,704 3,182 3,078
(Loss)/Income before taxes on income   (255) 205 652 622 572
Net (loss)/income   (127) 92 534 451 392
Basic (loss)/earnings per ordinary share   (9.0p) 6.6p 38.0p 32.0p 27.8p
Diluted (loss)/earnings per ordinary share 3 (9.0p) 6.5p 37.4p 31.6p 27.7p
Basic (loss)/earnings per ADS (after accounting change) 3 (54.3p) 39.5p 228.1p 192.1p 166.6p
Diluted (loss)/earnings per ADS (after accounting change) 3 (54.3p) 38.7p 224.3p 189.5p 166.0p
Dividends declared per ordinary share (including UK tax credit) 1&3 11.1p 18.0p 16.3p 16.3p 121.3p
Dividends declared per ADS (including UK tax credit): 1&3          
  Expressed in UK currency   66.7p 108.0p 97.7p 97.7p 727.5p
  Expressed in US currency 2 99.6c 155.3c 150.8c 156.4c 1,190.0c
Weighted average number of ordinary shares (in millions) 3 1,395 1,404 1,404 1,409 1,411

Consolidated balance sheet data
as at 31 December

Amounts in accordance with UK GAAP:            
Total assets   3,524 4,538 3,870 2,714 2,756
Long-term debt and provisions for charges (excluding deferred tax)   572 526 394 349 118
Net assets   727 1,273 1,153 663 440
Shareholders' equity   496 1,109 1,153 663 423
Share capital   358 358 357 355 354
Amounts in accordance with US GAAP:            
Total assets   3,510 4,373 3,783 3,173 2,722
Long-term debt   552 572 458 362 75
Net assets   770 1,125 1,186 1,109 521
Shareholders' equity   528 959 1,186 1,109 504

1. Under UK GAAP dividends declared are those declared in respect of the year for which selected financial data is presented. Under US GAAP dividends declared are those formally declared within each calendar twelve-month period. For further information relating to dividends and the UK taxation of dividends see pages 74 and 78 .
2. Dividends expressed in US$ have been converted at the actual exchange rates used in the payment of dividends to ADS holders, except that the final dividend declared in respect of 2002, payable to ADS holders on 1 May 2003, has been converted at the Noon Buying Rate on 24 February 2003 for convenience.
3. In 1998, Reuters Holdings PLC consummated a court approved capital reorganisation in which shares of Reuters Holdings were exchanged for a combination of shares of the company and approximately £1.5 billion in cash. Under US GAAP this transaction was deemed a share consolidation combined with a special dividend and accordingly, earnings per share and per ADS and dividends per share and per ADS amounts were retrospectively restated. Under UK GAAP no restatement was deemed appropriate as the cash payment was considered a repurchase of shares and the number of new shares in the company was set to facilitate comparability of per share amounts with those of Reuters Holdings.


– Page 4 –

The Reuters Group includes the core Reuters information business (Reuters) and Instinet Group Incorporated, a 63% owned public subsidiary, which operates the largest global electronic agency securities brokerage (Instinet).

Reuters, the global information company, provides valuable information and related services tailored for professionals in the financial services, media and corporate markets. Reuters information is trusted and drives important decision making across the globe based on Reuters reputation for speed, accuracy and independence. Reuters has 15,900 staff in 94 countries, including some 2,400 editorial staff in 197 bureaux, making Reuters the world's largest international multimedia news agency. Instinet had approximately 1,500 employees in 12 countries. In 2002 the Reuters Group had revenues of £3.6 billion.


On 18 February 2003 Reuters announced it was accelerating its transformation strategy to become a more competitive, focused and profitable information company. The three-year action plan, Fast Forward, is intended to strengthen Reuters core information business. It addresses the impact of structural changes in the financial services industry including consolidation, reduced headcount, growth in market data volumes and increasing regulation.

The five principal components of the Fast Forward plan are:


Supply information that customers value, by building on core strengths in providing content, analytics and trading and messaging capabilities in an open technology format. Reuters expects to; provide new company fundamental data and investment research through its pending acquisition of, Inc. (Multex)(described below); increase its investment in analytics; continue to provide advanced tools to help customers communicate and share information; and build enhanced trading capabilities for the equities and fixed income markets into its premium information products.
2.  Move to a single product delivery system, radically simplifying the way products and data are delivered by the use of a single, global technology platform.
3.  Simplify and segment the product line, supplying the right product at the right price to profitable target markets, worldwide. During 2003 Reuters expects to launch a series of next generation products, offering specific data and tools required by different financial professionals. At the same time Reuters will speed up the withdrawal of numerous legacy products and platforms.
4.  Focus Reuters solutions business, withdrawing from some elements of the established solutions business and actively managing Reuters portfolio of non-core investments. Going forward, Reuters solutions business will focus on three core areas of expertise – risk management, content management and treasury products – and Reuters will not seek further business from pure technology consulting or technology solutions that are not based on Reuters offerings.
5.  Reshape the cost base, redirecting investment into key areas such as customer service, reaping the benefits of global scale, reducing staff costs and driving higher operating margins through greater scalability.
See 'Operating and financial review' for information concerning the expected financial impact of the Fast Forward plan.


Reuters operates its business through customer segments, geographic sales and service channels and shared resources to build, sell and support the products and services its customers need.

Customer Segments. Three of Reuters four customer segments serve financial markets: Treasury Services, Asset Management and Investment Banking. The fourth, Corporates & Media, builds on Reuters well established media business and also aims to use Reuters assets to serve a broader customer base. Since February 2003, Reuters product management activities have been integrated with the customer segments to facilitate the move to a single product architecture and segmentation of the product line.

Treasury Services. Reuters has a long history of helping customers operate more effectively in the foreign exchange and money markets and has built a powerful global franchise. The largest segment, Treasury Services provides news, prices, analytics and transaction services. It also offers solutions that enable customers to service their customers efficiently and software applications that enable financial institutions to understand and manage their risks, cash flow and order flow. Treasury customers are foreign exchange and money market professionals working in banks, brokerages and exchanges, and corporate and institutional treasuries. This customer segment also provides real-time news and data to the commodities and energy markets. At present, Reuters has more than 66,400 professional users of its treasury information products and a community of 18,000 members who actively trade with each other using Reuters dealing services.

Reuters believes that providing banks with the capabilities they need to address the foreign exchange and money market requirements of their customers will be an important area. For this reason, in December 2002 Reuters acquired AVT Technologies Ltd. (AVT), a leading provider of automated dealing services and tailored solutions in this sector.

Asset Management. The asset management market is a large and diverse sector in which Reuters has a substantial presence. Reuters provides news, prices, analytics and transaction services to help asset managers make trading and investment decisions and gain access to liquidity. Reuters helps them to differentiate their services from those of their competitors and to communicate effectively with their customers and with each other. Reuters also enables them to streamline their business and transact more easily. Customers of this segment, which include the top 50 asset management firms around the world, range from institutional fund managers and hedge funds to private banks and retail broking houses. Reuters offers services for a wide range of roles within firms. These include portfolio managers, research analysts, traders and private wealth managers. Under the Lipper brand Reuters offers world class funds data and analytics for both equities and bonds.

Investment Banking. Reuters is well established in the investment banking sector. It provides news, prices, analytics and transaction services for a diverse range of organisations and end-users. Key customers are global, regional and boutique investment banks, brokerage and venture capital concerns. Within these firms, Reuters serves a wide range of professionals including equity and fixed income salespeople, traders and brokers, research analysts and corporate finance and M&A professionals. In addition, Reuters provides content and software solutions to serve the enterprise needs of its customers.

Corporates & Media. Reuters Media business is directed towards serving the needs of the world's newspapers, television and cable networks, radio stations, websites and consumers. Reuters offers its retail customers direct access to a segmented offering of news and data products through its branded websites (such as and, books and signage (such as Reuters has a long history of innovation in the media business, including having been the first to introduce fully packaged, multimedia news products for online publishers and having developed NewsML, the emerging internet standard for news delivery.

The Corporates businesses provide research, advisory and business intelligence services to customers primarily outside financial services, though much of their content is available to financial services clients as well. Reuters research business provides proprietary, high-value, decision-support information to a wide range of corporate customers who can be reached cost-effectively through its financial products or directly utilising web technology. Reuters research subsidiaries, Tower Group and Yankee Group, service the information needs of information technology, communications and financial services corporate customers. Factiva, Reuters joint venture with Dow Jones, operates one of the world's richest and most diverse news and information retrieval services. Reuters relationship with Datamonitor, a European based research company (in which it holds a 20% equity interest), allows Reuters to report information on an extensive range of companies and industries (including healthcare, automotive and energy). Reuters subsidiary ORT SA provides its customers with company information and summary credit evaluations of a number of French and Belgian companies.

– Page 5 –

On 18 February 2003 Reuters announced it had entered into a definitive agreement to acquire Multex for a total of £121 million in cash. Multex possesses significant content assets, access to the research community and market experience that Reuters expects to bring substantial benefits to it and its customers. Reuters expects that the acquisition will strengthen its financial information products with the addition of deeper global company information and estimates as well as global research content. Reuters intends to combine these assets with its own to offer the producers and consumers of investment research innovative, cost-effective solutions. Outside of the professional financial markets, Reuters expects to use these assets to create segmented online financial news, data and research products for retail consumers as well as corporate and media customers. Under the acquisition agreement, Reuters commenced a tender offer for all outstanding Multex shares on 26 February 2003 which, subject to satisfaction of its conditions, Reuters expects to complete by the end of March 2003. Following the acquisition, Multex will become a wholly-owned subsidiary of Reuters.

Reuters serves its customers through three geographic sales and service channels: the Americas; Europe, Middle East and Africa; and Asia Pacific. Members of the sales and service team locally work with customers to build global and local relationships and to identify the best mix of products and solutions for each individual enterprise and to provide after sales service to help customers and users get the most out of investments made. These sales channels provide feedback to the customer segments on how products are working and how they can be enhanced to meet future customer needs. Revenues for the three years to 31 December 2002 are analysed by segment on pages 27-28 of the operating and financial review and by geography and by segment on pages 37-38 in note 1 on the consolidated profit and loss account.


Reuters future success depends on its ability to create and deliver innovative and trusted services. Support is provided to the customer segments through shared centres of excellence providing specialist services – the Business Technology Group, the Chief Information Office, Editorial, Business Support Services and Corporate.

The Business Technology Group includes technical operations, development and data staff. BTG's role is to create a coherent and high quality product line that delivers considerable value and satisfaction to customers, supporting the evolving customer segment strategies with the Fast Forward plan overarching these.

The Chief Information Office's role is to establish a strong, consistent IT strategy across the Group and to bring innovation into the business through technology leadership.

Editorial's role is to cover and edit the news to the highest standards so as to meet the needs of customers. Reuters news has been a benchmark of excellence for more than 150 years and underpins our reputation for speed, accuracy, integrity and freedom from bias.

Business Support Services and Corporate ensure the business operates as efficiently as possible. These Groups include functions such as Finance, Human Resources and Legal.


Approximately half a million financial professionals across the globe each day receive market data, in-depth news, quotes, statistics and analytics on financial and commodity markets from Reuters. Known for its expertise in journalism, Reuters is also the largest financial information provider in the world with annual sales of £3.0 billion (US$4.4 billion) in 2002.

Relying on its considerable experience in the financial information industry and incorporating advanced technologies, Reuters has played an important role in redefining this rapidly changing industry and, as a result, provides a wide range of products and services that offer content, analytics, communities and openness to help customers succeed.

Reuters products and services fall into the broad categories of Information, Transaction & Interaction and Solutions; many of these products serve more than one customer segment.

Information. These products help professionals turn raw data into useable information, so they can make decisions with confidence.

Financial information is collected from an array of sources including exchanges, over-the-counter markets, research services and other contributors such as energy and fixed income providers. The data is available through various delivery platforms such as workstations, datafeeds and internet solutions.

High-powered workstations, such as Reuters 3000 Xtra and Reuters BridgeStation, operate on Microsoft Windows software and combine cross-market data with superior analytics, charting capabilities and news, so that traders, analysts, money managers, economists and others have the tools they need to interpret and act in the marketplace. Reuters also offers rich data and tools delivered in an internet browser, providing both convenient and cost-effective information solutions.

Transaction & Interaction. Reuters Global Routing Service (RGRS) (formerly known as IOE/Reuters Intertrade Direct), is a large order routing network that connect buyers and sellers by providing customers with electronic access to multiple brokers, including Instinet and Bridge Trading Company (BTC). Reuters is currently in the process of bringing end-to-end transactional capabilities to its equity clients through RGRS as well as its strategic alliance with Orc Software AB which will provide direct trading access to the world's leading equity and equity derivatives exchanges.

Treasury customers can choose from tiered product offerings, such as Reuters Dealing 3000 and Reuters Dealing Link, a browser-based version, which provides them access to a community with over 18,000 foreign exchange and money markets traders. BTC, a New York Stock Exchange (NYSE) member, provides agency trading for institutional customers. Instinet also provides substantial services in this area, as described below.

Solutions. In addition to helping customers manage their trading and investments, Reuters also helps them better manage risk throughout their organisation. These products are particularly suited to foreign exchange and money market professionals in the middle and back offices of banks and large corporations who are responsible for risk management systems, position-keeping, pricing, risk analysis, credit and other exposure. Products such as Reuters Kondor+, a real-time position-keeping system, Reuters KreditNet, a real-time credit limits management solution, and Reuters KvaR+, which coordinates with Reuters Kondor+ and other position-keeping systems to provide consolidated enterprise-wide risk information and analysis on all financial activities within an organisation, help treasury professionals make informed decisions in managing the financial exposure of their trading room activities. Reuters also offers a back office solution, Reuters Trade Processing, that facilitates the daily processing of trades through clearing and settlement and into the client's accounting systems.

Using its strengths in data management and technology know-how, Reuters helps customers automate and integrate their own internal business processes. Products like the Reuters Market Data System help companies address problems managing financial content across their trading environment, which results in greater performance, reliability and ultimately, profitability.

New capabilities for the future. In October 2002 Reuters Messaging was unveiled, an instant messaging service built specifically for financial professionals that enables them to collaborate in real time with their customers and colleagues. In 2003 Reuters expects to launch a number of new products. These include Reuters Knowledge, a new information service for research and investment banking professionals that combines a number of functions they need to do their job into one product; the European Markets Suite, aimed at Eurozone professionals; and Reuters Intelligent Advisor, a service designed to meet the needs of private wealth advisers.

– Page 6 –


Instinet, the largest global electronic agency securities broker, has been providing investors with electronic trading solutions for more than 30 years. Its services enable buyers and sellers worldwide to trade securities directly and anonymously with each other, gain price improvement for their trades, manage their orders and lower their overall trading costs. Through its electronic platforms, Instinet's customers also can access over 40 securities markets throughout the world, including Nasdaq, the NYSE and stock exchanges in Frankfurt, Hong Kong, London, Paris, Sydney, Tokyo, Toronto and Zurich. Instinet's customers primarily consist of institutional investors, such as mutual funds, pension funds, insurance companies and hedge funds, as well as market professionals, including broker-dealers.

Instinet completed an initial public offering in May 2001 and its common stock is listed on the Nasdaq Stock Market (symbol INET.O). In October 2001 Instinet acquired ProTrader Group LP, a provider of advanced trading technologies and electronic brokerage services, for consideration consisting of cash and shares. In September 2002, Instinet completed its acquisition of Island Holding Company, Inc., the parent company of The Island ECN, Inc. (Island), a leading electronic securities marketplace, in an all-stock transaction. As a result of the initial public offering, the ProTrader acquisition and the Island acquisition, Reuters Group's shareholding of Instinet is now approximately 63%.


The Group uses multiple communications networks, employing a complex variety of technologies, for distribution of its products. Reuters Group completed the first year of a major strategic initiative to migrate its principal product sets from its prior network infrastructures on to a single global IP-based network provided by Radianz Limited (Radianz), the 51% owned joint venture with network services provider Equant BV. This will deliver greater resilience, speed and capability at lower overall cost.

Reuters has four global technical centres, two main technical centres and many smaller local data centres. Our data centres are linked by communications services provided by Radianz, using dedicated international communications circuits that rely on satellite links, optical fibre cables and coaxial cables. These circuits are leased by Radianz from various governmental and private telecommunications operators including Equant. Communications between data centres and subscribers are provided by Radianz in 20 countries and by Reuters directly or third parties elsewhere; they mainly use dedicated terrestrial circuits which are leased from telecommunications operators and are supplemented by a variety of other transmission systems. These include satellite-based networks for delivery of services to small dish receivers on customer premises.

For further information regarding Radianz and the relationship between Reuters Group and Radianz, see page 77.

Two of the global technical centres and a number of smaller distribution centres were acquired in 2001 as part of Reuters acquisition of the core North American equities information and trading businesses of Bridge Information Systems, Inc. Some of these smaller distribution centres, located in Europe and Asia, are maintained by Moneyline Telerate (which acquired certain other businesses of Bridge).

The network services agreements with Radianz and with Savvis Communications Corporation (Savvis), Bridge's legacy network service provider, are important to the Group's capability to deliver products and services to customers. Although reasonable steps are taken to ensure continuity of service, any failure or interruption of such systems could have a significant effect on the Group's business (see Risk factors on page 34). A summary of these network services agreements is given on page 77.

Reuters products are generally billed by number of user accesses to datafeeds, portable devices and terminals. The number of accesses at the end of the last three years are shown below:
  31 December

000s 2002 2001 2000

Premium products* 93 84 31
2000/3000 series 98 134 166
Mid and lower tier 302 374 330

Total 493 592 527

*Premium products include 3000 Xtra, Dealing and BridgeStation.


Reuters principal joint ventures and associates include:

TIBCO Software Inc. (TSI). TSI provides total business integration solutions delivering infrastructure software that enables businesses to integrate their business systems in real-time. In 1999 TSI completed an initial public offering of its common stock on the Nasdaq Stock Market (symbol TIBX.O). At 31 December 2002 Reuters held approximately 50% (39% fully diluted) of the outstanding shares of TSI. Reuters Group does not consolidate TSI for accounting purposes. For information on a license agreement between Reuters and TSI with respect to TIBCO technology, see Related party transactions on page 72.

Radianz. Radianz, the joint venture with Equant, was formed in 2000 to develop a secure internet protocol network for use by the financial services industry. Reuters own 51% of the company but shares voting control and therefore does not consolidate Radianz as a subsidiary for accounting purposes. Radianz connects all types of market participants: brokers, institutions, exchanges, custodians, and clearing and settlement houses. An important part of Reuters strategy is to build communities in the securities markets as Reuters has done in the foreign exchange and money markets.

Factiva. Factiva is a 50% owned joint venture with Dow Jones formed in 1999. It provides a broad range of global news and a deep historical archive of business information. Through its products and technology solutions Factiva enables enterprises to retrieve information and to integrate content into their business applications and intranet portals. Factiva's business information includes Reuters and Dow Jones newswires, plus nearly 8,000 other newspaper and periodical sources and 8,500 business-oriented websites from around the world, delivered in 22 languages. These sources provide current news, historical articles, photographs, market research and investment analyst reports, and stock quotes. Factiva's primary audience consists of information professionals and researchers, with around 70% of their revenue derived from sources outside the financial services sector. Reuters is a major distributor of Factiva content within the financial services sector. Reuters Group does not consolidate Factiva for accounting purposes.


The Group faces significant competition in all market sectors and geographical areas in which it operates.

Competing information products for the financial markets are offered by Bloomberg LP, Quick Corporation of Japan, Telekurs AG, Thomson Financial, a division of The Thomson Corporation, Sungard, Moneyline Telerate (including the Telerate business formerly owned by Bridge) and Factset, plus a number of smaller local and regional competitors. In connection with the Bridge acquisition, Reuters agreed to provide Moneyline Telerate with various network, software development, data management, customer support, administrative and other transitional services and granted to Moneyline Telerate certain intellectual property and software licenses. Moneyline Telerate agreed to provide Reuters with various field support, network and administrative services and co-location rights, in each case for a term not to exceed four years (depending upon the service in question).

– Page 7 –

The Lipper funds information business competes with Morningstar Inc, the Micropal unit of Standard & Poor's, a division of the McGraw-Hill Companies Inc., Value Line Inc and Thomson Corporation's CDA Weisenberger.

Reuters foreign exchange spot matching services compete with the Electronic Broking Service and Bloomberg. Reuters money and foreign exchange transaction products also compete with voice brokers in the relevant markets.

Competitors in the supply of market data systems include Misys plc, Sunguard Data Systems Inc and CSK Software and a large number of other vendors. Competition for the supply of company, financial and industry specific information is fragmented widely among traditional information providers such as Bloomberg, Thomson Financial and Dow Jones, among online exchanges such as ICE and NYMEX and among niche players with specialist tools or local market coverage such as CQG and MetalBulletin.

Reuters main competitors in the supply of news to the media are Associated Press, Agence France Presse, Dow Jones and Bloomberg News.

Instinet competes with the following, among others: market makers and other traditional broker-dealers (including many of its own customers) acting as agent or principal; traditional and electronic trading methods in use on US and international exchanges, including NYSE specialists and the electronic matching systems of international exchanges; the trading platform for the Nasdaq market, known as SuperMontage, and Nasdaq's primex system which enable NASD members to trade electronically in Nasdaq quoted stocks; the NYSE's institutional Xpress, NYSE Openbook and NYSE Direct products; electronic communications networks (ECNs), alternative trading systems (ATSs), electronic brokers and other electronic trading systems, including Bloomberg Tradebook and Archipelago-Redi; automated trade execution services developed by third party vendors for commercialisation in a wide range of financial product markets; and trading system software companies.

The financial services industry generally, and the securities brokerage business in which Instinet engages in particular, is very competitive. Instinet has experienced intense price competition in its equity securities business in recent years. Also, some of its competitors may have more modern technology and a broader range of services and, therefore, may be able to offer brokerage services to customers at lower prices than Instinet can. As a result, Instinet has aggressively reduced pricing for its US broker-dealer customers. These pricing changes have caused the transaction fee revenue Instinet receives from this customer group to decline significantly and could cause the transaction fee revenue it receives from this customer group to continue to decline, even if their volumes increase. As a result of Instinet's reduced pricing for its US broker-dealer customers, it has experienced a decline in revenue and volatility in its market share. As a result of these pricing changes, Instinet has taken, and will continue to take, actions to reduce costs, which may include reducing staff levels, consolidating facilities, and reducing operational and transaction-related expenses, among other alternatives. Instinet expects intense competition to continue, and if it does so or intensifies, it could lose further market share and revenue.

Since the beginning of 2000, the Group has made a number of acquisitions and has invested in several new and existing businesses including several joint ventures. The principal acquisitions and investments (none of which exceeded a cost of £50 million, save where otherwise stated) were:
O R Télématique SA (now known as ORT SA), acquired in 2000, a leading online provider of company information;
Yankee Group Research Inc., acquired in 2000, an international technology research and advisory firm specialising in sectors essential to e-business;
Diagram fip SA, acquired in March 2001, a major European provider of financial software solutions for the capital markets;
ProTrader Group LP, acquired by Instinet in 2001 for total consideration valued at £105 million;
certain businesses of Bridge Information Systems, Inc., acquired in September 2001 for total consideration of £256 million, including interim funding to Bridge and Savvis;
Island Holding Company Inc., acquired by Instinet in September 2002 for stock consideration having a value at the closing of £194 million;
Capital Access International LLC, which provides fixed income holdings information, acquired in November 2002;
AVT Technologies Ltd, a specialist in foreign exchange transaction technology, acquired in December 2002; and
in February 2002, Reuters entered into a definitive agreement to acquire Multex for £121 million in cash, which is subject to the satisfaction of customary conditions and is expected to complete by the end of March 2003.

In October 2001 Reuters sold its interest in VentureOne Corporation, a provider of information and research for the venture capital investment industry, to Wicks Business Information, LLC for a net consideration of £18 million in cash.

The principal disposals or closures in 2002 were:

in September 2002, Reuters sold its 20% shareholding in London News Radio;
in September 2002 and November 2002, Reuters sold Diagram Asset Management and Diagram EDI respectively, two non-core units that were acquired as part of the acquisition of Diagram fip SA in 2001;
in December 2002, Reuters sold its 40% shareholding in Sila Communications;
during 2002, Atriax ceased operations and is currently in the process of being liquidated by its shareholders; and
Reuters disposed of or closed a total of 56 units in 2002.

Total capital expenditure for acquisitions, investments in joint ventures, associates and other investments during 2002 was £317 million (2001: £519 million, 2000: £426 million).

Further information relating to investments, acquisitions, joint ventures and disposals in 2002 is provided in note 16 and note 31.


The UK Financial Services Authority (FSA) under the Financial Services and Markets Acts 2000 regulates Reuters Limited, the principal operating company, as a service company.

Reuters Transaction Services Limited (RTSL), through which Dealing 3000 Spot and Forwards Matching are operated, is subject to regulation by the FSA equivalent to that applied to broking participants in the London foreign exchange market. The operations of RTSL's Singapore branch are subject to oversight by the Monetary Authority of Singapore and those of the Hong Kong branch by The Hong Kong Monetary Authority. The Group's other UK authorised firms include Reuters InterTrade Direct SA, also regulated as a service company, and Bridge Trading Company UK Limited which, under the passporting provisions of the EU Investment Services Directive, allows for the introduction of UK and EU clients directly to Bridge Trading Company in the US.

– Page 8 –

As registered broker-dealers, members of self-regulatory organisations in the US and other countries in which they operate and, in the case of the Instinet ATS and the Island ATS as operators of electronic communications networks and alternative trading systems in the US, Instinet and BTC are subject to regulation under the US securities laws and their equivalents in other countries, including but not limited to net capital requirements, and to possible increased levels of regulation in the future. The regulatory framework generally applies directly to Instinet and BTC affiliates that are registered or licensed in various jurisdictions.

The use of communications links is subject to government licensing in several countries.

The Group conducts its business through a portfolio of companies, including wholly and partly owned subsidiaries, joint ventures and associated companies. Information concerning the most significant companies is contained in note 32.


The Group's tangible fixed assets are primarily in the form of computer systems equipment that form the infrastructure for the company's business. This equipment is distributed across global sites with greater concentration at the major global and regional technical centres. A reducing proportion of the equipment is located at customer sites around the world.

The Group's principal facilities are:

the corporate headquarters and adjoining office building (145,000 sq. ft.) in Fleet Street, London;
the US headquarters at 3 Times Square in New York City (692,000 sq. ft.);
global technical centres in London (324,000 sq. ft.) and Geneva (144,000 sq. ft.);
properties located in St Louis County, Missouri, acquired from Bridge in 2001, consisting of four corporate office buildings (aggregate of 211,000 sq. ft.), two global technical centres (4,800 sq. ft. and 6,000 sq. ft., respectively), a warehouse (32,000 sq. ft.) and a 5.4 acre parcel of land; and
two other main technical centres in Hauppauge, New York (50,000 sq. ft.) and Singapore (180,000 sq. ft.).

The London properties and the New York technical centre are situated on land owned by Reuters, whereas the buildings in Geneva and Singapore were built by us on leased land. The leases, including periods covered by options to extend, expire in 2095 and 2050, respectively. The Reuters Building at 3 Times Square is owned, and was developed jointly, by Reuters and Rudin Times Square Associates LLC. In May 2001 Reuters leased 692,000 sq. ft. from the venture of which 360,000 sq. ft. was subleased to Instinet. The principal part of Reuters lease will expire in 2021. Reuters secured its lease position with a $120 million letter of credit. In St. Louis, all four corporate office buildings (211,000 sq. ft.) are owned, and the 32,000 sq. ft. warehouse is leased (and in turn subleased to Savvis) for a term that expires in 2004. One of the global technical centres in St. Louis is located in an owned facility and the other is located in a leased facility, whose lease expires in 2004. The 5.4 acre parcel of land is currently under ground lease to Savvis for a term expiring in 2099.

Though its predecessor was formed in London in 1851, the ultimate holding company for the Group, Reuters Group PLC, was incorporated in England and Wales on 24 December 1996. Reuters registered office and corporate headquarters are located at 85 Fleet Street, London EC4P 4AJ, England (telephone: +44 (0)20 7250 1122).


Reuters Group is a party to certain legal proceedings including the following:

Island commenced an arbitration proceeding before the NASD against Archipelago L.L.C. (Archipelago), B-Trade Services LLC (B-Trade), and REDIBook ECN L.L.C. (REDIBook). Island alleged that each respondent entered into a subscriber agreement with Island which prescribed certain fees and, despite Island's demand that each respondent abide by the terms of its contract, each respondent has refused to pay such fees. Island is seeking approximately US$11 million in total damages, of which approximately US$1.9 million is from B-Trade, US$5.1 million from Archipelago and US$4 million from REDIBook. Archipelago and REDIBook have counterclaimed against Island alleging that Island engaged in unfair, discriminatory pricing practices against them and asserting claims involving breach of contract, breach of obligation of good faith, and attempted monopolisation and conspiracy to restrain trade under the US Sherman Act. These counterclaims allege damages of no less than US$30 million before trebling, for a total of no less then US$90 million trebled damages pursuant to the federal antitrust laws. B-Trade also counterclaimed alleging a breach of contract counterclaim against Island and seeking at least US$2.75 million in damages. Island intends to pursue vigorously its claims and oppose respondents' counterclaims.

Archipelago commenced a separate action against Instinet before the NASD in which it alleged that Instinet also engaged in unfair, discriminatory pricing practices against it and asserted claims involving breach of contract, breach of obligation of good faith, and attempted monopolisation and conspiracy to restrain trade under the Sherman Act. Archipelago in its claim seeks no less than US$41 million before trebling for a total of no less than US$123 million trebled damages. Instinet intends to defend vigorously this proceeding by asserting certain affirmative defences and its own counterclaims against Archipelago.

NexTrade Holdings, Inc. has commenced an action against certain Instinet ProTrader subsidiaries alleging that they have infringed certain of NexTrade's trade mark rights. The plaintiff seeks to recover all of these subsidiaries' profits, gains and advantages resulting from the unauthorised use of the trade mark, damages sustained by the plaintiff of no less than US$15 million before trebling and that such damages be trebled, and exemplary and punitive damages of not less than US$90 million. The defendants intend to vigorously contest the plaintiff's claims.


– Page 9 –
The directors submit their annual report and audited financial statements for the year ended 31 December 2002.

The Group's business is described on page 4 . A detailed review of activities during 2002 and likely future developments is given on pages 4-8 and 24-33.


Details of the changes in the authorised and called-up share capital are set out in notes 26 and 27 on page 57. Details of major shareholdings are given on page 71 .

An interim dividend of 3.85 pence per ordinary share was paid on 4 September 2002. The directors recommend a final dividend of 6.15 pence per ordinary share, giving a total of 10.0 pence per ordinary share for the year (2001: 10.0 pence). Subject to shareholders' approval at the annual general meeting to be held on 17 April 2003, the final dividend will be paid on 24 April 2003 to members on the register at the close of business on 14 March 2003.


Since the last annual report the total number of the Group's employees has been reduced by some 3,000 people as a result of the business and structural changes which have been implemented. The total number of Reuters Group employees at 31 December 2002 was 17,414 (31 December 2001: 19,429). Details of average numbers of employees by segment are given on page 42.

It is Reuters policy that selection of employees, including for recruitment, training, development and promotion, should be determined solely on their skills, abilities and other requirements which are relevant to the job and in accordance with the laws in the country concerned. Reuters equal opportunities policy is designed to ensure that disabled people are given the same consideration as others and enjoy the same training, development and prospects as other employees.

To provide employees with the information they need to understand and achieve the Group's business objectives, Reuters makes extensive use of its intranet as a communication tool. Meetings are regularly held between management and employees' union representatives so that the views of employees can be taken into account in making decisions which may affect their interests. Reuters European Employee Forum operates as a pan-European works council. The Chief Executive or other executive directors meet with the Forum regularly. Regular employee surveys are undertaken to evaluate morale and to identify any employee issues that need to be addressed. The results are communicated to employees.

The Board values the courage and professionalism shown by employees operating in zones of conflict. Reuters has reviewed the adequacy of its policies, training and procedures for employees generally and for those working in dangerous places in particular. Reuters has reaffirmed the standing instructions to employees to avoid risks wherever possible and for hostile environment training and protective equipment to be provided to all employees who may need them.


In 2002 Reuters continued to support community initiatives and charitable causes, mainly through the work of the Reuters Foundation charitable trust. A report on the activities of the Foundation and the Group's wider corporate social responsibility programme can be found in the 2002 annual review or on Reuters website ( The total cash donated by Reuters in the year amounted to £4.7 million. In addition to these cash contributions, employees are encouraged to give their time and skills to a variety of causes and Reuters provides valuable equipment and information services free of charge.

No political contributions were made by Reuters.

It is the Group's normal procedure to agree terms of transactions, including payment terms, with suppliers in advance. Payment terms vary, reflecting local practices throughout the world. It is Group policy that payment is made on time, provided suppliers perform in accordance with the agreed terms. Group trade creditors at 31 December 2002 were equivalent to 18 days' purchases during the year (2001: 24 days).

At the annual general meeting held on 23 April 2002, members renewed the company's authority under section 166 of the Companies Act 1985 to make purchases of up to 143,206,517 ordinary shares at a price of not more than 5% above their average middle market quotation in the London Stock Exchange Daily Official List for the five business days prior to the date of purchase, nor less than 25 pence each.


The names and biographical details of current directors are given on pages 10-11.

Geoffrey Weetman and Dennis Malamatinas retired from the Board in July and October 2002 respectively, and Niall FitzGerald was appointed as a non-executive director with effect from 1 January 2003. On 17 February 2003 Devin Wenig was appointed as an executive director. Ed Kozel, Roberto Mendoza and Dick Olver retire by rotation and are proposed for re-election as directors at the forthcoming annual general meeting. Niall FitzGerald and Devin Wenig having been appointed by the Board since the last annual general meeting also retire and are proposed for election. As non-executive directors, Ed Kozel, Roberto Mendoza, Dick Olver and Niall FitzGerald do not have service contracts. Details of the remuneration of the non-executive directors and information on the service contracts and remuneration of the executive directors are set out on pages 13-21, together with details of directors' interests in shares of the company and its subsidiaries.


Details of post balance sheet events are given on page 61.

By order of the Board

Rosemary Martin
Company Secretary
24 February 2003


– Page 10 –
The directors and senior executives of Reuters are:
Name Position Position
held since

Sir Christopher Hogg Chairman; Director ¹ 1985; 1984
Thomas Glocer Chief Executive; Director 2001; 2000
Philip Green Chief Operating Officer; Director 2001; 2000
David Grigson Finance Director; Director 2000; 2000
Devin Wenig President – Customer Segments; Director 2003; 2003
Sir John Craven Director ¹ 1997
Niall FitzGerald Director ¹ 2003
Ed Kozel Director ¹ 2000
Roberto Mendoza Director ¹ 1998
Richard Olver Director ¹ 1997
Charles Sinclair Director ¹ 1994
Ian Strachan Director ¹ 2000
Senior Executives    
Graham Albutt President – Business Programs 2003
Christopher Hagman Managing Director – Europe, Middle East and Africa 2001
Alexander Hungate Chief Marketing Officer, President – Focus Group Accounts 2001
Geert Linnebank Editor-in-Chief 2000
Stephen Mitchell Head of Risk Management and General Counsel 1998
Michael Sayers Chief Technology Officer 1998
David Ure Strategic Adviser to the Board and non-executive Chairman of Radianz 2000

¹ Non-executive director

In accordance with the company's articles of association at each annual general meeting the greater of one third of the directors (or, if the number of directors is not a multiple of three, the number nearest to but not greater than one third) and the number of directors required to retire pursuant to the following criteria shall be proposed for re-election: (i) due to retire at the meeting by reason of age; (ii) wishes to retire and not offer himself for re-election; or (iii) shall not have retired from office by rotation in the period of three years ending on the date of the meeting.

If there are no changes to the current Board composition the following directors will be eligible for re-election at the annual general meeting in 2004: Sir Christopher Hogg, Tom Glocer, David Grigson and Ian Strachan, and in 2005: Charles Sinclair, Sir John Craven and Philip Green.

Sir Christopher Hogg. Non-executive Chairman of GlaxoSmithKline plc since May 2002 (non-executive director since 1993) and a non-executive director of Air Liquide SA since May 2000. Non-executive Chairman of the Royal National Theatre since 1995. Member of the International Council of JP Morgan since 1988. Former Chairman of Courtaulds PLC from 1980 to 1996 (Chief Executive 1979-1991) and of Allied Domecq PLC (1996-2002). Former non-executive director of the Bank of England (1992-1996). Member of the Audit and Nominations Committees. Age 66.

Tom Glocer. Chief Executive. Former Chief Executive Officer of Reuters Information (2000) and President & Senior Company Officer, Reuters America (1998-2000). Appointed Chief Executive Officer, Reuters Latin America in 1997 after serving in Reuters legal department from 1993. Formerly practised law in New York, Paris and Tokyo. Non-executive director of Instinet and of the New York City Investment Fund. Member of the International Advisory Board of the Monetary Authority of Singapore, the Corporate Council of the Whitney Museum and of the Leadership Champions Group (Education) of Business in the Community. Age 43.

Philip Green. Chief Operating Officer. Joined Reuters in September 1999 as Chief Executive, Reuters Trading Solutions. Former Chief Operating Officer, Europe and Africa, at DHL International, based in Brussels. Joined DHL in 1990 as Regional Director, Northern Europe having previously worked in both the UK and US. Non-executive director of SKF AB and a director of Radianz and TSI. Member of the Advisory Board of the London Business School. Trustee of the London Philharmonia Orchestra. Age 49.

David Grigson. Finance Director. Joined Reuters in August 2000 from Emap plc where he was Group Finance Director and Chairman of Emap Digital. He is a qualified chartered accountant and a member of the FSA Practitioners Panel. Formerly held senior finance roles in the UK and US at Saatchi and Saatchi Plc (1984-1989). Held a number of financial positions at Esso UK from 1980 to 1984. Also a non-executive director of Instinet. Age 48.

Devin Wenig. Executive Director and President – Customer Segments since February 2003. President – Investment Banking (2001-2003). Joined Reuters in 1993 as Corporate Counsel, Reuters America and held a number of senior management positions before being appointed President, Reuters Information in January 2001. Also a director of Instinet, Inc. and Nastech Pharmaceutical Company. Age 36.

Sir John Craven. Non-executive Chairman of Lonmin Plc since 1997. Non-executive director of Fleming Family & Partners. Former member of the Board of Managing Directors of Deutsche Bank AG and former executive Chairman of Morgan Grenfell Group plc (1989-1997). Former non-executive director of Gleacher & Co LLC, Rothmans International BV, Ducati SpA and Société Générale de Surveillance SA. He is a member of the Canadian and Ontario Institute of Chartered Accountants. Member of the Audit Committee and Chairman of the Nominations Committee. Age 62.

– Page 11 –

Niall FitzGerald. Chairman and Chief Executive Officer of Unilever PLC since 1996. He has held a number of posts including finance director during 30 years with Unilever. He is also President of the Advertising Association, a Member of the Foundation Board of the World Economic Forum and a Fellow of the Royal Society for the encouragement of Arts, Manufacturing and Commerce and the Association of Corporate Treasurers. Former non-executive director of Merck, Ericsson, Bank of Ireland and Prudential plc. Member of the Nominations Committee. Age 57.

Ed Kozel. Managing Director of Open Range Ventures LLC, a private venture capital firm active in telecom, networking and internet start-ups. Also a director of Yahoo! and Narus Inc. Formerly a non-executive director of Cisco Systems Inc. (2000-2001), where he worked from 1989-2000 in a number of roles, including Chief Technology Officer and senior vice president for business development. A former non-executive director of TSI (2000-2001). Prior to 1989 he worked with SRI International in California. Member of the Remuneration and Nominations Committees. Age 47.

Roberto Mendoza. Chairman of Egg plc and non-executive director of Prudential plc, Vitro SA and The BOC Group PLC. Formerly vice-chairman and director of JP Morgan & Co Inc. (1990-2000) and managing director of Goldman Sachs & Co (2000). Joined JP Morgan in 1967 with successive assignments in London and New York. Member of the Remuneration and Nominations Committees. Age 57.

Dick Olver. Deputy Group Chief Executive of BP p.l.c. since January 2003. Chief Executive Officer of BP Exploration & Production Division (1998-2002). A member of the Institute of Civil Engineers, he has worked for BP since 1973. A governor of New Hall School. Chairman of the Audit Committee and a member of the Nominations Committee. Age 56.

Charles Sinclair. Group Chief Executive of Daily Mail and General Trust plc since 1988. Joined Associated Newspapers in 1975 and held a number of roles prior to its merger into the Daily Mail Group in 1988. Non-executive director of Euromoney Institutional Investor PLC and Schroders plc. Fellow of the Institute of Chartered Accountants. Chairman of the Remuneration Committee and a member of the Nominations Committee. Age 54.

Ian Strachan. Chairman of Instinet since 1 January 2003. Non-executive director of Transocean Inc., Johnson Matthey plc and Harsco Corporation. Former Deputy Chairman of Invensys plc (1999-2000) and Chief Executive Officer of BTR plc (1996-1999). Former Deputy Chief Executive Officer (1991-1995) and Chief Financial Officer (1987-1991) of Rio Tinto plc. Also a former non-executive director of Commercial Union plc (1991-1995). Member of the Audit and Nominations Committees. Age 59.

Senior Executives
Graham Albutt. President – Business Programs. Graham joined Reuters in London in 1987. Held various posts in central and operational business functions and, in May 2001, was additionally appointed as Business Integration Executive, developing the structure and business model for the integration of the recently acquired Bridge assets. Non-executive director of Datamonitor PLC. Age 49.

Christopher Hagman. Managing Director – Europe, Middle East and Africa, since April 2001. Joined Reuters in 1987 based in Sweden and has held various senior sales and general business management positions in Sweden, Netherlands and the UK. Age 44.

Alexander Hungate. Chief Marketing Officer, President – Focus Group Accounts since September 2001. In 1993, Alex joined Reuters in London as a business development executive. From 1996 to 1998 he was Executive Vice President of Reuters Marketing before being appointed Chief Operating Officer, Reuters America in 1999 and Chief Executive Officer, Reuters America in 2000. Before joining Reuters Alex worked at Booz Allen & Hamilton as a strategy consultant. Non-executive director of British America Business Inc. Age 36.

Geert Linnebank. Editor-in-Chief. Geert became Editor-in-Chief in 2000 having held various editorial roles. Before he joined Reuters in 1983 he was a correspondent, EC and Belgium, for AP-Dow Jones – Brussels. Age 46.

Stephen Mitchell. Head of Risk Management and General Counsel. Stephen joined Reuters in 1996 as Deputy General Counsel. Company Secretary 1998 to 1999. He became Group General Counsel in 1998 and Head of Risk Management in 2001. Former partner in Australian law firm Freehill, Hollingdale & Page. Age 43.

Michael Sayers. Chief Technology Officer. Michael joined Reuters London development group in 1977 and in 1998 was appointed Chief Technology Officer. Age 49.

David Ure. Strategic Adviser to the Board and non-executive Chairman of Radianz. Former executive director of Reuters (1989-2000) responsible for group technical strategy and Reuters Trading Solutions Division. From 1992 to 1998 he was responsible for Group marketing and technical policy. Prior to that he headed Reuters operations in Europe, Middle East and Africa. Joined the company in 1968 as a trainee journalist. Age 55.


– Page 12 –
Reuters is committed to high standards of corporate governance and has complied throughout 2002 with the principles of corporate governance set out in Section 1 of the Combined Code as at the date of this report, save that Tom Glocer's service contract is terminable by the company on, in effect, up to two years' notice, until 1 July 2005, whereupon it becomes terminable on one year's notice.


The Board is responsible for Reuters system of corporate governance and is ultimately accountable for its activities throughout the Group. The articles of association require the directors to pay due regard to the Reuters Trust Principles which are designed to protect Reuters integrity and independence and represent the core values at the heart of Reuters business. These Principles are described more fully on page 74. As at 24 February 2003, there were four executive directors and eight non-executive directors, including the Chairman. Sir John Craven is the senior independent non-executive director.

The Board met eight times in 2002. The directors attended all the Board meetings in 2002 save that Sir John Craven, Ian Strachan, Dick Olver and Geoffrey Weetman were each absent from one meeting and Ed Kozel and Dennis Malamatinas were absent from two meetings.

A schedule of matters reserved for the Board's decision identifies those matters that the Board does not delegate. It includes the approval of annual and interim results, corporate objectives, strategy and the budget, significant transactions and matters relating to share capital.

Regular and ad hoc reports and presentations to the Board ensure the directors are supplied, in a timely fashion, with the information they need. They also have access to the Company Secretary and they may take independent professional advice at the Group's expense, although no such advice was sought during 2002.

Each year the Chairman and the non-executive directors review the Chief Executive's performance and the Chief Executive reviews the performance of the other executive directors. Each year Sir John Craven conducts a chairmanship review meeting, attended by the directors other than Sir Christopher Hogg, at which the Chairman's remuneration and performance are reviewed. During 2002 an informal review of the Board's effectiveness was undertaken and the results were considered by the Board as a whole.

Non-executive directors receive a series of briefings about Reuters when they join the Board. Training for executive directors is available as appropriate and a training programme is run for directors of subsidiaries.

The Board delegates specific responsibilities to certain committees. Each committee has its own terms of reference set by the Board. The main committees are:

The Audit Committee reviews and, as appropriate, actively engages in the processes for financial reporting, internal control, risk assessment, audit and compliance assurance, the independence of internal and external auditors and the effectiveness of the company's system of accounting, its internal financial controls and the internal and external audit functions. The committee comprises Dick Olver (Chairman), Sir John Craven, Ian Strachan and Sir Christopher Hogg. The Board considers that the members have the requisite skills and attributes to serve on the committee. The committee meets four times a year with the Chief Executive, the Finance Director, the Chief Operating Officer, other officers and the auditors attending as required. The auditors have unrestricted access to the Audit Committee. During 2002 only one member of the Audit Committee, Ian Strachan, was absent from one Audit Committee meeting.

The Remuneration Committee has oversight of executive remuneration policy. Information concerning the Remuneration Committee is set out in the Remuneration report on page 13.

The Nominations Committee makes recommendations to the Board about future appointments of non-executive directors, the Chairman and the Chief Executive, and considers recommendations from the Chief Executive to the Board about the future appointment of executive directors. This committee meets when required and comprises the eight non-executive directors, chaired by Sir John Craven. A director may not attend or be involved in any decision concerning him or his successor.

In addition, the Group Management Committee, which is chaired by the Chief Executive, implements strategy and manages the Group. It reviews business risk and monitors operating and financial performance. It comprises the four executive directors and seven other senior managers. The Group Operations Committee (comprising 13 senior executives and chaired by Philip Green) manages the business's operations.

The executive directors meet regularly with institutional shareholders and analysts. Investor relations departments in London and New York are dedicated to facilitating communications between the company and its shareholders. Non-executive directors receive a regular report on investor relations as part of the routine board report materials. From time to time they also receive reports from the company's brokers and investor relations advisers on investors' perceptions. The company's annual general meeting is used as an opportunity to communicate with private investors. At the annual general meeting the level of proxies lodged on each resolution and the balance for and against the resolution are announced after the resolution has been voted on by a show of hands. The results of voting at the annual general meeting in 2003 will be available on Reuters website:

The directors' responsibilities and information on internal controls and financial reporting can be found on page 22.


– Page 13 –
This report sets out Reuters executive remuneration policy and structure and details of the remuneration received by the directors in respect of the year ended 31 December 2002. Shareholders will be invited to approve this report at the annual general meeting on 17 April 2003.


The Board has overall responsibility for determining the framework of executive remuneration and its cost, and is required to take account of any recommendations made by the Remuneration Committee. The Board has delegated to the committee, through formal terms of reference, oversight of the specific remuneration packages for the executive directors and consideration of executive remuneration issues generally, including the use of equity incentive plans in particular.

The Remuneration Committee consists solely of non-executive directors. Its current members are Charles Sinclair (Chairman), Ed Kozel and Roberto Mendoza. Dennis Malamatinas was a member of the committee until his retirement from the Board on 9 October 2002 and Sir Christopher Hogg stepped down from the committee on 17 February 2003. The committee met four times in 2002. All members were present at each committee meeting save that Dennis Malamatinas and Ed Kozel were absent from one meeting.

The Chief Executive normally attends meetings of the Remuneration Committee, but is not present at any discussion concerning his own remuneration. For the year under review the committee was also advised internally by Geoffrey Weetman and Stephen Clements, whilst they were Group Human Resources Director and Director of Remuneration respectively, John Reid-Dodick, Acting Human Resources Director, and Jim McInally, who was appointed Director of Remuneration in November 2002. The terms of reference permit the Remuneration Committee to obtain its own external advice on any matter, at the company's expense, although it did not do so in 2002. The company itself takes external advice and information from many sources in preparing proposals for the Remuneration Committee, but no material external assistance from a single source was received in relation to remuneration decisions made for 2002.


Executive directors
The committee aims to ensure that remuneration and incentive arrangements are market-competitive, consistent with best practice and support the interests of shareholders.

In practical terms, this means that the reward structure for directors should attract, motivate and retain high-calibre individuals capable of leading the Group successfully. To achieve this in a global business environment, Reuters executive remuneration must reflect the competitive practices of its principal competitors and the other multinational businesses with which it competes for talent. The committee believes that market-led executive pay, with a heavy emphasis on the variable remuneration elements, is the best way to ensure Reuters Group has the high-performing executives necessary to achieve its immediate and longer-term strategic objectives. It is not the company's intention to pay more than is necessary for this.

Consistent with this view, total executive remuneration is calibrated to deliver mid-market rewards at target levels of personal and corporate performance. Variable reward components will provide an opportunity for much higher levels of remuneration where this is supported by exceptional performance whether on an individual level or in relation to the Group's short-term and longer-term business priorities.

Reuters has made a number of changes to executive remuneration over the past few years and an increased proportion of executive reward is variable and dependent upon the Group's performance. As such, the structure of the individual packages currently in place includes a significant proportion of reward that is performance related, with basic pay representing well under half of the target earnings potential. Excluding pension entitlements, the targeted composition of the expected value for each executive director's remuneration is:

Proportion of fixed and variable remuneration
  Fixed Variable                 

  Base pay (%) Bonus (%) Long-term
incentives (%)
Total (%)

Tom Glocer 20 25 55 100
Philip Green 30 30 40 100
David Grigson 30 30 40 100
Devin Wenig 30 30 40 100

Variable rewards will continue to be provided through a balanced mix of performance-related elements. The annual cash bonus plan supports operational objectives over the financial year, while the company's long-term incentive plan will reward superior performance relative to Reuters competitors over a longer period and share options will support the company's growth objectives and reward share price improvement.

The committee also believes that, in addition to participating in equity based incentive plans, the executive directors should build and maintain a personal equity stake in the company. To this end a share retention policy is operated requiring each executive director to accumulate a personal holding worth twice his salary within five years.


Non-executive directors
Non-executive directors are appointed for an initial period of six years, subject to review after three years. Reappointment may be made after one six-year term. Non-executive directors do not have service contracts and are not eligible to participate in executive share plans.

The Chairman's remuneration is determined by the Board, who in reaching future decisions on appropriate levels of pay will continue to have regard to the packages awarded to chairmen of other UK listed companies of a similar size and complexity.

The company's shareholders determine the remuneration paid to the other non-executive directors. Historically, this has comprised a fixed annual fee, which has been unchanged at £35,000 per annum for three years. During this time the workload of non-executive directors has increased considerably and will continue to do so following the Higgs Review, the Smith Report and Sarbanes-Oxley legislation. However, it has been decided to defer putting to shareholders until next year's annual general meeting any proposal to change the fixed annual fee. Meanwhile fees paid to non-executive directors for specific roles, for example, chairing a Board committee have been realigned to reflect the time commitment associated with each role. The fees for these additional roles with effect from 1 January 2003 are: senior independent director: £5,000 per annum; chairman of the Audit Committee: £15,000 per annum; chairman of the Remuneration Committee: £10,000 per annum; and chairman of the Nominations Committee: £5,000 per annum.

Remuneration structure
It is Reuters general policy to construct executive remuneration packages as described below. However, in order to ensure the company is able to recruit and retain the best senior executives, the committee believes it needs to maintain the freedom to negotiate terms of employment on an individual basis, taking account of the circumstances of each case. Where it is necessary, special arrangements will also be made to accommodate the needs of, for example, international executives who are required to relocate. As Devin Wenig was appointed an executive director on 17 February 2003, the figures for 2002 reported below do not include his remuneration. The terms of his appointment are under discussion and are expected to be consistent with the following policy disclosures.


Basic salary and benefits
In formulating and reviewing pay packages for the executive directors, the committee will normally receive comparator group information and assistance from independent remuneration consultants. Reuters policy is to maintain a salary structure based upon the mid-market of its comparator group of companies. The committee is also guided by salary levels among other executives and across the organisation as a whole. However, as part of the Group's ongoing programme of cost reductions, the executive directors elected that their base salaries should not be increased for 2002. They have reaffirmed that position for 2003.

– Page 14 –

Non-cash benefits are provided to executive directors and the Chairman in line with normal market practice. All executive directors and the Chairman receive company car and private healthcare benefits. Life and disability insurance is provided as part of the pension arrangements for each executive director and the Chairman. Under the terms of Tom Glocer's relocation agreement, the company provides accommodation in the UK and pays home leave expenses for him and his family. His accommodation costs have been renegotiated from April 2003 and are expected to be lower in future years. Reuters also met the costs of his relocation.

Since April 1999 it has been Reuters policy that all new employees, including directors, are offered participation in a defined contribution pension plan. In the case of UK executive directors, entitlement above the statutory earnings cap (where applicable) is met by an additional taxable 'retirement allowance' permitting each director to make his own supplementary pension arrangements.


Annual performance-related bonus
Bonus arrangements are normally negotiated individually and included in each director's service contract. The Remuneration Committee determines performance targets annually. Bonus payments are non-pensionable.

In 2002, the executive directors were eligible for an annual cash bonus, with a maximum level of 100% of base salary for Philip Green, David Grigson and Geoffrey Weetman. The maximum level for Tom Glocer was 125% of salary. The committee has agreed that bonus potential for all executive directors other than Tom Glocer will be 100% for 2003. Tom Glocer's bonus potential will remain at 125% for 2003 before reverting to 150% for 2004 as specified in his service contract.

For 2002, bonus targets were set on a sliding scale and included a mix of financial and strategic measures:

15% on Group normalised profit before tax;
15% on Reuters revenue;
20% on Reuters margin;

30% split equally between three key strategic measures relating to Reuters Messaging, migration to the Radianz network and customer satisfaction; and

20% on a maximum of two personal targets.

In February 2003 the committee considered 2002 performance relative to the specified targets and awarded bonuses in the amounts disclosed in the remuneration table on page 16 reflecting the achievement of margin and progress on the strategic and personal targets. No payment was made in respect of the profit and revenue measures.


Equity incentive plans
The executive directors also participate in a long-term incentive plan (LTIP) and discretionary share option plan (DSOP) designed to reward longer-term performance. Details of all share incentive awards outstanding for each director serving during 2002 are set out on pages 18-20. All directors' future entitlements are subject to the performance conditions applicable to the relevant plan as disclosed below. Other than as described below, the company has no present intention of making any significant change to the directors' entitlements under these plans.

LTIP: Since 1993, Reuters has operated a long-term incentive plan which seeks to encourage and reward long-term growth in shareholder value. It is Reuters practice to make an annual award of share rights to executive directors and those senior managers most able to influence corporate performance. Awards to the executive directors (excluding the Chief Executive) have normally been based on a face value of 100% of annual salary, using the average daily share price for the previous year. From 2003 all awards made under the LTIP will be based on fair value using option pricing methodology. Under the terms of his service contract, awards to Tom Glocer will be based on a fair value of not less than US$2.325 million (£1.56 million) per annum up to and including 2003. The actual value that may be realised is contingent on the Group performing as described below. The other executive directors will receive awards with a fair value of up to 100% of base salary.

LTIP performance condition – to be consistent with the objectives of the plan and to ensure the Group's growth is measured relative to other major companies in which the company's shareholders invest, performance is measured over a three-year period by comparing the Group's total shareholder return (TSR) with that of other companies comprising the FTSE 100 at the beginning of the period. The companies are ranked according to their TSR for the measurement period with the company having the highest TSR ranked first. The company's position on the list determines the extent to which awards will vest. In line with best practice, the minimum position for vesting was raised to the median level in 2001. Full vesting only occurs for top quartile performance. Between those positions, awards vest on a straight-line scale. If the awards do not vest or only partially vest after three years, the plan permits the measurement period to be extended by up to two years. The pre-set vesting criteria for awards not yet vested, or which vested during 2002, are shown in the table below, together with the actual ranking at 31 December 2002 (or on vesting if earlier). Awards vesting under the plan are not released until at least five years from the date of grant.

  Pre-set vesting criteria          
Date measurement
period commenced
Rankings for
100% vesting
Rankings for
zero vesting
  Ranking at 31
December 2002

1 January 1999 1 to 26 66 to 100   18 (final ranking)
1 January 2000 1 to 26 66 to 100   84
1 January 2001 1 to 26 50 to 100   86
1 January 2002 1 to 26 50 to 100   98

In order to smooth the opening and closing points of measurement the averages of the daily closing prices for the immediately preceding 12 months are used as the initial and final share prices when calculating the TSR.

As a matter of good practice, the measurements are verified by an independent consultant before being presented to the Remuneration Committee for approval. Shares awarded under the plan will continue to be met from existing shares held by Reuters employee share ownership trusts (ESOTs). The cost of the shares is charged to the profit and loss account over the vesting periods.

DSOP: A global discretionary share option plan was adopted by the Remuneration Committee in October 2000 and approved by shareholders in April 2001. It aims to incentivise growth in earnings and in the share price, and the performance condition for directors has been chosen to reflect this.

DSOP performance condition – options granted to executive directors can only vest if the percentage growth in the Group's normalised earnings per share (EPS) exceeds the percentage growth in the retail price index by more than 9% over the three-year performance period. If the target is not met, the performance period may be extended by up to two years with an increase of 3% in the hurdle rate of EPS growth for each year added to the performance period. If the target rate is not met by the end of the fifth year the options will lapse. There is no performance condition for options granted to participants other than executive directors, and both Geoffrey Weetman and Devin Wenig hold DSOP options granted without performance conditions prior to their appointments as directors.

The performance condition has not yet been measured since the first awards to directors were granted in June 2001. It is intended, however, to obtain independent verification of the measurement process as is done for the LTIP.

The executive directors are entitled to participate in the DSOP. Under the terms of his service contract, option allocations to Tom Glocer will be based on a fair value of at least US$2.062 million (£1.384 million) per annum up to and including 2003. There is no assurance that this value will be realised as this is contingent on the performance of Reuters. Awards to the other executive directors are not set out in their service contracts, but will also be based on levels commensurate with competitor company practices. It is the committee's practice to award participants' annual entitlements in two equal tranches in February and August to reduce issues associated with block grants losing their incentivising effect during periods of high volatility in share price.

– Page 15 –

SAYE Plan: An all-employee international savings related share option plan is offered in which the Chairman and the executive directors are eligible to participate. Participants save a fixed monthly amount of up to £250 for three or five years and are then able to use their savings to buy shares in the company at a price set at a 20% discount to the market value at the start of the savings period. In line with market practice, no performance conditions attach to options granted under this plan.

Legacy plans: There are several legacy plans, summarised below, under which Messrs Glocer, Green, Weetman and Wenig received awards prior to becoming directors of the company. It is not intended that directors should receive any further awards under these plans:

Performance related share plan (PRSP) – this plan operated from 1995 to 2001 and targeted senior executives not participating in the LTIP. Tom Glocer, Philip Green, Geoffrey Weetman and Devin Wenig hold awards granted before they became directors of the company. The performance condition is the same as for the LTIP, although vested shares can be released three years after grant.

Deferred bonus share plan (DBSP) – restricted share awards were made in 2000 as a special retention bonus to a total of around 100 senior executives. As a retention tool, and in line with market practice at the time, they were made conditional only on continued employment for two and three years and excluded the directors in office at the time. These awards vested in February 2002 and February 2003. Tom Glocer has deferred the vesting of his shares under the plan, which are currently due to vest in April 2004 subject to any further deferral that he may elect to make. The shares awarded under the plan are satisfied by existing shares from the ESOTs.

Executive stock option plan (ESO) – Tom Glocer participated in an executive stock option plan operated in 1993 and 1994. In line with market practice in the US, where he was based at that time, his options under the plan carry no performance conditions and vested automatically on the third anniversary of grant.

Plan 2000 – a one-off all-employee option grant was made in 1998 in order to support the retention of employees over the millennium period. In common with such all-employee plans, there is no performance condition to be satisfied. All employees, including the executive directors, were given the opportunity to apply for an option to acquire 2,000 shares at an exercise price of £5.50 per share. These options became exercisable in September 2001 and will normally expire in September 2005. A small supplementary grant was made to new employees in March 1999, at an option price of £8.14 and these will normally expire in March 2006. The company may issue new shares to satisfy options granted under this plan.


Shown below is the company's TSR, for the five years to 31 December 2002 compared with the return achieved by the FTSE 100 index of companies. This index is used as the comparator group for the performance conditions attached to the LTIP and PRSP referred to above. The calculations assume the reinvestment of dividends.


It is not Reuters policy to appoint executive directors for a fixed term, but it is the general policy that new directors be offered notice periods of not more than one year. Reuters recognises, however, that, in the case of appointments from outside the Group, a longer initial notice period may be necessary, reducing to one year subsequently. Given this, the committee expects to retain its policy of including provisions for termination payments in its contracts with directors.

Tom Glocer has a service contract, dated 23 July 2001, normally terminable by him on 90 days' notice or, with good reason, on 30 days' notice. The company may terminate without cause on 30 days' notice. In the event of termination by Tom Glocer with good reason or by the company without cause on or before 1 July 2003, Tom Glocer is entitled to a compensation payment equal to twice the sum of his basic annual salary and an estimated annual bonus calculated by reference to the highest bonus percentage received in the previous three years. If his contract is terminated after 1 July 2003 the compensation payment is reduced in equal tranches for each year down to a minimum of his annual salary and bonus in the case of termination after 1 July 2005. In the event of termination at any time by the company without cause, or by Tom Glocer with good reason, Tom Glocer retains the benefit of any outstanding share plan awards as if his employment had not ceased. In addition, Tom Glocer and his family retain the life assurance, medical and dental benefits provided by the company for one year following termination.

Philip Green and David Grigson's contracts are dated 20 June 2001 and 21 June 2001 respectively, and can be terminated on one year's notice. Any termination payment will not exceed an amount equal to the sum of the director's annual salary, bonus and 12 months' pension contributions paid by the company.

Geoffrey Weetman's contract was dated 31 December 2001 and was terminable on one year's notice. Details of the termination payment made on his retirement on 31 July 2002 are on page 16.

On a change of control of the company, Messrs Glocer, Green and Grigson are entitled to terminate their contracts on one month's notice unless the acquiring party has, within three months of the change of control, agreed to adopt and uphold the Reuters Trust Principles (see page 74). Termination payments are payable to the directors in such circumstances.

Reuters recognises that its directors may be invited to become non-executive directors of other companies or to become involved in charitable or public service organisations. As the Board believes that this can broaden the knowledge and experience of the company's directors to the benefit of Reuters Group, it is the company's policy to approve such appointments provided there is no conflict of interest and the commitment required is not excessive. Board approval is required and directors are permitted to retain cash fees paid for such appointments. In 2002 Philip Green received approximately £25,000 as a director of SKF AB. None of the other executive directors retained any fees for external directorships.

– Page 16 –

Directors' emoluments 2002 2001

  Salary/fees Bonus Benefits Expense
Total6 Total
  £000 £000 £000 £000 £000 £000 £000


Sir Christopher Hogg

263 14 277 274

Non-executive directors:              
Sir John Craven 45 45 45
Ed Kozel 35 35 35
Dennis Malamatinas (retired 9 October 2002) 27 27 35
Roberto Mendoza 35 35 35
Dick Olver 45 45 45
Charles Sinclair 45 45 45
Ian Strachan¹ 110 110 82

Executive directors:              
Tom Glocer2 816 612 282 1,710 2,065
Philip Green3 450 259 11 116 836 734
David Grigson4 400 220 2 68 690 641
Geoffrey Weetman5 (retired 31 July 2002) 219 16 624 859 244

Total emoluments of directors 2,490 1,091 325 184 624 4,714 4,280

Other senior executives as a group (8 persons)7 (2001: 17 persons) 2,283 1,233 136 96 3,748 6,676

1.  Fees paid to Ian Strachan include £75,168 in respect of his position as a non-executive director of Instinet. He also received from Instinet 4,153 restricted shares, which vested in September 2002 with a market value of £14,215, and 7,123 restricted shares that will vest in September 2003.
2. Non-cash benefits received by Tom Glocer included accommodation costs of £230,000, travel and relocation-related expenses of £30,000, and company car and healthcare benefits totalling £22,000.
3. Philip Green received company car and healthcare benefits totalling £11,000 and a retirement allowance of £116,000.
4. David Grigson received healthcare benefits of £2,000, a car allowance of £7,000 and a retirement allowance of £61,000.
5. Under the terms of his service contract Geoffrey Weetman was entitled to a termination payment of £597,495 being equivalent to one year's salary, bonus and employer's pension contributions. He was also made a gift of his company car, valued at £27,000. Details of his share plan and pension arrangements on termination are described on pages 17, 19 and 20.
6. For the purposes of the disclosure required by paragraph 1(a) of Schedule 6 to the Companies Act 1985, the total aggregate emoluments for the directors in respect of the year ended 31 December 2002, which excludes termination payments, were £4.1 million. Total equivalent emoluments for 2001, which included the emoluments of certain directors not serving during 2002, were £5.9 million excluding termination payments of £1.9 million.
7. The senior management group is identified on page 11 and included Devin Wenig prior to his appointment as a director on 17 February 2003.

– Page 17 –

Directors' pensions
Messrs Glocer, Green and Grigson all participate in defined contribution pension arrangements.

Philip Green and David Grigson are members of the Reuters Retirement Plan in the UK and receive a company contribution in respect of pension benefits equal to 20% of the statutory earnings cap. In addition, they each receive an allowance in lieu of any pension contribution by the company on salary above the cap (see page 16). Tom Glocer participates in the company's US pension arrangements and is entitled to a pension allowance of 20% of his base salary. All three directors are entitled to a lump sum death benefit whilst in service of four times basic salary.

Company contributions and allocations (including the cost of life cover and any other risk benefits provided through the pension plans) in respect of these directors in 2002 were:

  Age Company
during period

Tom Glocer 43 167
Philip Green 49 23
David Grigson 48 22

In 2001, the company made contributions of £201,000 in respect of the above directors' defined contribution pension arrangements.

The Chairman has been admitted as a member of the Reuters Pension Fund for the sole purpose of providing a fixed lump sum benefit of £300,000 for his dependants in the event of his death in service. Under a separate unfunded pension arrangement the Chairman is entitled to a pension of 2.5% of his final annual fee for each year of service, from the date of his appointment as Chairman in May 1985 to the date his office terminates.

On his retirement from Reuters service with effect from 31 July 2002, Geoffrey Weetman was entitled under the terms of his service contract to an early retirement pension of two-thirds of basic salary, without reduction.

Pension benefits earned during 2002 by the Chairman and Geoffrey Weetman are as set out in the following table:

  Age Director's
the year
pension at
  31 December
or date of
Increase in
  accrued pension
during the year
Increase in
  accrued pension
during the year
(net of inflation)
 Transfer value
of accrued
pension at
31 December
 Transfer value
of accrued
pension at
31 December
Increase in
transfer value
  (net of director's

Sir Christopher Hogg 66 0 116 7 5 1,703 1,802 99
Geoffrey Weetman (retired 31 July 2002) 56 13 250 32 30 3,260 5,220 1,947

In 2001, the Chairman and four executive directors were members of the Reuters Pension Fund.

The information shown above complies with requirements under both the Listing Rules of the UK Listing Authority and the Directors' Remuneration Report Regulations 2002. The transfer values have been calculated in accordance with the guidance note 'GN11' published by the Institute of Actuaries and Faculty of Actuaries.

The total amount of contributions or accruals made by the company in 2002 to provide pension and similar benefits for the directors was £1.76 million (2001: £3.1 million) and for the directors and other senior managers as a group was £2.15 million (2001: £3.7 million).

– Page 18 –
Directors' interests in long-term incentive plans
  Plan¹  Date of
 Number at
 1 January
per share
at grant
 for awards
 made during
Number at
 31 December
(or earlier
date of
End of
Date from
rights are

Tom Glocer PRSP  1 Apr 19995 9,855 9,855 9,855   31 Dec 01 1 Jan 02  31 Dec 05
    1 Apr 19995 42,596 42,596 42,596 31 Dec 01 1 Jan 02 31 Dec 05
     15 Mar 20005 33,518 33,518 31 Dec 03 1 Jan 04 31 Dec 06
  LTIP  25 June 2001 174,451 174,451 31 Dec 03 1 Jan 06 31 Dec 07
    20 Feb 2002  234,974 515p 234,974 31 Dec 04 1 Jan 07 31 Dec 08
  DBSP 24 Mar 20005 75,000 75,000 15 Feb 02 15 Feb 04 n/a
    30 May 20005 60,000 60,000 15 Feb 03 15 Feb 04 n/a

Total      395,420  234,974   52,451 630,394      

Philip Green PRSP 1 Apr 19995 100,000 100,000 100,000 31 Dec 01 1 Jan 02 31 Dec 05
  LTIP 15 Mar 2000 24,320 24,320 31 Dec 03 1 Jan 06 31 Dec 06
    25 June 2001 55,426 55,426 31 Dec 03 1 Jan 06 31 Dec 07
    20 Feb 2002 68,411 515p 68,411 31 Dec 04 1 Jan 07 31 Dec 08
  DBSP 24 Mar 20005 15,000 15,000 (15,000) 13 Feb 02 13 Feb 02 n/a

Total     194,746 68,411   115,000 (15,000) 248,157      

David Grigson   LTIP 5 Dec 2000 42,579 42,579 31 Dec 03 1 Jan 05 31 Dec 06
    25 June 2001 26,294 26,294 31 Dec 03 1 Jan 06 31 Dec 07
    20 Feb 2002 37,205 515p 37,205 31 Dec 04 1 Jan 07 31 Dec 08

Total     68,873 37,205   106,078      

Geoffrey PRSP 1 Apr 19995 31,763 31,763 31,763 31 Dec 01 1 Jan 02 30 Jul 03
Weetman4   1 Apr 19995 34,561 34,561 34,561 31 Dec 01 1 Jan 02 30 Jul 03
    15 Mar 20005 31,616 31,616 31 Dec 03 1 Jan 04  31 Dec 06
    29 Mar 20015 20,211 20,211 31 Dec 03 1 Jan 04 31 Dec 07
  LTIP 8 Oct 19965 21,173 21,173 31 Dec 00 1 Jan 01 31 Dec 02
    30 June 19975 17,185 17,185 31 Dec 00 1 Jan 01 31 Dec 03
    25 June 20015 9,851 9,851 31 Dec 03 1 Jan 06 31 Dec 07
    20 Feb 2002 34,881 515p 34,881 31 Dec 04 1 Jan 07 31 Dec 08

Total     166,360 34,881   66,324 201,241  

Other senior executives as a group (8 persons) (2001: 16 persons)        PRSP 15 Sep 1998 7,034 7,034 31 Dec 00 1 Jan 01 31 Dec 04
  1 Apr 1999 44,495 44,495 (4,785) 39,710 31 Dec 01 1 Jan 02 31 Dec 05
  1 Apr 1999  127,809 127,809 (57,108) 70,701 31 Dec 01 1 Jan 02 31 Dec 05
  15 Mar 2000 118,465 118,465 31 Dec 03 1 Jan 04 31 Dec 06
  29 Mar 2001 92,265 92,265 31 Dec 03 1 Jan 04 31 Dec 07
LTIP 8 Oct 1996 34,665 (34,665) 31 Dec 00 1 Jan 01 31 Dec 02
   30 June 1997 30,191 30,191 31 Dec 00 1 Jan 01 31 Dec 03
  1 Apr 1999 55,956 55,956 55,956 31 Dec 01 1 Jan 04 31 Dec 04
  1 Apr 1999 58,425 58,425 58,425 31 Dec 01 1 Jan 04 31 Dec 05
  15 Mar 2000 44,687 44,687 31 Dec 03 1 Jan 06 31 Dec 06
  25 June 2001 34,869 34,869 31 Dec 03 1 Jan 06 31 Dec 07
  20 Feb 2002 146,783 515p 146,783 31 Dec 04 1 Jan 07 31 Dec 08
DBSP 24 Mar 2000 150,000 150,000 (150,000) 13 Feb 02 13 Feb 02 n/a

Total     798,861   146,783    436,685  (246,558)  699,086      

– Page 19 –

1. The performance conditions attached to these awards are described above on page 14.

Additional information regarding the share awards vesting in 2002, which all vested in full, is given in the table below. No share awards vested or were exercised during 2001. The face values indicated do not represent actual gains save to the extent shares were subsequently sold following exercise or release.

  Plan Date of
Date of
Number of
value per
share on
value per
share on
value per
share at
exercise or

Tom Glocer PRSP 1 Apr 99 1 Jan 02 9,855 905 680 n/a
  PRSP 1 Apr 99 1 Jan 02 42,596 905 680 n/a

Philip Green PRSP 1 Apr 99 1 Jan 02 100,000 905 680 n/a
  DBSP 24 Mar 00 13 Feb 02 15,000 1,440 538 538

Geoffrey Weetman PRSP 1 Apr 99 1 Jan 02 31,763 905 680 n/a
  PRSP 1 Apr 99 1 Jan 02 34,561 905 680 n/a

3. PRSP awards are available for exercise immediately on vesting. The qualifying period may be extended by up to two years where vesting does not occur or is only partial after the initial three year period. LTIP awards are subject to a retention period of two years from vesting, save that this is reduced to one year where the performance period has been extended to five years.

In recognition of Geoffrey Weetman's service to Reuters over many years, the committee decided that his existing LTIP participation rights will continue until they vest or lapse, as if he had remained an employee. The awards will remain subject to the normal retention period. His unvested PRSP rights will also continue unaffected, save that on vesting they are required to be exercised within six months. No other awards had their terms varied during the year.

5. The indicated awards were made prior to the appointment of the relevant individual as a director of the company.

– Page 20 –
Directors' share options
  Plan Date of grant  Exercise
 Number at
1 January
Number at
 31 December
2002 (or
earlier date
  of retirement)
 exercise date

Sir Christopher Hogg  SAYE 1 Apr 1997 501 2,065 (2,065) 15 Apr 2002 15 Oct 2002
    11 Mar 1999 667 1,012 1,012 1 May 2004 1 Nov 2004

Total       3,077 (2,065) 1,012    

Tom Glocer DSOP   25 June 2001 862 565,113 565,113   25 June 2004   25 June 2011
    20 Feb 2002 528 461,295 461,295 20 Feb 2005 20 Feb 2012
    2 Aug 2002 266 915,654 915,654 2 Aug 2005 2 Aug 2012
  ESO  9 Feb 19941&2 US$7.28 13,716 13,716 9 Feb 1997 9 Feb 2004
  SAYE   11 Mar 19991&2   US$13.68 1,512 1,512 1 May 2004 1 Nov 2004
    11 Apr 2002 448 2,216 2,216 1 June 2007 1 Dec 2007
  Plan 2000 24 Sep 19982 550 2,000 2,000 24 Sep 2001 24 Sep 2005

Total       582,341 1,379,165 1,961,506    

Philip Green DSOP 25 June 2001 862 177,494 177,494  25 June 2004  25 June 2011
    20 Feb 2002 528 144,886 144,886 20 Feb 2005 20 Feb 2012
    2 Aug 2002 266 287,593 287,593 2 Aug 2005 2 Aug 2012
  SAYE 12 Apr 2001 832 1,216 (1,216) 1 June 2006 1 Dec 2006
    11 Apr 2002 448 1,272 1,272 1 June 2005 1 Dec 2005

Total       178,710 433,751 (1,216) 611,245    

David Grigson DSOP 25 June 2001 862 92,807 92,807 25 June 2004 25 June 2011
    20 Feb 2002 528 75,757 75,757 20 Feb 2005 20 Feb 2012
    2 Aug 2002 266 150,375 150,375 2 Aug 2005 2 Aug 2012
  SAYE 12 Apr 2001 832 698 698 1 June 2004 1 Dec 2004
    11 Apr 2002 448 2,216 2,216 1 June 2007 1 Dec 2007

Total       93,505 228,348 321,853    

Geoffrey Weetman DSOP 27 Dec 20002 1139 6,913 6,913 27 Dec 2001 31 Jul 2003
    25 June 20012 862 71,570 71,570 1 Aug 2002 31 Jul 2003
    20 Feb 2002 528 71,022 71,022 1 Aug 2002 31 Jul 2003
  SAYE 30 Sep 19962 601 1,721 (1,721) 15 Oct 2001 15 Apr 2002
    1 Apr 19972 501 1,377 1,377 15 Apr 2002 15 Oct 2002
    11 Apr 2002 448 1,272 1,272 1 Aug 2002 31 Jan 2003
  Plan 2000 24 Sep 19982 550 2,000 2,000 24 Sep 2001 31 Jan 2003

Total       83,581 72,294 (1,721) 154,154    

Other senior
executives as 
a group
(8 persons)
16 persons) 
SAYE 1 Apr 1997 501 5,507 (5,507) 15 Apr 2002 15 Oct 2002
  11 Mar 1999 667 1,012 1,012 1 May 2004 1 Nov 2004
  10 Mar 2000 992 1,170 (585) 585 15 Apr 2003 15 Oct 2003
  12 Apr 2001 832 930 (465) 465 1 June 2004 1 Dec 2004
  11 Apr 2002 448 4,760 4,760 1 June 2005 1 Dec 2005
DSOP 27 Dec 2000 1139 39,965 39,965 27 Dec 2001 27 Dec 2007
  25 June 2001 862 148,980 148,980 25 June 2002 25 June 2011
  20 Feb 2002 528 204,667 204,667 20 Feb 2003 20 Feb 2012
  2 Aug 2002 266   1,136,559 1,136,559 2 Aug 2003 2 Aug 2012
 Plan 2000 24 Sep 1998 550 16,000 16,000 24 Sep 2001 24 Sep 2005

Total       213,564 1,345,986 (6,557) 1,552,993    

1. The options indicated are over ADSs and, for the purposes of this disclosure, have been converted into the equivalent number of ordinary shares and an equivalent option price.

The indicated awards were made prior to the appointment of the relevant individual as a director of the company.


The DSOP option granted to Geoffrey Weetman on 27 December 2000, before he became a director, has no performance condition. On his retirement on 31 July 2002 and in accordance with their terms, all unvested DSOP options vested in full and became exercisable within 12 months. The early exercise provisions under the SAYE Plan and Plan 2000 rules were also triggered, requiring any exercise to take place within six months of his date of retirement.


Options granted under the SAYE Plan, Plan 2000 and the ESO have no performance conditions. Save as disclosed in note 3 above, exercise of each DSOP award is conditional on the performance criteria described on page 14 and no performance conditions were varied during 2002.

5. At 31 December 2002 the market price of Reuters shares was 178 pence per share and US$17.20 per ADS. The highest prices during the year were 747 pence per share and US$64.36 per ADS and the lowest were 161 pence per share and US$15.12 per ADS.
6. There were no gains on the exercise of share options in 2002 (2001: nil).

– Page 21 –

The total interests of the current directors and other senior executives in the issued share capital of the company and in shares underlying options and incentive plans are shown below as at 24 February 2003. No director or senior manager is beneficially interested in 1% or more of the company's issued share capital. Interests in ordinary shares (excluding options and interests in long term incentive plans disclosed above) held at 1 January 2002 and 31 December 2002 are also shown for directors in office at 31 December 2002. Directors were the beneficial owners of all shares listed save for 814 shares held by a family member of Sir Christopher Hogg and for 11,466 shares held by a trust of which Tom Glocer is a beneficiary.
      Interests at
1 January
  Interests at
31 December
Interests at 24 February 2003         

Shares Options Long-term

Sir Christopher Hogg 33,321 53,321 63,321 1,012
Tom Glocer 11,576 24,576 24,576 3,269,020 2,361,671
Philip Green 2,000 17,000 76,839 836,245 373,157
David Grigson 2,280 10,045 10,045 521,853 306,078
Devin Wenig n/a n/a 78,354 444,569 263,212
Sir John Craven 6,846 6,846 6,846
Niall FitzGerald n/a n/a 12,500
Ed Kozel 120,000 120,000
Roberto Mendoza 8,000 28,000 53,000
Dick Olver 3,000 10,000 10,000
Charles Sinclair 14,062 32,100 32,100
Ian Strachan 1,500 1,500 1,500

Other senior executives as a group (7 persons) n/a n/a 317,386 2,033,424 1,433,135


As at the date of this report Tom Glocer, David Grigson, Ed Kozel and Devin Wenig each held 1,000 shares in Instinet and Ian Strachan held 7,785 shares. The other senior executives as a group held interests in 3,000 shares of Instinet.

None of the directors has notified the company of an interest in any other shares, or other transactions or arrangements which require disclosure. There have been no movements in the interests of the directors in the share capital of the company or its subsidiaries since 31 December 2002 save as otherwise disclosed in this report.


Mark Wood served as a director of the company between September 1990 and December 1996. He left Reuters employment on 31 August 2002 and received early retirement benefits in accordance with the rules of the Reuters Supplementary Pension Scheme. However, as part of his termination terms, he waived a severance payment of £1.067 million in exchange for an additional annual pension of £59,000. He also received an ex-gratia gift of his company car valued at £22,000.

André Villeneuve served as a director between June 1989 and February 2000. When he transferred employment to Instinet in the US, he was given guarantees concerning the benefits that he would receive from the Reuters UK pension arrangements in the event of subsequent retirement. He left Reuters Group employment on 31 December 2002 and his early retirement pension was increased by £29,000 per annum. The company has made a special contribution of £465,000 to the UK pension plans in respect of this pension.

The severance agreement between Instinet and André Villeneuve also provides for him to continue to receive his base salary of US$600,000 (£402,685) per annum from 1 January 2003 until 30 November 2004. He also received, in February 2003, a payment of US$861,120 (£577,933) in lieu of bonus entitlements for that same period and an annual bonus of US$396,000 (£265,772) in respect of the year ended 31 December 2002.


A number of subsidiaries operate share plans over new or existing shares for their directors and employees. Of these, only the stock option plans operated by Instinet are significant.

The Instinet stock option plan permits the grant of options up to a maximum of 14% of the common stock outstanding immediately after Instinet's initial public offering (IPO) in May 2001. Options may be granted to directors and employees of Instinet at an exercise price of not less than fair market value at the date of grant. Options normally vest in instalments over a four-year period and may not exceed a term of 10 years. Approximately 1,300 employees and directors of Instinet participate in the plan. At 31 December 2002, options were outstanding over almost 24 million Instinet shares, equivalent to 9.8% of Instinet's common stock immediately after the IPO. These options have exercise prices ranging from US$3.29 to US$18.70 per share with a term of seven years.

As a result of the acquisition of Island by Instinet in 2002, a further 1.13 million shares under option were outstanding under the Island stock option plan as at 31 December 2002. Exercise prices range from US$0.91 to US$9.23 and these options are exercisable for 10 years from grant.

On behalf of the Board

Sir Christopher Hogg
24 February 2003


– Page 22 –

The directors are required by UK company law to prepare financial statements for each financial year, which give a true and fair view of the state of the affairs of the company and the Group as at the end of the financial year and of the loss and cash flows of the Group for the period. Reuters Group is also required to prepare financial statements and provide additional disclosures in accordance with the requirements of the SEC.

The Group has complied with both UK and US disclosure requirements in this report in order to present a consistent picture to all shareholders. In preparing the financial statements, applicable accounting standards have been followed, suitable accounting policies have been used and applied consistently and reasonable and prudent judgments and estimates have been made.

The directors have reviewed the Group's budget and cash flow forecast for the Group and the company for the year to 31 December 2003 and outline projections for the subsequent year in the light of the Group's financial position and borrowing facilities at 31 December 2002. On the basis of this review the directors are satisfied that the Reuters Group is a going concern and have continued to adopt the going concern basis in preparing the financial statements.


The directors acknowledge their responsibility for the Group's system of internal control and confirm they have reviewed its effectiveness. In doing so, the Board has taken note of the Turnbull guidance for directors on internal control, Internal Control: Guidance for Directors on the Combined Code, which is applicable to all UK listed companies.

The Board confirms that it has adopted a process for identifying, evaluating and managing significant risks the Group faces. This process, which accords with the Turnbull guidance, has been in place for the full financial year and is ongoing. The overall internal control system includes written policies and control procedures, clearly drawn lines of accountability and delegation of authority, and comprehensive reporting and analysis against approved budgets. There are supporting policies and procedures for reporting and management of control breakdowns. The Board considers that the control system is appropriately designed to manage, rather than eliminate, the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. The concept of reasonable assurance recognises that the cost of a control procedure should not exceed the expected benefits.

Using a common risk management framework throughout the organisation, each of the principal business and functional units identifies the significant risks that could impede the achievement of their objectives and records them in a 'Risk Register'. For each significant risk, line managers document an overview of the risk, consider the effectiveness of the current controls in place and identify any improvement actions required. In addition to the continuous monitoring processes embedded within the business, the Group Operating Committee monitors all significant operating risks. There is also a regular schedule of Group Risk Registers (covering significant operational, financial and strategic risks) submitted twice a year for review to the Group Management Committee and the Audit Committee. A common risk assessment process has also been adopted as an integral part of major programmes such as the restructuring programme.

In connection with the preparation of the statement on internal control in this report, the Group Management Committee formally considers the operation and effectiveness of Reuters risk management and internal control systems. This review includes consideration of self-assessment reports from line management and covers each of the most significant risks faced and how well these are controlled and managed. The Chief Executive and Chief Operating Officer report on the results of this review to the Audit Committee. Since October 2002 a Disclosure Committee, chaired by the Chief Executive, has also supported the process by reviewing disclosure controls and procedures.

Instinet and TSI, which are both listed on Nasdaq, have their own systems of risk management and internal controls on which they each report publicly to their shareholders. The boards of Radianz and Factiva, which include Reuters representatives, have responsibility for adopting processes for identifying, evaluating and managing significant risks in their respective businesses. Reuters assessment of the main risks relating to its affiliate companies are considered by the members of the Group Management Committee and included where required in the Chief Executive's report to the Audit Committee.

In addition to the self-assessment and management review procedures, the company monitors its internal financial control system through a programme of internal audits. Internal auditors independently review the controls in place to manage significant risks and report to the Audit Committee twice a year. The Audit Committee reviews the assurance procedures, including compliance controls, on a biannual basis and reports their findings to the Board.

The Group's external auditors, PricewaterhouseCoopers, have audited the financial statements and have reviewed the work of internal auditors and the internal control systems to the extent they consider necessary to support their audit report. The Audit Committee has met internal auditors and PricewaterhouseCoopers to discuss the results of their work.

During 2002, the directors were not aware of any control failures that resulted in a material loss to the Group.


Within the 90-day period prior to the filing of this report, an evaluation was carried out under the supervision and with the participation of Reuters management, including the Chief Executive and Finance Director, of the effectiveness of the design and operation of the Group's disclosure controls and procedures which are defined as those controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 is recorded, summarised and reported within specific time periods. As of the date of the evaluation, the Chief Executive and Finance Director concluded that the design and operation of these disclosure controls and procedures were effective. No significant changes were made in the Group's internal controls or in other factors that could significantly affect these controls subsequent to their evaluation.

By order of the Board

Rosemary Martin
Company Secretary
24 February 2003



– Page 23 –
We have audited the financial statements which comprise the consolidated profit and loss account, the consolidated balance sheet, the consolidated cash flow statement, the related notes and the balance sheet of Reuters Group PLC which have been prepared under the historical cost convention and the accounting policies set out in the statement of accounting policies, and the summary of differences between UK and US generally accepted accounting principles. We have also audited the disclosures required by Part 3 of Schedule 7A to the Companies Act 1985 contained in Section 6 of the remuneration report, 'the auditable part'.


The directors' responsibilities for preparing the annual report, the remuneration report and the financial statements in accordance with applicable United Kingdom law and accounting standards and the Form 20-F are set out in the statement of directors' responsibilities.

Our responsibility is to audit the financial statements and the auditable part of the remuneration report in accordance with relevant legal and regulatory requirements and United Kingdom Auditing Standards issued by the Auditing Practices Board and Auditing Standards generally accepted in the United States.

We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements and the auditable part of the remuneration report have been properly prepared in accordance with the Companies Act 1985. We also report to you if, in our opinion, the directors' report is not consistent with the financial statements, if the company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors' remuneration and transactions is not disclosed.

We read the other information contained in the annual report and Form 20-F and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. The other information comprises only those sections set out in the table of contents, including the directors' report, the unaudited part of the remuneration report, the report on corporate governance, the statement of directors' responsibilities and the operating and financial review.

We review whether the corporate governance statement reflects the company's compliance with the seven provisions of the Combined Code specified for our review by the Listing Rules of the Financial Services Authority and we report if it does not. We are not required to consider whether the Board's statements on internal control cover all risks and controls, or to form an opinion on the effectiveness of the Group's corporate governance procedures or its risk and control procedures.


We conducted our audit in accordance with United Kingdom Auditing Standards issued by the Auditing Practices Board and with Auditing Standards generally accepted in the United States. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements and the auditable part of the remuneration report. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements and of whether the accounting policies are appropriate to the company's circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements and the auditable part of the remuneration report are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.


In our opinion the financial statements give a true and fair view of the state of affairs of the company and the Group at 31 December 2002 and of the loss and cash flows of the Group for the year then ended and have been properly prepared in accordance with the Companies Act 1985. Those parts of the remuneration report required by Part 3 of Schedule 7A to the Companies Act 1985 have been properly prepared in accordance with the Companies Act 1985.


In our opinion the financial statements present fairly, in all material respects, the financial position of the Group at 31 December 2002, 2001 and 2000 and the results of its operations and cash flows for each of the three years in the period ended 31 December 2002, all expressed in pounds sterling in conformity with accounting principles generally accepted in the United Kingdom.

Accounting principles generally accepted in the United Kingdom vary in certain significant respects from accounting principles generally accepted in the United States. The application of the latter would have affected the determination of consolidated net result for each of the three years in the period ended 31 December 2002 and consolidated shareholders' equity at 31 December 2002, 2001 and 2000, all expressed in pounds sterling, as shown in the summary of differences between UK and US generally accepted accounting principles.

PricewaterhouseCoopers LLP
Chartered Accountants and Registered Auditors
24 February 2003


– Page 24 –

Under US law, all statements other than statements of historical fact included in this review are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Certain important factors that could cause actual results to differ materially from those discussed in such forward-looking statements are described under 'Risk factors' on pages 34-35 as well as elsewhere in this review. All written and oral forward-looking statements made on or after the date of this report and attributable to Reuters are expressly qualified in their entirety by such factors.

As of 1 January 2002, Reuters established a new organisation structure, moving from the previous product based divisions to the current customer-focused segments supported by specialist service centres. Reuters financial results for 2001 and 2000 have been restated accordingly and this review is based upon the restated figures. A review of the 2001 and 2000 results under the previous management structure can be found in the Annual Report and Form 20-F 2001.


The Group measures its performance by reference to revenue and profit, operating margin, earnings per share, cash conversion and free cash flow.

Underlying change and normalised profits and earnings are measures used by the Group to enable period-to-period comparison on a like-for-like basis so that organic operational growth can be easily identified. This reflects the manner in which the Group is managed.

Change is measured both in overall terms and in underlying terms. Underlying growth is calculated excluding acquisitions and disposals and the impact of currency fluctuations.

Operating profit, profit before tax and earnings per share are shown on a normalised basis, before the impact of amortisation of goodwill and other intangible assets, impairment charges and gains/losses on the disposal of subsidiaries and fixed asset investments.

A reconciliation of 2002 normalised operating profit and normalised profit before tax to operating profit and profit before tax under UK GAAP is shown below.

£m Reuters Instinet Group

Normalised operating profit/(loss)
before restructuring
393 (14) 379
Restructuring costs (112) (96) (208)

Normalised operating profit/(loss) 281 (110) 171
Amortisation of goodwill and other intangible assets – subsidiaries (86) (21) (107)
Impairment of goodwill (208) (208)

Operating profit/(loss) 195 (339) (144)

Normalised profit/(loss) before taxation 194 (105) 89
Amortisation of goodwill and other intangible assets:      
  subsidiaries (86) (21) (107)
  affiliates (11) (11)
  goodwill (208) (208)
  investments/affiliates (190) (38) (228)
Net (losses)/gains on disposal of subsidiaries/investments (30) 2 (28)

Loss on ordinary activities before taxation (123) (370) (493)

– Page 25 –

Summary of results
    Year to 31 December


  Revenue 3,575 3,885 3,592

  Normalised operating profit before restructuring 379 482 470
  Restructuring costs (208) (99)

  Normalised operating profit 171 383 470
  Affiliates/investment income (62) (70) (16)
  Net interest (payable)/receivable (20) (9) 3

  Normalised profit before tax 89 304 457
  Amortisation (118) (93) (71)
  Impairments and disposals (464) (53) 271

  (Loss)/profit before tax (493) 158 657


2002 results compared with 2001
Group revenue declined by 8% to £3,575 million. Underlying revenue fell 12%, driven by a 34% decline in revenue at Instinet. The decline at Instinet was primarily driven by the reduction in transaction fees per share traded and a fall in overall Nasdaq volumes. Reuters revenue was down 2% to £2,992 million reflecting weak trading conditions in global markets.

As a consequence of the declining revenues, actions have been taken at both Reuters and Instinet to reduce the operating cost base. The result has been a reduction in Group operating costs of 6% at actual rates and 11% at underlying rates. This also reflects the £114 million reduction in business transformation costs in 2002.

Group normalised operating profit before restructuring costs fell 22% to £379 million, with Instinet incurring a loss of £14 million.

The pre-restructuring normalised operating profit margin for the Group was 10.6% compared to 12.4% in 2001. Reuters margin improved to 13.1%, ahead of its publicly stated target of 12%. This improvement was more than offset by the loss in Instinet.

The restructuring costs in 2002 totalled £208 million across the Group, split £112 million in Reuters and £96 million in Instinet. This compares to a total of £99 million in 2001, split £82 million in Reuters and £17 million in Instinet. In both years, the restructuring costs related primarily to the reduction in headcount and rationalisation of the Group's property portfolio.

After restructuring costs, Group normalised operating profit fell 56% to £171 million. Normalised operating profit in Reuters was up 26% to £281 million in 2002, while Instinet incurred losses of £110 million.

The Group's share of affiliates' losses declined from £70 million in 2001 to £62 million in 2002. Of the three key affiliates, the profit from Factiva remained steady at £5 million, Radianz contributed a slightly lower loss at £26 million and TSI was significantly worse, moving from a loss of £17 million in 2001 to a loss of £40 million in 2002, mainly due to significant non-cash restructuring and amortisation charges. All other affiliates contributed a net £1 million loss compared to a £31 million loss in 2001. This reflected the Group's portfolio rationalisation programme, increased operating efficiencies and reduced start-up losses.

The Group's interest charge increased from £9 million in 2001 to £20 million in 2002. This is primarily due to a £10 million reduction in the interest receivable in Instinet due to reduced operating cash balances, reflecting trading performance, and lower deposit rates in the US.

The Group reported a normalised profit before tax of £89 million in 2002, compared to £304 million in 2001. The movement between the two years is explained as follows:



Normalised profit before taxation – 2001 304
29% increase in Reuters normalised operating profit before restructuring 89
Reduction in Instinet normalised operating profit before restructuring (192)
Additional restructuring in Reuters (30)
Additional restructuring in Instinet (79)
Decrease in losses from affiliates/investment income 8
Increase in net interest payable (11)

Normalised profit before taxation – 2002 89

Amortisation of goodwill and other intangible assets has increased by 26% to £118 million in 2002. The increase is attributable to the full-year impact of Bridge, which was acquired effective 1 October 2001. This was partly offset by reductions in the goodwill charge for the Instinet subsidiaries, as the goodwill was written down at the end of the third quarter of 2002.

Total impairments and disposals have increased from £53 million in 2001 to £464 million in 2002. In 2002, non-cash impairment charges reflected the fall in the share prices of both Reuters and Instinet over the course of the year, and included a £208 million impairment of Instinet goodwill and £147 million in respect of the write-down in the value of Reuters shares held in the Reuters Employee Share Ownership Trusts (ESOTs). In addition there were also some £81 million of charges taken to reflect a reduction in the carrying value of various investments held by the Group and net losses on disposal of £28 million, including a £19 million loss on the deemed disposal of a portion of the Group's investment in Instinet, following the Island acquisition. Although a significant impairment charge was taken in 2001, this was partially offset by the £200 million gain attributable to a deemed disposal of a 15.1% interest in connection with the initial public offering (IPO) of Instinet.

The Group reported a loss before taxation of £493 million in 2002 compared to a profit of £158 million in 2001. The 2002 loss is made up of a £370 million loss in Instinet and a £123 million loss in Reuters. These losses reflect the £464 million non-cash impairment charge discussed above.

The tax charge for 2002 was £23 million on reported losses before taxation of £493 million, compared with a charge for 2001 of £107 million on reported profits before taxation of £158 million. The tax charge for 2002 has arisen principally due to the non-deductible nature of write-downs in investments and amortisation charges. It also includes a £10 million charge arising on the dividend paid by Instinet. On a normalised basis the actual tax rate for the Group was 15% in 2002, compared to a rate of 35% in 2001. A reconciliation of the tax charge to the charge expected by applying the 30% UK rate of corporation tax to the reported profits before taxation is provided in note 4 to the consolidated profit and loss account.


Earnings/(loss) per share (EPS)
Normalised EPS for Reuters Group fell to 6.8 pence from 13.6 pence, reflecting the increase in restructuring costs and the operating loss in Instinet. On a reported basis the Group recorded a 29.0 pence loss per share, as compared to a 3.3 pence EPS in 2001, reflecting the £464 million non-cash impairment charge in 2002. Reuters normalised EPS grew 58% to 10.8 pence, reflecting the improvement in operating margins.


Cash flow
Cash conversion is used to measure the conversion of operating profit into cash and is calculated by taking the normalised operating cash flow (pre-restructuring) as a percentage of normalised operating profit (pre-restructuring). Reuters continues to be strongly cash generative, generating £423 million of operating cash before restructuring, representing cash conversion of 108% (109% on a post-restructuring basis).

– Page 26 –

Cash conversion is a less valuable measure for Instinet due to the relative size and volatility of counterparty debtors and creditors.

Reuters generated free cash flow of £214 million, providing cover of 1.5 times the dividend of £139 million. Further support for the dividend was provided by £134 million of dividend received from Instinet. Net debt for the Group was £66 million, comprised of net funds in Instinet of £518 million and net debt in Reuters of £584 million. Net debt for Reuters reduced by £118 million during the year.


Dividend per share
A final dividend of 6.15 pence has been proposed which, when added to the interim dividend of 3.85 pence amounts to 10.0 pence per share, consistent with 2001. This compares to Reuters normalised EPS of 10.8 pence.


2001 results compared with 2000
Group revenue increased 8% to £3,885 million and underlying revenues, driven primarily by Reuters core business, increased 2%. The difference between actual and underlying growth largely reflected the impact of currency movements and the Bridge acquisition.

Normalised operating profit before restructuring increased 3% to £482 million. Underlying growth was underpinned by a combination of revenue growth in Reuters and tighter cost control across Reuters and Instinet. This was partly offset by an increase in business transformation programme costs in Reuters of £25 million.

The normalised operating margin (before restructuring) for the Group was 12.4% compared to 13.1% in 2000. Expenditure relating to restructuring was £99 million in 2001 with no such charges incurred in 2000. After restructuring costs, Group normalised operating profit fell 19%.

The Group's share of net operating losses (before amortisation) in associates, joint ventures and investment income rose from £16 million in 2000 to £70 million in 2001, reflecting the inclusion of a full year's loss from Radianz and other start-ups, as well as losses arising from significant costs in TSI as a result of restructuring activity.

The £9 million net interest payable reflected £45 million of interest receivable, primarily relating to Instinet and also included £16 million from associates and joint ventures. This was more than offset by £54 million of interest payable, primarily related to Reuters, including £15 million of interest relating to the payment of corporate taxes. This compared to a £3 million net interest receivable in 2000.

Normalised profit before taxation fell by 34% to £304 million. The decline reflected costs associated with business transformation programmes which were higher in 2001, the restructuring costs incurred for the first time in 2001, increased losses in associates and joint ventures and increased interest payable, partly offset by higher operating profit in Reuters and Instinet.

Total amortisation was £93 million (2000: £71 million), of which £12 million (2000: £12 million) related to associates and joint ventures. The significant increase related principally to the acquisitions of Bridge, Diagram and ProTrader.

Net losses on investments were £53 million, compared to net gains of £271 million in 2000 (which included a £160 million book profit relating to a TSI follow-on public offering).

The most significant gain in 2001 was the deemed disposal of a 15.1% interest in Instinet following the IPO, which resulted in a £200 million book profit taken in the first half of the year. Reuters 'Greenhouse' portfolio of investments saw a net loss of £145 million with impairments offsetting the gains on disposal. These impairments reflected the substantial reduction in the value of technology stocks.

– Page 27 –

There were £108 million of net losses (of which £13 million related to write-downs by Instinet) with respect to the Group's other investments. This included full provisions against investments in Sila Communications and Pedestal and also £10 million in respect of assets lost in the World Trade Center. Also included in the net write-downs was a gain of £16 million on the disposal of VentureOne.

As a result, reported profit before taxation was £158 million, compared to £657 million in 2000.

The tax charge for 2001 resulted in an actual tax rate of 67% on profit before taxation, compared with a rate of 21% in 2000 and the prevailing UK corporate tax rate of 30%. The higher actual tax rate was due principally to the fact that the write-down in investments and the amortisation charges were non-deductible. On a normalised basis, the actual tax rate for 2001 and 2000 was 35%.

Profit after taxation was £51 million compared to £521 million in 2000.

Normalised EPS for Reuters Group fell to 13.6 pence from 21.0 pence, reflecting the lower normalised profit before tax. On a reported basis the Group recorded EPS of 3.3 pence compared to 37.1 pence in 2000, reflecting the impairments and net losses on disposal of £53 million, as compared to the net gain in 2000 of £271 million.

Cash conversion, pre-restructuring, was 86% in 2001 and 120% in 2000. This reflects the business transformation expenditure accrued in 2000, but paid in 2001.

The full year dividend fell from 16.0 pence in 2000 to 10.0 pence in 2001, following a review of dividend policy.


Underlying recurring revenues in Reuters in the last quarter of 2002 were down 6.5%, slightly better than expectations. Over the year-end market conditions have deteriorated such that Reuters now expects the decline in recurring revenue to be at or slightly above 9% in the first quarter of 2003 and for the decline to be somewhat higher in the second quarter.

Reuters remains committed to the long-term target of rebuilding operating margins and is confident that the Fast Forward plan announced on 18 February 2003 will deliver this outcome. In the short-term the business will not be managed exclusively for operating margin, as the priority is to execute rapidly and effectively on Fast Forward. Nevertheless, plans currently in place for 2003 are expected to deliver a normalised operating margin before restructuring of around 12%.

By executing aggressively on the separate initiatives that make up Fast Forward, Reuters expects to incur restructuring costs of approximately £160 million in 2003. Fast Forward will generate savings of £45 million in 2003, in addition to the £445 million of savings from initiatives to date.

Reuters has a strong track record of high cash conversion, reflecting the quality of its earnings, and remains committed to ensuring this continues.

As a result of the Fast Forward plan, the number of Reuters employees is expected to fall from 15,900 to around 13,000 by the end of 2006. Reuters expects to incur restructuring charges of £340 million between 2003 and 2005, with £160 million incurred in 2003. Reuters is targeting annualised savings from Fast Forward of approximately £440 million by 2006. The investment associated with Fast Forward measures such as building out the existing Bridge distribution system and building up Reuters content and analytics offerings is expected to come from the redirection of internal resources, rather than any incremental spend. Reuters estimates the amount of this internal investment at £120 million in each of 2003 and 2004.

The operating review reflects the manner in which the Group is managed: Reuters under its new organisation structure and, separately, Instinet which operates independently of Reuters.

    Year to 31 December


  Treasury Services 1,134 1,189 1,101
  Investment Banking 834 815 701
  Asset Management 709 690 649
  Corporates & Media 315 348 343

Total Reuters 2,992 3,042 2,794
Normalised operating costs      
  Segments (274) (293) (251)
  Channels (1,151) (1,147) (1,068)
  Business Technology Group (779) (775) (685)
  Chief Information Office (98) (105) (111)
  Editorial (216) (241) (233)
  Business Support Services (49) (99) (37)
  Corporate (32) (78) (96)

Normalised operating profit
before restructuring
393 304 313

Restructuring Costs (112) (82)

Normalised operating profit 281 222 313


Revenue by type
Reuters classifies revenue into three distinct types – recurring, outright and usage. Recurring revenue, which continues to make up approximately 91% of total revenues (£2.7 billion), refers to the sale of our subscription products and includes maintenance fees on solutions. Recurring revenue declined by 1% in 2002 compared to growth of 8% in the previous year, reflecting the challenging market environment. The underlying fall in the second half of the year was 6.1%.

Revenue from premium products (which comprises 3000 Xtra, Dealing and BridgeStation) grew 26% on an underlying basis to £654 million with the average number of accesses up 45%. Revenue from 3000 Xtra was £323 million, up 83% on 2001. The installed base of 3000 Xtra grew steadily through 2002 reaching 51,100 at the end of the year, a 45% increase. Installations represented 87% of firm sales of 3000 Xtra as at the end of the year. Dealing revenues were down 7% on an underlying basis with the average number of accesses down 6%.

Recurring revenue from legacy 2000/3000 series products totalled £552 million and was down 25% on an underlying basis with the average number of accesses down 22%. This decline was due to the migration to 3000 Xtra, especially from higher priced products such as Markets 3000, as well as cancellations.

Revenue from mid and low tier products was £308 million, down 5% in underlying terms with average accesses down 11%. The first of Reuters next generation products, aimed specifically to grow market share in the mid tier, are expected to go on sale during 2003.

Reuters saw good growth from client infrastructure products, enterprise information products such as DataScope and Bridge EJV, and risk management applications such as Kondor+. This growth was offset by revenue declines in exchange fees and other recoveries, software rentals, online media services and research and advisory services.

Outright revenue, comprising 5% (£163 million) of total revenue, is principally derived from the sales of solutions including software, hardware and consultancy. Outright revenue declined by 24% compared to an increase of 13% in 2001. The decline in 2002 is due to continuing constraints in IT spend by clients.

– Page 28 –

Usage revenue (4% or £122 million of total revenue) is principally derived from BTC and Dealing products where revenue is generated based on trading volumes. Usage revenue increased by 32% in 2002 compared to a 56% increase in 2001, attributable to the full year impact of BTC.


Revenue by customer segment
Treasury Services
The Treasury Services segment performed well against a challenging backdrop of market consolidation and cost cutting. Revenue was £1,134 million, down 5% compared to 8% growth in the previous year. On an underlying basis the decline was 3% – an underlying 7% decline in Dealing revenues was partially offset by strong demand for 3000 Xtra and other information products and by a pick-up in forwards matching volumes, particularly in the fourth quarter.

Recurring revenues within this segment experienced a modest decline, in tough market conditions, of 4% to £1,000 million, compared to growth of 7% in the prior year. Information product revenue has grown, principally through 100% growth in 3000 Xtra reflecting a mix of new sales and upgrades from the 2000/3000 product series.

Offsetting this growth was a 9% decline in revenue from Dealing products to £278 million (2001: 8% decline) from both Dealing 3000 and Dealing 2000-1. The largest declines were in the UK and the US, the former due to various mergers (for example, Halifax and Bank of Scotland) and the latter due partly to merger activity but also as a result of the full year impact of the events of 11 September 2001.

Outright revenue declined by 18% to £80 million compared to 20% growth in 2001 reflecting the constraints on major IT projects by clients. The consulting practices saw a decline as a result, although this was somewhat offset by an increase of almost a third in Commodities & Energy outright revenue, driven principally by two major deals in Japan.

Usage revenue grew by 4% to £54 million (2001: 4% growth), driven by increased activity on the Dealing Matching systems.


Investment Banking (IB)
Revenue increased 2% to £834 million due to the acquisition of Bridge, compared to 16% growth in 2001, but fell 11% on an underlying basis, as customers continued to cut costs by eliminating duplicate services, replacing existing products with lower cost alternatives and reducing headcount.

Recurring revenue grew by 1% to £726 million (2001: 12%) reflecting the inclusion of Bridge information revenue (principally BridgeStation, a premium product). On an underlying basis, recurring revenue was down 9% as cancellations of legacy products, particularly in Europe, were only partly offset by increased revenues from 3000 Xtra. IB's business has suffered from client headcount reductions (some 10,500 staff cut in the second half of 2002 at the six largest investment banks) and the intensive competitive actions (price-cutting and launch of products).

Partly offsetting the decline has been growth in Enterprise Information Products and the newly launched North American Capital Markets product (NACAP).

Outright revenues fell 32%, compared to 29% growth in 2001, as banks remain reluctant to commit to new IT projects.

Usage revenue grew 140% to £59 million aided by a full year of strong trading performance from BTC. Excluding BTC, there was growth of 11% driven by the Reuters InterTrade Direct product.


Asset Management (AM)
Although the AM segment has not seen the same level of cost-cutting as other parts of the financial services sector, there has been some level of retrenchment and consolidation in the industry. Revenue for the year grew 3% to £709 million (2001: 6%) benefiting from the Bridge acquisition, but was down 4% on an underlying basis. Recurring revenues grew by 4% overall (2001: 8%) and fell just 2% to £674 million on an underlying basis as demand for private client services, end-of-day pricing services and funds information partially offset the impact of cancellations due to headcount reductions.

Outright revenues declined by 24% to £32 million (2001: 20% decline) as asset managers cancelled or deferred IT expenditure plans or made greater use of their internal departments for development. AM's consulting practices have also suffered from aggressive price competition.


Corporates & Media (C&M)
Revenues from C&M declined 7% (2001: 1% growth) on an underlying basis to £315 million. This was due to the impact on our traditional media customers of the downturn in advertising, the fall-out among our new media customers of the decline in online advertising and the reduced demand for research and advisory products within the financial services and IT sectors. Corporates were affected by the general downturn in the economy particularly subsequent to the events of 11 September 2001 as well as current political uncertainty.

Recurring revenue declined by 7% to £307 million (2001: 2% decline) as corporate customers sought to trim costs and, as a result, held back or reduced installations of Reuters products. Clients also cut back quite severely on their research requirements, thus impacting our research-focused subsidiaries Yankee and Tower.


Operating costs
Operating costs for Reuters as a whole were reduced by 5% in 2002, compared to an increase of 11% in 2001. The underlying cost reduction in 2002 was 10%, compared to a 6% decline in underlying revenues. The principal drivers of this reduction were the business transformation programme initiated in 2000 and follow on savings initiatives. Annual savings from these totalled £235 million in 2002, £30 million more than originally planned. Reuters manages costs by geographic sales and service channels and centres of excellence.

– Page 29 –

Approximately 44% of Reuters costs arise in the Channels, principally the three main regions of the Americas, Europe Middle East & Africa (EMEA) and the Asia Time Zone (ATZ). Channel costs in total remained flat in 2002 compared to a 8% growth in 2001. On an underlying basis channel costs declined by 4%.

In the Americas, total costs grew by 22% to £392 million compared to 3% growth in 2001, reflecting the full year impact of Bridge. On an underlying basis growth was 6% reflecting the inclusion of the Research & Analytics business brought in from Instinet as well as charges related to further property rationalisation. Excluding these, costs were restrained through headcount reductions and rationalisation of the property portfolio, primarily by centralising staff in New York in the new 3 Times Square building, which was completed part way through 2001.

In EMEA costs were reduced by 8% to £573 million, the principal drivers of which were headcount cuts as part of the restructuring programme. In addition, data costs reduced significantly mainly as a result of the fall in end users. This compares to an 11% increase in overall costs in 2001 partly through transformation programmes.

In ATZ costs were flat year-on-year at £186 million (2001: 4% growth) with small increases in staff costs (to support the significant solutions deals) being offset by reductions in services (renegotiation of subscriber lease costs) and bad debt expenses.


Approximately 11% of Reuters costs are derived from the four customer segments and primarily consist of staff costs, professional fees and contractor staff. In 2002, segment costs were reduced by 6% to £274 million principally through a sizeable saving in marketing costs. Further savings were made in Lipper, Tower, Yankee and ORT through headcount reductions.


Business Technology Group (BTG)
BTG costs represent approximately 30% of Reuters cost base. Total BTG costs grew by 1%, compared with 13% in 2001. This marginal growth in 2002 reflects the inclusion of a full year of costs following the acquisition of Bridge offset by net cost savings across BTG.

On an underlying basis, costs declined by 7% compared with 3% growth in 2001. Major areas of cost reduction in 2002 were in the development function, where savings have been achieved through a combination of site rationalisations, severance programmes and a transfer of activity from higher cost to lower cost locations, and lower investment in business transformation programmes.

These cost reductions have been offset in part by growth in the cost of communications. This growth is a reflection of increases in data volumes and update rates, and the migration of clients to the next generation of Internet protocol networks.


Editorial costs, accounting for about 8% of total Reuters operating costs, were 11% lower at £216 million than in 2001, compared to an increase of 4% in the previous year.

The principal factors underpinning the reduction were the closure of Financial TV, deferral of further capital expenditure and the headcount reduction programme. The reduction was partly offset by further investment in our News2Web programme and coverage of the football World Cup.


Chief Information Office (CIO)
CIO costs, which represent 4% of total Reuters costs, declined by 7% to £98 million compared to a decline of 5% in 2001.

CIO's costs were reduced as a result of the completion in 2001 of a number of initiatives under the business transformation programme. These included the establishment of a Global Sourcing function which involved replacing local logistics and materials management staff with sourcing professionals and the outsourcing of logistics and installation staff in the UK. The new Global Sourcing function has seen significant reductions in the Reuters cost base as Reuters moves to a more

– Page 30 –

structured sourcing strategy. The outsourcing project has reduced costs and introduced a more flexible cost model linked to activity levels.


Business Support Services (BSS)
BSS makes up about 2% of Reuters cost base and declined by 51% to £49 million in 2002 compared to a growth of 168% in 2001. The cost decline reflects a significant reduction in headcount as shared service operations were rolled out and the investment in 2001 in implementing the shared service programme and a new global finance system as part of the business transformation programme.


 The Corporate centre accounts for 1% of Reuters costs and declined by 59% in 2002 to £32 million compared to a decline of 21% in 2001. Cost reductions have been primarily driven by the headcount reduction programme, with further savings coming from a renegotiation of the management contract with RVC, an independent fund manager established by former Reuters employees to manage the Greenhouse venture capital fund. Reductions in professional fees relating to tax and legal work have also helped to reduce the overall costs, as well as beneficial impacts from currency movements.


Reuters commenced a series of restructuring initiatives in the second half of 2001. Reuters aim is to achieve further cost savings in response to the continuing weak market conditions by reducing headcount beyond that resulting from the business transformation and other programmes. The combined target from restructuring and business transformation was a total of 2,250 staff. The restructuring programme actions resulted in a charge of £82 million in 2001, augmented by a further £112 million in 2002.

Business transformation and these other restructuring programmes are estimated to have realised benefits in 2001 of £65 million, £235 million in 2002 and are expected to yield total savings of £445 million in 2003.


Research and development (R&D)
R&D expenditure totalled £200 million in 2002 compared with £294 million in 2001 and £323 million in 2000. Of the total expenditure in 2002, £154 million related to Reuters (2001: £227 million) and £46 million to Instinet (2001: £67 million).

The decline in Reuters R&D costs partly reflects the impact of cost reduction measures across the development organisation. This decline has been offset in part by the full year impact of costs arising from the acquisition of Bridge. Notable areas of spend in 2002 included investment in next generation products and capabilities such as Reuters Knowledge, Reuters Messaging and News2Web, our new editorial multimedia production system. Part of the decline relates to the completion of projects related to the business transformation programme.

  Year to 31 December


Revenue 592 854 804

Normalised operating (loss)/profit before restructuring (14) 178 157
Restructuring costs (96) (17)

Normalised operating (loss)/profit (110) 161 157

– Page 31 –

Instinet has been operating in a very challenging market environment. Instinet's business is dependent on trading volumes in global equity markets and particularly the Nasdaq over-the-counter market in the USA. Trading volumes have been under continuous pressure throughout 2002. This, coupled with a substantial reduction in price, partly offset by improved Nasdaq market share, has resulted in a 31% decline in revenue to £592 million (2001: 6% increase). Operating losses, excluding restructuring, were £14 million as compared to a profit of £178 million in 2001 and a profit of £157 million in 2000. Following the acquisition of Island in September 2002, a goodwill impairment charge totalling £208 million was recorded. As part of that transaction Instinet paid a dividend of US$249 million, of which Reuters received US$207 million.

Nasdaq market volume per day in the fourth quarter of 2002 was 12% down from the fourth quarter of 2001 and 8% down for the full year 2002 versus 2001. Instinet's share of the Nasdaq traded volume in the last quarter of 2002 was 29.7% against 11.8% at the end of 2001 (2000: 13.9%) due to the addition of Island, market share gains from new products and price reductions earlier in the year. Instinet does not believe that the introduction of Nasdaq's SuperMontage system has had a material effect on its trading performance.

During 2002 a series of measures were implemented to increase the competitiveness of Instinet, including the acquisition of Island, a new management team under the leadership of Ed Nicoll, significant reductions in the fixed cost base and the rollout of new products including Instinet Trading Portal, a front-end trading application, and Newport, a global portfolio-trading and execution management solution. In addition, Reuters and Instinet began to work together on a series of initiatives including the ability to reach Instinet's liquidity pool from Reuters screens.

A £21 million decline in Instinet's R&D costs in 2002 principally reflects a reduction in Research and Analytics investment and the termination of expenditure in the Fixed Income business, which ceased trading early in 2002.

Cash flow movement in 2002        

Normalised operating profit/(loss) (pre-restructuring) 393 (14) 379
Depreciation 179 42 221
Capex (140) (28) (168)
Working capital (9) (90) (99)

Operating cash flow (pre-restructuring) 423 (90) 333

Restructuring (117) (34) (151)
Taxation, interest, other (92) (50) (142)

Free cash flow 214 (174) 40

Reuters dividend (139) (139)
Instinet dividend 134 (161) (27)
Net acquisitions (including ESOTs) (91) 13 (78)

Movements 118 (322) (204)

Net (debt)/funds (584) 518 (66)
Cash conversion (pre-restructuring) 108% n/a n/a

Spending on tangible fixed assets was £168 million in 2002 compared to £276 million in 2001 and £274 million in 2000. The reduction in expenditure reflects lower property-related expense and reduced spend on subscriber and administration equipment.

Reuters continues to be strongly cash generative, generating £423 million of operating cash flow before restructuring costs, representing cash conversion of 108% (109% on a post-restructuring basis). Instinet had a net operating cash outflow of £90 million, due principally to the movement in net counterparty debtors and creditors. Free cash flow was £40 million (2001: £443 million) for the Group, with Reuters generating £214 million, largely offset by an outflow at Instinet of £174 million.

Reuters paid dividends of £139 million in 2002 compared to £227 million in 2001 and £205 million in 2000. Instinet paid a dividend of £161 million during 2002, of which £27 million was paid to shareholders outside the Reuters Group.

Reuters Group spent £78 million in 2002 on acquisitions net of disposals (including ESOTs), compared to £43 million in 2001 and £318 million in 2000. In 2002, £65 million was spent on Reuters shares acquired by the ESOTs compared with £48 million in 2001 and £40 million in 2000. Proceeds from the sale of fixed asset investments, principally relating to Greenhouse portfolio disposals, were £22 million compared to £68 million in 2001 and £80 million in 2000.

On 18 February 2003 Reuters announced it had entered into a definitive agreement to acquire Multex for total consideration of £121 million. Reuters currently anticipates that the acquisition will be completed by the end of March 2003. Multex reported 2002 revenue of US$92 million (£57 million), EBITDA of US$11 million (£7 million) and a net loss of US$7 million (£4 million), in accordance with US GAAP. The acquisition covers net assets with a book value at 31 December 2002 of US$109 million (£68 million), including US$50 million (£31 million) of cash. Reuters expects the acquisition to reduce normalised profit before tax by approximately £10 million (US$16 million) in 2003 as a result of integration and financing costs. The acquisition is expected to have a positive impact thereafter.

Net debt for the Group at 31 December 2002 amounted to £66 million, compared with net funds of £138 million at 31 December 2001 and net debt of £34 million at 31 December 2000. Net debt increased by £204 million, reflecting a £322 million decrease in Instinet offset by £118 million of debt repayment in Reuters. Net debt at 31 December 2002 comprised gross debt of £794 million offset by cash and short-term investments of £728 million.

Reuters finances its operations by a mixture of cash flows from operations, short-term borrowings from banks and commercial paper markets, backed up as required by committed bank facilities and finance from capital markets. Reuters manages its net debt position and interest costs to support its continued access to the full range of debt capital markets. Reuters expects to be able to finance its current business plans from ongoing operations and its external facilities.

At 31 December 2002 Reuters had available a committed syndicated loan facility of £500 million which expires in December 2006, all undrawn at 31 December 2002. The facility contains one financial covenant that consolidated profits before interest, tax and amortisation (subject to certain adjustments) should be greater than 2.75 times consolidated net finance charges. As at 31 December 2002 Reuters complied with the covenant.

In February 2003 Reuters began the process of replacing its £500 million bank facility with a new facility of £1.25 billion. The facility is being syndicated to a group of international banks. The facility is structured with £800 million of the facility available for drawing and redrawing until 2008. The remaining £450 million will be available until 2004, with the ability to extend the maturity in whole or part in certain circumstances.

A £1.5 billion Euro Commercial Paper Programme was established in 1998. At 31 December 2002, Reuters had outstanding obligations of £176 million under this programme, repayable at various dates up to March 2003. The minimum outstanding during 2002 was £127 million and the maximum was £549 million.

In 1998 Reuters also established a £1 billion Euro Medium Term Note Programme. At 31 December 2002, Reuters had outstanding £588 million under this programme, repayable at various dates up to January 2006. The minimum outstanding during 2002 was £405 million and the maximum was £614 million.

– Page 32 –

In addition, Reuters has short-term uncommitted bank borrowing facilities denominated in various currencies, the sterling equivalent of which was approximately £185 million. Drawings under these lines was £10 million at 31 December 2002. Instinet has access to the equivalent of US$717 million short-term uncommitted bank facilities of which US$31 million was drawn at 31 December 2002.

The following table summarises the Group's principal contractual financial obligations at 31 December 2002, certain of which are described in the consolidated financial statements and notes. The Group expects to be able to fund such obligations from ongoing operations and its external facilities.

  Payments due by period

Contractual obligations Total Less
1 year
After 5

Short-term debt 440 440
Long-term debt 352 352
Operating leases 735 91 149 119 376
Unconditional purchase obligations 152 63 89

Total contractual obligations 1,679 594 590 119 376


The key objectives of Reuters Group treasury management are to ensure sufficient liquidity exists to meet funding needs and to manage the interest rate and currency risks arising from the Group's operations and its sources of finance.

Reuters borrows in many currencies, at both fixed and floating rates and uses derivative contracts to create the desired currency and interest rate basis. Historically, most funding was converted into sterling. However some debt may be left in, or converted to, other currencies to match asset exposures that arise from time to time. Derivatives used are principally interest rate swaps, forward rate agreements, interest rate caps and collars, currency swaps, forward foreign exchange contracts and currency options.

The main risks managed by the Group Treasurer, under policies approved by the Board are foreign currency risk, interest rate risk, liquidity and refinancing risk and counterparty credit risk. A Treasury Committee of the Board periodically reviews Reuters treasury activities, policies and procedures. All treasury activity takes place within a formal control framework. A separate treasury department exists within Instinet.

Almost 90% of Group revenue is denominated in non-sterling currencies. The Group also has significant costs denominated in foreign currencies with a different mix from revenue. Group profits are, therefore, exposed to currency fluctuations. The approximate proportions of operating profit excluding goodwill amortisation and currency gains attributable to each key currency group was as follows:

  Year to 31 December

Operating profit by currency 2002

Continental Europe      
  Euro and legacy currencies 296 133 107
  Other 54 25 18
US dollar (71) 66 57
Japanese yen 53 26 22
  Depreciation (140) (63) (58)
  Other (143) (97) (66)
Other 51 10 20

Total 100 100 100

– Page 33 –

Sterling costs exceeded sterling revenue due to the level of restructuring costs, UK-based marketing, development, operational and central management costs and depreciation which was largely accounted for in sterling once an asset has been acquired.

In broad terms, using the 2002 mix of profits, the impact of an additional unilateral 1% strengthening of sterling would have been a reduction of approximately £7 million in operating profits before hedging (2001: £10 million, 2000: £10 million).

Exchange rate movements in 2002 had an adverse impact before hedging on reported revenue offset by a favourable impact on costs, mainly due to the weaker US dollar in 2002 compared with 2001. The net impact on operating profit was not significant.

The Group holds cash and short-term investment balances of £728 million, of which £537 million is held by the Instinet group of companies. Reuters currency exposure with respect to Instinet is not currently hedged.

The priority in Reuters currency management policy is to reduce the risk of volatility in the Group's profit and loss account to acceptable levels while allowing a degree of flexibility to take advantage of market movements.

The main principles underlying currency hedging policies are as follows:

committed hedging cannot exceed the underlying cash flow exposure; and
levels of currency hedging cannot exceed 90% of underlying exposure for the first 12 months and 70% for the following 12 months.
The results of currency and interest rate hedging activities for the three years to December 2002 are summarised below:
  Year to 31 December

Recognised gains/(losses) 2002

Currency hedging 10 (4) 5
Interest rate hedging (2) (1) (3)

Recognised currency hedging gains in 2002 were favourable compared with 2001 due mainly to the lower level of US dollar hedging which gave rise to losses in 2001 when the currency weakened after hedges were placed.

Gains and losses on instruments used for hedging are not recognised until the exposure that is being hedged is itself recognised. Unrecognised gains and losses on instruments used for hedging, and the movements, are set out below:

Hedging Gains

Unrecognised at 1 January 2002 18 (9) 9
Arising in previous years:      
  recognised in 2002 (12) 5 (7)

  not recognised in 2002 6 (4) 2
Arising in 2002:      
  not recognised in 2002 7 (9) (2)

Unrecognised at 31 December 2002

13 (13)

Of which:      
  expected to be recognised in 2003 11 (8) 3
  expected to be recognised in 2004 or later 2 (5) (3)

Net unrecognised gains on derivatives used for hedging were nil at 31 December 2002 compared with unrecognised gains of £9 million at 31 December 2001 and unrecognised losses of £3 million in 2000. The decrease is mainly due to profitable Japanese yen hedges at 31 December 2001 which matured during 2002.

Net cash flows are mainly converted into sterling and either applied to reduce debt or invested in money market instruments with financial institutions holding strong credit ratings with pre-agreed limits set by the Board. Interest rates are managed using a mix of financial instruments, which commence and mature at various dates through to January 2006. Interest rate hedging relates to the use of derivative contracts to alter the currency and interest rate profile on medium-term fixed rate notes issued and to hedge timing mismatches. In broad terms, using the average net funds position, a 1% increase in global interest rates would have reduced profit before tax in the year by approximately £1 million (2001 and 2000: £1 million) excluding the impact of hedging.


Group accounting policies, which are set out on pages 63-64, conform with UK GAAP. In accordance with the requirements of Financial Reporting Standard 18 (FRS 18), these policies and any applicable estimation techniques have been reviewed by the directors who have confirmed them to be the most appropriate for the preparation of the 2002 financial statements.

Critical accounting policies
In preparing these financial statements, management has made its best estimates and judgements of certain amounts included in the financial statements. The most significant judgemental areas in 2002 related to:

the impairment of fixed assets and goodwill. Under UK accounting standards impairment is measured by comparing the carrying value of an asset with the higher of its net realisable value or value in use. These comparisons sometimes require subjective judgements and estimates to be made by management with regard to projected future cash flows of income generating units or the amounts that could be obtained from the sale of investments. As a result some fixed asset investments have been written down to net realisable value. In 2002 the following impairment charges were recorded in the consolidated profit and loss account:
  Impairment of Instinet goodwill 208
  Impairment of the carrying value of Reuters shares held by the ESOTs 147

Other fixed asset investments

  The impairment of both Instinet goodwill and Reuters shares held by the ESOTs have been impacted by market values falling below carrying values;

accounting for LTIPs. The costs of shares acquired to cover LTIP awards are charged in the profit and loss account over the period to which the performance criteria relate. Adjustments are made during the three-and-five year vesting period of each plan to reflect changes in the possibility of performance criteria being met. These adjustments are to some extent subjective as performance is based on Reuters Total Shareholder Return (TSR) relative to the TSR of the other 99 companies in the FTSE 100 at the start of the measurement period. The adoption of more pessimistic assumptions would result in a lower charge being recognised at the start of each plan and the possibility of higher charges in later years;

property provisions. As part of the 2002 restructuring charges a number of leasehold properties have been identified as being surplus to requirements. Although efforts are being made to sub-let this vacant space, management recognises that this may not be possible immediately given the current economic climate. Estimates have been made to cover the cost of vacant possession together with any shortfall arising from sub-leased rental income being lower than lease costs being borne by Reuters. The actual outcome may differ from the estimates;
allowances for doubtful accounts. For all trade debtors, we must make a judgement regarding the ability of our customers to pay and accordingly, we establish an allowance for estimated losses arising from non-payment. In evaluating this allowance we consider customer credit worthiness, current economic conditions and our own experience. If future collections differ from our estimates, this will affect future profit.

– Page 34 –

A reconciliation of net income under UK and US GAAP is set out on page 67. A discussion of the relevant US accounting policies which differ materially from UK GAAP is given on pages 65-66. Details of recent US GAAP accounting pronouncements are given on pages 69-70.


Forward-looking statements
This document contains certain forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 with respect to the Group's financial condition, results of operations and business and management's strategy, plans and objectives. In particular, all statements that express forecasts, expectations and projections with respect to certain matters, including trends in results of operations, margins, growth rates, overall financial market trends, the impact of interest rates or exchange rates, anticipated cost savings and synergies and the completion of strategic transactions or restructuring programmes are all forward-looking statements. These statements involve risk and uncertainty because they relate to events and depend on circumstances that may occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. These factors include, but are not limited to, the risk factors discussed below. Any forward-looking statements made by the Group or on its behalf speak only as of the date they are made. Reuters Group does not undertake to update any forward-looking statements.

Reuters may not be able to realise the anticipated benefits of its Fast Forward transformation plan
On 18 February 2003 Reuters announced it was accelerating its strategy to become a more focused information company. The Fast Forward plan includes investing in new information, streamlining the way information is delivered, offering a more simple and segmented product line, rationalising the non-core elements of the business and reshaping the cost base. While it is expected that these measures will produce significant competitive advantages, cost savings and eventual revenue growth, there can be no assurance of the extent to which these benefits will be realised.

Continued or worsened unfavourable conditions in financial markets may have a significant adverse effect on the Group's business
The Group's business is dependent upon the health of the financial markets and the participants in those markets. The Group's dealing products are dependent on the level of activity in the foreign exchange market. Similarly, the businesses of BTC and Instinet are dependent upon the level of activity in the equity markets. Reuters results were negatively impacted by the continuing economic downturn in 2002. If these conditions continue or get worse or in the event of significant trading market disruptions or suspensions there could be further adverse effects on the Group's business. In addition, the Group's business could be adversely affected by further consolidations among clients and competitors.

Currency fluctuations and interest rate fluctuations may have a negative impact on the Group's reported revenue and earnings
Reuters Group reports results in UK pounds sterling but receives revenue and incurs expenses in more than 60 currencies and is thereby exposed to the impact of fluctuations in currency rates. Currency movements had a broadly neutral impact on operating profit in 2002. A strengthening of sterling from current levels, especially in relation to other currencies in which Reuters Group derives significant revenues or holds significant assets such as the euro or the US dollar, could adversely affect results in future periods. To the extent that these currency exposures are not hedged, exchange rate movements may cause fluctuations in the Group's consolidated financial statements. In addition, an increase in interest rates from current levels could adversely affect the Group's results in future periods.

Reuters is exposed to a decline in the valuation of companies in which it has invested and does not have management control over all of them
Reuters has entered into joint ventures with, and made strategic investments in, a number of companies and also has significant interests in companies and joint ventures such as Instinet, TSI, Radianz and Factiva. The value of a number of these companies fluctuated widely and generally decreased significantly from 2001 through 2002, in part as a result of external market factors. The value of Reuters interests in these companies is dependent on, among other things, the performance of these companies generally, whether such performance meets investors' expectations, and external market and economic conditions.

The Group may experience difficulties or delays in developing or responding to new customer demands or launching new products
The Group's business environment is characterised by rapid technological change, changing and increasingly sophisticated customer demands and evolving industry standards. If the Group is unable to anticipate and respond to the demand for new services, products and technologies on a timely and cost-effective basis and to respond and adapt to technological advancements and changing standards, its business may be adversely affected. In addition, Reuters Group may fail to launch new products and its existing products and services may cease to be attractive to customers and new products and services that the Group may develop and introduce may not achieve market acceptance.

Reuters Group is dependent on third parties for the provision of certain network and other services
The Group has outsourced the day-to-day operation of most of its networks to Radianz, the joint venture with Equant. Radianz will source the majority of its requirements from Equant and will seek to provide network services to companies in addition to Reuters Group. Reuters and Equant are equally represented on the Radianz Board with neither party having control. Accordingly, Reuters ability to affect the performance of Radianz may be limited and our business could be adversely affected as a result.

In connection with the Bridge acquisition, Reuters entered into a network services agreement with Savvis which was the primary provider of network services to Bridge. Reuters currently holds Savvis preferred stock that votes as, and is convertible into, an approximately 15% common stock interest in Savvis share capital, and has an observer on Savvis' board. Reuters has very limited, if any, ability to affect the performance of Savvis. Should Savvis fail, or be unable to provide network services necessary to the continued conduct of the Bridge businesses Reuters acquired before Reuters is able to migrate these services to Radianz or make other alternative arrangements, the Group's business would be adversely affected.

The Group's business may be adversely affected if our networks or systems experience any significant failures or interruptions or cannot accommodate increased traffic
Reuters Group's business is dependent on the ability to handle speedily substantial quantities of data and transactions on its computer-based networks and systems and those of Radianz, Savvis and others. Any significant failure or interruption of such systems due to factors beyond the Group's control, including terrorist activities, could have a material adverse effect on its business and results of operations. The continuing increase in the update rates of market data may impact product and network performance from time to time. Factors that have significantly increased the market data update rates include: the emergence of Nasdaq's SuperMontage and proprietary data feeds from other markets; high market volatility; decimalisation; and the multiple listing of options. While the Group has implemented a number of capacity management initiatives, there can be no assurance that the Group and its network providers will be able to successfully accommodate accelerated growth of peak traffic volumes.

Changes in the regulatory or competitive environment could have an adverse effect on Instinet's business
Neither the Instinet alternative trading system (ATS) nor the Island ATS is currently required to register as a US national securities exchange. However, as the Island and Instinet ATSs are integrated over time, the SEC could determine that exchange registration is necessary resulting in substantial additional regulation of Instinet, which could reduce its operational flexibility in ways that could have a material adverse effect on its business. The Instinet ATS and the Island ATS are also subject to Regulation ATS, which requires ATSs meeting certain trading volume criteria to provide quotation data to an SRO and to provide other broker-dealers execution access to such quotes. Compliance with Regulation ATS could have a significant negative impact on Instinet's trading volumes. In July 2002, the SEC also took action that resulted

– Page 35 –

in the suspension of market data revenue sharing programmes, in which Island participated, and led to Island's suspension of its own programme. Instinet has been from time to time, and is currently, involved in discussions and proceedings with the SEC and some of its customers regarding the application of these and other SEC rules, which may have a material adverse effect on Instinet's pricing policies and business operations. Future SEC rule-makings or interpretations relating to equities securities markets could adversely affect Instinet's business, financial condition and operating results.

The financial services industry generally, and the securities brokerage business in which Instinet engages in particular, is very competitive, and competition is expected to continue to intensify in the future. Instinet has experienced intense price competition in recent years, which has led it to aggressively reduce pricing for its US broker-dealer customers. These pricing changes have resulted in volatility in Instinet's market share and a decline in revenue and could cause the transaction fee revenue Instinet receives from this customer group to continue to decline, even if their volumes increase.

Nasdaq began to roll-out its new trading platform, generally referred to as SuperMontage, on 14 October 2002 and fully implemented it on 2 December 2002. The implementation of SuperMontage could cause Instinet to receive fewer orders in Nasdaq-quoted stocks and also could cause fewer of the orders Instinet receives to be executed in its liquidity pool. Instinet competes with Nasdaq, through its operation of SuperMontage, as a trading venue for Nasdaq-quoted stocks, and Nasdaq has also applied for status as a for-profit exchange.

The NASD regulates the activities of Instinet's US broker-dealer subsidiaries and its Nasdaq subsidiary competes with Instinet. The NASD, either directly or through subsidiaries, is able to propose, and often obtain SEC approval of rule changes that the Group believes can be to Nasdaq's competitive benefit as a securities marketplace and to Instinet's competitive disadvantage. Reuters Group is unable to predict at this time the impact of any proposed or potential changes to the regulatory environment in which Instinet and its affiliates operate, which may include additional changes to the Nasdaq marketplace considered by the NASD or the adoption by authorities in other jurisdictions of new methods for regulating electronic over-the-counter trading. Any such regulatory changes may cause Instinet and its affiliates to incur substantial compliance costs, or impair their ability to conduct their businesses, or to compete effectively.

The Group may be exposed to adverse governmental action in countries where we conduct reporting activities
As the world's largest news and information company, Reuters Group may suffer discriminatory tariffs or other forms of adverse government intervention due to the nature of its editorial and other reporting activities.

The Group may not be able to realise the anticipated benefits of acquisitions such as the proposed Multex acquisition
To achieve its strategic objectives, Reuters Group has acquired or invested in, and in the future may seek to acquire or invest in, other companies and businesses such as the Multex acquisition Reuters announced on 18 February 2003. Reuters currently anticipates that this acquisition will be completed by the end of March 2003. No assurance can be given that Reuters Group will realise, when anticipated or at all, the benefits it expects as a result of any acquisition including that of Multex. Achieving these benefits will depend on many factors, including the successful and timely integration and, in some cases, the consolidation of products, technology, operations and administrative functions, of two companies that have previously operated separately. Considering the highly technical and complex nature of Reuters Group's products and services, these integration efforts may be difficult and time consuming.


– Page 36 –
Consolidated profit and loss account
for the year ended 31 December
    Notes 2002

Revenue:  Group and share of joint ventures   3,682 3,990 3,678
  less share of joint ventures revenue   (107) (105) (86)

Group revenue 1 3,575 3,885 3,592
Operating costs 2 (3,719) (3,583) (3,181)

Operating (loss)/profit   (144) 302 411
Share of operating losses of joint ventures   (35) (46) (17)
Impairment of investments in joint ventures 16 (6) (16)
Share of operating losses of associates   (39) (39) (16)
Impairment of investment in associate 16 (26)
(Loss)/profit on disposals of subsidiary undertakings 31 (29) 216 10
Profit on disposals of fixed assets/investments 31 1 18 291
Income from fixed asset investments   1 3 5
Amounts written off fixed asset investments 16 (222) (245) (30)
Net interest (payable)/receivable 3 (20) (9) 3

(Loss)/profit on ordinary activities before taxation   (493) 158 657
Taxation on (loss)/profit on ordinary activities 4 (23) (107) (136)

(Loss)/profit on ordinary activities after taxation   (516) 51 521
Equity minority interests   112 (5)

(Loss)/profit attributable to ordinary shareholders   (404) 46 521
Dividends 5 (139) (140) (224)

(Loss)/retained profit   (543) (94) 297

Basic (loss)/earnings per ordinary share 6 (29.0p) 3.3p 37.1p
Diluted (loss)/earnings per ordinary share 6 (29.0p) 3.2p 36.5p

Consolidated revenue and operating (loss)/profit derive from continuing operations in all material respects.

The result for the year has been computed on an unmodified historical cost basis.

Consolidated statement of total recognised gains and losses
for the year ended 31 December
  Notes 2002

(Loss)/profit attributable to ordinary shareholders   (404) 46 521
Unrealised gain on deemed partial disposal of subsidiary 31 1 11
Unrealised gains on formation of joint ventures and associates   73
Unrealised gain on deemed partial disposal of associate 31 12 39
Unrealised gains on disposals of fixed asset investments 31 10 13
Translation differences taken directly to reserves   (95) 23 40

Total recognised gains and losses relating to the year   (476) 80 686

A detailed statement showing the movement in capital and reserves is set out in note 26.

– Page 37 –

Notes on the consolidated profit and loss account


1. Segmental analysis
The tables below show a segmental analysis of revenue, costs and results which reflects the way Reuters was managed during 2002. Revenue is allocated to customer segments by reference to the activities at particular customer sites. Activities at certain customer sites fall into more than one segment. In such cases revenue is allocated based on estimated activity by segment. Prior periods have been restated on a comparable basis.

Segmental revenue less direct customer segment costs does not purport to represent segmental profitability. Direct segment costs include the costs of core management, marketing, non-integrated businesses and specific revenue related activities. The majority of revenue related costs are included within the channels and centres of excellence.

Revenue 2002

Treasury Services 1,134 (5%) 1,189 8% 1,101
Investment Banking 834 2% 815 16% 701
Asset Management 709 3% 690 7% 649
Corporates & Media 315 (10%) 348 1% 343

Reuters 2,992 (2%) 3,042 9% 2,794
Instinet 592 (31%) 854 6% 804

    3,584 (8%) 3,896 8% 3,598
Share of joint ventures revenue 107 1% 105 22% 86
Intra-group revenue (9) (11%) (11) 58% (6)

Gross revenue 3,682 (8%) 3,990 8% 3,678
Less share of joint ventures revenue (107) 1% (105) 22% (86)

Group revenue 3,575 (8%) 3,885 8% 3,592


Treasury Services (43) (15%) (51) 18% (43)
Investment Banking (51) 81% (28) 18% (24)
Asset Management (87) 11% (79) 31% (60)
Corporates & Media (93) (31%) (135) 10% (124)

Direct customer segment (274) (6%) (293) 14% (251)
Channels (1,151) (1,147) 8% (1,068)
Business Technology Group (779) 1% (775) 13% (685)
Chief Information Office (98) (7%) (105) (5%) (111)
Editorial (216) (11%) (241) 4% (233)
Business Support Services (49) (51%) (99) 169% (37)
Corporate/other (32) (59%) (78) (20%) (96)

Reuters (2,599) (5%) (2,738) 11% (2,481)
Instinet (606) (10%) (676) 4% (647)
Restructuring costs (208) 110% (99)
Intra-group costs 9 (11%) 11 58% 6

    (3,404) (3%) (3,502) 12% (3,122)

Amortisation and impairment of goodwill and other intangibles          

Treasury Services (27) 38% (20) 70% (11)
Investment Banking (13) 30% (10) 11% (9)
Asset Management (16) 19% (13) 7% (12)
Corporates & Media (24) 5% (22) 41% (16)

Direct customer segment (80) 22% (65) 34% (48)
Business Technology Group (6)   (2)

Reuters (86) 28% (67) 38% (48)
Instinet (229)   (14) 30% (11)

Operating costs (3,719) 4% (3,583) 13% (3,181)

– Page 38 –


Treasury Services 1,091 (4%) 1,138 8% 1,058
Investment Banking 783 787 16% 677
Asset Management 622 2% 611 4% 589
Corporates & Media 222 4% 213 (3%) 219

Segmental revenue less direct customer segment costs 2,718 (1%) 2,749 8% 2,543
Channels (1,151) (1,147) 8% (1,068)
Business Technology Group (779) 1% (775) 13% (685)
Chief Information Office (98) (7%) (105) (5%) (111)
Editorial (216) (11%) (241) 4% (233)
Business Support Services (49) (51%) (99) 169% (37)
Corporate/other (32) (59%) (78) (20%) (96)

Reuters 393 29% 304 (3%) 313
Instinet (14) (108%) 178 13% 157
Restructuring costs (208) 110% (99)

Operating profit before amortisation and impairment of goodwill and other intangibles 171 (56%) 383 (19%) 470

Amortisation of goodwill and other intangibles          
  Reuters (86) 28% (67) 38% (48)
  Instinet (21) 45% (14) 30% (11)
Impairment of goodwill          
  Instinet  (208)

Operating (loss)/profit (144)   302 (26%) 411

Revenue is normally invoiced in the same geographical area in which the customer is located. Revenue earned, therefore, generally represents revenue both by origin and by destination.

The geographical analysis of performance reflects the revenues earned and operating costs incurred in each area excluding amortisation of goodwill and intangibles, goodwill impairment, restructuring costs and net currency gain/(loss).

By geography 2002

Europe, Middle East and Africa 1,714 (7%) 1,838 9% 1,689
The Americas 1,354 (10%) 1,502 12% 1,344
Asia/Pacific 507 (7%) 545 (3%) 559

    3,575 (8%) 3,885 8% 3,592

Operating costs where incurred          
Europe, Middle East and Africa (1,483) (12%) (1,677) 7% (1,574)
The Americas (1,421) 1% (1,400) 16% (1,211)
Asia/Pacific (300) (4%) (313) (8%) (339)

    (3,204) (5%) (3,390) 9% (3,124)

Europe, Middle East and Africa 231 43% 161 40% 115
The Americas (67)   102 (23%) 133
Asia/Pacific 207 (11%) 232 5% 220

    371 (25%) 495 6% 468

Other costs          
Amortisation of goodwill and other intangible assets (107) 31% (81) 36% (59)
Goodwill impairment (208)
Restructuring costs (208) 110% (99)
Net currency gain/(loss) 8   (13)   2

  Operating profit (144)   302 (26%) 411

United Kingdom and Ireland revenue was £485 million (2001: £521 million, 2000: £522 million). With the exception of Instinet, Reuters products are delivered and sold primarily through a common geographical infrastructure and delivered over a number of communications networks.

The impact of the Island acquisition in 2002 and the Bridge acquisition in 2001 are reflected principally in the Americas (see note 31).

Revenue by type 2002

Recurring 2,699 (1%) 2,724 7% 2,537
Usage 713 (24%) 946 10% 863
Outright 163 (25%) 215 13% 192

    3,575 (8%) 3,885 8% 3,592

Recurring revenue is derived from the sale of subscription services, including maintenance contracts. Usage revenue is principally derived from Instinet, Dealing 2000-2, Dealing 3000 Spot Matching and BTC. Outright revenue comprises once-off sales including information and risk management solutions.
– Page 39 –

2. Operating costs
Costs by type 2002

Salaries, commission and allowances 1,180 (9%) 1,299 20% 1,081
Social security costs 79 (5%) 83 2% 81
Other, pension costs (see note 23) 65 4% 63 12% 56

Staff costs 1,324 (8%) 1,445 19% 1,218
Services 811 (8%) 883 (1%) 895
Depreciation 227 (8%) 246 (11%) 276
Data 343 1% 340 15% 296
Communications 420 25% 335 37% 245
Space 312 29% 242 20% 202
Cost of sales and other 31 (31%) 45 45% 31
Amortisation of goodwill and other intangibles 107 31% 81 37% 59
Goodwill impairment (see note 14) 208
Other operating income (56) 21% (47) 21% (39)
Currency hedging activities – net (gain)/loss (10)   2   (5)
Foreign currency translation – net loss 2   11   3

    3,719 4% 3,583 13% 3,181

The directors believe that the nature of the Group's business is such that the format of the analysis of operating costs required by the Companies Act 1985 is not appropriate. The format has been adapted in a manner consistent with the Group's activities. Services include equipment hire and bought-in services, including consultancy and contractors, advertising and publicity, professional fees and staff-related expenses. Other operating income comprises amounts received from joint ventures and others in respect of costs incurred by Reuters on their behalf.
Costs by function 2002

Production and communications 1,947 1% 1,933 6% 1,822
Selling and marketing 574 (19%) 706 14% 621
Support services and administration 683 (9%) 751 10% 681
Amortisation of goodwill and other intangibles 107 31% 81 37% 59
Restructuring costs 208 110% 99
Goodwill impairment 208
Net currency (gain)/loss (8)   13   (2)

    3,719 4% 3,583 13% 3,181

Costs include:          

Development expenditure 200 (32%) 294 (9%) 323
Operating lease expenditure:          
  Hire of equipment 9 (37%) 13 30% 10
  Other, principally property 112 4% 108 30% 83
Loss on disposal of tangible fixed assets 1   11 10% 10
Advertising 32 (6%) 34 (33%) 50

– Page 40 –

Fees payable to PricewaterhouseCoopers were as follows:

Audit fees:          
  United Kingdom 0.9 0.9 0.9
  Overseas 1.4 8% 1.3 44% 0.9

    2.3 5% 2.2 22% 1.8

Audit-related services:          
  United Kingdom 0.6   0.2 (82%) 1.1
  Overseas 0.9 (68%) 2.8 133% 1.2

    1.5 (50%) 3.0 30% 2.3

Non-audit services:          
  United Kingdom 4.3 (47%) 8.1 56% 5.2
  Overseas 1.0 (44%) 1.8 (68%) 5.6

    5.3 (46%) 9.9 (8%) 10.8

    9.1 (40%) 15.1 1% 14.9

The United Kingdom audit fee of £0.9 million includes £10,000 in respect of the parent company audit.

Non-audit services were as follows:


Management consultancy 3.4 (52%) 7.1 45% 4.9
Taxation advice 1.7 (19%) 2.1 (43%) 3.7
Other 0.2 (71%) 0.7 (68%) 2.2

    5.3 (46%) 9.9 (8%) 10.8

Management consultancy fees represent fees earned by PwC Consulting, which ceased to be part of PricewaterhouseCoopers on 1 October 2002.

The directors consider it important that the company has access to a broad range of external advice, including from PricewaterhouseCoopers. Where appropriate, work is put out to competitive tender. The Audit Committee monitors the relationship with PricewaterhouseCoopers, including the level of non-audit fees.


3. Net interest receivable/(payable)      

Interest receivable:      
  Listed investments 1 1 5
  Unlisted investments 19 28 19
  Share of joint ventures and associates interest (see note 16) 9 16 13

    29 45 37

Interest payable:      
  Bank loans and overdraft (4) (3) (3)
  Other borrowings (45) (51) (31)

    (49) (54) (34)

    (20) (9) 3

– Page 41 –

4. Taxation on profit on ordinary activities

UK corporation tax      
Current tax on income for the period 43 37 292
Adjustments in respect of prior periods (13) (19) (40)

  30 18 252
Double taxation relief (7) (23) (264)

  23 (5) (12)

Foreign tax      
Current tax on income for the period 82 150 133
Share of tax of joint ventures and associates (see note 16) 6 (4) 1
Adjustments in respect of prior periods (9) 16 15

  79 162 149

Total current tax 102 157 137
Deferred taxation (see note 24)      
Deferred tax in respect of the current period (61) (50) (1)
Deferred tax in respect of prior periods (18)

  (79) (50) (1)

Tax on (loss)/profit 23 107 136

In accordance with the requirements of the FRS No 19 'Deferred Tax', a reconciliation of the current tax charge on ordinary activities for the period reported in the profit and loss account is set out below.

Corporation tax on pre-tax (loss)/profit at UK nominal rate of 30% (148) 48 197
Non tax deductible amortisation of goodwill and other intangibles 88 28 21
Adjustments in respect of prior years (22) (3) (25)
Permanent differences 13 2 26
Book profit on TSI public share issues not taxable (47)
Tax deduction arising from exercise of employee options (60)
Book profit on Instinet IPO not taxable (60)
Non tax deductible investment impairments 77 86
Fixed asset related timing differences 1 5 (4)
Non fixed asset related timing differences 39 11 5
Tax losses not currently utilised 35 35 10
Tax on dividend received on acquisition of Island 10
Other differences 9 5 14

Total current tax 102 157 137

The other differences are primarily due to overseas profits taxed at rates differing from those in the UK and the geographical mix of profits.

No tax is expected to fall due in respect of the disposal of fixed asset investments, subsidiaries and associates in 2002 (2001: nil).

There is no tax impact on the unrealised gains arising in 2002 (2001: nil).


5. Dividends 2002

Interim paid 53 54 51
Final (2002 proposed) 86 86 173

  139 140 224

Per ordinary share Pence Pence Pence

Interim paid 3.85 3.85 3.65
Final (2002 proposed) 6.15 6.15 12.35

  10.00 10.00 16.00

– Page 42 –

6. Earnings per ordinary share
Basic and diluted earnings per ordinary share are based on the results attributable to ordinary shareholders and on the weighted average number of those shares in issue during the year. The weighted average number of shares in issue may be reconciled to the number used in the basic and diluted earnings per ordinary share calculations as follows:
Weighted average number in millions 2002 2001 2000

Ordinary shares in issue 1,432 1,431 1,426
Non-vested shares held by employee share ownership trusts (37) (27) (22)

Basic earnings per share denominator 1,395 1,404 1,404
Issuable on conversion of options 28 24

Diluted earnings per share denominator 1,395 1,432 1,428



7. Remuneration of directors
The remuneration report on pages 16-21 includes details of directors' emoluments, pension arrangements, long-term incentive plans and stock option plans; those details form part of these financial statements.



8. Employee information
The average number of employees during the year was as follows:

Customer segment 2002 2001 2000

Treasury Services 256 235 207
Investment Banking 176 162 135
Asset Management 712 345 292
Corporates & Media 868 1,245 904

Direct customer segment 2,012 1,987 1,538
Channels 6,515 6,907 6,351
Business Technology Group 4,243 3,792 3,707
Chief Information Office 652 806 762
Editorial 2,448 2,586 2,375
Business Support Services 343 203 143
Corporate/other 389 456 368

Reuters 16,602 16,737 15,244
Instinet 1,731 2,251 2,021

Total 18,333 18,988 17,265

By location      
Europe, Middle East and Africa 8,920 9,283 8,790
The Americas 6,874 6,998 6,064
Asia/Pacific 2,539 2,707 2,411

  18,333 18,988 17,265

By function      
Production and communications 9,658 9,809 9,274
Selling and marketing 5,146 5,282 4,844
Support services and administration 3,529 3,897 3,147

  18,333 18,988 17,265

The above include:      
  Development staff 2,109 2,440 2,460

The average number of employees during 2002 included 281 temporary staff (2001: 341).

– Page 43 –


Consolidated cash flow statement
for the year ended 31 December

  Notes  2002

Net cash inflow from operating activities 9 355 887 852
Dividends received from associates   2 2 2
Returns on investments and servicing of finance        
Interest received   20 30 25
Interest paid   (58) (40) (35)
Income from fixed asset investments   1 3 3
Dividends paid to equity minority interests   (27)

Net cash outflow from returns on investments and servicing of finance   (64) (7) (7)
Taxation paid   (73) (173) (159)
Capital expenditure and financial investment        
Purchase of tangible fixed assets   (168) (276) (274)
Sale of tangible fixed assets   15 6 20
Purchase of fixed asset investments   (80) (73) (304)
Sale of fixed asset investments   22 68 80

Net cash outflow on capital expenditure and financial investment   (211) (275) (478)
Acquisitions and disposals (including joint ventures and associates) 10 (6) (89) (146)
Equity dividends paid   (139) (227) (205)

Cash (outflow)/inflow before management of liquid resources and financing   (136) 118 (141)
Management of liquid resources        
Net decrease/(increase) in short-term investments 10 378 (448) (2)
Proceeds from the issue of shares 26 2 16 28
Net (decrease)/increase in borrowings 10 (158) 350 126

Net cash (outflow)/inflow from financing (156) 366 154

Increase in cash 11 86 36 11

  Notes  2002

Reconciliation of net cash flow to movement in net debt        
Increase in cash 86 36 11
Cash outflow/(inflow) from movement in borrowings 10 158 (350) (126)
Cash (inflow)/outflow from movement in liquid resources 10 (378) 448 2

Change in net (debt)/funds resulting from cash flows (134) 134 (113)
Net funds arising on acquisitions 1 15 12
Translation differences (71) 23 26

Movement in net (debt)/funds (204) 172 (75)
Opening net funds/(debt) 11 138 (34) 41

Closing net (debt)/funds 11 (66) 138 (34)

– Page 44 –

Notes on the consolidated cash flow statement

9. Net cash inflow from operating activities
Operating profit is reconciled to net cash inflow from operating activities as follows:

Operating (loss)/profit (144) 302 411
Depreciation 227 246 276
Amortisation and impairment of goodwill and other intangible assets 315 81 59
Decrease/(increase) in stocks 2 4 (3)
Decrease/(increase) in debtors 241 (6) (414)
(Decrease)/increase in creditors (314) 254 504
Loss on disposal of tangible fixed assets 1 11 10
Amounts written off interests in own shares 3 12 18
Other, principally translation differences 24 (17) (9)

Net cash inflow from operating activities 355 887 852


10. Analysis of cash flows for headings netted in the cash flow statement

Acquisitions and disposals (including joint ventures and associates)      
Cash consideration:      
Subsidiary undertakings (see note 31) (41) (373) (130)
Joint ventures (see note 31) (2) (44) (47)
Associated undertakings (see note 31) (22) (31)
Loans from/(to) joint ventures and associates 6 (9)
Deferred payments for acquisitions in prior years (5) (3) (8)

(42) (451) (216)
Less cash acquired 29 5 8

(13) (446) (208)
Cash received from disposals (including deemed disposals):      
  Subsidiary undertakings 4 357 21
  Associated undertakings 3 41

    (6) (89) (146)

Management of liquid resources      
Increase in term deposits (2,511) (1,242) (3,719)
Decrease in term deposits 2,595 1,176 3,842
Purchase of certificates of deposit (31) (108)
Sale of certificates of deposit 1 30 113
Purchase of listed/unlisted securities (4,587) (1,566) (989)
Sale of listed/unlisted securities 4,880 1,185 859

    378 (448) (2)

(Decrease)/increase in short-term borrowings (173) 300 99
Increase in long-term borrowings 15 50 27

    (158) 350 126

– Page 45 –

11. Analysis of net funds
          Bank/other borrowings  

  Cash at
bank and
in hand
cash and

due within
one year

due after
more than
one year

31 December 2000 117 (99) 18 530 (294) (288) (34)
Cash flow 20 16 36 448 (300) (50) 134
Exchange movements 1 (3) (2) 26 (1) 23
Arising on acquisition 15 15

31 December 2001 138 (86) 52 1,019 (595) (338) 138
Cash flow 23 63 86 (378) 173 (15) (134)
Exchange movements (3) 4 1 (71) (1) (71)
Arising on acquisition 1 1

31 December 2002 158 (19) 139 570 (422) (353) (66)



12. Derivatives and other financial instruments
A substantial portion of Reuters revenue is receivable in foreign currencies with terms of payment up to six months in advance. As such, Reuters is subject to currency exposure from committed revenue and additionally, to interest rate risk from borrowing and the investment of cash balances. Reuters seeks to limit these risks by entering into a mix of derivative financial instruments, which include forward contracts, options (including cylinders) and swaps. A more detailed discussion on Reuters Group treasury management can be found on pages 32-33.

If the derivative financial instruments were considered separately from the underlying future revenue and interest, Reuters would be subject to market risk on these financial instruments from fluctuations in currency and interest rates. Reuters only enters into such derivative financial instruments to hedge (or reduce) the underlying exposure described above. There is, therefore, no net market risk on such derivative financial instruments and only a credit risk from the potential non-performance by counterparties. The amount of this credit risk is generally restricted to any hedging gain and not the principal amount hedged.

Derivative instruments held at 31 December were:

        2002     2001     2000


Currency management                  
Foreign exchange forward contracts:                  
  Contracts in profit 96 7 110 13 187 1 11
  Contracts in loss 154 (6) 143 (3) 116 (5)
Foreign currency options:                  
  Contracts in profit 194 2 1 163 1 337 2 4
  Contracts in loss 60 (1) 148 (2) 267 (11)

    504 2 1 564 9 907 3 (1)

Interest rate management                  
Interest rate and currency swaps 487 (5) (4) 337 254 (2)
Foreign exchange swaps 77 3 3

    564 (2) (1) 337 254 (2)

The following table provides an analysis by currency of foreign exchange forward contracts and options held for currency hedging purposes as at 31 December.
            2002   2001   2000


Euro       54 100 22 90 16 53
Japanese yen       33 31 24
US dollar       23 10 42 47
Other       13 24 18

Total       100 100 100 100 100 100

Foreign exchange forward contracts and options mature at dates up to two years from the balance sheet date. Interest rate swaps commence and mature at various dates through to January 2006.

The fair values of foreign currency and interest rate management instruments are estimated on the basis of market quotes, discounted to current value using market-quoted interest rates.

The weighted average variable rate payable on the interest rate swaps used to alter the currency and interest rate profile of debt issued at 31 December 2002 was 4% (2001: 4%, 2000: 6%). The weighted average variable rate is based on the rate implied in the yield curve at the balance sheet date.

– Page 46 –

All derivative instruments are unsecured. However, Reuters does not anticipate non-performance by the counterparties who are all banks with recognised long-term credit ratings of 'A3/A–' or higher.

Tables containing information on hedging gains and losses are set out on page 33 .

Carrying and fair values of group financial assets and liabilities at 31 December were:

            2002   2001   2000


Derivative instruments       9 3 (3)
Other financial assets:                  
  Fixed asset investments       66 66 140 160 371 529
  Long-term debtors       12 12 15 15 19 19
  Short-term investments and cash      728 728 1,157 1,160 647 647
Other financial liabilities:                  
  Short-term borrowings       (440) (440) (681) (681) (393) (393)
  Long-term borrowings       (352) (353) (338) (338) (288) (286)
  Other long-term financial liabilities      (88) (88) (29) (29) (13) (13)

The fair value of fixed asset investments is the carrying value unless the investment has a readily determinable market value which is higher.

The fair value of listed short-term investments are based on quoted market prices for those investments. The carrying amount of the other short-term deposits and investments approximated to their fair values due to the short maturity of the instruments held.

The fair value of short-term borrowings approximated to the carrying value due to the short maturity of the investments.

The fair value of long-term liabilities takes into account the effect of interest rate swaps.

Short-term debtors and creditors have been excluded from the above analysis and all other disclosures in this note, other than the currency risk disclosures.


Financial instrument sensitivity analysis
The analysis below summarises the sensitivity of the fair value of the Group's financial instruments to hypothetical changes in market rates. Fair values are the present value of future cash flows based on market rates at the valuation date.

The estimated adverse changes in the fair value of financial instruments are based on an instantaneous:

i) 1% increase in the specific rate of interest from the levels effective at 31 December 2002 with all other variables remaining constant; and

10% weakening in the value of sterling against all other currencies from the levels applicable at 31 December 2002 with all other variables remaining constant.

    Fair value changes arising from

1% increase in
interest rates

in £ against


Currency swaps and interest rate (4) (25)
Foreign exchange:      
  Forward contracts 1 (25)
  Currency options (5)

    1 (4) (55)

Monetary assets and liabilities by currency, after cross currency swaps, excluding the functional currency of each operation at 31 December 2002, were:
    Net foreign currency monetary assets/(liabilities)

US dollar
Swiss franc
Hong Kong


Functional currency of operation:                
  Sterling (44) (16) (79) 6 (5) (10) (148)
  US dollar 4 9 (1) 9 3 4 28

    4 (44) (7) (80) 15 (2) (6) (120)

Net currency gains and losses arising from monetary assets and liabilities not in the functional currency of an operation are recognised in its profit and loss account. Those arising from the translation of US dollar functional currency financial statements into sterling (principally Instinet) are recognised in the statement of total recognised gains and losses (STRGL).
– Page 47 –

The currency and interest rate profile of the Group's financial assets at 31 December 2002 was:

    Cash and short-term

Fixed rate investments

rate at
31 December
time for
which rate
is fixed

Sterling 153 2 151
US dollar 586 65 515 6 2% 1
Other 67 11 51 5

31 December 2002 806 78 717 11 2% 1

31 December 2001 1,312 155 1,022 135 3% 2
31 December 2000 1,037 390 563 84 6% 2

Sterling and US dollar short-term floating rate investments include £135 million (2001: £301 million, 2000: £73 million) of money market deposits which mature within three months of the balance sheet date. Interest on floating rate investments is earned at rates based on local money market rates.

Fixed rate investments are those investments which have an interest rate fixed for a period of greater than one year.

The currency and interest rate profile of the Group's financial liabilities, after allowing for interest rate and cross currency swaps, at 31 December 2002 was:



Sterling     783 36 781
US dollar     20 39 11
Euro     7
Other     3 6 2

31 December 2002     806 88 794

31 December 2001     1,029 29 1,019
31 December 2000     692 13 681

The floating rate borrowings comprise bank loans and overdrafts bearing interest at rates based on local money market rates, commercial paper and medium-term notes. The weighted average interest rate on bank borrowings at 31 December 2002 was 4% (2001: 4%, 2000: 6%).
Total financial liabilities are repayable as follows:
      2002   2001   2000


Within one year 441 35 681 16 393 1
Between one and two years 282 23 137 3 88 8
Between two and five years 71 30 201 10 200 4

    794 88 1,019 29 681 13

In December 2001, Reuters Group PLC entered into syndicated credit facilities for £500 million to support borrowings from commercial paper markets. The facility is at variable interest rates based on LIBOR, the London Interbank Offer Rate, is committed and may be drawn and redrawn up to one month prior to its maturity in December 2006. At 31 December 2002, the facility was undrawn.

In March 1998, Reuters established a Euro Commercial Paper Programme. This provides access to £1.5 billion of uncommitted short-term finance of which £1 billion was unused at 31 December 2002. In December 1998, Reuters established a £1 billion Euro Medium Term Note Programme of which £412 million was unused at 31 December 2002.

In addition, at 31 December 2002 the Group had unused, short-term, uncommitted bank borrowing facilities denominated in various currencies, the sterling equivalent of which was approximately £600 million, at money market rates varying principally between 0% and 5%, depending on the currency.

Reuters is in the process of replacing its £500 million bank facility with a new facility of £1.25 billion. The facility is being syndicated to a group of international banks. The facility is structured with £800 million of the facility available for drawing and redrawing until 2008. The remaining £450 million will be available until 2004, with the ability to extend the maturity in whole or part in certain circumstances.

– Page 48 –


Consolidated balance sheet
at 31 December

  Notes   2002

Fixed assets              
Intangible assets 14   418   498   237
Tangible assets 15   601   691   632
Investments 16            
  Investments in joint ventures:              
    Share of gross assets     207   270   237
    Share of gross liabilities     (110)   (118)   (79)
          97   152   158
  Share of net assets of associates     266   329   353
  Other investments     134   293   488

          1,516   1,963   1,868

Current assets              
Stocks 17   1   3   7
  Amounts falling due within one year 18   1,120   1,302   1,289
  Amounts falling due after more than one year 18   159   113   59
Short-term investments 19   570   1,019   530
Cash at bank and in hand     158   138   117

          2,008   2,575   2,002
Creditors: Amounts falling due within one year 20   (2,198)   (2,709)   (2,295)

Net current liabilities     (190)   (134)   (293)

Total assets less current liabilities     1,326   1,829   1,575
Creditors: Amounts falling due after more than one year 21   (354)   (344)   (310)
Provisions for liabilities and charges:              
  Pensions and similar obligations 23   (59)   (58)   (50)
  Deferred taxation 24   (27)   (30)   (28)
  Other provisions 25   (159)   (124)   (34)

Net assets     727   1,273   1,153

Capital and reserves 26            
Called-up share capital     358   358   357
Share premium account     91   89   71
Other reserve     (1,717)   (1,717)   (1,717)
Capital redemption reserve     1   1   1
Profit and loss account reserve     1,763   2,378   2,441

Shareholders' equity     496   1,109   1,153
Equity minority interests     231   164  

Capital employed     727   1,273   1,153

The balance sheet of Reuters Group PLC is shown on page 62.

The financial statements on pages 36-64 and the summary of differences between UK and US generally accepted accounting principles on pages 65-70 were approved by the directors on 24 February 2003.

Tom Glocer,
Chief Executive
David Grigson,
Finance Director
– Page 49 –

Reconciliation of movements in shareholders' funds
for the year ended 31 December


(Loss)/retained profit (543) (94) 297
Unrealised gain on deemed partial disposal of subsidiary 1 11
Unrealised gains on formation of joint ventures and associates 73
Unrealised gain on deemed partial disposal of associate 12 39
Unrealised gains on disposals of fixed asset investments 10 13
Translation differences taken directly to reserves (95) 23 40
Shares issued during the year 2 16 28

Net movement in shareholders' equity (613) (44) 490
Opening shareholders' equity 1,109 1,153 663

Closing shareholders' equity 496 1,109 1,153

– Page 50 –

Notes on the consolidated balance sheet


13. Segmental analysis
The tables below show total assets and non-interest bearing net assets by customer segment and by location on a basis consistent with the segmental analysis of profit in note 1. For the reasons discussed in that note, the assets in any location are not matched with the revenue earned in that location.

  Total assets Non-interest bearing net assets

By customer segment 2002

Treasury Services 227 224 233 141 171 74
Investment Banking 131 162 164 49 67 58
Asset Management 160 175 204 55 74 88
Corporates & Media 170 224 259 75 109 123

Total customer segment 688 785 860 320 421 343
Channels 439 517 473 249 299 275
Business Technology Group 417 506 406 210 298 232
Editorial 25 32 20 (45) (40) (55)
Chief Information Office 16 19 15 (3) (5) (9)
Business Support Service 1 1 (9) (7) (4)
Central 594 714 576 (8) 48 171
Instinet 1,344 1,964 1,520 79 121 234

Total assets/non-interest bearing net assets 3,524 4,538 3,870 793 1,135 1,187
Interest bearing net assets       (66) 138 (34)

Total net assets       727 1,273 1,153

  Total assets Non-interest bearing net assets

By location 2002

Europe, Middle East and Africa 1,381 1,803 1,502 633 652 651
The Americas 1,660 2,093 1,644 253 523 671
Asia/Pacific 192 241 258 40 64 74
Central 291 401 466 (133) (104) (209)

Total assets/non-interest bearing net assets 3,524 4,538 3,870 793 1,135 1,187

Fixed assets 1,516 1,963 1,868      
Current assets 2,008 2,575 2,002      

  3,524 4,538 3,870      

Central total assets by customer segment consist principally of Reuters cash and short-term investments plus interests in own shares and other fixed asset investments. Central total assets by location consist principally of those assets held by head office operations together with unamortised goodwill and other intangibles.

14. Intangible assets
Trade names

31 December 2001 846 33 92 971
Additions 208 3 37 248
Disposals (17) (2) (19)

31 December 2002 1,037 36 127 1,200

Amortisation and impairment        
31 December 2001 (467) (1) (5) (473)
Disposals 5 1 6
Charged in the year:        
  – amortisation (88) (4) (15) (107)
  – impairment (208) (208)

31 December 2002 (758) (5) (19) (782)

Net book amount        
31 December 2002 279 31 108 418

31 December 2001 379 32 87 498

A decrease in the Instinet share price in the third quarter of 2002 triggered the need to perform an impairment test on the carrying value of goodwill associated with Instinet. As a consequence total unamortised goodwill of £208 million relating to Instinet has been written off.
– Page 51 –

15. Tangible assets
and motor

31 December 2001 223 241 1,581 320 2,365
Translation differences (9) (25) (5) (39)
Additions 5 40 82 27 154
Acquisitions 5 1 4 10
Disposals (26) (189) (30) (245)

31 December 2002 228 251 1,450 316 2,245

31 December 2001 (71) (111) (1,263) (229) (1,674)
Translation differences 4 19 4 27
Charged in the year (4) (28) (149) (46) (227)
Disposals 22 183 25 230

31 December 2002 (75) (113) (1,210) (246) (1,644)

Net book amount          
31 December 2002 153 138 240 70 601

31 December 2001 152 130 318 91 691

Net book amount of leasehold property     2002

Long-term leaseholds     38 38 19
Short-term leaseholds     100 92 71

      138 130 90

Contracted capital commitments     11 9 18


16. Investments          
    Interests in
own shares
Interests in
joint ventures
Interests in

Net assets/cost          
31 December 2001 153 146 313 140 752
Translation differences (11) (33) (1) (45)
Additions 65 2 12