UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number 0-13456
-------
Reuters Group PLC
(successor to Reuters Holdings PLC)
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
England
- --------------------------------------------------------------------------------
(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 predecessor's
classes of capital or common stock as of the close of the period covered by the
annual report (which does not reflect the capital reorganization effected
February 18, 1998).
Ordinary Shares of 2.5p each............... 1,694,222,503
Founders Share of (pound)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 [ ] Item 18 [X]
TABLE OF CONTENTS
Page
PART I
ITEM 1. Description of Business............................................ 3
ITEM 2. Description of Property............................................ 10
ITEM 3. Legal Proceedings.................................................. 10
ITEM 4. Control of Registrant.............................................. 10
ITEM 5. Nature of Trading Market........................................... 13
ITEM 6. Exchange Controls and Other Limitations
Affecting Security Holders......................................... 14
ITEM 7. Taxation........................................................... 14
ITEM 8. Selected Financial Data............................................ 17
ITEM 9. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................... 21
ITEM 9A Quantitative and Qualitative Disclosures About Market Risk......... 22
ITEM 10. Directors and Officers of Registrant............................... 23
ITEM 11. Compensation of Directors and Officers............................. 24
ITEM 12. Options to Purchase Securities from
Registrant or Subsidiaries......................................... 24
ITEM 13. Interest of Management in Certain Transactions..................... 27
PART II
ITEM 14. Description of Securities to be Registered......................... 27
PART III
ITEM 15. Defaults upon Senior Securities.................................... 27
ITEM 16. Changes in Securities and Changes in Security for
Registered Securities.............................................. 27
PART IV
ITEM 17. Financial Statements............................................... *
ITEM 18. Financial Statements............................................... 27
ITEM 19. Financial Statements and Exhibits.................................. 28
SIGNATURES................................................................... 29
- ----------------
* The registrant has responded to Item 18 in lieu of responding to this Item.
2
As more fully described below in Item 4 of this Report, on February 18,
1998 Reuters Holdings PLC ("Reuters Holdings") consummated a court approved
capital reorganization in which shares of Reuters Holdings PLC were exchanged
for a combination of shares of Reuters Group PLC ("Reuters Group") and
approximately 1.5 billion in cash. As a result, Reuters Holdings is now a
subsidiary of Reuters Group. In all other respects, the business and assets of
the Reuters group of companies have not been affected.
As used in this Report, "Reuters" refers collectively to Reuters Group and
its consolidated subsidiaries except as the context otherwise requires.
The Consolidated Financial Statements of Reuters Holdings incorporated
herein by reference from Reuters 1997 Annual Report to Shareholders (the "1997
Annual Report to Shareholders") are presented in pounds sterling ("pound"). On
December 31, 1997, 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 (the "Noon Buying Rate") was $1.64 per (pound)1; on February 18,
1998 the Noon Buying Rate was also $1.64 per (pound)1. For additional
information on exchange rates between the pound sterling and the US dollar, see
"Exchange Rates" in Item 8 of this Report.
Reuters 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 principal differences between UK GAAP and US
GAAP relevant to Reuters are explained in "Summary of Differences Between UK and
US Generally Accepted Accounting Principles" included in the Consolidated
Financial Statements referred to above.
PART I
------
ITEM 1. DESCRIPTION OF BUSINESS
- -------------------------------
Reuters supplies the global financial business and news media communities
with a wide range of products including real-time financial data, transaction
systems, information management systems, access to numeric and textual historic
databases, news, graphics, still photos, television news and news video. It
provides certain electronic brokerage services through Instinet for equities,
and through its Dealing 2000-2 automated matching service for foreign exchange.
Information is obtained from 277 exchanges and over-the-counter markets,
from some 4,800 subscribers who contribute data directly to Reuters, and from a
network of 2,036 journalists, photographers and camera operators. There are some
435,000 user accesses for Reuters products around the world, including accesses
by clients using equipment not owned by Reuters.
Information Sources
-------------------
Reuters gathers exchange and over-the-counter trading data, contributed
data, reference data and general, financial and business news.
Reuters obtains current trading information for securities, commodities,
options and futures from organized exchanges and over-the-counter markets. The
information is normally transmitted electronically to Reuters databases by a
direct feed from the computerized reporting system maintained by an exchange.
Dealers and brokers in foreign exchange and other financial markets contribute
their latest quotations to Reuters databases using Reuters terminals or their
own computer systems. Data contributed by one contributor is available to all
other subscribers to the same product except those the contributor directs
should be precluded. Reuters also has a number of long-term agreements with
certain brokers and specialist data vendors for the supply of key market data.
Other numeric data such as corporate and economic statistics and textual
historical information is obtained from a wide range of publications and other
third party sources, including annual reports. Data is gathered in either
electronic or hard copy form and is edited by specialized Reuters staff.
3
Reuters staff also report and edit general and specialized news for
business and media subscribers in textual, video and audio form. At December 31,
1997, Reuters journalists, photographers and camera operators were based in
reporting bureaus located in 174 cities in 107 countries. Reuters reporting
staff are supported by part-time staff in almost every country. Many Reuters
text journalists are financial or other market specialists.
As it is received, data is automatically processed and stored on a
continually updated basis so that subscribers can retrieve it within seconds.
Reuters information databases range from real-time to over ten years old.
Principal Products
------------------
Reuters products may be categorized into: information products
contributing 64% of total 1997 revenue, transaction products contributing 29%
and media and professional products contributing 7%.
Information Products
- --------------------
Reuters information products include real-time information, historic
information databases, applications products and information management systems.
Real-time information, historic information databases and applications products
are delivered to subscribers through personal computer-based Reuters Terminals
("RTs") or, in the case of real-time data, via datafeeds, through
Reuters-supplied or third-party information management systems. Reuters
databases carry around two million individual instruments. Reuters also supplies
a software-only version of its standard RT, which allows Reuters information
products to be distributed over a subscriber's own local area network and
hardware. In addition, Reuters delivers information via the Reuters Web, which
uses Internet technology, to customer intranets.
Reuters packages real-time and historical news and prices into products
designed to suit the requirements of subscribers in particular sectors of the
financial and business communities. These products cover the world's foreign
exchange, money, securities, fixed income, commodities, energy and shipping
markets. Reuters foreign exchange and money market products were its greatest
source of revenue in each of the last three years.
During 1997 Reuters continued the rollout of its new generation "3000"
range of information products. By year end approximately 28,000 accesses had
been installed. Reuters 3000 products combine the real-time features of its
existing "2000" series (described below) with access to historical data, a range
of analytics and graphing capabilities, textual and television news and Reuters
Mail, an electronic messaging facility. Subscribers to the 3000 range also
receive a continuous flow of news stories, as well as background economic data
and analyses, on the relevant instruments. The 3000 range is delivered to
subscribers over a high speed proprietary network using industry standard
Internet protocols. In 1997 Reuters launched PowerPlus 32, a new advanced
financial analytic package that is being marketed in conjunction with the
Reuters 3000 range of products.
Reuters 2000 series of real-time international services are carried on its
Integrated Data Network ("IDN"). These products are formed from a series of
content "building blocks", each containing relevant real-time prices and related
data on a particular market. Both the 3000 series and the 2000 series of
products are grouped in different combinations to allow subscribers to select
the product or products specific to their needs. As with the 3000 range, the
2000 range may be supplemented with news stories and analytics.
Reuters also delivers textual financial news in more than twenty languages
and offers a specialized financial television service designed for the
professional user.
In addition to the international products described above, Reuters offers
many domestic information products, focused on the needs of individual
countries. Domestic news services, written in the national language where
appropriate, complement the information products. A range of optional products
produced by third parties to augment Reuters news and market data is also
available to subscribers.
4
In 1997 Reuters also introduced several new information products for
intranet and Internet delivery. These included products developed in
collaboration with certain large European banks which enable the banks to
circulate information to their branches and customers over their own private
intranets. In addition, Reuters and Sun Microsystems Inc. launched ReutersFirst
Web, a web browser-based service for the Japanese market that uses "push"
architecture to deliver real-time data in an Internet protocol.
Reuters also offers a number of risk management products which encompass
deal capture, position keeping, credit management and risk analysis.
Reuters also designs, installs and maintains digital and video information
management systems. These systems allow access to Reuters real-time information,
information databases and transaction products, products of other data suppliers
and the customer's own in-house computer facilities. Reuters two main products
in this sector, Triarch 2000 and The Information Bus ("TIB"), are digital
systems offering a choice of operating systems and platforms and using local
area networks to distribute the data. TIB is the principal product of TIBCO
Finance Technology Inc. ("TIBCO Finance", formerly TIBCO Inc.), a US company
acquired by Reuters in 1994. In 1997 the business of TIBCO Inc. was
restructured. A new company, TIBCO Software Inc., ("TIBCO Software") was formed
to pursue opportunities for applying TIBCO technology to sectors outside
finance, including the Internet. TIBCO Finance continues to focus on the
financial sector in and beyond the trading room. In connection with this
restructuring, option plans were established under which up to 26% of the
outstanding shares of TIBCO Software (on a fully diluted basis) could be
acquired by employees of TIBCO Software and TIBCO Finance. In addition, TIBCO
Software issued new convertible preferred shares to two outside investors, CISCO
Systems, Inc. and Mayfield Venture Capital Fund, who at the end of 1997 owned 8%
and 5%, respectively, of the fully diluted share capital of TIBCO Software.
In 1997 Reuters acquired a 49% stake and voting control in Bisnews
Information Services Limited of Thailand, a supplier of domestic real-time
information and news to over 7,600 Thai financial market participants. Reuters
also acquired a 67% equity interest in Marvin S.A., a Paris-based real-time
calculation software specialist company, and has an option to purchase the
remaining 33% by 2001. In addition, Reuters and Jiji Press Limited of Japan
agreed to extend areas of cooperation in the production, distribution and sale
of services for financial and corporate markets.
Transaction Products
- --------------------
Reuters transaction products enable dealers to contact counterparties
through Reuters communications networks in order to effect trades.
Dealing 2000-1 enables dealers to contact one another directly within
seconds to negotiate and conclude trades in foreign exchange and other financial
markets. Up to four conversations can be conducted simultaneously. The product
also automates the production of "tickets" for foreign exchange deals and
certain other money market instruments.
Through its UK subsidiary Reuters Transaction Services Limited ("RTSL"), a
regulated wholesale money market institution, Reuters operates Dealing 2000-2
Spot, an electronic brokerage service for the interbank spot foreign exchange
market. Dealing 2000-2 Spot enables all traders linked to the product to see the
best buy or sell price for a currency pair simultaneously. This automatic,
anonymous service matches bid and offer orders using a central computer,
verifying that the counterparties have sufficient and mutually acceptable
credit.
In 1997 RTSL launched a modified version of the Dealing 2000-2 Spot
service, known as Dealing 2000-2 Forwards, to cater to the forward foreign
exchange market.
Through its subsidiary Instinet Corporation ("Instinet"), a registered US
securities broker, Reuters operates an equity securities market information and
trading system for investment professionals (the "Instinet System"). The
Instinet System provides anonymous two-way computerized transactional capability
and continuously updated market information with respect to equity securities
traded on US national and regional stock exchanges and NASDAQ and with respect
to certain non-US equity securities.
5
In addition to enabling customers to negotiate trades directly with each
other, the Instinet System automatically executes clients' matching buy and sell
orders. Instinet also offers a number of "crossing" services which operate
outside regular trading hours in the markets for the relevant securities, and a
research and analytics product which allows traders and portfolio managers to
monitor and analyze real-time and historical stock price data via traditional,
proprietary and customized technical indicators.
Affiliates of Instinet are members of the American Stock Exchange, the
Chicago Board Options Exchange, all major regional securities exchanges in the
US, the Toronto Stock Exchange, the London Stock Exchange, the Frankfurt Stock
Exchange, the Paris Bourse, the Zurich Stock Exchange, the Hong Kong Stock
Exchange, the Stockholm Stock Exchange and the European Options Exchange. An
Instinet affiliate has a license from the Ministry of Finance in Japan to
operate as a foreign securities firm with a Tokyo branch.
GLOBEX(R), an automated order matching system for trading futures and
options contracts, is operated by Reuters under an agreement with the Chicago
Mercantile Exchange ("CME") and the March Terme International de France
("MATIF"). The agreement, which was due to expire on May 1, 1998, has been
extended to September 30, 1998 and may be further extended to December 31, 1998.
GLOBEX will not continue beyond 1998 as MATIF and CME have announced their
intention to use a different proprietary system.
Media and Professional Products
- -------------------------------
Reuters supplies textual news on politics, finance, economics and
business, the arts, sports, science, technology and general human interest
issues to newspapers, radio and television stations, on-line services,
governments and international institutions. Reuters also operates international
news pictures and news graphics services for the newspaper, magazine, television
and on-line markets. Reuters supplies these services either directly to
subscribers or through national news organizations to which Reuters has granted
distribution rights.
Reuters also operates a large international television news agency,
Reuters Television, and participates in joint ventures that operate three 24
hour radio news stations. It holds minority interests in UK-based Independent
Television News (ITN) and India's ANI news agency.
In addition, Reuters provides a range of professional products for
customers outside the financial industry, including business information,
medical and advertising products, and provides multi-media news packages to
Internet-based publishers and redistributors. It is a leading provider of news
on the Internet and operates a specialized sports website with Digital Equipment
Corporation at "http://www.sportsweb.com/. Reuters is also using the Internet to
provide information about Reuters itself, and its products, to existing and
potential customers at "http://www.reuters.com/".
Data and Communications Networks
--------------------------------
Reuters operates a number of communications networks, employing various
technologies, for distribution of its products. Reuters is making increasing use
of Internet technology which is being incorporated into the Reuters Web
communications network.
Reuters has two global technical centers, two main technical centers and a
number of smaller local data centers. Reuters data centers are linked by
dedicated international communications circuits which rely on satellite links,
optical fiber cables and coaxial cables. These circuits are leased from various
governmental and private telecommunications operators.
Communications between data centers and Reuters subscribers are usually by
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 as an alternative to terrestrial lines.
6
Principal Geographic Markets
----------------------------
Reuters products are distributed to 163 countries. Operations are divided
for financial reporting purposes into three principal geographical areas;
Europe, Middle East and Africa; Asia/Pacific; and the Americas, with the
world-wide operations of Instinet and TIBCO reported separately because it is
impractical to report these operations by geographic area.
An analysis of revenue, costs, contribution and assets by market is
provided under the heading "Operating and Financial Review" and in Notes 2 and
15 of Notes on the Consolidated Financial Statements, both incorporated herein
by reference from the 1997 Annual Report to Shareholders.
Subscribers and Marketing
-------------------------
In an open systems environment customers can choose their own terminal
hardware. Therefore, Reuters information products are billed by number of user
accesses. User accesses include terminals, accesses to datafeeds, slave screens,
portable data screens and pagers. The number of user accesses at the end of each
of the last three years is set forth below.
At December 31,
----------------------------------
1997 1996 1995
------- ------- -------
Information Products 386,000 321,000 292,900
Transaction Products 38,000 33,500 30,100
Professional Products 11,000 7,500 4,100
------- ------- -------
Total 435,000 362,000 327,100
======= ======= =======
- --------------------
(1) Accesses to certain Professional Products, principally in healthcare and
advertising, are not included
Information relating to user accesses and an analysis of subscribers by
type are provided under the heading "Operating and Financial Review" and in Note
14 of Notes on the Consolidated Cash Flow Statement, both incorporated herein by
reference from the 1997 Annual Report to Shareholders.
Subscribers are supported by "Front Line Business Units", which are
responsible for the sale, delivery, support and administration of Reuters
products within their territory. Reuters products are generally marketed by
Reuters own sales force.
The majority of Reuters revenue is recurring and generally covered by
contracts of indefinite term, subject to a two year initial commitment for new
clients. Most services are cancellable on 12 months' notice although certain
services may be cancelled on six or three months' notice. Currently the majority
of contracts with larger, multi-location subscribers generally have terms of
four years and allow the subscriber to cancel a portion of its Reuters services
without incurring liquidated damages. Since the beginning of 1997, upon renewal
of their contracts, such subscribers are asked to sign an indefinite global
contract which is terminable by either party on two years' notice and which also
includes a cancellation allowance. Charges are based upon the particular
products purchased by a subscriber and the number of user accesses. Payment
terms are generally in advance. Charges for certain other Reuters products vary
according to volume of use. These include the Instinet System, Dealing 2000-2
and certain information database products.
Under its agreements with Dealing 2000-2 subscribers, RTSL accepts
liability for direct net loss incurred by subscribers solely as a result of a
transmission or processing fault that is shown to be caused by the negligence or
wilful misconduct of Reuters. RTSL only accepts this liability in full for
trades with a value of up to $15 million; for trades above $15 million, RTSL
agreements with Dealing 2000-2 subscribers limit RTSL's liability on a pro rata
basis.
7
Development Activities
----------------------
Expenditures for development, which exclude costs associated with the
Millennium program, aggregated (pound)235 million in 1997, (pound)202 million in
1996 and (pound)191 million in 1995. Of the total amount (pound)162 million
(1996 -- (pound)137 million) was spent on information products and (pound)60
million (1996 -- (pound)50 million) on transaction products. Activities during
1997 included continuing the development of the 3000 series products,
improvements to data collection systems, further development by Instinet and of
other transaction products and development relating to TIBCO and Internet
products.
The requirements of the forthcoming Millennium and European Monetary Union
deadlines necessitated diversion of development effort to upgrade certain
products and phase out others. For information relating to Reuters Millennium
and European Monetary Union Programs see the discussion included in the
"Operating and Financial Review" incorporated herein by reference from the 1997
Annual Report to Shareholders.
Equipment Supply and Servicing
------------------------------
Reuters central computers are presently supplied by Digital Equipment
Corporation, with a limited number of computers from International Business
Machines Corporation, NCR Corporation and other manufacturers. Reuters central
computers are installed and normally maintained by the supplier. Operation is
carried out by Reuters personnel. Reuters installs and provides first level
maintenance for client site equipment either directly or in some countries via
sub-contractors. Some clients specify and supply such equipment themselves and
may be responsible for its maintenance. All Reuters application software on
central computers and client site systems is maintained by Reuters.
Competition
-----------
Reuters faces competition in all market sectors and geographical areas.
Some rival information vendors compete across a range of markets and in most
major financial centers. Other vendors are more specialized, either in markets
or location. Reuters transaction products compete with similar products from
other vendors, other electronic brokers, and with other trading methods, such as
the use of non-electronic brokers and the telephone.
Information Products
- --------------------
Competitors in the provision of information for the financial markets
include Bloomberg L.P. ("Bloomberg"); Bridge Information Systems ("Bridge"); Dow
Jones Markets (formerly Dow Jones Telerate), a subsidiary of Dow Jones Company,
Inc. ("Dow Jones"); ICV Datastream International Ltd. ("Datastream"), a
subsidiary of Primark Corporation; Quick Corporation of Japan; Automatic Data
Processing Inc.; and Telekurs A.G. of Switzerland. In the provision of
information management systems, Reuters competes with Misys plc; British
Telecommunications plc; CSK Software, a subsidiary of CSK Corporation; Dow Jones
Markets, SunGard Data Systems Inc. and a large number of other vendors.
Transaction Products
- --------------------
The Electronic Broking Service ("EBS"), which includes FX Trader, and Dow
Jones Markets compete with Dealing 2000-1. EBS also competes with the foreign
exchange spot matching service provided by Reuters Dealing 2000-2. The EBS
partnership comprises a number of leading European, US and Japanese banks.
In the provision of equity transaction products, Instinet competes with,
among others, the SelectNet System of the National Association of Securities
Dealers, Inc. (the "NASD"), which enables NASD members to trade electronically
in OTC stocks, and other so-called "electronic communications networks"
("ECNs"), including Bloomberg Tradebook L.L.C., a subsidiary of Bloomberg, and
the Island System. In December 1997, the NASD filed proposed rule changes
designed to implement a new integrated order-delivery and execution system,
called "Next Nasdaq". Next Nasdaq would, among other things, create a central
limit
8
order book functionality within the Nasdaq Stock market, Inc. ("Nasdaq").
In January 1998 Nasdaq and Optimark Technologies, Inc. ("Optimark") announced an
agreement in principle to integrate Optimark's order matching technology
directly into Next Nasdaq. In its capacity as a broker-dealer, Instinet competes
with other broker-dealers (including many of its own customers) for
institutional order flow. In addition, the securities exchanges (including the
Tradepoint Investment Exchange in the UK) and other broker-dealers offer
competing crossing services.
Media Products, Television and Professional Products
- ----------------------------------------------------
Competition for the supply of news to the media comes from Associated
Press, Bloomberg, Agence France Presse and a number of other news agencies and
national newspapers which syndicate their news. Competition for the supply of
news pictures comes mainly from Associated Press, Agence France Presse and the
European Press Agency. The main competitors to Reuters Television are Worldwide
Television News, an agency controlled by the American Broadcasting Company, and
Associated Press Television.
The principal competitors for the supply of professional products are
LEXIS-NEXIS, Financial Times Electronic Publishing, The Dialog Corporation and
Dow Jones News Retrieval.
Government Regulations
----------------------
Information Products
- --------------------
Reuters Limited is regulated as a service company by the UK Financial
Services Authority (the successor regulatory body to the UK Securities and
Investments Board) under the Financial Services Act 1986.
The use of communications links is subject to government regulation and/or
licensing in every country.
Transaction Products
- --------------------
As registered broker-dealers and members of the NASD and various other
self-regulatory organizations in the US and other countries in which they
operate, Instinet and Instinet affiliates using the Instinet System are subject
to substantial regulation under the US securities laws and their equivalents in
other countries, including net capital requirements.
In January 1997 the US Securities and Exchange Commission ("SEC")
implemented rules governing market-maker and exchange specialist usage of
Instinet and other ECNs. See "Operating and Financial Review -- Cautionary
Statements -- SEC Rules on ECN usage" incorporated herein by reference from the
1997 Annual Report to Shareholders.
RTSL is subject to regulation by the Bank of England equivalent to that
applied to broking participants in the London foreign exchange market, including
capital adequacy requirements. The operations of its Singapore branch are
regulated by the Monetary Authority of Singapore.
9
ITEM 2. DESCRIPTION OF PROPERTY
- -------------------------------
Reuters principal properties are its corporate headquarters in London, its
two global technical centers in London and Geneva and its two other main
technical centers in New York and Singapore. The London and New York properties
are situated on land owned by Reuters, whereas the buildings in Geneva and
Singapore were built by Reuters on leased land. The leases, including periods
covered by options to extend, expire in 2095 and 2050, respectively.
On February 13, 1998 Reuters entered into a joint venture with Rudin Times
Square Associates, LLC to develop an 855,000 square foot building in the Times
Square section of New York City, to be known as "The Reuters Building". Each
party will invest approximately US$45 million of equity, with other costs to be
funded through a loan. The total cost of the project is estimated to be
approximately US$360 million. In connection with the transaction Reuters expects
to obtain approximately US$25 million in tax incentives from the City and State
of New York to remain in the city, half of which is linked to retention of jobs
and half to growth above 1997 headcount levels.
ITEM 3. LEGAL PROCEEDINGS
- -------------------------
On August 14, 1997, the United States Court of Appeals for the Second
Circuit unanimously upheld an order of the United States District Court for the
Southern District of New York granting summary judgment in favor of Reuters
America Inc. in a previously disclosed lawsuit brought by a former employee,
Timothy F. Scala. No further appeal was timely made.
For information concerning a grand jury investigation regarding Reuters
Analytics Inc., a US subsidiary based in Stamford, Connecticut, see "Operating
and Financial Review -- Cautionary Statements -- Reuters Analytics" and Note 31
of Notes on the Consolidated Balance Sheet, both incorporated herein by
reference from the 1997 Annual Report to Shareholders.
In addition, Reuters and its subsidiaries are parties to legal proceedings
that are considered to be either ordinary routine litigation incidental to their
business or not material to Reuters consolidated financial position.
ITEM 4. CONTROL OF REGISTRANT
- -----------------------------
Capital Reorganization
- ----------------------
On February 18, 1998 Reuters Holdings consummated a court-sanctioned
capital reorganization under which holders of Reuters Holdings' ordinary shares
of 2.5p each ("Reuters Holdings Shares") on the register on February 17, 1998
received, in exchange for such shares, cash and ordinary shares of 25p each of
Reuters Group ("Ordinary Shares"), on the following basis:
For every 15 Reuters Holdings Shares held - (pound)13.60 in cash and 13
Ordinary Shares.
Similarly, holders of American Depositary Shares, each representing six
Reuters Holdings Shares ("Reuters Holdings ADSs") on the register on February
17, 1998 received:
For every 15 Reuters Holdings ADSs held - $133.17 in cash (the US dollar
equivalent of (pound)81.60 on February 23, 1998) and 13 American Depositary
Shares, each representing six Ordinary Shares ("ADSs")
In addition, the existing Founders Share of (pound)1 in Reuters Holdings
was cancelled and a new Founders Share of (pound)1 in Reuters Group with
identical rights (the "Founders Share") was issued to Reuters Founders Share
Company Limited (the "Founders Share Company").
10
General
- -------
The Memorandum and Articles of Association of Reuters Group (the
"Articles") contain two sets of restrictions relating to the ownership of
Reuters Group shares that are intended to ensure continued compliance with the
following principles (the "Reuter Trust Principles") in a manner appropriate for
a public company:
I. that Reuters shall at no time pass into the hands of any one interest,
group or faction;
II. that the integrity, independence and freedom from bias of Reuters shall
at all times be fully preserved;
III. that Reuters shall supply unbiased and reliable news services to
newspapers, news agencies, broadcasters and other media subscribers and
to businesses, governments, institutions, individuals, and others with
whom Reuters has or may have contracts;
IV. that Reuters shall pay due regard to the many interests which it serves
in addition to those of the media; and
V. that no effort shall be spared to expand, develop and adapt the news and
other services and products of Reuters so as to maintain its leading
position in the international news and information business.
For purposes of the Reuter Trust Principles, the term "Reuters" means
Reuters Group and every subsidiary of Reuters Group from time to time supplying
news services. Reuters believes that the observance of the Reuter Trust
Principles is compatible with its ability to achieve its financial objectives
and to operate its business in the interest of its shareholders generally.
The first set of restrictions contained in the Articles applies to persons
that become "interested" in 15% or more of the Ordinary Shares outstanding at
any time. The term "interested" is defined in the Articles by reference to
provisions of the Companies Act 1985 of Great Britain, as amended (the
"Companies Act"), which require persons to disclose to public companies
interests in voting shares in excess of a prescribed percentage. (At present,
material interests of 3% of the class and other interests of 10% of the class
must be disclosed.) Subject to certain exceptions, all shares held by a person
who reaches the 15% limit will be disenfranchised. Moreover, Reuters Group is
empowered to effect an involuntary disposition of the number of shares by which
a person exceeds the 15% limit if that person fails to do so on demand (which
involuntary disposition may be made, if appropriate, by means of an instruction
to effect an electronic transfer of uncertificated shares).
Second, Reuters Group share capital includes the Founders Share which is
held by the Founders Share Company, a company limited by guarantee consisting of
individuals (the "Reuter Trustees") who constitute both its members and
directors. The Founders Share empowers the Founders Share Company to cast such
number of votes as will pass any resolution supported by, and defeat any
resolution opposed by, the Founders Share Company if it believes that any person
or persons have obtained, or are seeking to obtain, control of Reuters. Control
for these purposes is defined as the ability to control the exercise of 30% or
more of the votes that may be cast on a poll at general meetings. The Founders
Share also empowers the Founders Share Company to cast such number of votes as
will defeat any resolution opposed by it that would alter any provision of the
Articles relating to the Reuter Trust Principles or to the rights of the
Founders Share. See "Principal Shareholders -- The Founders Share" below.
The restrictions on "interests" in Ordinary Shares and the extraordinary
voting rights of the Founders Share may be characterized as "anti-takeover"
provisions to the extent they are intended to prevent a bid for control of
Reuters. Tender offers or other non-market acquisitions of shares are usually
made at prices above the prevailing market price of a company's shares.
Acquisitions of shares by persons attempting to acquire control through market
purchases may support the price of shares at market levels higher than otherwise
would be the case. The "anti-takeover" provisions applicable to Reuters may be
expected to preclude such offers.
11
Principal Shareholders
----------------------
Ordinary Shares
- ---------------
As of February 18, 1998, after giving effect to the capital
reorganization, there were 1,407,146,996 Ordinary Shares outstanding, excluding
10,184,697 Ordinary Shares owned by certain Employee Share Ownership Trusts. See
Note 18 of Notes on the Consolidated Balance Sheet, incorporated herein by
reference from the 1997 Annual Report to Shareholders. As of that date, no
person or group had disclosed an interest (as defined in the Companies Act) in
the Ordinary Shares of Reuters Group. On that date, to Reuters knowledge, all
directors and officers of Reuters as a group (23 persons) had an interest in an
aggregate of 1,378,948 Ordinary Shares, representing approximately 0.1% of the
total outstanding, excluding an aggregate of 2,396,883 Ordinary Shares that may
be acquired by directors and officers pursuant to the share option and
restricted share and share rights schemes referred to in Item 12 of this Report.
The Founders Share
- ------------------
Ownership of the Founders Share is restricted to the Founders Share
Company. Seven of the current Trustees were appointed by four news associations:
The Press Association Limited, NPA Nominees Limited, AAP Information Services
Pty Limited, and New Zealand Press Association Limited, (collectively, the
"Associations"). In accordance with certain 1995 amendments to the Articles of
Association of the Founders Share Company, future Reuter Trustees are to be
nominated by a Nomination Committee consisting of (i) the five longest serving
Reuter Trustees, (ii) the Chairman of the Reuter Trustees (unless included under
clause (i) above), (iii) one person nominated by each of the Associations, (iv)
two persons appointed by the Chairman of Reuters, and (v) two persons appointed
by the Chairman of the Nomination Committee after consultation with (and who are
acceptable to) the European Commission on Human Rights. Notwithstanding clause
(iii) above, none of the Associations may nominate a member of the Nomination
Committee pursuant to that clause while any of its appointments are included in
the Nomination Committee by virtue of clause (i) or clause (ii) above. Reuter
Trustees may not be directors or employees of Reuters.
The Articles of Association of the Founders Share Company require that the
Reuter Trustees generally act in accordance with the Reuter Trust Principles and
endeavor to ensure compliance with the Reuter Trust Principles insofar as the
Reuter Trustees are able to do so by the proper exercise of their powers,
including the exercise of the voting rights of the Founders Share. Reuters is
required to reimburse the reasonable expenses of the Reuter Trustees and to
indemnify the Founders Share Company in respect of all expenses incurred by it,
including those incurred in enforcing the Reuter Trust Principles.
The Reuter Trustees currently in office are as follows:
Trustee Since
- ------- -----
The Right Hon. the Lord Browne-Wilkinson 1989
Sir Michael Checkland 1994
Claude Neville David Cole CBE 1983
John Elliott Christopher Dicks 1985
Pehr Gustaf Gyllenhammar 1997
Sir John Gordon Seymour Linacre CBE, AFC, DFM 1986
Kenneth Morgan OBE 1984
Sir Frank Jarvis Rogers.(Chairman) 1989
The Right Hon. The Viscount Rothermere 1979
Arthur Ochs Sulzberger 1994
Ernest James Lyle Turnbull AO 1993
Richard John Winfrey 1987
All of the current Reuter Trustees were nominated pursuant to the
procedures in force prior to 1995, except for Mr. Gyllenhammar who was nominated
by the Nomination Committee referred to above.
12
Each Reuter Trustee is normally required to retire at the Annual General
Meeting ("AGM") of the Founders Share Company following the fifth anniversary of
his nomination or last renomination and will be eligible for renomination
(unless he has reached the age of 75).
ITEM 5. NATURE OF TRADING MARKET
- --------------------------------
The Ordinary Shares are traded on the London Stock Exchange and the ADSs
are included for trading in the NASDAQ National Market System. The ADSs are
evidenced by American Depositary Receipts ("ADRs") issued by Morgan Guaranty
Trust Company of New York, as Depositary under a Deposit Agreement, dated as of
February 18, 1998 (the "Deposit Agreement"), among Reuters, the Depositary and
the holders from time to time of ADRs.
The table below sets forth, for the periods indicated, (i) the reported
high and low sales prices for Reuters Holdings Shares based on the Daily
Official List of the London Stock Exchange and (ii) the reported high and low
sales prices of the Reuters Holdings ADSs on NASDAQ, except that the price
information included for February 18, 1998 (6.25/6.06 pounds per share;
$65-5/8/$60 per ADS) gives effect to the capital reorganization and is for the
Reuters Group Ordinary Shares and ADSs. The number of Ordinary Shares and ADSs
delivered in the capital reorganization was set to, among other things,
facilitate comparability of share price with the Reuters Holdings Shares and
Reuters Holdings ADSs, respectively. Accordingly, the prices for prior periods
have not been restated. However, see Note (1) to the table of Consolidated
Income Statement Data, Amounts in Accordance with US GAAP in Item 8 of this
Report, with respect to the US GAAP treatment of the capital reorganization and
its retroactive effect on the number of shares outstanding and per share
amounts.
The London Stock Exchange NASDAQ
------------------------- ------------------
Pounds Per Share US Dollars per ADS
------------------------- ------------------
High Low High Low
---- --- ---- ---
1996
First Quarter 7.28 5.84 66-1/2 54-5/8
Second Quarter 8.18 7.30 72-3/4 65-5/8
Third Quarter 7.92 6.64 73-1/2 62-3/16
Fourth Quarter 8.09 6.50 76-7/8 66-7/8
1997
First Quarter 7.57 5.98 76-3/4 58
Second Quarter 7.07 5.73 69-1/2 56
Third Quarter 7.40 5.55 71-1/2 56-3/4
Fourth Quarter 7.82 5.90 75-5/8 60
1998
First Quarter (to February 18) 6.94 5.18 67-1/8 50-1/4
As of February 18, 1998, 510,754 Ordinary Shares and ADRs evidencing
50,314,430 ADSs (representing 301,886,580 Ordinary Shares) were held of record
in the US. These Ordinary Shares and ADRs were held by 105 record holders and
3,155 record holders, respectively, and represented 0.04% or evidenced ADSs
representing 21.3%, respectively, of the total number of Ordinary Shares
outstanding. Since certain of these Ordinary Shares and ADRs were held by
brokers or other nominees, the number of record holders in the US may not be
representative of the number of beneficial holders or of where the beneficial
holders are resident.
13
ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS
- --------------------------------------------------------------------------
There are currently no UK foreign exchange control restrictions on
remittances of dividends on Ordinary Shares or on the conduct of Reuters
operations.
Under English Law and Reuters Articles persons who are neither residents
nor nationals of the UK may freely hold, vote and transfer their Ordinary Shares
in the same manner as UK residents or nationals.
ITEM 7. TAXATION
- ----------------
The following discussion of taxation is intended only as a descriptive
summary and does not purport to be a complete technical analysis or listing of
all potential tax effects relevant to the Ordinary Shares or ADRs. The
statements of UK and US tax laws set forth below are based on the laws and the
UK Inland Revenue practice in force as of the date of this Report and take
account of the changes to the tax treatment of dividends resulting from
provisions in the Finance (No. 2) Act 1997, which will become effective in
relation to dividends paid on or after 6 April 1999. The statements herein are
also subject to any other changes in UK or US law, and in any double taxation
convention between the US and the UK, occurring after the date of this Report.
UK Taxation of Dividends -- Refund of Tax Credits
- -------------------------------------------------
Position before 6 April 1999
- ----------------------------
General: When paying a dividend on Ordinary Shares, Reuters will be liable
to pay to the UK Inland Revenue advance corporation tax ("ACT") currently at a
rate equal to 25% of the cash dividend paid. UK resident individual shareholders
are entitled to a tax credit equal to the ACT paid against such individual
shareholder's total income tax liability or, in appropriate cases, a cash refund
of the ACT paid.
Under the terms of the UK/US Double Taxation Convention 1975, a US
resident individual or corporate portfolio holder of an Ordinary Share or ADR
who is not also resident in the UK for UK tax purposes (a "US holder") generally
will be entitled to receive from the UK Inland Revenue payment of a refund
("Refund") of the tax credit available to UK resident shareholders currently at
a rate equal to 25% of the cash dividend. A 15% withholding tax will be imposed
on the sum of the dividend plus the Refund (the "Gross Dividend"). For example,
at current rates, a (pound)80 dividend results in a (pound)20 Refund. The Gross
Dividend of (pound)100 ((pound)80 plus (pound)20) is subject to a UK withholding
tax of (pound)15. Thus, the US holder receives (pound)85.
These provisions do not apply to (i) shareholders whose holding of
Ordinary Shares or ADRs is effectively connected with a permanent establishment
or fixed place of business in the UK, (ii) under certain circumstances, an
investment or holding company, 25% or more of the capital of which is owned,
directly or indirectly, by persons that are neither individual residents nor
citizens of the US and (iii) under certain circumstances, a corporation which,
alone or together with one or more associated corporations controls, directly or
indirectly, 10% or more of the voting stock of Reuters.
Arrangements for Payment of Refund: Reuters Group is currently confirming
the application to the reorganized share capital of certain arrangements which
Reuters Holdings had with the UK Inland Revenue. Confirmation is expected before
payment of the final dividend in respect of 1997. On this basis, subject to
certain exceptions, the Refund will be paid by Reuters to a US holder together
with, and at the same time as, the associated dividend. To establish its
entitlement to the Refund, the US holder must complete the declaration on the
reverse of the dividend check and present the check for payment within three
months from the date of its issue. In the case of ADRs or Ordinary Shares held
through The Depository Trust Company ("DTC"), a declaration as to the conditions
entitling the beneficial US holder to the Refund should be completed by the
broker-dealer or bank member of DTC which holds the Ordinary Shares or ADRs on
behalf of such US holder. These arrangements can be terminated without notice by
the UK Inland Revenue.
A US holder who does not come within these arrangements may obtain the
Refund by filing a claim for refund directly with the UK Inland Revenue, in the
manner and at the time described in US Revenue Procedure 80-18, 1980-1 C.B. 623
and US Revenue Procedure 81-58, 1981-2 C.B. 678, summarized below.
14
Claims for payment must be made within six years of the UK year of assessment
(generally, the 12-month period ending April 5 in each year) in which the
related dividend was paid. The first claim by a US holder for an Refund must be
made by sending the appropriate UK form in duplicate to the Director of the US
Internal Revenue Service Center with which the shareholder's last federal income
tax return was filed. Forms may be obtained by writing to the US Internal
Revenue Service, Assistant Commissioner International, 950 L'Enfant Plaza South,
S.W., Washington, D.C. 20024, Attention: Taxpayers Service Division. Because a
refund claim is not considered made until the UK tax authorities receive the
appropriate form from the US Internal Revenue Service, forms should be sent to
the US Internal Revenue Service well before the end of the applicable limitation
period. Any subsequent claims by a US holder for payment of a Refund should be
filed directly with the UK Financial Intermediaries and Claims Office, Fitzroy
House, PO Box 46, Nottingham NG2 1BD, England.
Certain provisions of the UK Income and Corporation Taxes Act 1988 empower
the UK Government to deny the payment of tax credits in circumstances where (i)
a corporate shareholder which, either alone or together with one or more
associated corporations, controls, directly or indirectly, 10% or more of the
voting stock of the UK company and (ii) such shareholder or an associated
company has a qualifying presence in a jurisdiction which operates a unitary
system of corporate taxation. These provisions are only triggered if the UK
Treasury so determines by Statutory Instrument and no such Instrument has yet
been made. However, the UK Chancellor announced in 1994 that the UK will be
retaining its retaliatory powers against the possibility of harm to the
interests of UK-owned companies in the future.
Position on and after 6 April 1999
- ----------------------------------
The UK Government has invited comments on a proposal to abolish ACT with
effect from April 6, 1999, so that if the proposal is implemented no ACT would
be payable by Reuters on payment of a cash dividend on or after that date. The
proposal, however, envisages a system of "shadow ACT" to govern the rate at
which companies can utilise surplus ACT.
On and after April 6, 1999, the tax credit on cash dividends paid by
Reuters on Ordinary Shares would be reduced to one-ninth of the cash dividend
(or 10% of the Gross Dividend). The tax credit may be set off against a UK
resident individual shareholder's total income tax liability, but no cash refund
would be available.
Accordingly, a US holder would effectively cease to be entitled to any
Refund in respect of dividends, as the 15% withholding tax under the Treaty will
exceed (but will be limited to) the tax credit to which the Treaty otherwise
entitles him. Hence, using the example set out above, a (pound)80 cash dividend
would result in a US holder receiving (pound)80 after deduction of withholding
tax of (pound)8.89.
US Taxation Consequences.
- ------------------------
The Gross Dividend generally will be treated as dividend income for US
federal income tax purposes. Such dividends will not be eligible for the 70%
dividends received deduction allowed to US corporations. However, the
withholding tax will be eligible, subject to certain limitations, for credit
against the holder's US federal income tax. In most cases, such credit should
reduce the US federal income taxes on the dividend by the full amount of the
withholding tax. US Treasury regulations under certain circumstances impose a
special tax return disclosure obligation on holders who claim the benefits of
the US foreign tax credit on their US federal income tax returns. US holders
should consult their tax advisors as to the methods of compliance with such
disclosure obligations. Under recently enacted legislation, a US holder will be
denied a foreign tax credit (and instead allowed a deduction) for foreign taxes
imposed on a dividend if the US holder has not held the Ordinary Shares or ADRs
for at least 16 days in the 30-day holding period beginning 15 days before the
ex-dividend date. Any days during which a US holder has substantially diminished
its risk of loss on the Ordinary Shares or ADRs are not counted toward meeting
the 16 day holding period required by the statute. A US holder that is under an
obligation to make related payments with respect to the Ordinary Shares or ADRs
(or substantially similar or related property) also is not entitled to claim a
foreign tax credit with respect to a foreign tax imposed on a dividend.
15
Taxation of Capital Gains
- -------------------------
The following categories of persons may be liable for both UK and US tax
in respect of a gain on the sale of Ordinary Shares or ADRs: (i) US citizens
ordinarily resident in the UK, (ii) US corporations resident in the UK by reason
of their business being managed or controlled in the UK and (iii) US citizens or
corporations which are trading or carrying on a profession or vocation in the UK
through a branch or agency which constitutes a permanent establishment or fixed
base and which have used, held or acquired the Ordinary Shares or ADRs for the
purposes of such trade, profession or vocation or such branch or agency.
However, subject to applicable limitations, such persons may be entitled to a
tax credit against their US federal income tax liability for the amount of UK
capital gains tax or UK corporation tax on chargeable gains (as the case may be)
which is paid in respect of such gain. US holders who hold Ordinary Shares or
ADRs as capital assets will generally recognize long-term capital gain or loss
if such holder has held the shares for more than one-year on the date of
disposition. Under recently enacted legislation, the tax rate applicable to
long-term capital gains will vary depending upon whether the Ordinary Shares or
ADRs have been held for more than 18 months.
Information Reporting and Backup Withholding
- --------------------------------------------
Payment of dividends and other proceeds with respect to the Ordinary
Shares or ADRs by a US paying agent or other US intermediary will be reported to
the US Internal Revenue Service and to the US holder as required under
applicable regulations. A US holder will not be subject to US backup withholding
tax at the rate of 31% with respect to dividends received or the proceeds of a
sale, exchange or redemption of such Ordinary Shares or ADRs if such holder (i)
is a corporation or other exempt recipient or (ii) the holder provides a US
taxpayer identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with any applicable backup withholding
requirements.
UK Inheritance Tax
- ------------------
An individual who is domiciled in the US for the purposes of the UK/US
estate and gift tax convention and who is not a national of the UK for the
purposes of this convention generally will not be subject to UK inheritance tax
in respect of the Ordinary Shares or ADRs on the individual's death or on a gift
of the Ordinary Shares or ADRs during the individual's lifetime. However, the
individual will be subject to UK inheritance tax if the Ordinary Shares or ADRs
are part of the business property of a permanent establishment of the individual
in the UK or pertain to a fixed base in the UK of an individual who performs
independent personal services. Special rules apply to Ordinary Shares or ADRs
held in trust. In the exceptional case where the disposition is subject both to
UK inheritance tax and to US federal gift or estate tax, the convention
generally provides for the tax paid in the UK to be credited against tax liable
to be paid in the US.
UK Stamp Duty and Stamp Duty Reserve Tax
- ----------------------------------------
No UK stamp duty will be payable on the transfer of an ADR provided that
the instrument of transfer is executed and remains outside the UK and does not
relate to any matter or thing done or to be done in the UK, nor will UK stamp
duty reserve tax ("SDRT") be imposed in respect of any agreement for such a
transfer of ADRs.
Ad valorem stamp duty will be charged on conveyances or transfers of
Ordinary Shares at the rate of 50p per L100 (or part thereof) of the
consideration, if any, for the transfer.
SDRT will be imposed, at the rate of 0.5% of the consideration for the
transfer, if an agreement is made for the sale of Ordinary Shares, unless an
instrument of transfer of the Ordinary Shares in favor of the purchaser or its
nominee is executed and duly stamped on the day that the agreement is made (or,
in a case where the agreement is conditional, on the day that the condition is
satisfied). SDRT is in general payable by the purchaser of Ordinary Shares, but
there are regulations which provide for collection from other persons in certain
circumstances.
16
Ad valorem stamp duty or SDRT will be imposed on any instrument
transferring Ordinary Shares to a nominee or agent for a depositary which issues
depositary receipts (such as the ADRs). In these circumstances, stamp duty or
SDRT will be charged at the higher rate of 1.5% of the consideration for a sale
or, otherwise, 1.5% of the market value of the security transferred. This rate
of duty can be reduced to 1% in the case of certain transfers effected by a
qualified dealer in securities (as defined in the UK Finance Act 1986).
Clearance services may elect, under certain conditions, for the normal rates of
stamp duty or SDRT to apply to transfers into or transactions within the service
instead of the higher rate applying to an issue or transfer into the clearance
service. The UK Finance Act 1997 contains provisions which will remove this
reduced rate of duty from the "appointed day" (yet to be determined).
A transfer of Ordinary Shares from a depositary or its agent or nominee to
a transferee which results in the cancellation of the ADR, which cancellation is
liable to duty as a "conveyance on sale" because it completes a sale of such
Ordinary Shares, will be liable to ad valorem stamp duty, payable by the
transferee, at the rate of 50p per 100 (or part thereof) of the consideration,
if any, for the transfer. A transfer of Ordinary Shares from a depositary or its
agent or nominee to the ADR holder which results in cancellation of the ADR but
where there is no transfer of beneficial ownership is not liable to duty as a
"conveyance on sale", but will be liable to a fixed stamp duty of 50p.
ITEM 8. SELECTED FINANCIAL DATA
- -------------------------------
The selected financial information set forth below is derived, in part,
from the Consolidated Financial Statements incorporated by reference from the
1997 Annual Report to Shareholders, which is filed as an exhibit to this Report.
The selected data should be read in conjunction with the financial statements
and related notes, as well as the Operating and Financial Review incorporated
herein by reference from the 1997 Annual Report to Shareholders.
The Consolidated Financial Statements are prepared in accordance with UK
GAAP, which differ in certain respects from US GAAP. A summary of the principal
differences between UK and US GAAP, a reconciliation to US GAAP and a condensed
US GAAP balance sheet are set forth in the Consolidated Financial Statements,
appearing on pages 80 to 82 of the 1997 Annual Report to Shareholders, and are
incorporated herein by reference.
17
Consolidated Income Statement Data:
Year Ended December 31,
-----------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(in pound millions, except per share data)
Amounts in accordance with UK GAAP:
Revenue 2,882 2,914 2,703 2,309 1,874
Operating profit before goodwill amortization and interest 592 641 551 461 380
Profit on ordinary activities before taxation (1) 626 652 558 481 422
Profit on ordinary activities after taxation(1) 390 442 373 319 282
Profit attributable to ordinary shareholders (1) 390 442 373 318 281
======= ======= ======= ======= =======
Earnings per ordinary share (1) 24.0p 27.3p 23.2p 19.9p 16.9p
======= ======= ======= ======= =======
Earnings per ADS (1) 144.2p 164.0p 139.3p 119.4p 101.4p
======= ======= ======= ======= =======
Dividends declared per ordinary share (including UK tax credit) 16.3p 14.7p 12.3p 10.0p 8.1p
======= ======= ======= ======= =======
Dividends declared per ADS (including UK tax credit) 97.5p 88.1p 73.5p 60.0p 48.8p
======= ======= ======= ======= =======
Weighted average number of ordinary shares (in millions) 1,622 1,616 1,605 1,602 1,665
======= ======= ======= ======= =======
- --------------
(1) In 1997 Reuters adopted the UK Financial Reporting Standard No 10
`Goodwill and Intangible Assets'. This Standard requires purchased
goodwill and intangible assets to be capitalised and amortised through
the profit and loss account over their useful economic lives.
Accordingly, all goodwill previously written off against reserves has
been capitalised and amortised, and prior years have been restated in
line with the standard's transitional provisions. Amortisation periods
are consistent with those used under US GAAP, thus goodwill ceases to be
a US GAAP adjustment except where affected by timing differences in the
recognition of deferred consideration. (See Note 1 of Notes on the
Consolidated Profit and Loss Account, incorporated herein by reference
from the 1997 Annual Report to Shareholders.)
18
Consolidated Income Statement Data (continued):
Year Ended December 31,
-----------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(in pound millions, except per share data)
Amounts in accordance with
US GAAP
Revenue 2,882 2,914 2,703 2,309 1,874
Income before taxes on income 618 645 544 463 389
Net income 386 440 366 303 259
======= ======= ======= ======= =======
Basic earnings per ordinary share (1) 23.8p 27.2p 22.8p 18.9p 15.5p
Diluted earnings per ordinary share (1) 23.6p 26.8p 22.5p 18.6p 15.3p
Basic earnings per ADS (1) 142.6p 163.2p 136.9p 113.4p 93.2p
Diluted earnings per ADS (1) 141.6p 161.0p 134.9p 111.6p 92.1p
Dividends paid per ordinary share (including UK tax credit) (1) 15.1p 12.8p 10.5p 8.6p 7.2p
======= ======= ======= ======= =======
Dividends paid per ADS (including UK tax credit) (1) 90.8p 76.9p 63.0p 51.4p 43.4p
======= ======= ======= ======= =======
Weighted average number of ordinary shares (in millions) (1) 1,623 1,616 1,605 1,602 1,665
======= ======= ======= ======= =======
- ------------------
(1) On February 18, 1998 Reuters Holdings consummated a capital
reorganization (see Item 4 of this Report). Under US GAAP this
transaction is deemed a share consolidation combined with a special
dividend and requires retroactive restatement of earnings per share and
per ADS and dividends per share and per ADS amounts. However, the
consummation of the transaction was subsequent to completion of the
financial statements incorporated by reference from the 1997 Annual
Report to Shareholders in response to Item 18 of this Report, and
therefore no such restatements appear in those financial statements.
Moreover, under UK GAAP no restatement would be deemed appropriate as
the cash payment is considered a repurchase of shares and the number of
new shares in Reuters Group has been set to facilitate comparability of
per share amounts with those of Reuters Holdings. If the transaction had
been effected prior to completion of the financial statements, and the
retroactive treatment under US GAAP had been reflected above, earnings
and dividends per share and per ADS presented for each period would have
been approximately 15% higher. For additional information relating to
the capital reorganization see Note 30 of Notes on the Consolidated
Balance Sheet incorporated herein by reference from the 1997 Annual
Report to Shareholders.
19
Consolidated Balance Sheet Data:
Year Ended December 31,
-----------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(in pound millions, except per share data)
Amounts in accordance with UK GAAP:
Total assets(1) 2,836 2,536 2,369 1,882 1,537
Long-term debt and provisions for charges 65 71 162 109 51
Capital employed before minority interest(1) 1,661 1,458 1,211 973 785
Amounts in accordance with US GAAP:
Total assets 2,830 2,523 2,288 1,828 1,549
Long-term debt 86 84 105 68 40
Shareholders' equity 1,754 1,561 1,299 1,048 865
- -----------------
(1) For UK GAAP purposes, total assets and capital employed before minority
interest for the years prior to 1997 have been restated for the change
in accounting for goodwill. See Note 1 of Notes on the Consolidated
Profit and Loss Account, incorporated herein by reference from the 1997
Annual Report to Shareholders.
Dividends
- ---------
The table below sets forth the amounts of interim, final and total
dividends (excluding any associated UK tax credit discussed in Item 7 of this
Report) paid in respect of each fiscal year indicated. Pound sterling amounts
per share have been translated into US cents per ADS (each representing six
Ordinary Shares) at the Noon Buying Rate on each of the respective payment dates
for such interim and final dividends. The amounts have not been restated for the
capital reorganization consummated on February 18, 1998. See Note (1) to the
table of Consolidated Income Statement Data, Amounts in Accordance with US GAAP,
above.
Pence per Share Cents per ADS
Fiscal year ended --------------- -------------
December 31, Interim Final Total Interim Final Total
- ----------------- ------- ----- ----- ------- ----- -----
1993 1.55 4.95 6.50 14.25 44.71 58.96
1994 1.90 6.10 8.00 17.80 58.56 76.36
1995 2.30 7.50 9.80 21.39 67.92 89.31
1996 2.75 9.00 11.75 25.71 87.56 113.27
1997(1) 3.10 9.90 13.00 29.92
- --------------------
(1) The final dividend in respect of 1997 will be paid on April 27, 1998 to
holders of Ordinary Shares on the register at March 20, 1998 and on May
1, 1998 to holders of ADSs on the register at March 20, 1998, and will
be translated into US dollars from sterling at the rate prevailing on
April 27, 1998.
Any future dividends will be declared consistent with Reuters policy of
retaining a substantial portion of its earnings for use in its business, and
will be dependent upon Reuters earnings, financial condition and other factors.
20
Exchange Rates
--------------
The following table sets forth, for the periods and dates indicated, the
average, high, low and end of period Noon Buying Rates for pounds sterling in US
dollars per (pound)1.
Fiscal year ended
December 31,
Average* High Low Period End
-------- ---- --- ----------
1993 1.50 1.59 1.42 1.48
1994 1.54 1.64 1.46 1.57
1995 1.58 1.64 1.53 1.55
1996 1.57 1.71 1.49 1.71
1997 1.65 1.70 1.58 1.64
1998 (through February 18) 1.64 1.67 1.61 1.64
* The average of the exchange rates on the last trading day of each calendar
month during the period.
On February 18, 1998 the Noon Buying Rate was $1.64 per (pound)1.
Fluctuations in the exchange rate between the pound sterling and the US
dollar will affect the US dollar amounts received by holders of the ADSs upon
conversion by the Depositary of cash dividends paid in pounds sterling on the
Ordinary Shares represented by the ADSs and may affect the relative market
prices of the ADSs in the US and the Ordinary Shares in the UK.
For the effect on Reuters results of operations of fluctuations in the
exchange rates between the pound sterling and the other major currencies
(including the US dollar) in which revenues are received and expenditures are
made by Reuters, see "Operating and Financial Review" incorporated herein by
reference from the 1997 Annual Report to Shareholders, which is filed as an
exhibit to this Annual Report on Form 20-F.
ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
-----------------------------------------------------------------------
Reuters discussion and analysis of financial condition and results of
operations appears on pages 36 to 47 of Reuters 1997 Annual Report to
Shareholders under the heading "Operating and Financial Review", incorporated
herein by reference from the 1997 Annual Report to Shareholders.
The discussion is designed to comply with both the requirements of this
Item 9 and the recommendations of the July 1993 Statement, "Operating and
Financial Review", issued by the UK Accounting Standards Board.
The focus of Reuters discussion is on the financial statements included in
the 1997 Annual Report to Shareholders, which are prepared in accordance with UK
GAAP. A summary of differences between UK GAAP and US GAAP, a reconciliation to
US GAAP and a condensed US GAAP balance sheet are set forth in the Consolidated
Financial Statements, appearing on pages 80 to 82 of the 1997 Annual Report to
Shareholders, and are incorporated herein by reference. As reported in Item 2
above, Reuters has made certain commitments with respect to the development of a
new building in the Times Square section of New York City.
21
Cautionary Statements
- ---------------------
All statements other than statements of historical fact included in this
Report and the 1997 Annual Report to Shareholders incorporated by reference
herein are, or may be deemed to be, forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 31E 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 "Cautionary Statements" in the "Operating and
Financial Review" incorporated herein by reference from the 1997 Annual Report
to Shareholders, and in the paragraph below. All written and oral
forward-looking statements made on or after the date hereof and attributable to
Reuters are expressly qualified in their entirety by such Cautionary Statements.
All-Media-Typlan AG, the supplier of key components for certain of Reuters
editorial systems, purported in late February 1998 to terminate its software
license agreements with Reuters for material breach of contract. Reuters does
not accept that Typlan has justifiable grounds for such termination. The
breakdown of this relationship exposes Reuters to various risks associated with
those of its editorial systems which currently depend on Typlan. In particular,
the risks include possible lack of ongoing support and maintenance of the
relevant software by Typlan and potential difficulties that may be encountered
in the implementation of alternative systems.
ITEM 9A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- -------------------------------------------------------------------
Quantitative and qualitative disclosures about market risk are provided
under the sub-heading Treasury Management on pages 44 to 46 of the "Operating
and Financial Review", and in Note 13 of Notes on the Consolidated Cash Flow
Statement, both incorporated herein by reference from the 1997 Annual Report to
Shareholders.
22
ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT
- ---------------------------------------------
Reuters Articles provide for a Board of Directors consisting of not fewer
than five nor more than 15 directors. There are presently 14 directors in
office, including six executive directors.
The directors and executive officers of Reuters are as follows:
Name Position Position Held Since
- ---- -------- -------------------
Directors:
Sir Christopher Anthony Hogg Chairman; Director (1) 1985; 1984
Peter James Denton Job Chief Executive; Director 1991; 1989
Robert Oscar Rowley Finance Director 1990
Robert Patten Bauman Director (1) 1994
Sir John Anthony Craven Director (1) 1997
Michael Philip Green Director (1) 1992
Jean-Claude Marchand Managing Director of Reuters Europe, Middle East
and Africa; Director 1996
Roberto G Mendoza Director (1) 1998
Richard Lake Olver Director (1) 1997
John Michael Coldwell Parcell Director responsible for the Financial
Information Product Line; Director 1996
Charles James Francis Sinclair Director (1) 1994
David Granger Ure Director responsible for Marketing and Technical
Policy; Director 1992; 1989
Andre-Francois Helier Villeneuve Director responsible for Geographical Areas;
Director 1992; 1989
Sir David Alan Walker Director (1) 1994
Executive Officers:
Patrick Alexander Vellan Mannix Director of Personnel and Quality Programmes 1992
Gregory Charles Meekings Managing Director of the Corporate Technology
Group 1996
Jeremy John Harley Penn Managing Director of Reuters Asia/Pacific 1997
Michael Otto Sanderson Chairman of Reuters America Holdings Inc;
Chief Executive Officer of Instinet 1995; 1990
Geoffrey Arthur Weetman Managing Director of Media and New Business
Ventures 1997
Rosalyn Susan Wilton Managing Director, Transaction Products 1992
Mark William Wood Editor-in-Chief 1989
Philip Kenneth Wood Deputy Finance Director 1994
Simon Anthony Yencken Company Secretary and General Counsel 1994; 1993
- -----------------
(1) Non-executive director.
The business address of the directors is 85 Fleet Street, London EC4P 4AJ,
England.
The Chairman and all non-executive directors, except Michael Green and
Roberto Mendoza, served on the Remuneration and Audit Committees of the Board in
1997 and all non-executive directors except Roberto Mendoza served on the
Nomination Committee in 1997. Summaries of the functions of the Remuneration
Committee and the Audit Committee appear on pages 25 and 33, respectively, of
the 1997 Annual Report to Shareholders which is incorporated herein by
reference. During 1997, Reuters maintained insurance for the directors and
certain employees against liabilities in relation to Reuters.
23
The Articles require that, in performing their duties, the directors have
due regard for the Reuter Trust Principles insofar as, by the proper exercise of
their powers and in accordance with their other duties as directors, the
directors may do so. For additional information with respect to the Reuter Trust
Principles and the Reuter Trustees, who are charged with ensuring compliance
with them, see Item 4 of this Report.
The Articles contain provisions that require the Board of Directors to
include at least five non-executive directors before a new executive director
can be appointed.
At each AGM of Reuters one-third of the directors (or, if their number is
not a multiple of three, the number nearest to but not greater than one-third)
shall retire from office by rotation. A retiring director shall be eligible for
re-election. For additional information see the Report on Remuneration and
Related Matters which appears on pages 25 to 32 of the 1997 Annual Report to
Shareholders referred to above.
No director is required to hold any shares of Reuters in order to qualify
as a director. A director not holding any shares may nevertheless attend and
speak at general meetings of Reuters.
ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS
- -----------------------------------------------
For the year ended December 31, 1997, the aggregate compensation paid or
accrued by Reuters and its subsidiaries to all directors and officers as a group
(21 persons) for services in all capacities was (pound)7.0 million.
The aggregate compensation paid to all directors and officers as a group
included (pound)1.1 million relating to an officer's interest in a rolling
four-year profit sharing plan operated by a subsidiary. The remaining executive
directors and officers participated in a bonus plan which, in 1997, provided for
bonuses based one-half on a growth target in earnings per share and one-half on
the number of installations of Reuters new 3000 Series of products. Neither
target was achieved therefore no bonuses were paid under this plan.
For further information relating to Reuters senior executive remuneration
policy and compensation paid to the Chairman and the executive directors, see
the Report on Remuneration and Related Matters which appears on pages 25 to 32
of the 1997 Annual Report to Shareholders and is incorporated herein by
reference.
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES
- -----------------------------------------------------------------------
Reuters has established a number of employee share schemes. These include
(i) a long term incentive plan, a performance related share plan and an
international Save As You Earn ("SAYE") plan introduced by Reuters Group in
1997, which have substantially the same terms as Reuters Holdings' 1997 Long
Term Incentive Plan, 1997 Performance Related Share Scheme and 1994 SAYE Scheme,
respectively, referred to below, and (ii) two executive share plans of Reuters
Group (one for use in the US and the other for the rest of the world) which will
be used to provide replacement options to those persons who surrender options
granted under Reuters Holdings' 1984 Executive Schemes referred to below.
Reuters employee share schemes also include the following plans of Reuters
Holdings in respect of which no further grants of options or rights will be
made, but under which options remain outstanding: (i) a long-term incentive
scheme introduced in 1993 under which non-transferable awards of
performance-based restricted shares or rights exercisable for shares on a one
for one basis (share rights) were made annually to key senior executives (the
"1993 Long-Term Incentive Scheme"), (ii) a long-term incentive plan introduced
in 1997 under which non-transferable awards of performance-based share options
were made annually to key senior executives (the "1997 Long Term Incentive
Plan"), (iii) a long-term incentive scheme introduced in 1995 under which
non-transferable awards of performance-based share rights were made annually to
executives (the "1995 Performance Related Share Scheme"), (iv) a long-term
incentive scheme introduced in 1997 under which non-transferable
performance-based share options were granted annually to executives (the "1997
Performance Related Share Scheme"), (v) a SAYE share option scheme adopted in
1994 (the "1994 SAYE Scheme"), (vi) three SAYE share option schemes adopted in
1984 (the "1984 SAYE Schemes") and (vii) two executive share option schemes
adopted in 1984 (the "1984 Executive Schemes"). For additional information
24
relating to these plans, see the Report on Remuneration and Related Matters
which appears on pages 25 to 32 of the 1997 Annual Report to Shareholders which
is incorporated herein by reference.
In January 1998, in connection with the capital reorganization, mechanisms
were introduced so that, upon exercise of options and rights outstanding under
the Reuters Holdings plans referred to above, the person exercising his option
or right will receive Ordinary Shares of Reuters Group. In addition, the
Long-Term Incentive Scheme referred to in clause (i) above was amended to give
participants the option of taking 40% of their award in cash to enable them to
pay the taxes due on exercise.
At an Extraordinary General Meeting to be held April 21, 1998,
shareholders will be asked to approve a new share option plan under which
eligible employees (other than executive directors and part-time staff, whose
participation will be discretionary) will be invited to apply for an option to
acquire up to 2,000 Ordinary Shares at a price equal to the average of the
mid-market value of the shares on the three dealing days immediately preceding
the invitation date. These invitations will be made within six weeks of the
Reuters interim results announcement in July 1998 (and on later announcement
dates for employees who join Reuters after the initial qualification date). No
options under the plan will be granted after July 31, 1999 and no person will
receive an option over more than 2,000 shares. Options will generally become
exercisable on the third anniversary of the date of grant, by holders who have
been employed throughout that three-year period, and will then remain
exercisable for a further four years.
Reuters also offers an Employee Stock Purchase Plan for most US-based
employees, which Reuters Holdings introduced in 1995 in lieu of implementing a
US version of the 1994 SAYE Scheme. Under this plan, participating employees
authorize after-tax payroll deductions (subject to certain maximum amounts)
which, together with contributions from Reuters equal to 20% of the payroll
deductions, are transferred to a designated broker who, at the end of each pay
period, purchases ADSs at available market prices for the accounts of the
employees.
Outstanding Options and Restricted Shares
- -----------------------------------------
All options, restricted shares and share rights outstanding as of the date
of this Report were granted or awarded under the Reuters Holdings schemes
described above. On exercise of these options or rights, an employee will
receive Ordinary Shares in Reuters Group equal in number to the number of
Reuters Holdings Shares he would have received under the relevant scheme.
25
Information concerning options, restricted shares and share rights
outstanding under Reuters share option and restricted share schemes at February
18, 1998 is set forth below:
Number of Ordinary
Shares Issuable
Upon Exercise Ranges of Exercise
of Options or Subject Prices per
to Restricted Share Ordinary Share
or Share Right ((pound)L) Range of
Schemes/Plans Awards (1) or ADS ($) Expiration Dates
- ------------- ---------- ---------- ----------------
Options:
- --------
1984 SAYE (2) 7,084,152 L2.21 -- L3.94 5/98 -- 11/99
$23.50 -- $34.98 10/98 -- 11/99
1994 SAYE (2) 9,694,114 L3.51 -- L6.01 4/00 -- 10/02
1984 Executive (3) 2,910,306 L1.17 -- L4.93 2/98 -- 2/04
$15.94 -- $43.72 3/98 -- 2/04
----------
TOTAL 19,688,572
==========
Shares subject to
restrictions or rights:
- -----------------------
1993 Long-Term Incentive (4) 1,888,725 Not applicable 2/98 -- 12/02
1997 Long-Term Incentive (5) 518,290 L0 -- L6.40 12/03
1995 Performance Related (6) 1,854,094 Not applicable 12/01 -- 12/02
1997 Performance Related (5) 1,317,122 L0 -- L6.40 12/03
---------
TOTAL 5,578,231
=========
- -------------------
(1) Includes Ordinary Shares represented by ADSs.
(2) The exercise price of options granted under the 1984 and 1994 SAYE
Schemes is effectively fixed at 20% below the market price at the start
of either a three-year or a five-year savings period. In general, these
options become exercisable at the end of that period and remain
exercisable for six months thereafter.
(3) The exercise price of options granted under the 1984 Executive Schemes
is the market price either at or shortly before the date of grant. Under
their original terms, these options become exercisable during the period
commencing on the third anniversary of the date of grant (the second
anniversary in the case of options issued to US-based employees) and
ending on either the seventh or the tenth anniversary of the date of
grant. As a result of the capital reorganization all options expire on
August 16, 1998, but holders may elect to replace their original options
with unapproved Reuters Group options that have the same exercise price
but generally lapse one year later.
(4) Includes 1,201,296 restricted shares relating to 1993 and 1994 awards
which are vested. The capital reorganization technically triggered
immediate release of all vested restricted shares, but as part of the
terms of the reorganization, all currently employed participants have
agreed to defer the release of their 1994 awards (510,184 shares) until
February 1999.
(5) The 1997 long-term incentive and performance related awards granted in
the UK (a total of 417,688 shares and 692,064 shares, respectively) have
an exercise price equivalent to the market value of the underlying
shares on the date of the grant, and are linked with a cash bonus equal
to such exercise price. The share rights and linked cash bonus vest and
are exercisable only in tandem.
(6) Includes 211,663 options which have vested and are exercisable through
December 2001.
Of the total number of Ordinary Shares subject to outstanding options at
February 18, 1998, 191,890 Ordinary Shares were subject to options held by
directors and officers of Reuters, 27,622 of which were granted pursuant to 1994
SAYE Schemes, 13,980 of which were granted pursuant to 1984 SAYE Schemes and
150,288 of which were granted pursuant to the 1984 Executive Schemes. In
addition, Ordinary Shares subject to restrictions or rights held by directors
and officers at February 18, 1998 included 2,109,778 shares awarded
26
under the 1993 and 1997 long-term incentive plan (929,796 vested) and 95,215
shares awarded under the 1995 and 1997 performance related share plan (20,831
vested).
At February 18, 1998 options, restricted shares and/or share rights were
held by the Chairman and the executive directors as follows:
Long-Term Incentive
Savings Schemes/Plans
Related Executive --------------------
Schemes Scheme Vested Non-vested
------- ------ ------ ----------
Sir Christopher Hogg 2,065 --- --- ---
P.J.D. Job 2,065 --- 159,976 196,122
J-C. Marchand 3,098 --- 75,680 115,480
J. M. C. Parcell 2,065 100,000 66,240 83,286
R.O. Rowley 2,925 --- 98,936 122,045
D.G. Ure --- --- 109,480 130,550
A-F.H. Villeneuve 2,065 --- 109,480 130,550
For additional information concerning options, restricted shares and share
rights held by the executive directors, see the Report on Remuneration and
Related Matters, incorporated herein from the 1997 Annual Report to
Shareholders.
ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
- -------------------------------------------------------
Not applicable.
PART II
-------
ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED
- ---------------------------------------------------
Not applicable. However, information responding to this Item has been
filed with the SEC concurrently with this Annual Report on Form 20-F, under
cover of a Form 6-K for the month of March 1998.
PART III
--------
ITEM 15. DEFAULTS UPON SENIOR SECURITIES
- ----------------------------------------
Not applicable.
ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED SECURITIES
- --------------------------------------------------------------------------------
Not applicable.
PART IV
-------
ITEM 18. FINANCIAL STATEMENTS
- -----------------------------
Reference is made to Item 19 for a list of all financial statements filed
as part of this Report.
27
ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS
- ------------------------------------------
(a) Financial Statements:
Annual Report to
Shareholders
------------
Related
Notes
Pages Pages
----- -----------
Incorporated by reference from the 1997
Annual Report to Shareholders:
Report of the auditors 35
Consolidated profit and loss account for each of the
three years in the period ended December 31, 1997 48 49 to 54
Consolidated cash flow statement for each of the three
years in the period ended December 31, 1997 55 56 to 61
Consolidated balance sheet as of December 31, 1997, 1996
and 1995 62 63 to 75
Accounting policies 78 to 79
Summary of differences between UK and US GAAP 80 81 to 82
Report on Remuneration and Related Matters 25 to 32
The consolidated financial statements listed in the above index which are
included in the 1997 Annual Report to Shareholders of Reuters Holdings PLC are
hereby incorporated by reference. With the exception of the pages listed in the
above index and the items incorporated by reference in Items 1, 4, 8, 9, 9A, 10,
11 and 12 of this report, the 1997 Annual Report to Shareholders is not to be
deemed filed as part of this Report.
(b) Exhibits
- ------------
2.1 Memorandum and Articles of Association of Reuters Group
2.2 Deposit Agreement, dated February 18, 1998 among Reuters Group, Morgan
Guaranty Trust Company of New York, as depositary, and all holders from
time to time of American Depositary Receipts issued thereunder
2.3 Syndicated Credit Facility Agreement dated December 4, 1997 among
Reuters Group, Reuters Investments, Chase Manhattan plc, the banks
listed therein and Chase Manhattan International Limited
2.4 Consent of Price Waterhouse for incorporation by reference in Forms S-8
of their report dated February 13, 1998
2.5 Consent of Price Waterhouse for incorporation by reference in Forms F-3
of their report dated February 13, 1998
4. The 1997 Annual Report to Shareholders of Reuters Holdings PLC
27 Financial Data Schedule
28
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant certifies that it meets all of the requirements for
filing on Form 20-F and has duly caused this annual report to be signed on its
behalf by the undersigned thereunto duly authorized.
REUTERS GROUP PLC
(Registrant)
Dated: March 5, 1998 By /s/ Robert O. Rowley
--------------------------
Robert O. Rowley
Finance Director
29
EXHIBIT INDEX
-------------
Exhibit
Number Description
- ------ -----------
2.1 Memorandum and Articles of Association of Reuters Group
2.2 Deposit Agreement, dated February 18, 1998 among Reuters Group,
Morgan Guaranty Trust Company of New York, as depositary, and all
holders from time to time of American Depositary Receipts issued
thereunder
2.3 Syndicated Credit Facility Agreement dated December 4, 1997 among
Reuters Group, Reuters Investments, Chase Manhattan plc, the
banks listed therein and Chase Manhattan International Limited
2.4 Consent of Price Waterhouse for incorporation by reference in
Forms S-8 of their report dated February 13, 1998
2.5 Consent of Price Waterhouse for incorporation by reference in
Forms F-3 of their report dated February 13, 1998
4. The 1997 Annual Report to Shareholders of Reuters Holdings PLC
27 Financial Data Schedule
THE COMPANIES ACTS 1985 AND 1989
A PUBLIC COMPANY LIMITED BY SHARES.
MEMORANDUM OF ASSOCIATION OF
REUTERS GROUP PLC
(as altered by special resolution passed on 12 December 1997)
1. The name of the Company is: REUTERS GROUP PLC(1).
2. The Company is to be a public company1.
3. The Registered Office of the Company will be situated in England and Wales.
4. The objects for which the Company is established are:-
(1) To acquire and hold, directly or indirectly, all or any part of the
issued share capital of Reuters Holdings PLC and generally to carry
on business as an investment holding company and for that purpose to
acquire and hold, either in the name of the Company or in that of
any nominee, shares, stocks, debentures, debenture stock, bonds,
notes, options, obligations and securities issued or guaranteed by
any company wherever incorporated or carrying on business and
debentures, debenture stock, bonds, notes, obligations and
securities issued or guaranteed by any government, sovereign ruler,
commissioners, public body or authority, supreme, dependent,
municipal, local or otherwise in any part of the world and to
exercise and enforce all rights and powers conferred by or incident
to the ownership of any such shares, stock, obligations or other
securities including without prejudice to the generality of the
foregoing all such powers of veto or control as may be conferred or
capable of exercise whether by virtue of the holding by the Company
of some special proportion of the issued or nominal amount thereof
or otherwise and to provide managerial and other executive,
supervisory and consultant services for or in relation to any
company in which the Company is interested upon such terms as may be
thought fit
(2) To carry on, acquire, obtain and supply wireless, telegraphic,
telephonic, telex or other news and intelligence, and to issue,
publish and circulate, and otherwise utilise, with a view to the
profit or advantage of the Company, the same news and intelligence
................................................................................
(1) By virtue of a special resolution passed on 12 December 1997 the name
was changed to "Reuters Group PLC" with effect from 12 December 1997,
Clause 2 was added and Clause 4 was inserted in place of the existing
Clause 4.
(3) To construct, purchase, hire or otherwise acquire or work, wireless
installations, satellites and other electronic equipment,
telegraphs, telex, telephones and other means of communications and
telecommunications
(4) To undertake and facilitate the collection and remittance of money,
securities and other valuables, merchandise and property in, to and
between any part or parts of the world, to grant and issue letters
of credit and circular notes, to receive deposits of money and
securities, to open credits and generally to utilise the means of
inter-communication possessed by the Company, for the purpose of
granting pecuniary, financial and commercial facilities, in and
between any part or parts of the world
(5) To carry on any other business of any nature whatsoever which may
seem to the Directors to be capable of being conveniently carried on
in connection or conjunction with any business of the Company herein
authorised or to be expedient with a view to rendering profitable or
more profitable any of the Company's assets or utilising its
know-how or expertise
(6) To subscribe, underwrite, purchase or otherwise acquire, and to
hold, dispose of, and deal with, any shares or other securities or
investments of any nature whatsoever, and any options or rights in
respect thereof, and to buy and sell foreign exchange
(7) To draw, make, accept, endorse, discount, negotiate, execute, and
issue, and to buy, sell and deal with bills of exchange, promissory
notes, and other negotiable or transferable instruments or
securities
(8) To purchase, or otherwise acquire for any estate or interest any
property or assets or any concessions, licences, grants, patents,
trade marks, copyrights or other exclusive or non-exclusive rights
of any kind and to develop and turn to account and deal with the
same in such manner as may be thought fit and to make experiments
and tests and to carry on all kinds of research work
(9) To build, construct, equip, execute, carry out, improve, work,
develop, administer, maintain, manage or control works, plants,
factories, wharves, jetties, roads, railways, warehouses, depots,
offices and other buildings, structures or facilities of all kinds,
whether for the purposes of the Company or for sale, letting or hire
to or in return for any consideration from any company, firm or
person, and to contribute to or assist in or carry out any part of
any such operation
(10) To amalgamate or enter into partnership or any joint venture or
profit sharing arrangement or other association with any company,
firm or person
(11) To purchase or otherwise acquire and undertake all or any part of
the business, property and liabilities of any company, firm or
2
person carrying on any business which the Company is authorised to
carry on or possessed of any property suitable for the purposes of
the Company
(12) To promote, or join in the promotion of, any company, whether or not
having objects similar to those of the Company
(13) To borrow and raise money and to secure or discharge any debts or
obligations of or binding on the Company or on any company which in
relation to the Company is a subsidiary or a holding company or
subsidiary of such holding company in such manner as may be thought
fit and in particular by mortgages and charges upon all or any part
of the undertaking, property and assets (present and future) and the
uncalled capital of the Company, or by the creation and issue of
debentures, debenture stock or other securities of any description
(14) To advance, lend or deposit money or give credit to or with any
company, firm or person on such terms as may be thought fit and with
or without security
(15) To guarantee or give indemnities or provide security, whether by
personal covenant or by mortgage or charge upon all or any part of
the undertaking, property and assets (present and future) and the
uncalled capital of the Company, or by all or any such methods, and
for the performance of any contracts or obligations, and the payment
of capital or principal (together with any premium) and dividends or
interest on any shares, debentures or other securities, of any
person, firm or company including (without limiting the generality
of the foregoing) any company which is for the time being a
subsidiary or a holding company of the Company or another subsidiary
of any such holding company or is associated with the Company in
business
(16) To enter into a Deed of Mutual Covenant with Reuters Founders Share
Company Limited and others, and thereafter to agree to and become a
party to such alterations of and additions to such Deed of Mutual
Covenant as may be made in accordance with its terms or as the
Company may thereafter think fit to approve, and to exercise and
enforce such powers and rights and to perform and to discharge such
obligations as shall be conferred or (as the case may be) imposed
upon the Company by such Deed of Mutual Covenant, whether in its
original form or with and subject to any such alterations and
additions as aforesaid
(17) To give guarantees and indemnities of all kinds, and to make
payments of all kinds, to or in favour of Reuters Founders Share
Company Limited and/or all or any one or more of its directors and
members for the time being
(18) To issue any securities which the Company has power to issue for any
other purpose by way of security or indemnity or in satisfaction of
any liability undertaken or agreed to be undertaken by the Company
3
and in relation to any issue by the Company or offer by the Company
or any other company, person or firm of securities of the Company to
enter into such arrangements for the underwriting thereof and in
connection therewith to give any undertaking, warranty or indemnity
(19) To sell, lease, grant licences, easements and other rights over, and
in any manner deal with or dispose of, the undertaking, property,
assets, rights and effects of the Company or any part thereof for
such consideration as may be though fit, and in particular for
shares or other securities, whether fully or partly paid up
(20) To procure the registration or incorporation of the Company in or
under the laws of any territory outside England
(21) To subscribe or guarantee money for any national, charitable,
benevolent, public, general or useful object, or for any purpose
which may be considered likely directly or indirectly to further the
interests of the Company or of its members
(22) To establish and maintain or contribute to any pension or
superannuation funds for the benefit or, and to give or procure the
giving of donations, gratuities, pensions, allowances or emoluments
to, any individuals who are or were at any time in the employment or
service of the Company or of any company which is its holding
company or is a subsidiary of the Company or any such holding
company or otherwise is allied to or associated with the Company, or
who are or were at any time directors or officers of the Company or
of any such other company, and the spouses, widows, widowers,
families and dependants of any such individuals; to establish and
subsidise or subscribe to any institutions, associations, clubs or
funds which may be considered likely to benefit any such other
company; and to make payments for or towards the insurance of any
such persons
(23) To establish and maintain, and to contribute to, any scheme for
encouraging or facilitating the holding of shares or debentures in
the Company by or for the benefit of its employees or former
employees, of those of its subsidiary or holding company or any
subsidiary of its holding company, or by or for the benefit of such
other persons as may for the time being be permitted by law, or any
scheme for sharing profits with its employees or those of its
subsidiary and/or associated companies, and (so far as for the time
being permitted by law) to lend money to the Company's employees
(other than directors) with a view to enabling them to acquire
shares in the Company or its holding company
(24) To distribute among members of the Company in specie or otherwise,
by way of dividend or bonus or by way of reduction of capital, all
or any of the property or assets of the Company, or any proceeds of
4
sale or other disposal of any property or assets of the Company,
with and subject to any incident authorised and consent required by
law
(25) (i) To purchase and maintain insurance for or for the benefit of any
persons who are or were at any time directors, officers or employees
or auditors of the Company, or of any other company which is its
holding company or in which the Company or such holding company or
any of the predecessors of the Company or of such holding company
has any interest whether direct or indirect or which is in any way
allied to or associated with the Company, or of any subsidiary
undertaking of the Company or of any such other company, or who are
or were at any time trustees of any pension fund in which any
employees of the Company or of any such other company or subsidiary
undertaking are interested, including (without prejudice to the
generality of the foregoing) insurance against any liability
incurred by such persons in respect of any act or omission in the
actual or purported execution and/or discharge of their duties
and/or in the exercise or purported exercise of their powers and/or
otherwise in relation to their duties, powers or offices in relation
to the Company or any such other company, subsidiary undertaking or
pension fund and (ii) to such extent as may be permitted by law
otherwise to indemnify or to exempt any such person against or from
any such liability; for the purposes of this clause "holding
company" and "subsidiary undertaking" shall have the same meanings
as in the Companies Act 1989
(26) To do all or any of the things and matters aforesaid anywhere and
either as principals, agents, contractors, trustees or otherwise,
and by or through trustees, agents, subsidiary companies or
otherwise, and either alone or in conjunction with others
(27) To do all such other things as may be considered to be incidental or
conducive to any of the above objects
And it is hereby declared that the objects of the Company as specified in each
of the foregoing paragraphs of this Clause (except only if and so far as
otherwise expressly provided in any paragraph) shall be separate and distinct
objects of the Company and shall not be in any way limited by reference to any
other paragraph or the order in which the same occur or the name of the Company.
5. The liability of the members is limited.
5
6. The share capital of the Company is (pound)100 divided into 100 shares
of (pound)1 each with power to increase or to divide the shares in the
capital of the Company for the time being into different classes having
such rights, privileges and restrictions as to voting or otherwise as
the Articles of Association may from time to time prescribe.(2)
................................................................................
(2) By virtue of an ordinary resolution passed on 2 December 1997 the 2
issued shares of (pound)1 each were subdivided into 8 ordinary shares of
25p each, the 98 unissued but authorised shares of (pound)1 each were
converted into redeemable preference shares of (pound)1 each and the
authorised share capital of the Company was increased to (pound)50,000
by the creation of 49,900 redeemable preference shares of (pound)1 each.
By virtue of a special resolution passed on 16 December 1997 (approved
by the shareholders of Reuters Holdings PLC on 19 January 1998) the
authorised capital of the Company was increased to (pound)525,000,001 by
the creation of 2,099,800,000 ordinary shares of 25 pence each and one
Founders Share of (pound)1.
The 49,998 redeemable preference shares of (pound)1 each were redeemed
on [ ] 1998 and by operation of the articles of association of the
Company were converted into 199,992 ordinary shares of 25 pence.
6
We, the persons whose names and addresses are subscribed hereafter are desirous
of being formed into a company in pursuance of this Memorandum and we
respectively agree to take the number of shares in the capital of the Company
set opposite our respective names.
Names, Addresses and Descriptions Number of Shares taken
of the Subscribers by each Subscriber
- ------------------ ------------------
Chettleburgh's Limited One Ordinary Share
By Robert Stephen Kelford
a duly authorised Officer
Temple House
20 Holywell Row
London EC2A 4JB
Company Registration Agents
Chettleburgh International Limited One Ordinary Share
By Robert Stephen Kelford
a duly authorised Officer
Temple House
20 Holywell Row
London EC2A 4JB
Anglo-Japanese Consultants
Total Shares Taken Two Ordinary Shares
Dated this 2nd day of December, 1996
Witness to the above signatures:
Roland John Chettleburgh
17 Downhall Close
Rayleigh
Essex
SS6 9LU
Company Registration Agent
7
No. 3296375
THE COMPANIES ACTS 1985 AND 1989
--------------------
A PUBLIC COMPANY LIMITED BY SHARES
--------------------
ARTICLES OF ASSOCIATION
OF
REUTERS GROUP PLC
-----------------------------
No. 3296375
THE COMPANIES ACTS 1985 AND 1989
--------------------
A PUBLIC COMPANY LIMITED BY SHARES
--------------------
ARTICLES OF ASSOCIATION
OF
REUTERS GROUP PLC
(adopted pursuant to a Special Resolution passed on 16 December 1997)
-----------------------------
TABLE OF CONTENTS
PRELIMINARY.................................................................................................1
1. Table A not to apply...............................................................................1
F.2 Definitions and Interpretation.....................................................................1
SHARE CAPITAL...............................................................................................5
3. ...................................................................................................5
(A) Amount of capital..................................................................................5
(B) Rights attaching to shares.........................................................................5
VARIATION OF RIGHTS.........................................................................................6
F.4 ...................................................................................................6
(A) Consents required for variation....................................................................6
(B) When shares not a separate class...................................................................7
F.5 Rights not varied by issue of further shares or permission of transfer of Uncertificated
Shares; exception for Founders Share...............................................................7
ALTERATION OF SHARE CAPITAL.................................................................................7
F.6 Company may increase capital; Founders Share Company consent required for creation of shares
with voting rights not identical to those of Ordinary Shares.......................................7
F.7 ...................................................................................................8
(A) Company may consolidate, cancel (other than the Founders Share) and subdivide shares...............8
(B) Fractional entitlements to shares..................................................................8
F.8 Company may purchase its own shares (other than the Founders Share)................................9
F.9 Company may reduce its capital - exception regarding the Founders Share............................9
SHARES ..................................................................................................10
i
F.10 ..................................................................................................10
(A) Company may issue shares with whatever rights or restrictions, but Founders Share Company
consent required for issue of shares not identical to Ordinary Shares.............................10
(B) Directors may issue shares, but Founders Share Company consent required for issue of shares
not identical to Ordinary Shares..................................................................10
11. ..................................................................................................10
(A) Section 80 authority for allotments of relevant securities........................................10
(B) Disapplication of Section 89(1) (pre-emption) to allotments under Section 80 authority............10
12. Company may pay commissions and brokerages........................................................12
13. Company may recognise renunciations of allotments.................................................12
14. Company not bound to recognise trusts of shares...................................................12
LIMITATION OF SHAREHOLDINGS................................................................................12
F.15 ..................................................................................................12
(A) Definitions and interpretation....................................................................12
(B) Part VI of the Act to apply, save as provided.....................................................13
(C) Service of Restriction Notice on Relevant Person..................................................14
(D) Disenfranchisement of shares under Restriction Notice.............................................15
(E) Directors' power to make Required Disposal........................................................15
(F) Manner of making Directors' Disposal..............................................................15
(G) Relevant shares of multiple holders or of certificated and Uncertificated Shares to be sold
pro rata in Directors' Disposal...................................................................15
(H) Transfers, certificates and disposal of sale proceeds in Directors' Disposal......................16
(I) Cesser of voting restrictions.....................................................................16
(J) Directors' resolution as to a person being Relevant Person conclusive.............................17
(K) Directors' resolution as to shares being shares of a Relevant Person conclusive...................17
ii
(L) Notices under Regulation F.15 to be in writing....................................................17
(M) No obligation to serve notice if address unknown..................................................17
(N) Regulations on notices to apply...................................................................17
(O) Service of notices on non-members.................................................................17
(P) Directors' decisions conclusive...................................................................18
(Q) Company register of share interests...............................................................18
(R) Directors to inform other Directors regarding Relevant Persons....................................18
(S) ADR Custodians and ADS holders....................................................................18
(T) Rights issues and limitation of shareholdings.....................................................19
(U) Underwriting of share issues and limitation of shareholdings......................................19
UNCERTIFICATED SHARES......................................................................................20
16. ..................................................................................................20
(A) Directors may permit shares to be a Participating Security........................................20
(B) Shares may be changed from uncertificated to certificated form and vice versa.....................20
(C) Uncertificated Shares are not a separate class....................................................20
(D) Disapplication of inconsistent Regulations........................................................20
POWER OF SALE OF UNCERTIFICATED SHARES.....................................................................20
F.17 Powers of Company in respect of procuring sales of Uncertificated Shares..........................21
THE FOUNDERS SHARE.........................................................................................21
F.18 ..................................................................................................21
(A) Founders Share may defeat resolution to vary or abrogate its rights...............................21
(B) Deemed variations or abrogations of Founders Share rights.........................................22
(C) Action without consent of Founders Share Company a deemed variation or abrogation.................22
F.19 ..................................................................................................22
iii
(A) Definition and interpretation as regards "Control" of Company.....................................22
(B) Directors to inform other Directors (and Directors to inform Founders Share Company) of
attempts to gain Control..........................................................................23
(C) Founders Share Control Notices....................................................................23
(D) Rescission of Founders Share Control Notice.......................................................23
(E) Voting rights of Founders Share whilst Founder Share Control Notice in force......................24
(F) Founders Share Company decisions conclusive.......................................................24
F.20 ..................................................................................................24
(A) Founders Share Company may requisition Extraordinary General Meetings.............................24
(B) Directors to convene requisitioned meeting and circulate any statement of the Founders Share
Company...........................................................................................25
(C) Founders Share Company may convene meeting if Directors in default................................25
(D) Founders Share Company may convene Extraordinary General Meetings while Founders Share
Control Notice in force...........................................................................26
F.21 Founders Share Company may receive notice of and attend and speak at General Meetings.............26
F.22 ..................................................................................................27
(A) Consultation between Directors and Reuter Trustees................................................27
(B) Reuter Trustees entitled to receive reports from and make representations to the Directors........27
F.23 ..................................................................................................27
(A) Company to reimburse Founders Share Company for expenses of Reuter Trustees.......................27
(B) Company to fund or procure company secretarial and administrative services for Founders Share
Company...........................................................................................28
SHARE CERTIFICATES.........................................................................................28
24. Contents of share certificates....................................................................28
iv
25. Certificates for joint holders....................................................................28
26. Entitlement of members holding Certificated Shares to share certificates..........................28
27. Entitlement to balancing certificates.............................................................28
28. ..................................................................................................28
(A) Entitlement to consolidating certificates.........................................................28
(B) Directors may issue split certificates............................................................29
(C) Replacement of damaged, lost or stolen certificates...............................................29
(D) Requests for replacement certificates for joint holders...........................................29
29. ..................................................................................................29
(A) Entitlement to certificate for shares changed to Certificated Shares..............................29
(B) No entitlement to certificate in respect of Uncertificated Shares.................................29
CALLS ON SHARES............................................................................................29
30. Directors may make calls for amounts unpaid on shares.............................................29
31. Obligation to pay calls...........................................................................30
32. Interest on unpaid calls..........................................................................30
33. Calls deemed to be made when so provided by terms of issue of shares..............................30
34. Directors' discretion as to amounts and times of calls on issue of shares.........................30
35. Directors may accept and pay interest on moneys in advance of calls...............................30
FORFEITURE AND LIEN........................................................................................31
36. Directors may serve payment notice in respect of unpaid calls.....................................31
37. Notice to provide for forfeiture of shares........................................................31
38. Forfeiture of shares..............................................................................31
39. Forfeited or surrendered share the property of the Company........................................31
40. Ex-member to remain liable for moneys unpaid on forfeited shares..................................31
v
41. Company to have lien on shares not fully paid.....................................................32
42. Company's power of sale under lien................................................................32
43. Application of sale proceeds......................................................................32
44. Title to shares sold under lien or after forfeiture...............................................32
TRANSFER OF SHARES.........................................................................................33
45. ..................................................................................................33
(A) Requirements as to form of transfers of Certificated Shares.......................................33
(B) Requirements as to transfers of Uncertificated Shares.............................................33
(C) Transferor to remain holder until transfer actually registered....................................33
46. Directors may suspend registration of transfers...................................................33
47. ..................................................................................................33
(A) Directors may refuse to register certain renunciations and transfers of Certificated Shares.......33
(B) Directors may refuse to register transfers of Certificated Shares of more than one class of
share, unstamped transfers or transfers unaccompanied by proof of transferor's title..............34
48. ..................................................................................................34
(A) Registration of transfers of Uncertificated Shares................................................34
(B) Directors to notify refusals to register transfers of Uncertificated Shares.......................34
49. Company may retain registered transfers...........................................................34
50. No fee for registration of transfers or related documents.........................................34
51. Company may destroy documents after certain periods...............................................35
TRANSMISSION OF SHARES.....................................................................................35
52. Personal representatives of deceased holders entitled to shares but liabilities of estate
continue..........................................................................................35
53. ..................................................................................................36
vi
(A) Registration of persons entitled to shares by operation of law....................................36
(B) Registration of other persons.....................................................................36
(C) Limitations apply to such transfers...............................................................36
54. Entitlement to share rights pending registration of persons entitled to shares by operation
of law............................................................................................36
UNTRACED SHAREHOLDERS......................................................................................36
55. ..................................................................................................37
(A) Company may sell shares of untraced holders after certain periods.................................37
(B) Power of sale to extend to additional shares......................................................37
(C) Procedures for exercise of power of sale..........................................................38
GENERAL MEETINGS...........................................................................................38
56. Annual General Meetings to be held................................................................38
57. Directors to convene Extraordinary General Meetings...............................................38
NOTICE OF GENERAL MEETINGS.................................................................................39
F.58 ..................................................................................................39
(A) Periods of notice for General Meetings............................................................39
(B) Determination of record date for serving notices of meetings......................................39
(C) Accidental non-delivery of notice to or non-receipt of notice by any person (except Founders
Share Company) not to invalidate proceedings at meeting...........................................39
59. ..................................................................................................40
(A) Contents of notices of General Meetings...........................................................40
(B) Notice of Annual General Meeting..................................................................40
(C) Notices to identify special business..............................................................40
(D) Determination of record date for entitlement to attend and vote at general meetings...............40
60. Routine business of Annual General Meetings.......................................................40
vii
PROCEEDINGS AT GENERAL MEETINGS............................................................................41
61. ..................................................................................................41
(A) Chairmanship of General Meetings..................................................................41
(B) Directors may attend and speak at General Meetings................................................41
F.62 ..................................................................................................41
(A) Directors may make provision for persons (other than Founders Share Company) to attend
General Meetings at satellite venues..............................................................41
(B) Discretion of Chairman to interrupt or adjourn General Meetings...................................42
(C) Directors may arrange for persons to hear, see and speak at General Meetings by audio-visual
means.............................................................................................42
(D) Validity of meetings if accommodation inadequate..................................................42
(E) Rights of members to take part in General Meetings................................................43
F.63 ..................................................................................................43
(A) Quorum for General Meetings.......................................................................43
(B) Meetings where no quorum present..................................................................44
F.64 ..................................................................................................44
(A) Adjournment of General Meetings...................................................................44
(B) Chairman's power to adjourn in certain circumstances..............................................44
(C) Business at adjourned General Meetings............................................................45
65. Notice of adjournment not required................................................................45
66. Amendments to resolutions.........................................................................45
F.67 Votes by show of hands unless poll demanded and requisitionists required for poll.................45
68. ..................................................................................................46
(A) Withdrawal of demand for poll.....................................................................46
(B) Procedure for polls...............................................................................46
viii
69. Chairman to have casting vote.....................................................................47
F.70 Arrangements for security of General Meetings.....................................................47
VOTES OF MEMBERS...........................................................................................47
71. Votes on show of hands and on polls...............................................................47
72. Votes of joint holders............................................................................47
73. Votes by receivers and others on behalf of members suffering from mental disorder.................48
F.74 ..................................................................................................48
(A) No members to vote if sums unpaid on shares.......................................................48
(B) Direction Notices to members and others not entitled to vote because in default under Section
212...............................................................................................48
(C) Cesser of effect of Direction Notices.............................................................49
(D) Direction Notices and depositaries................................................................50
(E) Obligations of depositary under Direction Notice..................................................50
(F) Interpretation of Regulation F.74.................................................................50
(G) Saving for Directors powers under Section 216.....................................................51
F.75 Founders Share Company may require Directors to serve Section 212 notice or Direction Notice
or to apply to Court under Section 216............................................................51
F.76 Objections to admissibility of votes to be raised only at the relevant meeting - saving for
votes of Founders Share...........................................................................51
F.77 Votes on a poll may be given personally or by proxy...............................................52
F.78 Proxy need not be a member........................................................................52
F.79 Requirements as to form of appointment of proxy...................................................52
80. Procedure for appointment of proxy................................................................52
81. Proxy may join in demand for poll but not otherwise speak at meeting..............................53
82. Validity of votes by proxies......................................................................53
ix
CORPORATIONS ACTING BY REPRESENTATIVES.....................................................................53
F.83 ..................................................................................................53
(A) Requirements for appointment of representative by corporation.....................................53
(B) Representatives of Founders Share Company.........................................................53
(C) Powers of representatives of corporations.........................................................54
DIRECTORS..................................................................................................54
84. Number of Directors...............................................................................54
85. No share qualification - Directors may attend and speak at General Meetings.......................54
86. Remuneration of non-executive Directors...........................................................54
87. Executive Directors - numbers and remuneration....................................................54
88. Directors' expenses...............................................................................55
89. ..................................................................................................55
(A) Powers to give pensions to Directors..............................................................55
(B) Power to arrange Directors and Officers insurance.................................................55
90. Directors may be interested in contracts with the Company and in companies party to such
contracts.........................................................................................55
91. ..................................................................................................56
(A) Directors may appoint Managing Director...........................................................56
(B) Appointment as Managing Director to cease with Directorship.......................................56
(C) Appointment to any other executive office not to cease with Directorship unless contract so
provides..........................................................................................56
92. Directors may delegate powers to executive Directors..............................................56
APPOINTMENT, RETIREMENT AND REMOVAL OF DIRECTORS...........................................................56
93. Section 293 to apply to the Company...............................................................57
94. Vacation of office as Director:...................................................................57
x
95. Directors to retire by rotation...................................................................57
96. Which Directors to retire.........................................................................58
97. Appointment of Directors by Company...............................................................58
98. Resolutions to appoint two or more Directors to be subject to consent of General Meeting..........58
99. Notice of candidature for Directorship............................................................58
100. Company may remove and replace Directors by Ordinary Resolution...................................59
101. Company and Directors may fill casual vacancies and appoint additional Directors..................59
ALTERNATE DIRECTORS........................................................................................60
102. ..................................................................................................60
(A) Directors may appoint alternates..................................................................60
(B) Alternateships to determine with Directorship of appointor........................................60
(C) Rights and powers of alternates...................................................................60
(D) Alternates may be interested in contracts, be paid expenses and be indemnified....................60
MEETINGS AND PROCEEDINGS OF DIRECTORS......................................................................61
103. ..................................................................................................61
(A) Directors may meet and regulate proceedings - determining resolutions.............................61
(B) Directors may summon meetings of Directors........................................................61
104. Quorum for Directors' meetings....................................................................61
105. Questions to be determined by majority voting.....................................................61
106. ..................................................................................................61
(A) Directors' interests in contracts - general prohibition on voting.................................61
(B) Exceptions to prohibition on voting...............................................................61
(C) Directors voting on executive appointments........................................................63
xi
(D) Chairman to rule on materiality of a Director's interest..........................................63
(E) Directors to resolve as to the materiality of a Chairman's interest...............................63
(F) Interests of the appointor of an alternate to be treated as the interests of the alternate........63
107. Directors may act notwithstanding vacancies - limited powers if below minimum number..............63
108. ..................................................................................................64
(A) Chairmanship of Directors.........................................................................64
(B) Rights of Deputy Chairmen to act..................................................................64
109. ..................................................................................................64
(A) Resolutions of Directors in writing...............................................................64
(B) Form of written resolutions.......................................................................65
(C) Powers of alternates as to written resolutions....................................................65
(D) Resolutions in writing by committees..............................................................65
(E) Service on Directors of resolutions to be passed in writing.......................................66
F.110 Directors may delegate to committees..............................................................66
111. Meetings and proceedings of committees............................................................66
112. ..................................................................................................66
(A) Validity of acts of Directors or committees.......................................................66
(B) Participation in meetings by audio-visual means...................................................67
BORROWING POWERS...........................................................................................67
113 ..................................................................................................67
(A) Directors may exercise borrowing powers of Company................................................67
(B) Limit on exercise of borrowing powers.............................................................67
(C) Definition of "Adjusted Capital and Reserves".....................................................68
xii
(D) Interpretation of Regulation 113..................................................................69
POWERS AND DUTIES OF DIRECTORS.............................................................................71
F.114 Directors to observe Reuter Trust Principles......................................................71
115. Business and powers of Company to be managed and exercised by Directors...........................72
116. Non-limitation of Regulation 115 powers by other authorities or powers............................72
117. Directors may establish local boards or agencies..................................................72
118. Directors may appoint attorneys...................................................................73
119. Directors may elect a President of the Company....................................................73
120. Mode of signing cheques and other instruments.....................................................73
REGISTERS..................................................................................................73
121. ..................................................................................................73
(A) Entries on Registers of numbers of Uncertificated Shares and Certificated Shares..................73
(B) Directors may keep branch Registers...............................................................73
SECRETARY..................................................................................................74
122. Directors to appoint and may remove Secretary; Joint Secretaries and Assistant Secretaries........74
THE SEAL ..................................................................................................74
123. ..................................................................................................74
(A) Directors' authority required for use of Seal and any Securities Seal.............................74
(B) Mode of affixing Seal and Securities Seal.........................................................74
(C) Signing of sealed documents.......................................................................74
(D) Use of Securities Seal............................................................................74
(E) Execution of Deeds not under Seal.................................................................74
(F) Deeds to be authorised by Directors...............................................................75
xiii
124. Company may provide for an official seal for use abroad...........................................75
AUTHENTICATION OF DOCUMENTS................................................................................75
125. Procedure for and manner of authentication of documents...........................................75
RESERVES ..................................................................................................75
126. Directors may create reserves.....................................................................75
DIVIDENDS..................................................................................................76
127. Company may declare dividends not exceeding Directors' recommendation.............................76
128. Directors may declare and pay fixed and interim dividends.........................................76
F.129 ..................................................................................................76
(A) Dividends to be paid pro rata to amounts paid on shares...........................................76
(B) Directors may pay dividends to ADR Custodians in currencies other than sterling...................76
130. Distributable reserves............................................................................77
131. Pre-acquisition profits distributable.............................................................77
132. No dividends to bear interest against the Company.................................................77
133. ..................................................................................................77
(A) Directors may make deductions from dividends......................................................77
(B) Directors may retain dividends on shares of persons entitled by operation of law pending
registration......................................................................................77
134. Waivers of Dividends..............................................................................77
135. ..................................................................................................78
(A) Returned or uncashed dividends....................................................................78
(B) Directors not trustees of unclaimed dividends.....................................................78
F.136 Directors may pay dividends in kind...............................................................78
137. ..................................................................................................78
xiv
(A) Delivery of dividends and other payments..........................................................78
(B) Payments in respect of shares.....................................................................79
(C) Payment of foreign currency dividends to ADR Custodians...........................................79
138. Receipts for dividends to joint holders...........................................................80
F.139 Dividend resolution may specify record date at any time...........................................80
CAPITALISATION OF PROFITS AND RESERVES.....................................................................80
140. Directors may make capitalisation issues of shares................................................80
SCRIP DIVIDENDS............................................................................................81
141. ..................................................................................................81
(A) Directors may offer shares in lieu of dividends with authority of Ordinary Resolution.............81
(B) Period and other terms of authority for scrip dividends...........................................81
(C) Offer to be communicated to shareholders..........................................................81
(D) Number of shares to which shareholders entitled...................................................81
(E) No fractional entitlements........................................................................82
(F) Directors may capitalise profits and reserves for issue of scrip dividends........................82
(G) Scrip dividend shares to rank pari passu with existing shares.....................................82
(H) Directors may determine terms and conditions of offers of scrip dividends.........................83
ACCOUNTS ..................................................................................................83
142. Accounting records to be kept at Office; members' right of inspection.............................83
143. Balance sheets and profit and loss accounts to be sent to members and others......................83
AUDITORS ..................................................................................................83
144. Validity of acts of Auditors......................................................................84
145. Auditors entitled to notice of and to attend and be heard at General Meetings.....................84
NOTICES ..................................................................................................84
xv
F.146 Mode of delivery of notices; when notices deemed delivered........................................84
147. Transferees and persons entitled by operation of law bound by notices in respect of shares
pending registration..............................................................................85
148. Notices to joint holders..........................................................................85
149. Persons entitled following death or bankruptcy entitled to delivery of notices pending
registration......................................................................................85
150. No entitlement to receipt of notices outside the United Kingdom...................................85
151. Notices of General Meetings by advertisement......................................................85
152. Serving for statutory requirements................................................................86
WINDING UP.................................................................................................86
F.153 Directors may petition court for winding up with consent of Founders Share Company................86
154. Directors may distribute assets in kind on a winding up...........................................86
INDEMNITY..................................................................................................86
155. Directors and Officers entitled to indemnity......................................................86
THE REUTERS NEWS SERVICES..................................................................................87
F.156 Entitlement of certain members to receive Reuters News Services...................................87
xvi
No. 3296375
THE COMPANIES ACTS 1985 AND 1989
--------------------
A PUBLIC COMPANY LIMITED BY SHARES
--------------------
ARTICLES OF ASSOCIATION
OF
REUTERS GROUP PLC
(adopted pursuant to a Special Resolution passed on 16 December 1997)
-----------------------------
PRELIMINARY
1. TABLE A NOT TO APPLY
The regulations in Table A in the Companies (Tables A to F) Regulations
1985 shall not apply to the Company.
F.2 DEFINITIONS AND INTERPRETATION
(I) In these Regulations (if not inconsistent with the subject or
context) the words and expressions set out in the first column
below shall bear the meanings set opposite to them
respectively:-
the Act The Companies Act 1985.
ADR Custodian a custodian (or depositary),
approved by the Company, under
arrangements whereby such custodian
(or depositary) holds shares in the
Company and either itself or some
other person issues American
Depositary Receipts evidencing
American Depositary Shares which
represent such shares in the Company
(or evidence of a right to receive the
same).
Certificated Share a share which is recorded in the
Register as being held in certificated
form.
the Company Reuters Group PLC
1
the Deed of Mutual the Deed of Mutual Covenant referred
Covenant to in Clause 4(16) of the Memorandum
of Association as amended from time
to time.
Director a Director for the time being of the
Company.
F Regulation any of these Regulations to the
number of which the letter "F" is
prefixed.
the Founders Share the Founders Share of (pound)1 of
the Company.
the Founders Share
Company Reuters Founders Share Company
Limited in its capacity as the
holder of the Founders Share.
in writing written or produced by any
reasonably durable substitute for
writing or partly one and partly
another.
month calendar month.
the Office the registered office of the Company
from time to time.
Operator has the meaning given to that
expression in the Uncertificated
Securities Regulations.
Ordinary Shares the ordinary shares of 25p each of
the Company.
Paid paid or credited as paid.
Participating Issuer participating issuer, as defined in
the Uncertificated Securities
Regulations.
Participating
Security a share or class of shares or a
renounceable right of allotment of a
share, title to which is permitted
to be transferred by means of a
Relevant System in accordance with
the Uncertificated Securities
Regulations.
Register Unless the context otherwise
requires, the register of members
kept pursuant to section 352 of the
Act and any register maintained by
the Company of persons holding any
renounceable right of allotment of a
share
Relevant System relevant system, as defined in the
Uncertificated Securities
Regulations.
Reuters News
Services any news services which may from
time to time be supplied by Reuters.
2
Reuters the Company and every subsidiary
undertaking of the Company from time
to time supplying news services.
the Reuters Group the Company and its subsidiary
undertakings from time to time.
the Reuter Trustees the members and directors from time
to time of the Founders Share
Company.
Seal the Common Seal of the Company.
Securities Seal an official seal kept by the
Company by virtue of section 40 of
the Act.
the Statutes the Act and every act and
subordinate legislation (including,
but not limited to, the
Uncertificated Securities
Regulations) from time to time in
force concerning companies (whether
or not a company within the meaning
of the Act) and affecting the
Company.
these Regulations these articles of association as
amended from time to time.
the London Stock London Stock Exchange Limited.
Exchange
the Transfer Office the place where the Register is
situate from time to time.
the Uncertificated
Securities
Regulations the Uncertificated Securities
Regulations 1995 (S.I. 1995 no.
3272) including any modification
thereof or any regulations in
substitution therefor made under
section 207 of the Companies Act
1989 and for the time being in
force.
Uncertificated Share a share title to which is recorded
in the Register as being held in
uncertificated form and title to
which may, by virtue of the
Uncertificated Securities
Regulations, be transferred by means
of a Relevant System.
the United Kingdom Great Britain and Northern Ireland.
year calendar year.
3
(II) In these Regulations (if not inconsistent with the subject or
context):-
(A) The expression "Employees' Share Scheme" shall have the
meaning given to it by section 743 of the Act;
(B) The word "Secretary" shall include any person appointed by the
Directors to perform any of the duties of the Secretary, and
where two or more persons are appointed to act as Joint
Secretaries shall include any one or more of those persons;
(C) The expression "debenture" shall include debenture stock;
(D) The expressions "recognised clearing house" and "recognised
investment exchange" shall mean any clearing house or
investment exchange (as the case may be) granted recognition
under the Financial Services Act 1986;
(E) The word "company" shall include any body corporate
incorporated or registered in any part of the world and the
expressions "subsidiary undertaking" and "parent undertaking"
shall have the respective meanings given to them by section
258 of the Act;
(F) Such of the provisions of these Regulations as apply to
paid-up shares shall apply to stock, and the words "share" and
"shareholder" shall be construed accordingly;
(G) Words denoting the singular shall include the plural and
vice-versa; words denoting the masculine gender shall include
the feminine gender; and words denoting persons shall include
bodies corporate; and
(H) Any reference to any statute or statutory provision shall be
construed as including a reference to any statutory
modification or re-enactment thereof from time to time in
force.
(I) For the purposes of these Regulations, references to a
Relevant System shall be deemed to relate to the Relevant
System on which the particular share or class of shares or
renounceable right of allotment of a share concerned in the
capital of the Company is a Participating Security for the
time being and any references in these Regulations to the
giving of an instruction by means of a Relevant System shall
be deemed to relate to a properly authenticated dematerialised
instruction given in accordance with the Uncertificated
Securities Regulations. Such instructions shall only be given
to the extent:
(i) permitted by the Uncertificated Securities Regulations;
4
(ii) permitted by and practicable under the rules and practices
from time to time of the Operator of the Relevant System; and
(iii) practicable under and in accordance with the facilities and
requirements of the Relevant System.
(J) The headings in these Regulations do not affect the
interpretation of these Regulations.
(III) Subject as aforesaid or as otherwise expressly provided by these
Regulations any words or expressions defined in the Act or in the
Uncertificated Securities Regulations shall (if not inconsistent
with the subject or context) bear the same meanings in these
Regulations.
(IV) The written consent of the Founders Share Company shall be deemed
to have been given for any of the purposes of these Regulations if,
and only if, a certificate signed on behalf of the Founders Share
Company by not less than two of the Reuter Trustees shall have been
received at the Office confirming that a resolution giving the
consent in question has been duly passed at a meeting of the Reuter
Trustees (in their capacity as directors of the Founders Share
Company).
(V) A Special or Extraordinary Resolution shall be effective for any
purpose for which an Ordinary Resolution is expressed to be
required under any provision of these Regulations.
SHARE CAPITAL
3. .
(A) AMOUNT OF CAPITAL
The share capital of the Company is (pound)525,000,001 divided into
2,100,000,000 Ordinary Shares of 25p each and one Founders Share of
(pound)1.
(B) RIGHTS ATTACHING TO SHARES
The rights, as regards participation in the profits and assets of
the Company, respectively attaching to the above-mentioned shares,
shall be as follows:-
(1) Subject to any special rights which may be attached to any
other class of shares and to the provisions of the Statutes,
the profits of the Company available for distribution and
resolved to be distributed shall be distributed by way of
dividend among the holders of the Ordinary Shares rateably
according to the number of shares held by them respectively;
5
(2) On a return of assets on a winding-up, the assets of the
Company available for distribution among the members shall be
applied, subject to any provision made under section 719 of
the Act and any special rights which may be attached to any
other class of shares, in repaying to the holders of the
Founders Share and the Ordinary Shares rateably according to
the number of shares held by them respectively (save that the
Founders Share shall for this purpose count as four shares)
the amounts paid up on such shares, and subject thereto shall
belong to and be distributed among the holders of the Ordinary
Shares rateably according to the number of such shares held by
them respectively; and
(3) The Founders Share shall carry no right to receive any of the
profits of the Company available for distribution by way of
dividend or otherwise.
VARIATION OF RIGHTS
F.4 .
(A) CONSENTS REQUIRED FOR VARIATION
Whenever the share capital of the Company is divided into different
classes of shares, the special rights attached to any class may,
subject to the provisions of the Statutes, be varied or abrogated
either with the consent in writing of the holders of three-quarters
in nominal value of the issued shares of the class or with the
sanction of an Extraordinary Resolution passed at a separate General
Meeting of the holders of the shares of the class (but not
otherwise) and may be so varied or abrogated either whilst the
Company is a going concern or during or in contemplation of a
winding-up but so that the rights attached to the Founders Share
shall not be capable of being varied or abrogated in any respect
whatsoever without the prior written consent of the Founders Share
Company. To every such separate General Meeting all the provisions
of these Regulations relating to General Meetings of the Company and
to the proceedings thereat shall apply, except that the necessary
quorum shall be two persons at least holding or representing by
proxy at least one-third in nominal value of the issued shares of
the class (but that at any adjourned meeting any holder of shares of
the class present in person or by proxy shall be a quorum) and that
any holder of shares of the class present in person or by proxy may
demand a poll and that every such holder shall, subject as otherwise
provided by these Regulations, on a poll have one vote for every
share of the class held by him. The foregoing provisions of this
Regulation shall, subject to paragraph (B) below, apply to the
variation or abrogation of the special rights attached to some only
of the shares of any class as if each group of shares of the class
differently treated formed a separate class the special rights
whereof are to be varied.
6
(B) WHEN SHARES NOT A SEPARATE CLASS
Shares of a class shall not be treated as forming a separate class
from other shares of that class merely because any of the following
apply to them:-
(1) the restrictions set out in section 454 of the Act;
(2) suspension of voting rights or rights to receive dividends or
other distributions pursuant to these Regulations;
(3) any requirement pursuant to these Regulations that a person
dispose of such shares or any interest in them;
(4) any provisions of these Regulations enabling the Directors to
dispose of such shares or requiring the Directors not to
register transfers of such shares;
(5) they are enabled or permitted in accordance with the
Uncertificated Securities Regulations to become a
Participating Security, or cease to be a Participating
Security; or
(6) any shares of that class are from time to time held in
uncertificated form.
F.5 RIGHTS NOT VARIED BY ISSUE OF FURTHER SHARES OR PERMISSION OF TRANSFER OF
UNCERTIFICATED SHARES; EXCEPTION FOR FOUNDERS SHARE
The special rights attached to any class of shares having preferential
rights shall not unless otherwise expressly provided by the terms of issue
thereof be deemed to be varied by the creation or issue of further shares
ranking as regards participation in the profits or assets of the Company
in some or all respects pari passu therewith but in no respect in priority
thereto, or by the Company permitting, in accordance with the
Uncertificated Securities Regulations, the holding and transfer of shares
of any class in uncertificated form by means of a Relevant System. The
special rights attached to the Founders Share shall be deemed to be varied
by the creation or issue of any further Founders Share.
ALTERATION OF SHARE CAPITAL
F.6 COMPANY MAY INCREASE CAPITAL; FOUNDERS SHARE COMPANY CONSENT REQUIRED FOR
CREATION OF SHARES WITH VOTING RIGHTS NOT IDENTICAL TO THOSE OF ORDINARY
SHARES
The Company may from time to time by Ordinary Resolution increase its
capital by such sum to be divided into shares of such amounts as the
resolution shall prescribe. All new shares created on any such increase of
capital shall be subject to the provisions of the Statutes and of these
Regulations with reference to allotment, payment of calls, lien, transfer,
transmission, forfeiture and otherwise. No such new share shall, without
the prior written consent of the Founders Share Company, have attached
7
thereto (either at the time of the creation thereof or at any subsequent
time) any rights in respect of voting which are not identical in all
respects with those attached to the Ordinary Shares.
F.7 .
(A) COMPANY MAY CONSOLIDATE, CANCEL (OTHER THAN THE FOUNDERS SHARE) AND
SUBDIVIDE SHARES
The Company may by Extraordinary Resolution:-
(1) Consolidate and divide all or any of its capital (other than
the Founders Share) into shares of larger amounts than its
existing shares;
(2) Cancel any shares (other than the Founders Share) which, at
the date of the passing of the resolution, have not been
taken, or agreed to be taken, by any person and diminish the
amount of its capital by the amount of the shares so
cancelled;
(3) Sub-divide its shares, or any of them (other than the Founders
Share), into shares of smaller amount than is fixed by the
Memorandum of Association (subject nevertheless to the
provisions of the Statutes), and so that the resolution
whereby any share is sub-divided may determine that, as
between the holders of the shares resulting from such
sub-division, one or more of the shares may, as compared with
the others, have any such preferred, deferred or other special
rights, or be subject to any such restrictions, as the Company
has power to attach to unissued or new shares.
(B) FRACTIONAL ENTITLEMENTS TO SHARES
If, as the result of consolidation and division or sub-division of
shares, members become entitled to fractions of a share, the
Directors may on behalf of the members deal with the fractions as
they think fit. In particular, the Directors (treating holdings of
the same member or members of Certificated Shares and Uncertificated
Shares of the same class as if they were separate holdings, unless
the Directors otherwise determine) may:
(i) sell fractions of a share to a person (including, subject to
the Statutes, to the Company) for the best price reasonably
obtainable and distribute the net proceeds of sale in due
proportion amongst the persons entitled (except that if the
amount due to a person is less than(pound)3, or such other sum
as the board may decide, the sum may be retained for the
benefit of the Company). To give effect to a sale the
Directors may authorise a person to execute an instrument of
transfer of Certificated Shares or, in respect of
Uncertificated Shares, the Directors may exercise any of the
8
powers conferred on the Company by Regulation F.17 to effect
transfer of the shares to the purchaser or his nominee, and
may cause the name of the purchaser or his nominee to be
entered in the Register as the holder of the shares. The
purchaser is not bound to see to the application of the
purchase money and the title of the transferee to the shares
is not affected by an irregularity or invalidity in the
proceedings connected with the sale; or
(ii) subject to the Statutes, issue to a member credited as fully
paid by way of capitalisation the minimum number of shares
required to round up his holding of shares to a number which,
following consolidation and division or sub-division, leaves a
whole number of shares (such issue being deemed to have been
effected immediately before consolidation or sub-division, as
the case may be). The amount required to pay up those shares
may be capitalised as the Directors think fit out of amounts
standing to the credit of reserves (including a share premium
account, capital redemption reserve and profit and loss
account), whether or not available for distribution, and
applied in paying up in full the appropriate number of shares.
A resolution of the Directors capitalising part of the
reserves has the same effect as if the capitalisation had been
declared by ordinary resolution of the Company pursuant to
Regulation 140. In relation to the capitalisation the board
may exercise all the powers conferred on it by Regulation 140
without an ordinary resolution of the Company.
F.8 COMPANY MAY PURCHASE ITS OWN SHARES (OTHER THAN THE FOUNDERS SHARE)
Subject to the provisions of the Statutes the Company may purchase, or
enter into a contract under which it may become entitled or obliged to
purchase, any of its own shares (including any redeemable shares) other
than the Founders Share. Every contract for the purchase by the Company
of, or under which it may become entitled or obliged to purchase, its own
shares shall, in addition to such authorisation as may be required by the
Statutes, be sanctioned by an Extraordinary Resolution passed at a
separate General Meeting of the holders of each class of shares in issue
convertible into equity share capital of the Company.
F.9 COMPANY MAY REDUCE ITS CAPITAL - EXCEPTION REGARDING THE FOUNDERS SHARE
The Company may reduce its share capital or any capital redemption
reserve, share premium account or other undistributable reserve in any
manner and with and subject to any incident authorised and consent
required by law but this Regulation shall not apply in any way whatsoever
to the Founders Share.
9
SHARES
F.10 .
(A) COMPANY MAY ISSUE SHARES WITH WHATEVER RIGHTS OR RESTRICTIONS, BUT
FOUNDERS SHARE COMPANY CONSENT REQUIRED FOR ISSUE OF SHARES NOT
IDENTICAL TO ORDINARY SHARES
Subject as otherwise provided by these Regulations and without
prejudice to the rights attached to any shares or class of shares
from time to time issued, any share in the Company may be issued
with or have attached thereto such preferred, deferred or other
special rights, or be issued subject to or have attached such
restrictions, whether as regards dividend, return of capital or
otherwise, as the Company may from time to time by Ordinary
Resolution determine (or, in the absence of any such determination,
as the Directors may determine) and subject to the provisions of the
Statutes the Company may issue any shares which are, or at the
option of the Company or the holders are liable, to be redeemed
Provided always that, without the prior written consent of the
Founders Share Company, no share shall be capable of being issued
having attached thereto any rights which are not identical in all
respects with those attached to the Ordinary Shares.
(B) DIRECTORS MAY ISSUE SHARES, BUT FOUNDERS SHARE COMPANY CONSENT
REQUIRED FOR ISSUE OF SHARES NOT IDENTICAL TO ORDINARY SHARES
Subject to the provisions of the Statutes, of these Regulations and
of any resolution of the Company in general meeting passed pursuant
thereto, all unissued shares shall be at the disposal of the
Directors and they may allot (with or without conferring a right of
renunciation), grant options over or otherwise dispose of them to
such persons, at such times and on such terms as they think proper.
Provided always that, without the prior written consent of the
Founders Share Company, the Directors shall not allot, grant any
option over or otherwise dispose of any share having attached
thereto any rights in respect of voting which are not identical in
all respects with those attached to the Ordinary Shares.
11. .
(A) SECTION 80 AUTHORITY FOR ALLOTMENTS OF RELEVANT SECURITIES
The Directors have general and unconditional authority, pursuant to
section 80 of the Act, to exercise all powers of the Company to
allot relevant securities up to an aggregate nominal amount equal to
the section 80 amount, for each prescribed period.
(B) DISAPPLICATION OF SECTION 89(1) (PRE-EMPTION) TO ALLOTMENTS UNDER
SECTION 80 AUTHORITY
10
The Directors have general power for each prescribed period to allot
equity securities pursuant to the authority conferred by paragraph
(A) above:
(1) in connection with a rights issue; and
(2) up to an aggregate nominal amount equal to the section 89
amount otherwise than in connection with a rights issue;
as if section 89(1) of the Act does not apply to any such allotment.
(C) By the authority and power conferred by paragraphs (A) and (B)
above, the board may during a prescribed period make an offer or
agreement which would or might require equity securities or other
relevant securities to be allotted after the prescribed period and
may allot securities in pursuance of that offer or agreement.
(D) In this Regulation:
(1) "PRESCRIBED PERIOD" means any period for which the authority
conferred by paragraph (A) above is given by ordinary or
special resolution stating the section 80 amount and/or the
power conferred by paragraph (B) above is given by special
resolution stating the section 89 amount;
(2) "rights issue" means an offer of equity securities open for
acceptance for a period fixed by the Directors to holders of
equity securities on the Register on a fixed record date in
proportion to their respective holdings of such securities or
in accordance with the rights attached thereto (but subject to
such exclusions or other arrangements as the Directors may
deem necessary or expedient in relation to fractional
entitlements or legal or practical problems under the laws of,
or the requirements of any recognised regulatory body or any
stock exchange in, any territory);
(3) "section 80 amount" means for any prescribed period, the
amount stated in the relevant ordinary or special resolution
or, in either case, another amount fixed by resolution of the
Company;
(4) "section 89 amount" means for any prescribed period, the
amount stated in the relevant special resolution;
(5) the nominal amount of securities is, in the case of rights to
subscribe for or convert any securities into shares of the
Company, the nominal amount of shares which may be allotted
pursuant to those rights.
11
12. COMPANY MAY PAY COMMISSIONS AND BROKERAGES
The Company may exercise the powers of paying commissions conferred by the
Statutes to the full extent thereby permitted. The Company may also on any
issue of shares pay such brokerage as may be lawful.
13. COMPANY MAY RECOGNISE RENUNCIATIONS OF ALLOTMENTS
The Directors may at any time after the allotment of any share but before
any person has been entered in the Register as the holder recognise a
renunciation thereof by the allottee in favour of some other person and
may accord to any allottee of a share a right to effect such renunciation
upon and subject to such terms and conditions as the Directors may think
fit to impose.
14. COMPANY NOT BOUND TO RECOGNISE TRUSTS OF SHARES
Except as required by law, or pursuant to any of the provisions of these
Regulations, no person shall be recognised by the Company as holding any
share upon any trust, and the Company shall not be bound by or compelled
in any way to recognise any equitable, contingent, future or partial
interest in any shares, or any interest in any fractional part of a share,
or (except only as by these Regulations or by law otherwise provided) any
other right in respect of any share, except an absolute right to the
entirety thereof in the registered holder.
LIMITATION OF SHAREHOLDINGS
F.15 .
(A) DEFINITIONS AND INTERPRETATION
In this Regulation and subject as hereinafter provided:-
(1) except in paragraphs (J), (K) and (Q) below, references to
Part VI of and to sections of the Act are references to the
same as in force at 11 April 1995 notwithstanding any later
repeal, amendment or re-enactment thereof;
(2) an "Included Interest" means an interest referred to in
section 209(1)(a) of the Act except that of a bare trustee
under the law of England or of a simple trustee under the law
of Scotland or any analogous interest arising under the law of
any other jurisdiction;
(3) a person shall be treated as having an interest in shares and
as being interested in them whenever in accordance with Part
VI of the Act he would be taken either to have an interest or
to be interested in them for the purposes of sections 198 to
202 of the Act save that any Included Interest shall be taken
into account for all purposes instead of being disregarded and
12
save that section 203(3) of the Act shall be taken to read as
follows:-
"Where a person is entitled to exercise or control the
exercise of or is deemed by this subsection to be able
to exercise (in aggregate) one half or more of the
voting power at general meetings of a body corporate and
that body corporate is entitled to exercise or control
the exercise of any of the voting power at general
meetings of another body corporate ("the effective
voting power"), then, for the purposes of subsection
(2)(b) above and this subsection, the effective voting
power shall be deemed to be exercisable by that
person.";
(4) "Relevant Person" means any person who is interested in 15 per
cent. or more of the issued shares of any class of the
Company, other than the Founders Share, provided that, for the
purpose of calculating whether or not any person is interested
in 15 per cent. or more of the issued shares of any class of
the Company, holdings of Certificated Shares and
Uncertificated Shares of such class in which such person is
interested shall be aggregated;
(5) "Relevant Shares" means shares of the Company in which a
Relevant Person is interested; and
(6) "Required Disposal" means a disposal of such number and class
of Relevant Shares as will cause a Relevant Person to cease to
be a Relevant Person.
(B) PART VI OF THE ACT TO APPLY, SAVE AS PROVIDED
Without prejudice to the Statutes, the Company, its members and all
persons interested in issued shares of the Company shall have the
rights and obligations provided for in Part VI of the Act save
that:-
(1) Included Interests shall not be disregarded;
(2) a person shall be subject to such obligations notwithstanding
that he is outside the United Kingdom and that the event
giving rise to an obligation occurs outside the United
Kingdom;
(3) such rights and obligations shall apply as if section 203(3)
of the Act read as set out in paragraph (A) (3) above;
(4) this paragraph (B) shall not apply to an ADR Custodian in its
capacity as such;
13
(5) notwithstanding any Regulations made under section
210(A)(1)(b) of the Act, if the percentage giving rise to a
notifiable interest referred to in section 199(2)(a) of the
Act shall exceed 3 per cent. or in section 199(2)(b) of the
Act shall exceed 10 per cent., such rights and obligations
shall apply as though such percentages were 3 per cent. and 10
per cent. respectively;
(6) notwithstanding section 199(2A) of the Act, the following
interests shall be deemed to be material interests:
(a) interests mentioned in sections 199(2A)(a) and
199(2A)(b) of the Act;
(b) interest falling within section 199(2A)(c) of the Act
which would fall to be disregarded by virtue of section
209(10)(c) of the Act; and
(c) any interest of another person which a person is taken
to have by virtue of the application of section 203 or
205 of the Act where the interest of that other person
falls within sub-paragraphs (a) or (b) above;
(7) if a notification is given in compliance with such rights and
obligations and some or all of the shares in the Company to
which it relates are the subject of such a notification only
because of the provisions of sub-paragraph (1) and/or (3)
above, then such notification shall state that some or all (as
the case may be) of the shares to which it relates are the
subject of such a notification only because of such provisions
and, if it states that some of the said shares are so subject
only because of such provisions, shall specify the class and
number of such shares (or if they are of more than one class,
the classes and numbers of shares of each class); and
(8) Included Interests and other interests which would not require
to be notified to the Company under statute shall when
notified to the Company be entered by the Company in a
separate Register to be kept by it for that purpose and to
which the provisions of sections 217(1) to (6) and 218(1) and
(2) of the Act shall apply.
(C) SERVICE OF RESTRICTION NOTICE ON RELEVANT PERSON
If after 18 February 1998 any person has become or becomes a
Relevant Person, the Directors shall cause the Company to serve a
notice (hereinafter called a "Restriction Notice") on that Relevant
Person and on all those (so far as known to them) having interests
in, and, if different, on the registered holders of, his Relevant
Shares. A Restriction Notice shall (subject as hereinafter
provided):-
14
(1) set out the restrictions provided for by paragraph (D) below;
and
(2) subject to paragraphs (T) and (U) below, call for a Required
Disposal to be made and for reasonable evidence of it to be
supplied to the Company within twenty one days or such longer
period as the Directors consider reasonable.
The Directors may in their absolute discretion extend such twenty
one days or longer period.
(D) DISENFRANCHISEMENT OF SHARES UNDER RESTRICTION NOTICE
Subject to paragraph (T) below, from the serving of a Restriction
Notice in respect of Relevant Shares until any such time as the
restrictions specified in this paragraph (D) (hereinafter called
"the Voting Restrictions") cease to apply in accordance with the
later provisions of this Regulation, a registered holder of such
Relevant Shares shall not be entitled in respect of such shares to
receive notice of or to attend or vote (in person or by proxy) at
any General Meeting of the Company or any meeting of the holders of
any class of shares of the Company.
(E) DIRECTORS' POWER TO MAKE REQUIRED DISPOSAL
If a notice calling for a Required Disposal is not complied with to
the satisfaction of the Directors within the time appointed the
Directors shall, so far as they are able, make a Required Disposal
(hereinafter called a "Directors' Disposal") and shall give notice
in writing of it to the registered holders of the shares sold.
(F) MANNER OF MAKING DIRECTORS' DISPOSAL
The manner, timing and terms of any Directors' Disposal (including,
but not limited to, the price or prices at which the same is made
and the extent to which assurance is obtained that no transferee
thereunder is or would thereby become a Relevant Person) shall be
such as the Directors determine. The Directors may take advice from
bankers, brokers or other persons considered by them to be
appropriate as to such manner, timing and terms and shall not be
liable to any person for the consequences of reliance on such
advice. The Directors shall be entitled to make such disposal
without delay.
(G) RELEVANT SHARES OF MULTIPLE HOLDERS OR OF CERTIFICATED AND
UNCERTIFICATED SHARES TO BE SOLD PRO RATA IN DIRECTORS' DISPOSAL
If on a Directors' Disposal Relevant Shares are held:
(1) by more than one registered holder (treating joint holders of
any Relevant Shares as a single holder) the Directors shall,
15
so far as is practicable, cause the same proportion of each
holding as is known to them to be sold; or
(2) as Certificated Shares and Uncertificated Shares, the
Directors may in their absolute discretion vis a vis any
Relevant Person, but in consultation with the Founders Share
Company, treat such holdings of Certificated Shares and
Uncertificated Shares as if they were separate holdings and,
in such event, shall cause to be sold such proportion of
either or both holdings of Certificated Shares and
Uncertificated Shares as the Directors may, in exercise of
their discretion as aforesaid, direct.
(H) TRANSFERS, CERTIFICATES AND DISPOSAL OF SALE PROCEEDS IN DIRECTORS'
DISPOSAL
For the purpose of effecting any Directors' Disposal, the Directors
may authorise in writing any officer or employee of the Company to
execute any necessary transfer on behalf of any registered holder of
Certificated Shares and may notwithstanding that no share
certificate has been lodged enter the name of the transferee in the
Register and issue a new certificate to the purchaser for the
Certificated Shares so transferred or, in respect of Uncertificated
Shares, the Directors may exercise any of the powers conferred on
the Company by Regulation F.17 to effect valid transfer of such
shares. The net proceeds of such disposal shall be received by the
Company, whose receipt shall be a good discharge for the purchase
money, and shall be paid (without any interest being payable
thereon) to the former registered holder, in the case of
Uncertificated Shares, as soon as practicable, and, otherwise, on
surrender by him of the certificate for the Certificated Shares
formerly held by him and so sold.
(I) CESSER OF VOTING RESTRICTIONS
The Voting Restrictions shall cease to apply:-
(1) to any shares sold by a Directors' Disposal;
(2) to any Relevant Shares if the Directors resolve that they are
satisfied that the Relevant Person concerned has ceased to be
interested in them; and
(3) if the Directors resolve that they are satisfied that a
Required Disposal has been made, to the shares comprised in
such disposal and to any other shares in which the former
Relevant Person concerned continues to be interested;
from the date of such sale or resolution, as the case may be, but
without prejudice to their imposition again if the Directors serve a
new Restriction Notice in respect of them.
16
(J) DIRECTORS' RESOLUTION AS TO A PERSON BEING RELEVANT PERSON
CONCLUSIVE
If the Directors resolve that they have reasonable cause to believe
that a person is or may be a Relevant Person and that they have made
reasonable enquiries (whether by way of notices under section 212 of
the Act or otherwise) to establish whether he is or not but that
such enquiries have not been answered or fail to establish whether
he is or not, he shall for all the purposes of this Regulation be
deemed to be a Relevant Person from the date of such resolution
until any such time as the Directors resolve that they are satisfied
that he is not a Relevant Person.
(K) DIRECTORS' RESOLUTION AS TO SHARES BEING SHARES OF A RELEVANT PERSON
CONCLUSIVE
If the Directors resolve that they have reasonable cause to believe
that any shares of the Company are or may be shares in which a
Relevant Person (whether he is such by virtue of paragraph (J) above
or otherwise) is interested and that they have made reasonable
enquiries (whether by way of notices under section 212 of the Act or
otherwise) to establish whether they are or not but that such
enquiries have not been answered or fail to establish whether they
are or not, such shares shall for all the purposes of this
Regulation be deemed to be shares in which such Relevant Person is
interested from the date of such resolution until any such time as
the Directors resolve that they are satisfied that such shares are
not shares in which such Relevant Person is interested.
(L) NOTICES UNDER REGULATION F.15 TO BE IN WRITING
All notices provided for by this Regulation shall be in writing.
(M) NO OBLIGATION TO SERVE NOTICE IF ADDRESS UNKNOWN
Neither the Company nor the Directors shall be obliged to serve any
notice provided for by this Regulation on any person if they do not
know either his identity or his address. Subject as aforesaid, the
Directors shall give notice of any resolutions referred to in
paragraphs (I), (J) and (K) above to the Relevant Person concerned.
(N) REGULATIONS ON NOTICES TO APPLY
Regulations F.146, 148 and 149 shall apply to the service of any
notice required by this Regulation to be served by the Company on
any member of the Company.
(O) SERVICE OF NOTICES ON NON-MEMBERS
17
Any notice required by this Regulation to be served by the Company
on any person who is not a member of the Company may be served on or
delivered to him either personally or by placing it in the post in
the United Kingdom in a pre-paid cover addressed to him at such
address as the Directors believe to be his address or by delivering
it to such address. Where such notice is served or sent by post as
aforesaid, service or delivery shall be deemed to be effected at the
time when the same would be received in the ordinary course of post
and in proving such service or delivery it shall be sufficient to
prove that such cover was properly addressed, stamped and posted.
(P) DIRECTORS' DECISIONS CONCLUSIVE
Any belief, resolution or decision of the Directors which is held or
made in pursuance or purported pursuance of any of the provisions of
this Regulation shall be conclusive, final and binding on all
persons concerned, and the validity of any act or thing which is
done or caused to be done by the Directors in pursuance or purported
pursuance of any of such provisions shall not be capable of being
impeached by anyone on the ground that there was not any basis or
reasonable basis on which the Directors could have arrived at any
such belief or made any such resolution or decision, or on the
ground that any conclusion of fact on which the Directors relied or
might have relied for the purposes of arriving at any such belief or
making any such resolution or decision was incorrect, or on any
other ground whatsoever.
(Q) COMPANY REGISTER OF SHARE INTERESTS
Without prejudice to the provisions of the Statutes, the Directors
may assume without enquiry that a person is not a Relevant Person
unless the information contained in the Registers kept by the
Company under section 211 of the Act and under paragraph (B) (8)
above indicates to the contrary or they have reason to believe
otherwise. In the latter case the Directors shall make reasonable
enquiries to discover whether anyone is a Relevant Person.
(R) DIRECTORS TO INFORM OTHER DIRECTORS REGARDING RELEVANT PERSONS
If a Director has reason to believe that anyone is a Relevant Person
he shall without delay inform the other Directors of that fact.
(S) ADR CUSTODIANS AND ADS HOLDERS
An ADR Custodian in its capacity as such shall not be a Relevant
Person. A person who has an interest in American Depositary Shares
evidenced by an American Depositary Receipt representing shares held
by an ADR Custodian shall be treated for all the purposes of this
Regulation as having an interest in the number and class of shares
in the Company represented by such American Depositary Shares and
18
evidenced by such American Depositary Receipt and not (in the
absence of any other reason why he should be so treated) in the
remainder of the shares in the Company held by the ADR Custodian.
(T) RIGHTS ISSUES AND LIMITATION OF SHAREHOLDINGS
In this paragraph (T):-
(1) "RIGHTS ISSUE" means an offer by or on behalf of the Company
of shares in the Company to persons who already hold shares in
the Company (other than the Founders Share) under which
(subject to any exclusion from the offer of persons which the
Directors may deem necessary to deal with fractional
entitlements or problems with such offer arising in any
overseas territory) the number of shares offered to each
offeree is as nearly as practicable proportionate to the
number of shares already held by him; and
(2) "BASIC ENTITLEMENT" means the number of shares so offered to
an offeree and does not include any shares for which he makes
an excess application, that is, an application for shares so
offered to other shareholders but not taken up by them.
If a person (hereinafter in this paragraph (T) called "THE SAID
PERSON") becomes interested in 15 per cent. or more of the issued
shares of any class of the Company solely because on a rights issue
a holder of shares in the Company (whether he is the said person or
not) accepts up to his basic entitlement of the shares comprised in
such issue and the said person does not thereafter become interested
in any further shares of that class (except solely because of the
same occurring on a further rights issue), a Required Disposal shall
not be required, the Voting Restrictions shall apply only to shares
in excess of such 15 per cent. and any Restriction Notice given to
him shall be modified accordingly.
(U) UNDERWRITING OF SHARE ISSUES AND LIMITATION OF SHAREHOLDINGS
If a person becomes interested in 15 per cent. or more of the issued
shares of any class of the Company solely by underwriting an offer
of shares in the Company in the ordinary course of a business which
includes underwriting offers of securities, then so long as he does
not become interested in any further such shares (except solely by
so underwriting any further such offer) he shall be allowed one year
or such longer period as the Directors consider reasonable (either
of which the Directors may in their absolute discretion extend) in
which to make the Required Disposal and supply reasonable evidence
of it to the Company, and any Restriction Notice shall be modified
accordingly.
19
UNCERTIFICATED SHARES
16. .
(A) DIRECTORS MAY PERMIT SHARES TO BE A PARTICIPATING SECURITY
Subject to the Statutes and the rules of any Relevant System, the
Directors may permit the holding and transfer of any class of shares
in uncertificated form by means of a Relevant System and, subject as
aforesaid, the Directors may at any time determine that any class of
shares shall cease to be a Participating Security.
(B) SHARES MAY BE CHANGED FROM UNCERTIFICATED TO CERTIFICATED FORM AND
VICE VERSA
Where any class of shares in the capital of the Company is a
Participating Security, any share in such class may be changed from
an Uncertificated Share to a Certificated Share and from a
Certificated Share to an Uncertificated Share in accordance with and
subject to the provisions of the Uncertificated Securities
Regulations and the rules and procedures of the Relevant System.
(C) UNCERTIFICATED SHARES ARE NOT A SEPARATE CLASS
Subject to the Statutes, Uncertificated Shares shall not be regarded
as forming a separate class of shares from Certificated Shares of
the same class.
(D) DISAPPLICATION OF INCONSISTENT REGULATIONS
In relation to any class of shares which is a Participating
Security, and for so long as that class of shares or any part of
that class of shares remains a Participating Security, these
Regulations shall (notwithstanding anything contained in these
Regulations) only apply to Uncertificated Shares to the extent that
they are consistent with:-
(1) the holding of shares in that class in uncertificated form;
(2) the transfer of title to shares in that class by means of a
Relevant System; and
(3) the Uncertificated Securities Regulations.
POWER OF SALE OF UNCERTIFICATED SHARES
F.17 POWERS OF COMPANY IN RESPECT OF PROCURING SALES OF UNCERTIFICATED SHARES
Where any class of shares in the capital of the Company is a Participating
Security and the Company is entitled under any provisions of the Statutes
or the rules of any Relevant System or under these Regulations to dispose
20
of, forfeit, enforce a lien over or sell or procure the sale of any shares
of such class which are held in uncertificated form, the Directors shall
have the power (to the extent permitted by and subject to the provisions
of the Uncertificated Securities Regulations and the rules and procedures
of the Relevant System) to take such steps as may be required, by
instruction given by means of a Relevant System or otherwise, to effect
such disposal, forfeiture, enforcement or sale and such powers shall
(subject as aforesaid) include, but shall not be limited to, the power to:
(1) request or require the deletion of any computer-based entries in the
Relevant System relating to such shares;
(2) alter such computer-based entries so as to divest the registered
holder of such shares of the power to transfer them to any person
other than a transferee identified by the Company;
(3) require by notice in writing any holder of such shares:
(a) to change his holding of such shares into certificated form
within such period as may be specified in the notice; or
(b) direct the holder to take such steps as may be necessary to
sell or transfer such shares;
(4) appoint any person to take such steps in the name of the holder of
such shares as may be required to effect transfer of such shares and
such steps shall be as effective as if they had been taken by the
registered holder of the shares concerned.
THE FOUNDERS SHARE
F.18 .
(A) FOUNDERS SHARE MAY DEFEAT RESOLUTION TO VARY OR ABROGATE ITS RIGHTS
Without prejudice to paragraph (A) of Regulation F.4, on any poll on
any resolution of the Company in General Meeting, being a resolution
the passing of which by the requisite majority of votes would be, or
be deemed to be, a variation or abrogation of the rights attached to
the Founders Share, the Founders Share Company, if it opposes such
resolution, shall have the right to cast such number of votes as
shall be necessary to ensure the defeat of such resolution, and such
right may be exercisable either by a representative appointed by the
Founders Share Company in accordance with section 375(1)(a) of the
Act, or by a proxy for the Founders Share Company.
(B) DEEMED VARIATIONS OR ABROGATIONS OF FOUNDERS SHARE RIGHTS
21
For all of the purposes of these Regulations the passing by the
requisite majority of any of the following kinds of resolution by
the Company in General Meeting shall be deemed to be a variation or
abrogation of the rights attached to the Founders Share:-
(1) any Special Resolution the effect of which, if duly passed,
would be to alter, or to delete, or in any way to derogate
from the effect of, any F Regulation or to remove the prefix
"F" from any F Regulation;
(2) any resolution to wind up the Company voluntarily or pursuant
to paragraph (a) of section 122 of the Insolvency Act 1986;
(3) any resolution for, or approving or sanctioning, any
reconstruction of the Company;
(4) any resolution the effect of which, if duly passed, would be
to attach or to authorise the attachment to any share (whether
issued or unissued) of any voting rights which are not
identical in all respects with those attached to the Ordinary
Shares;
(5) any resolution to amend any such resolution as is described in
any of the preceding sub-paragraphs of this paragraph (B).
(C) ACTION WITHOUT CONSENT OF FOUNDERS SHARE COMPANY A DEEMED VARIATION
OR ABROGATION
For all of the purposes of these Regulations the doing of any act or
thing which, in accordance with any provision of these Regulations
requires the prior written consent of the Founders Share Company
shall be deemed to be a variation or abrogation of the rights
attached to the Founders Share.
F.19 .
(A) DEFINITION AND INTERPRETATION AS REGARDS "CONTROL" OF COMPANY
For the purposes of this Regulation:-
(1) where a person would in accordance with Part VI of the Act (as
in force at 11 April 1995 notwithstanding any later repeal,
amendment or re-enactment thereof) and/or Regulation F.15 be
taken to be interested in shares in which another person is
interested or would in accordance therewith be taken to be
interested, such other person shall be deemed to be his
associate;
(2) in addition, two or more persons shall be deemed to be
associates if there are, in the opinion of the Founders Share
Company, reasonable grounds for believing that they have or
are attempting to obtain Control pursuant (either wholly or in
part) to some arrangement between them;
22
(3) arrangement means any agreement, understanding or arrangement
of any kind, whether formal or tacit, and whether or not
legally binding, other than the Deed of Mutual Covenant;
(4) "Control" means the ability to control the exercise of 30 per
cent. or more of the votes which can be cast on a poll at a
General Meeting of the Company (disregarding the rights of the
Founders Share Company and disregarding any suspension of the
voting rights of any shares pursuant to the Statutes or these
Regulations).
(B) DIRECTORS TO INFORM OTHER DIRECTORS (AND DIRECTORS TO INFORM
FOUNDERS SHARE COMPANY) OF ATTEMPTS TO GAIN CONTROL
If any Director becomes aware of any facts which might lead to the
Directors and/or the Founders Share Company taking the view that a
person and his associates (if any) has or have obtained or is or are
attempting to obtain, directly or indirectly, Control, he shall
without delay inform the other Directors of such facts and the
Directors shall forthwith give written notice of such facts to the
Founders Share Company.
(C) FOUNDERS SHARE CONTROL NOTICES
If there are, in the opinion of the Founders Share Company,
reasonable grounds for believing that any person and his associates
(if any) has or have obtained or is or are attempting to obtain,
directly or indirectly, Control, the Founders Share Company, whether
it has received any notice pursuant to paragraph (B) above or not,
shall be entitled in its absolute discretion to serve or cause to be
served at the Office a notice in writing (hereinafter called a
"Founders Share Control Notice"), signed by any one or more of the
Reuter Trustees, to the effect that the Founders Share Company is of
that opinion.
(D) RESCISSION OF FOUNDERS SHARE CONTROL NOTICE
If at any time after the service of a Founders Share Control Notice,
the Founders Share Company becomes of the opinion that no person or
no person and his associates has or have obtained or is or are
attempting to obtain, directly or indirectly, Control, then the
Founders Share Company shall as soon as practicable thereafter
(provided that it is still of that opinion) serve or cause to be
served at the Office a notice in writing, signed by any one or more
of the Reuter Trustees, rescinding such Founders Share Control
Notice, but the service of any such notice in writing pursuant to
and in accordance with this paragraph (D) (in this Regulation called
a "Rescission Notice") shall be without prejudice to the entitlement
of the Founders Share Company subsequently to serve or cause to be
served at the Office another Founders Share Control Notice pursuant
to and in accordance with paragraph (C) above.
23
(E) VOTING RIGHTS OF FOUNDERS SHARE WHILST FOUNDER SHARE CONTROL NOTICE
IN FORCE
At all times after the service at the Office of any Founders Share
Control Notice, until any Rescission Notice rescinding that Founders
Share Control Notice is served, the Founders Share shall confer upon
the Founders Share Company the right to cast, on any poll which
shall be taken on any Ordinary, Special, Extraordinary or other
Resolution which is proposed at any General Meeting of the Company,
such number of votes as shall be necessary to ensure the effective
passing of such Resolution if those votes are cast in favour thereof
or (as may be appropriate) to ensure the defeat of such resolution
if those votes are cast against such Resolution, and such right may
be exercisable either by a representative appointed by the Founders
Share Company in accordance with section 375(1)(a) of the Act, or by
any proxy for the Founders Share Company.
(F) FOUNDERS SHARE COMPANY DECISIONS CONCLUSIVE
Any opinion of the Founders Share Company, which is expressed in and
for the purposes of any Founders Share Control Notice, or which is
manifested by any Rescission Notice, shall be conclusive, final and
binding on all persons concerned, and the validity of any Founders
Share Control Notice or of any Rescission Notice shall not be
impeached by any person on the ground that there was not any basis
or any reasonable basis upon which the Founders Share Company could
have arrived at any such opinion, or on the ground that any
conclusion of fact which the Founders Share Company relied on or
might have relied on in or for the purpose of arriving at any such
opinion was incorrect, or on any other ground whatsoever.
F.20 .
(A) FOUNDERS SHARE COMPANY MAY REQUISITION EXTRAORDINARY GENERAL
MEETINGS
The Founders Share Company shall be entitled at any time and from
time to time to serve upon the Company at the Office, a requisition
in writing, signed on behalf of the Founders Share Company,
requiring the Directors:-
(1) to convene an Extraordinary General Meeting of the Company for
the purposes specified in such requisition; and
(2) to ensure that every copy of any notice by which an
Extraordinary General Meeting is convened pursuant to such
requisition shall be accompanied by a copy of such statement
in writing (if any) of not more than five thousand words as
shall be attached to such requisition.
24
(B) DIRECTORS TO CONVENE REQUISITIONED MEETING AND CIRCULATE ANY
STATEMENT OF THE FOUNDERS SHARE COMPANY
In the event of any such requisition being served as aforesaid at
the Office the Directors shall, not later than the expiration of the
period of seven days next following such service, duly convene an
Extraordinary General Meeting of the Company for the purposes
specified in such requisition (and so that any Extraordinary General
Meeting shall be convened on such minimum period of notice as shall
be sufficient, having regard to the purposes so specified and to the
provisions of the Statutes and of these Regulations relative to
notices of Extraordinary General Meetings), and shall ensure that
every copy of any notice by which such Extraordinary General Meeting
is convened shall be accompanied by a copy of such statement in
writing (if any) as shall have been attached to such requisition in
accordance with the provisions of sub-paragraph (2) of paragraph (A)
of this Regulation.
(C) FOUNDERS SHARE COMPANY MAY CONVENE MEETING IF DIRECTORS IN DEFAULT
If the Directors do not, before the expiration of the period of
seven days next following the service at the Office of any such
requisition as aforesaid, duly convene an Extraordinary General
Meeting in accordance with the provisions of paragraph (B) of this
Regulation and otherwise comply in all respects with those
provisions, the Founders Share Company shall be entitled at any time
after such expiration to convene an Extraordinary General Meeting of
the Company for the purposes specified in such requisition, and so
that:-
(1) any Extraordinary General Meeting which is so convened by the
Founders Share Company shall be convened in the same manner,
as nearly as possible, in which Extraordinary General Meetings
of the Company are to be convened by the Directors pursuant to
paragraph (B) of this Regulation, but so that the requirement
as to minimum notice referred to in such paragraph (B) shall
not apply; and
(2) the Founders Share Company shall be entitled to procure that
each copy of the notice by which any such Extraordinary
General Meeting is convened by the Founders Share Company
shall be accompanied by a copy of such statement in writing of
not more than five thousand words as the Founders Share
Company shall in its absolute discretion think fit, and so
that the Founders Share Company shall have this entitlement
whether or not such requisition had attached thereto, in
accordance with sub-paragraph (2) of paragraph (A) of this
Regulation, any copy of any statement.
25
(D) FOUNDERS SHARE COMPANY MAY CONVENE EXTRAORDINARY GENERAL MEETINGS
WHILE FOUNDERS SHARE CONTROL NOTICE IN FORCE
In addition and without prejudice to the rights conferred upon the
Founders Share Company by the preceding paragraphs of this
Regulation, so long as any Founders Share Control Notice which has
been served at the Office pursuant to and in accordance with the
provisions of paragraph (C) of Regulation F.19 shall not have been
rescinded by a Rescission Notice served at the Office pursuant to
and in accordance with the provisions of paragraph (D) of Regulation
F.19, the Founders Share Company shall be entitled at any time and
from time to time to convene an Extraordinary General Meeting of the
Company for such purposes as the Founders Share Company shall in its
absolute discretion think fit, and shall also be entitled to cause
every copy of any notice by which any Extraordinary General Meeting
is so convened to be accompanied by a copy of such statement in
writing of not more than five thousand words as the Founders Share
Company shall in its absolute discretion think fit. Any
Extraordinary General Meeting which is convened by the Founders
Share Company pursuant to this paragraph (D) shall be convened in
such manner, as nearly as possible, in which Extraordinary General
Meetings are to be convened by the Directors pursuant to paragraph
(B) of this Regulation, but so that the requirement as to minimum
notice referred to in paragraph (B) of this Regulation shall not
apply.
F.21 FOUNDERS SHARE COMPANY MAY RECEIVE NOTICE OF AND ATTEND AND SPEAK AT
GENERAL MEETINGS The Founders Share Company shall be entitled:-
(A) to receive notice of every General Meeting of the Company, and of
every separate General Meeting of the holders of the shares of any
class in the Company's issued share capital; and
(B) to attend, either by a representative appointed in accordance with
section 375(1)(a) of the Act, or by any proxy, at any such General
Meeting or separate General Meeting; and
(C) through any such representative or proxy, to speak at any such
General Meeting or separate General Meeting;
but the Founders Share Company shall not, save as provided in Regulations
F.18 and F.19, be entitled to vote at any General Meeting of the Company,
and shall in no circumstances be entitled to vote at any such separate
General Meeting other than a separate General Meeting of the Founders
Share Company.
26
F.22 .
(A) CONSULTATION BETWEEN DIRECTORS AND REUTER TRUSTEES
The Reuter Trustees shall be entitled, at the invitation of the
Directors, to attend meetings of the Directors and to confer with
the Directors, and the Reuter Trustees shall generally be available
to act in a consultative capacity with the Directors.
(B) REUTER TRUSTEES ENTITLED TO RECEIVE REPORTS FROM AND MAKE
REPRESENTATIONS TO THE DIRECTORS
The Reuter Trustees shall be entitled to receive from the Directors
periodical reports of the activities of the Reuters Group, and shall
be entitled to make such representations (if any) to the Directors,
on matters of general interest affecting the Reuters Group, as the
Reuter Trustees may from time to time think fit.
F.23 .
(A) COMPANY TO REIMBURSE FOUNDERS SHARE COMPANY FOR EXPENSES OF REUTER
TRUSTEES
The Company will pay to the Founders Share Company on demand all
such sums of money as the Founders Share Company shall from time to
time certify are required by it:-
(1) to indemnify the Reuter Trustees in respect of their
travelling, hotel and other reasonable expenses incurred in
attending and returning from all meetings of the Reuter
Trustees as directors and members of the Founders Share
Company and in carrying on the functions of the Founders Share
Company, including (but without limitation) the exercise of
the rights, powers and duties exercisable by the Founders
Share Company and the Reuter Trustees;
(2) to indemnify the Founders Share Company in respect of all
disbursements, fees and expenses which have been incurred or
paid or will or may become liable to be incurred by it
including in particular (but without limitation) all expenses
incurred in enforcing the Reuter Trust Principles as contained
and defined in the Deed of Mutual Covenant and any other
provisions contained in the Deed of Mutual Covenant and in
carrying out the objects of the Founders Share Company,
whether by judicial proceedings or otherwise; and
(3) to comply with all statutory requirements in force (and
whether arising under taxation statutes or statutes relating
to companies or otherwise) and applicable to the Founders
Share Company.
27
(B) COMPANY TO FUND OR PROCURE COMPANY SECRETARIAL AND ADMINISTRATIVE
SERVICES FOR FOUNDERS SHARE COMPANY
The Company will pay to the Founders Share Company on demand the
cost of (or at the option of the Founders Share Company procure the
provision without cost to the Founders Share Company of) all company
secretarial services and other ancillary administrative services
which the Founders Share Company may from time to time request.
SHARE CERTIFICATES
24. CONTENTS OF SHARE CERTIFICATES
Every share certificate shall specify the number and class of shares to
which it relates and the amount paid up thereon. No certificate shall be
issued representing shares of more than one class. No certificate shall
normally be issued in respect of shares held by a recognised clearing
house or a nominee of a recognised clearing house or of a recognised
investment exchange.
25. CERTIFICATES FOR JOINT HOLDERS
In the case of a share held jointly by several persons the Company shall
not be bound to issue more than one certificate therefor and delivery of a
certificate to one of joint holders shall be sufficient delivery to all.
26. ENTITLEMENT OF MEMBERS HOLDING CERTIFICATED SHARES TO SHARE CERTIFICATES
Any person (subject as aforesaid) whose name is entered in the Register as
a holder of any Certificated Shares of any one class upon the issue or
transfer thereof shall be entitled without payment to a certificate
therefor (in the case of issue) within one month (or such longer period as
the terms of issue shall provide) after allotment of Certificated Shares
or (in the case of a transfer of fully paid shares) within fourteen days
after lodgment of a transfer or (in the case of a transfer of partly paid
shares) within two months after lodgment of a transfer of Certificated
Shares.
27. ENTITLEMENT TO BALANCING CERTIFICATES
Where some only of the shares comprised in a share certificate are
transferred the old certificate shall be cancelled and a new certificate
for the balance of such Certificated Shares shall be issued in lieu
without charge.
28. .
(A) ENTITLEMENT TO CONSOLIDATING CERTIFICATES
Any two or more certificates representing shares of any one class
held by any member may at his request be cancelled and a single new
certificate for such Certificated Shares issued in lieu without
charge.
28
(B) DIRECTORS MAY ISSUE SPLIT CERTIFICATES
If any member shall surrender for cancellation a share certificate
representing shares held by him and shall request the Company to
issue in lieu two or more share certificates representing such
Certificated Shares in such proportions as he may specify, the
Directors may, subject to the provisions of Regulation 29 below, if
they think fit, comply with such request.
(C) REPLACEMENT OF DAMAGED, LOST OR STOLEN CERTIFICATES
If a share certificate shall be damaged or defaced or alleged to
have been lost, stolen or destroyed, a new certificate representing
the same shares must be issued without charge (other than the
exceptional out of pocket expenses (if any) referred to below) to
the holder upon request subject to delivery up of the old
certificate or (if alleged to have been lost, stolen or destroyed)
upon compliance with such conditions as to evidence and indemnity
and the payment of any exceptional out-of-pocket expenses of the
Company in connection with the request as the Directors may think
fit.
(D) REQUESTS FOR REPLACEMENT CERTIFICATES FOR JOINT HOLDERS
In the case of shares held jointly by several persons any such
request may be made by any one of the joint holders.
29. .
(A) ENTITLEMENT TO CERTIFICATE FOR SHARES CHANGED TO CERTIFICATED SHARES
Subject to the Statutes, these Regulations and the requirements of
the London Stock Exchange, where any Uncertificated Share is changed
to certificated form, the holder (other than a recognised clearing
house or a nominee of a recognised clearing house or of a recognised
investment exchange referred to in Regulation 24) is entitled,
unless the terms of issue of the shares provide otherwise, without
charge, to one certificate in respect of all the Uncertificated
Shares so changed to certificated form.
(B) NO ENTITLEMENT TO CERTIFICATE IN RESPECT OF UNCERTIFICATED SHARES
The provisions of Regulations 24 to 29 (inclusive) shall not apply
so as to require the Company to issue to any person a certificate in
respect of any share where such person holds such share in
uncertificated form.
CALLS ON SHARES
30. DIRECTORS MAY MAKE CALLS FOR AMOUNTS UNPAID ON SHARES
The Directors may from time to time make calls upon the members in respect
of any moneys unpaid on their shares (whether on account of the nominal
value of the shares or, when permitted, by way of premium) but subject
29
always to the terms of issue of such shares. A call shall be deemed to
have been made at the time when the resolution of the Directors
authorising the call was passed and may be made payable by instalments.
31. OBLIGATION TO PAY CALLS
Each member shall (subject to receiving at least fourteen days' notice
specifying the time or times and place of payment) pay to the Company at
the time or times and place so specified the amount called on his shares.
The joint holders of a share shall be jointly and severally liable to pay
all calls in respect thereof. A call may be revoked or postponed as the
Directors may determine.
32. INTEREST ON UNPAID CALLS
If a sum called in respect of a share is not paid before or on the day
appointed for payment thereof, the person from whom the sum is due shall
pay interest on the sum from the day appointed for payment thereof to the
time of actual payment at such rate (not exceeding 15 per cent. per annum)
as the Directors determine but the Directors shall be at liberty in any
case or cases to waive payment of such interest wholly or in part.
33. CALLS DEEMED TO BE MADE WHEN SO PROVIDED BY TERMS OF ISSUE OF SHARES
Any sum (whether on account of the nominal value of the share or by way of
premium) which by the terms of issue of a share becomes payable upon
allotment or at any fixed date shall for all the purposes of these
Regulations be deemed to be a call duly made and payable on the date on
which by the terms of issue the same becomes payable. In case of
non-payment all the relevant provisions of these Regulations as to payment
of interest and expenses, forfeiture or otherwise shall apply as if such
sum had become payable by virtue of a call duly made and notified.
34. DIRECTORS' DISCRETION AS TO AMOUNTS AND TIMES OF CALLS ON ISSUE OF SHARES
The Directors may on the issue of shares differentiate between the holders
as to the amount of calls to be paid and the times of payment.
35. DIRECTORS MAY ACCEPT AND PAY INTEREST ON MONEYS IN ADVANCE OF CALLS
The Directors may if they think fit receive from any member willing to
advance the same all or any part of the moneys (whether on account of the
nominal value of the share or by way of premium) uncalled and unpaid upon
the shares held by him and such payment in advance of calls shall
extinguish to the extent of the payment the liability upon the shares in
respect of which it is made and upon the money so received (until and to
the extent that the same would but for such advance become payable) the
Company may pay interest at such rate (not exceeding 15 per cent. per
annum) as the member paying such sum and the Directors may agree.
30
FORFEITURE AND LIEN
36. DIRECTORS MAY SERVE PAYMENT NOTICE IN RESPECT OF UNPAID CALLS
If a member fails to pay in full any call or instalment of a call on the
due date for payment thereof, the Directors may at any time thereafter
serve a notice on him requiring payment of so much of the call or
instalment as is unpaid together with any interest which may have accrued
thereon and any expenses incurred by the Company by reason of such
non-payment.
37. NOTICE TO PROVIDE FOR FORFEITURE OF SHARES
The notice shall name a further day (not being less than seven days from
the date of service of the notice) on or before which and the place where
the payment required by the notice is to be made, and shall state that in
the event of non-payment in accordance therewith the shares on which the
call has been made will be liable to be forfeited.
38. FORFEITURE OF SHARES
If the requirements of any such notice as aforesaid are not complied with,
any share in respect of which such notice has been given may at any time
thereafter, before payment of all calls and interest and expenses due in
respect thereof has been made, be forfeited by a resolution of the
Directors to that effect. Such forfeiture shall include all dividends
declared in respect of the forfeited share and not actually paid before
forfeiture. The Directors may accept a surrender of any share liable to be
forfeited hereunder.
39. FORFEITED OR SURRENDERED SHARE THE PROPERTY OF THE COMPANY
A share so forfeited or surrendered shall become the property of the
Company and may be sold, re-allotted or otherwise disposed of either to
the person who was before such forfeiture or surrender the holder thereof
or entitled thereto or to any other person upon such terms and in such
manner as the Directors shall think fit and at any time before a sale,
re-allotment or disposition the forfeiture or surrender may be cancelled
on such terms as the Directors think fit. The Directors may, if necessary,
authorise some person to transfer a forfeited or surrendered share to any
such other person as aforesaid.
40. EX-MEMBER TO REMAIN LIABLE FOR MONEYS UNPAID ON FORFEITED SHARES
A member whose shares have been forfeited or surrendered shall cease to be
a member in respect of the shares but shall notwithstanding the forfeiture
or surrender remain liable to pay the Company all moneys which at the date
of forfeiture or surrender were presently payable by him to the Company in
respect of the shares with interest thereon at 15 per cent. per annum (or
such lower rate as the Directors may determine) from the date of
forfeiture or surrender until such payment and the Directors may at their
31
absolute discretion enforce payment without allowance for the value of the
shares at the time of forfeiture or surrender or waive payment in whole or
in part.
41. COMPANY TO HAVE LIEN ON SHARES NOT FULLY PAID
The Company shall have a first and paramount lien on every share (not
being a fully paid share) for all moneys (whether presently payable or
not) called or payable at a fixed time in respect of such share. The
Directors may waive any lien which has arisen and may resolve that any
shares for some limited period be exempt wholly or partially from the
provisions of this Regulation.
42. COMPANY'S POWER OF SALE UNDER LIEN
The Company may sell in such manner as the Directors think fit any share
on which the Company has a lien, but no sale shall be made unless some sum
in respect of which the lien exists is presently payable nor until the
expiration of fourteen days after a notice in writing stating and
demanding payment of the sum presently payable and giving notice of
intention to sell in default shall have been given to the holder for the
time being of the share or the person entitled thereto by reason of his
death or bankruptcy.
43. APPLICATION OF SALE PROCEEDS
The net proceeds of such sale after payment of the costs of such sale
shall be applied in or towards payment or satisfaction of the debts or
liabilities in respect whereof the lien exists so far as the same are then
payable and any residue shall, upon surrender to the Company for
cancellation of the certificate for the share sold or the provision of any
indemnity (with or without security) required by the Directors as to any
lost or destroyed certificate and subject to a like lien for debts or
liabilities not presently payable as existed upon the share prior to the
sale, be paid to the person entitled to the share at the time of the sale.
For the purpose of giving effect to any such sale the Directors may
authorise some person to transfer the share sold to, or in accordance with
the directions of, the purchaser.
44. TITLE TO SHARES SOLD UNDER LIEN OR AFTER FORFEITURE
A statutory declaration in writing that the declarant is a Director or the
Secretary of the Company and that a share has been duly forfeited or
surrendered or sold to satisfy a lien of the Company on a date stated in
the declaration shall be conclusive evidence of the facts therein stated
as against all persons claiming to be entitled to the share. Such
declaration and the receipt of the Company for the consideration (if any)
given for the share on the sale, re-allotment or disposal thereof together
with the share certificate delivered to a purchaser or allottee thereof
shall (subject to the execution of a transfer if the same be required)
constitute a good title to the share and the person to whom the share is
sold, re-allotted or disposed of shall be registered as the holder of the
share and shall not be bound to see to the application of the purchase
32
money (if any) nor shall his title to the share be affected by any
irregularity or invalidity in the proceedings relating to the forfeiture,
surrender, sale, re-allotment or disposal of the share.
TRANSFER OF SHARES
45. .
(A) REQUIREMENTS AS TO FORM OF TRANSFERS OF CERTIFICATED SHARES
All transfers of Certificated Shares may be effected by transfer in
writing in any usual or common form or in any other form acceptable
to the Directors and may be under hand only. The instrument of
transfer shall be signed by or on behalf of the transferor and
(except in the case of fully paid shares) by or on behalf of the
transferee.
(B) REQUIREMENTS AS TO TRANSFERS OF UNCERTIFICATED SHARES
A member may transfer all or any of his Uncertificated Shares in the
manner provided for in the rules and procedures of the Operator of
the Relevant System and in accordance with and subject to the
Uncertificated Securities Regulations.
(C) TRANSFEROR TO REMAIN HOLDER UNTIL TRANSFER ACTUALLY REGISTERED
The transferor of a share shall remain the holder of the share
concerned until the name of the transferee is entered in the
Register in respect thereof.
46. DIRECTORS MAY SUSPEND REGISTRATION OF TRANSFERS
Subject to the Statutes, the registration of transfers may be suspended at
such times and for such periods as the Directors may from time to time
determine and either generally or in respect of any class of shares,
provided that the Company shall not close any Register relating to a
Participating Security without the consent of the Operator of the Relevant
System. The Register shall not be closed for more than thirty days in any
year.
47. .
(A) DIRECTORS MAY REFUSE TO REGISTER CERTAIN RENUNCIATIONS AND TRANSFERS
OF CERTIFICATED SHARES
The Directors may refuse to register an allotment or a transfer of
Certificated Shares (whether fully paid or not) in favour of more
than four persons jointly. If the Directors refuse to register a
renounceable letter of allotment or a transfer of a Certificated
Share they shall within two months after the date on which the
letter of allotment or transfer was lodged with the Company send to
the allottee or transferee notice of the refusal.
33
(B) DIRECTORS MAY REFUSE TO REGISTER TRANSFERS OF CERTIFICATED SHARES OF
MORE THAN ONE CLASS OF SHARE, UNSTAMPED TRANSFERS OR TRANSFERS
UNACCOMPANIED BY PROOF OF TRANSFEROR'S TITLE
The Directors may also decline to recognise any instrument of
transfer in respect of Certificated Shares (which for the purposes
of these Regulations shall include a renunciation of a renounceable
letter of allotment) unless the instrument of transfer is in respect
of only one class of share, is duly stamped (if required) and is
lodged at the Transfer Office accompanied by the relevant share
certificate(s) (except in the case of a renunciation and as
described below) and such other evidence as the Directors may
reasonably require to show the right of the transferor to make the
transfer (and, if the instrument of transfer is executed by some
other person on his behalf, the authority of that person so to do).
In the case of a transfer by a recognised clearing house or a
nominee of a recognised clearing house or of a recognised investment
exchange the lodgment of share certificates will only be necessary
if and to the extent that certificates have been issued in respect
of the shares in question.
48. .
(A) REGISTRATION OF TRANSFERS OF UNCERTIFICATED SHARES
The Company shall register a transfer of title to any Uncertificated
Share or any renounceable right of allotment of a share which is a
Participating Security held in uncertificated form, but so that the
Directors may refuse to register such a transfer in favour of more
than four persons jointly or in any other circumstance permitted by
the Uncertificated Securities Regulations.
(B) DIRECTORS TO NOTIFY REFUSALS TO REGISTER TRANSFERS OF UNCERTIFICATED
SHARES
If the Directors refuse to register the transfer of an
Uncertificated Share or of any renounceable right of allotment of a
share which is a Participating Security held in uncertificated form
the Company shall, within two months after the date on which the
transfer instruction relating to such transfer was received by the
Company, send notice of the refusal to the transferee.
49. COMPANY MAY RETAIN REGISTERED TRANSFERS
All instruments of transfer which are registered may be retained by the
Company.
50. NO FEE FOR REGISTRATION OF TRANSFERS OR RELATED DOCUMENTS
No fee will be charged by the Company in respect of the registration of
any instrument of transfer or probate or letters of administration or
certificate of marriage or death or stop notice or power of attorney or
other document or instruction relating to or affecting the title to any
34
shares or otherwise for making any entry in the Register affecting the
title to any shares.
51. COMPANY MAY DESTROY DOCUMENTS AFTER CERTAIN PERIODS
The Company shall be entitled to destroy all instruments of transfer or
other documents which have been registered or on the basis of which
registration was made at any time after the expiration of six years from
the date of registration thereof and all dividend mandates and
notifications of change of address at any time after the expiration of two
years from the date of recording thereof and all share certificates which
have been cancelled at any time after the expiration of one year from the
date of cancellation thereof and it shall conclusively be presumed in
favour of the Company that every entry in the Register purporting to have
been made on the basis of an instrument of transfer or other such document
so destroyed was duly and properly made and every instrument of transfer
so destroyed was a valid and effective instrument duly and properly
registered and every share certificate so destroyed was a valid and
effective certificate duly and properly cancelled and every other document
hereinbefore mentioned so destroyed was a valid and effective document in
accordance with the recorded particulars thereof in the books or records
of the Company. Provided always that:-
(1) the provisions aforesaid shall apply only to the destruction of a
document in good faith and without notice of any claim (regardless
of the parties thereto) to which the document might be relevant;
(2) nothing herein contained shall be construed as imposing upon the
Company any liability in respect of the destruction of any such
document earlier than as aforesaid or in any other circumstances
which would not attach to the Company in the absence of this
Regulation;
(3) reference herein to the destruction of any document include
references to disposal thereof in any manner.
TRANSMISSION OF SHARES
52. PERSONAL REPRESENTATIVES OF DECEASED HOLDERS ENTITLED TO SHARES BUT
LIABILITIES OF ESTATE CONTINUE
In case of the death of a shareholder, the survivors or survivor where the
deceased was a joint holder, and the executors or administrators of the
deceased where a sole or only surviving holder, shall be the only persons
recognised by the Company as having any title to his interest in the
shares, but nothing in this Regulation shall release the estate of a
deceased holder (whether sole or joint) from any liability in respect of
any share held by him.
35
53. .
(A) REGISTRATION OF PERSONS ENTITLED TO SHARES BY OPERATION OF LAW
Any person becoming entitled to a share in consequence of the death
or bankruptcy of a member or otherwise by operation of law may
(subject as hereinafter provided) upon supplying to the Company such
evidence as the Directors may reasonably require to show his title
to the share either be registered himself as holder of the share
upon giving to the Company notice in writing of such desire of his
or transfer such share to some other person.
(B) REGISTRATION OF OTHER PERSONS
If he elects to have another person registered, he shall:
(1) in the case of a Certificated Share, execute an instrument of
transfer of the Certificated Share to that person; or
(2) in the case of an Uncertificated Share, either procure that
instructions are given by means of the Relevant System to
effect the transfer of such Uncertificated Share to that
person in accordance with the Uncertificated Securities
Regulations, or procure that the Uncertificated Share is
changed to certificated form and execute an instrument of
transfer of that Certificated Share to that person.
(C) LIMITATIONS APPLY TO SUCH TRANSFERS
All the limitations, restrictions and provisions of these
Regulations relating to the right to transfer and the registration
of transfers of shares shall be applicable to any such notice or
transfer as aforesaid as if the death or bankruptcy of the member
had not occurred and the notice or transfer were a transfer executed
or instruction given by such member.
54. ENTITLEMENT TO SHARE RIGHTS PENDING REGISTRATION OF PERSONS ENTITLED TO
SHARES BY OPERATION OF LAW
Save as otherwise provided by or in accordance with these Regulations, a
person becoming entitled to a share in consequence of the death or
bankruptcy of a member or otherwise by operation of law (upon supplying to
the Company such evidence as the Directors may reasonably require to show
his title to the share) shall be entitled to the same dividends and other
advantages as those to which he would be entitled if he were the
registered holder of the share except that he shall not be entitled in
respect thereof (except with the authority of the Directors) to exercise
any right conferred by membership in relation to meetings of the Company
until he shall have been registered as a member in respect of the share.
36
UNTRACED SHAREHOLDERS
55. .
(A) COMPANY MAY SELL SHARES OF UNTRACED HOLDERS AFTER CERTAIN PERIODS
The Company shall be entitled to sell the shares of a member or the
shares to which a person is entitled by virtue of transmission on
death or bankruptcy or otherwise by operation of law if and provided
that:-
(1) during the period of twelve years prior to the date of the
publication of the advertisements referred to in paragraph (2)
below (or, if published on different dates, the first thereof)
no communication has been received by the Company from the
member or the person entitled by transmission and no cheque or
warrant sent by the Company through the post in a pre-paid
letter addressed to the member or to the person entitled by
transmission to the shares at his address on the Register or
otherwise the last known address given by the member or the
person entitled by transmission to which cheques and warrants
are to be sent has been cashed or no payment made by the
Company by any other means permitted by these Regulations has
been claimed or accepted and at least three dividends in
respect of the shares in question have become payable and no
dividend in respect of those shares has been claimed; and
(2) the Company shall on expiry of the said period of twelve years
have inserted advertisements in both a national daily
newspaper and in a newspaper circulating in the area in which
the last known address of the member or the address at which
service of notices may be effected in the manner authorised by
these Regulations is located giving notice of its intention to
sell the said shares; and
(3) during the said period of twelve years and the period of three
months following the publication of the said advertisements
the Company shall have received no communication from such
member or person; and
(4) notice shall have been given to the London Stock Exchange in
London of its intention to make such sale.
(B) POWER OF SALE TO EXTEND TO ADDITIONAL SHARES
In addition to the power of sale conferred by paragraph (A) above,
if during the period of 12 years referred to in paragraph (A)(1)
above or a further period ending on the date when all the
requirements of paragraphs (A)(1) to (4) above have been satisfied
additional shares have been issued in right of those shares held at
the beginning of, or previously so issued during, those periods and
all the requirements of paragraphs (A)(1) to (4) have been satisfied
in respect of the additional shares, the Company shall be entitled
37
to sell the additional shares of the relevant member or the relevant
person entitled by transmission, as the case may be.
(C) PROCEDURES FOR EXERCISE OF POWER OF SALE
To give effect to any such sale the Company may appoint any person
to execute as transferor an instrument of transfer of Certificated
Shares or, in respect of any Uncertificated Shares, the Directors
may exercise any of the powers conferred on the Company by
Regulation F.17 to effect transfer of the shares, and such
instrument or exercise of such powers (as the case may be) shall be
as effective as if it had been executed or exercised by the
registered holder of or person entitled by transmission to such
shares, and the title of the transferee shall not be affected by any
irregularity or invalidity in the proceedings relating thereto. The
net proceeds of sale shall belong to the Company which shall be
obliged to account to the former member or other person previously
entitled as aforesaid for an amount equal to such proceeds and shall
enter the name of such former member or other person in the books of
the Company as a creditor for such amount which shall be a permanent
debt of the Company. No trust shall be created in respect of the
debt, no interest shall be payable in respect of the same and the
Company shall not be required to account for any money earned on the
net proceeds, which may be employed in the business of the Company
or invested in such investments (other than shares of the Company or
its parent undertaking, if any) as the Directors may from time to
time think fit.
GENERAL MEETINGS
56. ANNUAL GENERAL MEETINGS TO BE HELD
An Annual General Meeting shall be held once in every year, at such time
(within a period of not more than fifteen months after the holding of the
last preceding Annual General Meeting) and place as may be determined by
the Directors. All other General Meetings shall be called Extraordinary
General Meetings.
57. DIRECTORS TO CONVENE EXTRAORDINARY GENERAL MEETINGS
The Directors may whenever they think fit, and shall on any requisition
made in accordance with the Statutes, proceed with proper expedition to
convene an Extraordinary General Meeting.
38
NOTICE OF GENERAL MEETINGS
F.58 .
(A) PERIODS OF NOTICE FOR GENERAL MEETINGS
An Annual General Meeting and any Extraordinary General Meeting at
which it is proposed to pass a Special Resolution, or (save as
provided by the Statutes) a resolution of which special notice has
been given to the Company, shall be called by twenty one days'
notice in writing at the least, and any other Extraordinary General
Meeting by fourteen days' notice in writing at the least. The period
of notice shall in each case be exclusive of the day on which it is
served or deemed to be served and of the day on which the meeting is
to be held and shall, subject as provided in paragraph (B) of this
Regulation F.58, be given in the manner hereinafter mentioned to all
members other than such as are not under the provisions of these
Regulations entitled to receive such notices from the Company.
Provided that a General Meeting notwithstanding that it has been
called by a shorter notice than that specified above shall be deemed
to have been duly called if it is so agreed:-
(1) in the case of an Annual General Meeting by all the members
entitled to attend and vote thereat which for this purpose
shall include the Founders Share Company; and
(2) in the case of an Extraordinary General Meeting by a majority
in number of the members having a right to attend and vote
thereat, being a majority together holding not less than 95
per cent. in nominal value of the shares giving that right,
and by the Founders Share Company.
(B) DETERMINATION OF RECORD DATE FOR SERVING NOTICES OF MEETINGS
For the purposes of serving notices of meetings, whether under
section 370(2) of the Act or any other enactment or under these
Regulations, the Directors may determine that persons entitled to
receive such notices are those persons entered on the Register at
the close of business on a day determined by the Directors, provided
that, if the Company is a participating issuer, the day determined
by the Directors may not be more than 21 days before the day that
the relevant notice of meeting is sent.
(C) ACCIDENTAL NON-DELIVERY OF NOTICE TO OR NON-RECEIPT OF NOTICE BY ANY
PERSON (EXCEPT FOUNDERS SHARE COMPANY) NOT TO INVALIDATE PROCEEDINGS
AT MEETING
The accidental omission to give notice to or the non-receipt of
notice by any person entitled thereto (other than in each case the
Founders Share Company) shall not invalidate the proceedings at any
General Meeting.
39
59. .
(A) CONTENTS OF NOTICES OF GENERAL MEETINGS
Every notice of a General Meeting shall specify the principal
meeting place and the satellite meeting places (if any) and the day
and hour of the meeting and there shall appear with reasonable
prominence in every such notice a statement that a member entitled
to attend and vote is entitled to appoint a proxy or proxies to
attend and, on a poll, vote instead of him and that a proxy need not
be a member of the Company.
(B) NOTICE OF ANNUAL GENERAL MEETING
In the case of an Annual General Meeting, the notice shall also
specify the meeting as such.
(C) NOTICES TO IDENTIFY SPECIAL BUSINESS
In the case of any General Meeting at which business other than
routine business is to be transacted, the notice shall specify the
general nature of such business; and, if any resolution is to be
proposed as an Extraordinary Resolution or as a Special Resolution,
the notice shall contain a statement to that effect.
(D) DETERMINATION OF RECORD DATE FOR ENTITLEMENT TO ATTEND AND VOTE AT
GENERAL MEETINGS
For the purposes of determining which persons are entitled to attend
or vote at any General Meeting, the notice may also specify a time
(which shall not be more than 48 hours before the time fixed for the
meeting) by which a person must be entered on the Register in order
to have the right to attend or vote at the meeting. Changes to
entries on the Register after the time so specified in the notice
shall be disregarded in determining the rights of any person to so
attend or vote.
60. ROUTINE BUSINESS OF ANNUAL GENERAL MEETINGS
Routine business shall mean and include any business transacted at an
Annual General Meeting of the following classes:-
(1) declaring dividends;
(2) receiving and/or adopting the accounts, the reports of the Directors
and Auditors and other documents required to be attached or annexed
to the accounts;
(3) appointing or re-appointing Directors to fill vacancies arising at
the meeting on retirement whether by rotation or otherwise;
40
(4) re-appointing the retiring Auditors (unless they were last appointed
otherwise than by the Company in General Meeting);
(5) fixing the remuneration of the Auditors or determining the manner in
which such remuneration is to be fixed; and
(6) granting, renewing or varying authority under section 80 of the Act
or disapplying section 89 of the Act.
PROCEEDINGS AT GENERAL MEETINGS
61. .
(A) CHAIRMANSHIP OF GENERAL MEETINGS
The Chairman of the Directors, failing whom one of the Deputy
Chairmen, shall preside as chairman at a General Meeting. If there
be no such Chairman or Deputy Chairman, or if at any meeting neither
be present within five minutes after the time appointed for holding
the meeting and willing to act, the Directors present shall choose
one of their number (or, if no Director be present or if all the
Directors present decline to take the chair, the members present
shall choose one of their number) to be chairman of the meeting.
(B) DIRECTORS MAY ATTEND AND SPEAK AT GENERAL MEETINGS
A Director is entitled to attend and speak at a General Meeting and
at a separate General Meeting of the holders of a class of shares or
debentures whether or not he is a member.
F.62 .
(A) DIRECTORS MAY MAKE PROVISION FOR PERSONS (OTHER THAN FOUNDERS SHARE
COMPANY) TO ATTEND GENERAL MEETINGS AT SATELLITE VENUES
The Directors may resolve to enable persons entitled to attend a
General Meeting (other than the representative or proxy of the
Founders Share Company) to do so by attending at a satellite meeting
place anywhere in the world and the members present in person or by
proxy at satellite meeting places shall be counted in the quorum for
and entitled to vote at the meeting, and the meeting shall be duly
constituted and its proceedings valid provided that (a) in the case
of any General Meeting falling within the proviso to paragraph (A)
of Regulation F.63, the Founders Share Company has given its prior
written consent, and (b) the chairman of the General Meeting is
satisfied that adequate facilities are available throughout the
General Meeting to ensure that members attending at all the meeting
places are able to (i) participate in the business for which the
meeting has been convened, (ii) hear and see all persons present at
and who speak (whether by the use of microphones, loudspeakers,
41
audio-visual communications equipment or otherwise) in the principal
meeting place, any satellite meeting place or elsewhere in
accordance with paragraph (D) below, and (iii) be heard and seen by
all other persons so present in the same way. The chairman of the
General Meeting shall be present at, and the meeting shall be deemed
to take place at, the principal meeting place.
(B) DISCRETION OF CHAIRMAN TO INTERRUPT OR ADJOURN GENERAL MEETINGS
If it appears to the chairman of the General Meeting that the
facilities at the principal meeting place or any satellite meeting
place have become inadequate for the purposes referred to in
paragraph (A) above, then the chairman may, without the consent of
the meeting, interrupt or adjourn the General Meeting for such time
and/or to such other place as the chairman of the General Meeting
may in his absolute discretion determine. All business conducted at
that General Meeting up to the time of such adjournment shall be
valid.
(C) DIRECTORS MAY ARRANGE FOR PERSONS TO HEAR, SEE AND SPEAK AT GENERAL
MEETINGS BY AUDIO-VISUAL MEANS
The Directors may make arrangements for persons entitled to attend a
General Meeting to be able to view and/or hear the proceedings of
any General Meeting and/or to speak at the meeting (whether by the
use of microphones, loudspeakers, audio-visual communications
equipment or otherwise), by attending a venue anywhere in the world
not being a satellite meeting place and those attending any such
venue shall not be regarded as present and shall not be entitled to
vote at the meeting at or from that venue and the inability for any
reason of any member present in person or by proxy at such a venue
to view and/or hear all or any of the proceedings of the meeting
and/or to speak at the meeting shall not in any way affect the
validity of such proceedings.
(D) VALIDITY OF MEETINGS IF ACCOMMODATION INADEQUATE
If it appears to the chairman of the General Meeting that any
principal meeting place or satellite meeting place specified in the
notice convening the meeting is inadequate to accommodate all
members entitled and wishing to attend, the meeting shall be duly
constituted and its proceedings valid if (a) in the case of any
General Meeting falling within the proviso to paragraph (A) of
Regulation F.63, any representative or proxy of the Founders Share
Company is allowed to be present at the principal meeting place, and
(b) the chairman is satisfied that adequate facilities are available
to ensure that any other member who is unable to be accommodated is
able to (i) participate in the business for which the meeting has
been convened, and (ii) hear and see all persons present at and who
speak (whether by the use of microphones, loudspeakers, audio-visual
communications equipment or otherwise), in the principal meeting
43
place, any satellite meeting place or elsewhere in accordance with
this paragraph (D), and (iii) be heard and seen by all other persons
so present in the same way.
(E) RIGHTS OF MEMBERS TO TAKE PART IN GENERAL MEETINGS
For the purposes of this Regulation, the right for a member to
participate in the business of any General Meeting shall include,
without limitation, the right to: speak; vote on any show of hands;
vote on any poll; be represented by a proxy; and the right to have
access to all documents which are required by the Statutes and these
Regulations to be made available at the meeting.
F.63 .
(A) QUORUM FOR GENERAL MEETINGS
No business (other than the appointment of a chairman) shall be
transacted at any General Meeting unless a quorum is present at the
time when the meeting proceeds to business. Any two members present
in person or by proxy and entitled to vote or the Founders Share
Company, present either by a representative appointed in accordance
with section 375(1)(a) of the Act or by proxy, shall constitute a
quorum for all purposes at any General Meeting. Provided that at any
General Meeting:-
(1) the business of which includes the consideration of any such
resolution as is mentioned in Regulation F.18, or
(2) which is held at a time when a Founders Share Control Notice,
which has been served at the Office pursuant to and in
accordance with paragraph (C) of Regulation F.19, has not been
rescinded by any Rescission Notice served at the Office
pursuant to and in accordance with paragraph (D) of that
Regulation, or
(3) which is called by shorter notice than the twenty one days or
fourteen days (as the case may be) specified in Regulation
F.58,
a quorum shall not be present for any purpose unless the Founders
Share Company is present thereat, either by a representative
appointed as aforesaid or by proxy.
(B) MEETINGS WHERE NO QUORUM PRESENT
If within five minutes from the time appointed for a General Meeting
(or such longer interval as the chairman of the meeting may think
fit to allow) a quorum is not present, the General Meeting, if
convened pursuant to any of the provisions of section 368 of the Act
or of Regulation F.20, shall be dissolved. In any other case it
43
shall stand adjourned to such other day and such time and such
principal meeting place and satellite meeting places as may have
been specified for the purpose in the notice convening the General
Meeting or (if not so specified) as the chairman of the General
Meeting may determine and in the latter case not less than seven
days' notice of the adjourned meeting shall be given, subject always
to the provisions of paragraph (B) of Regulation F.58, in like
manner as in the case of the original meeting. At any such adjourned
meeting all of the provisions of paragraph (A) of this Regulation
shall apply as though every reference in that Regulation to a
General Meeting included a reference to any such adjourned meeting.
F.64 .
(A) ADJOURNMENT OF GENERAL MEETINGS
The chairman of any General Meeting at which a quorum is present may
with the consent of the General Meeting (and shall if so directed by
the General Meeting) adjourn the meeting from time to time and from
place to place or for an indefinite period, provided that in the
case of any General Meeting falling within the proviso to paragraph
(A) of Regulation F.63 any such adjournment will be subject to the
consent of any representative or proxy of the Founders Share
Company.
(B) CHAIRMAN'S POWER TO ADJOURN IN CERTAIN CIRCUMSTANCES
Without prejudice to any other power which he may have under the
provisions of these Regulations or at common law, the chairman of
any General Meeting may (without the consent of the meeting but, in
the case of any General Meeting falling within the proviso to
paragraph (A) of Regulation F.63, subject to the consent of any
representative or proxy of the Founders Share Company) interrupt or
adjourn a meeting if he is of the opinion that it has become
necessary to do so in order to (i) secure the proper and orderly
conduct of the meeting, or (ii) give all persons entitled to do so a
reasonable opportunity of speaking and voting at the meeting, or
(iii) ensure the proper disposal of the business of the meeting. Any
such adjournment may be for such time as the chairman of the meeting
may in his absolute discretion determine, and the chairman of the
meeting shall have power to specify some other place for holding the
meeting, notwithstanding that by reason of such adjournment some
members may be unable to be present at the adjourned meeting. Any
such person may nevertheless execute a form of proxy for the
adjourned meeting and if he shall do so and shall deliver the same
to the chairman of the adjourned meeting or to the Secretary of the
Company, such proxy shall be valid notwithstanding that it is given
at less notice than would otherwise be required under these
Regulations.
44
(C) BUSINESS AT ADJOURNED GENERAL MEETINGS
No business shall be transacted at any adjourned meeting except
business which might lawfully have been transacted at the meeting
from which the adjournment took place. Business transacted at any
adjourned meeting shall be treated as business transacted at the
General Meeting which had been adjourned. Where a meeting is
adjourned for an indefinite period, the time and place for the
adjourned meeting shall be fixed by the Directors. When a meeting is
adjourned for thirty days or more or for an indefinite period, not
less than seven days' notice of the adjourned meeting shall be
given, subject always to the provisions of paragraph (B) of
Regulation F.58, in like manner as in the case of the original
meeting. At any adjourned meeting held pursuant to any of the
provisions of this Regulation all of the provisions of Regulation 60
and Regulation F.63 shall apply as though every reference in those
Regulations to a General Meeting included a reference to any such
adjourned meeting.
65. NOTICE OF ADJOURNMENT NOT REQUIRED
Save as hereinbefore expressly provided, it shall not be necessary to give
any notice of an adjournment or of the business to be transacted at any
adjourned meeting.
66. AMENDMENTS TO RESOLUTIONS
If an amendment shall be proposed to any resolution under consideration
but shall in good faith be ruled out of order by the chairman of the
meeting the proceedings on the substantive resolution shall not be
invalidated by any error in such ruling. In the case of a resolution duly
proposed as a Special or Extraordinary Resolution no amendment thereto
(other than a mere clerical amendment to correct a patent error) may in
any event be considered or voted upon.
F.67 VOTES BY SHOW OF HANDS UNLESS POLL DEMANDED AND REQUISITIONISTS REQUIRED
FOR POLL
At any General Meeting a resolution put to the vote of the meeting shall
be decided on a show of hands unless a poll is (before or on the
declaration of the result of the show of hands) demanded by:-
(A) the chairman of the meeting; or
(B) not less than three members present in person or by proxy and
entitled to vote; or
(C) a member or members present in person or by proxy and representing
not less than one-tenth of the total voting rights of all the
members having the right to vote at the meeting; or
45
(D) a member or members present in person or by proxy and holding shares
in the Company conferring a right to vote at the meeting being
shares on which an aggregate sum has been paid up equal to not less
than one-tenth of the total sum paid up on all the shares conferring
that right; or
(E) the Founders Share Company, present either by a representative
appointed in accordance with section 375(1)(a) of the Act or by
proxy.
Provided that:-
(1) any such resolution as is mentioned in Regulation F.18, and
(2) any resolution which is proposed at a General Meeting at a time when
a Founders Share Control Notice, which has been served at the Office
pursuant to and in accordance with paragraph (C) of Regulation F.19,
has not been rescinded by any Rescission Notice served at the Office
pursuant to and in accordance with paragraph (D) of that Regulation,
shall, in the absence of the written consent of the Founders Share Company
to the contrary, be a resolution on which a poll must be taken, and in the
event that a poll shall not be taken on any such resolution as aforesaid
the result of any show of hands on that resolution shall be deemed to be
invalid for all purposes.
68. .
(A) WITHDRAWAL OF DEMAND FOR POLL
A demand for a poll may be withdrawn only with the approval of the
General Meeting. Unless a poll is duly demanded, or is required to
be taken, a declaration by the chairman of the meeting that a
resolution has been carried, or carried unanimously, or by a
particular majority, or lost, and an entry to that effect in the
minute book, shall be conclusive evidence of that fact without proof
of the number or proportion of the votes recorded for or against
such resolution. If a poll is duly demanded, or is required to be
taken, it shall be taken in such manner (including the use of ballot
or other voting papers or tickets) as the chairman of the meeting
may direct, and the result of the poll shall be deemed to be the
resolution of the meeting at which the poll was so demanded or
required to be taken. The chairman of the meeting may (and if so
directed by the meeting shall) appoint scrutineers and may adjourn
the meeting to some place and time fixed by him for the purpose of
declaring the result of the poll.
(B) PROCEDURE FOR POLLS
A poll which is duly demanded (or which is required to be taken) on
the choice of a chairman or on a question of adjournment shall be
taken forthwith. A poll which is duly demanded (or which is required
to be taken) on any other question shall be taken either immediately
46
or at such subsequent time (not being more than thirty days from the
date of the meeting) and place as the chairman may direct. No notice
need be given of a poll not taken immediately. The fact that a poll
shall have been duly demanded (or shall be required to be taken) on
any question (other than on the choice of a chairman or an
adjournment) shall not prevent the continuance of the meeting for
the transaction of any business other than that question.
69. CHAIRMAN TO HAVE CASTING VOTE
In the case of an equality of votes, whether on a show of hands or on a
poll, the chairman of the meeting at which the show of hands takes place
or at which the poll is demanded shall be entitled to a casting vote.
F.70 ARRANGEMENTS FOR SECURITY OF GENERAL MEETINGS
The Directors and, at any General Meeting, the chairman may make any
arrangement and impose any restriction they consider appropriate to ensure
the security and orderly conduct of a General Meeting including, without
limitation, the searching of the personal property of persons attending
the meeting and the restriction of items that may be taken into the
meeting place. The Directors and, at any General Meeting, the chairman is
entitled to refuse entry to a meeting to a person (other than any
representative or proxy of the Founders Share Company) who refuses to
comply with these arrangements or restrictions.
VOTES OF MEMBERS
71. VOTES ON SHOW OF HANDS AND ON POLLS
Subject as otherwise provided by these Regulations, at any General Meeting
of the Company:-
(1) on any show of hands every member entitled to vote at such General
Meeting other than the Founders Share Company who is present in
person shall have one vote;
(2) on any poll every holder of Ordinary Shares shall have one vote for
every Ordinary Share of which he is the holder.
72. VOTES OF JOINT HOLDERS
In the case of joint holders of a share the vote of the senior who tenders
a vote, whether in person or by proxy, shall be accepted to the exclusion
of the votes of the other joint holders and for this purpose seniority
shall be determined by the order in which the names stand in the Register
in respect of the share.
47
73. VOTES BY RECEIVERS AND OTHERS ON BEHALF OF MEMBERS SUFFERING FROM MENTAL
DISORDER
Where in England or elsewhere a receiver or other person (by whatever name
called) has been appointed by any court claiming jurisdiction in that
behalf to exercise powers with respect to the property or affairs of any
member on the ground (however formulated) of mental disorder, the
Directors may in their absolute discretion, upon or subject to production
of such evidence of the appointment as the Directors may require, permit
such receiver or other person on behalf of such member to vote in person
or by proxy at any General Meeting or to exercise any other right
conferred by membership in relation to meetings of the Company.
F.74 .
(A) NO MEMBERS TO VOTE IF SUMS UNPAID ON SHARES
No member shall, unless the Directors otherwise determine, be
entitled in respect of shares held by him to vote at a General
Meeting or meeting of the holders of any class of shares of the
Company either personally or by proxy or to exercise any other right
conferred by membership in relation to meetings of the Company or of
the holders of any class of shares of the Company if any call or
other sum presently payable by him to the Company in respect of such
shares remains unpaid.
(B) DIRECTION NOTICES TO MEMBERS AND OTHERS NOT ENTITLED TO VOTE BECAUSE
IN DEFAULT UNDER SECTION 212
If any member, or any other person appearing to be interested in
shares held by such member, has been duly served with a notice under
section 212 of the Act and is in default for the prescribed period
in supplying to the Company the information thereby required, then
the Directors may in their absolute discretion at any time
thereafter by notice (a "DIRECTION NOTICE") to such member direct
that:-
(1) in respect of the shares in relation to which the default
occurred (the "DEFAULT SHARES") the member shall not be
entitled to attend or vote (either in person or by proxy) at a
General Meeting or at a separate general meeting of the
holders of a class of shares or on a poll;
(2) where the Default Shares represent at least 0.25 per cent. of
the class of shares concerned, then the Direction Notice may
additionally direct that any of the following shall be
effected:-
(a) in respect of the Default Shares any dividend or other
money which would otherwise be payable on such shares
shall be retained by the Company without any liability
to pay interest thereon when such money is finally paid
to the member and any shares issued in lieu of dividend
be withheld by the Company;
48
(b) no transfer of any Default Shares which are held in
certificated form shall be registered unless the
transfer is an approved transfer or:-
(i) the member is not himself in default as regards
supplying the information requested; and
(ii) the transfer is of part only of the member's
holding and when presented for registration is
accompanied by a certificate by the member in a
form satisfactory to the Directors to the effect
that after due and careful enquiry the member is
satisfied that no person in default as regards
supplying such information is interested in any of
the shares the subject of the transfer;
(c) if the Directors so determine, the Company shall be
entitled to require the holder of any such Default
Shares which are held in uncertificated form, by notice
in writing to the holder concerned, to change his
holding of uncertificated Default Shares to certificated
form within such period as may be specified in the
notice and require such holder to continue to hold such
Default Shares in certificated form for so long as the
default subsists. The Directors may also appoint any
person to take such other steps, by instruction by means
of a Relevant System or otherwise, in the name of the
holder of such Default Shares, to effect conversion of
such shares to certificated form and such steps shall be
as effective as if they had been taken by the registered
holder of the uncertificated Default Shares.
The Company shall send to each other person appearing to be interested in
the shares the subject of any Direction Notice a copy of the notice, but
the failure or omission by the Company to do so shall not invalidate such
notice.
(C) CESSER OF EFFECT OF DIRECTION NOTICES
Any Direction Notice shall cease to have effect seven days after the
earlier of:
(1) receipt by the Company of notice of an approved transfer, but
only in relation to the shares transferred; and
(2) receipt by the Company, in a form satisfactory to the
Directors, of all the information required by the section 212
notice.
49
(D) DIRECTION NOTICES AND DEPOSITARIES
Where any person appearing to be interested in any shares has been
served with a notice under section 212 of the Act and such shares
are held by a recognised depositary, the provisions of this
Regulation shall be deemed to apply only to those shares held by the
recognised depositary in which such person appears to be interested
and references to default shares shall be construed accordingly.
(E) OBLIGATIONS OF DEPOSITARY UNDER DIRECTION NOTICE
Where the member on whom a notice under section 212 of the Act has
been served is a recognised depositary, the obligations of the
recognised depositary acting in its capacity as such shall be
limited to disclosing to the Company such information relating to
any person appearing to be interested in the shares held by it as
has been recorded by the recognised depositary pursuant to the
arrangements entered into by the Company or approved by the
Directors pursuant to which it was appointed as a recognised
depositary.
(F) INTERPRETATION OF REGULATION F.74
For the purposes of this Regulation:-
(1) a person shall be treated as appearing to be interested in any
shares if the member holding such shares has given to the
Company a notification under the said section 212 which either
(a) names such person as being so interested or (b) fails to
establish the identities of those interested in the shares and
(after taking into account the said notification and any other
relevant section 212 notification) the Company knows or has
reasonable cause to believe that the person in question is or
may be interested in the shares;
(2) the prescribed period in respect of any particular member is
14 days from the date of service of the said notice under the
said section 212;
(3) a transfer of shares is an approved transfer if but only if:-
(a) it is a transfer of shares to an offeror by way or in
pursuance of acceptance of a takeover offer (as defined
in section 428(1) of the Act); or
(b) the Directors are satisfied that the transfer is made
pursuant to a sale of the whole of the beneficial
ownership of the shares to a party unconnected with the
member and with other persons appearing to be interested
in such shares; or
50
(c) the transfer results from a sale made through a
recognised investment exchange as defined in the
Financial Services Act 1986 or any other stock exchange
outside the United Kingdom on which the Company's shares
are normally traded.
(4) a recognised depositary is an ADR Custodian or a trustee
(acting in his capacity as such) of any Employee's Share
Scheme established by the Company where such scheme has been
approved by the Directors for the purposes of this Regulation.
(G) SAVING FOR DIRECTORS POWERS UNDER SECTION 216
Nothing contained in this Regulation shall limit the power of the
Directors under section 216 of the Act.
F.75 FOUNDERS SHARE COMPANY MAY REQUIRE DIRECTORS TO SERVE SECTION 212 NOTICE
OR DIRECTION NOTICE OR TO APPLY TO COURT UNDER SECTION 216
The Founders Share Company shall be entitled in its absolute discretion at
any time and from time to time to serve or cause to be served upon the
Company at the Office a requisition in writing requiring the Directors:
(1) to serve in accordance with section 212 of the Act such notice or
notices upon such person or respective persons as shall be specified
in such requisition; and/or
(2) to serve in accordance with paragraph (B) of Regulation F.74 a
Direction Notice or Notices upon such person or respective persons
and applying such of the provisions of paragraph (B) of Regulation
F.74 as shall be specified in such requisition; and/or
(3) to apply to the Court under section 216 of the Act for such order
against such person or respective persons as shall be specified in
such requisition,
and the Directors shall be bound to comply with any such requisition as
soon as practicable after service thereof as aforesaid.
F.76 OBJECTIONS TO ADMISSIBILITY OF VOTES TO BE RAISED ONLY AT THE RELEVANT
MEETING - SAVING FOR VOTES OF FOUNDERS SHARE
No objection shall be raised as to the admissibility of any vote except at
the meeting or adjourned meeting at which the vote objected to is or may
be given or tendered and every vote not disallowed at such meeting shall
be valid for all purposes. Any such objection shall be referred to the
chairman of the meeting whose decision shall be final and conclusive save
that no such decision shall be capable of prejudicing the effect of any
valid exercise of any of the voting rights attached by these Regulations
to the Founders Share.
51
F.77 VOTES ON A POLL MAY BE GIVEN PERSONALLY OR BY PROXY
On a poll votes may be given either personally or by proxy and a person
entitled to more than one vote need not use all his votes or cast all the
votes he uses in the same way.
F.78 PROXY NEED NOT BE A MEMBER
A proxy need not be a member of the Company.
F.79 REQUIREMENTS AS TO FORM OF APPOINTMENT OF PROXY
An instrument appointing a proxy shall be in writing in any usual or
common form or in any other form which the Directors may approve and:-
(A) in the case of an individual shall be signed by the appointor or his
attorney; and
(B) in the case of a corporation shall be either given under its common
seal or signed on its behalf by an attorney or a duly authorised
officer of the corporation, or in the case of the Founders Share
Company may be signed by any one of the Reuter Trustees.
The signature on such instrument need not be witnessed. Where an
instrument appointing a proxy is signed on behalf of the appointor by an
attorney, the letter or power of attorney or a duly certified copy thereof
must (failing previous registration with the Company) be lodged with the
instrument of proxy pursuant to the next following Regulation, failing
which the chairman of the meeting may treat the instrument as invalid.
80. PROCEDURE FOR APPOINTMENT OF PROXY
An instrument appointing a proxy must be left at such place or one of such
places (if any) as may be specified for that purpose in or by way of note
to or in any document accompanying the notice convening the meeting (or,
if no place is so specified, at the Transfer Office) not less than forty
eight hours before the time appointed for the holding of the meeting or
adjourned meeting or (in the case of a poll taken otherwise than at or on
the same day as the meeting or adjourned meeting) for the taking of the
poll at which it is to be used, and in default shall not be treated as
valid. The instrument shall, unless the contrary is stated thereon, be
valid as well for any adjournment of the meeting as for the meeting to
which it relates. Provided that an instrument of proxy relating to more
than one meeting (including any adjournment thereof) having once been so
delivered for the purposes of any meeting shall not require again to be
delivered for the purposes of any subsequent meeting to which it relates.
When two or more valid but differing instruments of proxy are delivered
for the same share for use at the same meeting, the one which is last
validly delivered (regardless of its date or the date of its execution)
shall be treated as replacing and revoking the other or others as regards
that share. Deposit of an instrument of proxy does not prevent a member
52
attending and voting in person at the meeting or an adjournment of the
meeting or on a poll in which case no proxy shall be entitled to attend or
vote in place of that member.
81. PROXY MAY JOIN IN DEMAND FOR POLL BUT NOT OTHERWISE SPEAK AT MEETING
An instrument appointing a proxy shall be deemed to include the right to
demand or join in demanding a poll but shall not confer any further right
to speak at the meeting, except with the permission of the chairman of the
meeting.
82. VALIDITY OF VOTES BY PROXIES
A vote cast by proxy shall not be invalidated by the previous death or
insanity of the principal or by the revocation of the appointment of the
proxy or of the authority under which the appointment was made provided
that no intimation in writing of such death, insanity or revocation shall
have been received by the Company at the Transfer Office at least one hour
before the commencement of the meeting or (in the case of a poll taken
other than at or on the same day as the meeting or adjourned meeting) the
time appointed for the taking of a poll at which the vote is cast.
CORPORATIONS ACTING BY REPRESENTATIVES
F.83 .
(A) REQUIREMENTS FOR APPOINTMENT OF REPRESENTATIVE BY CORPORATION
Any corporation which is a member of the Company may, in accordance
with the provisions of section 375(1)(a) of the Act, by resolution
of its directors or other governing body authorise such person as it
thinks fit to act as its representative at any meeting of the
Company or of any class of members of the Company. A Director, the
Secretary or other person authorised for the purpose by the
Secretary may require the representative to produce a certified copy
of the resolution of authorisation before permitting him to exercise
his powers.
(B) REPRESENTATIVES OF FOUNDERS SHARE COMPANY
A person who in accordance with the Articles of Association of the
Founders Share Company from time to time in force is deemed to be
such a representative as aforesaid shall be treated as such for the
purposes of these Regulations.
(C) POWERS OF REPRESENTATIVES OF CORPORATIONS
Any person so authorised or treated as so authorised shall be
entitled to exercise the same powers on behalf of such corporation
as the corporation could exercise if it were an individual member of
the Company and such corporation shall for the purposes of these
Regulations be deemed to be present in person at any such meeting if
a person so authorised or treated as so authorised is present
thereat.
53
DIRECTORS
84. NUMBER OF DIRECTORS
The Directors shall not be less than five nor more than fifteen in number,
but the Company in General Meeting may at any time and from time to time
by Ordinary Resolution alter the minimum number and/or the maximum number
of Directors.
85. NO SHARE QUALIFICATION - DIRECTORS MAY ATTEND AND SPEAK AT GENERAL
MEETINGS
A Director shall not be required to hold any shares of the Company by way
of qualification. A Director who is not a member of the Company shall
nevertheless be entitled to attend and speak at General Meetings.
86. REMUNERATION OF NON-EXECUTIVE DIRECTORS
Directors of the Company not holding executive office shall each be
entitled to ordinary remuneration of such sum as shall be determined
either before or after the adoption of these Regulations by an Ordinary
Resolution of the Company in General Meeting.
87. EXECUTIVE DIRECTORS - NUMBERS AND REMUNERATION
Any Director who holds an executive office (including for this purpose the
office of Chairman or Deputy Chairman whether or not such office is held
in an executive capacity) may be paid such remuneration by way of salary,
commission or otherwise as the Directors may determine. Any other Director
who serves on any committee of the Directors or otherwise performs
services which in the opinion of the Directors are outside the ordinary
duties of a non-executive Director may be paid such remuneration, in
addition to his ordinary remuneration, by way of salary, commission or
otherwise as the Directors may determine. The maximum number of the
Directors who may hold an executive office shall be the maximum number of
Directors prescribed pursuant to Regulation 84 less five, provided that,
if at any time there are less than such maximum number of Directors, no
Director may be appointed who holds executive office or to an executive
office unless there are at least five Directors not holding any executive
office.
88. DIRECTORS' EXPENSES
The Directors may repay to any Director all such reasonable expenses as he
may incur in attending and returning from meetings of the Directors or of
any committee of the Directors or General Meetings or otherwise in or
about the business of the Company.
54
89. .
(A) POWERS TO GIVE PENSIONS TO DIRECTORS
The Directors shall have power to pay and agree to pay pensions or
other retirement, superannuation, death or disability benefits to
(or to any person in respect of) any Director or ex-Director and for
the purpose of providing any such pensions or other benefits to
contribute to any scheme or fund or to pay premiums.
(B) POWER TO ARRANGE DIRECTORS AND OFFICERS INSURANCE
Without prejudice to the provisions of Regulation 155 the Directors
shall have power to purchase and maintain insurance for or for the
benefit of any persons who are or were at any time directors,
officers or employees or auditors of the Company, or of any other
company which is its parent undertaking or in which the Company or
such parent undertaking or any of the predecessors of the Company or
of such parent undertaking has any interest whether direct or
indirect or which is in any way allied to or associated with the
Company, or of any subsidiary undertaking of the Company or of any
such other company, or who are or were at any time trustees of any
pension fund in which any employees of the Company or of any such
other company or subsidiary undertaking are interested, including
(without prejudice to the generality of the foregoing) insurance
against any liability incurred by such persons in respect of any act
or omission in the actual or purported execution and/or discharge of
their duties and/or in the exercise or purported exercise of their
powers and/or otherwise in relation to their duties, powers or
offices in relation to the Company or any such other company,
subsidiary undertaking or pension fund.
90. DIRECTORS MAY BE INTERESTED IN CONTRACTS WITH THE COMPANY AND IN COMPANIES
PARTY TO SUCH CONTRACTS
A Director may be party to or in any way interested in any contract or
arrangement or transaction to which the Company is a party or in which the
Company is in any way interested and he may hold and be remunerated in
respect of any office or place of profit (other than the office of Auditor
of the Company or any subsidiary undertaking thereof) under the Company or
any other company in which the Company is in any way interested and he (or
any firm of which he is a member) may act in a professional capacity for
the Company or any such other company and be remunerated therefor and in
any such case as aforesaid (save as otherwise agreed) he may retain for
his own absolute use and benefit all profits and advantages accruing to
him thereunder or in consequence thereof.
91. .
(A) DIRECTORS MAY APPOINT MANAGING DIRECTOR
55
The Directors may from time to time appoint (subject to the
provisions of Regulation 87) one or more of their body to be the
holder of any executive office (including, where considered
appropriate, the office of Managing or Joint Managing or Deputy or
Assistant Managing Director or Chief Executive) on such terms and
for such periods as they may (subject to the provisions of the
Statutes) determine and, without prejudice to the terms of any
contract entered into in any particular case, may at any time revoke
any such appointment.
(B) APPOINTMENT AS MANAGING DIRECTOR TO CEASE WITH DIRECTORSHIP
The appointment of any Director to the office of Managing or Joint
Managing or Deputy or Assistant Managing Director or Chief Executive
shall automatically determine if he ceases to be a Director but
without prejudice to any claim for damages for breach of any
contract of service between him and the Company.
(C) APPOINTMENT TO ANY OTHER EXECUTIVE OFFICE NOT TO CEASE WITH
DIRECTORSHIP UNLESS CONTRACT SO PROVIDES
The appointment of any Director to any other executive office shall
not automatically determine if he ceases from any cause to be a
Director, unless the contract or resolution under which he holds
office shall expressly state otherwise, in which event such
determination shall be without prejudice to any claim for damages
for breach of any contract of service between him and the Company.
92. DIRECTORS MAY DELEGATE POWERS TO EXECUTIVE DIRECTORS
The Directors may entrust to and confer upon any Director holding any
executive office any of the powers exercisable by them as directors upon
such terms and conditions and with such restrictions as they think fit,
and either collaterally with or to the exclusion of their own powers, and
may from time to time revoke, withdraw, alter or vary all or any of such
powers.
APPOINTMENT, RETIREMENT AND REMOVAL OF DIRECTORS
93. SECTION 293 TO APPLY TO THE COMPANY
The provisions of section 293 of the Act shall apply to the Company.
94. VACATION OF OFFICE AS DIRECTOR:
The office of a Director shall be vacated in any of the following events,
namely:-
(A) IF PROHIBITED FROM ACTING BY LAW:
If he shall become prohibited by law from acting as a Director;
56
(B) ON RESIGNATION:
If he shall resign by writing under his hand left at the Office or
if he shall in writing offer to resign and the Directors shall
resolve to accept such offer;
(C) ON INSOLVENCY:
If he shall have a receiving order made against him or shall
compound with his creditors generally or shall apply to the court
for an interim order under section 253 of the Insolvency Act 1986 in
connection with a voluntary arrangement under that Act;
(D) AS A CONSEQUENCE OF MENTAL DISORDER:
If in England or elsewhere an order shall be made by any court
claiming jurisdiction in that behalf on the ground (however
formulated) of mental disorder for his detention or for the
appointment of a guardian or for the appointment of a receiver or
other person (by whatever name called) to exercise powers with
respect to his property or affairs; and/or
(E) ON REMOVAL BY CO-DIRECTORS:
If he shall be removed from office by notice in writing served upon
him signed by all his co-Directors, but so that if he holds an
appointment to an executive office which thereby automatically
determines such removal shall be deemed an act of the Company and
shall have effect without prejudice to any claim for damages for
breach of any contract of service between him and the Company.
95. DIRECTORS TO RETIRE BY ROTATION
At each Annual General Meeting of the Company one-third of the Directors
for the time being (or, if their number is not a multiple of three, the
number nearest to but not greater than one-third) shall retire from office
by rotation.
96. WHICH DIRECTORS TO RETIRE
The Directors to retire by rotation shall include or comprise any Director
who is due to retire at the meeting by reason of age or who wishes to
retire and not to offer himself for re-election. Any further Directors so
to retire shall be those of the Directors who have been longest in office
since their last re-election or appointment and so that as between persons
who become or were last re-elected Directors on the same day those to
retire shall (unless they otherwise agree among themselves) be determined
by lot. A retiring Director shall be eligible for re-election.
57
97. APPOINTMENT OF DIRECTORS BY COMPANY
The Company at the meeting at which a Director retires under any provision
of these Regulations may by Ordinary Resolution fill the office being
vacated by electing thereto the retiring Director or some other person
eligible for appointment. In default the retiring Director shall be deemed
to have been re-elected except in any of the following cases:-
(1) Where at such meeting it is expressly resolved not to fill such office
or a resolution for the re-election of such Director is put to the
meeting and lost;
(2) Where such Director has given notice in writing to the Company that he
is unwilling to be re-elected;
(3) Where the default is due to the moving of a resolution in
contravention of the next following Regulation;
(4) Where such Director has attained any retiring age applicable to him as
Director.
The retirement shall not have effect until the conclusion of the meeting
except where a resolution is passed to elect some other person in the place
of the retiring Director or a resolution for his re-election is put to the
meeting and lost and accordingly a retiring Director who is re-elected or
deemed to have been re-elected will continue in office without a break.
98. RESOLUTIONS TO APPOINT TWO OR MORE DIRECTORS TO BE SUBJECT TO CONSENT OF
GENERAL MEETING
A resolution for the appointment of two or more persons as Directors by a
single resolution shall not be moved at any General Meeting unless a
resolution that it shall be so moved has first been agreed to by the
meeting without any vote being given against it; and any resolution moved
in contravention of this Regulation shall be void.
99. NOTICE OF CANDIDATURE FOR DIRECTORSHIP
No person other than a Director retiring at the meeting shall, unless
recommended by the Directors for election, be eligible for appointment as
a Director at any General Meeting unless not less than seven nor more than
forty two days (inclusive of the date on which the notice is given) before
the date appointed for the meeting there shall have been lodged at the
Office notice in writing signed by some member (other than the person to
be proposed) duly qualified to attend and vote in respect of the
appointment of such person at the meeting concerned or by the Founders
Share Company of his or its intention to propose such person for election
and also notice in writing signed by the person to be proposed of his
willingness to be appointed or reappointed.
58
100. COMPANY MAY REMOVE AND REPLACE DIRECTORS BY ORDINARY RESOLUTION
The Company may, in accordance with and subject to the provisions of the
Statutes, by Ordinary Resolution of which special notice has been given
remove any Director from office (notwithstanding any provision of these
Regulations or of any agreement between the Company and such Director, but
without prejudice to any claim he may have for damages for breach of any
such agreement) and appoint another person to be a Director in place of
the Director so removed from office and any person so appointed shall be
treated for the purpose of determining the time at which he or any other
Director is to retire by rotation as if he had become a Director on the
day on which the Director in whose place he is appointed was last elected
such a Director. In default of such appointment the vacancy arising upon
the removal of a Director from office may be filled as a casual vacancy.
101. COMPANY AND DIRECTORS MAY FILL CASUAL VACANCIES AND APPOINT ADDITIONAL
DIRECTORS
Subject to the maximum numbers of Directors and of Directors who may hold
an executive office fixed by or in accordance with these Regulations:-
(1) the Company may by Ordinary Resolution appoint any person to be a
Director either to fill a casual vacancy or as an additional
Director; and
(2) without prejudice to paragraph (1) above the Directors may at any
time appoint any person to be a Director either to fill a casual
vacancy or as an additional Director.
Any person so appointed by the Directors shall hold office only until the
next Annual General Meeting and shall then be eligible for re-election,
but he shall not be taken into account in determining the number of
Directors who are to retire by rotation at such meeting.
ALTERNATE DIRECTORS
102. .
(A) DIRECTORS MAY APPOINT ALTERNATES
Any Director may at any time in writing under his hand and deposited at
the Office, or delivered at a meeting of the Directors, appoint any person
(including another Director) to be his alternate Director and may in like
manner at any time terminate such appointment. Such appointment, unless
previously approved by the Directors, shall have effect only upon and
subject to being so approved.
(B) ALTERNATESHIPS TO DETERMINE WITH DIRECTORSHIP OF APPOINTOR
59
The appointment of an alternate Director shall determine on the happening
of any event which if he were a Director would cause him to vacate such
office or if his appointor ceases to be a Director.
(C) RIGHTS AND POWERS OF ALTERNATES
An alternate Director shall be entitled to receive notices of
meetings of the Directors and shall be entitled to attend and vote
as a Director at any such meeting at which the Director appointing
him is not personally present and generally at such meeting to
perform all functions of his appointor as a Director and for the
purposes of the proceedings at such meeting the provisions of these
Regulations shall apply as if he (instead of his appointor) were a
Director. If he shall be himself a Director or shall attend any such
meeting as an alternate for more than one Director, his voting right
shall be cumulative. To such extent as the Directors may from time
to time determine in relation to any committees of the Directors the
foregoing provisions of this paragraph shall also apply to any
meeting of any such committee of which his appointor is a member. An
alternate Director shall not (save as aforesaid) have power to act
as a Director nor shall he be deemed to be a Director for the
purposes of these Regulations.
(D) ALTERNATES MAY BE INTERESTED IN CONTRACTS, BE PAID EXPENSES AND BE
INDEMNIFIED
An alternate Director shall be entitled to contract and be
interested in and benefit from contracts or arrangements or
transactions and to be repaid expenses and to be indemnified to the
same extent as if he were a Director but he shall not be entitled to
receive from the Company in respect of his appointment as alternate
Director any remuneration except only such part (if any) of the
remuneration otherwise payable to his appointor as such appointor
may by notice in writing to the Company from time to time direct.
MEETINGS AND PROCEEDINGS OF DIRECTORS
103. .
(A) DIRECTORS MAY MEET AND REGULATE PROCEEDINGS - DETERMINING
RESOLUTIONS
Subject to the provisions of these Regulations the Directors may
meet together for the despatch of business, adjourn and otherwise
regulate their proceedings as they think fit. Without prejudice to
the generality of the foregoing, the Directors may determine by
resolution (a "DETERMINING RESOLUTION") that questions on certain
matters may only be determined by a special majority of votes. To be
valid a resolution varying or revoking a determining resolution will
require the same special majority of votes as is required to
determine questions on matters which are the subject of the
determining resolution.
60
(B) DIRECTORS MAY SUMMON MEETINGS OF DIRECTORS
At any time any Director may, and the Secretary on the requisition
of a Director shall, summon a meeting of the Directors. Any Director
may waive notice of any meeting and any such waiver may be
retroactive.
104. QUORUM FOR DIRECTORS' MEETINGS
The quorum necessary for the transaction of the business of the Directors
may be fixed from time to time by the Directors and unless so fixed at any
other number shall be five. A meeting of the Directors at which a quorum
is present shall be competent to exercise all powers and discretions from
time to time exercisable by the Directors.
105. QUESTIONS TO BE DETERMINED BY MAJORITY VOTING
Subject to Regulations 103 and 109, questions arising at any meeting of
the Directors shall be determined by a majority of votes.
106. .
(A) DIRECTORS' INTERESTS IN CONTRACTS - GENERAL PROHIBITION ON VOTING
Save as herein provided, a Director shall not vote in respect of any
contract or arrangement or any other proposal whatsoever in which he
has an interest which (together with any interest of any person
connected with him within the meaning of section 346 of the Act) is,
to his knowledge, a material interest, otherwise than by virtue of
his interests in shares or debentures or other securities of or
otherwise in or through the Company.
(B) EXCEPTIONS TO PROHIBITION ON VOTING
Subject to the provisions of the Statutes a Director shall (in the
absence of some other material interest than is indicated below) be
entitled to vote in respect of any resolution concerning any of the
following matters, namely:-
(1) The giving of any guarantee, security or indemnity to him in
respect of money lent or obligations incurred by him or any
other person at the request of or for the benefit of the
Company or any of its subsidiary undertakings;
(2) The giving of any guarantee, security or indemnity to a third
party in respect of a debt or obligation of the Company or any
of its subsidiary undertakings for which he himself has
assumed responsibility in whole or in part under a guarantee
or indemnity or by the giving of security;
(3) Any proposal concerning an offer of shares or debentures or
other securities of or by the Company or any of its subsidiary
undertakings for subscription or purchase in which offer he is
or may be entitled to participate as a holder of securities or
61
is to be interested as a participant in the underwriting or
sub-underwriting thereof;
(4) Any proposal concerning any other company in which he is
interested, directly or indirectly and whether as an officer
or shareholder or otherwise howsoever, provided that he
(together with persons connected with him within the meaning
of section 346 of the Act) does not to his knowledge hold an
interest in shares (as that term is used in sections 198 to
211 of the Act) representing one per cent. or more of the
issued shares of any class of such company (or of any third
company through which his interest is derived) or of the
voting rights available to members of the relevant company
(any such interest being deemed for the purpose of this
Regulation to be a material interest in all circumstances);
and/or
(5) Any proposal concerning the adoption, modification or
operation of any pension, superannuation or similar scheme or
retirement, death or disability benefits scheme or Employees'
Share Scheme which has been approved by the Inland Revenue or
is conditional upon such approval or does not award him any
privilege or benefit not awarded to the employees to whom such
scheme relates; and/or
(6) Any proposal concerning any insurance which the Company is
empowered to purchase and/or maintain for or for the benefit
of any Directors of the Company or for persons who include
Directors of the Company.
(C) DIRECTORS VOTING ON EXECUTIVE APPOINTMENTS
Where proposals are under consideration concerning the appointment
(including fixing or varying the terms of the appointment) of two or
more Directors to offices or employments with the Company or any
company in which the Company is interested, such proposals may be
divided and considered in relation to each Director separately and
in such case each of the Directors concerned (if not debarred from
voting under paragraph (B)(4) of this Regulation) shall be entitled
to vote in respect of each resolution except that concerning his own
appointment.
(D) CHAIRMAN TO RULE ON MATERIALITY OF A DIRECTOR'S INTEREST
If any question shall arise at any time as to the materiality of a
Director's interest or as to the entitlement of any Director (other
than the chairman of the meeting) to vote and such question is not
resolved by his voluntarily agreeing to abstain from voting, such
question shall be referred to the chairman of the meeting and his
ruling in relation to any other Director shall be final and
62
conclusive except in a case where the nature or extent of the
interest of such Director has not been fairly disclosed.
(E) DIRECTORS TO RESOLVE AS TO THE MATERIALITY OF A CHAIRMAN'S INTEREST
If any question shall arise at any time as to the materiality of the
interest of the chairman of the meeting or as to the entitlement of
the chairman to vote and such question is not resolved by his
voluntarily agreeing to abstain from voting, such question shall be
decided by resolution of the Directors or committee members present
at the meeting (excluding the chairman) whose majority vote shall be
final and conclusive, except in a case where the nature or extent of
the interest of the chairman has not been fairly disclosed.
(F) INTERESTS OF THE APPOINTOR OF AN ALTERNATE TO BE TREATED AS THE
INTERESTS OF THE ALTERNATE
For the purposes of this Regulation, in relation to an alternate
Director, the interest of his appointor shall be treated as the
interest of the alternate Director in addition to any interest which
the alternate Director otherwise has. This Regulation applies to an
alternate Director as if he were a Director otherwise appointed.
107. DIRECTORS MAY ACT NOTWITHSTANDING VACANCIES - LIMITED POWERS IF BELOW
MINIMUM NUMBER
The continuing Directors may act notwithstanding any vacancies, but if and
so long as the number of Directors is reduced below the minimum number
fixed by or in accordance with these Regulations the continuing Directors
or Director may act for the purpose of filling such vacancies or of
summoning General Meetings, but not for any other purpose. If there be no
Directors or Director able or willing to act, then any two members may
summon a General Meeting for the purpose of appointing Directors.
108. .
(A) CHAIRMANSHIP OF DIRECTORS
The Directors may elect from their number a Chairman and a Deputy
Chairman (or two or more Deputy Chairmen) and determine the period
for which each is to hold office. If no Chairman or Deputy Chairman
shall have been appointed or if at any meeting of the Directors no
Chairman or Deputy Chairman shall be present within five minutes
after the time appointed for holding the meeting, the Directors
present may choose one of their number to be chairman of the
meeting.
(B) RIGHTS OF DEPUTY CHAIRMEN TO ACT
63
If at any time there is more than one Deputy Chairman the right in
the absence of the Chairman to preside at a meeting of the Directors
or of the Company shall be determined as between the Deputy Chairmen
present (if more than one) by seniority in length of appointment or
otherwise as resolved by the Directors.
109. .
(A) RESOLUTIONS OF DIRECTORS IN WRITING
A resolution in writing of the Directors shall be as valid and
effectual as if it had been passed at a meeting of Directors duly
convened and held where:
(i) the resolution is signed or approved by all the Directors, in
which case the resolution shall have effect at the time and
date when the resolution is last signed or approved by a
Director; or
(ii)
(a) the resolution has been served on all the Directors and
alternate Directors entitled to receive notice of a
meeting of Directors (being at least such number of
Directors as would constitute a quorum of a meeting of
Directors);
(b) the resolution is signed or approved in accordance with
paragraph (B) below by three-quarters of the Directors
who would be entitled to vote on the resolution if it
were considered at a meeting of Directors (or, if their
number is not a multiple of four, the number nearest to
but not less than three-quarters); and
(c) no Director has within forty-eight hours of the time
(the "SERVICE TIME") at which the resolution is served
on him, or deemed to have been served on him in
accordance with paragraph (E) below, notified the
Secretary that he requires the resolution to be
considered by a meeting of Directors,
in which case the resolution shall, subject to the terms of the
resolution, have effect at the expiry of the later of (aa) the
period of forty-eight hours following the service time in respect of
the Director or alternate Director on whom the resolution is served
or deemed to have been served last, (bb) the date and time when the
resolution is signed or approved by the last Director required to
constitute the necessary majority.
(B) FORM OF WRITTEN RESOLUTIONS
64
Such a written resolution may consist of several documents in like
form, each signed by one or more Directors, and/or may be approved
by one or more Directors by one or more telex, facsimile or
electronic mail messages sent to the Secretary by them or at their
request and specifically identifying the resolution seen and
approved by them.
(C) POWERS OF ALTERNATES AS TO WRITTEN RESOLUTIONS
If the appointor of an alternate Director is for the time being
absent from the United Kingdom or temporarily unable to act through
ill-health or disability the signature or approval of his alternate
Director to any resolution in writing of the Directors or his
alternate Director notifying the Secretary pursuant to paragraph
(A)(ii)(c) above that he requires any such resolution to be
considered by a meeting of Directors, shall be as effective as the
signature, approval or notification of his appointor for all
purposes under this Regulation.
(D) RESOLUTIONS IN WRITING BY COMMITTEES
This Regulation shall also apply to resolutions in writing of a
committee of the Directors in which case each reference in this
Regulation to a Director or Directors should be read as a reference
to a member or members of the committee, each reference in this
Regulation to an alternate Director or alternate Directors should be
read as a reference to an alternate Director or alternate Directors
appointed by a Director or Directors who is or are a member or
members of the committee and each reference in this Regulation to a
meeting or meetings of the Directors should be read as a reference
to a meeting or meetings of the committee.
(E) SERVICE ON DIRECTORS OF RESOLUTIONS TO BE PASSED IN WRITING
Any resolution required under paragraph (A)(ii) above to have been
served on a Director or alternate Director shall be delivered
personally or sent by facsimile, telex, electronic mail or pre-paid
first class post (air mail if overseas) to the facsimile or telex
number or address to which notices of a meeting of Directors may be
properly served on such person in accordance with the Regulations
prescribed by the Directors from time to time pursuant to Regulation
103 or, if the Director or alternate Director has otherwise notified
the Secretary of another facsimile or telex number or address or
electronic mail address anywhere in the world for the service of
such resolutions or notices during a specified or indefinite period,
during such period to such number or address and, in the absence of
evidence of earlier receipt, the resolution shall be deemed to have
been duly given (a) if delivered personally, when left with the
Director or alternate Director or at such address; (b) if sent by
facsimile, on completion of its transmission; (c) if sent by telex,
when the proper answer-back is received; (d) if sent by electronic
65
mail receipt requested, when the receipt is received by the sender
of the resolution; (e) if sent by post other than air mail,
twenty-four hours after posting it; and (f) if sent by air mail, six
days after posting it.
F.110 DIRECTORS MAY DELEGATE TO COMMITTEES
The Directors may delegate any of their powers or discretions to
committees consisting of one or more members of their body and (if thought
fit) one or more other persons co-opted as hereinafter provided. Any
committee so formed shall in the exercise of the powers so delegated
conform to any Regulations which may from time to time be imposed by the
Directors. Any such Regulations may provide for or authorise the co-option
to the committee of persons other than Directors and for such co-opted
members to have voting rights as members of the committee.
111. MEETINGS AND PROCEEDINGS OF COMMITTEES
The meetings and proceedings of any such committee consisting of two or
more members shall be governed by the provisions of these Regulations
regulating the meetings and proceedings of the Directors, so far as the
same are not superseded by any Regulations made by the Directors under
Regulation F.110. To the extent that any such power or discretion is so
delegated any reference in these Regulations to the exercise by the
Directors of such power or discretion shall be read and construed as if it
were a reference to such committee.
112. .
(A) VALIDITY OF ACTS OF DIRECTORS OR COMMITTEES
All acts done by any meeting of Directors, or of any such committee,
or by any person acting as a Director or as a member of any such
committee, shall as regards all persons dealing in good faith with
the Company, notwithstanding that there was some defect in the
appointment of any of the persons acting as aforesaid, or that any
such persons were disqualified or had vacated office, or were not
entitled to vote, be as valid as if every such person had been duly
appointed and was qualified and had continued to be a Director or
member of the committee and had been entitled to vote.
(B) PARTICIPATION IN MEETINGS BY AUDIO-VISUAL MEANS
A Director or his alternate Director may participate in a meeting of
the board or a committee of the board through the medium of
conference telephone, video conferencing or similar form of
communication equipment if all persons participating in the meeting
are able to hear and speak to each other throughout the meeting. A
person participating in this way is deemed to be present in person
at the meeting and is counted in a quorum and entitled to vote.
Subject to the Statutes, all business transacted in this way by the
board or a committee of the board is for the purposes of these
Regulations deemed to be validly and effectively transacted at a
66
meeting of the board or a committee of the board although fewer than
two Directors or alternate Directors are physically present at the
same place. The meeting is deemed to take place where the largest
group of those participating is assembled or, if there is no such
group, where the chairman of the meeting then is.
BORROWING POWERS
113 .
(A) DIRECTORS MAY EXERCISE BORROWING POWERS OF COMPANY
Subject to the following provisions in this Regulation 113, the
Directors may exercise all the powers of the Company to borrow money
and to mortgage or charge all or part of the undertaking, property
and assets (present or future) and uncalled capital of the Company
and, subject to the Statutes, to issue debentures and other
securities, whether outright or as collateral security for a debt,
liability or obligation of the Company or of a third party.
(B) LIMIT ON EXERCISE OF BORROWING POWERS
The Directors shall restrict the borrowings of the Company and shall
exercise all voting and other rights or powers of control
exercisable by the Company in relation to its subsidiary
undertakings so as to ensure (as regards subsidiary undertakings, to
the extent possible) that the aggregate principal amount outstanding
in respect of moneys borrowed by the Reuters Group does not at any
time without the previous sanction of an Ordinary Resolution of the
Company exceed a sum equal to the higher of two and a half times the
Adjusted Capital and Reserves and (pound)5,000 million (or its
equivalent from time to time) or such greater amount as the Company
in general meeting may decide.
(C) DEFINITION OF "ADJUSTED CAPITAL AND RESERVES"
In this Regulation the expression "ADJUSTED CAPITAL AND RESERVES"
means at any material time a sum equal to the aggregate of:-
(1) the amount paid up (or credited as or deemed to be paid up) on
the issued share capital of the Company;
(2) the amount standing to the credit of the capital and revenue
reserves of the Reuters Group (including without limitation
any share premium account or capital redemption reserve) after
adding thereto or deducting therefrom any balance outstanding
to the credit or debit of the profit and loss account or any
reserve of the Reuters Group; and
67
(3) the amount standing to the credit of the revaluation reserves
of the Reuters Group (in accordance with Schedule 4 of the
Act);
based on a consolidation of the then latest audited balance sheet of
the Reuters Group, after excluding reserves and any balances on
profit and loss account of companies other than members of the
Reuters Group and after:-
(a) making such adjustments as may be appropriate in respect of
any variation in the amount of such paid up share capital or
any such capital reserves subsequent to the relevant balance
sheet date; and so that for the purpose of making such
adjustments, if any issue or proposed issue of shares by the
Company for cash has been underwritten, then such shares shall
be deemed to have been issued and the amount (including any
premium) of the subscription moneys payable in respect thereof
(not being moneys payable later than six months after the date
of allotment) shall, to the extent so underwritten be deemed
to have been paid up on the date when the issue of such shares
was underwritten (or, if such underwriting was conditional, on
the date when it became unconditional);
(b) making such adjustments as may be appropriate in respect of
any distributions declared, recommended or made by the Company
or its subsidiary undertakings (otherwise than attributable
directly or indirectly to the Company) out of profits earned
up to and including the date of the latest audited balance
sheet of the Company or its subsidiary undertakings (as the
case may be) to the extent that such distribution is not
provided for in such balance sheet;
(c) making such adjustments as may be appropriate in respect of
any variation in the interests of the Company in its
subsidiary undertakings since the date of the last audited
balance sheet of the Company;
(d) making such adjustments, if the calculation is required for
the purposes of or in connection with a transaction under or
in connection with which any company is to become or cease to
be a subsidiary undertaking, as would be appropriate if such
transaction had been carried into effect;
(e) adding back an amount equal to the value of any goodwill
arising on acquisitions made after 1 January 1990 and written
off against reserves of the Reuters Group in such
consolidation provided that an amount equal to only such part
of such goodwill shall be added back which would have remained
unamortised had such goodwill been written off in accordance
with United States generally accepted accounting principles;
and
68
(f) excluding minority interests in subsidiary undertakings.
The determination of the Auditors as to the amount of the Adjusted
Capital and Reserves at any time shall be conclusive and binding on
all concerned, and for the purposes of their computation, the
Auditors may at their discretion make such further adjustments (if
any) as they think fit. Nevertheless, for the purposes of this
Regulation, the Directors may act in reliance on a bona fide
estimate of the amount of the Adjusted Capital Reserves at any time
and, if in consequence the limit hereinbefore contained is
inadvertently exceeded, an amount of borrowed moneys equal to the
excess may be disregarded until the expiration of three months after
the date on which by reason of a determination of the Auditors or
otherwise the Directors become aware that such a situation has or
may have arisen.
(D) INTERPRETATION OF REGULATION 113
For the purpose of the foregoing limit the following provisions
shall apply:-
(1) there shall be deemed, subject as hereinafter provided, to
have been borrowed and to be outstanding as borrowed moneys of
the relevant member of the Reuters Group (to the extent that
the same would not otherwise fall to be taken into account):-
(a) the principal amount of all debentures of any member of
the Reuters Group which are not for the time being
beneficially owned within the Reuters Group;
(b) the outstanding amount of acceptances (not being
acceptances of trade bills in respect of the purchase or
sale of goods in the ordinary course of trading) by any
member of the Reuters Group or by any bank or accepting
house under any acceptance credit opened on behalf of
and in favour of any member of the Reuters Group;
(c) the nominal amount of any issued and paid up share
capital (other than equity share capital) of any
subsidiary undertaking of the Company not for the time
being beneficially owned by other members of the Reuters
Group;
(d) the nominal amount of any other issued and paid up share
capital and the principal amount of any other debentures
or other borrowed moneys (not being shares or debentures
which or borrowed moneys the indebtedness in respect of
which is for the time being beneficially owned within
the Reuters Group) the redemption or repayment whereof
is guaranteed or wholly or partly secured by any member
of the Reuters Group;
69
(e) any fixed or minimum premium payable on final redemption
or repayment of any debentures, share capital or other
borrowed moneys falling to be taken into account;
(2) moneys borrowed by any member of the Reuters Group for the
purpose of repaying or redeeming (with or without premium) in
whole or in part any other borrowed moneys falling to be taken
into account and intended to be applied for such purpose
within six months after the borrowing thereof shall not during
such period, except to the extent so applied, themselves be
taken into account;
(3) any amounts borrowed by any member of the Reuters Group from
bankers or others for the purpose of financing any contract up
to an amount not exceeding that part of the price receivable
under such contract which is guaranteed or insured by the
Export Credits Guarantee Department or other like institution
carrying on a similar business shall be deemed not to be
borrowed moneys;
(4) moneys borrowed by a partly owned subsidiary undertaking and
not owing to another member of the Reuters Group shall be
taken into account subject to the exclusion of a proportion
thereof equal to the minority proportion and moneys borrowed
and owing to a partly owned subsidiary undertaking by another
member of the Reuters Group shall be taken into account to the
extent of a proportion thereof equal to the minority
proportion; for the purposes aforesaid "minority proportion"
shall mean the proportion of the issued equity share capital
of such partly owned subsidiary undertaking which is not
attributable to the Company;
(5) borrowed moneys of any member of the Reuters Group expressed
in or calculated by reference to a currency other than
sterling shall be translated into sterling by reference to the
rate of exchange used for the conversion of such currency in
the latest audited balance sheet of the relevant member of the
Reuters Group or, if the relevant currency was not thereby
involved, by reference to the rate of exchange or approximate
rate of exchange ruling on such date and determined on such
basis as the Auditors may determine or approve.
(D) In establishing the amounts of all monies borrowed by the Reuters
Group referred to in this Regulation 113 there shall be set against
the gross borrowings of the Reuters Group cash deposits (including
certificates of deposit and similar instruments having a maturity of
less than one year), and other marketable investments of the Reuters
Group (other than shares in the Company and investments held by a
company in the Reuters Group in a capacity other than for its own
account or for that of any other undertaking in the Reuters Group).
70
(E) No person dealing with the Company or any of its subsidiary
undertakings shall be concerned to see or enquire whether the said
limit is observed and no debt incurred or security given in excess
of such limit shall be invalid or ineffectual unless the lender or
the recipient of the security had, at the time when the debt was
incurred or security given, express notice that the said limit had
been or would thereby be exceeded.
(F) If a Director or other employee of the Company or any of its
subsidiary undertakings so authorised by the Directors confirms in
writing that a particular borrowing or grant of security will not
cause the said limit to be exceeded, such certificate shall be
conclusive for all purposes and may be relied on by the recipient
for all purposes.
POWERS AND DUTIES OF DIRECTORS
F.114 DIRECTORS TO OBSERVE REUTER TRUST PRINCIPLES
The Directors shall in the performance of their functions have due regard
to the principles set out in sub-paragraphs (1) to (5) below in so far as
by the proper exercise of their powers as Directors (including the proper
exercise of all such powers as they may have to control the affairs of all
undertakings which shall from time to time be subsidiary undertakings of
the Company) and in accordance with their other duties as Directors of the
Company those principles are capable of being observed by the Directors:-
(1) that Reuters shall at no time pass into the hands of any one
interest, group or faction;
(2) that the integrity, independence and freedom from bias of Reuters
shall at all times be fully preserved;
(3) that Reuters shall supply unbiased and reliable news services to
newspapers, news agencies, broadcasters and other media subscribers
and to businesses, governments, institutions, individuals, and
others with whom Reuters has or may have contracts;
(4) that Reuters shall pay due regard to the many interests which it
serves in addition to those of the media; and
(5) that no effort shall be spared to expand, develop and adapt the news
and other services and products of Reuters so as to maintain its
leading position in the international news and information business.
71
115. BUSINESS AND POWERS OF COMPANY TO BE MANAGED AND EXERCISED BY DIRECTORS
The business and affairs of the Company shall be managed by the Directors,
who may exercise all such powers of the Company as are not by the Statutes
or by these Regulations required to be exercised by the Company in General
Meeting, subject nevertheless to any of these Regulations, to the
provisions of the Statutes and to such Regulations, being not inconsistent
with the aforesaid Regulations or provisions, as may be prescribed by
Special Resolution of the Company, but no Regulation so made by the
Company shall invalidate any prior act of the Directors which would have
been valid if such Regulation had not been made.
116. NON-LIMITATION OF REGULATION 115 POWERS BY OTHER AUTHORITIES OR POWERS
The general powers given by Regulation 115 shall not be limited or
restricted by any special authority or power given to the Directors by any
other Regulation.
117. DIRECTORS MAY ESTABLISH LOCAL BOARDS OR AGENCIES
The Directors may establish any local boards or agencies for managing any
of the affairs of the Company, either in the United Kingdom or elsewhere,
and may appoint any persons to be members of such local boards, or any
managers or agents, and may fix their remuneration, and may delegate to
any local board, manager or agent any of the powers, authorities and
discretions vested in the Directors, with power to sub-delegate, and may
authorise the members of any local boards, or any of them, to fill any
vacancies therein, and to act notwithstanding vacancies, and any such
appointment or delegation may be made upon such terms and subject to such
conditions as the Directors may think fit and the Directors may remove any
person so appointed, and may annul or vary any such delegation, but no
persons dealing in good faith and without notice of any such annulment or
variation shall be affected thereby.
118. DIRECTORS MAY APPOINT ATTORNEYS
The Directors may from time to time and at any time by power of attorney
or otherwise appoint any person or any fluctuating body of persons,
whether nominated directly or indirectly by the Directors, to be the
attorney or attorneys of the Company for such purposes and with such
powers, authorities and discretions (not exceeding those vested in or
exercisable by the Directors under these Regulations) and for such period
and subject to such conditions, as they may think fit, and any such power
of attorney may contain such provisions for the protection and convenience
of persons dealing with any such attorney as the Directors may think fit,
and may also authorise any such attorney to sub-delegate all or any of the
powers, authorities and discretions vested in him.
119. DIRECTORS MAY ELECT A PRESIDENT OF THE COMPANY
The Directors may from time to time elect a President of the Company and
may determine the period for which he shall hold office. Such President
72
may be either honorary or paid such remuneration as the Directors in their
discretion shall think fit, and need not be a Director but shall, if not a
Director, be entitled to receive notice of and attend and speak, but not
to vote, at all meetings of the Board of Directors.
120. MODE OF SIGNING CHEQUES AND OTHER INSTRUMENTS
All cheques, promissory notes, drafts, bills of exchange, and other
negotiable or transferable instruments, and all receipts for moneys paid
to the Company, shall be signed, drawn, accepted, endorsed, or otherwise
executed, as the case may be, in such manner as the Directors shall from
time to time by resolution determine.
REGISTERS
121. .
(A) ENTRIES ON REGISTERS OF NUMBERS OF UNCERTIFICATED SHARES AND
CERTIFICATED SHARES
Subject to the Statutes, the Company shall enter on the Register how
many Certificated Shares and Uncertificated Shares each member
holds.
(B) DIRECTORS MAY KEEP BRANCH REGISTERS
Subject to and to the extent permitted by the Statutes, the Company,
or the Directors on behalf of the Company, may cause to be kept in
any territory a branch Register of members resident in such
territory, and the Directors may make and vary such Regulations as
they think fit respecting the keeping of any such Register, provided
however that those members who hold Uncertificated Shares may not be
entered as holders of those shares on an overseas branch Register.
SECRETARY
122. DIRECTORS TO APPOINT AND MAY REMOVE SECRETARY; JOINT SECRETARIES AND
ASSISTANT SECRETARIES
The Secretary shall be appointed by the Directors on such terms and for
such period as they may think fit. Any Secretary so appointed may at any
time be removed from office by the Directors, but without prejudice to any
claim for damages for breach of any contract of service between him and
the Company. If thought fit two or more persons may be appointed as Joint
Secretaries. The Directors may also appoint from time to time on such
terms as they may think fit one or more Assistant Secretaries.
THE SEAL
123. .
(A) DIRECTORS' AUTHORITY REQUIRED FOR USE OF SEAL AND ANY SECURITIES
SEAL
73
The Directors shall provide for the safe custody of the Seal and any
Securities Seal and neither shall be used without the authority of
the Directors or of a committee authorised by the Directors in that
behalf.
(B) MODE OF AFFIXING SEAL AND SECURITIES SEAL
Each of the Seal and the Securities Seal may be properly affixed to
any document by impressing it by mechanical means or by printing it
or a facsimile of it on such document, or by applying it or a
facsimile of it by any other means to such document.
(C) SIGNING OF SEALED DOCUMENTS
Every instrument to which the Seal shall be affixed shall be signed
autographically by one Director and the Secretary or by two
Directors save that as regards any certificates for shares or
debentures or other securities of the Company the Directors may by
resolution determine that such signatures or either of them shall be
dispensed with or that facsimiles of such signatures or either of
them shall be printed or applied by any other means to any such
certificates.
(D) USE OF SECURITIES SEAL
The Securities Seal shall be used only for sealing securities issued
by the Company in certificated form and documents creating and
evidencing securities so issued. Any such securities or documents
sealed with the Securities Seal shall not require to be signed.
(E) EXECUTION OF DEEDS NOT UNDER SEAL
Where the Statutes so permit any instrument signed by one Director
and the Secretary or by two Directors and expressed to be executed
by the Company shall have the same effect as if executed under the
Seal.
(F) DEEDS TO BE AUTHORISED BY DIRECTORS
No instrument shall be signed pursuant to Regulation 123(E) which
makes it clear on its face that it is intended by the person or
persons making it to have effect as a deed without the authority of
the Directors or of a committee authorised by the Directors in that
behalf.
124. COMPANY MAY PROVIDE FOR AN OFFICIAL SEAL FOR USE ABROAD
The Company may exercise the powers conferred by the Statutes with regard
to having an official seal for use abroad and such powers shall be vested
in the Directors.
74
AUTHENTICATION OF DOCUMENTS
125. PROCEDURE FOR AND MANNER OF AUTHENTICATION OF DOCUMENTS
Any Director or the Secretary or any person appointed by the Directors for
the purpose shall have power to authenticate any documents affecting the
constitution of the Company and any resolutions passed by the Company or
the Directors or any committee, and any books, records, documents and
accounts relating to the business of the Company, and to certify copies
thereof or extracts therefrom as true copies or extracts; and where any
books, records, documents or accounts are elsewhere than at the Office the
local manager or other officer of the Company having the custody thereof
shall be deemed to be a person appointed by the Directors as aforesaid. A
document purporting to be a copy of a resolution, or an extract from the
minutes of the meeting, of the Company or of the Directors or any
committee which is certified as aforesaid shall be conclusive evidence in
favour of all persons dealing with the Company upon the faith thereof that
such resolution has been duly passed or, as the case may be, that any
minute so extracted is a true and accurate record of proceedings at a duly
constituted meeting.
RESERVES
126. DIRECTORS MAY CREATE RESERVES
The Directors may from time to time set aside out of the profits of the
Company and carry to reserve such sums as they think proper which, at the
discretion of the Directors, shall be applicable for any purpose to which
the profits of the Company may properly be applied and pending such
application may either be employed in the business of the Company or be
invested. The Directors may divide the reserve into such special funds as
they think fit and may consolidate into one fund any special funds or any
parts of any special fund into which the reserve may have been divided.
The Directors may also without placing the same to reserve carry forward
any profits. In carrying sums to reserve and in applying the same the
Directors shall comply with the provisions of the Statutes.
DIVIDENDS
127. COMPANY MAY DECLARE DIVIDENDS NOT EXCEEDING DIRECTORS' RECOMMENDATION
The Company may by Ordinary Resolution declare dividends but no such
dividend shall exceed the amount recommended by the Directors.
128. DIRECTORS MAY DECLARE AND PAY FIXED AND INTERIM DIVIDENDS
If and so far as in the opinion of the Directors the profits of the
Company justify such payments, the Directors may declare and pay fixed
dividends on any class of shares carrying a fixed dividend expressed to be
payable on fixed dates on the half yearly or other dates prescribed for
the payment thereof and may also from time to time declare and pay interim
75
dividends on shares of any class of such amounts and on such dates and in
respect of such periods as they think fit.
F.129 .
(A) DIVIDENDS TO BE PAID PRO RATA TO AMOUNTS PAID ON SHARES
Unless and to the extent that the rights attached to any shares or
the terms of issue thereof otherwise provide, all dividends shall
(as regards any shares not fully paid throughout the period in
respect of which the dividend is paid) be apportioned and paid pro
rata according to the amounts paid on the shares during any portion
or portions of the period in respect of which the dividend is paid.
For the purposes of this Regulation no amount paid on a share in
advance of calls shall be treated as paid on the share.
(B) DIRECTORS MAY PAY DIVIDENDS TO ADR CUSTODIANS IN CURRENCIES OTHER
THAN STERLING
The Directors may at their discretion make provision to enable such
ADR Custodian and/or member as they shall from time to time
determine to receive dividends duly declared in a currency or
currencies other than sterling. For the purposes of the calculation
of the amount receivable in respect of any dividend, the rate of
exchange to be used to determine the foreign currency equivalent of
any sum payable as a dividend shall be such market rate selected by
the Directors as they shall consider appropriate ruling at the close
of business (in London) on the date which is the business day last
preceding (a) in the case of a dividend to be declared by the
Company in General Meeting, the date on which the Directors publicly
announce their intention to recommend that specific dividend and (b)
in the case of any other dividend, the date on which the Directors
publicly announce their intention to pay that specific dividend.
130. DISTRIBUTABLE RESERVES
No dividend shall be paid otherwise than out of profits available for
distributions under the provisions of the Statutes.
131. PRE-ACQUISITION PROFITS DISTRIBUTABLE
Subject to the provisions of the Statutes, where any asset, business or
property is bought by the Company as from a past date the profits and
losses thereof as from such date may at the discretion of the Directors in
whole or in part be carried to revenue account and treated for all
purposes as profits or losses of the Company. Subject as aforesaid, if any
shares or securities are purchased cum dividend or interest, such dividend
or interest may at the discretion of the Directors be treated as revenue
and it shall not be obligatory to capitalise the same or any part thereof.
76
132. NO DIVIDENDS TO BEAR INTEREST AGAINST THE COMPANY
No dividend or other moneys payable on or in respect of a share shall bear
interest as against the Company.
133. .
(A) DIRECTORS MAY MAKE DEDUCTIONS FROM DIVIDENDS
The Directors may deduct from any dividend or other moneys payable
on or in respect of a share all sums of money (if any) presently due
and payable by the holder thereof to the Company on account of calls
or otherwise.
(B) DIRECTORS MAY RETAIN DIVIDENDS ON SHARES OF PERSONS ENTITLED BY
OPERATION OF LAW PENDING REGISTRATION
The Directors may retain the dividends payable upon shares in
respect of which any person is under the provisions as to the
transmission of shares hereinbefore contained entitled to become a
member, or which any person is under those provisions entitled to
transfer, until such person shall become a member in respect of such
shares or shall transfer the same.
134. WAIVERS OF DIVIDENDS
The waiver in whole or in part of any dividend on any share by any
document (whether or not under seal) shall be effective only if such
document is signed by the shareholder (or the person entitled to the share
in consequence of the death or bankruptcy of the holder) and delivered to
the Company and if or to the extent that the same is accepted as such or
acted upon by the Company.
135. .
(A) RETURNED OR UNCASHED DIVIDENDS
If, in respect of a dividend or other amount payable in respect of a
share on any one occasion:-
(1) a cheque, warrant or order is returned undelivered or left
uncashed, or
(2) a transfer made by a bank or other funds transfer system is
not accepted,
and reasonable enquiries have failed to establish another address or
account of the person entitled to the payment, the Company is not
obliged to send or transfer a dividend or other amount payable in
respect of that share to that person until he notifies the Company
of an address or account to be used for that purpose. If the cheque,
warrant or order is returned undelivered or left uncashed or
77
transfer not accepted on two consecutive occasions, the Company may
exercise this power without making any such enquiries.
(B) DIRECTORS NOT TRUSTEES OF UNCLAIMED DIVIDENDS
The payment by the Directors of any unclaimed dividend or other
moneys payable on or in respect of a share into a separate account
shall not constitute the Company a trustee in respect thereof and
any dividend unclaimed after a period of twelve years from the date
such dividend became due for payment shall be forfeited and shall
revert to the Company.
F.136 DIRECTORS MAY PAY DIVIDENDS IN KIND
The Company may with the prior written consent of the Founders Share
Company and upon the recommendation of the Directors by Ordinary
Resolution direct payment of a dividend in whole or in part by the
distribution of specific assets (and in particular of paid-up shares or
debentures of any other company) and the Directors shall give effect to
such resolution. Where any difficulty arises in regard to such
distribution, the Directors may settle the same as they think expedient
and in particular may issue fractional certificates, may fix the value for
distribution of such specific assets or any part thereof, may determine
that cash payments shall be made to any members upon the footing of the
value so fixed in order to adjust the rights of all parties and may vest
any such specific assets in trustees as may seem expedient to the
Directors.
137. .
(A) DELIVERY OF DIVIDENDS AND OTHER PAYMENTS
Any dividend or other moneys payable in cash or in respect of a
share may be paid (i) by cheque or warrant sent through the post to
the registered address of the member or person entitled thereto (or,
if two or more persons are registered as joint holders of the share
or are entitled thereto in consequence of the death or bankruptcy of
the holder, to any one of such persons) or to such person at such
address as such member or person or persons may by writing direct,
or (ii) by a bank or other funds transfer system to an account
designated in writing by the person entitled to the payment or (iii)
by such other method as the Directors may in their absolute
discretion think fit including but not limited to payments in
respect of Uncertificated Shares being made through the Relevant
System (subject always to the facilities and requirements of the
Relevant System, these Regulations and any other legal
requirements). Every such cheque or warrant shall be made payable to
the order of the person to whom it is sent or to such person as the
holder or joint holders or person or persons entitled to the share
in consequence of the death or bankruptcy of the holder may direct
and payment of the cheque or warrant by the banker upon whom it is
drawn shall be a good discharge to the Company. Every such cheque or
warrant shall be sent at the risk of the person entitled to the
78
money represented thereby. If payment is made by bank or other funds
transfer, or by another method at the direction of the person
entitled to payment, the Company is not responsible for amounts lost
or delayed in the course of transfer or in carrying out those
directions.
(B) PAYMENTS IN RESPECT OF SHARES
Notwithstanding any other provision of these Regulations relating to
payments in respect of shares, where:
(i) the Directors determine to make payments in respect of
Uncertificated Shares through the Relevant System, they may
also determine to enable any holder of Uncertificated Shares
to elect not to so receive payments through the Relevant
System and, in such event, establish procedures to enable such
holder to make, vary or revoke any such election; and
(ii) the Company receives an authority in respect of such payments
in respect of shares in a form satisfactory to it from a
holder of any share (whether such authority is given in
writing or by means of the Relevant System or otherwise), the
Company may make, or procure the making of, such payments in
accordance with such authority and any payment made in
accordance with such authority shall constitute a good
discharge therefor.
(C) PAYMENT OF FOREIGN CURRENCY DIVIDENDS TO ADR CUSTODIANS
Where an ADR Custodian approved by the Directors for the purposes of
this Regulation has elected or agreed pursuant to provision made
under these Regulations to receive dividends in a foreign currency
the Directors may in their discretion approve the entering into of
arrangements with such ADR Custodian to enable payment of the
dividend to be made to such ADR Custodian in such foreign currency
for value on the date on which the relevant dividend is paid, or
such later date as the Directors may determine.
138. RECEIPTS FOR DIVIDENDS TO JOINT HOLDERS
If two or more persons are registered as joint holders of any share, or
are entitled jointly to a share in consequence of the death or bankruptcy
of the holder, any one of them may give effectual receipts for any
dividend or other moneys payable or property distributable on or in
respect of the share.
F.139 DIVIDEND RESOLUTION MAY SPECIFY RECORD DATE AT ANY TIME
Any resolution declaring a dividend on shares of any class, whether a
resolution of the Company in General Meeting or a resolution of the
Directors, may specify that the same shall be payable to the persons
registered as the holders of such shares at the close of business on a
particular date, notwithstanding that it may be a date prior to that on
79
which the resolution is passed, and thereupon the dividend shall be
payable to them in accordance with their respective holdings so
registered, but without prejudice to the respective rights of transferors
and transferees of any such shares in respect of such dividend.
CAPITALISATION OF PROFITS AND RESERVES
140. DIRECTORS MAY MAKE CAPITALISATION ISSUES OF SHARES
Subject to the Statutes, the Directors may, with the sanction of an
Ordinary Resolution of the Company, capitalise any sum standing to the
credit of any of the Company's reserve accounts (including any share
premium account, capital redemption reserve, revaluation reserve pursuant
to Schedule 4 to the Act or other undistributable reserve) or any sum
standing to the credit of any profit and loss account by appropriating
such sum to the holders of each class of shares on the Register at the
close of business on the date of the Resolution (or such other date as may
be specified therein or determined as therein provided) in proportion to
their then holdings of shares of that class and applying such sum on their
behalf in paying up in full, subject to any special rights previously
conferred on any shares or class of share for the time being issued and
subject to the other provisions of these Regulations, unissued shares of
that class for allotment and distribution credited as fully paid up to and
amongst them as bonus shares in the proportion aforesaid but so that such
provisions shall not apply in respect of the Founders Share. The Directors
may do all acts and things considered necessary or expedient to give
effect to any such capitalisation, with full power to the Directors to
make such provisions as they think fit for any fractional entitlements
which would arise on the basis aforesaid (including provisions whereby
fractional entitlements are disregarded or the benefit thereof accrues to
the Company rather than to the members concerned). The Directors may
authorise any person to enter on behalf of the members interested into an
agreement with the Company providing for any such capitalisation and
matters incidental thereto and any agreement made under such authority
shall be effective and binding on all concerned.
SCRIP DIVIDENDS
141. .
(A) DIRECTORS MAY OFFER SHARES IN LIEU OF DIVIDENDS WITH AUTHORITY OF
ORDINARY RESOLUTION
The Directors may, with the prior sanction of an Ordinary Resolution
of the Company, offer the holders of Ordinary Shares the right to
elect to receive in respect of all or part of their holding of
Ordinary Shares, additional Ordinary Shares credited as fully paid
("additional Ordinary Shares") instead of cash in respect of all or
part of such dividend or dividends and (subject as hereinafter
provided) upon such terms and conditions and in such manner as may
be specified in such Ordinary Resolution.
80
(B) PERIOD AND OTHER TERMS OF AUTHORITY FOR SCRIP DIVIDENDS
The said Ordinary Resolution may specify that such right to elect
shall apply in respect of all or part of a particular dividend or in
respect of all or any dividends (or any part of such dividends)
declared or paid within a specified period but such period may not
end later than the date of the fifth Annual General Meeting next
following the date of the general meeting at which such Ordinary
Resolution is passed, subject nevertheless to the provisions of the
Statutes and provided nevertheless that the Directors may in their
absolute discretion if it shall in their opinion seem expedient
suspend or terminate (whether temporarily or otherwise) such right
to elect and may do such acts and things considered necessary or
expedient with regard to, or in order to effect, any such suspension
or termination.
(C) OFFER TO BE COMMUNICATED TO SHAREHOLDERS
When such right to elect is to be offered to holders of Ordinary
Shares pursuant to this Regulation, the Directors shall notify such
holders of the said right and shall make available or provide to
such holders forms or other method of election (in such form as the
Directors may approve) whereby such holders may exercise such right.
(D) NUMBER OF SHARES TO WHICH SHAREHOLDERS ENTITLED
Each holder of Ordinary Shares who elects to receive additional
Ordinary Shares shall be entitled to receive such number of
additional Ordinary Shares, calculated at the Relevant Price for
each such share, as is nearly as possible equal to (but not in
excess of) the cash amount of the relevant dividend which such
holder would otherwise have received. For the purposes of this
Regulation, the "Relevant Price" of an additional Ordinary Share
shall be such price as is equal to the average of the middle market
prices for the Ordinary Shares of the Company, ascertained by
reference to the Daily Official List of the London Stock Exchange
during the period of five dealing days commencing on the day when
such Ordinary Shares are first quoted "ex" the relevant dividend or
to the par value of an Ordinary Share (whichever is the higher).
(E) NO FRACTIONAL ENTITLEMENTS
The basis of allotment shall be such that no member may receive a
fraction of an Ordinary Share. The Directors may make such
provisions as they may think fit for any fractional entitlements
which may or would arise (including provisions whereby fractional
entitlements are disregarded or the benefit thereof accrues to the
Company rather than to the members concerned).
(F) DIRECTORS MAY CAPITALISE PROFITS AND RESERVES FOR ISSUE OF SCRIP
DIVIDENDS
81
Subject to any right of the Directors to retain any dividend or
other moneys payable on or in respect of shares pursuant to these
Regulations, the cash amount of a dividend on or in respect of an
Ordinary Share in respect whereof the holder thereof has made an
election pursuant to this Regulation shall not be payable and in
lieu thereof additional Ordinary Shares shall be allotted to such
holders on the basis of allotment hereinbefore specified. For such
purpose, the Directors may (without prejudice to their powers under
Regulation 140) capitalise out of such of the sums standing to the
credit of any of the Company's reserve accounts (including any share
premium account, capital redemption reserve or any other
undistributable reserve) or any of the profits available for
distribution under the provisions of the Statutes which would
otherwise have been applied in paying dividends in cash as the
Directors may determine a sum equal to the aggregate nominal amount
of the additional Ordinary Shares to be so allotted and shall apply
the same in paying up in full the appropriate number of unissued
Ordinary Shares for allotment and distribution credited as fully
paid to and amongst the relevant holders of Ordinary Shares. The
Directors may do all acts and things considered necessary or
expedient to give effect to any such capitalisation with full power
to the Directors to make such provisions as they think fit for any
fractional entitlements which would or might arise (including
provisions whereby fractional entitlements are disregarded or the
benefit thereof accrues to the Company rather than to the members
concerned). The Directors may authorise any person to enter on
behalf of all the members interested into an agreement with the
Company providing for any such capitalisation and matters incidental
thereto and any agreement made under such authority shall be
effective and binding on all concerned.
(G) SCRIP DIVIDEND SHARES TO RANK PARI PASSU WITH EXISTING SHARES
The additional Ordinary Shares so allotted shall rank pari passu in
all respects with the fully paid Ordinary Shares then in issue save
only as regards participation in the relevant dividend (or share
election in lieu).
(H) DIRECTORS MAY DETERMINE TERMS AND CONDITIONS OF OFFERS OF SCRIP
DIVIDENDS
Without prejudice to (but notwithstanding) the foregoing provisions
of this Regulation, the Directors may on any occasion determine that
such rights of election shall be subject to such exclusions or other
arrangements as the Directors may deem necessary or expedient in
relation to any legal or practical problems under the laws of, or
the requirements of any recognised regulatory body or any stock
exchange in, any territory.
ACCOUNTS
82
142. ACCOUNTING RECORDS TO BE KEPT AT OFFICE; MEMBERS' RIGHT OF INSPECTION
Accounting records sufficient to show and explain the Company's
transactions and otherwise complying with the Statutes shall be kept at
the Office, or at such other place as the Directors think fit, and shall
always be open to inspection by the officers of the Company. Subject as
aforesaid no member of the Company or other person shall have any right of
inspecting any account or book or document of the Company except as
conferred by statute or ordered by a court of competent jurisdiction or
authorised by the Directors.
143. BALANCE SHEETS AND PROFIT AND LOSS ACCOUNTS TO BE SENT TO MEMBERS AND
OTHERS
A copy of every balance sheet and profit and loss account which is to be
laid before a General Meeting of the Company (including every document
required by law to be comprised therein or attached or annexed thereto)
shall not less than twenty one days before the date of the meeting be sent
to every member of, and every holder of debentures of, the Company and to
every other person who is entitled to receive notices of meetings from the
Company under the provisions of the Statutes or of these Regulations.
Provided that this Regulation shall not require a copy of these documents
to be sent to more than one of joint holders or to any person of whose
address the Company is not aware, but any member or holder of debentures
to whom a copy of these documents has not been sent shall be entitled to
receive a copy free of charge on application at the Office and provided
further that if the Statutes so permit the Company need not send copies of
such documents to members who do not wish to receive them but may send
them such summary financial statement or other documents as may be
authorised by the Statutes. If all or any of the shares or debentures of
the Company shall for the time being be listed or dealt in on the London
Stock Exchange there shall be forwarded to the appropriate officer of the
London Stock Exchange such number of copies of such documents as may from
time to time be required under its Regulations or practice.
AUDITORS
144. VALIDITY OF ACTS OF AUDITORS
Subject to the provisions of the Statutes, all acts done by any person
acting as an Auditor shall, as regards all persons dealing in good faith
with the Company, be valid, notwithstanding that there was some defect in
his appointment or that he was at the time of his appointment not
qualified for appointment or subsequently disqualified.
145. AUDITORS ENTITLED TO NOTICE OF AND TO ATTEND AND BE HEARD AT GENERAL
MEETINGS
An Auditor shall be entitled to attend any General Meeting and to receive
all notices of and other communications relating to any General Meeting
which any member is entitled to receive and to be heard at any General
Meeting on any part of the business of the meeting which concerns him as
Auditor.
83
NOTICES
F.146 MODE OF DELIVERY OF NOTICES; WHEN NOTICES DEEMED DELIVERED
Any notice or document (including a share certificate) may be served on or
delivered to any member by the Company either personally or by sending it
through the post in a prepaid cover addressed to such member at his
registered address, or (if he has no registered address within the United
Kingdom) to the address, if any, within the United Kingdom supplied by him
to the Company as his address for the service of notices, or by delivering
it to such address addressed as aforesaid. In the case of a member holding
Certificated Shares registered on a branch Register any such notice or
document may be posted either in the United Kingdom or in the territory in
which such branch Register is maintained. Where a notice or other document
is served or sent by post, service or delivery shall be deemed to be
effected at the expiration of twenty four hours (or, where second class
mail is employed, forty eight hours) after the time when the cover
containing the same is posted and in proving such service or delivery it
shall be sufficient to prove that such cover was properly addressed,
stamped and posted. Provided always that every notice or other document
which is required to be served or delivered, or capable of being delivered
to the Founders Share Company shall, so long as the Founders Share Company
has a registered address within fifteen miles of Charing Cross, be
personally delivered to the Founders Share Company at that address. The
accidental failure to send, or the non receipt by any person entitled to
any notice of or other document relating to any meeting or other
proceeding shall not invalidate the relevant meeting or other proceeding,
unless the person so entitled is the Founders Share Company. A notice or
document (other than a notice or document to be served on or delivered to
the Founders Share Company) not sent by post but left at a registered
address or address for service in the United Kingdom is deemed to be given
on the day it is left.
147. TRANSFEREES AND PERSONS ENTITLED BY OPERATION OF LAW BOUND BY NOTICES IN
RESPECT OF SHARES PENDING REGISTRATION
A person who becomes entitled to a share by transmission, transfer or
otherwise is bound by a notice in respect of that share (other than a
notice served by the Company under section 212 of the Act) which, before
his name is entered in the Register, has been properly served on a person
from whom he derives his title.
148. NOTICES TO JOINT HOLDERS
Any notice given to that one of the joint holders of a share whose name
stands first in the Register in respect of the share shall be sufficient
notice to all the joint holders in their capacity as such. For such
purpose a joint holder having no registered address in the United Kingdom
and not having supplied an address within the United Kingdom for the
service of notice shall be disregarded.
84
149. PERSONS ENTITLED FOLLOWING DEATH OR BANKRUPTCY ENTITLED TO DELIVERY OF
NOTICES PENDING REGISTRATION
A person entitled to a share in consequence of the death or bankruptcy of
a member upon supplying to the Company such evidence as the Directors may
reasonably require to show his title to the share, and upon supplying also
an address within the United Kingdom for the service of notices, shall be
entitled to have served upon or delivered to him at such address any
notice or document to which the member but for his death or bankruptcy
would have been entitled, and such service or delivery shall for all
purposes be deemed a sufficient service or delivery of such notice or
document on all persons interested (whether jointly with or as claiming
through or under him) in the share. Save as aforesaid any notice or
document delivered or sent by post to or left at the address of any member
in pursuance of these Regulations shall, notwithstanding that such member
be then dead or bankrupt or in liquidation, and whether or not the Company
have notice of his death or bankruptcy or liquidation be deemed to have
been duly served or delivered in respect of any share registered in the
name of such member as sole or first named joint holder.
150. NO ENTITLEMENT TO RECEIPT OF NOTICES OUTSIDE THE UNITED KINGDOM
A member who has no registered address within the United Kingdom and has
not supplied to the Company an address within the United Kingdom for the
service of notices shall not be entitled to receive notices from the
Company.
151. NOTICES OF GENERAL MEETINGS BY ADVERTISEMENT
If at any time by reason of the suspension or curtailment of postal
services within the United Kingdom the Company is unable effectively to
convene a General Meeting by notices sent through the post, a General
Meeting may be convened by a notice advertised on the same date in at
least one national daily newspaper and such notice shall be deemed to have
been duly served on all members entitled thereto at noon on the day when
the advertisement appears. In any such case the Company shall send
confirmatory copies of the notice by post if at least seven days prior to
the meeting the posting of notices to addresses throughout the United
Kingdom again becomes practicable.
152. SERVING FOR STATUTORY REQUIREMENTS
Nothing in any of the preceding six Regulations shall affect any
requirement of the Statutes or of any other provision of these Regulations
that any particular offer, notice or other document be served in any
particular manner.
85
WINDING UP
F.153 DIRECTORS MAY PETITION COURT FOR WINDING UP WITH CONSENT OF FOUNDERS SHARE
COMPANY
The Directors shall have power, with the prior consent in writing of the
Founders Share Company (but not otherwise), to present to the Court a
petition, in the name of and on behalf of the Company, for the Company to
be wound up.
154. DIRECTORS MAY DISTRIBUTE ASSETS IN KIND ON A WINDING UP
If the Company shall be wound up (whether the liquidation is voluntary,
under supervision, or by the court) the Liquidator may, with the authority
of an Extraordinary Resolution, divide among the members in specie or in
kind the whole or any part of the assets of the Company and whether or not
the assets shall consist of property of one kind or shall consist of
properties of different kinds, and may for such purpose set such value as
he deems fair upon any one or more class or classes of property and may
determine how such division shall be carried out as between the members or
different classes of members. The Liquidator may, with the like authority,
vest any part of the assets in trustees upon such trusts for the benefit
of members as the Liquidator with the like authority shall think fit, and
the liquidation of the Company may be closed and the Company dissolved. No
contributory shall be compelled to accept any shares or other property in
respect of which there is a liability.
INDEMNITY
155. DIRECTORS AND OFFICERS ENTITLED TO INDEMNITY
Subject to the provisions of and so far as may be consistent with the
Statutes, every Director, Auditor, Secretary or other officer of the
Company shall be entitled to be indemnified by the Company out of its own
funds against all costs, charges, losses, expenses and liabilities
incurred by him in the actual or purported execution and/or discharge of
his duties and/or the exercise or purported exercise of his powers and/or
otherwise in relation to or in connection with his duties, powers or
office including (without prejudice to the generality of the foregoing)
any liability incurred by him in defending any proceedings, civil or
criminal, which relate to anything done or omitted or alleged to have been
done or omitted by him as an officer or employee of the Company and in
which judgment is given in his favour (or the proceedings are otherwise
disposed of without any finding or admission of any material breach of
duty on his part) or in which he is acquitted or in connection with any
application under any statute for relief from liability in respect of any
such act or omission in which relief is granted to him by the Court.
THE REUTERS NEWS SERVICES
86
F.156 ENTITLEMENT OF CERTAIN MEMBERS TO RECEIVE REUTERS NEWS SERVICES
The Press Association Limited, the Newspaper Publishers Association
Limited, AAP Information Services Proprietary Limited and New Zealand
Press Association Limited shall be entitled to receive the Reuters News
Services upon payment of such consideration as may be agreed from time to
time. Upon and subject to the terms of any such agreement:-
(i) The Press Association Limited shall be entitled to receive Reuters
News Services for the use of its members, such use to be limited to
the incorporation thereof in newspapers owned by such members or any
subsidiary undertaking of such members respectively
(ii) The Newspaper Publishers Association Limited shall be entitled to
receive Reuters News Services for the use of its members, such use
to be limited to the incorporation thereof in newspapers owned by
such members or any subsidiary undertaking of such members
respectively.
(iii) AAP Information Services Proprietary Limited shall be entitled to
receive Reuters News Services for the use of its members, such use
to be limited to the incorporation thereof in newspapers owned by
such members or any subsidiary undertaking of such members
respectively.
(iv) New Zealand Press Association Limited shall be entitled to receive
Reuters News Services for the use of its members, such use to be
limited to the incorporation thereof in newspapers owned by such
members or any subsidiary undertaking of such members respectively.
87
================================================================================
REUTERS GROUP PLC
AND
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
As Depositary
AND
HOLDERS OF AMERICAN DEPOSITARY RECEIPTS
----------------------
Deposit Agreement
Dated as of February 18, 1998
================================================================================
TABLE OF CONTENTS
-----------------
Page
----
PARTIES.................................................................... 1
RECITALS................................................................... 1
Section 1. Certain Definitions
(a) ADR Register..............................................1
(b) ADRs..................................................... 1
(c) ADSs......................................................1
(d) Beneficial Owner..........................................1
(e) Custodian................................................ 1
(f) Delivery Order............................................1
(g) Deposited Securities..................................... 1
(h) Holder....................................................1
(i) Pre-Release...............................................1
(j) Pre-Released ADR..........................................1
(k) Securities Act of 1933....................................1
(l) Securities Exchange Act of 1934...........................1
(m) Shares....................................................2
(n) Transfer Office.......................................... 2
(o) Withdrawal Order......................................... 2
Section 2. Form of ADR; Incorporation By Reference.................. 2
Section 3. Deposit of Shares.........................................2
Section 4. Issue of ADRs.............................................3
Section 5. Distributions on Deposited Securities;
Conversion of Foreign Currency............................3
Section 6. Substitution of ADRs..................................... 4
Section 7. Cancellation and Destruction of ADRs......................4
Section 8. The Custodian............................................ 4
Section 9. Co-Registrars and Co-Transfer Agents..................... 5
Section 10. Lists of Holders. ....................................... 5
Section 11. Depositary's Agents...................................... 5
Section 12. Successor Depositary..................................... 5
Section 13. Reports.................................................. 6
Section 14. Additional Shares.........................................6
Section 15. Indemnification...........................................6
Section 16. Notices...................................................7
Section 17. Miscellaneous............................................ 8
TESTIMONIUM................................................................ 9
SIGNATURES................................................................. 9
- i -
Page
----
EXHIBIT A
---------
FORM OF FACE OF ADR....................................................... A-1
Introductory Paragraph.............................................. A-1
(1) Issuance of ADRs............................................ A-2
(2) Withdrawal of Deposited Securities.......................... A-2
(3) Transfers of ADRs........................................... A-3
(4) Certain Limitations......................................... A-3
(5) Taxes; Withholding.......................................... A-4
(6) Disclosure of Interests..................................... A-5
(7) Charges of Depositary....................................... A-5
(8) Available Information....................................... A-6
(9) Execution................................................... A-6
Signature of Depositary............................................. A-6
Address of Depositary's Office ..................................... A-6
FORM OF REVERSE OF ADR.................................................... A-7
(10) Distributions on Deposited Securities....................... A-7
(11) Record Dates................................................ A-8
(12) Voting of Deposited Securities.............................. A-8
(13) Changes Affecting Deposited Securities...................... A-9
(14) Exoneration................................................ A-10
(15) Resignation and Removal of Depositary; the
Custodian.................................................. A-10
(16) Amendment.................................................. A-11
(17) Termination................................................ A-11
(18) Restrictions on Ownership.................................. A-11
- ii -
DEPOSIT AGREEMENT dated as of February 18, 1998 (the "Deposit Agreement")
among REUTERS GROUP PLC (the "Company") and its successors, MORGAN GUARANTY
TRUST COMPANY OF NEW YORK, as depositary hereunder (the "Depositary"), and all
Holders and Beneficial Owners from time to time of American Depositary Receipts
issued hereunder ("ADRs") evidencing American Depositary Shares ("ADSs")
representing deposited Shares (defined below). The parties hereto agree as
follows:
1. Certain Definitions.
(a) "ADR Register" is defined in paragraph (3) of the form of ADR.
(b) "ADRs" mean certificates evidencing ADSs substantially in the form of
Exhibit A annexed hereto (the "form of ADR").
(c) "ADSs" means American depositary shares representing beneficial
interests in the Deposited Securities. Subject to Paragraphs (10) and (13) of
the Form of ADR, each ADS represents the right to receive six (6) Shares.
(d) "Beneficial Owner" means a person with a beneficial interest in an
ADS.
(e) "Custodian" means the agent or agents of the Depositary (singly or
collectively, as the context requires) and any additional or substitute
Custodian appointed pursuant to Section 8 The initial Custodian hereunder is the
London Office of Morgan Guaranty Trust Company of New York.
(f) "Delivery Order" is defined in Section 3.
(g) "Deposited Securities" as of any time means all Shares at such time
deposited under this Deposit Agreement and any and all other Shares, securities,
property and cash at such time held by the Depositary or the Custodian in
respect or in lieu of such deposited Shares and other Shares, securities,
property and cash.
(h) "Holder" means the person or persons in whose name an ADR is
registered on the ADR Register.
(i) "Pre-release" has the meaning set forth in paragraph (1) of the form
of ADR.
(j) "Pre-released ADR" has the meaning set forth in paragraph (1) of the
form of ADR.
(k) "Securities Act of 1933" means the United States Securities Act of
1933, as from time to time amended.
(l) "Securities Exchange Act of 1934" means the United States Securities
Exchange Act of 1934, as from time to time amended.
(m) "Shares" mean the ordinary shares of 25 pence each, of the Company and
shall include the rights to receive Shares specified in paragraph (1) of the
form of ADR.
(n) "Transfer Office" is defined in paragraph (3) of the form of ADR.
(o) "Withdrawal Order" is defined in paragraph (2) of the form of ADR.
2. Form of ADR; Incorporation by Reference.
(a) Form of ADR. ADRs shall be engraved, printed or otherwise reproduced
at the discretion of the Depositary in accordance with its customary practices
in its American depositary receipt business, or at the request of the Company
typewritten and photocopied on plain or safety paper, and shall be substantially
in the form set forth in the form of ADR, with such changes as may be required
by the Depositary or the Company to comply with their obligations hereunder, any
applicable law, regulation or usage or to indicate any special limitations or
restrictions to which any particular ADRs are subject. ADRs may be issued in
denominations of any number of ADSs. ADRs shall be executed by the Depositary by
the manual or facsimile signature of a duly authorized officer of the
Depositary. ADRs bearing the manual or facsimile signature of anyone who was at
the time of execution a duly authorized officer of the Depositary shall bind the
Depositary, notwithstanding that such officer has ceased to hold such office
prior to the delivery of such ADRs.
(b) Incorporation by Reference. The terms and conditions set forth in the
form of ADR are hereby incorporated by reference herein and made a part hereof
as if set forth herein, and shall be binding upon the parties hereto.
3. Deposit of Shares. Subject to paragraph (1) of the form of ADR, in
connection with the deposit of Shares hereunder, the Depositary or the Custodian
may require the following in form satisfactory to it: (a) a written order
directing the Depositary to execute and deliver to, or upon the written order
of, the person or persons designated in such order an ADR or ADRs evidencing the
number of ADSs representing such deposited Shares (a "Delivery Order"); (b)
proper endorsements or duly executed instruments of transfer in respect of such
deposited Shares; (c) instruments assigning to the Depositary or its nominee any
distribution on or in respect of such deposited Shares or indemnity therefor;
and, (d) proxies entitling the Depositary to vote such deposited Shares. As soon
as practicable after the Custodian receives Deposited Securities pursuant to any
such deposit or pursuant to paragraph (10) or (13) of the form of ADR, the
Custodian shall present such Deposited Securities for registration of transfer
into the name of the Depositary or its nominee, to the extent such registration
is practicable, at the cost and expense of the person making such deposit (or
for whose
2
benefit such deposit is made) and shall obtain evidence satisfactory to it of
such registration. Deposited Securities shall be held by the Custodian for the
account and to the order of the Depositary at such place or places and in such
manner as the Depositary shall determine. Deposited Securities may be delivered
by the Custodian to any person only under the circumstances expressly
contemplated in the Deposit Agreement.
4. Issue of ADRs. After any such deposit of Shares, the Custodian shall
notify the Depositary of such deposit and of the information contained in any
related Delivery Order by letter, first class airmail postage prepaid, or, at
the request, risk and expense of the person making the deposit, by cable, telex
or facsimile transmission. After receiving such notice from the Custodian, the
Depositary, subject to the Deposit Agreement, shall execute and deliver at the
Transfer Office, to or upon the order of any person named in such notice, an ADR
or ADRs registered as requested and evidencing the aggregate ADSs to which such
person is entitled. ADRs may be issued by the Depositary only under
circumstances contemplated in this Deposit Agreement.
5. Distributions on Deposited Securities; Conversion of Foreign Currency.
(a) To the extent that the Depositary determines in its good faith discretion,
after consultation with the Company to the extent practicable, that any
distribution pursuant to paragraph (10) of the Form of ADR is not practicable
with respect to any Holder, the Depositary may make such distribution as it so
deems practicable, including the distribution of foreign currency, securities or
property (or appropriate documents evidencing the right to receive foreign
currency, securities or property) or the retention thereof as Deposited
Securities with respect to such Holder's ADRs (without liability for interest
thereon or the investment thereof).
(b) Upon receipt by the Depositary or the Custodian of any foreign
currency, if at the time of its receipt such foreign currency can in the
judgment of the Depositary be converted on a reasonable basis into U.S. dollars
and the resulting U.S. dollars transferred to the United States for distribution
to Holders entitled thereto, the Depositary shall as promptly as practicable
convert or cause to be converted such foreign currency into U.S. dollars by sale
or in any other manner that it may determine, and shall promptly transfer the
resulting U.S. dollars (net of its expenses in effecting such conversion) to the
United States and shall distribute such U.S. dollars to the Holders entitled
thereto in accordance with Paragraph (10) of the Form of ADR. If such conversion
or distribution can be effected only with the approval or license of any
government or agency thereof, the Depositary shall have discretion to file such
application for approval or license as it may deem desirable. If the Depositary
determines in its reasonable judgment that such foreign currency is not
convertible, in whole or in part, on a reasonable basis into U.S. dollars
transferable to the United States, or if any approval or license which is
required for such conversion is
3
denied or in the opinion of the Depositary, after consultation with the Company
to the extent practicable, is not obtainable or is not obtained within a
reasonable period or at a reasonable cost, the Depositary may distribute all or
part of the foreign currency (or an appropriate document evidencing the right to
receive such foreign currency) to, or in its discretion may hold such foreign
currency uninvested and without liability for interest thereon for the
respective accounts of, the Holders entitled thereto. All expenses of any such
conversion shall be deducted from the proceeds thereof.
6. Substitution of ADRs. The Depositary shall execute and deliver a new
ADR of like tenor in exchange and substitution for any mutilated ADR upon
cancellation thereof or in lieu of and in substitution for such destroyed, lost
or stolen ADR, unless the Depositary has notice that such ADR has been acquired
by a bona fide purchaser, upon the Holder thereof filing with the Depositary a
request for such execution and delivery and a sufficient indemnity bond and
satisfying any other reasonable requirements imposed by the Depositary.
7. Cancellation and Destruction of ADRs. All ADRs surrendered to the
Depositary shall be canceled by the Depositary. The Depositary is authorized to
destroy ADRs so canceled in accordance with its customary practices. The
Depositary shall maintain records of all ADRs surrendered and Deposited
Securities withdrawn under Paragraph (1) of the form of ADR, substitute ADRs
delivered, and canceled or destroyed ADRs under this Section 7, in keeping with
the procedures ordinarily followed by stock transfer agents located in The City
of New York or as required by applicable law, rule or regulation.
8. The Custodian. The Depositary shall use its best efforts under the
circumstances to ensure that at all times there is a Custodian hereunder. Any
Custodian in acting hereunder shall be subject to the directions of the
Depositary and shall be responsible solely to it. The Depositary shall be
responsible for the compliance by each Custodian with the provisions hereof
applicable thereto. The Depositary may from time to time, after consultation
with the Company, appoint one or more agents to act for it as Custodian
hereunder in addition to or in lieu of the Custodian named in the form of ADR.
Each Custodian so appointed (other than Morgan Guaranty Trust Company of New
York) shall give written notice to the Company and the Depositary accepting such
appointment and agreeing to be bound by the provisions hereof. Any Custodian may
resign from its duties hereunder by at least 30 days' written notice to the
Depositary and the Company. The Depositary may, after consultation with the
Company, discharge any Custodian at any time upon notice to the Custodian being
discharged and subject to the provisions of any agreement between such Custodian
and the Depositary. Any Custodian ceasing to act hereunder as Custodian shall
deliver, upon the instruction of the Depositary, all Deposited Securities held
by it to a Custodian continuing to act.
4
9. Co-Registrars and Co-Transfer Agents. The Depositary may, after
consultation with the Company if practicable, appoint and remove (i)
co-registrars to register ADRs and transfers, combinations and split-ups of ADRs
and to countersign ADRs in accordance with the terms of any such appointment and
(ii) co-transfer agents for the purpose of effecting transfers, combinations and
split-ups of ADRs at designated transfer offices in addition to the Transfer
Office on behalf of the Depositary. Each co-registrar or co-transfer agent
(other than Morgan Guaranty Trust Company of New York) shall give notice in
writing to the Company and the Depositary accepting such appointment and
agreeing to be bound by the applicable terms of the Deposit Agreement.
10. Lists of Holders. The Company shall have the right to inspect transfer
records of the Depositary and its agents and the ADR Register, take copies
thereof and require the Depositary and its agents to supply copies of such
portions of such records as the Company may request. The Depositary or its agent
shall furnish to the Company promptly upon the written request of the Company, a
list of the names, addresses and holdings of ADSs by all Holders as of a date
within seven days of the Depositary's receipt of such request.
11. Depositary's Agents. The Depositary may perform its obligations
hereunder through any agent appointed by it, provided that the Depositary shall
notify the Company of such appointment and shall remain responsible for the
performance of such obligations as if no agent were appointed. The Depositary
shall use its best efforts under the circumstances to obtain a written notice
from each agent appointed hereunder (other than those agents which, on the date
hereof, are acting in an agency capacity for Morgan Guaranty Trust Company of
New York), addressed to the Company and the Depositary accepting such
appointment and agreeing to be bound by the terms of the applicable provisions
hereof.
12. Successor Depositary. If the Depositary acting hereunder shall resign
or be removed, the Company shall use its best efforts to appoint a bank or trust
company having an office in the Borough of Manhattan, The City of New York, as
successor depositary hereunder. Every successor depositary shall execute and
deliver to its predecessor and to the Company written acceptance of its
appointment hereunder, and thereupon such successor depositary, without any
further act or deed, shall become Depositary hereunder; but such predecessor,
upon payment of all sums due it and on the written request of the Company, shall
execute and deliver an instrument transferring to such successor all rights and
powers of such predecessor hereunder and assigning all right, title and interest
in the Deposited Securities to such successor, and shall deliver to such
successor a list of the Holders. Any bank or trust company into or with which
the Depositary may be merged or consolidated, or to which the Depositary shall
transfer substantially all its American depositary receipt business (including
the ADR facility established pursuant to this Agreement), shall be the successor
5
of the Depositary without the execution or filing of any document or any further
act; provided, however, that such bank or trust company shall give a written
notice thereof to the Company. Upon the appointment of any successor depositary
hereunder, any agent of the Depositary then acting hereunder shall forthwith
become such agent hereunder of such successor depositary and such successor
depositary shall, on the written request of any such agent, execute and deliver
to such agent any instruments necessary to give such agent authority as such
agent hereunder of such successor depositary.
13. Reports. On or before the first date on which the Company makes any
communication available to holders of Deposited Securities by publication or
otherwise or publicly files or submits any communication to any securities
regulatory authority or stock exchange, the Company shall transmit to the
Depositary a copy thereof in English or with an English translation or summary
to the extent required under applicable rules of the Securities Exchange Act of
1934. In connection with any registration statement under the Securities Act of
1933 relating to the ADRs or with any undertaking contained therein, the Company
and the Depositary shall each furnish to the other and to the United States
Securities and Exchange Commission or any successor governmental agency such
information as shall be required to make such filings or comply with such
undertakings. The Company has delivered to the Depositary and the Custodian a
copy of all provisions of or governing the Shares and any other Deposited
Securities issued by the Company and, promptly upon any change thereto, the
Company shall deliver to the Depositary and the Custodian a copy (in English or
with an English translation) of such provisions as so changed. The Depositary
and its agents may rely upon the Company's delivery thereof for all purposes of
the Deposit Agreement.
14. Additional Shares. Neither the Company nor any company controlling,
controlled by or under common control with the Company shall issue additional
Shares, rights to subscribe for Shares, securities convertible into or
exchangeable for Shares or rights to subscribe for any such securities or shall
deposit any Shares under this Deposit Agreement, except under circumstances
complying in all respects with the Securities Act of 1933. The Depositary will
use reasonable efforts to comply with written instructions of the Company not to
accept for deposit hereunder any Shares identified in such instructions at such
times and under such circumstances as may reasonably be specified in such
instructions in order to facilitate the Company's compliance with securities
laws in the United States.
15. Indemnification. (a) The Company shall indemnify, defend and save
harmless each of the Depositary and its agents hereunder against any loss,
liability or expense (including reasonable fees and expenses of counsel) that
may arise out of (i) its acceptance and performance of its powers and duties in
respect of the Deposit Agreement, except to the extent such loss, liability or
expense is due to the negligence or bad faith of the Depositary or any of its
agents hereunder, or (ii) any offer or
6
sale of ADRs, ADSs, Shares or other Deposited Securities or any registration
statement under the Securities Act of 1933 in respect thereof, except to the
extent such loss, liability or expense arises out of information (or omissions
from such information) relating to it furnished in writing to the Company by it
expressly for use in any such registration statement. The Depositary shall
indemnify, defend and save harmless the Company against any loss, liability or
expense (including reasonable fees and expenses of counsel) incurred by the
Company in respect of the Deposit Agreement to the extent such loss, liability
or expense is due to the negligence or bad faith of the Depositary or any of its
agents appointed hereunder.
(b) Any person seeking indemnification hereunder (an "indemnified person")
shall notify the person from whom it is seeking indemnification (the
"indemnifying person") of the commencement of any indemnifiable action or claim
promptly after such indemnified person becomes aware of such commencement
(provided that the failure to make such notification shall not affect such
indemnified person's rights otherwise than under this Section 15 and shall only
affect its rights hereunder to the extent such failure is prejudicial) and shall
consult in good faith with the indemnifying person as to the conduct of the
defense of such action or claim, which shall be reasonable in the circumstances.
No indemnified person shall compromise or settle any indemnifiable action or
claim without the prior written consent of the indemnifying person (which
consent shall not be unreasonably withheld or delayed).
(c) The obligations set forth in this Section 15 shall survive the
termination of the Deposit Agreement and the succession or substitution of any
indemnified person.
16. Notices. Notice to any Holder shall be deemed given when first mailed,
first class postage prepaid, to the address of such Holder on the ADR Register
or received by such Holder. Notice to the Depositary or the Company shall be
deemed given when first received by it at the address or facsimile transmission
number set forth in (a) or (b), respectively, or at such other address or
facsimile transmission number as either may specify to the other by written
notice:
(a) Morgan Guaranty Trust Company
of New York
60 Wall Street (36th Floor)
New York, New York 10260
Attention: ADR Administration
Fax: (212) 648-5104 or 5105
(b) REUTERS GROUP PLC
85 Fleet Street
London EC4P 4AJ
England Attention: Robert O. Rowley
Fax: 44-171-
7
17. Miscellaneous. The Deposit Agreement is for the exclusive benefit of
the Company, the Depositary, the Holders, and their respective successors
hereunder, and shall not give any legal or equitable right, remedy or claim
whatsoever to any other person. The Holders and owners of ADRs from time to time
shall be parties to the Deposit Agreement and shall be bound by all of the
provisions hereof. If any such provision is invalid, illegal or unenforceable in
any respect, the remaining provisions shall in no way be affected thereby. The
Deposit Agreement may be executed in any number of counterparts, each of which
shall be deemed an original and all of which shall constitute one instrument.
8
IN WITNESS WHEREOF, REUTERS GROUP PLC and MORGAN GUARANTY TRUST
COMPANY OF NEW YORK have duly executed this Deposit Agreement as of the day and
year first above set forth and all Holders and Beneficial Owners of ADRs shall
become parties hereto upon acceptance by them of ADRs issued in accordance with
the terms hereof.
REUTERS GROUP PLC
By:
--------------------------------
Name:
Title:
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By
--------------------------------
Name:
Title: Vice President
9
EXHIBIT A
ANNEXED TO AND INCORPORATED IN
DEPOSIT AGREEMENT
-----------------
[FORM OF FACE OF ADR]
- ------ No. of ADSs:
Number
-------------------
Each ADS represents
Six Shares
CUSIP:
AMERICAN DEPOSITARY RECEIPT
evidencing
AMERICAN DEPOSITARY SHARES
representing
ORDINARY SHARES OF 25 PENCE EACH
of
REUTERS GROUP PLC
(Incorporated under the
laws of England and Wales)
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, a New York corporation, as
depositary hereunder (the "Depositary"), hereby certifies that _______ is the
registered owner (a "Holder") of _________ American Depositary Shares ("ADSs"),
each (subject to paragraph (13)) representing Six (6) Ordinary Shares of 25
pence each (including the rights to receive Shares described in paragraph (1),
"Shares" and, together with any other securities, cash or property from time to
time held by the Depositary in respect or in lieu of deposited Shares, the
"Deposited Securities"), of REUTERS GROUP PLC (the "Company"), a corporation
organized under the laws of England and Wales, deposited with the Custodian (the
"Custodian") under the Deposit Agreement dated as of February 18, 1998 (as
amended from time to time, the "Deposit Agreement") among the Company, the
Depositary and all Holders and Beneficial Owners from time to time of American
Depositary Receipts issued thereunder ("ADRs"), each of whom, by accepting an
ADR, agrees to become a party thereto and to be bound by all of the terms and
conditions thereof and hereof. The Deposit Agreement and this ADR (which
includes the provisions set forth on the reverse hereof) shall be governed by
and construed in accordance with the laws of the State of New York. The terms
and conditions of the Deposit Agreement are hereby incorporated by reference.
A-1
(1) Issuance of ADRs. This ADR is one of the ADRs issued under the Deposit
Agreement. Subject to paragraph (4), the Depositary may so issue ADRs for
delivery at the Transfer Office (defined in paragraph (3)) only against deposit
with the Custodian of: (a) Shares in form satisfactory to the Custodian; (b)
rights to receive Shares from the Company or any registrar, transfer agent,
clearing agent or other entity recording Share ownership or transactions; or,
(c) unless requested in writing by the Company to cease doing so at least two
business days in advance of the proposed deposit, other rights to receive Shares
(until such Shares are actually deposited pursuant to (a) or (b) above,
"Pre-released ADRs"), only if (i) Pre-released ADRs are fully collateralized
(marked to market daily) with cash or U.S. government securities held by the
Depositary for the benefit of Holders (but such collateral shall not constitute
Deposited Securities), (ii) each recipient of Pre-released ADRs represents and
agrees in writing with the Depositary that such recipient or its customer (A)
beneficially owns such Shares, (B) assigns all beneficial right, title and
interest therein to the Depositary for the benefit of the Holders, (C) holds
such Shares for the account of the Depositary and (D) will deliver such Shares
to the Custodian as soon as practicable and promptly upon demand therefor but in
no event more than five days after demand therefor and (iii) all Pre-released
ADRs evidence not more than 15% of all ADSs (excluding those evidenced by
Pre-released ADRs). The Depositary may retain for its own account any earnings
on collateral for Pre-released ADRs and its charges for issuance thereof. At the
request, risk and expense of the person depositing Shares, the Depositary may
accept deposits for forwarding to the Custodian and may deliver ADRs at a place
other than its office. Every person depositing Shares under the Deposit
Agreement represents and warrants that such Shares are validly issued and
outstanding, fully paid, nonassessable and free of pre-emptive rights, that the
person making such deposit is duly authorized to do so and that such Shares (A)
are not "restricted securities" as such term is defined in Rule 144 under the
Securities Act of 1933 unless at the time of deposit they may be freely
transferred in accordance with Rule 144(k) and may otherwise be offered and sold
freely in the United States or (B) have been registered under the Securities Act
of 1933. Such representations and warranties shall survive the deposit of Shares
and issuance of ADRs. The Depositary will not knowingly accept for deposit under
the Deposit Agreement any Shares required to be registered under the Securities
Act of 1933 and not so registered; the Depositary may refuse to accept for such
deposit any Shares identified by the Company in order to facilitate the
Company's compliance with such Act.
(2) Withdrawal of Deposited Securities. Holders of ADRs will be entitled
to withdraw the Deposited Securities at any time subject only to (i) temporary
delays caused by closing the transfer books of the Depositary or the Company or
the deposit of Shares in connection with voting at a shareholders' meeting, or
the payment of dividends, (ii) the payment of fees, taxes and similar charges,
and (iii) compliance with any laws or governmental regulations relating to the
ADRs or the withdrawal of Deposited Securities. Upon surrender of the ADRs at
the Depositary's New York office and upon payment of any fees, expenses, taxes
or governmental charges as provided in the
A-2
Deposit Agreement, subject to the terms of the Deposit Agreement and paragraphs
(4) and (5) hereof, upon surrender of this ADR in form satisfactory to the
Depositary at the Transfer Office, the Holder hereof is entitled to delivery at
the Custodian's office of the Deposited Securities at the time represented by
the ADSs evidenced by this ADR. In connection with any surrender of an ADR for
withdrawal and the delivery of the Deposited Securities represented by the ADSs
evidenced thereby, the Depositary may require proper endorsement in blank of
such ADR (or duly executed instruments of transfer thereof in blank) and the
Holder's written order (a "Withdrawal Order") directing the Depositary to cause
the Deposited Securities represented by the ADSs evidenced by such ADR to be
withdrawn and delivered to, or upon the written order of, any person designated
in such order. At the request, risk and expense of the Holder hereof, the
Depositary may deliver such Deposited Securities at such other place as may have
been requested by the Holder, subject to applicable laws in England and Wales.
Delivery of Deposited Securities may be made by the delivery of certificates
(which, if required by law shall be properly endorsed or accompanied by properly
executed instruments of transfer or, if such certificates may be registered,
registered in the name of such Holder or as ordered by such Holder in any
Withdrawal Order) or by such other means as the Depositary may deem practicable.
(3) Transfers of ADRs. The Depositary or its agent will keep, at a
designated transfer office in the Borough of Manhattan, The City of New York
(the "Transfer Office"), (a) a register (the "ADR Register") for the
registration, registration of transfer, combination and split-up of ADRs, which
at all reasonable times will be open for inspection by Holders and the Company
for the purpose of communicating with Holders in the interest of the business of
the Company or a matter relating to the Deposit Agreement and (b) facilities for
the delivery and receipt of ADRs. Title to this ADR (and to the Deposited
Securities represented by the ADSs evidenced hereby), when properly endorsed or
accompanied by proper instruments of transfer, is transferable by delivery with
the same effect as in the case of negotiable instruments under the laws of the
State of New York; provided that the Depositary, notwithstanding any notice to
the contrary, may treat the person in whose name this ADR is registered on the
ADR Register as the absolute owner hereof for all purposes. Subject to
paragraphs (4) and (5), this ADR is transferable on the ADR Register and may be
split into other ADRs or combined with other ADRs into one ADR, evidencing the
same number of ADSs evidenced by this ADR, by the Holder hereof or by duly
authorized attorney upon surrender of this ADR at the Transfer Office properly
endorsed or accompanied by proper instruments of transfer and duly stamped as
may be required by applicable law; provided that the Depositary may close the
ADR Register at any time or from time to time when deemed reasonably expedient
by it or requested by the Company.
(4) Certain Limitations. Prior to the issue, registration, registration of
transfer, split-up or combination of any ADR, the delivery of any distribution
in respect thereof, or, subject to the last sentence of paragraph (2), the
withdrawal of any Deposited Securities, and from time to time in the case of
clause (b)(ii) of
A-3
this paragraph (4), the Company, the Depositary or the Custodian may require:
(a) payment with respect thereto of (i) any stock transfer or other tax or other
governmental charge, (ii) any stock transfer or registration fees in effect for
the registration of transfers of Shares or other Deposited Securities upon any
applicable register and (iii) any applicable charges as provided in paragraph
(7) of this ADR; (b) the production of proof satisfactory to it of (i) the
identity and genuineness of any signature and (ii) such other information,
including without limitation, information as to citizenship, residence, exchange
control approval, beneficial ownership of any securities, compliance with
applicable law, regulations, provisions of or governing Deposited Securities and
terms of the Deposit Agreement and this ADR, as it may deem necessary or proper;
and (c) compliance with such regulations as the Depositary may establish
consistent with the Deposit Agreement. The issuance of ADRs, the acceptance of
deposits of Shares, the registration, registration of transfer, split-up or
combination of ADRs or, subject to the last sentence of paragraph (2), the
withdrawal of Deposited Securities may be suspended, generally or in particular
instances, when the ADR Register or any register for Deposited Securities is
closed or when any such action is deemed advisable by the Depositary or the
Company.
(5) Taxes; Withholding. If any tax or other governmental charge shall
become payable by or on behalf of the Custodian or the Depositary with respect
to this ADR, any Deposited Securities represented by the ADSs evidenced hereby
or any distribution thereon, such tax or other governmental charge shall be paid
by the Holder hereof to the Depositary. The Depositary may refuse to effect any
registration, registration of transfer, split-up or combination hereof or,
subject to the last sentence of paragraph (2), any withdrawal of such Deposited
Securities until such payment is made. The Depositary may also deduct from any
distributions on or in respect of Deposited Securities, or may sell by public or
private sale for the account of the Holder hereof any part or all of such
Deposited Securities (after attempting by reasonable means to notify the Holder
hereof prior to such sale), and may apply such deduction or the proceeds of any
such sale in payment of such tax or other governmental charge, the Holder hereof
remaining liable for any deficiency, and, if appropriate, shall reduce the
number of ADSs evidenced hereby to reflect any such sales of Shares and shall
distribute the net proceeds of any such sale or the balance of any such property
after deduction of such tax or other governmental charge to the Holder hereof.
In connection with any distribution to Holders, the Company will remit to the
appropriate governmental authority or agency all amounts (if any) required to be
withheld and owing to such authority or agency by the Company; and the
Depositary and the Custodian will remit to the appropriate governmental
authority or agency all amounts (if any) required to be withheld and owing to
such authority or agency by the Depositary or the Custodian. If the Depositary
determines that any distribution in property other than cash (including Shares
or rights) on Deposited Securities is subject to any tax that the Depositary or
the Custodian is obligated to withhold, the Depositary may dispose of all or a
portion of such property in such amounts and in such manner as the Depositary
deems necessary and practicable to pay such taxes,
A-4
by public or private sale, and the Depositary shall distribute the net proceeds
of any such sale or the balance of any such property after deduction of such
taxes to the Holders entitled thereto.
(6) Disclosure of Interests. To the extent that the provisions of or
governing any Deposited Securities may require disclosure of or impose limits on
beneficial or other ownership of Deposited Securities, other Shares and other
securities and may provide for blocking transfer, voting or other rights to
enforce such disclosure or limits, Holders and all persons holding ADRs agree to
comply with all such disclosure requirements and ownership limitations and to
cooperate with the Depositary in the Depositary's compliance with any Company
instructions in respect thereof, and the Depositary will use reasonable efforts
to comply with such Company instructions.
Notwithstanding any other provision of the Deposit Agreement or this ADR,
each Holder agrees to provide such information as the Company may request in a
disclosure notice (a "Disclosure Notice") given pursuant to the United Kingdom
Companies Act 1985 (as amended from time to time and including any statutory
modification or reenactment thereof, the "Companies Act") or the Articles of
Association of the Company within the time period specified in such Disclosure
Notice. Each Holder acknowledges that it understands that failure to comply with
a Disclosure Notice may result in the imposition of sanctions against the holder
of the Shares in respect of which the non-complying person is or was, or appears
to be or has been, interested as provided in the Companies Act and the Articles
of Association which currently include, the withdrawal of the voting rights of
such Shares and the imposition of restrictions on the rights to receive
dividends on and to transfer such Shares. In addition, each Holder agrees to
comply with the provisions of the Companies Act with regard to the notification
to the Company of interests in Shares, which currently provide, inter alia, that
any Holder who is or becomes directly or indirectly interested (within the
meaning of the Companies Act) in 3% or more of the outstanding Shares, or is
aware that another person for whom it holds such ADRs is so interested, must
within two business days after becoming so interested or so aware (and
thereafter in certain circumstances upon any change to the particulars
previously notified) notify the Company as required by the Companies Act.
(7) Charges of Depositary. The Depositary may charge each person to whom
ADRs are issued against deposits of Shares, including deposits in respect of
Share Distributions, Rights and Other Distributions (as such terms are defined
in paragraph (10)), and each person surrendering ADRs for withdrawal of
Deposited Securities, U.S.$5.00 for each 100 ADSs (or portion thereof) evidenced
by the ADRs delivered or surrendered. The Depositary may sell (by public or
private sale) sufficient securities and property received in respect of Share
Distributions, Rights and Other Distributions prior to such deposit to pay such
charge. The Company will pay all other charges and expenses of the Depositary
and any agent of the Depositary (except the Custodian) as may be provided
pursuant to agreements from time to time between the Company and the Depositary,
except (i) stock transfer or other taxes and other governmental charges (which
are payable by Holders or persons
A-5
depositing Shares), (ii) cable, telex and facsimile transmission and delivery
charges incurred at the request of persons depositing, or Holders delivering
Shares, ADRs or Deposited Securities (which are payable by such persons or
Holders), (iii) transfer or registration fees for the registration of transfer
of Deposited Securities on any applicable register in connection with the
deposit or withdrawal of Deposited Securities (which are payable by persons
depositing Shares or Holders withdrawing Deposited Securities; there are no such
fees in respect of the Shares as of the date of the Deposit Agreement) and (iv)
expenses of the Depositary in connection with the conversion of foreign currency
into U.S. dollars (which are paid out of such foreign currency). These charges
may be changed in the manner indicated in paragraph (16).
(8) Available Information. The Deposit Agreement, the provisions of or
governing Deposited Securities and any written communications from the Company,
which are both received by the Custodian or its nominee as a holder of Deposited
Securities and made generally available to the holders of Deposited Securities,
are available for inspection by Holders at the offices of the Depositary and the
Custodian and at the Transfer Office. At the written request of the Company, the
Depositary will mail copies of such communications (or English translations or
summaries thereof) to Holders when furnished by the Company. The Company is
subject to the periodic reporting requirements of the Securities Exchange Act of
1934 applicable to foreign issuers and accordingly files certain reports with
the United States Securities and Exchange Commission (the "Commission"). Such
reports and other information may be inspected and copied at the public
reference facilities maintained by the Commission located at the date of the
Deposit Agreement at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549.
(9) Execution. This ADR shall not be valid for any purpose unless executed
by the Depositary by the manual or facsimile signature of a duly authorized
officer of the Depositary.
Dated:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Depositary
By
------------------------------------
Authorized Officer
The Depositary's principal executive office is located at 60 Wall Street,
New York, New York 10260.
A-6
[FORM OF REVERSE OF ADR]
(10) Distributions on Deposited Securities. Subject to paragraphs (4) and
(5) and any restrictions imposed by United Kingdom law, regulation or applicable
permit, to the extent practicable, the Depositary will promptly distribute by
mail to each Holder entitled thereto on the record date set by the Depositary
therefor at such Holder's address shown on the ADR Register, in proportion to
the number of Deposited Securities (on which the following distributions on
Deposited Securities are received by the Custodian) represented by ADSs
evidenced by such Holder's ADRs: (a) Cash. Any U.S. dollars available to the
Depositary resulting from a cash dividend or other cash distribution or the net
proceeds of sales of any other distribution or portion thereof authorized in
this paragraph (10) ("Cash"), on an averaged or other practicable basis, subject
to (i) appropriate adjustments for taxes withheld, (ii) such distribution being
impermissible or impracticable with respect to certain Holders, and (iii)
deduction of the Depositary's expenses in (1) converting any foreign currency to
U.S. dollars by sale or in such other manner as the Depositary may determine to
the extent that it determines that such conversion may be made on a reasonable
basis, (2) transferring foreign currency or U.S. dollars to the United States by
such means as the Depositary may determine to the extent that it determines that
such transfer may be made on a reasonable basis, (3) obtaining any approval or
license of any governmental authority required for such conversion or transfer,
which is obtainable at a reasonable cost and within a reasonable time and (4)
making any sale by public or private means in any commercially reasonable
manner. If the Depositary determines that any foreign currency received by it
cannot be converted on a reasonable basis and transferred to the United States,
the Depositary may distribute the foreign currency received by it or, at its
sole discretion, hold such foreign currency, uninvested and without liability
for interest thereon. (b) Shares. (i) Additional ADRs evidencing whole ADSs
representing any Shares available to the Depositary resulting from a dividend or
free distribution on Deposited Securities consisting of Shares (a "Share
Distribution") and (ii) U.S. dollars available to it resulting from the net
proceeds of sales of Shares received in a Share Distribution, which Shares would
give rise to fractional ADSs if additional ADRs were issued therefor, as in the
case of Cash. (c) Rights. (i) Warrants or other instruments in the good faith
discretion of the Depositary representing rights to acquire additional ADRs in
respect of any rights to subscribe for additional Shares or rights of any nature
available to the Depositary as a result of a distribution on Deposited
Securities ("Rights"), to the extent that the Company timely furnishes to the
Depositary evidence satisfactory to the Depositary that the Depositary may
lawfully distribute the same (the Company has no obligation to so furnish such
evidence), or (ii) to the extent the Company does not so furnish such evidence
and sales of Rights are practicable, any U.S. dollars available to the
Depositary from the net proceeds of sales of Rights as in the case of Cash, or
(iii) to the extent the Company does not so furnish such evidence and such sales
cannot practicably be accomplished by reason of the nontransferability of the
Rights, limited markets therefor, their short duration or otherwise, nothing
(and any Rights may
A-7
lapse). (d) Other Distributions. (i) Securities or property available to the
Depositary resulting from any distribution on Deposited Securities other than
Cash, Share Distributions and Rights ("Other Distributions"), by any means that
the Depositary may deem, after consultation with the Company to the extent
practicable, lawful, equitable and practicable, or (ii) to the extent the
Depositary deems, after consultation with the Company to the extent practicable,
distribution of such securities or property not to be lawful, equitable or
practicable, any U.S. dollars available to the Depositary from the net proceeds
of sales of Other Distributions as in the case of Cash. Such U.S. dollars
available will be distributed by checks drawn on a bank in the United States for
whole dollars and cents (any fractional cents being withheld without liability
for interest and added to future Cash distributions). Notwithstanding anything
herein to the contrary, the Company shall have no obligation to either (i)
register any ADSs, Shares, Rights or other securities described in this
Paragraph (10) under the Securities Act of 1933 or (ii) take other actions to
permit the distribution of such ADSs, Shares, Rights or other securities in
accordance with applicable U.S. securities laws.
(11) Record Dates. The Depositary shall, after consultation with the
Company if practicable, fix a record date (which shall be as near as practicable
to any corresponding record date set by the Company with respect to the Shares)
for the determination of the Holders who shall be entitled to receive any
distribution on or in respect of Deposited Securities, to give instructions for
the exercise of any voting rights, to receive any notice or to act in respect of
other matters and only such Holders shall be so entitled.
(12) Voting of Deposited Securities. As soon as practicable after receipt
from the Company of notice of any meeting or solicitation of consents or proxies
of holders of Shares or other Deposited Securities, the Depositary, to the
extent practicable, shall mail to Holders a notice stating (a) such information
as is contained in such notice and any solicitation materials, (b) that each
Holder on the record date set by the Depositary therefor will be entitled to
instruct the Depositary as to the exercise of the voting rights, if any,
pertaining to the Deposited Securities represented by the ADSs evidenced by such
Holder's ADRs and (c) the manner in which such instructions may be given. Upon
receipt of instructions of a Holder on such record date in the manner and on or
before the date established by the Depositary for such purpose, the Depositary
shall endeavor insofar as practicable and permitted under the provisions of or
governing Deposited Securities to vote or cause to be voted the Deposited
Securities represented by the ADSs evidenced by such Holder's ADRs in accordance
with such instructions. The Depositary will not itself exercise any voting
discretion in respect of any Deposited Security. To the extent such instructions
are not so received by the Depositary from any Holder, the Depositary shall deem
such Holder to have so instructed the Depositary to give a discretionary proxy
to a person designated by the Company and the Depositary shall endeavor insofar
as practicable and permitted under the provisions of or governing Deposited
Securities to give a discretionary proxy to a person designated by the Company
to vote the Deposited Securities represented by the ADSs
A-8
evidenced by such Holder's ADRs as to which such instructions are so given,
provided that no such instruction shall be deemed given and no discretionary
proxy shall be given with respect to any matter as to which the Company informs
the Depositary (and the Company agrees to provide such information promptly in
writing) that (x) the Company does not wish such proxy given, (y) substantial
opposition exists or (z) materially affects the rights of holders of Shares.
Notwithstanding anything to the contrary contained herein, the Depositary
shall not be obligated to give any such deemed instruction unless and until the
Depositary has been provided with an opinion, which may be given at the time of
entering into the Deposit Agreement, of counsel to the Company, in form and
substance satisfactory to the Depositary, to the effect that (i) the granting of
such discretionary proxy does not subject the Depositary to any reporting
obligations in England or Wales, (ii) the granting of such proxy will not result
in a violation of United Kingdom law, rule, regulation or permit, (iii) the
voting arrangement and proxy as contemplated herein will be given effect under
United Kingdom law, and (iv) the Depositary will not be deemed to be authorized
to exercise any discretion when voting in accordance with the terms of this
paragraph (12) under United Kingdom law and, the Depositary will not be subject
to any liability under United Kingdom law for losses arising from the exercise
of the voting arrangements set forth in this paragraph (12). If after the date
such opinion is delivered to the Depositary the Company is advised by counsel
that there has occurred a change in United Kingdom law such that the foregoing
opinion could no longer be rendered favorably in whole or in part, the Company
shall promptly notify the Depositary of such change and the Depositary shall
thereafter have no obligation to give any such discretionary proxy. The Company
agrees to direct its counsel to inform it of any such changes in United Kingdom
law.
(13) Changes Affecting Deposited Securities. Subject to paragraphs (4) and
(5), the Depositary may, in its discretion, amend this ADR or distribute
additional or amended ADRs (with or without calling this ADR for exchange) or
cash, securities or property on the record date set by the Depositary therefor
to reflect any change in par value, split-up, consolidation, cancellation or
other reclassification of Deposited Securities, any Share Distribution or Other
Distribution not distributed to Holders or any cash, securities or property
available to the Depositary in respect of Deposited Securities from (and the
Depositary is hereby authorized to surrender any Deposited Securities to any
person and to sell by public or private sale any property received in connection
with) any recapitalization, reorganization, merger, consolidation, liquidation,
receivership, bankruptcy or sale of all or substantially all the assets of the
Company, and to the extent the Depositary does not so amend this ADR or make a
distribution to Holders to reflect any of the foregoing, or the net proceeds
thereof, whatever cash, securities or property results from any of the foregoing
shall constitute Deposited Securities and each ADS evidenced by this ADR shall
automatically represent its pro rata interest in the Deposited Securities as
then constituted.
A-9
(14) Exoneration. The Depositary, the Company, their agents and each of
them shall: (a) incur no liability (i) if law, regulation, the provisions of or
governing any Deposited Securities, act of God, war or other circumstance beyond
its control shall prevent, delay or subject to any civil or criminal penalty any
act which the Deposit Agreement or this ADR provides shall be done or performed
by it, or (ii) by reason of any exercise or failure to exercise any discretion
given it in the Deposit Agreement or this ADR; (b) assume no liability except to
perform its obligations (other than those directly related to the handling of
Deposited Securities and Cash) to the extent they are specifically set forth in
this ADR and the Deposit Agreement without gross negligence or bad faith; (c)
assume no liability except to perform its obligations directly related to the
handling of Deposited Securities and Cash to the extent they are specifically
set forth in this ADR and the Deposit Agreement without negligence or bad faith;
(d) in the case of the Depositary and its agents hereunder, be under no
obligation to appear in, prosecute or defend any action, suit or other
proceeding in respect of any Deposited Securities or this ADR; (e) in the case
of the Company and its agents hereunder, be under no obligation to appear in,
prosecute or defend any action, suit or other proceeding in respect of any
Deposited Securities or this ADR, which in its opinion may involve it in expense
or liability, unless indemnity satisfactory to it against all expense (including
fees and disbursements of counsel) and liability be furnished as often as may be
required; or (f) not be liable for any action or inaction by it in reliance upon
the advice of or information from legal counsel, accountants, any person
presenting Shares for deposit, any Holder, or any other person believed by it in
good faith to be competent to give such advice or information. The Depositary,
the Company and the respective agents of each of them may rely and shall be
protected in acting upon any written notice, request, direction or other
document believed by them to be genuine and to have been signed or presented by
the proper party or parties. The Depositary and its agents will not be
responsible for any failure to carry out any instructions to vote any of the
Deposited Securities, for the manner in which any such vote is cast or for the
effect of any such vote. The Depositary and its agents may own and deal in any
class of securities of the Company and its affiliates and in ADRs. The Company
has agreed to indemnify the Depositary and its agents under certain
circumstances and the Depositary has agreed to indemnify the Company against
losses incurred by the Company under certain circumstances. No disclaimer of
liability under the Securities Act of 1933 is intended by any provision hereof.
(15) Resignation and Removal of Depositary; the Custodian. The Depositary
may resign as Depositary by written notice of its election to do so delivered to
the Company, or be removed as Depositary by the Company by written notice of
such removal delivered to the Depositary; such resignation or removal shall take
effect upon the appointment of and acceptance by a successor depositary. The
Depositary may, after consultation with the Company, appoint substitute or
additional Custodians and the term "Custodian" refers to each Custodian or all
Custodians as the context requires.
A-10
(16) Amendment. Subject to the last sentence of paragraph (2), the ADRs
and the Deposit Agreement may be amended by the Company and the Depositary
without the consent of the Holders in any respect, provided that any amendment
that imposes or increases any fees or charges (other than stock transfer or
other taxes and other governmental charges, transfer or registration fees,
cable, telex or facsimile transmission costs, delivery costs or other such
expenses), or that shall otherwise prejudice any substantial existing right of
Holders, shall become effective 30 days after notice of such amendment shall
have been given to the Holders. Every Holder of an ADR at the time any amendment
to the Deposit Agreement so becomes effective shall be deemed, by continuing to
hold such ADR, to consent and agree to such amendment and to be bound by the
Deposit Agreement as amended thereby. In no event shall any amendment impair the
right of the Holder of any ADR to surrender such ADR and receive the Deposited
Securities represented thereby, except in order to comply with mandatory
provisions of applicable law.
(17) Termination. The Depositary may, and shall at the written direction
of the Company, terminate the Deposit Agreement and this ADR by mailing notice
of such termination to the Holders at least 30 days prior to the date fixed in
such notice for such termination. After the date so fixed for termination, the
Depositary and its agents will perform no further acts under the Deposit
Agreement and this ADR, except to advise Holders of such termination, receive
and hold (or sell) distributions on Deposited Securities and deliver Deposited
Securities being withdrawn. As soon as practicable after the expiration of six
months from the date so fixed for termination, the Depositary shall sell the
Deposited Securities and shall thereafter (as long as it may lawfully do so)
hold in a segregated account the net proceeds of such sales, together with any
other cash then held by it under the Deposit Agreement, without liability for
interest, in trust for the pro rata benefit of the Holders of ADRs not
theretofore surrendered. After making such sale, the Depositary shall be
discharged from all obligations in respect of the Deposit Agreement and this
ADR, except to account for such net proceeds and other cash. After the date so
fixed for termination, the Company shall be discharged from all obligations
under the Deposit Agreement except for its obligations to the Depositary and its
agents.
(18) Restrictions upon Ownership. So long as the Articles of Associations
of the Company (i) limit the number of Shares in which any holder of Shares may
be interested, or (ii) authorize the Company to take certain actions (including
disenfranchisement and withholding of dividends) in respect of Shares held by a
person who does not respond properly to a notice from the Company requiring
details of his interest in those Shares, notwithstanding any contrary provision
of the Deposit Agreement, each Holder agrees that such limitations shall be
applicable to and enforceable by the Company against such Holder and such
Holder's ADRs as if they were, to the extent practicable, the Shares represented
thereby and the Depositary agrees to use its reasonable efforts to comply with
any written instructions received from the Company requesting that the
Depositary take the reasonable actions specified therein to apply
A-11
and enforce such limitations (including disenfranchisement and disposal) against
specified Holders (other than The Depository Trust Company ("DTC") or its
nominees), provided that the Company shall indemnify the Depositary and hold it
harmless from any expense or liability incurred in complying with such
instructions. The Depositary shall not be required to take any actions with
respect to DTC or its nominees other than the providing of notice and the
forwarding of information and requests thereto.
A-12
CONFORMED COPY
AGREEMENT
DATED 4th December, 1997
(pound)1,500,000,000
SYNDICATED CREDIT FACILITY
FOR
REUTERS GROUP LIMITED
ARRANGED BY
CHASE MANHATTAN PLC
ALLEN & OVERY
London
B2:102972.2
INDEX
CLAUSE PAGE
1. Interpretation.................................................1
2. The Facilities................................................14
3. Purpose.......................................................15
4. Conditions Precedent..........................................16
5. Advances......................................................16
6. Repayment.....................................................18
7. Prepayment And Cancellation...................................18
8. Interest......................................................21
9. Payments......................................................22
10. Taxes.........................................................24
11. Market Disruption.............................................26
12. Increased Costs...............................................28
13. Illegality And Mitigation.....................................28
14. Guarantee.....................................................29
15. Representations And Warranties................................32
16. Undertakings..................................................35
17. Financial Covenant............................................36
18. Default.......................................................36
19. The Agent And The Arranger....................................39
20. Fees..........................................................43
21. Expenses......................................................44
22. Stamp Duties..................................................45
23. Indemnities...................................................45
24. Evidence And Calculations.....................................46
25. Amendments And Waivers........................................47
26. Changes To The Parties........................................47
27. Disclosure Of Information.....................................51
28. Set-Off.......................................................51
29. Pro Rata Sharing..............................................51
30. Severability..................................................52
31. Counterparts..................................................52
32. Notices.......................................................53
33. Language......................................................55
34. Jurisdiction..................................................55
35. Governing Law.................................................56
SCHEDULE PAGE
1. Banks And Commitments.........................................57
2. Conditions Precedent Documents................................58
Part I - To Be Delivered Before The First Advance.............58
Part II - To Be Delivered By An Additional Borrower...........60
Part III - To Be Delivered By An Additional Guarantor.........61
3. Calculation Of The MLA Cost...................................63
4. Form Of Request...............................................65
5. Forms Of Accession Documents..................................66
Part I - Novation Certificate.................................66
Part II - Borrower Accession Agreement........................68
Part III - Guarantor Accession Agreement......................69
Part IV - Form Of Borrower Novation Agreement.................70
6. Form Of Compliance Certificate................................72
7. Form Of Confidentiality Undertaking...........................73
Signatories............................................................74
THIS AGREEMENT is dated 4th December, 1997 BETWEEN:
(1) REUTERS GROUP LIMITED (Company No. 3296375) (the "PARENT");
(2) REUTERS INVESTMENTS (Company No. 3477402) as original borrower (the
"ORIGINAL BORROWER");
(3) CHASE MANHATTAN PLC as arranger (the "ARRANGER");
(4) THE FINANCIAL INSTITUTIONS listed in Schedule 1 as banks; and
(5) CHASE MANHATTAN INTERNATIONAL LIMITED as agent (the "AGENT").
IT IS AGREED as follows:
1. INTERPRETATION
1.1 DEFINITIONS
In this Agreement:
"ACCEDING COMPANY"
means any Additional Borrower or Additional Guarantor.
"ADDITIONAL BORROWER"
means a wholly owned Subsidiary of the Parent approved in writing by
all the Banks which becomes a Borrower in accordance with Clause 26.4
(Additional Borrowers).
"ADDITIONAL GUARANTOR"
means an Affiliate of the Parent which becomes a Guarantor in
accordance with Clause 26.5 (Additional Guarantors).
"ADVANCE"
means a Tranche A Advance or a Tranche B Advance.
"AFFILIATE"
for the purposes of this Agreement means a Subsidiary or a holding
company (as defined in Section 736 of the Companies Act 1985) of a
person and any other Subsidiary of that holding company.
"AGENT'S SPOT RATE OF EXCHANGE"
means the spot rate of exchange as determined by the Agent for the
purchase of the relevant Optional Currency in the London foreign
exchange market with Sterling at the relevant time on a particular day.
"ANNIVERSARY"
means an anniversary of the Signing Date.
"APPROVED SCHEME"
means a scheme of arrangement under Section 425 of the Companies Act
1985 under which the Parent becomes a subsidiary of a new holding
company in substantially the same manner as effected under the Scheme
of Arrangement and that new holding company has become an Additional
Guarantor.
"BACK TO BACK LOAN"
means any Indebtedness made available to a member of the Group to the
extent that the creditor has recourse directly or indirectly to a
deposit of cash or cash equivalent investments beneficially owned by
any member of the Group placed, as part of a related transaction, with
that creditor (or an affiliate of that creditor) or a financial
institution approved by that creditor on the basis that the deposit be
available, directly or indirectly, so as to reduce the economic
exposure of the creditor to the Group, when looking at the related
transactions together, to a net amount.
"BANKS"
means those financial institutions listed in Schedule 1 and their
respective successors and assigns which are for the time being
participating in the Facilities.
"BORROWER"
means the Parent and the Original Borrower (whether in their capacity
as a borrower or guarantor as the context may require) and each
Additional Borrower.
"BORROWER ACCESSION AGREEMENT"
means a letter substantially in the form of Part II of Schedule 5 with
such amendments as the Agent may approve or reasonably require.
"BORROWINGS"
means any Indebtedness in respect of the following:
(a) money borrowed or raised and debit balances at banks;
(b) any bond, note, loan stock, debenture or similar debt
instrument;
(c) acceptance credit facilities and documentary credit
facilities;
(d) receivables sold or discounted (otherwise than on a
non-recourse basis);
(e) finance leases and hire purchase contracts which are required
to be capitalised under generally accepted accounting
principles in the UK in force as at the Signing Date;
(f) any other transaction (including without limitation forward
sale or purchase agreements) having the commercial effect of a
borrowing or raising of money or of any of paragraphs (b) to
(e) (both inclusive) above;
(g) for the purposes of Clause 18.8 (Cross Default) only, the net
amount of any liability under any swap, hedging or similar
treasury instrument; and
(h) guarantees in respect of Indebtedness of any person falling
within any of paragraphs (a) to (g) (both inclusive) above,
provided that Indebtedness owing by one member of the Group to another
member of the Group shall not be taken into account as Borrowings.
"BUSINESS DAY"
means a day (other than a Saturday or Sunday) on which banks and the
interbank and foreign exchange markets are open for business in London
and (in respect of a day on which a payment in an Optional Currency is
required hereunder) the principal financial centre of the country of
such Optional Currency.
"CERTAIN FUNDS PERIOD"
means the period beginning on the Signing Date and ending on the
earlier of:
(a) 31st March, 1998;
(b) the date falling 30 days after the date on which the shares of
the Parent are admitted to the Official List of the London
Stock Exchange; and
(c) the first Utilisation Date under this Agreement.
"COMMITMENT"
means, in respect of a Bank, the aggregate of its Tranche A Commitment
and Tranche B Commitment in each case to the extent not cancelled or
reduced under this Agreement.
"CONSOLIDATED NET FINANCE CHARGES"
means, in respect of any financial year of the Group, the aggregate
amount of the interest (including, without limitation, the interest
element of finance leases and hire purchase payments but, for the
avoidance of doubt, excluding any deemed interest on operating leases),
commission and other finance charges payable by the Group in respect of
that financial year less the amount of interest receivable by the Group
during such financial year, as determined from the audited consolidated
profit and loss account of the Group for that financial year.
"CONSOLIDATED PROFITS BEFORE INTEREST AND TAX"
means, in respect of any financial year of the Group, consolidated
trading profit of the Group from continuing operations, acquisitions
(as a component of continuing operations) and discontinued operations
as set out in FRS 3 (excluding exceptional profits or losses and
extraordinary items for such financial year as set out in FRS 3) prior
to deduction of:
(a) Consolidated Net Finance Charges for that financial year; and
(b) tax on the overall income of the Group payable in respect of
that financial year,
all as determined from the audited consolidated profit and loss account
of the Group for that financial year.
"COURT ORDER"
means the order of the High Court of Justice sanctioning the Scheme of
Arrangement pursuant to Section 425 of the Companies Act 1985 and
confirming the reduction of capital included therein pursuant to
Section 137 of the Companies Act 1985.
"DEFAULT"
means an Event of Default or an event which, with the giving of notice,
determination of materiality or expiry of any grace period, each as
referred to in Clause 18 (Default), (or any combination of the
foregoing), would constitute an Event of Default.
"EFFECTIVE DATE"
means the date upon which the Court Order is registered by the
Registrar of Companies under Sections 138 and 425 of the Companies Act
1985.
"ENCUMBRANCE"
means a mortgage, charge, pledge, lien or other security interest.
"EVENT OF DEFAULT"
means an event specified as such in Clause 18 (Default).
"FACILITY"
means either of the facilities designated as Tranche A or Tranche B in
Clause 2.1 (Facilities).
"FACILITY OFFICE"
means the office(s) notified by a Bank to the Agent:
(a) on or before the date it becomes a Bank; or
(b) by not less than five Business Days' notice,
as the office(s) through which it will perform all or any of its
obligations under this Agreement.
"FEE LETTERS"
means each letter dated on or about the Signing Date:
(a) between the Agent and the Parent; and
(b) between, inter alia, the Arranger, The Chase Manhattan Bank,
the Parent and the Original Borrower,
in each case setting out the amount of various fees referred to in
Clause 20 (Fees).
"FINANCE DOCUMENT"
means this Agreement, each Fee Letter, a Novation Certificate, a
Borrower Accession Agreement, each Novation Agreement entered into as
contemplated by Clause 7.6(b)(iii) (Changes to Borrowers), a Guarantor
Accession Agreement or any other document designated in writing as such
by the Agent and the Parent.
"FINANCE PARTY"
means the Arranger, a Bank or the Agent.
"GROUP"
means the Parent and its Subsidiaries.
"GUARANTOR"
means each of:
(a) the Parent and the Original Borrower; and
(b) each Additional Guarantor.
"GUARANTOR ACCESSION AGREEMENT"
means a deed substantially in the form of Part III of Schedule 5 with
such amendments as the Agent may approve or reasonably require.
"INDEBTEDNESS"
means any obligation (whether incurred as principal or as surety) for
the payment or repayment of moneys, whether present or future, actual
or contingent.
"LIBOR"
means in relation to any period in respect of which an interest rate is
to be determined in relation to any Advance or unpaid sum, the rate
determined by the Agent to be the arithmetic mean (rounded upwards, if
necessary, to the nearest four decimal places) of the respective rates
notified to the Agent by each of the Reference Banks quoting (provided
that at least two Reference Banks are quoting) as the rate at which it
is offering deposits in the required currency and for the required
period in an amount comparable to the Advance or unpaid sum to prime
banks in the London interbank market at or about 11.00 a.m. on the Rate
Fixing Day for such period.
For the purpose of this definition "REQUIRED PERIOD" means the
applicable Term for a Tranche A or Tranche B Advance or the period in
respect of which LIBOR falls to be determined in relation to such
unpaid sum.
"MAJORITY BANKS"
means, at any time:
(a) if any Advances are outstanding, Banks with an aggregate
Original Sterling Amount of Advances at that time of more than
66 2/3 per cent. of the aggregate Original Sterling Amount of
all Advances then outstanding; or
(b) if no Advances are outstanding, Banks whose Commitments then
aggregate more than 66 2/3 per cent. of the Total Commitments
(or if the Total Commitments have been reduced to zero,
aggregated more than 66 2/3 per cent. of the Total Commitments
immediately before the reduction).
"MANDATORY PREPAYMENT EVENT"
means an event specified in paragraph (a), (b) or (c) of Clause 7.4
(Mandatory Prepayment Events).
"MARGIN"
means:
(a) in respect of each Tranche A Advance other than a Term-out
Advance 0.175 per cent. per annum and in respect of each
Term-out Advance, 0.225 per cent. per annum; and
(b) in respect of each Tranche B Advance, 0.175 per cent. per
annum from the Signing Date until the third Anniversary and
0.20 per cent. per annum thereafter.
"MATERIAL ADVERSE EFFECT"
means a material adverse effect on the Group taken as a whole which
would affect the ability of any Obligor to perform or observe any of
its obligations under any of the Finance Documents.
"MATERIAL SUBSIDIARY"
means at any particular time, a member of the Group (other than an
Obligor) whose gross assets or pre-taxation profits, as at the end of
or (as the case may be) of the latest financial year of the Group and
as taken into account for the purpose of the audited consolidated
financial statements of the Group for such financial year, represent at
least ten per cent. of the consolidated gross assets or pre-taxation
profits of the Group as determined from those audited consolidated
financial statements of the Group. For this purpose:
(a) in the case of a member of the Group which itself has
Subsidiaries, the calculation shall be made by comparing the
consolidated gross assets or pre-taxation profits of it and
its Subsidiaries to those of the Group;
(b) assets which arise from transactions between members of the
Group and which would be eliminated in the consolidated
financial statements of the Group shall be excluded; and
(c) if a Subsidiary which is not a Material Subsidiary on the
basis of the most recent such accounts receives a transfer
of assets or the right to receive any trading profits which
taken together with the existing assets or trading profits of
that Subsidiary, as the case may be, would satisfy any of
the tests above, then that Subsidiary shall also be a
Material Subsidiary on and from the date it receives
such transfer. If a Material Subsidiary disposes of any
assets or the right to receive any trading profits such
that it would on the basis of the most recent such accounts
cease to be a Material Subsidiary, then it shall be
excluded as a Material Subsidiary on and from the date the
Parent next notifies the Agent of the identity of the
Material Subsidiaries under Clause 16.2(f) (Financial
Information).
"MATURITY DATE"
means the last day of the Term of an Advance.
"MLA COST"
means the cost imputed to a Bank making an Advance in Sterling of
compliance with the Mandatory Liquid Assets requirements of the Bank of
England during its Term, determined in accordance with Schedule 3.
"NOVATION CERTIFICATE"
has the meaning given to it in Clause 26.3(a)(i) (Procedure for
novations).
"OBLIGOR"
means the Parent, each Borrower and each Guarantor.
"OPTIONAL CURRENCY"
means, in relation to any Advance or proposed Advance, U.S. Dollars or
any other currency other than Sterling which all the Banks have
confirmed in relation to the proposed Advance is readily available and
freely transferable in the London foreign exchange market in sufficient
amounts to fund that Advance.
"ORIGINAL GROUP ACCOUNTS"
means the audited consolidated financial statements of Reuters Holdings
Plc and its Subsidiaries for the year ended 31st December, 1996.
"ORIGINAL STERLING AMOUNT"
means:
(a) the principal amount of an Advance denominated in Sterling; or
(b) the principal amount of an Advance denominated in any other
currency, translated into Sterling on the basis of the Agent's
Spot Rate of Exchange on the date of receipt by the Agent of
the Request for that Advance.
"PARTY"
means a party to this Agreement.
"PERMITTED ENCUMBRANCE" means:
(a) a lien or right of set-off arising solely by operation of
law or by agreement and in the ordinary course of business;
(b) an Encumbrance in existence as at the Effective Date and
disclosed in writing prior to the Signing Date to the Agent;
(c) an Encumbrance granted over any real property of a member of
the Group at the time of purchase thereof for any loan or
other obligation raised or undertaken for the sole purpose of
financing the purchase of that real property;
(d) any Encumbrance securing any Indebtedness of any company which
becomes a member of the Group after the date hereof and which
was in existence when such company became a member of the
Group provided that each such Encumbrance is discharged in
full within 180 days after such company becomes a member of
the Group;
(e) an Encumbrance over an asset purchased by a member of the
Group (otherwise than from another member of the Group) after
the date hereof and to which such asset was subject at the
time of such purchase provided that such Encumbrance is
discharged in full within 180 days after the date of purchase
of such asset by such member of the Group;
(f) any retention of title reserved by any seller of goods in the
normal course of business, or any Encumbrance imposed,
reserved or granted over goods supplied by such seller in
respect of the unpaid price of goods supplied in the ordinary
course of business;
(g) an Encumbrance granted by Instinet Corporation, Instinet
Holdings Ltd or Instinet Canada Ltd or any of their respective
Subsidiaries or any other member of the Group which carries on
a broking or similar business, in each case in the ordinary
course of that broking or similar business over any asset
deposited with either a bank in connection with the clearance
of traded securities, landlord, securities exchange or
clearing system as security for the relevant company's
obligations to such bank, landlord, securities exchange or
clearing system;
(h) an Encumbrance which the Majority Banks have at any time
agreed in writing shall be a Permitted Encumbrance;
(i) an Encumbrance granted in respect of a Back to Back Loan over
the cash or cash equivalent deposits concerned;
(j) any Encumbrance granted by any member of the Group in the
ordinary course of business in respect of any assets deposited
with a central bank or other regulatory body in compliance
with the requirements of that central bank or regulatory body;
and
(k) Encumbrances (other than Encumbrances permitted by paragraphs
(a) to (j) above) which secure, in aggregate, Indebtedness in
an amount not exceeding (pound)100,000,000 or its equivalent
in other currencies.
"PRESS RELEASE" has the meaning given to it in Part I of Schedule 2.
"QUALIFYING BANK"
means a bank or financial institution which is:
(a) a bank as defined in Section 840A of the Income and
Corporation Taxes Act 1988 which is within the charge to
corporation tax as regards any interest received by it under
this Agreement; or
(b) resident (as such term is defined in the appropriate double
taxation treaty) in a country with which the United Kingdom
has an appropriate double taxation treaty under which that
institution is entitled to exemption from United Kingdom tax
on interest and is entitled to apply under the Double Taxation
Relief (Taxes on Income) (General) Regulations 1970 to have
interest paid to its Facility Office without withholding or
deduction for or on account of United Kingdom tax (and does
not carry on business in the United Kingdom through a
permanent establishment with which the investments under
this Agreement in respect of which the interest is paid is
effectively connected) and for this purpose "DOUBLE
TAXATION treaty" means any convention or agreement between
the government of the United Kingdom and any other
government for the avoidance of double taxation and the
prevention of fiscal evasion with respect to taxes on income
and capital gains.
"RATE FIXING DAY"
means:
(a) the Utilisation Date for an Advance denominated in Sterling;
or
(b) the second Business Day before the Utilisation Date for an
Advance denominated in any Optional Currency.
"REFERENCE BANKS"
means, subject to Clause 26.6 (Reference Banks), prior to primary
syndication of the Facilities, the principal London office of The Chase
Manhattan Bank and, thereafter, the principal London offices of The
Chase Manhattan Bank and another two financial institutions nominated
by the Arranger after consultation with the Parent.
"REQUEST"
means a request made by a Borrower to utilise a Facility, substantially
in the form of Schedule 4.
"REQUESTED AMOUNT"
means the amount requested in a Request.
"RESERVE ASSET COSTS"
means:
(a) in relation to any Advance in Sterling for any period, MLA
Cost; and
(b) in relation to an Advance denominated in any other currency,
the cost, if any, certified by any Bank as the cost to it of
complying with any applicable regulatory or central bank
requirement relating to Advances in that currency made through
a branch in the jurisdiction of the relevant currency.
"ROLLOVER"
means, in relation to a particular date, one or more Advances
(including, for the avoidance of doubt, the Term-out Advances):
(a) whose proposed Utilisation Date is the same as the Maturity
Date of one or more existing Advances;
(b) whose aggregate principal amount is the same as or less than
the aggregate outstanding principal amount of all existing
Advances whose Maturity Date is the same as that Utilisation
Date; and
(c) which are to be denominated in the same currency as the
existing Advance(s) whose Maturity Date is the same as that
Utilisation Date (or, if there is more than one such existing
Advance and such Advances are denominated in different
currencies, in the same or lesser respective amounts of the
same currencies as for such existing Advances).
"SCHEME OF ARRANGEMENT"
means the scheme of arrangement proposed to be made between Reuters
Holdings Plc and the holders of the Scheme Shares (as defined in the
Scheme of Arrangement) under Section 425 of the Companies Act 1985 as
described in the Press Release under which the Parent becomes the new
holding company of Reuters Holdings Plc.
"SIGNING DATE"
means the date of this Agreement.
"SPECIFIED SUBSIDIARY"
means Reuters Limited or any other Subsidiary or Subsidiaries of the
Parent to whom all or substantially all of the assets or business of
Reuters Limited is transferred.
"SUBSIDIARY"
means:
(a) a subsidiary within the meaning of Section 736 of the
Companies Act 1985, as amended by Section 144 of the Companies
Act 1989; and
(b) unless the context otherwise requires, a subsidiary
undertaking within the meaning of Section 258 of the Companies
Act 1985 (as inserted by Section 21 of the Companies Act
1989).
"SYNDICATION PERIOD"
means the period ending 31st March, 1998 or, if earlier, the date the
Arranger notifies the Parent that primary syndication of the Facilities
is completed.
"TERM"
means the period selected by a Borrower in a Request for which the
relevant Advance is to be outstanding.
"TERM-OUT ADVANCES"
means the Tranche A Advances, if any, drawn under Clause 6.1(b)
(Repayment of Tranche A Advances).
"TOTAL COMMITMENTS"
means the aggregate of the Tranche A Total Commitments and Tranche B
Total Commitments from time to time.
"TRANCHE A ADVANCE"
means an advance made by a Bank under Tranche A.
"TRANCHE A AVAILABILITY PERIOD"
means the period from the Signing Date up to and including 2nd
December, 1998 (being the date which is 364 days after the Signing
Date).
"TRANCHE A COMMITMENT"
means, in respect of a Bank, the amount in Sterling set opposite the
name of that Bank in Column 1 of Schedule 1 to the extent not cancelled
or reduced under this Agreement.
"TRANCHE A TERM DATE"
means the last day of the Tranche A Availability Period or, if that day
is not a Business Day, the preceding Business Day.
"TRANCHE A TERM-OUT OPTION"
means the option available to the Borrowers to draw an Advance under
Tranche A on the Tranche A Term Date pursuant to Clause 6.1(b)
(Repayment of Tranche A Advances).
"TRANCHE A TOTAL COMMITMENTS"
means the aggregate for the time being of the Tranche A Commitments,
being (pound)1,000,000,000 at the date of this Agreement.
"TRANCHE B ADVANCE"
means an advance made by a Bank under Tranche B.
"TRANCHE B AVAILABILITY PERIOD"
means the period from and including the Signing Date to and including
the date which is one month prior to the Tranche B Final Maturity Date.
"TRANCHE B COMMITMENT"
means, in respect of a Bank, the amount in Sterling set opposite the
name of that Bank in Column 2 of Schedule 1 to the extent not cancelled
or reduced under this Agreement.
"TRANCHE B FINAL MATURITY DATE"
means the fifth Anniversary.
"TRANCHE B TOTAL COMMITMENTS"
means the aggregate for the time being of the Tranche B Commitments,
being (pound)500,000,000 at the date of this Agreement.
"UK" or "UNITED KINGDOM"
means the United Kingdom of Great Britain and Northern Ireland.
"UTILISATION DATE"
means the date for the making of an Advance.
1.2 CONSTRUCTION
(a) In this Agreement, unless the contrary intention appears, a reference
to:
(i) "ASSETS" includes properties, revenues and rights of every
description;
an "AUTHORISATION" includes an authorisation, consent,
approval, resolution, licence, exemption, filing,
registration and notarisation;
a "MONTH" is a reference to a period starting on one day in a
calendar month and ending on the numerically corresponding day
in the next calendar month, except that, if there is no
numerically corresponding day in the month in which that
period ends, that period shall end on the last Business Day in
that calendar month;
a "REGULATION" includes any regulation, rule, official
directive, request or guideline (whether or not having the
force of law) of any governmental body, agency, department or
regulatory, self-regulatory or other authority or
organisation; and
a reference to the currency of a country is to the lawful
currency of that country for the time being, "(POUND)" and
"STERLING" is a reference to the lawful currency of the United
Kingdom for the time being and "U.S. $" and "U.S. DOLLARS" is
a reference to the lawful currency of the United States of
America for the time being;
(ii) a provision of a law is a reference to that provision as
amended or re-enacted;
(iii) a Clause or a Schedule is a reference to a clause of or a
schedule to this Agreement;
(iv) a person includes its successors and assigns;
(v) a Finance Document or another document is a reference to that
Finance Document or that other document as amended, novated or
supplemented; and
(vi) a time of day is a reference to London time.
(b) Unless the contrary intention appears, a term used in any other Finance
Document or in any notice given under or in connection with any Finance
Document has the same meaning in that Finance Document or notice as in
this Agreement.
(c) The index to and the headings in this Agreement are for convenience
only and are to be ignored in construing this Agreement.
(d) The definitions of "CONSOLIDATED NET FINANCE CHARGES" and
"CONSOLIDATED PROFITS BEFORE INTEREST AND TAX" and any calculations
made for the purposes of Clause 17 (Financial Covenant) shall be
construed or, as the case may be, made in accordance with generally
accepted accounting principles in the UK in force as at the Signing
Date. If there is any change to those accounting principles after the
Signing Date the financial statements referred to in paragraphs (a)
and (b) of Clause 16.2 (Financial Information) shall be accompanied by
a reconciliation of the differences between the accounting principles
in force as at the Signing Date and the accounting principles applied
in the preparation of those financial statements in sufficient detail
to calculate those definitions as though there had been no such
change.
2. THE FACILITIES
2.1 FACILITIES
The Banks grant to the Borrowers the following facilities:
(a) a committed multicurrency revolving 364 day credit facility,
with an option to draw Term-out Advances, to be designated as
TRANCHE A, under which the Banks will, when requested by a
Borrower, make cash advances in Sterling or Optional
Currencies to that Borrower on a revolving basis up to the
Tranche A Term Date; and
(b) a committed multicurrency revolving credit facility, to be
designated as TRANCHE B, under which the Banks will, when
requested by a Borrower, make cash advances in Sterling or
Optional Currencies to that Borrower on a revolving basis,
in all cases subject to the terms of this Agreement.
2.2 OVERALL FACILITY LIMIT
(a) The aggregate Original Sterling Amount of all outstanding Advances:
(i) under Tranche A, shall not at any time exceed the Tranche A
Total Commitments at that time; and
(ii) under Tranche B, shall not at any time exceed the Tranche B
Total Commitments at that time.
(b) The aggregate Original Sterling Amount of:
(i) Tranche A Advances made by a Bank shall not at any time exceed
its Tranche A Commitment at that time; and
(ii) Tranche B Advances made by a Bank shall not at any time exceed
its Tranche B Commitment at that time.
2.3 NUMBER OF REQUESTS AND ADVANCES
No more than one Request may be delivered on any one day and not more
than 10 Advances may be outstanding at any time but, subject to the
foregoing, that Request may specify any number of Advances from either
Tranche A or Tranche B or both.
2.4 SYNDICATION PERIOD
Notwithstanding any other provision of this Agreement no Borrower will
deliver a Request during the Syndication Period specifying a Term other
than one week, two or three weeks or one month. Nothing in this
Agreement will prevent a Borrower from requesting Terms of those
durations in the Syndication Period.
2.5 NATURE OF A FINANCE PARTY'S RIGHTS AND OBLIGATIONS
(a) The obligations of a Finance Party under the Finance Documents are
several. Failure of a Finance Party to carry out those obligations does
not relieve any other Party of its obligations under the Finance
Documents. No Finance Party is responsible for the obligations of any
other Finance Party under the Finance Documents.
(b) The rights of a Finance Party under the Finance Documents are divided
rights. A Finance Party may, except as otherwise stated in the Finance
Documents, separately enforce those rights.
2.6 OBLIGORS' AGENT
Each Obligor irrevocably authorises and instructs the Parent to give
and receive as agent on its behalf all notices (including Requests) and
sign all documents in connection with the Finance Documents on its
behalf (including Novation Agreements under Clause 7.6(b) (Changes to
Borrowers)) and take such other action as may be necessary or desirable
under or in connection with the Finance Documents and confirms that it
will be bound by any action taken by the Parent under or in connection
with the Finance Documents.
2.7 ACTIONS OF PARENT
The respective liabilities of each of the Obligors under the Finance
Documents shall not be in any way affected by:
(a) any irregularity (or purported irregularity) in any act done
by or any failure (or purported failure) by the Parent; or
(b) the Parent acting (or purporting to act) in any respect
outside any authority conferred upon it by any Obligor; or
(c) the failure (or purported failure) by, or inability (or
purported inability) of, the Parent to inform any Obligor of
receipt by it of any notification under a Finance Document.
3. PURPOSE
(a) Each Advance will be applied:
(i) in the case of Tranche A Advances, in or towards providing
bridging finance for the Group's financial requirements (in
respect of, amongst other things, the Scheme of Arrangement);
and
(ii) in the case of Tranche B Advances, in or towards the general
corporate purposes of the Group including, without limitation,
capital expenditure and working capital financing.
(b) Without affecting the obligations of any Borrower in any way, no
Finance Party is bound to monitor or verify the application of the
proceeds of any Advance.
4. CONDITIONS PRECEDENT
4.1 DOCUMENTARY CONDITIONS PRECEDENT
The obligations of each Finance Party to any Borrower under this
Agreement are subject to the condition precedent that the Agent has
notified the Parent and the Banks that it has received all of the
documents set out in Part I of Schedule 2 in form and substance
satisfactory to the Agent. The Agent will promptly notify the Parent
upon such receipt.
4.2 FURTHER CONDITIONS PRECEDENT
Subject to Clause 4.3 (Certain Funds Period), the obligations of each
Bank to participate in an Advance are subject to the further conditions
precedent that on the date of the Request for the Advance and on its
Utilisation Date:
(a) except in the case of a Rollover, the representations and
warranties in Clause 15 (Representations and Warranties) to be
repeated in accordance with Clause 15.13(c) (Times for making
representations and warranties) on those dates are correct and
will be correct immediately after the disbursement of the
Advance;
(b) except in the case of a Rollover, no Default or Mandatory
Prepayment Event is outstanding or would result from the
disbursement of the Advance; and
(c) the Advance would not cause Clause 2.2 (Overall facility
limit) to be contravened.
4.3 CERTAIN FUNDS PERIOD
To assist the Group to have sufficient funds available to fulfil its
obligations under the Scheme of Arrangement, the Banks agree that:
(a) any Default which occurs under Clause 18.4 (Misrepresentation)
or Clause 18.8 (Cross-default) or as a result of a breach of
Clause 17 (Financial Covenant); and
(b) any misrepresentation which occurs under Clause 15.5 (No
default), Clause 15.8 (Litigation) or Clause 15.11 (Material
Adverse Change),
that has occurred, or would result from an Advance drawn down to
finance the Scheme of Arrangement, will be suspended for all the
purposes of this Agreement during the Certain Funds Period.
5. ADVANCES
5.1 RECEIPT OF REQUESTS
A Borrower may borrow Advances under Tranche A or Tranche B if the
Agent receives, not later than 5.00 p.m. on the third Business Day
before the proposed Utilisation Date, or, in the case of an Advance in
Sterling, not later than 8.00 a.m. on the proposed Utilisation Date, a
duly completed Request.
5.2 COMPLETION OF REQUESTS
A Request will not be regarded as having been duly completed unless:
(a) the Utilisation Date is a Business Day during the Tranche A
Availability Period (in respect of a Tranche A Advance) or
Tranche B Availability Period (in respect of a Tranche B
Advance);
(b) only one currency is specified for each separate Advance and
the Requested Amount for each separate Advance is in a minimum
Original Sterling Amount of (pound)50,000,000 (rounded to the
nearest convenient 100,000 units in the case of currencies
other than Sterling);
(c) only one Term for each separate Advance is specified which:
(i) does not overrun the Tranche A Term Date (in respect
of a Tranche A Advance (other than a Term-out
Advance)) or the Tranche B Final Maturity Date (in
respect of a Tranche B Advance); and
(ii) is a period of one month, two, three or six months
or, with respect to the Term-out Advances only, nine
or 12 months (or, in any case, such other period as
all the Banks may previously have agreed for the
purposes of such Advance);
(d) the currency specified is either Sterling or an Optional
Currency; and
(e) the payment instructions comply with Clause 9.1 (Place of
Payment).
5.3 AMOUNT OF EACH BANK'S ADVANCE
The amount of a Bank's Advance will be the proportion of the Requested
Amount which:
(a) in the case of a Tranche A Advance, its Tranche A
Commitment bears to Tranche A Total Commitments; and
(b) in the case of a Tranche B Advance, its Tranche B Commitment
bears to the Tranche B Total Commitments,
in each case on the date of receipt of the relevant Request.
5.4 NOTIFICATION OF THE BANKS
The Agent shall promptly notify each Bank of the details of the
requested Advances and the amount of its Advance.
5.5 PAYMENT OF PROCEEDS
Subject to the terms of this Agreement, each Bank shall make its
Advance available to the Agent for the Borrower for value on the
relevant Utilisation Date.
6. REPAYMENT
6.1 REPAYMENT OF TRANCHE A ADVANCES
(a) Each Borrower shall repay each Tranche A Advance made to it in full on
its Maturity Date to the Agent for the relevant Bank but since Tranche
A is available on a revolving basis amounts repaid may be reborrowed
subject to the terms of this Agreement. Subject to paragraph (b) below,
no Tranche A Advance may be outstanding after the Tranche A Term Date.
(b) No earlier than 60 days prior to the Tranche A Term Date, any Borrower
may, by delivery of a duly completed Request to the Agent under Clause
5 (Advances) (who shall send a copy of the same to the Banks), elect to
draw Advances (each a "TERM-OUT ADVANCE") under Tranche A with a
Maturity Date after the Tranche A Term Date. No Term-out Advance, once
repaid or prepaid, may be reborrowed.
(c) No Tranche A Advance, other than a Term-out Advance, may be outstanding
after the Tranche A Term Date. No Term-out Advance may be outstanding
after the date falling on the anniversary of the Tranche A Term Date.
6.2 REPAYMENT OF TRANCHE B ADVANCES
Each Borrower shall repay each Tranche B Advance made to it in full on
its Maturity Date to the Agent for the relevant Banks but since Tranche
B is available on a revolving basis amounts repaid may be reborrowed
subject to the terms of this Agreement. No Tranche B Advance may be
outstanding after the Tranche B Final Maturity Date.
7. PREPAYMENT AND CANCELLATION
7.1 AUTOMATIC CANCELLATION OF THE TOTAL COMMITMENTS
(a) The undrawn Tranche A Commitment of each Bank shall be automatically
cancelled at the close of business in London on the last day of the
Tranche A Availability Period.
(b) The Tranche B Commitment of each Bank shall be automatically cancelled
at the close of business in London on the last day of the Tranche B
Availability Period.
(c) The Total Commitments will be automatically cancelled in full if the
conditions precedent to drawing set out in Part I of Schedule 2 are not
satisfied on or before 31st March, 1998.
7.2 VOLUNTARY CANCELLATION
The Parent may, by giving not less than 15 days' prior written notice
to the Agent specifying the relevant Tranche, cancel the unutilised
portion of the Tranche A Total Commitments or the Tranche B Total
Commitments or both, in whole or in part (but, if in part, in a minimum
amount of (pound)50,000,000 for each Tranche). Any cancellation in part
of the Tranche A Total Commitments shall be applied against the Tranche
A Commitment of each Bank pro rata. Any cancellation in part of the
Tranche B Total Commitments shall be applied against the Tranche B
Commitment of each Bank pro rata. If the Parent fails to specify
whether such cancellation shall be applied against Tranche A or Tranche
B, any cancellation shall be applied first against the Tranche A Total
Commitments until cancelled in full and then against the Tranche B
Total Commitments.
7.3 VOLUNTARY PREPAYMENT
(a) Any Borrower may, by giving not less than 10 Business Days' prior
notice to the Agent, prepay without premium or penalty the whole or any
part of the Advances made to it under Tranches A or B (but, if in part,
in an aggregate minimum Original Sterling Amount, taking all
prepayments made by all the Borrowers on the same day together, of
(pound)50,000,000).
(b) Any voluntary prepayment under paragraph (a) above will:
(i) be applied against Tranche A or B in such proportions as may
be specified by the Borrower in the notice of prepayment or,
if not specified, against Tranche A; and
(ii) be applied against all the Advances of all the Banks in the
relevant Tranche(s) pro rata.
7.4 MANDATORY PREPAYMENT EVENTS
If at any time:
(a) it is or becomes unlawful for any Obligor to perform any of
its obligations under the Finance Documents in any material
respect; or
(b) the guarantee of any Guarantor under Clause 14 (Guarantee) is
not effective or is alleged by that Guarantor to be
ineffective for any reason; or
(c) any single person, or group of persons acting in concert (as
defined in the City Code on Takeovers and Mergers), acquires
control (as defined in Section 416 of the Income and
Corporation Taxes Act 1988) of the Parent, after the Effective
Date (other than by way of an Approved Scheme),
then the Agent shall, if instructed to do so by the Majority Banks, by
notice to the Parent:
(i) call for prepayment of all the Advances on such date as it may
specify in such notice whereupon all the Advances shall become
due and payable on such date together with accrued interest
and any other sums then owed by the Obligors under the Finance
Documents; and
(ii) declare that the Total Commitments shall be cancelled,
whereupon the Total Commitments shall be cancelled and the
Commitments of each Bank shall be cancelled and reduced to
zero.
7.5 MANDATORY PREPAYMENT BY BORROWERS
If any Borrower (other than the Parent) ceases to be a wholly-owned
Subsidiary of the Parent it shall forthwith prepay all Advances made to
it together with all amounts payable by it under this Agreement and
thereupon cease to be a Borrower.
7.6 CHANGES TO BORROWERS AND GUARANTORS
(a) Any Borrower (other than the Parent or the Original Borrower) in
respect of which no Advance is outstanding hereunder (including any
other amounts outstanding in relation thereto) may, at the request of
the Parent, cease to be a Borrower by entering into a supplemental
agreement to this Agreement in such form as the Agent may reasonably
require which shall discharge that Borrower's obligations hereunder.
(b) Any Borrower (the "EXISTING BORROWER") may be released from its
obligations under this Agreement as a Borrower provided that another
Borrower (the "SUBSTITUTE BORROWER") assumes the obligations in respect
thereof of the Existing Borrower and provided further that:
(i) any such substitution shall take effect on and from the later
of the day upon which the Agent notifies the Parent in writing
that it is satisfied with the compliance with the matters set
out in paragraph (b)(iii) below and the date for substitution
specified in the relevant notice under paragraph (b)(ii)
below;
(ii) notice of the proposed substitution has been delivered by the
Parent to the Agent not less than 14 days prior to the
proposed substitution; and
(iii) the Substitute Borrower enters into a Novation Agreement with
the Existing Borrower, the Parent and the Agent on behalf of
the Banks in the form of Part IV of Schedule 5 together with
such amendments as the Agent may reasonably require.
Each Bank authorises the Agent to sign on its behalf any Novation
Agreement entered into in accordance with this paragraph (b).
(c) If any Subsidiary of the Parent becomes an Additional Guarantor in
order solely to comply with Clause 16.5 (Upstream Guarantees) as a
result of giving any other guarantee or undertaking any similar
liability in respect of any Borrowings (other than under this
Agreement) of any Borrower, then that Additional Guarantor may be
released from its obligations as a Guarantor provided:
(i) that other guarantee or undertaking is also released;
(ii) no Default has occurred which is continuing; and
(iii) the Agent executes an agreement to release (which it is
authorised to execute without reference to the Banks if the
Parent confirms the conditions in sub-paragraphs (i) and (ii)
above have been fulfilled) in such form as it may reasonably
require.
7.7 RIGHT OF PREPAYMENT AND CANCELLATION
If any Borrower is required to pay or is notified by any Bank in
writing that it will be required to pay any amount to a Bank under
Clause 10 (Taxes) or Clause 12 (Increased Costs), or if circumstances
exist such that a Borrower will be required to pay any amount to a Bank
under Clause 10 (Taxes), the Parent may, whilst the circumstances
giving rise or which will give rise to the requirement continue, serve
a notice of prepayment and cancellation on that Bank through the Agent.
On the date falling five Business Days after the date of service of the
notice:
(a) each Borrower shall prepay all outstanding Advances made to it
by that Bank; and
(b) the Bank's Tranche A Commitment and Tranche B Commitment shall
be permanently cancelled on the date of service of the notice.
7.8 MISCELLANEOUS PROVISIONS
(a) Any notice of prepayment and/or cancellation under this Agreement is
irrevocable. The Agent shall notify the Banks promptly of receipt of
any such notice.
(b) All prepayments under this Agreement shall be made together with
accrued interest on the amount prepaid and any other amounts due under
this Agreement in respect of that prepayment (including, but not
limited to, any amounts payable under Clause 23.2(c) (Other
indemnities) if not made on a Maturity Date for the relevant Tranche A
Advance or Tranche B Advance).
(c) No prepayment or cancellation is permitted except in accordance with
the express terms of this Agreement.
(d) Subject to the terms of this Agreement, any amount prepaid under Clause
7.3 (Voluntary Prepayment) in respect of Tranche A (other than in
respect of a Term-out Advance) or Tranche B may be reborrowed. No
amount of the Tranche A Total Commitments or Tranche B Total
Commitments cancelled under this Agreement may subsequently be
reinstated.
8. INTEREST
8.1 INTEREST RATE FOR ALL ADVANCES
The rate of interest on each Tranche A and B Advance for its Term is
the rate per annum determined by the Agent to be the aggregate of:
(a) the relevant Margin;
(b) LIBOR; and
(c) Reserve Asset Costs.
8.2 DUE DATES
Except as otherwise provided in this Agreement, accrued interest on
each Advance is payable by the relevant Borrower on its Maturity Date
and also, in the case of any Advance with a Term longer than six
months, at six-monthly intervals after its Utilisation Date for so long
as the Term is outstanding.
8.3 DEFAULT INTEREST
(a) If a Borrower fails to pay any amount payable by it under this
Agreement, it shall forthwith on demand by the Agent pay interest on
the overdue amount from the due date up to the date of actual payment,
both before and after judgment, at a rate (the "DEFAULT RATE")
determined by the Agent to be one per cent. per annum above the higher
of:
(i) the rate on the overdue amount under Clause 8.1 (Interest rate
for all Advances) immediately before the due date (in the case
of principal); and
(ii) the rate which would have been payable if the overdue amount
had, during the period of non-payment, constituted a Tranche A
Advance in the currency of the overdue amount for such
successive Terms of such duration as the Agent may determine
(each a "DESIGNATED TERM").
(b) The default rate will be determined on each Business Day or the first
day of, or two Business Days before the first day of, the relevant
Designated Term, as appropriate.
(c) If the Agent determines that deposits in the currency of the overdue
amount are not at the relevant time being made available by the
Reference Banks to leading banks in the London interbank market, the
default rate will be determined by reference to the cost of funds to
the Agent from whatever sources it selects after consultation with the
Reference Banks.
(d) Default interest will be compounded at the end of each Designated Term.
8.4 NOTIFICATION OF RATES OF INTEREST
The Agent will promptly notify each relevant Party of the determination
of a rate of interest under this Agreement.
9. PAYMENTS
9.1 PLACE OF PAYMENT
All payments by an Obligor or a Bank under this Agreement shall be made
to the Agent to its account at such office or bank in the principal
financial centre of the country of the currency concerned as it may
notify to the Obligor or Bank for this purpose.
9.2 FUNDS
Payments under this Agreement to the Agent shall be made for value on
the due date at such times and in such funds as the Agent may specify
to the Party concerned as being customary at the time for the
settlement of transactions in the relevant currency in the place for
payment.
9.3 DISTRIBUTION
(a) Each payment received by the Agent under this Agreement for another
Party shall, subject to paragraphs (b) and (c) below, be made available
by the Agent to that Party by payment (on the date and in the currency
and funds of receipt) to its account with such bank in the principal
financial centre of the country of the relevant currency as it may
notify to the Agent for this purpose by not less than five Business
Days' prior notice.
(b) The Agent may apply any amount received by it for an Obligor in or
towards payment (on the date and in the currency and funds of receipt)
of any amount due from an Obligor under this Agreement or in or towards
the purchase of any amount of any currency to be so applied.
(c) Where a sum is to be paid under this Agreement to the Agent for the
account of another Party, the Agent is not obliged to pay that sum
to that Party until it has established that it has actually
received that sum. The Agent may, however, assume that the sum has
been paid to it in accordance with this Agreement and, in
reliance on that assumption, make available to that Party a
corresponding amount. If the sum has not been made available but the
Agent has paid a corresponding amount to another Party, that Party
shall forthwith on demand refund the corresponding amount to the
Agent together with interest on that amount from the date of
payment to the date of receipt, calculated at a rate reasonably
determined by the Agent to reflect its cost of funds.
9.4 CURRENCY
(a) A repayment or prepayment of an Advance is payable in the currency in
which the Advance is denominated.
(b) Interest is payable in the currency in which the relevant amount in
respect of which it is payable is denominated.
(c) Amounts payable in respect of costs, expenses, taxes and the like are
payable in the currency in which they are incurred.
(d) Any other amount payable under this Agreement is, except as otherwise
provided in this Agreement, payable in Sterling.
9.5 SET-OFF AND COUNTERCLAIM
All payments made by an Obligor under this Agreement shall be made
without set-off or counterclaim.
9.6 NON-BUSINESS DAYS
(a) If a payment under this Agreement is due on a day which is not a
Business Day, the due date for that payment shall instead be the next
Business Day in the same calendar month (if there is one) or the
preceding Business Day (if there is not).
(b) During any extension of the due date for payment of any principal under
this Agreement interest is payable on the principal at the rate payable
on the original due date.
9.7 PARTIAL PAYMENTS
(a) If the Agent receives a payment insufficient to discharge all the
amounts then due and payable by an Obligor under this Agreement, the
Agent shall apply that payment towards the obligations of the Obligors
under this Agreement in the following order:
(i) FIRST, in or towards payment pro rata of any unpaid costs,
fees and expenses of the Agent under this Agreement;
(ii) SECONDLY, in or towards payment pro rata of any accrued fees
due but unpaid under Clause 20 (Fees);
(iii) THIRDLY, in or towards payment pro rata of any interest due
but unpaid under this Agreement;
(iv) FOURTHLY, in or towards payment pro rata of any principal due
but unpaid under this Agreement; and
(v) FIFTHLY, in or towards payment pro rata of any other sum due
but unpaid under this Agreement.
(b) The Agent shall, if so directed by all the Banks, vary the order set
out in sub-paragraphs (a)(ii) to (v) above.
(c) Paragraphs (a) and (b) above shall override any appropriation made by
any Obligor.
10. TAXES
10.1 GROSS-UP
(a) All payments by an Obligor under the Finance Documents shall be made
free and clear of and without deduction for or on account of any taxes,
except to the extent that the Obligor is required by law to make
payment subject to any taxes. Subject to paragraph (b) below, if any
tax or amounts in respect of tax must be deducted from any amounts
payable or paid by an Obligor, or paid or payable by the Agent to a
Finance Party, under the Finance Documents, the Obligor shall pay such
additional amounts as may be necessary to ensure that the relevant
Finance Party receives a net amount equal to the full amount which it
would have received had payment not been made subject to tax.
(b) An Obligor is not obliged to pay any additional amount pursuant to
paragraph (a) above in respect of any deduction which would not have
been required if the relevant Finance Party had completed a
declaration, claim or exemption or other form which it is able to
complete.
10.2 TAX RECEIPTS
All taxes required by law to be deducted or withheld by an Obligor from
any amounts paid or payable under the Finance Documents shall be paid
by the relevant Obligor when due and the Obligor shall, within 15 days
of the payment being made, deliver to the Agent for the relevant Bank
evidence satisfactory to that Bank (including any relevant tax
receipts) that the payment has been duly remitted to the appropriate
authority.
10.3 QUALIFYING BANK
If:
(a) on the Signing Date, any Bank which is a Party on the
Signing Date is not a Qualifying Bank; or
(b) after the first Utilisation Date, a Bank ceases to be a
Qualifying Bank other than as a result of the introduction of,
suspension, withdrawal or cancellation of, or change in, or
change in the official interpretation, administration or
official application of, any law, regulation having the force
of law, tax treaty or any published practice or published
concession of the UK Inland Revenue or any other relevant
taxing or fiscal authority in any jurisdiction with which the
relevant Bank has a connection, occurring after the Signing
Date; or
(c) on the date of any novation under Clause 26 (Changes to the
Parties), a New Bank (as such term is defined in that Clause)
is not a Qualifying Bank,
then no Obligor shall be liable to pay to that Bank under Clause 10.1
(Gross-up) any amount in respect of taxes levied or imposed by the UK
or any taxing authority of or in the UK in excess of the amount it
would have been obliged to pay if that Bank had been a Qualifying Bank
on such date.
10.4 COLLECTING AGENTS RULES
Each Bank represents to the Agent that, in the case of a Bank which is
a Bank on the Signing Date, on the Signing Date, and, in the case of a
Bank which becomes a Bank after the date of this Agreement, on the date
it becomes a Bank, in relation to the Facilities, it is:
(a) either:
(i) not resident in the United Kingdom for United Kingdom
tax purposes; or
(ii) a bank as defined in section 840A of the Income and
Corporation Taxes Act 1988 and resident in the United
Kingdom; and
(b) beneficially entitled to the principal and interest payable by
the Agent to it under this Agreement,
and it shall forthwith notify the Agent if either representation ceases
to be correct.
10.5 TAX CREDIT
(a) If an Obligor makes a payment pursuant to Clause 10.1 (Gross up) for
the account of any Finance Party and such Finance Party has received
or been granted a credit against, or relief or remission or repayment
of, any tax paid or payable by it (a "TAX CREDIT") which is
attributable to that payment or the corresponding payment under the
Finance Document such Finance Party shall, to the extent that it can
do so without prejudice to the retention of the amount of such credit,
relief, remission or repayment, pay to the Obligor concerned such
amount as the Finance Party shall have reasonably determined to be
attributable to such payments and which will leave the Finance Party
(after such payment) in no better or worse position than it would have
been if the Obligor concerned had not been required to make any
deduction or withholding.
(b) Nothing in this Clause 10.5 shall interfere with the right of a
Finance Party to arrange its tax affairs in whatever manner it thinks
fit and without limiting the foregoing no Finance Party shall be under
any obligation to claim a Tax Credit or to claim a Tax Credit in
priority to any other claims, relief, credit or deduction available to
it. No Finance Party shall be obliged to disclose any information
relating to its tax affairs or any computations in respect thereof.
Unless it would in a Bank's reasonable judgement be prejudicial to its
interests, such Bank shall seek any Tax Credit available to it
consequent upon any deductions for tax being made from any payment to
it under Clause 10.1 (Gross up).
11. MARKET DISRUPTION
11.1 MARKET DISTURBANCE
Notwithstanding anything to the contrary herein contained, if and each
time that prior to or on a Utilisation Date relative to an Advance to
be made:
(a) only one or no Reference Bank supplies a rate for the purposes
of determining LIBOR; or
(b) the Agent is notified by Banks whose Commitments represent 35
per cent. or more of the Total Commitments that deposits in
the currency of that Advance are not in the ordinary course of
business available in the London Interbank Market for a period
equal to the Term concerned in amounts sufficient to fund
their participations in that Advance; or
(c) the Agent (after consultation with the Reference Banks) shall
have determined (which determination shall be conclusive and
binding upon all Parties) that by reason of circumstances
affecting the London Interbank Market generally, adequate and
fair means do not exist for ascertaining the LIBOR applicable
to such Advance during its Term or LIBOR does not adequately
represent the cost of funding to the Banks,
the Agent shall promptly give written notice of such determination or
notification to the Parent and to each of the Banks.
11.2 ALTERNATIVE RATES
If the Agent gives a notice under Clause 11.1 (Market disturbance):
(a) the Parent and the Banks may (through the Agent) agree that
the Advances concerned shall not be borrowed; or
(b) in the absence of such agreement:
(i) the Term of the Advances concerned shall be one
month;
(ii) in the case of Clause 11.1(b) (Market disturbance),
the Advances shall be made in Sterling in an amount
equal to the Original Sterling Amount of the Advance
concerned; and
(iii) during the Term of each Advance the rate of interest
applicable to the participation of each Bank in such
Advance shall be the applicable Margin plus
applicable Reserve Asset Costs plus the rate per
annum notified by the Bank concerned to the Agent
before the last day of such Term to be that which
expresses as a percentage rate per annum the cost to
such Bank of funding its participation in such
Advance from whatever sources it may reasonably
select.
11.3 NON-AVAILABILITY OF CURRENCY
If any Bank notifies the Agent before 10.00 a.m. (London time) two
Business Days prior to the proposed Utilisation Date of an Advance to
be denominated in an Optional Currency (other than U.S. Dollars) that
it is unable for any reason to fund its participation in such Advance
in the Optional Currency concerned, the Agent shall notify the Parent
and such Bank shall make its participation in the Advance available in
Sterling for the period in question.
11.4 CHANGE IN CIRCUMSTANCES
If before 9.00 a.m. (London time) on the proposed Utilisation Date of
an Advance which is to be denominated in an Optional Currency (other
than U.S. Dollars) there occurs any change in national or international
financial, political or economic conditions, currency availability,
currency exchange rates or exchange controls, which in the opinion of
the Agent renders the making of the Advance in such currency
impracticable:
(a) the Agent shall give notice to each of the Banks and the
Parent to that effect as soon as practicable but in any event
before 11.00 a.m. (London time) on the proposed Utilisation
Date;
(b) unless the Parent and the Banks agree otherwise, the Advance
shall be made in Sterling and the Rate Fixing Date for the
Term of the Advance shall be the Utilisation Date; and
(c) the relevant Borrower shall pay to the Agent on behalf of the
Banks any amount claimed in accordance with Clause 23.2 (Other
Indemnities).
11.5 CHANGE IN CURRENCY
(a) If more than one currency or currency unit are at the same time
recognised by the central bank of any country as the lawful currency of
that country, then:
(i) any reference in the Finance Documents to, and any obligations
arising under the Finance Documents in, the currency of that
country shall be translated into, or paid in, the currency or
currency unit of that country designated by the Agent; and
(ii) any translation from one currency or currency unit to another
shall be at the official rate of exchange recognised by the
central bank for the conversion of that currency or currency
unit into the other, rounded up or down by the Agent acting
reasonably.
(b) If any change in any currency of a country occurs, this Agreement will
be amended to the extent the Agent specifies to be necessary to reflect
the change in the currency and to put the Finance Parties in the same
position, so far as possible, that they would have been in if no change
in currency has occurred.
12. INCREASED COSTS
12.1 INCREASED COSTS
(a) Subject to Clause 12.2 (Exceptions), the Parent shall forthwith on
demand by a Finance Party pay that Finance Party the amount of any
increased cost incurred by it or any of its holding companies as a
result of any change in or introduction of any law or regulation
(including any relating to taxation or reserve asset, special deposit,
cash ratio, liquidity or capital adequacy requirements or any other
form of banking or monetary control).
(b) In this Agreement "INCREASED COST" means:
(i) an additional cost incurred by a Finance Party or any of its
holding companies as a result of it performing, maintaining or
funding its obligations under, this Agreement; or
(ii) that portion of an additional cost incurred by a Finance Party
or any of its holding companies in making, funding or
maintaining all or any advances comprised in a class of
advances formed by or including the Advances made or to be
made by it under this Agreement as is attributable to it
making, funding or maintaining its Advances; or
(iii) a reduction in any amount payable to a Finance Party or the
effective return to a Finance Party under this Agreement or on
its capital (or the capital of any of its holding companies);
or
(iv) the amount of any payment made by a Finance Party, or the
amount of interest or other return foregone by a Finance
Party, calculated by reference to any amount received or
receivable by a Finance Party from any other Party under this
Agreement.
12.2 EXCEPTIONS
Clause 12.1 (Increased costs) does not apply to any increased cost:
(a) compensated for by the payment of the Reserve Asset Costs; or
(b) attributable to any tax or amounts in respect of tax which
must be deducted from any amounts payable or paid by a
Borrower or paid or payable by the Agent to a Finance Party
under the Finance Documents; or
(c) which is, or is attributable to, any tax on the overall net
income, profits or gains of a Bank or any of its holding
companies (or the overall net income, profits or gains of a
division or branch of the Bank or any of its holding
companies).
13. ILLEGALITY AND MITIGATION
13.1 ILLEGALITY
If it becomes unlawful in any jurisdiction for a Bank to give effect to
any of its obligations as contemplated by this Agreement or to fund or
maintain any Advance, then the Bank may notify the Parent through the
Agent accordingly and thereupon:
(a) each Borrower shall, to the extent required and within the
period allowed or if no period is allowed, forthwith, repay
any Advances made to it by that Bank together with all other
amounts payable by it to that Bank under this Agreement; and
(b) the Bank's Tranche A Commitment and Tranche B Commitment shall
be cancelled.
13.2 MITIGATION
Notwithstanding the provisions of Clauses 10 (Taxes), 12 (Increased
Costs) and 13.1 (Illegality), if in relation to a Bank or (as the case
may be) the Agent circumstances arise which would result in:
(a) any deduction, withholding or payment of the nature referred
to in Clause 10 (Taxes); or
(b) any increased cost of the nature referred to in Clause 12
(Increased Costs); or
(c) a notification pursuant to Clause 13.1 (Illegality),
then without in any way limiting, reducing or otherwise qualifying the
rights of such Bank or the Agent, such Bank shall promptly upon
becoming aware of the same notify the Agent thereof (whereupon the
Agent shall promptly notify the Parent) and such Bank shall use
reasonable endeavours to transfer its participation in the Facility and
its rights hereunder and under the Finance Documents to another
financial institution or Facility Office not affected by the
circumstances having the results set out in (a), (b) or (c) above and
shall otherwise take such reasonable steps as may be open to it to
mitigate the effects of such circumstances provided that such Bank
shall not be under any obligation to take any such action if, in its
opinion, to do so would or would be likely to have an adverse effect
upon its business, operations or financial condition or would involve
it in any unlawful activity or any activity that is contrary to its
policies or any request, guidance or directive of any competent
authority (whether or not having the force of law) or (unless
indemnified to its satisfaction) would involve it in any significant
expense or tax disadvantage.
14. GUARANTEE
14.1 GUARANTEE
Each Guarantor jointly and severally irrevocably and unconditionally:
(a) as principal obligor, guarantees to each Finance Party prompt
performance by each Borrower of all its obligations under the
Finance Documents;
(b) undertakes with each Finance Party that whenever a Borrower
does not pay any amount when due under or in connection with
any Finance Document, each Guarantor shall forthwith on demand
by the Agent pay that amount as if that Guarantor instead of
the relevant Borrower were expressed to be the principal
obligor; and
(c) indemnifies each Finance Party on demand against any loss or
liability suffered by it if any obligation guaranteed by any
Guarantor is or becomes unenforceable, invalid or illegal.
14.2 CONTINUING GUARANTEE
This guarantee is a continuing guarantee and will extend to the
ultimate balance of all sums payable by the Borrowers under the Finance
Documents, regardless of any intermediate payment or discharge in part.
14.3 REINSTATEMENT
(a) Where any discharge (whether in respect of the obligations of any
Borrower or any security for those obligations or otherwise) is made in
whole or in part or any arrangement is made on the faith of any
payment, security or other disposition which is avoided or must be
restored on insolvency, liquidation or otherwise without limitation,
the liability of the Guarantors under this Clause 14 shall continue as
if the discharge or arrangement had not occurred (but only to the
extent that such payment, security or other disposition is avoided or
restored).
(b) Each Finance Party may concede or compromise any claim that any
payment, security or other disposition is liable to avoidance or
restoration.
14.4 WAIVER OF DEFENCES
The obligations of the Guarantors under this Clause 14 will not be
affected by any act, omission, matter or thing which, but for this
provision, would reduce, release or prejudice any of its obligations
under this Clause 14 or prejudice or diminish those obligations in
whole or in part, including (whether or not known to it or any Finance
Party):
(a) any time or waiver granted to, or composition with, any
Borrower or other person;
(b) the taking, variation, compromise, exchange, renewal or
release of, or refusal or neglect to perfect, take up or
enforce, any rights against, or security over assets of, any
Borrower or other person or any non-presentation or
non-observance of any formality or other requirement in
respect of any instrument or any failure to realise the full
value of any security;
(c) any incapacity or lack of powers, authority or legal
personality of or dissolution or change in the members or
status of a Borrower or any other person;
(d) any variation (however fundamental) or replacement of a
Finance Document or any other document or security so that
references to that Finance Document in this Clause 14 shall
include each variation or replacement;
(e) any unenforceability, illegality or invalidity of any
obligation of any person under any Finance Document or any
other document or security, to the intent that the Guarantors'
obligations under this Clause 14 shall remain in full force
and their guarantee be construed accordingly, as if there were
no unenforceability, illegality or invalidity; and
(f) any postponement, discharge, reduction, non-provability or
other similar circumstance affecting any obligation of any
Borrower under a Finance Document resulting from any
insolvency, liquidation or dissolution proceedings or from any
law, regulation or order so that each such obligation shall
for the purposes of the Guarantors' obligations under this
Clause 14 shall be construed as if there were no such
circumstance.
14.5 IMMEDIATE RECOURSE
Each Guarantor waives any right it may have of first requiring any
Finance Party (or any trustee or agent on its behalf) to proceed
against or enforce any other rights or security or claim payment from
any person before claiming from that Guarantor under this Clause 14.
14.6 APPROPRIATIONS
Until all amounts which may be or become payable by the Borrowers under
or in connection with the Finance Documents have been irrevocably paid
in full, each Finance Party (or any trustee or agent on its behalf)
may:
(a) refrain from applying or enforcing any other moneys, security
or rights held or received by that Finance Party (or any
trustee or agent on its behalf) in respect of those amounts,
or apply and enforce the same in such manner and order as it
sees fit (whether against those amounts or otherwise) and no
Guarantor shall be entitled to the benefit of the same; and
(b) hold in a suspense account any moneys received from any
Guarantor or on account of that Guarantor's liability under
this Clause 14, without liability to pay interest on those
moneys.
14.7 NON-COMPETITION
Until all amounts which may be or become payable by the Borrowers under
or in connection with the Finance Documents have been paid in full, no
Guarantor shall, after a claim has been made or by virtue of any
payment or performance by it under this Clause 14:
(a) be subrogated to any rights, security or moneys held, received
or receivable by any Finance Party (or any trustee or agent on
its behalf) or be entitled to any right of contribution or
indemnity in respect of any payment made or moneys received on
account of that Guarantor's liability under this Clause 14; or
(b) claim, rank, prove or vote as a creditor of any Borrower or
its estate in competition with any Finance Party (or any
trustee or agent on its behalf); or
(c) receive, claim or have the benefit of any payment,
distribution or security from or on account of any Borrower or
exercise any right of set-off as against any Borrower.
Each Guarantor shall hold in trust for and forthwith pay or transfer to
the Agent for the Finance Parties any payment or distribution or
benefit of security received by it contrary to this Clause 14.7.
14.8 ADDITIONAL SECURITY
This guarantee is in addition to and is not in any way prejudiced by
any other security now or hereafter held by any Finance Party.
14.9 REMOVAL OF GUARANTORS
Any Guarantor (other than the Parent or any other Borrower) may, at the
request of the Parent and if no Default or Mandatory Prepayment Event
is continuing, cease to be a Guarantor by entering into a supplemental
agreement to this Agreement at the cost of the Original Borrower in
such form as the Agent may reasonably require which shall discharge
that Guarantor's obligations as a Guarantor under this Agreement.
15. REPRESENTATIONS AND WARRANTIES
15.1 REPRESENTATIONS AND WARRANTIES
Each Obligor makes the representations and warranties set out in this
Clause 15 (Representations and Warranties) to each Finance Party (but
in the case of an Obligor other than the Parent only in respect of
itself).
15.2 STATUS, POWERS AND AUTHORITY
It is duly incorporated under the laws of the country in which it is
incorporated and has power and is able lawfully to execute and deliver
the Finance Documents to which it is a party and to exercise its rights
and perform its obligations thereunder and all corporate or other
action required to be taken by it in order to authorise the execution
and delivery by it of the Finance Documents to which it is a party and
the performance by it of its obligations thereunder has been duly
taken.
15.3 LEGAL VALIDITY
The Finance Documents to which it is a party constitute (or will, when
drawn in the manner contemplated herein, constitute) its legal, valid,
binding and enforceable obligations.
15.4 NON-CONFLICT
The execution, delivery and performance by it of the Finance Documents
to which it is a party will not:
(a) contravene any provision of any law, statute, decree, rule or
regulation to which it or any of its assets or revenues is
subject, or of any order, judgment, injunction, decree,
resolution, determination or award of any court or any
judicial, administrative or governmental authority or
organisation having applicability to it or any of its assets
or revenues; or
(b) result in any breach of any of the terms, covenants,
conditions or provisions of, or constitute default under, any
indenture, mortgage, deed of trust, bond, agreement or other
instrument or obligation to which it is a party or by which it
or any of its assets or revenues may be bound or affected; or
(c) violate any provision of its Memorandum and Articles of
Association or other constitutive documents.
15.5 NO DEFAULT
(a) No Event of Default has occurred and is continuing which has not been
remedied.
(b) No Default has occurred and is continuing which has not been remedied.
15.6 AUTHORISATIONS
It has obtained (and there are in full force and effect) any
governmental and other consents necessary to enable it to enter into
and perform its obligations under each Finance Document.
15.7 ACCOUNTS
(a) The most recently published audited consolidated financial statements
of the Group give (in conjunction with the notes thereto) a true and
fair view of the financial condition of the Group as at the date as of
which the same were prepared.
(b) The Original Group Accounts were prepared in accordance with accounting
principles generally accepted in England and consistently applied and
give (in conjunction with the notes thereto) a true and fair view of
the consolidated financial condition of Reuters Holdings Plc and its
Subsidiaries as at the date as of which they were prepared and the
consolidated results of the operations of Reuters Holdings Plc and its
Subsidiaries during the financial year then ended.
(c) As at the date as of which the most recently published audited
consolidated financial statements of the Group were prepared no member
of the Group had any material liabilities which were not disclosed
thereby (or by the notes thereto) or provided for therein and which
should at that date have been so disclosed or provided for.
(d) The financial information supplied by it or on behalf of it by any
other member of the Group to the Banks relating to any member of the
Group in connection with this Agreement is true and accurate in all
material respects.
15.8 LITIGATION
No action or proceeding of or before any court or administrative
tribunal has been commenced, or (to its knowledge) is threatened:
(a) to restrain or affect the execution or delivery by it of any
of the Finance Documents to which it is a party or the
performance and compliance by it of, and with, the obligations
expressed to be assumed by it therein or the legality,
validity or enforceability thereof; or
(b) which would be reasonably expected to succeed and, if
successful, to have a Material Adverse Effect.
15.9 PARI PASSU
Its Indebtedness under the Finance Documents to which it is a party
will rank at least pari passu with all its other unsecured Indebtedness
with the exception of that which is preferred by operation of law.
15.10 ENCUMBRANCES
Its execution of the Finance Documents and its exercise of its rights
and performance of its obligations thereunder will not result in the
existence of, nor oblige any member of the Group to create, any
Encumbrance over all or any of its present or future revenues or
assets.
15.11 MATERIAL ADVERSE CHANGE
There has been no material adverse change in the business or financial
condition of the Group when compared with the business or financial
condition of Reuters Holdings Plc and its Subsidiaries (as shown in the
Original Group Accounts but excluding the effect of the Scheme of
Arrangement) taken as a whole which could reasonably be expected to
have a Material Adverse Effect.
15.12 INFORMATION
(a) The factual information in relation to the Group in the Information
Memorandum is to the best of the Parent's knowledge and belief true and
accurate in all material aspects and opinion expressed about the Group
in the Information Memorandum was honestly held and all such factual
information and opinions were provided in good faith and after due
enquiry as to their accuracy.
(b) The Information Memorandum did not omit at its date any information
which made misleading any information in the Information Memorandum.
(c) In this Clause 15.12 and Clause 15.13 (Time for making representations
and warranties), "INFORMATION MEMORANDUM" means the information
memorandum to be prepared and delivered to the Banks in connection with
the primary syndication of the Facility.
15.13 TIMES FOR MAKING REPRESENTATIONS AND WARRANTIES
The representations and warranties set out in this Clause 15:
(a) (except for Clause 15.12 (Information)) are made on the
Effective Date;
(b) (except for Clause 15.5(b) (No default), Clause 15.7
(Accounts), Clause 15.8 (Litigation), Clause 15.11 (Material
Adverse Change) and Clause 15.12 (Information)) in the case of
an Obligor which becomes a Party after the date of this
Agreement, will be deemed to be made by that Obligor on the
date it executes a Borrower Accession Agreement or, as the
case may be, a Guarantor Accession Agreement;
(c) (except for Clause 15.5(b) (No default), Clause 15.7(b)
(Accounts), Clause 15.8 (Litigation), Clause 15.11 (Material
Adverse Change) and Clause 15.12 (Information)) are deemed to
be repeated by each Obligor on:
(i) the date of each Request; and
(ii) each Utilisation Date with reference to the facts and
circumstances then existing; and
(d) in the case of Clause 15.12 (Information), are made on the
date of the Information Memorandum.
16. UNDERTAKINGS
16.1 DURATION
The undertakings in this Clause 16 (Undertakings) will remain in force
from the Effective Date for so long as any amount is or may be
outstanding under this Agreement or any Commitment is in force.
16.2 FINANCIAL INFORMATION
(a) In the case of the Parent, it will as soon as the same become
available, but in any event within 120 days after the end of each
financial year, procure the delivery to each of the Banks through the
Agent of one copy (or such other number of copies as the Agent shall
reasonably request) of the audited consolidated financial statements
(including balance sheet and profit and loss account) of the Group
together with the audited financial statements of the Parent for such
financial year.
(b) In the case of the Parent, it will as soon as the same become
available, but in any event within 60 days after the end of the first
half of each financial year, procure the delivery to each of the Banks
through the Agent of one copy (or such other number of copies as the
Agent shall reasonably request) of the published interim consolidated
financial statements of the Group for such financial half-year.
(c) In the case of each other Obligor, it will as soon as the same become
available, but in any event within 120 days after the end of each
financial year, procure the delivery to each of the Banks through the
Agent of one copy (or such other number of copies as the Agent shall
reasonably request) of its audited financial statements (including
balance sheet and profit and loss account) for such financial year.
(d) It will ensure that each set of financial statements delivered by it
pursuant to paragraphs (a) and (b) above, in the case of the Parent,
and paragraph (c) above, in the case of each other Obligor, is
prepared and audited in accordance with United Kingdom accounting
principles generally accepted and consistently applied (save for
changes in accounting principles disclosed in the relevant financial
statements) except (in the case of an Obligor incorporated outside the
United Kingdom) where the relevant Obligor is required to prepare its
financial statements in accordance with accounting principles
generally accepted in a jurisdiction other than the United Kingdom in
which case its financial statements will be prepared and audited in
accordance with the accounting principles of that jurisdiction
generally accepted and consistently applied (save for changes in
accounting principles disclosed in the relevant financial statements).
(e) In the case of the Parent, it will supply to the Banks through the
Agent one copy (or such other number of copies as the Agent shall
reasonably request) (as and when the same are distributed to its
shareholders) of all information and circulars from time to time
distributed by Parent to its shareholders.
(f) In the case of the Parent, together with the accounts specified in
paragraph (a) above, a certificate signed by two officers of the Parent
in the form of Schedule 6:
(i) setting out in reasonable detail computations establishing
compliance with Clause 17 (Financial Covenant) as at the date
to which those accounts were drawn-up; and
(ii) identifying the Material Subsidiaries on the basis of those
accounts.
16.3 NOTIFICATION OF DEFAULT
Each Obligor shall, promptly upon becoming aware of the same, inform
the Banks through the Agent of the occurrence of any Default, and upon
receipt of a notice to that effect from the Agent, confirm to the Banks
that, save as previously notified to the Banks or as notified in such
confirmation, and so far as it is aware having made reasonable enquiry,
no such event has occurred.
16.4 NEGATIVE PLEDGE/SUBSIDIARIES
Each Obligor will not, and will procure that none of the Subsidiaries
shall, create or permit to subsist any Encumbrance (other than
Permitted Encumbrances) upon the whole or any part of its present or
future revenues or assets.
16.5 UPSTREAM GUARANTEES
The Parent shall procure that no member of the Group (other than a
Guarantor) will give any guarantee or undertake any similar liability
in respect of any Borrowings of any Borrower.
17. FINANCIAL COVENANT
The Parent shall ensure that the ratio of Consolidated Profits before
Interest and Tax in respect of any financial year to Consolidated Net
Finance Charges for such financial year shall exceed 2.5:1.
18. DEFAULT
18.1 EVENTS OF DEFAULT
Each of the events set out in Clauses 18.2 (Non-Payment) to 18.11
(Execution or distress) (inclusive) is an Event of Default (whether or
not caused by any reason whatsoever outside the control of any Obligor
or any other person).
18.2 NON-PAYMENT
An Obligor fails to pay in the currency or in the manner specified
therein any sum due from it under any Finance Document within three
Business Days, in the case of any principal sum, or within five
Business Days, in the case of any other sum, of the due date therefor.
18.3 BREACH OF OTHER OBLIGATIONS
An Obligor fails to perform or observe any other obligation binding on
it under any of the Finance Documents and such default is (if capable
of remedy) not remedied within thirty days after the Agent has given
notice to that Obligor requiring remedy.
18.4 MISREPRESENTATION
Any representation or statement made or deemed to be made by any
Obligor herein or pursuant hereto is or proves to be incorrect or
misleading in any material respect when made or deemed to be made and,
if capable of remedy, is not remedied within 30 days after the Agent
has given notice to that Obligor requiring remedy.
18.5 INSOLVENCY
Any order(s) is or are made or effective resolution(s) is or are passed
for the liquidation, administration, winding-up or dissolution of any
Obligor or any Material Subsidiary or for the reorganisation of any
Obligor or any Material Subsidiary except, in the case of any Material
Subsidiary, for:
(a) the purpose of and followed by an amalgamation and
reconstruction the terms of which have first been approved by
the Majority Banks in writing such approval not to be
unreasonably withheld or delayed; or
(b) a voluntary solvent liquidation, winding-up, dissolution or
reorganisation in connection with the transfer of the
business, undertaking and assets of such Material Subsidiary
to another member of the Group; or
(c) except in relation to a Specified Subsidiary, where such
liquidation, administration, winding-up, dissolution or
reorganisation could not reasonably be expected to have a
Material Adverse Effect.
18.6 INSOLVENCY PROCEEDINGS
Any Obligor or any Material Subsidiary takes any corporate action or
other steps are taken or legal proceedings are started for the
appointment of a receiver, administrative receiver, trustee or similar
officer (other than an administrator) of it or of any or all of its
revenues and assets (or any order(s) is or are made or effective
resolution(s) is or are passed for the appointment of an administrator
of it) which, in the case of any Material Subsidiary (other than a
Specified Subsidiary), could reasonably be expected to have a Material
Adverse Effect.
18.7 CREDITORS PROCESS
Any Obligor or any Material Subsidiary is unable or admits in writing
its inability to pay its debts as they fall due or commences
negotiations with a view to, or takes any proceedings under any law
for, a readjustment, rescheduling or deferment of all or any of its
obligations (or proposes, makes or enters into a general assignment,
arrangement or composition with or for the benefit of its creditors)
which, in the case of any Material Subsidiary, could reasonably be
expected to have a Material Adverse Effect.
18.8 CROSS DEFAULT
Any other Borrowings of any Obligor or any Material Subsidiary:-
(a) are not paid when due nor within any applicable grace period
in any agreement or instrument relating to those Borrowings;
or
(b) becomes due and payable before its normal or agreed maturity
through the occurrence of an event of default (howsoever
described),
and such other Borrowings, when aggregated with any other Borrowings of
any Obligor or Material Subsidiary which falls within the terms of
paragraph (a) or (b) above, is in excess of (pound)20,000,000 (or its
equivalent in other currencies) except that this Clause 18.8 does not
apply during the period of 180 days beginning on the date any company
becomes a member of the Group to any Borrowings of that company
outstanding as at the date it becomes a member of the Group which, but
for this proviso, would have caused an Event of Default under this
Clause 18.8 at that date.
18.9 SUSPENSION OF BUSINESS
Save as previously approved in writing by the Majority Banks, any
Obligor or any Material Subsidiary shall suspend or threaten to suspend
all or a substantial part of its operations or ceases, or threatens to
cease, to carry on its business which, in the case of any such Material
Subsidiary could reasonably be expected to have a Material Adverse
Effect and except, in the case of any such Material Subsidiary, for the
purpose of and followed by an amalgamation, the terms of which have
first been approved by the Majority Banks in writing or in connection
with the transfer of the business, undertaking and assets of such
Material Subsidiary to another member of the Group.
18.10 INVALIDITY OF ANY FINANCE DOCUMENT
Any Finance Document shall at any time for any reason cease to be in
full force and effect (other than in accordance with its terms or by
agreement with the Banks).
18.11 EXECUTION OR DISTRESS
Any execution or distress is levied against, or an encumbrancer takes
possession of the whole or any part of, the property, undertaking or
assets of any Obligor or any Material Subsidiary and it is not
satisfied, removed or discharged within seven days and which, in the
case of any Material Subsidiary could reasonably be expected to have a
Material Adverse Effect.
18.12 ACCELERATION
On and at any time after the occurrence of an Event of Default while
such event is continuing the Agent may, and shall if so directed by the
Majority Banks, by notice to the Parent, declare that an Event of
Default has occurred and:
(a) cancel the Total Commitments; and/or
(b) demand that all the Advances, together with accrued interest,
and all other amounts accrued under this Agreement be
immediately due and payable, whereupon they shall become
immediately due and payable; and/or
(c) demand that all the Advances be payable on demand, whereupon
they shall immediately become payable on demand.
18.13 NOTICE
The Agent will, if practicable to do so, notify the Parent prior to
issuing a notice under Clause 18.12 (Acceleration) in respect of a
default by any Obligor other than the Parent provided that the Agent
shall not be liable to any Obligor if it fails to give such notice and
provided that any failure by the Agent to give such notice shall not
prejudice, in any way, the rights of each Finance Party under the
Finance Documents including, without limitation, the Agent's right to
deliver a notice under Clause 18.12 (Acceleration).
19. THE AGENT AND THE ARRANGER
19.1 APPOINTMENT AND DUTIES OF THE AGENT
Each Finance Party (other than the Agent) irrevocably appoints the
Agent to act as its agent under and in connection with the Finance
Documents, and irrevocably authorises the Agent on its behalf to
perform the duties and to exercise the rights, powers and discretions
that are specifically delegated to it under or in connection with the
Finance Documents, together with any other incidental rights, powers
and discretions. The Agent shall have only those duties which are
expressly specified in this Agreement. Those duties are solely of a
mechanical and administrative nature.
19.2 ROLE OF THE ARRANGER
Except as otherwise provided in this Agreement, the Arranger has no
obligations of any kind to any other Party under or in connection with
any Finance Document.
19.3 RELATIONSHIP
The relationship between the Agent and the other Finance Parties is
that of agent and principal only. Nothing in this Agreement constitutes
the Agent as trustee or fiduciary for any other Party or any other
person and the Agent need not hold in trust any moneys paid to it for a
Party or be liable to account for interest on those moneys.
19.4 MAJORITY BANKS' DIRECTIONS
The Agent will be fully protected if it acts in accordance with the
instructions of the Majority Banks in connection with the exercise of
any right, power or discretion or any matter not expressly provided for
in the Finance Documents. Any such instructions given by the Majority
Banks will be binding on all the Banks. In the absence of such
instructions the Agent may act as it considers to be in the best
interests of all the Banks.
19.5 DELEGATION
The Agent may act under the Finance Documents through its personnel and
agents.
19.6 RESPONSIBILITY FOR DOCUMENTATION
Neither the Agent nor the Arranger is responsible to any other Party
for:
(a) the execution, genuineness, validity, enforceability or
sufficiency of any Finance Document or any other document; or
(b) the collectability of amounts payable under any Finance
Document; or
(c) the accuracy of any statements (whether written or oral) made
in or in connection with any Finance Document.
19.7 DEFAULT
(a) The Agent is not obliged to monitor or enquire as to whether or not a
Default or a Mandatory Prepayment Event has occurred. The Agent will
not be deemed to have knowledge of the occurrence of a Default or a
Mandatory Prepayment Event. However, if the Agent receives notice from
a Party referring to this Agreement, describing the Default or
Mandatory Prepayment Event and stating that the event is a Default or a
Mandatory Prepayment Event, it shall promptly notify the Banks.
(b) The Agent may require the receipt of security satisfactory to it,
whether by way of payment in advance or otherwise, against any
liability or loss which it will or may incur in taking any proceedings
or action arising out of or in connection with any Finance Document
before it commences these proceedings or takes that action.
19.8 EXONERATION
(a) Without limiting paragraph (b) below, the Agent will not be liable to
any other Party for any action taken or not taken by it under or in
connection with any Finance Document, unless directly caused by its
negligence or wilful misconduct.
(b) No Party may take any proceedings against any officer, employee or
agent of the Agent in respect of any claim it might have against the
Agent or in respect of any act or omission of any kind (including
negligence or wilful misconduct) by that officer, employee or agent in
relation to any Finance Document.
19.9 RELIANCE
The Agent may:
(a) rely on any notice or document believed by it to be genuine
and correct and to have been signed by, or with the authority
of, the proper person;
(b) rely on any statement made by a director or employee of any
person regarding any matters which may reasonably be assumed
to be within his knowledge or within his power to verify; and
(c) engage, pay for and rely on legal or other professional
advisers selected by it (including those in the Agent's
employment and those representing a Party other than the
Agent).
19.10 CREDIT APPROVAL AND APPRAISAL
Without affecting the responsibility of any Obligor for information
supplied by it or on its behalf in connection with any Finance
Document, each Bank confirms that it:
(a) has made its own independent investigation and assessment of
the financial condition and affairs of each Obligor and its
related entities in connection with its participation in this
Agreement and has not relied exclusively on any information
provided to it by the Agent or the Arranger in connection with
any Finance Document; and
(b) will continue to make its own independent appraisal of the
creditworthiness of each Obligor and its related entities
while any amount is or may be outstanding under the Finance
Documents or any Commitment is in force.
19.11 INFORMATION
(a) The Agent shall promptly forward to the person concerned the original
or a copy of any document which is delivered to the Agent by a Party
for that person.
(b) The Agent shall promptly supply a Bank with a copy of each document
received by the Agent under Clauses 4 (Conditions Precedent), 26.4
(Additional Borrowers) or 26.5 (Additional Guarantors) upon
the request and at the expense of that Bank.
(c) Except where this Agreement specifically provides otherwise, the Agent
is not obliged to review or check the accuracy or completeness of any
document it forwards to another Party.
(d) Except as provided above, the Agent has no duty:
(i) either initially or on a continuing basis to provide any Bank
with any credit or other information concerning the financial
condition or affairs of any Obligor or any related entity of
any Obligor whether coming into its possession or that of any
of its related entities before, on or after the date of this
Agreement; or
(ii) unless specifically requested to do so by a Bank in accordance
with this Agreement, to request any certificates or other
documents from any Obligor.
19.12 THE AGENT AND THE ARRANGER INDIVIDUALLY
(a) If it is also a Bank, each of the Agent and the Arranger has the same
rights and powers under this Agreement as any other Bank and may
exercise those rights and powers as though it were not the Agent or the
Arranger.
(b) Each of the Agent and the Arranger may:
(i) carry on any business with an Obligor or its related entities;
(ii) act as agent or trustee for, or in relation to any financing
involving, an Obligor or its related entities; and
(iii) retain any profits or remuneration in connection with its
activities under this Agreement or in relation to any of the
foregoing.
19.13 INDEMNITIES
(a) Without limiting the liability of any Obligor under the Finance
Documents, each Bank shall forthwith on demand indemnify the Agent for
its proportion of any liability or loss incurred by the Agent in any
way relating to or arising out of its acting as the Agent, except to
the extent that the liability or loss arises directly from the Agent's
negligence or wilful misconduct.
(b) A Bank's proportion of the liability or loss set out in paragraph (a)
above is the proportion which the Original Sterling Amount of its
Advance(s) bears to the Original Sterling Amount of all Advances
outstanding on the date of the demand. If, however, no Advances are
outstanding on the date of demand, then the proportion will be the
proportion which its Commitment bears to the Total Commitments at the
date of demand or, if the Total Commitments have been cancelled, bore
to the Total Commitments immediately before being cancelled.
(c) The Parent shall forthwith on demand reimburse each Bank for any
payment made by it under paragraph (a) above.
19.14 COMPLIANCE
(a) The Agent may refrain from doing anything which might, in its opinion,
constitute a breach of any law or regulation or be otherwise actionable
at the suit of any person, and may do anything which, in its opinion, is
necessary or desirable to comply with any law or regulation of any
jurisdiction.
(b) Without limiting paragraph (a) above, the Agent need not disclose any
information relating to any Obligor or any of its related entities if
the disclosure might, in the opinion of the Agent, constitute a breach
of any law or regulation or any duty of secrecy or confidentiality or be
otherwise actionable at the suit of any person.
19.15 RESIGNATION OF AGENT
(a) Notwithstanding its irrevocable appointment, the Agent may resign by
giving notice to the Banks and the Parent, in which case the Agent may
forthwith appoint one of its Affiliates as successor Agent or, failing
that, the Majority Banks may, following consultation with the Parent,
appoint a successor Agent.
(b) If the appointment of a successor Agent is to be made by the Majority
Banks but they have not, within 30 days after notice of resignation,
appointed a successor Agent which accepts the appointment, the retiring
Agent may, following consultation with the Parent, appoint a successor
Agent.
(c) The resignation of the retiring Agent and the appointment of any
successor Agent will both become effective only upon the successor
Agent notifying all the Parties that it accepts the appointment and
provided the successor Agent has, if required under paragraph (a)
above, been approved by the Parent. On giving the notification and
receiving such approval, the successor Agent will succeed to the
position of the retiring Agent and the term "AGENT" will mean the
successor Agent.
(d) The retiring Agent shall, at its own cost, make available to the
successor Agent such documents and records and provide such assistance
as the successor Agent may reasonably request for the purposes of
performing its functions as the Agent under this Agreement.
(e) Upon its resignation becoming effective, this Clause 19 shall continue
to benefit the retiring Agent in respect of any action taken or not
taken by it under or in connection with the Finance Documents while it
was the Agent, and, subject to paragraph (d) above, it shall have no
further obligation under any Finance Document.
19.16 BANKS
The Agent may treat each Bank as a Bank, entitled to payments under
this Agreement and as acting through its Facility Office(s) until it
has received notice from the Bank to the contrary by not less than five
Business Days prior to the relevant payment.
19.17 CHINESE WALL
In acting as Agent or Arranger, the agency and syndications division of
each of the Agent and the Arranger shall be treated as a separate
entity from its other divisions and departments. Any information
acquired at any time by the Agent or the Arranger otherwise than in the
capacity of Agent or Arranger through its agency and syndications
division (whether as financial advisor to any member of the Group or
otherwise) may be treated as confidential by the Agent or Arranger and
shall not be deemed to be information possessed by the Agent or
Arranger in their capacity as such. Each Finance Party acknowledges
that the Agent and the Arranger may, now or in the future, be in
possession of, or provided with, information relating to the Obligors
which has not or will not be provided to the other Finance Parties.
Each Finance Party agrees that, except as expressly provided in this
Agreement, neither the Agent nor the Arranger will be under any
obligation to provide, or under any liability for failure to provide,
any such information.
20. FEES
20.1 COMMITMENT FEE
(a) The Parent shall pay to the Agent for distribution to each Bank pro
rata to the proportion its Commitment bears to the Total Commitments
from time to time a commitment fee at the rate of:
(i) 0.040 per cent. per annum from the Effective Date in relation
to Tranche A; and
(ii) in relation to Tranche B, 0.075 per cent. per annum from the
Effective Date until the third Anniversary and 0.080 per cent.
per annum thereafter,
on, in each case, any undrawn, uncancelled amount of the Tranche A
Total Commitments or the Tranche B Total Commitments, as the case may
be, on each day.
(b) The commitment fee is calculated and accrues on a daily basis from the
Effective Date and is payable quarterly in arrear with the first
payment due three months after the Effective Date. Accrued commitment
fee is also payable to the Agent for the relevant Bank(s) on the
cancelled amount of its Tranche A Commitment or, as the case may be,
Tranche B Commitment at the time the cancellation takes effect.
20.2 AGENT'S FEE
The Parent shall pay to the Agent for its own account an agency fee in
the amounts and on the dates agreed in the relevant Fee Letter.
20.3 PARTICIPATION FEE
The Parent shall pay to the Arranger a participation fee and to The
Chase Manhattan Bank an up-front fee, in each case in the amount and on
the dates specified in the relevant Fee Letter.
20.4 MANAGEMENT FEE
The Parent shall pay to the Arranger a management fee in amount and on
the dates set out in the relevant Fee Letter.
20.5 UTILISATION FEE
(a) The Parent shall pay to the Agent for distribution to each Bank pro
rata to the proportion its outstanding Tranche B Advances bears to the
aggregate outstanding Tranche B Advances on each day a utilisation fee
at the rate of 0.025 per cent. per annum on the aggregate outstanding
Tranche B Advances on that day provided that the fee will only accrue
on any day on which the aggregate outstanding Tranche B Advances on
such day exceeds 50 per cent. of the Tranche B Total Commitments as at
that day.
(b) Utilisation fee is calculated and accrues on a daily basis and is
payable quarterly in arrear with the first such payment due three
months after the Effective Date. Accrued utilisation fee is also
payable to the Agent for the relevant Banks on the Tranche B Final
Maturity Date.
20.6 VAT
Any fee referred to in this Clause 20 is exclusive of any United
Kingdom value added tax. If any value added tax is so chargeable, it
shall be paid by the Original Borrower at the same time as it pays the
relevant fee.
21. EXPENSES
21.1 INITIAL AND SPECIAL COSTS
The Parent shall forthwith on demand pay the Agent and the Arranger the
amount of all out-of-pocket costs and expenses (including legal fees)
reasonably incurred by either of them in connection with:
(a) the arranging, underwriting and primary syndication of the
Facilities;
(b) the negotiation, preparation, printing and execution of:
(i) this Agreement and any other documents referred to in
this Agreement; and
(ii) any other Finance Document (other than a Novation
Certificate) executed after the date of this
Agreement;
(c) any amendment, waiver, consent or suspension of rights (or any
proposal for any of the foregoing) requested by or on behalf
of an Obligor and relating to a Finance Document or a document
referred to in any Finance Document; and
(d) any other matter, not of an ordinary administrative nature,
arising out of or in connection with a Finance Document.
21.2 ENFORCEMENT COSTS
The Parent shall forthwith on demand pay to each Finance Party the
amount of all costs and expenses (including legal fees) incurred by it:
(a) in connection with the enforcement of, or the preservation of
any rights under, any Finance Document; or
(b) in investigating any possible Default or Mandatory Prepayment
Event.
22. STAMP DUTIES
The Parent shall pay and forthwith on demand indemnify each Finance
Party against any liability it incurs in respect of any stamp,
registration and similar tax which is or becomes payable in connection
with the entry into, performance or enforcement of any Finance Document
other than a Novation Certificate.
23. INDEMNITIES
23.1 CURRENCY INDEMNITY
(a) If a Finance Party receives an amount in respect of an Obligor's
liability under the Finance Documents or if that liability is converted
into a claim, proof, judgment or order in a currency other than the
currency (the "CONTRACTUAL CURRENCY") in which the amount is expressed
to be payable under the relevant Finance Document:
(i) that Obligor shall indemnify that Finance Party as an
independent obligation against any loss or liability arising
out of or as a result of the conversion;
(ii) if the amount received by that Finance Party, when converted
into the contractual currency at a market rate in the usual
course of its business, is less than the amount owed in the
contractual currency, the Obligor concerned shall forthwith on
demand pay to that Finance Party an amount in the contractual
currency equal to the deficit; and
(iii) the Obligor shall pay to the Finance Party concerned on demand
any exchange costs and taxes payable in connection with any
such conversion.
(b) Each Obligor waives any right it may have in any jurisdiction to pay
any amount under the Finance Documents in a currency other than that in
which it is expressed to be payable.
23.2 OTHER INDEMNITIES
The Parent shall forthwith on demand indemnify each Finance Party
against any loss or liability which that Finance Party incurs as a
consequence of:
(a) the occurrence of any Event of Default or Mandatory Prepayment
Event;
(b) the operation of Clauses 18.12 (Acceleration), 7.4 (Mandatory
Prepayment Events) or Clause 29 (Pro Rata Sharing);
(c) any payment of principal or an overdue amount being received
from any source otherwise than, in the case of Tranche A
Advances, and Tranche B Advances, on its Maturity Date (and,
for the purposes of this paragraph (c), the Maturity Date of
an overdue amount is the last day of each Designated Term (as
defined in Clause 8.3 (Default interest)));
(d) the occurrence of a change described in, and the operation of
Clause 11.4 (Change in circumstances) in relation to, an
Optional Currency; or
(e) (other than by reason of negligence or default by a Finance
Party) an Advance not being disbursed after a Borrower has
delivered a Request for that Advance.
The Parent's liability in each case includes any loss or expense on
account of funds borrowed, contracted for or utilised to fund any
amount payable under any Finance Document, any amount repaid or prepaid
or any Advance.
24. EVIDENCE AND CALCULATIONS
24.1 ACCOUNTS
Accounts maintained by a Finance Party in connection with this
Agreement are prima facie evidence of the matters to which they relate.
24.2 CERTIFICATES AND DETERMINATIONS
Any certification or determination by a Finance Party of a rate or
amount under this Agreement is, in the absence of manifest error,
conclusive evidence of the matters to which it relates.
24.3 CALCULATIONS
Interest (and any MLA Cost) and the fees payable under Clause 20.1
(Commitment fee) and Clause 20.5 (Utilisation fee) accrue from day to
day and are calculated on the basis of the actual number of days
elapsed and a year of 365 days, or, in the case of interest payable on
an amount denominated in a currency other than Sterling (including any
applicable Reserve Asset Cost other than any MLA Cost), 360 days.
25. AMENDMENTS AND WAIVERS
25.1 PROCEDURE
(a) Subject to Clause 25.2 (Exceptions), any provision of the Finance
Documents may be amended or waived with the agreement of the Parent,
the Majority Banks and the Agent. The Agent may effect, on behalf of
the Majority Banks, an amendment or waiver to which they have agreed.
(b) The Agent shall promptly notify the other Parties of any amendment or
waiver effected under paragraph (a) above, and any such amendment or
waiver shall be binding on all the Parties.
25.2 EXCEPTIONS
An amendment or waiver which relates to:
(a) the definition of "Majority Banks" in Clause 1.1
(Definitions); or
(b) an extension of the date for, or a decrease in an amount or a
change in the currency of, any payment under the Finance
Documents; or
(c) an increase in a Bank's Commitment; or
(d) a change in the guarantee under Clause 14 (Guarantee)
otherwise than in accordance with Clause 26.5 (Additional
Guarantors) or Clause 14.9 (Removal of Guarantors); or
(e) a term of a Finance Document which expressly requires the
consent of each Bank; or
(f) Clause 29 (Pro Rata Sharing) or this Clause 25 (Amendments and
Waivers),
may not be effected without the consent of each Bank.
25.3 WAIVERS AND REMEDIES CUMULATIVE
The rights of each Finance Party under the Finance Documents:
(a) may be exercised as often as necessary;
(b) are cumulative and not exclusive of its rights under the
general law; and
(c) may be waived only in writing and specifically.
Delay in exercising or non-exercise of any such right is not a waiver
of that right.
26. CHANGES TO THE PARTIES
26.1 TRANSFERS BY OBLIGORS
No Obligor may assign, transfer, novate or dispose of any of, or any
interest in, its rights and/or obligations under this Agreement.
26.2 TRANSFERS BY BANKS
(a) A Bank (the "EXISTING BANK") may at any time assign, transfer or novate
any of its rights and/or obligations under this Agreement to another
bank or financial institution (the "NEW BANK") with the prior consent
of the Parent unless:
(i) the New Bank is another Bank or an Affiliate of a Bank; or
(ii) a Default is outstanding,
in which case no such consent is required. The prior written consent of
the Parent must not be unreasonably withheld or delayed and will be
deemed to be given if, within 14 days of receipt by the Parent of an
application for consent, it has not been expressly refused.
(b) A transfer of obligations will be effective only if either:
(i) the obligations are novated in accordance with Clause 26.3
(Procedure for novations); or
(ii) the New Bank confirms to the Agent and the Parent that it
undertakes to be bound by the terms of this Agreement as a
Bank in form and substance satisfactory to the Agent and the
Parent. On the transfer becoming effective in this manner the
Existing Bank shall be relieved of its obligations under this
Agreement to the extent that they are transferred to the New
Bank.
(c) Nothing in this Agreement restricts the ability of a Bank to
sub-contract an obligation if that Bank remains liable under this
Agreement for that obligation.
(d) On each occasion an Existing Bank assigns, transfers or novates any of
its rights and/or obligations under this Agreement after the end of the
Syndication Period (other than to an Affiliate), the New Bank shall, on
the date the assignment, transfer and/or novation takes effect, pay to
the Agent for its own account a fee of (pound)1,000.
(e) An Existing Bank is not responsible to a New Bank for:
(i) the execution, genuineness, validity, enforceability or
sufficiency of any Finance Document or any other document; or
(ii) the collectability of amounts payable under any Finance
Document; or
(iii) the accuracy of any statements (whether written or oral) made
in or in connection with any Finance Document.
(f) Each New Bank confirms to the Existing Bank and the other Finance
Parties that it:
(i) has made its own independent investigation and assessment of
the financial condition and affairs of each Obligor and its
related entities in connection with its participation in this
Agreement and has not relied exclusively on any information
provided to it by the Existing Bank in connection with any
Finance Document; and
(ii) will continue to make its own independent appraisal of the
creditworthiness of each Obligor and its related entities
while any amount is or may be outstanding under this Agreement
or any Commitment is in force.
(g) Nothing in any Finance Document obliges an Existing Bank to:
(i) accept a re-transfer from a New Bank of any of the rights
and/or obligations assigned, transferred or novated under this
Clause; or
(ii) support any losses incurred by the New Bank by reason of the
non-performance by any Obligor of its obligations under this
Agreement or otherwise.
(h) Any reference in this Agreement to a Bank includes a New Bank but
excludes a Bank if no amount is or may be owed to or by it under this
Agreement and its Commitment has been cancelled or reduced to nil.
26.3 PROCEDURE FOR NOVATIONS
(a) A novation is effected if:
(i) the Existing Bank and the New Bank deliver to the Agent a duly
completed certificate (a "NOVATION CERTIFICATE"),
substantially in the form of Part I of Schedule 5 or such
other form as the Agent may require or approve (which may be
delivered by fax and confirmed by delivery of a hard copy
original but the fax will be effective irrespective of whether
confirmation is received); and
(ii) the Agent executes it.
(b) Each Party (other than the Existing Bank and the New Bank) irrevocably
authorises the Agent to execute any duly completed Novation Certificate
on its behalf.
(c) To the extent that they are expressed to be the subject of the novation
in the Novation Certificate:
(i) the Existing Bank and the other Parties (the "EXISTING
PARTIES") will be released from their obligations to each
other (the "DISCHARGED OBLIGATIONS");
(ii) the New Bank and the existing Parties will assume obligations
towards each other which differ from the discharged
obligations only insofar as they are owed to or assumed by the
New Bank instead of the Existing Bank;
(iii) the rights of the Existing Bank against the existing Parties
and vice versa (the "DISCHARGED RIGHTS") will be cancelled;
and
(iv) the New Bank and the existing Parties will acquire rights
against each other which differ from the discharged rights
only insofar as they are exercisable by or against the New
Bank instead of the Existing Bank,
all on the date of execution of the Novation Certificate by the Agent
or, if later, the date specified in the Novation Certificate.
26.4 ADDITIONAL BORROWERS
(a) If the Parent wishes one of its wholly-owned Subsidiaries to become an
Additional Borrower, then it may (if all the Banks have approved the
identity of the Additional Borrower in writing) deliver to the Agent
the documents listed in Part II of Schedule 2 in each case in form and
substance satisfactory to the Agent.
(b) On delivery of a Borrower Accession Agreement, executed by the relevant
Subsidiary and the Parent, the Subsidiary concerned will become an
Additional Borrower. However, it may not submit a Request until the
Agent confirms to the other Finance Parties and the Parent that it has
received all the documents referred to in paragraph (a) above in form
and substance satisfactory to it.
(c) Delivery of a Borrower Accession Agreement, executed by the relevant
Subsidiary and the Parent, constitutes confirmation by that Subsidiary
and the Parent that the representations and warranties set out in
Clause 15.13(b) (Representations and Warranties) to be made by them on
the date of the Borrower Accession Agreement are correct, as if made by
them with reference to the facts and circumstances then existing.
26.5 ADDITIONAL GUARANTORS
(a) (i) Subject to paragraph (b) below, a Subsidiary of the Parent
(or a new holding company of the Parent in relation to an
Approved Scheme) may become an Additional Guarantor by
delivering to the Agent a Guarantor Accession Agreement, duly
executed by that company.
(ii) Upon execution and delivery of a Guarantor Accession
Agreement, the relevant company will become an Additional
Guarantor even if the Guarantor Accession Agreement is amended
or the liability of the proposed Additional Guarantor is
limited or qualified provided the Agent is satisfied (acting
on the advice of the legal advisers giving the opinion
referred to in sub-paragraph (iii) below) that the limit or
qualification arises by reason of a legal limitation on the
ability of that Additional Guarantor to enter into, or its
directors' ability to authorise the giving of, that guarantee.
(iii) The Parent shall procure that, at the same time as a Guarantor
Accession Agreement is delivered to the Agent, there is also
delivered to the Agent all those other documents listed in
Part III of Schedule 2, in each case in form and substance
satisfactory to the Agent.
(b) The execution of a Guarantor Accession Agreement constitutes
confirmation by the Additional Guarantor concerned that the
representations and warranties set out in Clause 15.13(b)
(Representations and Warranties) to be made by it on the date of the
Guarantor Accession Agreement are correct, as if made with reference to
the facts and circumstances then existing.
26.6 REFERENCE BANKS
If a Reference Bank (or, if a Reference Bank is not a Bank, the Bank of
which it is an Affiliate) ceases to be a Bank, the Agent shall (in
consultation with the Parent) appoint another Bank or an Affiliate of a
Bank which is not a Reference Bank to replace that Reference Bank.
26.7 REGISTER
The Agent shall keep a register of all the Parties (including in the
case of Banks the details of their Facility Office notified to the
Agent from time to time) and shall supply any other Party (at that
Party's expense) with a copy of the register on request.
27. DISCLOSURE OF INFORMATION
A Bank may disclose to one of its Affiliates or any person with whom it
is proposing to enter, or has entered into, any kind of transfer,
participation or other agreement in relation to this Agreement:
(a) a copy of any Finance Document; and
(b) any information which that Bank has acquired under or in
connection with any Finance Document,
provided that a Bank shall not disclose any such information to a
person other than one of its Affiliates unless that person has provided
to that Bank a confidentiality undertaking addressed to that Bank and
the Parent substantially in the form of Schedule 7 or such other form
as the Parent may approve.
28. SET-OFF
After a Default which is continuing, a Finance Party may set off any
matured obligation owed by an Obligor under this Agreement (to the
extent beneficially owned by that Finance Party) against any obligation
(whether or not matured) owed by that Finance Party to that Obligor,
regardless of the place of payment, booking branch or currency of
either obligation. If the obligations are in different currencies, the
Finance Party may convert either obligation at a market rate of
exchange in its usual course of business for the purpose of the
set-off. If either obligation is unliquidated or unascertained, the
Finance Party may set off in an amount estimated by it in good faith to
be the amount of that obligation.
29. PRO RATA SHARING
29.1 REDISTRIBUTION
If any amount owing by an Obligor under this Agreement to a Finance
Party (the "RECOVERING FINANCE PARTY") is discharged by payment,
set-off or any other manner other than through the Agent in accordance
with Clause 9 (Payments) (a "RECOVERY"), then:
(a) the recovering Finance Party shall, within three Business
Days, notify details of the recovery to the Agent;
(b) the Agent shall determine whether the recovery is in excess of
the amount which the recovering Finance Party would have
received had the recovery been received by the Agent and
distributed in accordance with Clause 9 (Payments);
(c) subject to Clause 29.3 (Exception), the recovering Finance
Party shall, within three Business Days of demand by the
Agent, pay to the Agent an amount (the "redistribution") equal
to the excess;
(d) the Agent shall treat the redistribution as if it were a
payment by the Obligor concerned under Clause 9 (Payments) and
shall pay the redistribution to the Finance Parties (other
than the recovering Finance Party) in accordance with Clause
9.7 (Partial payments); and
(e) after payment of the full redistribution, the recovering
Finance Party will be subrogated to the portion of the claims
paid under paragraph (d) above and that Obligor will owe the
recovering Finance Party a debt which is equal to the
redistribution, immediately payable and of the type originally
discharged.
29.2 REVERSAL OF REDISTRIBUTION
If under Clause 29.1 (Redistribution):
(a) a recovering Finance Party must subsequently return a
recovery, or an amount measured by reference to a recovery,
to an Obligor; and
(b) the recovering Finance Party has paid a redistribution in
relation to that recovery,
each Finance Party shall, within three Business Days of demand by the
recovering Finance Party through the Agent, reimburse the recovering
Finance Party all or the appropriate portion of the redistribution paid
to that Finance Party. Thereupon the subrogation in Clause 29.1(e)
(Redistribution) will operate in reverse to the extent of the
reimbursement.
29.3 EXCEPTION
A recovering Finance Party need not pay a redistribution to the extent
that it would not, after the payment, have a valid claim against the
Obligor concerned in the amount of the redistribution pursuant to
Clause 29.1(e) (Redistribution).
30. SEVERABILITY
If a provision of any Finance Document is or becomes illegal, invalid
or unenforceable in any jurisdiction, that shall not affect:
(a) the legality, validity or enforceability in that jurisdiction
of any other provision of the Finance Documents; or
(b) the legality, validity or enforceability in other
jurisdictions of that or any other provision of the Finance
Documents.
31. COUNTERPARTS
This Agreement may be executed in any number of counterparts, and this
has the same effect as if the signatures on the counterparts were on a
single copy of this Agreement.
32. NOTICES
32.1 GIVING OF NOTICES
All notices or other communications under or in connection with this
Agreement shall be given in writing or by telex or facsimile. Any such
notice will be deemed to be given as follows:
(a) if in writing, when delivered;
(b) if by telex, when despatched, but only if, at the time of
transmission, the correct answerback appears at the start and
at the end of the sender's copy of the notice; and
(c) if by facsimile, when received.
However, a notice given in accordance with the above but received on a
non-working day or after business hours in the place of receipt will
only be deemed to be given on the next working day in that place.
Facsimile Requests are to be confirmed by the relevant Borrower in
writing (but may be relied upon by the Agent and the Banks irrespective
of receipt of such confirmation).
32.2 ADDRESSES FOR NOTICES
(a) The address and facsimile number of each Party (other than the Agent,
the Original Borrower and the Parent) for all notices under or in
connection with this Agreement are:
(i) that notified by that Party for this purpose to the Agent on
or before it becomes a Party; or
(ii) any other notified by that Party for this purpose to the Agent
by not less than five Business Days' notice.
(b) The address and facsimile numbers of the Agent are:
Chase Manhattan International Limited
Trinity Tower
9 Thomas More Street
London E1 9YT
Attention: Loans Agency Department
Facsimile: 0171-777 2360
or such other as the Agent may notify to the other Parties by not less
than five Business Days' notice.
(c) The addresses and facsimile numbers of the Parent and the Original
Borrower are:
85 Fleet Street
London EC4P 4AJ
Attention: Group Treasurer
Facsimile: 0171 542 5404
or such other as the Parent may notify to the other Parties by not less
than five Business Days' notice.
(d) The Agent shall, promptly upon request from any Party, give to that
Party the address, telex number or facsimile number of any other Party
applicable at the time for the purposes of this Clause.
33. LANGUAGE
(a) Any notice given under or in connection with any Finance Document shall
be in English.
(b) All other documents provided under or in connection with any Finance
Document shall be:
(i) in English; or
(ii) if not in English, accompanied by a certified English
translation and, in this case, the English translation shall
prevail unless the document is a statutory or other official
document.
34. JURISDICTION
34.1 SUBMISSION
For the benefit of each Finance Party, each Obligor agrees that the
courts of England have jurisdiction to settle any disputes in
connection with any Finance Document and accordingly submits to the
jurisdiction of the English courts.
34.2 SERVICE OF PROCESS
Without prejudice to any other mode of service, each Obligor (other
than an Obligor incorporated in England and Wales):
(a) irrevocably appoints the Parent as its agent for service of
process relating to any proceedings before the English courts
in connection with any Finance Document;
(b) agrees that failure by a process agent to notify the Obligor
of the process will not invalidate the proceedings concerned;
and
(c) consents to the service of process relating to any such
proceedings by prepaid posting of a copy of the process to its
address for the time being applying under Clause 32.2
(Addresses for notices).
34.3 FORUM CONVENIENCE AND ENFORCEMENT ABROAD
Each Obligor:
(a) waives objection to the English courts on grounds of
inconvenient forum or otherwise as regards proceedings in
connection with a Finance Document; and
(b) agrees that a judgment or order of an English court in
connection with a Finance Document is conclusive and binding
on it and may be enforced against it in the courts of any
other jurisdiction.
34.4 NON-EXCLUSIVITY
Nothing in this Clause 34 limits the right of a Finance Party to bring
proceedings against an Obligor in connection with any Finance Document:
(a) in any other court of competent jurisdiction; or
(b) concurrently in more than one jurisdiction.
35. GOVERNING LAW
This Agreement is governed by English law.
THIS AGREEMENT has been entered into on the date stated at the beginning of this
Agreement.
SCHEDULE 1
BANKS AND COMMITMENTS
COLUMN 1 COLUMN 2
BANK TRANCHE A COMMITMENTS TRANCHE B COMMITMENTS
(POUND) (POUND)
The Chase Manhattan Bank 1,000,000,000 500,000,000
================ ===============
Total 1,000,000,000 500,000,000
================ ===============
SCHEDULE 2
CONDITIONS PRECEDENT DOCUMENTS
PART I
TO BE DELIVERED BEFORE THE FIRST ADVANCE
1. ALL OBLIGORS
A copy of the memorandum and articles of association and certificate of
incorporation (or equivalent constituent documents) of each Obligor.
2. PARENT
(a) A copy of a resolution of the board of directors of the Parent:
(i) approving the terms of, and the transactions contemplated by,
the Finance Documents and resolving that it execute and, where
applicable, deliver the Finance Documents to which it is a
party;
(ii) authorising a specified person or persons to execute and,
where applicable, deliver the Finance Documents to which it is
a party on its behalf; and
(iii) authorising a specified person or persons, on its behalf, to
sign and/or despatch all documents and notices (including
Requests) to be signed and/or despatched by it under or in
connection with the Finance Documents;
(b) a specimen of the signature of each person authorised by the resolution
referred to in paragraph (a) above;
(c) a certificate of a director of the Parent confirming that the borrowing
of the Total Commitments in full would not cause any borrowing limit
binding on any Obligor to be exceeded; and
(d) a certificate of an Authorised Signatory of the Parent certifying that
each copy document specified in Part I of this Schedule 2 is correct,
complete and in full force and effect as at a date no earlier than the
Signing Date.
3. ORIGINAL BORROWER
(a) A copy of a resolution of the board of directors of the Original
Borrower:
(i) approving the terms of, and the transactions contemplated by,
the Finance Documents and resolving that it execute and, where
applicable, deliver the Finance Documents to which it is a
party;
(ii) authorising a specified person or persons to execute and,
where applicable, deliver the Finance Documents to which it is
a party on its behalf; and
(iii) authorising a specified person or persons, on its behalf, to
sign and/or despatch all other documents and notices
(including Requests) to be signed and/or despatched by it
under or in connection with the Finance Documents; and
(b) a specimen of the signature of each person authorised by the
resolutions referred to in paragraph (a) above.
4. SCHEME OF ARRANGEMENT DOCUMENTS
A press release in final form in form and substance satisfactory to the
Agent relating to the Scheme of Arrangement (the "PRESS RELEASE").
5. COMPLETION OF THE SCHEME OF ARRANGEMENT
(a) A certificate from a director of the Parent addressed to the Agent on
behalf of the Finance Parties certifying that:
(i) the Scheme of Arrangement has been effected substantially in
accordance with the terms of the Press Release;
(ii) the Effective Date has occurred and confirming such date; and
(iii) the shares of the Parent have been admitted to the Official
List of the London Stock Exchange,
and attaching certified copies of the Court Order and the Certificate
of Registration issued by the Registrar of Companies of the Court
Order.
(b) Copies of irrevocable notices given to cancel all existing bilateral
loan agreements between any Bank and Reuters Holdings Plc or its
Subsidiaries.
6. LEGAL OPINION
A legal opinion of Allen & Overy in relation to English law.
PART II
TO BE DELIVERED BY AN ADDITIONAL BORROWER
1. A Borrower Accession Agreement, duly executed by the Additional Borrower and
the Parent.
2. A copy of the memorandum and articles of association and certificate of
incorporation of the Additional Borrower.
3. A copy of a resolution of the board of directors of the Additional Borrower:
(a) approving the terms of, and the transactions contemplated by,
the Borrower Accession Agreement and resolving that it execute
the Borrower Accession Agreement;
(b) authorising a specified person or persons to execute the
Borrower Accession Agreement on its behalf; and
(c) authorising a specified person or persons, on its behalf, to
sign and/or despatch all other documents and notices
(including Requests) to be signed and/or despatched by it
under or in connection with this Agreement.
4. A copy of any other authorisation or other document, opinion or
assurance which the Agent considers to be necessary or desirable in
connection with the entry into and performance of, and the transactions
contemplated by, the Borrower Accession Agreement or for the validity
and enforceability of any Finance Document.
5. A specimen of the signature of each person authorised by the
resolution referred to in paragraph 3 above.
6. A copy of the latest audited accounts of the Additional Borrower (if
any).
7. A legal opinion of Allen & Overy, legal advisers to the Agent and, if
applicable, other lawyers approved by the Agent in the place of
incorporation of the Additional Borrower, addressed to the Finance
Parties.
8. A certificate of an Authorised Signatory of the Additional Borrower
certifying that each copy document specified in Part II of this
Schedule 2 is correct, complete and in full force and effect as at a
date no earlier than the date of the Borrower Accession Agreement.
9. A certificate of a director of the Additional Borrower certifying that
the borrowing of the Total Commitments in full would not cause any
borrowing limit binding on it to be exceeded.
PART III
TO BE DELIVERED BY AN ADDITIONAL GUARANTOR
1. A Guarantor Accession Agreement, duly executed as a deed by the Additional
Guarantor.
2. A copy of the memorandum and articles of association and certificate of
incorporation (or other equivalent constitutional documents) of the
Additional Guarantor.
3. A copy of a resolution of the board of directors of the Additional Guarantor:
(a) approving the terms of, and the transactions contemplated by,
the Guarantor Accession Agreement and resolving that it
execute the Guarantor Accession Agreement as a deed;
(b) authorising a specified person or persons to execute and
deliver the Guarantor Accession Agreement as a deed; and
(c) authorising a specified person or persons, on its behalf, to
sign and/or despatch all documents to be signed and/or
despatched by it under or in connection with this Agreement.
4. If the lawyers referred to in paragraph 10 below so advise, a copy of a
resolution, signed by all the holders of the issued or allotted shares
in the Additional Guarantor, approving the terms of, and the
transactions contemplated by, the Guarantor Accession Agreement.
5. A copy of a resolution of the Board of Directors of each corporate
shareholder in the Additional Guarantor:
(a) approving the terms of the resolution referred to in paragraph 4
above; and
(b) authorising a specified person or persons to sign the resolution on
its behalf.
6. A certificate of a director of the Additional Guarantor certifying that
the borrowing of the Total Commitments in full would not cause any
borrowing limit binding on it to be exceeded.
7. A copy of any other authorisation or other document, opinion or
assurance which the Agent considers to be necessary or desirable in
connection with the entry into and performance of, and the transactions
contemplated by, the Guarantor Accession Agreement or for the validity
and enforceability of any Finance Document.
8. A specimen of the signature of each person authorised by the
resolutions referred to in paragraphs 3 and 5 above.
9. A copy of the latest audited accounts of the Additional Guarantor.
10. A legal opinion of Allen & Overy, legal advisers to the Agent, and, if
applicable, other lawyers approved by the Agent in the place of
incorporation of the Additional Guarantor addressed to the Finance
Parties.
11. A certificate of an Authorised Signatory of the Additional Guarantor
certifying that each copy document specified in Part III of this
Schedule 2 is correct, complete and in full force and effect as at a
date no earlier than the date of the Guarantor Accession Agreement.
SCHEDULE 3
CALCULATION OF THE MLA COST
(a) The MLA Cost for an Advance denominated in Sterling is calculated in
accordance with the following formula:
BY + L(Y-X) + S(Y-Z) % per annum = MLA Cost 100-(B + S)
where on the day of application of the formula:
B is the percentage of the Agent's eligible liabilities which
the Bank of England requires the Agent to hold on a
non-interest-bearing deposit account in accordance with its
cash ratio requirements;
Y is the rate at which Sterling deposits are offered by the
Agent to leading banks in the London interbank market at or
about 11.00 a.m. on that day for the relevant period;
L is the percentage of eligible liabilities which the Bank of
England requires the Agent to maintain as secured money with
members of the London Discount Market Association and/or as
secured call money with certain money brokers and gilt-edged
primary market makers;
X is the rate at which secured Sterling deposits in the relevant
amount may be placed by the Agent with members of the London
Discount Market Association and/or as secured call money with
certain money brokers and gilt-edged primary market makers at
or about 11.00 a.m. on that day for the relevant period;
S is the percentage of the Agent's eligible liabilities which
the Bank of England requires the Agent to place as a special
deposit; and
Z is the interest rate per annum allowed by the Bank of England
on special deposits.
(b) For the purposes of this Schedule 3:
(i) "ELIGIBLE LIABILITIES" and "SPECIAL DEPOSITS" have the
meanings given to them at the time of application of the
formula by the Bank of England;
(ii) "RELEVANT PERIOD" in relation to an Advance, means:
(A) if its Term is three months or less, its Term; or
(B) if its Term is more than three months, each
successive period of three months and any necessary
shorter period comprised in that Term.
(c) In the application of the formula, B, Y, L, X, S and Z are included in
the formula as figures and not as percentages, e.g. if B = 0.5% and Y =
15%, BY is calculated as 0.5 x 15.
(d) (i) The formula is applied on the first day of each relevant
period comprised in the Term of the relevant Advance.
(ii) Each rate calculated in accordance with the formula is, if
necessary, rounded upward to four decimal places.
(e) If the Agent determines that a change in circumstances has rendered, or
will render, the formula inappropriate, the Agent (after consultation
with the Reference Banks) shall notify the Parent of the manner in
which the MLA Cost will subsequently be calculated. The manner of
calculation so notified by the Agent shall, in the absence of manifest
error, be binding on all the Parties.
SCHEDULE 4
FORM OF REQUEST
To: Chase Manhattan International Limited as Agent
From: [BORROWER]
Date: [ ]
REUTERS GROUP LIMITED - (POUND)1,500,000,000 SYNDICATED CREDIT FACILITY
DATED 4TH DECEMBER, 1997
1. We wish to utilise Tranche A* and/or*/Tranche B* by way of Advance(s)* as
follows:
(a) Utilisation Date: Tranche A: [ ]*
Tranche B: [ ]*
(b) Requested Amount (including currency): Tranche A: [ ]*
Tranche B: [ ]*
(c) Term: Tranche A: [ ]*
Tranche B: [ ]*
(d) Payment Instructions: Tranche A: [ ]*
Tranche B: [ ]*
2. We confirm that each condition specified in Clause 4.2 (Further
conditions precedent) is satisfied on the date of this Request and this
Advance would not cause any borrowing limit binding on us to be
exceeded.
By:
[BORROWER]
Authorised Signatory
- ---------------------
* Delete as appropriate.
SCHEDULE 5
FORMS OF ACCESSION DOCUMENTS
PART I
NOVATION CERTIFICATE
To: Chase Manhattan International Limited as Agent
From: [THE EXISTING BANK] and [THE NEW BANK] Date: [ ]
REUTERS GROUP LIMITED - (POUND)1,500,000,000 SYNDICATED CREDIT AGREEMENT DATED
4TH DECEMBER, 1997
We refer to Clause 26.3 (Procedure for novations).
1. We [ ] (the "EXISTING BANK") and [ ] (the "NEW BANK") agree to the
Existing Bank and the New Bank novating all the Existing Bank's rights
and obligations referred to in the Schedule in accordance with Clause
26.3 (Procedure for novations).
2. The specified date for the purposes of Clause 26.3(c) (Procedure for
novations) is [date of novation].
3. The Facility Office and address for notices of the New Bank for the
purposes of Clause 32.2 (Addresses for notices) are set out in the
Schedule.
4. This Novation Certificate is governed by English law.
THE SCHEDULE
RIGHTS AND OBLIGATIONS TO BE NOVATED
[Details of the rights and obligations of the Existing Bank to be novated].
[NEW BANK]
[Facility Office Address for notices]
[Existing Bank] [New Bank] [ ]
By: By: By:
Date: Date: Date:
PART II
BORROWER ACCESSION AGREEMENT
To: Chase Manhattan International Limited as Agent
From: [PROPOSED BORROWER] and Reuters Group Limited
[Date]
REUTERS GROUP LIMITED - (POUND)1,500,000,000 SYNDICATED CREDIT FACILITY DATED
4TH DECEMBER, 1997 (THE "CREDIT AGREEMENT")
We refer to Clause 26.4 (Additional Borrowers).
[Name of company] of [Registered Office] (Registered no. [ ]) (the "PROPOSED
BORROWER") agrees to become an Additional Borrower and to be bound by the terms
of the Credit Agreement as an Additional Borrower in accordance with Clause 26.4
(Additional Borrowers).
The address for notices of the Proposed Borrower for the purposes of Clause 32.2
(Addresses for notices) is:
[ ]
This Agreement is governed by English law.
By:
[PROPOSED BORROWER]
Authorised Signatory
By:
REUTERS GROUP LIMITED
Authorised Signatory
PART III
GUARANTOR ACCESSION AGREEMENT
To: Chase Manhattan International Limited as Agent
From: [PROPOSED GUARANTOR]
Date: [ ]
REUTERS GROUP LIMITED - (POUND)1,500,000,000 SYNDICATED CREDIT FACILITY DATED
4TH DECEMBER, 1997 (THE "CREDIT AGREEMENT")
We refer to Clause 26.5 (Additional Guarantors).
We, [name of company] of [Registered Office] (Registered no. [ ]) agree to
become an Additional Guarantor and to be bound by the terms of the Credit
Agreement as an Additional Guarantor in accordance with Clause 26.5 (Additional
Guarantors).
Our address for notices for the purposes of Clause 32.2 (Addresses for notices)
is:
[
]
This Deed is governed by English law.
Executed as a deed by ) Director
[PROPOSED GUARANTOR] )
acting by ) Director/Secretary
and )
PART IV
FORM OF BORROWER NOVATION AGREEMENT
A NOVATION AGREEMENT dated [ ]
BETWEEN:
(1) [ ] (the "EXISTING BORROWER");
(2) [ ] (the "SUBSTITUTE BORROWER");
(3) REUTERS GROUP LIMITED on behalf of itself, each other Borrower and each
other Guarantor (as both such capitalised terms are defined in the
Credit Agreement referred to below) (the "PARENT"); and
(4) CHASE MANHATTAN INTERNATIONAL LIMITED as agent (the "AGENT") on behalf
of itself and the Banks (as defined in the Credit Agreement referred to
below),
and is supplemental to the Syndicated Credit Agreement dated 4th December, 1997
and made between Reuters Group Limited, Reuters Investments, the financial
institutions listed in Schedule 1 thereto, Chase Manhattan plc and the Agent
(the "CREDIT AGREEMENT").
IT IS AGREED:
1. NOVATION
In consideration of a payment made by the Existing Borrower to the
Substitute Borrower and the release of the Existing Borrower from its
obligations and liabilities (actual or contingent) specified in the
Schedule hereto under the Credit Agreement and with effect on and from
[ ] (the "EFFECTIVE DATE") the Substitute Borrower hereby undertakes
to observe and perform all the obligations and liabilities (actual or
contingent) of the Existing Borrower under the Credit Agreement in
respect of the Advances specified in the Schedule (including any such
obligations or liabilities as may have accrued or become due in respect
thereof prior to the Effective Date).
2. INTEGRATION
This Novation Agreement shall be read as one with the Credit Agreement
so that any reference therein to "this Agreement", "hereunder" and
similar shall include and be deemed to include this Novation Agreement.
3. CONTINUING LIABILITY
The Parent on behalf of itself and each other Guarantor acknowledges
and confirms that the Guarantors' obligations under Clause 14 of the
Credit Agreement apply to the obligations and liabilities assumed by
the Substitute Borrower hereunder.
SCHEDULE
[
]
IN WITNESS whereof the parties hereto have caused this Novation
Agreement to be duly executed on the date first written above.
.........................................
For and on behalf of
[The Existing Borrower]
.........................................
For and on behalf of
[The Substitute Borrower]
.........................................
For and on behalf of each
Guarantor, each Borrower and the
Parent
.........................................
For and on behalf of each
Bank and the Agent
SCHEDULE 6
FORM OF COMPLIANCE CERTIFICATE
To: Chase Manhattan International Limited
From: Reuters Group Limited
[date] 1997
REUTERS GROUP LIMITED - (POUND)1,500,000,000 SYNDICATED CREDIT FACILITY DATED
4TH DECEMBER, 1997 (THE "CREDIT AGREEMENT")
1. Terms defined in the Credit Agreement have the same meaning in this
Certificate.
2. We hereby certify that based on the annual consolidated financial
statements of the Group for the financial year ended [ ] (the
"TESTING DATE"):
(a) in respect of the financial year ending on the Testing Date,
Consolidated Profits before Interest and Taxes was [ ] and
Consolidated Net Finance Charges was [ ] and accordingly
the ratio of Consolidated Profits before Interest and Taxes to
Consolidated Net Finance Charges for that financial year was
[ ]; and
[(b) the Material Subsidiaries were:
[ ]].
3. The information in this certificate is based on information which has
been properly extracted from the audited consolidated accounts of
Reuters Group Limited for the year ended [ ], is clerically accurate
and has been calculated in accordance with the Credit Agreement.
[Officer] [Officer]
- --------------------------- --------------------------
for and on behalf of for and on behalf of
Reuters Group Limited Reuters Group Limited
SCHEDULE 7
FORM OF CONFIDENTIALITY UNDERTAKING
To: [Bank]
Reuters Group Limited
Dear Sirs
We refer to the (pound)1,500,000,000 Syndicated Credit Facility dated 4th
December, 1997 (the "CREDIT AGREEMENT") between, among others, Reuters Group
Limited and The Chase Manhattan Bank.
This is a confidentiality undertaking referred to in Clause 27 (Disclosure of
Information) of the Credit Agreement. A term defined in the Credit Agreement has
the same meaning in this undertaking.
We are considering entering into contractual relations with [insert name of
Bank] (the "BANK") and understand that it is a condition of our receiving
information about Reuters Group Limited and its related companies and any
Finance Document and/or any information under or in connection with any Finance
Document (the "Information") that we execute this undertaking.
We undertake to treat as confidential any Information and to use the Information
solely for the purposes of determining whether or not to enter into the
contractual relations and to keep any Information under secured and controlled
conditions. We will not disclose any of the Information to any third party
(other than our directors, officers, employees or outside advisors, who shall be
advised of and agree to those confidentiality obligations) without the prior
written consent of the Reuters Group Limited.
The foregoing undertakings do not apply to any Information that is publicly
available when provided or that thereafter becomes publicly available other than
through a breach by us of the above undertakings, or that is required to be
disclosed by us by judicial or administrative process in connection with any
action, suit, proceedings or claim or in order to comply with a request from any
fiscal, monetary or other authority with which we are accustomed to comply or
otherwise by applicable law. Information shall be deemed "publicly available" if
it becomes a matter of public knowledge or is contained in materials available
to the public or is obtained by us from any source other than the Bank or from
you (or its or your directors, officers, employees or outside advisors),
provided that such source has not entered into a confidentiality agreement with
you with respect to the Information.
Yours faithfully,
SIGNATORIES
PARENT
REUTERS GROUP LIMITED
By: STEVEN MITCHELL
ORIGINAL BORROWER
REUTERS INVESTMENTS
By: STEVEN MITCHELL
ARRANGER
CHASE MANHATTAN PLC
By: NEVILLE CROW
AGENT
CHASE MANHATTAN INTERNATIONAL LIMITED
By: NEVILLE CROW
TIM COLLIER
BANKS
THE CHASE MANHATTAN BANK
By: TIM COLLIER
CONSENT OF INDEPENDENT ACCOUNTANTS
- ----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-16927, No. 33-27879 and No. 33-90398) of Reuters
Holdings PLC (predecessor to Reuters Group PLC), of our report dated February
13, 1998 appearing on page 35 of Reuters Holdings PLC 1997 Annual Report to
Shareholders which is incorporated in this Reuters Group PLC Annual Report on
Form 20-F.
By /s/ Price Waterhouse
London, England Chartered Accountants
March 2, 1998 and Registered Auditors
CONSENT OF INDEPENDENT ACCOUNTANTS
- ----------------------------------
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form F-3 (No. 33-69694 and
No. 333-7374) of Reuters Holdings PLC (predecessor to Reuters Group PLC), of our
report dated February 13, 1998 appearing on page 35 of Reuters Holdings PLC 1997
Annual Report to Shareholders which is incorporated in this Reuters Group PLC
Annual Report on Form 20-F.
By /s/Price Waterhouse
London, England Chartered Accountants
March 2, 1998 and Registered Auditors
. [COVER]
BREAKING NEW GROUND
Reuters Holdings PLC Annual Report 1997
FIVE YEAR SUMMARY
Revenue (pound)million
1997 1996 1995 1994 1993
2,882 2,914 2,703 2,309 1,874
Declined 1% at actual exchange rates but grew 9% at comparable exchange rates
================================================================================
Profit before tax (pound)million
1997 1996 1995 1994 1993
626 652 558 481 422
1993 - 1996 have been restated to reflect goodwill amortisation
================================================================================
Earnings before interest, tax, depreciation and amortisation (EBITDA)
(pound)million
1997 1996 1995 1994 1993
904 924 801 681 584
Declined 2% at actual exchange rates but grew 8% at comparable rates
================================================================================
Adjusted earnings per ordinary share pence
1997 1996 1995 1994 1993
29.1 30.4 25.8 21.7 18.0
Adjusted to exclude goodwill amortisation and the cost of the capital
reorganisation
================================================================================
Dividends per ordinary share pence
1997 1996 1995 1994 1993
13.00 11.75 9.80 8.00 6.50
Increased by 11% in 1997
================================================================================
Cash flow per ordinary share pence
1997 1996 1995 1994 1993
61.0 60.7 52.7 45.6 40.3
Remained virtually unchanged from 1996. The ratio is defined on page 89
================================================================================
COVER IMAGE
A colour image of Sojourner, a toy-sized robot exploring Mars, is beamed back to
Earth at the end of the day on 8 August, more than a month after landing on the
Red Planet to launch a new phase of space exploration. The Pathfinder space
probe will be followed by four more landing craft over the next eight years,
culminating in a landing by another robot explorer that will collect rock and
soil samples and return them to Earth for examination.
NASA/Jet Propulsion Laboratory/CALTECH.
Reuters products
- ----------------
User accesses 435,000
Customer locations 53,000
Countries served 163
Languages in which news services created 25
Infrastructure
- --------------
Staff 16,119
Countries with Reuters offices 97
Cities with Reuters offices 217
Information sources
- -------------------
Data contributors 4,800
Markets reported in realtime 277
Journalistic staff 2,036
Editorial bureaux 174
FINANCIAL HIGHLIGHTS
Restated
1997 1996 %
(pound)m (pound)m change
============================================================================================================
Revenue 2,882 2,914 (1)
Earnings before interest, tax, depreciation and amortisation 904 924 (2)
Operating profit 592 641 (8)
Interest 80 61 32
Profit before tax 626 652 (4)
Pre-tax profit margin 21.7% 22.4%
Taxation 236 210 13
Profit after tax 390 442 (12)
Post-tax profit margin 13.5% 15.2%
Return on tangible fixed assets 49.0% 60.0%
Return on equity 25.6% 33.7%
Free cash flow 449 494 (9)
Net funds 1,290 1,050 23
============================================================================================================
Earnings per ordinary share 24.0p 27.3p (12)
Adjusted earnings per ordinary share# 29.1p 30.4p (4)
Earnings per ADS*+ $2.38 $2.71 (12)
Adjusted earnings per ADS*#+ $2.88 $3.01 (4)
Dividends per ordinary share 13.0p 11.75p 11
Dividends per ADS*(see page 84) 82.9p 74.9p 11
============================================================================================================
* Each ADS represents six ordinary shares.
+ A nominal exchange rate of US $1.65 = (pound)1 has been used for convenience.
# Adjusted earnings per ordinary share and per ADS are based on profit
attributable to ordinary shareholders excluding amortisation of goodwill and
capital reorganisation costs.
Reuters share price over ten year period relative to Financial Times Stock
Exchange 100 index
Picture of a Reuters 3000 screen showing a line graph where the FTSE 100 index
is identified as a straight line at value '1' and the Reuters share price is
identified as a line varying as follows:
Relative Relative Relative Relative
Performance Performance Performance Performance
Against the Against the Against the Against the
Date FTSE 100 Date FTSE 100 Date FTSE 100 Date FTSE 100
- --------- ----------- --------- ----------- --------- ----------- --------- -----------
31-Dec-97 1.58779514 31-Dec-94 1.86018478 31-Dec-91 1.26325880 31-Dec-88 0.87922866
30-Nov-97 1.68633293 30-Nov-94 1.94361042 30-Nov-91 1.14028426 30-Nov-88 0.78940312
31-Oct-97 1.6297778 31-Oct-94 1.88237613 31-Oct-91 1.14323160 31-Oct-88 0.81321985
30-Sep-97 1.70955811 30-Sep-94 1.91652429 30-Sep-91 1.10847452 30-Sep-88 0.84478587
31-Aug-97 1.58499684 31-Aug-94 1.91707737 31-Aug-91 1.02695855 31-Aug-88 0.82773672
31-Jul-97 1.63546546 31-Jul-94 1.84195191 31-Jul-91 0.91289114 31-Jul-88 0.82585443
30-Jun-97 1.67682439 30-Jun-94 1.79045238 30-Jun-91 0.96604211 30-Jun-88 0.89302271
31-May-97 1.81065523 31-May-94 1.88477243 31-May-91 1.0284667 31-May-88 0.82536562
30-Apr-97 1.74468039 30-Apr-94 2.07437534 30-Apr-91 0.99471943 30-Apr-88 0.80879922
31-Mar-97 1.75064086 31-Mar-94 1.93650969 31-Mar-91 1.08743457 31-Mar-88 0.84000960
28-Feb-97 1.86009551 28-Feb-94 1.86001077 28-Feb-91 1.02718585 29-Feb-88 0.91027157
31-Jan-97 1.87138122 31-Jan-94 1.74137212 31-Jan-91 1.08189906 31-Jan-88 0.89568323
31-Dec-96 2.22569529 31-Dec-93 1.59410706 31-Dec-90 1.00010969 31-Dec-87 0.87537757
30-Nov-96 2.17170884 30-Nov-93 1.61863593 30-Nov-90 0.85832932 30-Nov-87 0.75854045
31-Oct-96 2.34351866 31-Oct-93 1.57134522 31-Oct-90 0.83734951 31-Oct-87 0.80862163
30-Sep-96 2.27836124 30-Sep-93 1.52294807 30-Sep-90 1.13996633 30-Sep-87 1.16640571
31-Aug-96 2.35273523 31-Aug-93 1.51388444 31-Aug-90 1.18152645 31-Aug-87 1.17790693
31-Jul-96 2.22002838 31-Jul-93 1.50256245 31-Jul-90 1.38863386 31-Jul-87 1.12242673
30-Jun-96 2.56048535 30-Jun-93 1.45425304 30-Jun-90 1.59623359 30-Jun-87 1.14281105
31-May-96 2.44258719 31-May-93 1.44703931 31-May-90 1.55623799 31-May-87 1.03538746
30-Apr-96 2.40253152 30-Apr-93 1.36476018 30-Apr-90 1.50861271 30-Apr-87 0.98003467
31-Mar-96 2.34411486 31-Mar-93 1.39827737 31-Mar-90 1.50483146 31-Mar-87 1.07010229
29-Feb-96 2.29057500 28-Feb-93 1.47047902 28-Feb-90 1.41532434 28-Feb-87 1.01379938
31-Jan-96 2.01168737 31-Jan-93 1.51427665 31-Jan-90 1.29032058 31-Jan-87 1
31-Dec-95 1.95067009 31-Dec-92 1.50836785 31-Dec-89 1.28612169
30-Nov-95 2.0538557 30-Nov-92 1.46610461 30-Nov-89 1.26701584
31-Oct-95 2.03230619 31-Oct-92 1.35590505 31-Oct-89 1.29229162
30-Sep-95 1.94358376 30-Sep-92 1.42855236 30-Sep-89 1.23334404
31-Aug-95 1.96408016 31-Aug-92 1.38321837 31-Aug-89 1.24254613
31-Jul-95 1.84903433 31-Jul-92 1.31527716 31-Jul-89 1.13506549
30-Jun-95 1.92830594 30-Jun-92 1.40060950 30-Jun-89 1.11854225
31-May-95 1.73076108 31-May-92 1.33910038 31-May-89 1.16819055
30-Apr-95 1.79170725 30-Apr-92 1.35529319 30-Apr-89 1.04814465
31-Mar-95 1.85030643 31-Mar-92 1.40004667 31-Mar-89 1.01695982
28-Feb-95 1.79764497 29-Feb-92 1.39289035 28-Feb-89 0.98987035
31-Jan-95 1.78177840 31-Jan-92 1.33791197 31-Jan-89 0.90213068
1
REUTERS IN 1997
Reuters first with news of Chinese leader Deng Xiaoping's death
Reuters Business Briefing in Cyrillic
RFTV, live and exclusive, covers first televised Bank of England inflation
briefing
new Internet private investor services
Dealing 2000-2 launches new forward dealing product
global Millennium Challenge Programme launched
3000 series sales hit 43,900
new capital structure to form Reuters Group PLC
(pound)1.5 billion cash to shareholders announced
daily trade on Instinet tops 200 million shares on 28 October 1997
Reuter Foundation launches AlertNet Internet service for relief agencies
new advanced multicast technology from TIBCO subsidiary
SportsWeb global Internet site launched
CONTENTS
IFC Five Year Summary
1 Financial Highlights
2 Reuters in 1997
4 This is Reuters Who we are, what we do, our customers and competitors
6 Our Strengths Performance, Balance, Opportunity
12 From the Chairman Sir Christopher Hogg discusses the challenges faced in
1997
14 From the Chief Executive Peter Job: How Reuters is breaking new ground
through the use of advanced technology
16 An Interview with the Chief Executive Peter Job answers the key questions
facing Reuters
18 Board of Directors
20 Report of the Directors
24 Financial Review and Statements Contents
25 Report on Remuneration and Related Matters
33 Audit Committee
34 Statement of Directors' Responsibilities
35 Auditors' Report to the Board of Directors and Members of Reuters
Holdings PLC
36 Operating and Financial Review
48 Consolidated Profit and Loss Account
48 Consolidated Statement of Total Recognised Gains and Losses
55 Consolidated Cash Flow Statement
62 Consolidated Balance Sheet
76 Balance Sheet of Reuters Holdings PLC
78 Accounting Policies
80 Summary of Differences between UK and US Generally Accepted Accounting
Principles (GAAP)
83 Other Information for Shareholders
85 Preserving Reuters Independence
85 Financial Diary for 1998
86 The Reuter Trust Principles
87 Glossary
88 Eleven Year Consolidated Financial Summary
90 Where To Find Us
2-3
THIS IS REUTERS
Reuters uses the latest technology to inform the world.
Since 1850, when Paul Julius Reuter used carrier pigeons to bridge a gap in
European telegraph lines, Reuters has been breaking new ground to deliver
financial information and news significantly faster than anyone else.
Today, Reuters operates the world's largest private communications network,
using satellites to beam realtime information and news around the planet.
Reuters products are distinguished by speed and accuracy. In the fast-moving
markets of a shrinking world, they have global reach and local focus. New
Internet technologies enable Reuters to meet our clients' needs for information
and analytics ever more rapidly.
Our customers demand in-depth data, sophisticated analytics and easy-to-use
applications across the Reuters product line, ranging from electronic
transactions to risk management.
Reuters clients watch news and prices on more than 435,000 computer screens in
163 countries.
4
FINANCIAL PRODUCTS
INFORMATION PRODUCTS
Information products deliver realtime and historical news and financial data to
customers within the financial markets and provide the software tools to analyse
data. Reuters main offerings are the series 2000 and 3000 product lines.
Information management systems offer customers the means to integrate and
analyse data from a variety of sources for financial trading rooms. Risk
management, order handling products and customised solutions from TIBCO offer
customers the means of managing their own information flows and exposure to
risk.
TRANSACTION PRODUCTS
Transaction products principally comprise the Dealing 2000 product line and
Instinet. Dealing 2000 products enable foreign exchange professionals to
converse electronically with chosen trading partners using Dealing 2000-1 or
Reuters automated matching system Dealing 2000-2. Instinet provides agency
brokerage services in global equities to securities industry professionals in
more than 30 countries.
CUSTOMERS: Most of the world's leading financial institutions. Traders, brokers,
dealers, analysts, investors and corporate treasurers use both information and
transaction products.
COMPETITORS: Reuters is a market leader in most of these sectors. Its principal
competitors are Bloomberg, Bridge Information Systems and Dow Jones Markets.
They offer differing levels of geographic spread and market coverage. In many
countries there are national competitors. For information management systems,
the principal competitors are CSK Software and Dow Jones Markets. The Electronic
Broking Service is the principal competitor for foreign exchange. Instinet
competes with other brokers for transactions in global equity order flow, and
delivers its services using both advanced computer and traditional telephonic
technology.
OUTLOOK: The new 3000 series, which packages historical data and analytics along
with prices and news, is selling strongly and is well-received by customers.
While there are signs of consolidation among customers in several geographical
markets, there is more rapid deregulation in Asia which is expected to be
positive for our business over time despite the present short-term market
instability. The addition of new products and expansion into emerging markets
play a significant role in Reuters Transactions products growth strategy.
PROFESSIONAL PRODUCTS
Professional products provide a range of near realtime and historical financial
information news products and related technology to the corporate and
professional markets. Reuters Business Briefing provides access to 10 years'
business information from one of the world's most comprehensive databases.
CUSTOMERS: Reuters services have been developed for the insurance, advertising
and transportation industries and other corporate sectors. VAMP Health Ltd.
provides computer facilities to UK doctors.
COMPETITORS: Reed Elsevier's Lexis-Nexis, Dialog, FT Profile, Dow Jones News
Retrieval, are among them.
OUTLOOK: Rising demand for accurate and relevant information at the desktop is
driving the growth of this market, with increasing delivery over corporate
intranets and the Web.
MEDIA PRODUCTS
Media products comprise textual news, television services, pictures and graphics
for republication by media customers and also the repackaging and sale of
content for online services.
CUSTOMERS: Broadcasters, newspapers, digital and Internet online publishers
around the world.
COMPETITORS: Associated Press, Agence France Presse and Worldwide Television
News are the main international competitors.
OUTLOOK: The growth of new generation digital publishing, on the Internet and
elsewhere, provides continuing revenue opportunities beyond Reuters traditional
markets.
Information products revenue (pound)million
1997 1996 1995 1994 1993
1,852 1,892 1,841 1,617 1,345
Revenue declined 2% and accounted for 64% of the total.
================================================================================
Transaction products revenue (pound)million
1997 1996 1995 1994 1993
828 813 671 527 394
Revenue grew 2% and accounted for 29% of the total.
================================================================================
Media and professional products revenue (pound)million
1997 1996 1995 1994 1993
202 209 191 165 135
Revenue declined 3% and accounted for 7% of the total.
5
[PICTURE PAGES 6 AND 7]
Performance
The British Thrust SuperSonic Car broke the sound barrier to set the first world
supersonic land speed record on 15 October, racing across the remote Black Rock
Desert in Nevada at 763.04 mph (1,220.86 kph). Thrust had previously shattered
the old land speed record of 633 mph (1,012 kph) with a run of 714 mph (1,142
kph) on 25 September. Gary Caskey/Reuters.
6
As the shock waves of Asia's economic turmoil swept the world in 1997, financial
markets from east to west registered new levels of volatility and record trading
volumes. The ever-growing demand for fast, accurate and reliable information in
an accessible form means Reuters products must perform at ever higher levels to
help our customers do their jobs better. On 28 October, the New York Stock
Exchange and NASDAQ traded 2.5 billion shares on the busiest day in their
trading history.
On that same day, Reuters Integrated Data Network (IDN) at one point reached a
peak of 2,772 updates a second of new data and information supplied by our
realtime broadcast services, ranging from news to money, securities to
commodities. IDN updates currently average 1,950 items a second, an explosive
growth from an average 500 a second just five years ago and less than 200 in
1988.
7
[PICTURE PAGES 8 AND 9]
Balance
American tightrope artist Jade Kindar-Martin walks on a tightrope over the River
Thames in London with St. Paul's cathedral in the background on 14 September.
Kindar-Martin and French colleague Didier Pasiquette successfully completed a
world record attempt to cross the 300 metre-long tightrope passing each other on
the way. Paul Hackett/Reuters.
8
The reputation of Reuters is based on the key qualities of accuracy, speed and
impartiality. Our customers look to Reuters as a source of trust. The authority
and balance of Reuters information allows them to trade and report with
confidence. Reuters Financial Television rose to the challenge of reporting
Asia's economic crisis by becoming the live news source for the professional
financial market. Since the crisis began in July 1997, RFTV attracted onto its
screens, on a regular, live and exclusive basis, almost every Asian finance
minister and central bank governor. Some of those officials had never before
spoken willingly in public. But their regard for Reuters objectivity and
understanding of our reach into the world markets made RFTV a brand of respect
in the corridors of Asian government, and a crucial trading tool for its
clients.
9
[PICTURE PAGES 10 AND 11]
Opportunity
Soldiers of China's People's Liberation Army raise the Chinese flag at a
ceremony on 1 July marking Hong Kong's return to Chinese sovereignty. Britain
lowered its flag for the last time during the midnight ceremony, ending 156
years of colonial rule. Kimimasa Mayama/Reuters.
10
For Reuters and its customers, change means opportunity. Emerging markets,
Internet investor services, market deregulation, new electronic trading systems
all feed the burgeoning demand for information. The ceaseless march of
technology which enables these advances is not a threat, but an opportunity to
develop faster, cheaper and more focused delivery systems. Putting new Web
technology to work helped develop Reuters flagship 3000 series packaging
together realtime data and news with analytics and huge databases of historical
information in a user-friendly way. Technology allows the cost of transactions
to be much lower than before and opens the way for electronic order-books and
cross-border investment. The quick and easy access to historical data enables
speedy analysis of past performance as a guide to what may happen in the future.
Technology gives Reuters products the flexibility that allows our customers to
mix and match hardware and software as best suits them.
11
FROM THE CHAIRMAN
"Reported operating profits fell by 8%, the first actual decline since 1979,
whereas operating profit increased by 7% on a comparable exchange rate basis."
"The Board remains confident ... in the growth opportunities to be derived from
exceptional service to the global financial industry, Reuters principal market."
1997 was a testing year for shareholders in Reuters, as it was for those
managing the company. The share price, in marked contrast to the trend for many
years past, declined absolutely and also lost a lot of ground relative to the
market. The principal influencing factor was the strength of sterling, as
demonstrated by the fact that reported operating profits actually fell by 8%,
the first decline since 1979, whereas operating profit increased by 7% on a
comparable exchange rate basis. Taking an overall view, the Board again decided
on a rate of dividend increase well ahead of reported earnings. Also, the
strength of the company's cash generation and financial position enabled us to
propose towards the year end a Scheme of Arrangement whereby (pound)1.5 billion
of capital would be returned to shareholders. This sum incidentally is roughly
equivalent in real terms to the total market capitalisation of the company on
its flotation in 1984. Reported earnings per share in Reuters Group will be
readily able to be compared with past figures but absolute profits will not be,
as a result of the interest loss on the cash distributed.
The fundamental question, of course, is `whither earnings?' What underlying rate
of revenue growth can be achieved? Can percentage sales growth be translated
into at least equivalent percentage earnings growth?
The Board remains confident, notwithstanding the effects of industry
consolidation, in the growth opportunities to be derived from exceptional
service to the global financial industry, Reuters principal market. Over the
years we have backed this confidence with substantial investment in improvement
and innovation. The company's major assets are intangible, but real and
competitive: the skills and loyalty of its people; its data bases and the
organisation of them; the extraordinary geographical diversification of the
business; and the Reuters brand, unswervingly underpinned by the Reuter Trust
Principles. We believe, on the basis of thorough and regular research into the
views of major investors, that there is broad consensus on the key elements of
our strategy and that it will stand the test of time, if it is well implemented.
On the cost side of the business there are currently exceptional pressures on
resources stemming from technological change, EMU and our Millennium Compliance
Programme. For many years now, despite leaving prices substantially unchanged
overall, we have been able to keep underlying revenue growth generally in line
with or ahead of underlying cost growth and we have also made room for pursuit
of market share and further sales growth. The Board is committed to these
objectives.
In summary, therefore, we believe that we are steering a good course and we are
determined not to be blown off it. We are aware, however, that what we regard as
realism, others may view as excessive caution; and that a policy of exploiting
our traditional strengths and markets may be seen by some as indicating a lack
of ambition. So be it. As a Board, we try to ensure that, both in our own
discussions and in the company as a whole, there is that degree of sensitivity
to events and to relevant opinion which is fundamental to good corporate
governance. But genuinely held differences of view are bound to arise - not just
in strategic matters but also, for example, as between the Remuneration
Committee and some institutional shareholders over one or two parameters of the
long-term incentive scheme approved last April. The only remedy is persistent
and high quality two-way communication; and on principle we strive for that,
albeit laying no claims to perfection.
Pehr Gyllenhammar, a non-executive director since 1984, retired from the Board
in October and has subsequently been appointed a trustee by the Board of the
Reuters Founders Share Company. His service to Reuters was outstanding. New
non-executive directors for re-election at the annual general meeting will be
Dick Olver, Managing Director of BP's Exploration and Production, and Roberto
Mendoza, a vice chairman and executive director of J. P. Morgan & Co Inc. The
Board takes this opportunity to pay warm tribute to Lord McGregor, Chairman of
the Founders Share Company from 1987 until his death last November, and to
welcome his successor, Sir Frank Rogers. The guardianship of our objectivity, as
enshrined in the Reuter Trust Principles, is in good hands.
Sir Christopher Hogg Chairman
12 - 13
FROM THE CHIEF EXECUTIVE
"Photographs from our own news service on the pages of our Annual Report ...
illustrate the drive to break new ground through the use of advanced
technology."
"These images match the reality only if we are prepared to sustain a substantial
programme of investment and innovation on behalf of our customers."
For many years now we have been using photographs from our own news pictures
service on the pages of our Annual Report. This year we have used them to
represent some of our main challenges.
They illustrate the drive to break new ground through the use of advanced
technology, and to draw competitive advantage from the rapid rate of change it
brings about. Then there is the pressure for performance, as we girdle the globe
with instant electronic consciousness of all that makes politics and markets
hum. Nor can we ever forget the requirement to handle information in a balanced
manner, so that those originating news events, who so often complain about
distortion by journalists, can readily recognise their face in the mirror we
hold up to them. In the torrent of change, this remains the company's ethical
distinction, as it has since 1851.
These images match the reality only if we are prepared to sustain a substantial
programme of investment and innovation on behalf of our customers. The picture
will soon become blurred if we dissipate our concentration. The rationale of
returning cash to investors is that we invest money as fast as possible in our
business and shed the rest to improve the return on a smaller equity base.
Where are the investment flows going? One major destination is our new 3000
series of products, adding new dimensions of background and analysis to our
markets coverage. These products are selling well. They are gathering critical
mass. We shall go on extending their capacity and features in order to meet
anticipated good growth in demand. We shall allow other older products and
technology to become obsolete. We shall concentrate our strengths around the
3000 range - for example transaction and brokerage facilities, or our emerging
new concept in television, which uses the screen only for coverage of
market-moving events and analysis. Unlike competing products which have opted
for the consumer market, Reuters Financial Television is gaining a name for
itself as the video service for professionals. There can be no more fast or
direct approach to getting at the facts than to see them uttered by the
newsmaker.
The 3000 series is further reinforced by access to a very large text database,
including news from Reuters and several thousand publications worldwide,
searchable in seconds. No other financial services vendor has such a facility.
The Reuters Business Briefing, as it is known, is developing strong appeal to
finance professionals and corporate managers alike.
In short, we aim to persuade our clients to search no further than the "Reuters
3000" to find out all that they can conceivably want to know, and to take action
on this knowledge. But we do not seek to impose our technology on them. We
interface conveniently to the client's own system, bought from us or from
another supplier, so that data can readily be transferred, within the customer
organisation, to the place where it is needed - for example in risk management
models where we have made a large and successful investment.
Our open systems approach should stand us in good stead for some years to come.
Customers tell us that, despite ever-increasing internal technology budgets,
they have more and more problems producing useful developments on time. Reuters
ability to deliver standard systems products cheaply compares more and more
favourably with in-house developments which are expensive to maintain and do not
for long remain a unique source of advantage.
Another rich source of standard technologies is the Internet, which has enabled
us, for the first time, to invest in a promising new range of products which we
are supplying to clients and to the clients of our clients.
Electronic banking and brokerage are no longer stymied by the cost of the "last
mile" link into the home. The private investor needs no special lines or
equipment since an Internet link to the home already exists. The air is
naturally thick with predictions that conventional financial service providers
will be disintermediated by this development. At Reuters we do not think this is
what is likely to happen. We see our banking and brokerage customers speedily
adapting themselves, in some countries, to home delivery of their services,
needing only a package of information and related technology to enliven their
products for the consumer.
We are opening new markets by providing just such a branded package for our
customers to use in their offerings. We believe there will be performance
limitations on the Internet for some time to come, although we are investing
constantly in smaller companies working on technologies which will improve its
efficiency. But the Internet already offers a cheap means to penetrate
lower-tier markets which were hitherto ruled out by high delivery cost. The
technological future is usually less dramatic than the pundits proclaim, but,
over the long haul, it works and it is working for us.
Peter Job Chief Executive
14 - 15
AN INTERVIEW WITH THE CHIEF EXECUTIVE
Why was it necessary to reorganise the company into Reuters Group PLC and what
impact will paying out (pound)1.5 billion to shareholders have on the business?
UK rules tend to assume that all companies distribute cash through dividends
rather than share repurchases, yet that is not what many of our investors want,
particularly in the US. Reuters has also accumulated more surplus capital than
it needs for investment purposes or could reasonably dispense through dividends
without making commitments to high continuing levels of pay-out. Fortunately the
new British government has grasped the nettle on these matters and wholesale
fiscal changes are planned for 1999 - though we didn't think we should wait that
long before shedding our surplus capital. Our capital reorganisation solves
these various problems, which have been creating unwanted noise around our stock
price for long enough. First, it allows us to make an immediate return of
capital without a significant tax cost. Second, it allows us to reduce the
number of shares in issue to match the capital reduction, thus allowing
comparability of earnings per share past and future. Third, it allows us to
return surplus capital now and undertake share repurchases in the future without
the constraints of distributable reserves needed under UK law.
The impact on the business? Well, my views are already well-known, but it stops
you spending money on buying companies just because you have it. It allows us to
make a tax-efficient injection of debt, which creates pressure for better
resource allocation. It piles up our growth on a smaller equity base and
prevents dilution of earnings from non-growth sources like interest.
- --------------------------------------------------------------------------------
How will European Monetary Union affect your foreign exchange transactions
business?
Whatever happens in the EMU countries, the lesson of the past few months has
been that foreign exchange volatility is not going to go away. We have always
avoided dependence on a single group of currencies and countries, and our
Dealing 2000-2 offering today covers 35 currency pairs traded across 33
countries.
Our Forwards foreign exchange matching product, launched last June, is also
building up critical mass. We have added a number of currencies to this service
which is now available in 21 countries.
At the same time, we are not saying that foreign exchange is the biggest growth
market in the business. EMU will clearly have a dampening effect.
- --------------------------------------------------------------------------------
How are the sales and installations of the 3000 series going?
The 3000 series ended the year with about 28,000 installations after the first
full year of sales. We fell 2,000 short of the target 30,000 figure. Sales were
well ahead of expectations at 43,000. A quarter of the installations were for
new users. I think we have got off to a good start. There is still lots to be
done in filling out the product line and these efforts will continue year in and
year out.
- --------------------------------------------------------------------------------
What can you say about the investigation in the United States into the
activities of a Reuters subsidiary, Reuters Analytics, and the impact this might
have on the company as a whole?
Obviously, we take this very seriously. The thing in front of our minds is that
Reuters is an ethical company, a company with principles. Under the Reuter Trust
Principles, our trustees have a legal duty to see that the independence,
integrity and freedom from bias of Reuters are fully preserved. That comes out
of the journalistic business, it comes out of the history that Reuters has of
reporting the affairs of the world these last 150 years. But they should not be
seen only in that context. The integrity part should spread and does spread
throughout the organisation. We are cooperating with the investigating
authorities and we are conducting a full investigation of our own with outside
legal counsel. It is difficult to say more until the results of those
investigations are known.
- --------------------------------------------------------------------------------
What impact is the strength of sterling having on your business?
The strong pound spelled a 10% cut in sterling revenue for Reuters in 1997. Now
the pound has become even stronger and may well hold back revenue growth in
1998. This will not go on for ever. Excluding pure currency effects, underlying
growth will be propelled by a strong order book we built up in the course of
last year. There are some bearish effects around, nevertheless. Asian revenue
growth will be less than it was in 1997, though we still expect growth to
happen. Longer term there will be more deregulation and more business for us
there.
- --------------------------------------------------------------------------------
Two major Swiss banks recently merged and there are forecasts that other
consolidations will follow. What effect does this have for Reuters?
We have been experiencing mergers among our account base for quite a few years
now. Where merged organisations have little business overlap, it can be positive
for our business. Merged organisations often grow faster than previously. On
average the trend is for revenue to reduce by around 5% in the year of merger
but to have grown by around 6% in the year following the year of the merger.
Mergers also tend to stimulate our systems business as new requirements often
come out of the merged firms. It is too early to be specific about the impact of
the Swiss merger. The two banks have similar profiles and this merger is
therefore likely to have a negative impact on revenue. There could be other
European mergers in 1998.
- --------------------------------------------------------------------------------
"The lesson of the past few months has been that foreign exchange volatility is
not going to go away."
"3000 series sales were well ahead of expectations at 43,000."
"Reuters is an ethical company, a company with principles."
"The strong pound spelled a 10% cut in sterling revenue for Reuters in 1997."
16 - 17
BOARD OF DIRECTORS
NON-EXECUTIVE DIRECTORS
Sir Christopher Hogg (1984, Chairman 1985): Chairman of Allied Domecq since
April 1996. Director of SmithKline Beecham, member of the International Council
of JP Morgan and a Ford Foundation Trustee. Former Chairman of Courtaulds
1980-1996 (Chief Executive 1979-1991); director of the Bank of England
1992-1996. Age 61.
Robert (Bob) Bauman (1994): Chairman of British Aerospace PLC. Deputy Chairman
BTR plc becoming Chairman in May 1998. Former Executive Chairman of Beecham
Group plc. Director of Morgan Stanley Group Inc, Hathaway Holdings Inc, Union
Pacific Corporation, CIGNA Corporation and Russell Reynolds Associates. Age 66.
Sir John Craven (1997): Former member of the Board of Managing Directors of
Deutsche Bank AG and Chairman of Deutsche Morgan Grenfell plc; Chairman of
Lonrho Plc; non-executive director of Rothmans International B.V. Member of the
Supervisory Board, Societe Generale de Surveillance Holdings SA, Geneva. Age 57.
Michael Green (1992): Chairman of Carlton Communications Plc and British Digital
Broadcasting PLC. Non-executive director of ITN. Age 50.
Charles Sinclair (1994): Group Chief Executive of Daily Mail and General Trust
plc. A director of Euromoney Publications PLC and Schroders PLC. Age 49.
Richard (Dick) Olver (1997): A group managing director of British Petroleum (BP)
and Managing Director, Exploration and Production. Member of the Institution of
Civil Engineers. A Governor of New Hall School. Age 50.
Sir David Walker (1994): Chairman of Morgan Stanley International Inc., and a
member of the Management Committee of the Board of Morgan Stanley, Dean Witter,
Discover & Co. in New York. Former Deputy Chairman of Lloyds Bank plc, Chairman
of the Securities and Investments Board and director of the Bank of England. Age
58.
EXECUTIVE DIRECTORS
Peter Job (1988): Chief Executive since 1991. Joined Reuters as a journalist in
1963. From 1971 he worked to develop the company's business in Latin America,
Africa, Asia and the Middle East. From 1978 until 1991 he headed the company's
business in Asia. Non-executive director Diageo Plc and Glaxo Wellcome plc. Age
56.
Jean-Claude Marchand (1996): Managing Director, Continental Europe since 1989,
with Middle East and Africa since 1995. Joined Reuters in 1971 as a sales
executive. He held a number of sales management positions, and became Sales and
Marketing Manager, Asia, in 1978. A Swiss national, he has held senior
management positions in Europe since 1979. Age 51.
John Parcell (1996): Responsible for the financial information product line
since October 1996. Joined Reuters in 1969 as a journalist, working in Asia and
Latin America, then became a marketing and product manager. He was Assistant
Managing Director, Europe, Middle East and Africa 1988-1990. Managing Director,
UK and Ireland 1990-1996. Age 51.
Robert (Rob) Rowley (1989): Finance Director since 1990. Joined Reuters in 1978,
taking financial responsibility for Europe in 1981. He became Joint Company
Secretary in 1988, Group Financial Controller in 1989, and Company Secretary
from 1991 to 1993. Responsible for new business ventures and media since 1996.
Age 48.
David Ure (1988): Has been responsible for marketing and technical policy since
1992. He headed Reuters operations in Europe for nine years, adding the Middle
East and Africa for the last three. He joined in 1968 as a journalist.
Non-executive director of Woolwich PLC. Age 50.
Andre Villeneuve (1988) Has headed Reuters geographical operating units since
1992. He managed the company's business in North America from 1983 to 1991,
taking charge of Latin America as well in 1989. He joined as a journalist in
1967. Independent (non-executive) director Commercial Union and non- executive
director of United Technologies Corporation. Age 53.
EXECUTIVE COMMITTEE
Peter Job
Jean-Claude Marchand
John Parcell
Rob Rowley
David Ure
Andre Villeneuve
Patrick Mannix: Director of Personnel and Quality Programmes since 1992. With a
law degree and an engineer by training, he joined the company in 1970, from
Shell International Petroleum, and shortly afterwards worked on the Reuter
Monitor project. In 1983 he became International Technical Manager and in 1989
Director of Group Quality Programmes. Member of the Executive Committee since
1989. He will be taking early retirement in July 1998. Age 55.
Greg Meekings: Managing Director, Corporate Technology Group since 1996. Joined
Reuters from the information technology industry in 1986 as Manager, Historical
Information Products. From 1988-1992, he was International Technical Manager,
Information Management Systems, and from 1992-1996 International Marketing
Manager, Information Management Systems. He is a director of Effix and ESL,
Reuters subsidiaries. Age 44.
Jeremy Penn: Managing Director, Reuters Asia since January 1997. Joined Reuters
in 1981 as a graduate management trainee. From 1982 worked in Africa, Hong Kong
and Australia in sales and project management posts. Marketing Manager, South
East Asia 1991-1992. International Marketing Manager, Equities, 1992-1995.
International Marketing Director, Equities, 1995-1996. From 1993-1996 was
responsible for the development of the 3000 product line. Age 38.
Michael Sanderson: Chairman, Reuters America Holdings Inc. since 1995. Joined
Instinet as President and Chief Executive in 1990, having spent his entire
career in the securities industry. Past member of NASDAQ Board. He was 23 years
with Merrill Lynch, where his last position was Chief Executive, Merrill Lynch
Canada. Age 55.
Geoffrey Weetman: Managing Director, Media and New Business Ventures since
October 1996. Joined Reuters as an accountant in 1973, working first in Europe.
From 1983-1996 he held senior positions in Asia. He was Manager, South East
Asia, for six years and President, Reuters Japan for five years. Managing
Director, Reuters Asia 1992-1996. He will become Director of Human Resources
from May 1998. Age 51.
Rosalyn Wilton: Managing Director, Transaction Products since 1992. She joined
Reuters in 1990 as Senior Vice President, Transaction Products after being a
Managing Director and a Senior Vice President at Drexel Burnham Lambert. She was
also elected and served as a Board Director of the London International
Financial Futures and Options Exchange (LIFFE) from 1985 to 1990. Non-executive
director of Scottish Widows since October 1997. Age 46
Mark Wood: Editor-in-Chief since 1989. Responsible for all news and television
operations worldwide. He joined Reuters as a journalist in 1976 and was a
correspondent in Vienna, East Berlin, Moscow and Bonn before becoming Editor,
Europe in 1987. Age 45.
Simon Yencken: Company Secretary since 1994 and General Counsel since 1993.
Non-executive director of Tibco Software Inc., since 1996 and Tibco Finance
Technology Inc., since March 1997. Joined Reuters in January 1993 from the
Australian law firm Freehill Hollingdale and Page. Age 42.
18 - 19
REPORT OF THE DIRECTORS
The directors submit their annual report and audited financial statements for
the year ended 31 December 1997.
ACTIVITIES - Reuters activities are set out on page 5.
A detailed review of Reuters activities during 1997 and likely future
developments is given in the messages from the Chairman and the Chief Executive
(pages 12-15) and the operating and financial review appearing on pages 36-47.
The directors consider that these reviews, taken together, comply with the
statement issued by the UK Accounting Standards Board on the Operating and
Financial Review and with the requirements of the US Securities and Exchange
Commission (SEC) for a Management's Discussion and Analysis of Financial
Condition and Results of Operations.
FINANCIAL STATEMENTS AND INTERNAL CONTROL - Separate statements about the Audit
Committee and about directors' responsibilities in respect of the financial
statements which include details of internal financial control are set out on
pages 33-34.
The consolidated profit and loss account is set out on page 48.
AUDITORS - In accordance with section 385(1) of the Companies Act 1985 a
resolution to reappoint Price Waterhouse as auditors at a remuneration to be
agreed by the directors will be placed before the annual general meeting of the
company on 21 April 1998.
CORPORATE GOVERNANCE - The directors consider that the company complies fully
with the Cadbury Committee's code of best practice and with section A of the
Best Practice Provisions annexed to the Listing Rules of the London Stock
Exchange. Price Waterhouse have reviewed those matters which the Cadbury
Committee recommended that the auditors should review. Their report on the
results of their review is set out on page 35.
The ways in which Reuters applies relevant principles of corporate governance
(including the principles set out in the Hampel Committee Report on Corporate
Governance) are described in the appropriate parts of this annual report. Thus
the application of corporate governance principles to Board matters is described
on pages 20-21, to internal control on page 21, to relations with shareholders
on page 23, to directors' remuneration on page 25 and to financial reporting on
page 33.
COMPANY ORGANISATION - The Board currently comprises six executive and seven
non-executive directors (including the Chairman who is responsible for running
the Board). It carries the ultimate responsibility for the conduct of Reuters
business. Its regular meetings take place every two months. Regular and ad-hoc
reports and presentations to the Board ensure it is supplied, in a timely
fashion, with the information it needs. Non-executive directors periodically
visit Reuters offices throughout the world where they are briefed on various
aspects of the company's operations.
The Executive Committee, chaired by the Chief Executive, is responsible for the
management of the business. It meets at least six times a year. The functions of
its 14 members are described in the biographies on pages 18-19.
The Executive presents the annual budget and plan to the Board for its approval.
Actual results are reported to each scheduled meeting of the Board, with
appropriate trend analysis.
The three principal committees of the Board are the Remuneration Committee (see
pages 25-32), the Audit Committee (see page 33) and the Nomination Committee.
The Board sets the terms of reference of these committees. With the exception of
Michael Green all the non-executive directors, including the Chairman, served on
all three committees in 1997. Michael Green at his request relinquished his
membership of the Remuneration and Audit Committees at the end of 1996
20
in order to devote more of his time as a non-executive director to the other
aspects of the company's business. Peter Job, the Chief Executive, also serves
on the Nomination Committee which makes recommendations to the Board on the
appointment of directors.
The schedule of matters reserved for the Board's decision includes treasury
investment, borrowing and hedging policies, significant capital expenditure or
disposals of assets, and all investments, acquisitions or disposals which are
not in line with strategies previously adopted by the Board.
Also reserved for Board decision is any transaction by a group company likely to
require listing particulars or a tender offer to be filed with the London Stock
Exchange or to require a filing under the US federal securities laws with the
SEC.
The Board must approve any agreement with any other party that entails or may
involve the assumption of ongoing business risks, liabilities or commitments
equal to or exceeding (pound)50 million in aggregate during the life of the
contract.
Non-financial risks, including possible damage to Reuters reputation as a
leading news provider, or threats to the reliability of its computer systems,
are examined by a business risks steering group which periodically reports to
the Board on the management of risks throughout the group. In addition there is
a dedicated risk management function at Instinet.
The directors are bound by the company's Articles to pay due regard to the
Reuter Trust Principles. The Board views these principles as central to the
company's standing and commercial success and works closely with the Reuters
Founders Share Company to safeguard them. The Trust Principles and other
relevant information are set out on page 86.
Company technical policies provide standards for the integrity, confidentiality
and availability of internal and external information services and the systems
on which they operate. These policies, together with the company's Code of
Conduct which sets out the standards of behaviour and integrity which all
employees are expected to observe, are readily available on the company's
internal information database.
CAPITAL REORGANISATION - On 4 December 1997 Reuters announced its intention to
implement a capital reorganisation which will return (pound)1.5 billion of
surplus capital to shareholders. The reorganisation, which was approved by the
shareholders on 19 January 1998, involves the creation of a new holding company,
Reuters Group PLC, which will acquire Reuters Holdings PLC. Subject to the High
Court sanctioning the arrangement, trading of the new company's shares should
commence on 18 February 1998. For further details see note 30 on pages 71-72.
SHARE CAPITAL AND DIVIDENDS - Details of the changes in the authorised and
called-up share capital are set out in notes 26 and 28 on pages 69-70.
For details of proposed resolutions, see the explanatory notes attached to the
notice of the annual general meeting.
The company has not been notified of any material interest in the company's
issued share capital either at 31 December 1997 or at the date of this report.
Reuters Founders Share Company Limited has held the Founders Share since it was
issued on 9 May 1984.
The company is not a close company within the meaning of the Income and
Corporation Taxes Act 1988.
An interim dividend of 3.1p per ordinary share was paid on 8 September 1997. The
directors recommend a final dividend of 9.9p
21
per ordinary share giving a total of 13.0p per ordinary share for the year (1996
- - 11.75p). If the capital reorganisation is approved by the court, the final
dividend will be paid as an interim dividend by Reuters Group PLC to members on
its register at the close of business on 20 March 1998, subject to the approval
of its shareholders at its annual general meeting.
EMPLOYEES - The total number of employees at 31 December 1997 was 16,119 (31
December 1996 - 15,478). For further details see page 54.
Reuters aims to offer a wide range of experience to employees. The group offers
competitive rates of pay and a commitment to training. This enables staff to
respond to rapid change in an open systems environment and to take advantage of
opportunities to develop their careers around the world.
It is Reuters policy that selection of employees including for entry to the
company, for 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.
The Board values the courage and professionalism shown by employees operating in
zones of conflict. Reuters aims to cover news wherever it breaks but instructs
staff to avoid risks wherever possible.
THE ENVIRONMENT - Reuters activities have marginal direct impact on the
environment and contribute minimally to pollution. The group's information
products help to spread global awareness of the environment. One of them,
Reuters Business Briefing, offers a wealth of information on many topics,
including the environment. Its search facilities enable customers to keep
abreast of events and issues with minimal use of paper and other resources. They
need only print out what they want to keep.
Reuters seeks to ensure its major international equipment suppliers avoid using
environmentally harmful materials or processes.
Reuters contributes to public awareness and understanding of environmental
issues through the educational work of the Reuter Foundation. For journalists
wanting to specialise in the field and improve their knowledge base, the
Foundation offers both practical training courses and fellowships in its
international journalism programme at Green College, Oxford University. It also
makes grants in support of environmental projects recommended by Reuters
employees in different parts of the world, such as Kew Foundation's work in
northwest Brazil.
MILLENNIUM PROGRAMME - In 1996 Reuters established a Millennium Compliance
Programme to address the issues arising as a result of the millennium date. Many
computer systems store or process date information by the last two digits of the
year only, resulting in incorrect or unpredictable treatment of dates after the
year 2000 in software applications.
The purpose of the Programme is to determine which software components and
systems have to be upgraded and which will need to be replaced. The process will
also be used to confirm which products will be discontinued before the
millennium. For further details see pages 37-38.
CHARITABLE CONTRIBUTIONS - The Reuter Foundation, the group's charitable trust,
developed and launched a specialised Internet service, AlertNet, designed to
help the work of international disaster relief agencies. This was the
Foundation's key new activity in 1997, alongside a growing range of educational
programmes and support for humanitarian causes.
AlertNet (Internet address: alertnet.org) was launched in September 1997, amid
favourable media comment, and has been welcomed by some of the leading aid
agencies, including the Red Cross movement. By the year end it had 32 full
members, mainly
22
based in Europe and the United States. Membership applications from Africa, Asia
and Latin America were in hand and the specialist content of the service was
being developed under experienced Reuters editors.
Reuters charitable spending through the Foundation increased to (pound)3.0
million in 1997 from (pound)2.7 million in 1996. In addition, Reuters
subsidiaries made direct contributions amounting to (pound)1.0 million in cash
and (pound)4.4 million in kind last year, including donations of staff time,
services and equipment. This total of (pound)8.4 million in overall charitable
donations amounted to 1.3% of the group's pre-tax profit in 1997.
The Reuter Foundation extended its regular educational programmes around the
world, concentrating particularly on building close links with key universities
and professional schools, in cooperation with Reuters line management. The main
areas addressed are those in which Reuters has experience and interests,
including business studies, information technology, journalism and
telecommunications.
The other principal activity of the Foundation, also growing in value and
geographical scope, comprised charitable grants in response to the concerns of
Reuters employees around the world. Through area committees, colleagues suggest
the causes they want to help, mainly health and community projects, with some
emphasis on environmental issues. Increasingly, the Foundation makes grants in
support of Reuters employees' own voluntary work or fund-raising. In 1997,
Reuters raised an additional (pound)0.3 million in public donations from
organised charity events in different parts of the world.
More information on the work of the Reuter Foundation is contained in a separate
annual review, available on request from the Director, Reuter Foundation, 85
Fleet Street, London EC4P 4AJ, or on the Foundation's website:
http://www.foundation.reuters.com.
No political contributions are made.
CREDITOR PAYMENT TERMS - It is Reuters normal procedure to agree terms of
transactions, including payment terms, with suppliers in advance. Payment terms
vary, reflecting local practice throughout the world. It is Reuters policy that
payment is made on time, provided suppliers perform in accordance with the
agreed terms. Group trade creditors at 31 December 1997 were equivalent to 35
days purchases during the year.
INVESTOR RELATIONS - The directors regularly meet with institutional
shareholders and analysts. The company's annual general meeting is used as an
opportunity to communicate with private investors. Investor Relations
departments in London, New York and Geneva are dedicated to improving
communications between the company and its shareholders.
DIRECTORS - On 19 February 1997 Sir John Craven was appointed a director. On 15
October 1997 Pehr Gyllenhammar resigned as a director and was replaced by Dick
Olver who joined the Board on 1 December 1997.
All other directors mentioned on pages 18-19 served throughout the year.
The group maintained insurance for directors and certain employees against
liabilities in relation to the group throughout the year.
By order of the Board
Simon Yencken Company Secretary
13 February 1998
23
FINANCIAL REVIEW AND STATEMENTS CONTENTS
25 Report on Remuneration and Related Matters
33 Audit Committee
34 Statement of Directors' Responsibilities
35 Auditors' Report to the Board of Directors and Members of Reuters Holdings
PLC
36 Operating and Financial Review
48 Consolidated Profit and Loss Account
48 Consolidated Statement of Total Recognised Gains and Losses
55 Consolidated Cash Flow Statement
62 Consolidated Balance Sheet
76 Balance Sheet of Reuters Holdings PLC
78 Accounting Policies
80 Summary of Differences between UK and US Generally Accepted Accounting
Principles (GAAP)
83 Other Information for Shareholders
85 Preserving Reuters Independence
85 Financial Diary for 1998
86 The Reuter Trust Principles
87 Glossary
88 Eleven Year Consolidated Financial Summary
90 Where To Find Us
24
REPORT ON REMUNERATION AND RELATED MATTERS
For completeness of presentation this report covers the remuneration of the
non-executive as well as the executive directors, and also related matters such
as the interests of the directors in the company's shares. It therefore covers
issues which are the concern of the Board as a whole in addition to those which
are dealt with by the Remuneration Committee.
THE REMUNERATION COMMITTEE
The Remuneration Committee deals with the remuneration of senior executive
management on behalf of the Board and shareholders. It has agreed a framework of
policies within which it sets the remuneration package for each executive
director. All the non-executive directors served on the Remuneration Committee
during 1997 except Michael Green.
During 1997 Sir Christopher Hogg was chairman of the committee. The Board
considered that the benefits he received from the company as the non-executive
Chairman of the Board did not materially influence his judgement as chairman of
the Remuneration Committee. His salary and benefits, which comprise life
assurance, prolonged disability insurance and pension, are determined at an
annual meeting of the directors, chaired by Bob Bauman. Sir Christopher Hogg is
not present for these discussions.
On 9 February 1998 Bob Bauman took over the chairmanship of the Remuneration
Committee from Sir Christopher Hogg, who resigned as chairman of the committee
on that date.
REMUNERATION POLICIES
The basic objectives of the Remuneration Committee's policies are that executive
directors should receive compensation which is appropriate to their scale of
responsibility and performance, and which will attract, motivate and retain
executives of the necessary calibre. The committee also agrees the principles
underlying remuneration for other senior executives. In framing the remuneration
policies, the Remuneration Committee has given full consideration to section B
of the Best Practice Provisions annexed to the Listing Rules of the London Stock
Exchange.
The remuneration packages of executive directors consist of annual salary,
health and car benefits, prolonged disability insurance, an annual cash bonus
plan, pension contributions and participation in a performance-linked share
plan. Performance targets are established to achieve consistency with the
interests of shareholders, with an appropriate balance between long- and
short-term goals.
SUMMARY OF REMUNERATION
SALARIES OF EXECUTIVE DIRECTORS - In setting annual salary levels the committee
has been assisted by reports from independent professional consultants. It
considers, inter alia, the company's operating performance in the previous year
and the UK inflation rate over the same period. It also compares Reuters
remuneration packages with those for jobs of similar type and seniority in
relevant national and international companies. There are only a few companies
whose activities are closely comparable to Reuters, and these are in the US. For
the purpose of each year's comparison the committee has used large international
companies from the Financial Times Stock Exchange 100 index (FTSE 100). The
comparisons consider the relative size of each company in terms of sales,
profits and number of employees, its market capitalisation, the complexity of
its operations and the international spread of its business. The committee has
also had some regard to competitors in the US where higher levels of
compensation are typically paid.
PROFIT-RELATED PAY - Under UK tax legislation the company has registered a
profit-related pay plan for most employees in the UK. In 1997 this plan enabled
employees to receive up to (pound)4,000 (1998 - (pound)2,000) of their pay free
of tax if a pre-defined target was met. The executive directors participate in
the plan.
BONUSES - The 1997 annual cash bonuses for executive directors were based one
half on a growth target in earnings per share of 10% and one half on targets
relating to the number of installations of Reuters new 3000 series products.
Although underlying profit growth was in double digits, the appreciation of
sterling wiped out these gains. The number of 3000 series accesses installed
approached 28,000, which was 2,000 less than the one-year target. No bonuses
were therefore paid to the executive directors for 1997. Annual cash bonuses do
not form part of pensionable earnings. Bonus earnings of the executive directors
are capped at 50% of salary.
Total expenditure on bonuses in the group (including annual cash bonuses at
TIBCO and Instinet) was (pound)34.3 million.
LONG-TERM INCENTIVES - Reuters operates long-term performance-linked share plans
geared to total shareholder return over a period of not less than three years.
Awards vesting under the plan which covers the executive directors are not
released until at least five years from the date of grant. Directors received no
remuneration from this source in 1997.
Reuters has announced a capital reorganisation which has been
25
approved by the shareholders and which, subject to court approval, will become
effective on 18 February 1998. Under the terms of the reorganisation and related
documents a new holding company, Reuters Group PLC, will be formed and rights or
options vesting under the company's various employee benefit plans will entitle
the holders to shares in Reuters Group PLC on a one-for-one basis. For further
information on the reorganisation see note 30 on pages 71-72.
SERVICE CONTRACTS - The executive directors' service contracts terminate on two
years' notice. The committee is aware that the term of these contracts is longer
than the one year recommended by section B of the Best Practice Provisions, but
it considers them appropriate having regard, inter alia, to the length of the
executive directors' service to the company, collectively and individually, and
to the substantial knowledge gained thereby of the company and its business.
If an executive director's contract is terminated by the company, the benefits
for which the company is liable may vary depending on length of service. The
benefits will not be more than a termination payment of up to twice salary and
benefits, retention of long-term incentive plan awards held for more than 18
months, and enhanced early retirement benefits under the company's pension
plans.
1997 1996
--------------------------------------------------- --------------
Salary/fees Remuneration
Salary/fees increase Benefits Total total
(pound)000 % (pound)000 (pound)000 (pound)000
===============================================================================================================================
Chairman:
Sir Christopher Hogg(1) 185 13.5 10 195 142
- -------------------------------------------------------------------------------------------------------------------------------
Non-executive directors:
R P Bauman 30 - - 30 30
Sir John Craven (appointed 19 February 1997) 26 - - 26 -
M P Green 30 - - 30 30
P G Gyllenhammar (resigned 15 October 1997) 25 - - 25 30
R L Olver (appointed 1 December 1997) 3 - - 3 -
C J F Sinclair 40 - - 40 40
Sir David Walker 30 - - 30 30
- -------------------------------------------------------------------------------------------------------------------------------
Total for non-executive directors (excluding Chairman) 184 - - 184 160
- -------------------------------------------------------------------------------------------------------------------------------
Executive directors:
P Job, Chief Executive and highest paid director 500 17.7 13 513 651
J-C Marchand (appointed 8 October 1996)(1)(2) 329 - 18 347 119
J M C Parcell (appointed 8 October 1996)(1) 235 6.8 11 246 69
R O Rowley 310 17.0 10 320 408
D G Ure 325 13.4 12 337 442
A-F H Villeneuve 325 13.4 18 343 448
M W Wood (resigned 3 December 1996) - - - - 318
- -------------------------------------------------------------------------------------------------------------------------------
Total for executive directors 2,024 82 2,106 2,455
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL EMOLUMENTS 2,393 92 2,485 2,757
===============================================================================================================================
(1) The percentage increase in salaries/fees is based on annualised amounts for
Jean-Claude Marchand and John Parcell and, in respect of the Chairman, is
computed before deduction of a salary sacrifice taken in the first four months
of 1996 at the rate of (pound)75,000 per annum, in exchange for contributions by
the company, on his behalf, to an individual money purchase pension plan.
(2) Jean-Claude Marchand's remuneration is paid in Swiss francs and is converted
at SF2.37 to the (pound).
26
It is the Board's policy that executive directors, in the interests of their
development to the benefit of Reuters, may serve as non-executive directors on
the boards of other companies and may each, as a general rule, retain
remuneration from such appointments.
DIRECTORS' REMUNERATION - Directors' remuneration fell by 10% due to the absence
of bonuses offset by salary and fee increases.
NON-EXECUTIVE DIRECTORS' REMUNERATION - The remuneration of the non-executive
directors is determined by ordinary resolution of the shareholders in general
meeting. The Board has power to pay additional remuneration for services outside
the scope of the ordinary duties of a non-executive director. It is proposed
that the non-executive directors' fees, which have stood at (pound)30,000 per
annum since 1995, should now be raised to (pound)33,000.
PENSION ARRANGEMENTS - Executive directors are entitled to a pension of
two-thirds of basic salary on retirement from Reuters at the normal retirement
age of 60. Post-retirement increases are expected to be in line with inflation
(guaranteed up to the level of 5% and discretionary above that level).
In the event of death before retirement, a spouse's pension of four-ninths of
the executive's basic salary is payable, together with a capital sum equal to
four times the aggregate of basic salary and taxable health and car benefits and
a refund with interest of the executive director's own contributions. On death
in retirement, the executive director's spouse will receive a pension equal to
two-thirds of that payable to the executive director. In addition, on death
within the first five years of retirement, a lump sum is payable equal to the
balance outstanding of the first five years' pension instalments.
Provision for the above benefits is made through the Reuters Pension Fund, a
contributory plan, and the Reuters Supplementary Pension Scheme, a
non-contributory plan. None of the executive directors has pension arrangements
that are subject to the Inland Revenue earnings cap.
Pension contributions paid by the company in respect of the six (1996 - seven)
executive directors participating in the plans, are assessed according to
long-term funding arrangements and are expressed as an average contribution
rate, which for 1997 was 21.075% of basic salaries.
Under an unfunded pension arrangement the Chairman is entitled to a pension of
2.5% of his annual fee times the number of years of service, from the date of
his appointment as Chairman in May 1985 to the date his office terminates. In
addition the Chairman has been admitted as a member of the Reuters Pension Fund
for the purpose only of providing a fixed lump sum benefit of (pound)300,000 for
his dependants in the event of his death in service.
Pensions benefits earned by directors are as follows:
At 31 December 1997 Accrued Pension Entitlement
------------------------------ Directors' ----------------------------------
Years of contributions Increase Total at
Age Service during Year during Year 31 December 1997
(pound)000 (pound)000 (pound)000
==============================================================================================================================
Sir Christopher Hogg 61 12 - 10 59
P Job 56 33 30 44 333
J-C Marchand 51 26 20 3 167
J M C Parcell 51 28 14 9 120
R O Rowley 48 19 19 22 118
D G Ure 50 29 20 21 156
A-F H Villeneuve 53 30 20 23 169
==============================================================================================================================
The accrued pension entitlement shown is that which would be paid annually,
commencing at normal retirement age, based on service to 31 December 1997. The
increase in accrued pension during 1997 excludes any increase for inflation.
Neither the contributions nor the accrued entitlement reflect any additional
voluntary contributions made by the directors.
27
SHARE PLANS
LONG-TERM INCENTIVE PLAN - Since 1993, Reuters has operated a long-term
incentive plan under which annual awards of restricted shares or, commencing in
1995, rights exercisable for shares on a one-for-one basis (share rights), are
made to executive directors and certain key executives. Vesting of the awards
depends on performance in terms of total return to shareholders over a defined
period. The plan was approved by the shareholders at the 1997 extraordinary
general meeting.
Awards granted in earlier years were made under substantially similar terms.
The table below shows the number of shares underlying awards to each executive
director:
Value at
31 December 1997
(pound)000 Date of Release
Awards 1997 Linked Awards --------------------------- or exercisable
outstanding at Share and outstanding at Vested Non-Vested period if
1 January 1997 Bonus Awards 31 December 1997 Awards Awards (range) vesting occurs
================================================================================================================================
P Job
Restricted shares 77,920 - 77,920 521 - Feb 1998
Restricted shares 82,056 - 82,056 548 - Feb 1999
Share rights 127,310 68,812 196,122 - 0-1,311 Feb 2000-Dec 2003
- --------------------------------------------------------------------------------------------------------------------------------
287,286 68,812 356,098 1,069
- --------------------------------------------------------------------------------------------------------------------------------
J-C Marchand
Restricted shares 41,216 - 41,216 276 - Feb 1998
Restricted shares 34,464 - 34,464 230 - Feb 1999
Share rights 66,486 48,994 115,480 - 0-772 Feb 2000-Dec 2003
- --------------------------------------------------------------------------------------------------------------------------------
142,166 48,994 191,160 506
- --------------------------------------------------------------------------------------------------------------------------------
J M C Parcell
Restricted shares 36,064 - 36,064 241 - Feb 1998
Restricted shares 30,176 - 30,176 202 - Feb 1999
Share rights 50,944 32,342 83,286 - 0-557 Feb 2000-Dec 2003
- --------------------------------------------------------------------------------------------------------------------------------
117,184 32,342 149,526 443
- --------------------------------------------------------------------------------------------------------------------------------
R O Rowley
Restricted shares 47,652 - 47,652 318 - Feb 1998
Restricted shares 51,284 - 51,284 343 - Feb 1999
Share rights 79,382 42,663 122,045 - 0-816 Feb 2000-Dec 2003
- --------------------------------------------------------------------------------------------------------------------------------
178,318 42,663 220,981 661
- --------------------------------------------------------------------------------------------------------------------------------
D G Ure
Restricted shares 54,092 - 54,092 362 - Feb 1998
Restricted shares 55,388 - 55,388 370 - Feb 1999
Share rights 85,822 44,728 130,550 - 0-873 Feb 2000-Dec 2003
- --------------------------------------------------------------------------------------------------------------------------------
195,302 44,728 240,030 732
- --------------------------------------------------------------------------------------------------------------------------------
A-F H Villeneuve
Restricted shares 54,092 - 54,092 362 - Feb 1998
Restricted shares 55,388 - 55,388 370 - Feb 1999
Share rights 85,822 44,728 130,550 - 0-873 Feb 2000-Dec 2003
- --------------------------------------------------------------------------------------------------------------------------------
195,302 44,728 240,030 732
================================================================================================================================
The value of the awards at 31 December 1997 has been based on the day's closing
price of Reuters ordinary shares of 668.5p per share from the Daily Official
List.
28
In 1997 the number of share rights awarded to each senior executive was
determined by dividing each executive's annual salary by the average of the
daily closing price of Reuters shares in the year 1996. Commencing with the 1997
awards, the share rights granted in the UK (which includes those granted to the
executive directors) are at an exercise price equivalent to the market value of
the underlying shares on the date of grant, and are linked with a cash bonus
equal to such exercise price. The share rights and linked cash bonus vest and
are exercisable only in tandem.
Performance is measured over a three- to five-year period by comparing the total
shareholder return (TSR) of Reuters with that of other companies comprising the
FTSE 100 at the beginning of the period. Awards vest only after the expiration
of this period. The TSR for each company is determined based on the internal
rate of return from cash flows of an investor who bought a share at the
beginning of the period, sold it at the end and received dividends and benefited
from capital changes during the period. The average of the daily closing prices
for the prior calendar year are used as the initial and ending share prices.
Since the 1997 plan was approved by shareholders two changes have been made to
the method of determining TSR. Following the UK government budget proposals on 2
July 1997, dividends paid after that date have been included in the calculations
net of tax instead of gross, and, from 20 October 1997 when the London Stock
Exchange commenced electronic trading in FTSE 100 shares, the daily closing
share prices included in the average share price calculations are the price of
the last trade, instead of the mid point between the closing best bid and ask
quotes.
The companies comprising the comparator group are ranked according to each
company's TSR for the measurement period with the company having the highest, or
best, TSR ranked first. Reuters position on the list determines the extent to
which plan awards will vest. The preset vesting criteria for awards are shown in
the table below together with the actual ranking for each award as at either the
date of vesting or, if not yet vested, at 31 December 1997. Between the two
vesting extremes awards vest on a graduated scale. Rankings can change
materially during a measurement period.
Preset Vesting Criteria
---------------------------------
Date Measurement Rankings for Rankings for Ranking at Ranking at
Period Commenced 100% Vesting Zero Vesting Date of Vesting 31 December 1997
==========================================================================================================
1 January 1993 1 to 40 75 to 100 18 -
1 January 1994 1 to 40 75 to 100 7 -
1 January 1995 1 to 30 70 to 100 - 60
1 January 1996 1 to 25 75 to 100 - 70
1 January 1997 1 to 26 66 to 100 - 96
==========================================================================================================
The three-year measurement period for the 1995 award ended on 31 December 1997.
Since the awards did not vest 100% each participant is permitted, in accordance
with the plan rules, to either let the lesser number of shares vest (for release
in February 2000) or to elect to extend the measurement period for the entire
award to the end of 1998 without a change to the preset vesting criteria. A
similar election may be made by each executive at the end of 1998. The 1993 and
1994 awards of restricted shares vested 100% at the end of their initial
three-year vesting periods and are due for release in February 1998 and February
1999 respectively. The obligations under the plan, and those of the
performance-related share plan discussed below, will be met from shares held by
Reuters employee share ownership trusts (ESOTs). The costs charged to profit for
these plans are based on the cost of shares purchased by the ESOTs. In 1997 the
charge for the long-term incentive plan amounted to (pound)1.9 million (1996 -
(pound)1.9 million, 1995 - (pound)2.1 million).
PERFORMANCE-RELATED SHARE PLAN - Reuters has another performance-related share
plan for senior executives not participating in the long-term incentive plan.
Under the performance-related share plan, awards have been made to up to 350
executives each year. The rules for vesting are substantially the same as those
currently operating for the long-term incentive plan, except that, after three
years, share rights become exercisable immediately upon crystallisation.
Accordingly, rights to 452,363 shares (25% of the total grant) relating to the
1995 award, vested on 1 January 1998 and are exercisable through the end of
2001, when they expire.
Participants in the 1997 award received rights to a total of 1.3 million shares
(1996 - 1.6 million shares) and the costs
29
charged against 1997 profit amounted to (pound)1.7 million (1996 - (pound)5.6
million, 1995 - (pound)3.0 million). The 1997 charge is net of a credit of
(pound)7.0 million relating to 1995 awards that did not vest and lapsed. Costs
are based on the total cost of shares purchased by the ESOTs to match awards.
SUBSIDIARIES' LONG-TERM PLANS - Subsidiaries in the group operate profit-sharing
and various share plans and earn-out arrangements which generally result from
acquisition negotiations. The most significant have been the stock appreciation
rights plans for employees/former shareholders of TIBCO Finance Technology Inc.,
(TIBCO) negotiated as part of the agreement to acquire TIBCO in 1994. In 1997,
86 (1996 - 246) TIBCO employees were paid (pound)1.0 million (1996 - (pound)73.1
million) under these plans.
Following the creation, in late 1996, of a new subsidiary, TIBCO Software Inc.,
to market middleware products outside the finance industry, option plans have
been established over TIBCO Software shares for both TIBCO and TIBCO Software
employees. These options will be satisfied in part by issuing new TIBCO Software
shares and in part through existing TIBCO Software shares owned by Reuters such
that, in total, employees could own up to approximately 26% of TIBCO Software.
As at 31 December 1997 options had been granted equivalent to approximately 20%
of TIBCO Software on a fully diluted basis.
Another significant plan is operated by Instinet, which in 1993 began a rolling
four-year profit-sharing plan now covering approximately 590 employees. During
1997, (pound)27.7 million was paid to 130 employees and a further (pound)17.9
million has been reserved as at 31 December 1997. Of the total sum reserved
(pound)6.3 million relates to the 1994 plan and will be payable in early 1998.
SAVE-AS-YOU-EARN PLAN (SAYE) - All company employees are eligible to save a
fixed sum each month and use these funds to exercise options. The exercise price
is fixed at 20% below the market price at the start of the savings period. UK
legislation limits the amount that can be saved each month and participants can
choose between plans having either a five-year or a three-year savings period.
The number of shares issued under share option plans over the 10 years to 31
December 1997, combined with the total of 20,567,784 outstanding options, was
approximately 6.8% of issued capital at that date. This compares with a maximum
authorised level of 10%. Also at 31 December 1997 the ESOTs held 11,810,274
shares of Reuters Holdings PLC, approximately 0.7% of issued capital. The
authorised limit is 5%.
EXECUTIVE OPTIONS - At 31 December 1997 Reuters had vested but unexercised
options relating to 3,400,110 shares outstanding to 221 employees under
executive option plans that have completed their 10-year term. These plans have
been replaced by the performance based plans described above.
Vested options on shares held by directors during 1997, including SAYE options,
were all in respect of Reuters Holdings PLC and were as follows:
30
No. of options
-----------------------------------------------
At Granted Exercised At Net Value at Date from
Date of 1 January during during 31 December Exercise Gains on 31 December which Expiry
Grant 1997 Year Year 1997 price exercise 1997 exercisable date
pence (pound)000 (pound)000
===================================================================================================================================
Sir Christopher Hogg
SAYE Mar 1997 - 2,065 - 2,065 501.0 - 3 Apr 2002 Oct 2002
- -----------------------------------------------------------------------------------------------------------------------------------
P Job
SAYE Mar 1992 3,396 - 3,396 - 220.8 15 May 1997 Nov 1997
Mar 1997 - 2,065 - 2,065 501.0 - Apr 2002 Oct 2002
- -----------------------------------------------------------------------------------------------------------------------------------
3,396 2,065 3,396 2,065 15 3
- -----------------------------------------------------------------------------------------------------------------------------------
J-C Marchand
SAYE Mar 1992 3,396 - 3,396 - 220.8 14 May 1997 Nov 1997
Sept 1996 1,721 - - 1,721 601.2 - Oct 2001 Apr 2002
Mar 1997 - 1,377 - 1,377 501.0 - Apr 2002 Oct 2002
- -----------------------------------------------------------------------------------------------------------------------------------
5,117 1,377 3,396 3,098 14 3
- -----------------------------------------------------------------------------------------------------------------------------------
J M C Parcell
Executive Mar 1990 23,120 - 23,120 - 259.5 88 Mar 1993 Mar 1997
Mar 1991 60,000 - - 60,000 192.2 - Mar 1994 Mar 1998
Aug 1992 40,000 - - 40,000 253.5 - Aug 1995 Aug 1999
SAYE Mar 1992 3,396 - 3,396 - 220.8 16 May 1997 Nov 1997
Mar 1997 - 2,065 - 2,065 501.0 - Apr 2002 Oct 2002
- -----------------------------------------------------------------------------------------------------------------------------------
126,516 2,065 26,516 102,065 104 455
- -----------------------------------------------------------------------------------------------------------------------------------
R O Rowley
SAYE Mar 1992 3,396 - 3,396 - 220.8 15 May 1997 Nov 1997
Sept 1996 860 - - 860 601.2 - Oct 2001 Apr 2002
Mar 1997 - 2,065 - 2,065 501.0 - Apr 2002 Oct 2002
- -----------------------------------------------------------------------------------------------------------------------------------
4,256 2,065 3,396 2,925 15 4
- -----------------------------------------------------------------------------------------------------------------------------------
A-F H Villeneuve
SAYE Mar 1992 3,396 - 3,396 - 220.8 15 May 1997 Nov 1997
Mar 1997 - 2,065 - 2,065 501.0 - Apr 2002 Oct 2002
- -----------------------------------------------------------------------------------------------------------------------------------
3,396 2,065 3,396 2,065 15 3
- -----------------------------------------------------------------------------------------------------------------------------------
163
===================================================================================================================================
Gains on exercise of share options are calculated as at the dates of exercise
even though the directors may have retained their shares. The aggregate gain
made by directors in 1996 was (pound)180,069 and the gain made by Peter Job, the
highest paid director, was (pound)46,069. The net value at 31 December 1997 is
the difference between the day's closing price of Reuters ordinary shares of
668.5p per share and the exercise price of the options. During 1997 the price
for Reuters ordinary shares ranged between 555p and 782p.
31
DIRECTORS' INTERESTS
The interests of directors in the issued share capital of group companies at 31
December 1997 were as follows:
1997
-------------------------------------
Proforma 1996
Reuters Reuters Reuters
Holdings Group Holdings
Reuters Holdings PLC PLC PLC PLC
=========================================================================================================================
R P Bauman 10,000 8,666 10,000
Sir John Craven 12,400 10,746 4,500
M P Green 8,000 6,933 8,000
Sir Christopher Hogg 30,800 26,693 58,800
P Job 128,584 111,438 124,716
J-C Marchand 3,396 2,943 -
J M C Parcell - - 7,316
R O Rowley 141,876 122,957 138,476
C J F Sinclair 11,611 10,062 5,556
D G Ure 359,590 311,644 359,590
A-F H Villeneuve 119,106 103,223 115,716
Sir David Walker 3,000 2,600 1,000
- -------------------------------------------------------------------------------------------------------------------------
828,363 717,905 833,670
=========================================================================================================================
The proforma Reuters Group PLC column indicates the directors' interests
immediately following the effective date of the reorganisation. The 1996 column
indicates shares held at 31 December 1996 or at the date of appointment,
whichever is later.
Directors were the beneficial holders of all shares listed, except certain
shares held by, or in trust for the benefit of, family members. These were Sir
John Craven 1,500 shares (1,500 at date of appointment); Rob Rowley 5,316 shares
(1996 - 5,316); Andre Villeneuve 101,709 shares (1996 - 101,200). At 31 December
1996 Sir Christopher Hogg had an interest in 28,000 shares which were not
beneficially owned.
There have been no movements in the interests of the directors in the share
capital of the group companies since 31 December 1997.
None of the directors has notified the company of an interest in any other
shares, transactions or arrangements which require disclosure.
Following his appointment during 1997 Dick Olver will retire as a director at
the annual general meeting and offer himself for election. Other directors
proposed for re-election at the forthcoming annual general meeting are Peter
Job, David Ure, Andre Villeneuve and Sir David Walker. As executive directors,
Peter Job, David Ure and Andre Villeneuve each have service contracts terminable
by the company on two years' notice. As non-executive directors, Dick Olver and
Sir David Walker do not have service contracts.
On behalf of the Board
Sir Christopher Hogg
Chairman 13 February 1998
32
AUDIT COMMITTEE
With the exception of Michael Green all the non-executive directors, including
the Chairman, served on the Audit Committee during 1997. Charles Sinclair chairs
the Audit Committee. The Finance Director and the Deputy Finance Director attend
its meetings. All executive directors are invited to attend. The Audit Committee
meets regularly twice a year, with further meetings as required.
The Audit Committee reviews the half year and annual financial results before
they are approved by the Board. In doing so it focuses on any changes in
accounting practice, major areas of judgement, the going concern assumption and
compliance with accounting principles and regulatory requirements and it ensures
that the annual report presents a balanced and understandable assessment of the
company's financial position and prospects.
The committee may examine whatever aspects it deems appropriate of the group's
financial affairs, its internal and external audits and its exposure to risks of
a regulatory or legal nature. It keeps under review the effectiveness of Reuters
system of accounting and internal financial controls, for which the directors
are responsible (see page 34). It also keeps under review the company's
programme to monitor compliance with its legal, regulatory and contractual
obligations. This programme was established in 1997 to consolidate and extend
separate compliance activities previously undertaken.
The Audit Committee reviews the plans and findings of the internal and external
auditors with them each year. The auditors have unrestricted access to the Audit
Committee. The Audit Committee recommends the appointment of the company's
external auditors.
33
STATEMENT OF DIRECTORS' RESPONSIBILITIES
Reuters 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 affairs
of the company and group as at the end of the financial year and of the profit
and cash flows of the group for the period. Reuters is also required to prepare
financial statements for US shareholders in accordance with the requirements of
the SEC.
Reuters 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 judgements and estimates have been made.
The directors have reviewed the group's budget and cash flow forecast for the
year to 31 December 1998 and outline projections for the subsequent four years
in the light of the strong financial position and borrowing facilities at 31
December 1997 and after taking into account the effects of the capital
reorganisation approved by the shareholders in January 1998. On the basis of
this review the directors are satisfied that Reuters 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 financial control and confirm that they have reviewed its
effectiveness. They consider that it is appropriately designed to provide
reasonable but not absolute assurance that assets are safeguarded against
material loss or unauthorised use and that transactions are properly authorised
and recorded. The concept of reasonable assurance recognises that the cost of a
control procedure should not exceed the expected benefits. The control system
includes written accounting and control policies and procedures, clearly drawn
lines of accountability and delegation of authority and comprehensive financial
reporting and analysis against approved budgets. In a growing group of the size,
complexity and geographical diversity of Reuters it should be expected that
breakdowns in established control procedures may occur. During 1997 the
directors were not aware of any such breakdowns which resulted in a material
loss.
The group monitors its internal financial control system through management
reviews, detailed representation letters on compliance signed by the Chief
Executive and Chief Financial Officer of each significant business unit and a
programme of internal audits. The group's external auditors, Price Waterhouse,
have audited the financial statements and have reviewed the work of the internal
auditors and the internal financial control systems to the extent they
considered necessary to support their audit report. The Audit Committee has met
the internal auditors and Price Waterhouse to discuss the results of their work,
which included an assessment of the relative strengths and weaknesses of
business units in key control areas. Further information on the group's
monitoring processes is set out in the Report of the Directors on pages 20-21.
By order of the Board
Simon Yencken Company Secretary
13 February 1998
34
AUDITORS' REPORT TO THE BOARD OF DIRECTORS AND MEMBERS OF REUTERS HOLDINGS PLC
AUDIT REPORT
We have audited the financial statements on pages 48-79 incorporating pages
25-32 which have been prepared under the historical cost convention and the
accounting policies set out on pages 78-79 and the summary of differences
between UK and US generally accepted accounting principles on pages 80-82.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS - As described on page 34,
the company's directors are responsible for the preparation of financial
statements. It is our responsibility to form an independent opinion, based on
our audit, on those statements and to report our opinion to you.
BASIS OF OPINION - We conducted our audit in accordance with auditing standards
generally accepted in the United Kingdom and in the United States. An audit
includes examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements. 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
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.
UNITED KINGDOM OPINION - In our opinion, the financial statements give a true
and fair view of the state of affairs of the company and the group as at 31
December 1997 and of the profit and cash flows of the group for the year then
ended and have been properly prepared in accordance with the Companies Act 1985.
UNITED STATES OPINION - In our opinion, the financial statements present fairly,
in all material respects, the financial position of the group at 31 December
1997, 1996 and 1995 and the results of its operations and cash flows for each of
the three years in the period ended 31 December 1997 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 income for each of the three years in the period ended 31
December 1997 and consolidated shareholders' equity all expressed in pounds
sterling at 31 December 1997, 1996 and 1995 as shown in the summary of
differences between UK and US generally accepted accounting principles set out
on pages 80-82.
REPORT ON CORPORATE GOVERNANCE MATTERS
In addition to our audit of the financial statements we have reviewed the
directors' statements on pages 20 - 21 and 34 concerning the group's compliance
with the paragraphs of the Cadbury Code of Best Practice specified for our
review by the London Stock Exchange and the adoption of the going concern basis
in preparing the financial statements. The objective of our review is to draw
attention to any non-compliance with Listing Rules 12.43(j) and 12.43(v), if not
otherwise disclosed.
BASIS OF OPINION - We carried out our review having regard to guidance issued by
the Auditing Practices Board. That guidance does not require us to perform the
additional work necessary to, and we do not, express any opinion on the
effectiveness of either the group's system of internal financial control or
corporate governance procedures nor on the ability of the group to continue in
operational existence.
OPINION - In our opinion, the directors' statements on internal financial
controls and going concern on page 34 have provided the disclosures required by
the Listing Rules referred to above and are consistent with the information
which came to our attention as a result of our audit work on the financial
statements.
In our opinion, based on enquiry of certain directors and officers of the
company and examination of relevant documents, the directors' statement on page
20 appropriately reflects the group's compliance with the other aspects of the
Code specified for our review by Listing Rule 12.43(j).
/s/ Price Waterhouse
Chartered Accountants and Registered Auditors
London
13 February 1998
35
OPERATING AND FINANCIAL REVIEW
The following review has been prepared in accordance with both the
recommendations of the UK Accounting Standards Board in their statement entitled
`Operating and Financial Review', and the US requirement for a Management's
Discussion and Analysis of Financial Condition and Results of Operations.
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 "Cautionary Statements" as well as elsewhere in
this review. All written and oral forward-looking statements made on or after
the date hereof and attributable to Reuters are expressly qualified in their
entirety by such Cautionary Statements.
FINANCIAL SUMMARY - Reported revenues declined 1% to (pound)2,882 million in
1997 due to the strength of sterling against all major currencies. Stripping out
the impact of currency movements, revenues grew 9% at comparable exchange rates,
compared with 8% growth in 1996.
Revenue at actual and comparable rates
% change 1997 1996 1995
================================================================================
Actual (1%) 8% 17%
Comparable 9% 8% 15%
================================================================================
Fourth quarter revenue growth of 11% at comparable exchange rates was reduced to
3% at actual rates by the strength of sterling.
Operating profit fell 8% to (pound)592 million at actual exchange rates and grew
7% at comparable rates, compared with 8% underlying growth in 1996.
Operating profit at actual and comparable rates
% change 1997 1996 1995
================================================================================
Actual (8%) 16% 20%
Comparable 7% 8% 14%
================================================================================
The operating profit margin was 20.5% compared with 22.0% in 1996, and 20.4% in
1995. The decline in 1997 was due to the net impact of currency, incremental
costs of (pound)11 million associated with the Millennium Programme and costs of
(pound)8 million related to the capital reorganisation described below.
Earnings before interest, tax, depreciation and amortisation (EBITDA) declined
2% at actual rates to (pound)904 million. It grew 8% at comparable rates
compared with 9% in 1996.
As a result of the adoption of UK Financial Reporting Standard 10 (Goodwill and
Intangible Assets), amortisation of (pound)51 million has been charged to the
1997 profit and loss account in respect of goodwill arising on acquisitions.
Prior period profits have been restated. On a portfolio basis there has been no
diminution in the value of Reuters acquisitions compared to their original cost
to the business. The amortisation charge does not, therefore, represent an
economic cost. Accordingly, an adjusted earnings per share figure has been
disclosed which excludes this accounting charge.
As a consequence of the implementation of FRS 10, profits under UK and US
generally accepted accounting principles (GAAP) are now more closely aligned.
Net interest receivable increased by 32% in 1997 to (pound)80 million following
growth of 2% in 1996. This increase was due to higher net cash balances and
yields. Interest income represented 2.8% of revenue in 1997 compared with 2.1%
in 1996.
On 19 January 1998, shareholders approved a capital reorganisation under which,
subject to final court
36
approval, (pound)1.5 billion of surplus capital is to be returned to
shareholders on 25 February 1998. This will result in the creation of a new
holding company, Reuters Group PLC. Further details are given on pages 44 and
71-72. Tax of (pound)23 million and other costs of (pound)8 million in respect
of this reorganisation have been charged against 1997 earnings.
Profit before tax of (pound)626 million was 4% lower than 1996. Excluding
goodwill amortisation, profit before tax at comparable exchange rates increased
11%.
The effective rate of tax on profit before goodwill amortisation increased to
34.9% from 29.9% in 1996. The increase was primarily due to one-off costs
relating to the capital reorganisation. If these were excluded, the underlying
effective tax rate was 31% compared with 29.9% in 1996.
Earnings per share declined 12% to 24.0p from 27.3p in 1996. Adjusted earnings
per share, which excludes goodwill amortisation and the costs of the capital
reorganisation, declined 4% to 29.1p from 30.4p in 1996.
Earnings per share
1997 1996 1995
================================================================================
Earnings per share 24.0p 27.3p 23.2p
Adjusted earnings per share 29.1p 30.4p 25.8p
================================================================================
Dividends per share increased by 11% in 1997 to 13.0p after growth of 20% in
1996. The final dividend is based on the reduced number of shares expected to be
in issue following the capital reorganisation.
Earnings and dividends
% change 1997 1996 1995
================================================================================
Adjusted earnings per share (4%) 18% 19%
Dividends per share 11% 20% 23%
================================================================================
Dividend cover declined to 2.1 in 1997 from 2.3 in 1996. Had the capital
reorganisation been effective at the start of 1997, dividend cover on a
pro-forma basis would have been 1.9 in 1997.
Free cash flow per share, which represents surplus cash generated after capital
expenditure and tax payments, was 27.7p, down 9% from 30.5p in 1996 reflecting
sterling's strength.
Sterling continued to strengthen during 1997. If year end exchange rates had
prevailed throughout the year, revenue would have been about (pound)83 million
lower and operating profit before currency hedging around (pound)39 million
lower. At year end exchange rates the value of the currency hedging book is
(pound)36 million in respect of 1998 and (pound)3 million in respect of 1999.
This compares with currency hedging gains of (pound)56 million in 1997. If
sterling's strength persists it will, therefore, continue to restrict prospects
for reported revenue and earnings.
Net funds at 31 December 1997 were (pound)1,290 million, an increase of
(pound)240 million in the year. Investment in the business continued with
(pound)368 million spent on capital expenditure, (pound)235 million on
development and (pound)29 million on acquisitions and investments.
MILLENNIUM PROGRAMME - In 1996 Reuters established a Millennium Compliance
Programme to address the issues arising as a result of the millennium date. Many
computer systems store or process date information by the last two digits of the
year only, resulting in incorrect or unpredictable treatment of dates after the
year 2000 in software applications. The Programme is led by an executive
director of Reuters supported by a central group of technical staff and a
full-time programme director.
The Programme will certify products, operations and internal processes for
millennium compliance and establish safeguards and procedures in respect of
third parties from whom Reuters obtains software or services. A key third-party
dependency is the external global telecommunications infrastructure which
Reuters uses to deliver its products.
Reuters has launched "Millennium Challenge", a global communications exercise
for customers and other external audiences to explain the changes to the shape
of the Reuters product line over the millennium period. Further information will
be made available as the Programme progresses.
In order to underline the importance of the Programme, a series of milestones
has been established, and the incentive remuneration of Reuters senior
executives is based in part upon achievement of these milestones.
37
The purpose of the Programme is to determine which software components and
systems have to be upgraded and which will need to be replaced. The process will
also be used to confirm which products will be discontinued before the
millennium.
Reuters is bearing the costs of its Millennium Programme. There may be some
instances in which customers will choose upgrades at additional cost to higher
product specifications than required for millennium compliance. There may also
be cases where customers request high levels of out-of-hours work for which
there will be an additional charge. These charges to customers are not expected
to be significant and will be in accordance with existing agreements and
practices.
The effort associated with the Programme falls into two main categories:
1. The diversion of existing internal resources. This includes development staff
who would otherwise be deployed on other projects and operational staff involved
in the implementation at customer sites.
2. Incremental external resources, largely contractors and consultants, who will
not remain following the completion of the Programme.
Details of the effort incurred in 1997 and budgeted for 1998, together with
estimated costs of incremental external resource, are set out below:
Incremental
Man years Cost
((pound)m)
================================================================================
1997
Internal effort:
Development 155 n/a
External effort:
Development 120 11
- --------------------------------------------------------------------------------
Total 275 11
================================================================================
1998
Internal effort:
Development 325 n/a
Implementation 440 n/a
External effort:
Development 150 16
Implementation 230 15
- --------------------------------------------------------------------------------
Total 1,145 31
================================================================================
The implementation process is complex and reliant upon co-ordination with
customers and suppliers. The effort and costs in 1999 will depend upon progress
during 1998 and Reuters current assessment is that these will not exceed those
incurred in 1998.
The above figures are based on the current status of the Programme and may be
subject to change. They include estimates and allocations of time in those cases
where Reuters staff have other responsibilities in addition to the Millennium
Programme.
EUROPEAN MONETARY UNION - Most financial markets across the world are likely to
be affected either directly or indirectly following European Monetary Union
which is scheduled to commence on 1 January 1999. Reuters is actively involved
in discussions with relevant regulatory bodies and market institutions.
Reuters has established a Euro Programme to handle the product-related issues
arising from monetary union and is examining its systems and range of products
to identify those areas where changes will be required to meet the demands of
the single European currency. The Programme will oversee the testing of all
revised products prior to release. Information held on Reuters historical
databases may also need to be restated where instruments are denominated in
participating currencies.
The Euro Programme is being co-ordinated by a full-time programme director and a
series of milestones are being set. These will be linked in part to the
incentive remuneration of senior executives.
The overlapping time frames for European Monetary Union and the millennium offer
some opportunities for Reuters to combine the two programmes to increase
efficiency and reduce customer disruption.
Costs incurred in 1997 on the Euro Programme were not significant. Reuters is
still finalising estimates of effort and costs expected to be incurred in 1998
and 1999. However, there are several issues unresolved by the participants of
European Monetary Union and it may be difficult to estimate the precise effort
involved.
SHAREHOLDER VALUE - Reuters is committed to delivering long-term shareholder
value through continued revenue and earnings growth, and adoption of a more
efficient capital structure.
38
Reuters believes that its mix of assets, some of which are unique to the
company, will help it to meet this commitment. These assets, which are not
included in the consolidated balance sheet, include:
o Reuters independence, as enshrined in the Reuter Trust Principles;
o Goodwill attached to the Reuters name;
o Software and other intellectual property;
o Global databases of financial and other information;
o Integrated global organisation including a skilled workforce.
Reuters uses a model for measuring and ranking its total shareholder return
(TSR) compared with that of the other 99 companies in the Financial Times Stock
Exchange 100 index (FTSE 100) at the start of each measurement period. This
model is used to determine vesting of awards under the performance-linked share
plans (see pages 28-30). Reuters rankings over both completed and three-, two-
and one-year ongoing measurement periods are shown below:
Reuters TSR ranking in FTSE 100
1997 1996-1997 1995-1997 1994-1996 1993-1995
================================================================================
Completed periods 7 18
Ongoing periods:
Over 3 years 60
Over 2 years 70
Over 1 year 96
================================================================================
Reuters believes that its total shareholder return has been depressed by the
impact on Reuters results of the strength of sterling and the general weakness
of the UK media sector.
REVENUES BY PRODUCT AND TYPE - Financial information products continued to
account for the most significant part of group revenue, representing 64% of
revenues in 1997. Transaction products revenue, including Instinet, continued to
grow more quickly than the financial information product line, representing 29%
of revenue in 1997 compared with 28% in 1996 and 25% in 1995. Media and
professional products accounted for 7% of 1997 revenue.
Product revenue
(pound)million 1997 1996 1995
================================================================================
Financial information products 1852 1892 1841
Transaction products 828 813 671
Media/Professional products 202 209 191
- --------------------------------------------------------------------------------
Total 2,882 2,914 2,703
================================================================================
In 1997, 74% of Reuters revenue was recurring, 18% was derived from usage and 8%
came from outright sales. Recurring revenue is derived from sales of
subscription services. Usage revenue is based primarily on volume, predominantly
from transaction products. Outright sales mainly represent once-off sales of
information management systems and risk management software. The proportion of
usage-based revenue is increasing as revenues from transaction products continue
to grow at above the average for the group as a whole.
Revenue by type
(pound)million 1997 1996 1995
================================================================================
Recurring 2147 2232 2128
Usage 511 478 358
Outright sales 224 204 217
- --------------------------------------------------------------------------------
Total 2,882 2,914 2,703
================================================================================
FINANCIAL INFORMATION PRODUCTS: Information products deliver realtime and
historical news and financial data to customers within the financial markets and
provide the software tools to analyse data. Reuters main offerings are the
series 2000 and 3000 product lines. Information management systems offer
customers the means to integrate and analyse data from a variety of sources for
financial trading rooms. Risk management, order handling products and customised
solutions from TIBCO offer customers the means of managing their own information
flows and exposure to risk.
Financial information revenue
1997 1996 1995
================================================================================
Revenue ((pound)m) 1,852 1,892 1,841
% change:
actual (2%) 3%
comparable 8% 4%
================================================================================
Underlying revenue growth improved to 8% from 4% in 1996 with higher growth
achieved in both recurring and outright revenue.
39
Recurring revenue
1997 1996 1995
================================================================================
Revenue ((pound)m) 1,640 1,703 1,638
% change:
actual (4%) 4%
comparable 7% 5%
- --------------------------------------------------------------------------------
Revenue per
access ((pound)000) 4.7 5.6 5.9
% change:
actual (16%) (5%)
comparable (7%) (4%)
================================================================================
Information product accesses grew by 20% during 1997 to 386,000. This compares
to growth of 10% to 321,000 in 1996. Over half of this growth came from off
trading floor products with total installed accesses of 49,000 at the year end.
Installed 3000 accesses approached 28,000 by the year end (1996 - 1,400
accesses) of which 21,000 were upgrades of existing users.
The rapid growth in lower priced off trading floor product accesses reduced the
overall revenue per access in 1997 by 6%. Excluding these accesses the revenue
per access at comparable exchange rates was stable.
Outright revenue
1997 1996 1995
================================================================================
Revenue ((pound)m) 212 189 203
% change:
actual 12% (7%)
comparable 22% (6%)
================================================================================
Growth in revenue during 1997 came principally from TIBCO and risk management
products.
TRANSACTION PRODUCTS - Transaction products principally comprise the Dealing
2000 product line and Instinet. Dealing 2000 products enable foreign exchange
professionals to converse electronically with chosen trading partners using
Dealing 2000-1 or Reuters automated matching system Dealing 2000-2. Instinet
provides agency brokerage services in global equities to securities industry
professionals in more than 30 countries.
Transaction revenue
1997 1996 1995
================================================================================
Revenue ((pound)m) 828 813 671
% change:
actual 2% 21%
comparable 10% 20%
- --------------------------------------------------------------------------------
Revenue per access ((pound)000) 23.4 25.5 24.1
% change:
actual (8%) 6%
comparable (1%) 5%
================================================================================
Underlying double-digit revenue growth reflects another good year at Instinet
where revenue grew by 17%. This is discussed further on page 42.
Total Dealing 2000 product revenue fell 5% at actual rates to (pound)438 million
but grew 5% at comparable rates reflecting the benefit of increased levels of
foreign exchange activity in the second half of the year.
Accesses grew by 13% during 1997 to 38,000 at the year end of which 25,000
related to Dealing 2000. This compares to growth of 11% to 33,500 in 1996.
Revenue per access at comparable rates was stable.
MEDIA AND PROFESSIONAL PRODUCTS - Media products comprise textual news,
television services, pictures and graphics for republication by media customers
and also the repackaging and sale of content for on-line services. Professional
products provide a range of near realtime and historical financial information
news products and related technology to the corporate and professional markets.
Reuters Business Briefing provides access to 10 years' business information from
one of the world's most comprehensive databases.
Revenue
(pound)million 1997 1996 1995
================================================================================
Media 138 155 153
Professional 64 54 38
- --------------------------------------------------------------------------------
Total 202 209 191
================================================================================
Revenue
% change 1997 1996
================================================================================
Media
actual (11%) 1%
comparable (4%) 1%
Professional
actual 19% 42%
comparable 25% 42%
- --------------------------------------------------------------------------------
Total
actual (3%) 9%
comparable 3% 9%
================================================================================
Excluding revenues from the satellite services business sold during the year,
media revenue was flat at comparable exchange rates.
Strong growth from professional products reflects the successful penetration of
the corporate business information market with the Reuters Business Briefing
product range.
40
SEGMENTAL ANALYSIS OF REVENUE AND CONTRIBUTION
Europe, Middle East and Africa
(pound)million 1997 1996 1995
================================================================================
Revenue 1,484 1,564 1,475
Contribution 498 588 511
================================================================================
Revenue and contribution
% change 1997 1996
================================================================================
Revenue
actual (5%) 6%
comparable 6% 7%
Contribution
actual (15%) 15%
comparable 2% 15%
================================================================================
Revenue growth was highest in eastern Europe and Germany where revenues grew 13%
and 12% respectively at comparable rates. In eastern Europe there continues to
be a strong demand, particularly for foreign exchange and domestic products. In
Germany risk management and information management systems supplemented sales of
the 3000 product range. A continuation of consolidation of our major customers
restricted revenue growth in Switzerland, France and Benelux and reduced revenue
growth in the UK and Ireland to 7% compared to 10% in 1996.
Contribution growth was restrained by continuing investment in the technical
infrastructure to support the 3000 product line and the impact of currency. As a
result, operating margin reduced to 34% from 38% in 1996.
Asia/Pacific
(pound)million 1997 1996 1995
================================================================================
Revenue 496 504 491
Contribution 184 193 193
================================================================================
Revenue and contribution
% change 1997 1996
================================================================================
Revenue
actual (2%) 3%
comparable 9% 6%
Contribution
actual (5%) -
comparable 9% 3%
================================================================================
The acquisition of Bisnews, a leading realtime domestic equities information
supplier in Thailand, boosted revenue growth in Asia/Pacific. Excluding the
impact of Bisnews, revenue grew by 7% at comparable rates.
The highest revenue growth was seen in South East Asia (excluding Bisnews) where
sales of the Dealing 2000 products, 3000 series products and information
management systems produced growth of 11% at comparable rates.
Revenue in Japan grew by 6% at comparable rates mainly due to sales of
information management systems and ReuterFirst, the domestic equities product.
Contribution growth excluding the impact of currency was strong throughout Asia
except in Australia where continued contraction in the financial services market
was combined with tough price competition. The operating margin reduced from 38%
in 1996 to 37% due to currency and the lower margin at Bisnews.
The Americas
(pound)million 1997 1996 1995
================================================================================
Revenue 437 440 417
Contribution 37 26 31
================================================================================
Revenue and contribution
% change 1997 1996
================================================================================
Revenue
actual (1%) 6%
comparable 6% 3%
Contribution
actual 45% (16%)
comparable 76% (20%)
================================================================================
Revenue from the Americas, excluding Instinet and TIBCO, grew 6% at comparable
rates.
Revenues grew 11% in Latin America. Revenue growth in Brazil was 30% reflecting
the strength of the underlying economy. North American revenues grew 5% with
good demand for information products against a background of industry
consolidation.
Contribution in 1997 benefited from rationalisation programmes initiated last
year with operating margin increasing from 6% in 1996 to 8% in 1997.
41
Instinet
(pound)million 1997 1996 1995
================================================================================
Revenue 383 346 243
Contribution 149 135 73
================================================================================
Revenue and contribution
% change 1997 1996
================================================================================
Revenue
actual 11% 42%
comparable 17% 40%
Contribution
actual 11% 87%
comparable 18% 82%
================================================================================
At comparable rates, Instinet revenues grew 15% in the US reflecting growth in
volumes traded on the New York Stock Exchange and NASDAQ.
Internationally, Instinet continued to expand trading in all its major financial
markets with revenues growing 35% in the year at comparable rates. Growth was
driven by increasing liquidity in European equities and expansion in Asia.
Accesses grew 43% to 13,000 at the end of the year compared with growth of 44%
in 1996. Revenue per access at comparable rates fell 17%, reflecting lower
pricing and lower initial trading volumes from new users.
Contribution grew in line with revenue with the operating margin maintained at
39% despite increased development costs. Capital expenditure increased 74% to
(pound)58 million as business growth and regulatory requirements required
additional investment in network capacity.
TIBCO
(pound)million 1997 1996 1995
================================================================================
Revenue 82 60 77
Contribution 15 12 33
================================================================================
Revenue and contribution
% change 1997 1996
================================================================================
Revenue:
actual 37% (23%)
comparable 45% (24%)
Contribution:
actual 23% (64%)
comparable 30% (64%)
================================================================================
TIBCO is now managed as two units. TIBCO Software was formed in late 1996 to
pursue opportunities outside the finance sector. During 1997 Cisco Systems,
Inc., and Mayfield Venture Capital acquired minority shareholdings in this
company. TIBCO Finance continues to focus on the financial sector. It is
extending its product range beyond trading room software toward integrated
middle office systems.
Underlying revenue growth of 45% for the two units and strong order books at the
end of the year reflected the benefit of higher development spending and
associated increases in headcount. However, this has resulted in a slightly
lower operating margin of 18% compared with 20% in 1996.
EMERGING MARKETS - Revenue from emerging markets (eastern Europe, Latin America,
South East and East Asia, excluding Hong Kong and Singapore) grew 3% to
(pound)272 million in 1997 or 15% at comparable rates compared with 28% in 1996.
CONTRIBUTION - Total contribution before central costs fell 7% to (pound)883
million in 1997 after growing 13% in 1996. Excluding the impact of currency,
contribution increased 8%.
COSTS - Total costs grew 9% in 1997 at comparable exchange rates, in line with
revenue growth. In 1996 cost growth and revenue growth were 8% at comparable
rates.
Central costs grew 10% in 1997 at comparable exchange rates reflecting higher
levels of central development costs and incremental costs related to the
Millennium Programme. 1996 costs increased by 29% due to increased legal costs
and development spending.
COSTS BY TYPE
%
Staff 36
Services 26
Depreciation 14
Communications 9
Space 6
Data 9
42
Staff
1997 1996 1995
================================================================================
Cost ((pound)m) 835 856 766
% change
actual (2%) 12%
comparable 5% 12%
- --------------------------------------------------------------------------------
Average staff cost ((pound)000) 52 57 54
% change (9%) 6%
================================================================================
Total staff numbers grew by 4% in 1997 to 16,119 at 31 December 1997. This
compares with growth of 8% to 15,478 in 1996. Acquisitions during the year,
principally Bisnews, added 358 staff. Excluding acquisitions staff growth was
2%. This reflected the continuing investment in development resources and
increases to support business expansion at Instinet and TIBCO, offset by
reductions in America and Europe from rationalisation programmes.
Salary increases were generally in line with local inflation. Staff costs per
head reduced 9%, or 2% at comparable rates, reflecting the benefits of
rationalisation programmes initiated in 1996 and lower costs associated with
short- and long-term incentive plans.
Services
1997 1996 1995
================================================================================
Cost ((pound)m) 585 539 512
% change
actual 9% 5%
comparable 17% 4%
================================================================================
While cost containment initiatives continued to restrict growth in discretionary
spending, there was significant growth in consultancy and contractor costs to
support the Millennium Programme and other product development. Legal and
professional fees also increased, including the costs of the capital
reorganisation.
Depreciation
1997 1996 1995
================================================================================
Cost ((pound)m) 312 283 250
% change
actual 10% 13%
comparable 11% 13%
================================================================================
Double-digit cost growth reflected the high level of capital investment in
recent years on both subscriber equipment and technical infrastructure.
Communications
1997 1996 1995
================================================================================
Cost ((pound)m) 201 202 194
% change
actual - 4%
comparable 7% 4%
================================================================================
Cost growth to accommodate the higher volumes of data in Reuters products and
increase in subscribers was partially offset by savings from the sale of the
satellite services business and tariff reductions.
Space
1997 1996 1995
================================================================================
Cost ((pound)m) 142 150 140
% change
actual (6%) 8%
comparable 1% 7%
================================================================================
No significant expansion or refurbishment costs were incurred in 1997.
Data
1997 1996 1995
================================================================================
Cost ((pound)m) 207 195 168
% change
actual 6% 16%
comparable 12% 17%
================================================================================
The number of equity products liable to exchange fees continued to increase
along with growth in royalties and other third-party data costs as Reuters
continues to increase the breadth of data in its products.
COSTS BY FUNCTION - Selling, marketing and administrative expenses declined 2%
in 1997 to (pound)664 million compared with 13% growth in 1996. The reduction
reflected the impact of currency and lower incentive plan costs.
Production and communication costs grew 2% in 1997 to (pound)1,626 million
compared with growth of 3% in 1996. This increase was principally due to
increased data costs and development spending.
Development expenditure, which excluded the costs associated with the Millennium
Programme, increased 17% to (pound)235 million in 1997, representing 8% of group
revenues. In 1996 development expenditure increased 5% to (pound)202 million
which represented 7% of group revenues. The 1997 increase principally reflected
continuing enhancements to the 3000 series product line, additional development
spending at Instinet and development of services based on Internet technology.
INCOME FROM FIXED ASSET INVESTMENTS AND ASSOCIATES - Income from fixed asset
investments of (pound)6 million (1996 - (pound)6 million) included profits from
the sale of investments in various US high technology companies.
Losses from associated undertakings were (pound)1 million compared with (pound)7
million in 1996. Independent Television News (ITN) has been accounted for as an
associate this year following the purchase of a 2% stake which took Reuters
holding up to 20%.
43
RETURN OF CAPITAL TO SHAREHOLDERS - On 4 December 1997 Reuters announced its
intention to implement a capital reorganisation which will return (pound)1.5
billion of surplus capital to shareholders. The reorganisation will involve the
creation of a new holding company, Reuters Group PLC, which will acquire Reuters
Holdings PLC in a court approved scheme of arrangement.
Ordinary shareholders will receive 13 shares in Reuters Group PLC plus
(pound)13.60 in cash for every 15 shares held. Holders of American Depositary
Shares (ADSs), each representing six ordinary shares, will receive 13 new ADSs
plus the US dollar equivalent of (pound)81.60 in cash for every 15 ADSs held.
Shareholder approval was received in January 1998 and the final court hearing to
approve the scheme is scheduled for 16 February 1998. After the transaction
Reuters will have approximately (pound)1.5 billion of gross debt and (pound)200
million of net debt.
The return of surplus capital reflects Reuters policy of focusing on the
existing business. Reuters continues to believe that its markets, primarily the
different segments of the finance industry worldwide, are already sufficiently
broad and demanding and that a focused approach remains essential to success.
Reuters believes that growth prospects in these markets are good and that it
retains sufficient access to funds to allow it to maintain necessary levels of
investment, and to increase them if the continuing rapid pace of technological
development so demands.
One-off tax and other costs relating to the return of capital to shareholders,
principally the cost of remitting funds from overseas subsidiaries, amount to
(pound)31 million and have been charged against 1997 earnings. The number of new
shares issued is intended to facilitate comparability of past performance of
both UK GAAP earnings per share and the ordinary share price. The impact on
earnings per share is expected to be broadly neutral.
FINANCIAL NEEDS AND RESOURCES - Reuters funds its business from internally
generated cash. Net funds increased by (pound)240 million to (pound)1,290
million at the end of 1997.
NET FUNDS (pound)million
1997 1996 1995
================================================================================
1,290 1,050 850
================================================================================
"Free cash flow" which comprises operating cash flow plus net interest received
less tax paid and expenditure on tangible fixed assets was (pound)449 million in
1997, a decrease of 9% on 1996, reflecting the impact of the strength of
sterling on trading results. Last year free cash flow was (pound)494 million, an
increase of 8% on the previous year.
Capital expenditure was (pound)368 million in 1997 compared with (pound)372
million in 1996. Subscriber equipment expenditure was (pound)132 million in 1997
compared with (pound)139 million in 1996. Reuters spent (pound)29 million on
acquisitions and investments in 1997 compared to (pound)119 million in 1996
after taking into account the net cash position of the companies acquired.
Tax payments were (pound)196 million in 1997 down from (pound)197 million in
1996. Dividends paid were (pound)196 million in 1997 against (pound)166 million
in 1996.
Reuters expects to be able to finance its current business plans and the return
of capital to shareholders from existing resources and facilities. Committed
bank borrowing facilities at 31 December 1997 comprised bilateral facilities
with 10 banks totalling (pound)150 million, which will be cancelled as a result
of the capital reorganisation. These will be replaced by committed bank
facilities of (pound)1.5 billion obtained by Reuters Group PLC.
These facilities are conditional on the capital reorganisation becoming
effective on or before 31 March 1998. Of the (pound)1.5 billion, (pound)1
billion may be drawn and redrawn until 2 December 1998, at which time Reuters
Group PLC may elect to borrow any available amounts for a period of up to 12
months. The remaining (pound)0.5 billion may be drawn and redrawn up to one
month prior to its maturity on 4 December 2002. The interest rates payable are
between 17.5 and 22.5 basis points per annum above LIBOR, the London Interbank
Offered Rate.
TREASURY MANAGEMENT - A substantial portion of Reuters revenue is committed
under one-, two- and four-year contracts and approximately 80% is denominated in
non-sterling currencies. Reuters also has significant costs denominated in
foreign currencies with a different mix from revenue.
44
Reuters profits are, therefore, exposed to currency fluctuations. The
approximate proportion attributable to each key currency group in 1997 was as
follows:
Operating profit by currency
================================================================================
Continental Europe 90%
US dollar 55%
Japanese yen 14%
Sterling depreciation (52%)
other (23%)
Other 16%
- --------------------------------------------------------------------------------
Total 100%
================================================================================
Sterling costs exceed sterling revenues due to the UK-based marketing,
development, operational and central management costs exceeding sterling
revenues and depreciation costs which, with the exceptions of Instinet and
TIBCO, are largely accounted for in sterling once an asset has been acquired.
In broad terms using the 1997 mix of profits, the impact of an additional
unilateral 1% strengthening of sterling would have been a reduction of
approximately (pound)9 million in 1997 trading profits before hedging.
Sterling trade weighted exchange rate index
1997 1996 1995
================================================================================
J 94.4 83.3 88.7
F 98.5 83.5 86.8
M 98 83.4 85.3
A 100.1 83.6 84.9
M 99.3 86.3 84.3
J 102.1 86.3 83.4
J 104.6 84.6 83.4
A 102.2 86.3 84.6
S 100.4 87 84.7
O 102.3 90.2 84
N 105 94 82.5
D 104.4 96.1 83.1
================================================================================
Sterling has strengthened significantly over the last two years. As a result,
trading profits have been adversely affected.
The risk that sterling might strengthen against foreign currencies is hedged
within parameters laid down by the Board. The priority in treasury policy is to
reduce the risk of earnings volatility to acceptable levels while allowing a
degree of flexibility to take advantage of market movements.
The main principles underlying hedging policies are as follows:
o Committed hedging cannot exceed the underlying exposure;
o Options may only be written against an underlying exposure;
o Levels of cover for currency hedging cannot exceed 90% of underlying exposure
for the first 12 months and 70% for the following 12 months.
During 1997 the company introduced value at risk (VAR) analysis as a means of
quantifying the potential impact of exchange rate volatility on reported
earnings. VAR is a measure of the potential loss on a portfolio within a
specified time horizon, at a specified confidence interval. Loss is defined, in
this instance, as the diminution in value of rolling 12 month forecast group
profits denominated in sterling. Due to the approximations used in determining
VAR, the theory provides order of magnitude estimates only, but these are useful
for comparison purposes.
Reuters estimates that there is currently a 5% chance that 1998 profits will
deteriorate by more than (pound)74 million before hedging and (pound)42 million
after taking into account hedging at 31 December 1997. These figures represent
the value at risk.
During 1997 the average value at risk on profits forecast for the coming 12
months was (pound)72 million before hedging and (pound)36 million after hedging.
Net cash flows are mainly converted into sterling and invested in sterling money
market instruments with financial institutions holding strong credit ratings.
The use of sterling instruments avoids any currency exposure. Interest rates are
hedged using a mix of financial instruments which commence and mature at various
dates through April 2000.
Following completion of the capital reorganisation Reuters will be in a net debt
position and will be a net payer of interest in 1998 based upon current cash
flow forecasts.
In broad terms, using the average net funds position, adjusted on a proforma
basis for the return of capital to shareholders as if it had taken place at the
beginning of that year, a 1% increase in global interest rates would have
reduced proforma profit before tax by approximately (pound)3 million excluding
the impact of hedging.
The gain/(loss) on hedging activities for the three years to 31 December 1997
and the fair value of the unrecognised gain on the hedging book at the end of
1997 are summarised below. The interest rate hedging benefit is calculated by
comparing the achieved yield with the yield that would have been obtained from
three-month sterling certificates of deposit in respect of sterling investments
and three-month Treasuries in respect of US dollar investments. The unrecognised
gains shown below are based on fair values at the end of 1997 and include
certain realised items which have been deferred because they relate to future
periods.
45
(pound)50 million of currency gains and (pound)5 million of interest hedging
gains in 1997 related to contracts in place at the end of 1996.
Recognised gain/(loss)
(pound)million 1997 1996 1995
================================================================================
Currency hedging 56 5 (33)
Interest hedging 4 6 17
- --------------------------------------------------------------------------------
Total 60 11 (16)
================================================================================
Unrecognised gain/(loss)
at 31 December
(pound)million 1997 1996 1995
================================================================================
Currency hedging 39 39 (6)
Interest hedging 2 6 12
- --------------------------------------------------------------------------------
Total 41 45 6
================================================================================
Of the unrecognised currency hedging profit at 31 December 1997, (pound)36
million related to 1998 (31 December 1996 - (pound)35 million related to 1997).
CAUTIONARY STATEMENTS
IMPACT OF CURRENCY MOVEMENTS - Reuters receives revenue and incurs expenses in
more than 60 currencies and is thereby exposed to the impact of fluctuations in
currency rates. Sterling's strength during 1997 has restricted revenue and
earnings. If sterling's current strength continues it will restrict reported
revenue and earnings in 1998. Reuters currency exposure is actively hedged. For
additional information concerning currency fluctuations see "Treasury
Management" above.
STATE OF FINANCIAL MARKETS - Reuters business is dependent upon the health of
the financial markets and the participants in those markets. Recent events in
the financial sector in Asia have created uncertainty in these markets. Reuters
business could also be adversely affected by consolidations and rationalisations
among clients in the banking and other industries. Reuters transactions business
is particularly dependent upon the level of activity in the foreign exchange and
equity markets.
3000 PRODUCT RANGE - Reuters revenue growth and market share in information
products depends in part upon the continuing successful rollout and enhancement
of the 3000 range of products launched in 1996.
PRODUCT DEVELOPMENT - Products in the information technology industry are
becoming increasingly sophisticated. As a result, Reuters, like other
information vendors, may encounter difficulties or delays in the development,
production, testing, marketing, installation and market acceptance of new
products.
ECONOMIC AND MONETARY UNION - The introduction of a single currency in Europe is
scheduled to occur in 1999 with up to 11 currencies participating. This may
reduce the volume of foreign exchange trading in the near term and hence have an
effect on Reuters foreign exchange information and transaction services. In
addition Reuters will need to complete a comprehensive programme of adjustments
to its products and internal systems to reflect the single currency.
MILLENNIUM ISSUES - Reuters is exposed to various risks arising out of the
change of millennium and the impact which this may have on its products and the
development and production processes upon which they depend. Also, Reuters
product range is dependent on software, hardware, systems and databases supplied
by third parties. For additional information concerning Reuters Millennium
Programme, including an estimate of associated costs, see "Millennium Programme"
on pages 37-38.
BROKER ACTIVITIES - Certain Reuters subsidiaries act as brokers in the financial
markets but do not undertake trading on their own account. Instinet Corporation
is an agency broker in the equity markets and Reuters Transaction Services
Limited (RTSL) operates the Dealing 2000-2 electronic brokerage services for the
foreign exchange market. These brokers could incur losses from broken trades
and, in respect of equities, the failure of a counterparty. Reuters seeks to
mitigate these risks by computerised systems, procedural controls and
contractual agreements with customers.
SEC RULES ON ECN USAGE - In January 1997, the US Securities and Exchange
Commission (SEC) introduced new rules governing market-maker and exchange
specialist usage of electronic communications networks (ECNs). The rules were
introduced progressively, with the phase-in of all securities subject to the
rules completed as of 13 October 1997. Instinet Corporation and Reuters are
closely monitoring the implementation and operation of the rules.
The rules have placed a strain, however, on certain Instinet Corporation
resources due, among other things, to the significantly increased volume of
message traffic experienced following the rules' implementation, as well as the
move by US markets to permit trading in smaller increments. Most recently by
letter dated 15 January 1998, the division of Market Regulation ("Division") of
the SEC issued an extension, until 15 April 1998, of the Division's no-action
position verifying Instinet's status as an ECN. In its letter the Division
conditioned its position upon, among other things, Instinet Corporation's
representation that it has sufficient capacity to handle the volume of trading
reasonably anticipated. Instinet
46
Corporation has no reason at this time to believe that it will not be able to
continue to meet its obligations as an ECN under the SEC's rules.
FURTHER REGULATION OF TRANSACTION PRODUCTS - The increasing use of electronic
systems as alternatives to traditional exchange and over-the-counter trading has
led authorities in several jurisdictions to explore various methods of
regulating such systems, implementation of which could impact Instinet and other
transaction products offered by Reuters from time to time. For example, in May
1997 the SEC issued a "concept release" soliciting public comment on a number of
issues and proposals concerning oversight of alternative trading systems. At
this time Reuters is unable to predict whether and when any rule making will
result from the concept release.
KEY SUPPLIERS - Reuters is reasonably dependent on certain hardware and software
suppliers, although alternative sources could be found if the need arose. The
main suppliers are Intel Corporation, Microsoft Corporation, Digital Equipment
Corporation and NCR Corporation.
NETWORKS AND SYSTEMS - Reuters networks and systems risk being impacted by a
catastrophic failure of long or short duration due to factors beyond its
control. Reuters seeks over time to minimise these risks as far as it can by,
inter alia, security controls, systems and communications redundancy and
elimination of single points of failure where feasible.
INTERNET - The availability of the public Internet and Internet technology may,
over time, reduce barriers to entry for new information providers, creating
additional competition and new price/cost dynamics in the industry. It may also
increase the availability of commoditised data in cheaper forms and the loss of
control over intellectual property. As a new publishing medium, it will also
create new outlets for content providers.
GEOGRAPHICAL OPERATIONS - Reuters may suffer discriminatory tariffs or other
forms of government intervention due to the nature of its editorial and other
reporting activities.
REUTERS ANALYTICS - In January 1998 Reuters was notified that Reuters Analytics
Inc. ("Reuters Analytics"), one of its US subsidiaries, is the subject of a
grand jury investigation in New York. Reuters understands that the investigation
is focused primarily on an arrangement that Reuters Analytics had with a New
York-based consultant. The consultant subscribed to Bloomberg L.P.'s service,
which included the associated data and analytics. The investigation is focused
on, among other things, whether Reuters Analytics improperly induced the
consultant to breach certain provisions of the consultant's subscription
agreement by arranging for the consultant to provide Bloomberg information to
Reuters.
The investigation also is focused on the use by Reuters of the transmitted
information - more specifically, for example, whether Bloomberg data obtained
from the consultant was improperly incorporated into Reuters products and
whether Bloomberg information was used by Reuters Analytics for any improper
"reverse engineering" of certain analytics. It is Reuters understanding that the
principal focus of the grand jury investigation is on Reuters Analytics and
certain of its personnel. However, the investigation will also involve an
examination of the activities of other individuals and entities outside Reuters
Analytics.
Reuters is co-operating with the investigation and has engaged external legal
counsel to conduct a thorough internal inquiry. At this time Reuters is unable
to predict the impact the investigation or related events may have on its
business or financial condition.
REGULATION OF TRANSACTIONAL ACTIVITIES - Instinet's US business is regulated by
the SEC. Instinet's UK business is regulated by the Securities and Futures
Authority. Instinet's other operations are subject to local regulatory control.
RTSL is subject to supervision by the Bank of England.
47
CONSOLIDATED PROFIT AND LOSS ACCOUNT For the year ended 31 December
Restated
---------------------------
1997 1996 1995
Notes (pound)m (pound)m (pound)m
===========================================================================================================================
Revenue 2 2,882 2,914 2,703
Operating costs 3 (2,290) (2,273) (2,152)
- ---------------------------------------------------------------------------------------------------------------------------
Operating profit 592 641 551
Goodwill amortisation (51) (49) (41)
- ---------------------------------------------------------------------------------------------------------------------------
541 592 510
Loss from associates (1) (7) (12)
Income from fixed asset investments 6 6 -
Net interest receivable 4 80 61 60
- ---------------------------------------------------------------------------------------------------------------------------
Profit on ordinary activities before taxation 626 652 558
Taxation on profit on ordinary activities 5 (236) (210) (185)
- ---------------------------------------------------------------------------------------------------------------------------
Profit after taxation attributable to ordinary shareholders 390 442 373
Dividends 6 (190) (190) (158)
- ---------------------------------------------------------------------------------------------------------------------------
Retained profit 26 200 252 215
- ---------------------------------------------------------------------------------------------------------------------------
Earnings per ordinary share 7 24.0p 27.3p 23.2p
Adjustments for:
Capital reorganisation costs 1.9p - -
Goodwill amortisation 1 3.2p 3.1p 2.6p
- ---------------------------------------------------------------------------------------------------------------------------
Adjusted earnings per ordinary share 7 29.1p 30.4p 25.8p
===========================================================================================================================
Consolidated revenue and operating profit derive from continuing operations in
all material respects. Accounting policies are set out on pages 78-79.
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the year ended 31 December
Restated
--------------------------
1997 1996 1995
(pound)m (pound)m (pound)m
==========================================================================================================================
Profit attributable to ordinary shareholders 390 442 373
Translation differences credited/(debited) directly to reserves 2 (28) 3
- --------------------------------------------------------------------------------------------------------------------------
Total recognised gains and losses relating to the year 392 414 376
Dividends (190) (190) (158)
Shares issued during the year 22 23 19
Shares repurchased during the year (21) - -
- --------------------------------------------------------------------------------------------------------------------------
Net addition to shareholders' equity 203 247 237
Opening shareholders' equity (restated) 1,540 1,293 1,056
- --------------------------------------------------------------------------------------------------------------------------
Closing shareholders' equity 1,743 1,540 1,293
==========================================================================================================================
Opening shareholders' equity has been restated to reflect a change in the method
of accounting for goodwill following the introduction of UK Financial Reporting
Standard 10 (see note 1). The cumulative effect of the restatement as at 31
December 1996 was due to the capitalisation of goodwill of (pound)464 million
less cumulative amortisation of (pound)266 million resulting in an increase in
shareholders' equity of (pound)198 million.
The detailed statement showing the movement in capital and reserves is set out
in note 26.
48
NOTES ON THE CONSOLIDATED PROFIT AND LOSS ACCOUNT
1. PRIOR YEAR ADJUSTMENT
In 1997 the UK Accounting Standards Board issued Financial Reporting Standard 10
Goodwill and Intangible Assets. Reuters has implemented this Standard which
requires purchased goodwill and intangible assets to be capitalised and
amortised through the profit and loss account over their useful economic lives.
All goodwill previously eliminated against reserves has been reinstated as an
asset on the balance sheet by way of a prior year adjustment and cumulative
amortisation as at 31 December 1994 has been written-off against brought forward
profit and loss account reserves at that date. Goodwill capitalisation includes
(pound)48 million arising on the acquisition of Rich Inc., in 1985 which was not
previously eliminated against reserves but was accounted for as a merger.
Previously reported profit after taxation attributable to shareholders in 1996
and 1995 has been reduced by (pound)49 million and (pound)41 million
respectively. This change in accounting policy has had no impact on net funds.
2. SEGMENTAL ANALYSIS
Restated Restated
1997 % 1996 % 1995
(pound)m change (pound)m change (pound)m
==============================================================================================================================
Revenue
Europe, Middle East and Africa (see note below) 1,484 (5) 1,564 6 1,475
Asia/Pacific 496 (2) 504 3 491
The Americas 437 (1) 440 6 417
- ------------------------------------------------------------------------------------------------------------------------------
2,417 (4) 2,508 5 2,383
Instinet 383 11 346 42 243
TIBCO 82 37 60 (23) 77
- ------------------------------------------------------------------------------------------------------------------------------
2,882 (1) 2,914 8 2,703
==============================================================================================================================
Operating costs where incurred
Europe, Middle East and Africa (986) 1 (976) 1 (964)
Asia/Pacific (312) - (311) 5 (298)
The Americas (400) (3) (414) 7 (386)
- ------------------------------------------------------------------------------------------------------------------------------
(1,698) - (1,701) 3 (1,648)
Instinet (234) 11 (211) 24 (170)
TIBCO (67) 40 (48) 7 (44)
- ------------------------------------------------------------------------------------------------------------------------------
(1,999) 2 (1,960) 5 (1,862)
==============================================================================================================================
Contribution
Europe, Middle East and Africa 498 (15) 588 15 511
Asia/Pacific 184 (5) 193 - 193
The Americas 37 45 26 (16) 31
- ------------------------------------------------------------------------------------------------------------------------------
719 (11) 807 10 735
Instinet 149 11 135 87 73
TIBCO 15 23 12 (64) 33
- ------------------------------------------------------------------------------------------------------------------------------
883 (7) 954 13 841
Central costs (347) 7 (324) 30 (250)
Net currency gain/(loss) 56 - 11 - (40)
- ------------------------------------------------------------------------------------------------------------------------------
Operating profit 592 (8) 641 16 551
==============================================================================================================================
United Kingdom and Ireland revenue was (pound)509 million (1996 - (pound)477
million, 1995 - (pound)435 million). Instinet's and TIBCO's operations are
predominantly based in the Americas.
49
2. SEGMENTAL ANALYSIS continued
The above table is a segmental analysis of revenue, costs and contribution.
Central costs comprise the costs of corporate administration and the centrally
controlled elements of development, marketing and technical operations. The
table does not purport to show geographical profitability but reflects how
Reuters controls costs and monitors contribution including the worldwide
activities of Instinet and TIBCO which are managed separately. Because of the
interactive nature of the worldwide operations of Reuters, Instinet and TIBCO
costs incurred in one location often relate to revenues earned in other
locations. Central costs and the segmental contribution have been restated to
reflect organisational changes involving greater central direction of the risk
management product line.
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 main exception is TIBCO, where a substantial
proportion of revenue billed by the Americas is from customers located
elsewhere. In 1997, 42% (1996 - 42%, 1995 - 38%) of TIBCO's revenue was
generated from customers in the Americas, 43% (1996 - 39%, 1995 - 42%) from
customers located in Europe, Middle East and Africa and 15% (1996 - 19%, 1995 -
20%) from customers in Asia/Pacific.
1997 % 1996 % 1995
Revenue by product category (pound)m change (pound)m change (pound)m
================================================================================================================
Information products
Europe, Middle East and Africa 1,087 (5) 1,145 5 1,090
Asia/Pacific 359 (2) 365 1 361
The Americas 324 1 322 3 313
TIBCO 82 37 60 (23) 77
- ----------------------------------------------------------------------------------------------------------------
1,852 (2) 1,892 3 1,841
================================================================================================================
Transaction products
Europe, Middle East and Africa 266 (7) 286 9 263
Asia/Pacific 107 (1) 108 7 101
The Americas 72 (1) 73 14 64
Instinet 383 11 346 42 243
- ----------------------------------------------------------------------------------------------------------------
828 2 813 21 671
================================================================================================================
Media and professional products
Europe, Middle East and Africa 131 (1) 133 9 122
Asia/Pacific 30 (3) 31 8 29
The Americas 41 (9) 45 11 40
- ----------------------------------------------------------------------------------------------------------------
202 (3) 209 9 191
================================================================================================================
2,882 (1) 2,914 8 2,703
================================================================================================================
Reuters operates in a single class of business: the provision of news and
financial information and related services. With the exception of Instinet and
TIBCO, Reuters products are delivered and sold through a common network and
geographical infrastructure.
50
2. SEGMENTAL ANALYSIS continued
1997 % 1996 % 1995
Revenue by type (pound)m change (pound)m change (pound)m
========================================================================================================
Recurring 2,147 (4) 2,232 5 2,128
Usage 511 7 478 34 358
Outright sales 224 10 204 (6) 217
- --------------------------------------------------------------------------------------------------------
2,882 (1) 2,914 8 2,703
========================================================================================================
Recurring revenue is derived from the sale of subscription services, including
maintenance contracts. Usage revenue is based on volume and primarily relates to
transaction products, including Instinet and certain activities of Reuters
Television. Outright sales mainly represents once-off sales of information
management systems.
3. OPERATING COSTS
1997 % 1996 % 1995
Costs by type (pound)m change (pound)m change (pound)m
==================================================================================================================================
Wages, salaries, commission and allowances 729 (2) 748 12 666
Social security costs 62 (3) 64 5 61
Other pension costs (see note 24) 44 1 44 10 39
- ----------------------------------------------------------------------------------------------------------------------------------
Staff costs 835 (2) 856 12 766
Services 585 9 539 5 512
Depreciation 312 10 283 13 250
Communications 201 - 202 4 194
Space 142 (6) 150 8 140
Data 207 6 195 16 168
Other 64 9 59 (28) 82
Currency hedging activities - net (gain)/loss (56) - (5) - 33
Foreign currency translation - net (gain)/loss - - (6) - 7
- ----------------------------------------------------------------------------------------------------------------------------------
2,290 1 2,273 6 2,152
==================================================================================================================================
Services costs include equipment hire and bought-in services, including
consultancy and contractors, advertising and publicity, professional fees and
staff-related expenses.
1997 % 1996 % 1995
Costs by function (pound)m change (pound)m change (pound)m
==================================================================================================================================
Production and communications costs 1,626 2 1,597 3 1,552
Selling, marketing and administrative expenses 664 (2) 676 13 600
- ----------------------------------------------------------------------------------------------------------------------------------
2,290 1 2,273 6 2,152
==================================================================================================================================
51
3. OPERATING COSTS continued
1997 % 1996 % 1995
Costs include: (pound)m change (pound)m change (pound)m
==================================================================================================================================
Development expenditure 235 17 202 5 191
Operating lease expenditure:
Hire of equipment 14 (4) 14 (17) 17
Other, principally property 72 (4) 75 3 73
Advertising costs 17 (15) 21 26 16
==================================================================================================================================
Fees payable to Price Waterhouse were as follows:
==================================================================================================================================
Audit fees:
United Kingdom 0.9 - 0.9 (1) 0.9
Overseas 1.0 (9) 1.1 7 1.0
- ----------------------------------------------------------------------------------------------------------------------------------
1.9 (5) 2.0 3 1.9
- ----------------------------------------------------------------------------------------------------------------------------------
Non-audit services:
United Kingdom 0.9 - 0.9 80 0.5
Overseas 5.3 10 4.8 194 1.7
- ----------------------------------------------------------------------------------------------------------------------------------
6.2 9 5.7 159 2.2
- ----------------------------------------------------------------------------------------------------------------------------------
8.1 5 7.7 88 4.1
==================================================================================================================================
The United Kingdom audit fee of (pound)0.9 million includes (pound)10,000 in
respect of the parent company audit.
4. NET INTEREST RECEIVABLE
1997 1996 1995
(pound)m (pound)m (pound)m
===============================================================================================================================
Interest receivable:
Listed investments 14 5 6
Unlisted investments 68 59 59
- -------------------------------------------------------------------------------------------------------------------------------
82 64 65
- -------------------------------------------------------------------------------------------------------------------------------
Interest payable:
Short-term borrowings (2) (3) (4)
Bank borrowings repayable in five years or more - - (1)
- -------------------------------------------------------------------------------------------------------------------------------
(2) (3) (5)
- -------------------------------------------------------------------------------------------------------------------------------
80 61 60
===============================================================================================================================
52
5. TAXATION ON PROFIT ON ORDINARY ACTIVITIES
1997 1996 1995
(pound)m (pound)m (pound)m
===============================================================================================================================
UK corporation tax 97 146 125
Credit for overseas taxation (9) (16) (9)
Overseas taxation 135 61 75
Taxes on return of capital to shareholders 23 - -
- -------------------------------------------------------------------------------------------------------------------------------
246 191 191
Deferred taxation (10) 19 (6)
- -------------------------------------------------------------------------------------------------------------------------------
236 210 185
===============================================================================================================================
Reconciliation to the UK nominal tax rate:
Effective tax rate 37.7% 32.2% 33.2%
Effective tax rate before non-deductible goodwill amortisation 34.9% 29.9% 30.9%
UK nominal tax rate 31.5% 33.0% 33.0%
Taxes as shown in these financial statements 236 210 185
Corporation tax on pre-tax profit at UK nominal rate 197 215 184
- -------------------------------------------------------------------------------------------------------------------------------
Difference 39 (5) 1
===============================================================================================================================
The difference is principally due to:
Non-tax deductible amortisation of goodwill 16 16 14
Taxes on return of capital to shareholders 23 - -
Other differences - (21) (13)
- -------------------------------------------------------------------------------------------------------------------------------
39 (5) 1
===============================================================================================================================
The other differences are primarily due to overseas profits taxed at rates
differing from those in the UK. Significantly higher US profits subject to
higher tax rates have largely eliminated the difference in 1997.
6. DIVIDENDS
1997 1996 1995
(pound)m (pound)m (pound)m
================================================================================
Interim 50 45 37
Final (1997 proposed) 140 145 121
- --------------------------------------------------------------------------------
190 190 158
================================================================================
1997 1996 1995
Per ordinary share pence pence pence
================================================================================
Interim 3.1 2.75 2.3
Final (1997 proposed) 9.9 9.0 7.5
- --------------------------------------------------------------------------------
13.0 11.75 9.8
================================================================================
The cost of the 1997 final proposed dividend is based on 1,407 million shares
which are expected to be in issue following the capital reorganisation (see note
30).
53
7. EARNINGS PER ORDINARY SHARE
Earnings per ordinary share are based on the profit attributable to ordinary
shareholders and on the weighted average number of those shares in issue during
the year and ranking for dividend. The weighted average number of shares in
issue may be reconciled to the number used in the earnings per ordinary share
calculation as follows:
Weighted average number in millions 1997 1996 1995
==============================================================================================================
Ordinary shares in issue 1,692 1,684 1,672
Reuters interest in ordinary shares held by:
Telfer Investments (Australia) Pty Limited (55) (55) (55)
Instinet Corporation (4) (4) (4)
Shares held by employee share ownership trusts (11) (9) (8)
- --------------------------------------------------------------------------------------------------------------
1,622 1,616 1,605
==============================================================================================================
The adjusted earnings per share calculations are based on profit attributable to
ordinary shareholders excluding amortisation of goodwill and capital
reorganisation costs.
8. REMUNERATION OF DIRECTORS
The report of the Remuneration Committee on pages 25-32 includes details of
directors' emoluments and forms part of these financial statements.
9. EMPLOYEE INFORMATION
The average number of employees during the year was as follows:
Segmental analysis 1997 1996 1995
===================================================================================================================================
Europe, Middle East and Africa 6,708 6,432 6,170
Asia/Pacific 2,547 2,088 1,993
The Americas 2,737 2,790 2,840
Instinet 1,086 906 774
TIBCO 473 390 321
Central 2,454 2,311 2,084
- -----------------------------------------------------------------------------------------------------------------------------------
16,005 14,917 14,182
===================================================================================================================================
Analysis by function
===================================================================================================================================
Production and communications 9,347 8,636 8,085
Selling, marketing and administration 6,658 6,281 6,097
- -----------------------------------------------------------------------------------------------------------------------------------
16,005 14,917 14,182
===================================================================================================================================
The above include:
Development staff 2,510 2,340 2,046
Journalists 1,990 1,920 1,778
===================================================================================================================================
54
CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 December
1997 1996 1995
Notes (pound)m (pound)m (pound)m
===================================================================================================================================
Net cash inflow from operating activities 10 936 995 854
Returns on investments and servicing of finance
Interest received 79 65 63
Interest paid (3) (3) (5)
Income from fixed asset investments 1 6 -
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash inflow from returns on investments and servicing of finance 77 68 58
Taxation paid (196) (197) (161)
Capital expenditure and financial investment
Purchase of tangible fixed assets (369) (374) (304)
Sale of tangible fixed assets 1 2 8
Purchase of fixed asset investments (21) (23) (4)
Sale of fixed asset investments 11 - -
- -----------------------------------------------------------------------------------------------------------------------------------
(378) (395) (300)
Acquisitions including associates 11 (22) (106) (19)
Dividends paid (196) (166) (135)
- -----------------------------------------------------------------------------------------------------------------------------------
Cash inflow before use of liquid resources and financing 221 199 297
Management of liquid resources
Net increase in short-term investments 11 (255) (172) (352)
Financing
Proceeds from issue of shares 22 23 19
Proceeds from issue of non-equity shares in TIBCO Software Inc 27 17 - -
Shares repurchased (21) - -
Net (decrease)/increase in borrowings 11 (15) 2 18
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash inflow from financing 3 25 37
- -----------------------------------------------------------------------------------------------------------------------------------
(Decrease)/increase in cash 12 (31) 52 (18)
===================================================================================================================================
1997 1996 1995
Reconciliation of net cash flow to movement in net funds (pound)m (pound)m (pound)m
===================================================================================================================================
(Decrease)/increase in cash (31) 52 (18)
Cash outflow/(inflow) from movement in borrowings 15 (2) (18)
Cash outflow from movement in liquid resources 255 172 352
- -----------------------------------------------------------------------------------------------------------------------------------
Change in net cash resulting from cash flows 239 222 316
Translation differences 1 (22) -
- -----------------------------------------------------------------------------------------------------------------------------------
Movement in net funds 240 200 316
Opening net funds 1,050 850 534
- -----------------------------------------------------------------------------------------------------------------------------------
Closing net funds 12 1,290 1,050 850
===================================================================================================================================
55
NOTES ON THE CONSOLIDATED CASH FLOW STATEMENT
10. NET CASH INFLOW FROM OPERATING ACTIVITIES
Operating profit is reconciled to net cash inflow from operating activities as
follows:
1997 1996 1995
(pound)m (pound)m (pound)m
===================================================================================================================================
Operating profit 592 641 551
Depreciation 312 283 250
Decrease/(increase) in stocks 10 (1) 9
Increase in debtors (35) (1) (36)
Increase in creditors 43 57 75
Loss on disposal of fixed assets 10 8 -
Amortisation of interests in own shares 4 8 -
Miscellaneous, principally translation differences - - 5
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash inflow from operating activities 936 995 854
===================================================================================================================================
11. ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT
1997 1996 1995
Acquisitions including associates (pound)m (pound)m (pound)m
===================================================================================================================================
Cash consideration:
Subsidiary undertakings (see note 34) (17) (17) (5)
Associated undertakings (see note 34) (3) (7) (11)
Deferred payments for acquisitions in prior years (3) (82) (3)
- -----------------------------------------------------------------------------------------------------------------------------------
(23) (106) (19)
Less cash acquired 1 - -
- -----------------------------------------------------------------------------------------------------------------------------------
(22) (106) (19)
===================================================================================================================================
Management of liquid resources
===================================================================================================================================
Increase in term deposits (5,826) (6,110) (3,495)
Decrease in term deposits 5,739 5,982 3,304
Purchase of certificates of deposit (842) (433) (380)
Sale of certificates of deposit 940 432 240
Purchase of listed/unlisted securities (771) (74) (89)
Sale of listed/unlisted securities 505 31 68
- -----------------------------------------------------------------------------------------------------------------------------------
(255) (172) (352)
===================================================================================================================================
Financing
===================================================================================================================================
(Decrease)/increase in short-term borrowings (12) 6 8
(Decrease)/increase in long-term borrowings (3) (4) 10
- -----------------------------------------------------------------------------------------------------------------------------------
(15) 2 18
===================================================================================================================================
56
12. ANALYSIS OF NET FUNDS
Bank borrowings
-----------------------
Falling
Cash at Total Falling due after
bank and cash and Short-term due within more than
in hand Overdrafts overdrafts investments one year one year Total
(pound)m (pound)m (pound)m (pound)m (pound)m (pound)m (pound)m
==================================================================================================================================
31 December 1995 61 (34) 27 867 (10) (34) 850
Cash flow 25 27 52 172 (6) 4 222
Non-cash movements - - - - (4) 4 -
Exchange movements (9) 1 (8) (20) 2 4 (22)
- ----------------------------------------------------------------------------------------------------------------------------------
31 December 1996 77 (6) 71 1,019 (18) (22) 1,050
Cash flow 7 (38) (31) 255 12 3 239
Exchange movements (3) 2 (1) 1 - 1 1
- ----------------------------------------------------------------------------------------------------------------------------------
31 December 1997 81 (42) 39 1,275 (6) (18) 1,290
==================================================================================================================================
13. DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS
A substantial portion of Reuters revenue is receivable in foreign currencies and
committed under one-, two- or four-year contracts with terms of payment up to
six months in advance. As such, Reuters is subject to currency exposure from
committed revenue. In addition, Reuters is subject to interest rate risk from
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, swaps and forward rate agreements.
If the derivative financial instruments were considered separately from the
underlying future revenue and interest income, 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.
Reuters may also purchase options to hedge translation exposure arising on the
conversion of the results of subsidiaries whose functional currency is not
sterling - principally Instinet and TIBCO. In such cases the maximum cash
outflow from this activity is the cost of the option premia.
57
13. DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS continued
Derivative instruments held at 31 December were:
1997 1996 1995
------------------------------ ------------------------------- ------------------------------
Gross Gross Gross
contract Carrying Fair contract Carrying Fair contract Carrying Fair
amounts value value amounts value value amounts value value
(pound)m (pound)m (pound)m (pound)m (pound)m (pound)m (pound)m (pound)m (pound)m
==================================================================================================================================
Currency management
Foreign exchange forward
contracts:
Contracts in profit 324 - 39 531 - 29 189 - 10
Contracts in loss 59 - - 7 - - 244 - (16)
Foreign currency options 53 2 2 166 3 13 76 1 1
- ----------------------------------------------------------------------------------------------------------------------------------
436 2 41 704 3 42 509 1 (5)
==================================================================================================================================
Interest rate management
Interest rate swaps 140 1 3 250 2 8 535 5 17
Forward rate agreements 50 - - 450 - - 20 - -
- ----------------------------------------------------------------------------------------------------------------------------------
190 1 3 700 2 8 555 5 17
==================================================================================================================================
Carrying values are amounts recorded in the balance sheet and comprise deferred
option premia, which are recognised over the period to which the option relates,
and certain locked in profits on swap contracts which have been recognised for
accounting purposes but where settlement in cash has not yet occurred. Fair
values represent the mark to market value of contracts at the balance sheet
date.
The foreign exchange forward contracts are held 56% in continental European
currencies (1996 - 74%, 1995 - 72%). The remaining contracts were principally in
Japanese yen and US dollars.
Foreign exchange forward contracts and options mature at dates up to 23 months
from the balance sheet date. Interest forward rate agreements, swaps and options
on swaps commence and mature at various dates through April 2000.
The fair value of foreign currency and interest rate management instruments is
estimated on the basis of market quotes, discounted to current value using
market-quoted interest rates.
The weighted average fixed rate receivable on the interest rate swaps at 31
December 1997 was 8% (1996 - 9%, 1995 - 9%) and the weighted average variable
rate payable was 7% (1996 - 7%, 1995 - 6%). The weighted average variable rate
is based on the rate implied in the yield curve at the balance sheet date.
All derivative instruments are unsecured. However, Reuters does not anticipate
non-performance by the counterparties who are all banks with recognised credit
ratings of "A" or higher.
58
13. DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS continued
Carrying and fair values of group financial instruments at 31 December were:
1997 1996 1995
---------------------- -------------------------- ------------------------
Carrying Fair Carrying Fair Carrying Fair
value value value value value value
(pound)m (pound)m (pound)m (pound)m (pound)m (pound)m
==================================================================================================================================
Derivative instruments 3 44 5 50 6 12
Other assets:
Interests in own shares 39 79 28 73 26 49
Other fixed asset investments 19 33 22 46 9 9
Debtors (see note below) 267 267 230 230 216 216
Short-term investments and cash 1,356 1,356 1,096 1,096 928 928
Liabilities:
Current liabilities (see note below) (359) (359) (321) (321) (345) (345)
Long-term liabilities (see note below) (18) (18) (22) (22) (34) (34)
==================================================================================================================================
Financial instruments exclude prepayments and accrued income and taxation
classified within debtors and accruals, deferred income and taxation classified
within creditors.
Net assets by currency at 31 December were:
Net
operating
assets Net assets
(excluding Net funds -------------------------------------------
net funds) (see note 12) 1997 1996 1995
(pound)m (pound)m (pound)m (pound)m (pound)m
====================================================================================================
Sterling 407 1,019 1,426 1,312 1,235
US dollar 48 224 272 189 12
Other (66) 47 (19) (42) (35)
- ----------------------------------------------------------------------------------------------------
389 1,290 1,679 1,459 1,212
====================================================================================================
Sterling net operating assets include capitalised goodwill, net of accumulated
amortisation.
59
13. DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS continued
The currency and interest rate profile of the group's short-term investments at
31 December 1997 was:
Short-term investments Fixed rate investments
----------------------------------- ----------------------------------
Weighted Weighted
average average
Floating interest time for
rate Fixed rate rate at which rate
Total investments investments 31 December is fixed
(pound)m (pound)m (pound)m % years
========================================================================================================================
Sterling 1,020 1,015 5 7 3
US dollar 182 126 56 7 2
Other 73 71 2 5 2
- ------------------------------------------------------------------------------------------------------------------------
Total short-term investments
31 December 1997 1,275 1,212 63 7 2
31 December 1996 1,019 979 40 7 2
31 December 1995 867 827 40 7 2
========================================================================================================================
Sterling and US dollar floating rate investments include (pound)789 million of
money market deposits and (pound)265 million of equity based investments which
mature within three months of the balance sheet date.
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 total borrowings at 31
December 1997 was:
Borrowings Fixed rate borrowings
----------------------------------- ---------------------------------
Weighted Weighted
average average
Floating interest time for
rate Fixed rate rate at which rate
Total borrowings borrowings 31 December is fixed
(pound)m (pound)m (pound)m % years
=================================================================================================================
French franc 22 22 - - -
Swiss franc 12 12 - - -
Deutschmark 11 11 - - -
Japanese yen 4 4 - - -
Sterling 9 1 8 9 2
Other 8 8 - - -
- -----------------------------------------------------------------------------------------------------------------
Total borrowings
31 December 1997 66 58 8 9 2
31 December 1996 46 35 11 9 3
31 December 1995 78 58 20 7 4
=================================================================================================================
The floating rate borrowings comprise bank loans and overdrafts bearing interest
at rates based on LIBOR in the case of the Swiss franc and based on local money
market rates in the case of the French franc and deutschmark overdrafts.
60
13. DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS continued
Total borrowings are repayable as follows:
1997 1996 1995
(pound)m (pound)m (pound)m
================================================================================
Within one year 48 24 44
Between one and two years 18 4 9
Between two and five years - 18 25
66 46 78
================================================================================
The weighted average interest rate on bank borrowings at 31 December 1997 was 4%
(1996 - 4%, 1995 - 5%).
In December 1994 Reuters obtained a series of bilateral loan facilities with
some of its close relationship banks. A total commitment of (pound)150 million
was put in place, reducing to (pound)50 million in December 1999. The facilities
which were floating rate based on money market rates were terminated on 6
February 1998 in anticipation of the capital reorganisation described in note
30. In addition, at 31 December 1997 Reuters had unused, short-term, uncommitted
bank borrowing facilities denominated in various currencies, the sterling
equivalent of which was approximately (pound)432 million, at money market rates
varying principally between 2% and 10%, depending on the currency.
14. CONCENTRATION OF CREDIT RISK
Reuters is exposed to concentrations of credit risk. Reuters invests in UK and
US government securities and with high credit quality financial institutions.
Reuters limits the amount of credit exposure to any one financial institution.
Reuters is also exposed to credit risk from its trade debtors which are
concentrated in the financial community. Reuters estimates that approximately
58% of its subscribers are financial institutions, 28% are corporations in other
sectors of the business community, 5% are from the news media and 9% are
government institutions and individuals worldwide (1996 - 57%, 28%, 6% and 9%
respectively).
Instinet is exposed to the possibility of trades between its counterparties
failing to settle. Due to the settlement mechanism employed the maximum exposure
is generally limited to the market movement between the trade date and the
settlement date. There are no material unprovided off balance sheet exposures or
positions in respect of trades undertaken on or prior to 31 December 1997.
61
CONSOLIDATED BALANCE SHEET at 31 December
Restated
------------------------------
1997 1996 1995
Notes (pound)m (pound)m (pound)m
==============================================================================================================================
Fixed assets
Intangible assets: Goodwill 16 157 198 264
Tangible assets 17 816 775 698
Investments 18 73 53 37
- ------------------------------------------------------------------------------------------------------------------------------
1,046 1,026 999
- ------------------------------------------------------------------------------------------------------------------------------
Current assets
Stocks 19 13 22 21
Debtors (see note below) 20 421 392 421
Short-term investments 21 1,275 1,019 867
Cash at bank and in hand 81 77 61
- ------------------------------------------------------------------------------------------------------------------------------
1,790 1,510 1,370
Creditors: Amounts falling due within one year 22 (1,076) (985) (983)
- ------------------------------------------------------------------------------------------------------------------------------
Net current assets 714 525 387
- ------------------------------------------------------------------------------------------------------------------------------
Total assets less current liabilities 1,760 1,551 1,386
Creditors: Amounts falling due after more than one year 23 (37) (41) (135)
Provisions for liabilities and charges:
Pensions and similar obligations 24 (28) (30) (27)
Deferred taxation 25 (16) (21) (12)
- ------------------------------------------------------------------------------------------------------------------------------
Net assets 1,679 1,459 1,212
==============================================================================================================================
Capital and reserves 26
Called-up share capital 42 42 42
Capital redemption reserve 2 2 2
Share premium account 156 121 76
Profit and loss account reserve 1,543 1,375 1,173
- ------------------------------------------------------------------------------------------------------------------------------
Shareholders' equity 1,743 1,540 1,293
Interest in shares of Reuters Holdings PLC (82) (82) (82)
- ------------------------------------------------------------------------------------------------------------------------------
1,661 1,458 1,211
Minority interests - equity 1 1 1
- non-equity 27 17 - -
- ------------------------------------------------------------------------------------------------------------------------------
Capital employed 1,679 1,459 1,212
==============================================================================================================================
Debtors and net current assets include amounts due after more than one year
of(pound)57 million (1996 -(pound)39 million, 1995 -(pound)77 million).
The balance sheet of Reuters Holdings PLC is shown on page 76.
The financial statements on pages 48-79 were approved by the directors on 13
February 1998.
/s/ Peter Job /s/ Rob Rowley
Peter Job Chief Executive Rob Rowley Finance Director
62
NOTES ON THE CONSOLIDATED BALANCE SHEET
15. SEGMENTAL ANALYSIS
The tables below show net assets and total assets by location on a basis
consistent with the segmental analysis of profit in note 2. For the reasons
discussed in that note, the assets in any location are not matched with the
revenue earned in that location. Central net assets and total assets have been
restated to include capitalised goodwill.
Restated
----------------------
1997 1996 1995
Location of net assets (pound)m (pound)m (pound)m
====================================================================================================================================
Non-interest bearing assets/(liabilities):
Europe, Middle East and Africa 301 295 267
Asia/Pacific 101 98 105
The Americas 53 80 46
Instinet 114 37 43
TIBCO 6 4 (3)
Central (180) (98) (6)
- ------------------------------------------------------------------------------------------------------------------------------------
Non-interest bearing net assets 395 416 452
Interest bearing net assets 1,284 1,043 760
- ------------------------------------------------------------------------------------------------------------------------------------
1,679 1,459 1,212
====================================================================================================================================
Central non-interest bearing liabilities consist principally of dividend and
taxation liabilities partially offset by unamortised goodwill. Interest bearing
net assets are stated after deducting deferred consideration which has been
discounted for accounting purposes.
Restated
----------------------
1997 1996 1995
Location of total assets (pound)m (pound)m (pound)m
====================================================================================================================================
Europe, Middle East and Africa 644 584 583
Asia/Pacific 224 206 205
The Americas 178 195 189
Instinet 423 316 235
TIBCO 56 33 33
Central 1,311 1,202 1,124
- ------------------------------------------------------------------------------------------------------------------------------------
2,836 2,536 2,369
====================================================================================================================================
Fixed assets 1,046 1,026 999
Current assets 1,790 1,510 1,370
- ------------------------------------------------------------------------------------------------------------------------------------
2,836 2,536 2,369
====================================================================================================================================
Central assets consist principally of purchased goodwill net of accumulated
amortisation, short-term investments and cash.
63
16. INTANGIBLE ASSETS: GOODWILL
Net Book
Cost Amortisation Amount
(pound)m (pound)m (pound)m
==================================================================================================================
31 December 1994
As previously reported - - -
Prior year adjustment 411 (176) 235
- ------------------------------------------------------------------------------------------------------------------
Restated 411 (176) 235
Additions 70 - 70
Amortisation charged in year - (41) (41)
- ------------------------------------------------------------------------------------------------------------------
31 December 1995 481 (217) 264
Additions (17) - (17)
Amortisation charged in year - (49) (49)
- ------------------------------------------------------------------------------------------------------------------
31 December 1996 464 (266) 198
Additions 10 - 10
Amortisation charged in year - (51) (51)
- ------------------------------------------------------------------------------------------------------------------
31 December 1997 474 (317) 157
==================================================================================================================
17. TANGIBLE ASSETS
Office
Computer equipment
Freehold Leasehold systems and motor
property property equipment vehicles Total
(pound)m (pound)m (pound)m (pound)m (pound)m
================================================================================================================================
Cost
31 December 1996 165 118 1,493 191 1,967
Translation differences - - 3 - 3
Additions 11 21 295 34 361
Owned by subsidiaries acquired - 2 - 2 4
Disposals - (4) (168) (19) (191)
- --------------------------------------------------------------------------------------------------------------------------------
31 December 1997 176 137 1,623 208 2,144
- --------------------------------------------------------------------------------------------------------------------------------
Depreciation
31 December 1996 48 59 972 113 1,192
Translation differences - - 2 - 2
Charged in the year 10 13 258 31 312
Owned by subsidiaries acquired - - - 2 2
On disposals - (4) (161) (15) (180)
- --------------------------------------------------------------------------------------------------------------------------------
31 December 1997 58 68 1,071 131 1,328
- --------------------------------------------------------------------------------------------------------------------------------
Net book amount
31 December 1997 118 69 552 77 816
31 December 1996 117 59 521 78 775
================================================================================================================================
64
17. TANGIBLE ASSETS continued
1997 1996 1995
Net book amount of leasehold property (pound)m (pound)m (pound)m
================================================================================================================================
Long-term leaseholds 16 15 16
Short-term leaseholds 53 44 40
- --------------------------------------------------------------------------------------------------------------------------------
69 59 56
================================================================================================================================
Capital commitments
- --------------------------------------------------------------------------------------------------------------------------------
Contracted for 47 52 64
================================================================================================================================
18. INVESTMENTS
Interests in Interests in Other
own shares associates investments Total
(pound)m (pound)m (pound)m (pound)m
================================================================================================================================
Cost less amounts written off 31 December 1996 28 10 22 60
Net additions 11 10 - 21
Disposals - (1) - (1)
Reclassification - 3 (3) -
- --------------------------------------------------------------------------------------------------------------------------------
31 December 1997 39 22 19 80
================================================================================================================================
Share of post-acquisition losses 31 December 1996 - (7) - (7)
Arising in the year - (1) - (1)
Disposals - 1 - 1
- --------------------------------------------------------------------------------------------------------------------------------
31 December 1997 - (7) - (7)
================================================================================================================================
39 15 19 73
================================================================================================================================
The reclassification reflects the purchase of an additional 2% of Independent
Television News Limited. This takes Reuters equity stake to 20% and it is now
treated as an associate.
Interests in own shares represents the cost less amounts written off of 11.8
million ordinary shares held by employee share ownership trusts (ESOTs). These
were acquired in the open market using funds provided by Reuters. The write-off
reflects employee interests under incentive plans which are charged against
profit over the vesting period of the awards (see pages 28-30). The market value
of these shares at 31 December 1997 was (pound)79 million. The ESOTs have waived
dividend and voting rights on these shares. This presentation accords with that
required by the Urgent Issues Task Force abstracts 13 and 17. Should the shares
held by the ESOTs become material this treatment may be reviewed.
Other investments consist principally of US technology stocks, a number of which
are listed with a market value of (pound)23 million, and Stock Exchange seats.
65
19. STOCKS
1997 1996 1995
(pound)m (pound)m (pound)m
===================================================================================================================================
Contract work in progress 15 22 18
Less progress payments (11) (13) (11)
- -----------------------------------------------------------------------------------------------------------------------------------
4 9 7
Equipment stocks 9 13 14
- -----------------------------------------------------------------------------------------------------------------------------------
13 22 21
===================================================================================================================================
20. DEBTORS
1997 1996 1995
(pound)m (pound)m (pound)m
===================================================================================================================================
Trade debtors 176 166 167
Less allowance for doubtful accounts (27) (24) (28)
- -----------------------------------------------------------------------------------------------------------------------------------
149 142 139
Other debtors 118 93 83
Prepayments and accrued income 73 65 72
Deferred taxation (see note 25) 74 69 97
Advance corporation tax recoverable 7 23 30
- -----------------------------------------------------------------------------------------------------------------------------------
421 392 421
===================================================================================================================================
Amounts falling due after more than one year:
Other debtors 15 15 21
Deferred taxation 42 24 56
- -----------------------------------------------------------------------------------------------------------------------------------
57 39 77
===================================================================================================================================
21. SHORT-TERM INVESTMENTS
1997 1996 1995
(pound)m (pound)m (pound)m
===================================================================================================================================
Listed
Government securities: UK 2 - -
Overseas 83 54 55
Other investments: Overseas 265 - 1
- -----------------------------------------------------------------------------------------------------------------------------------
350 54 56
===================================================================================================================================
Unlisted
Certificates of deposit 144 242 241
Term deposits: UK 647 594 474
Overseas 73 39 43
Other investments: Overseas 61 90 53
- -----------------------------------------------------------------------------------------------------------------------------------
925 965 811
1,275 1,019 867
===================================================================================================================================
66
22. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
1997 1996 1995
(pound)m (pound)m (pound)m
===================================================================================================================================
Trade creditors 135 122 144
Accruals 374 362 333
Deferred income 38 43 36
Other creditors 36 30 36
Other taxation and social security 36 25 29
- -----------------------------------------------------------------------------------------------------------------------------------
619 582 578
Bank overdrafts 42 6 34
Bank loans 6 18 10
Current UK corporation and overseas taxation 269 234 240
Proposed dividend 140 145 121
- -----------------------------------------------------------------------------------------------------------------------------------
1,076 985 983
===================================================================================================================================
Current UK corporation and overseas taxation comprises:
1997 1996 1995
(pound)m (pound)m (pound)m
===================================================================================================================================
UK corporation tax:
Advance corporation tax 47 22 75
Mainstream corporation tax 134 163 93
Overseas taxes 88 49 72
- -----------------------------------------------------------------------------------------------------------------------------------
269 234 240
===================================================================================================================================
23. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
1997 1996 1995
(pound)m (pound)m (pound)m
===================================================================================================================================
Bank borrowings 18 22 34
Other creditors 19 19 101
- -----------------------------------------------------------------------------------------------------------------------------------
37 41 135
===================================================================================================================================
Bank borrowings secured against freehold property 15 19 24
Bank borrowings at 31 December 1997 included loans denominated in Swiss francs
and sterling, secured on freehold property held at a cost of (pound)116 million.
The interest rate payable on the Swiss franc loan was 1.75% and 8.81% on the
sterling loan.
24. PENSIONS AND SIMILAR OBLIGATIONS
Reuters has established various pension arrangements covering the majority of
its employees. In all plans, except those which are internally funded, the
assets are held separately from those of the company and are independently
administered.
DEFINED CONTRIBUTION PLANS - Reuters operates 27 defined contribution plans
covering approximately 68% of its employees, of which the largest plan, the
Reuters Pension Fund, covers approximately 27% of employees. Members of this
plan contribute 6% of basic salaries and Reuters is required to make an annual
contribution of 9.525% of members' basic salaries regardless of the funding
status of the plan. Reuters does not have the ability to recover assets held by
the plan, nor can it be required to make additional payments to the plan over
and above the annual contributions referred to above. Custodial responsibility
for the assets of the plan rests with two substantial and independent UK
investment managers.
67
24. PENSIONS AND SIMILAR OBLIGATIONS continued
DEFINED BENEFIT PLANS - Reuters also operates 34 defined benefit plans covering
approximately 17% of employees. Individually, these plans are of a relatively
minor nature. They are subject to regular valuations based on the accepted
actuarial practice and standards within the country in which the plan is
established. The largest plans are directly invested and others are invested in
insurance contracts. The remainder are internally funded in accordance with
local practice with provisions in the subsidiary undertakings to recognise the
pension obligations.
Where necessary, additional provisions have been established for the group's
plans in accordance with UK Statement of Standard Accounting Practice 24 based
on independent actuarial advice.
POST-RETIREMENT MEDICAL BENEFITS - In the US, Reuters provides unfunded
post-retirement medical benefits to certain US employees. The principal
assumptions used in the most recent actuarial valuation undertaken at 31
December 1997 were that health care costs would increase by 8% per annum per
head over the next year decreasing to 6% over the following two years and remain
at 6% thereafter.
The movement on pension provisions and similar obligations was as follows:
1997 1996 1995
(pound)m (pound)m (pound)m
================================================================================================================================
Opening balance 30 27 22
Profit and loss account (see note 3):
Defined contribution plans 32 29 26
Defined benefit plans 11 14 12
Post-retirement medical benefits 1 1 1
- --------------------------------------------------------------------------------------------------------------------------------
44 44 39
Utilised in the year (46) (41) (34)
- --------------------------------------------------------------------------------------------------------------------------------
Closing balance 28 30 27
================================================================================================================================
25. DEFERRED TAXATION LIABILITIES/(ASSETS)
1997 1996 1995
(pound)m (pound)m (pound)m
================================================================================================================================
Opening balance (48) (85) (46)
Arising on acquisitions - 18 (33)
Profit and loss account (10) 19 (6)
- --------------------------------------------------------------------------------------------------------------------------------
Closing balance (58) (48) (85)
================================================================================================================================
The closing balance is analysed below:
- --------------------------------------------------------------------------------------------------------------------------------
Timing differences:
Fixed asset related (1) 13 13
Other (57) (61) (98)
- --------------------------------------------------------------------------------------------------------------------------------
(58) (48) (85)
================================================================================================================================
68
25. DEFERRED TAXATION LIABILITIES/(ASSETS) continued
Reuters has provided for all potential deferred tax liabilities in respect of
timing differences and has provided for deferred UK income and foreign
withholding taxes that will be triggered by the expected future remittance of
earnings by overseas subsidiary undertakings. Reuters has not provided for
deferred UK income and foreign withholding taxes relating to unremitted earnings
where remittance of these earnings is not currently anticipated in the
foreseeable future. Reuters estimates that these unrecognised taxes total
approximately (pound)114 million at 31 December 1997.
Valuation
Assets allowance Liabilities Net
Total timing differences at 31 December 1997 (pound)m (pound)m (pound)m (pound)m
===================================================================================================================================
Fixed asset related (36) 7 28 (1)
Unrecognised tax losses (18) 17 - (1)
Other (84) 20 8 (56)
- -----------------------------------------------------------------------------------------------------------------------------------
(138) 44 36 (58)
===================================================================================================================================
The valuation allowance increased by (pound)10 million during 1997. Where
appropriate deferred tax assets and liabilities are netted for balance sheet
presentation purposes. The net deferred tax balance has been analysed as:
1997 1996 1995
(pound)m (pound)m (pound)m
===================================================================================================================================
Deferred tax debtor (included in debtors - see note 20) (74) (69) (97)
Deferred tax liability (included in provisions for liabilities and charges) 16 21 12
===================================================================================================================================
26. CAPITAL AND RESERVES
Profit Interest
and in shares
Called-up Capital Share loss Goodwill Share- of Reuters
share redemption premium account elimination holders' Holdings
capital reserve account reserve reserve equity PLC Total
(pound)m (pound)m (pound)m (pound)m (pound)m (pound)m (pound)m (pound)m
===================================================================================================================================
31 December 1994
As previously reported 42 2 57 1,083 (363) 821 (82) 739
Prior year adjustment (see note 1) - - - (128) 363 235 - 235
- -----------------------------------------------------------------------------------------------------------------------------------
Restated 42 2 57 955 - 1,056 (82) 974
Shares issued during the year - - 19 - - 19 - 19
Translation differences - - - 3 - 3 - 3
Retained earnings for the year (restated) - - - 215 - 215 - 215
- -----------------------------------------------------------------------------------------------------------------------------------
31 December 1995 42 2 76 1,173 - 1,293 (82) 1,211
Shares issued during the year - - 45 (22) - 23 - 23
Translation differences - - - (28) - (28) - (28)
Retained earnings for the year (restated) - - - 252 - 252 - 252
- -----------------------------------------------------------------------------------------------------------------------------------
31 December 1996 42 2 121 1,375 - 1,540 (82) 1,458
Shares issued during the year - - 35 (13) - 22 - 22
Shares repurchased during the year
(see note 29) - - - (21) - (21) - (21)
Translation differences - - - 2 - 2 - 2
Retained earnings for the year - - - 200 - 200 - 200
- -----------------------------------------------------------------------------------------------------------------------------------
31 December 1997 42 2 156 1,543 - 1,743 (82) 1,661
===================================================================================================================================
69
26. CAPITAL AND RESERVES continued
Cumulative translation losses at 31 December 1997 totalled (pound)27 million
(1996 - (pound)29 million, 1995 - (pound)1 million).
Interest in shares of Reuters Holdings PLC comprises Reuters interest in 55.6
million ordinary shares owned by Telfer Investments (Australia) Pty Limited and
3.7 million ordinary shares owned by Instinet Corporation which were originally
acquired prior to 31 December 1989. The economic substance is that the shares
have been retired; no dividends are paid outside the group in respect of them
and, therefore, they have been excluded from the earnings per share calculation.
They are included in the consolidated balance sheet as a deduction from
shareholders' equity at original cost. Treating them as an asset would not
reflect the substance of the original transactions and would not give a true and
fair view. The treatment adopted is consistent with US GAAP but could be
considered a departure from the presentation required by the UK Companies Act
1985 which, except for the overriding requirement to show a true and fair view,
would otherwise require these shares to be shown as a fixed asset investment.
During 1997 Reuters Holdings PLC received (pound)35 million on the issue of
shares in respect of the exercise of options awarded under various share option
plans. Employees paid (pound)22 million to the group for the issue of these
shares and the balance of (pound)13 million comprised contributions to the
qualifying employee share trust (QUEST) from subsidiary undertakings.
27. NON-EQUITY MINORITY INTERESTS
Non-equity minority interests comprise convertible preferred stock issued by
TIBCO Software Inc., a US subsidiary. The holders of these securities, which are
non-redeemable, have no rights against group undertakings other than the issuing
entity. Dividends on the preferred stock are only payable when declared.
28. SHARE CAPITAL
1997 1996 1995
(pound)m (pound)m (pound)m
==================================================================================================================================
Authorised
One Founders Share of (pound)1 - - -
2,100 million ordinary shares of 2.5p each 53 53 53
- ----------------------------------------------------------------------------------------------------------------------------------
53 53 53
==================================================================================================================================
Allotted and called-up
One Founders Share of (pound)1 - - -
Ordinary shares of 2.5p each 42 42 42
- ----------------------------------------------------------------------------------------------------------------------------------
42 42 42
==================================================================================================================================
Number of ordinary shares of 2.5p each (millions) 1,694.2 1,688.6 1,677.1
==================================================================================================================================
Shares allotted/(repurchased) during the year in millions 1997 1996 1995
==================================================================================================================================
Issued for cash under employee share schemes at prices
ranging from 117p to 601p per share in 1997 8.6 11.5 9.0
Repurchased at prices ranging from 689p to 694p per share and cancelled in 1997 (3.0) - -
- ----------------------------------------------------------------------------------------------------------------------------------
5.6 11.5 9.0
==================================================================================================================================
70
29. SHARE REPURCHASE
During 1997 Reuters carried out an on market share repurchase programme to
acquire, and subsequently cancel, 3.0 million of its ordinary shares at prices
ranging from 689p to 694p. The total cost of the repurchase programme including
expenses was (pound)21 million, which has been charged against distributable
reserves.
30. POST BALANCE SHEET EVENT
An extraordinary general meeting of Reuters Holdings PLC was held on 19 January
1998 at which a capital reorganisation was approved by the shareholders. The
reorganisation, which is subject to approval of the High Court, returns
(pound)1,482 million of surplus capital in the form of cash to shareholders and
involves the creation of a new holding company Reuters Group PLC which will
acquire Reuters Holdings PLC.
The reorganisation will be effected by a scheme of arrangement under which
Reuters Holdings PLC shareholders will receive 13 shares in Reuters Group PLC
plus (pound)13.60 in cash in return for every 15 shares held. ADS holders will
receive 13 ADSs in Reuters Group PLC plus the US dollar equivalent of
(pound)81.60 in cash in return for every 15 ADSs held.
The number of new shares in Reuters Group PLC to be received has been set to
facilitate comparability of earnings per share under UK GAAP with existing
Reuters Holdings PLC shares. US GAAP will treat the reorganisation as a share
consolidation together with a special dividend and accordingly will require
earnings per share to be restated in historical periods for the reduced number
of shares.
One-off tax and other costs relating to the return of capital to shareholders,
principally the cost of remitting funds from overseas subsidiaries, amounted to
(pound)31 million. These costs, which were charged against 1997 earnings,
comprised (pound)23 million included within taxation on profit on ordinary
activities and (pound)8 million of advisers' fees included within operating
costs.
On 4 December 1997, Reuters Group PLC entered into syndicated credit facilities
for (pound)1.5 billion to cover the payment to shareholders under the scheme of
arrangement. The facilities are with a number of Reuters close relationship
banks at variable interest rates based on LIBOR, the London Interbank Offered
Rate. The (pound)1.0 billion facility may be drawn and redrawn until 2 December
1998 at which time Reuters Group PLC may elect to borrow any available amounts
for a period of up to 12 months. The remaining (pound)0.5 billion may be drawn
and redrawn up to one month prior to its maturity on 4 December 2002.
Reuters has put forward proposals to the participants in the Reuters Holdings
PLC share plans which are intended to preserve the value of their rights after
the scheme has come into effect. This will mean in most instances the exercise
of existing options on their existing terms but with arrangements for option
holders to receive shares in Reuters Group PLC in exchange for shares in Reuters
Holdings PLC.
An international SAYE plan, a performance-related share plan and a long-term
incentive plan, each on substantially the same terms as the corresponding plans
in Reuters Holdings PLC, and unapproved executive share option plans, one for
use in the US and the other for use in the rest of the world, have been adopted
by Reuters Group PLC and approved by Reuters Holdings PLC shareholders at the
extraordinary general meeting on 19 January 1998.
71
30. POST BALANCE SHEET EVENT continued
The proforma consolidated balance sheet of Reuters Group PLC at 31 December 1997
is set out below for illustrative purposes only. The movements between this
balance sheet and the audited consolidated balance sheet of Reuters Holdings PLC
are as follows:
As reported Adjustments Proforma
(pound)m (pound)m (pound)m
================================================================================================================
Fixed assets 1,046 - 1,046
Net funds 1,290 (1,513) (223)
Net liabilities (576) 31 (545)
Long term creditors and provisions (81) - (81)
- ----------------------------------------------------------------------------------------------------------------
Net assets 1,679 (1,482) 197
================================================================================================================
Shareholders' equity 1,661 (1,482) 179
Minority interests 18 - 18
- ----------------------------------------------------------------------------------------------------------------
Capital and reserves 1,679 (1,482) 197
================================================================================================================
Net funds reduce by (pound)1,513 million due to the return of surplus capital to
shareholders of (pound)1,482 million which is reflected in shareholders' equity
and (pound)31 million of costs which were accrued at 31 December 1997.
On a proforma basis, assuming the (pound)1,482 million had been paid to
shareholders on 1 January 1997 and funded at an interest rate of 7.5%, group
profit before tax in 1997 would have been (pound)113 million lower at (pound)513
million.
31. CONTINGENT LIABILITY
In January 1998 Reuters was notified that Reuters Analytics Inc. ("Reuters
Analytics"), one of its US subsidiaries, is the subject of a grand jury
investigation in New York. Reuters understands that the investigation is focused
primarily on an arrangement that Reuters Analytics had with a New York-based
consultant. The consultant subscribed to Bloomberg L.P.'s service, which
included the associated data and analytics. The investigation is focused on,
among other things, whether Reuters Analytics improperly induced the consultant
to breach certain provisions of the consultant's subscription agreement by
arranging for the consultant to provide Bloomberg information to Reuters. The
investigation also is focused on the use by Reuters of the transmitted
information - more specifically, for example, whether Bloomberg data obtained
from the consultant was improperly incorporated into Reuters products and
whether Bloomberg information was used by Reuters Analytics for any improper
"reverse engineering" of certain analytics. It is Reuters understanding that the
principal focus of the grand jury investigation is on Reuters Analytics and
certain of its personnel. However, the investigation will also involve an
examination of the activities of other individuals and entities outside Reuters
Analytics. Reuters is co-operating with the investigation and has engaged
external legal counsel to conduct a thorough internal inquiry. At this time
Reuters is unable to predict the impact the investigation or related events may
have on its business or financial condition, and accordingly, no provision has
been made in these financial statements.
72
32. EMPLOYEE SHARE OPTION PLANS
Reuters operates share plans for the benefit of employees as explained in the
report on remuneration. Since the flotation in 1984, Reuters has issued 84
million shares under these plans.
Share option activity for the two years ended 31 December 1997 was as follows:
Weighted
average
exercise
Save-as-you- Executive price
earn plans plans Total (pound)
==================================================================================================================================
Ordinary shares under option in millions (including ADSs):
31 December 1995 27.4 10.1 37.5 2.86
Granted 3.7 - 3.7 6.01
Exercised (7.7) (3.7) (11.4) 2.06
Expired, cancelled or lapsed (1.7) - (1.7) 3.20
- ----------------------------------------------------------------------------------------------------------------------------------
31 December 1996 21.7 6.4 28.1 3.52
Granted 4.8 - 4.8 5.01
Exercised (5.9) (2.7) (8.6) 2.57
Expired, cancelled or lapsed (3.4) (0.3) (3.7) 4.86
- ----------------------------------------------------------------------------------------------------------------------------------
31 December 1997 17.2 3.4 20.6 4.05
==================================================================================================================================
Number of participants at 31 December 1997 7,464 221
==================================================================================================================================
The following table summarises information relating to the number of shares
under option and those which were exercisable at 31 December 1997.
Weighted Shares
average exercisable
remaining Weighted at Weighted
Total shares contractual average 31 december average
under option life exercise 1997 exercise
Range of exercise prices (millions) (months) price (millions) price
=============================================================================================================================
Ordinary shares
(pound)1.00 -(pound)3.00 3.4 2 (pound)2.59 1.0 (pound)2.17
(pound)3.01 -(pound)5.00 8.5 18 (pound)3.82 1.6 (pound)4.31
(pound)5.01 -(pound)7.00 6.4 37 (pound)5.31 - -
ADSs
$00.01 - $20.00 0.2 - $14.12 0.2 $14.12
$20.01 - $40.00 0.9 2 $28.94 0.4 $28.43
$40.01 - $60.00 1.2 13 $43.72 0.2 $43.72
- -----------------------------------------------------------------------------------------------------------------------------
20.6 3.4
=============================================================================================================================
In August 1990 and January 1994, Reuters established employee share ownership
trusts with the power to acquire shares in the open market. The trustee of both
trusts, an off-shore subsidiary of Reuters, is being managed under contract by
an independent management company. Shares purchased by the trusts will be used
to meet obligations under the company's restricted share plans described in the
report on remuneration on pages 28-31. Shares may also be used to satisfy the
exercise of options granted, or to be granted, under the employee share option
plans. Alternatively, new shares may be issued to satisfy these option
obligations.
73
33. OPERATING LEASES
Minimum payments for non-cancellable operating leases for terms in excess of one
year from 31 December are as follows:
1997 1996 1995
(pound)m (pound)m (pound)m
================================================================================
Year ended 31 December
1996 - - 70
1997 - 62 57
1998 62 58 43
1999 60 47 34
2000 51 42 28
2001 45 35 24
2002 38 30 23
Thereafter 149 144 102
- --------------------------------------------------------------------------------
Total minimum lease payments 405 418 381
================================================================================
At 31 December Reuters had commitments to make payments during the following
year under non-cancellable operating leases as follows:
Land and buildings Other
------------------------------------ -----------------------------------------------
1997 1996 1995 1997 1996 1995
(pound)m (pound)m (pound)m (pound)m (pound)m (pound)m
==================================================================================================================================
Operating leases which expire:
Within one year 5 5 7 1 5 2
In the second to fifth years 26 27 31 8 7 15
Over five years 28 28 24 - - -
==================================================================================================================================
34. ACQUISITIONS
(pound)m
==================================================================================================
Consideration:
Paid in the year in respect of subsidiaries and associates (see note 11) 20
Contingent/deferred 6
- --------------------------------------------------------------------------------------------------
Total consideration 26
Total net assets acquired 12
- --------------------------------------------------------------------------------------------------
Goodwill arising on acquisitions in the year 14
Goodwill written back (4)
- --------------------------------------------------------------------------------------------------
Goodwill capitalised in the year (see note 16) 10
==================================================================================================
During 1997 Reuters acquired Bisnews Limited, Hardwick Stafford Wright Limited
and Marvin SA.
Contribution to group revenue of acquisitions made during 1997 was immaterial.
Had these companies been acquired on 1 January 1997, their impact on the group's
results would have been immaterial.
74
35. SUBSIDIARY UNDERTAKINGS
The principal subsidiary undertakings at 31 December 1997, all of which are
included in the consolidated financial statements, are shown below. The shares
in Reuters Limited are held by Reuters Holdings PLC. The shares in the other
companies are held by Reuters Limited or its wholly-owned subsidiaries.
Country Principal Percentage
of area of of equity
Subsidiary undertakings incorporation operation shares held
=====================================================================================================================
Instinet Corporation USA USA 100
Reuters AG Germany Germany 100
Reuters America Inc USA USA 100
Reuters Asia Pte Limited Singapore Asia/Pacific 100
Reuters Australia Pty Limited Australia Australia 100
Reuters Eastern Europe Limited Great Britain Russia 100
Reuters Espana SA Spain Spain 100
Reuters Hong Kong Limited Cook Islands Hong Kong 100
Reuters Italia SpA Italy Italy 100
Reuters Japan Kabushiki Kaisha Japan Japan 100
Reuters Limited Great Britain Worldwide 100
Reuters Nederland BV Netherlands Netherlands 100
Reuters SA Switzerland Continental Europe 100
Reuters Services SARL France France 100
Reuters Singapore Pte Limited Singapore Singapore 100
Reuters Transaction Services Limited Great Britain Worldwide 100
TIBCO Finance Technology Inc USA Worldwide 100
TIBCO Software Inc USA Worldwide 100*
=====================================================================================================================
The activities of the subsidiary undertakings listed above are set out on page
5. The financial years for the above subsidiary undertakings end on 31 December.
Associated undertakings are not listed as their carrying value is only (pound)15
million.
*Excludes the impact of non-equity stock issued during the year (see note 27).
75
BALANCE SHEET OF REUTERS HOLDINGS PLC at 31 December
1997 1996 1995
Notes (pound)m (pound)m (pound)m
===============================================================================================================================
Fixed asset investment 36 165 165 165
Amounts owed by group undertakings 536 545 582
Advance corporation tax recoverable 5 - 6
Short-term investments 5 - -
Proposed dividends (140) (145) (121)
- -------------------------------------------------------------------------------------------------------------------------------
406 400 467
- -------------------------------------------------------------------------------------------------------------------------------
Net assets 571 565 632
===============================================================================================================================
Capital and reserves 37
Called-up share capital 42 42 42
Capital redemption reserve 2 2 2
Share premium account 156 121 76
Profit and loss account reserve 334 363 475
Revaluation reserve 37 37 37
- -------------------------------------------------------------------------------------------------------------------------------
Capital employed 571 565 632
===============================================================================================================================
Profit attributable to shareholders is 182 78 292
This balance sheet was approved by the directors on 13 February 1998.
/s/ Peter Job /s/ Rob Rowley
Peter Job Chief Executive Rob Rowley Finance Director
Advantage has been taken of the provisions of section 230(3) of the Companies
Act 1985 not to produce a separate profit and loss account for Reuters Holdings
PLC.
76
NOTES ON THE BALANCE SHEET OF REUTERS HOLDINGS PLC
36. FIXED ASSET INVESTMENT
The investment represents the shareholding of Reuters Holdings PLC in Reuters
Limited. It is stated at valuation based on the net asset values at 31 December
1983, adjusted for the subsequent conversion of Reuters Limited E shares, and
additional investment of (pound)91 million in 1989.
37. CAPITAL AND RESERVES
Profit
Called-up Capital Share and loss
share redemption premium account Revaluation
capital reserve account reserve reserve Total
(pound)m (pound)m (pound)m (pound)m (pound)m (pound)m
===============================================================================================================================
31 December 1996 42 2 121 363 37 565
Shares issued during the year - - 35 - - 35
Shares repurchased during the year - - - (21) - (21)
Retained loss for the year - - - (8) - (8)
- -------------------------------------------------------------------------------------------------------------------------------
31 December 1997 42 2 156 334 37 571
===============================================================================================================================
The retained loss for the year represents dividends paid to shareholders and
certain administrative costs less dividends from Reuters Limited.
77
ACCOUNTING POLICIES
ACCOUNTING BASIS - The financial statements are prepared under the historical
cost convention and in accordance with applicable accounting standards. As set
out in note 26 the treatment of interest in shares of Reuters Holdings PLC has
been varied from that set out in Schedule 4 of the Companies Act 1985 in order
to show a true and fair view.
BASIS OF CONSOLIDATION - The consolidated financial statements include:
a.The financial statements of Reuters Holdings PLC and its subsidiaries to 31
December. The results of subsidiaries are included for the period during which
they are a member of the group.
b.Reuters share of the post-acquisition results of associated undertakings.
Investments in associated undertakings are included at Reuters share of the
tangible net assets at the dates of acquisition plus the group's share of
post-acquisition reserves.
FOREIGN CURRENCY TRANSLATION - Where it is considered that the functional
currency of an operation is sterling the financial statements are expressed in
sterling on the following basis:
a.Fixed assets are translated into sterling at the rates ruling on the date of
acquisition as adjusted for any profits or losses from related financial
instruments.
b.Monetary assets and liabilities denominated in a foreign currency are
translated into sterling at the foreign exchange rates ruling at the balance
sheet date.
c.Revenue and expenses in foreign currencies are recorded in sterling at the
rates ruling for the month of the transactions.
d.Any gains or losses arising on translation are reported as part of profit.
For other operations and associated undertakings, assets and liabilities are
translated into sterling at the rates ruling at the balance sheet date. Revenue
and expenses in foreign currencies are recorded in sterling at the rates ruling
for the month of the transactions and gains or losses arising on translation are
dealt with through reserves.
TREASURY - Reuters receives revenue and incurs expenses in more than 60
currencies and uses financial instruments to hedge a portion of its net cash
flow and operating profit. Profits and losses from hedging activities are
matched with the underlying cash flows and profits being hedged. Those relating
to trading cash flows are reported as part of profit and those relating to
Reuters capital expenditure programme are adjusted against the cost of the
assets to which they relate.
Reuters uses financial instruments to hedge a portion of its interest exposure.
Profits and losses on financial instruments are reported as part of profit for
the period to which they relate. Financial instruments hedging the risk on
foreign currency assets are revalued at the balance sheet date and the resulting
gain or loss offset against that arising from the translation of the underlying
asset into sterling.
REVENUE - Revenue represents the turnover, net of discounts, derived from
services provided to subscribers and sales of equipment applicable to the year.
Short-term contracts are accounted for on a completed contract basis.
INSTINET TRANSACTIONS - Securities transactions between Instinet counterparties
which pass through Instinet in its role as an agency broker are recorded on a
settlement date basis and, therefore, are only reflected in the balance sheet if
there is a failure to settle. Revenues and related expenses arising from such
securities transactions are accrued from the date of the transaction.
DEVELOPMENT - Development expenditure is charged against profit in the year in
which it is incurred.
PENSIONS AND SIMILAR OBLIGATIONS - The expected cost of pensions and other
post-retirement benefits is charged against profit so as to spread the cost over
the service lives of the employees affected.
RESTRICTED SHARE AND INSTINET LONG-TERM INCENTIVE PLANS - Costs of the
restricted share and Instinet long-term incentive plans are charged to profit
over the vesting period of the awards.
TANGIBLE FIXED ASSETS - Depreciation is calculated on a straight line basis so
as to write down the assets to their residual values over their expected useful
lives:
Freehold land Not depreciated
Freehold buildings Normally 50 years
Leasehold property Over the term of the lease
Computer systems equipment,
office equipment and motor
vehicles 3-5 years
STOCKS - Stocks and contract work in progress are valued at the lower of cost
and net realisable value less progress payments received and receivable from
clients. Progress payments in excess of the value of work carried out are
included within creditors.
Cost is calculated on a first in first out basis by reference to the
invoiced value
78
of supplies and attributable costs of bringing stocks to their present location
and condition.
Net realisable value is the estimated market value less selling costs.
SHORT-TERM INVESTMENTS - Government securities are stated in the balance sheet
at the lower of cost plus accrued capital appreciation and market value. Income
from these securities and any adjustment for changes in their market value
during the year are reported as part of profit.
Interest on certificates of deposit is calculated at the yield at which the
certificate was purchased and is reported as part of profit over the life of the
certificate. Certificates of deposit are stated in the balance sheet at the
lower of cost plus accrued interest and market value.
Movements in short-term investments are reported under the heading of management
of liquid resources in the cash flow statement.
LEASING - Assets acquired under a finance lease are recorded in the balance
sheet as tangible fixed assets with corresponding obligations to pay future
rentals. The assets are valued at the present value of the minimum lease
payments at the rate implicit in the lease.
Rentals payable are apportioned between a finance charge and a reduction of the
outstanding obligation for future amounts payable. The total finance charge is
allocated to accounting periods during the lease term so as to produce a
constant periodic rate of charge on the outstanding obligation throughout the
lease.
Operating lease rentals are charged against profit on a straight line basis over
the period of the lease.
DEFERRED TAXATION - Tax deferred or accelerated by the effect of timing
differences is accounted for to the extent that it is considered probable that a
liability or asset will crystallise in the foreseeable future. The only
exception to this is in respect of deferred tax assets relating to provisions
for pensions and other post-retirement benefits which are recognised in full.
GOODWILL AND INTANGIBLE ASSETS - Purchased goodwill and intangible assets are
capitalised and amortised through the profit and loss account over their
estimated lives which are between five and 20 years.
INTEREST IN SHARES OF REUTERS HOLDINGS PLC - Shares held by subsidiary
undertakings are recorded in the balance sheet as a deduction from shareholders'
equity at cost including expenses. Shares held by the employee share ownership
trusts are recorded in the balance sheet within fixed asset investments at cost
including expenses less amounts written off.
79
SUMMARY OF DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (GAAP)
ACCOUNTING PRINCIPLES - These consolidated financial statements have been
prepared in accordance with UK GAAP, which differ in certain significant
respects from US GAAP. A description of the relevant accounting principles which
differ materially is given below:
GOODWILL AND OTHER ACQUISITION ACCOUNTING ADJUSTMENTS - UK GAAP require
purchased goodwill to include an estimate of the fair value of any deferred
consideration. Under US GAAP, contingent consideration is recognised as a
component of goodwill when the contingency is resolved.
SOFTWARE DEVELOPMENT COSTS - Under UK GAAP, costs of developing computer
software products are expensed in the year in which they are incurred. Under US
GAAP, the costs of developing computer software products subsequent to
establishing technical feasibility are capitalised. The amortisation of the
capitalised costs is based on the estimated future revenues or remaining
estimated useful economic lives of the products involved.
EMPLOYEE COSTS - Since 1990, options have been granted under Reuters
save-as-you-earn plans at a 20% discount. Under UK GAAP, the share issues are
recorded at their discounted price when the options are exercised. Under US
GAAP, the discount is regarded as employee compensation and is accrued over the
vesting period of the grants.
TAXES ON INCOME - Under UK GAAP, deferred taxes are accounted for to the extent
that it is considered probable that a liability or asset will crystallise in the
foreseeable future. Under US GAAP, deferred taxes are accounted for on all
timing differences and a valuation allowance is established in respect of those
deferred tax assets where it is more likely than not that some portion will
remain unrealised. Deferred tax also arises in relation to the tax effect of the
other US GAAP adjustments.
DIVIDENDS - Under UK GAAP, dividends are provided for in the year in respect of
which they are declared or proposed. Under US GAAP, dividends and the related
advance corporation tax are given effect only in the period in which dividends
are formally declared.
SHARES HELD BY EMPLOYEE SHARE OWNERSHIP TRUSTS (ESOTS) - Under UK GAAP, shares
held by the ESOTs are recorded as fixed asset investments at cost less amounts
written off. Under US GAAP, those shares not fully vested are regarded as
treasury stock and recorded at cost as a deduction from shareholders' equity.
FIXED ASSET INVESTMENTS - Under UK GAAP, fixed asset investments are held in the
balance sheet at the lower of cost or net realisable value. Under US GAAP, fixed
asset investments which are available for sale are stated at fair value with
unrealised gains or losses included in shareholders' equity.
The effects of these differing accounting principles are shown in notes
38-40.
CASH FLOW STATEMENTS - The cash flow statement set out on pages 55-57 has been
prepared in conformity with UK Financial Reporting Standard 1 (Revised) Cash
Flow Statements. The principal differences between this statement and cash flow
statements presented in accordance with US Financial Accounting Standard 95 are
as follows:
1.Under UK GAAP, net cash flow from operating activities is determined before
considering cash flows from (a) returns on investments and servicing of finance
and (b) taxes paid. Under US GAAP, net cash flow from operating activities is
determined after these items.
2.Under UK GAAP, capital expenditure is classified separately while under US
GAAP, it is classified as an investing activity.
3.Under UK GAAP, dividends are classified separately while under US GAAP,
dividends are classified as financing activities.
4.Under UK GAAP, movements in short-term investments are not included in cash
but classified as management of liquid resources. Under US GAAP, short-term
investments with a maturity of three months or less at the date of acquisition
are included in cash.
5.Under UK GAAP, movements in bank overdrafts are classified as movements in
cash while under US GAAP, they are classified as a financing activity.
Set out below is a summary consolidated cash flow statement under US GAAP:
1997 1996 1995
(pound)m (pound)m (pound)m
===============================================================================================================================
Net cash inflow from operating activities 817 866 751
Net cash outflow from investing activities (400) (501) (319)
Net cash outflow from financing activities (85) (5) (249)
- -------------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents under US GAAP 332 360 183
- -------------------------------------------------------------------------------------------------------------------------------
Net (decrease)/increase in cash under UK GAAP (see notes 4-5 above) (31) 52 (18)
===============================================================================================================================
80
38. ADJUSTMENTS TO NET INCOME
Restated
------------------------
1997 1996 1995
(pound)m (pound)m (pound)m
================================================================================================================================
Profit attributable to ordinary shareholders in accordance with UK GAAP 390 442 373
US GAAP adjustments:
Acquisition accounting adjustments (see note below) (3) 2 (6)
Software development costs (2) (2) (2)
Employee costs (3) (7) (6)
Taxes 4 5 7
- --------------------------------------------------------------------------------------------------------------------------------
Approximate net income in accordance with US GAAP 386 440 366
================================================================================================================================
1997 1996 1995
pence pence pence
================================================================================================================================
Basic earnings per ADS in accordance with US GAAP 142.6 163.2 136.9
- --------------------------------------------------------------------------------------------------------------------------------
Diluted earnings per ADS in accordance with US GAAP 141.6 161.0 134.9
- --------------------------------------------------------------------------------------------------------------------------------
Dividends paid per ADS (including UK advance corporation tax credit) 90.8 76.9 63.0
================================================================================================================================
In 1997 the UK Accounting Standards Board issued Financial Reporting Standard 10
Goodwill and Intangible Assets. Reuters has adopted this Standard in 1997 and,
in line with its transition arrangements, has, by way of a prior year
adjustment, capitalised and amortised all goodwill previously written off
against reserves. Amortisation periods are in line with those used under US
GAAP. 1995 and 1996 profit attributable to ordinary shareholders in accordance
with UK GAAP has been restated and goodwill ceases to be a US GAAP adjustment
except where affected by timing differences in the recognition of deferred
consideration.
The company has complied with Financial Accounting Standard 123, Accounting for
Stock-Based Compensation (FAS 123). Reuters has continued to apply the
methodologies set out in APB Opinion 25, Accounting for Stock Issued to
Employees, and other US GAAP literature in calculating its US GAAP adjustments
for share option plans and awards of share rights. Had Reuters elected to
recognise compensation expense based upon the fair value at grant date for
awards made in 1995, 1996 and 1997 under these plans consistent with the
alternative methodology set out in FAS 123, net income and earnings per ADS in
accordance with US GAAP would not have been materially different from those
shown above. This position may not be representative of future disclosures since
the estimated fair value of share options is amortised to expense over the
vesting period and additional options may be granted in future years.
81
39. ADJUSTMENTS TO SHAREHOLDERS' EQUITY
Restated
1997 1996 1995
(pound)m (pound)m (pound)m
==============================================================================================================================
Capital employed before minority interest in accordance with UK GAAP 1,661 1,458 1,211
US GAAP adjustments:
Acquisition accounting adjustments 11 8 (35)
Capitalised software development costs net of amortisation 8 10 12
Fixed asset investments 14 - -
Shares held by employee share ownership trusts (39) (28) (26)
Liabilities (25) (19) 53
Taxes (16) (13) (37)
Dividends not formally declared or paid during the year 140 145 121
- ------------------------------------------------------------------------------------------------------------------------------
Shareholders' equity in accordance with US GAAP 1,754 1,561 1,299
==============================================================================================================================
40. SUMMARISED BALANCE SHEET (US GAAP BASIS)
1997 1996 1995
(pound)m (pound)m (pound)m
==============================================================================================================================
Assets
Fixed tangible assets 858 800 709
Current assets 1,732 1,467 1,292
Other assets 58 40 46
Software development costs 8 10 12
Goodwill and other intangibles 174 206 229
- ------------------------------------------------------------------------------------------------------------------------------
Total assets 2,830 2,523 2,288
==============================================================================================================================
Liabilities and shareholders' equity
Current liabilities 940 845 866
Long-term liabilities 86 84 105
Deferred taxes 32 32 17
Minority interest 18 1 1
Shareholders' equity before deductions 1,889 1,684 1,414
Treasury stock (82) (82) (82)
Shares held by employee share ownership trusts (53) (41) (33)
- ------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 1,754 1,561 1,299
- ------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity 2,830 2,523 2,288
==============================================================================================================================
Goodwill and other intangibles are net of accumulated amortisation of (pound)322
million (1996 - (pound)270 million, 1995 - (pound)221 million). Software
development costs are net of accumulated amortisation of (pound)11 million (1996
- - (pound)9 million, 1995 - (pound)7 million).
82
OTHER INFORMATION FOR SHAREHOLDERS
ORDINARY SHARES - A register of shareholders' interests is kept at the company's
head office and is available for inspection on request. The register includes
information on nominee accounts and their beneficial owners.
A newspaper for investors, 'News from Reuters', is published several times a
year. To obtain copies, contact the Investor Relations department in London,
Geneva or New York (addresses on page 90).
Hoare Govett and Cazenove & Co. offer a low cost share dealing service for
existing and potential Reuters shareholders. Further information can be obtained
from Hoare Govett Corporate Finance Limited's Low Cost Share Dealing Department,
4 Broadgate, London EC2M 7LE (Tel: 0171 601 0101) and Mrs Nancy Young, Postal
Dealing Department Cazenove & Co., 12 Tokenhouse Yard, London EC2R 7AN (Tel:
0171 606 1768).
Reuters offers a single company Personal Equity Plan (PEP) and a general PEP for
UK residents wishing to hold Reuters shares in such plans. The plan manager,
Bank of Scotland, is regulated in the conduct of PEP investment business by the
Investment Management Regulatory Organisation (IMRO). Further information can be
obtained from Bank of Scotland, Personal Equity Plans, 101 George Street,
Edinburgh EH2 3JH (Tel: 0131 243 8053).
DIVIDENDS AND EARNINGS - Ordinary shareholders have received the following
dividends in respect of each financial year:
1997 1996 1995 1994 1993
===============================================================================================================================
Interim 3.1p 2.75p 2.3p 1.9p 1.55p
Final (1997 proposed) 9.9p 9.0p 7.5p 6.1p 4.95p
- -------------------------------------------------------------------------------------------------------------------------------
13.0p 11.75p 9.8p 8.0p 6.50p
===============================================================================================================================
Earnings per ordinary share 24.0p 27.3p 23.2p 19.9p 16.9p
Adjusted earnings per ordinary share 29.1p 30.4p 25.8p 21.7p 18.0p
Ordinary shareholders living in selected countries outside the United Kingdom
can have their dividends paid directly into their bank accounts in local
currency through Bank of Scotland's transcontinental automated payment service.
Any shareholders interested in this service, for which there is a small charge,
should write to Bank of Scotland (address on page 90).
ANALYSIS OF SHAREHOLDINGS AT 31 DECEMBER 1997 - Excluding Reuters interest in
its own shares (see note 7 on page 54), there were 1,623 million shares in
issue, analysed as in the chart below. There were 25,769 shareholders on the
ordinary share register.
%
Pension funds 30
American Depositary Shares 23
Insurance companies 15
Investment funds and trusts1 9
Individuals 5
Foreign governments 2
Corporate holdings 2
Other2 14
(1) including UK unit trusts and US mutual funds.
(2) including all holdings below 100,000 shares, except for individuals, whose
holdings are analysed below this level.
83
AMERICAN DEPOSITARY SHARES (ADSs) - Each ADS represents six ordinary shares.
ADS holders receive the annual and half-yearly reports issued by Reuters
Holdings PLC.
Reuters Holdings PLC is subject to the informational requirements of the US
securities laws applicable to foreign companies and in accordance therewith
files an annual report on Form 20-F and other information with the US Securities
and Exchange Commission. Form 20-F is also available from the Investor Relations
departments in London or New York.
ADS DIVIDENDS - ADS holders are eligible for all stock dividends or other
entitlements accruing on the underlying Reuters Holdings PLC shares and receive
all cash dividends in US dollars. These are normally paid twice a year.
Dividend cheques are mailed directly to the ADS holder on the payment date if
ADSs are registered with Reuters US depositary. Dividends on ADSs that are
registered with brokers are sent to the brokers, who forward them to ADS
holders. Reuters US depositary is Morgan Guaranty Trust Company of New York
(address on page 90).
ADS holders should be aware of tax refunds that increase the cash dividends paid
to qualifying US residents. Dividends per ADS, including UK tax refunds but
before US tax credits, in respect of each financial year are set out below.
1997 1996 1995 1994 1993
===============================================================================================================================
In sterling
Interim 19.8p 17.5p 14.7p 12.1p 9.9p
Final (1997 proposed) 63.1p 57.4p 47.8p 38.9p 31.6p
- -------------------------------------------------------------------------------------------------------------------------------
82.9p 74.9p 62.5p 51.0p 41.5p
===============================================================================================================================
In dollars
Interim 31.2c 27.3c 22.7c 18.9c 15.3c
Final (1997 proposed) * 93.1c 72.2c 62.6c 47.5c
===============================================================================================================================
* Final 1997 dividend will be converted to US dollars from sterling at the rate
prevailing on 1 May 1998.
The figures above include a refund of UK tax, less a UK withholding tax of 15%
of the total of the dividend and the tax credit. Since 1993 the tax credit has
been one-quarter of the amount of the dividends on the ordinary shares. Prior to
1993 it was one-third. For 1997 the total of the declared dividends per ADS is
78.0p, the related tax credit per ADS is 19.5p and the withholding tax per ADS
is 14.6p, giving a net UK tax refund of 4.9p per ADS and a total cash payment of
82.9p per ADS.
ADS holders who are US residents for tax purposes may normally credit the
withholding tax against their federal income tax liabilities. The UK net tax
refund together with the US tax credit can, therefore, effectively increase the
value of the gross dividends paid to qualifying ADS holders by up to 25% in
sterling terms over the amount of the declared dividends on the underlying
ordinary shares. The amount of the credit is specified on Internal Revenue
Service Form 1099, which is provided to ADS holders automatically by the
depositary agent.
Dollar amounts paid to ADS holders depend on the sterling/dollar exchange rate
at the time of payment.
84
PRESERVING REUTERS INDEPENDENCE
Customers in all parts of the world depend on Reuters to provide them with
reliable and objective news and information.
Reuters therefore has a special need to safeguard its independence and integrity
and avoid any bias which may stem from control by any particular individuals or
interests. Reuters share structure includes two mechanisms specifically designed
to prevent this happening:
No shareholder may own 15% or more shares.
There is a single Founders Share, in addition to the publicly traded ordinary
shares. This may be used to outvote all ordinary shares If other safeguards fail
and there is an attempt to seize control of the company. "Control", for this
purpose, means 30% of the shares.
The Reuter Trust Principles, which are protected by the Founders Share, also
impose further obligations. The Principles and a list of the trustees are
printed on page 86.
FINANCIAL DIARY FOR 1998
Monday 19 January Extraordinary general meeting at Merchant Taylors' Hall
30 Threadneedle Street, London EC2R
8AY (Tel: 0171 588 7606)
Tuesday 10 February Results for year 1997 announced
Friday 6 March Annual report posted to shareholders
Monday 16 March Ordinary shares go ex-dividend
Wednesday 18 March ADSs go ex-dividend
Tuesday 21 April First quarter trading statement issued
Annual general meeting at Stationers' Hall, Ave Maria
Lane, London EC4M 7DD
(Tel: 0171 248 2934)
Monday 27 April Final dividend for 1997 payable to ordinary
shareholders on the register as at 20 March 1998
Friday 1 May Final dividend payable to ADS holders on the register
as at 20 March 1998
Wednesday 22 July Results for the first six months of 1998 announced
Monday 3 August Ordinary shares go ex-dividend
Wednesday 5 August ADSs go ex-dividend
Tuesday 8 September Interim dividend for 1998 payable to ordinary
shareholders on the register as at 7 August 1998
Monday 14 September Interim dividend payable to ADS holders on the
register as at 7 August 1998
Thursday 22 October Third quarter trading statement issued
85
THE REUTER TRUST PRINCIPLES
Reuters is dedicated to preserving its independence, integrity and freedom from
bias in the gathering and dissemination of news and information. The Reuters
Founders Share Company Limited, of which all Reuter trustees are directors, was
established to safeguard those qualities. The trustees have a duty to ensure
that, as far as they are able by the proper exercise of the powers vested in
them, the Reuter Trust Principles are observed. These are:
- - That Reuters shall at no time pass into the hands of any one interest, group
or faction;
- - That the integrity, independence and freedom from bias of Reuters shall at all
times be fully preserved;
- - That Reuters shall supply unbiased and reliable news services to newspapers,
news agencies, broadcasters and other media subscribers and to businesses,
governments, institutions, individuals and others with whom Reuters has or may
have contracts;
- - That Reuters shall pay due regard to the many interests which it serves in
addition to those of the media; and
- - That no effort shall be spared to expand, develop and adapt the news and other
services and products of Reuters so as to maintain its leading position in the
international news and information business.
If the trustees believe that any person, together with any associates, is
seeking to obtain or has obtained control of Reuters Holdings PLC, a majority of
the Reuter trustees may require the votes attaching to the Founders Share to be
exercised. "Control" means the ability to control the exercise of 30% or more of
the votes which may be cast on a poll at general meetings of Reuters Holdings
PLC. In such circumstances, the Founders Share Company has the right at any
general meeting of Reuters Holdings PLC to cast sufficient votes to pass any
resolution supported by, and to defeat any resolution opposed by, the Founders
Share Company.
Any two Reuter trustees may require the votes attaching to the Founders Share to
be cast against any resolution which would alter any of the articles of
association of Reuters Holdings PLC relating to the Reuter Trust Principles and
the rights of the Founders Share. In such circumstances, the Founders Share
confers upon the Founders Share Company the right to cast sufficient votes to
defeat that resolution.
The Reuter trustees are: Sir Frank Rogers (Chairman); The Rt Hon the Lord
Browne-Wilkinson; Sir Michael Checkland; David Cole CBE; Christopher Dicks; Pehr
Gyllenhammar; Sir Gordon Linacre CBE AFC DFM; Kenneth Morgan OBE; The Rt Hon the
Viscount Rothermere; Arthur Ochs Sulzberger; Lyle Turnbull AO; Richard Winfrey.
Following the capital reorganisation the existing Founders Share in Reuters
Holdings PLC will be cancelled and a Founders Share with like rights will be
issued by Reuters Group PLC to the Reuters Founders Share Company Limited.
86
GLOSSARY
TERM USED IN ANNUAL REPORT US EQUIVALENT OR BRIEF DESCRIPTION
- -------------------------- ----------------------------------
Advance corporation tax No direct US equivalent. Tax paid on company
distributions recoverable from UK taxes due
on income
Allotted Issued
Associated undertakings Affiliates accounted for under the equity
method
Cadbury Committee UK committee set up in 1991 to address the
financial aspects of corporate governance
Called-up share capital Ordinary shares, issued and fully paid
Capital allowances Tax term equivalent to US tax depreciation
allowances
Cash at bank and in hand Cash
Class of business Industry segment
Creditors Accounts payable
Creditors: Amounts falling due
after more than one year Long-term debt
Creditors: Amounts falling due
within one year Current liabilities
Debtors Accounts receivable
Destination (of revenue) The geographical area to which goods or
services are supplied
Finance lease Capital lease
Freehold Ownership with absolute rights in perpetuity
Greenbury Committee UK committee set up in 1995 to address the
issue of directors' remuneration
Hampel Committee UK committee set up in 1995 to review
implementation of the recommendations made by
the Cadbury and Greenbury Committees.
Interest receivable Interest income
Interest in shares of
Reuters Holdings PLC Treasury stock
Origin (of revenue) The geographical area from which goods or
services are supplied to a third party or
another geographical area
Profit Income
Profit and loss account
(statement) Income statement
Profit and loss account reserve
(under "capital and reserves") Retained earnings
Profit attributable to ordinary
shareholders Net income
Proposed dividend Dividend declared by directors but not yet
approved by shareholders
Revaluation reserve No direct US equivalent. Represents the
increase in the valuation of Reuters Limited
net assets as compared with historical cost
at 31 December 1983 to the extent that it is
attributable to the parent company,
Reuters Holdings PLC
Share capital Ordinary shares, capital stock or common
stock issued and fully paid
Share premium account Additional paid-in capital or paid-in surplus
(not distributable)
Shares in issue Shares outstanding
Stocks Inventories
Tangible fixed assets Property and equipment
87
ORDINARY SHARES HIGHS/LOWS 1997 (pence)
Lowest Highest
------ -------
J 650 755
F 599.8 685
M 598 662
A 576 632.5
M 630 707
J 606 707
J 555 692
A 612.3 696.5
S 620 740
O 590 782
N 620 707
D 629 740
The highest price in 1997 was 782p, the lowest 555p.
ADS HIGHS/LOWS 1997 (US Dollars)
Lowest Highest
------ -------
J 62-1/4 76-3/4
F 60-7/8 65-7/8
M 58 64
A 56 62
M 63-7/8 68-3/4
J 62-3/4 69-1/2
J 56-3/4 65-3/4
A 58-1/2 66-5/8
S 59-7/8 71-1/2
O 60 75-5/8
N 62-11/16 71-7/16
D 62-5/8 72-5/8
The highest price in 1997 was $76-3/4, the lowest $56.
REVENUE PER EMPLOYEE (pound)000
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
Revenue 180 195 191 182 173 151 136 129 118 101 101
====================================================================================================================================
ELEVEN YEAR CONSOLIDATED FINANCIAL SUMMARY for the year ended 31 December
Restated Restated
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
(pound)m (pound)m (pound)m (pound)m (pound)m (pound)m (pound)m (pound)m (pound)m (pound)m (pound)m
====================================================================================================================================
Results
Revenue 2,882 2,914 2,703 2,309 1,874 1,568 1,467 1,369 1,187 1,003 867
Net interest receivable 80 61 60 51 60 66 49 30 19 9 11
Profit before tax 626 652 558 510 440 383 340 320 283 208 179
Taxation 236 210 185 162 140 123 110 112 102 81 69
Profit attributable to ordinary
shareholders 390 442 373 347 299 236 230 207 181 126 109
Net assets
Fixed assets 1,046 1,026 999 687 571 499 488 531 484 408 281
Net current assets/(liabilities) 714 525 387 176 151 419 289 81 (33) (46) (45)
Long-term creditors (37) (41) (135) (87) (32) (26) (30) (27) (22) (77) (19)
Provisions (44) (51) (39) (36) (32) (23) (25) (30) (20) (11) (2)
- ------------------------------------------------------------------------------------------------------------------------------------
1,679 1,459 1,212 740 658 869 722 555 409 274 215
- ------------------------------------------------------------------------------------------------------------------------------------
Tangible fixed assets
Additions 361 372 304 319 268 199 159 196 193 229 152
Depreciation 312 283 250 221 204 186 193 140 110 95 78
Development expenditure 235 202 191 159 110 79 67 62 60 55 48
Free cash flow 449 494 455 321 224 276 339 227 54 30 53
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
====================================================================================================================================
Ratios
Earnings per ordinary share 24.0p 27.3p 23.2p 21.7p 18.0p 14.0p 13.7p 12.4p 10.9p 7.6p 6.5p
Adjusted earnings per ordinary
share (1) 29.1p 30.4p 25.8p 21.7p 18.0p 14.0p 13.7p 12.4p 10.9p 7.6p 6.5p
Dividends per ordinary share 13.0p 11.75p 9.8p 8.0p 6.5p 5.3p 4.25p 3.75p 3.25p 2.25p 1.83p
Cash flow per ordinary share (2) 61.0p 60.7p 52.7p 45.6p 40.3p 33.6p 31.7p 27.4p 23.6p 18.3p 15.3p
Book value per ordinary share (3) 99.9p 88.3p 73.7p 44.7p 40.6p 51.2p 42.7p 32.9p 24.5p 16.4p 12.8p
Cash flow/book value (4) 61.0% 68.8% 71.5% 102.0% 99.2% 65.7% 74.2% 83.5% 96.2% 111.4% 119.7%
Profit before tax as a percentage
of revenue 21.7% 22.4% 20.6% 22.1% 23.5% 24.4% 23.2% 23.4% 23.8% 20.7% 20.6%
Return on tangible fixed assets (5) 49.0% 60.0% 55.2% 57.6% 57.2% 53.2% 45.4% 41.3% 40.9% 37.2% 45.9%
Return on equity (6) 25.6% 33.7% 34.8% 50.8% 39.5% 29.9% 36.2% 43.2% 53.6% 51.8% 55.2%
UK corporation tax rate 31.5% 33.0% 33.0% 33.0% 33.0% 33.0% 33.25% 34.25% 35.0% 35.0% 35.0%
Infrastructure
Shares issued (millions) 1,694 1,689 1,677 1,668 1,662 1,753 1,743 1,735 1,724 1,686 1,683
Employees 16,119 15,478 14,348 13,548 11,306 10,393 10,450 10,731 10,071 10,064 9,586
User accesses 435,000 362,000 327,100 296,700 227,400 200,800 201,800 200,900 194,800 169,100 141,300
====================================================================================================================================
NOTES.
1987 to 1994 have not been restated to reflect the effect of FRS 10, issued in
1997, which requires purchased goodwill and intangible assets to be capitalised
and amortised through the profit and loss account.
1987 to 1988 have not been restated to reflect the effects of the prior year
adjustment for pensions made in 1989.
1987 to 1991 have not been restated to reflect the effects of the prior year
adjustment for post-retirement medical benefits made in 1992.
1987 to 1991 have not been restated to reflect the change to reporting user
accesses in 1994.
1987 to 1993 have been restated for the subdivision of every ordinary share of
10 pence each into four new ordinary shares of 2.5 pence each in April 1994.
1988 has been restated to reflect the cost of discontinuing operations at IDR
Inc. as an exceptional item rather than an extraordinary item.
1990 to 1994 fixed assets have been restated to reflect the effect of UITF
abstract 13 issued in 1995.
Free cash flow is defined as net cash inflow from operating activities plus net
interest received less tax paid and expenditure on tangible fixed assets.
RATIOS.
(1)Adjusted earnings per share are based on profit attributable to ordinary
shareholders excluding capital reorganisation costs and goodwill amortisation.
(2)Cash flow per ordinary share represents profit before taxation, goodwill
amortisation and depreciation divided by the number of shares in issue after
deducting shares of Reuters Holdings PLC held by group companies and by employee
share ownership trusts.
(3)Book value per ordinary share represents adjusted shareholders' equity
divided by the number of shares in issue after deducting shares of Reuters
Holdings PLC held by group companies and by employee share ownership trusts.
Adjusted shareholders' equity is calculated after deducting the carrying value
of interests in shares of Reuters Holdings PLC.
(4)Cash flow/book value represents profit before taxation, goodwill amortisation
and depreciation as a percentage of adjusted shareholders' equity.
(5)Return on tangible fixed assets represents profit after taxation as a
percentage of average tangible fixed assets. The average is calculated by adding
tangible fixed assets at the start and the end of each year and dividing by two.
(6)Return on equity represents profit attributable to ordinary shareholders
divided by the average adjusted shareholders' equity. The average is calculated
by adding adjusted shareholders' equity at the start and the end of each year
and dividing by two.
88 - 89
WHERE TO FIND US
CORPORATE HEADQUARTERS:
85 Fleet Street
London EC4P 4AJ
Tel: 44 (0171) 250 1122
Registered in England No. 1796065
http://www.reuters.com
OTHER PRINCIPAL ADDRESSES:
1700 Broadway
New York NY 10019
USA
Tel: 1 (212) 603 3300
1 Rue de Jargonnant
1207 Geneva
Switzerland
Tel: 41 (022) 718 2828
3rd Floor
Shuwa Kamiyacho Building
4-3-13 Toranomon
Minato-ku, Tokyo 105
Japan
Tel: 81 (03) 3432 4141
18 Science Park Drive
Singapore 118229
Republic of Singapore
Tel: 65 775 5088
INVESTOR RELATIONS:
Geoff Wicks
London
Tel: 44 (0171) 542 8666
Fax: 44 (0171) 542 3002
Email: geoff.wicks@reuters.com
Nancy Bobrowitz
New York
Tel: 1 (212) 603 3244
Fax: 1 (212) 247 0346
Email: nancy.bobrowitz@reuters.com
Marcus Ferrar
Geneva
Tel: 41 (022) 718 2405
Fax: 41 (022) 718 2697
Email: marcus.ferrar@reuters.com
MEDIA QUERIES:
Peter Thomas
London
Tel: 44 (0171) 542 4890
Fax: 44 (0171) 542 5458
Email: peter.v.thomas@reuters.com
Robert Crooke
New York
Tel: 1 (212) 603 3587
Fax: 1 (212) 247 0346
Email: robert.crooke@reuters.com
Marcus Ferrar
Geneva
Tel: 41 (022) 718 2405
Fax: 41 (022) 718 2697
Email: marcus.ferrar@reuters.com
Liam Hwee Tay
Singapore
Tel: 65 870 3028
Fax: 65 870 3456
Email: liam.tay@reuters.com
REGISTRAR/DEPOSITARY: FOR DIVIDEND QUERIES, DUPLICATE MAILINGS AND ADDRESS
CHANGES
ORDINARY SHARES
Bank of Scotland
Apex House
9 Haddington Place
Edinburgh EH7 4AL
Tel: 44 (0) 870 601 5366
Fax: 44 (0131) 243 5327
AMERICAN DEPOSITARY SHARES
Morgan Guaranty Trust Company
of New York
PO Box 8205
Boston, MA 02266-8205
Tel: 1 (781) 575 4328
Fax: 1 (781) 575 4088
LISTINGS - London Stock Exchange Limited and NASDAQ (American Depositary Share
symbol RTRSY).
Options on ordinary shares are traded on the London International Financial
Futures and Options Exchange. The American Stock Exchange in New York lists
options on American Depositary Shares of Reuters.
SHARE PRICE INFORMATION - Share price information about Reuters Holdings PLC is
available on the Reuters Securities 3000, Securities 2000, Equity Focus and
Quotron products. Reuters Instrument Codes (RlCs) and Quotron codes are as
follows:
Equity Focus
Securities 2000 Quotron
Securities 3000
Ordinary shares RTR.L RTRU.EU
ADSs traded on NASDAQ RTRSY.O RTRSY
ADSs traded on the London Stock Exchange Limited RTRSy.L RTRAU.EU
Within the UK, information on ordinary shares is available by telephone. Dial
0839 500 233 for the mid-market price quoted on the London Stock Exchange
Limited. There is a charge of approximately 13p per call.
This annual report is available on the Internet at
http://www.reuters.com/ar1997/
FORM 20-F - Filed with US Securities and Exchange Commission. Form 20-F
corresponds to the Form 10-K filed by US-based companies. Printed copies are
available from the Investor Relations departments in London and New York.
Electronic copies can be accessed on the Internet at
http://www.reuters.com/ar1997/20-f/frames/indexframe.html or from the SEC's
EDGAR database via http://www.sec.gov.
Ric Gemmell took the photographs on pages 12, 14, 18 and 19.
Lance Bell, Reuters News Graphics, drew the cartoon opposite.
(C) Reuters Holdings PLC 1998. Design by CGI. Typesetting by Real Time Studio.
Printing by Litho-Tech. The paper used in this annual report is from fully
sustainable forests. It was produced without the use of any chlorine compounds.
Instinet is a registered trade mark of Instinet Corporation. Quotron is a
registered trade mark of Quotron Systems, Inc. Reuters is a registered trademark
in more than 25 countries.
90
10:12 12 June Italy well on course towards EMU goals - Prodi
Rome, June 12 (Reuters) - Italy has made huge strides towards satisfying
criteria for the European single currency, Prime Minister Romano Prodi said on
Thursday.
He said he had been particularly satisfied to have been able to tell
this to leaders of mainly Christian Democrat parties at a meeting in Strasbourg
earlier this week.
"At this meeting with European party leaders," Prodi said, "I told them; you
haven't understood anything. For a year I've been running a government with a
Reuters screen for the markets on my right and Bertinotti on my left, and
everything's fine."
Prodi was referring to Fausto Bertinotti, leader of the hard-left Communist
Refoundation which fiercely opposes Prodi's attempts to cut back on social
spending. The party lies outside the centre-left government but guarantees its
majority in the lower house of parliament.
91
5
1,000,000
UK STERLING
12-MOS
DEC-31-1997
DEC-31-1997
1
81
1,275
176
27
13
1,790
2,144
1,328
2,836
1,076
0
0
0
42
1,701
2,836
0
2,882
0
2,290
52
27
0
626
236
390
0
0
0
390
24.0
0
