Exhibit 99.1

Annual Report 2017

March 16, 2018

Information in this annual report is provided as of March 1, 2018, unless otherwise indicated.

Certain statements in this annual report are forward-looking. These forward-looking statements are based on certain assumptions and reflect our current expectations. As a result, forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations. Some of the factors that could cause actual results to differ materially from current expectations are discussed in the “Risk Factors” section of this annual report as well as in materials that we from time to time file with, or furnish to, the Canadian securities regulatory authorities and the U.S. Securities and Exchange Commission. There is no assurance that any forward-looking statements will materialize. You are cautioned not to place undue reliance on forward-looking statements, which reflect expectations only as of the date of this annual report. Except as may be required by applicable law, we disclaim any intention or obligation to update or revise any forward-looking statements.

The following terms in this annual report have the following meanings, unless otherwise indicated:

When we refer to our performance before the impact of foreign currency (or at “constant currency”), we mean that we apply the same foreign currency exchange rates to the financial results of the current and equivalent prior period. We believe this provides the best basis to measure the performance of our business as it allows better comparability of our business trends from period to period.

Non-International Financial Reporting Standards (IFRS) financial measures are defined and reconciled to the most directly comparable IFRS measures in the “Management’s Discussion and Analysis” section of this annual report.

For information regarding our disclosure requirements under applicable Canadian and U.S. laws and regulations, please see the “Cross Reference Tables” section of this annual report.

Information contained on our website or any other websites identified in this annual report is not part of this annual report. All website addresses listed in this annual report are intended to be inactive, textual references only. The Thomson Reuters logo and our other trademarks, trade names and service names mentioned in this annual report are the property of Thomson Reuters.

Table of Contents

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Business

Overview

Thomson Reuters is the world’s leading source of news and information for professional markets. Our customers rely on us to deliver the intelligence, technology and expertise they need to find trusted answers. The business has operated in more than 100 countries for more than 100 years. We are a Canadian company with shares listed on the Toronto Stock Exchange and New York Stock Exchange (symbol: TRI). Our website is www.thomsonreuters.com.

In 2017, we were organized in three business units supported by a corporate center:

We also operate:

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Proposed Financial & Risk Strategic Partnership

On January 30, 2018, we signed a definitive agreement to enter into a strategic partnership with private equity funds managed by Blackstone. Canada Pension Plan Investment Board and an affiliate of GIC will invest alongside Blackstone. As part of the transaction, we will sell a 55% majority stake in our Financial & Risk business and will retain a 45% interest in the business. We will maintain full ownership of our Legal, Tax & Accounting and the Reuters News businesses. The transaction will enable us to focus on expanding our business and accelerating revenue growth in the legal, tax and accounting and regulatory market segments.

We expect to receive approximately $17 billion in gross proceeds at closing (subject to purchase price adjustments). The transaction is expected to close in the second half of 2018 and is subject to specified regulatory approvals and customary closing conditions.

We currently expect to use the proceeds of the transaction as follows:

On the closing date of the transaction, Reuters News and the new Financial & Risk partnership will sign a 30-year agreement for Reuters News to supply news and editorial content to the partnership for a minimum amount of $325 million per year. For the duration of the news agreement, we will grant the Financial & Risk partnership a license to permit it to brand its products/services and company name with the “Reuters” mark, subject to applicable limitations and restrictions set forth in a trademark license agreement.

Upon closing of the transaction, we expect that our global workforce will roughly split in half. About 22,000 employees will transfer from Thomson Reuters to the new partnership, including approximately 16,000 people in Financial & Risk and approximately 6,000 people across the Corporate functions. Corporate staff will be primarily from ET&O and GGO, but will also include staff from the Finance, Human Resources, Legal, Strategy and Communications functions.

We expect Financial & Risk and our remaining businesses will benefit as a result of the proposed strategic partnership.

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Financial & Risk is included in our full-year 2017 results but will be reported as a discontinued operation in our 2018 results. Additional information about the proposed transaction is provided in the “Additional Information – Material Contracts” section of this annual report.

Business Model and Key Operating Characteristics

We derive the majority of our revenues from selling electronic content and services to professionals, primarily on a subscription basis. Our businesses provide solutions, software and workflow tools which integrate our core data and information. The table below describes some of our key operating characteristics.

2017 Performance Highlights

2017 was a year of continued progress for our company. We improved profitability through our continued rigor and focus to transform the business and operate at scale. Below are financial highlights of our results for the year ended December 31, 2017.

(1) Refer to the Management’s Discussion and Analysis section of this annual report for additional information on non-IFRS financial measures (including how we define each of them and how we calculate them) and the Q4 2016 severance charges.

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2017 was the sixth consecutive year that we met or exceeded each of the performance metrics in our external financial outlook. The table below compares our actual performance to our outlook.

Non-IFRS Financial Measures(1)		2017 Outlook(2)		2017 Actual Performance(2)
Total Revenues		Low single digit growth		2% total growth; 1% organic growth
Adjusted EBITDA margin		Between 29.3% and 30.3%		30.2%
Adjusted EPS		Between $2.40 and $2.45		$2.49
Free cash flow		Between $0.9 billion and $1.2 billion		$1.0 billion

(1) This information includes non-IFRS financial measures. Please refer to the Management’s Discussion and Analysis section of this annual report for additional information on these non-IFRS financial measures, including how we define each of them and how we calculate them.

(2) The 2017 Outlook and 2017 actual performance were measured at constant currency rates relative to 2016, except for the 2017 free cash flow performance which was reflected at actual currency rates.

Our Strategy

Our strategy is to be the premier global provider of the most trusted, must-have decision support tools and workflow solutions to professionals in information-intensive and highly regulated businesses. We operate at the fast-changing intersection of regulation and commerce, where intelligence, technology and human expertise are required to achieve success in the digital economy. We continue to drive our growth strategy through the following three pillars:

		Accelerate revenue growth, with a focus on our high-growth market segments   We continue to increase investments in the segments of our business that we believe have the highest potential for growth and customer impact. We also see opportunities to better serve corporate customers by investing in analytics, cognitive computing and other new ways to help these customers find trusted answers. We plan to continue focusing on these businesses in 2018.
		Improve go-to-market capabilities   We continue to pursue opportunities to enhance our go-to-market capabilities, which are focused on our customers’ experiences and our sales and service practices. We are focused on improving our digital capabilities to allow more customers to more easily find and buy our products online, as well as help drive increasingly effective selling. We are strengthening our relationships with partners to help us reach more customers and provide richer experiences. Also, we continue to simplify commercial relationships, with a focus on simplifying contracts, policies and product offerings.
		Strengthen and enable the core   We controlled our operating expenses by further simplifying our business in 2017. We continued to migrate and retire legacy platforms (while investing in current and future platforms), close additional data centers and reduce the number of product variations in our businesses. We believe that additional opportunities remain in 2018 to further simplify and improve productivity through our transformation initiatives.

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Three-Year History

Capital strategy developments – We have consistently and successfully been implementing our capital strategy announced in late 2013. Over the last five years, we dramatically reduced our acquisition activity as we focused the organization on driving organic growth. From 2014 to 2017, we completed 22 acquisitions for an aggregate cost of over $500 million compared to closing nearly 100 acquisitions for an aggregate cost of $3.8 billion between 2011 and 2013. The maturity dates for our term debt are also well balanced with no significant concentration in any one year. At the end of 2017, the average interest rate on our debt portfolio was slightly below 5% with an average maturity of nine years. We have returned over $7.0 billion to shareholders over the last three years through share repurchases and dividends.

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Legal

Legal is a leading provider of critical online and print information, know-how, decision tools, software and services. The business serves customers in law firms, corporate legal departments and governments, including federal, provincial, state and local government lawyers and judges, as well as investigators.

The following provides a summary of Legal’s 2017 revenues. For additional information, please see the Management’s Discussion and Analysis section of this annual report.

In recent years, Legal has been focused on driving growth in its Solutions businesses, which are subscription-based as well as transactional. U.S. Online Legal Information is composed of Westlaw and Practical Law. Revenues for Legal’s U.S. Print business have been declining and are expected to continue to decline given the shift in the industry to digital consumption.

Major brands

The following table provides information about Legal’s major brands.

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Competition

Legal’s primary global competitors are LexisNexis (which is owned by RELX Group) and Wolters Kluwer. Legal also competes with other companies that provide legal and regulatory information, including Bloomberg BNA, as well as practice and matter management software companies, client development providers and other service providers that support legal professionals.

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Tax & Accounting

Tax & Accounting is a leading global provider of integrated tax compliance and accounting information, software and services for professionals in accounting firms, corporations, law firms and government.

The following provides a summary of Tax & Accounting’s 2017 revenues. For additional information, please see the Management’s Discussion and Analysis section of this annual report.

Major brands

The following table provides information about Tax & Accounting’s major brands.

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Competition

Tax & Accounting’s primary competitor across all customer segments is Wolters Kluwer. Other competitors include CORPTAX (owned by Corporation Services Company), Vertex, Avalara, SOVOS Compliance, Longview and AlphaTax in the corporate software and services market segment; and Bloomberg BNA in the tax research market segment. Competitors in the professional software and services market segment include Intuit and Sage and Tyler Technologies in the government software segment. Tax & Accounting also competes with other providers of software and services and ERP vendors.

Reuters

Founded over 165 years ago and powered by nearly 2,500 journalists around the world, our news has a reputation for speed, impartiality and insight. Reuters is dedicated to upholding the Thomson Reuters Trust Principles and preserving independence, integrity and freedom from bias in the gathering and dissemination of information and news. For more information on the Thomson Reuters Trust Principles, please see the “Additional Information – Material Contracts – Thomson Reuters Trust Principles and Thomson Reuters Founders Share Company” section of this annual report.

We provide trusted business, financial, national and international news to professionals through Thomson Reuters desktops, the world’s media organizations and directly to consumers via www.reuters.com and Reuters TV. In 2017, we delivered over 2 million unique news stories, over 1.4 million news alerts, over 730,000 pictures/images and over 110,000 video stories.

Primary competitors of Reuters include the Associated Press, Agence France-Presse, Bloomberg and Dow Jones.

Global Growth Organization

Our Global Growth Organization (GGO) works with our Financial & Risk, Legal and Tax & Accounting businesses to combine our global capabilities and to expand our local presence and development in countries and regions where we believe the greatest growth opportunities exist. Financial results for GGO are reported within our segment businesses results. Geographic areas that GGO is focused on include Latin America, China, India, the Middle East, Africa, the Association of Southeast Asian Nations, North Asia, Russia and countries comprising the Commonwealth of Independent States, and Turkey.

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Other Businesses

As noted earlier in this annual report, we signed a definitive agreement to enter into a strategic partnership related to our Financial & Risk business. Financial & Risk will be presented as a discontinued operation in our 2018 financial results and we expect to close the transaction in the second half of 2018.

Financial & Risk

Through its open platform approach, Financial & Risk provides critical news, information and analytics, enables transactions and connects communities of trading, investment, financial and corporate professionals. It also provides leading regulatory and risk management solutions to help customers anticipate and manage risk and compliance.

The following provides a summary of Financial & Risk’s 2017 revenues. For additional information, please see the Management’s Discussion and Analysis section of this annual report.

Financial & Risk’s business mix has been evolving over the last few years. Financial & Risk’s proportion of revenues from the Elektron Data Platform and Risk has grown, while the proportion of revenues from desktop has declined. Over the same period, Financial & Risk has increased the proportion of its revenues from buy side customers (compared to sell side customers). Financial & Risk continues to have a fairly balanced and global presence in terms of where it derives its revenues.

Financial

The Financial business provides a broad and robust range of offerings to financial markets professionals. It delivers global content sets, including fundamentals, estimates and primary and secondary research. Financial also provides customers with tools, platforms, venues and services to enable fast, intelligent decision-making. Financial’s flagship financial markets desktop platform is Thomson Reuters Eikon. In 2017, Financial & Risk acquired REDI to integrate execution management capabilities into the Eikon desktop.

Major brands

The following table provides information about Financial’s major brands.

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Competition

Our Financial business competes with a wide range of large and specialist providers which primarily include Bloomberg, FactSet, S&P Global (including its Capital IQ business), FIS, ICE Data Services, Telekurs, Dow Jones and large IT vendors, such as IBM. The FX business primarily competes with large inter-dealer brokers, such as NEX Group’s (formerly ICAP) EBS platform and other electronic communication networks (ECNs). It also competes with single-dealer and multi-dealer portals. Tradeweb’s principal competitors include MarketAxess and Bloomberg. The REDI execution management capabilities compete with companies such as FlexTrade and Portware.

Risk

The Risk business provides a comprehensive suite of solutions designed to help our customers address third party risk (customer, supplier and partner), regulatory compliance, corporate governance, operational risk controls and pricing and valuation. Risk’s solutions combine powerful technology with trusted regulatory and risk intelligence to deliver integrated offerings to financial services and multinational institutions for global regulatory intelligence, financial crime prevention, anti-bribery, anti-money laundering and anti-corruption, know-your-customer (KYC) and other due diligence, compliance management, internal audit, e-learning and risk management services. In early 2017, Financial & Risk launched the Connected Risk platform to allow customers and partners to tailor an array of solutions to meet both the varied and collective needs of the risk community. In early 2017, Financial & Risk acquired Clarient and Avox to expand its ability to serve key customers for KYC and legal entity identifier (LEI) services.

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Major Brands

The following table provides information about Risk’s major product categories.

¹ The Regulatory Intelligence and Compliance Learning businesses will be retained by Thomson Reuters following the closing of the proposed Financial & Risk transaction and will be part of the Legal segment.

Competition

Risk’s products and services compete with a wide variety of global, regional and niche competitors. Risk’s Customer and Third Party Risk key competitors include Dow Jones (which is owned by News Corp.) and LexisNexis (which is owned by RELX Group). Regulatory Intelligence products primarily compete with Wolters Kluwer, LexisNexis, Bloomberg and MetricStream. Regulatory Change Management products primarily compete with Wolters Kluwer, IBM Watson Analytics and Nasdaq BWise. Connected Risk primarily competes with SAI Global, MetricStream, LogicManager, Nasdaq, SAP, IBM, and NAVEX Global. Risk’s Pricing and Reference Services business primarily competes with ICE Data Services, Bloomberg and a number of smaller asset pricing and reference data providers.

Additional Business Information

Corporate

Our corporate office seeks to foster a group-wide approach to management while allowing our business units sufficient operational flexibility to serve their customers effectively. The corporate office’s primary areas of focus are strategy, capital allocation, technology operations and infrastructure and talent management. The corporate office is also responsible for overall direction on communications, investor relations, tax, accounting, finance, treasury and legal, and administers certain human resources services, such as employee compensation, benefits administration, share plans and training and development.

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Our Enterprise Technology & Operations (ET&O) group, which was formed in 2016 to combine many of our core functions in a single organization, is part of our Enterprise Centre. ET&O brings together nearly 11,500 employees (approximately 25% of our total workforce as of year-end 2017) and approximately $2.2 billion of our operating expenses. It unifies more than 10 functions (most notably, our technology functions, operations centers, real estate and sourcing) into a single Enterprise team. We believe that ET&O continues to provide us with a greater opportunity to accelerate our progress on scale and growth initiatives and allows us to sharpen our focus on allocating resources to our growth priorities.

In the second quarter of 2017, our Chief Executive Officer and Chief Financial Officer relocated to Toronto. Our corporate offices are located around the world, including in Toronto, Canada; Stamford, Connecticut; New York, New York; Baar, Switzerland; Eagan, Minnesota; London, United Kingdom; Carrollton, Texas and Bangalore, India.

Technology

We believe we can make information more relevant, more personal and deliver it faster to our customers through the smart use of technology. By using shared platforms and working across our businesses, we are making our data more accessible and valuable for our customers, no matter how they access it.

We believe that we are continually transforming our content, products, services and company to better meet our customers’ needs. We are focused on securing our customer data and global systems as we implement and enhance our security programs.

Our Technology group is a unified enterprise made up of all our development, operations, content platforms, research and innovation teams.

In October 2017, one year after opening our Technology Centre in Toronto, we announced a new long-term facility for the Centre. Once fully staffed, the Centre will house one of Canada’s largest technology hubs dedicated to developing the next generation of products and capabilities for our global customers.

We continue to operate Thomson Reuters Labs facilities on four continents enabling us greater proximity to our customers and partners to collaborate on data-driven innovation and research. Additionally, we launched an Incubator program in the Swiss lab which offers financial technology startup companies a physical base and access to our solutions while providing us with greater insight into emerging technologies.

Research and Development

Innovation is essential to our success and is one of our primary bases of competition. Research & Development (R&D), part of Thomson Reuters Labs, performs computer science research and practical development in areas of cognitive computing, including machine learning and artificial intelligence. This group leads our Centre for AI and Cognitive Computing in Toronto.

Our teams are at the driving edge of how emerging technologies like machine learning, big data, cloud and blockchain can be applied to the distinct challenges of the industries and customers we serve. We believe we are uniquely positioned to combine these technologies with the intelligence and human expertise that our customers need to find trusted answers.

Digital Transformation

We have been a pioneer of digital product development for decades. As part of our customer experience transformation, we are creating a more holistic online experience, making it easier for our customers to find, buy and get the most out of our products and interact with Thomson Reuters digitally. In 2017, we released new digital capabilities for some customer renewals and on our MyTR service, which we plan to roll out more broadly in 2018.

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Intellectual Property

Many of our products and services are comprised of information delivered through a variety of media, including online, software-based applications, smartphones, tablets, books, journals and dedicated transmission lines. Our principal IP assets include patents, trademarks, trade secrets, databases and copyrights in our content. We believe that our IP is sufficient to permit us to carry on our business as presently conducted. We also rely on confidentiality agreements to protect our rights. We continue to apply for and receive patents for our innovative technologies. Additionally, we continue to acquire patents through the acquisition of companies. We also obtain significant content and data through third party licensing arrangements with content providers. We have registered a number of website domain names in connection with our online operations.

Sales and Marketing

We primarily sell our products and services directly to our customers. In addition, we sell some of our products and services online directly to customers. Focusing some of our marketing and sales efforts online has allowed us to broaden our range of customers and reduce sales and marketing costs. Some of our products and services are sold through partners.

Corporate Responsibility & Inclusion

Corporate Responsibility & Inclusion (CR&I) is an integral part of the way we do business. Our approach encompasses community investment, diversity & inclusion and sustainability and seeks to empower sustainable growth for our people, our markets and our world. Our strategic approach supports our commitment to the United Nations Global Compact, which is underpinned by the Thomson Reuters Trust Principles and our Code of Business Conduct and Ethics. Our Supply Chain Ethical Code is designed to ensure that our suppliers and vendors meet a specified set of standards and reflects anti-bribery and anti-corruption legislation. In 2017, we published our Modern Slavery Statement in line with U.K. governmental requirements. We continue to report on our progress and update on our key focus areas in our annual global CR&I report, which we post on www.thomsonreuters.com.

Community Investment

In 2017, our employees continued to invest in their local communities with over 150,000 hours of volunteering time, made possible with the support of our employee-led global volunteer networks. Our Matching Gifts and Volunteer Grants programs continue to be a cornerstone of our community investment efforts with employees across the company taking part in numerous fundraising and volunteering efforts throughout the year.

Diversity & Inclusion

To serve our customers and communities, we want to attract and retain the most talented individuals and create an environment where all our people can develop to their full potential. Valuing and promoting diversity and inclusion are key aspects of this objective. Our business resource groups also provide a network of support for other employees and work with the business to enhance professional development, recruitment and retention. Our Diversity & Inclusion Index reflects the importance of a diverse workforce for all businesses and in 2017, we launched a new top 100 of publicly traded companies globally with the most diverse and inclusive workplaces using our own ESG (Environment, Social, Governance) data. This data continues to be used to gain insight and help financial professionals screen companies for long-term opportunities and risks in their investments.

Sustainability

As a global company, we have a broad focus and an ongoing commitment to sustainability, both through the measurement and management of our own emissions and environmental impacts, and also through our own insights and thought leadership on sustainable growth. In 2017, we re-launched a thought leadership site (blogs.thomsonreuters.com/sustainability) with a new look and feel but continuing to provide insights from Reuters and other partners on current trends and stories in the sustainability space.

We continue to make progress in our own environmental process, as we continue to identify ways to assess, monitor and manage our carbon footprint. In 2017, we identified robust targets to continue to manage and measure our emissions.

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Thomson Reuters Foundation

The Thomson Reuters Foundation stands for free independent journalism, human rights, women’s empowerment and the rule of law. Leveraging the skills, values and expertise of our company, the Foundation plays a leading role in the global fight against human trafficking and runs a number of programs and initiatives that trigger change and empower people globally: free legal assistance, media development and in-depth coverage of the world’s underreported stories. Additional information on the Foundation can be found at www.trust.org.

Acquisitions and Dispositions

Many of our recent acquisitions have been tactical and complemented our existing businesses. For many of these acquisitions, we purchased information or a service that we integrated into our operations to broaden the range of our offerings. We have also targeted some acquisitions on broadening our product and service offerings in higher growth market segments and executing our global growth strategy, particularly in rapidly developing economies. In 2018, we plan to pursue organic and inorganic opportunities in the key growth segments of our Legal and Tax & Accounting businesses.

In addition, as part of our continuing strategy to optimize our portfolio of businesses and ensure that we are investing in parts of our business that offer the greatest opportunities to achieve growth and returns, we also sold a number of businesses during the last several years. As mentioned earlier in this annual report, we signed a definitive agreement to enter into a strategic partnership and sell a 55% interest in our Financial & Risk business and we currently expect to close the transaction in the second half of 2018.

For more information on acquisitions and dispositions that we made in the last two years, please see the Management’s Discussion and Analysis section of this annual report.

Employees

The following table sets forth information about our employees as of December 31, 2017.

We expect that the Financial & Risk partnership will have approximately 22,000 employees at the time of the transaction closing, comprised of staff currently working in the business, plus certain staff from GGO and our various Corporate functions.

We believe that we generally have good relations with our employees, unions and work councils, although we have had disputes from time to time with the various unions that represent some of our employees. Our senior management team is committed to maintaining good relations with our employees, unions and works councils.

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Properties and Facilities

We own and lease office space and facilities around the world to support our businesses. We believe that our properties are in good condition and are adequate and suitable for our present purposes. The following table provides summary information about our principal properties as of December 31, 2017.

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Risk Factors

The risks and uncertainties below represent the risks that our management believes are material. If any of the events or developments discussed below actually occurs, our business, financial condition or results of operations could be adversely affected. Other factors not presently known to us or that we presently believe are not material could also affect our future business and operations.

We may be adversely affected by uncertainty, downturns and changes in the markets that we serve, in particular in the financial services and legal industries.

We operate in a dynamic external environment that is rapidly shifting due to innovation in technology, evolving and increasing global regulation, information proliferation and a generation of new users. While we believe that we operate in attractive market segments, our performance depends on the financial health and strength of our customers, which in turn is dependent on the general economies in North America, Europe, Asia Pacific and Latin America. In 2017, we derived 84% of our revenues from our financial and legal businesses.

In 2017, the economic environment for our core businesses continued to be challenging, which was similar to that experienced in recent years. The momentum and pace of growth continued to be unequal around the world, as advances in some regions were offset by weaknesses in others. Uncertainty in global economic and market conditions, including related to the U.K.’s plan to leave the European Union (Brexit), continued to cause disruptions and volatility worldwide, particularly in the financial services industry.

In 2017, 54% of our revenues were from our Financial & Risk business. The financial services industry is undergoing rapid transformation and remains challenged with heightened regulatory scrutiny, consolidation among firms, trading venues and data providers, increasing capital requirements, lower transaction volumes in certain markets and asset classes, and relatively low overall anticipated market growth. Since the 2008 financial crisis, banks and other firms across the financial services industry have continued to implement structural and technological changes designed to reduce costs, including job cuts and reducing supplier spending. In 2017, the combination of these factors continued to put intense pressure on financial institutions’ profitability and returns. At the same time, increased and more complex regulatory requirements have caused many financial institutions to increase their spending on compliance and risk-related matters, which can benefit our Financial & Risk business. Continued global economic uncertainty and future downturns in the financial services industry in one or more of the countries in which we operate or significant trading market disruptions could adversely affect our Financial & Risk business. As we have agreed to enter into a strategic partnership and sell a 55% interest in our Financial & Risk business, our company’s exposure to the financial services industry will be reduced when the proposed transaction closes.

In 2017, 30% of our revenues were from our Legal business, which primarily serves law firms and corporate legal departments. Uncertain and changing economic conditions also continue to impact the legal industry. Power continues to shift from law firms to their corporate customers. Larger law firms in particular continue to be challenged in their efforts to increase revenue growth as corporate counsels limit increases in billing rates and hours, keep more work in-house and insist on increased transparency and efficiency from law firms. This has caused a number of law firms to increase their focus on increasing efficiency and reducing costs (including spending on legal research). As expected, we have also continued to experience a decline in U.S. Legal’s print revenues as customers increasingly migrate to our online offerings and as law firms reduce library space for print materials. Technology is also changing how lawyers work and the evolving regulatory landscape is enabling new types of legal services, which can benefit our Legal business. While we have been allocating greater amounts of capital to our solutions offerings within the Legal business that we believe present the highest growth opportunities, an accelerated decline in print revenues or a future decline in U.S. online legal information revenues could adversely affect our profitability and cash flows.

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Cost-cutting, reduced spending or reduced activity by any of our customer segments may decrease demand for, and usage of, some of our products and services. This could adversely affect our financial results by reducing our revenues, which could in turn reduce the profitability of some of our products and services. Cost-cutting by customers has also caused us to further simplify our organization and take additional steps beyond those we might otherwise take to optimize our own cost structure as a means to maintain or improve profitability.

We operate in highly competitive markets and may be adversely affected by this competition.

The markets for our information, software, services and news are highly competitive and are subject to rapid technological changes and evolving customer demands and needs. As the competitive landscape changes, our customers increasingly look to us to help them take action by combining information, technology and human expertise to provide trusted answers.

To better serve the needs of their existing customers and to attract new customers, our competitors continue to:

Some of our competitors are also aggressively marketing their products as a lower cost alternative and offering price incentives to acquire new business, although we believe that many of our customers continue to see the value reflected in our offerings that sometimes results in a higher price. As some of our competitors are able to offer products and services that may be viewed as more cost effective than ours or which may be seen as having greater functionality or performance than ours, the relative value of some of our products or services could be diminished.

Competition may require us to reduce the price of some of our products and services (which may result in lower revenues) or make additional capital investments (which might result in lower profit margins). For example, in 2017, our Financial & Risk business continued to be impacted by commercial pricing adjustments that it made in connection with the migration of remaining foreign exchange and buy-side customers onto new products. If we are unable or unwilling to reduce prices or make additional investments for some of our products and services in the future, we may lose customers and our financial results may be adversely affected. Some of our current or future products or services could also be rendered obsolete as a result of competitive offerings and new technologies.

In addition, some of our customers have in the past and may decide again to develop independently certain products and services that they obtain from us, including through the formation of partnerships or consortia. In the financial services industry, some firms have also invested in competitors to our Financial & Risk business, in part due to increasing regulatory and cost considerations or to pursue their own business models. If more of our customers become self-sufficient, demand for our products and services may be reduced. If we fail to compete effectively, our revenues, profitability and cash flows could be adversely affected.

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If we are unable to develop new products, services, applications and functionalities to meet our customers’ needs, attract new customers and retain existing ones, expand into new geographic markets and identify areas of higher growth, our ability to generate revenues or achieve higher levels of revenue growth in the future may be adversely affected.

Our growth strategy involves developing new products, services, applications and functionalities in a timely and cost effective manner to meet our customers’ needs, anticipating and responding to industry trends and technological changes, and maintaining a strong position in the sectors that we serve. In 2018, we are seeking to improve customer and digital experiences and our sales and marketing expertise, and continue to simplify the organization.

Over the last few years, we have made significant investments designed to improve and enhance the functionality and performance of a number of our existing flagship products, such as Thomson Reuters Eikon, Thomson Reuters Elektron, Thomson Reuters Westlaw and ONESOURCE. We have also successfully migrated customers from legacy offerings to our current propositions and continued to enhance the reliability and resiliency of the technology infrastructure that we use to deliver products and services. However, if our customers’ adoption rates for existing and new products and services are lower than our expectations, our revenues may be lower and our results of operations may be adversely affected.

Some of our businesses, in particular Legal, continue to evolve towards becoming greater providers of solutions to our customers as part of an ongoing transformation from focusing primarily on providing data and information. These solutions often are designed to integrate our core information with software and workflow tools. While we believe that transitioning a greater part of our business to solutions will help us increase customer value, create growth, diversify business mix and differentiate us from competitors, operating a business with a greater percentage of solutions may result in lower profit margins.

In addition, we have been attracting new customers and continuing to expand into Asia, Latin America and the Middle East through our Global Growth Organization. As we focus on organic growth, it may take us a longer period of time and we may need to incur greater costs to develop new products, services, applications and functionalities to meet needs of customers, attract new customers or expand into these markets. If we are unable to do so, our ability to increase our revenues may be adversely affected.

Historically, our customers accessed our web-based products and services primarily through desktop computers and laptops. Over the last few years, Internet use through smartphones, tablets and other mobile devices has increased significantly. Applications or “apps” have also experienced significant growth and popularity. As a result of this shift, we have been focused on developing, supporting and maintaining various products and services on different platforms and devices (some of which complement traditional forms of delivery). If our competitors are able to release alternative device products, services or apps more quickly than we are able to, or if our customers do not adopt our offerings in this area, our revenues and retention rates could be adversely affected.

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Fraudulent or unpermitted data access or other cyber-security or privacy breaches may cause some of our customers to lose confidence in our security measures and could result in increased costs for our company.

Similar to other global multinational companies that provide services online and also due to the prominence of our Financial & Risk and Reuters News businesses, we experience cyber-threats, cyber-attacks and security breaches, which can include unauthorized attempts to access, disable, improperly modify or degrade our information, systems and networks, the introduction of computer viruses and other malicious codes and fraudulent “phishing” e-mails that seek to misappropriate data and information or install malware onto users’ computers. Cyber-threats in particular vary in technique and sources, are persistent, frequently change and increasingly are more sophisticated, targeted and difficult to detect and prevent against. None of these threats and related incidents to date have resulted in a material adverse impact for our business.

While we have dedicated resources at our company who are responsible for maintaining appropriate levels of cyber-security and we utilize third party technology products and services to help identify, protect and remediate our company’s information technology systems and infrastructure against security breaches and cyber-incidents, our measures may not be adequate or effective to prevent, identify or mitigate attacks by hackers or breaches caused by employee error, malfeasance or other disruptions. While we maintain what we believe is sufficient insurance coverage that may (subject to certain policy terms and conditions including self-insured deductibles) cover certain aspects of third party security and cyber-risks and business interruption, our insurance coverage may not always cover all costs or losses.

We are also dependent on security measures that some of our third party suppliers and customers are taking to protect their own systems and infrastructures. For example, our outsourcing of certain functions requires us to sometimes grant network access to third party suppliers. If our third party suppliers do not maintain adequate security measures, do not require their sub-contractors to maintain adequate security measures or do not perform as anticipated and in accordance with contractual requirements, we may experience operational difficulties and increased costs. In addition, if a customer experiences a data security breach that results in the misappropriation of some of our proprietary business information, our company’s reputation could be harmed, even if we were not responsible for the breach.

We collect, store, use and transmit sensitive data, including public records, intellectual property, our proprietary business information and personally identifiable information of our employees and customers on our networks. A number of our customers and suppliers also entrust us with storing and securing their own confidential data and information. Our businesses include certain subscription-based screening products (such as World-Check in our Financial & Risk business and CLEAR in our Legal business) which we sell to institutional customers and governments to enable them to satisfy various regulatory obligations including anti-money laundering reviews, know-your-customer checks, sanctions screening, politically exposed person screening, anti-bribery and corruption screening, counter-terrorist financing and the prevention of financial crimes. Any fraudulent, malicious or accidental breach of our data security could result in unintentional disclosure of, or unauthorized access to, third party, customer, vendor, employee or other confidential or sensitive data or information, which could potentially result in additional costs to our company to enhance security or to respond to occurrences, lost sales, violations of privacy or other laws, penalties, fines, regulatory action or litigation. In addition, media or other reports of perceived security vulnerabilities to our systems or those of our third party suppliers, even if no breach has been attempted or occurred, could adversely impact our brand and reputation and materially impact our business.

Misappropriation, improper modification, destruction, corruption or unavailability of data and information, or ransom demands due to cyber-attacks or other security breaches, could damage our brand and reputation and customers could lose confidence in our security measures and reliability, which would harm our ability to retain customers and gain new ones. We could also face litigation or other claims from impacted individuals as well as substantial regulatory sanctions or fines. If any of these were to occur, it could have a material adverse effect on our business and results of operations.

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We rely heavily on our own and third party telecommunications, data centers, network systems and the Internet and any failures or disruptions may adversely affect our ability to serve our customers and could negatively impact our revenues and reputation.

Most of our products and services are delivered electronically and our customers depend on our ability to receive, store, process, transmit and otherwise rapidly handle very substantial quantities of data and transactions on computer-based networks. Our customers also depend on the continued capacity, reliability and security of our telecommunications, data centers, networks and other electronic delivery systems, including websites and the Internet. Our employees also depend on these systems for our internal use. Upon the closing of our proposed Financial & Risk partnership transaction, most of our company’s data centers will transfer to the new partnership and our remaining businesses will receive services from the partnership for a period of time through a transitional services agreement. As a result of these arrangements, many of our businesses will largely be dependent on the Financial & Risk partnership for continued reliable and secure services in this area.

Any significant failure, compromise, cyber-breach or interruption of our systems, including operational services, loss of service from third parties, sabotage, break-ins, war, terrorist activities, human error, natural disaster, power or coding loss and computer viruses, could cause our systems to operate slowly or could interrupt service for periods of time. While we have (and the Financial & Risk partnership, after the closing of the transaction, will have) disaster recovery and business continuity plans that utilize industry standards and best practices, including back-up facilities for primary data centers, a testing program and staff training, the systems are not always fully redundant and disaster recovery and business continuity plans may not always be sufficient or effective. To the extent that our telecommunications, information technology systems, cloud based service providers or other networks are managed or hosted by third parties, we would need to coordinate with these third parties to resolve any issues. In the past when we have experienced slow operation of our systems or service interruptions, some of our products, services or websites have been unavailable for a limited period of time, but none of these occurrences have been material to our business.

Our ability to effectively use the Internet may also be impaired due to infrastructure failures, service outages at third party Internet providers or increased government regulation. In addition, we are facing significant increases in our use of power and data storage. We may experience shortage of capacity and increased costs associated with such usage. These events may affect our ability to store, process and transmit data and services to our customers.

From time to time, update rates of market data have increased. This can sometimes impact product and network performance. Factors that have significantly increased the market data update rates include the emergence of proprietary data feeds from other markets, high market volatility, decimalization, reductions in trade sizes resulting in more transactions, new derivative instruments, increased automatically-generated algorithmic and program trading, market fragmentation resulting in an increased number of trading venues, and multiple listings of options and other securities. Changes in legislation and regulation pertaining to market structure and dissemination of market information may also increase update rates. While we continue to implement a number of capacity management initiatives, there can be no assurance that our company and our network providers will be able to accommodate accelerated growth of peak traffic volumes or avoid other failures or interruptions.

Increased accessibility to free or relatively inexpensive information sources may reduce demand for our products and services.

In recent years, more public sources of free or relatively inexpensive information have become available, particularly through the Internet, and this trend is expected to continue. For example:

Public sources of free or relatively inexpensive information may reduce demand for our products and services. Demand could also be reduced as a result of cost-cutting initiatives at certain companies and organizations. Although we believe our information is more valuable and enhanced through analysis, tools and applications that are embedded into customers’ workflows, our financial results may be adversely affected if our customers choose to use these public sources as a substitute for our products or services.

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Operating globally involves challenges that we may not be able to meet and that may adversely affect our ability to grow.

In 2017, 38% of our revenues were derived outside of North America. As of December 31, 2017, approximately 60% of our employees were located outside of North America.

We believe that there are advantages to operating globally, including a proportionately reduced exposure to the market developments of a single country or region. However, there are certain risks inherent in doing business globally which may adversely affect our business and ability to grow. These risks include:

Adverse developments in any of these areas could cause our actual results to differ materially from expected results. Challenges associated with operating globally may increase for our company as we continue to expand into geographic areas that we believe present the highest growth opportunities.

We generate a significant percentage of our revenues from recurring, subscription-based arrangements, and our ability to maintain existing revenues and to generate higher revenues is dependent in part on maintaining a high renewal rate.

In 2017, 86% of our revenues were derived from subscriptions or similar contractual arrangements, which result in recurring revenues. Our revenues are supported by a relatively fixed cost base that is generally not impacted by fluctuations in revenues. The majority of our subscription arrangements have a term of one year and the remaining portion is largely for two or three year terms. These arrangements typically have renewal provisions. Renewal dates are spread over the course of the year. In order to maintain existing revenues and to generate higher revenues, we are dependent on a significant number of our customers to renew their arrangements with us. In our Legal and Tax & Accounting business units, our customers have increasingly been seeking products and services delivered electronically and continue to migrate away from higher margin print products. In 2017, our Legal U.S. print-related revenues declined 6%. Our revenues could also be lower if a significant number of our customers renewed their arrangements with us, but reduced the amount of their spending.

We are dependent on third parties for data, information and other services.

We obtain significant data and information through licensing arrangements with content providers, some of which may be viewed as competitors. Some providers may seek to increase fees for providing their proprietary content or services and others may not offer our company an opportunity to renew existing agreements.

In addition, we rely on third party service providers for telecommunications and other services that we have outsourced, such as certain human resources administrative functions, facilities management and IT services.

If we are unable to maintain or renegotiate commercially acceptable arrangements with these content or service providers or find substitutes or alternative sources of equivalent content or service, our business could be adversely affected. Our revenues and margins could also be reduced if some of our competitors obtained exclusive rights to provide or distribute certain types of data or information that was viewed as critical by our customers.

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We may be adversely affected by changes in legislation and regulation, which may impact how we provide products and services and how we collect and use information.

Legislative and regulatory changes that impact our customers’ industries also impact how we provide products and services to our customers. This affects our Financial & Risk business in particular. The United Kingdom’s plan to leave the European Union (Brexit), the upcoming new E.U. General Data Protection Regulation (GDPR) and the recently implemented Markets in Financial Instruments Directive (MiFID II) and new, related rules and regulations have been focus areas for the Financial & Risk business. As global regulation has increased, Financial & Risk also faces a divergence of country-specific and regional regulatory regimes. Financial & Risk has also increased its regulatory profile over the last year through acquisitions.

Laws relating to electronic and mobile communications, privacy, data security, data protection, anti-money laundering, e-commerce, direct marketing and digital advertising and the use of public records have also become more prevalent and developed in recent years. Brexit and actions of the U.S. federal government have created some legal uncertainties and it is difficult to predict in what form laws and regulations will be adopted, changed or repealed, how they will be construed by the relevant courts, or the extent to which any changes might adversely affect us.

In the ordinary course of business, we collect, store, use and transmit certain types of information that are subject to an increasing number of different laws and regulations. In particular, data security and data protection laws and regulations that we are subject to often vary by jurisdiction and include, without limitation, the E.U. Data Protection Directive and various U.S. state regulations. These laws and regulations are continuously evolving. In 2016, the European Commission and U.S. adopted a new framework structure called the Privacy Shield to govern transfers of personal data from the European Union and Switzerland to entities in the United States which subscribe to the Privacy Shield. Certain privacy groups have launched legal challenges against the Privacy Shield. In May 2018, the GDPR will replace the existing E.U. Data Protection Directive. The GDPR will introduce new data protection requirements and related compliance obligations in the E.U. and significantly increases fines for breaches. We are also subject to data localization laws in certain countries, which require us to store and process certain types of data within a particular country.

Existing, new and proposed legislation and regulations, including changes in the manner in which such legislation and regulations are interpreted by courts, may:

Although we have implemented policies and procedures that are designed to ensure compliance with applicable laws, rules and regulations, we could be subject to penalties as well as reputational harm for any violations.

Tax matters, including changes to tax laws, regulations and treaties, could impact our effective tax rate and our results of operations.

We operate in many countries worldwide and our earnings are subject to taxation in many different jurisdictions and at different rates. We seek to organize our affairs in a tax efficient manner, taking account of the jurisdictions in which we operate. In 2017, our effective tax rate was lower than the Canadian corporate income tax rate due significantly to lower tax rates and differing tax rules applicable to certain of our operating and financing subsidiaries outside Canada. Our effective tax rate has fluctuated in the past and is likely to fluctuate in the future, reflecting the mix of taxing jurisdictions in which pre-tax profits and losses are recognized. Our effective tax rate and our cash tax cost in the future will depend on the laws of numerous countries and the provisions of multiple income tax treaties between various countries in which we operate. Changes in tax laws and regulations, international treaties and tax accounting standards and/or uncertainty over their application and interpretation as well as changes in the geographic mix of our profits may adversely affect our results (notably our income tax expense) and our effective tax rate. Tax-related changes or tax rulings may also require adjustments to our previously filed tax returns, which if unfavorable, may adversely affect our results. Tax laws and regulations that apply to our company may also be amended by the relevant authorities due to changes in fiscal circumstances or priorities. These types of amendments, or their application to our company, may adversely affect our results.

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Many governments in jurisdictions where we operate are facing budget deficits and challenges and as a result, may look to increase their tax revenues through increased audit activity and tax reform. Various tax-related legislative initiatives have been proposed or are being discussed that if enacted, could adversely affect our tax positions and/or our tax liabilities. The Organization for Economic Co-operation and Development (OECD), which is comprised of member countries that encompass many of the jurisdictions where we operate, has been working on a coordinated, multi-jurisdictional approach to address issues in existing tax systems associated with “base erosion and profit shifting” (BEPS) that the OECD believes may lead to tax avoidance by global companies. In 2016, the member states of the European Union adopted an anti-tax avoidance directive which is intended to provide uniform implementation of BEPS measures across all of the member states by the start of 2020.

In December 2017, the U.S. enacted the Tax Cuts and Jobs Act (Tax Act), which significantly alters how the U.S. taxes corporations. Accounting for the income tax effects of the Tax Act requires complex computations and significant judgments and estimates not previously required under U.S. law. The Tax Act reduces the U.S. federal corporate tax rate from 35% to 21%. We have made reasonable estimates of the effects and recorded provisional adjustments to our deferred tax balances amounts in our financial statements for the year ended December 31, 2017. The Tax Act includes a number of provisions that may offset future benefits associated with the reduced tax rate. These provisions include (but are not limited to) further limitations on deductions for interest expense and the introduction of a minimum tax under which certain payments to foreign affiliates are non-deductible. The U.S. Treasury Department, the Internal Revenue Service, and other standard-setting bodies may issue regulations or guidance on how the provisions of the Tax Act will be applied or otherwise administered that is different from our interpretations. We expect these provisions and/or forthcoming regulations to adversely impact our tax expense in periods beyond 2018. As we conduct additional analyses and collect additional information, and as any regulatory guidance is issued, we may need to make adjustments to the provisional amounts in our financial statements that could materially affect our U.S. federal income tax position and our financial condition and results of operations in the period in which the adjustments are made.

Currency and interest rate fluctuations and volatility in global currency markets may have a significant impact on our reported revenues and earnings.

Our financial statements are expressed in U.S. dollars and are, therefore, subject to movements in exchange rates on the translation of the financial information of businesses whose functional currencies are not U.S. dollars. We receive revenues and incur expenses in many currencies and are thereby exposed to the impact of fluctuations in various currency rates. Foreign currency movements have been unusually volatile over the last three years and volatility in foreign currencies is expected to continue as the U.K. negotiates its exit from the European Union.

Exchange rate movements in our currency exposures may cause fluctuations in our consolidated financial statements. As our operations outside of the U.S. continue to expand, we expect this trend to continue. In particular, we have exposure to the Euro, the British pound sterling, the Japanese yen and the Canadian dollar. We mitigate this exposure to our operating cash flow by entering into exchange contracts to purchase or sell certain currencies in the future at fixed amounts. However, because these instruments have not been designated as hedges for accounting purposes, changes in the fair value of these contracts are recognized through the income statement with no offsetting impact, and therefore our income statement will reflect volatility from exchange rate movements.

We monitor the financial stability of the foreign countries in which we operate. Global markets continued to experience uncertainty in 2017, and continuing volatility could adversely affect our results.

Substantially all of our non-U.S. dollar-denominated debt is in Canadian dollars and has been hedged into U.S. dollars. In addition, an increase in interest rates from current levels could adversely affect our results in future periods.

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If we are unable to successfully adapt to organizational changes and effectively implement strategic initiatives, our reputation and results of operations could be impacted.

We have experienced, and are in the midst of experiencing, significant organizational changes.

Our ability to successfully manage organizational changes is important for our future business success. In particular, our reputation and results of operations could be harmed if employee morale, engagement or productivity decline as a result of organizational or simplification changes.

Furthermore, we may not realize cost savings and synergies that we expect to achieve from our current strategic initiatives due to a variety of risks, including, but not limited to, operational challenges across impacted business units, difficulties in integrating shared services with our business, higher than expected employee severance or retention costs, higher than expected overhead expenses, delays in the anticipated timing of activities related to our initiatives and other unexpected costs associated with operating our business. If we are unable to achieve the cost savings or synergies that we expect to achieve from our strategic initiatives, it could adversely affect our profitability and related margins.

If we do not continue to attract, motivate and retain high quality management and key employees, we may not be able to execute our strategies.

The completion and execution of our strategies depends on our ability to continue to attract, motivate and retain high quality management and employees across all of our businesses. We compete with many businesses that are seeking skilled individuals, particularly those with experience in technology and data science. Competition for professionals in our financial services and legal businesses in particular can also be intense as other companies seek to enhance their positions in our market segments. In addition, competition for experienced talent in our faster growing geographic areas outside of the United States and Europe continues to intensify, requiring us to increase our focus on attracting and developing highly skilled future leaders in our most strategically important locations in those areas of the world. Future organizational changes could also cause our employee attrition rate to increase. If we are unable to continue to identify or be successful in attracting, motivating and retaining the appropriate qualified personnel for our businesses, it could adversely affect our ability to execute our strategies.

Our brands and reputation are important company assets and are key to our ability to remain a trusted source of information and news.

The integrity of our brands and reputation is key to our ability to remain a trusted source of information and news and to attract and retain customers. Negative publicity regarding our company or actual, alleged or perceived issues regarding one of our products or services could harm our relationship with customers.

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We have agreed to grant the proposed new Financial & Risk partnership a license to permit it to brand its products/services and company name with the “Reuters” mark, subject to applicable limitations and restrictions in the trademark license agreement intended to protect the “Reuters” mark. Following the closing, we do not plan to change our company name. As a result, despite the protective provisions of the license agreement, actions taken by the Financial & Risk partnership under the Reuters name could potentially have a negative impact on our company’s reputation. Failure to protect our brands or a failure by our company to uphold the Thomson Reuters Trust Principles may adversely impact our credibility as a trusted supplier of content and may have a negative impact on our information and news business.

Our intellectual property rights may not be adequately protected, which may adversely affect our financial results.

Many of our products and services are based on information delivered through a variety of media, including online, software-based applications, smartphones, tablets, books, journals and dedicated transmission lines. We rely on agreements with our customers and employees and patent, trademark, copyright and other intellectual property laws to establish and protect our proprietary rights in our products and services. Third parties may be able to copy, infringe or otherwise profit from our proprietary rights without authorization and the Internet may facilitate these activities. We also conduct business in some countries where the extent of effective legal protection for intellectual property rights is uncertain. We cannot assure you that we have adequate protection of our intellectual property rights. If we are not able to protect our intellectual property rights, our financial results may be adversely affected.

The intellectual property of an acquired business may also be an important component of the value that we agree to pay for such a business. However, such acquisitions are subject to the risks that the acquired business may not own the intellectual property that we believe we are acquiring, that the intellectual property is dependent upon licenses from third parties, that the acquired business infringes upon the intellectual property rights of others or that the technology does not have the acceptance in the marketplace that we anticipated. If we are not able to successfully integrate acquired businesses’ intellectual property rights, our financial results may be adversely affected.

Some of our competitors may also be able to develop new products or services that are similar to ours without infringing our intellectual property rights, which could adversely affect our financial condition and results of operations.

We operate in a litigious environment which may adversely affect our financial results.

We may become involved in legal actions and claims arising in the ordinary course of business, including employment matters, commercial matters, defamation claims and intellectual property infringement claims. Regardless of the merit of legal actions and claims, such matters can be expensive, time consuming, or harmful to our reputation and in recognition of these considerations, we may engage in arrangements to settle litigation. While we maintain insurance for certain potential liabilities, such insurance does not cover all types and amounts of potential liabilities and is subject to various exclusions as well as caps on amounts recoverable. Due to the inherent uncertainty in the litigation process, the resolution of any particular legal proceeding could result in changes to our products and business practices and could have a material adverse effect on our financial position and results of operations.

We are significantly dependent on technology and the rights related to it. From time to time, we have been sued by other companies for allegedly violating their patents. Our company and other companies have experienced alleged claims from third parties whose sole or primary business is to monetize patents. If an infringement suit against our company is successful, we may be required to compensate the third party bringing the suit either by paying a lump sum or ongoing license fees to be able to continue selling a particular product or service. This type of compensation could be significant, in addition to legal fees and other costs that we would incur defending such a claim. We might also be prevented or enjoined by a court from continuing to provide the affected product or service. We may also be required to defend or indemnify any customers who have been sued for allegedly infringing a third party’s patent in connection with using one of our products or services. Responding to intellectual property claims, regardless of the validity, can be time consuming for our technology personnel and management.

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Our credit ratings may be downgraded, which may impede our access to the debt markets or raise our borrowing rates.

Our access to financing depends on, among other things, suitable market conditions and the maintenance of suitable long-term credit ratings. Our credit ratings may be adversely affected by various factors, including increased debt levels, decreased earnings, declines in customer demands, increased competition, a further deterioration in general economic and business conditions and adverse publicity. In 2018, following the announcement of our proposed Financial & Risk strategic partnership, several ratings agencies announced that our credit ratings were on negative watch. Our credit ratings may be lowered in the future as a result of the proposed transaction or otherwise. Any downgrades in our credit ratings may impede our access to the debt markets or raise our borrowing rates. For additional information on our credit ratings, please see the “Management’s Discussion and Analysis” and “Additional Information – Ratings of Debt Securities” sections of this annual report.

We may be unable to derive fully the anticipated benefits from our existing or future acquisitions, joint ventures, investments or dispositions.

While we are focused on growing our businesses organically, acquisitions remain an important part of our growth strategy to expand and enhance our products, services and customer base and to enter new geographic areas. In the future, we may not be able to successfully identify attractive acquisition opportunities or make acquisitions on terms that are satisfactory to our company from a commercial perspective. In addition, competition for acquisitions in the industries in which we operate during recent years has escalated, and may increase costs of acquisitions or cause us to refrain from making certain acquisitions. We may also be subject to increasing regulatory scrutiny from competition and antitrust authorities in connection with acquisitions. Achieving the expected returns and synergies from existing and future acquisitions will depend in part upon our ability to integrate the products and services, technology, administrative functions and personnel of these businesses into our segments in an efficient and effective manner. We cannot assure you that we will be able to do so, or that our acquired businesses will perform at anticipated levels or that we will be able to obtain these synergies. Management resources may also be diverted from operating our existing businesses to certain acquisition integration challenges. If we are unable to successfully integrate acquired businesses, our anticipated revenues and profits may be lower. Our profit margins may also be lower, or diluted, following the acquisition of companies whose profit margins are less than those of our existing businesses. Acquisition spending may also reduce our earnings per share in certain periods.

We have also historically decided from time to time to dispose of assets or businesses that are no longer aligned with strategic objectives or our current business portfolio. In 2016, we completed the sale of our Intellectual Property & Science business and in January 2018, we signed a definitive agreement to enter into a strategic partnership and sell a 55% interest in our Financial & Risk business. These transactions may involve challenges and risks. There can be no assurance that future divestitures will occur, or if a transaction does occur, there can be no assurance as to the potential value created by the transaction. The process of exploring strategic alternatives or selling a business could also negatively impact customer decision-making and cause uncertainty and negatively impact our ability to attract, retain and motivate key employees. Any failures or delays in completing divestitures could have an adverse effect on our financial results and on our ability to execute our strategy. Although we have established procedures and processes to mitigate these risks, there is no assurance that these transactions will be successful. In addition, we expend costs and management resources to complete divestitures and manage post-closing arrangements. Completed divestitures may also result in continued financial involvement in the divested business, such as through guarantees, indemnifications, transition services arrangements or other financial arrangements, following the transaction.

Please also see the risk factors below under the heading “Risks Related to Our Proposed Financial & Risk Strategic Partnership”.

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We have significant funding obligations for pension arrangements that are affected by factors outside of our control.

We have significant funding obligations for various pension arrangements that are affected by factors outside of our control, including market factors and changes in legislation. In the past, we also have contributed to our pension plans to pre-fund certain obligations. In the first quarter of 2017, we contributed $500 million to our U.S. defined benefit pension plan to improve the funded status of that plan. We may be required or we may agree to make additional contributions to some pension plans in connection with the proposed Financial & Risk transaction and the amounts of any such contributions may be material.

The valuations of obligations for material plans are determined by independent actuaries and require assumptions in respect of future compensation levels, expected mortality, inflation and medical cost trends, along with the discount rate to measure obligations. These assumptions are reviewed annually. While we believe that these assumptions are appropriate given current economic conditions, significant differences in actual experience or significant changes in assumptions may materially affect our valuations of pension obligations and related future expenses. In addition, the performance of equity and fixed income markets, which may be influenced by general economic conditions, including interest rates, inflation and currency exchange rates, may impact the funding level of our funded plans and required contributions.

Antitrust/competition-related claims or investigations could result in changes to how we do business and could be costly.

We are subject to applicable antitrust and competition laws and regulations in the countries where we have operations. These laws and regulations seek to prevent and prohibit anti-competitive activity. From time to time, we may be subject to antitrust/competition-related claims and investigations. Following such a claim or investigation, we may be required to change the way that we offer a particular product or service and if we are found to have violated antitrust or competition laws or regulations, we may be subject to fines or penalties. Any antitrust or competition-related claim or investigation could be costly for our company in terms of time and expense and could have an adverse effect on our financial condition and results of operations.

We may be required to take future impairment charges that would reduce our reported assets and earnings.

Goodwill and other identifiable intangible assets comprise a substantial portion of our total assets. We are required under IFRS to test our goodwill and identifiable intangible assets with indefinite lives for impairment on an annual basis. We also are required by IFRS to perform an interim or periodic review of our goodwill and all identifiable intangible assets if events or changes in circumstances indicate that impairment may have occurred. Impairment testing requires our company to make significant estimates about our future performance and cash flows, as well as other assumptions. Economic, legal, regulatory, competitive, contractual and other factors as well as changes in our company’s share price and market capitalization may affect these assumptions. If our testing indicates that impairment has occurred relative to current fair values, we may be required to record an impairment charge in the period the determination is made. Recognition of an impairment would reduce our reported assets and earnings.

Woodbridge controls our company and is in a position to affect our governance and operations.

Woodbridge beneficially owned approximately 64% of our shares as of March 1, 2018. For so long as Woodbridge maintains its controlling interest in our company, it will generally be able to approve matters submitted to a majority vote of our shareholders without the consent of other shareholders, including, among other things, the election of our board. In addition, Woodbridge may be able to exercise a controlling influence over our business and affairs, the selection of our senior management, the acquisition or disposition of our assets, our access to capital markets, the payment of dividends and any change of control of our company, such as a merger or take-over. The effect of this control may be to limit the price that investors are willing to pay for our shares. In addition, a sale of shares by Woodbridge or the perception of the market that a sale may occur may adversely affect the market price of our shares. For additional information, please see the “Additional Information – Woodbridge” section of this annual report.

Changes in the tax residence of our company could cause us adverse tax consequences.

We expect our company will remain resident only in Canada for tax purposes. However, if our company were to cease to be resident solely in Canada for tax purposes (including as a result of changes in applicable laws or in Canadian regulatory practice), this could cause us adverse tax consequences.

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Thomson Reuters Founders Share Company holds a Thomson Reuters Founders Share in our company and may be in a position to affect our governance and management.

Thomson Reuters Founders Share Company was established to safeguard the Thomson Reuters Trust Principles, including the independence, integrity and freedom from bias in the gathering and dissemination of information and news. The Thomson Reuters Founders Share Company holds a Thomson Reuters Founders Share in our company. The interest of the Thomson Reuters Founders Share Company in safeguarding the Trust Principles may conflict with our other business objectives, impose additional costs or burdens on us or otherwise affect our management and governance. In addition, the Founders Share enables the Thomson Reuters Founders Share Company to exercise extraordinary voting power to safeguard the Trust Principles and to thwart those whose holdings of voting shares of Thomson Reuters threaten the Trust Principles. As a result, the Thomson Reuters Founders Share Company may prevent a change of control (including by way of a take-over bid or similar transaction) of our company in the future. The effect of these rights of the Thomson Reuters Founders Share Company may be to limit the price that investors are willing to pay for our shares. For additional information, please see the “Additional Information – Material Contracts” section of this annual report.

Risks Related to Our Proposed Financial & Risk Strategic Partnership

We may not complete the Financial & Risk transaction within the timeframe we anticipate or at all, which could have an adverse impact on our business, operations or results.

We expect the proposed Financial & Risk transaction to close in the second half of 2018. Closing of the transaction is subject to specified regulatory approvals and customary closing conditions. It is possible that factors outside our control could delay the completion of the transaction, or prevent it from being completed at all. If the transaction is not completed within the expected time frame or at all, it could negatively impact customer retention and decision-making, which could impact Financial & Risk’s revenues in particular. Any failures or delays in completing the transaction could have a material and adverse effect on our financial results and on our ability to execute our strategy.

In addition, some costs related to the proposed transaction must be paid whether or not the transaction is completed, and we have incurred, and will continue to incur, significant costs, expenses and fees for professional services and other transaction costs in connection with the proposed transaction.

We may be unable to attract and retain key employees during the pendency of the transaction.

Current and prospective employees of our company may experience uncertainty about their future roles with Thomson Reuters or the new Financial & Risk partnership, which may materially and adversely affect our ability to attract and retain key personnel during the pendency of the transaction. Key employees may leave the company because of this uncertainty or a desire not to remain with Thomson Reuters or the new Financial & Risk partnership following the closing of the transaction. The departure of existing key employees or the failure of potential key employees to accept employment with Thomson Reuters or the new Financial & Risk partnership, despite our recruiting efforts, could have a material and adverse impact on our business, regardless of whether the transaction closes.

Separating the Financial & Risk business from Thomson Reuters may be more difficult, costly or time consuming than expected, which may adversely affect Thomson Reuters.

The separation of the Financial & Risk business from Thomson Reuters is a complex, costly and time-consuming process and multi-year transitional services agreements are contemplated in certain areas, notably in technology. As a result, we will be required to devote significant management time, attention and resources to separate Financial & Risk from Thomson Reuters. This process may disrupt our businesses. The failure to meet the challenges involved in disentangling the businesses could cause an interruption of, or a loss of momentum in, the activities of our company and could have a material and adverse effect on our financial condition and results of operations. There are other significant challenges to successfully implementing the transaction, many of which may be beyond the control of management, including, without limitation:

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Some of these factors will be outside of the control of Thomson Reuters and any one of them could result in increased costs and diversion of management’s time and energy, as well as decreases in the amount of expected revenue which could materially impact our business, financial condition and results of operations. The integration process and other disruptions resulting from the transaction may also adversely affect our relationships with employees, suppliers, customers, distributors, licensors and others with whom we have business or other dealings.

We may fail to realize the anticipated benefits of the strategic Financial & Risk transaction.

Following the closing of the transaction, we will own a 45% equity stake in the Financial & Risk business. There can be no assurance that the partnership will result in the Financial & Risk business realizing the anticipated opportunities and growth. Also, we may not realize the anticipated benefits of the agreement that we plan to sign at closing for Reuters News to supply news and editorial content to the new partnership for a 30-year term. In addition, we may be unable to accelerate revenue growth in our Legal and Tax & Accounting businesses, despite having an increased focus on those businesses. If we are unable to achieve the anticipated benefits of the transaction, it could have a material and adverse effect on our financial condition and results of operations.

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Management’s Discussion and Analysis

This management’s discussion and analysis is designed to provide you with a narrative explanation through the eyes of our management of how we performed in the last two years, as well as information about our financial condition and future prospects. We recommend that you read this in conjunction with our 2017 annual consolidated financial statements, as management’s discussion and analysis is intended to supplement and complement our financial statements. This management’s discussion and analysis contains forward-looking statements, which are subject to risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements. Forward-looking statements include, but are not limited to, statements regarding our proposed Financial & Risk strategic partnership and our expectations related to general economic conditions and market trends and their anticipated effects on our business segments. For additional information related to forward-looking statements and material risks associated with them, please see the “Cautionary Note Concerning Factors That May Affect Future Results” section of this management’s discussion and analysis. This management’s discussion and analysis is dated as of March 1, 2018.

Unless otherwise indicated or the context otherwise requires, references in this discussion to “we,” “our,” “us” and “Thomson Reuters” are to Thomson Reuters Corporation and our subsidiaries.

Basis of Presentation

We prepare our consolidated financial statements in U.S. dollars in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB). In this management’s discussion and analysis, we discuss our results from continuing operations on both an IFRS and non-IFRS basis. Both bases exclude the results of our IP & Science business, which was reported as a discontinued operation through the date of its sale in October 2016, and include the results of acquired businesses from the date of purchase. Our Financial & Risk business is included in our 2017 and 2016 results, but will be reported as a discontinued operation beginning with our results for the first quarter of 2018.

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Use of Non-IFRS Financial Measures

We use non-IFRS measures as supplemental indicators of our operating performance and financial position as well as for internal planning purposes. We believe non-IFRS financial measures provide more insight into our performance. Non-IFRS measures do not have standardized meanings prescribed by IFRS and therefore are unlikely to be comparable to the calculation of similar measures used by other companies, and should not be viewed as alternatives to measures of financial performance calculated in accordance with IFRS.

Our non-IFRS financial measures include:

We also report changes in our revenues, operating expenses, adjusted EBITDA, the related margin and adjusted EPS before the impact of foreign currency or at “constant currency”. These measures remove the impacts from changes in foreign currency exchange rates in order to provide better comparability of our business trends from period to period.

Changes excluding the fourth-quarter 2016 charges: As a supplemental measure, we also compare 2017 adjusted EBITDA, the related margin and adjusted EPS to the same measure in 2016, excluding $212 million of fourth-quarter severance charges incurred in 2016. We believe this supplemental information provides enhanced visibility about our 2017 performance compared to 2016.

See Appendix A of this management’s discussion and analysis for a description of our non-IFRS financial measures, including an explanation of why we believe they are useful measures of our performance, including our ability to generate cash flow. Refer to the sections of this management’s discussion and analysis entitled “Results of Operations-Continuing Operations”, “Liquidity and Capital Resources” and Appendices B, C and D for reconciliations of our non-IFRS financial measures to the most directly comparable IFRS financial measures.

Glossary of Key Terms

We use the following terms in this management’s discussion and analysis.

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Executive Summary

Our Company

We are a leading source of news and information for professional markets. Our customers rely on us to deliver the intelligence, technology and expertise they need to find trusted answers. We have operated in more than 100 countries for more than 100 years.

In 2017, we were organized in three reportable segments supported by a corporate center:

		Financial & Risk   A provider of critical news, information and analytics, enabling transactions and connecting communities of trading, investment, financial and corporate professionals. Financial & Risk also provides regulatory and operational risk management solutions. We recently signed an agreement to enter into a strategic partnership that includes the sale of a 55% interest in this business. See “Proposed Financial & Risk Strategic Partnership” below.
		Legal   A provider of critical online and print information, decision tools, software and services that support legal, investigation, business and government professionals around the world.
		Tax & Accounting   A provider of integrated tax compliance and accounting information, software and services for professionals in accounting firms, corporations, law firms and government.

We also operate:

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Our Business Model and Key Operating Characteristics

We live at a time when the amount of data is overwhelming, the regulatory environment is complex, markets move at breakneck speed and connectivity is expanding around the world. Our customers count on the accuracy of our information, the reliability of our systems and the relevance of our insights to help them navigate the changing worlds of commerce and regulation. We believe our workflow solutions make our customers more productive, by streamlining how they operate. Reuters is renowned for the integrity of its news. The principles of freedom from bias and access to information govern everything that we do.

We derive the majority of our revenues from selling solutions to our customers, primarily electronically and on a subscription basis. Many of our customers utilize our solutions as part of their workflows. We believe this is a significant competitive advantage as it has led to strong customer retention. Over the years, our business model has proven to be capital efficient and cash flow generative, and it has enabled us to maintain leading and scalable positions in our chosen market segments.

The table below describes some of our key operating characteristics.

2017 Results and Key Accomplishments

Below are the financial highlights of our results for the year ended December 31, 2017.

(1) Refer to Appendix A of this management’s discussion and analysis for additional information on non-IFRS financial measures.

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Our results reflected our progress against our key financial priorities, as follows:

Accelerate Organic Revenue Growth. In 2017, we continued to invest in our faster growing businesses, including Risk, Elektron Data Platform, Legal Software & Solutions, and Global Tax, and we focused on improving customer retention and driving new sales globally. Our faster growth segments represented over one-third of our revenue base in 2017 and collectively grew 7%. As a result of our efforts, revenues increased 1% in total and 2% in constant currency, comprised of 1% organic growth and a 1% contribution from acquisitions. Organic revenues increased in both our Legal and Tax & Accounting businesses, but were essentially unchanged in Financial & Risk. Financial & Risk’s organic revenue performance was lower than expected and reflected weaker than expected net sales and longer lead times to convert sales to revenues.

Continue to Drive Productivity Gains. We controlled our operating expenses by further simplifying our business in 2017. For example, we continued to close data centers and we reduced the number of products that we sell in our Financial & Risk business. In 2017, our operating expenses decreased 1%, excluding fair value adjustments and $212 million of severance charges in 2016. Higher revenues and lower expenses, partly reflecting the favorable comparison to 2016 that included $212 million of severance charges, resulted in higher operating profit and adjusted EBITDA. Our 2017 adjusted EBITDA margin exceeded 30%. We reinvested some of our cost savings from our simplification initiatives into our revenue growth initiatives.

Deliver on Our Financial Objectives. In 2017, we continued to balance reinvestment in our core businesses with the return of nearly $2.0 billion of capital to our shareholders through dividends and share repurchases. Diluted EPS declined in 2017 because 2016 included a $2.0 billion gain on sale of the IP & Science business. We met the 2017 adjusted EPS target that we set three years ago, as adjusted for foreign currency and the IP & Science sale. Adjusted EPS, which excludes the IP & Science gain, grew 40% overall and 21% excluding the favorable impact from the 2016 severance charges. We also generated strong cash flow from operations and free cash flow in 2017. However, both measures were negatively impacted by a $500 million pension contribution in January 2017. In January 2018, in connection with announcing a proposed strategic partnership for our Financial & Risk business, our board of directors approved maintaining our dividend at its current level of $1.38 per common share (on an annualized basis).

Additionally, 2017 was the sixth consecutive year that we met or exceeded each of the performance metrics in our external financial outlook. We originally communicated our 2017 full-year business outlook in February 2017. In August 2017, we raised our 2017 full-year adjusted EPS outlook from $2.35 to a range of $2.40 to $2.45, and increased the range of our 2017 full-year adjusted EBITDA margin outlook by 50bp from a range of 28.8% to 29.8% to a range of 29.3% to 30.3%.The table below compares our actual performance to the updated outlook that we provided in August 2017:

Non-IFRS Financial Measures(1)		2017 Outlook(2)		2017 Actual  Performance(2)
Total Revenues		Low single digit growth		2% total growth; 1% organic growth
Adjusted EBITDA margin		Between 29.3% and 30.3%		30.2%
Adjusted EPS		Between $2.40 and $2.45		$2.49
Free cash flow		Between $0.9 billion and $1.2 billion		$1.0 billion

(1) Refer to Appendix A for additional information on non-IFRS financial measures.

(2) The 2017 Outlook and 2017 actual performance were measured at constant currency rates relative to 2016, except for the 2017 free cash flow performance which was reflected at actual currency rates. Refer to the sections of this management’s discussion and analysis entitled “Results of Operations-Continuing Operations”, “Liquidity and Capital Resources” and Appendices B, C and D for reconciliations of our non-IFRS financial measures to the most directly comparable IFRS financial measures.

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Proposed Financial & Risk Strategic Partnership

On January 30, 2018, we signed a definitive agreement to enter into a strategic partnership with private equity funds managed by Blackstone. Canada Pension Plan Investment Board and an affiliate of GIC will invest alongside Blackstone. As part of the transaction, we will sell a 55% majority stake in our Financial & Risk business and will retain a 45% interest in the business. We will maintain full ownership of our Legal, Tax & Accounting and the Reuters News businesses. The transaction will enable us to focus on expanding our business and accelerating revenue growth in the legal, tax and accounting and regulatory market segments.

We expect to receive approximately $17 billion in gross proceeds at closing (subject to purchase price adjustments). The transaction is expected to close in the second half of 2018 and is subject to specified regulatory approvals and customary closing conditions.

We currently expect to use the proceeds of the transaction as follows:

On the closing date of the transaction, Reuters News and the new Financial & Risk partnership will sign a 30-year agreement for Reuters News to supply news and editorial content to the partnership for a minimum amount of $325 million per year. For the duration of the news agreement, we will grant the Financial & Risk partnership a license to permit it to brand its products/services and company name with the “Reuters” mark, subject to applicable limitations and restrictions set forth in a trademark license agreement.

Upon closing of the transaction, we expect that our global workforce will roughly split in half. About 22,000 employees will transfer from Thomson Reuters to the new partnership, including approximately 16,000 people in Financial & Risk and approximately 6,000 people across the Corporate functions. Corporate staff will be primarily from ET&O and GGO, but will also include staff from our Finance, Human Resources, Legal, Strategy and Communications functions.

The information in this section is forward-looking and should be read in conjunction with the section entitled “Cautionary Note Concerning Factors That May Affect Future Results”. See the “Subsequent Events” section of this management’s discussion and analysis for additional information.

2018 Business Outlook

Given the significance and complexity of the proposed Financial & Risk transaction to our business, particularly the extent of cost allocations that will need to be made between Financial & Risk and our remaining businesses, we plan to provide a 2018 Business Outlook when we report first-quarter results in May 2018.

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Revenue Dynamics and Related Trends

Below, we provide information regarding our 2017 revenues by media, type and geographic area.

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Expenses

A majority of our operating expenses are fixed. As a result, when our revenues increase, we become more profitable and our margins increase, and when our revenues decline, we become less profitable and our margins decrease. We invest some of the profits from our incremental revenues in our business, so the full impact of incremental revenues are not always reflected in our profitability. Our most significant operating expense is staff costs which are comprised of salaries, bonuses, commissions, benefits, severance, payroll taxes, and equity-based compensation awards. In 2017, staff costs represented 53% of our total 2017 expenses, compared to 56% in 2016, which included $212 million of severance charges.

Seasonality

On a consolidated basis, our revenues and operating profit do not tend to be significantly impacted by seasonality as we record a large portion of our revenues ratably over a contract term and our costs are generally incurred evenly throughout the year. However, our performance from quarter to consecutive quarter can be impacted by transactions revenues as well as by the release of certain print-based offerings, which tend to be concentrated at the end of the year. As a consequence, the results of certain of our segments can be impacted by seasonality to a greater extent than our consolidated results.

Acquisitions and Dispositions

Acquisitions. We have been focused on driving organic growth. However, we make tactical acquisitions from time to time that we believe will strengthen our positions in key growth segments. In 2017 and 2016, we spent $185 million and $112 million on acquisitions, respectively. When integrating acquired businesses, we focus on eliminating cost redundancies and combining the acquired products and services with our existing offerings and capabilities to achieve revenue growth. Generally, the businesses that we acquire initially have lower margins than our existing businesses, largely reflecting the costs of integration.

Dispositions. We optimize our portfolio of businesses by investing in the parts of our business that offer the greatest opportunities to achieve higher growth and returns. As a result, we sell businesses from time to time that are not fundamental to our strategy. In 2016, we sold our IP & Science business for gross proceeds of $3.55 billion. In January 2018, we signed a definitive agreement to enter into a strategic partnership with private equity funds managed by Blackstone. Canada Pension Plan Investment Board and an affiliate of GIC will invest alongside Blackstone. As part of the transaction, we will sell a 55% majority stake in our Financial & Risk business for approximately $17 billion, as we believe that higher growth opportunities may exist through this partnership. We expect the transaction to close in the second half of the year.

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Results of Operations – Continuing Operations

Consolidated Results

(1) Refer to Appendix A for additional information on non-IFRS financial measures. Refer to Appendix B of this management’s discussion for a reconciliation of earnings from continuing operations to adjusted EBITDA and adjusted EBITDA less capital expenditures.

Foreign currency effects

As set forth in the table above, fluctuations in foreign exchange rates impact our results given our currency mix of revenues and expenses around the world. Average foreign exchange rates for the most significant foreign currencies that we transact in were as follows:

Revenues

Revenues increased 1% in total and 2% in constant currency, comprised of 1% organic growth and a 1% contribution from acquisitions. Our organic growth primarily reflected increases in recurring revenues.

Operating profit, adjusted EBITDA and adjusted EBITDA less capital expenditures

Operating profit increased primarily due to higher revenues and lower operating expenses, despite a significant negative impact from fair value adjustments associated with foreign currency derivatives embedded in certain customer contracts. In 2016, operating expenses included $212 million of severance charges related to our simplification initiatives.

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The increases in adjusted EBITDA and the related margin in total and in constant currency were partly due to a favorable comparison to prior year results, which included the severance charges. Excluding the severance charges, adjusted EBITDA and the related margin increased in total and on a constant currency basis due to higher revenues and cost benefits generated by our ongoing simplification initiatives.

Adjusted EBITDA less capital expenditures and the related margin increased due to higher adjusted EBITDA, which more than offset an increase in capital expenditures.

Operating expenses

(1) Fair value adjustments primarily represent mark-to-market impacts on embedded derivatives. In 2016, fair value adjustments also included the mark-to-market impacts on certain share-based awards. Please refer to the “Changes in Accounting Policies” section of this management’s discussion and analysis for additional information on our adoption of IFRS 2 amendments in 2017.

Operating expenses decreased in total despite higher expenses from unfavorable fair value adjustments associated with foreign currency derivatives embedded in certain customer contracts. Excluding fair value adjustments, operating expenses decreased in total and in constant currency due to a favorable comparison to the prior year, which included $212 million of severance charges, and cost benefits generated by our ongoing simplification initiatives. These decreases more than offset investments to consolidate real estate and improve customer experience. As an indication of how our simplification initiatives are providing benefits, operating costs decreased 1% excluding the fair value adjustments and the 2016 severance charges.

Depreciation and amortization

Other operating (losses) gains, net

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In 2017, other operating losses, net, included expense associated with contingent consideration and a gain from the sale of a portion of an investment. The contingent consideration is payable to non-controlling interests of Financial & Risk’s Tradeweb business in additional common shares of the Tradeweb business, based upon financial performance measures.

In 2016, other operating gains, net, primarily included gains on the sale of two Canadian wholly owned subsidiaries to a company affiliated with our principal shareholder, Woodbridge. These gains were partly offset by costs associated with acquisitions and expenses associated with contingent consideration payable to non-controlling interests of the Tradeweb business.

Additional information about the Woodbridge transactions is provided in the “Related Party Transactions” section of this management’s discussion and analysis.

Net interest expense

The decrease in net interest expense was primarily due to lower interest from commercial paper borrowings, net pension obligations, and certain tax liabilities. Lower interest on pension obligations reflected a $500 million contribution to our U.S. defined benefit pension plan in January 2017. Interest on our long-term debt obligations also declined due to the redemption of notes during the year. As substantially all of our long-term debt obligations paid interest at fixed rates (after swaps), the net interest expense on the balance of our term-debt was essentially unchanged. See the “Liquidity and Capital Resources – Cash Flow” section of this management’s discussion and analysis for additional information regarding our financing activities.

Other finance costs (income)

Other finance costs (income) included losses related to changes in foreign exchange contracts and losses or gains on the impact of fluctuations of foreign currency exchange rates on certain intercompany funding arrangements. Additionally, 2017 included a loss of $26 million primarily for premiums incurred for the early redemption of debt securities in December. See the “Liquidity and Capital Resources – Cash Flow” section of this management’s discussion and analysis for additional information regarding our financing activities.

Tax expense (benefit)

In the fourth quarter of 2017, we recorded a $304 million deferred tax benefit reflecting a lower U.S. corporate tax rate as a result of the U.S. Tax Cuts and Jobs Act of 2017 (the Tax Act). As a result, our effective income tax rate on earnings from continuing operations was a 23.1% benefit compared to a 1.4% benefit in 2016. This adjustment reflects our reasonable estimate of the impact of the new tax law, as we are still assessing its impact upon the consolidated financial statements. The comparability of our tax benefit was further impacted by various transactions and accounting adjustments during each year. Additionally, the tax benefit in each year reflected the mix of taxing jurisdictions in which pre-tax profits and losses were recognized.

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The following table sets forth certain components within income tax expense or benefit that impact comparability from year to year, as well as tax expense or benefit associated with items that are removed from adjusted earnings:

(1) Relates to the net changes in deferred tax liabilities due to changes in corporate tax rates that were substantively enacted in certain jurisdictions. In 2017, this primarily relates to the impact of the Tax Act.

(2) Relates to the write-down of deferred tax assets to reflect the expected outcome of certain tax disputes.

(3) Relates primarily to changes in the recognition of deferred tax assets in various jurisdictions due to earlier acquisitions, assumptions regarding future profitability, and adjustments for indefinite-lived assets and liabilities that are not expected to reverse.

Because the items described above impact the comparability of our tax expense or benefit for each year, we remove them from our calculation of adjusted earnings, along with the pre-tax items to which they relate.

The computation of our adjusted tax expense is set forth below: