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

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

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

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

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

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

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

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

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

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

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

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

Consolidated profit and loss account
year ended 31 December

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

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

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

The five principal components of the Fast Forward plan are:
 

1. 

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

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

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

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

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

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

Corporates & Media. Reuters Media business is directed towards serving the needs of the world's newspapers, television and cable networks, radio stations, websites and consumers. Reuters offers its retail customers direct access to a segmented offering of news and data products through its branded websites (such as www.reuters.com and www.reuters.co.uk), books and signage (such as www.thebigpicture@3xsq.com). Reuters has a long history of innovation in the media business, including having been the first to introduce fully packaged, multimedia news products for online publishers and having developed NewsML, the emerging internet standard for news delivery.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Reuters principal joint ventures and associates include:

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

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

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

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

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

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

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

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

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

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

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

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

The principal disposals or closures in 2002 were:

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

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

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

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

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

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

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

The Group's principal facilities are:

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

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

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

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

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

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

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

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

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

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

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

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

No political contributions were made by Reuters.

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

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

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

By order of the Board

Rosemary Martin
Company Secretary
24 February 2003

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Sir Christopher Hogg

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

On behalf of the Board

Sir Christopher Hogg
Chairman
24 February 2003

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

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

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

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

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

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

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

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

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

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

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

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

By order of the Board

Rosemary Martin
Company Secretary
24 February 2003

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

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

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

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

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

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

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

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

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

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

PricewaterhouseCoopers LLP
Chartered Accountants and Registered Auditors
London
24 February 2003

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

£m

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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