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UNITED STATES
  SECURITIES AND EXCHANGE COMMISSION
  Washington, D.C. 20549

FORM 20-F

(Mark One)

|   | REGISTRATION STATEMENT
        PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|-- | ------------------------------------------------------------------------------------------------------
|  
|OR
|   |                                                                                                       
|   | ANNUAL REPORT PURSUANT
        TO SECTION 13 OR 15(b) OF THE SECURITIES EXCHANGE ACT OF 1934          
|   |                                                                                                       
|   | For the fiscal year ended December
          31, 2005                                                 
|  
|OR
|   |                                                                                                       
|   | TRANSITION REPORT PURSUANT
        TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934      
|   |                                                                                                       
|   | For the transition period
        from _________________ to ________________                          

Commission file number333-08354

Reuters Group PLC(Exact name of Registrant as specified
in its charter)

---

(Translation of Registrant’s
    name into English)

England(Jurisdiction of incorporation or organization)

The Reuters Building, South
      Colonnade, Canary Wharf, London E14 5EP,
      England
(Address of Principal Executive Offices)

Securities registered or to
    be registered pursuant to Section 12(b) of the Act:None

Securities registered or to
    be registered pursuant to Section 12(g) of the Act:Ordinary Shares of 25p each

Securities for which there
    is a reporting obligation pursuant to Section 15(d) of the Act:None

Indicate the number of outstanding
    shares of each of the issuer’s classes of capital or common stock as
    of the close of the period covered by the annual report.

| | Ordinary Shares of 25p each | 1,383,647,406 | 
| | --------------------------- | ------------- | 
| | Founders Share of £1        | 1             | 

Indicate by check mark whether
    the registrant (1) has filed all reports required to be filed by Section
    13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
    months (or for such shorter period that the registrant was required to file
    such reports), and (2) has been subject to such filing requirements for the
    past 90 days.

Yes                                No

Indicate by check mark which
    financial statement item the registrant has elected to follow.

Item 17                               Item
    18

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|
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Back to Contents

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| | Contents
| | --------



01
      
      Introduction02
      
      Financial
        highlights03
      
      Chairmans
        statement04
      
      Chief
        Executives review05
      
      Selected
        financial highlights07
      
      Operating
        and Financial Review31
      
      Directors
        report32
      
      Directors
        and senior managers34
      
      Corporate
        governance and statement of directors responsibilities39
      
      Remuneration
        report49
      
      United
        States opinion50
      
      Consolidated
        income statement50
      
      Consolidated
        statement of recognised income and expense51
      
      Consolidated
        balance sheet52
      
      Consolidated
        cash flow statement


52
      
    Group
      accounting policies58
      
    Notes
      to the financial statements104
      
    Summary
      of differences between IFRS (as adopted by the EU) and US GAAP107
      
    Notes
      on the summary of differences between IFRS and US GAAP109
      
    Eleven
      year consolidated financial summary118
      
    Information
      for shareholders128
      
    Cross-reference
      guide to Form 20-F130
      
    Glossary131
      
    Financial
      diary for 2006131
      
    Where
      to find us


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Back to Contents

| | Introduction
| | ------------



ContentsThis
report comprises the annual report of Reuters Group PLC in accordance with the
requirements of the United Kingdom and its annual report on Form 20-F in accordance
with the requirements of the United States Securities and Exchange Commission
(SEC) for 2005. A cross-reference guide setting out the information in this annual
report that corresponds to the Form 20-F items is provided on pages 128 to 129. Definitions of companyAs
used in this annual report the Group and Reuters refer
to Reuters Group PLC and its subsidiary undertakings, including joint ventures
and associates. The
company refers to Reuters Group PLC. Where relevant, Instinet Group Incorporated
(Instinet Group) is treated as a discontinued operation as it was sold in December
2005. International Financial Reporting Standards and UK GAAPPrior
to 2005, the Group prepared its audited annual financial statements under UK
Generally Accepted Accounting Principles (UK GAAP). For the year ended 31 December
2005, the Group is required to prepare its annual consolidated financial statements
in accordance with International Financial Reporting Standards (IFRS) and International
Financial Reporting Interpretations Committee (IFRIC) interpretations as adopted
by the European Union (EU) and those parts of the UK Companies Act 1985 applicable
to companies reporting under IFRS. The 2004 comparatives have been restated as part of the first-time adoption requirements
of IFRS. As allowed by SEC rules in relation to first-time adoption of IFRS,
only one year of
comparatives is reported in this annual report. IFRS differs in certain respects from accounting principles generally accepted
in the United States (US GAAP). The material differences between IFRS and US
GAAP relevant to the Group are
explained on pages 104 to 108. The accounts for the parent entity Reuters Group PLC (refer pages 112 to 117)
continue to be prepared in accordance with UK GAAP.


Presentational
    currencyThe
    consolidated financial statements of the Group included in this annual report
    are presented in pounds sterling (£). On 31 December 2005, the Noon Buying
    Rate in New York City for cable transfers in foreign currencies as announced
    for customs purposes by the Federal Reserve Bank of New York (Noon Buying
    Rate) was $1.72 = £1; on7
    March 2006 the Noon Buying Rate was $1.74 = £1. Additional information
    on exchange rates between the pound sterling and the US dollar is provided,
    on page 122. Forward-looking statementsUnder
US law, all statements other than statements of historical fact included in this
annual report are, or may be deemed to be, forward-looking statements within
the meaning of the US Private Securities Litigation Reform Act of 1995. Certain
important factors that could cause actual results to differ materially from those
discussed in
such forward-looking statements are described under Section 18 Risk Factors on
pages 24 to 25 as well as elsewhere in this annual report. All written and oral
forward-looking statements made on or after the date of this annual report and
attributable to the Group are expressly qualified in their entirety by such factors. TrademarksReuters,
the sphere logo and Reuters product names referred to in the report are trade
marks or registered trade marks of the Group around the world. Other trade marks
of third parties are
used in this report for the purpose of identification only.




|Reuters
          Group PLCAnnual
          Report and Form 20-F 2005 |  | 01
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| | Financial highlights1
| | ---------------------



First year of revenue growth (up 3%) since 2001Our 2005 revenue
was £2,409 million, a 3% increase over 2004. 2005 was the first full year
of revenue growth since 2001, mainly driven by growth in recurring revenues,
as a result of
acquisitions made during the year. Recurring revenue2of £2,242 million
(up 4%) was driven by the acquisition of Moneyline Telerate (Telerate) and price increases. Usage revenue2of £97 million (up 13%)
reflected a good performance in transaction services and higher reuters.com advertising revenue. Outright revenue2was £70 million (down
22%) with the fall principally explained by our continued withdrawal from technology consulting. Operating profit up £13 million, trading profit1up £8 millionOperating profit
was £207 million in 2005, up £13 million on the previous year, principally
explained by an increase in trading profit. Trading profit of £334 million (trading margin 14%) was up £8 million
over 2004. A strong revenue performance combined with continuing tight cost control
was sufficient to fund
our Core Plus transformation and growth investments of £41 million and a £7
million charge relating to an accounting change in the Reuters Pension Fund (RPF),
to a defined benefit plan. Within trading profit, the three year Fast Forward restructuring programme delivered
additional savings of £126 million, bringing the cumulative total from the
programme to £360
million. Profit for the year up £107 millionOur 2005 profit
was £482 million, an increase of £107 million over the previous year,
principally explained by the increase in profit from discontinued operations
and profit on
asset sales. Profit from discontinued operations, which is where Instinet Group is reported
as the disposal of a major business line, was £253 million. This largely
represents profit realised from
our disposal of Instinet Group (£191 million) and profit from Instinet Group
in the eleven months prior to its sale (£68 million). Profit from other asset disposals totalled £38 million, largely from further
sales of our remaining stake in Tibco Software Inc. (TSI). EPS up 6.6p to 32.6p and adjusted EPS1up 2.0p to 13.8pEPS was 32.6p in
2005, up 6.6p from the previous year, mainly due to the increase in profit for
the year. Adjusted EPS was 13.8p in 2005, up 2.0p from the previous year, reflecting stronger
trading profit and a reduction in the number of shares in circulation due to
the share buyback
programme. Dividend of 10p per shareA final dividend
of 6.15p is proposed, which will bring the total dividend to 10p per share, the
same level as the previous year. Net assets stand at £570 millionNet assets stand
at £570 million, the same level as at 31 December 2004. The profit for the
year was offset by the return of equity to shareholders and the removal of minority
interest
equity, due to the sale of Instinet Group. Net funds1were £253 million, down
£73 million from the previous year. During 2005, £363 million of cash was returned to shareholders via dividend
payments and as a result of the share buyback programme to return £1 billion
to shareholders by July
2007.


Notes:1
  A number of measures are ‘non-GAAP’ figures, which are business
    performance measures used to manage the business, and which supplement the
    IFRS-based headline numbers. These include ‘trading profit’, ‘adjusted
    EPS’ and ‘net debt/net funds’. The rationale for using
    non-GAAP indicators and their reconciliation to the most directly comparable
    IFRS indicator is provided in sections 19 and 20 on pages 25 to 30.2
        See note 2 of the Financial Statements on page 59 for definitions of the terms recurring, usage and outright revenue.




|02 |  | Reuters
          Group PLCAnnual
          Report and Form 20-F 2005
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| | Chairmans
    statement
| | ------------------------



I
  am greatly encouraged by what
  I have seen and heard a
  business
  regaining its confidence, and that
  of its customers, and well placed
  to enter a new phase of growth.



In my first full year as Chairman, I have had the opportunity to travel around the Reuters world, meeting many of our people and customers. I am greatly encouraged by what I have seen and
heard  a business regaining its confidence, and that of its customers, and well placed to enter a new phase of growth. I am humbled by the courage and conviction shown by our people, particularly our journalists who continue to operate in
areas where the threat of violence and arbitrary detention is the norm. In 2005, we mourned the deaths of Waleed Khaled, who was shot and killed in Iraq, and Rashid Khaled who died there too following a car crash in Basra. We remain intensely
troubled by the difficult circumstances of journalists in war zones and continue to press for a better model of engagement between the media and the military. I am privileged to lead a world-class Board, which encompasses a broad range
of backgrounds and experiences. I am a passionate believer in the power of diversity
to enhance decision making. The unique outlook each Board member brings is undoubtedly
the Boards greatest asset. As a Board, we have worked hard to develop a
healthy relationship with management, characterised by constructive challenge
and support. Tom Glocer is an
exceptional Chief Executive. The Board and management have worked together to define a coherent strategic
framework. The resulting strategy for growth builds on our core strengths in
content and transaction services
and addresses our customers critical needs. We must also continue to transform
our core business, by pursuing greater efficiency and simplicity in everything
we do. In a world where trust is scarce, the Reuters brand, which has trust at its heart,
resonates deeply. It is our challenge to grow the company to fill the space occupied
by the brand. Reuters is unique in that it is governed by the Reuters Trust Principles,
which commit us to act with integrity, independence and without bias. These principles
are not


restricted to the collection and dissemination of the news. They inform every
decision we make, whether it concerns our customers, suppliers, staff or the
communities in which we operate. A responsible approach to business is not optional.
Without responsibility there is no sustainability. For over 150 years, Reuters has been relentless in the pursuit of truth. We have
built one of the worlds great brands. Now I am confident that we are on
course to enjoy a new phase of
growth. Niall
        FitzGerald, KBEChairman




|Reuters
          Group PLCAnnual
    Report and Form 20-F 2005 |  | 03
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| | Chief
    Executives review
| | ----------------------------



Weve completed the Fix it stage of
our strategy, putting our core business
back on track.Reuters
is
now more
competitive, simpler, more customer-
focused and more efficient.



What
was the highlight for you in 2005?The key thing for
me is that we went from four years of losing revenue to revenue
growth – thats really important for our shareholders and for
our employees
as well. Fast Forward has just completed. Did it achieve its objectives?Our
Fast Forward transformation plan has achieved its objectives in full. The £440
million in cost savings being delivered in 2006 has turned Reuters from loss-making
to profit, and we have significantly enhanced our product line, putting out a
slew of great products at year-end. We also improved customer service and built
a solid platform for growth. Last July the company launched the Core Plus growth initiatives
  which you said would strengthen the core business and accelerate revenue growth.
  Its
  very early, but is that working
  as you had hoped?Yes, there are
  really good early signs of success in Core Plus. There are four initiatives:
  electronic trading, high-value content, a new approach to enterprise-wide sales
  and new markets. And for each one, we have an important milestone or set of
  milestones we can point to, to show that were on track to deliver additional growth
  at Reuters. How do you think our customers are responding to those changes?I judge the customer
response in a number of ways: First, is it coming through in revenues and in sales? The answer is yes, weve
seen
increases
in these lines. Second, by how they tell Reuters they are feeling  we have a formal customer
satisfaction survey that goes to about 12,000 users and thats shown steady
improvement. And finally, the thing I really like is, I just go out and spend time with customers.
    I walk around the trading desks, I talk to our customers, and they tell me
    they can
see the difference at
Reuters. And
        what about the product offering at Reuters?We seek to
    provide a sensible range of products. We believe that customers don’t
    just want a single box at a single price. That said, Reuters had gotten far
    too complex, with 1,300 products in the product line in 2001. What we’ve
    done is rationalise it, reduced the number of products and platforms, and
    then
    put fit-for-purpose products out to meet different customer needs.  This review is taken from a video interview with Tom Glocer which can be seen at www.about.reuters.com/investors.


Were returning cash to the market via a share buyback. Why was that
method chosen above others?Its a tax-efficient
strategy and it also allows us to retire shares while putting out cash, thereby
raising the earnings per share for everybody  who remains a shareholder.
The Reuters Board looked at a number of alternatives and we thought this was
the best method, reflecting our
capital
needs, the needs of our shareholders, and the market value of Reuters shares. Looking to 2006, what do you see lying ahead for the company?Im very excited
about 2006. The key drivers for us will be to deliver on our Core Plus investments,
to accelerate our revenue growth, to continue to really focus on customer service
and to maintain the good cost control that weve had throughout the last
few years. What are your ambitions for the Media business?Reuters has operated
a successful wholesale media agency for over 150 years, and we believe we can
grow a direct-to-consumer media business alongside it. Our content and our brand
form a compelling offer to individuals in search of an independent, unbiased
view of world events. Why are electronic trading systems so important to Reuters?Reuters pioneered
electronic trading with the launch of our first Reuters Monitor Dealing System
back in 1981. Since then, we have had a track record of continuous innovation
in this area, right up to the launch in 2005 of Reuters Trading for Fixed Income
and Reuters Trading for Foreign Exchange. We see trading moving increasingly
to electronic platforms, so we are investing heavily in this area as part of
our Core Plus strategy. How is Reuters culture changing?There are many
wonderful aspects of the Reuters culture that underpin much of the company’s
enduring value. However, during Fast Forward it has been important to introduce
a leaner, more performance-driven aspect to our culture. Corporate cultures
do not change overnight, but I am pleased with the progress we have made to date
and confident we can continue to blend these two aspects of our culture. Tom
        GlocerCEO




|04 |  | Reuters
          Group PLCAnnual
          Report and Form 20-F 2005
|-- |  | ---------------------------------------------------------------------

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| | Selected financial highlights
| | -----------------------------

The selected
    financial information set out below is derived from the consolidated financial
    statements. The selected financial data should be read in conjunction with
    the
  financial statements and related notes (pages 50 to 108), as well as the Operating
  and Financial Review on pages 7 to 30.

The consolidated
  financial statements are prepared in accordance with IFRS, which differs in
  certain respects from US GAAP. For a summary of the material differences between
  IFRS and US GAAP and related information relevant to the Group, see pages 104
  to 108.

Consolidated income statement datafor the year ended 31 December

|£m (except per share data)                               |  | Notes |  | 2005   |  | 2004   | 
|-------------------------------------------------------- |  | ----- |  | ------ |  | ------ | 
|                                                         |  |       |  |        |  |        | 
|Amounts in accordance with IFRS                          |  |       |  |        |  |        | 
|                                                         |  |       |  |        |  |        | 
|Continuing activities:                                   |  |       |  |        |  |        | 
|                                                         |  |       |  |        |  |        | 
|Revenue                                                  |  |       |  | 2,409  |  | 2,339  | 
|                                                         |  |       |  |        |  |        | 
|Operating
      profit                                   |  |       |  | 207    |  | 194    | 
|                                                         |  |       |  |        |  |        | 
|Profit
      before taxation                             |  |       |  | 238    |  | 396    | 
|                                                         |  |       |  |        |  |        | 
|Profit
      after taxation                              |  |       |  | 229    |  | 356    | 
|                                                         |  |       |  |        |  |        | 
|Profit from discontinued activities                      |  |       |  | 253    |  | 19     | 
|                                                         |  |       |  |        |  |        | 
|Profit for the year                                      |  |       |  | 482    |  | 375    | 
|                                                         |  |       |  |        |  |        | 
|Basic earnings per ordinary share                        |  |       |  | 32.6p  |  | 26.0p  | 
|                                                         |  |       |  |        |  |        | 
|Basic earnings per ordinary share  continuing           |  |       |  | 16.3p  |  | 25.4p  | 
|                                                         |  |       |  |        |  |        | 
|Diluted earnings per ordinary share                      |  |       |  | 31.7p  |  | 25.4p  | 
|                                                         |  |       |  |        |  |        | 
|Diluted earnings per ordinary share  continuing         |  |       |  | 15.9p  |  | 24.8p  | 
|                                                         |  |       |  |        |  |        | 
|Basic earnings per ADS                                   |  | 1     |  | 195.8p |  | 156.1p | 
|                                                         |  |       |  |        |  |        | 
|Basic earnings per ADS  continuing                      |  |       |  | 97.8p  |  | 152.7p | 
|                                                         |  |       |  |        |  |        | 
|Diluted earnings per ADS                                 |  | 1     |  | 190.3p |  | 152.2p | 
|                                                         |  |       |  |        |  |        | 
|Diluted earnings per ADS  continuing                    |  |       |  | 95.4p  |  | 148.8p | 
|                                                         |  |       |  |        |  |        | 
|Dividends declared per ordinary share                    |  | 2     |  | 10.0p  |  | 10.0p  | 
|                                                         |  |       |  |        |  |        | 
|Dividends declared per ADS:                              |  | 2     |  |        |  |        | 
|                                                         |  |       |  |        |  |        | 
|Expressed
      in UK currency                           |  |       |  | 60.0p  |  | 60.0p  | 
|                                                         |  |       |  |        |  |        | 
|Expressed
      in US currency                           |  |       |  | 111.4c |  | 105.8c | 
|                                                         |  |       |  |        |  |        | 
|Weighted average number of ordinary shares (in millions) |  |       |  | 1,396  |  | 1,400  | 
|                                                         |  |       |  |        |  |        | 
|                                                         |  |       |  |        |  |        | 

|                                                                                                               |  |       |  |        |  | Reclassified | 3 | Reclassified | 3 | Reclassified | 3 | Reclassified | 3
|-------------------------------------------------------------------------------------------------------------- |  | ----- |  | ------ |  | ------------ | - | ------------ | - | ------------ | - | ------------ | -
|£m (except per share data)                                                                                     |  | Notes |  | 2005   |  | 2004         |   | 2003         |   | 2002         |   | 2001         |  
|                                                                                                               |  |       |  |        |  |              |   |              |   |              |   |              |  
|Amounts in accordance with US GAAP                                                                             |  |       |  |        |  |              |   |              |   |              |   |              |  
|                                                                                                               |  |       |  |        |  |              |   |              |   |              |   |              |  
|Continuing activities:                                                                                         |  |       |  |        |  |              |   |              |   |              |   |              |  
|                                                                                                               |  |       |  |        |  |              |   |              |   |              |   |              |  
|Revenue                                                                                                        |  |       |  | 2,503  |  | 2,370        |   | 2,669        |   | 2,955        |   | 3,017        |  
|                                                                                                               |  |       |  |        |  |              |   |              |   |              |   |              |  
|Income/(loss)
      before taxes on income                                                                     |  |       |  | 207    |  | 501          |   | (8           | ) | 198          |   | 83           |  
|                                                                                                               |  |       |  |        |  |              |   |              |   |              |   |              |  
|Income
      after taxes on income                                                                             |  |       |  | 211    |  | 395          |   | 23           |   | 168          |   | 29           |  
|                                                                                                               |  |       |  |        |  |              |   |              |   |              |   |              |  
|Income/(loss)
             after taxes (including minority interest)from
              discontinued activities |  |       |  | 185    |  | 44           |   | (51          | ) | (273         | ) | 95           |  
|                                                                                                               |  |       |  |        |  |              |   |              |   |              |   |              |  
|Net income/(loss)                                                                                              |  |       |  | 396    |  | 439          |   | (28          | ) | (105         | ) | 124          |  
|                                                                                                               |  |       |  |        |  |              |   |              |   |              |   |              |  
|Basic earnings/(loss) per ordinary share                                                                       |  |       |  | 28.4p  |  | 31.4p        |   | (2.0p        | ) | (7.5p        | ) | 8.8p         |  
|                                                                                                               |  |       |  |        |  |              |   |              |   |              |   |              |  
|Basic earnings per ordinary share  continuing                                                                 |  |       |  | 15.1p  |  | 28.1p        |   | 1.6p         |   | 12.0p        |   | 2.1p         |  
|                                                                                                               |  |       |  |        |  |              |   |              |   |              |   |              |  
|Diluted earnings/(loss) per ordinary share                                                                     |  |       |  | 27.6p  |  | 30.5p        |   | (2.0p        | ) | (7.5p        | ) | 8.6p         |  
|                                                                                                               |  |       |  |        |  |              |   |              |   |              |   |              |  
|Diluted earnings per ordinary share  continuing                                                               |  |       |  | 14.7p  |  | 27.4p        |   | 1.6p         |   | 12.0p        |   | 2.0p         |  
|                                                                                                               |  |       |  |        |  |              |   |              |   |              |   |              |  
|Basic earnings/(loss) per ADS                                                                                  |  | 1     |  | 170.2p |  | 188.2p       |   | (12.0p       | ) | (44.8p       | ) | 52.6p        |  
|                                                                                                               |  |       |  |        |  |              |   |              |   |              |   |              |  
|Basic earnings per ADS  continuing                                                                            |  |       |  | 90.8p  |  | 168.5p       |   | 9.8p         |   | 72.1p        |   | 12.4p        |  
|                                                                                                               |  |       |  |        |  |              |   |              |   |              |   |              |  
|Diluted earnings/(loss) per ADS                                                                                |  | 1     |  | 165.4p |  | 183.2p       |   | (12.0p       | ) | (44.8p       | ) | 51.6p        |  
|                                                                                                               |  |       |  |        |  |              |   |              |   |              |   |              |  
|Diluted earnings per ADS  continuing                                                                          |  |       |  | 88.2p  |  | 164.3p       |   | 9.7p         |   | 72.1p        |   | 12.1p        |  
|                                                                                                               |  |       |  |        |  |              |   |              |   |              |   |              |  
|Dividends declared per ordinary share                                                                          |  | 2     |  | 10.0p  |  | 10.0p        |   | 10.0p        |   | 11.1p        |   | 18.0p        |  
|                                                                                                               |  |       |  |        |  |              |   |              |   |              |   |              |  
|Dividends declared per ADS:                                                                                    |  | 2     |  |        |  |              |   |              |   |              |   |              |  
|                                                                                                               |  |       |  |        |  |              |   |              |   |              |   |              |  
|Expressed
      in UK currency                                                                                 |  |       |  | 60.0p  |  | 60.0p        |   | 60.0p        |   | 66.7p        |   | 108.0p       |  
|                                                                                                               |  |       |  |        |  |              |   |              |   |              |   |              |  
|Expressed
      in US currency                                                                                 |  |       |  | 111.4c |  | 105.8c       |   | 105.1c       |   | 99.6c        |   | 155.3c       |  
|                                                                                                               |  |       |  |        |  |              |   |              |   |              |   |              |  
|Weighted
      average number of ordinary shares(in
      millions)                                            |  |       |  | 1,396  |  | 1,400        |   | 1,396        |   | 1,395        |   | 1,404        |  
|                                                                                                               |  |       |  |        |  |              |   |              |   |              |   |              |  



|Reuters
          Group PLCAnnual
          Report and Form 20-F 2005 |  | 05
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Selected financial highlightscontinued



Consolidated
  balance sheet dataat
31
December

|£m                                                      |  | 2005  |  | 2004  | 
|------------------------------------------------------- |  | ----- |  | ----- | 
|                                                        |  |       |  |       | 
|Amounts
      in accordance with IFRS                   |  |       |  |       | 
|                                                        |  |       |  |       | 
|Total
      assets                                      |  | 2,137 |  | 2,580 | 
|                                                        |  |       |  |       | 
|Non-current
      liabilities (excluding deferred tax)  |  | 763   |  | 669   | 
|                                                        |  |       |  |       | 
|Net
      assets                                        |  | 570   |  | 570   | 
|                                                        |  |       |  |       | 
|Shareholders
      equity (attributable to the parent) |  | 570   |  | 371   | 
|                                                        |  |       |  |       | 
|Share
      capital                                     |  | 467   |  | 455   | 
|                                                        |  |       |  |       | 

|                                                     |  |       |  |       |  |       |  |       |  |       | 
|---------------------------------------------------- |  | ----- |  | ----- |  | ----- |  | ----- |  | ----- | 
|£m                                                   |  | 2005  |  | 2004  |  | 2003  |  | 2002  |  | 2001  | 
|                                                     |  |       |  |       |  |       |  |       |  |       | 
|Amounts
      in accordance with US GAAP             |  |       |  |       |  |       |  |       |  |       | 
|                                                     |  |       |  |       |  |       |  |       |  |       | 
|Total
      assets                                   |  | 2,326 |  | 2,743 |  | 3,280 |  | 3,789 |  | 4,641 | 
|                                                     |  |       |  |       |  |       |  |       |  |       | 
|Long-term
      liabilities (excluding deferred tax) |  | 696   |  | 597   |  | 499   |  | 474   |  | 514   | 
|                                                     |  |       |  |       |  |       |  |       |  |       | 
|Shareholders
      equity                           |  | 705   |  | 568   |  | 514   |  | 804   |  | 1,212 | 
|                                                     |  |       |  |       |  |       |  |       |  |       | 

|      
|------
|Notes:
|1     
|      
|2     
|      
|3     
|      



|06 |  | Reuters
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| | Operating
    and Financial Review
| | ----------------------------------



|  |                                                                                                                  |  |   |                                              |  |   |                                                              | 
|- | ---------------------------------------------------------------------------------------------------------------- |  | - | -------------------------------------------- |  | - | ------------------------------------------------------------ | 
|  | Company
          information(sections 01-09)                                                                    |  |   | Financial
            review(sections 10-11) |  |   | Supporting
            financial information(sections 12-20) | 
|  |                                                                                                                  |  |   |                                              |  |   |                                                              | 
|• | The markets
      we serve                                                                                       |  | • | Group
      financial performance            |  | • | Treasury
      policies and risk management                  | 
|• | Strategy,
      Brand, People                                                                                    |  | • | Divisional
      performance                 |  | • | Critical
      accounting policies, risk factors             | 
|• | Corporate
          responsibility, Reuters in the community,
    Environmental impact and Government regulation |  |   |                                              |  | • | Non-GAAP
      measures, reconciliations                     | 
|  |                                                                                                                  |  |   |                                              |  |   |                                                              | 

Company information 01 OverviewReuters
  is the worlds largest electronic publisher of news and financial data, operating in 128 countries. Daily, almost 350,000 financial professionals across the globe use market
  data and in-depth news on financial and commodities markets from Reuters, and one billion consumers see and hear news from Reuters in the worlds
  media. Our trusted information drives decision-making around the world, based
  on our reputation
  for speed, accuracy and independence. We provide tools
    to enable traders to perform fast and accurate analysis of financial data
    and to manage trading risk. Our electronic trading services connect financial
    communities, helping them to gain access to the best prices and to trade efficiently
    and cost-effectively. We offer systems to help our customers manage trade
    processing, financial content and internal business processes more effectively
    throughout their organisations. Until December
    2005, we owned a 62% stake in Instinet Group, a global electronic agency securities
    broker which operated two major businesses: Instinet, an institutional broker,
    and INET, an electronic marketplace. On 8 December 2005 we disposed of our
    entire interest when Instinet Group was acquired by the NASDAQ Stock Market
    Inc (NASDAQ) for cash. As a result of this transaction, we received cash proceeds
    of $1.1 billion (£630 million), which includes the dividend received
    from Instinet Group prior to disposal, less disposal costs. We intend to return
    the sale proceeds to shareholders as part of the two-year £1 billion
    share buyback programme announced in July 2005. 02 The markets we serve Financial markets More than 90% of our revenue comes from serving the wholesale financial services industry, which includes investment and commercial banks, broker-dealers, asset and wealth managers, and
commodities and energy traders. We and our customers
    are affected by global economic trends and by developments in the financial
    services markets. In this section, we provide a high-level macro-economic
    overview of 2005 as the backdrop to our performance during the year and to
    highlight the factors we have taken into account in the development of our
    strategy. The global economy in 2005The
    global economy was robust in 2005, although soaring energy prices and inflationary
    pressure contributed to a reduction in global Gross Domestic Product (GDP)
    growth from 5.1% in 2004 to an estimated 4.3% in 20051.
    The US and Asia, excluding Japan, remained the major growth engines of the
    world economy, with China growing at an estimated 9%1.
    Japan continued its gradual but sustained Notes:1
    World Economic
        Outlook, September 2005, International Monetary Fund. 2005 figures are
        projections.2
    Price return
        in local currency. Equivalent in US$ is 8.7%.


recovery in 2005,
    growing by an estimated 2%. The Euro zone economy struggled to gain momentum
    in 2005, up an estimated 1.2% compared to 2% in the previous year. UK GDP
    growth fell to an estimated 1.9% in 2005 from 3.2% in 2004. Financial services industry performance in 2005Overall,
    the financial services industry performed well in 2005 in terms of both revenue
    and profit growth, with the Morgan Stanley Capital International World Financials
    index gaining 15.5% over the period2.  Trading was a major source of profit for investment banks in 2005. Fixed income trading revenue remained strong despite increasing interest rates, and equity trading revenue continued on an
upward trend as benchmark European and Asian stock indices surged. Foreign exchange (FX) trading volumes continued to grow, driven by increasing buy-side activity. Prime brokerage revenue,
which includes securities lending, margin and other services provided by banks
to the hedge fund industry, grew by an estimated 28% in 2005. Mergers and acquisitions
(M&A) advisory also generated strong results for banks, with global M&A volume growing by 38% to reach $2.9
trillion of announced deals3. Derivatives and commodities markets continued to grow, with the notional amount outstanding of credit default swaps seeing a
48% increase in the first half of 20054. According to the Securities
Industry Association, US securities industry employment grew by 3% in 2005, and
had recovered 59% of the jobs lost in the 20012003 downturn by the end
of
the year5. Headcount in the UK financial sector also grew by 3% in 2005, according to the Centre for
Economics and Business Research. However, much of this growth has been in off-trading floor areas such as compliance, and some banks are reported to have reduced their equity trading staff as they shift a greater proportion of their execution
services to direct market access and algorithmic trading. 3
          Dealogic,
        preliminary data.4
          2005 Mid-Year
        Market Survey, International Swaps and Derivatives Association.5
          Securities
        Industry Association (SIA). November and December figures are preliminary.






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Operating and Financial Reviewcontinued



Our challenge at Reuters is to ensure that we continue to respond to fundamental structural changes in our markets and the resulting changing requirements of our customers. By aligning our
  business to customer needs, we are better positioned to shift our focus towards the higher-growth areas of the financial markets. Structural changeThe financial services
industry continued to undergo rapid structural change in 2005, particularly with
the continued growth in electronic and automated trading. Program trading,  computer-driven
automatically-executed securities trades involving a basket of stocks, accounted
for an average 58% of total trading volume on the New York Stock Exchange (NYSE)
during the final quarter of 2005, compared to 53% over the same period
in 20046.
Algorithmic trading, trading systems that use advanced mathematical models to
make transaction  decisions in the financial markets, is also being more widely
used as both buy-side and sell-side trading operations drive for greater efficiency
and search for trading patterns that they can exploit. On the regulatory
    front, we saw initiatives aimed at improving transparency and ensuring best
    execution of client orders. In Europe, the financial services industry
    is preparing for the introduction of the Markets in Financial Instruments
    Directive (MiFID), which is due to be implemented in all EU member states
    in 2007. The directive increases the regulatory obligations of many market
    participants and is intended to harmonise regulation across the EU. In the US,
      the  SEC adopted the Regulation National Market System (Reg NMS) in April
      2005.
    The new regulation prompted several major changes to the US exchange landscape,
       with NASDAQ acquiring Instinet Group and the NYSE acquiring the Archipelago
      Exchange
    and announcing it would combine its physical trading floor and an automated
       platform into a hybrid market. In a response to the increased consolidation

    among US exchanges, a group of five banks and a hedge fund acquired 45% of
       the Philadelphia Stock Exchange. New markets and alternative asset classesHedge funds
    continue to grow, although at a slower rate. The growth rate of net capital
    inflow into the hedge fund industry has come down from 19% in 2004 to 4% in
    2005. At the end of 2005, we estimate the size of the hedge fund industry
    to be approximately $1.1 trillion. We saw further
    interest in investing in emerging markets in 2005. For example, despite structural
    challenges and restrictions on foreign investments, major Western banks acquired
    significant stakes in a number of Chinese banks. Demand for alternative
    asset classes such as structured financial products, property derivatives,
    and emission credits continued to increase in 2005. With booming property
    markets in many parts of the world, institutional investors increased their
    exposure to the property sector and property indices saw strong returns. Emission
    credits received much attention as an emerging alternative asset class with
    the launch of the EUs Emissions Trading Scheme on 1 January 2005. Media marketsThe news media
    industry continued to show a mixed performance in 2005. News media companies
    revenue and profit performance were strongly correlated to the annual national,
    local and classified advertising spend.


In Western media
    markets, broadcasters and publishers saw modest growth in advertising revenues
    for their traditional offerings. However, the emerging digital offerings of
    these providers (only approximately 5% of their total 2005 revenues came from
    digital platforms) experienced audience and advertising revenue growth of
    over 15%. In developing markets, particularly China and India, traditional
    and digital media platforms achieved double digit growth, according to Universal
    McCann. The news media
    industry has been in a slow transition for the past 20 years. Newspaper subscriptions
    continue to decline and newspaper audiences get older as younger audiences
    focus their attention on mobile and online services. Increased proliferation
    of cable news has caused a wider distribution of advertising and distribution
    revenues. It has also created new opportunities for audiences worldwide to
    obtain news. The proliferation of broadband at home has further accelerated
    the pace in the past three years. Online offerings
    have already established themselves as important media for news delivery as
    users prefer them to traditional media for their timeliness and their ability
    to go further in-depth. Technology advances are overcoming the portability
    advantages of printed publications and are allowing increasingly for time-shifting
    and television mobility. 03 Our strategyReuters goal
    is to be the information company our customers value most, by offering indispensable
    content, innovative trading services and great customer service. There are three
    stages to achieving this goal: •
      Firstcomplete
        and realise the benefits of Fast Forward, ourbusiness transformation programme
        designed to turn Reuters into
        a more competitive, simpler, more customer-focused and more
        efficient organisation Fix
        it•
      Secondcontinue
        to streamline and improve the efficiency of ouroperations Strengthen
        it•
      Thirdgrow
        our core business and pursue new opportunities inadjacent markets Grow
        it Fix it through Fast Forward, our three year business transformation
    programmeThe Fix
    it phase has been largely completed with the end of the Fast Forward
    transformation period. With Fast Forward, we have made Reuters more competitive
    by strengthening and segmenting our product line to provide a range of products
    at different price points to meet the needs of a wide range of finance professionals.
    We have also simplified our product line, cutting the total number of products
    being sold from over 1,300 to 400. This includes a reduction in the number
    of desktop financial information products to 110, on the way to our target
    of 50. In addition,
    we have streamlined our portfolio over the last four years. The most significant
    disposal was the sale of our stake in Instinet Group, completed in 2005, which
    generated cash proceeds of £630 million. Customer satisfaction
    has been improved by recruiting and training new customer support staff and
    by investing in service resilience.




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We use several tools, including a regular customer satisfaction survey of some 12,000 customers, to gather feedback. The survey has shown improvement year-on-year for the past three
years. Consistent with
    our goal of making Reuters more efficient, we are on track to meet our cost
    savings targets. In 2005, we delivered cumulative annualised savings of £360
    million, towards our goal of £440 million in 2006. Strengthen it  continue to streamline and improve the
    efficiency of our operationsWe plan to continue
    the improving trend in customer service by reducing time to market for new
    products, raising product quality and improving the resilience of our service
    delivery. In July 2005,
    we announced four new service improvement initiatives: Rationalising our data centresfrom
    250 to approximately 10 globally to reduce costs, simplify data distribution
    and help us to improve service quality; Simplifying our product development processand
    concentrating our development activities into fewer centres to improve product
    quality and reduce time to market; Streamlining our content management processesto
    improve the accuracy, timeliness and breadth of our data; Modernising our customer administration systemsto
    make Reuters easier to do business with and enable us to deploy products faster
    to customers. We will be investing
    £170 million, over a four-year period, in our strengthen it
    service improvement and cost efficiency initiatives. By 2010, we expect these
    to deliver total annualised savings of at least £150 million. Grow it  grow our core business and pursue Core
    Plus growth opportunities in adjacent marketsThroughout 2005,
    Reuters served a £6 billion per annum market for financial information
    and related services, with an expected medium-term growth rate of 24%. We are continuing
    to enhance our product line by introducing new versions of our flagship products,
    by broadening and deepening our content and by extending our distribution
    capability. For example, our acquisition of Telerate in 2005 brought us market
    benchmark content for the fixed income markets and increased our user accesses,
    notably in the US and Asia. As a result of this continued investment in our
    service offerings, we believe we can grow our business in line with the market. In addition,
    we have identified four Core Plus growth opportunities which expand
    the market we are able to serve from £6 billion to £11 billion per
    annum. They also target higher growth areas, giving us the potential to deliver
    additional revenue growth from 2006 onwards. •
      Electronic tradingReuters has an established track record of providing electronic transaction
        services for the financial markets, for example, our foreign exchange
        matching service. We believe that the electronic trading trend is accelerating
        and as a result we are increasing our investment in electronic trading
        services by building a multi-asset trading platform on which we have already
        launched Reuters Trading for Foreign Exchange (RTFX) and Reuters Trading
        for Fixed Income (RTFI). In March 2006 we announced our plans to launch
        Reuters Trading for Exchanges. We are also building a post-trade notification
        service to help customers streamline their trade confirmation operations.


•
      High-value contentWe see increasing demand from customers, especially from hedge funds,
        for content which gives them not just facts but insight. We are investing
        in the creation of this high-value content by expanding our specialist
        editorial and data teams and also through acquisition and distribution
        agreements. In 2005 we acquired EcoWin, a leading provider of economic
        data. We also signed an exclusive content agreement with MasterCard in
        February 2006 to distribute the earliest detailed monthly view of US retail
        sales data, a key financial markets indicator.•
      A
        new approach to selling content and transactions servicesto whole enterprisesOur Enterprise business helps trading businesses to manage the flow of
        information and transactions both internally and with their institutional
        customers. Demand for structured information and data management services
        is increasing, driven by growth in program and algorithmic trading. The
        need for greater transparency in order to satisfy regulatory compliance
        requirements is also a factor in the growing demand for data. We have
        a wide range of assets such as high-speed streams of machine-readable
        trading data; historical price data and risk management and position-keeping
        systems. Using these tools, we have built long-term partnerships with
        many of our largest clients to help them develop their internal information
        and trading infrastructures. We are making our products more compelling
        to our customers by offering targeted packages of components designed
        to address specific customer activities such as algorithmic trading and
        fund valuation.•
      New
        marketsWe see three types of opportunity to develop new markets; high-growth
        geographic markets, such as India and China; new asset classes, such as
        emissions and property; and new types of customer such as a consumer media
        audience. We are scaling up our presence as a leading provider of financial
        information and trading services in rapidly developing financial markets,
        starting with India, China and Brazil. We are already the market leader
        in providing information, electronic trading and risk management products
        to the Indian financial markets and we are continuing to build up our
        product offer to enable us to capitalise on market growth. In early 2006
        we launched TIMES NOW, a TV news channel, in partnership with The Times
        of India Group to support our consumer media growth plans.We are continuing to build our presence in the Chinese financial and media
        markets. In 2005 we brought greater transparency to Chinas developing
        bond market by launching a range of market standard reference rates. We
        are taking a significant role in the development of Chinas foreign
        exchange market  our electronic trading system is the platform on
        which the China Foreign Exchange Trade System (CFETS) launched an FX portal
        for trading in eight foreign currency pairs. In July we launched our Chinese
        language website www.reuters.com.cn and began providing branded English
        language inserts for China Central Television.We plan to launch RTFI in Brazil and Mexico in 2006 and to expand our
        fixed income products to other Latin American countries. We created a
        new sales channel in Brazils growing market by entering into agreements
        with American Express and Universal OnLine, a major regional internet
        service provider, for them to promote Reuters Trader for Latin America
        to their corporate accounts.In the second half of 2005, we invested £15 million in Core Plus
        revenue growth initiatives. We expect trading profit, net of new revenue
        generated, to be reduced by approximately £50 million in 2006 and
        £20 million in 2007.




|Reuters
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Operating
  and Financial Reviewcontinued



We anticipate that together, these four new initiatives will generate one percentage point of revenue growth in 2006, in addition to revenue growth in the existing business which we expect
to grow in line with the market. We expect additional revenue growth from new initiatives to deliver three percentage points of additional revenues in 2008. 04 BrandOur brand is
    a powerful asset, ranked as a Top 100 Global Brand by Interbrand. In a cluttered
    marketplace, strong brands attract customers and drive financial performance.
    As an organisation and a brand, we are aligned to deliver consistently on
    the Reuters Trust Principles of independence, integrity and freedom from bias.
    Throughout the company, these principles guide us in everything we do (see
    page 119 for more information on the Trust Principles). Reuters news
    and information reaches more than one billion people daily and trust in the
    Reuters brand remains key to our future success. Our reputation as a trusted
    source, neutral electronic trading platform and provider of essential enterprise-wide
    services for the financial sector will enable us to expand our business into
    new markets. In 2005, we
    re-launched our visual brand identity, creating a distinctive look which makes
    extensive use of Reuters award-winning photography. The move of our headquarters
    to Canary Wharf, Londons new financial district, also helped us to establish
    a strong brand presence among many of our largest customers. They are able
    to see Europes largest price ticker wrapped around our building, together
    with a giant screen displaying Reuters real time multimedia news. 05 PeopleThe quality
    and commitment of our people have played a major role in our business transformation.
    This has been demonstrated in many ways, including improvements in customer
    satisfaction, the reinvigoration of our product line and the high standards
    we apply in order to uphold our Trust Principles. Our employees have also
    shown flexibility in adapting to changing business requirements and implementing
    new ways of working. Employees adapted to changeWith our business,
    markets and customers changing rapidly, we seek to employ people who are highly
    talented, knowledgeable about the markets we serve, customer focused, adaptable
    and committed to learning and development. We are also keen to ensure our
    employee base is diverse, to reflect the different cultures and markets we
    operate in and to bring a range of perspectives that allow us to develop fresh
    and innovative ways to serve our diverse customers. Change has been
    a constant theme throughout 2005, as we have continued to re-balance our employee
    base to support our strengthen it and grow it strategic
    objectives. Our Bangalore content centre and Bangkok development centre have
    expanded as we renew our focus on content and strengthen our product line.
    Recruiting highly skilled employees in Asia has allowed us to extend the service
    we offer to our customers, enabling us, for example, to cover a wider range
    of news while containing costs and continuing to locate employees close to
    our customers. With 28% of employees now based in Asia, we are also well placed
    to support our growth strategies in the region. We are bringing
    in fresh markets, media, content and technology expertise, both through targeted
    hiring and through acquisition. During the year, we welcomed new employees
    to the Group through a series of acquisitions, including Telerate, Ecowin
    and Action Images. Reflecting our drive to recruit new talent, over 50% of
    our employees have joined us in the last five years.


Employee communicationsWe use a variety
    of methods, including our intranet, to communicate with our geographically
    diverse workforce about the companys strategy and priorities. Our Daily
    Briefing, edited by a Reuters journalist, delivers an online multimedia
    information service seen by 75% of employees each day. It covers news and
    events about the company and about employees. The CEO hosts regular webcasts,
    teleconference briefings and question and answer sessions for employees in
    addition to meeting informally with groups of Reuters employees around the
    world. At the end of the year, the CEOs overall mission for the coming
    year is explained. Through the performance management process, objectives
    in support of that mission are set for everyone. Regular meetings are also
    held between management, employees union representatives and other groups
    of employees so that the views of employees can be taken into account in making
    decisions which may affect their interests. Reuters European Employee Forum
    operates as a pan-European works council and the CEO and other executive directors
    meet with the Forum regularly. Employee surveyWe carry out
    annual employee surveys to identify issues that need to be addressed and areas
    upon which to build; the findings are communicated to employees. Overall,
    the results of our most recent survey (November 2005) showed improvements
    across all the groupings that make up our employee engagement index (leadership,
    customer orientation, performance, employee commitment and career development).
    We have very strong scores on items related to the company brand and values
     two of the highest-scoring statements were: I fully support the
    values for which Reuters stands and Reuters provides a working
    environment that is accepting of ethnic differences. Highlighting areas
    for improvement, employees reinforced the need for further organisation simplification
    and improved customer service. The Group Management Committee (GMC) has put
    in place a range of initiatives to continue to address these issues in 2006. Talent and performance managementWe have remained
    committed to retaining and developing our talent despite the pressures of
    our Fast Forward transformation programme over the last few years. Our company-wide
    talent review process involves management teams openly reviewing their people.
    This enables us to identify our highest performers and strongest talent and
    to create tailored plans to develop them. These processes covered more than
    4,000 people worldwide in 2005. We report regularly to the Board on these
    activities and the Board also reviews our succession plans for our most critical
    roles, ensuring that we have sufficient depth and breadth in our most senior
    talent pools. Employee turnover for our highest performers remains below the
    3.5% threshold we have set. Employees
    performance is aligned to company goals through an annual performance review
    process that is carried out with all employees. Reviews focus both on the
    objectives that were set and how they were achieved, drawing on input from
    a range of people to ensure a rounded view of performance. The achievement
    of objectives is reinforced through our compensation plans. Employee developmentOur learning
    strategy is to increase the provision of flexible learning solutions to support
    employee development. This allows us to support the business by providing
    a wide range of learning opportunities as and where they are needed. Certification
    programmes ensure that the product and market knowledge of our customer-facing
    employees is kept up-to-date and tested on a regular basis. We have continued
    to develop managers through our middle manager programme with the University
    of Michigan and through a recently updated First Level Manager Programme.




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Employee safetyThe Board recognises the courage and professionalism shown by our employees operating in conflict zones. We regularly review our policies, training and procedures for employees,
  particularly for those working in dangerous places. We have reaffirmed the standing instructions to our employees to avoid risks wherever possible and we provide hostile environment training, protective equipment and post-trauma training programmes
  to all employees who may need them. We were deeply saddened by the deaths of two Reuters employees in Iraq in 2005. Photographer Rashid Khaled died following a car crash in Basra, Southern Iraq, in February and TV soundman Waleed Khaled was shot and
killed in Western Baghdad. Four Reuters journalists were held in US military custody in Iraq, three of them for several months, during 2005. All were released without charge. Equal opportunities and diversityWe have extensive fair employment practices in place and with the support of our Global Diversity Advisory Council, established in 2004, we are working to make Reuters an increasingly
inclusive company. The Council is chaired by the CEO, and serves as an advisory board to the GMC on issues related to diversity. Our policy is
    that the selection of employees, including for recruitment, training, development
    and promotion, should be determined solely on their skills, abilities and
    other requirements which are relevant to the job and in accordance with the
    laws in the country concerned. Our equal opportunities policy is designed,
    among other things, to ensure that people with disabilities, and other under-represented
    groups, are given the same consideration as others and enjoy the same training,
    development and prospects as other employees. In the UK, as well as being
    a member of the Employers Forum for Disability, we have made use of the services
    of both AbilityNet (which supplies technology for disabled users) and Employment
    Opportunities (a UK charity helping people with disabilities to find and retain
    work). We have successfully retained staff who have become disabled, as well
    as integrating those who are disabled when they join the company. This has
    been achieved by using technological solutions and re-designing the way jobs
    are handled, enabling individuals to contribute actively to meeting the needs
    of our business. Our commitment to ethics and complianceSince
Reuters was founded in 1851, we have run our business with independence, freedom
from bias, and
  integrity. We endeavour to do the right thing in all that we do, adhering to
  the values set out in the Trust Principles, our code of conduct, and the companys
  policies, while we comply with the different laws and rules that apply to us
  in the countries where we operate. As part of this commitment, our efforts
  to maintain an environment at Reuters that promotes and protects these values
  is overseen by a global ethics and compliance steering group, chaired by the
  General Counsel and Company Secretary, which reports to the Audit Committee
  and periodically briefs senior
management and the Board. As part of this
    global programme, we train our employees on key ethics and compliance areas;
    provide an anonymous and confidential system for staff to report concerns
    without the threat of retaliation; investigate and take appropriate measures
    when compliance issues are raised; and periodically assess the efficacy of
    the programme as a whole. On an individual level, ethics and compliance aspects
    are incorporated into our performance management system as we understand that
    each of us at Reuters must uphold the values and principles that have served
    Reuters well for so long and are at the very core of what defines Reuters
    as a business.


Employee profileAt 31 December 2005, we had 15,300 employees (31 December 2004: 14,465) of 115 nationalities in 89 countries. 490 employees joined Reuters through acquisitions. RemunerationDetailed information on our remuneration policies can be found in the Remuneration report on pages 39 to 48. 06 Corporate responsibilityCorporate responsibility within Reuters is established as the way we carry out our business practices and conduct ourselves responsibly throughout our day-to-day activities, as determined
by the Trust Principles. We steer our
    corporate responsibility strategy through our Corporate Responsibility Advisory
    Board, established in 2003, which comprises customer, supplier, investor and
    employee representatives. The Advisory Board considers workplace, marketplace,
    environment and community issues of relevance to our business and our employees
    and it is chaired by the General Counsel and Company Secretary, who represents
    it on the GMC and to the Board. For 2006, we have set ourselves the objectives
    of developing a code for our suppliers to adhere to when working with us;
    rolling out a programme of mentoring of senior managers by employees on diversity
    issues; raising employee participation in our Community Events Week to 15%
    in 45 locations; and creating a system for recording Reuters impact on the
    environment. Reuters is included
    in the Dow Jones Sustainability Index, the FTSE4Good Index, the Ethibel Sustainability
    Indices and the Ethibel Pioneer Investment Register. For information
    about our employees, see People on page 10 to 11. For information
    about creditor payment terms see the Directors Report on page 31. For
    information about charitable donations, see the Directors Report on
    page 31. We also make
    extensive information available through our website www.about.reuters.com/csr. 07 Reuters in the communityWe support a variety of community initiatives and charitable causes through the work of Reuters Foundation and the volunteering efforts of our employees around the world. Reuters Foundation
    (www.foundation.reuters.com) continues to focus on areas where Reuters expertise
    in information gathering and communications can be put to use in ways which
    will benefit the communities in which we operate across the world. During the year,
    the Foundation offered training opportunities to journalists from all over
    the world, providing short courses for 391 journalists from 86 countries.
    Amongst the courses was a workshop in New York on HIV/AIDS reporting. In February
    2006, to build on our work in this area, Reuters became a member of the Global
    Business Coalition on HIV/AIDS, an organisation which aims to increase the
    range and quality of business sector AIDS programmes in the workplace and
    in the community. The Reuters
    Institute for the Study of Journalism was launched in January 2006 (at the
    University of Oxford) with Reuters Foundation providing £1.75 million
    of funding over five years. The Institute builds on the Reuters Foundation
    Fellowship Programme at Green College, Oxford, and its reputation for engaging
    first class international journalists from across the world in serious research.
    It will focus on analysing the practice of journalism worldwide and examining
    the basis for reliable and accurate reporting in the digital age.


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Operating and Financial Reviewcontinued



AlertNet (www.alertnet.org),
    established by Reuters Foundation in 1997, enables relief agencies and the
    public to share information about emergencies and associated relief efforts.
    In addition to carrying breaking news on emergencies, the site also helps
    to ensure that forgotten emergencies, those disasters long forgotten
    by the mainstream media, are kept in the headlines. We have seen traffic double
    over the past twelve months to an average 215,000 page views per day in December,
    as we add new content sources and as media recognition increases. The innovative
    Tsunami Aidwatch (www.alertnet.org/thefacts/aidtracker), set up by AlertNet
    to measure how much of the money pledged after the disaster was turned into
    actual funding for relief and reconstruction in the area, has helped position
    the service as an authority on humanitarian media issues. Reuters Digital
       Vision Program (RDVP) (www.rdvp.org) is a fellowship programme at Stanford

    University, California, which develops innovative applications of information
       and communication technologies to address the needs of under-served communities.

    Its projects focus on three areas: advancing financial services, knowledge
    & empowerment and networked health & welfare. In 2005, Reuters invested
     in the development of Project Market Light, a project initiated by a 20042005
      RDVP fellow. Its goal is to help Indian farmers to price their produce
     more
    accurately, thereby enhancing their incomes, by delivering affordable, relevant
      and up-to-date commodities information to them by SMS over mobile phones. In response
    to the Asian tsunami disaster, we pledged a donation of $1 million to
    fund relief efforts in affected countries. To date, just over $435,000
    (£235,809) has been awarded in grants to Thai and Indian charities working
    with victims. This figure includes a donation to the Surin Islands National
    Park as recognition for the support and assistance offered by Surin residents
    to employees from Reuters Software (Thailand) Ltd (RSTL), when they were caught
    on the island during the tsunami. Employees at RSTL have also volunteered
    their time to help restore the villagers livelihood. The remainder of
    the donation has been allocated to support house building programmes, with
    64 Reuters volunteers travelling to Hikkaduwa in Sri Lanka to participate
    in rebuilding projects with Habitat for Humanity in 2005 and additional housebuilding
    team visits planned for 2006 and 2007. Building on
    the enthusiasm shown by employees for housebuilding projects, we are looking
    at offering employees further opportunities to build in areas of New Orleans
    affected by Hurricane Katrina, and KwaZulu Natal, South Africa, as part of
    a programme to provide housing to families devastated by AIDS. All employees
    may take one day of company time each year to engage in community activities.
    We focus on these activities during our annual Community Events Week programme.
    In 2005, 1,856 employees from 42 countries (12% of employees, 2004: 12%) participated
    in the scheme, undertaking a range of challenges. We encourage employees to
    use this opportunity to share their skills on projects ranging from hosted
    school visits, childrens events and fundraising to conservation work.
    We recognise that employees benefit from practising their professional and
    personal skills whilst team-building with their colleagues and providing valuable
    support to our communities. In addition,
    we operate programmes in the US and UK which match donations and fundraising
    efforts of our employees. Under these schemes we matched gifts of time and
    money amounting to £26,581 in the UK and just over $175,000 in the
    year. 2006 will see the launch of a similar scheme for employees across Asia.


Further information
    on Reuters volunteering programmes can be found at www.about.reuters.com/csr. 08 Environmental impactThe Ethical
     Investment Research Service classifies our business activities as having
    a
    low environmental impact and electronic publishing creates scope to reduce
    paper-based distribution of information. However, we recognise that our employees
    and facilities have an impact, both at work
    and at home.
    We
    therefore
    held
    our
    first Reuters

    Green Week exhibition in London in November, during which we set out to provide
     information to employees around the world on the subjects of Reuse, Reduce

    and Recycle. With a variety of online materials, web-based debates and informal
     presentations, we were able to increase the awareness of our employees as

    to how their behaviours can impact the environment. During 2006, we intend
     to run additional Green Week exhibitions, focusing on other major office
    locations
    around the world. Relocation to
    our new corporate headquarters in Londons Canary Wharf created an opportunity
    to introduce facilities which have a positive environmental impact. These
    include the use of fewer waste bins and plastic liners, movement sensitive
    lighting, default double-sided photocopying and piloting the use of recycled
    paper. Our entire UK property portfolio is now supplied with CCL-exempt green
    energy. Practices designed to reduce our environmental impact are also being
    rolled out in other centres in 2006. We also have
    a role to play in the effective communication of environmental issues. Reuters
    has 80 journalists providing environment news and we are expanding our coverage
    of environmental markets such as the carbon emissions markets. Through the
    Reuters Foundation, in 2005 we delivered six training workshops to over 100
    non-Reuters journalists in Mexico, Germany, America, Kenya and Morocco in
    conjunction with funding partners. 09 Government regulationWe are regulated
    by several bodies in the various jurisdictions in which we operate. Under the provisions
    of the Financial Services and Markets Act 2000, Reuters Limited is regulated
    and authorised as a service company by the UK Financial Services Authority
    (FSA). Reuters Transaction
    Services Limited (RTSL), through which we offer Dealing 3000, equities order
    routing and our new suite of next generation transaction products such as
    RTFI, is also subject to regulation by the FSA. Since 1 April 2004 RTSL has
    been classified by the FSA as an Alternative Trading System (ATS). In accordance
    with the passporting provisions of the EU Investment Services Directive, RTSL
    provides its services through the European Economic Area (EEA). RTSL is also
    subject to regulatory approval in Singapore, Hong Kong and Australia, where
    it is approved by the Monetary Authority of Singapore, the Hong Kong Monetary
    Authority and by the Australian Securities and Investments Commission, respectively.
    Since late 2005 RTSL has also become subject to regulatory oversight by the
    Hong Kong Securities and Futures Commission. RTSLs
    sister company in the United States, Reuters Transaction Services LLC (RTS
    LLC), is responsible for an equity order routing and indications of interest
    network. RTS LLC is subject to regulation by the National Association of Securities
    Dealers, Inc. (NASD). RTS LLC has been seeking additional approvals in the
    US to allow for the trading of other financial instruments such as derivatives.




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In order to comply with
  anti-money laundering regulations and to reduce the opportunity for Reuters
  transactions products to be used as a conduit for money laundering operations,
  all our regulated subsidiaries have put in place appropriate know your customer systems
and controls. Financial
    review Non-GAAP measuresA
  number of measures used in the following commentary are non-GAAP figures, which are business performance measures used to manage the business, which supplement the IFRS based
    headline numbers. These include underlying change, trading costs, trading profit, adjusted EPS, free cash flow and net debt/net funds.
    Brief descriptions of these terms are provided below. A more detailed discussion
    of these non-GAAP measures, including the rationale for using them and reconciliations
    to the most directly comparable IFRS indicator, is provided in sections 19
  and 20 on pages 25 to 30. Underlying changeis
    calculated by excluding the impact of currency fluctuations and the results
    of acquisitions and disposals. Trading costsare
    calculated by excluding the following from operating costs from continuing
    operations: restructuring charges associated with Fast Forward and acquisitions,
    impairments and amortisation of intangibles acquired via business combinations,
    and fair value movements included in operating costs; and adding back foreign
    currency gains and other income (both of which are included in other operating
    income). Trading profitis
    calculated by excluding the following from operating profit from continuing
    operations: restructuring charges associated with Fast Forward and acquisitions,
    impairments and amortisation of intangibles acquired via business combinations,
    investment income, profits from disposals of subsidiaries and fair value movements. Adjusted EPSis
    calculated as basic EPS from continuing operations before impairments and
    amortisation of intangibles acquired via business combinations, investment
    income, fair value movements, disposal profits/losses and related tax effects. Free cash flowmeasures
    cash flows from continuing operations, other than those which are both discretionary
    in nature and unrelated to ongoing recurring operating activities such as
    the purchase of shares by the Employee Share Ownership Trusts (ESOTs), loans
    with associates and joint ventures and dividends paid out by Reuters. Net debt/net fundsrepresents
    cash, cash equivalents and short-term investments, net of bank overdrafts
    and other borrowings.


10 Group performance Summary profit results
        
          2005
        
          2004
        
          ActualYear to 31 December
        
          £m
        
          £m
        
          changeContinuing operationsRevenue
        
          2,409
        
          2,339
        
          3
          %Operating
        costs
        
          (2,251
          )
          (2,187
          )
          3
          %Other
        operating income
        
          49
        
          42
        
          16
          %Operating
        profit
        
          207
        
          194
        
          7
          %Net
        finance costs
        
          (12
          )
          (12
          )Profit
        on disposal of associates andavailable-for-sale financial assets
        
          38
        
          203Share
        of post-taxation profit fromassociates and joint ventures
        
          5
        
          11Profit
        before taxation
        
          238
        
          396
        
          (40
          %)Taxation
        
          (9
          )
          (40
          )Profit
        for the year fromcontinuing
        operations
        
          229
        
          356
        
          (36
          %)Discontinued operationsProfit
        for the year fromdiscontinued
        operations
        
          253
        
          19Profit for the year
        
          482
        
          375
        
          28
          %Basic EPS
        
          32.6p
        
          26.0p
        
          25
          %Adjusted EPS
        
          13.8p
        
          11.8p
        
          17
          %  Revenue, costs and profit
        
          2005
        
          2004
        
          Actual
        
          UnderlyingYear to 31 December
        
          £m
        
          £m
        
          change
        
          changeRecurring
        
          2,242
        
          2,164
        
          4
          %
          1
          %Usage
        
          97
        
          86
        
          13
          %
          12
          %Outright
        
          70
        
          89
        
          (22
          %)
          (23
          %)Total revenue
        
          2,409
        
          2,339
        
          3
          %
          0
          %Operating costs
        
          (2,251
          )
          (2,187
          )
          3
          %
          0
          %Operating profit
        
          207
        
          194
        
          
        
          Operating margin
        
          9
          %
          8
          %
          
        
          Trading costs
        
          (2,075
          )
          (2,013
          )
          3
          %
          0
          %Trading profit
        
          334
        
          326
        
          
        
          Trading margin
        
          14
          %
          14
          %
          
        
           RevenueReuters
full year revenue
grew 3% to £2,409 million (2004: £2,339 million). This was our first
full year of revenue growth since 2001. On an underlying basis, adjusting for
exchange rate movements and the impact of acquisitions and disposals, revenue
was approximately the same as in 2004. Acquisitions, particularly of Telerate,
accounted for most of the difference between actual and underlying increases,
with the
remainder due to currency movements. In the newly integrated Telerate business,
sales focus on revenue retention post-acquisition drove better than expected
revenue performance. Recurring revenue,
    which represented 93% of our revenue in 2005, was £2,242 million (2004:
    £2,164 million). This represented an increase of 4% on an actual basis
    (1% underlying) compared to 2004, and was the first time underlying recurring
    revenue had grown since 2001. Usage revenues,
    4% of our revenue in 2005, grew by 13% to £97 million (2004: £86
    million). This was driven by strong performance from Reuters transaction services
    as well as higher advertising revenue from reuters.com.




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Operating
  and Financial Reviewcontinued



Outright revenue,
    3% of our revenue in 2005, totalled £70 million (2004: £89 million),
    a decline of 22% compared to 2004. This decline was mainly due to our continued
    withdrawal from technology consulting as part of the Fast Forward programme,
    a process which is nearing completion. Desktop accesses
    totalled 346,000 at the end of 2005, up 18,000 from the end of 2004. This
    increase was driven by our acquisition of Telerate. Average revenue per access
    (ARPA) for the fourth quarter of 2005 was up 2% to £309 compared to the
    same period in 2004, driven by price increases and a shift in the product
    mix to higher value accesses. Operating costs and trading costsTotal
operating costs were £2,251 million, an increase of 3% from 2004. The drivers of the increase are largely explained in the context of the movement in trading costs (as defined
  above). Additionally, Fast Forward restructuring costs of £94 million were £26 million lower than the previous year, bringing to an end this important transformation programme. We also incurred £18
million of acquisition related integration costs, principally relating to Telerate.
Trading costs totalled £2,075 million in 2005 (2004: £2,013
  million), up 3% on an actual basis (flat on an underlying basis), demonstrating
  our continued cost discipline. The differences between the underlying and actual
  increases are mostly related to acquisitions, principally Telerate, with the
remainder due to currency movements.
A change to the accounting
  treatment of the RPF, which is now recognised as a defined benefit plan rather
  than a defined contribution plan, resulted in an additional 2005 charge of £7
  million. At the 2005 year end, a deficit of £223 million in the RPF was
  recorded on Reuters balance sheet. Further details on pension charges can be
found in note 25 in the financial statements on page 84.
We invested £41 million
  in the second half of 2005 in Core Plus transformation projects and growth
  initiatives. These included investment in new electronic trading products and
rationalising data centres and product development units.


The Fast Forward business
    transformation programme is now complete and we remain on track to achieve
    annualised cost savings of £440 million from the programme by the end of 2006,
    contributing to a total reduction from all transformation programmes of £900 million since 2001. In 2005, we delivered a further £126 million of annualised savings taking the total to £360
    million under Fast Forward. These resulted largely from outsourcing our communications
    network to BT/Radianz in April 2005 (for more information on BT/Radianz,
    please refer to page 16), from further headcount reductions and from expanding
    our
    content and development facilities in Bangalore
  and Bangkok. Operating profit and trading profitOur
  operating profit totalled £207 million in 2005 (2004: £194
  million) reflecting improved trading performance. Trading profit
    was £334 million in 2005 (2004: £326 million). Trading margin was
    14% (2004: 14%), after expenditure on investments in the Core Plus programme.
    The net effect of currency movements on trading profit was neutral with the
    small positive effect on revenue offset by a small negative effect in the
    cost base (please refer to foreign exchange on page 22). Profit for the year from continuing operationsProfit
  for the year from continuing operations was £229 million (2004: £356 million). The year-on-year decline was almost entirely driven by a reduction in profits from asset
    disposals. In 2004, continuing operations contained the profits from the sale of a 39% stake in TSI and our holding in GL TRADE, whereas the £38
    million of disposal profits in 2005 came largely from further sales of our
  smaller remaining stake in TSI. Net finance
    costs of £12 million were comparable to 2004, due to a broadly similar
    net debt position throughout the year, prior to completion of the Instinet
    Group disposal. Income from our associates and joint ventures in 2005 generated
    a net profit of £5 million, compared to £11 million in 2004. TSI
    and GL TRADE account for £5 million of this reduction as they contributed
    a net profit in 2004, prior to disposal. The tax charge
    for the year was £9 million, compared to £40 million in 2004. The
    reduction was mainly due to the benefit of settling prior year taxation matters.
    A reconciliation of the actual taxation charge to the taxation charge expected
    by applying the standard 30% UK rate of corporation tax to the reported profits
    is provided in note 6 of the financial statements on pages 61 to 62. Profit for the year from discontinued operationsProfit
  from discontinued operations was £253 million (2004: £19 million). This was largely made up of the post-taxation profit of £191 million on the disposal of Instinet
    Group and £68 million profit after taxation from Instinet Groups business operations prior to its sale in December 2005. This was partly offset by losses on sale of Radianz Limited (Radianz) to BT Group PLC (BT), and on the partial
    disposal of the Groups interest in the Bridge Trading Company (BTC)
  to Instinet Group.




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Earnings per shareProfit
for the year was £482 million (2004: £375
  million), resulting in basic EPS of 32.6p, up 6.6p from the previous year.
  Adjusted EPS was 13.8p in 2005, up 2p from the previous year, reflecting a
  stronger trading profit and a reduction in the number of shares in circulation
due to the share buyback programme. Summarised cash flow and Reuters free cash flow Reconciliation of net cash flow fromcontinuing operating activities to free cash flow
        
          2005
        
          2004Year to 31 December
        
          £m
        
          £mCash flow from continuing operations
        
          268
        
          307Net interest paid
        
          (7
          )
          (19
          )Tax paid
        
          (11
          )
          (34
          )Capital expenditure
        
          (178
          )
          (117
          )Proceeds from sale of property, plant and equipment
        
          3
        
          49Dividends received
        
          5
        
          4Interim funding repayment from Telerate
        
          (18
          )
          18Repayment of funds to BTC
        
          26
        
          Free cash flow
        
          88
        
          208 Note: Refer
    to section 20 on page 30 for reconciliation to Group cash flows. Summarised Group cash flow
        
          2005
        
          2004Year to 31 December
        
          £m
        
          £mNet cash inflow from operating activities
        
          253
        
          226Acquisitions and disposals
        
          206
        
          384Purchases
        of property, plant and equipment,and intangibles
        
          (185
          )
          (136
          )Proceeds from sale of property, plant and equipment
        
          3
        
          66Dividends received
        
          5
        
          5Proceeds from issue of shares
        
          10
        
          6Share buyback
        
          (223
          )
          Equity dividends paid to shareholders
        
          (140
          )
          (140
          )Equity dividends paid to minority interests
        
          (23
          )
          Other movements
        
          21
        
          (8
          )Movement in net (debt)/funds
        
          (73
          )
          403Opening net funds/(debt)
        
          326
        
          (77
          )Closing net funds
        
          253
        
          326 Note: Refer
    to section 20 on page 30 for reconciliation to statutory cash flow. Cash generated
    from continuing operations was £268 million. Free cash flow was £88
    million in 2005 (2004: £208 million). The year-on-year decline was driven
    by increases both in capital investment and restructuring charges. Higher
    capital investment resulted from our move to our new London headquarters at
    Canary Wharf, stepped-up investment in data centres and the capitalisation
    of product development and software costs. 2005 cash restructuring costs were
    £147 million (2004: £100 million), of which £132 million represented
    the peak year for Fast Forward cash charges and the remainder related mainly
    to the integration of Telerate. Cash flow in 2004 also benefited from £49
    million of proceeds from the sale of property, plant and equipment disposals
    which did not recur in 2005. Net funds were
    £253 million (2004: £326 million). The 2004 amount included £507
    million of net funds at Instinet Group, reduced by £181 million of net
    debt in Reuters. Excluding Instinet Group, the year-on-year improvement in
    net debt to net funds is largely due to cash flow from operations of £268
    million and net cash proceeds from disposals/acquisitions (largely Instinet
    Group) of £710 million. These inflows were partly offset by net purchases
    of assets of £182 million, dividend payments to Reuters shareholders
    of £140 million, and payments made as part of the share buyback programme
    of £223 million.


DividendsDividends
    paid in 2005 totalled £140 million. The final dividend proposed for 2005
    is 6.15p per share, in line with the prior year. Balance sheetThe
    net assets of the Group, at £570 million, are unchanged from 2004. Summarised Group balance sheet
        
          2005
        
          2004Year to 31 December
        
          £m
        
          £mNon-current assets
        
          1,179
        
          1,025Current assets
        
          957
        
          1,410Non-current assets classified as held for sale
        
          1
        
          145Total assets
        
          2,137
        
          2,580Current liabilities
        
          (738
          )
          (1,249
          )Non-current liabilities
        
          (829
          )
          (714
          )Liabilities
        associated with assetsclassified as held for sale
        
          
        
          (47
          )Total liabilities
        
          (1,567
          )
          (2,010
          )Net assets
        
          570
        
          570Shareholders equity
        
          570
        
          371Minority interest
        
          
        
          199Total equity
        
          570
        
          570 The main movements
    in the Group balance sheet are: •
    The disposal of Instinet
    Group  reducing both total assets and liabilities upon sale and reducing the minority
interest in Instinet Group to zero.•
    An increase in non-current liabilities, principally reflecting an increase
    in net pension obligations from £256
million to £310 million, largely as a result of changes to key assumptions underpinning the net liability
valuation (both the rate of return and discount rate have decreased which results in a larger present value liability). Our largest
    acquisition during the year was that of Telerate for £122 million, which
    completed in June 2005. Other smaller acquisitions included Action Images
    (September 2005) and EcoWin (November 2005). Disposal activity
    for the year included our 62% stake in Instinet Group to NASDAQ for gross
    proceeds of £612 million (we realised a gain on sale of £191 million),
    along with the dividend received from Instinet Group in July 2005 of £37
    million following the sale of its Lynch, Jones&
    Ryan (LJR) to the Bank of New York for £96 million. The net proceeds
    from these transactions (including our March 2005 sale of BTC to Instinet
    Group) totalled approximately £630 million. Other disposals
    included our sale of 16 million shares in TSI for £63 million, realising
    a profit of £33 million, and the sale of Radianz to BT in April 2005
    for £115 million cash, resulting in a loss of £4 million. 2006 OutlookIn
    2006, we expect to accelerate revenue growth through our Core Plus investment
    programme against a backdrop of favourable market conditions. We are targeting
    total revenue growth of around 5%. This includes 2005 acquisitions and a percentage
    point of growth from Core Plus and excludes currency effects. Within operating
    profit and trading profit, we expect 2006 to benefit from the final £80
    million of Fast Forward savings, taking the total to £440 million of
    annualised savings which we committed to in February 2003. In line with our
    guidance in July 2005, operating profit and trading profit in 2006 are expected
    to reduce by £120 million due to investments to drive Core Plus growth
    and transformation.




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Operating
  and Financial Reviewcontinued



In cash flow,
    we expect to spend £220 million on capital investment in 2006, up from
    £178 million in 2005, as we continue to invest in new data centres and
    step up the level of product development under Core Plus, as well as continuing
    enhancements to our core services and infrastructure. As part of the £220
    million, we expect to capitalise around £80 million of software and development
    expenditure. This increase will be more than offset by an expected £90
    million fall in restructuring spend relating to Fast Forward and Telerate
    integration. 11 Divisional performanceOverviewWe
    operate through four business divisions, which are responsible for defining,
    building and managing products. They are closely aligned with the user communities
    they serve. The business
    divisions have profit and loss responsibility. Revenues and trading profit
    for the two years to 31 December 2005 are analysed by business division in
    the following sections. We have equipped
    our managers to take on greater accountability for divisional performance
    by introducing Profitability Insight, an activity-based costing (ABC) tool
    which enables us to allocate and monitor costs by business division, by product,
    by region and by major customer (see Critical Accounting Policies on page
    22). Further information on revenue by division and by geography is included
    in note 1 of the financial statements on pages 58 to 59. The software
    development teams who build and support our products and delivery platforms
    were integrated into the business divisions in 2005. They work closely with
    the product management teams and market experts responsible for identifying
    opportunities and defining product strategy. Shared infrastructure design
    is provided by an infrastructure team tasked with providing technical coherence,
    scale efficiencies and compliance with standards. We face competition
    in all the market sectors and geographical areas in which we operate. We monitor
    the competitive landscape actively in order to be able to respond to market
    developments. Global Sales and Service Operations (GSSO)The
    business divisions serve customers through our GSSO which is split into geographic
    regions: the Americas, Asia, and Europe, Middle East and Africa. In addition,
    we run our Focus Group Accounts team as a global sales and support channel
    for our largest customers. Locally, members
    of our sales and service teams work with customers to build relationships
    and to identify the correct Reuters products to meet customer needs and to
    feed back customer needs to the business divisions. Through regular training
    visits, our customer training specialists work with end-users to ensure they
    get full value from our products. In addition we provide product, content
    and technical support by telephone and email from three regional hubs, one
    based in each principal time zone. We also offer proactive telephone support
    and remote learning to help users of our premium products get the most out
    of their service. To increase awareness of the latest developments in our
    product range, we have a brightspot travelling showcase for Reuters
    products, visited by over 7,000 customers in 35 cities around the world in
    2005.


ContentThe
    Content group brings together all of Reuters news and data. Within the Content
    group, the role of editorial is to cover and edit the news to the highest
    standards of accuracy, insight and timeliness. Our 2,300 journalists and photographers
    in 189 bureaux file more than two-and-a-half million news items a year to
    customers in the form of text, pictures, TV, video and graphics and we publish
    news in 19 languages. Our Data group
    is responsible for collecting, producing, packaging and delivering an extensive
    range of financial information from an array of sources such as exchanges,
    over-the-counter markets, research services and other contributors such as
    energy and fixed income data providers, as well as from our own news, research
    and data operations. Our coverage includes data from over 300 exchanges, more
    than 1.2 million bonds, 250,000 foreign exchange and money market instruments
    and award-winning commodities and energy content. This is further complemented
    by data from around 4,000 financial services contributors. In addition, our
    fundamentals and estimates data is recognised as a leading source of high
    quality financial information covering over 43,000 companies worldwide. Our
    acquisition of Telerate brought us additional key content for the fixed income,
    money, foreign exchange and over-the-counter derivatives markets. We have content
    operations in the UK and the US and in 2004 we opened a content operation
    in Bangalore, India. This now has almost 1,200 employees, most in highly skilled
    jobs, and continues to grow, enabling us to expand our content coverage to
    meet growing customer needs as well as achieving operating efficiencies. Communications networksOur
    high-tier financial and media products are mainly delivered to customers over
    secure high-speed communications networks, with internet delivery options
    for lower tier products and for consumer services. During 2005, we sold our
    network services/financial extranet subsidiary Radianz, a former joint venture
    with Equant NV, to BT. At the same time we entered into an eight and a half
    year outsourcing deal with BT, as a result of which BT will provide the majority
    of our networks. This outsourcing deal will result in the migration of all
    products to IP-based services. It will enable us to deliver greater resilience,
    capability and flexibility through the use of industry standards. We have major
    technical centres in the Asian, European and American time zones, supported
    by many smaller local data centres. The data centres are linked by communications
    services provided principally by BT/Radianz (see above) and SAVVIS, Inc. (Savvis). The services
    agreements with BT/Radianz and with Savvis are important to our ability to
    deliver products and services to customers. Summaries of these network services
    agreements and the Radianz purchase and sale agreements are given on pages
    123 and 125. Our productsProducts
    are grouped into families, each of which is managed primarily
    by one of the business divisions. 11.1 Sales & Trading divisionOverviewThe
    Sales & Trading divisionfocuses
    on salespeople and traders who deal in the FX, fixed income, equities, commodities
    and energy and related markets. The Sales &
    Trading division is responsible for the Reuters Xtra and Reuters Trader families
    of products:




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Reuters Xtra familyis targeted at the most sophisticated end-users within the sales, trading and portfolio management
functions. It includes cross-asset class, cross-geography information, advanced integrated analytics and electronic trading capabilities. We have now installed more than 100,000 accesses of our Reuters 3000 Xtra product. Our customers
    have access to a trading community of around 18,000 foreign exchange and money
    market traders globally. They can also use Reuters large equities order routing
    network to gain electronic access to over 200 brokers and exchanges, including
    their proprietary trading algorithms. Reuters Trader familyis
    targeted at salespeople and traders who do not need the sophistication and
    full integration capability offered by the Reuters Xtra family of products,
    including those who focus on domestic and regional financial instruments.
    We are working to complete the migration of our customers from older products
    such as the 2000 and 3000 series to new Reuters Trader products, many of which
    are browser-based. Reuters Enterprise Connectivity familyoffers
    electronic trading and order routing tools to enable customers to connect
    their systems to electronic markets. It also includes Reuters Messaging to
    enable end-users to interact with their peers in the financial community. Our Sales &
    Trading information products compete with Bloomberg, Thomson Financial (a
    division of The Thomson Corporation), Sungard, Telekurs, IDC, and Factset,
    as well as stock exchanges, plus a number of smaller local and regional competitors
    which offer information products for the financial markets. In the electronic
    trading business we compete with, among others, stock exchanges, particularly
    in the energy and commodity markets; direct market access providers such as
    Lava, Liquidnet and Sonic, now owned by banks; order management system providers,
    which are increasingly adding information and trading capabilities; single
    bank portals and multi bank portals such as FX All; and other electronic execution
    venues such as Market Axess, Thomson TradeWeb, EBS, Bloomberg and ICAP. Financial performance Sales & Trading
division summary operatingand trading results
        
          2005
        
          2004Year to 31 December
        
          £m
        
          £mRevenue
        
          1,595
        
          1,542Operating costs
        
          (1,475
          )
          (1,385
          )Operating profit
        
          157
        
          175Operating margin
        
          10%
          
          11%Trading costs
        
          (1,354
          )
          (1,289
          )Trading profit
        
          241
        
          253Trading margin
        
          15%
          
          16% Reconciliations
    between the GAAP and non-GAAP measures are provided in section 20 on page
    27. Revenue from
    Sales & Trading, 66% of our total revenue for the year, was £1,595
    million (2004: £1,542 million), up 3% on an actual basis and down 1%
    on an underlying basis. The incorporation of Telerate revenue accounts for
    most of the difference between the underlying and actual results. Reuters Xtra
    family revenue in Sales & Trading grew by 11% compared to 2004. Reuters
    3000 Xtra revenue growth of 18% in 2005 came from a mixture of new business,
    including the displacement of competing desktops at some of our largest customers,
    and the migration of customers from legacy products.


Trading capabilities
    played an important part in the performance of the Reuters Xtra family in
    2005. In particular, usage revenue from FX trading over Reuters Dealing was
    up 10%. As trading between banks and their customers continued to move from
    phone to screen, Reuters Electronic Trading added 30 new customers in 2005
    and saw volumes increase six fold. Our newest transactions products, RTFI
    and RTFX, continued to build momentum with significant increases in active
    traders and trading volumes. Reuters Messaging is proving increasingly popular
    in the credit and fixed income communities, and now has around 60,000 regular
    users. In the Reuters
    Trader family, reductions in legacy positions continue to be the main drag
    on recurring revenue, although cancellations were mostly of lower value accesses.
    Migration to Reuters 3000 Xtra and continued growth in new Reuters Trader
    positions (over 8,200 now installed) ensured that overall revenue retention
    within Reuters remained high. Operating costs
    totalled £1,475 million, up 6%. Within this trading costs totalled £1,354
    million, up 5% on an actual basis but flat on an underlying basis compared
    to 2004, with the incorporation of Telerate costs accounting for the majority
    of the difference. Fast Forward savings from reduced communications costs
    under the BT/Radianz agreement were offset by investment in our Core Plus
    initiatives, notably electronic trading and development and data centre restructuring,
    as well as service resilience. Looking forward
    to 2006, the major revenue drivers in Sales & Trading are expected to
    be new trading services; continued growth from Reuters 3000 Xtra; Telerate
    revenue retention; and the deployment of Reuters Trader to reduce attrition
    and attract new customers. There will be three sources of revenue from electronic
    trading: transactions-based revenues; recurring revenue from new desktop sales;
    and per message fees from trades processed through the Reuters Trade Notification
    Service. Increased Core Plus investment in electronic trading and development
    transformation will affect Sales & Trading profitability. 11.2 Research & Asset Management divisionOverviewThe
    Research & Asset Managementdivisionfocuses
    on supporting portfolio managers, wealth managers, brokers, investment bankers
    and research analysts who make complex financial decisions outside the core
    sales and trading environment. Research &
    Asset Management division is responsible for the Reuters Knowledge and Reuters
    Wealth Manager product families: Reuters Knowledge familyis
    targeted at the research and advisory business, including investment bankers
    and analysts, portfolio managers, and others focused on company and industry-specific
    research. Reuters Knowledge offers an integrated package of public and proprietary
    fundamental information about companies, plus economic data, as well as markets
    information, news and other content. It can be integrated with Reuters flagship
    real time information desktop product, Reuters 3000 Xtra. Reuters Wealth Manager familyis
    targeted at wealth managers and retail brokers who require products that can
    be integrated closely into their workflow, helping users manage their clients
    portfolios better and allowing more time to concentrate on building deeper
    client relationships. The Reuters Wealth Manager family includes information
    on a wide range of managed funds provided by our Lipper subsidiary. Research &
    Asset Management division also receives a share of revenue from Reuters 3000
    Xtra and the Reuters 2000/3000 range of products.




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Operating and Financial reviewcontinued



In the Research
    & Asset Management arena, we compete with Thomson Financial, Factset and
    Standard and Poors, as well as smaller niche players. Our Lipper funds
    information business competes with Morningstar and the Micropal unit of Standard
    & Poors and a number of local domestic players. Financial performance Research & Asset
Management division summaryoperating and trading results
        
          2005
        
          2004Year to 31 December
        
          £m
        
          £mRevenue
        
          268
        
          262Operating costs
        
          (305
          )
          (295
          )Operating profit
        
          (37
          )
          (16
          )Operating margin
        
          (14%
          )
          (6%
          )Trading costs
        
          (288
          )
          (269
          )Trading profit
        
          (20
          )
          (7
          )Trading margin
        
          (7%
          )
          (3%
          ) Reconciliations
    between the GAAP and non-GAAP measures are provided in section 20 on page
    27. Revenue from
    the Research & Asset Management division, 11% of our total revenue for
    the year, was £268 million, up 2%. Revenue from
    the Reuters Xtra and Reuters Trader families included in the Research &
    Asset Management division grew 5% to £76 million. Our success in making
    Reuters Knowledge available through Reuters 3000 Xtra and Reuters Trader was
    the key driver of this growth. In the Reuters
    Knowledge family, revenue of £57 million was down 12% at actual rates
    but up 9% on an underlying basis, excluding disposals. Underlying growth was
    driven by new sales of Reuters Knowledge and feeds of fundamentals and estimates
    data. Reuters Knowledge accesses grew by 3,000 over the course of 2005 to
    11,000. In the Reuters
    Wealth Manager family, revenue of £135 million was up 8% at actual rates
    and 1% on an underlying basis. Growth in areas such as Lipper, our fund information
    subsidiary, and Reuters Plus, our US retail equities product, was partly offset
    by a revenue decline from products such as Reuters Markets Monitor where we
    decided to withdraw from unprofitable business. Operating costs
    totalled £305 million, up 3%. Within this trading costs totalled £288
    million, a 7% increase compared to 2004. This increase resulted from investment
    in Core Plus, particularly development transformation; investment to enhance
    the performance of Reuters Wealth Manager; and targeted sales campaigns to
    drive the growth of Reuters Knowledge and Wealth Management products. This
    investment was partially offset by Fast Forward savings generated by the move
    of certain content activities to Bangalore. Looking forward
    to 2006, revenue growth in Research & Asset Management is expected to
    be driven by three factors: sales of Reuters Knowledge, both stand-alone and
    embedded in Reuters 3000 Xtra; improved Lipper content; and demand for new
    high value content such as the new MasterCard data and EcoWin macro-economic
    data. This will be more than offset by investment in high value content and
    product functionality as part of Core Plus. 11.3 Enterprise divisionOverview  The
  Enterprise division provides
  solutions to the institution (as opposed to the individual user), including
  datafeeds (high-speed feeds of trading data in machine-readable formats), trading
  room systems and risk management systems. The Enterprise
    division delivers data in a range of formats for use throughout our clients
    organisations.


Reuters Information Management familyprovides
    the enterprise with a range of applications, tools and infrastructure components
    to manage financial content in real time across the customer trading environment
    with a high degree of scalability and resilience. Our flagship product in
    this product family is Reuters Market Data System (RMDS). Reuters Enterprise Information familyincludes
    real time datafeeds, which companies use to power systems such as algorithmic
    trading and portfolio management, and reference data often used for compliance
    and portfolio pricing purposes, including end-of-day and intra-day instrument
    prices, corporate actions, price histories and terms and conditions. Reuters Trade and Risk Management familyconsists
    of products to help manage trading positions and credit extension, make trading
    decisions, keep track of P&Ls and control risk. Several stock
    exchanges compete with our real time datafeed business by providing low-latency
    real time feeds of their data direct to banks and financial institutions.
    In addition, feedhandlers and application-programmable interface developers
    such as Wombat, Infodyne and Hyperfeed compete with Reuters in the market
    data delivery arena. Our end of day enterprise information offerings compete
    primarily with Bloomberg, Telekurs, and IDC. Competitors in the supply of
    risk products and market data systems or related components include Algorithmics,
    Murex, Summit Systems, Sungard Data Systems, Misys, IBM, TSI, GL TRADE and
    a large number of smaller firms. Financial performance Enterprise division summary operatingand trading results
        
          2005
        
          2004Year to 31 December
        
          £m
        
          £mRevenue
        
          393
        
          391Operating costs
        
          (325
          )
          (365
          )Operating profit
        
          76
        
          31Operating margin
        
          20%
          
          8%Trading costs
        
          (298
          )
          (328
          )Trading profit
        
          95
        
          63Trading margin
        
          24%
          
          16% Reconciliations
    between the GAAP and non-GAAP measures are provided in section 20 on page
    27. Revenue from
    the Enterprise division, 16% of our total revenue, was £393 million,
    up 1% for the year. This was driven by strong growth in Reuters Enterprise
    Information, partly offset by declines in outright revenue from Reuters Information
    Management. Reuters Enterprise
    Information, which accounts for 52% of the Enterprise divisions revenue,
    saw revenue rise by 11% to £203 million. Real time datafeed revenue grew
    4% and Reuters DataScope revenue grew 36%, driven by increased demand for
    machine-readable real time and historical data to power an increasingly wide
    range of customer applications. Looking ahead to 2006, we expect increased
    customer demand for machine-readable content in standardised formats. Revenue in Reuters
    Information Management, 28% of divisional revenue, was down 14% to £108
    million. Growth in recurring revenue from RMDS, primarily maintenance, was
    more than offset by a fall in outright revenue. This fall was driven by our
    continued withdrawal from technology consulting as part of the Fast Forward
    programme, the impact of moving to desktop-based solutions at smaller sites
    and the fact that the majority of customers have already migrated from legacy
    platforms onto RMDS. With the RMDS upgrade programme drawing to a successful
    close and a standard platform now largely in place, the focus in 2006 will
    shift to marketing new products such as




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Reuters Wireless Delivery Service (to support trader mobility) and Reuters Tick Capture Engine (which collects trading history to support increasing regulatory requirements and complex
trading analytics). We will also expand our third party developers programme to encourage development of applications on RMDS. Reuters Trade
    and Risk Management, 20% of divisional revenue, saw revenues rise by 1% to
    £82 million, helped by price increases during the year and steady growth
    in Asia, including significant new sales with leading banks in China. Total
    outright revenue in 2005 of £36 million represented a 4% decrease over
    2004, partly driven by the longer sales-to-revenue cycle associated with larger
    client deals. After a strong fourth quarter in 2005, prospects for 2006 in
    Trade and Risk Management are encouraging. Operating costs
    totalled £325 million, down 11%. Within this, trading costs totalled
    £298 million, a drop of 9% compared to 2004. Fast Forward savings from
    scaling back dedicated technology consulting groups, following the decision
    to exit this business, were partially offset by investment in Core Plus growth
    initiatives including the 10 year Reuters Tick History database. During 2006,
    we will continue to market the New Enterprise Approach launched as part of
    Core Plus. It groups Enterprise products together to create workflow solutions
    for customers, and will focus initially on portfolio valuation and algorithmic
    trading. 11.4 Media divisionOverview  The
  Media division focuses
  on creating and delivering news to the worlds newspapers, television and
  cable networks, radio stations and websites. It is also developing direct-to-consumer
  services, principally through the reuters.com family of websites. Reuters Text and Visualsproducts
    provide newspapers and magazines, news and information websites and TV channels
    with comprehensive, accurate and immediate text and broadcast news, video
    and photographic coverage. In 2005, we acquired Action Images, a specialist
    sports photography agency, to enable us to expand our global pictures business. Reuters Consumerproducts
    target business professionals and individual investors with fast, accurate
    news and financial data, enabling them to stay informed about world events,
    manage their financial portfolios and perform better professionally. Factiva, our
    50% owned joint venture with Dow Jones, provides a broad range of global news
    and a deep historical archive of business information which client organisations
    can integrate into their business applications and intranet portals. Around
    70% of Factivas revenue is derived from sources outside the financial
    services sector. Our main competitors
    in the supply of news to the media are Associated Press, Agence France Presse,
    Dow Jones and Bloomberg News. In the direct-to-consumer market, Reuters competes
    with a variety of local and global providers including the BBCs websites
    and Yahoo! Finance.


Financial performance Media
    division summary operating and trading results
        
          2005
        
          2004Year to 31 December
        
          £m
        
          £mRevenue
        
          153
        
          144Operating costs
        
          (146
          )
          (142
          )Operating profit
        
          11
        
          4Operating margin
        
          7
          %
          3
          %Trading costs
        
          (135
          )
          (127
          )Trading profit
        
          18
        
          17Trading margin
        
          12
          %
          12
          % Reconciliations
    between the GAAP and non-GAAP measures are provided in section 20 on page
    27. Revenue from
    the Media division, 7% of our total revenue, totalled £153 million, up
    7% year-on-year. Agency revenues
    grew 6% to £133 million, driven by a good performance from TV, including
    the successful launch of a Middle East service, continued strength in our
    Pictures business and new contractual arrangements with Factiva. Consumer services
    revenues grew 12% to £20 million, reflecting a successful move away from
    syndication of news to other websites and towards promotion of direct to consumer
    platforms, such as reuters.com. Advertising revenues from online and signage
    platforms continued to grow rapidly, attracting high quality brands as diverse
    as Diet Coke, GE and Fidelity. In January 2006
    our 24 hour TV news channel for India in collaboration with The Times of India,
    TIMES NOW, went live. It represents an attractive investment in its own right
    and a strong branding opportunity from which to launch services to Indias
    growing urban, affluent audience. Operating costs
    totalled £146 million, up 3%. Within this trading costs totalled £135
    million, a 7% increase compared to 2004. Key cost drivers included expansion
    of news coverage to new regions and Core Plus investment in consumer services.
    These were partially offset by a reduction in data content costs with the
    move of activities to Bangalore as part of Fast Forward. In 2006, the
    Media division is looking forward to continued strong revenue performance.
    We expect opportunities to grow our video news products and expand our Pictures
    business on the back of our recent acquisition of Action Images sports photography.
    The consumer services business expects strong growth in online advertising
    from its US, UK and Japanese markets. Profitability will be influenced by
    higher levels of investment in consumer editorial and marketing teams, and
    in developing online, mobile and ipTV distribution capabilities. 11.5 Instinet GroupInstinet Group review




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Operating
  and Financial Reviewcontinued



A key driver of Instinet Groups business was average daily trading volume in the US securities markets, which increased in 2005 over 2004 levels. A significant
    portion of securities traded in Instinet Groups business were NASDAQ-listed
    securities. Average daily trading volume in NASDAQ-listed stocks, which decreased
    slightly by 0.8% for the three quarters to September 2005 compared to the
    full year 2004. Average daily trading volume in US exchange-listed stocks
    has increased over the same time period by 7.1%, continuing the trend of the
    past five years. Overall market
    share for INET, the electronic marketplace, had increased slightly to 13.5%
    of total US market share volume by September 2005 from 13.4% in 2004. Overall
    market share for Instinet, the institutional broker, decreased to 2.6% of
    total US equity trading volume to 30 September 2005 compared to 2.7% in 2004. The volatility
    in market share reflected the intense competitive environment within the brokerage
    business, which has resulted in price reductions since 2001. In September
    2001, INET reduced average prices by 11% with a new pricing schedule for US
    broker-dealer customers. In March 2002, INET began offering broker-dealer
    rebates. In October 2003, it reduced pricing for routing orders in Nasdaq-listed
    stocks to other trading venues through its automated smart order-routing system
    by 37% and introduced tiered pricing, offering lower prices to customers based
    on volume levels. In October 2004, INET introduced a new pricing schedule
    for transactions in US exchange-listed stocks. In January 2005, INET announced
    that it would share up to 50% of its market data revenue for certain American
    Stock Exchange transactions. Instinet also
    operated in a highly competitive environment. Traditional brokerages were
    also severely impacted by tighter spreads, smaller commissions, the decrease
    of NASDAQ market making and diminished investment banking fee revenues, which
    compelled them to spend more time looking for additional profit-generating
    opportunities. This led traditional brokerage firms to increase their focus
    on offering algorithmic trading, program trading and direct market access
    to institutional customers and resulting in their directly competing with
    Instinet in price and technology to provide these services to customers. As
    a result, customers had become more demanding and cost conscious. Instinet
    pricing for US equities, measured in cents per share, declined 21.0% to 30
    September in 2005, and 2.6% in 2004, and pricing for non-US equities, measured
    as a percentage of the total consideration of the trade, declined 12.5% to
    30 September 2005 and 5.4% in 2004.


Supporting financial information12 Management of risksThe
    Board has adopted a process for identifying, evaluating and managing significant
    risks faced by the Group. It has reviewed its effectiveness and, in doing
    so, has taken note of the Guidance on Internal Control (the Turnbull Guidance)
    contained in the Combined Code as updated by the version published by the
    Financial Reporting Council on 13 October 2005. The control system includes: •
    objective setting, risk
assessment and monitoring of performance at
both strategic and business unit levels though a
process known within
the Group as mission analysis;•
    the use of balanced
scorecards to track performance against targets
relating to the financial, business,
people and customer aspects
of the Groups business;•
      written
        policies and control procedures;•
    monthly reporting to the Board and senior management which, amongst other things, tracks performance against the annual
budget;•
    systems to communicate rapidly to appropriate managers incidents requiring immediate attention; and•
    regular review meetings by the CEO and CFO with each GMC member which cover the performance, risks and controls for
which the GMC member is responsible. Two committees
    (the Audit Committee and the Disclosure Committee) are involved in the risk
    management process, together with a programme of internal audits. Internal
    auditors independently review the controls in place to manage significant
    risks and report to the Audit Committee twice a year. The Audit Committee
    reviews the assurance procedures annually, including compliance controls,
    and reports its findings to the Board. The process
    and the component parts of the risk management framework are more fully described
    in Risk Management, Internal Controls and Disclosure Controls and Procedures
    on page 37. Further information
    on financial risks is contained in the financial statements within note 17
    on page 73 to 81. 13
    Pending transactionsThere
    are no material pending transactions. 14
    Treasury policiesReuters
    treasury function is a cost rather than profit centre. All treasury activity
    takes place within a formal control framework under policies approved by the
    Board. As such, all transactions which are undertaken are designed to mitigate
    risk within the business or to secure committed funding. At no time are speculative
    transactions or transactions without an underlying commercial rationale undertaken. The key objectives
    of the treasury function are to ensure sufficient liquidity exists to meet
    funding needs and to manage the interest rate and currency risks arising from
    the Groups operations and its sources of finance. FinancingWe
    finance our operations by a mixture of cash flows from operations, short-term
    borrowings from banks and commercial paper markets, backed up as required
    by committed bank facilities and finance from capital markets. We manage our
    net fund position and interest costs to support our continued access to the
    full range of debt capital




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markets. We expect to be able to finance our current business plans from ongoing operations and our external facilities. Net cash flows
    are applied to reduce debt, placed in short-term investments with financial
    institutions holding strong credit ratings or used to repurchase the companys
    own shares as part of an announced programme to enhance shareholder returns.
    The latter is subject to our intention to maintain an investment grade credit
    rating in the longer term. During 2005, £223 million was applied to market
    purchases of the companys own shares (for information about the companys
    share repurchases, see page 31). As at 31 December 2005, the Group held net
    funds of £253 million. Reuters is rated
    by the three principal rating agencies. As at 31 December 2005, our long-
    and short-term ratings were Fitch A/F1, Moodys A3/P-2 and Standard and
    Poors A-/A-2. We borrow in
    various currencies, at both fixed and floating rates, and use derivative contracts
    to create the desired currency and interest rate basis. The conversion of
    net investments in foreign operations into the Groups reporting currency
    of sterling creates translation exposure. To mitigate this effect, to the
    extent that the Group has core debt it will be held in currencies approximately
    proportionate to the currency profile of the Groups net assets. In broad terms,
    using the average net funds position, a 1% increase in global interest rates
    would have reduced profit before tax in the year by approximately £2
    million (2004: £2 million) before the impact of hedging. Syndicated credit facilityIn
    April 2003, we entered into a committed syndicated credit facility for £1
    billion. Subsequently £520 million of the facility has expired or been
    voluntarily cancelled. At 31 December 2005, we had available £480 million
    under the facility. The facility was undrawn during 2005. The commitment expires,
    and any final repayment is due, in April 2008. The facility
    is on customary terms and conditions. Drawings under the facility may be made
    in sterling, euros or other currencies agreed at the time and bear interest
    at LIBOR plus a margin, variable according to the long-term credit rating
    of the company. The facility cross-defaults upon default by Reuters in payment
    or acceleration of any other borrowings in excess of £20 million. The
    facility contains two financial covenants (as calculated in accordance with
    UK GAAP): that Reuters operating profit before interest, tax and amortisation
    (subject to certain adjustments) should be greater than 2.75 times net finance
    charges and that Reuters net borrowings should not be greater than 3.50 times
    Reuters operating profit before depreciation and amortisation (subject to
    certain adjustments). As at 31 December 2005, we complied with these covenants. Bilateral loan facilitiesAt
    the same time as the syndicated credit facility was arranged, committed bilateral
    facilities of £90 million were put in place on similar terms. Subsequently
    £66 million of the amount available has expired or been voluntarily cancelled.
    At 31 December 2005, we had available £24 million. No loans were outstanding
    under this facility during 2005. Euro Commercial Paper ProgrammeA
    £1.5 billion Euro Commercial Paper Programme is available in respect
    of which Reuters had no outstanding obligations at 31 December 2005. The minimum
    outstanding during 2005 was nil and the maximum was £259 million. The programme
    is on customary terms and conditions, including a condition that the company
    should not be in default on any other


debt or similar
    obligation. Issues are only made to the extent that funds can be repaid from
    committed financing facilities or available Group cash. The programme has
    no final maturity date, contains no financial covenants and there is no requirement
    to update the programme documentation. Debt is issued at market rates agreed
    between the issuer and the dealer. Euro Medium Term Note ProgrammeWe
    also have available a £1 billion Medium Term Note Programme. At 31 December
    2005, we had outstanding obligations of £369 million under the programme,
    repayable at various dates up to November 2010 including a500
    million (£344 million) public bond, issued in November 2003 and maturing
    in November 2010. The minimum outstanding during 2005 was £369 million
    and the maximum was £428 million. The programme
    is on customary terms and conditions. The programme has no final maturity
    date but the prospectus, containing financial information, is updated each
    year to allow issuance to continue. Debt is issued at market rates agreed
    between the issuer and the dealer. The programme documentation contains no
    financial covenants and notes in issue have no cross-default provision. Short-term uncommitted facilitiesIn
    addition, we have short-term uncommitted bank borrowing facilities denominated
    in various currencies, the sterling equivalent of which was approximately
    £164 million. At 31 December 2005, £25 million of the facilities
    were utilised in the form of bank overdrafts. Contractual financial obligationsThe
    following table summarises the Groups principal contractual financial
    obligations at 31 December 2005, certain of which are described in the consolidated
    financial statements and notes. The Group expects to be able to fund such
    obligations from ongoing operations and its external facilities. Additionally,
    while not contractual commitments, we announced in July 2005 our Core Plus
    strategy, which will impact future cash flows. These included strengthen
    it initiatives totalling £170 million to 2008 (£26 million
    was incurred in 2005), grow it initiatives with a net impact on
    profit of £85 million to 2007 (£15 million impacted in 2005), and
    capital expenditure plans in 2006 of £220 million. Payments due by periodLess than
        
          1-3
        
          3-5
        
          After 5Contractual obligations
        Total
        
          1 year
        
          years
        
          years
        
          yearsat 31 December 2005
        £m
        
          £m
        
          £m
        
          £m
        
          £mFinance lease payables
          2
        
          1
        
          1
        
          
        
          Debt obligations(including futureinterest payments)
          653
        
          92
        
          105
        
          456
        
          Pension obligations*
          317
        
          47
        
          50
        
          47
        
          173Other long-term liabilities**
          53
        
          
        
          34
        
          12
        
          7Operating leases
          673
        
          79
        
          137
        
          105
        
          352Purchase obligations
          1,394
        
          132
        
          231
        
          441
        
          590Total contractualobligations
          3,092
        
          351
        
          558
        
          1,061
        
          1,122 *
          Pension
        obligations are recorded on the balance sheet at £317 million. As
        there is some discretion under the various schemes as to the amounts the
        Group will contribute to settlement of the net pension obligation, the
        amounts provided are estimates.**
          Non-current
        provisions (excluding net pension obligations) recorded on the balance
        sheet total £75 million. Of this, £53 million are financial
        liabilities that require settlement in cash. Additionally, the balance
        sheet contains a deferred tax liability of £66 million. No estimate
        has been provided for deferred tax in the table above as it is not a contractually
        obligated financial liability. The most significant
    purchase obligation entered into during the year related to BT/Radianz becoming
    our supplier of network services over the next eight and a half years.


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Operating
  and Financial Reviewcontinued



Foreign exchangeAlmost 90% of Group revenue is denominated in non-sterling currencies. The Group also has significant costs denominated in foreign currencies with a somewhat different mix from revenue. In
some cases, product pricing is denominated in a currency which is not the functional currency of the provider of services or the Reuters customer which gives rise to embedded derivatives, for which movements in value are recognised within the other
income line as part of operating profit. Group profits are therefore exposed to currency fluctuations. The approximate proportions of operating profit excluding profits on disposals received in each key currency group were as follows: Group operating profit excluding profitson diposals by currency
        
          2005
        
          2004Year to 31 December
        
          %
        
          %Euro
        
          171
        
          173US dollar
        
          (10
        )
          (13
          )Japanese yen
        
          39
        
          36Sterling
        
          (98
        )
          (134
          )Other
        
          (2
          )
          38Total
        
          100
        
          100 Sterling costs
    exceeded sterling revenue due to the level of restructuring costs and UK-based
    marketing, development, operational and central services costs. In broad terms,
    using the 2005 mix of profits, the impact of an additional unilateral 1% strengthening
    of sterling would have been a reduction of approximately £4 million in
    operating profits (2004: £5 million). Exchange rate
    movements in 2005 had a £1 million net positive impact on operating profit. Operating
        
          OperatingRevenue
        
          cost
        
          profitCurrency impact
        
          £m
        
          £m
        
          £mImpact of:Weaker dollar
        
          (7
          )
          7
        
          Stronger euro
        
          5
        
          (2
          )
          3Other currencies
        
          
        
          (1
          )
          (1
          )Exchange rate movements
        
          (2
          )
          4
        
          2Change in currency mix
        
          6
        
          (7
          )
          (1
          )Total currency movements
        
          4
        
          (3
        )
          1 The annual average
    rates for the dollar and the euro were 1.83 and 1.46 respectively (2004: 1.82
    and 1.47 respectively). No unremitted
    profits are hedged with foreign exchange contracts as we judge it inappropriate
    to hedge non-cash flow translation exposure with cash-based instruments. Forward foreign
    exchange contracts, currency options and foreign exchange swaps are used to
    manage, where appropriate, the effects of transaction exposure and certain
    intercompany transactions which impact Group profits. Transaction exposure
    occurs when, as a result of trading activities, an entity receives or expends
    cash in a currency different to its functional currency. 15 Critical accounting policiesGroup
    accounting policies comply with IFRS. These policies and associated estimation
    techniques and judgements have been reviewed by management and discussed with
    the Audit Committee, who have confirmed they are the most appropriate for
    the preparation of the 2005 financial statements.


Adoption of International Financial Reporting StandardsPrior
    to 2005, the Group prepared its audited annual financial statements under
    UK GAAP. For the year ended 31 December 2005, the Group is required to prepare
    its annual consolidated financial statements in accordance with IFRS and IFRIC
    interpretations as adopted by the EU and those parts of the Companies Act
    1985 applicable to companies reporting under IFRS. The financial statements
    take account of the requirements and options in IFRS 1 First-time Adoption
    of International Financial Reporting Standards as they relate to the
    2004 comparatives included herein. IFRS 1 sets
    out the transition rules which must be applied when IFRS is adopted for the
    first time. As a result, certain of the requirements and options in IFRS 1
    may result in a different application of accounting policies in the 2004 restated
    information from that which would apply if the 2004 financial statements were
    prepared using full retrospective adoption of IFRS. The standard sets out
    certain mandatory exceptions to retrospective application and certain optional
    exemptions. Detailed disclosure
    on the mandatory exceptions applicable to the Group and the optional exemptions
    taken are provided within the financial statements on page 52 and pages 101
    to 103. Previously the
    financial statements were prepared in accordance with UK GAAP. To provide
    an indication of the impact of IFRS from the previously reported UK GAAP,
    reconciliations of the net profit and equity for 2004 are shown in note 40
    on pages 101 to 103. Accounting policies involving management judgementIn
    preparing these financial statements, management has made its best estimates
    and judgements of certain amounts included in the financial statements. The
    areas discussed below are considered to be the most critical. The Group accounting
    policies underpinning the financial statements are outlined on pages 52 to
    57, which also include reference to the areas of judgement within the accounting
    policies. The impairment of property, plant and equipment, non-current assets held for sale and intangible assets (including goodwill)Under
    IFRS, impairment is measured by comparing the carrying value of an asset or
    cash generating unit to its recoverable amount. Recoverable amount is defined
    as the higher of its fair value less costs to sell and its value in
    use. These comparisons require subjective judgements and estimates to
    be made by management with regard to projected future cash flows of income-generating
    units or the amounts that could be obtained from the sale of investments. Note 13 of the
    financial statements on pages 67 to 68 outlines the key assumptions. Management
    has determined that no impairments are required for 2005 (2004: £18 million). Intangible assetsExpenditure
    related to the development of new products or capabilities that is incurred
    between establishing technical feasibility and the asset becoming income-generating,
    is capitalised where it meets the criteria outlined in IAS 38 (Intangible
    Assets). Such assets are then systematically amortised over their useful
    economic life (normally between three and five years). Additionally, the costs
    of acquiring software licences and costs incurred in bringing software into
    use are capitalised, and amortised over the expected life of the licence (normally
    five years). There is judgement
    involved in determining an appropriate framework to consider which expenditure
    requires capitalisation and which should be expensed. Amounts capitalised
    in 2005 for development and software total £40 million (2004: £26
    million).




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Defined
    benefit pension plansThe Group operates
    a number of defined benefit plans, some of which also include post-retirement
    medical benefits. For material schemes, their valuation is determined by independent
    actuaries. These valuations require assumptions to be made in respect of future
    income levels, expected mortality, inflation, the long-term rate of return
    on the scheme assets, rate of increase in social security costs and medical
    cost trends, expected mortality, along with the discount rate used to convert
    the future cash flows into a present value. These assumptions are reviewed
    annually. The amounts recorded in the annual charge (service cost and interest cost offset by the expected return on assets) are sensitive to changes in these assumptions. Actuarial gains and losses
are recognised fully in the Statement of Recognised Income and Expense. Note 25 on pages 84 to 87 provides further details of the annual charges (£30 million) and the net outstanding pension obligation (£310 million), quantification of the underlying
assumptions and an estimate of the impact on the financial statements to changes in the most critical assumptions. Share-based
    payments and long-term incentive plans (LTIP)IFRS 2 (Share-based
    payments), which we have elected to apply only to share awards granted after
    7 November 2002 which have not vested by 1 January 2005, recognises that options
    represent an element of remuneration for services provided by employees and
    should be reflected as a charge against profit. The charge, which is spread
    over the vesting period of the award, is the fair value of the award at grant
    date and is calculated using an option pricing model. A combination of Black Scholes and Monte Carlo simulation models has been used to calculate the fair values of awards. The use of these models requires management to make a number of
assumptions including expected life of the options, expected dividends for the life of the option and historic volatility of Reuters shares. Management has considered historical data and made use of best practices in making these
assumptions. The total cost of share schemes in 2005 was £30 million (2004: £22 million). For additional information concerning the long-term incentive plan (LTIP), see Equity incentive
plans  LTIP on page 41 and note 33 on page 93. ProvisionsThe recognition
    of provisions, both in terms of timing and quantum, requires the exercise
    of judgement based on the relevant circumstances, which can be subject to
    change over time. The largest provisions relate to 2005 Fast Forward restructuring charges, which cover primarily severances and leasehold properties. For severance provisions, the provision is only
recognised where employees have a valid expectation, or have already been told, of their redundancy. A number of leasehold properties have been identified as surplus to requirements. Although efforts are being made to sub-let this vacant space,
management recognises that this may not be possible immediately. Estimates have been made to cover the cost of vacant possession, together with any shortfall arising from sub-leased rental income being lower than lease costs being borne by Reuters.
A judgement has also been made in respect of the discount factor, based on a risk-free rate, which is applied to the rent shortfalls. Additionally, the Group is subject to certain legal claims and actions (refer to note 35 on page 97). Provision for specific claims or actions are only made when the outcome is considered
probable that there


will be a future outflow of funds, and/or providing for any associated legal costs. The level of any provision is inevitably an area of management judgement given that the outcome of
litigation is difficult to predict. Other provisions are held where the recoverability of amounts is uncertain, where the actual outcome may differ from the resulting estimates. Segment
    reportingThe Groups
    primary segmental reporting is by business division. The Group operates through
    four business divisions: Sales & Trading, Research & Asset Management,
    Enterprise, and Media. In order to report segmental results, it is necessary
    to determine a methodology to allocate revenues, costs, assets and liabilities
    to those segments. Each division
    is responsible for specific products revenues, except for the Reuters
    2000/3000 range of products and Reuters 3000 Xtra. Revenues for these shared
    products are attributed to either the Sales&
    Trading division or the Research & Asset Management division, by reference
    to the nature of the customer taking the product. This is determined on a
    client-by-client basis. Where costs relate to a specific division, they are mapped directly to that division. Where costs are shared, ABC techniques are used to split these costs between divisions. The Reuters ABC
tool (known as Profitability Insight) allocates shared costs to business activities, which in turn are attributed to products, and therefore divisions, using different drivers of cost. These cost drivers (e.g. the number of helpdesk calls received
or the number of installed accesses) are derived from a variety of underlying source systems. Judgement has been applied in determining these cost drivers and the resulting allocation of costs. Assets and liabilities are attributed to business divisions using methodologies consistent with those applied to revenue and costs. Assets and liabilities are segmented to the extent that
they relate to the operating activities of the divisions. Assets and liabilities related to financing activities, including cash balances, are not segmented. Divisional results could alter with the application of other allocation approaches and as improvements to the Profitability Insight model are made. TaxationThe Group is subject
    to taxation in numerous jurisdictions. Significant judgement is required in
    determining the worldwide provision for taxation. There are many transactions
    and calculations for which the ultimate tax determination is uncertain during
    the ordinary course of business. The Group recognises liabilities for anticipated
    tax audit issues, based on estimates of whether additional taxes will be due.
    Where the final tax outcome of these matters is different from the amounts
    that were originally recorded, such differences will affect the tax provisions
    in the period in which such determination is made. Under IFRS and US accounting standards, in assessing which deferred tax assets to record on the balance sheet, management has made subjective judgements over the projected future
profitability of certain legal entities. 16
    US GAAPA reconciliation
    of net income under IFRS and US GAAP is set out on page 107. A discussion
    of the relevant US accounting policies which differ materially from IFRS is
    given on pages 104 to 108 in the Summary of differences between IFRS
    (as adopted by the EU) and US GAAP. Details of recent US GAAP accounting pronouncements
    are given on page 108.




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Operating
  and Financial Reviewcontinued



17
  Off-balance sheet arrangementsThe Group does not
  have any off-balance sheet arrangements, as defined by the SEC that have, or
  are reasonably likely to have, a current or future effect on the Groups
  financial position or results of operations material to investors. 18
  Risk factors  Forward-looking
  statements This
  document contains certain forward-looking statements within the meaning of the
  United States Private Securities Litigation Reform Act of 1995 with respect
  to the Groups financial condition, results of operations and business,
  and managements strategy, plans and objectives for the Group. In particular,
  all statements that express forecasts, expectations and projections with respect
  to certain matters, including trends in results of operations, margins, growth
  rates, overall financial market trends, anticipated cost savings and synergies
  and the successful completion of restructuring programmes, strategy plans, acquisitions
  and disposals, are all forward-looking statements. These statements involve
  risk and uncertainty because they relate to events and depend on circumstances
  that may occur in the future. There are a number of factors that could cause
  actual results and developments to differ materially from those expressed or
  implied by these forward-looking statements. These factors include, but are
  not limited to, the Risk Factors discussed below. Any forward-looking statements
  made by the Group or on its behalf speak only as of the date they are made.
  The Group does not undertake to update any forward-looking statements. Reuters
  may not be able to realise the anticipated benefits of the transformation initiatives
  undertaken through the Fast Forward programme and the Core Plus growth strategyThe Fast Forward
  programme included streamlining the way information is delivered, offering a
  simpler and segmented product line, rationalising the non-core elements of the
  business, reshaping the cost base and reinvigorating the company culture. The
  Core Plus growth strategy includes investing in new revenue initiatives, product
  development rationalisation and data centre rationalisation. There can be no
  assurance of achievement of these objectives or of the exact timing or extent
  to which the anticipated benefits of the Fast Forward programme or Core Plus
  growth strategy will be realised. Unfavourable
  conditions in financial markets may have a significant adverse effect on the
  Groups businessThe Groups
  business is dependent upon the health of the financial markets and the participants
  in those markets. The Groups trading products are dependent on the level
  of activity in those markets. If these conditions were to worsen or in the event
  of significant trading market disruptions or suspensions there could be adverse
  effects on the Groups business. In addition, the Groups business
  could be adversely affected by further consolidations among clients and competitors. Currency
  fluctuations and interest rate fluctuations may have a significant impact on
  the Groups reported revenue and earningsThe Group reports
  results in pounds sterling but receives revenue and incurs expenses in more
  than 70 currencies and is thereby exposed to the impact of fluctuations in currency
  rates. Currency movements resulted in a small positive impact on the Group operating
  profit in 2005. A strengthening of sterling from current levels, especially
  in relation to other currencies in which the Group derives significant revenues
  or holds significant assets such as the euro or the US dollar, could adversely
  affect results in future periods. To the extent that these currency exposures
  are not hedged, exchange rate movements may cause fluctuations in the Groups
  consolidated financial statements. In addition, an increase in interest rates
  from current levels could adversely affect the Groups results in future
  periods.


The
  Group may experience difficulties or delays in developing or responding to new
  customer demands or launching new productsThe Groups
  business environment is characterised by rapid technological change, changing
  and increasingly sophisticated customer demands and evolving industry standards.
  If the Group is unable to anticipate and respond to the demand for new services,
  products and technologies on a timely and cost-effective basis and to respond
  and adapt to technological advancements and changing standards, its business
  may be adversely affected. In addition, the Group may delay or halt the launch of new products and services; its existing products and services may cease to be attractive to customers; and new products and services
that the Group may develop and introduce may not achieve market acceptance. In the event any of the foregoing occurs, the Groups financial results could be adversely affected. The
  Group is dependent on third parties for the provision of certain network and
  other servicesThe Group has outsourced
  the day-to-day operation of most of its networks to BT/Radianz, which also provides
  network services to companies in addition to the Group. In connection with the
  2001 acquisition of certain businesses and assets of Bridge Information Services
  (Bridge), Reuters entered into a network services agreement with Savvis which
  was the primary provider of network services to Bridge. In addition, Savvis
  had a network services agreement with Telerate which Reuters acquired in its
  acquisition of Telerate. Failure or inability of any third party that provides
  significant services to the Group, such as BT/Radianz or Savvis, to perform
  its obligations could adversely affect the Groups financial results. The
  Groups business may be adversely affected if its networks or systems experience
  any significant failures or interruptions or cannot accommodate increased trafficThe Groups
  business is dependent on the ability to rapidly handle substantial quantities
  of data and transactions on its computer-based networks and systems and those
  of BT/Radianz, Savvis and others. Any significant failure or interruption of
  such systems, including terrorist activities, could have a material adverse
  effect on its business and results of its operations. The continuing increase
  in the update rates of market data may impact product and network performance
  from time to time. Factors that have significantly increased the market data
  update rates include: the emergence of proprietary data feeds from other markets;
  high market volatility; decimalisation; 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.
  While the Group has implemented a number of capacity management initiatives,
  there can be no assurance that the Group and its network providers will be able
  to accommodate accelerated growth of peak traffic volumes or avoid other failures
  or interruptions. The
  Group is exposed to a decline in the valuation of companies in which it has
  investedThe Group has entered
  into joint ventures with, and made strategic investments in, a number of companies
  and intends to continue to do so. The value of Reuters interests in these companies
  is dependent on, among other things, the performance of these companies generally,
  whether such performance meets investors expectations, and external market
  and economic conditions. The Group has limited ability to influence the management
  or performance of these companies.




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Significant
    competition or structural changes in the financial information and trading
    industries could adversely affect the Groups businessThe Group faces
    significant competition in the financial information and trading industries.
    The availability of public internet technology reduces barriers to entry and
    increases the availability of trading venues, resulting in more commoditised
    data and less valuable data, less effective control over intellectual property
    and reduced revenues. Many of the financial markets which the Group serves
    are undergoing or may undergo structural changes as a result of competition,
    regulation or otherwise. If the Group is unable to cope effectively with increased
    competitive pressure or structural changes arising from the above or any other
    factors, its financial results could be adversely affected. The
    Group may be exposed to adverse governmental action in countries where Reuters
    conducts reporting activitiesAs the worlds
    largest news and information company, the Group may suffer discriminatory
    tariffs or other forms of adverse government intervention due to the nature
    of its editorial and other reporting activities. The
    Group may not be able to realise the anticipated benefits of existing or future
    acquisitions or disposalsTo achieve its
    strategic objectives, the Group has acquired, invested in and/or disposed
    of, and in the future may seek to acquire, invest in and/or dispose of various
    companies and businesses. No assurance can be given that the Group will realise,
    when anticipated or at all, the benefits it expects as a result of any acquisition,
    investment or disposal. Achieving the benefits of acquisitions and investments
    will depend on many factors, including the successful and timely integration,
    and in some cases the consolidation of products, technology, operations and
    administrative functions, of companies that have previously operated separately.
    Considering the technical and complex nature of the Groups products
    and services, these integration efforts may be difficult and time-consuming.
    Achieving benefits of disposals will likewise depend on many factors, including
    realisation of appropriate value, successful separation of the businesses
    and operations and management of related costs, and achievement of any benefits
    sought in connection with the transaction. The
    Group may identify issues with controls over financial reporting, including
    as a result of the implementation project to achieve compliance with the Sarbanes
    Oxley Act, section 404Reuters will be
    required to comply with section 404 of the US Sarbanes-Oxley Act of 2002 (the
    Sarbanes-Oxley Act) next year. This requires that companies evaluate and report
    on their systems of internal control over financial reporting. In addition,
    the Groups independent auditors must report on managements evaluation
    of those controls. The Group began working on necessary activities in 2003
    and is in the process of documenting and testing its systems of internal controls
    over financial reporting to provide the basis for its certification. During
    this process, the Group may identify deficiencies in its system of internal
    controls over financial reporting that may require remediation. At this stage,
    due to the ongoing evaluation and testing of the Groups internal controls,
    there can be no assurance that any such deficiencies identified may not be
    significant deficiencies or material weaknesses that would require remediation.
    The Group complies with other elements of the Act that are already in force. The
    Group operates in an increasingly litigious environmentThe Groups
    business involves a number of areas of technology, including certain business
    methods. This, combined with the recent proliferation of so-called business
    method patents issuing from the US Patent Office, and the increasingly
    litigious environment that surrounds patents in general, increases the possibility
    that a member of the Group could be sued for patent infringement. If such
    an infringement suit were


successful, it is possible that the infringing product would be enjoined by court order and removed from the market, in addition to the legal fees that would be incurred defending such a
claim. Any settlement of such a claim could also involve a significant sum. 19
    Definition of key financial performance measuresThe Group measures
    its financial performance by reference to revenue and profit, operating margin,
    EPS, cash flow and net funds. To supplement IFRS measures, the Group undertakes further analysis to break these measures out into their component parts, which results in the creation of certain measures which differ
from the IFRS headline indicators (non-GAAP measures). The rationale for this analysis is outlined below, and reconciliations of the non-GAAP measures to IFRS measures are included within the review of results. These measures are used by
management to assess the performance of the business and should be seen as complementary to, rather than replacements for, reported statutory results. Underlying
    resultsPeriod-on-period
    change in Reuters is measured in overall terms (i.e. actual reported results
    under IFRS) and sometimes in underlying terms. Underlying change is calculated
    by excluding the impact of currency fluctuations and the results of acquisitions
    and disposals, as these are factors that are not on a like-for-like basis
    between periods. This enables comparison of Reuters operating results on a
    like-for-like basis between periods. •
      Variations
        in currency exchange rates impact the results because Reuters
        generates revenues and incurs costs in currencies other than
        its reporting currency. Year-on-year, currency exchange rate movements
        will influence reported numbers to a greater or lesser extent,
        and therefore they are discussed separately from underlying results
        to make clear their impact on the overall growth or decline in
        operations.
        Underlying results are calculated by restating the prior periods results using the
        current periods exchange rates. This also reflects
        the variables over which management has control, as business
        units do not manage currency exposure, and business division
        operating performance is managed against targets set on a constant
        currency basis. Currency exposure is described in section 14
        Treasury Policies on pages 20 to 21.•
      Underlying
        results are calculated excluding the results of entities acquired
        or disposed of during the current or prior periods from the results
        of each period under review. Underlying results reflect the operating
        results of the ongoing elements of each business division, and
        measure the performance of management against variables over
        which they have control, without the year-on-year impact of a step
        change in revenue and costs that can result from acquisition or
        disposal activity. Exclusion
    of restructuring chargesReuters results
    are reviewed before and after the costs of Reuters business transformation
    plan (which includes the Fast Forward programme) and acquisition integration
    charges. Under the Fast Forward
programme, Reuters incurred restructuring charges relating primarily to headcount
reduction and rationalisation of the Groups property portfolio. Fast Forward
 is a three year programme implemented to accelerate and expand on Reuters five
year business transformation plan which was launched in 2001; the programme completed
in 2005, as originally envisaged (refer to page 8 for discussion of the
programme). The Fast Forward
  programme was centrally managed, and its




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Operating
  and Financial Reviewcontinued



performance against targets was evaluated separately from the ongoing Reuters business. Fast Forward restructuring charges are therefore excluded from certain profit and margin
measures. Acquisition
    integration costs are one-off charges associated with transaction activity
    which do not recur. As described above, the charges in respect of acquisition
    activity are excluded to enable better like-for-like comparison between periods. Because of their time-limited and defined nature, Reuters believes that presenting these measures, both including and excluding restructuring charges, gives investors a more detailed
insight into the performance of management and the business. In addition, Reuters management uses both measures to assess the performance of management and the business. Exclusion of amortisation and impairment of intangibles acquired in a business combination, investment income, profit/(losses) from disposals, and fair value movementsFor
    certain cost, profit, margin and EPS measures, Reuters analyses its results
    both before and after the impact of restructuring charges, amortisation and
    impairments of intangibles acquired in a business combination, investment
    income, profits and losses from disposals, and fair value movements. The adjusted
    measures are referred to as Trading Profit, Trading Costs
    and Trading Margin. The rationale for isolating restructuring
  charges is explained above. Amortisation and impairment of intangibles acquired in a business combination, investment income and profit/(losses) from disposalsReuters isolates the impact of income and charges in respect of its investments. Income and charges from investments relate to impairments of goodwill, subsidiaries, associates and joint
ventures; impairments and amortisation of other intangibles acquired in a business combination; income from investments; and pre-taxation profits and losses on disposal of subsidiaries, joint ventures, associates and other investments. Such charges
    and income may arise from corporate acquisition and disposal activity, rather
    than the ongoing operations of the business divisions, with a reasonable allocation
    being determined for segmental reporting. These are analysed and reviewed
    separately from ongoing operations, as this is consistent with the manner
    in which Reuters sets internal targets, evaluates its business units and issues
    guidance to the investor community. Amortisation
    and impairment charges in respect of software and development intangibles
    are included within operating costs. Fair value movementsReuters
    also isolates the impact of movements in the fair value of financial assets
    held at fair value through profit or loss, embedded derivatives, and derivatives
    used for hedging purposes (where those changes are reflected in the income
    statement). Financial assets
    held at fair value through profit or loss included Reuters investment in Savvis
    convertible shares. This investment was sold as part of the acquisition consideration
    for Telerate. Fair value movements for this investment have been analysed
    separately from the ongoing operations of the business units during 2005. Embedded derivatives
    are foreign exchange contracts implicitly contained in some of Reuters revenue
    and purchase commitments. Changes in the fair value of embedded derivatives
    arise as a result of movements in foreign currency forward rates. The unpredictable
    nature of forward rates, the uncertainty over whether the gains or losses
    they anticipate will actually arise, and the volatility they bring to


the income statement
    lead Reuters to consider that it is appropriate to analyse their effects separately
    from the ongoing operations of the business. This enables Reuters to undertake
    more meaningful period-on-period comparisons of its results, as well as to
    isolate and understand better the effect of future currency movements on revenue
    and purchase commitments. This separate analysis is also consistent with the
    manner in which Reuters sets its internal targets, evaluates its business
    divisions and issues guidance to the investor community. The impact of
    fair value movements on derivatives relating to treasury hedging activity
    is also excluded, unless there is an equivalent offset in operating results.
    All derivatives undertaken provide effective economic hedges, but some may
    not qualify for hedge accounting and in these situations the reported impact
    of the underlying item and the hedge may not offset. The impact of treasury
    derivatives is mainly due to currency or interest rate movements and, as for
    the other items noted above, business division operating performance is managed
    against targets which exclude these factors. Tax and adjusted EPSTo
    ensure consistency, the non-GAAP EPS measure also eliminates the earnings
    impact of taxation charges and credits related to excluded items. Adjusted EPS
    is defined as basic EPS from continuing operations before impairments and
    amortisation of intangibles acquired via business combinations, fair value
    movements, disposal profits/losses and related tax effects. Dividend policyPresenting
    earnings before the impact of restructuring charges, amortisation and impairment
    of intangibles acquired in a business combination, investment income, disposals
    and fair value movements also helps investors to measure performance in relation
    to Reuters dividend policy. In 2001, the Group defined the long-term goal
    of its dividend policy to be a dividend cover of at least two times, based
    on Reuters UK GAAP earnings before amortisation of goodwill and other intangibles,
    impairments and disposals. Reuters dividend policy remains unaltered. With
    the adoption of IFRS, the equivalent earnings measure is Reuters earnings
    (after interest and taxation) before amortisation and impairments of intangibles
    acquired in a business combination, fair value movements and profits/(losses)
    on disposals. Free cash flowReuters
    free cash flow is used as a performance measure to assess Reuters ability
    to pay its dividend from cash flow. Free cash flow is intended to measure
    all Reuters cash movements, other than those which are both discretionary
    in nature and unrelated to ongoing recurring operating activities such as
    purchase of shares by the Employee Share Ownership Trusts (ESOTs), loans
    with associates and joint ventures and dividends paid out by Reuters. Whilst
    Reuters
    believes that free cash flow is an important performance measure in respect
    of its cash flows, it is not used in isolation, but rather in conjunction
    with other cash flow measures as presented in the financial statements. Net funds/debtNet
    funds/debt represents cash, cash equivalents and short-term investments,
    net of bank overdrafts and borrowings. This measure aggregates certain components
    of financial assets and liabilities and is used in conjunction with total
    financial assets and liabilities to manage Reuters overall financing position.




|26 |  | Reuters
          Group PLCAnnual
    Report and Form 20-F 2005
|-- |  | ---------------------------------------------------------------

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Back to Contents

20
  Reconciliations of non-GAAP measures to IFRSReconciliation
  of operating profit to Reuters trading profit and margin measures

|                                                                               |  | 2005 |   | 2005 |   | 2004 |   | 2004 |  
|------------------------------------------------------------------------------ |  | ---- | - | ---- | - | ---- | - | ---- | -
|Year to 31 December                                                            |  | £m   |   | %    |   | £m   |   | %    |  
|                                                                               |  |      |   |      |   |      |   |      |  
|Operating profit from continuing activities/margin                             |  | 207  |   | 9    | % | 194  |   | 8    | %
|                                                                               |  |      |   |      |   |      |   |      |  
|Excluding:                                                                     |  |      |   |      |   |      |   |      |  
|                                                                               |  |      |   |      |   |      |   |      |  
|Restructuring
              charges                                            |  | 112  |   | 4    | % | 120  |   | 5    | %
|                                                                               |  |      |   |      |   |      |   |      |  
|Impairments
              and amortisation of business combination intangibles |  | 22   |   | 1    | % | 16   |   | 1    | %
|                                                                               |  |      |   |      |   |      |   |      |  
|Investment
              income                                                |  | (1   | ) |     |   |     |   |     |  
|                                                                               |  |      |   |      |   |      |   |      |  
|Profit
              on disposal of subsidiaries                               |  | (4   | ) |     |   | (4   | ) |     |  
|                                                                               |  |      |   |      |   |      |   |      |  
|Fair
              value movements                                             |  | (2   | ) |     |   |     |   |     |  
|                                                                               |  |      |   |      |   |      |   |      |  
|Reuters trading profit/margin                                                  |  | 334  |   | 14   | % | 326  |   | 14   | %
|                                                                               |  |      |   |      |   |      |   |      |  

Reconciliation of profit before taxation from continuing activities to Reuters non-GAAP profit before taxation

|                                                                                                                                                                                 |  | 2005 |   | 2005 |    | 2004 |   | 2004 |   
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | - | ---- | -- | ---- | - | ---- | --
|Year to 31 December                                                                                                                                                              |  | £m   |   | %    |    | £m   |   | %    |   
|                                                                                                                                                                                 |  |      |   |      |    |      |   |      |   
|Profit before tax/margin from continuing operations                                                                                                                              |  | 238  |   | 10   | %  | 396  |   | 17   | % 
|                                                                                                                                                                                 |  |      |   |      |    |      |   |      |   
|Excluding:                                                                                                                                                                       |  |      |   |      |    |      |   |      |   
|                                                                                                                                                                                 |  |      |   |      |    |      |   |      |   
|Impairments
      and amortisation of business combination intangibles                                                                                                           |  | 22   |   | 1    | %  | 16   |   | 1    | % 
|                                                                                                                                                                                 |  |      |   |      |    |      |   |      |   
|Investment
      income                                                                                                                                                          |  | (1   | ) |     |    |     |   |     |   
|                                                                                                                                                                                 |  |      |   |      |    |      |   |      |   
|Profit
      on disposal of subsidiaries, associates and joint ventures                                                                                                          |  | (42  | ) | (2   | %) | (207 | ) | (9   | %)
|                                                                                                                                                                                 |  |      |   |      |    |      |   |      |   
|Fair
      value movements                                                                                                                                                       |  | (2   | ) |     |    |     |   |     |   
|                                                                                                                                                                                 |  |      |   |      |    |      |   |      |   
|Reuters profit from continuing operations before impairmentsand amortisation of business combination intangibles,investment income, profit on disposals and fair value movements |  | 215  |   | 9    | %  | 205  |   | 9    | % 
|                                                                                                                                                                                 |  |      |   |      |    |      |   |      |   

Reconciliation of basic EPS to Reuters adjusted EPS

|                                                                                                                                                                                                                                 |  | 2005 |   | 2005            |   | 2004 |   | 2004            |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | - | --------------- | - | ---- | - | --------------- | -
|Year to 31 December                                                                                                                                                                                                              |  | £m   |   | EPS
      Pence |   | £m   |   | EPS
      Pence |  
|                                                                                                                                                                                                                                 |  |      |   |                 |   |      |   |                 |  
|Profit/basic EPS from continuing activities                                                                                                                                                                                      |  | 229  |   | 16.3            |   | 356  |   | 25.4            |  
|                                                                                                                                                                                                                                 |  |      |   |                 |   |      |   |                 |  
|Excluding:                                                                                                                                                                                                                       |  |      |   |                 |   |      |   |                 |  
|                                                                                                                                                                                                                                 |  |      |   |                 |   |      |   |                 |  
|Impairments
      and amortisation of business combination intangibles                                                                                                                                                           |  | 22   |   | 1.6             |   | 16   |   | 1.1             |  
|                                                                                                                                                                                                                                 |  |      |   |                 |   |      |   |                 |  
|Investment
      income                                                                                                                                                                                                          |  | (1   | ) | (0.1            | ) |     |   |                |  
|                                                                                                                                                                                                                                 |  |      |   |                 |   |      |   |                 |  
|Profit
      on disposal of subsidiaries, associates and joint ventures                                                                                                                                                          |  | (42  | ) | (2.9            | ) | (207 | ) | (14.7           | )
|                                                                                                                                                                                                                                 |  |      |   |                 |   |      |   |                 |  
|Fair
      value movements                                                                                                                                                                                                       |  | (2   | ) | (0.2            | ) |     |   |                |  
|                                                                                                                                                                                                                                 |  |      |   |                 |   |      |   |                 |  
|Adjustments
      to tax charge for tax effect of excluded items                                                                                                                                                                 |  | (13  | ) | (0.9            | ) |     |   |                |  
|                                                                                                                                                                                                                                 |  |      |   |                 |   |      |   |                 |  
|Reuters profit/basic EPS from continuing operations before impairmentsand
      amortisation of business combination intangibles, investment income,profit
      on disposals, fair value movements and related taxation effects |  | 193  |   | 13.8            |   | 165  |   | 11.8            |  
|                                                                                                                                                                                                                                 |  |      |   |                 |   |      |   |                 |  



|Reuters
          Group PLCAnnual
          Report and Form 20-F 2005 |  | 27
|--------------------------------------------------------------------- |  | --

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Back to Contents

Operating
  and Financial Reviewcontinued



Reconciliation of actual percentage change to underlying change  Revenue by division by type

|                                            |  |            |    |           |   | Impact of    |    |        |   
|------------------------------------------- |  | ---------- | -- | --------- | - | ------------ | -- | ------ | --
|                                            |  | Underlying |    | Impact of |   | acquisitions |    | Actual |   
|% change versus year ended 31 December 2004 |  | change     |    | currency  |   | & disposals  |    | change |   
|                                            |  |            |    |           |   |              |    |        |   
|Recurring                                   |  | (1         | %) |          |   | 4            | %  | 3      | % 
|                                            |  |            |    |           |   |              |    |        |   
|Outright                                    |  | (40        | %) | 5         | % |             |    | (35    | %)
|                                            |  |            |    |           |   |              |    |        |   
|Usage                                       |  | 10         | %  |          |   |             |    | 10     | % 
|                                            |  |            |    |           |   |              |    |        |   
|Sales & Trading                             |  | (1         | %) |          |   | 4            | %  | 3      | % 
|                                            |  |            |    |           |   |              |    |        |   
|Recurring                                   |  | 4          | %  |          |   | (1           | %) | 3      | % 
|                                            |  |            |    |           |   |              |    |        |   
|Outright                                    |  | (36        | %) | 3         | % |             |    | (33    | %)
|                                            |  |            |    |           |   |              |    |        |   
|Usage                                       |  | (41        | %) |          |   |             |    | (41    | %)
|                                            |  |            |    |           |   |              |    |        |   
|Research & Asset Management                 |  | 3          | %  |          |   | (1           | %) | 2      | % 
|                                            |  |            |    |           |   |              |    |        |   
|Recurring                                   |  | 4          | %  | 1         | % | 1            | %  | 6      | % 
|                                            |  |            |    |           |   |              |    |        |   
|Outright                                    |  | (21        | %) | 1         | % |             |    | (20    | %)
|                                            |  |            |    |           |   |              |    |        |   
|Enterprise                                  |  | (1         | %) | 1         | % | 1            | %  | 1      | % 
|                                            |  |            |    |           |   |              |    |        |   
|Recurring                                   |  | 3          | %  |          |   |             |    | 3      | % 
|                                            |  |            |    |           |   |              |    |        |   
|Outright                                    |  | 34         | %  | 1         | % | 7            | %  | 40     | % 
|                                            |  |            |    |           |   |              |    |        |   
|Media                                       |  | 6          | %  |          |   | 1            | %  | 7      | % 
|                                            |  |            |    |           |   |              |    |        |   
|Recurring                                   |  | 1          | %  |          |   | 3            | %  | 4      | % 
|                                            |  |            |    |           |   |              |    |        |   
|Outright                                    |  | (23        | %) | 1         | % |             |    | (22    | %)
|                                            |  |            |    |           |   |              |    |        |   
|Usage                                       |  | 12         | %  |          |   | 1            | %  | 13     | % 
|                                            |  |            |    |           |   |              |    |        |   
|Total Reuters revenue                       |  |           |    |          |   | 3            | %  | 3      | % 
|                                            |  |            |    |           |   |              |    |        |   

Reconciliation of actual percentage change to underlying change  Reuters revenue by division by product family

|                                            |  |            |    |           |   | Impact of    |    |        |   
|------------------------------------------- |  | ---------- | -- | --------- | - | ------------ | -- | ------ | --
|                                            |  | Underlying |    | Impact of |   | acquisitions |    | Actual |   
|% change versus year ended 31 December 2004 |  | change     |    | currency  |   | & disposals  |    | change |   
|                                            |  |            |    |           |   |              |    |        |   
|Reuters Xtra                                |  | 11         | %  |          |   |             |    | 11     | % 
|                                            |  |            |    |           |   |              |    |        |   
|Reuters Trader                              |  | (23        | %) | 1         | % | 10           | %  | (12    | %)
|                                            |  |            |    |           |   |              |    |        |   
|Recoveries                                  |  |           |    | 1         | % | 5            | %  | 6      | % 
|                                            |  |            |    |           |   |              |    |        |   
|Sales & Trading                             |  | (1         | %) |          |   | 4            | %  | 3      | % 
|                                            |  |            |    |           |   |              |    |        |   
|Reuters Xtra                                |  | 1          | %  |          |   | 7            | %  |        |   
|                                            |  |            |    |           |   |              |    |        |   
|Reuters Trader                              |  | (15        | %) | 2         | % | 1            | %  | (12    | %)
|                                            |  |            |    |           |   |              |    |        |   
|Reuters Knowledge                           |  | 9          | %  | 1         | % | (22          | %) | (12    | %)
|                                            |  |            |    |           |   |              |    |        |   
|Reuters Wealth Manager                      |  | 1          | %  |          |   | 7            | %  | 8      | % 
|                                            |  |            |    |           |   |              |    |        |   
|Research & Asset Management                 |  | 3          | %  |          |   | (1           | %) | 2      | % 
|                                            |  |            |    |           |   |              |    |        |   
|Enterprise                                  |  | (1         | %) | 1         | % | 1            | %  | 1      | % 
|                                            |  |            |    |           |   |              |    |        |   
|Media                                       |  | 6          | %  |          |   | 1            | %  | 7      | % 
|                                            |  |            |    |           |   |              |    |        |   
|Total Reuters revenue                       |  |           |    |          |   | 3            | %  | 3      | % 
|                                            |  |            |    |           |   |              |    |        |   



|28 |  | Reuters
          Group PLCAnnual
          Report and Form 20-F 2005
|-- |  | ---------------------------------------------------------------------

---



Back to Contents

Reconciliation of divisional operating costs to trading costs

|                                                                       |  | 2005                  |  
|---------------------------------------------------------------------- |  | --------------------- | -
|                                                                       |  |                       |  
|                                                                       |  | Sales
      & Trading |  
|Year
      to 31 December                                              |  | £m                    |  
|                                                                       |  |                       |  
|Operating
      costs                                                  |  | 1,475                 |  
|                                                                       |  |                       |  
|Restructuring
      charges                                            |  | (76                   | )
|                                                                       |  |                       |  
|Impairments
      and amortisation of business combination intangibles |  | (13                   | )
|                                                                       |  |                       |  
|Fair
      value movements (in expenses)                               |  | (16                   | )
|                                                                       |  |                       |  
|Foreign
      currency translation                                     |  | (2                    | )
|                                                                       |  |                       |  
|Other
      income                                                     |  | (14                   | )
|                                                                       |  |                       |  
|Trading
      costs                                                    |  | 1,354                 |  
|                                                                       |  |                       |  



|                                                                       |  | 2004                  |  
|---------------------------------------------------------------------- |  | --------------------- | -
|                                                                       |  |                       |  
|                                                                       |  | Sales
      & Trading |  
|Year
      to 31 December                                              |  | £m                    |  
|                                                                       |  |                       |  
|Operating
      costs                                                  |  | 1,385                 |  
|                                                                       |  |                       |  
|Restructuring
      charges                                            |  | (63                   | )
|                                                                       |  |                       |  
|Impairments
      and amortisation of business combination intangibles |  | (10                   | )
|                                                                       |  |                       |  
|Foreign
      currency translation                                     |  | (1                    | )
|                                                                       |  |                       |  
|Other
      income                                                     |  | (22                   | )
|                                                                       |  |                       |  
|Trading
      costs                                                    |  | 1,289                 |  
|                                                                       |  |                       |  

Reconciliation of divisional operating profit to trading profit

|                                                                       |  | 2005                  |  
|---------------------------------------------------------------------- |  | --------------------- | -
|                                                                       |  |                       |  
|                                                                       |  | Sales
      & Trading |  
|Year
      to 31 December                                              |  | £m                    |  
|                                                                       |  |                       |  
|Operating
      profit                                                 |  | 157                   |  
|                                                                       |  |                       |  
|Restructuring
      charges                                            |  | 76                    |  
|                                                                       |  |                       |  
|Impairments
      and amortisation of business combination intangibles |  | 13                    |  
|                                                                       |  |                       |  
|Investment
      income                                                |  | (1                    | )
|                                                                       |  |                       |  
|(Profit)/loss
      on disposal of subsidiaries                        |  | (7                    | )
|                                                                       |  |                       |  
|Fair
      value movements                                             |  | 3                     |  
|                                                                       |  |                       |  
|Trading
      profit                                                   |  | 241                   |  
|                                                                       |  |                       |  



|                                                                       |  |                       |  |      |   | 2004       |  |       |  |       |  
|---------------------------------------------------------------------- |  | --------------------- |  | ---- | - | ---------- |  | ----- |  | ----- | -
|                                                                       |  |                       |  |      |   |            |  |       |  |       |  
|                                                                       |  | Sales
      & Trading |  | R&AM |   | Enterprise |  | Media |  | Group |  
|Year
      to 31 December                                              |  | £m                    |  | £m   |   | £m         |  | £m    |  | £m    |  
|                                                                       |  |                       |  |      |   |            |  |       |  |       |  
|Operating
      profit                                                 |  | 175                   |  | (16  | ) | 31         |  | 4     |  | 194   |  
|                                                                       |  |                       |  |      |   |            |  |       |  |       |  
|Restructuring
      charges                                            |  | 63                    |  | 18   |   | 27         |  | 12    |  | 120   |  
|                                                                       |  |                       |  |      |   |            |  |       |  |       |  
|Impairments
      and amortisation of business combination intangibles |  | 10                    |  | 3    |   | 3          |  |      |  | 16    |  
|                                                                       |  |                       |  |      |   |            |  |       |  |       |  
|Foreign
      currency translation                                     |  | 5                     |  | (12  | ) | 2          |  | 1     |  | (4    | )
|                                                                       |  |                       |  |      |   |            |  |       |  |       |  
|Trading
      profit                                                   |  | 253                   |  | (7   | ) | 63         |  | 17    |  | 326   |  
|                                                                       |  |                       |  |      |   |            |  |       |  |       |  



|Reuters
      Group PLCAnnual
      Report and Form 20-F 2005 |  | 29
|------------------------------------------------------------- |  | --

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Back to Contents

Operating and Financial Reviewcontinued



Reconciliation
  of cash generated from Reuters operations to Reuters free cash flow

|                                                          |  | 2005       |   | 2004         |  
|--------------------------------------------------------- |  | ---------- | - | ------------ | -
|                                                          |  |            |   |              |  
|                                                          |  | Continuing |   | Discontinued |  
|                                                          |  | operations |   | operations   |  
|Year
      to 31 December                                 |  | £m         |   | £m           |  
|                                                          |  |            |   |              |  
|Cash
      generated from operations                      |  | 268        |   | 3            |  
|                                                          |  |            |   |              |  
|Interest
      received                                   |  | 42         |   | 13           |  
|                                                          |  |            |   |              |  
|Interest
      paid                                       |  | (49        | ) |             |  
|                                                          |  |            |   |              |  
|Taxation
      paid                                       |  | (11        | ) | (13          | )
|                                                          |  |            |   |              |  
|Cash
      flow from operating activities                 |  | 250        |   | 3            |  
|                                                          |  |            |   |              |  
|Purchases
      of property, plant and equipment          |  | (138       | ) | (7           | )
|                                                          |  |            |   |              |  
|Proceeds
      from sale of property, plant and equipment |  | 3          |   |             |  
|                                                          |  |            |   |              |  
|Purchases
      of intangible assets                      |  | (40        | ) |             |  
|                                                          |  |            |   |              |  
|Interim
      funding payment from Telerate               |  | (18        | ) |             |  
|                                                          |  |            |   |              |  
|Dividends
      received                                  |  | 5          |   |             |  
|                                                          |  |            |   |              |  
|Repayment
      of funds to/(from) BTC                    |  | 26         |   | (26          | )
|                                                          |  |            |   |              |  
|Free
      cash flow                                      |  | 88         |   | (30          | )
|                                                          |  |            |   |              |  

Components of net funds

|                                             |  | 2005 |   | 2004 |  
|-------------------------------------------- |  | ---- | - | ---- | -
|As
      at 31 December                      |  | £m   |   | £m   |  
|                                             |  |      |   |      |  
|Cash
      and cash equivalents              |  | 662  |   | 578  |  
|                                             |  |      |   |      |  
|Bank
      overdrafts                        |  | (25  | ) | (17  | )
|                                             |  |      |   |      |  
|                                             |  | 637  |   | 561  |  
|                                             |  |      |   |      |  
|Short-term
      investments                 |  | 1    |   | 258  |  
|                                             |  |      |   |      |  
|Borrowings
      (excluding bank overdrafts) |  | (385 | ) | (493 | )
|                                             |  |      |   |      |  
|Net
      funds                              |  | 253  |   | 326  |  
|                                             |  |      |   |      |  



|30 |  | Reuters
      Group PLCAnnual
      Report and Form 20-F 2005
|-- |  | -------------------------------------------------------------

---



Back to Contents

| | Directors
      report
| | -----------------------



The directors submit their annual report and audited financial statements for the year ended 31 December 2005. 01
      ActivitiesThe
  Groups business, a review of its activities during 2005 and likely future
  developments are described on pages 7 to 20. Details of the Groups research
  and development activity and expenditure is given on page 60. 02
      Share capital and dividendsDetails
  of the changes in the authorised and called up share capital are set out in
  note 27 on page 89. Details of significant shareholdings are given on page 119. An interim dividend of 3.85 pence per ordinary share was paid on 31 August 2005. The directors recommend a final dividend of 6.15 pence per ordinary share, giving a total of 10 pence per
ordinary share for the year (2004: 10 pence). Subject to shareholders approval at the Annual General Meeting (AGM) to be held on 27 April 2006, the final dividend will be paid on 4 May 2006 to members on the register holding ordinary shares at
the close of business on 17 March 2006. It will be paid on 11 May 2006 to ADS holders on the register at the close of business on 17 March 2006. 03
      EmployeesInformation
  about Reuters employment policies and practices can be found in People
  on pages 10 and 11. 04
      Charitable contributionsIn
  2005 Reuters continued to support community initiatives and charitable causes,
  mainly through the work of the Reuters Foundation charitable trust. A report
  on the activities of the Foundation and Reuters wider corporate responsibility
  programme can be found on page xx and at www.about.reuters.com/csr. Reuters
  donated cash totalling £1.7 million during 2005 (2004: £2.4 million).
  In addition to this cash contribution, employees are encouraged to give their
  time and skills to a variety of causes and Reuters provides equipment and information
  services free of charge. It is the Groups policy not to make political contributions and none was made in 2005. 05
      Creditor payment termsIt
  is our normal procedure to agree terms of transactions, including payment terms,
  with suppliers in advance. Payment terms vary, reflecting local practice throughout
  the world. In the UK, Reuters has signed up to the Better Payment Practice Code.
  Reuters policy is to make payments on time, provided suppliers perform in accordance
  with the agreed terms. Group trade creditors at 31 December 2005 were equivalent
  to 13 days purchases during the year (2004: 19 days). 06
      Acquisition of own sharesAt
  the AGM held on 21 April 2005, shareholders renewed the companys authority
  under section 166 of the Companies Act 1985 to make purchases of up to 143,540,000
  ordinary shares at a price of not more than 5% above their average middle market
  quotation in the London Stock Exchange Daily Official List for the five business
  days prior to the date of purchase. On 26 July 2005, Reuters announced its intention to return £1 billion to shareholders, including the proceeds of around $1 billion from the Instinet Group sale, and initiated an
on-market buyback programme, which is expected to run up to July 2007. Between 26 July and 31 December 2005, 57,400,000 shares with a nominal value of £14,350,000 were repurchased at a cost of approximately £224 million. This represents 4%
of called up share capital.


07
      Substantial shareholdingsDetails
  of substantial shareholdings can be found on page 119. 08
      Related party transactionsDetails
  of related party transactions are given on page 123. 09
      Financial instrumentsDetails
  of the financial risk management objectives and policies of the company and
  the exposure of the company to financial risk is given on page 20 and note 17
  on pages 73 to 81. 10
      Post balance sheet eventsDetails
  of post balance sheet events are given on page 100. 11
      DirectorsThe
  names and biographical details of current directors are given on pages 32 and
  33. The following Board changes occurred during 2005 and early 2006: 8 February 2005Ian Strachan stood down from the Audit Committee. 20 July 2005Charles Sinclair stepped down as Chairman of Remuneration Committee but remained on the Committee until 6 December 2005. 19 September 2005Ian Strachan appointed as Chairman of Remuneration Committee. 23 September 2005Sir Deryck Maughan appointed to the Board. 6 December 2005Charles Sinclair retired from the Board. 24 January 2006Ian Strachan appointed to the Nominations Committee. Details of directors interests in the companys shares, the remuneration of the non-executive and executive directors and information on the service contracts of the executive
directors are set out on pages 39 to 48. A non-executive director is not required to hold ordinary shares in order to qualify as a director. 12
      Risk management, internal controls and disclosure controls and proceduresDisclosures
  can be found in Corporate governance and statement of directors
  responsibilities on page 37. 13
      AuditorsThe
  auditors, PricewaterhouseCoopers LLP, have indicated their willingness to continue
  in office and a resolution that they be reappointed will be proposed at the
  AGM. By order of the Board  Rosemary Martin
  General Counsel and Company Secretary
  10 March 2006




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| | Directors
    and senior managers
| | ---------------------------------



The directors and senior managers of Reuters Group at 7 March 2006 are:

|Name                                |  | Position                                             | Position held since
|----------------------------------- |  | ---------------------------------------------------- | -------------------
|                                    |  |                                                      |                    
|Directors                           |  |                                                      |                    
|                                    |  |                                                      |                    
|Niall FitzGerald, KBE               |  | Chairman, Director1                                  | 2004;
2003         
|                                    |  |                                                      |                    
|Thomas Glocer                       |  | CEO; Director                                        | 2001;
2000         
|                                    |  |                                                      |                    
|David Grigson                       |  | CFO; Director                                        | 2000               
|                                    |  |                                                      |                    
|Devin Wenig                         |  | President of Business Divisions; Director            | 2003               
|                                    |  |                                                      |                    
|Lawton Fitt                         |  | Director1                                            | 2004               
|                                    |  |                                                      |                    
|Penelope Hughes                     |  | Director1                                            | 2004               
|                                    |  |                                                      |                    
|Edward Kozel                        |  | Director1                                            | 2000               
|                                    |  |                                                      |                    
|Sir Deryck Maughan                  |  | Director1                                            | 2005               
|                                    |  |                                                      |                    
|Kenneth Olisa                       |  | Director1                                            | 2004               
|                                    |  |                                                      |                    
|Richard Olver                       |  | Director1                                            | 1997               
|                                    |  |                                                      |                    
|Ian Strachan                        |  | Director1                                            | 2000               
|                                    |  |                                                      |                    
|Senior Managers                     |  |                                                      |                    
|                                    |  |                                                      |                    
|Anne Bowerman                       |  | Interim Group HR Director                            | 2005               
|                                    |  |                                                      |                    
|Christopher Hagman                  |  | Managing Director, Global
Sales & Service Operations | 2003               
|                                    |  |                                                      |                    
|Geert Linnebank                     |  | Editor-in-Chief and Global Head of Content           | 2000               
|                                    |  |                                                      |                    
|Rosemary Martin                     |  | General Counsel and Company Secretary                | 2003;
1999         
|                                    |  |                                                      |                    
|Susan Taylor-Martin                 |  | Global Head of Corporate Strategy                    | 2004               
|                                    |  |                                                      |                    
|Simon Walker                        |  | Director of Corporate Marketing & Communications     | 2003               
|                                    |  |                                                      |                    
|Note:1   Non-executive
    director |  |                                                      |                    



DirectorsNiall
FitzGerald,
KBEChairman;
Chairman of the Nominations Committee.
He is a Member of the World Economic Forums Foundation Board, a Fellow
of the Royal Society for the encouragement of Arts, Manufactures & Commerce
and the Association of Corporate Treasurers and a Non-executive director of the
Nelson Mandela Legacy Trust (UK). He is also a member of various advisory bodies,
including the President of South Africas International Investment Advisory
Council and the Shanghai
Mayors International Business Leaders Council. Former Chairman and Chief
Executive Officer of Unilever PLC (19962004), former Non-executive director
of Merck, Ericsson, Bank of Ireland and Prudential PLC. Former President of the
Advertising Association, former Co-Chairman of The TransAtlantic Business Dialogue
and former Chairman of The Conference Board,
Inc. Age 60. Thomas (Tom) GlocerCEO. Previously CEO of Reuters Information (2000) and President and Senior Company Officer, Reuters
America (19982000). Appointed CEO, Reuters Latin America in 1997 after serving in Reuters legal department from 1993. Formerly practised law in New York, Paris and Tokyo with Davis Polk & Wardwell.
Member of the Corporate Council of the Whitney Museum, The Madison Council of
the Library of Congress, the Leadership Champions Group (Education) of Business
in the Community, The Advisory Board of the Judge Institute of Cambridge University
and The Corporate Advisory Board of the Tate.
Non-executive director of Instinet Group until Instinet Group was acquired in
2005 by NASDAQ. Age 46. David GrigsonCFO. Joined Reuters in August 2000 from Emap PLC where he was Group Finance Director and Chairman of Emap
Digital. He is a qualified chartered accountant. Formerly held senior finance roles in the UK and US at Saatchi and Saatchi PLC (19841989). Held a number of financial positions at Esso UK (19801984).
Former Non-executive director of Instinet Group. Chairman of Radianz until Radianz
was acquired in 2005 by BT. Age 51.


Devin WenigExecutive director and President of Business Divisions. Previously President, Investment Banking &
Brokerage Services (20012003). Joined Reuters in 1993 as corporate counsel, Reuters America and held a number of senior management positions before being appointed President, Investment Banking & Brokerage Services in January 2001. Also a
Non-executive director of Nastech Pharmaceutical Company and a former Non-executive director of Instinet Group. Age 39. Lawton FittNon-executive director; member of the Audit Committee. Non-executive director of CIENA Corporation and Citizen
Communications. Director and Trustee of Reuters Foundation. Previously a Partner and Managing Director of Goldman Sachs Group Inc. Trustee of several not-for-profit organisations including contemporary arts centres in New York and Berlin. Former
Secretary (Chief Executive) of the Royal Academy of Arts. Age 52. Penelope (Penny) HughesNon-executive director; member of the Remuneration Committee. Director of The GAP Inc., Vodafone
PLC, Skandinaviska Enskilda Banken, Molton Brown Limited and a Member of the Advisory Board of Bridgepoint Capital. Former President, Coca Cola Great Britain and Ireland. Former Director of Bodyshop International PLC (19942000), Enodis PLC
(19962001), SC Johnson (20022004), web-angel (20002003) and Trinity Mirror PLC (19992005). Age 46. Edward (Ed) KozelNon-executive
director; member of the Remuneration Committee. Chief Executive of CRIGHT. Also
a Director of Yahoo. Formerly a Non-executive director of Cisco
Systems Inc. (20002001), where he worked from 19892000 in a number of
roles, including Chief Technology Officer and Senior Vice President for business development. Also a former Non-executive director of Tibco Software Inc. (20002001) and Narus Inc. (19992003). Prior to 1989 he worked with SRI International in California. Age 50.




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Sir Deryck MaughanNon-executive director. Director of Glaxosmithkline plc, Managing Director of KKR, Chairman of KKR, Asia, Trustee of Carnegie Hall, Lincoln Center Inc. and NYU Medical Center. He serves on Advisory Councils at Stanford and
Harvard Universities. Former Chairman and CEO of Citigroup International, former Vice-Chairman of the New York Stock Exchange and former Chairman and CEO of Salomon Brothers (19921997). Age 58. Kenneth (Ken) OlisaNon-executive director; member of the Audit Committee. Non-executive director of BioWisdom and Open
Text Corporation. He is a Liveryman of the Worshipful Company of Information Technologists, a Freeman of the City of London, Chairman of homelessness charity, Thames Reach Bondway, a Governor of the Peabody Trust and a Director and Trustee of
Reuters Foundation. Former Chairman (20002006) and CEO of Interregnum plc which he founded in 1992. Former Senior Vice President and General Manager of Wang Europe, Africa and the Middle East (19811992) and his career began at IBM
(19741981). Former Director of uDate.com, Metapraxis Adaptive Inc. and Yospace Technologies Ltd and former Postal Services Commissioner. Age 54. Richard (Dick) OlverNon-executive director; Chairman of the Audit Committee; member of the Nominations Committee and
Senior Independent Director. Chairman of BAe Systems PLC since July 2004. He worked for BP PLC and was Deputy Group Chief Executive (20032004) and CEO of BP Exploration & Production Division (19982002). A Fellow of the Royal Academy
of Engineering. A Guardian of New Hall School. Age 59. Ian StrachanNon-executive director; Chairman of the Remuneration Committee; member of the Nominations Committee.
Non-executive director of Transocean Inc., Johnson Matthey PLC, Xstrata PLC and Rolls Royce Group PLC. Former Chairman of Instinet Group, former Non-executive director of Harsco Corporation, Deputy Chairman of Invensys PLC (19992000) and Chief
Executive Officer of BTR PLC (19961999). Former Deputy Chief Executive Officer (19911995) and Chief Financial Officer of Rio Tinto PLC (19871991). Also a former Non-executive director of Commercial Union PLC (19911995). Age
62. Charles Sinclairretired from the Board on 6 December 2005. Senior managersAnne
BowermanInterim
Group HR Director. Anne joined Reuters in 1995. She held a variety of HR roles
within Reuters,
including Head of Learning & Development, prior to being appointed to her
current role in July 2005. Before joining Reuters, Anne was HR Director for an
information technology company. Age 50. Christopher HagmanManaging Director, Global Sales & Service Operations. Christopher joined Reuters in 1987, based in
Sweden, and has held various senior sales and general business management positions in Sweden, the Netherlands and the UK before being appointed to his current post in April 2001. Christopher was appointed as a Member of the Executive Board of the
Community of European Management Schools and Internal Companies in December 2005. Age 47. Geert LinnebankEditor-in-Chief and Global Head of Content. Geert became Editor-in-Chief in 2000 having held various
editorial roles. He was appointed Chairman of Reuters Foundation in March 2004 and President and Director of Reuters Foundation Inc. in September 2005. Before joining Reuters in 1983, he was a correspondent, EC and Belgium, for AP-Dow Jones 
Brussels. Age 49.


Rosemary MartinGeneral Counsel and Company Secretary. Rosemary joined Reuters in 1997 as Deputy Company Secretary and
became Company Secretary in 1999. Appointed General Counsel in 2003. Rosemary has been the Director of Reuters Foundation since 2000. Former Partner at Mayer, Brown, Rowe & Maw for nine years. Non-executive director of HSBC Bank PLC. Member of
Financial Services Authority Listing Authority Advisory Committee. Age 45. Susan Taylor-MartinGlobal Head of Corporate Strategy. Susan joined Reuters in 1993, during which time she has held a
number of management roles including running the global news product group and the global equities business. Susan was appointed to her current role in 2004. Prior to joining Reuters, Susan worked in Corporate Finance, specialising in mergers and
acquisitions. Age 41. Simon WalkerDirector of Corporate Marketing & Communications. Simon joined Reuters in 2003. Prior to joining Reuters,
Simon was Communications Secretary at Buckingham Palace and Director of communications at British Airways PLC. Simon is a Trustee of the charity, UK-NZ Link Foundation and a Director of Communicor Public Relations and Awaroa Partners. Age
52. Michael Sayersresigned from the GMC on 21 September 2005 and left Reuters on 31 December 2005.Christian Verougstraeteresigned from the GMC and Reuters on 2 October 2005.Alex Hungatestepped down from the GMC on 30 June 2005 to take up his role as Managing Director for Asia.Stephen Dandowill be joining Reuters as Group HR Director and a member of the GMC in April 2006.Roy Lowrancehas been appointed Chief Technology Officer of the Group and will join the GMC in March 2006.




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| | Corporate
    governance and statement of directors responsibilities
| | ---------------------------------------------------------------------



01 Statement on corporate governance complianceCorporate
governance  the system by which the Group is directed and controlled  is
important for Reuters. The strength of the Groups corporate values, its
reputation and its ability to deliver its business objectives depend, amongst
other things, on the effectiveness of its corporate governance
system. External influences on the
Groups approach to corporate governance are: •
    the laws to which it is subject;•
    the rules which apply as a company listed on the London Stock Exchange and on NASDAQ in the US;•
    the regulations applied by financial services regulators around the world; and•
    the guidance given by investors and others interested in seeing good governance applied in practice. Reuters monitors and responds to these, particularly in the UK and US which are
where most of the companys shareholders are located, continuously improving
the Groups
internal
governance systems. Throughout 2005, the Group has complied with the Combined Code on Corporate Governance
published in July 2003, save that no individual member of the Audit Committee
has been identified
by
the Board as having recent and relevant financial experience (code
principle C3.1) . However, in common with all the non-executive directors, the
members of the Audit Committee are experienced and influential individuals, having
the
skills described in their biographies in Directors and senior managers (see
pages 32 and 33) and the Board considers that, collectively, the members have
the attributes required to discharge properly the Committees
responsibilities. The Group also complies with all SEC and NASDAQ governance requirements, with
the exception of two provisions of the NASDAQ governance rules. The company has
received waivers from NASDAQ to both exceptions on the basis that compliance
with the rules would be contrary to standard UK business practice. Since 1988,
Reuters has operated under a waiver
of NASDAQs requirement that all shareholder meetings require a quorum of
at least
one-third of outstanding voting shares; instead, the companys Memorandum
and Articles of Association (Articles) provide, as is typical for English public
companies, that a quorum shall consist of any two shareholders. In 2004 the company
also
received a waiver from NASDAQs provisions requiring shareholder approval
of employee share-based incentive schemes. Reuters seeks and has received shareholder
approval of its employee share-based incentive schemes to the extent required
by UK
regulation, including the UKLA Listing Rules. 02 Reuters Trust PrinciplesThe
Groups internal system of governance begins with Reuters Trust Principles
(see Information for shareholders  Memorandum and Articles of Association  The
Reuters
Trust Principles and The Founders Share Company on pages 119 to 120) which
are designed to protect Reuters integrity and independence and represent the
core values at the heart of Reuters business. They are set out in the companys
constitutional documents and in the code of conduct which applies to every Reuters
employee. The Trust Principles are a fundamental part of the Reuters brand. The directors are required by the Articles to have due regard to the Trust Principles
insofar as they are capable of being observed in accordance with their other
duties as directors.
Thus
the Trust Principles are integral to the Boards approach to the companys
business.


03 The BoardBoard
composition and directors independenceNiall
  FitzGerald chairs the companys Board. He met the independence criteria set out in the Combined Code when he was appointed. His significant commitments, other than Reuters, are
  being a member of the World Economic Forums Foundation Board and Chairman
  of the Nelson Mandela Legacy Trust (UK). Reuters has three executive directors: CEO, Tom Glocer; Chief Financial Officer
  (CFO), David Grigson; and President of Business Divisions, Devin Wenig. In addition to the Chairman, there are seven non-executive directors on the
  Board. Dick Olver, who is the senior independent non-executive director, is
  available to shareholders if they have concerns. No meetings with Dick Olver
  were requested by shareholders during 2005. The quality of the individual directors,
  the balance of the Boards composition and the dynamics of the Board as
  a group, ensure both the Boards effectiveness and the inability of an
  individual or small group to dominate the Boards decision making. The
  Board has determined that each of the non-executive directors is independent
  in character and judgement by reason of his or her personal qualities, and
  that each of the non-executive directors is independent as that
  term is defined in NASDAQ and SEC governance requirements. Each executive director receives a service contract on appointment (see the
  Remuneration report for further information) and each non-executive director
  receives a letter setting out the terms of the appointment. Copies of the service
  contracts and non-executive directors letters of appointment are available
  to shareholders from the Company Secretary on request. The non-executive directors appointment
  letters specify that the appointment is for a term of six years, subject to
  review after three years. Dick Olver continued to hold office beyond the initial
  six-year term at the request of the Board. On 1 December 2006 Dick Olver will
  have served on the Reuters Board for nine years. In view of this, his continuing
  role as a director of the company and as the senior independent non-executive
  director has been discussed by the Chairman with representatives of the major
  shareholders of the company. During the discussions the Chairman explained
  the value of continuing to have available to the Board Dick Olvers skills,
  experience and detailed knowledge of Reuters, particularly in view of the fact
  that over half of the non-executive directors have less than two years experience
  on the Reuters Board. The major shareholders representatives support
  Dick Olvers continuation as a director. The Articles provide that at each AGM any director appointed since the last
  AGM shall stand for election by the shareholders and one third of the directors
  shall retire from office by rotation and be eligible for re-election by the
  shareholders. However, to recognise that some shareholders prefer all the directors
  to stand for re-election each year, once again at the 2006 AGM each of the
  directors will retire from office and offer himself or herself for re-election. Role of the Board and its committeesThe Board is responsible for the success of the Group within a framework of controls which enables risk to be assessed and managed. Its aim is for the Group to achieve profitable growth
  within an acceptable risk profile. It seeks to achieve this by: •
    agreeing the strategic framework and keeping it under rigorous review;•
    monitoring the implementation of strategy through the operational plans;•
    focusing on long-term sustainable value creation;




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•
    safeguarding the longer-term values of the company, including its brand and corporate reputation;•
    overseeing the quality of management and how it is maintained at world-class levels; and•
    maintaining a governance framework that facilitates substance and not merely form. A schedule of matters reserved for the Boards decision identifies those matters that the Board does not delegate to management. It includes the approval of corporate objectives,
strategy and the budget, significant transactions and matters relating to share capital. During 2005 the Board focused particular attention on the development of Reuters growth strategy; the acquisition of Telerate and the disposals of Instinet
Group and Radianz; brand management; succession planning; performance management and the control environment. The Board is assisted by its committees. Through the Audit Committee, it satisfies
itself on the integrity of financial information and that the financial, operational
and compliance controls and systems of risk management are robust. Through the
Remuneration Committee, the Board determines appropriate levels of remuneration
of executive directors and other senior managers. The Nominations Committee is
the forum through which the Board discharges its role in nominating new directors
and succession planning. These committees are described in more detail below. There is a clear division of responsibilities between the running of the Board,
which is the Chairmans responsibility, and the running of Reuters business,
which is the CEOs responsibility, with the Board having oversight. The
division of responsibilities is set out in a document approved by the Board. Directors induction,
training and informationDuring
2005, Ken Olisa, Lawton Fitt and Penny Hughes, who joined the Board in 2004,
continued their induction. In addition to these directors continuing to expand
their knowledge of Reuters business generally, Ken Olisa visited Reuters operations
in Thailand and India and Penny Hughes visited Reuters operations in Sweden and
Germany. Furthermore, Ken Olisa joined the advisory board which oversees Reuters
innovation initiatives. Ken Olisa and Lawton Fitt became trustees of Reuters
charitable arm, Reuters Foundation. To help promote diversity within Reuters,
Lawton Fitt, Penny Hughes and the Chairman met with groups of women employees
in London and New York. Two Board meetings were held outside the UK in 2005,
one in Geneva and one in New York, enabling the directors to meet customers and
to see aspects of Reuters business in those locations. Sir Deryck Maughan, who joined Reuters Board on 23 September 2005, received a
directors manual which provides information about Reuters and the operation
of the Board and its committees. He also received a series of induction briefings
in New York and London to gain insights into the Group. Sir Deryck, like the
other directors, has been supplied with Reuters products. Ongoing training for directors is available as appropriate. The Groups
legal advisers and auditors provide briefings to the directors from time to time.
In 2005 the directors participated in a workshop on ethical decision-making,
based on training which Reuters editorial staff receive. Guest speakers are occasionally
invited to join Board dinners to discuss topics of interest with the directors
and opportunities are provided for non-executive directors to meet with shareholders,
customers and others involved in Reuters business.


Monthly financial information is provided to the directors. Regular and ad hoc reports and presentations are prepared and circulated to the directors in advance of Board meetings, together
with minutes and papers relating to the Boards committees, to ensure the directors are supplied, in a timely fashion, with the information they need. They also have access to the Company Secretary who is responsible for advising the Board
through the Chairman on all governance matters. The Company Secretary is appointed by, and can only be removed by, the Board. The directors may take independent professional advice at the companys expense. None of the directors sought such
advice during 2005 although the Remuneration Committee has appointed an independent adviser, Towers Perrin, which gave advice to the Committee. Frequency of meetingsThe
Board met eight times in 2005 and, in addition, held a two-day strategy review
meeting in June, building on a series of strategy discussions at Board meetings
during the year. The directors attended all the Board meetings in 2005 save that,
by prior arrangement, Penny Hughes and Ed Kozel were absent from two meetings
and Ken Olisa, Charles Sinclair and Ian Strachan were each absent from one meeting. Board effectivenessIn 2005,
the Chairman held one meeting with the non-executive directors without the executive
directors present. It is intended to increase the number of these meetings in
2006. A comprehensive Board review was undertaken in 2005 in which: •
    the Chairman reviewed the performance of the CEO and each individual director;•
    the CEO reviewed the performance of the CFO and the President of Business Divisions;•
    Dick Olver, the senior independent non-executive director, led a review of the performance of the Chairman;•
    Dr Annie McKee of the Teleos Leadership Institute facilitated a Board effectiveness review in which the performance of the
Board as a whole and each of the directors was considered;•
    Dr McKee also facilitated reviews of the effectiveness of the Audit Committee and the Remuneration Committee;
and•
    the Board discussed
    and agreed the Nominations Committees approach to identifying and recruiting potential future
Board members. The format of the reviews was interviews with the directors and others involved in the work of the Board and its committees, the output from which was thematically analysed and discussed
with the person or group being reviewed, as well as with the Chairman. Actions were agreed to address matters identified in the reviews and implementation of these actions will be monitored. Board committeesThe
Board delegates specific responsibilities to certain committees. Each committee
has its own terms of reference set by the Board. These are available on request
from the Company
Secretary or at www.about.reuters.com/csr/corporategovernance. Each year, the Audit Committee reviews and, as appropriate, actively engages
in the processes for financial reporting, internal control, risk assessment,
audit and compliance assurance, the
independence of the companys internal and external auditors and the effectiveness
of the companys system of accounting, its internal financial controls and
the internal and external audit functions.




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Corporate governance and
statement of directors responsibilitiescontinued



Members of the committee during 2005 were Dick Olver (Chairman), Lawton Fitt, Ken Olisa and Ian Strachan (until his retirement from the committee on 8 February 2005). Each member of the
committee is considered by the Board to be independent under the Combined Code and according to the SEC and NASDAQ definitions. The Board has determined that the Audit Committee does not at present include
a member who is a financial expert, as defined in the Sarbanes-Oxley
Act and related SEC rules because the Board considers that none of the members
clearly meets all the criteria set out in the relevant definitions nor has the
Board identified a member of the committee as having recent and relevant financial
experience. However, the Board considers that collectively the members have the
requisite skills and attributes to enable the committee properly to discharge
its responsibilities. The Company Secretary is secretary to the committee. The Audit Committees remit, which is set out in its terms of reference,
includes responsibility for: •
    the oversight responsibilities described in the above paragraph and for
    reviewing compliance with laws, regulations, the
companys code of conduct and policies;•
    approving related party transactions to the extent required under NASDAQ rules;•
    monitoring the integrity
    of the companys financial statements and any
    announcements relating to the companys
financial performance and reviewing significant financial reporting judgements contained in them;•
    monitoring and reviewing
    the effectiveness of the companys internal audit function;•
    making recommendations to the Board, for it to put to the shareholders for their approval, regarding the appointment,
re- appointment and removal of the external auditor and approving the remuneration and terms of engagement of the
external auditor;•
    reviewing and monitoring
    the external auditors independence and the effectiveness of the audit process and
developing and implementing policy on the engagement of the external auditor to supply non-audit services;
and•
    overseeing the receipt, review and treatment of complaints received regarding accounting, internal accounting controls,
auditing and compliance
matters, whether through the companys whistleblower confidential helpline
or otherwise. The committee met five times in 2005 with the CEO, the CFO, other officers and the auditors attending as required. The auditors have unrestricted access to the Audit Committee and, in
accordance with usual practice, met twice during the year privately with the committee, as did the Head of Internal Audit. The Chairman of the Audit Committee meets with the Head of Internal Audit and
with the external auditors before each Audit Committee meeting. All members of
the Audit Committee attended
every committee meeting during the year. The committee reports its activities and makes recommendations to the Board.
During 2005 the committee discharged the responsibilities described above. Its
activities included:


•
    formally reviewing the draft annual report and interim statement, respectively, and associated announcements, focusing on
the main areas of judgement and critical accounting policies;•
    reviewing the findings of the external auditors and the report of the Head of Internal Audit on internal audit
activities;•
    reviewing the effectiveness of internal control systems, the risk management process and the compliance programme
(including the whistleblower programme), paying particular attention to the work being undertaken in connection
with section 404 of the Sarbanes-Oxley Act;•
    receiving the report of the CEO and the CFO on the processes followed prior to certification being given by them in
connection with section 302 of the Sarbanes-Oxley Act;•
    reviewing the external
    audit strategy and the external auditors report to the committee in respect of the annual
report and interim statement;•
    keeping under review the proportion of non-audit fees to audit fees paid to the auditors and giving pre-approval to
non-audit work undertaken by the auditors;•
    reviewing the effectiveness of the internal and external auditors; and•
    reviewing a report on the companys corporate responsibility activities. The Board adopted a code of ethics for the companys CEO and senior financial officers in 2003, in addition to the companys general code of conduct. In 2005, the code of ethics
was expanded to include personnel involved in reports and documents that the company files with government agencies and other public communications. No other material amendments to, or waivers in respect of, either code were made during 2005. Copies
of the codes are available on request from the Company Secretary and can be viewed at www.about.reuters.com. The committee monitors adherence to the companys auditor independence policy,
which prohibits Group entities from engaging the auditors in activities prohibited
by the SEC or the US Public Company Accounting Oversight Board. The policy was
revised and approved by the Audit Committee in September 2005. The policy permits
the auditors to be engaged for other services provided the engagement is specifically
approved in advance by the committee or is approved by the CFO and meets the
detailed criteria of specific pre-approved activities and is notified to the
committee. However, any services where the expected level of fees is greater
than £150,000 or the expected term is longer than one year, must be approved
in advance by the committee. For details regarding fees paid to the Groups auditors, see note 3 to the
financial statements on page 60. The committee may engage, at the companys expense, independent counsel
and other advisers as it deems necessary to carry out its duties. None was engaged
during the year. The Remuneration Committeehas oversight of executive remuneration policy. Information concerning the Remuneration
Committee is set out in the Remuneration report on page 39. The Nominations Committeemakes recommendations to the Board about future appointments of non-executive directors, the
Chairman and the CEO and considers recommendations from the CEO to the Board about the future appointment of executive directors. The committee gives due consideration to the Combined Codes provisions relating to directors when making
appointments to the Board.




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In 2005 the composition of the committee was Niall FitzGerald, Dick Olver and Charles Sinclair. Charles Sinclair stepped down from the committee when he resigned as a director on 6 December
2005. On 24 January 2006 Ian Strachan was appointed as a member of the committee. The committee is chaired by Niall FitzGerald. The Board has determined that these directors are independent under the Combined Code and according to the NASDAQ and SEC
definitions. A director may not attend or be involved in any decision concerning him or his successor. The committee has appointed an external adviser to assist it in its work in identifying potential candidates for non-executive directorships. The
committee met twice in 2005 and during the year, having identified the skills, experience and attributes which are desirable for Reuters non-executive directors, the committee recommended to the Board the appointment of Sir Deryck
Maughan. 04 Executive committeesThe
Group Management Committee(GMC), which is chaired by the CEO, manages the Group. It comprises the three executive
directors and the senior executives listed on page 32. It met twenty-two times in 2005. A Disclosure Committee, chaired by the CEO, was set up in 2002. Its members comprise the CEO, the CFO, the Global Head of
Corporate Communications, the General Counsel and Company Secretary, the Head of Internal Audit, the Global Head of Finance, the Head of External Reporting, the General Counsel for the Americas and the Head of Investor Relations. The committee meets
formally at least five times a year to review the Groups trading statements and financial results and to consider the effectiveness of the Groups disclosure controls and procedures. A sub-committee meets on an ad hoc basis to address
disclosure matters arising between reporting periods. 05 Relations with shareholdersThe
executive directors meet regularly with institutional shareholders and analysts.
Non-executive directors are offered the opportunity to attend meetings with major
shareholders and from time to time some attend the presentations of the annual
results to analysts. Niall FitzGerald met with various investors during the year
and Dick Olver, in his capacity as senior independent director, responded to
emails sent to him by shareholders. No shareholders asked to meet him in person
in 2005. An investor relations department is dedicated to facilitating communications
between the company and its shareholders. It provides a regular report on investor
relations as part of the
routine Board report materials. The companys AGM is used as an opportunity to communicate with private
investors. The chairmen of each of the Board committees are available to answer
questions at the AGM, and all directors are expected to attend the AGM. At the
AGM the level of proxies lodged on each resolution and the balance for and against
the resolution and the number of votes withheld are announced after the resolution
has been voted on. At the 2005 AGM, voting using a poll for all resolutions was
introduced to replace voting by a show of hands as the Board considers poll voting
gives a better representation of shareholders views. The results of voting
at the AGM in 2006 will be available
at www.about.reuters.com. 06 Financial reportingThe
directors are required by UK company law to prepare financial statements for
each financial year which give a true and fair view of the state of affairs of
the company and the Group as at the end of the financial year and of the profit
and cash flows of the Group for the period. The Group is also required to prepare
financial statements in


accordance with the requirements of the SEC. Reuters has complied with both UK and US disclosure requirements in this report
in order to present a true and fair view to all shareholders. In preparing the
financial statements, the directors have ensured that applicable accounting standards
have been followed, suitable accounting policies have been used and applied consistently,
and reasonable and prudent judgements and estimates have been made where appropriate.
The directors confirm that the financial statements comply with IFRS as adopted
by the EU. The directors have reviewed the budget and cash flow forecasts for Reuters for
the year to 31 December 2006. On the basis of this review, the directors are
satisfied that the Group is a going concern and have continued to adopt the going
concern basis in preparing the financial statements. 07 Risk management, internal controls and disclosure controls and proceduresThe
directors acknowledge their responsibility for the Groups system of internal
control and confirm they have reviewed its effectiveness. In doing so, the Board
has taken note of the Guidance on Internal Control (the Turnbull Guidance) contained
in the Combined Code, as updated by the version published by the Financial Reporting
Council on 13 October 2005. The Board confirms that it has a process for identifying, evaluating and managing
significant risks faced by the Group. This process, which accords with the Turnbull
guidance, has been in place for the full financial year and is ongoing. The control
system includes: •
    objective setting, risk assessment and monitoring of performance at both strategic and business unit levels though a
process known within
the company as mission analysis;•
    the use of balanced scorecards to
    track performance against targets relating to the financial, business,
people and customer aspects
of the companys business;•
    written policies and control procedures;•
    monthly reporting to the Board and senior management which, amongst other things, tracks performance against the annual
budget;•
    systems to communicate rapidly to appropriate managers incidents requiring immediate attention; and•
    regular review meetings by the CEO and CFO with each GMC member which cover the performance, risks and controls for
which the GMC member is responsible. In a group of the size, complexity and geographical diversity of Reuters it should be expected that breakdowns in established control procedures might occur. There are supporting policies
and procedures for reporting and management of control breakdowns. The Board considers that the control system is appropriately designed to manage, rather than eliminate, the risk of failure to achieve business objectives and can only provide
reasonable and not absolute assurance against material misstatement or loss. The concept of reasonable assurance recognises that the cost of a control procedure should not exceed the expected benefits. Using a common risk management framework throughout Reuters, each of the principal
business and functional units summarises the risks that could impede the achievement
of its objectives. For each significant risk, line managers document an overview
of the risk, how




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Corporate governance and statement of directors responsibilitiescontinued

it is managed and any improvement actions required. A document called a risk radar is created which sets out the main strategic and operational risks that have been identified.
This document is reviewed by the GMC and the Board. At the year end, before producing the above statement on internal control in
the annual report and Form 20-F, the CEO and CFO meet with members of the GMC
and others to consider formally
the operation and effectiveness of the companys risk management and financial,
operational and compliance internal control systems. This review includes consideration
of self-assessment reports from line management and covers each of the most significant
risks the company faces and how well these are controlled and managed. The CEO
and the CFO report on the results of this review to the Audit Committee and to
the Board. The Disclosure Committee (described on page 37) supports the process
by reviewing disclosure controls and procedures. Whilst Instinet Group was part of the Group, it had its own systems of risk management
and internal controls on which it reported to its shareholders. Reuters executive
directors were members of the Instinet Group board, and Reuters CFO was a member
of Instinets Audit Committee, until its disposal on 8 December 2005. The
board of Factiva, which includes Reuters representatives, has responsibility
for adopting processes for identifying, evaluating and managing significant risks
in its business. The board of Radianz, which included Reuters representatives
until its disposal on 29 April 2005, also had responsibility, while Radianz was
part of the Group, for adopting such
processes. In addition to the self-assessment and management review procedures, the Group
monitors its internal financial control system through a programme of internal
audits. Internal auditors independently review the controls in place to manage
significant risks and report to the Audit Committee twice a year. The Audit Committee
reviews the assurance procedures annually, including compliance controls, and
reports its findings to the
Board. The Groups external auditors, PricewaterhouseCoopers LLP, have audited
the financial statements and have reviewed the work of internal auditors and
the internal control systems to the extent they consider necessary to support
their audit report. The Audit Committee has met the internal auditors and PricewaterhouseCoopers
LLP to discuss the results of their work. During 2005, Reuters management, the Audit Committee and the Groups external
auditors considered the accounting treatment of the RPF. The RPF is a hybrid pension scheme which has been in existence since 1893. It
has been accounted for as a defined contribution plan, since at least 1984 when
the Group went public, under
both UK GAAP and US GAAP. Under the RPFs rules, the Group is not able to
access any surplus in the RPF. Although Reuters and employees make defined contributions
to the fund, the RPF does not provide for contributions to be made to individual
participant accounts. In 2005, management determined that the accounting for
the RPF had been incorrect under US GAAP. There was no impact on the Groups previously reported UK GAAP profit and
loss account and balance sheet. As disclosed in the Groups Form 20F/A dated
21 February 2006, amending
the Groups 2004 annual report and Form 20-F, following the change in accounting
for the RPF, certain US GAAP financial information was restated. The impact of
the restatement on prior year US GAAP results was to


increase both reported net income before taxes and net equity in four of the
five years (2000-2004). Management therefore determined that there was a material
weakness in the Groups internal control over financial reporting with respect
to US GAAP accounting as at 31 December 2004. The Group has taken a range of steps to remediate this material weakness. The
remedial actions aimed at strengthening controls over US GAAP, which are continuing,
include: •
    More comprehensive US GAAP training of head office finance staff, supported by external advisors;•
    Operating a more tightly controlled process for the Groups US GAAP reconciliation, which has involved moving away
from the previous off-line spreadsheet reconciliation methodology to a more comprehensive systems-based
methodology;•
    Reconciliation of the material differences between UK GAAP, US GAAP and IFRS highlighting, in particular, differences
between IFRS and US GAAP as at 31 December 2004 and 31 December 2005; and•
    Improving documentation of US GAAP adjustments as at 31 December 2004 and 31 December 2005 as part of our
preparation for Sarbanes-Oxley section 404 compliance. At the end of 2005, Reuters management carried out an evaluation of the effectiveness
of the design and operation of the Groups disclosure controls and procedures.
These are designed to ensure that information required to be disclosed in reports
filed under the Securities Exchange Act of 1934 is recorded, summarised and reported
within specific time periods. Based on this evaluation, the CEO and the CFO concluded
that, taking into account the matter noted above, the design and operation of
these disclosure controls and procedures were effective as at 31 December 2005
to a reasonable assurance level (within the meaning of the US federal securities
laws). With the exception of the steps noted above, no significant changes were made
in the Groups internal controls over financial reporting during the period
covered by this report that materially affected, or are reasonably likely to
affect materially, the Groups internal control over financial reporting. Reuters annual report and Form 20-F for 2006 is also expected to contain an internal
control report, so Reuters management have taken during 2005, and will be taking
throughout 2006, steps in preparation for the Sarbanes-Oxley Act, section 404
reporting and attestation requirements that are scheduled to be met in respect
of the financial year ending 31 December 2006. By order of the Board  Rosemary MartinGeneral
Counsel & Company Secretary
10 March 2006




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| | Remuneration
    report
| | -----------------------



This report sets out Reuters executive remuneration policy, structure and details of the remuneration received by directors and senior managers for the year ended 31 December 2005.
  Shareholders will be invited to approve this report at the AGM on 27 April 2006. 01
Consideration
of remuneration matters  generalThe
Board has overall responsibility for determining the framework of executive remuneration
and its cost, and is required to take account of any recommendations made by
the Remuneration Committee. Through formal terms of reference, the Board has
delegated to the Remuneration Committee oversight of the specific remuneration
packages for the executive directors and consideration of executive remuneration
issues generally, including the use of equity incentive plans. Specifically,
it is tasked with setting remuneration for the executive directors. It also reviews
the CEOs proposals for the remuneration of the GMC members and other designated
senior executives. The Remuneration Committee consists solely of non-executive directors. All members
of the Remuneration Committee have been determined by the Board to be independent
as defined by NASDAQ. Its current members are Ed Kozel, Penny Hughes and Ian
Strachan. On 20 July 2005, Charles Sinclair resigned as Chairman of the Remuneration
Committee, with Ian Strachan succeeding him. Charles Sinclair remained as a member
of the Committee until his resignation from the Board on 6 December 2005. The
Company Secretary is secretary to the Remuneration Committee. The Remuneration
Committee met seven times in 2005. All members were present at each meeting except
that Ed Kozel, Penny Hughes and Ian
Strachan were each absent once. The CEO and the Chairman may attend meetings of the Remuneration Committee. Neither
is present at any discussion concerning his own remuneration. During 2005, internal
advice was provided by the Global Head of Human Resources, the Global Head of
Performance & Reward, Tom Glocer and David Grigson. The terms of reference
permit the Remuneration Committee to obtain its own external, independent advice
on any matter, at the
companys expense. Towers Perrin were appointed as independent advisers
to the Remuneration Committee on 20 July 2005. Towers Perrin has provided salary
data to Reuters. This is routine information and independent of the advice provided
to the
Remuneration Committee. 02 Chairman and non-executive directorsThe
Chairmans remuneration is determined by the Board. In reaching future decisions
on appropriate fee levels, the Board will continue to have regard to the remuneration
arrangements
of chairmen of other UK listed companies of a similar size and complexity. As Chairman, Niall FitzGerald receives an annual fee of £500,000. This fee
is fixed until 1 October 2007. The company does not provide a pension contribution
to him. Details of non-executive director appointments are contained on page 31. Niall
FitzGerald and the non-executive directors have letters of engagement rather
than service contracts and are not eligible to participate in executive share
plans. No letter of engagement contains any provision for compensation in the
event of termination outside of the periods referred to on page 34.


The dates on which each non-executive director joined the Board are detailed
below. Non-executive director
        Board joining dateCharles Sinclair
        January 1994Ed Kozel
        February 2000Ian Strachan
        April 2000Niall FitzGerald
        January 2003Ken Olisa
        April 2004Dick Olver
        September 1997Penny Hughes
        July 2004Lawton Fitt
        July 2004Sir Deryck Maughan
        September 2005 Reuters shareholders determine the remuneration paid to the non-executive directors.
From 1 January 2005, this has been set at £50,000 per annum.The Board determines
the additional fees payable to each non-executive director who chairs a Board
committee. For 2005, these were £15,000 per annum, £10,000 per annum
and £5,000 per annum for chairing the Audit, Remuneration and Nominations
Committees respectively. Dick Olver, the senior independent non-executive director,
receives an additional £5,000 per annum for this role. Niall FitzGerald
is Chairman of the Nominations Committee and he has waived receipt of any committee
chairmanship fees. In addition, non-executive directors who are resident outside
Europe are eligible to receive a travel allowance of £5,000 for each Board
meeting attended in the UK. 03 Executive directorsThe
Remuneration Committees policy is that remuneration and incentive arrangements
are market-competitive, consistent with best practice and support the interests
of
shareholders. In practical terms, this means that the reward structure for executive directors
should attract, motivate and retain high-calibre individuals capable of successful
leadership. To achieve this in a global business environment, Reuters executive
remuneration must reflect the competitive practices of its principal competitors
and the other multi-national businesses with which it competes for talent. Market-determined
executive compensation, with a heavy emphasis on the variable remuneration elements,
is the best way to ensure that Reuters has the high-performing executive directors
necessary to achieve its immediate and longer-term strategic objectives. The
Remuneration Committee ensures that the quantum of remuneration received by the
executive directors is aligned with returns to shareholders. Reuters continues to ensure that a substantial proportion of executive reward
is variable and dependent upon performance, with both corporate and personal
performance affecting total executive remuneration. Basic pay represents a quarter
or less of the target earnings potential. The executive directors are eligible
for a cash bonus. In 2005, excluding pension contributions, the targeted composition of each executive
directors remuneration was as follows: Fixed
        
        VariableLong-termBase pay
        
        Bonus
        
        incentives
        
        Total%
        
        %
        
        %
        
        %Tom Glocer
        
        18.8%
        
        28.2%
        
        53%
        
        100%David Grigson
        
        25%
        
        25%
        
        50%
        
        100%Devin Wenig
        
        22.5%
        
        22.5%
        
        55%
        
        100% Executive directors are required to build and maintain a personal equity stake
in the company. This personal shareholding policy




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requires each executive director to accumulate a personal holding worth twice his basic salary within five years. If the policy requirements are not met, then the Remuneration Committee may
recommend that it is inappropriate to grant further awards to that individual. 04 Remuneration frameworkIt
is Reuters general policy to construct executive remuneration packages that are
business-driven, performance-sensitive and market-competitive. The Remuneration
Committee reviews awards to executive directors and other senior managers to
ensure that remuneration remains aligned to this policy. This policy is described
in more detail below. The Remuneration Committee has monitored the transition
to IFRS to ensure that performance is measured consistently. To safeguard Reuters
ability to recruit and retain the best senior executives, the Remuneration Committee
maintains the freedom to negotiate terms of employment on an individual basis,
taking account of the circumstances of
each individual. Basic salary and benefitsIn
formulating and reviewing pay packages for the executive directors, the Remuneration
Committee receives comparator group information and assistance from independent
remuneration consultants. In 2005, the Remuneration Committee reviewed the comparator
group and reaffirmed its relevance. Currently, the comparator group comprises
the FTSE 100 companies minus the top and bottom five companies as the main UK
reference point. These companies were selected to ensure both stability in the
comparator group
as well as relevance to the companys position in the market. Reuters maintains a salary structure with salary ranges based upon the mid-market
of a comparator group of companies. Individual salaries are positioned at an
appropriate point within the salary range. The Remuneration Committee reviews
salaries and other rewards on a regular basis to ensure that the structure is
maintained. Non-cash benefits are provided to executive directors and the Chairman in line
with normal market practice and detailed on page 44. All executive directors
receive a company car or an allowance and private healthcare benefits. Death
and disability benefits are also provided to each executive director. Niall FitzGerald
does not receive any death, disability or other benefits. Under the terms of
Tom Glocers relocation agreement, Reuters provides accommodation in the
UK and pays home leave expenses for him and his family. Tom Glocers salary
has been unchanged since his appointment in 2001. PensionsAll
executive directors participate in defined contribution arrangements. Since April
1999 it has been Reuters policy that all new UK employees, including executive
directors, are offered participation in a defined contribution pension plan.
In the case of UK executive directors, in lieu of pension provisions above the
statutory earnings cap (where applicable) an additional taxable cash allowance
is granted. The Remuneration Committee may substitute certain benefits following
changes to UK pensions legislation. However, there is no intention to provide
any additional compensation as a consequence of such changes. In the US, all
employees are offered participation in a defined contribution (401K) plan. In
lieu of a contribution on salary above the tax qualified limit, an additional
contribution is granted to a Supplemental Employee Executive Retirement Plan
(SERP). The SERP is unfunded. Annual performance-related bonusThe
Remuneration Committee determines performance targets annually. Bonus payments
are non-pensionable. In 2005, the executive directors


were eligible
    for an annual cash bonus, with a maximum level of 100% of base salary for
    all but Tom Glocer, whose maximum level was 150% of salary. In February 2006,
    the Remuneration Committee considered 2005 performance, relative to the specified
    targets, and determined that the executive directors had earned bonuses of
  72% of bonus potential. 2005 was the final year of the Fast Forward programme. During 2005, recognising
the importance of revenue and cost targets during this period of significant
transformation, the Remuneration Committee increased the focus on achieving the
financial results associated with the Fast Forward programme. As such, 80% of
the maximum bonus potential was measured against Target Trading Profit, budgeted
revenue and free cash flow targets. The remainder was determined by customer
satisfaction results. For 2006, the bonus will continue to focus on financial
performance and customer satisfaction measures in the same proportion as in 2005.
The bonus potential for Tom Glocer will remain at 150% of salary. The bonus potential
for David Grigson and Devin Wenig will be 125% of salary. There is a profit threshold, based on Target Trading Profit, below which no bonuses
will be paid. The Remuneration Committee reviews the business plan and establishes
this threshold each
year. Equity incentive plansIn
2004, the Remuneration Committee introduced an Annual Bonus Profit Sharing Plan
and a Restricted Share Plan as discussed below. Executive directors do not normally
participate in these
Plans and they have not done so since their introduction. The executive directors participate in a discretionary stock option plan (DSOP)
and a long-term incentive plan (LTIP) designed to reward longer-term performance.
Details of all share incentive awards outstanding for each executive director
serving during 2005 are set out on pages 46 and 47. Equity awards for executive directors are subject to the performance conditions
applicable to the relevant plan. Towers Perrin provides data to the Remuneration
Committee that models the expected values for equity awards. The Remuneration
Committee has completed a review of remuneration arrangements, including the
structure of equity plans to ensure that they remain in line with best practice
and are also in alignment with the
strategic business plan. This review included consultation with a number of the companys major shareholders
as well as the main representative bodies, the Association of British Industry
(ABI) and the Research Recommendations and Electronic Voting Services (RREV)
(a joint venture between the National Association of Pension Funds (NAPF) and
Institutional Shareholder Services (ISS)). It was decided to continue to operate
the LTIP and the DSOP but to increase the proportion of performance shares and
to reduce the number of share options awarded, effectively rebalancing the quantum
of share options and performance shares, placing more emphasis on performance
shares. The Remuneration Committee also plans to maintain the overall expected
value of the equity incentive plans at a comparable level to the 2005 level.
These are described in more detail below. It is also the Remuneration Committees intention to fix, at least for 2006
and 2007, the number of shares over which options will be granted under the DSOP
and the number of conditional shares which will be awarded under the LTIP. This
will bring greater transparency, shareholder certainty and consistency to the
equity element of remuneration. Details of the number of shares awarded under
each plan are included in the
relevant section below.




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In 2001, the Remuneration Committee obtained shareholder approval to dis-apply inner dilution limits. The Remuneration Committee conducts regular reviews to ensure that the
dilutive impact of equity plans remains within appropriate levels. The projected dilution rate for the 2006 awards is below 1% of issued share capital. LTIPSince 1993, Reuters has operated a long-term incentive plan that seeks to encourage and reward long-term growth in
shareholder value. It is Reuters practice to make an annual award of contingent share rights to executive directors and to those senior managers most able to influence corporate performance. From 2003, awards have been based on the fair market value
per share using option pricing methodology. The fair market value ascribed to each share for LTIP purposes in 2005 was 43.8% of current market value. The LTIPs performance is assessed by reference to the companys relative total
shareholder return (TSR) measured against the FTSE 100 over the performance period. As a matter of good practice, TSR performance is measured independently prior
to review by the Remuneration Committee. The Remuneration Committee considers that relative TSR remains an appropriate
measurement criterion for the LTIP. Whilst endorsing relative TSR as a measure,
the Remuneration Committee recognises that Reuters does not fall naturally into
any one of the existing FTSE industrial sectors. Accordingly, following a review,
the Remuneration Committee continues to believe that the FTSE 100, rather than
one individual sector or a bespoke peer group e.g. media and photography, remains
the most appropriate peer group for comparison purposes. For awards made in 2006
and subsequently, this criterion will apply to determine the vesting for 50%
of the initial award. The remaining proportion of the award will be determined
by Reuters achievement of preset Profit Before Tax (PBT) growth achieved over
the three year performance period. The performance range will be calibrated by
the Remuneration Committee at the commencement of
each performance period. For both the preset PBT growth element and the TSR element one third of the full
award will vest for threshold performance. This is the median of the FTSE 100
for the TSR element and growth
equivalent to at least 8% a year for the PBT element. For awards made in or prior to 2003 that do not vest or only partially vest after
three years, the plan permits the measurement period to be extended by up to
two years under a re-testing provision. Awards granted in 2000 and 2001 did not
meet the performance condition required for vesting and accordingly, these awards
lapsed. At the 2004 AGM and for grants from 2004, shareholders approved the removal
of the re-testing
provision. For 2005 awards, Reuters relative TSR ranking determines the extent to which
plan awards will vest. Reuters must achieve median TSR performance for a proportion
of the award to vest; full vesting only occurs for top quartile performance.
Awards that do not meet at least the median performance condition on completion
of the performance period will lapse. As noted above, future awards of shares
subject to the TSR test will continue to vest in full for top quartile performance,
with one-third of the initial award vesting for median performance, and with
proportionate vesting for incremental performance between these points. Details
of the awards for 2005 are set out in the table
on page 46. The pre-set vesting criteria for awards which vested during 2005 or which have
not yet vested are shown in the following table together with the actual ranking
at 31 December 2005 (or on vesting if earlier). Awards granted prior to 2004
that vest under the plan are not released until at least five years from the
date of grant.


Pre-set
    vesting criteriaDate measurementperiod commenced
        
        Rankings for100% vesting
        Rankings forzero vesting
        Ranking at31 December 20051 January 2001
        
        1 to 25
        51 to 100
        861 January 2002
        
        1 to 25
        51 to 100
        931 January 2003
        
        1 to 25
        51 to 100
        711 January 2004
        
        1 to 25
        51 to 100
        61 January 2005
        
        1 to 25
        51 to 100
        70 In order to smooth the opening and closing points of measurement, the average
of the daily closing prices for the immediately preceding twelve months, together
with any dividends paid, is used to calculate the TSR. Shares awarded under the
plan will continue to be met from existing shares held by Reuters Employee Share
Ownership Trusts (ESOTs). The costs are charged to the profit and loss account
over the vesting periods. For 2006, a fixed award will be granted to each executive director as noted above.
These will be 500,000 shares for Tom Glocer, 200,000 shares for David Grigson
and 250,000 shares for Devin
Wenig. DSOPA global discretionary stock option plan was adopted by the Remuneration Committee in October 2000 and approved by
shareholders in April 2001. It aims to reward growth in earnings and in the share price. With effect from 2004, to reduce the dilutive impact DSOPs have on shareholders interests and to allow the introduction of a plan better targeted at the
general employee population, the number of participants was reduced significantly. Participation will normally be confined to executive directors and members of the GMC. Other employees may be eligible to participate in the Restricted Share Plan
(see below). Specific performance conditions apply to each option grant to executive directors. For awards granted from 2001 to 2004, the Remuneration Committee could approve
the re-testing of performance up to twice, in the event the performance condition
was not met, by extending the performance period by up to two years with an increase
of 3% in the hurdle rate of Earnings Per Share (EPS) growth as calculated under
UK GAAP for each year added to the performance period. If the target rate was
not met by the end of the fifth
year, the options would lapse. These performance conditions were established in 2001 to retain management focus
on earnings in a particularly challenging market. The performance conditions have been measured for the 2001, 2002 and 2003 grants.
The performance conditions were not met for the 2001 and 2002 grants. The 2001
grant will lapse and, under the legacy re-testing provisions, the 2002 grant
will be subject to a final retest against basic EPS performance for 2006. The
2003 award did meet the performance conditions and, accordingly, the 2003 DSOP
award has vested. For awards granted from 2004, the re-testing provisions have been removed and
new awards will not permit any extension of the measurement period. If the awards
do not meet the EPS performance condition upon completion of the initial performance
period they will lapse. Options granted to executive directors in 2004 and 2005 can vest only if the
percentage growth in EPS exceeds the percentage growth in the retail price index
by more than 9% over the three
year performance period.




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Remuneration reportcontinued



The executive directors are contractually entitled to participate in the DSOP.
2005 awards are detailed in the table set out on page 40. It is the Remuneration
Committees practice to
divide participants annual entitlements into two awards, normally made
following the announcement of preliminary annual and half-yearly results. For 2006 and 2007 awards, the Remuneration Committee has introduced a more demanding
target to determine the extent to which options will be exercisable, introduced
sliding scale vesting provisions and extended the period over which shares can
be released from the plan. A minimum level of 6% a year growth in EPS will be
required for half the options to vest; 9% a year will be required for all options
to vest. For rates of growth between 6% and 9% options will vest on a proportionate
basis. Furthermore, whereas all options may be exercised at present three years
after grant provided that the performance test is met, executive directors will
only be permitted to exercise 50% of the vested options after the initial three
year period. The remaining options will only be exercisable, in two equal tranches,
one and two years later. It is proposed that a fixed number of share options be established for granting
to each executive director and that these are granted in equal measure over the
next two years. For 2006, Tom Glocer will receive 1,250,000 options, David Grigson
and Devin Wenig will each receive 500,000 options and 650,000 options, respectively. Since 2001, in addition to the requirements applicable under the plan rules,
share options granted under the DSOP have been granted on terms that require
recipients, who are subject to the UK national insurance regime, to pay that
proportion of national insurance contributions normally attributable to the employer
in addition to the proportion normally payable by the employee. The quantum of
options awarded was not increased to reflect the transfer of this liability from
Reuters to the recipient. At the time of its introduction, it was envisaged that the above approach would
become standard market practice. However, market practice has not evolved in
this way and accordingly the approach operated by Reuters is inconsistent with
market norms. In light of this and other factors, including a desire to optimise
the effect of incentive plans and to operate plans in a consistent manner across
geographical borders, the Remuneration Committee, having taken independent advice,
decided that any future share options would not be granted on the above basis
and that the employers national insurance liability would be borne by Reuters.
It was considered that such action would result in the DSOP being a more effective
incentive. This approach has the additional benefit of all executive directors
being treated on a more equitable basis. SAYE PlanAn all-employee international savings-related share option plan is offered in which the executive directors are
eligible to participate. Participants save a fixed monthly amount of up to £250 (subject to a maximum, established annually for each offer) for three years and are then able to use their savings to buy shares at a price set at a 20% discount to
the market value at the start of the savings period. In line with market practice, no performance conditions are attached to options granted under this plan. For the 2005 offer, the fixed monthly savings amount was established at a maximum of
£100 per month with a three year savings period. Annual Bonus Profit Sharing Plan (ABPSP)On 18 December 2003, Reuters announced its intention to introduce a new
profit-sharing plan across the all-employee population. This plan was introduced to focus employees on reward for profit growth. Executive directors and members of the GMC did not participate in this plan in 2005.


A decision is taken on an annual basis to operate the plan for the forthcoming
year. Reuters has determined that this plan will operate for 2006. Payments under
the plan were typically made in the form of shares which were normally subject
to a 12 month vesting period with automatic release thereafter. To simplify the
operation of the plan, payments in the future, including under the 2005 plan,
will be made in cash. For 2005, participating employees will receive an award
equivalent to 1% of an employees eligible salary. Restricted Share Plan (RSP)On 17 April 2004, at the AGM, the shareholders approved the introduction in 2004 of the RSP.
Currently restricted shares will not normally be granted for long-term incentive purposes to executive directors or members of the GMC. It is intended that, other than for executive directors and GMC members, employees will be eligible to
participate in this plan instead of the DSOP. This plan enables Reuters to provide market competitive remuneration, whilst reducing the dilution impact to shareholders. Other than in 2004, the year of introduction, employees would generally not be
eligible to participate in the DSOP and the RSP in the same year. The RSP is normally granted with a four-year vesting period, shares vesting 25% each year. Legacy plansThe following four plans are legacy plans under which Tom Glocer and Devin Wenig received awards prior to
becoming executive directors. It is not intended that executive directors should receive any further awards under these plans. Performance related share plan (PRSP)This plan operated from 1995 to 2001 and targeted senior executives not
participating in the LTIP. Tom Glocer and Devin Wenig hold awards granted before they became executive directors. All outstanding awards have now lapsed. The performance condition was the same as for the LTIP, although vested shares could be
released three years after grant. Deferred bonus share plan (DBSP)Restricted share awards were made in 2000 as a special retention bonus to a total of
around 100 senior managers, excluding the executive directors in office at that time. As a retention tool, and in line with the then market practice, they were made conditional only on remaining in employment until the shares vested. These awards
vested in February 2002 and February 2003. Tom Glocer retained all of the shares that vested, meeting the statutory deductions and taxes from his own resources. Executive stock option plan (ESOP)Tom Glocer participated in an executive stock option plan operated in 1993 and 1994
prior to being appointed to the Board. Options under the plan carry no performance conditions and vested automatically on the third anniversary of grant. All options awarded to Tom Glocer under this plan have lapsed. Plan 2000A one-off all-employee option grant was made in 1998 in order to support the retention of employees over the
millennium period. In common with such all-employee plans, there is no performance condition to be satisfied. All employees, including the executive directors, were given the opportunity to apply for an option to acquire 2,000 shares at an exercise
price of £5.50 per share. These options became exercisable in September 2001 and lapsed in September 2005. A small supplementary grant was made to new employees in March 1999, at an option price of £8.14 and these will normally expire in
March 2006. 05 Performance graphReuters TSR for
the five years to 31 December 2005 compared with the return achieved by the FTSE
100 index of companies is shown below. This index is used as the comparator group
for the performance conditions attached to the LTIP and PRSP referred to above.
The




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calculations assume the reinvestment of dividends. Performance in respect of
  individual awards is shown on pages 41 and 42. 06 Subsidiary undertaking share plansReuters divested its interest in Instinet Group on 8 December 2005 and consequently no subsidiary undertaking share plans are significant. 07 Service contractsIt
  is Reuters policy that new executive directors be offered notice periods of
  not more than one year. Reuters recognises, however, that, in the case of appointments
  from outside the company, a longer notice period may initially be necessary,
  reducing to one year subsequently. In light of this, the Remuneration Committee
  will consider termination provisions to ensure that appropriate provisions
  are
  in place in the event of the
  termination of any executive directors service contract. Tom Glocer has a service contract, with an effective date of 23 July 2001,
  normally terminable by him on 90 days notice or, where due to the companys
  fault, on 30 days notice. The company may terminate without cause on
  30 days notice. In the event of termination by Tom Glocer due to the
  companys fault, or by the company without cause, or in the event of a
  change of control, Tom Glocers compensation will be limited to a maximum
  of 12 months accrued benefits being annual-salary, annual bonus and pension
  contributions. In the event of a non-fault termination, Tom Glocer retains the benefit of
  any outstanding share plan awards as if his employment had not ceased. In addition,
  Tom Glocer and his family retain the life assurance and private healthcare
  benefits provided by Reuters for one year following termination. David Grigsons and Devin Wenigs contracts have effective dates
  of 21 June 2001 and 17 February 2003 respectively, and can be terminated on
  one years notice. Any termination payment will not exceed an amount equal
  to the sum of annual salary, bonus and 12 months pension contributions
  paid by Reuters. On a change of control of the company, all the executive directors are entitled
  to terminate their contracts on one months notice unless the acquiring
  party has, within three months of the change of control, agreed to adopt and
  uphold the Reuters Trust Principles (see page 119). Termination payments of
  a maximum of 12 months salary, annual bonus and 12 months pension
  contributions are payable to David Grigson and Devin Wenig (and to Tom Glocer
  as previously detailed) in such circumstances. All executive directors have contractual terms that limit the ability of an
  executive director to work for a defined list of competitor


companies for a period of time. These provisions are in place to protect intellectual property and commercially sensitive information. 08 Policy on external appointmentsReuters
  recognises that executive directors may be invited to become non-executive directors
  of other companies or to become involved in charitable or public service organisations.
  As the Board believes that this can broaden the knowledge and experience of directors
  to its benefit, it is Reuters policy to approve such appointments, provided there
  is no conflict of interest and the commitment required is not excessive. Board
  approval
  is required and directors are permitted to retain cash-only fees paid for such
  appointments. No executive directors retained any fees for external directorships
  during 2005 except for Devin Wenig who received fees of $17,625 and 3,000
  shares of restricted stock, in his capacity as director of Nastech Pharmaceutical
  Company.




|Reuters
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          Report and Form 20-F 2005 |  | 43
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Remuneration reportcontinued

09
Directors remuneration for 2005The
disclosures required by Part 3 of schedule 7A to the Companies Act 1985 (the auditable part)
are contained within this section.

|                                                                                  |  |         |  |       |  |           |  |             |  |              |  | 2005  |  | 2004  | 
|--------------------------------------------------------------------------------- |  | ------- |  | ----- |  | --------- |  | ----------- |  | ------------ |  | ----- |  | ----- | 
|                                                                                  |  |         |  |       |  |           |  |             |  |              |  |       |  |       | 
|                                                                                  |  |         |  |       |  |           |  |             |  | Compensation |  |       |  |       | 
|                                                                                  |  | Salary/ |  |       |  |           |  | Expense     |  | for Loss     |  |       |  |       | 
|                                                                                  |  | Fees    |  | Bonus |  | Benefits1 |  | Allowances2 |  | of Office    |  | Total |  | Total | 
|                                                                                  |  |         |  |       |  |           |  |             |  |              |  |       |  |       | 
|                                                                                  |  | £000    |  | £000  |  | £000      |  | £ 000       |  | £000         |  | £000  |  | £000  | 
|                                                                                  |  |         |  |       |  |           |  |             |  |              |  |       |  |       | 
|Chairman                                                                          |  |         |  |       |  |           |  |             |  |              |  |       |  |       | 
|                                                                                  |  |         |  |       |  |           |  |             |  |              |  |       |  |       | 
|Niall FitzGerald, KBE                                                             |  | 500     |  |      |  | 23        |  |            |  |             |  | 523   |  | 163   | 
|                                                                                  |  |         |  |       |  |           |  |             |  |              |  |       |  |       | 
|Non-executive directors                                                           |  |         |  |       |  |           |  |             |  |              |  |       |  |       | 
|                                                                                  |  |         |  |       |  |           |  |             |  |              |  |       |  |       | 
|Lawton Fitt3                                                                      |  | 50      |  |      |  |          |  | 25          |  |             |  | 75    |  | 25    | 
|                                                                                  |  |         |  |       |  |           |  |             |  |              |  |       |  |       | 
|Penny Hughes                                                                      |  | 50      |  |      |  |          |  |            |  |             |  | 50    |  | 25    | 
|                                                                                  |  |         |  |       |  |           |  |             |  |              |  |       |  |       | 
|Ed Kozel3                                                                         |  | 50      |  |      |  |          |  | 30          |  |             |  | 80    |  | 65    | 
|                                                                                  |  |         |  |       |  |           |  |             |  |              |  |       |  |       | 
|Sir Deryck Maughan                                                                |  | 14      |  |      |  |          |  |            |  |             |  | 14    |  | n/a   | 
|                                                                                  |  |         |  |       |  |           |  |             |  |              |  |       |  |       | 
|Ken Olisa4                                                                        |  | 50      |  |      |  |          |  | 1           |  |             |  | 51    |  | 35    | 
|                                                                                  |  |         |  |       |  |           |  |             |  |              |  |       |  |       | 
|Dick Olver                                                                        |  | 70      |  |      |  |          |  |            |  |             |  | 70    |  | 69    | 
|                                                                                  |  |         |  |       |  |           |  |             |  |              |  |       |  |       | 
|Charles Sinclair                                                                  |  | 55      |  |      |  |          |  |            |  |             |  | 55    |  | 60    | 
|                                                                                  |  |         |  |       |  |           |  |             |  |              |  |       |  |       | 
|Ian Strachan5                                                                     |  | 246     |  |      |  |          |  |            |  |             |  | 246   |  | 243   | 
|                                                                                  |  |         |  |       |  |           |  |             |  |              |  |       |  |       | 
|Executive directors                                                               |  |         |  |       |  |           |  |             |  |              |  |       |  |       | 
|                                                                                  |  |         |  |       |  |           |  |             |  |              |  |       |  |       | 
|Tom Glocer6                                                                       |  | 816     |  | 881   |  | 269       |  |            |  |             |  | 1,966 |  | 2,322 | 
|                                                                                  |  |         |  |       |  |           |  |             |  |              |  |       |  |       | 
|David Grigson7                                                                    |  | 436     |  | 324   |  | 5         |  | 74          |  |             |  | 839   |  | 872   | 
|                                                                                  |  |         |  |       |  |           |  |             |  |              |  |       |  |       | 
|Devin Wenig8                                                                      |  | 346     |  | 266   |  | 16        |  | 11          |  |             |  | 639   |  | 686   | 
|                                                                                  |  |         |  |       |  |           |  |             |  |              |  |       |  |       | 
|Total emoluments of directors9                                                    |  | 2,683   |  | 1,471 |  | 313       |  | 141         |  |             |  | 4,608 |  | 4,894 | 
|                                                                                  |  |         |  |       |  |           |  |             |  |              |  |       |  |       | 
|Other
                  senior managers as a group(6 persons) (2004: 9 persons)10 |  | 2,187   |  | 1,194 |  | 174       |  | 182         |  | 879          |  | 4,616 |  | 5,026 | 
|                                                                                  |  |         |  |       |  |           |  |             |  |              |  |       |  |       | 

|                                                                                                                                                                        
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Notes: For
      disclosure purposes, all amounts have been rounded up to the nearest thousand.
    The following conversion rates were used: $1.83: £1 and CHF2.26: £1.
|                                                                                                                                                                        
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Directors pensionsTom Glocer, David Grigson and Devin Wenig participate in defined contribution pension arrangements. Tom Glocer participates in Reuters US pension arrangements and is entitled to
a pension allowance of 25% of his base salary during 2005 and 2006. He is entitled
to a lump sum death-in-service benefit whilst in service of four-times basic
salary. David Grigson is a member of the Reuters Retirement Plan in the UK and is entitled
to a contribution in respect of pension benefits equal to 20% of the UK earnings
cap. With effect from 1
June 2005, the


company introduced a salary sacrifice scheme for all pension plan members under
which the company increased pension contributions by 4% in return for a reduction
in the contractual base salary of the same percentage. This increased the company
contribution from 20% to 24% from that date. He is entitled to a lump sum death-in-service
benefit whilst in service of four-times basic salary. Devin Wenig participates in Reuters US pension arrangements and is entitled to
a pension allowance of 6% of his base salary. He is entitled to a lump sum death-in-service
benefit of $1
million.


Contributions and
allocations (including the cost of life cover) in respect of these directors
in 2005 were:

|              |  |     |  | Company contribution     
|------------- |  | --- |  | -------------------------
|              |  | Age |  | in respect of period £000
|              |  |     |  |                          
|Tom Glocer    |  | 46  |  | 207                      
|              |  |     |  |                          
|David Grigson |  | 51  |  | 28                       
|              |  |     |  |                          
|Devin Wenig   |  | 39  |  | 20                       
|              |  |     |  |                          

The information shown complies with requirements under both the UK Listing Authority and the Directors Remuneration report Regulations 2002.

The total amount of contributions or accruals made in 2005 to provide pension
and similar benefits for the directors was £307,310 (2004: £693,315)
and for the executive directors
and the other senior managers as a group was £847,251 (2004: £1,622,626).

These aggregate figures also include an accrual of £52,000 and £60,000
respectively for the investment returns within the US executive pension arrangements.
These investment
returns are calculated based on each individuals notional fund choices
made by reference to actual investment funds and the actual investment returns
achieved on these funds.

|Reuters
          Group PLCAnnual
          Report and Form 20-F 2005 |  | 45
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Remuneration reportcontinued

Directors interests
in long-term incentive plans5

|                   |  |       |  |            |   |              |  |         |  | Market value |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|------------------ |  | ----- |  | ---------- | - | ------------ |  | ------- |  | ------------ | - | ------- |  | ----------- | - | -------- | - | ----------- |  | ---------- |  | ----------- |  | --------- | 
|                   |  |       |  |            |   | Number at    |  |         |  | per share    |   |         |  |             |   |          |   | Number at   |  |            |  |             |  |           | 
|                   |  |       |  |            |   | 1 January    |  |         |  | at grant     |   |         |  |             |   |          |   | 31 December |  |            |  |             |  |           | 
|                   |  |       |  |            |   | 2005         |  | Number  |  | for awards   |   | Number  |  | Number      |   | Number   |   | 2005        |  |            |  | Date        |  |           | 
|                   |  |       |  |            |   | (or later    |  | granted |  | made         |   | vested  |  | (exercised) |   | (lapsed) |   | (or earlier |  | End of     |  | from which  |  |           | 
|                   |  |       |  | Date of    |   | date of      |  | during  |  | during       |   | during  |  | during      |   | during   |   | date of     |  | qualifying |  | rights are  |  | Expiry    | 
|                   |  | Plan1 |  | award      |   | appointment) |  | period  |  | period       |   | period2 |  | period      |   | period   |   | departure)  |  | period     |  | exercisable |  | date      | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|Tom Glocer5        |  | PRSP3 |  | 15 Mar 00  | 4 | 33,518       |  |        |  |             |   |        |  |            |   | (33,518  | ) |            |  | 31 Dec 04  |  | 1 Jan 05    |  | 31 Dec 06 | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|                   |  | LTIP3 |  | 25 Jun 01  |   | 174,451      |  |        |  |             |   |        |  |            |   |         |   | 174,451     |  | 31 Dec 05  |  | 1 Jan 06    |  | 31 Dec 07 | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|                   |  |       |  | 20 Feb 02  |   | 234,974      |  |        |  |             |   |        |  |            |   |         |   | 234,974     |  | 31 Dec 06  |  | 1 Jan 07    |  | 31 Dec 08 | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|                   |  |       |  | 24 Feb 03  |   | 1,731,277    |  |        |  |             |   |        |  |            |   |         |   | 1,731,277   |  | 31 Dec 06  |  | 1 Jan 07    |  | 31 Dec 09 | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|                   |  |       |  | 23 Feb 04  |   | 544,094      |  |        |  |             |   |        |  |            |   |         |   | 544,094     |  | 31 Dec 06  |  | 1 Jan 07    |  | 31 Dec 10 | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|                   |  |       |  | 11 Mar 05  |   |             |  | 417,228 |  | 419          | p |        |  |            |   |         |   | 417,228     |  | 31 Dec 07  |  | 1 Jan 08    |  | 31 Dec 11 | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|                   |  | DBSP  |  | 24 Mar 00  | 4 | 75,000       |  |        |  |             |   |        |  | (75,000     | ) |         |   |            |  | 15 Feb 02  |  | 6 Apr 05    |  | n/a       | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|                   |  |       |  | 30 May 00  | 4 | 60,000       |  |        |  |             |   |        |  | (60,000     | ) |         |   |            |  | 15 Feb 03  |  | 6 Apr 05    |  | n/a       | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|Total              |  |       |  |            |   | 2,853,314    |  | 417,228 |  |             |   |        |  | (135,000    | ) | (33,518  | ) | 3,102,024   |  |            |  |             |  |           | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|David Grigson5     |  | LTIP3 |  | 5 Dec 00   |   | 42,579       |  |        |  |             |   |        |  |            |   | (42,579  | ) |            |  | 31 Dec 04  |  | 1 Jan 05    |  | 31 Dec 06 | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|                   |  |       |  | 25 Jun 01  |   | 26,294       |  |        |  |             |   |        |  |            |   |         |   | 26,294      |  | 31 Dec 05  |  | 1 Jan 06    |  | 31 Dec 07 | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|                   |  |       |  | 20 Feb 02  |   | 37,205       |  |        |  |             |   |        |  |            |   |         |   | 37,205      |  | 31 Dec 06  |  | 1 Jan 07    |  | 31 Dec 08 | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|                   |  |       |  | 24 Feb 03  |   | 200,000      |  |        |  |             |   |        |  |            |   |         |   | 200,000     |  | 31 Dec 06  |  | 1 Jan 07    |  | 31 Dec 09 | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|                   |  |       |  | 23 Feb 04  |   | 200,000      |  |        |  |             |   |        |  |            |   |         |   | 200,000     |  | 31 Dec 06  |  | 1 Jan 07    |  | 31 Dec 10 | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|                   |  |       |  | 11 Mar 05  |   |             |  | 163,468 |  | 419          | p |        |  |            |   |         |   | 163,468     |  | 31 Dec 07  |  | 1 Jan 08    |  | 31 Dec 11 | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|Total              |  |       |  |            |   | 506,078      |  | 163,468 |  |             |   |        |  |            |   | (42,579  | ) | 626,967     |  |            |  |             |  |           | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|Devin Wenig5       |  | PRSP3 |  | 1 Apr 99   | 4 | 15,489       |  |        |  |             |   |        |  | (15,489     | ) |         |   |            |  | 31 Dec 01  |  | 1 Jan 02    |  | 31 Dec 05 | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|                   |  |       |  | 15 Mar 00  | 4 | 18,166       |  |        |  |             |   |        |  |            |   | (18,166  | ) |            |  | 31 Dec 04  |  | 1 Jan 05    |  | 31 Dec 06 | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|                   |  |       |  | 29 Mar 01  | 4 | 20,704       |  |        |  |             |   |        |  |            |   |         |   | 20,704      |  | 31 Dec 05  |  | 1 Jan 06    |  | 31 Dec 07 | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|                   |  | LTIP3 |  | 25 Jun 01  | 4 | 2,295        |  |        |  |             |   |        |  |            |   |         |   | 2,295       |  | 31 Dec 05  |  | 1 Jan 06    |  | 31 Dec 07 | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|                   |  |       |  | 20 Feb 02  | 4 | 22,047       |  |        |  |             |   |        |  |            |   |         |   | 22,047      |  | 31 Dec 06  |  | 1 Jan 06    |  | 31 Dec 08 | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|                   |  |       |  | 24 Feb 03  |   | 200,000      |  |        |  |             |   |        |  |            |   |         |   | 200,000     |  | 31 Dec 06  |  | 1 Jan 07    |  | 31 Dec 09 | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|                   |  |       |  | 23 Feb 04  |   | 200,000      |  |        |  |             |   |        |  |            |   |         |   | 200,000     |  | 31 Dec 06  |  | 1 Jan 07    |  | 31 Dec 10 | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|                   |  |       |  | 11 Mar 05  |   |             |  | 163,468 |  | 419          | p |        |  |            |   |         |   | 163,468     |  | 31 Dec 07  |  | 1 Jan 08    |  | 31 Dec 11 | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|Total              |  |       |  |            |   | 478,701      |  | 163,468 |  |             |   |        |  | (15,489     | ) | (18,166  | ) | 608,514     |  |            |  |             |  |           | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|Other senior       |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|managers as a      |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|group (6 persons)  |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|(2004: 9 persons)6 |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|                   |  | PRSP3 |  | 1 Apr 99   |   | 22,110       |  |        |  |             |   |        |  | (22,110     | ) |         |   |            |  | 31 Dec 01  |  | 1 Jan 02    |  | 31 Dec 05 | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|                   |  |       |  | 15 Mar 00  |   | 71,314       |  |        |  |             |   |        |  |            |   | (71,314  | ) |            |  | 31 Dec 04  |  | 1 Jan 05    |  | 31 Dec 06 | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|                   |  |       |  | 29 Mar 01  |   | 52,910       |  |        |  |             |   |        |  |            |   |         |   | 52,910      |  | 31 Dec 05  |  | 1 Jan 06    |  | 31 Dec 07 | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|                   |  | LTIP3 |  | 25 Jun 01  |   | 5,279        |  |        |  |             |   |        |  |            |   |         |   | 5,279       |  | 31 Dec 05  |  | 1 Jan 06    |  | 31 Dec 07 | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|                   |  |       |  | 20 Feb 02  |   | 64,328       |  |        |  |             |   |        |  |            |   |         |   | 64,328      |  | 31 Dec 06  |  | 1 Jan 07    |  | 31 Dec 08 | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|                   |  |       |  | 24 Feb 03  |   | 546,343      |  |        |  |             |   |        |  |            |   |         |   | 546,343     |  | 31 Dec 06  |  | 1 Jan 07    |  | 31 Dec 09 | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|                   |  |       |  | 4 Aug 03   |   | 208,333      |  |        |  |             |   |        |  |            |   |         |   | 208,333     |  | 31 Dec 06  |  | 1 Jan 07    |  | 31 Dec 09 | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|                   |  |       |  | 23 Feb 04  |   | 432,988      |  |        |  |             |   |        |  |            |   | (5,562   | ) | 427,426     |  | 31 Dec 06  |  | 1 Jan 07    |  | 31 Dec 10 | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|                   |  |       |  | 11 Mar 05  |   | 7,266        |  | 354,417 |  | 419          | p |        |  |            |   | (24,606  | ) | 337,077     |  | 31 Dec 06  |  | 1 Jan 07    |  | 31 Dec 11 | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|                   |  | RSP   |  | 27 Aug 042 |   | 4,096        |  |        |  |             |   | 1,024   |  | (1,024      | ) |         |   | 3,072       |  | 27 Aug 05  |  | 27 Aug 05   |  | 27 Aug 08 | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|                   |  |       |  | 11 Mar 05  |   | 7,352        |  | 41,968  |  | 419          | p |        |  |            |   |         |   | 49,320      |  | 11 Mar 06  |  | 11 Mar 06   |  | 11 Mar 09 | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|                   |  | ABPSP |  | 11 Mar 05  |   | 417          |  |        |  | 419          | p |        |  |            |   |         |   | 417         |  | 11 Mar 06  |  | 11 Mar 06   |  | 11 Mar 06 | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 
|Total              |  |       |  |            |   | 1,422,736    |  | 396,385 |  |             |   | 1,024   |  | (23,134     | ) | (101,482 | ) | 1,694,505   |  |            |  |             |  |           | 
|                   |  |       |  |            |   |              |  |         |  |              |   |         |  |             |   |          |   |             |  |            |  |             |  |           | 

|Notes:
|------
|      
|1     
|      
|2     
|      
|3     
|      
|      
|      
|4     
|      
|5     
|      
|6     



|46 |  | Reuters
          Group PLCAnnual
          Report and Form 20-F 2005
|-- |  | ---------------------------------------------------------------------

---

Back to Contents


Directors share options
Number
      at
    
    
    
    
    5
    
    5
    
    
    Number
      at1
      January
    
    
    
    
    31
      December2005
    Number
    Number
    Number
    Number
    2005Exercise
    (or
      later
    granted
    vested
    (exercised)
    (lapsed)
    (or
      earlier
    EarliestDate
    of
    price
    date
      of
    during
    during
    during
    during
    date
      of
    exercise
    ExpiryPlan
    grant
    (pence)
    (appointment)
    period
    period)
    period)
    period
    departure)
    date
    dateTom
      Glocer6
    
    DSOP
    3
    25
      Jun 01
    
    862
    
    565,113
    
    
    
    
    
    
    
    
    
    565,113
    
    25
      Jun 06
    
    25
      Jun 1120
      Feb 02
    
    528
    
    461,295
    
    
    
    
    
    
    
    
    
    461,295
    
    20
      Feb 07
    
    20
      Feb 122
      Aug 02
    
    266
    
    915,654
    
    
    
    
    
    
    
    
    
    915,654
    
    2
      Aug 07
    
    2
      Aug 1224
      Feb 03
    
    135
    
    1,307,514
    
    
    
    
    
    
    
    
    
    1,307,514
    
    24
      Feb 06
    
    24
      Feb 134
      Aug 03
    
    245
    
    706,594
    
    
    
    
    
    
    
    
    
    706,594
    
    4
      Aug 06
    
    4
      Aug 1323
      Feb 04
    
    407
    
    789,430
    
    
    
    
    
    
    
    
    
    789,430
    
    23
      Feb 07
    
    23
      Feb 1427
      Aug 04
    
    321
    
    1,000,928
    
    
    
    
    
    
    
    
    
    1,000,928
    
    27
      Aug 07
    
    27
      Aug 1411
      Mar 05
    
    419
    
    
    
    719,473
    
    
    
    
    
    
    
    719,473
    
    11
      Mar 08
    
    11
      Mar 152
      Aug 05
    
    389
    
    
    
    774,959
    
    
    
    
    
    
    
    774,959
    
    2
      Aug 08
    
    2
      Aug 15ESOP
    3
    9
      Feb 94
    1&2
    $7.28
    
    13,716
    
    
    
    
    
    
    
    (13,716
    )
    
    
    9
      Feb 97
    
    9
      Feb 05SAYE
    3
    16
      Apr 03
    
    90
    
    4,200
    
    
    
    
    
    
    
    
    
    4,200
    
    1
      Jun 06
    
    1
      Dec 067
      Apr 04
    
    314
    
    1,200
    
    
    
    
    
    
    
    
    
    1,200
    
    1
      Jun 07
    
    1
      Dec 0714
      Apr 05
    
    333
    
    
    
    569
    
    
    
    
    
    
    
    569
    
    1
      Jun 08
    
    1
      Dec 08Plan
        2000
    3
    24
      Sep 98
    
    550
    
    2,000
    
    
    
    
    
    
    
    (2,000
    )
    
    
    24
      Sep 01
    2
    24
      Sep 05Total
    
    
    
    
    
    
    
    5,767,644
    
    1,495,001
    
    
    
    
    
    (15,716
    )
    7,246,929David
      Grigson6
    
    DSOP
    3
    25
      Jun 01
    
    862
    
    92,807
    
    
    
    
    
    
    
    
    
    92,807
    
    25
      Jun 06
    
    25
      Jun 1120
      Feb 02
    
    528
    
    75,757
    
    
    
    
    
    
    
    
    
    75,757
    
    20
      Feb 07
    
    20
      Feb 122
      Aug 02
    
    266
    
    150,375
    
    
    
    
    
    
    
    
    
    150,375
    
    2
      Aug 07
    
    2
      Aug 1224
      Feb 03
    
    135
    
    200,000
    
    
    
    
    
    
    
    
    
    200,000
    
    24
      Feb 06
    
    24
      Feb 134
      Aug 03
    
    245
    
    200,000
    
    
    
    
    
    
    
    
    
    200,000
    
    4
      Aug 06
    
    4
      Aug 1323
      Feb 04
    
    407
    
    122,950
    
    
    
    
    
    
    
    
    
    122,950
    
    23
      Feb 07
    
    23
      Feb 1427
      Aug 04
    
    321
    
    155,892
    
    
    
    
    
    
    
    
    
    155,892
    
    27
      Aug 07
    
    27
      Aug 1411
      Mar 05
    
    419
    
    
    
    281,886
    
    
    
    
    
    
    
    281,886
    
    11
      Mar 08
    
    11
      Mar 152
      Aug 05
    
    389
    
    
    
    303,625
    
    
    
    
    
    
    
    303,625
    
    2
      Aug 08
    
    2
      Aug 15SAYE
    3
    16
      Apr 03
    
    90
    
    4,200
    
    
    
    
    
    
    
    
    
    4,200
    
    1
      Jun 06
    
    1
      Dec 067
      Apr 04
    
    314
    
    1,200
    
    
    
    
    
    
    
    
    
    1,200
    
    1
      Jun 07
    
    1
      Dec 0714
      Apr 05
    
    333
    
    
    
    569
    
    
    
    
    
    
    
    569
    
    1
      Jun 08
    
    1
      Dec 08Total
    
    
    
    
    
    
    
    1,003,181
    
    586,080
    
    
    
    
    
    
    
    1,589,261Devin
      Wenig6
    
    DSOP
    3
    27
      Dec 00
    2&3
    1,139
    
    6,913
    
    
    
    
    
    
    
    
    
    6,913
    
    27
      Dec 01
    
    27
      Dec 0725
      Jun 01
    2&3
    862
    
    9,135
    
    
    
    2,284
    
    
    
    
    
    9,135
    
    25
      Jun 02
    
    25
      Jun 1120
      Feb 02
    2&3
    528
    
    25,936
    
    
    
    6,484
    
    
    
    
    
    25,936
    
    20
      Feb 03
    
    20
      Feb 122
      Aug 02
    2
    266
    
    200,000
    
    
    
    50,000
    
    
    
    
    
    200,000
    
    2
      Aug 03
    
    2
      Aug 1224
      Feb 03
    
    135
    
    200,000
    
    
    
    
    
    
    
    
    
    200,000
    
    24
      Feb 06
    
    20
      Feb 134
      Aug 03
    
    245
    
    200,000
    
    
    
    
    
    
    
    
    
    200,000
    
    4
      Aug 06
    
    4
      Aug 1323
      Feb 04
    
    407
    
    122,950
    
    
    
    
    
    
    
    
    
    122,950
    
    23
      Feb 07
    
    23
      Feb 1427
      Aug 04
    
    321
    
    155,892
    
    
    
    
    
    
    
    
    
    155,892
    
    27
      Aug 07
    
    27
      Aug 1411
      Mar 05
    
    419
    
    
    
    281,886
    
    
    
    
    
    
    
    281,886
    
    11
      Mar 08
    
    11
      Mar 152
      Aug 05
    
    389
    
    
    
    303,625
    
    
    
    
    
    
    
    303,625
    
    2
      Aug 08
    
    2
      Aug 15SAYE
    3
    7
      Apr 04
    1
    $7.27
    
    1,200
    
    
    
    
    
    
    
    
    
    1,200
    
    1
      Jun 07
    
    1
      Dec 0714
      Apr 05
    1
    $7.93
    
    
    
    1,138
    
    
    
    
    
    
    
    1,138
    
    1
      Jun 08
    
    1
      Dec 08Plan
        2000
    3
    24
      Sep 98
    2
    550
    
    2,000
    
    
    
    
    
    
    
    (2,000
    )
    
    
    24
      Sep 01
    
    24
      Sep 05Total
    
    
    
    
    
    
    
    924,026
    
    586,649
    
    58,768
    
    
    
    (2,000
    )
    1,508,675Other
            senior managers 
as a group (6 persons)
 (2004:
                     9 persons)7DSOP
    3
    27
      Dec 00
    
    1,139
    
    28,904
    
    
    
    
    
    
    
    
    
    28,904
    
    27
      Dec 01
    
    27
      Dec 0725
      Jun 01
    
    862
    
    5,800
    
    
    
    1,450
    
    
    
    
    
    5,800
    
    25
      Jun 02
    
    25
      Jun 0625
      Jun 01
    
    862
    
    35,757
    
    
    
    15,140
    
    
    
    
    
    35,757
    
    25
      Jun 02
    
    25
      Jun 1121
      Dec 01
    
    692
    
    2,025
    
    
    
    507
    
    
    
    
    
    2,025
    
    21
      Dec 02
    
    21
      Dec 1120
      Feb 02
    
    528
    
    5,697
    
    
    
    1,424
    
    
    
    
    
    5,697
    
    20
      Feb 03
    
    20
      Feb 0720
      Feb 02
    
    528
    
    78,242
    
    
    
    31,955
    
    
    
    
    
    78,242
    
    20
      Feb 03
    
    20
      Feb 122
      Aug 02
    
    266
    
    150,000
    
    
    
    37,500
    
    
    
    
    
    150,000
    
    2
      Aug 03
    
    2
      Aug 072
      Aug 02
    
    266
    
    570,246
    
    
    
    255,061
    
    
    
    
    
    570,246
    
    2
      Aug 03
    
    2
      Aug 1224
      Feb 03
    
    135
    
    460,737
    
    
    
    182,954
    
    (31,829
    )
    (3,125
    )
    425,783
    
    24
      Feb 04
    
    24
      Feb 131
      Apr 03
    
    108
    
    350,208
    
    
    
    306,432
    
    
    
    (43,776
    )
    306,432
    
    1
      Apr 04
    
    1
      Apr 134
      Aug 03
    
    245
    
    675,050
    
    
    
    266,364
    
    (17,538
    )
    (29,821
    )
    627,691
    
    4
      Aug 04
    
    4
      Aug 1323
      Feb 04
    
    407
    
    391,075
    
    
    
    146,252
    
    
    
    (36,735
    )
    354,340
    
    23
      Feb 05
    
    23
      Feb 14
Reuters
          Group PLCAnnual
          Report and Form 20-F 2005
    
    47Back to Contents


Remuneration reportcontinued
Directors share
optionscontinued
27 Aug 04
        
        321
        
        487,676
        
        
        
        165,384
        
        
        
        (64,586
        )
        423,090
        
        27 Aug 05
        
        27 Aug 1411 Mar 05
        
        419
        
        
        
        276,904
        
        19,596
        
        
        
        (32,660
        )
        244,244
        
        11 Mar 06
        
        11 Mar 152 Aug 05
        
        389
        
        
        
        241,968
        
        
        
        
        
        
        
        241,968
        
        2 Aug 06
        
        2 Aug 15Plan 2000
        3
        24 Sep 98
        
        550
        
        14,000
        
        
        
        
        
        
        
        (14,000
        )
        
        
        24 Sep 01
        
        24 Sep 05SAYE
        3
        11 Apr 02
        
        448
        
        2,120
        
        
        
        
        
        
        
        (2,120
        )
        
        
        1 Jun 05
        
        1 Dec 0516 Apr 03
        
        90
        
        21,000
        
        
        
        3,500
        
        
        
        (700
        )
        20,300
        
        1 Jun 06
        
        1 Dec 067 Apr 04
        
        314
        
        7,800
        
        
        
        1,200
        
        
        
        (1,200
        )
        6,600
        
        1 Jun 07
        
        1 Dec 0714 Apr 05
        
        333
        
        1,138
        
        3,129
        
        316
        
        
        
        (822
        )
        3,445
        
        1 Jun 08
        
        1 Dec 08Total
        
        
        
        
        
        
        
        3,287,475
        
        522,001
        
        1,435,035
        
        (49,367
        )
        (229,545
        )
        3,530,564Notes:1
        The options indicated are over American Depositary Shares (ADSs). Each ADS represents six ordinary shares, is denominated is US dollars and trades on NASDAQ. For the purposes of this
disclosure, ADSs have been converted into the equivalent number of ordinary shares and an equivalent option price.2
        The indicated awards were made prior to the appointment of the relevant individual as an executive director. The DSOP options granted prior to the appointment as an executive director have
no performance condition.3
        Options granted under the SAYE Plan, Plan 2000 and the ESOP have no performance conditions. Save as disclosed in note 2 above, exercise of each DSOP award is conditional on the performance
criteria described in section 04 and no performance conditions were varied during 2005.4
        At 31 December 2005, the market price of our shares was 431 pence per share and $44.25 per ADS. The highest prices during the year were 431 pence per share and $49.35 per ADS and
the lowest were 351.75 pence per share and $37.33 per ADS.5
        There were gains of £823,125 on the exercise of share options in 2005 (2004: £306,526). The market price of the shares at the date of exercise on 9 June 2005 was £3.705.
There were hypothetical gains of £2,141,667 made on the vesting of shares at the market value share price on the date of vesting.6
        2006 awards are described on pages 40 and 41.7
        Other senior managers as a group were 8 persons at 1 January 2005 and were 6 persons at 31 December 2005 following the resignations from the GMC of Alex Hungate on 30 June 2005, Mike Sayers
on 21 September 2005 and Chris Verougstraete on 2 October 2005 and the appointment of Anne Bowerman to the GMC on 7 July 2005.10   Directors interests
in ordinary sharesThe
total interests of the current directors and other senior management in issued
share capital and in shares underlying options and incentive plans are shown
below as at 7 March 2006. No director or senior manager beneficially owns 1%
or more of Reuters issued share capital. Interests in ordinary shares (excluding
options and interests in long-term incentive plans disclosed above) held at 1
January 2005 and 31 December 2005 are also
shown for directors in office at 31 December 2004. Directors were the beneficial
owners of all shares except for 16,875 shares held by David Grigsons family
members and 52,451 shares held by a trust of which Tom Glocer and his family
are
beneficiaries.
Interests at 7 March 2006Interests
    at
    1 January 2005Shares
  Interests
    at
    31 December 2005Shares)Shares
        
        Long-term
incentives
        
        Options1DirectorsNiall FitzGerald, KBE
        
        30,000
        
        50,000
        
        
        55,000
        
        
        
        Tom Glocer
        
        217,113
        
        372,145
        
        
        372,145
        
        3,102,024
        
        7,246,929David Grigson
        
        48,430
        
        63,430
        
        
        63,430
        
        626,967
        
        1,589,261Devin Wenig
        
        78,354
        
        105,843
        
        
        105,843
        
        608,514
        
        1,508,675Lawton Fitt
        
        
        
        25,000
        
        
        25,000
        
        
        
        Penny Hughes
        
        
        
        
        
        
        2,392
        
        
        
        Ed Kozel
        
        7,500
        
        7,500
        
        
        7,500
        
        
        
        Sir Deryck Maughan
        
        n/a
        
        
        
        
        
        
        
        
        Ken Olisa
        
        
        
        2,550
        
        
        2,550
        
        
        
        Dick Olver
        
        10,000
        
        10,000
        
        
        10,000
        
        
        
        Charles Sinclair
        
        35,000
        
        35,000
        
        
        n/a
        
        
        
        Ian Strachan
        
        15,500
        
        15,500
        
        
        15,500
        
        
        
        Other senior managers as a group (6 persons)2
        
        162,124
        
        198,599
        
        
        139,150
        
        1,662,676
        
        3,530,564None
      of the directors has notified the company of an interest in any other shares,
      or other transactions or arrangements which require disclosure. There have
      been no movements in the interests of the directors in the share capital
      of the Group companies since 31 December 2005 other than a purchase of
    5,000 shares by Niall FitzGerald and 2,392 by Penny Hughes.Notes:1
        Or as at the date of retirement, if earlier.2
        Other senior managers as a group were 8 persons at 1 January 2005 and were 6 persons at 31 December 2005 following the resignations from the GMC of Alex Hungate on 30 June 2005, Mike Sayers
on 21 September 2005 and Chris Verougstraete on 2 October 2005 and the interim appointment of Anne Bowerman to the GMC on 7 July 2005.On behalf of
      the BoardNiall
      FitzGerald, KBE Chairman,
    10 March 2006
48
    
    Reuters
          Group PLCAnnual
          Report and Form 20-F 2005Back to Contents
UnitedStatesopinion
Report
          of independent Registered Public Accounting FirmIn
          our opinion, the accompanying consolidated balance sheet and the related
          consolidated income statement, consolidated cash flow statement and
          consolidated statement of recognised income and expense present fairly,
          in all material respects, the financial position of the Reuters Group
          PLC and its subsidiaries at 31 December 2005 and 2004, and the results
          of their operations and their cash flows for each of the two years
          in the period ended 31 December, 2005 in conformity with IFRSs as adopted
          by the EU. These financial statements are the responsibility of the
          Groups management; our responsibility is to express an opinion
          on these financial statements based on our audits. We conducted our
          audits of these statements in accordance with the standards of the
          Public Company Accounting Oversight Board (United States). Those standards
          require that we plan and perform the audit to obtain reasonable assurance
          about whether the financial statements are free of material misstatement.
          An audit includes examining, on a test basis, evidence supporting the
          amounts and disclosures in the financial statements, assessing the
          accounting principles used and significant estimates made by management,
          and evaluating the overall financial statement presentation. We believe
          that our audits provide a reasonable basis for our opinion.
As discussed
  in the accounting policies, the Group adopted International Accounting Standards
  (IAS) 32 Financial Instruments: Disclosure and Presentation, IAS
  39 Financial Instruments: Recognition and Measurement and IFRS
  5 Non-Current Assets Held for Sale and Discontinued Operations,
  in accordance with IFRS as adopted by the EU. The change has been accounted
  for prospectively from 1 January 2005 except for the disclosure requirements
  of IFRS 5 which were also applied to the comparative information.
IFRSs as adopted by the EU vary in certain significant respects from accounting
principles generally accepted in the United States of America. Information relating
to the nature and effect of such differences is presented in the Summary of differences
between IFRS and US Generally Accepted Accounting Principles (US GAAP) in the
consolidated financial statements.
PricewaterhouseCoopers
            LLPLondon, 10 March
    2006

Reuters
          Group PLCAnnual
          Report and Form 20-F 2005
    
    49Back to Contents
Consolidated income statementFor the year ended
  31 December
2005
    
    2004Notes
    
    £m
    
    £mRevenue
    
    01,
      02
    
    2,409
    
    2,339Operating
      costs
    
    03
    
    (2,251
    )
    (2,187
    )Other
      operating income
    
    04
    
    49
    
    42Operating
      profit
    
    
    
    207
    
    194Finance
      income
    
    05
    
    41
    
    15Finance
      costs
    
    05
    
    (53
    )
    (27
    )Profit
      on disposal of associates and available-for-sale financial assets
    
    
    
    38
    
    203Share
      of post-taxation profits from associates and joint ventures*
    
    15
    
    5
    
    11Profit
      before taxation
    
    
    
    238
    
    396Taxation
    
    06
    
    (9
    )
    (40
    )Profit
      for the year from continuing operations
    
    
    
    229
    
    356Discontinued
      operationsProfit
      for the year from discontinued operations
    
    07
    
    253
    
    19Profit
      for the year
    
    
    
    482
    
    375Attributable
      to:Equity
      holders of the parent
    
    11
    
    456
    
    364Minority
      interest
    
    11
    
    26
    
    11Earnings
      per shareFrom
      continuing and discontinued operationsBasic
      earnings per ordinary share
    
    08
    
    32.6
    p
    26.0
    pDiluted
      earnings per ordinary share
    
    08
    
    31.7
    p
    25.4
    pFrom
      continuing operationsBasic
      earnings per ordinary share
    
    08
    
    16.3
    p
    25.4
    pDiluted
      earnings per ordinary share
    
    08
    
    15.9
    p
    24.8
    p*
    Share of
      post-taxation profits from associates and joint ventures includes a taxation
      charge of £1 million (2004: £2 million).Dividends paid
  and proposed during the year were £140 million (2004: £140 million
  paid and proposed). Please see note 32 on page 92.
Consolidated statement of recognised income and expenseFor the year ended
  31 December
2005
    
    2004Notes
    
    £m
    
    £mProfit
      for the year
    
    
    
    482
    
    375Actuarial
      losses on defined benefit plans
    
    11,
      25
    
    (48
    )
    (205
    )Exchange
      adjustments offset in reserves
    
    11
    
    118
    
    (48
    )Translation
      differences taken to the income statement on disposal of assets
    
    11,
      28
    
    (2
    )
    6Fair
      value losses on available-for-sale financial assets
    
    11
    
    (15
    )
    Fair
      value gains on available-for-sale financial assets taken to the income statement
      on disposal of assets
    
    11
    
    (73
    )
    Fair
      value losses on net investment hedges
    
    11,
      28
    
    (39
    )
    Fair
      value gains taken to the income statement on disposal of net investment
      hedges
    
    11,
      28
    
    (14
    )
    Taxation
      on the items taken directly to or transferred from equity
    
    11
    
    14
    
    35Net
      losses not recognised in income statement
    
    11
    
    (59
    )
    (212
    )Total
      recognised income for the year
    
    
    
    423
    
    163Attributable
      to:Equity
      holders of the parent
    
    
    
    374
    
    166Minority
      interest
    
    
    
    49
    
    (3
    )Fair value gains
    and losses arise as a result of application of IAS 39 by the Group, with
    effect from 1 January 2005. The adoption of IAS 39 resulted in an increase
    in equity at 1 January 2005 of £129 million, of which £2 million
  was attributable to the minority interest.
The consolidated
    reconciliation of changes in equity is set out in note 11 on page 65.
50
    
    Reuters
      Group PLCAnnual
      Report and Form 20-F 2005Back to Contents
Consolidated balance sheetAt 31 December


2005
    
    2004Notes
    
    £m
    
    £mAssetsNon-current
      assets:Intangible
      assets
    
    13
    
    487
    
    316Property,
      plant and equipment
    
    14
    
    358
    
    354Investments
      accounted for using the equity method:Investments
      in joint ventures
    
    15
    
    32
    
    29Investments
      in associates
    
    15
    
    4
    
    6Deferred
      tax assets
    
    26
    
    276
    
    292Other
      financial assets and derivatives
    
    16
    
    22
    
    281,179
    
    1,025Current
      assets:Inventories
    
    18
    
    1
    
    3Trade
      and other receivables
    
    19
    
    270
    
    535Other
      financial assets and derivatives
    
    16
    
    18
    
    287Current
      tax debtor
    
    
    
    6
    
    7Cash
      and cash equivalents
    
    20
    
    662
    
    578957
    
    1,410Non-current
      assets classified as held for sale
    
    21
    
    1
    
    145Total
      assets
    
    
    
    2,137
    
    2,580LiabilitiesCurrent
      liabilities:Trade
      and other payables
    
    22
    
    (397
    )
    (721
    )Current
      tax liability
    
    23
    
    (228
    )
    (260
    )Provisions
      for liabilities and charges
    
    24
    
    (64
    )
    (87
    )Other
      financial liabilities and derivatives
    
    16
    
    (49
    )
    (181
    )(738
    )
    (1,249
    )Non-current
      liabilities:Provisions
      for liabilities and charges
    
    24
    
    (392
    )
    (340
    )Other
      financial liabilities and derivatives
    
    16
    
    (371
    )
    (329
    )Deferred
      tax liabilities
    
    26
    
    (66
    )
    (45
    )(829
    )
    (714
    )Liabilities
      directly associated with non-current assets classified as held for sale
    
    21
    
    
    
    (47
    )Total
      liabilities
    
    
    
    (1,567
    )
    (2,010
    )Net
      assets
    
    
    
    570
    
    570Shareholders
      equityShare
      capital
    
    27
    
    467
    
    455Other
      reserves
    
    28
    
    (1,692
    )
    (1,755
    )Retained
      earnings
    
    11
    
    1,795
    
    1,671Total
      parent shareholders equity
    
    
    
    570
    
    371Minority
      interest in equity
    
    
    
    
    
    199Total
      equity
    
    
    
    570
    
    570The balance sheet of Reuters Group PLC is shown on page 112.
The financial
  statements on pages 50103 and the summary of differences between IFRS
  and US GAAP on pages 104108 were approved by the Board of Directors on
  10 March 2006.
Tom
      Glocer
      CEO
    David
      Grigson
      CFOReuters
      Group PLCAnnual
      Report and Form 20-F 2005
    
    51Back to Contents
Consolidated cash flow statementFor the year ended
  31 December
2005
    
    2004Notes
    
    £m
    
    £mCash
      flows from operating activitiesCash
      generated from operations
    
    29
    
    271
    
    280Interest
      received
    
    
    
    55
    
    19Interest
      paid
    
    
    
    (49
    )
    (30
    )Tax
      paid
    
    
    
    (24
    )
    (43
    )Net
      cash flow from operating activities
    
    
    
    253
    
    226Cash
      flows from investing activitiesAcquisitions,
      net of cash acquired
    
    30
    
    (124
    )
    (78
    )Disposals,
      net of cash disposed
    
    30
    
    246
    
    438Purchases
      of property, plant and equipment
    
    
    
    (145
    )
    (109
    )Proceeds
      from sale of property, plant and equipment
    
    
    
    3
    
    66Purchases
      of intangible assets
    
    
    
    (40
    )
    (27
    )Purchases
      of available-for-sale financial assets
    
    
    
    (1
    )
    (1
    )Proceeds
      from sale of available-for-sale financial assets
    
    
    
    85
    
    25Dividends
      received
    
    
    
    5
    
    5Net
      cash flow from investing activities
    
    
    
    29
    
    319Cash
      flows from financing activitiesProceeds
      from issue of shares
    
    
    
    10
    
    6Share
      buyback
    
    
    
    (223
    )
    Decrease/(increase)
      in short-term investments
    
    
    
    248
    
    (105
    )Decrease
      in borrowings
    
    
    
    (144
    )
    (225
    )Equity
      dividends paid to shareholders
    
    
    
    (140
    )
    (140
    )Equity
      dividends paid to minority interests
    
    
    
    (23
    )
    Net
      cash flow from financing activities
    
    
    
    (272
    )
    (464
    )Exchange
      gains/(losses) on cash and cash equivalents
    
    
    
    66
    
    (33
    )Net
      increase in cash and cash equivalents
    
    
    
    76
    
    48Cash
      and cash equivalents at the beginning of the year
    
    
    
    561
    
    513Cash
      and cash equivalents at the end of the year
    
    31
    
    637
    
    561Group accounting
  policies
The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to 2005 and 2004, unless
otherwise stated.
  Basis
    of accountingThe
    financial statements have been prepared under the historical cost convention,
    unless otherwise stated below, and in accordance with the Companies Act 1985
  and applicable accounting standards.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain judgements, estimates and assumptions that affect the
reported amounts of revenue and expenses during the reported period, the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet dates. Although these estimates are based on
managements best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates.
Further details regarding areas requiring significant assumptions and estimates are provided in the relevant notes to the financial statements.
There are certain areas of complexity which require a higher degree of judgement. These areas include impairment of assets, accounting for employee share plans and defined benefit pension
funds, provisions, allowances for doubtful accounts, deferred taxation and accounting for derivative assets and liabilities.
Adoption
    of International Financial 
    Reporting Standards (IFRS)Prior
    to 2005, the Group prepared its audited annual financial statements under
    UK GAAP. For the year ended 31 December 2005, the Group is required to prepare
    its annual consolidated financial statements in accordance with IFRS and International
    Financial Reporting Interpretations Committee (IFRIC) interpretations as adopted
    by the EU and those parts of the Companies Act 1985 applicable to companies
    reporting under IFRS. The financial statements take account of the requirements
    and options in IFRS 1 First-time Adoption of International Financial
    Reporting Standards as they relate to the 2004 comparatives included
  herein.
The Groups transition date to IFRS was 1 January 2004. All adjustments on first time adoption were recorded in shareholders equity on the date of transition, except for
adjustments relating to IAS 32 Financial Instruments: Disclosure and Presentation and IAS 39 Financial Instruments: Recognition and Measurement which were recorded in shareholders equity at 1 January 2005.
IFRS 1 sets out
  the transition rules which must be applied when IFRS is adopted for the first
  time. As a result, some of the requirements and options in IFRS 1 may result
  in a different application of accounting policies in the 2004 financial information,
  presented for the first time under IFRS, from that which would apply if the
  2004 financial statements were prepared using full retrospective adoption of
  IFRS. The standard sets out the mandatory exceptions to retrospective application
  and certain optional exemptions. The optional exemptions taken by the Group
  are:
52
    
    Reuters
      Group PLCAnnual
      Report and Form 20-F 2005Back to Contents

(a)
        Business combinations;(b)
        Employee benefits;(c)
        Cumulative translation differences;(d)
        Share-based payment transactions; and(e)
        Financial instruments.The mandatory exceptions outlined in IFRS 1 relevant to the financial statements
of the Group (with which the Group has complied) relate to:
(f)
        Estimates; and(g)
        Assets classified as held for sale and discontinued operations.For more details regarding
the Groups transition to IFRS and detailed explanation of the above, please
refer to note 40 on page 101.
The following accounting policies have been consistently applied to 2005 and
2004, except those noted in (e) and (g) above, where the comparative information
is determined under the
previous accounting policies in accordance with UK GAAP.
Basis of consolidationThe
consolidated financial statements include the financial statements of Reuters
Group PLC and its subsidiaries
and the Groups share of the post-acquisition results of associates and
joint ventures.
SubsidiariesSubsidiaries
are all entities over which the Group has the power to govern the financial and
operating policies generally accompanying a shareholding of more than one half
of the voting rights. Subsidiaries are consolidated from the date on which control
is transferred to the Group and are de-consolidated from the date on which control
ceases.
The purchase method of accounting is used to account for the acquisition of subsidiaries
by the Group. The excess of the cost of an acquisition over the fair value of
the Groups share of the identifiable net assets acquired is recorded as
goodwill. If the cost of acquisition is less than the fair value of the net assets
of the subsidiary acquired, the difference is recognised directly in the income
statement.
All intra-group transactions are eliminated as part of the consolidation process.
In preparing the Group financial statements, accounting policies of subsidiaries
have been adjusted where necessary to ensure consistency with the accounting
policies adopted by the Group.
Associates and joint venturesAssociates
are all entities over which the Group has significant influence but not control
generally accompanying a shareholding of between 20% and 50% of the voting rights.
Joint ventures are all entities over which the Group has joint control with one
or more other entities outside the Group. Investments in associates and joint
ventures are accounted for by the equity method of accounting and are initially
recognised at cost.
The
Groups investment in associates and joint ventures includes goodwill identified
on acquisition, plus the Groups
share of post-acquisition reserves.
The Groups share of post-acquisition profits or losses is recognised in
the income statement and its share of post-acquisition movements in reserves
is recognised in reserves. When
the Groups share of losses of an associate or joint venture equals or exceeds
its interest in the associate or joint venture, the Group does not recognise
further losses unless it has incurred obligations or made payments on behalf
of the
associate or joint venture.
Unrealised gains on transactions between the Group and its associates and joint
ventures are eliminated to the
extent of the Groups interest. For Group reporting purposes, the results
of associates and joint ventures have been adjusted where necessary to ensure
consistency with the accounting policies adopted by the Group.
Foreign currency translationAmounts
included in the
financial statements of each of the Groups entities are measured using
the currency of the primary economic environment in which the entity operates
(the
functional currency). The consolidated financial statements
are presented in pounds
sterling, Reuters Group PLCs functional and presentation currency.
Transactions in foreign currencies are translated into the functional currency
using the exchange rate prevailing at the date of the transaction. Foreign exchange
gains and losses resulting from settlement of such transactions, and from the
translation at year end exchange rates of monetary assets and liabilities denominated
in foreign currencies, are recognised in the income statement except when deferred
in equity as qualifying cash
flow and net investment hedges.
Translation differences on non-monetary items, such as available-for-sale financial
assets, are included in the fair value reserve in equity.
The results and financial position of all Group companies that have a functional
currency other than sterling are translated as follows:
•
    income and expenses are translated at average exchange rates (unless this average is not a reasonable approximation of the
cumulative effect of the rate prevailing on the transaction date, in which case income and expenses are translated
at the date of the transaction);•
    assets and liabilities are translated at the closing exchange rate at the date of the balance sheet; and•
    all resulting differences are recognised as a separate component of equity.On consolidation, exchange differences arising from the translation of the net
investment in foreign entities, and from borrowings and other currency instruments
designated as hedges of such investments, are taken to equity. When a foreign
operation is sold, such exchange differences are recognised in the income statement
as part of the gain or loss on sale.
Goodwill and fair value adjustments on the acquisition of a foreign entity are
treated as assets and liabilities of the foreign entity and translated at the
closing exchange rate.
Revenue recognitionRevenue
represents the turnover, net of discounts, derived from services provided to
subscribers and sales of products applicable to the year.
Revenue from sales of subscription-based real-time and historical information
services is recognised rateably over the term of the subscription.
Revenue from contracts for the outright sale of systems-based product solutions,
which include the sale of fully developed software licences, is recognised at
the time of client acceptance, at which time the Group has no further obligation.
Long-term contracts are accounted for in accordance with the contractual terms
either on a percentage of completion basis or on a time and materials as incurred
basis.
Revenue from associated maintenance and support services is recognised rateably
over the term of the maintenance contract. Where contracts allow the Group to
recharge costs from communications suppliers and exchanges onwards to subscribers,
this income is recognised as revenue.
Transaction products usage revenue is accounted for on a trade date basis.
Interest income is accrued on a time basis by reference to the amount outstanding
and at the effective interest rate applicable, which is the rate that exactly
discounts estimated future cash receipts through the expected life of the financial
asset to that assets
net carrying value.
Securities transactions between Instinet Group counterparties which pass through
Instinet Group in its role as agency broker are recorded on a settlement date
basis and, therefore, are only reflected in the balance sheet if there is a failure
to settle. Revenues and related expenses arising from such securities transactions
are accrued from the date of the transaction.
Pensions and similar obligationsIAS
19 Employee Benefits was amended on 16 December 2004, with effect
from 1 January 2006. The amendment provides the option to recognise all actuarial
gains and losses in the statement of recognised income and expense. The Group
has elected to adopt this treatment early and has applied this accounting from
the date of transition to IFRS.

Reuters
          Group PLCAnnual
          Report and Form 20-F 2005
    
    53Back to Contents


Group accounting policiescontinued
The Group operates defined contribution and defined benefit pension plans and provides post-retirement medical benefits.
Payments to defined contribution pension plans are charged as an expense to the
income statement, as incurred, when the related employee service is rendered.
The Group has no further legal or constructive payment obligations once the contributions
have been made.
For defined benefit pension plans, the cost of providing benefits is determined
using the Projected Unit Credit Method and is charged to the income statement
so as to spread the service cost over the service lives of the employees. An
interest cost representing the unwinding of the discount rate on the scheme liabilities,
net of the expected return on scheme assets, is charged to the income statement.
The liability recognised in the balance sheet, in respect of defined benefit
pension plans, is the present value of the defined benefit obligation at the
balance sheet date less the fair value of the plan assets. The defined benefit
obligation is calculated annually by independent actuaries. The present value
of the defined benefit obligation is determined by discounting the estimated
future cash outflows using interest rates of high-quality corporate bonds that
are denominated in a currency in which the benefits will be paid and that have
terms of maturity approximating to the terms of the relevant pension liability.
All actuarial gains and losses which arise in calculating the present value of
the defined benefit obligation, and the fair value of plan assets, are recognised
immediately in the statement
of recognised income and expense.
Post-retirement medical benefits are provided to employees of some Group companies.
The expected costs are determined using an accounting methodology similar to
that for defined benefit
pension plans.
Share-based paymentsThe
Group makes equity-settled and cash-settled share-based payments to its employees.
Equity-settled share-based awards granted after 7 November 2002 but not vested
by 1 January 2005 are measured at fair value at the date of grant and expensed
on a straight-line basis over the vesting period of the award. At each balance
sheet date, the Group revises its estimate of the number of options that are
expected to become
exercisable.
Cash-settled share-based payments are accrued over the vesting period of the
award, based on the current fair market value at each balance sheet date.
When share options are exercised, the proceeds received, net of any transaction
costs, are credited to share capital (nominal value) and share premium.
Intangible assetsGoodwillGoodwill
represents the excess of the cost of an acquisition over the fair value of the
Groups share of the identifiable net assets (including intangible assets)
of the acquired subsidiary, associate or joint venture at the date of acquisition.
Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill
on acquisition of associates and joint ventures is included in the carrying value
of the investment. Goodwill is tested annually for impairment and carried at
cost less accumulated impairment losses. Gains and losses on disposal of an entity
include the carrying amount of goodwill relating to the entity or investment
sold. Goodwill which was previously directly written off to reserves under UK
GAAP is not included
in the gain or loss on disposal of an entity.
Internally
generated intangible assets  product developmentExpenditure
related to the development of new products or capabilities that is incurred between
establishing technical feasibility and the asset becoming income-generating is
capitalised as an intangible asset and amortised over the useful economic life.
Capitalisation commences from the point at which the technical feasibility and
commercial viability of the product can be demonstrated and the Group is satisfied
that it is probable that future economic benefits will result from the product
once completed. Capitalisation ceases when the product is ready for launch.
Expenditure on research activities and on development activities that does not
meet the above criteria is charged to the income statement as incurred.
Internally developed intangible assets are systematically amortised over their
useful economic lives which range from three to five years on a straight line
basis.
Other intangiblesCosts
which are directly associated with the production of software for internal use
in the business are capitalised as an intangible asset. Software which forms
an integral part of the related hardware is capitalised with that hardware and
included within property, plant and equipment. Software assets are amortised
on a straight line basis over their expected useful economic lives.
Acquired intangible assets include computer software licences, customer relationships,
trade names and trademarks. These assets are capitalised on acquisition and amortised
over their
expected useful economic lives.
Other intangible assets are systematically amortised on a straight line basis
over their useful economic lives which are as follows:
Computer software
        3 to 5 yearsOther acquired intangibles
        5 to 15 yearsImpairment of assetsAssets
which have an indefinite useful life are not subject to amortisation and are
tested annually for impairment. Assets which are subject to amortisation are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss is recognised
for the amount by which the assets carrying amount exceeds its recoverable
amount. The recoverable amount is
the higher of an assets fair value less cost to sell and value in use.
For the purposes of assessing impairment, assets are grouped at the lowest level
for which there are separately identifiable cash flows (cash generating units, CGUs).
Where assets do not generate independent cash flows and their carrying value
cannot be attributed to a particular CGU, CGUs are grouped together at the level
at which these assets reside, and the carrying amount of this group of CGUs is
compared to the
recoverable amount of that particular group.
Property, plant and equipmentAll
property, plant and equipment is stated at historical cost less depreciation
and includes expenditure directly attributable to the acquisition of the items.
Subsequent costs are
included in the assets carrying amount or recognised as a separate asset,
as appropriate, only when it is probable that future economic benefit will flow
to the Group and the cost of the item can be measured reliably.
Depreciation is calculated on a straight line basis so as to write down the assets
to their residual values over their expected useful lives:
Freehold land
        Not depreciatedFreehold buildings
        Normally 50 yearsLeasehold property
        Over the term of the leaseComputer systems equipment, office equipmentand motor vehicles
        2 to 5 yearsThe assets residual values and useful lives are reviewed, and adjusted
if appropriate, at each balance sheet date.
Non-current assets held for sale (effective 1 January 2005)Non-current
assets and disposal groups are classified as held for sale if their carrying
amount will be recovered principally through a sale transaction rather than through
continuing use. This condition is regarded as met only when the sale is highly
probable and the asset is available for immediate sale in its present condition.
Non-current assets and disposal groups classified as held for sale are measured
at the lower of carrying amount and fair value less selling costs.
For 2004 comparatives, the Group has applied the disclosure requirements for
assets held for sale as at 31 December 2004. Balance sheet values have not been
restated, in accordance with
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.
54
    
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          Group PLCAnnual
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Investments (effective 1 January 2005)The Group classifies its investments in the following categories:
•
    financial assets at fair value through profit and loss;•
    loans and receivables;•
    held-to-maturity investments; and•
    available-for-sale financial assets.The classification depends on the purpose for which the assets were acquired.
Management determines the classification of its investments at initial recognition
and re-evaluates this
designation at every reporting date.
Financial assets at fair value through profit and lossThis
category includes financial assets held for trading and those designated at fair
value through profit and loss at inception. A financial asset is classified in
this category if acquired principally for the purpose of selling in the short-term
or if so designated by management. Derivatives are also classified as held for
trading unless they are designated as hedges. Assets in this category are initially
recognised at fair value and subsequently remeasured at fair value. Realised
and unrealised gains and losses are included in the income statement in the period
in which they arise.
Loans and receivablesLoans
and receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market; they are included in trade
and other receivables in the balance sheet. Assets in this category are initially
recognised at fair value and subsequently measured at amortised cost.
Held-to-maturity investmentsHeld-to-maturity
investments are non-derivative financial assets with fixed or determinable payments
and fixed maturities that the Groups management has the positive intention
and ability to hold to maturity. Assets in this category are initially recognised
at fair value and subsequently measured at amortised cost.
Available-for-sale financial assetsThe
Group has classified all of its marketable securities as available-for-sale.
Assets in this category are initially recognised at fair value and subsequently
remeasured at fair value. Unrealised gains and losses arising from changes in
fair value are recognised in the statement of recognised income and expense.
The Group assesses at each balance sheet date whether there is objective evidence
that a financial asset or group of financial assets is impaired. On disposal
or impairment of the asset, gains or losses in equity are recycled through the
income statement.
Cash and cash equivalentsCash
and cash equivalents include cash in hand, bank deposits repayable on demand,
other highly liquid investments with original maturities of three months or less,
and bank
overdrafts.
Inventories and contract work in progressInventories
and contract work in progress are valued at the lower of cost and net realisable
value less progress payments received and receivable from the client.
Cost is calculated on a First-In-First-Out basis by reference to the invoice
value of supplies and attributable costs of bringing inventories to their present
location and
condition.
Net realisable value is the estimated market value less selling costs.
Trade receivablesTrade
receivables do not carry interest and are stated at their nominal value, as reduced
by appropriate allowances for estimated irrecoverable amounts. A provision for
impairment of trade receivables is established when there is evidence that the
Group will not be able to collect all amounts due according to the original terms
of these receivables. The amount of the provision is the difference between the
carrying value and the present value of estimated future cash flows, discounted
at the effective interest rate. The amount of the provision is recognised in
the income statement.
ProvisionsProvisions,
other than in respect of pension and post-retirement healthcare benefits, are
recognised when the Group has a present legal or constructive obligation as a
result of past events; it is more likely than not that an outflow of resources
will be required to settle the obligation; and the amount can be reliably estimated.
Restructuring provisions comprise lease termination liabilities, employee termination
payments and other liabilities incurred as part of restructuring programmes.
Provisions are not recognised for future operating losses.
LeasingAssets
held under finance leases are recognised as assets of the Group at their fair
value or, if lower, at the present value of the minimum lease payments, each
determined at the inception of the lease. The corresponding liability to the
lessor is included in the balance sheet as a finance lease obligation. Lease
payments are apportioned between finance charges and reduction of the lease obligation
so as to achieve a constant rate of interest on the remaining balance of the
liability.
Operating lease rentals are charged against profit on a straight line basis over
the period of the lease. Operating lease incentives received are initially deferred
and then recognised over
the full period of the lease.
BorrowingsBorrowings
are recognised initially at fair value, net of transaction costs incurred. Borrowings
are subsequently stated at amortised cost; any difference between the proceeds
(net of transaction costs) and the redemption value is recognised in the income
statement over the period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the Group has an unconditional
right to defer settlement of the liability for at least twelve months after the
balance sheet
date.
Borrowing costs on qualifying assets are expensed as incurred and not capitalised
as part of the cost of the asset.
Purchases and sales of financial assetsPurchases
and sales of financial assets are recognised on the settlement date, which is
the date that the asset is delivered to or by the Group. This includes securities
transactions between Instinet Group counterparties that pass through Instinet
Group in its role as agency broker and, therefore, are only reflected in the
balance sheet if there is a failure to settle. Revenues and related expenses
arising from such securities
transactions are accrued from the date of the transaction.
Derivative financial instruments and hedging (effective 1 January 2005)Derivatives
are initially recognised at fair value on the date a derivative contract is entered
into and are subsequently remeasured at their fair value. The method of recognising
the resulting gain or loss depends on whether the derivative is designated as
a hedging instrument and, if so, the nature of the item being hedged. The Group
designates certain derivatives as either:
•
    hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedges);•
    hedges of highly probable forecast transactions (cash flow hedges); or•
    hedges of net investments in foreign operations (net investment hedges).Fair value hedgesChanges
in the fair value of derivatives that are designated and qualify as fair value
hedges are recorded in the income statement, together with any changes in the
fair value of the hedged asset or liability that are attributable to the hedged
risk.
Cash flow hedgesThe
effective portion of changes in the fair value of derivatives that are designated
and qualify as a cash flow hedge is recognised in equity. The gain or loss relating
to the ineffective
portion is recognised immediately in the income statement.
Amounts accumulated in equity are recycled to the income statement in the period
when the hedged item will affect profit and loss (for instance, when the forecast
sale that is hedged takes
place). However, when the forecast transaction
Reuters
          Group PLCAnnual
          Report and Form 20-F 2005
    
    55Back to Contents


Group accounting policiescontinued
that is hedged results in the recognition of a non-financial asset (for example,
project costs or a major business investment) or a liability, the gains and losses
previously deferred in equity are transferred from equity and included in the
initial measurement of the cost of the asset or liability.
When a hedging instrument expires or is sold, or when a hedge no longer meets
the criteria for hedge accounting, any cumulative gain or loss existing in equity
at that time remains in equity and is recognised when the forecast transaction
is ultimately recognised in the income statement. When a forecast transaction
is no longer expected to occur, the cumulative gain or loss that was reported
in equity is immediately transferred
to the income statement.
Net investment hedgesDerivatives
and foreign currency borrowings are used as hedges for net investments in foreign
operations. Any gain or loss on a derivative hedging instrument relating to the
effective portion of the hedge is recognised in equity; the gain or loss relating
to the ineffective portion of the hedge is recognised immediately in the income
statement. Any gain or loss on foreign currency borrowings used as a hedge is
recognised in
equity.
Gains and losses accumulated in equity are included in the income statement on
disposal or impairment of the foreign operation.
Derivatives that do not qualify for hedge accountingCertain
derivative instruments, while providing effective economic hedges under the Groups
policies, are not designated as hedges. Changes in the fair value of any derivative
instruments that do not qualify for hedge accounting are recognised immediately
in the income statement. The Group does not hold or issue derivative financial
instruments for speculative purposes.
Fair value estimation (effective 1 January 2005)The
fair value of financial instruments traded in active markets (such as available-for-sale
securities) is based on quoted market prices at the balance sheet date. The fair
value of foreign exchange contracts is determined using forward exchange market
rates at the balance sheet date. Other financial instruments are valued using
standard pricing models based on quoted forward market rates, interpolated between
dates where
appropriate, and discounted cash flow techniques.
Interest in shares of Reuters Group PLCShares
held by the employee share ownership trusts and repurchased shares are recorded
in the balance sheet as a deduction
from shareholders equity at cost.
Dividend distributionDividend
distributions are recognised as a liability in the period in which the dividends
are approved by the companys shareholders. Interim dividends are recognised
when they are
paid; final dividends when authorised in general meeting by shareholders.
TaxationThe
tax expense for the year comprises current and deferred tax. Tax is recognised
in the income statement except to the extent that it relates to items recognised
directly in equity, in
which case it is recognised in equity.
The current tax expense is based on the results for the year as adjusted for
items that are not taxable or not deductible. Current tax is calculated using
tax rates and laws that have been enacted or substantively enacted at the balance
sheet date.
Deferred tax is accounted for using the balance sheet liability method, and is
the tax expected to be payable or recoverable on temporary differences between
the carrying amount of assets and liabilities in the financial statements and
the corresponding tax bases used in the computation of taxable profit. Deferred
tax is calculated based on the expected manner of realisation or settlement of
the carrying amount of assets and liabilities, using tax rates that are expected
to apply to the year of realisation or settlement based on tax rates and laws
enacted or substantively enacted at the balance sheet date.
Deferred tax liabilities are generally recognised for all taxable temporary differences.
Deferred tax liabilities are recognised for taxable temporary differences arising
on investments in subsidiaries, associates and joint ventures except where the
reversal of the temporary difference can be controlled and it is probable that
the difference will not reverse in the foreseeable future.
Deferred tax assets are recognised to the extent it is probable that taxable
profits will be available against which the deductible temporary differences
can be utilised. The carrying amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that it is no longer probable that
sufficient taxable profits will be available to allow all or part of the asset
to be recovered.
Deferred tax assets and liabilities are not recognised if the temporary differences
arise from goodwill not deductible for tax purposes, or from the initial recognition
(other than in a business combination) of other assets and liabilities in a transaction
that affects neither the taxable profit nor the accounting profit.
Segment reportingA business
segment is a group of assets and operations engaged in providing products and
services that are subject to risks and returns which are different from those
in other business segments. A geographical segment is a different economic environment
in which an entity operates.
Business segmentation is the primary reporting dimension for the Group, with
geographical segmentation being the secondary reporting dimension. Accordingly,
the four business divisions
(Sales & Trading, Research & Asset Management, Enterprise, and Media)
and Instinet Group (in 2004), are the primary reporting segments for the Group.
Note 1 on page 58 outlines in detail the allocation approach in respect of revenues,
costs, assets and liabilities.
Standards, interpretations and amendments to published standards that are
not yet effectiveCertain
new standards, amendments and interpretations to existing standards have been
published that are mandatory for accounting periods beginning on or after 1 January
2006 or later periods but which the Group has chosen not to early adopt. The
new standards which are expected to be relevant to the Groups operations
are as follows:
IAS 39 (Amendment) Cash Flow Hedge Accounting of Forecast Intragroup Transactions (effective
from 1 January 2006)The amendment
allows the foreign currency risk of a highly probable forecast intragroup transaction
to qualify as a hedged item in the consolidated financial statements, provided
that: (a) the transaction is denominated in a currency other than the functional
currency of the entity entering into that transaction; and (b) the foreign currency
risk will affect consolidated profit or loss. The Group has no current plans
to take advantage
of this amendment.
IAS 39 (Amendment) The
Fair Value Option (effective from 1 January 2006)This amendment
changes the definition of financial instruments classified at fair value through
profit or loss and restricts the ability to designate financial instruments as
part of this category. The Group believes that this amendment should not have
a significant impact on the classification of financial instruments, as the Group
should be able to comply with the amended criteria for the designation of financial
instruments at fair value through profit and loss. The Group will apply this
amendment from annual periods beginning 1 January 2006.
IAS 39 and IFRS 4 (Amendments) Financial Guarantee Contracts (effective
from 1 January 2006)This amendment
requires issued financial guarantees, other than those previously asserted by
the entity to be insurance contracts, to be initially recognised at their fair
value and subsequently measured at the higher of: (a) the unamortised balance
of the related fees received and deferred; and (b) the expenditure required to
settle the commitment at the balance sheet date.
IFRS 7 Financial Instruments: Disclosures and IAS 1 (Amendment) Presentation
of Financial Statements  Capital Disclosures (effective from1
January 2007)IFRS 7 introduces
new disclosures to improve the information about financial instruments. It requires
the disclosure of qualitative and quantitative information about exposure to
risks arising from financial instruments, including specified minimum disclosures
about credit risk, liquidity risk and market risk, including sensitivity analysis
to market risk. It replaces IAS 30 Disclosures in the Financial Statements
of Banks
and Similar Financial Institutions, and disclosure requirements in IAS
32 Financial Instruments: Disclosure and Presentation. It is applicable
to all entities that report under IFRS. The amendment to IAS 1 introduces disclosures
about the level of an entitys capital and how it manages capital. The Group
assessed the impact of IFRS 7 and the amendment to IAS 1

56
    
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          Group PLCAnnual
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and concluded that the main additional disclosures will be the sensitivity analysis to market risk and the capital disclosures required by the amendment of IAS 1. The Group will apply IFRS
7 and the amendment to IAS 1 from annual periods beginning 1 January 2007.
IFRIC 4 Determining whether an Arrangement contains a Lease (effective
from 1 January 2006)IFRIC 4
requires the determination of whether an arrangement is, or contains a lease,
to be based on the substance of the arrangement. It requires an assessment of
whether: (a) fulfilment of the arrangement is dependent on the use of a specific
asset or assets (the asset); and (b) the arrangement conveys a right to use the
asset.
IAS 21 (Amendment) Net investment in a foreign operationThis amendment
relaxes the requirement for a monetary item that forms part of a reporting
entitys net investment in a foreign operation to be denominated in the
functional currency of either the reporting entity or the foreign operation.
It also clarifies the treatment of so-called sister company loans.
IFRIC 7 Applying the restatement approach under IAS 29IFRIC 7
deals with the accounting when an entity identifies the existence of hyperinflation
in the economy of its functional currency and how deferred tax items in the opening
balance sheet should be restated. The Group has assessed the impact of the interpretation
and concluded that it is not likely to have a significant effect on the Groups
operations.
IFRIC 8 Scope of IFRS 2IFRIC 8
clarifies that transactions within the scope of IFRS 2 Share-based payment,
include those in which the entity cannot specifically identify some or all of
the goods or services received. If the identifiable consideration given appears
to be less than the fair value of the equity instruments granted or liability
incurred, this situation typically indicates that other consideration has been
or will be
received.
IFRIC 9 Reassessment of embedded derivativesIFRIC
9 Reassessment of embedded derivatives clarifies that an entity should
assess whether an embedded derivative is required to be separated from the host
contract and accounted for as a derivative when the entity first becomes a party
to the contract. Subsequent reassessment is prohibited, unless there is a change
in the contracts terms, in which case it is required. The Group has assessed
the impact of the interpretation and concluded that will not have a significant
effect on the Groups
operations.
Applicable accounting policies for 2004 comparativesIAS
32 and IAS 39 have been adopted by the Group at 1 January 2005. The comparative
information in 2004 for financial instruments, within the scope of IAS 39, is
determined under the previous accounting policies in accordance with UK GAAP.
Those policies include:
InvestmentsGovernment
securities are stated in the balance sheet at the lower of cost plus accrued
capital appreciation and market value. Income from these securities and any adjustment
for changes in
their market value during the year is reported as part of profit.
Debt issuanceMedium-term
notes and commercial paper are stated at the amount of the net proceeds plus
accrued interest or any discount or premium. Discounts or premiums to the nominal
value are amortised over the term of the issue. Costs associated with debt issuance
are charged against profit over the life of the instrument.
Foreign currency swap agreements and forward contracts are used to convert non-sterling
debt into sterling. Interest rate swaps, swaptions and forward rate agreements
are used to manage interest rate exposures. Amounts payable or receivable in
respect of these derivatives are recognised as adjustments to interest expense
over the period of the contract.
TreasuryThe
Group receives revenue and incurs expenses in more than 70 currencies and uses
financial instruments to hedge a portion of its net cash flow and operating profit.
The derivative contracts are treated from inception as an economic hedge of the
underlying financial instrument, with matching accounting treatment and cash
flows. The derivative contracts have high correlation with the specific underlying
risks being hedged, both at inception and throughout the hedge period.
The Group uses financial instruments to hedge a portion of its interest exposure.
Profits and losses on financial instruments are reported as part of profit for
the period to which they
relate.
Financial instruments hedging the risk on foreign currency assets are revalued
at the balance sheet date and the resulting gain or loss offset against that
arising from the translation of
the underlying asset into sterling.
The Group does not hold or issue derivative financial instruments for speculative
purposes.

Reuters
          Group PLCAnnual
    Report and Form 20-F 2005
    
    57Back to Contents
Notes
    to the financial statements
01
      Segmental analysis  income
  statement
Primary
reportable segments  business divisionsThe
Group operates through four business divisions: Sales & Trading, Research& Asset
Management, Enterprise, and Media (excluding Instinet Group in 2004).Therefore,
the Groups primary segmental reporting is by business division. In order
to report segmental results, it is necessary to determine a methodology to allocate
revenues,
costs, assets and liabilities to those segments.
Each division is responsible for specific product revenues, with the exception
of Reuters 3000 Xtra and the 2000/3000 range of products. Revenues for these
shared products are
attributed to either the Sales & Trading division or the Research & Asset
Management division by reference to the nature of the customer purchasing the
product. This is determined on a customer-by-customer basis.
Where costs relate to a specific division, they are mapped directly to that division.
Where costs are shared, an activity based costing (ABC) technique is used to
split these costs between divisions. The Reuters ABC model (known as Profitability
Insight) allocates shared costs to business activities, which in turn are attributed
to products, and therefore divisions, using cost drivers. These cost drivers
(such as the number of helpdesk calls received or the number of installed accesses)
are derived from a variety of underlying source systems. Judgement has been applied
in determining these cost drivers and the resulting allocation of costs.
Divisional results could alter with the application of other allocation approaches
and as continuous improvements are made to the Profitability Insight model.
Revenue and costs are allocated on a consistent basis year-on-year.
The tables below show a segmental analysis of results for Reuters continuing
  operations.For information relating to
  discontinued operations, please see note 7 on page 62.
2005Research& AssetSales &
        
        Manage-Trading
        
        ment
        
        Enterprise
        
        Media
        
        Total£m
        
        £m
        
        £m
        
        £m
        
        £mRevenue
        
        1,595
        
        268
        
        393
        
        153
        
        2,409Operating costs
        
        (1,475
        )
        (305
        )
        (325
        )
        (146
        )
        (2,251
        )Other operating income
        
        37
        
        
        
        8
        
        4
        
        49Operating profit
        
        157
        
        (37
        )
        76
        
        11
        
        207Finance income
        
        
        
        
        
        
        
        
        
        41Finance costs
        
        
        
        
        
        
        
        
        
        (53
        )Profit on disposal of associates and available-for-sale financial assets
        
        
        
        
        
        
        
        
        
        38Share of post-taxation profits from associates and joint ventures
        
        
        
        
        
        
        
        
        
        5Profit before taxation
        
        
        
        
        
        
        
        
        
        238Taxation
        
        
        
        
        
        
        
        
        
        (9
        )Profit for the year from continuing operations
        
        
        
        
        
        
        
        
        
        2292004Research& AssetSales &
        
        Manage-Trading
        
        ment
        
        Enterprise
        
        Media
        
        Total£m
        
        £m
        
        £m
        
        £m
        
        £mRevenue
        
        1,542
        
        262
        
        391
        
        144
        
        2,339Operating costs
        
        (1,385
        )
        (295
        )
        (365
        )
        (142
        )
        (2,187
        )Other operating income
        
        18
        
        17
        
        5
        
        2
        
        42Operating profit
        
        175
        
        (16
        )
        31
        
        4
        
        194Finance income
        
        
        
        
        
        
        
        
        
        15Finance costs
        
        
        
        
        
        
        
        
        
        (27
        )Profit on disposal of associates and available-for-sale financial assets
        
        
        
        
        
        
        
        
        
        203Share of post-taxation profits from associates and joint ventures
        
        
        
        
        
        
        
        
        
        11Profit before taxation
        
        
        
        
        
        
        
        
        
        396Taxation
        
        
        
        
        
        
        
        
        
        (40
        )Profit for the year from continuing operations
        
        
        
        
        
        
        
        
        
        356Divisional revenue comprises sales to external customers only. Divisional revenue
from transactions with other segments is £nil (2004: £nil).

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    Reuters
          Group PLCAnnual
          Report and Form 20-F 2005Back to Contents


The following table shows the aggregate of each business divisions share of results of associates and joint ventures:
2005
        
        2004£m
        
        £mSales & Trading
        
        2
        
        2Research & Asset Management
        
        
        
        Enterprise
        
        
        
        3Media
        
        3
        
        6Share of post-taxation profits from associates and joint ventures
        
        5
        
        11The following table provides information relating to depreciation, amortisation, impairments and other significant non-cash expenditures (excluding impairments) included in the divisional
operating costs above:
2005
        
        2004Other non-cash
        
        
        
        
        
        Other non-cashDepreciation
        
        
        
        expenses
        
        Depreciation
        
        
        
        expensesand
        
        
        
        (excluding
        
        and
        
        
        
        (excludingamortisation
        
        Impairments
        
        impairments)
        
        amortisation
        
        Impairments
        
        impairments)£m
        
        £m
        
        £m
        
        £m
        
        £m
        
        £mSales & Trading
        
        88
        
        1
        
        39
        
        83
        
        22
        
        13Research & Asset Management
        
        19
        
        
        
        4
        
        16
        
        8
        
        3Enterprise
        
        21
        
        1
        
        2
        
        35
        
        5
        
        5Media
        
        4
        
        1
        
        1
        
        6
        
        
        
        1Total
        
        132
        
        3
        
        46
        
        140
        
        35
        
        22Impairments for 2004 exclude the £17 million impairment of goodwill in respect of BTC which has been reported in discontinued operations in 2005. Please see note 7 on page
62.
Please see note 13 on page 67 for more details relating to impairments.
Secondary
reportable segments  geographicalRevenue is normally invoiced in the same geographical area in which the customer is located. Revenue earned, therefore, generally represents revenue both by origin and by
destination.
The following table represents revenue from external customers by geographical area based on the geographical location of the customers:
2005
        
        %
        
        2004Revenue
        
        £m
        
        change
        
        £mUK and Ireland
        
        379
        
        1
        %
        374EMEA West
        
        375
        
        (5
        %)
        393EMEA East
        
        576
        
        
        
        577Americas
        
        651
        
        7
        %
        609Asia
        
        428
        
        11
        %
        386Total revenue
        
        2,409
        
        3
        %
        2,33902 Revenue by type
An analysis of the Groups revenue from sale of goods and services by type is set out below:
2005
        
        %
        
        2004£m
        
        change
        
        £mRecurring
        
        2,242
        
        4
        %
        2,164Usage
        
        97
        
        13
        %
        86Outright
        
        70
        
        (22
        %)
        89Total revenue
        
        2,409
        
        3
        %
        2,339Customers generally pay for Reuters products and services in three ways. Recurring revenue is generated through subscription fees to cover access of terminals and maintenance fees for
software. Usage revenue is principally derived from matching and trading transactions, and other newer electronic trading products such as RTFI and RTFX. Outright revenue comprises once-off sales including information and risk management
solutions.

Reuters
          Group PLCAnnual
          Report and Form 20-F 2005
    
    59Back to Contents


Notes to the financial statementscontinued
03 Operating costs
2005
        
        %
        
        2004Costs by nature
        
        £m
        
        change
        
        £mSalaries, commission and allowances
        
        761
        
        (3%
        )
        782Social security costs
        
        67
        
        7%
        
        63Share based payments (see note 33)
        
        30
        
        38%
        
        22Pension costs (see note 25)
        
        55
        
        92%
        
        28Total staff costs
        
        913
        
        2%
        
        895Services*
        
        455
        
        15%
        
        394Depreciation
        
        99
        
        (11%
        )
        112Data
        
        281
        
        14%
        
        247Communications
        
        289
        
        (4%
        )
        301Space
        
        162
        
        (8%
        )
        175Amortisation of intangibles
        
        33
        
        15%
        
        28Impairments
        
        3
        
        (90%
        )
        35Fair value movements on other financial assets
        
        16
        
        
        
        Total operating costs
        
        2,251
        
        3%
        
        2,187Operating costs include:Research and development expenditure
        
        92
        
        (13%
        )
        105Operating lease expenditure:Hire of equipment
        
        6
        
        (22%
        )
        7Other, principally property
        
        67
        
        (4%
        )
        70Loss on disposal of property, plant and equipment
        
        
        
        
        
        1Advertising
        
        17
        
        (14%
        )
        20*
        Services include equipment hire and bought-in services, including consultancy and contractors, advertising and publicity, professional fees and staff-related expenses.An analysis of the fees paid for professional services to the Groups auditors is set out below:
2005
        
        %
        
        2004£m
        
        Change
        
        £mAudit services:Statutory audit
        
        3.0
        
        (6%
        )
        3.2Audit-related services:Regulatory reporting
        
        0.2
        
        
        
        0.2Further assurance services
        
        2.1
        
        24%
        
        1.7Tax services:Compliance services
        
        1.5
        
        50%
        
        1.0Advisory services
        
        1.1
        
        (15%
        )
        1.3Total fees paid
        
        7.9
        
        7%
        
        7.4United Kingdom
        
        3.8
        
        36%
        
        2.8Overseas
        
        4.1
        
        (11%
        )
        4.6The statutory audit fee includes £10,000 in respect of the parent company audit (2004: £10,000).
Further assurance services include advice on preparation for Sarbanes-Oxley Act
S404 compliance (including the attest work in relation to Instinet Groups
2004 reporting requirements under the Act), review of conversion to IFRS reporting,
advice in respect of accounting for the RPF and due diligence activities related
to acquisitions and disposals. Tax compliance services include assistance with
corporation and other tax returns. Tax advisory services relate to tax planning
and employee-related issues.
The directors consider it important that the company has access to a broad range
of external advice, including from PricewaterhouseCoopers. Where appropriate,
work is put out to competitive tender. The Audit Committee monitors the relationship
with PricewaterhouseCoopers, including the level of non-audit fees.

60
    
    Reuters
          Group PLCAnnual
          Report and Form 20-F 2005Back to Contents


04 Other operating income
2005
        
        %
        
        2004£m
        
        change
        
        £mProfit on disposal of subsidiaries
        
        4
        
        5%
        
        4Fair value movements on derivatives
        
        18
        
        
        
        Investment income
        
        1
        
        
        
        Foreign exchange gains
        
        3
        
        
        
        1Other income
        
        23
        
        (39%
        )
        37Total other operating income
        
        49
        
        16%
        
        42Other income comprises amounts received in respect of service provided by Reuters to joint ventures and other parties.
05 Finance income and finance costs
2005
        
        2004£m
        
        £mInterest receivable:Listed investments
        
        1
        
        Unlisted investments
        
        18
        
        15Swap contracts
        
        18
        
        Fair value gains on financial instruments
        
        1
        
        Foreign exchange gains on borrowings
        
        3
        
        Total finance income
        
        41
        
        15Interest payable:Bank loans and overdrafts
        
        (4
        )
        (2
        )Other borrowings
        
        (23
        )
        (24
        )Swap contracts
        
        (22
        )
        Fair value losses on financial instruments
        
        (2
        )
        Unwinding of discounts
        
        (2
        )
        (1
        )Total finance costs
        
        (53
        )
        (27
        )Following the adoption of IAS 39 Financial Instruments: Recognition and Measurement on 1 January 2005, derivatives are recognised separately from the underlying borrowings to
which they relate. In 2005, therefore, interest on derivatives has been recognised separately from interest on the underlying borrowings. This treatment is different from the 2004 treatment where interest on derivatives was netted against interest
on the underlying borrowings.
06 Taxation
Analysis of charge for the period
2005
        
        2004£m
        
        £mCurrent taxation:Continuing operations
        
        (10
        )
        17Discontinued operations
        
        50
        
        2140
        
        38Deferred taxation (see note 26):Continuing operations
        
        19
        
        23Discontinued operations
        
        13
        
        132
        
        24Continuing operations
        
        9
        
        40Discontinued operations
        
        63
        
        22Total taxation
        
        72
        
        62Tax on items
charged to equity
2005
        
        
        
        2004Continuing
        
        Discontinued
        
        Continuing
        
        Discontinued£m
        
        £m
        
        £m
        
        £mCurrent tax charge on unrealised exchange movements
        
        
        
        
        
        10
        
        Deferred tax credit on actuarial losses on defined benefit plans
        
        (10
        )
        
        
        (45
        )
        Deferred tax credit on stock options
        
        (10
        )
        (1
        )
        (8
        )
        (1
        )Current tax credit on revaluations and fair value movements
        
        (4
        )
        
        
        
        
        Reuters
          Group PLCAnnual
          Report and Form 20-F 2005
    
    61Back to Contents


Notes to the financial statementscontinued

Factors
  affecting tax charge for the periodThe tax assessed
  for the period is lower than the standard rate of corporation tax in the UK
  (30%). The differences are explained below:
2005
    
    2004£m
    
    £mProfit before taxation
    
    238
    
    396Profit before taxation multiplied by standard rate of corporation tax in
      the UK of 30% (2004: 30%)
    
    71
    
    119Effects of:Non-tax deductible amortisation and impairment of intangibles
    
    4
    
    11Expenses not deductible for tax purposes
    
    4
    
    11Non-taxable investment disposals and impairments
    
    (13
    )
    (66
    )Adjustments in respect of prior years
    
    (23
    )
    (26
    )Recognition of tax losses that arose in prior years
    
    (33
    )
    Other differences
    
    (1
    )
    (9
    )Total taxation for continuing operations
    
    9
    
    40The tax charge
  for the year includes a credit of £16 million in respect of UK taxation.
07 Discontinued operations
The Group adopted
  IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
  from 1 January 2005 in accordance with the standards provisions. The adoption
  of IFRS 5 has resulted in the presentation of Instinet Group (including BTC)
  and Radianz as discontinued operations for the year ended 31 December 2005.
  There is no impact on the prior year financial statements other than a change
  in the presentation of the results and cash flows of discontinued operations.
  The prior period balance sheets are not restated.
The Profit
  for the year from discontinued operations line within the income statement
  comprises the post-taxation profit or loss of discontinued operations, and the
  post-taxation profit or loss recognised on the disposal of the assets or disposal
  groups.
2005
    
    2004£m
    
    £mProfits after taxation of subsidiaries acquired with a view to resale
    
    
    
    1Profits after taxation of subsidiaries (net of taxation £20 million,
      2004: £22 million)
    
    69
    
    39Profit/(loss) on disposal of subsidiaries (net of taxation £43 million,
      2004: £nil)
    
    184
    
    (1
    )Impairment of subsidiaries (net of taxation £nil, 2004: £nil)
    
    
    
    (20
    )Profit for the year from discontinued operations
    
    253
    
    19Basic earnings per ordinary share for discontinued operations
    
    16.3p
    
    0.6pDiluted earnings per ordinary share for discontinued operations
    
    15.8p
    
    0.6pBasic and diluted
  earnings per share are calculated using the weighted average number of ordinary
  shares as disclosed in note 8 on page 63.
Subsidiaries acquired with a view to resale: RadianzOn
    21 October 2004, Reuters entered into exclusive discussions with BT to secure
    a long-term agreement for the provision of network services, including the
    sale of Radianz to BT. As a prerequisite to this agreement Reuters acquired
    Equants 49% voting interest in Radianz, with a view to selling the 100%
    interest to BT.
  On 29 April
    2005, Reuters completed the sale of its 100% voting interest in Radianz to
    BT for gross proceeds of £115 million.
  Subsidiaries
    acquired with a view to resale are, by definition, discontinued operations
    under IFRS 5. However, IFRS 5 was only applicable from 1 January 2005, whereas
    Reuters acquired the remaining 49% of the voting shares in Radianz in November
    2004. Radianz was a subsidiary from this date, and was therefore consolidated
    under IAS 27 Consolidated and Separate Financial Statements. For
    presentation purposes, the results for the year and the balance sheet position
    at 31 December 2004 have been presented using the income statement and balance
    sheet headings detailed in IFRS 5. The 2004 profits after taxation of
    subsidiaries acquired with a view to resale of £1 million include
    a £9 million gain in respect of Reuters share of the disposal by Radianz
    of its Voice Services business offset by operating losses of Radianz for the
    year. Impairment of subsidiaries includes £3 million in respect of impairment
    of Radianzs net assets to fair value less costs to sell.
  The disposal
    of Radianz resulted in a loss on disposal of £4 million, which is presented
    within the profit/loss on disposal of subsidiaries within discontinued
    operations.
Disposal of subsidiaries: Instinet Group (including BTC)Reuters
    held approximately 62% of the shares in Instinet Group, a US based company,
    which was previously accounted for as a subsidiary of Reuters Group PLC on
    a 100% consolidated basis with offsetting minority interest.
  On 31 March
    2005, Reuters sold BTC, a soft dollar execution broker, to Instinet Group,
    for approximately 3.8 million shares of Instinet Group stock, valued at approximately
    £12 million. In 2004, an impairment loss of £17 million was recognised
    for BTC within profit for the year from discontinued operations.
  The sale to
    Instinet Group has been accounted for as a partial disposal of the Groups
    interest in BTC, which resulted in a loss of £3 million. BTC made profits
    after tax of £1 million in the period prior to sale.
  On 22 April
    2005, Instinet Group entered into a definitive agreement, pursuant to which
    NASDAQ would acquire all outstanding shares of Instinet Group.
  At the same
    time, Instinet Group also agreed to sell its subsidiary, Lynch, Jones &
    Ryan, Inc. (LJR) to the Bank of New York for £96 million in cash, which
    closed on 1 July 2005.
  In addition
    to these transactions, Instinet Groups Board approved the declaration
    of a dividend to all stockholders of an amount not to exceed the net proceeds
    of the LJR transaction. The dividend was declared in July for approximately
    £60 million in cash (Reuters share being approximately £37 million).
62
    
    Reuters
          Group PLCAnnual
          Report and Form 20-F 2005Back to Contents


Following regulatory
  approval, the NASDAQ transaction closed on 8 December 2005. The gross proceeds
received by the Group on completion of the sale were £612 million.
Reuters has
  recorded a net gain on sale of £191 million.
Instinet Groups
  results up until sale, a profit after taxation of £68 million (before minority
  interest), are also included in the Group results as part of discontinued operations.
2005
    
    2004Results
      of Instinet and BTC
    
    £m
    
    £mRevenue
    
    466
    
    551Operating costs
    
    (402
    )
    (517
    )Operating profit
    
    64
    
    34Finance income
    
    13
    
    7Profit on disposal of available-for-sale financial assets
    
    12
    
    20Profit before taxation
    
    89
    
    61Taxation
    
    (20
    )
    (22
    )Profit for the period
    
    69
    
    39The net cash flow attributable to discontinued operations is as follows:
2005
    
    2004£m
    
    £mCash generated from discontinued operations (see note 29)
    
    3
    
    (27
    )Tax paid
    
    (13
    )
    (9
    )Interest received
    
    13
    
    9Interest paid
    
    
    
    (1
    )Net cash flow from operating activities
    
    3
    
    (28
    )Net cash flow from investing activities*
    
    (474
    )
    28Net cash flow from financing activities
    
    (85)
    
    129Exchange gains/(losses) on cash and cash equivalents
    
    57
    
    (30
    )(Decrease)/increase in cash and cash equivalents from discontinued operations
    
    (499
    )
    99*
        In 2005,
      includes £582 million relating to cash held by subsidiaries at the
      date of disposal.08 Earnings per ordinary share
Basic earnings
  per ordinary share is based on the results attributable to equity shareholders
  and on the weighted average number of ordinary shares in issue during the year,
  excluding ordinary shares purchased by employee share ownership trusts and shares
  purchased as part of the share buyback and held as own shares.
Diluted earnings
  per share is calculated adjusting the weighted average number of ordinary shares
  used in the basic earnings per share calculation to assume conversion of all
  dilutive potential ordinary shares resulting from outstanding share options.
Weighted average number in millions
        
        2005
        
        
        2004Ordinary shares in issue
        
        1,438
        
        
        1,434Non-vested shares held by employee share ownership trusts
        
        (32
        )
        
        (34
        )Shares repurchased
        
        (10
        )
        
        Basic earnings per share denominator
        
        1,396
        
        
        1,400Issuable under employee share schemes
        
        41
        
        
        36Diluted earnings per share denominator
        
        1,437
        
        
        1,436Earnings per share from continuing and discontinued operations
        
        2005
        
        
        2004Profit attributable to equity holders of the company (£m)
        
        456
        
        
        364Basic earnings per share
        
        32.6p
        
        
        26.0
        pDiluted earnings per share
        
        31.7p
        
        
        25.4
        pEarnings per share from continuing operations
        
        2005
        
        
        2004Profit attributable to equity holders of the company (£m)
        
        229
        
        
        356Basic earnings per share
        
        16.3p
        
        
        25.4pDiluted earnings per share
        
        15.9p
        
        
        24.8p
Reuters
          Group PLCAnnual
          Report and Form 20-F 2005
    
    63Back to Contents


Notes
to the financial statementscontinued

09
  Remuneration of directors
Section 9 of the
    remuneration report includes details of directors emoluments,
    pension arrangements, long-term incentive plans and stock option plans, details
    of which form
  part of these financial statements.
Details of senior
  management remuneration are given in note 34 on page 95.
10 Employee information
The average number of employees during the year was as follows:
2005
    
    
    2004Business division:Sales & Trading
    
    491
    
    
    305Research & Asset Management
    
    658
    
    
    699Enterprise
    
    925
    
    
    296Media
    
    109
    
    
    64Shared divisional resources
    
    1,974
    
    
    2,181Total divisions
    
    4,157
    
    
    3,545Global Sales & Service Organisation
    
    5,438
    
    
    5,944Content
    
    3,841
    
    
    3,546Corporate Services
    
    1,582
    
    
    1,780Total continuing operations
    
    15,018
    
    
    14,815Discontinued operations
    
    846
    
    
    1,165Total average number of employees
    
    15,864
    
    
    15,980By location:UK and Ireland
    
    3,332
    
    
    3,429EMEA East
    
    2,266
    
    
    2,493EMEA West
    
    1,364
    
    
    1,522Americas
    
    4,292
    
    
    4,550Asia
    
    3,764
    
    
    2,821Total continuing operations
    
    15,018
    
    
    14,815Discontinued operations
    
    846
    
    
    1,165Total average number of employees
    
    15,864
    
    
    15,980By function:Production and communications
    
    8,498
    
    
    8,315Selling and marketing
    
    4,179
    
    
    3,878Support services and administration
    
    2,341
    
    
    2,622Total continuing operations
    
    15,018
    
    
    14,815Discontinued operations
    
    846
    
    
    1,165Total average number of employees
    
    15,864
    
    
    15,980The above include:Development staff
    
    2,332
    
    
    2,282The average
  number of employees during 2005 included 181 temporary staff (2004: 181).
64
    
    Reuters
          Group PLCAnnual
          Report and Form 20-F 2005Back to Contents
11 Consolidated reconciliation of changes in equity


Attributable
      to equity
    
    Minority
    
    Totalholders
      of parent
    interest
    equityShare
    
    Other
    
    Retainedcapital
    reserves
    earningsNote
    £m
    £m
    £m
    £m
    £m1
      January 2004
    
    
    
    449
    
    (1,717
    )
    1,569
    
    193
    
    494Actuarial
      losses on defined benefit plans
    
    25
    
    
    
    
    
    (205
    )
    
    
    (205
    )Exchange
      adjustments offset in reserves
    
    
    
    
    
    (34
    )
    
    
    (14
    )
    (48
    )Translation
      differences taken to the income statement on disposal of assets
    
    
    
    
    
    6
    
    
    
    
    
    6Taxation
      on the items taken directly to or transferred from equity
    
    
    
    
    
    (10
    )
    45
    
    
    
    35Net
      expense recognised directly in equity
    
    
    
    
    
    (38
    )
    (160
    )
    (14
    )
    (212
    )Profit
      for the year
    
    
    
    
    
    
    
    364
    
    11
    
    375Total
      recognised (expense)/income for 2004
    
    
    
    
    
    (38
    )
    204
    
    (3
    )
    163Employee
      share schemes
    
    
    
    
    
    
    
    28
    
    4
    
    32Taxation
      on employee share schemes
    
    
    
    
    
    
    
    9
    
    
    
    9Proceeds
      from shares issued to ordinary shareholders
    
    27
    
    6
    
    
    
    
    
    
    
    6Proceeds
      from shares issued to minority shareholders of Instinet
    
    
    
    
    
    
    
    
    
    4
    
    4Dividends:
    
    32Interim
      dividend for 2004
    
    
    
    
    
    
    
    (54
    )
    
    
    (54
    )Final
      dividend for 2003
    
    
    
    
    
    
    
    (86
    )
    
    
    (86
    )Other
      movements in equity
    
    
    
    
    
    
    
    1
    
    1
    
    231
      December 2004
    
    
    
    455
    
    (1,755
    )
    1,671
    
    199
    
    570Transitional
      adjustment on first-time adoption of IAS 39*
    
    
    
    
    
    108
    
    19
    
    2
    
    1291
      January 2005
    
    
    
    455
    
    (1,647
    )
    1,690
    
    201
    
    699Actuarial
      losses on defined benefit plans
    
    25
    
    
    
    
    
    (48
    )
    
    
    (48
    )Exchange
      adjustments offset in reserves
    
    
    
    
    
    97
    
    
    
    21
    
    118Translation
      differences taken to the income statement on disposal of assets
    
    
    
    
    
    (2
    )
    
    
    
    
    (2
    )Fair
      value losses on available-for-sale financial assets
    
    16
    
    
    
    (22
    )
    
    
    7
    
    (15
    )Fair
      value gains on available-for-sale financial assetstaken
      to the income statement on disposal of assets
    
    16
    
    
    
    (68
    )
    
    
    (5
    )
    (73
    )Fair
      value losses on net investment hedges
    
    17
    
    
    
    (39
    )
    
    
    
    
    (39
    )Fair
      value gains taken to the income statement on disposal of net investment
      hedges
    
    17
    
    
    
    (14
    )
    
    
    
    
    (14
    )Taxation
      on the items taken directly to or transferred from equity
    
    
    
    
    
    4
    
    10
    
    
    
    14Net
      expense recognised directly in equity
    
    
    
    
    
    (44
    )
    (38
    )
    23
    
    (59
    )Profit
      for the year
    
    
    
    
    
    
    
    456
    
    26
    
    482Total
      recognised (expense)/income for 2005
    
    
    
    
    
    (44
    )
    418
    
    49
    
    423Employee
      share schemes
    
    
    
    
    
    
    
    40
    
    7
    
    47Taxation
      on employee share schemes
    
    
    
    
    
    
    
    11
    
    
    
    11Purchase
      of own shares**
    
    
    
    
    
    
    
    (224
    )
    
    
    (224
    )Proceeds
      from shares issued to ordinary shareholders
    
    27
    
    12
    
    
    
    
    
    
    
    12Proceeds
      of shares issued to minority shareholders of Instinet
    
    
    
    
    
    
    
    
    
    3
    
    3Dividends:
    
    32Interim
      dividend for 2005
    
    
    
    
    
    
    
    (54
    )
    
    
    (54
    )Final
      dividend for 2004
    
    
    
    
    
    
    
    (86
    )
    
    
    (86
    )Share
      of Instinets dividend paid to minority shareholders
    
    
    
    
    
    
    
    
    
    (23
    )
    (23
    )Other
      movements in equity
    
    
    
    
    
    (1
    )
    
    
    
    
    (1
    )Minority
      interest in subsidiary disposed in the year
    
    
    
    
    
    
    
    
    
    (237
    )
    (237
    )31
      December 2005
    
    
    
    467
    
    (1,692
    )
    1,795
    
    
    
    570*
        The transitional adjustment on the balance sheet at 1 January 2005 primarily comprises recognition of the fair value of the Groups investments in Savvis (£45 million gain) and
Tibco Software Inc (TSI) (£86 million gain), offset by initial recognition of embedded derivatives (£14 million loss plus £3 million taxation credit). Note 17 on page 73 includes further details.**
        Purchase of own shares represents the cost of 57 million shares in Reuters Group PLC purchased in the market as a part of the ongoing buyback programme.Please refer to note 27 on page 89 and note 28 on page 90 for more information on the nature of and movements in share capital and other reserves respectively.
Retained earnings is stated after deducting £206 million (2004: £213
million) in respect of shares held by Reuters Employee Share Option Trusts (ESOTs)
to satisfy certain options
under the Groups share option plans (see note 33 on page 93).
Reuters
          Group PLCAnnual
    Report and Form 20-F 2005
    
    65Back to Contents


Notes to the financial statementscontinued

12
    Segmental analysis  balance sheet
Primary
  reportable segmentsThe tables below show assets, liabilities and other information by business division. The assets and liabilities are attributed to business divisions using methodologies consistent with
those applied to revenues and costs (see note 1):
Shared assets by business division consist principally of taxation, hedging derivatives,
short-term investments, cash and borrowings as these are not managed separately
by the division.

31
      December 2005ResearchSales
      &
    &
      AssetTrading
    Management
    Enterprise
    Media
    Shared
    Total£m
    £m
    £m
    £m
    £m
    £mAssets
      (excluding investment in associates and joint ventures)
    
    661
    
    253
    
    183
    
    43
    
    961
    
    2,101Investment
      in associates and joint ventures
    
    11
    
    5
    
    3
    
    17
    
    
    
    36Total
      assets
    
    672
    
    258
    
    186
    
    60
    
    961
    
    2,137Total
      liabilities
    
    (506
    )
    (128
    )
    (146
    )
    (70
    )
    (717
    )
    (1,567
    )Capital
      expenditure
    
    197
    
    53
    
    82
    
    14
    
    
    
    34631
      December 2004ResearchSales
      &
    &
      AssetTrading
    Management
    Enterprise
    Media
    Instinet
    Shared
    Total£m
    £m
    £m
    £m
    £m
    £m
    £mAssets
      (excluding investment in associates and joint ventures)
    
    629
    
    184
    
    182
    
    34
    
    919
    
    597
    
    2,545Investment
      in associates and joint ventures
    
    9
    
    5
    
    3
    
    18
    
    
    
    
    
    35Total
      assets
    
    638
    
    189
    
    185
    
    52
    
    919
    
    597
    
    2,580Total
      liabilities
    
    (511
    )
    (120
    )
    (151
    )
    (66
    )
    (397
    )
    (765
    )
    (2,010
    )Capital
      expenditure
    
    71
    
    20
    
    28
    
    6
    
    19
    
    
    
    144Secondary
      reportable segments31
      December 2005
    
    
    
    31
      December 2004Total
    
    Capital
    
    Total
    
    Capitalassets
    expenditure
    assets
    
    expenditureBy
      geographical location
    £m
    £m
    £m
    
    £mUK
      and Ireland
    
    314
    
    127
    
    476
    
    57EMEA
      West
    
    67
    
    18
    
    140
    
    2EMEA
      East
    
    208
    
    46
    
    147
    
    14Americas
    
    520
    
    99
    
    1,102
    
    56Asia
    
    143
    
    56
    
    133
    
    15Central
    
    885
    
    
    
    582
    
    Total
    
    2,137
    
    346
    
    2,580
    
    144Central assets by geography consist principally of investments in associates and joint ventures, taxation, hedging derivatives and centrally managed cash and short-term
investments.
66
    
    Reuters
          Group PLCAnnual
    Report and Form 20-F 2005Back to Contents
13 Intangible assets


InternallyTrade
    Customer
    Technology
    generated
    PurchasedGoodwill
    names
    relationships
    know-how
    software
    software
    Total£m
    £m
    £m
    £m
    £m
    £m
    £mCost:1
      January 2004
    
    243
    
    30
    
    
    
    153
    
    21
    
    53
    
    500Exchange
      differences
    
    (14
    )
    (2
    )
    
    
    (9
    )
    
    
    (2
    )
    (27
    )Additions:Acquisition
      of subsidiaries
    
    5
    
    1
    
    1
    
    
    
    
    
    
    
    7Other
      additions
    
    
    
    
    
    
    
    
    
    23
    
    3
    
    26Disposals
    
    (19
    )
    
    
    
    
    
    
    
    
    
    
    (19
    )Adjustments*
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    (6
    )31
      December 2004
    
    209
    
    29
    
    1
    
    144
    
    44
    
    54
    
    481Exchange
      differences
    
    24
    
    3
    
    4
    
    6
    
    1
    
    2
    
    40Additions:Acquisition
      of subsidiaries
    
    103
    
    4
    
    59
    
    4
    
    
    
    
    
    170Other
      additions
    
    
    
    
    
    
    
    
    
    29
    
    11
    
    40Reclassifications**
    
    (9
    )
    (3
    )
    
    
    (65
    )
    
    
    (3
    )
    (80
    )31
      December 2005
    
    327
    
    33
    
    64
    
    89
    
    74
    
    64
    
    651Amortisation
      and impairment:1
      January 2004
    
    
    
    (9
    )
    
    
    (50
    )
    (2
    )
    (19
    )
    (80
    )Exchange
      differences
    
    
    
    
    
    
    
    4
    
    
    
    1
    
    5Charged
      in the year:Amortisation
    
    
    
    (2
    )
    
    
    (20
    )
    (2
    )
    (11
    )
    (35
    )Impairment
    
    (18
    )
    
    
    
    
    
    
    (34
    )
    (3
    )
    (55
    )31
      December 2004
    
    (18
    )
    (11
    )
    
    
    (66
    )
    (38
    )
    (32
    )
    (165
    )Exchange
      differences
    
    
    
    (2
    )
    
    
    (3
    )
    
    
    (2
    )
    (7
    )Charged
      in the year:Amortisation
    
    
    
    (3
    )
    (4
    )
    (15
    )
    (3
    )
    (10
    )
    (35
    )Impairment
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )Reclassifications**
    
    
    
    3
    
    
    
    38
    
    
    
    3
    
    4431
      December 2005
    
    (18
    )
    (13
    )
    (4
    )
    (46
    )
    (42
    )
    (41
    )
    (164
    )Carrying
      amount:31
      December 2004
    
    191
    
    18
    
    1
    
    78
    
    6
    
    22
    
    31631
      December 2005
    
    309
    
    20
    
    60
    
    43
    
    32
    
    23
    
    487*
        Adjustments of £6 million to goodwill in 2004 relate to the finalisation of earn out agreements in relation to the acquisition of AVT Technologies Limited and Capital Access
International LLC, and also to the finalisation of fair value adjustments in respect of the acquisition of Multex. Fair value adjustments are based on an independent valuation performed by professionally-qualified valuers.**
        Reclassifications relate to Instinet Group which was classified as a discontinued operation prior to its disposal during the year.Carrying amount of intangibles other than goodwill, internally-generated software and purchased software, includes the following balances which are considered to be material to the
Groups financial statements:
Arising on acquisition of
        Nature (included in category)
        Date of acquisition
        Carrying amount £m
        Remaining amortisation periodTelerate
        Customer relationships
        June 2005
        52
        9 years, 5 monthsBridge
        Trade names
        October 2001
        16
        5 years, 9 monthsBridge
        Technology know-how
        October 2001
        15
        5 years, 9 monthsReuters
          Group PLCAnnual
          Report and Form 20-F 2005
    
    67Back to Contents


Notes to the financial statementscontinued

Impairment
      tests of goodwill during 2005No impairment losses in respect of goodwill have been recognised in 2005.
For the purpose of performing impairment reviews, Reuters has identified eight cash generating units (CGUs). Annual impairment reviews are performed as at1
July for all CGUs, which include allocated intangible assets with indefinite
useful lives. No intangible assets other than goodwill have indefinite useful
lives. These reviews compare the carrying value of each CGU with the present
value of future cash flows arising from the use of the assets of the unit (value
in use). If the value in use is less than the carrying value of the CGU, an impairment
loss is recognised immediately in the
income statement.
Goodwill has been allocated directly to CGUs, with the exception of goodwill
  arising from the acquisition of Telerate. This goodwill has been allocated £48
  million to the Sales & Trading division and £24 million to the Enterprise
  division (excluding Risk) on the basis of the anticipated performance of Telerates
products in each of the markets in which they operate.

Carrying
    amount of goodwill at31 December 2005
        
        31 December 2004Business division
        Cash Generating Unit
        
        £m
        
        £mSales & Trading
        Sales & Trading
        
        132
        
        74Bridge Trading Company
        
        
        
        8Research & Asset Management
        Investment Banking & Investment Management
        
        103
        
        74Wealth Management
        
        
        
        Lipper
        
        31
        
        22Enterprise
        Enterprise (excluding Risk)
        
        29
        
        4Risk
        
        9
        
        9Media
        Media
        
        5
        
        Total
        
        
        309
        
        191
Key assumptions used in the value in use calculations are as follows:
Cash flow projections are derived from financial plans approved by the Board
and cover a five year period. They reflect managements expectations of
revenue growth, operating cost and margin for each CGU based on past experience.
Projections exclude the expected revenue and cost synergy benefits arising from
the various Core Plus growth strategies. Cash flows beyond the five year period
have been extrapolated using estimated
terminal growth rates.
A pre-tax discount rate of 9% (2004: 9%), reflecting the risks relating to the
CGUs has been applied to cash flow projections. For accounting purposes, impairment
testing has been performed using perpetuity growth rates ranging from 0% to 3%
(2004: 0% to 3%). The rates used have been determined with regard to projected
growth for the specific markets in which the CGUs participate. These rates are
below the long-term average growth rate
for the businesses in which Reuters operates.
The forecasts are most sensitive to changes in projected revenue growth rates
in the first five years of the forecast period. However, there is significant
headroom and forecast revenues would have to be more than 7% lower than currently
projected, before a possible impairment charge would be indicated.
Impairment of goodwill and intangibles during 2004Impairment losses
in respect of goodwill in 2004 totalled £18 million, £17 million of
which related to BTC, the soft dollar execution broker business.
In March 2005, Reuters agreed to sell BTC to Instinet Group in exchange for 3.8
million shares of Instinet Group. As a result, Reuters recognised a £17
million impairment loss on goodwill relating to BTC, which formed its own cash
generating unit. Business had declined since the original purchase and future
business could be further impacted by changes in the external marketplace. The
loss was calculated on the basis of fair value less selling costs, as the value
of the business could be ascertained by the existence in 2004 of an arms-length
sale and purchase agreement. Although Instinet Group was a Group subsidiary at
the time of the sale, Reuters had already announced an intention to sell the
Instinet Group, subject to regulatory approval. The negotiations for the sale
of BTC were therefore conducted on an arms-length basis. The impairment loss
was reported within the Sales & Trading division and reclassified to discontinued
operations in 2005.
Reuters also recorded a £37 million impairment on internally generated and
purchased software of which £30 million relates to the impairment of a new
order entry and billing system. During 2004, management revised the architectural
solution to be simpler and more consistent with industry standards, leading to
impairment of all of the previously capitalised expenditure. Management considers
this decision will lead to a more cost effective and easier to execute solution
in the longer term. The impairment loss has been allocated to the Sales & Trading
(70%), Research & Asset Management (12%) and Enterprise (18%) business divisions.
The balance relates to an impairment recorded in respect of development costs
capitalised in our internal effort to build Reuters Knowledge for Investment
Banking which was rationalised in favour of the newly acquired Multex platform
and a write down in the value of capitalised software for Instinet Group which
has been reclassified to discontinued operations in 2005.
68
    
    Reuters
          Group PLCAnnual
          Report and Form 20-F 2005Back to Contents
14 Property,
    plant and
equipment
OfficeComputer
  
  equipmentFreehold
        
        Leasehold
        
        systems
        
        and motorproperty
        
        property
        
        equipment
        
        vehicles
        
        Total£m
        
        £m
        
        £m
        
        £m
        
        £mCost:1 January 2004
        
        241
        
        214
        
        1,038
        
        247
        
        1,740Exchange differences
        
        (6
        )
        (12
        )
        (34
        )
        (10
        )
        (62
        )Additions
        
        1
        
        32
        
        69
        
        9
        
        111Disposals
        
        (83
        )
        (47
        )
        (215
        )
        (53
        )
        (398
        )31 December 2004
        
        153
        
        187
        
        858
        
        193
        
        1,391Exchange differences
        
        1
        
        8
        
        36
        
        4
        
        49Additions
        
        5
        
        41
        
        80
        
        11
        
        137Acquisitions
        
        
        
        
        
        1
        
        1
        
        2Disposals
        
        
        
        (8
        )
        (91
        )
        (15
        )
        (114
        )Reclassifications*
        
        (1
        )
        (62
        )
        (41
        )
        (36
        )
        (140
        )31 December 2005
        
        158
        
        166
        
        843
        
        158
        
        1,325Depreciation:1 January 2004
        
        (95
        )
        (112
        )
        (853
        )
        (203
        )
        (1,263
        )Exchange differences
        
        6
        
        3
        
        32
        
        5
        
        46Charged in the year
        
        (8
        )
        (11
        )
        (95
        )
        (16
        )
        (130
        )Disposals
        
        27
        
        27
        
        208
        
        48
        
        31031 December 2004
        
        (70
        )
        (93
        )
        (708
        )
        (166
        )
        (1,037
        )Exchange differences
        
        (1
        )
        (3
        )
        (29
        )
        (3
        )
        (36
        )Charged in the year
        
        (4
        )
        (13
        )
        (73
        )
        (13
        )
        (103
        )Disposals
        
        
        
        8
        
        89
        
        14
        
        111Reclassifications*
        
        
        
        31
        
        33
        
        34
        
        9831 December 2005
        
        (75
        )
        (70
        )
        (688
        )
        (134
        )
        (967
        )Carrying amount:31 December 2004
        
        83
        
        94
        
        150
        
        27
        
        35431 December 2005
        
        83
        
        96
        
        155
        
        24
        
        358*
    Reclassifications
      relate to Instinet Groups property, plant and equipment which was
      classified as discontinued operation prior to disposal during the year,
      other assets held for sale at the balance sheet date and depreciation capitalised
      as intangible assets.2005
    
    2004Carrying
          amount of leasehold property
    
    £m
    
    £mLong-term leaseholds
    
    33
    
    32Short-term leaseholds
    
    63
    
    62Total
          leasehold property
    
    96
    
    94The carrying amount of computer systems equipment includes an amount of £2 million in respect of subscriber equipment being sourced and managed by IBM on behalf of Reuters. This
equipment has been classified as an asset held under finance lease (2004: £nil). The agreement for provision of equipment and services by IBM includes a renewal clause and an option to purchase the equipment at fair market value.

Reuters
          Group PLCAnnual
          Report and Form 20-F 2005
    
    69Back to Contents


Notes
  to the financial statementscontinued

15 Investments
accounted for using the equity method
Interestsin joint
        
        Interests inventures
        
        associates
        
        Total£m
        
        £m
        
        £mNet assets/cost:1 January 2004
        
        72
        
        207
        
        279Reclassifications*
        
        (47
        )
        (31
        )
        (78
        )Exchange differences
        
        (1
        )
        
        
        (1
        )Arising in year  share of:Operating profits
        
        5
        
        8
        
        13Taxation
        
        
        
        (2
        )
        (2
        )Dividends received
        
        (3
        )
        (1
        )
        (4
        )Loans repaid to joint ventures
        
        5
        
        
        
        5Disposals
        
        
        
        (176
        )
        (176
        )Shareholder taxes
        
        (2
        )
        
        
        (2
        )31 December 2004
        
        29
        
        5
        
        34Exchange differences
        
        2
        
        
        
        2Arising in year  share of:Operating profits
        
        5
        
        
        
        5Interest receivable
        
        1
        
        
        
        1Taxation
        
        (1
        )
        
        
        (1
        )Additions
        
        1
        
        
        
        1Dividends received
        
        (4
        )
        
        
        (4
        )Disposals
        
        (1
        )
        
        
        (1
        )Impairments
        
        
        
        (2
        )
        (2
        )31 December 2005
        
        32
        
        3
        
        35Goodwill:1 January 2004
        
        
        
        1
        
        131 December 2004
        
        
        
        1
        
        131 December 2005
        
        
        
        1
        
        1Carrying amount:Net assets/cost
        
        29
        
        5
        
        34Goodwill
        
        
        
        1
        
        131 December 2004
        
        29
        
        6
        
        35Net assets/cost
        
        32
        
        3
        
        35Goodwill
        
        
        
        1
        
        131 December 2005
        
        32
        
        4
        
        36*
        Reclassifications
      relate to the Groups investment in Radianz, which was classified
    as discontinued operation in 2004 and sold during 2005.The Group holds 50% of the voting stock in Factiva which is a joint venture between Reuters and Dow Jones that provides a deep historical archive of Reuters news, Dow Jones news and around
8,000 additional publications.
The Group holds a 51% interest in AFE Solutions Limited, a 39% holding in 3 Times
Square Associates LLC and a 40% holding in Independent Research Network LLC,
being other jointly controlled entities accounted for under the equity method
of accounting.
70
    
    Reuters
          Group PLCAnnual
          Report and Form 20-F 2005Back to Contents


Summarised financial information in respect of the Groups interests in joint ventures at 31 December is as follows:
2005
    
    2004£m
    £mIncome
    
    83
    
    80Expenses
    
    (78
    )
    (75
    )Profit
    
    5
    
    5Non-current
      assets
    
    76
    
    66Current
      assets
    
    37
    
    37Current
      liabilities
    
    (20
    )
    (19
    )Non-current
      liabilities
    
    (61
    )
    (55
    )Carrying
      value
    
    32
    
    29Summarised financial information in respect of the Groups interests in its principal associates at 31 December is as follows:
2005
    
    2004£m
    £mRevenues
    
    21
    
    43Profit
    
    
    
    6Assets
    
    19
    
    17Liabilities
    
    (15
    )
    (11
    )Carrying
      value
    
    4
    
    616 Other financial assets and liabilities
Other financial assets and derivatives are stated at fair value in 2005 and comparatives have been presented under UK GAAP as noted in the accounting policies. They include the
following:
2005
    
    2004£m
    £mAvailable-for-sale
      financial assets:Equity
      securities
    
    13
    
    47Other
      available-for-sale financial assets
    
    5
    
    10Short-term
      investments
    
    1
    
    258Derivative
      financial instruments (see note 17)
    
    21
    
    Total
    
    40
    
    315Less:
      Non-current portion
    
    (22
    )
    (28
    )Current
      portion
    
    18
    
    287Movements in the carrying value of available-for-sale financial assets are analysed as follows:
2005
    
    2004£m
    £mOpening
      balance
    
    57
    
    54Adjustment
      on adoption of IAS 39 on 1 January 2005
    
    101
    
    Opening
      balance as adjusted
    
    158
    
    54Foreign
      exchange
    
    
    
    (1
    )Additions
    
    1
    
    Fair
      value adjustments transferred to equity
    
    (50
    )
    Reclassifications*
    
    (23
    )
    31Disposals
    
    (68
    )
    (27
    )Closing
      balance
    
    18
    
    57*
    Reclassifications
      in 2005 include balances transferred to assets held for sale and liabilities
      associated with assets held for sale. Reclassifications in 2004 include
      balances transferred from investments in associates, following Reuters part-disposal
      of its stake in TSI.Reuters
      Group PLCAnnual
      Report and Form 20-F 2005
    
    71Back to Contents


Notes
  to the financial statementscontinued

Fair value movements on other financial assets and liabilities recognised during 2005 include the following:
Fair
      valuegain/(loss)
    Fair
      valuein
      income
    gain/(loss)statement
    in
      equity£m
    £mAvailable-for-sale
      financial assets
    
    
    
    (50
    )Financial
      assets held at fair value through profit or loss
    
    (16
    )
    Embedded
      derivatives in revenue contracts
    
    21
    
    Embedded
      derivatives in supplier contracts
    
    (2
    )
    Hedging
      instruments:Cross-currency
      interest rate swaps  fair value hedges
    
    (1
    )
    Cross-currency
      interest rate swaps  net investment hedges
    
    (1
    )
    (39
    )Total
    
    1
    
    (89
    )Other financial liabilities include the following:
2005
    
    2004£m
    £mBorrowings:Bank
      overdrafts
    
    25
    
    17Bank
      loans
    
    
    
    37Term
      notes and commercial paper
    
    383
    
    456Finance
      lease payables
    
    2
    
    Total
      borrowings
    
    410
    
    510Derivative
      financial instruments (see note 17)
    
    10
    
    Total
    
    420
    
    510Less:
      Non-current portion
    
    (371
    )
    (329
    )Current
      portion
    
    49
    
    181The term notes
  principally relate to a public bond of £356 million which is repayable
  in November 2010 and incurs interest at a fixed rate of 4.6%.
The maturity profile of finance lease payables is as below:
Minimum
      lease payments
    
    Present
      value of minimum lease payments2005
    
    2004
    
    2005
    
    2004£m
    £m
    £m
    £mWithin
      one year
    
    1
    
    
    
    1
    
    One
      to five years
    
    1
    
    
    
    1
    
    Greater
      than five years
    
    
    
    
    
    
    
    2
    
    
    
    2
    
    The fair value
  of the Groups lease obligations approximates to their carrying amounts.

72
    
    Reuters
      Group PLCAnnual
      Report and Form 20-F 2005Back to Contents

17
  Derivatives and other financial instruments
IAS 32 Financial Instruments: Presentation and Disclosure and IAS 39 Financial Instruments: Recognition and Measurement were adopted by the Group with effect from 1
January 2005. Financial information was prepared under UK GAAP for the financial period ended 31 December 2004. Comparative information for 2004 is therefore shown separately after the 2005 information below.
Management
  of financial riskThe Groups
  activities expose it to a variety of financial risks: market risk (including
  currency risk, fair value interest rate risk and price risk), credit risk, liquidity
  risk and cash flow interest rate risk. The Groups overall risk management
  programme focuses on the unpredictability of financial markets and seeks to
  minimise potential adverse effects on the Groups financial performance.
The main risks managed by the Group, under policies approved by the Board, are foreign currency risk, interest rate risk, liquidity and refinancing risk and counterparty credit risk. The
Board periodically reviews Reuters treasury activities, policies and procedures. All treasury activity takes place within a formal control framework.
Market
riskCurrency
  riskForeign
  exchange risk arises from cash flows relating to commercial transactions, recognised
  assets and liabilities and net investments in foreign operations.
  Transaction exposure occurs when, as a result of trading activities, an entity receives or pays cash in a currency different from its functional currency. A substantial portion of Reuters
revenue is receivable in foreign currencies with terms of payments up to three months in advance. Reuters is exposed to currency risk from committed revenue for periods of up to two years.
The Group has certain investments in foreign operations, whose net assets and related goodwill are exposed to foreign currency translation risk. The main currencies to which the Group is
exposed are the US dollar, the Swiss franc and the Euro. Group policy is for currency exposure to be managed primarily through maintaining debt in currencies approximately proportionate to the foreign currency net assets. The currency of the debt
may be altered by the use of currency swaps.
Price
  riskMovements
  in equity security prices change the carrying value of available-for-sale financial
  assets, with changes being recorded in equity. On adoption of IAS 39 on 1 January
  2005, Reuters designated its investment in Savvis convertible preference shares
  as being held at fair value through profit or loss, with movements in the fair
  value being recognised within the income statement. The shares were pledged
  as part of the consideration for the Telerate acquisition (see note 36) in June
  2005 and no further fair value movements were recorded in the income statement
  after this point.
The Group does not have a material exposure to commodity price risk.
Credit
  riskThe Group
  is exposed to concentrations of credit risk. Trade debtors are concentrated
  in the financial community. The Group estimates that approximately 72% of its
  subscribers are financial institutions, 14% are corporations in other sectors
  of the business community, 9% are from the news media and 5% are government
  institutions and individuals worldwide (2004: 72%, 17%, 4% and 7%).
The maximum exposure to credit risk at 31 December 2005 was as follows: trade receivables £120 million, amounts owed by associates and joint ventures £4 million, accrued income
£38 million, short-term investments £1 million, cash and equivalents £662 million and derivatives £21 million (2004: £131 million, £3 million, £38 million, £258 million, £578 million, £64
million).
The Group invests with high credit quality financial institutions. The Group has policies that limit the amount of credit exposure to any one financial institution. All derivative
instruments are unsecured, but the amount of this credit risk is generally restricted to any fair value gain and not the principal amount hedged. However, Reuters does not anticipate non-performance by the counterparties who are all banks with
recognised long-term credit ratings of A3/A- or higher.
Liquidity
  riskPrudent
  liquidity risk management implies maintaining sufficient cash and marketable
  securities, the availability of funding through an adequate amount of committed
  credit facilities and the ability to close out market positions. Reuters manages
  its net debt position and interest costs to support its continued access to
  the full range of debt capital markets.
In April 2003, Reuters entered into a committed syndicated credit facility for £1.0 billion. In 2004, £520 million of the facility either expired or was voluntarily cancelled. At
31 December 2005, Reuters had £480 million available under the facility. The facility was undrawn during 2005. The commitment expires and final repayment is due in April 2008.
At the same time as the syndicated facility was arranged, committed bilateral facilities of £90 million were also put in place on similar terms. During 2004, £66 million of the
facilities either expired or were voluntarily cancelled. At 31 December 2005, Reuters had £24 million available, all of which was undrawn. No loans were outstanding under this facility during 2005.
In March 1998, Reuters established a Euro commercial paper programme. This provides access to £1.5 billion of uncommitted short-term finance of which £1.5 billion was unused at 31
December 2005 (£1.4 billion was unused at 31 December 2004). In December 1998, Reuters established a £1.0 billion Euro medium-term note programme of which £631 million was unused at 31 December 2005 (£613 million was unused at 31
December 2004).
In addition, at 31 December 2005, the Group had unused, short-term, uncommitted bank borrowing facilities denominated in various currencies, the sterling equivalent of which was
approximately £139 million, at money market rates.
Cash
  flow and fair value interest rate riskThe Groups
  interest rate risk arises from interest-bearing assets and from borrowings.
Investments and borrowings subject to variable rates expose the Group to cash flow interest rate risk, which is the risk that future cash flows will fluctuate because of changes in market
interest rates. Investments and borrowings subject to fixed rates expose the Group to fair value interest rate risk, as the fair value of the financial instrument fluctuates because of changes in market interest rates.
The Group has
  no specific requirements on the exact proportion of interest that should be
  fixed or floating. The position is reviewed periodically on a currency by currency
  basis. Various factors are considered in the review including existing debt
  covenant restrictions, forecast core debt levels and prevailing market conditions.
  Based on this review, the Group manages its cash flow interest rate risk by
  using interest rate swaps. Under interest rate swaps, the Group agrees with
  other parties to exchange, at specified intervals (mainly quarterly), the difference
  between fixed contract rates and floating-rate interest amounts calculated by
  reference to the agreed notional principal amounts.
Reuters
      Group PLCAnnual
      Report and Form 20-F 2005
    
    73Back to Contents


Notes to the financial statementscontinued

Financial assets and liabilitiesCarrying and fair values of Group financial assets and liabilities at 31 December
  were:
2005Carrying value
        
        Fair value£m
        
        £mDerivative instruments:Cross-currency interest rate swaps  fair value hedges < 1 year
        
        2
        
        2Cross-currency interest rate swaps  fair value hedges > 1 year
        
        12
        
        12Embedded derivatives in revenue contracts
        
        6
        
        6Embedded derivatives in supplier contracts
        
        (1
        )
        (1
        )Cross-currency interest rate swaps  net investment hedges
        
        (8
        )
        (8
        )Financial assets:Available-for-sale assets (see note 16)
        
        18
        
        18Trade receivables less provision for impairment (see note 19)
        
        120
        
        120Amounts owed by associates and joint ventures (see note 19)
        
        4
        
        4Other receivables (see note 19)
        
        68
        
        68Accrued income*
        
        38
        
        38Short-term investments (see note 16)
        
        1
        
        1Cash and cash equivalents (see note 20)
        
        662
        
        662Financial liabilities:Borrowings (see note 16)
        
        (410
        )
        (410
        )Trade payables (see note 22)
        
        (14
        )
        (14
        )Accruals**
        
        (262
        )
        (262
        )Amounts owed to associates and joint ventures (see note 22)
        
        (11
        )
        (11
        )Other payables***
        
        (36
        )
        (36
        )Other provisions and liabilities for charges****
        
        (113
        )
        (113
        )Total
        
        76
        
        76*
    Prepayments
        and accrued income in note 19 (£78 million) include £40 million
    of prepayments that are not financial assets.**
    Accruals
        in note 22 (£264 million) include £2 million of non-financial
    liabilities.***
    Other payables
        in note 22 (£48 million) include £3 million of progress payments
        on contracts and £9 million of subscriptions in advance which are
        non-financial
liabilities.****
    Other provisions
        and liabilities for charges in note 24 (£139 million) includes £26
    million of non-financial liabilities.The fair value of foreign exchange contracts is determined using forward exchange market rates at the balance sheet date. Other financial instruments are valued using standard pricing
models based on quoted forward market rates, interpolated between dates where appropriate, and discounted cash flow techniques.
Embedded derivatives
  arise in revenue and supplier contracts where the currency of the contract is
  different from the functional currencies of the parties involved. The derivatives
  are separated from the host contracts and valued using quoted forward market
  rates.
Borrowings are
  recorded initially at fair value and subsequently recorded at amortised cost,
  adjusted for fair value movements in respect of related fair value hedges.
Derivative instrumentsDerivative
  instruments held at 31 December 2005 were:
Grosscontractamounts
        Assets
        Liabilities£m
        £m
        £mMaturing
      in less than one year:Cross-currency
      interest rate swaps  fair value hedges
        
        19
        2
        Forward
      foreign exchange contracts  held for trading
        
        131
        
        Embedded
      derivatives in revenue contracts
        
        440
        6
        Embedded
      derivatives in supplier contracts
        
        26
        
        1616
        8
        1Maturing
      in greater than one year:Cross currency
      interest rate swaps  net investment hedges
        
        304
        1
        9Cross currency
      interest rate swaps  fair value hedges
        
        337
        12
        Interest
      rate swaps  fair value hedges
        
        10
        
        651
        13
        9Total
        
        1,267
        21
        10Gross contract
  amounts are calculated at historical exchange rates.
During 2005,
  certain derivatives were transacted for the purpose of providing an economic
  hedge for an underlying risk but were not formally documented as hedges and
  consequently are classified above as forward foreign exchange contracts 
  held for trading.

74
    
    Reuters
          Group PLCAnnual
          Report and Form 20-F 2005Back to Contents


Reuters designated its investment in Savvis convertible preference shares as being held at fair value through profit or loss at 1 January 2005. The investment was pledged as part of the
consideration on the Telerate acquisition in June 2005 (see note 36). Movements in the fair value of the investment between the start of the year and the date of disposal have been recognised within the income statement.
The following
    table provides an analysis by currency of interest rate swaps held for risk
management purposes at 31 December 2005:
Gross
      contractamountReceived
    Paid
    
    £mEuro fixed
    Sterling
      floating
    
    351Euro fixed
    Euro floating
    
    10Japanese
      yen fixed
    Sterling
      floating
    
    5Sterling
      floating
    US dollar
      floating
    
    280Sterling
      floating
    Swiss franc
      floating
    
    24Total
    
    
    670Interest is receivable under swap contracts at rates between 0.1% and 5.3% and is payable at rates between 1.5% and 5.3% . Interest rate swaps are due to mature at various dates between
January 2006 and November 2010.
The following table provides an analysis by currency of forward exchange contracts
  held for risk management purposes at 31 December 2005:
Gross contractamount£mSales:US dollar
        
        22Euro
        
        14Japanese yen
        
        12Australian dollar
        
        8Hong Kong dollar
        
        8Canadian dollar
        
        7Purchases:Singapore dollar
        
        24South Africa rand
        
        23Swiss franc
        
        9Other
        
        4Total
        
        131Foreign exchange forward contracts are due to mature in January 2006.
Hedges of net investment in foreign entityThe
  Groups long-term borrowing undertaken in November 2003 was swapped into US dollars and Swiss francs by transacting cross-currency interest rate swaps and designated as a hedge of
  the net investment in the Groups foreign subsidiaries. The resulting debt of $470 million was designated against the US dollar foreign investment in Instinet Group until the time of its disposal and subsequently restructured and
  redesignated as a hedge of $498 million against the foreign investment
  in Reuters America LLC and goodwill arising on various acquisitions. The resulting
  Swiss franc liability of 55 million Swiss francs is designated as a hedge of
  the foreign investment in Reuters SA. The foreign exchange risk arising on
  retranslation
  of a485 million
  quasi-equity loan from Reuters Finance (CI) Limited to Reuters Group PLC was hedged into sterling by designating a cross-currency interest rate swap as a hedge.
Hedges of fair valuesThe fair value interest rate risk of the500 million fixed rate bond issued
by Reuters Finance PLC was hedged by being swapped into floating rate interest.
The foreign exchange risk arising from retranslation and interest rate risk arising
from the impact of changes in interest rates on the fair values of foreign currency
medium-term notes amounting to £27 million and maturing in 2006 and 2008
were also swapped into floating rate sterling interest rates. The above hedges
were
executed in the form of cross-currency interest rate swaps.
  The weighted
    average variable rate payable on the interest rate swaps used to alter the
    currency and interest rate profile of debt issued at 31 December 2005 was
    5%. The weighted average variable rate is based on the rate implied in the
    yield curve at the balance sheet date.
Financial instrument sensitivity analysisThe
analysis below summarises the sensitivity of the fair value of the Groups
financial instruments to hypothetical changes in market rates. Fair values are
the present value of future cash flows based on market rates at the valuation
date.
  The estimated
    adverse changes in the fair value of financial instruments are based on an
    instantaneous:
•
    1% increase in the specific rate of interest from the levels effective at 31 December 2005 with all other variables
remaining constant; and•
    10% weakening in the value of sterling against all other currencies from the levels applicable at 31 December 2005 with
all other variables remaining constant.

Reuters
          Group PLCAnnual
          Report and Form 20-F 2005
    
    75Back to Contents


Notes
  to the financial statementscontinued

Fair value changes arising from10% weakeningin other1% increase in
        
        currenciesFair value
        
        interest rates
        
        against ££m
        
        £m
        
        £mFinancial assets:Available-for-sale assets (see note 16)
        
        18
        
        
        
        (2
        )Trade receivables less provision for impairment (see note 19)
        
        120
        
        
        
        (12
        )Amounts owed by associates and joint ventures (see note 19)
        
        4
        
        
        
        Other receivables (see note 19)
        
        68
        
        
        
        (4
        )Accrued income*
        
        38
        
        
        
        (3
        )Short-term investments (see note 16)
        
        1
        
        
        
        Cash and cash equivalents (see note 20)
        
        662
        
        
        
        Financial liabilities:Borrowings (see note 16)
        
        (410
        )
        22
        
        38Trade payables (see note 22)
        
        (14
        )
        
        
        1Accruals**
        
        (262
        )
        
        
        16Amounts owed to associates and joint ventures (see note 22)
        
        (11
        )
        
        
        Other payables***
        
        (36
        )
        
        
        2Other provisions and liabilities for charges****
        
        (113
        )
        
        
        9Derivatives:Currency and interest rate swaps
        
        6
        
        (22
        )
        4Forward contracts
        
        
        
        
        
        (1
        )Embedded derivatives in revenue contracts
        
        6
        
        
        
        (44
        )Embedded derivatives in supplier contracts
        
        (1
        )
        
        
        3Total
        
        76
        
        
        
        7*
        Prepayments and accrued
      income in note 19 (£78 million) include £40 million of prepayments
    that are not financial assets.**
        Accruals in note 22
    (£264 million) include £2 million of non-financial liabilities.***
        Other payables in
      note 22 (£48 million) include £3 million of progress payments on contracts and £9
      million of subscriptions in advance which are non-financial
liabilities.****
        Other provisions and
      liabilities for charges in note 24 (£139 million) includes £26
    million of non-financial liabilities.Monetary assets and liabilitiesMonetary assets and liabilities by currency, excluding the functional currency of each operation, at 31 December 2005 were:
Net foreign currency monetary assets/(liabilities)HongUS
        
        
        
        Swiss
        
        Japanese
        
        KongSterling
        
        dollar
        
        Euro
        
        franc
        
        yen
        
        dollar
        
        Other
        
        Total£m
        
        £m
        
        £m
        
        £m
        
        £m
        
        £m
        
        £m
        
        £mFunctional currency of operation:Sterling
        
        
        
        (20
        )
        15
        
        (8
        )
        11
        
        8
        
        (55
        )
        (49
        )US dollar
        
        (13
        )
        
        
        (4
        )
        (4
        )
        
        
        (1
        )
        (4
        )
        (26
        )Euro
        
        (2
        )
        3
        
        
        
        
        
        
        
        
        
        7
        
        8Swiss franc
        
        (2
        )
        12
        
        11
        
        
        
        
        
        
        
        
        
        21Hong Kong dollar
        
        2
        
        1
        
        
        
        
        
        
        
        
        
        
        
        3Other
        
        (3
        )
        13
        
        
        
        
        
        
        
        
        
        
        
        10Total
        
        (18
        )
        9
        
        22
        
        (12
        )
        11
        
        7
        
        (52
        )
        (33
        )Exchange differences that arise as a consequence of trading transactions and the translation of monetary assets and liabilities are taken to the income statement (see more detailed
disclosure above).

76
    
    Reuters
          Group PLCAnnual
          Report and Form 20-F 2005Back to Contents


The currency and interest rate profile of the Groups financial assets and liabilities that are subject to interest rate risk at 31 December 2005 was:
Classes
            of financial assets and liabilitiesTerm
        
        
        
        
        
        WeightedCash and
        
        
        
        notes and
        
        Finance
        
        
        
        averageShort-term
        
        cash
        
        Bank
        
        commercial
        
        lease
        
        
        
        interestinvestments
        
        equivalents
        
        overdrafts
        
        paper
        
        creditors
        
        Total
        
        rate£m
        
        £m
        
        £m
        
        £m
        
        £m
        
        £m
        
        %By currency:Sterling:Floating
        
        
        
        580
        
        (24
        )
        
        
        
        
        556
        
        4US dollar:Floating
        
        
        
        19
        
        
        
        
        
        
        
        19
        
        4Fixed
        
        
        
        
        
        
        
        
        
        (2
        )
        (2
        )
        6Euro:Floating
        
        
        
        8
        
        
        
        
        
        
        
        8
        
        2Fixed
        
        
        
        
        
        
        
        (378
        )
        
        
        (378
        )
        4Other:Floating
        
        1
        
        55
        
        (1
        )
        
        
        
        
        55
        
        3Fixed
        
        
        
        
        
        
        
        (5
        )
        
        
        (5
        )
        1Total
        
        1
        
        662
        
        (25
        )
        (383
        )
        (2
        )
        253By maturity:Within one year
        
        1
        
        662
        
        (25
        )
        (22
        )
        (1
        )
        615Between one and two years
        
        
        
        
        
        
        
        
        
        (1
        )
        (1
        )Between two and three years
        
        
        
        
        
        
        
        (5
        )
        
        
        (5
        )Between three and four years
        
        
        
        
        
        
        
        
        
        
        
        Between four and five years
        
        
        
        
        
        
        
        (356
        )
        
        
        (356
        )Over five years
        
        
        
        
        
        
        
        
        
        
        
        Total
        
        1
        
        662
        
        (25
        )
        (383
        )
        (2
        )
        253Total financial liabilities at 31 December 2005 are repayable as follows:Other financialBorrowings
        
        liabilities£m
        
        £mWithin one year
        
        48
        
        379Between one and two years
        
        1
        
        30Between two and three years
        
        5
        
        8Between three and four years
        
        
        
        8Between four and five years
        
        356
        
        4Over five years
        
        
        
        7Total
        
        410
        
        436The exposure of the Groups borrowings to interest rate changes and the contractual re-pricing dates are as follows:
6 monthsor less
        
        612 months
        
        15 years
        
        Over 5 years
        
        Total£m
        
        £m
        
        £m
        
        £m
        
        £mBank overdrafts
        
        25
        
        
        
        
        
        
        
        25Term notes and commercial paper
        
        22
        
        
        
        361
        
        
        
        383Finance lease creditors
        
        1
        
        
        
        1
        
        
        
        2Effect of interest rate swaps
        
        361
        
        
        
        (361
        )
        
        
        Total
        
        409
        
        
        
        1
        
        
        
        410
Reuters
          Group PLCAnnual
          Report and Form 20-F 2005
    
    77Back to Contents
Notes
  to the financial statementscontinued

Derivatives
    and other financial instruments (2004 UK GAAP comparatives)The
    accounting policies relevant to this note in 2004 under UK GAAP are given
    on page 57.
  The following
    disclosure for Derivatives and Other Financial Instruments was made at 31
    December 2004 in the annual report prepared under UK GAAP.
  A substantial
    portion of the Groups revenue is receivable in foreign currencies with
    terms of payment up to three months in advance. As such, the Group is subject
    to currency exposure from committed revenue and, additionally, to interest
    rate risk from borrowing and the investment of cash balances. The Group seeks
    to limit these risks by entering into a mix of derivative financial instruments.
If the derivative
    financial instruments were considered separately from the underlying future
    revenue and interest, the Group would be subject to market risk on these financial
    instruments from fluctuations in currency and interest rates. The Group only
    enters into such derivative financial instruments to hedge (or reduce) the
    underlying exposure described above. There is, therefore, no net market risk
    on such derivative financial instruments and only a credit risk from the potential
    non-performance by counterparties. The amount of this credit risk is generally
    restricted to any hedging gain and not the principal amount hedged.Derivative instruments held at 31 December 2004 were:2004Gross contractamounts
    
    Carrying value
    
    Fair value£m
    
    £m
    
    £mForeign exchange forward contracts:Contracts in profit
    
    124
    
    1
    
    1Contracts in loss
    
    271
    
    (1
    )
    (1
    )Foreign currency options:Contracts in profit
    
    
    
    
    
    Contracts in loss
    
    
    
    
    
    Currency and interest rate swaps:Contracts in profit
    
    373
    
    54
    
    64Contracts in loss
    
    5
    
    
    
    Total
    
    773
    
    54
    
    64The fair values of foreign currency and interest rate management instruments are estimated on the basis of market quotes, discounted to current value using market-quoted interest
rates.
An analysis by
    currency of derivative contracts held for currency hedging purposes at 31
December 2004 is set out below:
2004Swaps
        
        Forwards%
        
        %Euro
        
        8
        
        28Japanese yen
        
        3
        
        2Swiss franc
        
        19
        
        15US dollar
        
        70
        
        37Other
        
        
        
        18Total
        
        100
        
        100Foreign exchange forward contracts mature at dates up to February 2005, currency swaps and interest rate swaps both mature at various dates through to November 2010.
The results of currency and interest rate hedging activities for the year to
  December 2004 are as summarised below:
2004Recognised gains
        
        £mCurrency hedging
        
        29Interest rate hedging
        
        10Recognised currency hedging gains in 2004 were favourable mainly due to the effect of the weaker US dollar on hedges of the net investment in overseas subsidiaries.

78
    
    Reuters
          Group PLCAnnual
          Report and Form 20-F 2005Back to Contents


Gains and losses on instruments used for hedging are not recognised until the exposure that is being hedged is itself recognised. Unrecognised gains and losses on instruments used for
hedging, and the movements, are set out below:
2004Gain
        
        (Losses)
        
        NetHedging
        
        £m
        
        £m
        
        £mUnrecognised at 1 January 2004:
        
        5
        
        (4
        )
        1Arising in previous yearsRecognised in 2004
        
        4
        
        (2
        )
        2Not recognised in 2004
        
        1
        
        (2
        )
        (1
        )Arising in 2004:Not recognised in 2004
        
        11
        
        
        
        11Unrecognised at 31 December 2004
        
        12
        
        (2
        )
        10Of which:Expected to be recognised in 2005
        
        1
        
        (1
        )
        Expected to be recognised in 2006 or later
        
        11
        
        (1
        )
        10Net unrecognised
  gains on derivatives used for hedging were £10 million at 31 December
2004.
The weighted
  average variable rate payable on the interest rate swaps used to alter the currency
  and interest rate profile of debt issued at 31 December 2004 was 3%. The weighted
  average variable rate is based on the rate implied in the yield curve at the
  balance sheet date.
All derivative
  instruments are unsecured. However, Reuters does not anticipate non-performance
  by the counterparties who are all banks with recognised long-term credit ratings
  of A3/A- or higher.
Carrying and fair values of Group financial assets and liabilities at 31
      December were:2004Carrying value
        
        Fair value£m
        
        £mDerivative instruments
        
        54
        
        64Other financial assets:Fixed asset investments
        
        28
        
        34Long-term debtors
        
        20
        
        20Investments held for resale
        
        108
        
        194Other short-term investments and cash
        
        836
        
        836Other financial liabilities:Short-term borrowings
        
        (181
        )
        (181
        )Long-term borrowings
        
        (329
        )
        (329
        )Other financial liabilities
        
        (97
        )
        (97
        )The fair value of fixed asset investments and investments held for sale is the carrying value unless the investment has a readily determinable market value which is higher.
The fair value
  of listed short-term investments was based on quoted market prices for those
  investments. The carrying amount of the other short-term deposits and investments
  approximated to their fair values due to the short maturity of the instruments
  held.
The fair value
  of short-term borrowings approximated to the carrying value due to the short
  maturity of the investments.
Short-term debtors
  and creditors have been excluded from the above analysis and all other disclosures
  in this note, other than the currency risk disclosures.
Financial instrument sensitivity analysisThe
analysis below summarises the sensitivity of the fair value of the Groups
financial instruments to hypothetical changes in market rates. Fair values are
the present
  value of
future cash flows based on market rates at the valuation date.
The estimated
  adverse changes in the fair value of financial instruments are based on an instantaneous:
•
    1% increase
      in the specific rate of interest from the levels effective at 31 December
      2004 with all other variables remaining constant; and•
    10% weakening
      in the value of sterling against all other currencies from the levels applicable
      at 31 December 2004 with all other variables remaining constant.Fair value changes arising from10% weakening1% increase in
        
        in £ againstinterest rates
        
        other currenciesFair value
        
        (adverse)
        
        (adverse)£m
        
        £m
        
        £mCurrent and interest rate swaps
        
        64
        
        (27
        )
        (10
        )Forward contracts
        
        
        
        
        
        (16
        )Total
        
        64
        
        (27
        )
        (26
        )
Reuters
          Group PLCAnnual
          Report and Form 20-F 2005
    
    79Back to Contents


Notes
  to the financial statementscontinued

Monetary assets and liabilities by currency, after cross currency swaps, excluding the functional currency of each operation at 31 December 2004, were:
Net
                foreign currency monetary assets/(liabilities)Sterling
        
        US dollar
        
        Euro
        
        Swiss franc
        
        Japanese yen
        
        Hong Kong dollar
        
        Other
        
        Total£m
        
        £m
        
        £m
        
        £m
        
        £m
        
        £m
        
        £m
        
        £mFunctional currency of operation:Sterling
        
        
        
        (71
        )
        42
        
        (6
        )
        1
        
        
        
        22
        
        (12
        )US dollar
        
        (15
        )
        
        
        (21
        )
        (16
        )
        
        
        
        
        (2
        )
        (54
        )Euro
        
        
        
        (4
        )
        
        
        
        
        
        
        
        
        1
        
        (3
        )Swiss franc
        
        (23
        )
        2
        
        3
        
        
        
        (1
        )
        
        
        
        
        (19
        )Japanese yen
        
        1
        
        
        
        
        
        
        
        
        
        
        
        
        
        1Hong Kong dollar
        
        1
        
        18
        
        
        
        
        
        5
        
        
        
        
        
        24Other
        
        
        
        4
        
        (1
        )
        
        
        
        
        
        
        
        
        3Total
        
        (36
        )
        (51
        )
        23
        
        (22
        )
        5
        
        
        
        21
        
        (60
        )Exchange differences that arise as a consequence of trading transactions and
the translation of monetary assets and liabilities are taken to the income statement.
In accordance with the
Groups accounting policy, exchange differences attributable to long-term
foreign currency borrowings used to finance the Groups foreign currency
investments are taken directly to reserves. Consequently, long-term foreign currency
borrowings have been excluded from the above table.
The
    currency and interest rate profile of the Groups financial assets at
    31 December
2004 was:
Cash and short-term investments
        
        Fixed rate investmentsWeighted
      average interest
      rate at
        
        Weighted
      average timefor which rate
      is fixedNon-interest
          bearing assetsFloating rate
        
        Fixed rateTotal
        
        
        investments
        
        investments
        
        31 December£m
        
        £m
        
        £m
        
        £m
        
        %
        
        YearsSterling
        
        416
        
        80
        
        336
        
        
        
        
        
        US dollar
        
        469
        
        58
        
        411
        
        
        
        
        
        Euro
        
        33
        
        7
        
        26
        
        
        
        
        
        Other
        
        74
        
        11
        
        58
        
        5
        
        
        
        331 December 2004
        
        992
        
        156
        
        831
        
        5
        
        
        
        3Interest on floating rate investments is earned at rates based on local money
market rates. Floating rate investments include £370 million of money market
deposits which mature within
three months of the balance sheet date.
Fixed rate investments are those investments which have an interest rate fixed
for a period of greater than one year.
The currency and interest rate profile of the Groups financial liabilities
after allowing for interest rate and cross-currency swaps at 31 December 2004
was:
BorrowingsOther
        
        Floatingfinancial
        
        rateTotal
        
        liabilities
        
        borrowings£m
        
        £m
        
        £mSterling
        
        280
        
        60
        
        220US dollar
        
        271
        
        21
        
        250Euro
        
        25
        
        13
        
        12Swiss francs
        
        27
        
        2
        
        25Other
        
        4
        
        1
        
        331 December 2004
        
        607
        
        97
        
        510The floating rate borrowings comprise bank loans and overdrafts bearing interest
at rates based on local money market rates, commercial paper and medium-term
notes. The weighted average effective interest rate on borrowings at 31 December
2004 was 4%. The above analysis excludes creditors falling due within one year
which are of a non-financial nature.

80
    
    Reuters
          Group PLCAnnual
          Report and Form 20-F 2005Back to Contents
Total financial
liabilities at 31 December 2004 are repayable as follows:
Borrowings
        
        Other financialliabilities£m
        
        £mWithin one year
        
        181
        
        32Between one and two years
        
        19
        
        19Between two and five years
        
        5
        
        18Over five years
        
        305
        
        28Total
        
        510
        
        97In April 2003, Reuters entered into a committed syndicated credit facility for £1.0 billion. £520 million of the facility either expired or was voluntarily cancelled in 2004. At
31 December 2004, Reuters had £480 million available under the facility. The facility was undrawn during 2004. The commitment expires and final repayment is due in April 2008.
At the same time as the syndicated credit facility was arranged, committed bilateral
facilities of £90 million were also put in place on similar terms. During
2004, £66 million of the facilities either expired or were voluntarily cancelled.
At 31 December 2004, Reuters had £24 million available, all of which was
undrawn. No loans were outstanding under this facility during 2004.
In addition, at 31 December 2004, the Group had unused, short-term, uncommitted
bank borrowing facilities denominated in various currencies, the sterling equivalent
of which was
approximately £200 million, at money market rates varying between 2% and
6%, depending on the currency.
18 Inventories
2005
        
        2004£m
        
        £mWork in progress on contracts
        
        1
        
        319 Trade
and other receivables
2005
    
    2004£m
    
    £mTrade receivables
    
    138
    
    162Less: Provision for impairment
    
    (18
    )
    (31
    )120
    
    131Instinet counterparty debtors
    
    
    
    216Amounts owed by joint ventures and associates
    
    4
    
    3Other receivables
    
    68
    
    111Prepayments and accrued income
    
    78
    
    74Total trade and other receivables
    
    270
    
    535Less: Non-current portion
    
    (18
    )
    (19
    )Current portion
    
    252
    
    516The carrying value of trade and other receivables approximates to their fair
value based on discounted cash flows using the Groups weighted average
cost of capital.
The recognition of provisions, both in terms of timing and quantum, requires
the exercise of judgement based on the relevant circumstances, which can be subject
to change over time. If the final outcome (on the judgement areas) were to differ
by 10% from managements estimates, the Group would need to book an adjustment
of £2 million to operating costs and to trade receivables.
Concentration of credit risk faced by the Group and other relevant risk factors
are detailed in note 17 on page 73.

Reuters
          Group PLCAnnual
          Report and Form 20-F 2005
    
    81Back to Contents


Notes to the financial statementscontinued

20 Cash
and cash equivalents
2005
        
        2004£m
        
        £mCash:Cash in hand and at bank
        
        98
        
        83Listed cash equivalents:Government securities  overseas
        
        
        
        8Unlisted cash equivalents:Term deposits  UK
        
        12
        
        84Term deposits  overseas
        
        3
        
        31Other investments  UK
        
        546
        
        Other investments  overseas
        
        3
        
        372Cash and cash equivalents
        
        662
        
        57821 Non-current
assets and liabilities held for sale
The following are assets and liabilities classified as held for sale at 31 December:
2005
        
        2004£m
        
        £mNon-current assets classified as held for sale:Property, plant and equipment
        
        1
        
        Assets of subsidiary held exclusively for resale*
        
        
        
        145Total assets classified as held for sale
        
        1
        
        145Liabilities directly associated with non-current assets classified as held
for sale:Liabilities of subsidiary held exclusively for resale*
        
        
        
        (47
        )Total net assets classified as held for sale
        
        1
        
        98*
        2004 figures have
      been measured in accordance with IAS 27 Consolidated and Separate Financial Statements, and not in accordance with IFRS 5 Non-Current Assets Held for
Sale and Discontinued Operations.In 2005, a property with a net book value of £1 million has been classified
  as a non-current asset held for sale. The sale of this property is due to be
completed in 2006.
On 22 April 2005, Reuters Group PLC classified the net assets of Instinet Group
  as a disposal group held for sale. Following regulatory approval, the transaction
  closed on 8 December 2005. Instinet Group is therefore shown within discontinued
operations in note 7 on page 62.
In 2004, Radianz was classified as a subsidiary held exclusively for resale.
  Radianzs net assets of £98 million were shown as held for sale.
  Radianz is reported within the Sales & Trading division. The acquisition
  and subsequent disposal of Radianz is
detailed in note 7 on page 62.
22 Trade
  and other payables
2005
        
        2004£m
        
        £mTrade payables
        
        14
        
        71Accruals
        
        264
        
        346Instinet counterparty creditors
        
        
        
        197Deferred income
        
        25
        
        21Amounts owed to joint ventures and associates
        
        11
        
        12Other payables
        
        48
        
        39Other taxation and social security
        
        35
        
        35Total trade and other payables
        
        397
        
        721Less: Non-current portion
        
        (17
        )
        (19
        )Current portion
        
        380
        
        702The carrying value of trade and other payables approximates to their fair value
  based on discounted
cash flows using the Groups weighted average cost of capital.

82
    
    Reuters
          Group PLCAnnual
          Report and Form 20-F 2005Back to Contents


23 Current tax liability
2005
        
        2004£m
        
        £mCurrent tax liabilities
        
        228
        
        260The Group is
  subject to taxation in numerous jurisdictions. Significant judgement is required
  in determining the worldwide provision for taxation. There are many transactions
  and calculations for which the ultimate tax determination is uncertain during
  the ordinary course of business. The Group recognises liabilities for anticipated
  tax audit issues based on estimates of whether additional taxes will be due.
  Where the final tax outcome of these matters is different from the amounts that
  were initially recorded, such differences will affect the tax provisions in
  the period in which such determination is made.
The current
  tax liability carried forward at the balance sheet date does not take account
  of any benefit of potential UK tax deductions associated with the acquisition
  of shares in prior periods in order to satisfy employee share awards. It is
  reasonably possible that, based on existing knowledge, outcomes within the next
  financial year could require a material adjustment to the carrying amount of
  the current tax liability in order to recognise this benefit.
24 Provisions for liabilities and charges
2005
        
        2004£m
        
        £mProvisions for post-employment benefits (see note 25)
        
        317
        
        263Other provisions for liabilities and charges
        
        139
        
        164Total provisions
        
        456
        
        427Less: Non-current portion
        
        (392
        )
        (340
        )Current portion
        
        64
        
        87The
  movement in other provisions during 2005 was as follows:
Legal/
        
        OtherRationalisation
        
        compliance
        
        property
        
        Other
        
        Total£m
        
        £m
        
        £m
        
        £m
        
        £m1 January 2005
        
        151
        
        4
        
        2
        
        7
        
        164Exchange differences
        
        2
        
        
        
        
        
        1
        
        3Charged in the year
        
        147
        
        5
        
        
        
        14
        
        166Utilised in the year
        
        (169
        )
        (1
        )
        (2
        )
        (1
        )
        (173
        )Released
        
        (7
        )
        (1
        )
        
        
        (4
        )
        (12
        )Provisions acquired through business combinations
        
        
        
        
        
        5
        
        
        
        5Reclassifications*
        
        (15
        )
        
        
        
        
        
        
        (15
        )Unwinding of discount
        
        1
        
        
        
        
        
        
        
        131 December 2005
        
        110
        
        7
        
        5
        
        17
        
        139*
        Reclassifications
      relate to Instinet Groups provisions which were reclassified to discontinuing
      operations prior to disposal during the year.The recognition
    of provisions, both in terms of timing and quantum, requires the exercise
    of judgement based on the relevant circumstances, which can be subject to
    change over time.
  The largest
    provisions relate to the 2005 restructuring charges, which cover primarily
    leasehold properties and severances. A number of leasehold properties have
    been identified as surplus to requirements. Although efforts are being made
    to sub-let this vacant space, management recognises that this may not be possible
    immediately. Estimates have been made to cover the cost of vacant possession,
    together with any shortfall arising from sub-leased rental income being lower
    than lease costs being borne by us. A judgement has also been made in respect
    of the discount factor, based on a risk-free rate (4% to 5%), which is applied
    to the rent shortfalls. For severance provisions, the provision is only recognised
    where employees have a valid expectation or have already been told of their
    redundancy. Other provisions are held where the recoverability of amounts
    is uncertain where the actual outcome may differ from the resulting estimates.
  Additionally,
    the Group is subject to certain legal claims and actions (please see note
    35 on page 97). Provision for specific claims or actions are only made when
    the outcome is considered probable that there will be a future
    outflow of funds, and/or providing for any associated legal costs. The level
    of any provision is inevitably an area of management judgement given the outcome
    of litigation is difficult to predict. There can be no assurance that there
    will not be an increase in the scope of these legal matters or that any future
    lawsuits, claims, preceedings or investigations will not be material.
The legal/compliance
    provision represents the expected cost of settling disputes arising from contractual
    arrangements with third-party suppliers and individuals and the expected cost
    of fulfilling indemnities given on the disposal of subsidiaries.
  Included within
    the rationalisation provision at the end of 2005 are obligations related to
    the Fast Forward programme which was first announced in 2003 and the Telerate
    integration programme which began in June 2005. Both programmes included headcount
    reduction and property rationalisation. Severance related provisions will
    be utilised during 2006 and property-related provisions will be substantially
    utilised over the remaining lease periods.
  Other property
    provisions reflect Reuters contractual liability at the balance sheet date
    to make good dilapidations under ongoing rental agreements outside the rationalisation
    programmes and will be utilised over the remaining lease periods.
Reuters
          Group PLCAnnual
          Report and Form 20-F 2005
    
    83Back to Contents


Notes
  to the financial statementscontinued

25 Retirement benefits
The Group has established various pension arrangements covering the majority of its employees. In all plans, except those which are internally funded, the assets are held separately from
those of the Group and are independently administered.
Defined contribution plansReuters
  Group operates 38 defined contribution plans covering approximately 55% of its
  employees, of which the largest plans are the Reuters Retirement Plan and the
  Reuters 401(k) Pension Plans. The percentage of employees covered and the company
  contribution to these plans were:
Company contribution% of employees
        
        % of basic salaryReuters Retirement Plan
        
        15.1
        %
        11.0
        %Reuters 401(k) Pension Plans
        
        23.9
        %
        6.0
        %The Group contributed £25 million to defined contribution plans in 2005 (2004: £19 million) and expects to contribute £24 million in 2006.
Defined benefit plansThe Group also operates 30 defined benefit plans and post retirement medical plans covering approximately 22% of employees. All significant plans are valued under IAS 19 by independently
qualified actuaries using the Projected Unit Credit Method.
  The defined
    benefit plans include the RPF which has been accounted for as a defined benefit
    plan under IFRS. The RPF is the largest defined benefit plan operated by Reuters.
    The total defined benefit obligation at 31 December 2005 was £1,346 million,
    of which £985 million related to the RPF. The RPF is a complex, hybrid
    pension fund, with both defined company and employee
    contributions, and defined employee benefits.
The RPF has been in existence
    since 1893 and has historically been treated as a defined contribution plan.
    Under the rules of the pension fund, the Group is not able to access any surplus
    in the RPF. Although the Group and employees make defined contributions to
    the fund, the RPF does not provide for contributions to be made to individual
    plan participant accounts and there are circumstances where the Group may
    be required to make additional contributions. Under IAS 19, the RPF is treated
    as a defined benefit plan from the date of transition to IFRS. At transition,
    the net plan liabilities are £nil. At 31 December 2004, a net liability
    of £178 million has been recognised together with a related deferred
    tax asset of £39 million.
Movement on pension provisions and similar obligations
2005
        
        2004£m
        
        £mOpening balance
        
        (263
        )
        (77
        )Income statement (see note 3):Defined benefit plans*
        
        (27
        )
        (11
        )Post-retirement medical benefits
        
        (3
        )
        2Actuarial gains and losses taken directly to reserves:Defined benefit plans*
        
        (46
        )
        (206
        )Post-retirement medical benefits
        
        (2
        )
        1(341
        )
        (291
        )Utilised in the year
        
        24
        
        28Closing balance
        
        (317
        )
        (263
        )Made up of:Defined benefit plans*
        
        (302
        )
        (252
        )Post-retirement medical benefits
        
        (8
        )
        (4
        )Other
        
        (7
        )
        (7
        )Closing balance
        
        (317
        )
        (263
        )*
    The figures
        for defined benefit plans include a number of immaterial schemes which
        have not been valued under IAS 19. The following disclosures refer only
    to material schemes valued under IAS 19.84
    
    Reuters
          Group PLCAnnual
          Report and Form 20-F 2005Back to Contents


Amounts recognised in respect of defined benefit obligationsDefined
  benefit obligations recognised in the balance sheet
Post retirementUK Plans
        
        Overseas Plans
        
        medical benefits
        
        
        
        Total2005
        
        2004
        
        2005
        
        2004
        
        2005
        
        2004
        
        2005
        
        2004£m
        
        £m
        
        £m
        
        £m
        
        £m
        
        £m
        
        £m
        
        £mPresent value of funded obligations
        
        (1,148
        )
        (977
        )
        (167
        )
        (151
        )
        
        
        
        
        (1,315
        )
        (1,128
        )Fair value of plan assets
        
        902
        
        781
        
        139
        
        124
        
        
        
        
        
        1,041
        
        905(246
        )
        (196
        )
        (28
        )
        (27
        )
        
        
        
        
        (274
        )
        (223
        )Present value of unfunded obligations
        
        (19
        )
        (18
        )
        (4
        )
        (9
        )
        (8
        )
        (3
        )
        (31
        )
        (30
        )(265
        )
        (214
        )
        (32
        )
        (36
        )
        (8
        )
        (3
        )
        (305
        )
        (253
        )Plan asset not recognised in the balance sheet
        
        
        
        
        
        (3
        )
        
        
        
        
        
        
        (3
        )
        Net liability recognised in the balance sheet
        
        (265
        )
        (214
        )
        (35
        )
        (36
        )
        (8
        )
        (3
        )
        (308
        )
        (253
        )Fair value of reimbursement rights not recognised as plan assets
        
        
        
        
        
        4
        
        3
        
        
        
        
        
        4
        
        3The assets and obligations reported under UK plans include the RPF, a smaller UK scheme with 32 active members and a number of smaller unfunded early retirement, ill health and retirement
benefit schemes.
The reimbursement
  rights reported relate to insurance policies held by Reuters in respect of an
  unfunded plan in Germany.
Amounts recognised
in the income statement
Post retirementUK Plans
        
        Overseas Plans
        
        medical benefits
        
        
        
        Total2005
        
        2004
        
        2005
        
        2004
        
        2005
        
        2004
        
        2005
        
        2004£m
        
        £m
        
        £m
        
        £m
        
        £m
        
        £m
        
        £m
        
        £mCurrent service cost
        
        19
        
        20
        
        11
        
        10
        
        
        
        
        
        30
        
        30Interest cost
        
        52
        
        41
        
        5
        
        6
        
        
        
        
        
        57
        
        47Expected gain on plan assets
        
        (51
        )
        (52
        )
        (7
        )
        (6
        )
        
        
        
        
        (58
        )
        (58
        )Past service cost
        
        1
        
        
        
        
        
        
        
        2
        
        
        
        3
        
        Gains on curtailments
        
        (2
        )
        (3
        )
        (3
        )
        
        
        
        
        
        
        (5
        )
        (3
        )Gains on settlements
        
        (1
        )
        
        
        
        
        
        
        
        
        
        
        (1
        )
        Total included in operating costs
        
        18
        
        6
        
        6
        
        10
        
        2
        
        
        
        26
        
        16Actual return on plan assets
        
        146
        
        76
        
        18
        
        5
        
        
        
        
        
        164
        
        81Further amounts recognised in the statement of recognised income and expense
Post retirementUK Plans
        
        Overseas Plans
        
        medical benefits
        
        
        
        Total2005
        
        2004
        
        2005
        
        2004
        
        2005
        
        2004
        
        2005
        
        2004£m
        
        £m
        
        £m
        
        £m
        
        £m
        
        £m
        
        £m
        
        £mActuarial losses/(gains)
        
        46
        
        195
        
        (3
        )
        10
        
        2
        
        
        
        45
        
        205Effect of asset ceiling
        
        
        
        
        
        3
        
        
        
        
        
        
        
        3
        
        46
        
        195
        
        
        
        10
        
        2
        
        
        
        48
        
        205Deferred
        taxation impact of actuarial gains and losses recognisedin the statement of recognised income and expense
        
        (10
        )
        (43
        )
        
        
        (2
        )
        
        
        
        
        (10
        )
        (45
        )Total
    recognised in the statement of recognised income and
    expense
        
        36
        
        152
        
        
        
        8
        
        2
        
        
        
        38
        
        160Cumulative amounts recognised in the statement of recognised income and expense
Post retirementUK Plans
        
        Overseas Plans
        
        medical benefits
        
        
        
        Total2005
        
        2004
        
        2005
        
        2004
        
        2005
        
        2004
        
        2005
        
        2004£m
        
        £m
        
        £m
        
        £m
        
        £m
        
        £m
        
        £m
        
        £mBalance of actuarial losses at 1 January
        
        195
        
        
        
        10
        
        
        
        
        
        
        
        205
        
        Net actuarial losses/(gains) recognised in year
        
        46
        
        195
        
        (3
        )
        10
        
        2
        
        
        
        45
        
        205Balance of actuarial losses at 31 December
        
        241
        
        195
        
        7
        
        10
        
        2
        
        
        
        250
        
        205Balance of asset limit effects at 1 January
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        Effects of the asset ceiling in the year
        
        
        
        
        
        3
        
        
        
        
        
        
        
        3
        
        Balance of asset limit effects at 31 December
        
        
        
        
        
        3
        
        
        
        
        
        
        
        3
        
        
Reuters
          Group PLCAnnual
          Report and Form 20-F 2005
    
    85Back to Contents


Notes to the financial statementscontinued

Changes
      in the present value of the defined benefit obligationPost
      retirementUK
      Plans
    Overseas
      Plans
    medical
      benefits
    Total2005
    
    2004
    
    2005
    
    2004
    
    2005
    
    2004
    
    2005
    
    2004£m
    £m
    £m
    £m
    £m
    £m
    £m
    £mOpening
      defined benefit obligation
    
    (995
    )
    (743
    )
    (160
    )
    (141
    )
    (3
    )
    (4
    )
    (1,158
    )
    (888
    )Current
      service cost
    
    (19
    )
    (20
    )
    (11
    )
    (10
    )
    
    
    
    
    (30
    )
    (30
    )Past
      service cost
    
    (1
    )
    
    
    
    
    
    
    (2
    )
    
    
    (3
    )
    Interest
      cost
    
    (52
    )
    (41
    )
    (5
    )
    (6
    )
    
    
    
    
    (57
    )
    (47
    )Gains
      on curtailments
    
    2
    
    3
    
    3
    
    
    
    
    
    
    
    5
    
    3Liabilities
      extinguished on settlements
    
    8
    
    
    
    
    
    
    
    
    
    
    
    8
    
    Actuarial
      losses
    
    (141
    )
    (219
    )
    (8
    )
    (9
    )
    (2
    )
    
    
    (151
    )
    (228
    )Contributions
      by employees
    
    (3
    )
    (6
    )
    (4
    )
    (5
    )
    
    
    
    
    (7
    )
    (11
    )Benefits
      paid
    
    34
    
    31
    
    14
    
    9
    
    
    
    1
    
    48
    
    41Exchange
      differences on overseas plans
    
    
    
    
    
    
    
    2
    
    (1
    )
    
    
    (1
    )
    2Closing
      defined benefit obligation
    
    (1,167
    )
    (995
    )
    (171
    )
    (160
    )
    (8
    )
    (3
    )
    (1,346
    )
    (1,158
    )Changes
      in the fair value of plan assetsPost
      retirementUK
      Plans
    Overseas
      Plans
    medical
      benefits
    Total2005
    
    2004
    
    2005
    
    2004
    
    2005
    
    2004
    
    2005
    
    2004£m
    £m
    £m
    £m
    £m
    £m
    £m
    £mOpening
      fair value of plan assets
    
    781
    
    716
    
    124
    
    116
    
    
    
    
    
    905
    
    832Expected
      return
    
    51
    
    52
    
    7
    
    6
    
    
    
    
    
    58
    
    58Assets
      transferred on settlements
    
    (7
    )
    
    
    
    
    
    
    
    
    
    
    (7
    )
    Actuarial
      gains/(losses)
    
    95
    
    24
    
    11
    
    (1
    )
    
    
    
    
    106
    
    23Contributions
      by employer
    
    13
    
    14
    
    6
    
    9
    
    
    
    1
    
    19
    
    24Contributions
      by employees
    
    3
    
    6
    
    4
    
    5
    
    
    
    
    
    7
    
    11Benefits
      paid
    
    (34
    )
    (31
    )
    (14
    )
    (9
    )
    
    
    (1
    )
    (48
    )
    (41
    )Exchange
      differences on overseas plans
    
    
    
    
    
    1
    
    (2
    )
    
    
    
    
    1
    
    (2
    )Closing
      fair value of plan assets
    
    902
    
    781
    
    139
    
    124
    
    
    
    
    
    1,041
    
    905The Group expects to contribute around £47 million to its material defined benefit plans in 2006. Furthermore, the company is currently in discussion with the Trustees of the RPF
regarding a proposed plan to fund the deficit. At 31 December 2005, the RPF deficit was £223 million (£174 million after adjustment for deferred taxation).
Major
      categories of plan assets as a percentage of total plan assetsPost
      retirementUK
      Plans
    Overseas
      Plans
    
    medical
      benefits
    Total2005
    
    2004
    
    2005
    
    2004
    
    2005
    
    2004
    
    2005
    
    2004%
    %
    %
    %
    %
    %
    %
    %Equities
    
    55
    
    55
    
    46
    
    49
    
    
    
    
    
    54
    
    54Bonds
    
    36
    
    37
    
    45
    
    38
    
    
    
    
    
    37
    
    37Property
    
    7
    
    7
    
    
    
    
    
    
    
    
    
    6
    
    6Cash
    
    2
    
    1
    
    5
    
    4
    
    
    
    
    
    2
    
    2Other
    
    
    
    
    
    4
    
    9
    
    
    
    
    
    1
    
    1Principal actuarial assumptions at the balance sheet date (expressed as a weighted average)Post retirementUK Plans
        Overseas Plans
        medical benefits2005
        
        2004
        
        2005
        
        2004
        
        2005
        
        2004%
        %
        %
        %
        %
        %Discount rate
        
        4.75
        
        5.25
        
        3.29
        
        3.55
        
        5.50
        
        5.75Inflation assumption
        
        2.75
        
        2.75
        
        1.47
        
        1.44
        
        
        
        Rate of increase in salaries
        
        4.00
        
        4.00
        
        2.39
        
        2.53
        
        
        
        Rate of increase in pensions in payment
        
        2.75
        
        2.75
        
        1.38
        
        1.42
        
        
        
        Medical cost trend
        
        
        
        
        
        
        
        
        
        5.50
        
        5.50Expected rate of return on reimbursement rights
        
        
        
        
        
        4.25
        
        
        
        
        
        Expected rate of return on assets
        
        6.36
        
        6.70
        
        4.93
        
        5.17
        
        
        
        The expected return on plan assets reflects the investments currently held to provide for the pension benefit obligations as at the balance sheet date. Plan assets primarily consist of
equity instruments and fixed income investments. The expected rate of return on equities was based on expected market conditions in each of the territories in which plans operate. The expected return on assets is stated net of investment expenses.
The expected return on assets for the UK plans at 31 December 2005 is stated gross of the expected 2006 levy to the UK Pension Protection Fund.
86
    
    Reuters
          Group PLCAnnual
    Report and Form 20-F 2005Back to Contents


The mortality assumptions used to assess the defined benefit obligation for the RPF, the largest plan, at 31 December 2005 and 31 December 2004 are based on the 92 series short cohort
tables issued by the Continuous Mortality Investigation Bureau with allowance for projected longevity improvements to calendar year 2025.
Assumed healthcare cost trend rates do not have a significant effect on the amounts recognised in the income statement. A one percentage point change in assumed healthcare cost trend rates
would have the following effects:
One percentage
        
        One percentagepoint decrease
        point increase£m
        £mIncrease in the aggregate of interest cost and service cost
        
        
        
        Increase in the defined benefit obligation
        
        (1
        )
        1History of experience gains and losses2005
        
        
        
        
        
        
        
        2004Post
        
        
        
        
        
        
        
        Postretirement
        retirementUK
        Overseas
        medical
        UK
        Overseas
        medicalplans
        plans
        benefits
        Total
        plans
        plans
        benefits
        Total£m
        £m
        £m
        £m
        £m
        £m
        £m
        £mDefined benefit obligation
        
        (1,167
        )
        (171
        )
        (8
        )
        (1,346
        )
        (995
        )
        (160
        )
        (3
        )
        (1,158
        )Plan assets
        
        902
        
        139
        
        
        
        1,041
        
        781
        
        124
        
        
        
        905Deficit
        
        (265
        )
        (32
        )
        (8
        )
        (305
        )
        (214
        )
        (36
        )
        (3
        )
        (253
        )Experience adjustments on plan liabilities
        
        (16
        )
        6
        
        (1
        )
        (11
        )
        (100
        )
        5
        
        1
        
        (94
        )Experience adjustments on plan assets
        
        95
        
        11
        
        
        
        106
        
        24
        
        (1
        )
        
        
        23Reuters
          Group PLCAnnual
          Report and Form 20-F 2005
    
    87Back to Contents


Notes to the financial statementscontinued

26 Deferred taxation
The movement on the deferred tax account is as shown below:
2005
        
        2004£m
        £m1 January
        
        247
        
        219Disposals
        
        (46
        )
        Income statement charge
        
        (19
        )
        (23
        )Deferred taxation credit on pension revaluations recognised in equity
        
        10
        
        45Deferred taxation on stock options recognised in equity
        
        10
        
        8Exchange differences
        
        8
        
        (2
        )31 December
        
        210
        
        247Deferred tax assets have been recognised in respect of tax losses and other temporary differences giving rise to deferred tax assets only to the extent that it is probable that sufficient
taxable profits will be available to allow the asset to be recovered. Accordingly, no deferred tax asset has been recognised in respect of unused tax losses of £113 million carried forward at the balance sheet date. The deferred tax asset not
recognised in respect of these losses is £46 million.
Deferred tax
  assets of £195 million have been recognised in respect of tax losses and
  other deductible temporary differences arising in certain jurisdictions where
  losses were incurred in the current or preceding period. Recognition of these
  assets is based on all relevant factors including their expected recovery measured
  using Group profit forecasts.
No deferred
  tax is recognised on the unremitted earnings of overseas subsidiaries and joint
  ventures as the Group is able to control the timing of the reversal of the temporary
  differences, and it is probable that the temporary differences will not reverse
  in the foreseeable future. If the earnings were remitted, tax of £847 million
  would be payable.
The
      movements of deferred tax assets and liabilities are shown below:Deferred
      tax liabilitiesProperty,plant
      andequipment
    Other
    Total£m
    £m
    £m1
      January 2005
    
    (12
    )
    (33
    )
    (45
    )Disposal
    
    
    
    6
    
    6Charged
      to income statement
    
    
    
    (27
    )
    (27
    )31
      December 2005
    
    (12
    )
    (54
    )
    (66
    )Deferred tax assetsProperty,plant and
        Stockequipment
        Losses
        options
        Other
        Total£m
        £m
        £m
        £m
        £m1 January 2005
        
        57
        
        45
        
        13
        
        177
        
        292Disposal
        
        (7
        )
        (29
        )
        (2
        )
        (14
        )
        (52
        )(Charged)/credited to income statement
        
        (10
        )
        71
        
        1
        
        (54
        )
        8Credited in equity
        
        
        
        
        
        10
        
        10
        
        20Exchange differences
        
        
        
        1
        
        
        
        7
        
        831 December 2005
        
        40
        
        88
        
        22
        
        126
        
        276The deferred tax asset expected to be recovered after more than one year is £135 million (2004: £186 million).
88
    
    Reuters
          Group PLCAnnual
    Report and Form 20-F 2005Back to Contents


27 Share capital
Movements in share capital during the year ended 31 December were as below:
Called
      upshare
    Share
    Sharecapital
    premium
    capital£m
    £m
    £m1 January 2004
    
    358
    91
    449Shares allotted during the year
    
    1
    5
    631 December 2004
    
    359
    96
    455Shares allotted during the year
    
    1
    11
    1231
      December 2005
    
    360
    107
    467An
analysis of called up share capital is set out below:
2005
    
    2004£m
    
    £mAuthorised:One Founders Share of £1
    
    
    
    2,100 million ordinary shares of 25p each
    
    525
    
    525525
    
    525Allotted,
           called up and fully paid:One Founders Share of £1
    
    
    
    Ordinary shares of 25p each
    
    360
    
    359360
    
    359Number of ordinary shares of 25p each (millions)
    
    1,441.1
    
    1,435.5Shares
      allotted during the year in millions5,554,900 shares in Reuters Group PLC were issued under employee share schemes
      at pricesranging
      from £nil to 333p per share. Transaction costs incurred on issue of
      shares amounted to £nil (2004: £nil)
    
    5.6
    
    3.0Called up share capital includes £1 million for shares granted to employees on exercise of share options in respect of which no cash had been received at the balance sheet date (2004:
£1 million).
The rights attaching
  to the Founders Share are set out on page 120.
At 31 December
  2005, the balance in the treasury stock reserve of £430 million (2004:
  £213 million) included £206 million (2004: £213 million) held
  by Reuters ESOTs. This represents the cost of 32 million shares (2004: 33 million)
  in Reuters Group PLC purchased in the market and held by Reuters ESOTs to satisfy
  certain options under the Groups share option plans. A futher £224
  million relates to the cost of 57 million shares in Reuters Group PLC purchased
  in the market as a part of the ongoing buyback programme announced in July 2005.
The following table provides a summary of the shares bought under the buyback
  programme, since its announcement in July 2005:
Total
      number
    
    
    
    Approximateof
      shares
    
    
    
    value
      of sharespurchased
      as
    
    
    
    that
      may yetpart
      of publicly
    
    Average
      price
    
    be
      purchasedannounced
    
    paid
      per
    
    under
      theMonth
    
    programme
    
    share
      (£)
    
    programme
      (£m)July
    
    1,500,000
    
    3.89
    
    994August
    
    8,500,000
    
    3.70
    
    963September
    
    7,150,000
    
    3.73
    
    936October
    
    2,800,000
    
    3.53
    
    926November
    
    22,800,000
    
    3.89
    
    838December
    
    14,650,000
    
    4.08
    
    778The current buyback programme was announced on 26 July 2005 and the total buyback is expected to be £1 billion. The programme is due to run for up to two years. No
programme has expired during the period covered by the table. Reuters has not determined to terminate any programme prior to expiration.
Reuters
          Group PLCAnnual
          Report and Form 20-F 2005
    
    89Back to Contents


Notes
  to the financial statementscontinued

28 Reserves
An
  analysis of the movement in other reserves is set out below:
Capital
    
    
    
    Available-
    
    
    
    
    
    Totalredemption
    
    Other
    
    for-sale
    
    Hedging
    
    Translation
    
    otherreserve
    
    reserve
    
    reserve
    
    reserve
    
    reserve
    
    reserves£m
    
    £m
    
    £m
    
    £m
    
    £m
    
    £m1 January 2004
    
    1
    
    (1,718
    )
    
    
    
    
    
    
    (1,717
    )Translation differences taken directly to reserves
    
    
    
    
    
    
    
    
    
    (34
    )
    (34
    )Translation differences taken to the income statement on disposal of assets
    
    
    
    
    
    
    
    
    
    6
    
    6Taxation on items taken directly to or transferred from reserves
    
    
    
    
    
    
    
    
    
    (10
    )
    (10
    )31 December 2004
    
    1
    
    (1,718
    )
    
    
    
    
    (38
    )
    (1,755
    )Transitional adjustments on adoption of IAS 39*
    
    
    
    
    
    94
    
    30
    
    (16
    )
    1081 January 2005
    
    1
    
    (1,718
    )
    94
    
    30
    
    (54
    )
    (1,647
    )Translation differences taken directly to reserves
    
    
    
    
    
    
    
    
    
    97
    
    97Translation differences taken to the income statement on disposal of assets
    
    
    
    
    
    
    
    
    
    (2
    )
    (2
    )Fair value losses on available-for-sale financial assets
    
    
    
    
    
    (22
    )
    
    
    
    
    (22
    )Fair
      value gains on available-for-sale financial assets taken to the income statement 
      on disposal of assets
    
    
    
    
    
    (68
    )
    
    
    
    
    (68
    )Fair value losses on net investment hedges
    
    
    
    
    
    
    
    (39
    )
    
    
    (39
    )Fair value losses taken to the income statement on disposal of net investment
      hedges
    
    
    
    
    
    
    
    (14
    )
    
    
    (14
    )Other movements
    
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )Taxation on items taken directly to or transferred from reserves
    
    
    
    
    
    
    
    16
    
    (12
    )
    431
      December 2005
    
    1
    
    (1,719
    )
    4
    
    (7
    )
    29
    
    (1,692
    )*
        The transitional adjustment on the balance sheet at 1 January 2005 primarily comprises recognition of the fair value of the Groups
investments in
TSI (£86 million gain).In 1998, a court approved capital reorganisation took place. In exchange for every 15 ordinary shares in Reuters Holdings PLC, shareholders received pro-rata 13 ordinary shares in Reuters
Group PLC plus £13.60 in cash. The difference between the proforma nominal value of shares in issue of Reuters Group PLC immediately prior to the reorganisation and the previously reported capital and reserves of Reuters Holdings PLC, excluding
retained earnings, represents the merger difference which has since been recorded in the Other reserve.
  The Available-for-sale
    reserve is used to record the cumulative fair value gains and losses on available-for-sale
    financial assets. The cumulative gains and losses are recycled to the income
    statement on disposal of the assets.

The Hedging
    reserve is used to record the cumulative gains and losses on hedges of the
    Groups net investment in foreign operations, providing that they were
    effective. The gains and losses are recognised in the income statement on
    disposal of the foreign operation.
  The Translation
    reserve is used to record cumulative translation differences on the assets
    and liabilities of foreign operations. The cumulative translation differences
    are recycled to the income statement on disposal of the foreign operation.90
    
    Reuters
          Group PLCAnnual
          Report and Form 20-F 2005Back to Contents


29 Net cash flows from operating activities
Net profit is reconciled to net cash inflow from operating activities as follows:
2005
    
    2004£m
    
    £mProfit
      for the year from continuing operations
    
    229
    
    356Adjustments for:Depreciation
    
    99
    
    112Impairment
      of associates and joint ventures
    
    2
    
    Impairment
      of intangibles
    
    1
    
    35Amortisation
      of intangibles
    
    33
    
    28Loss
      on disposal of property, plant and equipment
    
    
    
    1Employee
      share scheme charges
    
    30
    
    22Foreign
      exchange (gains)/losses
    
    (8
    )
    9Fair
      value movements on derivatives
    
    (18
    )
    Fair
      value movements on other financial assets
    
    16
    
    Profits
      on disposals
    
    (42
    )
    (207
    )Income
      from investments
    
    (1
    )
    Share
      of post-taxation profits of associates and joint ventures
    
    (5
    )
    (11
    )Finance
      income
    
    (41
    )
    (15
    )Finance
      costs
    
    53
    
    27Taxation
    
    9
    
    40Movements in working capital:Decrease/(increase)
      in inventories
    
    2
    
    (1
    )Decrease
      in trade and other receivables
    
    3
    
    2Decrease
      in trade and other payables
    
    (52
    )
    (98
    )Increase/(decrease)
      in pensions deficit
    
    9
    
    (17
    )(Decrease)/increase
      in provisions
    
    (27
    )
    16(Decrease)/increase
      in amounts payable to discontinued operations
    
    (24
    )
    8Cash
      generated from continuing operations
    
    268
    
    307Profit
      for the year from discontinued operations
    
    253
    
    19Adjustments for:Profits
      after taxation of subsidiaries acquired with a view to resale
    
    
    
    (1
    )Depreciation
    
    4
    
    18Impairment
      of intangibles
    
    
    
    23Amortisation
      of intangibles
    
    2
    
    7Loss
      on disposal of property, plant and equipment
    
    4
    
    2Employee
      share scheme charges
    
    18
    
    11Profits
      on disposals
    
    (278
    )
    (19
    )Income
      from investments
    
    
    
    (1
    )Finance
      income
    
    (13
    )
    (7
    )Taxation
    
    20
    
    22Movements in working capital:(Increase)/decrease
      in trade and other receivables
    
    (28
    )
    146Decrease
      in trade and other payables
    
    (17
    )
    (212
    )Decrease
      in pensions deficit
    
    
    
    (2
    )Increase/(decrease)
      in provisions
    
    14
    
    (25
    )Decrease/(increase)
      in amounts receivable from continuing operations
    
    24
    
    (8
    )Cash
      generated from discontinued operations
    
    3
    
    (27
    )Cash
      generated from operations
    
    271
    
    280
Reuters
          Group PLCAnnual
          Report and Form 20-F 2005
    
    91Back to Contents


Notes
  to the financial statementscontinued

30
  Cash flow from acquisitions and disposals
2005
    
    2004£m
    £mAcquisitions
      (including joint ventures and associates):Subsidiary
      undertakings (see note 36)
    
    (135
    )
    (66
    )Joint
      ventures and associates
    
    (1
    )
    Loans
      (repaid to)/from joint ventures and associates
    
    
    
    (5
    )Deferred
      payments for acquisitions in prior years
    
    (8
    )
    (8
    )(144
    )
    (79
    )Less:
      cash acquired
    
    20
    
    1Acquisitions,
      net of cash acquired
    
    (124
    )
    (78
    )Disposals
      (including joint ventures and associates):Subsidiary
      undertakings
    
    824
    
    70Joint
      ventures and associates
    
    1
    
    379Instinet
      (deemed disposal)
    
    3
    
    5828
    
    454Add:
      cash disposed
    
    (582
    )
    (16
    )Disposals,
      net of cash disposed
    
    246
    
    43831 Reconciliation of cash and cash equivalents
Cash and cash equivalents included in the cash flow statement comprise the following balance sheet amounts:
2005
    
    2004£m
    £mCash
      and cash equivalents (see note 20)
    
    662
    
    578Bank
      overdrafts
    
    (25
    )
    (17
    )Total
      cash and cash equivalents
    
    637
    
    56132 Dividends
2005
    
    2004£m
    £mPrior
      year final paid
    
    (86
    )
    (86
    )Current
      year interim paid
    
    (54
    )
    (54
    )(140
    )
    (140
    )Per
      ordinary share
    
    Pence
    
    PencePrior
      year final paid
    
    6.15
    
    6.15Current
      year interim paid
    
    3.85
    
    3.85A final dividend in respect of 2005 of 6.15p per ordinary share, amounting to a total dividend of £83 million, is to be proposed at the AGM on 27 April 2006. These financial statements
do not reflect this proposed dividend payable.
At 31 December
  2005, 31.6 million shares representing 2% of the Groups share capital
  were held by the ESOT in respect of which dividend rights have been waived until
  the Group receives written confirmation of cancellation from Computershare Trustees
  (CI) Limited.
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    Reuters
      Group PLCAnnual
      Report and Form 20-F 2005Back to Contents
33 Employee share plans
The Group operates a number of share plans for the benefit of employees. The nature of each plan including general terms and conditions and the methods of settlement is set out
below:
  LTIP:Since 1993,
    Reuters has operated a long-term incentive plan that seeks to encourage and
    reward long-term growth in shareholder value. It is Reuters practice to make
    an annual award of contingent share rights to executive directors and to those
    senior managers most able to influence corporate performance. From 2003, awards
    have been based on the fair market value per share using option pricing methodology.
    The fair market value ascribed to each share for LTIP purposes in 2005 was
    43.8% of current market value. The LTIPs performance is assessed by
    reference to the companys relative total shareholder return (TSR) measured
    against the FTSE 100 over the performance period and awards vest after 3 years
    subject to the performance conditions attached. For awards made prior to 2004
    that do not vest or only partially vest after three years, the plan permits
    the measurement period to be extended by up to two years under a re-testing
    provision. For awards made from 2004 onwards, the re-testing provision does
    not apply.
  Discretionary
    Share Option Plan (DSOP):The global
    DSOP was adopted by the Remuneration Committee in October 2000 and approved
    by shareholders in April 2001. It aims to reward growth in earnings and in
    the share price. The options were normally granted with a four year vesting
    period, shares vesting 25% each year.
With effect from 2004, to reduce the dilutive impact DSOPs have on shareholders interests and to allow the introduction of a plan better targeted at the general employee population,
the number of participants was reduced significantly. Participation will normally be confined to executive directors and members of the GMC. Other employees may be eligible to participate in the Restricted Share Plan (see below).
Performance conditions apply to each option grant. For awards granted from 2001 to 2004, the Remuneration Committee could approve the re-testing of performance up to twice in the event the
performance condition was not met by extending the performance period by up to two years with an increase of 3% in the hurdle rate of EPS growth as calculated under UK GAAP for each year added to the performance period. If the target rate was not
met by the end of the fifth year, the options would lapse.
For awards granted from 2004, the re-testing provisions have been removed and accordingly, new awards will not permit any extension of the measurement period. If the awards do not meet the
EPS performance condition upon completion of the initial performance period they will lapse.
Options granted to executive directors in 2004 and 2005 can vest only if the percentage growth in EPS exceeds the percentage growth in the retail price index by more than 9% over the three
year performance period.
Save as you Earn (SAYE) Plan:An all-employee international savings related share option plan is offered in which the
executive directors are eligible to participate. Participants save a fixed monthly amount of up to £250 (subject to a maximum, established annually for each offer) for three years and are then able to use their savings to buy shares at a price
set at a 20% discount to the market value at the start of the savings period. In line with market practice, no performance conditions are attached to options granted under this plan.
Annual Bonus Profit Sharing Plan:In December 2003, Reuters announced its intention to introduce a new profit-sharing plan
across the all-employee population. This plan was introduced to focus employees on reward for profit growth. Executive directors and members of the GMC did not participate in this plan in 2005. A decision is taken on an annual basis to operate the
Plan for the forthcoming year. Payments under the plan were typically made in the form of shares which were normally subject to a 12 month vesting period with automatic release thereafter. Reuters has determined that this Plan will operate for 2006
as a cash-only plan and no shares will be issued to employees.
Restricted Share Plan (RSP):In April 2004, at the AGM, the shareholders approved the introduction of the RSP. Currently
restricted shares will not normally be granted for long-term incentive purposes to executive directors or members of the GMC. It is intended that, other than for executive directors and GMC members, employees will be eligible to participate in this
plan instead of the DSOP. Other than in 2004, the year of introduction, employees would generally not be eligible to participate in the DSOP and the RSP in the same year. The RSP is normally granted with a four year vesting period, shares vesting
25% each year.
Legacy plans:The following plans are legacy plans under which Tom Glocer and Devin Wenig received awards prior to
becoming executive directors. It is not intended that executive directors should receive any further awards under these plans.
Performance related share plan (PRSP):This plan operated from 1995 to 2001 and targeted senior executives not
participating in the LTIP. Tom Glocer and Devin Wenig hold awards granted before they became executive directors. All outstanding awards have now lapsed. The performance condition was the same as for the LTIP, although vested shares could be
released three years after grant.
Plan 2000:A one-off all-employee option grant was made in 1998 in order to support the retention of employees over the
millennium period. In common with such all-employee plans, there is no performance condition to be satisfied. All employees, including the executive directors, were given the opportunity to apply for an option to acquire 2,000 shares at an exercise
price of £5.50 per share. These options became exercisable in September 2001 and lapsed in September 2005. A small supplementary grant was made to new employees in March 1999, at an option price of £8.14 and these will normally expire in
March 2006.
Reuters
          Group PLCAnnual
    Report and Form 20-F 2005
    
    93Back to Contents


Notes
  to the financial statementscontinued

Activity relating to share options for the year ended 31 December 2004 and 31 December 2005 was as follows:
Discretionary
    
    Annual    bonus profit     share
    plans
    
    Long-term
    
    
    
    Weightedemployee
      &
    incentive
    averageexecutive
    plans
    exerciseplans
    and
    price
      forSave-as-
    (including
    Performance
    optionyou-earn
    Plan
    Restricted
    Related
    plansplans
    2000
    Share
      Plans)
    Share
      Plan
    Total
    £Ordinary
      shares under option in millions (including ADSs):1
      January 2004
    
    30.2
    
    14.1
    
    56.4
    
    
    
    13.5
    
    114.2
    
    2.86Granted
    
    4.6
    
    
    
    10.3
    
    
    
    2.6
    
    17.5
    
    2.45Forfeited
    
    (0.3
    )
    (0.3
    )
    (0.8
    )
    
    
    (0.2
    )
    (1.6
    )
    3.42Exercised
    
    (0.5
    )
    
    
    (2.5
    )
    
    
    (0.9
    )
    (3.9
    )
    1.62Expired
      or lapsed
    
    (4.1
    )
    (2.4
    )
    (4.2
    )
    
    
    (0.4
    )
    (11.1
    )
    4.2731
      December 2004
    
    29.9
    
    11.4
    
    59.2
    
    
    
    14.6
    
    115.1
    
    2.71Granted
    
    3.4
    
    
    
    7.5
    
    2.3
    
    2.2
    
    15.4
    
    2.07Forfeited
    
    (2.5
    )
    (0.4
    )
    (2.5
    )
    (0.1
    )
    (0.4
    )
    (5.9
    )
    4.60Exercised
    
    (1.2
    )
    
    
    (4.8
    )
    (0.1
    )
    (0.7
    )
    (6.8
    )
    1.66Expired
      or lapsed
    
    (1.4
    )
    (10.3
    )
    (4.0
    )
    
    
    (4.4
    )
    (20.1
    )
    3.8831
      December 2005
    
    28.2
    
    0.7
    
    55.4
    
    2.1
    
    11.3
    
    97.7
    
    2.70Number
      of participants at 31 December 2005
    
    7,663
    
    349
    
    6,437
    
    12,120
    
    200Expense
      included in the income statement for year ended
    
    £m
    
    £m
    
    £m
    
    £m
    
    £m
    
    £m31
      December 2004
    
    4
    
    
    
    9
    
    5
    
    4
    
    2231
      December 2005
    
    5
    
    
    
    18
    
    2
    
    5
    
    30Options were exercised on a regular basis throughout the year and the average share price was £3.92 (2004: £3.54) .
The following table summarises information relating to the number of shares under option and those which were exercisable at 31 December 2005:
Range
      of exercise prices
    
    
    
    
    
    ExercisableWeighted
    Options
    Options
    weightedaverage
    exercisable
      at
    exercisable
      at
    average
      exerciseTotal
      shares
    remaining
    31
      December
    31
      December
    price
      for optionsunder
      option
    contractual
      life
    2005
    2004
    exercisable
      at(million)
    (months)
    (million)
    (million)
    31
      December 2005Ordinary
      shares£0.00
       £2.00
    
    44.8
    8
    2.5
    2.5
    £1.32£2.01
       £5.00
    
    36.4
    17
    12.0
    9.2
    £2.73£5.01
       £7.00
    
    7.0
    2
    5.1
    14.2
    £5.67£7.01
       £9.00
    
    5.3
    6
    4.6
    3.7
    £8.55£9.01
       £11.00
    
    0.4
    
    0.4
    0.3
    £9.71ADSs*$ 10.01  $30.00
    
    3.1
    5
    0.1
    
    $11.39$30.01
       $50.00
    
    0.7
    21
    
    29.9
    97.7*
    One ADS is
      equivalent to six ordinary shares.The fair values
  of options granted during the period were determined using options pricing models.
94
    
    Reuters
      Group PLCAnnual
      Report and Form 20-F 2005Back to Contents
The following
tables summarise the models and key assumptions used:
Year ended 31 December 2005Discretionary
    
    All-employee
    
    
    
    Long-termSave-as-you-
    
    employee
      &
    
    bonus
      profit
    
    Restricted
    
    incentiveearn
      plans
    
    executive
      plans
    
    sharing
      plan
    
    share
      plans
    
    plansWeighted
      average fair value (£)
    
    1.61
    
    1.30
    
    3.95
    
    3.81
    
    2.42Options
      pricing model used
    
    Black
      Scholes
    
    Black
      Scholes
    
    Black
      Scholes
    
    Black
      Scholes
    
    Monte
      Carlooptions
    
    options
    
    options
    
    options
    
    simulation
      basedpricing
      model
    
    pricing
      model
    
    pricing
      model
    
    pricing
      model
    
    customised
      optionspricing
      modelKey
      assumptions used:Weighted
      average share price (£)
    
    4.12
    
    3.97
    
    4.05
    
    4.04
    
    4.05Range
      of exercise prices (£)
    
    3.33
    
    3.894.05
    
    Nil
    
    Nil
    
    NilRange
      of expected volatility (%)
    
    47%
    
    28%54%
    
    37%
    
    28%54%
    
    48%Range
      of risk-free rates (%)
    
    5%
    
    4%5%
    
    5%
    
    4%5%
    
    5%Range
      of expected option term (life)
    
    3
      years
    
    4
      to 7 years
    
    2
      years
    
    1
      to 4 years
    
    3
      yearsExpected
      dividends (per year)
    
    10p
    
    10p
    
    10p
    
    10p
    
    10pYear ended 31 December 2004Discretionary
        
        
        
        Long-termSave-as-you-
        
        employee &
        
        Restricted
        
        incentiveearn plans
        
        executive plans
        
        share plans
        
        plansWeighted average fair value (£)
        
        1.65
        
        1.50
        
        2.98
        
        2.73Options pricing model used
        
        
        
        
        
        
        
        Monte CarloBlack Scholes
        
        Black Scholes
        
        Black Scholes
        
        simulation basedoptions pricing
        
        options pricing
        
        options pricing
        
        customised optionsmodel
        
        model
        
        model
        
        pricing modelKey assumptions used:Weighted
      average share price (£)
        
        3.91
        
        3.88
        
        3.21
        
        3.63Range
      of exercise prices (£)
        
        3.14
        
        3.214.07
        
        Nil
        
        NilRange
      of expected volatility (%)
        
        54%
        
        41%58%
        
        41%56%
        
        53%Range
      of risk-free rates (%)
        
        5%
        
        4%5%
        
        5%
        
        5%Range
      of expected option term (life)
        
        3 years
        
        4 to 7 years
        
        1 to 4 years
        
        3 yearsExpected
      dividends (per year)
        
        10p
        
        10p
        
        10p
        
        10pAssumptions on expected volatility and expected option term have been made on the basis of historical data, wherever available, for the period corresponding with the vesting period of the
option. Best estimates have been used where historical data is not available in this respect.
Market-related
  performance conditions, which are used to determine the vesting pattern on the
  LTIP options, are built into the Monte Carlo simulation based options pricing
  model used to determine fair value of these options.
The Group reported
  a provision for National Insurance and other social security taxes of £11
  million (2004: £9 million) in respect of liabilities arising from the above
  share-based payment transactions.
34 Related
party transactions
The parent company of the Group is Reuters Group PLC (incorporated in the United Kingdom). Reuters Group PLC owns 4% of its own shares, relating to the share buyback programme (see note 27
on page 89). 2% of Reuters Group PLC is owned by the Group ESOTs (see note 27 on page 89).
The ESOTs were
  established by Reuters in August 1990, January 1994 and August 2004. The ESOTs
  established in August 1990 and January 1994 are funded by Reuters Limited. The
  ESOT established in August 2004 is funded by Reuters SA. The trustee of the
  ESOTs is an offshore independent professional trustee. Shares purchased by the
  trusts, which are deducted from shareholders equity on the consolidated
  balance sheet, will be used either to meet obligations under the Groups
  restricted share plans to satisfy the exercise of options granted, or to be
  granted, under other employee share option plans.
Reuters
          Group PLCAnnual
          Report and Form 20-F 2005
    
    95Back to Contents


Notes to the financial statementscontinued

Key management personnel compensation, including the Groups directors, is shown in the table below:
2005
        
        
        2004£m
        
        
        £mSalaries and short-term employee benefits
        
        8
        
        
        10Post-employment benefits
        
        1
        
        
        2Other long-term benefits
        
        
        
        
        Termination benefits
        
        1
        
        
        Share-based payments
        
        6
        
        
        4Total
        
        16
        
        
        16More details of directors remuneration and senior management compensation are given in section 9 of the Remuneration report.
During the year,
  the Group carried out a number of transactions with related parties, mainly
  being relationships where the Group holds investments in associates and joint
  ventures. These transactions involved supply of services and were entered into
  in the normal course of business and on an arms length basis.
Details of these
transactions are shown below:
31 December
        
        Amounts
        
        Amounts
        
        31 December2004
        
        invoiced
        
        collected
        
        2005£m
        
        £m
        
        £m
        
        £mAmounts receivable:Joint ventures:Factiva
        
        3
        
        39
        
        (38
        )
        4Other
      joint ventures
        
        
        
        1
        
        (1
        )
        Associates
        
        
        
        3
        
        (3
        )
        Total amounts receivable
        
        3
        
        43
        
        (42
        )
        4Amounts payable:Joint ventures:Factiva
        
        1
        
        4
        
        (4
        )
        1Associates:3
      Times Square Associates
        
        
        
        18
        
        (18
        )
        Other
      associates
        
        
        
        2
        
        (2
        )
        Total amounts payable
        
        1
        
        24
        
        (24
        )
        1
No amounts were provided for or written off in the income statement in respect of amounts receivable from related parties.
  The above amounts
    relate to the rendering or receiving of services between both parties, including
    agency agreements and licence agreements. Detailed summaries of key transactions
    in respect of the Groups related parties are set out below. Except as
    noted below, these services are ongoing and continued at historical levels
    to the date of this report.
  During 2005,
    Reuters paid £47 million (2004: £42 million) to the Groups
    pension funds.
FactivaFactiva
and Reuters each provide a variety of services to the other. Factiva hosts and
maintains Reuters pictures archiving service under a rolling one-year contract.
Under a three-year agreement which commenced on 1 January 2003 and has been renewed
for a further three-year period from 1 January 2006, Factiva permits Reuters
to incorporate Factiva content in certain Reuters products. Under a separate
licence, Factiva also permits
Reuters staff to access Factiva content. The total cost of the services provided
by Factiva to Reuters in 2005 was £4 million (2004: £9 million).
  Reuters provides
    Factiva with technical and administrative support services, including use
    of Reuters premises, facilities, finance and payroll services, subject to
    termination by Factiva on six months written notice or Reuters on twelve
    months written notice. Reuters also provides content, primarily its
    newswires, to Factiva for incorporation in certain Factiva services for a
    fixed fee and royalty payment. This agreement was renewed for a further four
    year period from 1 January 2004. In 2004, Reuters granted Factiva an additional
    trademark licence permitting Factiva to use Reuters name for an annual fee
    based on a percentage, increasing in the

next calendar
    year, of Factivas gross revenues. The licence continues until breach,
    insolvency, dissolution of the joint venture or Reuters owning less than 50%
    of Factiva. The total cost of the services provided by Reuters to Factiva
    in 2005 was £39 million (2004: £23 million). Under the terms of
    the agreement with Dow Jones&
    Co. relating to the formation of the Factiva joint venture, Reuters has agreed
    that it will only supply its content in accordance with its written policy
    regarding distribution of content to third parties and that in the event that
    it makes its proprietary content available to any service that competes or
    would reasonably be deemed to compete with Factiva then any revenue from such
    sale shall be paid to Factiva. Such terms also apply to Dow Jones.
  In addition
    to the above amounts, Reuters held a loan payable to Factiva of £11 million
    at the start of 2005, on which interest was payable at LIBOR. This was repaid
    during 2005. A further loan of £10 million repayable to Factiva, on which
    interest is payable at LIBOR, was made by Factiva to Reuters during 2005 and
    remained payable at 31 December 2005.
3 Times Square Associates LLC (3XSQ Associates)Reuters
is party to a lease entered into in 1998 with 3XSQ Associates, an entity owned
by Reuters and Rudin Times Square Associates, LLC formed to acquire, develop
and operate the 3 Times Square property and building. Pursuant to the lease,
which has been amended from time to time, Reuters leases approximately 692,000
square feet for a term of approximately 20 years expiring in 2021, with an option
to terminate 10 years early as to
77,000 square feet and three successive ten-year renewal options as to the entirety
of the space. Reuters made payments of $33 million (£18 million) to 3XSQ Associates during 2004 and 2005 in respect of rent, operating expenses, taxes,
insurance and other obligations. The lease is supported by a $120 million
letter of credit provided by Reuters.

96
    
    Reuters
          Group PLCAnnual
          Report and Form 20-F 2005Back to Contents


35 Contingencies and commitments
Contingent liabilities and contingent assetsExcept
  as described below, neither the Group, nor any of its directors, members of senior
  management
    or affiliates, is subject to any legal or arbitration proceedings which may
    have, or
  have had in the recent past, significant effects on the Groups financial performance or profitability. A description of certain legal proceedings relating to Instinet Group was included in the 2004 Annual Report and Form 20-F but is not
  included in this Annual Report in light of Instinet Groups sale to NASDAQ
  in December 2005. The Group has no contingent assets.
Douglas Gilstrap and Myron Tataryn v. Radianz Ltd., Radianz Americas, Inc., Reuters Limited, Blaxmill (Six) Limited, Reuters C LLC, Reuters America LLC, and British Telecommunications
plcOn
  12 September 2005, Radianzs former CEO Douglas Gilstrap filed a class
  action lawsuit purportedly on behalf of Radianz option holders against Radianz,
  Radianz
  Americas, Inc., Reuters Limited, Blaxmill (Six) Limited, Reuters C LLC, Reuters
  America LLC, and BT in the United States District Court, Southern District
  of New York, relating to the cash cancellation of Radianz options, in conjunction
  with Reuters sale of Radianz
  to BT. The complaint does not specify the amount of damages sought. Under the
  claims and indemnification provision of the Radianz Sale Agreement between
  BT
  and Reuters, Reuters elected to take control of the defence of this litigation
  as to all defendants. On 15 December 2005, a First Amended Complaint was filed,
  which among other things, added Myron Tataryn, a former Radianz employee based
in the UK, as an
additional named
    plaintiff and purported class representative. On 30 January 2006, the defendants
    filed a motion to dismiss the case in its entirety on forum non conveniens
    grounds. The Court has stayed the initiation of any discovery or the filing
    of any other dispositive motions until the motion to dismiss for forum non
    conveniens is decided. Oral arguments on the motion to dismiss for forum non
    conveniens are now scheduled for 12 May 2006. The Group believes the claims
    are without merit and intends to defend them vigorously.
Ariel (UK) Limited v. Reuters Group PLC, Reuters C LLC, Reuters Transactions Services Limited, Instinet Group, Incorporated, the NASDAQ Stock Market Inc. and Silver Lake Partners
LPOn 16
November 2005, Ariel (UK) Limited brought an action in the United States District
Court, Southern District of New York against Reuters Group PLC, Reuters C LLC,
Reuters Transactions Services Limited, Instinet Group, NASDAQ and Silver Lake
Partners LP, seeking a declaration that a 1975 Agreement between Ariel and Instinet
permits Ariel to license Reuters current patent portfolio to others. The complaint,
as amended on 28
February 2006, also claims breach of contract, copyright infringement and requests
for declaratory relief. Ariel seeks $50 million compensatory damages from
Reuters and Instinet Group. The defendants have until 31 March 2006 to respond
by answering or moving to dismiss the amended complaint. Reuters intends to do
both. The Court has stayed discovery until the anticipated motions to dismiss
the amended complaint are decided. The Group believes the claims are without
merit and intends
to defend them vigorously.
Capital commitmentsCapital expenditure contracted for at the balance sheet date but not yet incurred is as follows:
2005
        
        
        2004£m
        
        
        £mProperty, plant and equipment
        
        16
        
        
        37Intangible assets
        
        13
        
        
        Total capital commitments
        
        29
        
        
        37Groups share of contingent liabilities and commitments in respect of
  associates and joint venturesThe
Groups share in contingent liabilities and commitments in relation to its interest in associates and joint ventures was £nil (2004: £nil).
Warranties and indemnitiesDuring 2005, the Group has disposed of a number of its investments and provided standard warranties and indemnities as part of the sale and purchase agreements. The likelihood of the Group
incurring any liability in relation to these is considered remote, therefore no provisions have been recorded and no disclosure is presented in the financial statements.
Operating lease payablesMinimum payments for non-cancellable operating leases for terms in excess of one year from 31 December are as follows:
2005
        
        
        2004Year ended 31 December
        
        £m
        
        
        £m2005
        
        
        
        
        1032006
        
        79
        
        
        812007
        
        74
        
        
        742008
        
        63
        
        
        672009
        
        54
        
        
        612010
        
        51
        
        
        55Thereafter
        
        352
        
        
        252Total operating lease payables
        
        673
        
        
        693At 31 December 2005, future minimum sublease payments expected to be received under non-cancellable subleases were £114 million (2004: £24 million).
The Group leases
  various facilities under non-cancellable operating lease agreements. The leases
  have various terms, escalation clauses and renewal rights. The Group also leases
  equipment under non-cancellable operating lease agreements.

Reuters
          Group PLCAnnual
          Report and Form 20-F 2005
    
    97Back to Contents


Notes
  to the financial statementscontinued

36 Acquisitions
Acquisition
  of TelerateOn 3
  June 2005, Reuters purchased the trade and assets of Telerate and 100% of the
  share capital of three of Telerates subsidiaries in exchange for cash
  and the Groups 14% holding in Savvis convertible preference shares. In
  addition, on 6 June 2005, Reuters carried out a merger with Quick Telerate,
  the distributor of Telerates products in Japan. All of these purchases
  have been accounted for as acquisitions. As a result of this acquisition, Reuters
  disposed of its 4.85% holding in Quick Corporation, the parent of Quick Telerate.
  The profit on disposal is detailed within note 37.
Book
    
    Fair
      value
    
    Provisionalvalue
    
    adjustments
    
    fair
      value£m
    
    £m
    
    £mNon-current
      assets:Intangible assets
    
    7
    
    49
    
    56Property, plant and equipment
    
    3
    
    (1
    )
    2Current
      assets:Cash and cash equivalents
    
    16
    
    
    
    16Other current assets
    
    19
    
    
    
    19Current
      liabilities
    
    (31
    )
    1
    
    (30
    )Non-current
      liabilities
    
    (3
    )
    (2
    )
    (5
    )Net
      assets acquired
    
    11
    
    47
    
    58Goodwill
    
    
    
    
    
    72Total
      consideration
    
    
    
    
    
    130Consideration
      satisfied by:Cash
      (including £8 million of transaction fees)
    
    
    
    
    
    99Fair
      value of investment in Savvis convertible preference shares
    
    
    
    
    
    31Total
      consideration
    
    
    
    
    
    130The fair value adjustments in respect of intangible assets are due to the recognition of £2 million in respect of trademarks and £53 million in respect of customer relationships,
which have been independently valued, partly offset by the write-off of £6 million of intangibles that were recorded on Telerates balance sheet prior to the acquisition. Goodwill represents the value of synergies arising from the
acquisition and the acquirees assembled work force. The adjustments to property, plant and equipment, current assets, current liabilities and non-current liabilities relate to valuation adjustments and are provisional, based on
managements best estimates. The fair value adjustments relating to the Telerate acquisition will be finalised in the 2006 financial statements.
The
  outflow of cash and cash equivalents on the acquisition can be calculated as
  follows:
£mCash
      consideration
    
    99Cash
      acquired
    
    (16
    )Total
      outflow of cash and cash equivalents
    
    83From the date of acquisition to 31 December 2005, the acquisition contributed £74 million to turnover, £5 million loss before interest and amortisation of intangibles and £5
million loss before amortisation, but after interest.
If the acquisitions
  had been made at the beginning of the financial year, Telerate would have contributed
  £133 million to revenue and incurred a £21 million loss. This information
  takes into account the amortisation of acquired intangible assets, together
  with related income tax effects and should not be viewed as indicative of the
  results of operations that would have occurred if the acquisitions had been
  made at the beginning of the year.

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      Group PLCAnnual
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Other
  acquisitionsDuring
  2005, Reuters acquired the trade and assets of Tremont Capital Managements
  hedge fund database business (March 2005) and the trade and assets of the Hedgeworld
  Group in March 2005. Reuters also purchased the share capital of Image Group
  Limited (trading as Action Images) in September 2005 and EcoWin AB in November
  2005.
Book
    
    Fair
      value
    
    Provisionalvalue
    
    adjustments
    
    fair
      value£m
    
    £m
    
    £mNon-current
      assets:Intangible
      assets
    
    1
    
    10
    
    11Current
      assets:Cash
      and cash equivalents
    
    4
    
    
    
    4Other
      current assets
    
    2
    
    
    
    2Current
      liabilities
    
    (6
    )
    
    
    (6
    )Non-current
      liabilities
    
    
    
    (1
    )
    (1
    )Net
      assets acquired
    
    1
    
    9
    
    10Goodwill
    
    
    
    
    
    31Total
      consideration
    
    
    
    
    
    41Consideration
      satisfied by:Cash
    
    
    
    
    
    36Other*
    
    
    
    
    
    5Total
      consideration
    
    
    
    
    
    41*
    Other consideration
      principally comprises the issue of £3 million of loan notes, relating
      to the acquisition of Image Group Limited.The fair value adjustments in respect of intangible assets are due to the recognition of £3 million in respect of trademarks, £2 million in respect of acquired technology and
£5 million in respect of customer relationships, which have been independently valued. Goodwill represents the value of synergies arising from the acquisition and the acquirees assembled work force. The adjustments to current assets and
non-current liabilities relate to valuation adjustments and are provisional, based on managements best estimates. The fair value adjustments relating to these acquisitions will be finalised in the 2006 financial statements.
The outflow of cash and cash equivalents on the acquisition can be calculated as follows:
£mCash consideration
    
    36Cash
      acquired
    
    (4
    )Total
      outflow of cash and cash equivalents
    
    32From the date
  of acquisition to 31 December 2005, the acquisitions contributed £4 million
  to turnover, £1 million to profit before interest and amortisation of intangibles
  and £nil to profit before amortisation, but after interest. If Reuters
  had acquired the assets at the beginning of the financial year, the acquisitions
  would have contributed £13 million to revenue and £3 million to profit.
37 Disposals
Gains on the disposal
  of associates and available-for-sale financial assets include £4 million
  arising from the disposal of Reuters holding in Quick Corporation and £33
  million in respect of the part-disposal of shares in TSI. Gains on disposal
  of subsidiary undertakings mainly comprise an £8 million gain on disposal
  of a number of UK entities partly offset by a £6 million loss on disposal
  of the Reuters Portfolio Management System (RPMS) business.
Realised net gains, all of which were recorded in the income statement within continuing operations were:
£mOn
      disposal of subsidiary undertakings
    
    4On
      disposal of associates and available-for-sale financial assets
    
    38Recorded
      in the income statement
    
    42During 2005, Reuters disposed of a number of wholly owned subsidiary undertakings including Radianz and Instinet Group. These subsidiaries were treated as discontinued operations in
accordance with IFRS 5 and are therefore disclosed separately in note 7.
During 2004, the
  Group made net disposal gains of £235 million, principally relating to
  the reduction of its stake in TSI from 48.4% to 8.8% (£149 million) and
  the disposal of its 34.2% stake in GL TRADE (£47 million).

Reuters
      Group PLCAnnual
      Report and Form 20-F 2005
    
    99Back to Contents


Notes
  to the financial statementscontinued

38 Post balance sheet events
During the period
  1 January 2006 to 7 March 2006, the Group purchased 33 million shares representing
  total consideration of £137 million, as a part of its continuing share
  buyback programme announced in July 2005.
The following
  table provides a summary of the shares bought back during this period:
Total
      number
    
    
    
    Approximateof
      shares
    
    
    
    value
      of sharespurchased
      as
    
    
    
    that
      may yetpart
      of publicly
    
    Average
      price
    
    be
      purchasedannounced
    
    paid
      per
    
    under
      theMonth
    
    programme
    
    share
      (£)
    
    programme
      (£m)January
    
    10,500,000
    
    4.32
    
    733February
    
    18,450,000
    
    4.06
    
    658March
    
    4,500,000
    
    3.82
    
    640The Group expects to contribute around £47 million to its material defined benefit plans in 2006. Furthermore, the company is currently in discussion with the Trustees of the RPF
regarding a proposed plan to fund the deficit. At 31 December 2005, the RPF deficit was £223 million (£174 million after adjustment for deferred taxation).
39 Significant subsidiaries and joint ventures
The principal subsidiary undertakings and joint ventures at 31 December 2005, all of which are included in the consolidated financial statements, are shown below:
Subsidiary
      undertakings
    
    Country
      of incorporation
    
    Principal
      area of operation
    
    Percentage
      of equity shares heldReuters
      AG
    
    Germany
    
    Germany
    
    100Reuters
      America Holdings Inc*
    
    USA
    
    Worldwide
    
    100Reuters
      America LLC
    
    USA
    
    USA
    
    100Reuters
      Australia Pty Limited
    
    Australia
    
    Australia
    
    100Reuters
      BV
    
    Netherlands
    
    Netherlands
    
    100Reuters
      Canada Limited
    
    Canada
    
    Canada/USA
    
    100Reuters
      Europe SA
    
    Switzerland
    
    Spain/Portugal
    
    100Reuters
      Finance PLC*
    
    UK
    
    UK
    
    100Reuters
      Group Overseas Holdings Ltd
    
    UK
    
    Worldwide
    
    100Reuters
      Holdings Limited*
    
    UK
    
    UK
    
    100Reuters
      Hong Kong Limited
    
    Cook
      Islands
    
    Hong
      Kong
    
    100Reuters
      International Holdings SARL*
    
    Switzerland
    
    Worldwide
    
    100Reuters
      Investments Limited*
    
    UK
    
    UK
    
    100Reuters
      Investments (2002) Limited*
    
    UK
    
    UK
    
    100Reuters
      Italia SpA
    
    Italy
    
    Italy
    
    100Reuters
      Japan Kabushiki Kaisha
    
    Japan
    
    Japan
    
    100Reuters
      Limited
    
    UK
    
    Worldwide
    
    100Reuters
      Middle East Limited
    
    Cook
      Islands
    
    Middle
      East
    
    100Reuters
      Nederland BV*
    
    Netherlands
    
    Netherlands
    
    100Reuters
      Research Inc
    
    USA
    
    USA
    
    100Reuters
      SA
    
    Switzerland
    
    Worldwide
    
    100Reuters
      Services SA
    
    France
    
    France
    
    100Reuters
      Singapore Limited
    
    Singapore
    
    Singapore
    
    100Reuters
      Telerate Inc
    
    USA
    
    USA
    
    100Reuters
      Transaction Services Limited
    
    UK
    
    Worldwide
    
    100Joint
      ventures
    
    Country
      of incorporation
    
    Principal
      area of operation
    
    Percentage
      of equity shares heldFactiva
      LLC
    
    USA
    
    Worldwide
    
    503
      Times Square Associates LLC
    
    USA
    
    USA
    
    50*
    Denotes investment
      companies. All other entities are operating companies.The financial years for all of the above undertakings end on 31 December.
Factiva is a 50% joint venture with Dow Jones, providing a broad range of global news and a deep historical archive of business information which client organisations can integrate into
their business applications and intranet portals.
3 Times Square
  Associates LLC is a 50% joint venture with Rudins Times Square Associates LLC,
  formed to acquire, develop and operate the 3 Times Square property and building.

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40 First-time adoption of IFRSAn explanation of how the transition from UK GAAP to IFRS has affected the Groups income statement, financial position and cash flows is given in the reconciliations and explanatory
notes below.
Reconciliation of the consolidated income statement for the year ended 31 December 2004Explanatory
notes are given below the tables.
DiscontinuedUK GAAP
        
        IFRS impact
        
        operations
        
        IFRSNote
        
        £m
        
        £m
        
        £m
        
        £mRevenue
        
        
        
        2,885
        
        
        
        (546
        )
        2,339Development and software licences
        
        b
        
        
        
        (21
        )Employee benefits  share-based payments
        
        c
        
        
        
        (7
        )Employee benefits  others including pensions
        
        d
        
        
        
        7Goodwill amortisation and impairment
        
        e
        
        
        
        40IFRS adjustments to discontinued operations
        
        g
        
        
        
        (10
        )Operating costs
        
        
        
        (2,732
        )
        9
        
        536
        
        (2,187
        )Profit/(loss) on disposal of subsidiaries
        
        h
        
        
        
        (6
        )Other operating income
        
        
        
        50
        
        (6
        )
        (2
        )
        42Operating profit
        
        
        
        203
        
        3
        
        (12
        )
        194Net finance costs
        
        f
        
        (4
        )
        (1
        )
        (7
        )
        (12
        )Profit on disposal of associates and fixed asset investments
        
        h
        
        225
        
        (2
        )
        (20
        )
        203Share of profits/(losses) from associates and joint ventures
        
        f
        
        4
        
        
        
        7
        
        11Share of joint ventures disposal of investment
        
        
        
        9
        
        
        
        (9
        )
        Share of profits/(losses) from associates and joint ventures
        
        
        
        13
        
        
        
        (2
        )
        11Profit/(loss) before taxation
        
        
        
        437
        
        
        
        (41
        )
        396Taxation
        
        i
        
        (73
        )
        11
        
        22
        
        (40
        )Profit/(loss) from continuing operations
        
        
        
        364
        
        11
        
        (19
        )
        356Discontinued operationsProfit after tax from discontinued operations
        
        l
        
        
        
        
        
        19
        
        19Profit from discontinued operations
        
        
        
        
        
        
        
        19
        
        19Profit for the period
        
        
        
        364
        
        11
        
        
        
        375Attributable to:Equity
              holders of the parent
        
        
        
        351
        
        11
        
        2
        
        364Minority
              interest
        
        
        
        13
        
        
        
        (2
        )
        11Basic EPS
        
        
        
        25.1
        p
        0.8
        p
        0.1
        p
        26.0
        pBasic EPS from continuing operations
        
        
        
        26.0
        p
        0.8
        p
        (1.4
        p)
        25.4
        p
Reuters
          Group PLCAnnual
          Report and Form 20-F 2005
    
    101Back to Contents


Notes
  to the financial statementscontinued

Reconciliation
of shareholders equity
31 December
        
        1 January2004
        
        2004
        *Note
        
        £m
        
        £mReported under UK GAAP
        
        
        
        612
        
        407First-time adoption of IFRS:
        
        aDevelopment and software licences
        
        b
        
        49
        
        49Employee benefits
        
        d
        
        (14
        )
        (14
        )Goodwill amortisation
        
        e
        
        6
        
        6Taxation
        
        i
        
        (21
        )
        (21
        )Post balance sheet events  dividends
        
        j
        
        86
        
        86Financial assets and derivatives
        
        k
        
        
        
        Acquired intangible assets
        
        a
        
        (14
        )
        (14
        )Other
        
        
        
        (5
        )
        (5
        )87
        
        87Ongoing IFRS adjustments:Development and software licences
        
        b
        
        (21
        )
        Employee benefits
        
        d
        
        (200
        )
        Goodwill amortisation and impairments
        
        e
        
        29
        
        Taxation
        
        i
        
        63
        
        Post balance sheet events  dividends
        
        j
        
        
        
        Financial assets and derivatives
        
        k
        
        
        
        Acquired intangible assets
        
        a
        
        (1
        )
        Other
        
        
        
        1
        
        (129
        )
        Total
        
        
        
        (42
        )
        87Shareholders equity under IFRS
        
        
        
        570
        
        494* Date of transition to IFRS for the Group.
This reconciliation has been updated since the 2005 interim press release, primarily due to the reclassification of the RPF to a defined benefit plan under IFRS. The RPF is a complex,
  hybrid pension fund, with both defined company and employee contributions, and defined employee benefits. The RPF has been in existence since 1893 and has historically been treated as a defined contribution plan.
  Under the rules
    of the pension fund, the Group is not able to access any surplus in the RPF.
    Although the Group and employees make defined contributions to the fund, the
    RPF does not provide for contributions to be made to individual plan participant
    accounts. Under IAS 19, the RPF is treated as a defined benefit plan from
    the date of transition to IFRS. At transition, the net plan liabilities are
    £nil. At 31 December 2004, a net liability of £178 million has been
    recognised together with a related deferred tax asset of £39 million.
Explanatory
    notes to the UK GAAP to IFRS reconciliationsa.
          Transition date and first-time adoption of IFRS:The Groups transition date to IFRS was 1 January 2004. All adjustments
        on first-time adoption were recorded in shareholders equity on the
        date of transition, except for adjustments relating to IAS 32 Financial
        Instruments: Disclosure and Presentation and IAS 39 Financial
        Instruments: Recognition and Measurement which were recorded in
        shareholders equity at 1 January 2005.IFRS 1 sets out the transition rules which must be applied when IFRS is adopted for the first-time. As a result, certain of the requirements and options in IFRS 1 may result in a different
application of accounting policies in the 2004 restated financial information from that which would apply if the 2004 financial statements were prepared using full retrospective adoption of IFRS. The standard sets out certain mandatory exceptions to
retrospective application and certain optional exemptions. The optional exemptions taken by the Group are:1.
          Business combinations:The
        Group has elected not to apply IFRS 3 Business Combinations
        retrospectively to business combinations that took place prior to the
        transition date to IFRS. Consequently, goodwill arising on business combinations
        before the transition date remains at its
previous UK GAAP carrying value at the date of transition from the UK GAAP financial statements. The functional currency of certain subsidiary goodwill and intangible balances has been
changed to reflect the functional currency of the subsidiary to which the goodwill relates, which resulted in £13 million additional translation losses being recorded in opening equity at the date of transition.2.
          Employee benefits:The
        Group has elected to recognise all cumulative actuarial gains and losses
        relating to employee benefit schemes in full in the statement of recognised
        income and expense. The impact is to recognise a net liability at 1 January
        2004 of £17 million.3.
          Cumulative translation differences:Under
        IAS 21 The Effects of Changes in Foreign Exchange Rates, cumulative
        translation differences within reserves are recycled from equity to the
        income statement on disposal of a foreign operation. In order to eliminate
        the need to apply this requirement retrospectively, the Group took the
        exemption to set cumulative translation differences to zero at the date
        of transition. Resetting
        to zero has no impact on net equity.4.
          Share-based payment transactions:The
         Group adopted the exemption in IFRS 1 which allows a first-time adopter

        to apply the new standard, IFRS 2 Share-based Payment, only
         to share options and equity instruments granted after 7 November 2002

        that have not vested by 1 January 2005. This will
        result in a number of existing schemes not being considered under IFRS
        and charges in 2004 and 2005 are likely to be lower than in 2006, when
        the full impact of IFRS 2 will be
seen.5.
          Financial instruments:The
        Group took the exemption in IFRS 1 to apply IAS 32 and IAS 39 from 1 January
        2005. The comparative information in 2004 for financial instruments, within
        the scope of IAS 39, is based on the underlying UK GAAP numbers. The main
        differences relate to the fair value of certain financial assets and recognition
        of all derivatives (including embedded derivatives) at fair value. The
        adjustment to increase opening equity as at 1 January 2005 for the adoption
        of IAS 32 and IAS 39 is £129 million.

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          Group PLCAnnual
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The mandatory exceptions outlined in IFRS 1 relevant to the financial statements (with which Reuters has complied) relate to:
6.
          Estimates:Estimates
        under IFRS at the date of transition are required to be consistent with
        estimates made for the same date under previous GAAP.7.
          Assets classified as held for sale and discontinued operations:An
        entity with a transition date to IFRS before 1 January 2005 shall apply
        the transitional provisions of IFRS 5, which require prospective application
        of IFRS 5. Earlier application is permissible so long as the necessary
        valuation information was available at the time the classification criteria
        would originally have needed to be met. The Group has applied IFRS 5 from
        1 January 2005, but has used the relevant statement headings in its 2004
        comparative numbers.b.
          Development and software licences:Under
        UK GAAP, both internally developed and acquired software licence costs
        were expensed through the income statement in the year that they
        were incurred. Under IFRS, the Group capitalises expenditure on development
        of new or substantially improved products that is incurred between establishing
        technical feasibility and the asset becoming income generating, provided
        it satisfies the conditions set out in IAS 38.c.
          Employee benefits (share-based payments):Under
        UK GAAP, charges were based on the intrinsic value of awarded shares at
        grant date, with no charge required for certain SAYE and DSOP. Under IFRS
        the income statement cost is based on the fair value of all share-based
        awards at grant date if equity- settled, or at the balance sheet date
        if cash-settled. The cost is calculated using option pricing models and,
        for equity-settled awards, applies to all options granted after 7 November
        2002 that have not vested by 1 January 2005 and amortised over the vesting
        period of the options.d.
          Employee benefits (pension costs):Under
         UK GAAP, the expected costs of defined benefit pension plans and post-retirement

        medical benefits were charged against the income statement over the expected
         service lives of employees. The Group has elected to adopt the December

        2004 amendments to IAS 19 Employee Benefits, hence differences
         between actual and expected return on assets, changes in the retirement

        benefit obligation due to experience and changes in actuarial assumptions
         are included in the statement of recognised income and expense. The
        amount
        reflected on the balance sheet is therefore the present value of the
        defined  benefit obligation less the fair value of defined benefit plan
        assets.
        The service cost of post retirement benefits accruing, the unwinding
        of  the discount rate on the scheme liabilities and the expected return
        on
        scheme assets are accounted for as operating costs. Under IAS 19, the
         Group reassessed the classification of its pension schemes, resulting

        in the reclassification of the RPF as a defined benefit scheme from the
         date of transition. The restated opening IFRS balance sheet reflects
        the
        present value of the defined benefit obligations less the fair value
        of  the plan assets of the Groups defined benefit schemes.e.
          Goodwill amortisation and impairments:Under
        UK GAAP, goodwill was amortised through the income statement on a straight
        line basis and impairment reviews were carried out periodically or when
        a specific event occurred. Under IFRS 3, goodwill is not amortised through
        the income statement but instead is subject to an annual test for impairment
        resulting in adjustments in the income statement and the balance sheet.f.
          Share of profits/(losses) from joint ventures and associates:This
        is reported net of interest and taxation under IFRS, whereas under UK
        GAAP, interest and taxation were reported separately in the respective
        headings. In 2004, the Group acquired the 49% voting interest in Radianz
        that it did not already own. Under UK GAAP; equity accounting continued
        for the original 51% interest and the 49% interest was held on the balance
        sheet as an asset held for sale. Under IFRS, from the date of acquisition
        of the remaining 49%, it was necessary to consolidate 100% of Radianz.
        IFRS 5 presentation was used, and hence the results of Radianz prior to
        16 November 2004 were presented within discontinued operations on the
        income statement.
g.
          IFRS adjustments to discontinued operations:These
        adjustments relate to employee benefit costs (as described in (c) and
        (d) above) and deferred taxation (as set out in (i) below).h.
          Profit/(loss) on disposals:Under
        UK GAAP, the profit or loss on disposals represented the difference between
        the balance sheet carrying value and the net disposal proceeds. Under
        IFRS, any currency translation differences previously taken to reserves
        are now included in the profit on disposal calculation. Also, the carrying
        value will be higher under IFRS as subsidiary goodwill is no longer amortised.i.
          Taxation:Under
        IFRS, deferred tax is recognised on the basis of temporary differences
        between the carrying value of assets and liabilities in the balance sheet,
        and their tax bases. Deferred tax has been recognised on the IFRS adjustments
        to the extent that they result in a temporary difference. The principal
        items that result in adjustments to deferred tax between UK GAAP and IFRS
        are: fair values of employee benefits; development and software licences;
        acquired intangible assets; and share based payments. The £6 million
        change in the carrying value of goodwill at 1 January 2004 represents
        the creation of a deferred tax liability on intangibles acquired in past
        business combinations.j.
          Post-balance sheet event dividends:Under
        UK GAAP, dividends are provided for in the year in respect of which they
        are declared or proposed by the Directors. Under IFRS, dividends declared
        after the balance sheet date are not recognised as an adjusting post-balance
        sheet event. Dividends are only provided for when they are declared. The
        final 2003 dividend is derecognised on transition to IFRS and has been
        disclosed as a movement in reserves during 2004 alongside the 2004 interim
        dividend.k.
          Financial assets and derivatives:Under
        IFRS, the Group adopted IAS 32 Financial Instruments: Disclosure
        and Presentation and IAS 39 Financial Instruments: Recognition
        and Measurement at the effective date of1
        January 2005. IAS 39 covers the recognition, measurement and derecognition
        of financial instruments. The Group decided to take the exemption granted
        in IFRS 1 which removed the requirement to produce 2004 comparatives.
        Financial assets and liabilities recognised at 31
        December 2004 have therefore been valued in accordance with the requirements
        of UK GAAP.l.
          Profit after taxation from discontinued operations:The
        adoption of IFRS 5 has resulted in presentation of certain Group subsidiaries
        as discontinued operations. For more details on discontinued operations
        please refer to note 7.Explanation of principal differences between the cash flow statement presented
    under UK GAAP and the cash flow statement presented under IFRS (unaudited)The
    cash flow statement has been prepared in conformity with IAS 7Cash
    Flow Statements. The principal differences between the 2004 cash flow
    statement presented in accordance with UK GAAP and the cash flow statement
    presented in accordance with IFRS for the same period were as follows:
1.
          Under UK
        GAAP, net cash flow from operating activities was determined before considering
        cash outflows from (a) returns on investments and servicing of finance,
        (b) dividends received from associates, and (c) taxes paid. Under IFRS,
        net cash flow from operating activities is determined after these items.2.
          Under UK
        GAAP, capital expenditure, financial investments and acquisitions were
        classified separately, while under IFRS, they are classified as investing
        activities.3.
          Under UK
        GAAP, dividends paid were classified separately, while under IFRS, dividends
        paid are classified as financing activities.4.
          Under UK
        GAAP, movements in short-term investments were not included in cash but
        classified as management of liquid resources. Under IFRS, short- term
        investments with a maturity of three months or less at the date of acquisition
        are included in cash and cash equivalents.

Reuters
          Group PLCAnnual
          Report and Form 20-F 2005
    
    103Back to Contents
Summary
      of differences between IFRS (as adopted by the EU) and US GAAPAccounting
  principlesThese
  consolidated financial statements have been prepared in accordance with IFRS
  as adopted by the EU, which differ in certain significant respects from US GAAP.
Material
  differences between IFRS (as adopted by the EU) and published IFRSFor the
  Group, there are no material differences between the application of IFRS as
  issued by the International Accounting Standards Board and IFRS as adopted by
  the EU.
Material
  differences between IFRS (as adopted by the EU) and US GAAPA description
  of the relevant accounting principles which differ materially is given below.
a.
  Goodwill and other intangiblesGoodwillPrior to
  the adoption of IFRS on 1 January 2004, goodwill arising on acquisitions before
  1998 and accounted for under the purchase method was eliminated against equity.
  Goodwill arising on acquisitions from 1998 to 31 December 2003 was capitalised
  and amortised over its useful life.
Under IFRS, from 1 January 2004, goodwill arising on acquisitions is no longer amortised and is allocated to cash generating units and assessed for impairment at least annually. The Group
has elected not to apply IFRS 3 Business Combinations retrospectively to business combinations that took place prior to the Groups 1 January 2004 transition date to IFRS, and amortisation arising prior to transition has not been
reversed. Goodwill arising on acquisitions before 1 January 2004 remains at its previous carrying value at the date of transition to IFRS.
Under US GAAP, prior to 1 July 2001, goodwill was amortised over its estimated useful life. In 2002, Reuters adopted the provisions of FAS 142 Goodwill and Other Intangible
Assets, and as a result goodwill arising on acquisitions completed after 30 June 2001 was not amortised. From 1 January 2002, goodwill was no longer subject to amortisation. Under US GAAP, goodwill is assessed for impairment at least annually.
As a result of differences in the carrying value of goodwill under US GAAP, impairment charges may differ from those recorded under IFRS.
In addition to differences arising from the previous GAAP requirement to amortise goodwill, as described above, goodwill balances at the date of IFRS adoption may differ from US GAAP
balances because of: differences in the measurement of the fair value ascribed to quoted securities issued to effect a business combination; differences in the treatment of contingent purchase consideration; and differences in the definition of
separately identifiable intangible assets of the acquiree to which purchase consideration should be allocated.
Other
  intangiblesPrior to
  the adoption of IFRS on 1 January 2004, identifiable intangibles acquired in
  a business combination were required to be recognised separately on the balance
  sheet and amortised over their useful life.
Under US GAAP, a different definition of intangible assets is applied, therefore additional intangible assets were identified under US GAAP giving rise to additional amortisation.
b.
  Joint ventures and associatesUnder
  US GAAP, the Groups share of the results of joint ventures and associates
  is adjusted to reflect the non-amortisation of goodwill since 1 January 2002.
  Under IFRS, the Group has elected not to apply IFRS 3 Business Combinations
  retrospectively to business combinations that took place prior to the transition
  date to IFRS, and this also applies to past acquisitions of investments in associates
  and of interests in joint ventures. Goodwill arising on the acquisition of associates
  and joint ventures before the transition date remains at its previous carrying
  value at the transition date to IFRS of 1 January 2004.
c.
  Deferred gain on assets contributed to joint venturesPrior
   to the adoption of IFRS on 1 January 2004, where the fair value of assets
  contributed
  to joint ventures and associates is greater than the book value, the difference
   is recognised in reserves. Under US GAAP, the difference is released to the
  income
  statement over the anticipated life of the long lived assets contributed to
   the venture.
  d.
  Gains and losses on disposal of subsidiary and associated undertakingsOn the
  disposal of subsidiaries and associate undertakings a different gain or loss
  on sale may arise as a result of the following:
GoodwillPrior to
  the transition to IFRS, goodwill arising on business combinations was amortised
  on a systematic basis, or, prior to 1998, written off directly to reserves.
  Under US GAAP, goodwill is not amortised but tested for impairment on an annual
  basis. Under US GAAP, therefore, the carrying value of goodwill is different,
  and results in different gains or losses on disposal.
Investment
  hedge on foreign subsidiariesUnder IFRS,
  gains and losses on the fair value of instruments designated as hedges against
  the carrying value of group undertakings are recognised in a hedging reserve
  within equity, to the extent that the hedge is effective. On disposal of such
  undertakings, cumulative gains and losses that had previously been recognised
  in the hedging reserve are transferred and recognised in the income statement.
  Under US GAAP, Reuters has not designated any of its derivative instruments
  as qualifying hedge instruments under FAS 133. Accordingly, no cumulative gains
  and losses from hedging are transferred to the income statement on disposal
  of Group undertakings under US GAAP.
Recycling
  of foreign currency translation differencesUnder IFRS,
  gains and losses on the retranslation of assets and liabilities of foreign operations
  that have been recorded in equity since the IFRS transition date of 1 January
  2004 are transferred to the income statement and recognised as part of the gain
  or loss on disposal of those operations.
Under US GAAP, amounts attributable to foreign operations that have been accumulated in the translation adjustment component of equity from the date of acquisition are removed from the
separate component of equity, and are reported as part of the gain or loss on disposal of those operations.
Differences in the amounts recognised on disposals under US GAAP and IFRS arise as the currency translation reserve under IFRS was set to zero on adoption of IFRS as at 1 January 2004, and
also due to underlying GAAP differences in the carrying values under IFRS and US GAAP of the underlying foreign currency assets and liabilities being retranslated.
In 2005, there was a US GAAP adjustment of £25 million to reduce the Radianz loss on sale and an adjustment of £57 million to reduce the Instinet gain on sale. Only Instinet
qualifies as a discontinued operation under US GAAP.
e.
  InvestmentsUnder
  IFRS, prior to the adoption of IAS 32 Financial Instruments: Disclosure
  and Presentation and IAS 39 Financial Instruments: Recognition and
  Measurement on 1 January 2005, fixed asset investments were held in the
  balance sheet at cost, net of permanent diminution in value as assessed by the
  directors.
Under IFRS, following the adoption of IAS 32 and IAS 39, available-for-sale assets and financial assets held for trading are initially recognised at fair value in the translation reserve
and subsequently remeasured at fair value. The Group has classified all of its marketable securities as available-for-sale, with the exception of its investment in Savvis, which was classified as a financial asset at fair value through profit or
loss, before being disposed of in 2005. Realised and unrealised gains and losses on financial assets held for trading are included in the income statement in the period in which they arise. Unrealised gains and losses arising from changes in fair
value of available-for-sale assets are recognised in the statement of recognised income and expense.
Under US GAAP, traded investments are stated at fair value with unrealised gains or losses included in the income statement. Investments which have a readily determinable fair value and are
classified as available-for-sale are stated at fair value with unrealised gains or losses included in other comprehensive income. Investments in available-for-sale assets which do not have a readily determinable fair value are carried at historic
cost.
f.
  Stock optionsEmployee
  share awardsUnder IFRS,
  compensation charges relating to equity-settled employee share awards made after
  7 November 2002 but not vested at 1 January 2005 are based on the fair value
  of the awards at the date of grant, expensed on a straight-line basis over the
  vesting period of the award. At each balance sheet
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date, the Group revises its estimate of the number of options that are expected to become exercisable. Cash-settled share-based payments are accrued over the vesting period of the award,
based on the current fair market value at each balance sheet date.
Under US GAAP, the Group applies the measurement provisions of APB 25 Accounting for Stock Issued to Employees and recognises the intrinsic value of options granted as
determined on the measurement date over the vesting period. Under US GAAP, additional compensation cost is recognised when the vesting of an option has been accelerated and those options would otherwise have been forfeited unvested. Additional
compensation cost is also recognised where a new measurement date is established, following the amendment of a stock option plan, where the exercise price is less than the market value of the underlying shares on the new measurement date.
Under Reuters Save-As-You-Earn (SAYE) plans, shares are granted to employees at a 20% discount. Under US GAAP, the discount is treated as employee compensation and is accrued over the
vesting period of the grants. Under US GAAP, if an SAYE scheme is offered at a lower price than those offered previously and participants are able to transfer out of an existing scheme into the new scheme, variable plan accounting rules apply. Under
these rules, a compensation charge is recorded on issue of the option for the intrinsic value of the award at the grant date, any subsequent movement in the share value results in a re-measuring of the compensation charge, which continues until the
option is exercised. Variable plan accounting applies to all options in existing higher priced schemes and also to options in lower priced schemes to the extent that those options have been transferred from a higher priced scheme.
  National
    Insurance on stock optionsUnder IFRS,
    the liability for National Insurance on stock options is accrued based on
    the fair value of the options on the date of grant and adjusted for subsequent
    changes in the market value of the underlying shares. Under US GAAP, this
    expense is recorded upon exercise of the stock options.
  Options
    granted to non-employeesUnder IFRS,
    the transfer of employees that held unvested stock option awards to a joint
    venture prior to 7 January 2002 does not give rise to a charge against profit.
    Under US GAAP, the stock awards are considered to be held by non-employees
    and accordingly a stock option expense relating to the fair value of the unvested
    awards is included in share of operating profit/loss in joint ventures
    over the remaining vesting period.
  g.
    PensionsUnder
    IFRS, pension assets, defined benefit pension liabilities and pension expense
    are determined using the Projected Unit Credit Method in a similar manner
    to US GAAP. However, under IFRS all actuarial gains and losses which arise
    in calculating the present value of the defined benefit obligation and the
    fair value of plan assets, are recognised immediately in the statement of
    recognised income and expense.
Under US GAAP, actuarial
gains and losses in excess of the corridor are recogised over the average remaining
service life of the employees. Also, under US GAAP an additional minimum  liability
is recorded when the accumulated benefit obligation exceeds the fair value of
the plan assets by an amount greater than the liability recognised in the balance
sheet. In addition, there is a transition asset or obligation recognised upon

the adoption of FAS 87 Employers Accounting for Pensions, which
is then released to the income statement over the average remaining service lives
of the employees.
  h.
    RestructuringUnder
    IFRS, Reuters recognises provisions for restructuring charges other than termination
    benefits, once the Group has a present obligation (legal or constructive)
    to incur the costs as a result of a past event, it is probable that an economic
    outflow will be required, and a reliable estimate can be made. A constructive
    obligation is considered to exist when a detailed formal plan is in place
    and a valid expectation has been raised in those affected. Termination benefits
    are recognised when the Group is demonstrably committed to a plan of termination
    when, and only when, the Group has a detailed formal plan (with specified
    minimum contents) for the termination, and there is no realistic possibility
    of withdrawal. Provisions for costs associated with the exit of a property
    are recognised once the intention to exit has been announced.
Under US GAAP,
  employee severance costs that are not one-time termination charges are recognised
  when it is probable that these costs will be incurred and the amount is capable
  of being estimated. Charges for costs associated with the exit of properties
  are recognised upon vacating the property or legal termination of the lease
  contract.
Under IFRS, liabilities for terminating or reducing the activities of an acquired company are only recognised as part of allocating the cost of a combination if they exist at the date of
acquisition and meet certain recognition criteria. Provisions for future losses or other costs expected to be incurred as a result of a business combination are not recognised.
Under US GAAP, the Group applies the provisions of EITF 95-3 Recognition of liabilities in connection with a purchase combination, which requires recognition of certain costs
incurred in respect of exit activities and integration if specified conditions are met, as part of purchase accounting.
  i.
    Derivative instrumentsIn
    2004, the Group applied hedge accounting and was not required to record its
    derivative instruments or any of its embedded derivative instruments on the
    balance sheet at fair value. Compound derivative instruments, having multiple
    underlyings, could be designated as net investment hedges and, where this
    treatment was applied, foreign currency translation gains and losses arising
    on the instruments were recorded in the statement of total recognised gains
    and losses.
  From 1 January 2005, Reuters adopted IAS 32 Financial Instruments: Disclosure and Presentation and IAS 39 Financial Instruments: Recognition and Measurement. These
standards require all stand-alone and embedded derivative instruments to be recognised on the balance sheet at fair value. The method of recognising subsequent changes in fair value depends on whether the derivative is designated as a hedging
instrument, and if so, the nature of the item being hedged.
Under IFRS, the Group has designated certain derivatives as hedges of foreign net investments and fair value hedges of borrowings. For net investment hedges, fair value movements arising
from these derivatives are recognised in a hedging reserve, until transferred to the income statement on disposal or impairment of the underlying item. For fair value hedges, fair value movements are adjusted in the carrying value of borrowings;
movements in the fair value of fair value hedges are recognised in the income statement, together with movements in the fair value of the item being hedged. To the extent that hedges are ineffective, gains and losses are recognised in the income
statement.
Under US GAAP, the Group adopted FAS 133 Accounting for Derivative Instruments and Hedging Activities as amended by FAS 138, on 1 January 2001. FAS 133 introduced new rules in
respect of hedge accounting and the recognition of movements in fair value through the income statement. As a result of the adoption, all derivatives and embedded derivative instruments, whether designated in hedging relationships or not, are
carried on the balance sheet at fair value. The Group has not designated any of its derivative instruments as qualifying hedge instruments under FAS 133. Accordingly, changes in the fair value of derivative and embedded derivative instruments have
been included within the income statement under US GAAP.
Under IFRS, IAS 39 grants an exemption from the requirement to recognise embedded foreign currency derivatives where the currency is commonly used in the economic environment of the host
contract. FAS133 does not grant such an exemption, therefore the Group identifies and separately accounts for more embedded derivatives under US GAAP than it does under IFRS.
  j.
    Consolidation of subsidiary undertakingsOn
    16 November 2004, Reuters purchased the 49% voting stake of Radianz that it
    did not already own from Equant, thereby increasing its shareholding from
    51% to 100% of the voting shares. Under IFRS, from the date of acquisition
    of the remaining 49%, Radianz was fully consolidated. IFRS 5 Non-current
    Assets Held for Sale and Discontinued Operations was applied for presentation
    purposes, and hence Radianz was classified as a subsidiary acquired with a
    view to resale, and included in the balance sheet as a non-current asset held
    for sale. Liabilities directly associated with the non-current assets held
    for sale were also shown separately. The results of Radianz prior to 16 November
    2004 were presented within discontinued operations in the income statement.
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Summary
  of differences between IFRS (as adopted by the EU) and US GAAPcontinued

Under US GAAP,
     Radianz was treated as a joint venture of the Group for the period 1 January

  2004 to 16 November 2004. The acquisition of the additional 49% stake in Radianz
     was accounted for as a step acquisition at which time Radianz was fully
    consolidated
  as a subsidiary until its disposal during 2005. It is the opinion of the directors
     that Radianz met the criteria set forth in FAS 144, Accounting for
     the  Impairment and Disposal of Long Lived Assets, as a disposal group
     and  was therefore classified as an asset held-for-sale until its disposal.
     Although
  Reuters has no significant continuing involvement in the operations of Radianz
      following disposal, the classification of Radianz as a discontinued operation

  is not considered appropriate given a significant level of continuing cash
     outflows.  Under US GAAP, Radianz had a higher carrying value resulting
     in a greater write
  down to fair value less costs to sell at the end of 2004.
k.
  Sale and leaseback transactionsUnder
  IFRS, where gains and losses arise from transactions qualifying as sale and
  operating leaseback, such gains and losses on the sale of the properties and
  rental expenses associated with subsequent leasebacks are recognised in the
  income statement.
Under US GAAP, where a portion of the leased property is sub-let and that sublease is not minor, the sale and leaseback is accounted for as financing. The asset is retained on the balance
sheet at its written down value and depreciated over the term of the lease. The proceeds received from the sale of the property are deferred on the balance sheet as a financing liability, whilst lease rental payments are offset against the liability
as they are made. The differences between the initial proceeds received and subsequent rental payments are recorded as financing costs over the term of the lease.
l.
  Property, plant and equipmentUnder
  IFRS, the Group does not capitalise interest on self-constructed assets. Under
  US GAAP, interest incurred as part of the cost of constructing a fixed asset
  is capitalised and amortised over the life of the asset.
  m.
  TaxationUnder
  IFRS, deferred taxes are accounted for in accordance with IAS 12 Income
  Taxes, which requires deferred tax to be accounted for on temporary differences.
  Deferred tax assets are recognised to the extent that it is probable that taxable
  profits will be available against which the deductible temporary difference
  can be utilised. Assets not recognised are disclosed in note 26.
Under US GAAP, deferred taxes are accounted for in accordance with FAS 109 Accounting for Income Taxes on all temporary differences and a valuation allowance is established in
respect of those deferred tax assets where it is more likely than not that some portion will remain unrealised.
Deferred tax adjustments in the IFRS to US GAAP reconciliation are primarily the result of the deferred tax impact of the other US GAAP adjustments made in the reconciliation. However, tax
adjustments also arise in respect of the timing of recognition of deferred tax on share options and current tax benefits.
n.
  Reclassification of minority interestIFRS
  requires the presentation of minority interest within equity on the face of
  the balance sheet. Under US GAAP, minority interest is presented as a separate
  item on the face of the balance sheet outside of equity.
Cash
  flowsThe cash
  flow statement set out on page 52 has been prepared in accordance with IAS 7
  Cash Flow Statements. If the cash flow statement had been prepared
  in accordance with FAS 95 Statement of Cash Flows, the net increase
  in cash and cash equivalents would have been £84 million (2004: £36
  million). This is because under IFRS, the cash outflow in bank overdrafts of
  £8 million (2004: inflow of £12 million) is classified as a movement
  in cash and cash equivalents, while under US GAAP, the cash flow in bank overdrafts
  is classified as a financing activity.
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Notes
    on the summary of differences between IFRS and US GAAP01 Adjustments to net income
Note
        
        2005
        
        2004£m
        
        £mProfit/(loss) attributable to ordinary shareholders in accordance with IFRS
        
        
        
        456
        
        364US GAAP adjustments:Intangible amortisation and impairment
        
        a
        
        (4
        )
        21Amortisation of
gain on assets contributed to joint ventures
        
        c
        
        
        
        6(Loss)/gain on disposal of subsidiaries
        
        d
        
        (32
        )
        (18
        )(Loss)/gain on disposal of associated undertaking
        
        d
        
        
        
        (35
        )Gain/(loss) on disposal of fixed asset investments, available-for-sale assets andfinancial assets held for trading
        
        e
        
        42
        
        (18
        )Stock options
        
        f
        
        (1
        )
        18Pensions
        
        g
        
        (28
        )
        1Restructuring
        
        h
        
        (9
        )
        105Derivative instruments
        
        i
        
        (42
        )
        58Consolidation of subsidiary undertakings
        
        j
        
        
        
        (7
        )Sale and leaseback
        
        k
        
        (1
        )
        (1
        )Taxation
        
        m
        
        18
        
        (62
        )Minority interest in respect of US GAAP adjustments
        
        
        
        (3
        )
        7Net income/(loss) attributable to ordinary shareholders in accordance with US GAAP
        
        
        
        396
        
        439
2005
        
        2004pence
        
        penceEarnings and dividends:Basic earnings per ADS in accordance with US GAAP
        
        170.2
        
        188.2Diluted earnings per ADS in accordance with US GAAP
        
        165.4
        
        183.2Dividend paid per ADS
        
        60.0
        
        60.0Weighted average number of shares used in basic EPS calculation (millions)
        
        1,396
        
        1,400Dilutive shares
        
        41
        
        36Used in diluted EPS calculation
        
        1,437
        
        1,43602 Adjustments to shareholders equity
2005
    
    2004Note
    
    £m
    
    £mCapital
      employed before minority interest in accordance with IFRS
    
    
    
    570
    
    371US
      GAAP adjustments:Goodwill
      and other intangibles
    
    a
    
    128
    
    119Joint
      ventures and associates
    
    b
    
    6
    
    8Deferred
      gain on assets contributed to joint ventures
    
    c
    
    
    
    (31
    )(Loss)/gain
      on disposal of fixed asset investments, available-for-sale assets andfinancial
      assets held for trading
    
    e
    
    (2
    )
    89Stock
      options
    
    f
    
    (57
    )
    (33
    )Pensions
    
    g
    
    177
    
    143Restructuring
    
    h
    
    (71
    )
    (45
    )Derivative
      instruments
    
    i
    
    6
    
    (8
    )Consolidation
      of subsidiary undertakings
    
    j
    
    
    
    (7
    )Sale
      and leaseback
    
    k
    
    (2
    )
    (1
    )Property,
      plant and equipment
    
    l
    
    1
    
    1Taxation
    
    m
    
    (51
    )
    (39
    )Minority
      interest in respect of US GAAP adjustments
    
    
    
    
    
    1Shareholders
      equity in accordance with US GAAP
    
    
    
    705
    
    568
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Notes on the summary of differences between IFRS and US GAAPcontinued

03 Discontinued operations
Under IFRS, operations are classified as discontinued if they have been either disposed of, or are classified as held for sale, and: represent a major line of business or geographical area
of operation; the disposal is part of a single coordinated plan; or if the operations constitute a subsidiary acquired exclusively with a view to resale. As discussed in note 7 on page 62, Radianz, Instinet and BTC have been classified as
discontinued operations under IFRS.
  Under US GAAP,
    operations are classed as discontinuing operations if the operations and cash
    flows of the component will be eliminated from the ongoing operations as a
    result of the disposal transaction and the Group will not have any significant
    continuing involvement in the operations after the disposal. The Group has
    determined that it has not eliminated significant cash flows related to Radianz
    and therefore Radianz does not meet the criteria for classification as a discontinued
    operation; accordingly, the results of Radianz, for US GAAP purposes, have
    been reported within continuing operations. Instinet and BTC do meet the criteria
    and have been classified within discontinued operations.
  Under US GAAP
    the key data for the operations classed as discontinuing operations are analysed
    below:  2005
        
        2004Discontinued operations under US GAAP
        
          £m
          
        £mOperating income
        
        96
        
        66Income tax charge
        
        (15
        )
        (18
        )Gain on disposal
        
        133
        
        Minority interest
        
        (29
        )
        (4
        )Net income
        
        185
        
        44Basic profit per ADS
        
        79.4
        p
        19.7
        pDiluted profit per ADS
        
        77.2
        p
        18.9
        p
04 Additional disclosures required by US GAAP
  Derivative instrumentsThe current
     year loss on derivative instruments is £41 million (2004: £58
     million  gain). At 31 December 2005, the balance sheet includes a derivative
     asset
    of £15 million and a derivative liability of £11 million. The current
     year loss includes a gain of £17 million (2004: £21 million gain)
      relating to currency forward contracts embedded within customer and supplier

    contracts.
  Recent Accounting PronouncementsFASB
    Statement No. 123 (revised 2004) ShareBased Payment
    (FAS 123 (R))In December
    2004, the FASB issued FAS 123 (R). The statement is a revision of FASB Statement
    No. 123 Accounting for Stock-Based Compensation and supersedes
    APB Opinion No. 25 Accounting for Stock Issued to Employees and
    its related implementation guidance. FAS 123 (R) establishes standards for
    accounting for transactions in which an entity exchanges its equity instruments
    for goods and services, primarily employee services. The statement requires
    a public entity to measure the cost of employee services received in exchange
    for an award of equity instruments to be based on the grant date fair value
    of the award, as determined using an option pricing model which considers
    the unique characteristics of those instruments. The cost should be recognised
    over the period during which an employee is required to provide service in
    exchange for the award. FAS 123 (R) is applicable to the Group from the start
    of the first annual reporting period beginning after 15 June 2005. The implementation
    of FAS 123 (R) will require the Group to establish the grant date fair value
    for all its employee share option plans. The Group is in the process of assessing
    these fair values and the resulting impact on the Groups financial position.
  FASB Statement No. 153 Exchanges of Non-monetary Assets (FAS
    153)In December
    2004, the FASB issued FAS 153 as an amendment to APB Opinion No. 29 Accounting
    for Non-monetary Transactions. The guidance in APB Opinion No. 29 is
    based on the principle that exchanges on non-monetary assets should be measured
    based on the fair value of the assets exchanged, with certain exceptions to
    that principle. FAS 153 amends APB Opinion No. 29 to eliminate the exception
    for non-monetary exchanges of similar productive assets and replaces it with
    a general exception for exchanges on non-monetary assets that do not have
    commercial substance. A non-monetary exchange has commercial substance if
    future cash flows of the entity are expected to change significantly as a
    result of the exchange.
  FAS 153 is effective
    for non-monetary exchanges occurring in fiscal periods beginning after 15
    June 2005. This accounting pronouncement is not expected to have a significant
    impact on the Groups financial position or the results of its operations.
  FASB Statement No.154 Accounting Changes and Error Corrections
    (FAS 154)In May 2005,
    the FASB issued FAS 154, a replacement of APB Opinion No. 20 and FASB Statement
    No. 3. FAS 154 provides guidance on the accounting for and reporting of accounting
    changes and error corrections. FAS 154 is effective for accounting changes
    and corrections of errors made in fiscal years beginning after 15 December
    2005.

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Eleven
    year consolidated financial summaryFor the year ended 31 December
Two year consolidated financial summary (IFRS)
IFRS
        
        IFRS2005
        
        2004£m
        
        £mResults:Revenue1
        
        2,409
        
        2,339Net finance costs
        
        (12
        )
        (12
        )Profit before tax
        
        238
        
        396Taxation
        
        9
        
        40Profit attributable to equity holders of the parent
        
        456
        
        364Net assets:Non-current assets
        
        1,179
        
        1,025Current assets
        
        957
        
        1,410Current liabilities
        
        (738
        )
        (1,249
        )Non-current liabilities
        
        (829
        )
        (714
        )Non-current assets classified as held for sale
        
        1
        
        145Liabilities directly associated with non-current assets classified as held for sale
        
        
        
        (47
        )570
        
        570Property, plant and equipment:Additions
        
        137
        
        111Depreciation
        
        103
        
        1302005
        
        2004Ratios:Basic earnings per ordinary share from continuing operations
        
        16.3
        p
        25.4
        pDividends per ordinary share
        
        10.0
        p
        10.0
        pBook value per ordinary share2
        
        42.1
        p
        26.5
        pProfit before taxation as a percentage of revenue (%)
        
        9.9
        
        16.9Return on property, plant and equipment3(%)
        
        64.2
        
        85.7Return on equity4(%)
        
        96.9
        
        108.5UK corporation tax rate (%)
        
        30
        
        30Infrastructure:Shares issued (millions)
        
        1,441
        
        1,436Employees
        
        15,300
        
        14,465User accesses
        
        346,000
        
        328,000Notes:1
    2004 and
      2005 exclude revenue for Instinet Group which was classified as a discontinued
      operation and subsequently sold in 2005.Ratios:2
    Book value
      per ordinary share represents total parent shareholders equity divided
      by the number of shares in issue after deducting shares held by employee
      share ownership trusts and repurchased shares.3
    Return on
      property, plant and equipment represents profit after taxation from continuing
      operations as a percentage of average property, plant and equipment. The
      average is calculated by adding property, plant and equipment at the start
      and the end of each year and dividing by two.4
    Return on
      equity represents profit attributable to equity holders of the parent divided
      by the average total parent shareholders equity. The average is calculated
      by adding total parent shareholders equity at the start and the end
      of each year and dividing by two.
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    109Back to Contents


Eleven
      year consolidated financial summaryFor the year ended 31 December
Nine year consolidated financial summary (UK GAAP)
UK
      GAAP
    
    UK
      GAAP
    
    UK
      GAAP
    
    UK
      GAAP
    
    UK
      GAAP
    
    UK
      GAAP
    
    UK
      GAAP
    
    UK
      GAAP
    
    UK
      GAAP2003
    
    2002
    
    2001
    
    2000
    
    1999
    
    1998
    
    1997
    
    1996
    
    1995For
      the year ended 31 December
    
    £m
    
    £m
    
    £m
    
    £m
    
    £m
    
    £m
    
    £m
    
    £m
    
    £mResults:Revenue
    
    3,235
    
    3,593
    
    3,885
    
    3,592
    
    3,125
    
    3,032
    
    2,882
    
    2,914
    
    2,703Net
      interest (payable)/receivable
    
    (29
    )
    (20
    )
    (9
    )
    3
    
    (4
    )
    2
    
    80
    
    61
    
    60Profit/(loss)
      before tax
    
    56
    
    (344
    )
    158
    
    657
    
    632
    
    580
    
    626
    
    652
    
    558Taxation
    
    22
    
    23
    
    107
    
    136
    
    196
    
    196
    
    236
    
    210
    
    185Profit/(loss)
      attributable to ordinary shareholders
    
    50
    
    (255
    )
    46
    
    521
    
    436
    
    384
    
    390
    
    442
    
    373Net
      assets:Fixed
      assets
    
    1,192
    
    1,448
    
    1,963
    
    1,868
    
    1,205
    
    1,098
    
    1,046
    
    1,026
    
    999Net
      current (liabilities)/assets
    
    (89
    )
    (190
    )
    (134
    )
    (293
    )
    (170
    )
    (577
    )
    790
    
    525
    
    387Long-term
      creditors
    
    (425
    )
    (354
    )
    (344
    )
    (310
    )
    (284
    )
    (16
    )
    (37
    )
    (41
    )
    (135
    )Provisions
    
    (271
    )
    (245
    )
    (212
    )
    (112
    )
    (88
    )
    (116
    )
    (120
    )
    (51
    )
    (39
    )407
    
    659
    
    1,273
    
    1,153
    
    663
    
    389
    
    1,679
    
    1,459
    
    1,212Tangible
      fixed assets:Additions
    
    130
    
    154
    
    276
    
    282
    
    244
    
    296
    
    361
    
    372
    
    304Depreciation
    
    193
    
    227
    
    246
    
    276
    
    310
    
    331
    
    312
    
    283
    
    250Development
      expenditure
    
    171
    
    200
    
    294
    
    323
    
    197
    
    200
    
    235
    
    202
    
    1912003
    
    2002
    
    2001
    
    2000
    
    1999
    
    1998
    
    1997
    
    1996
    
    1995Ratios:Earnings/(loss)
      per ordinary share
    
    3.6p
    
    (18.3p
    )
    3.3p
    
    37.1p
    
    30.9p
    
    26.7p
    
    24.0p
    
    27.3p
    
    23.2pDividends
      per ordinary share
    
    10.0p
    
    10.0p
    
    10.0p
    
    16.0p
    
    14.65p
    
    14.4p
    
    13.0p
    
    11.75p
    
    9.8pBook
      value per ordinary share1
    
    15.2p
    
    30.7p
    
    68.2p
    
    73.7p
    
    40.5p
    
    23.3p
    
    99.9p
    
    88.3p
    
    73.7pProfit/(loss)
      before tax as a percentage of revenue (%)
    
    1.7
    
    (9.6
    )
    4.1
    
    18.3
    
    20.2
    
    19.1
    
    21.7
    
    22.4
    
    20.6Return
      on tangible fixed assets2(%)
    
    6.3
    
    (56.8
    )
    7.8
    
    78.3
    
    59.1
    
    48.2
    
    49.0
    
    60.0
    
    55.2Return
      on equity3(%)
    
    15.7
    
    (36.8
    )
    4.6
    
    65.0
    
    92.2
    
    78.5
    
    25.6
    
    33.7
    
    34.8UK
      corporation tax rate (%)
    
    30
    
    30
    
    30
    
    30
    
    30
    
    31
    
    32
    
    33
    
    33Infrastructure:Shares
      issued (millions)
    
    1,433
    
    1,433
    
    1,431
    
    1,429
    
    1,423
    
    1,422
    
    1,694
    
    1,689
    
    1,677Employees
    
    16,744
    
    17,414
    
    19,429
    
    18,082
    
    16,546
    
    16,938
    
    16,119
    
    15,478
    
    14,348User
      accesses
    
    338,000
    
    388,000
    
    592,000
    
    558,000
    
    520,858
    
    482,380
    
    429,000
    
    362,000
    
    327,100Notes:Information
         provided prior to 2004 year end was reported under UK GAAP which may
        differ
      materially from IFRS. The main differences impacting the Groups financial
      statements are on account of share-based payments, employee benefits, intangible
      assets
      and financial instruments.2003 and
      2002 have been restated following adoption of UITF17 and UITF38, and the
      reclassification of transaction-related regulatory fees following recently
      issued SEC guidance.2003 and
      2002 user accesses have been revised to reflect the exclusion of mobile
      and other low-cost accesses. 1997 and 1998 have been restated to reflect
      changes to reporting user accesses in 1999.1999 and 2000
      have been restated following adoption of FRS 19.1995 and
      1996 have been restated to reflect the effect of FRS 10 issued in 1997 which
      required purchased goodwill and intangible assets to be capitalised and
      amortised through the profit and loss account.Ratios:1
    Book
        value per ordinary share represents adjusted shareholders equity divided  by the number of shares in issue after deducting shares held
         by employee share ownership trusts. In 1995 to 1997, shares in Reuters
      Holding PLC held by Group companies are also deducted from shares in issue. Adjusted
      shareholders equity is calculated after deducting the carrying value
      of interests in shares of Reuters Holdings PLC (1995 to 1997).2
    Return
      on tangible fixed assets represents profit after taxation as a percentage
      of average tangible fixed assets. The average is calculated by adding tangible
      fixed assets at the start and the end of each year and dividing by two.3
    Return
        on equity represents profit attributable to ordinary shareholders divided
        by the average adjusted shareholders equity. The average is calculated
      by adding adjusted shareholders equity at the start and the end of
      each year and dividing by two. In 1998 a weighted average has been used
      to reflect the capital reorganisation.
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          Group PLCAnnual
    Report and Form 20-F 2005
    
    117Back to Contents
Information
    for shareholders
01 Ordinary sharesAs of 7 March 2006, there were 1,351,605,175 ordinary shares outstanding, excluding 31,553,221 ordinary shares owned by certain employee share ownership trusts and 90,850,000 held in
Treasury (see Note 27 on page 89).
02 Major shareholdersThe company had received notice under section 198 of the UK Companies Act 1985, as at 7 March 2006, that the following parties held notifiable interests in its shares:
  Number
      
      
      
      Numberof
        shares
      Percentage
      of
        sharesheld
        on
      of
        issued
      held
        on7
        March
      share
      2
        March2006
      capital
      2005Fidelity
        Investments
      
      150,753,687
      
      11.14
      %
      130,364,252Legal & General Investment Management
      
      55,230,590
      
      4.08
      %
      58,006,887Merrill
        Lynch Investment Managers
      
      48,978,642
      
      3.62
      %
      48,978,642The
        Capital Group of Companies, Inc
      
      42,135,514
      
      3.11
      %
      Barclays
        PLC
      
      n/a
      
      n/a
      
      53,902,608The companys major shareholders do not have any different voting rights from the other ordinary shareholders. There were no significant changes in the holdings of the companys
major shareholders other than Barclays PLC reduced its shareholding below the 3% threshold in April 2005 and The Capital Group of Companies, Inc became a notifiable holding in January 2006.
The Founders ShareIndependence,
integrity and freedom from bias in the gathering and dissemination of news and
information are fundamental to Reuters. Reuters Founders Share Company Limited
(the Founders Share Company) was established to safeguard those qualities and
holds a single Founders Share. This share may be used to outvote all ordinary
shares if other safeguards fail and there is an attempt to effect a change in
control of the company. Control, for this purpose, means 30% of the
ordinary shares. The directors of the Founders Share Company have a duty to ensure,
as far as they are able by the proper exercise of the powers vested in them,
that the Reuters Trust
Principles are observed (see pages 119 to 120).
The Founders Share Companys directors are nominated by a Nomination Committee which includes certain serving directors of the Founders Share Company, one person nominated by each of
four news associations, two people appointed by the Chairman of Reuters Group PLC and two people appointed after consultation with the European Court of Human Rights. A director of the Founders Share Company may not be a director or employee of
Reuters Group.
  The
        current directors of the Founders Share Company are as follows:TrusteesinceThe
        Honourable Mrs Anson, GBM, CBE, JP
      
      2002Leonard
        Berkowitz
      
      1998Sir
        Michael Checkland
      
      1994Bertrand
        Collomb
      
      2004Jiri
        Dienstbier
      
      2005Uffe
        Ellemann-Jensen, MP
      
      2001John
        Fairfax, AM
      
      2005Dr
        Frene Ginwala
      
      2004Pehr
        Gyllenhammar (Chairman)
      
      1997Joseph
        Lelyveld
      
      2004Sir
        Christopher Mallaby, GCMG, GCVO
      
      1998John
        McArthur
      
      2001Mammen
        Mathew
      
      2002The
        Right Hon The Baroness Noakes, DBE
      
      1998Sir
        William Purves, CBE, DSO
      
      1998Jaakko
        Rauramo
      
      1999Dr
        Mark Wössner
      
      2001Toyoo Gyohten retired as a Trustee in October 2005.
Trustees are appointed for an initial term of five years and must resign at the
AGM on or after the fifth anniversary following appointment or re-appointment.
Trustees are eligible for re-appointment for a further term of five years, subject
to a maximum term of 15
years and maximum age limit of 75.
Except as described above, to the best of the Groups knowledge, the company
is not directly or indirectly owned or controlled by another corporation, by
any foreign government or by any other natural or legal person, severally or
jointly, and currently there are no arrangements that may, at a subsequent date,
result in a change in control of the company.
03 Corporate structureThe Group conducts its business through a portfolio of companies, including wholly and partly-owned subsidiary undertakings, joint ventures and associates. Information concerning the most
significant companies is contained in note 39 to the consolidated financial statements, on page 100.
04 Trading marketsThe
companys ordinary shares are traded on the London Stock Exchange. American
Depositary Shares (ADSs), each representing six ordinary shares, are traded on
the NASDAQ Stock Market. The ADSs are evidenced by American Depositary Receipts
(ADRs) issued by Deutsche Bank Trust Company Americas, as Depositary under a
Deposit Agreement, dated 18 February 1998 and supplemented 16 December 2005 (the
Deposit Agreement), among the
company, the Depositary and ADR holders.
The table below sets out, for the periods indicated (i) the reported high and low sales prices for the ordinary shares based on the Daily Official List of the London Stock Exchange and (ii)
the reported high and low sales prices of the ADSs on NASDAQ.
The
        LondonStock
        Exchange
    NASDAQPounds
        per share
    US
        dollars per ADSHigh
    
    Low
    
    High
    
    LowAnnual
          market prices2001
    
    11.58
    
    5.26
    
    103.44
    
    46.002002
    
    7.47
    
    1.61
    
    64.36
    
    15.122003
    
    2.68
    
    0.96
    
    27.09
    
    9.592004
    
    4.29
    
    2.41
    
    49.15
    
    25.722005
    
    4.31
    
    3.52
    
    49.35
    
    37.33Quarterly
          market prices2004First
        quarter
    
    4.29
    
    2.41
    
    49.15
    
    25.72Second
        quarter
    
    4.15
    
    3.33
    
    45.01
    
    35.38Third
        quarter
    
    3.56
    
    2.89
    
    39.40
    
    31.75Fourth
        quarter
    
    4.09
    
    3.23
    
    45.30
    
    34.92Quarterly
          market prices2005First
        quarter
    
    4.28
    
    3.64
    
    49.35
    
    40.83Second
        quarter
    
    4.26
    
    3.75
    
    48.65
    
    41.48Third
        quarter
    
    4.12
    
    3.59
    
    43.45
    
    39.03Fourth
        quarter
    
    4.31
    
    3.52
    
    44.40
    
    37.33Monthly
          market prices2005August
    
    3.93
    
    3.59
    
    41.80
    
    39.03September
    
    3.83
    
    3.60
    
    42.25
    
    39.24October
    
    3.82
    
    3.52
    
    40.54
    
    37.33November
    
    4.05
    
    3.63
    
    41.60
    
    38.41December
    
    4.31
    
    4.02
    
    44.40
    
    41.78Monthly
          market prices2006January
    
    4.43
    
    4.17
    
    47.01
    
    44.12February
    
    4.61
    
    3.80
    
    48.44
    
    39.93March
        (to 7 March)
    
    3.87
    
    3.80
    
    40.89
    
    39.67
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          Group PLCAnnual
          Report and Form 20-F 2005Back to Contents

Analysis of shareholdersAs of 7 March 2006, there were 1,351,605,175 Reuters ordinary shares in issue, including the shares referred to below but excluding ordinary shares held by employee share ownership trusts.
There were 27,567 shareholders on the ordinary share register analysed in the chart below.
  As of the
    same date, 874,117 ordinary shares and 18,282,496 ADSs(representing
    109,694,976 ordinary shares) were held on the record in the US. These ordinary
    shares and ADSs were held by 588 record holders and 2,176 record holders respectively,
    and represented 0.065% or evidenced ADSs respectively, representing 8.12%
    respectively of the total number of ordinary shares outstanding. Since certain
    of these ordinary shares and ADSs were held by brokers or other nominees,
    the number of record holders in the US may not be representative of the number
    of beneficial holders or of where the beneficial holders are resident.
Note: Includes all holdings below 100,000 shares, except for private investors, whose holdings are analysed below this level.
DividendsThe table below sets forth the amounts of interim, final and total dividends (excluding any associated UK tax credit discussed on pages 122 to 123) paid in respect of each fiscal year
indicated. Pound sterling amounts per share have been translated into US cents per ADS (each representing six ordinary shares) at the actual rates of exchange used for each of the respective payments of interim and final dividends.
Pence
        per share
          Cents
        per ADSInterim
          Final
          Total
          Interim
          Final
          Total2001
          3.85
          6.15
          10.00
          33.29
          53.56
          86.852002
          3.85
          6.15
          10.00
          36.05
          58.46
          94.512003
          3.85
          6.15
          10.00
          36.08
          64.88
          100.962004
          3.85
          6.15
          10.00
          40.94
          70.24
          111.182005
          3.85
          6.15
          10.00
          41.18
          
          The
      final dividend in respect of 2005 is payable on 4 May 2006 to holders of
      ordinary shares on the register at 17 March 2006 and on 11 May 2006 to
      holders of ADSs on the record at 17 March 2006 and will be converted into
    US dollars from sterling at the rate prevailing on 11 May 2006.See page 26 for a discussion of the Groups dividend policy.05 History and developmentThe ultimate
    holding company for the Group, Reuters Group PLC, was incorporated in England
    and Wales on 24 December 1996, though its predecessor was formed in England
    in 1851. Reuters Group PLCs registered office and corporate headquarters
    are located at The Reuters Building, South Colonnade, Canary Wharf, London
    E14 5EP, UK.
06 Memorandum
  and articles
of associationThe following
    description summarises certain material rights of holders of the companys
    ordinary shares of 25 pence each and material provisions of the companys
    Memorandum and Articles of Association (the Articles), the Memorandum and
    Articles of Association of Reuters Founders Share Company Limited (the Founders
    Share Company) and English law. The following description is a summary only
    and is qualified in its entirety by reference to the Articles (which have
    been filed with the SEC and Companies House) and the Companies Act.
All of the outstanding
    ordinary shares are fully paid. Accordingly, no further contribution of capital
    may be required from the holders of such shares by Reuters.
  In this description,
    the term holder refers to the person registered in the register
    of members as the holder of the relevant share and the term beneficial
    owner refers to a person other than the holder who has a beneficial
    interest in the relevant share. Deutsche Bank, which acts as Depositary under
    the Deposit Agreement relating to the American Depositary Shares, or ADSs,
    is the holder of the ordinary shares represented by the outstanding ADSs.
  GeneralReuters Group
    PLC is incorporated under that name and is registered in England and Wales
    with registered number 3296375. Its objects are set out in the fourth clause
    of its Memorandum of Association and cover a wide range of activities, including
    the following:
•
    collecting information and supplying news and information services and products;•
    acquiring and operating wireless installations, satellites and other means of communication;•
    utilising the Groups
      communications capabilities to provide various financial and securities markets services;
and•
    carrying on any other business supplemental to the foregoing or capable of enhancing
      the Groups profitability or
capitalising on the Groups expertise.The Memorandum
    of Association provides a broad range of corporate powers to effect these
    objectives.
  The Reuters Trust Principles and the Founders Share CompanyThe Articles
    contain two sets of restrictions relating to the ownership of Reuters shares.
    These restrictions are intended to ensure continued compliance with the following
    principles (the Reuters Trust Principles) set out in the Article F.114:
•
    that Reuters
    shall at no time pass into the hands of any one interest, group or faction;•
    that the integrity, independence and freedom from bias of Reuters shall at all times be fully preserved;•
    that Reuters shall supply unbiased and reliable news services to newspapers, news agencies, broadcasters and other media
subscribers and to businesses, governments, institutions, individuals and others with whom Reuters has or may have
contracts;•
    that Reuters shall pay due regard to the many interests which it serves in addition to those of the media; and•
    that no effort shall be spared to expand, develop and adapt the news and other services and products of Reuters so as to
maintain its leading position in
the international news and information business.For the purposes
    of the Reuters Trust Principles, the Articles define the term Reuters to mean
    Reuters Group PLC and every subsidiary of it from time to time supplying news
    services.
  The first set
    of restrictions contained in the Articles applies to persons that become interested
    in 15% or more of the ordinary shares outstanding at any time (excluding any
    shares held by Reuters as treasury shares). The term interested
    is defined in the Articles by reference to provisions of the Companies Act
    which require persons to disclose to public companies interests in voting
    shares in excess of a prescribed percentage. Subject to certain exceptions,
    all shares held by a person who reaches the 15% limit will be disenfranchised
    and the shares exceeding the 15% limit must be disposed of. This set of restrictions
    is more fully described below under Rights and restrictions attaching
    to Reuters shares  Restrictions on ownership Disenfranchisement
    and disposal of excess interests.
  Second, the
    companys share capital includes the Founders Share, which is held by
    the Founders Share Company, a company limited by guarantee consisting of individuals,
    referred to as the Reuters Trustees, who constitute both its members and directors.
    The Founders Share empowers the Founders Share Company to
Reuters
          Group PLCAnnual
          Report and Form 20-F 2005
    
    119Back to Contents


Information for shareholderscontinued


cast such number
    of votes as will pass any resolution supported by and defeat any resolution
    opposed by, the Founders Share Company if it believes that any person or persons
    have obtained, or are seeking to obtain, control of the Group. Control for
    these purposes is defined as the ability to control the exercise of 30% or
    more of the votes that may be cast on a poll at general meetings. Under the
    Articles, the special rights attaching to the Founders Share may not be varied
    or abrogated in any respect without the prior written consent of the Founders
    Share Company. The rights attaching to the Founders Share are described in
    more detail below under Rights and restrictions attaching shares 
    Voting rights 
    Rights conferred by Founders Share.
  The restrictions
    on interests in ordinary shares and the extraordinary voting rights of the
    Founders Share may be characterised as anti-takeover provisions to the extent
    they may have the effect of preventing a bid for control of the Group. Tender
    offers or other non-market acquisitions of shares are usually made at prices
    above the prevailing market price of a companys shares. Acquisitions
    of shares by persons attempting to acquire control through market purchases
    may support the price of shares at market levels higher than otherwise would
    be the case. The restrictions and extraordinary voting rights summarised in
    this section may be expected to preclude such offers.
  DirectorsThe companys
    Articles provide for a board of directors consisting of not fewer than five
    nor more than 15 directors. The Articles require that, in performing their
    duties, the directors have due regard for the Reuters Trust Principles insofar
    as, by the proper exercise of their powers and in accordance with their other
    duties as directors, the directors may do so.
  The Articles
    contain provisions that require the board of directors to include at least
    five non-executive directors before a new executive director can be appointed.
  Under the Articles,
    a director may not vote in respect of any contract, arrangement or proposal
    in which the director, or any person connected with the director, has any
    material interest other than by virtue of the directors interests in
    securities of, or otherwise in or through, the company. This is subject to
    certain exceptions relating to proposals (a) giving the director any guarantee,
    security or indemnity in respect of obligations incurred at the request of
    or for the benefit of the Group, (b) giving any guarantee, security or indemnity
    to a third party in respect of obligations of the Group for which the director
    has assumed responsibility under an indemnity or guarantee, (c) relating to
    an offer of securities of the Group in which the director may be entitled
    to participate or will be interested as an underwriter, (d) concerning any
    other company in which the director is beneficially interested in less than
    1% of the issued shares of any class of the company or the voting rights available
    to its shareholders, (e) relating to the adoption, modification or operation
    of any employee benefits plan which will provide the director with the same
    benefits as other employees and (f) relating to any liability insurance that
    Reuters is empowered to purchase for its directors or employees in respect
    of actions undertaken as directors or officers of the Group.
  The directors
    are empowered to exercise all the powers of the Group to borrow money, subject
    to the limitation that the aggregate principal amount outstanding in respect
    of monies borrowed by the Group shall not exceed a sum equal to two and a
    half times the companys share capital and aggregate reserves, calculated
    in the manner described in the Articles and £5,000 million, unless sanctioned
    by an ordinary resolution of the companys shareholders.
  At each AGM
    of Reuters shareholders at least one-third of the directors (or, if their
    number is not a multiple of three, the number nearest to but not greater than
    one-third) shall retire from office by rotation. The directors to retire by
    rotation at the AGM include any director who is due to retire at the meeting
    by reason of age as prescribed in section 293 of the Companies Act, namely
    70 years old. A retiring director shall be eligible for re-election subject
    to the requirements of the Combined Code. Since the 2005 AGM, the Board has
    asked all directors to stand for re-election on an annual basis. For additional
    information see the Directors Report and Corporate Governance which
    appear on pages 31 and 34.
  Directors are
    not required to hold shares in order to qualify as a director. A director
    not holding any shares may nevertheless attend and speak at general meetings
    of the company.
  Rights and restrictions attaching to shares
    DividendsHolders of ordinary
    shares are entitled to participate in the payment of dividends pro rata to
    their holdings. The Founders Share is not entitled to participate in the payment
    of dividends nor will any dividend be paid on any
shares held by
    Reuters in treasury. The Board may propose and pay interim dividends and recommend
    a final dividend, in respect of any accounting period out of the profits available
    for distribution under English law.
  A final dividend
    may be declared by the shareholders in general meeting by ordinary resolution,
    but no dividend may be declared in excess of the amount recommended by the
    Board.
  The company
    may allot ordinary shares in lieu of cash dividends, subject to shareholder
    approval at the time the relevant dividend is declared. In addition, the company
    may declare and pay equivalent dividends to shareholders outside the United
    Kingdom in local currencies and pay such dividends to the Depositary for value
    on the payment date.
  Voting
    rightsRights
    conferred by ordinary sharesVoting
    at a general meeting of shareholders is by show of hands unless, before or
    on making known the result, a poll is demanded in accordance with the Articles.
    If voting is by show of hands, each holder of ordinary shares who is present
    in person has one vote. On a poll, every holder of ordinary shares who is
    present in person or by proxy has one vote for every ordinary share held.
    Voting on all resolutions is carried out by way of a poll.
  Holders of a
    substantial number of ordinary shares may be disenfranchised under the circumstances
    described under Restrictions on ownership below.
  Rights conferred by the Founders ShareThe
    Founders Share confers upon the Founders Share Company the right to cast such
    number of votes as are necessary to defeat any resolution which would vary
    or abrogate the rights of the Founders Share. The Articles provide that the
    alteration of specified articles relating to the Founders Share and the Reuters
    Trust Principles are deemed to constitute a variation of the rights of the
    Founders Share. In addition, any resolution proposing the winding up of the
    Group voluntarily, by the Court, or any reconstruction of the Group, or any
    resolution which would attach to any share voting rights not identical in
    all respects with those of the ordinary shares, is deemed to be a variation
    of the rights of the Founders Share.
  Additionally,
    if there are, in the opinion of the Founders Share Company, reasonable grounds
    for believing that any person and his associates have obtained or are attempting
    to obtain, directly or indirectly, control of Reuters Group, the Founders
    Share Company is entitled in its absolute discretion to serve Reuters with
    a written notice (a Founders Share Control Notice) to that effect. Control
    is defined for these purposes as the ability to control the exercise of 30%
    or more of the votes which may be cast on a poll at a general meeting. At
    all times after the service of a Founders Share Control Notice and pending
    its rescission, the Founders Share confers upon the Founders Share Company
    the right to cast on a poll such number of votes as are necessary to ensure
    the effective passing of any resolution in favour of which it votes and to
    ensure the defeat of any resolution against which it votes. The Articles provide
    that the opinion of the Founders Share Company in respect of the service or
    rescission of a Founders Share Control Notice shall be final and binding and
    may not be challenged on any grounds whatsoever.
  The Founders
    Share Company is entitled at any time to serve Reuters with a written request
    for an extraordinary general meeting and the directors are obliged to comply
    with such request. If they do not comply, the Founders Share Company is entitled
    to convene an extraordinary general meeting. If a Founders Share Control Notice
    has been served, however, the Founders Share Company can convene an extraordinary
    general meeting without first requesting that the directors do so.
  Four Reuters
    Trustees present at the relevant Trustees meeting can bind all the Founders
    Share Company directors to exercise the voting rights attaching to the Founders
    Share so as to defeat a resolution that would be deemed to be a variation
    of the rights attached to the Founders Share. However, the vote of a majority
    of the Reuters Trustees (the chairman of the Founders Share Company having
    a casting vote in the event of equality of votes) is required to determine
    whether a Founders Share Control Notice should be served and, if so, the manner
    in which the voting rights attaching to the Founders Share shall be exercised
    (excluding the vote of any Reuters Trustee who is associated with or materially
    financially interested in the person attempting to obtain control of Reuters).
  Restrictions on ownershipOrdinary
    sharesUnder
    the Articles, a person is interested in shares if, among other
    things, he is interested directly, or through his family or one or more companies,
    or through an interest in association with others pursuant to an agreement
    or understanding, or through a trust or if he controls the voting
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rights of others. The
  definition of interest in shares in the Articles is made by reference,
with specified variations, to certain provisions of the Companies Act.
  Disclosure of interests in ordinary sharesThe
    Articles provide for the disclosure of interests in Reuters ordinary shares
    by reference to the Companies Act provisions mentioned above, with specified
    variations. Under these provisions as currently in force, if a person acquires
    an interest in voting shares of a public company amounting to
    10% or more of the voting shares of any class, or if he increases or reduces
    such holding by at least 1% or if he ceases to have such holding, he is obliged
    to notify the company within two days of the day on which he acquired 10%
    or any such change in his interest took place. Further, if his interest is
    a material interest the 10% referred to above is reduced to 3%.
  The Articles
    provide for disenfranchisement of shares which are the subject of a notice
    under Section 212 of the Companies Act (which allows a company to require
    disclosure of certain details concerning ownership of its shares) if the person
    served with the notice is in default in answering it. The Articles also provide
    for the imposition of restrictions on transferability of the shares concerned
    and on the right to receive dividends if such shares represent at least 0.25%
    of the class concerned. Such restrictions cannot, however, be imposed until
    the expiry of 14 days after the date of the Section 212 notice. Any such restrictions
    cease if the shares concerned are sold pursuant to a takeover offer or to
    an unconnected third party or through the London Stock Exchange. The restrictions
    on transferability only apply to certificated shares. Where a holder of uncertificated
    shares is in default in answering a Section 212 notice, the Articles provide
    that the Founders Share Company may require the Groups directors to
    apply to the Court for such order as may be appropriate.
  Disenfranchisement and disposals of excess interestsSubject
    to certain exceptions described below, certain restrictions apply to persons
    that become interested (as defined in the Articles) in 15% or
    more of the ordinary shares. If any person becomes interested in 15% or more
    of the outstanding shares (excluding any shares held by Reuters as treasury
    shares) (the Relevant Shares), the directors are required to serve
    a Restriction Notice on that person, on any other person known to the directors
    to have an interest in the Relevant Shares and, if different, on the registered
    holder of the Relevant Shares. While a Restriction Notice in respect of Relevant
    Shares is in force, a registered holder of the Relevant Shares is not entitled
    to attend or vote, either in person or by proxy, at any general meeting or
    at any meeting of the holders of any class of Reuters shares. In addition,
    a Restriction Notice will require such person to dispose of any Relevant Shares
    exceeding the 15% limit and supply evidence to the company that such disposal
    has occurred within 21 days or such longer period as the directors consider
    reasonable. If such disposition is not made within the specified period, the
    directors must as far as they are able, dispose of any shares exceeding the
    15% limit. Under the Articles, any belief, resolution, decision or action
    of the directors held, made or taken pursuant to any of the provisions concerning
    restrictions on ownership shall be conclusive, final and binding on all persons
    concerned and may not be challenged on any grounds whatsoever.
  The restrictions
    are subject to certain modifications where a person becomes interested in
    15% or more of the issued shares of any class by reason of a rights issue
    or an underwriting in the ordinary course of its business.
  The Founders ShareOwnership
    of the Founders Share is restricted to the Founders Share Company. Under its
    Memorandum of Association, the Founders Share Company is not permitted, directly
    or indirectly, to dispose of the Founders Share or of any interest therein,
    or to grant any rights in respect of the Founders Share or any interest therein.
  Treasury SharesReuters
    may acquire and thereafter hold up to 10% of its issued listed share capital
    in treasury. Any such acquisition must be financed from the distributable
    profits of Reuters. Subject to certain limited exceptions, the rights attaching
    to shares while held in treasury will be suspended. Treasury shares may only
    be subsequently disposed of by Reuters by way of cash sale, transfer for the
    purposes of or pursuant to an employees share scheme or cancellation.
  Pre-emptive rights, new issues of shares, sale of treasury shares and repurchase
    of sharesHolders of ordinary
    shares have no pre-emptive rights under the Articles. However, the ability
    of the directors to cause the company to issue shares, securities convertible
    into shares or rights to shares, or to sell treasury shares, otherwise than
    pursuant to an employee share scheme, is restricted.
  Under the Companies
    Act, the directors are, with certain exceptions, unable to allot any equity
    securities without express authorisation, which may be
contained in
    the Articles or given by its shareholders in general meeting, but which in
    either event cannot last for more than five years. The Companies Act imposes
    further restrictions on the issue of equity securities for cash or sale of
    treasury shares for cash other than by offering them first to existing shareholders
    unless the statutory requirement is displaced or modified by the shareholders
    in general meeting or under the companys Articles.
  At Reuters AGM
    to be held on 27 April 2006, a resolution will be proposed to authorise the
    directors to allot relevant securities, as defined in the Companies Act, including
    any equity securities, up to an aggregate nominal amount of £114 million
    until the earlier to occur of the AGM in 2007 or 27 July 2007. A resolution
    will also be proposed to authorise equity securities as defined in the Companies
    Act to be issued within this limit by way of a rights offer, or otherwise
    pro rata to existing shareholders, but other issues of equity securities,
    except for shares issued pursuant to employee share schemes, will be limited
    to an aggregate of £17 million in nominal value.
  Subject to applicable
    provisions of English law, the company may purchase its ordinary shares. Currently,
    it has general authority to repurchase up to 143,540,000 ordinary shares.
    At the Reuters AGM on 27 April 2006, a resolution will be proposed to increase
    this authority to 207 million ordinary shares at prices ranging from 25 pence
    and not more than the higher of 5% above the average market value of the ordinary
    shares for the five business days prior to the day the purchase is made or
    the price stipulated by Article 5(1) of the buyback and Stabilisation Regulation,
    namely the higher of the price of the last independent trade and the highest
    current independent bid on trading venues where the purchase is carried out.
  Rights in a winding upIf Reuters Group
    PLC is wound up, the liquidator may, with the authority of an extraordinary
    resolution, divide among the holders of ordinary shares and the Founders Share,
    pro rata to their holdings, Reuters assets (after satisfaction of liabilities
    to creditors), provided, however, that the Founders Share Company may receive
    up to £1 and no more.
  Variation of rights and alteration of share capitalIf, at any time,
    the companys share capital is divided into different classes of shares,
    the rights attached to any class may be varied, subject to the provisions
    of the Companies Act, with the consent in writing of holders of three-quarters
    in value of the shares of that class or upon the adoption of an extraordinary
    resolution passed at a separate meeting of the holders of the shares of the
    class. At every such separate meeting, all of the provisions of the Articles
    relating to proceedings at a general meeting apply, except that the quorum
    is to be the number of persons (which must be two or more) who hold or represent
    by proxy not less than one-third in nominal value of the issued shares of
    the class.
  The company
    can increase its share capital by ordinary resolution in conformity with the
    provisions of the Companies Act. However, new shares cannot have voting rights,
    which are not identical to those of ordinary shares without the prior written
    consent of the Founders Share Company. Furthermore, the company may issue
    shares with preferred and other special rights or restrictions, provided that
    the prior written consent of the Founders Share Company has been sought for
    issuing any shares with rights not identical to those of ordinary shares.
    The company can consolidate, divide and cancel any of its shares (other than
    the Founders Share) by extraordinary resolution and can reduce its share capital
    (other than the Founders Share).
  AGMs and extraordinary general meetings (EGMs)AGMs must be
    convened upon advance written notice of 21 days. An extraordinary general
    meeting must be convened upon advance written notice of 21 days for the passing
    of a special resolution and 14 days for any other resolution, depending on
    the nature of the business to be transacted. The notice must specify the nature
    of the business to be transacted if it is other than routine business or if
    an extraordinary or a special resolution is proposed. The notice may also
    specify a time, not more than 48 hours prior to the time fixed for the meeting,
    by which a person must be entered on the companys register in order
    to have the right to attend and vote at the meeting.
  Limitations on voting and shareholdingThere are no
    limitations imposed by English law or the companys Articles on the right
    of non-residents or foreign persons to hold or vote ordinary shares or ADSs,
    other than the limitations that would generally apply to all of Reuters shareholders.
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    121Back to Contents


Information
  for shareholderscontinued

07 Exchange controlUnder English law and the Articles, persons who are neither residents nor nationals of the UK may freely hold, vote and transfer their ordinary shares in the same manner as UK residents or
nationals.
  There are currently
    no UK foreign exchange control restrictions on remittances of dividends to
    non-resident holders of ordinary shares or on the conduct of Reuters operations.
08 Exchange ratesThe
following table sets out, for the periods indicated, the average or the high
and low Noon Buying Rates for pounds sterling in US dollars per £1.
  Fiscal
        year ended31
        December
      Average*
      
      Month
      
      High
      
      Low2001
      
      1.44
      
      August
        2005
      
      1.81
      
      1.772002
      
      1.51
      
      September
        2005
      
      1.84
      
      1.762003
      
      1.64
      
      October
        2005
      
      1.78
      
      1.742004
      
      1.84
      
      November
        2005
      
      1.78
      
      1.712005
      
      1.83
      
      December
        2005
      
      1.77
      
      1.712006
        (to 7 March)
      
      1.75
      
      January
        2006
      
      1.79
      
      1.74February
        2006
      
      1.78
      
      1.73*
        The average exchange rates have been calculated using the Noon Buying Rates on the last trading day of each calendar month during the period.On 7 March 2006 the Noon Buying Rate was $1.74 per £1.
  Fluctuations
    in the exchange rate between the pound sterling and the US dollar will affect
    the US dollar amounts received by holders of the ADSs upon conversion by the
    depositary of cash dividends paid in pounds sterling on the ordinary shares
    and represented by the ADSs. Also, fluctuations in the exchange rate may affect
    the relative market prices of the ADSs in the US and the ordinary shares in
    the UK.
  For the effect
    on the Groups results of operations of fluctuations in the exchange
    rates between the pound sterling and the other major currencies (including
    the US dollar) in which revenues are received and expenses are incurred us,
    see Operating and financial review on page 22.
09 Taxation information for US shareholdersThe
following discussion of taxation is intended only as a descriptive summary and
does not purport to be a complete technical analysis or listing of all potential
tax effects relevant to a
decision to acquire the companys ordinary shares or ADSs. This is a summary
of the material US federal income tax and UK tax consequences of the ownership
of ordinary shares or ADSs by a US holder who holds the ordinary shares or ADSs
as capital assets. The summary does not take into account the specific circumstances
of any particular investors, some of which may be subject to special rules, such
as dealers in securities, US holders who hold directly or indirectly 10% or more
of
the voting stock or US holders who elected to apply the provisions of the former
income tax convention between the United States and the United Kingdom. In addition,
the summary is based in part upon the representations of the Depositary and the
assumption that each obligation in the Deposit Agreement and any related agreement
will be performed in accordance with its terms. The summaries of US and UK tax
laws are based on the Internal Revenue Code of 1986, as amended, its legislative
history, existing and proposed regulations, published rulings and court decisions,
current tax laws, current UK Inland Revenue published practice and the terms
of the UK/US double tax treaty which came into effect on 31 March 2003 (the Treaty),
as
appropriate, all of which are subject to change at any time, possibly with retrospective
effect.
  For the purposes
    of this discussion, a US holder is any beneficial owner of ordinary
    shares or ADSs that is (i) a citizen or resident for tax purposes of the US,
    (ii) a corporation organised under the laws of the US or any US State, (iii)
    an estate the income of which is subject to US federal income tax without
    regard to its source, or (iv) a trust if a court within the US is able to
    exercise primary supervision over the administration of the trust and one
    or more US persons have the authority to control all substantial decisions
    of the trust.
Taxation of dividendsUK taxationUnder
    current UK taxation legislation, no withholding tax will be deducted from
    dividends paid by the company. A shareholder that is a company resident for
    UK tax purposes in the UK will not generally be taxable on any dividend it
    receives
from the company.
    A shareholder who is an individual resident for tax purposes in the UK is
    entitled to a tax credit on cash dividends paid by the company on ordinary
    shares or ADSs equal to one-ninth of the cash dividend or 10% of the dividend
    plus the tax credit. Such shareholders will be taxable on the total of the
    dividend and the related tax credit, which will be regarded as the top slice
    of the shareholders income. The tax credit may be set off against a
    UK resident individual shareholders total income tax liability, but
    no cash refund will be available. A US holder (as defined above) will not
    be entitled to any tax credit from the UK Inland Revenue in respect of a dividend
    from the company although there will be no further UK tax to pay in respect
    of that dividend.
US federal income taxationThe
    gross amount of any dividend paid by the company to a US holder will generally
    be subject to US federal income taxation. Such a dividend will not be eligible
    for the dividends-received deduction generally allowed to US corporations
    with respect to dividends from other US corporations. The amount of the dividend
    to be included in income will be the US dollar value of the pound sterling
    payments made, determined at the spot pound sterling/US dollar rate on the
    date of the dividend distribution, regardless of whether the payment is in
    fact converted into US dollars.
Qualified dividend incomeAn
    individual US holders qualified dividend income is subject
    to tax at a reduced rate of tax of 15% provided that the shares or ADSs are
    held for at least 61 days of the 121 day period beginning on the date which
    is 60 days before the ex-dividend date and the holder meets other holding
    period requirements. Dividends will not however qualify for the reduced rate
    if such corporation is treated for the tax year in which dividends are paid
    (or for the prior year), as a foreign investment company, a foreign
    personal holding company, or a passive foreign investment company
    (a PFIC) for US federal income tax purposes. Recently enacted legislation
    repealed the foreign investment company and foreign personal holding company
    provisions for tax years of the corporation beginning after 31 December 2004.
    The Company does not believe that it would be treated as a foreign investment
    company or a foreign personal holding company for 2004. The Company does not
    believe it was a PFIC or were a PFIC for 2005. Accordingly, the Company considers
    that dividends paid with respect to the shares or ADSs will be qualified
    dividend income and, subject to the US holders satisfaction of
    the holding period requirements described above, should be eligible for the
    reduced 15% US federal income tax rate. The Company dividends generally will
    be foreign source passive income for US foreign tax credit purposes.
Taxation of capital gainsUK taxationUpon
    a sale or other disposal by a holder of ordinary shares or ADSs, a gain or
    loss may be recognised for UK capital gains tax purposes equal broadly to
    the difference between the sterling value of the disposal proceeds and the
    holders tax basis in the relevant ordinary shares or ADSs (and subject
    to the availability of any applicable exemptions). Under the Treaty, capital
    gains on disposals of ordinary shares or ADSs will generally be subject to
    tax only in the jurisdiction of residence of the relevant holder as determined
    for the purposes of the Treaty, unless the ordinary shares or ADSs are held
    as part of the business property of a permanent establishment of that holder
    in the UK in which case such capital gains may be subject to tax in both jurisdictions.
    The Treaty also contains an anti-avoidance rule which will be relevant to
    individuals who are residents of either the UK or the US and who have been
    resident of the other jurisdiction (the US or the UK, as the case may be)
    at any time during the six years immediately preceding the relevant disposal
    of shares or ADSs. The Treaty provides that, in such circumstances, capital
    gains arising from the disposal may be subject to tax not only in the jurisdiction
    of which the holder is resident at the time of the disposal, but also in that
    other jurisdiction.
US federal income taxationUpon
    a sale or other disposal by a US holder of ordinary shares or ADSs, a gain
    or loss may be recognised for US federal income tax purposes equal broadly
    to the difference between the US dollar value of the disposal proceeds and
    the US holders tax basis (determined in US dollars) in the relevant
    ordinary shares or ADSs. Generally, such gain or loss will be regarded as
    a capital gain or loss and, as a long-term capital gain or loss, if the US
    holders holding period for such ordinary shares or ADSs exceeds one
    year. Long-term capital gains of a non-corporate US holder are generally subject
    to a maximum tax rate of 15%.
  Any such gain
    or loss will generally be income or loss from sources within the US for foreign
    tax credit limitation purposes. The deductibility of a capital loss is subject
    to limitations. If the ADSs or ordinary shares are publicly traded, a

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disposal of such ADSs or ordinary shares will be considered to occur on the trade date, regardless of the US holders method of accounting. A US holder that uses the cash
method of accounting calculates the US dollar value of the disposal proceeds as of the date that the sale settles. However, a US holder that uses the accrual method of accounting is required to calculate the value of the disposal proceeds as of the
trade date and, therefore, may realise a foreign currency gain or loss (unless such US holder has elected to use the settlement date to determine its disposal proceeds). In addition, a US holder that receives foreign currency upon the
sale or exchange of the ADSs or ordinary shares and subsequently converts the foreign currency into US dollars, will have a foreign exchange gain or loss based on any appreciation or depreciation in the value of the foreign currency against the US
dollar. Foreign exchange gain or loss will generally be US source ordinary income or loss. Deposits and withdrawals of ordinary shares by US holders in exchange for ADSs will not result in the realisation of a gain or loss for US federal income tax
purposes.
Additional tax considerationsUK inheritance taxAn
individual who is domiciled in the US for the purposes of the UK/US Estate and
Gift Tax Convention (the Convention) and who is not a national of the UK for
the purposes of the Convention, will not generally be subject to UK inheritance
tax in respect of ordinary shares or ADSs on the individuals death, or on a transfer of ordinary shares or ADSs during the individuals
lifetime provided that any applicable US federal gift or estate tax is paid.
However, such an individual will be subject to UK inheritance tax if the ordinary
shares or ADSs are part of the business property of a permanent establishment
of the individual in the UK, or pertain to a fixed
base in the UK of an individual who performs independent personal services. Special
rules apply to ordinary shares or ADSs held in trust. In the exceptional case,
where the disposition is subject both to UK inheritance tax and to US federal
gift or estate tax, the Convention generally provides for any tax paid in the
UK to be credited against tax liable to be paid in the US, or for tax paid in
the US to be credited against the tax payable in the UK, based on priority rules
set out in the
Convention.
UK stamp duty and stamp duty reserve taxNo
    UK stamp duty or stamp duty reserve tax (SDRT) will be payable on the transfer
    of an ADS, or agreement to transfer an ADS, provided that the instrument of
    transfer, or written agreement, is executed and retained outside the UK and
    does not relate to any matter or thing done, or to be done, in the UK.
UK stamp duty will generally be payable on conveyances or transfers of ordinary shares, at the rate of 0.5% of the amount or value of the consideration, if any, for the transfer (rounded up
to the next multiple of £5). SDRT will be imposed, at the rate of 0.5% of the amount or value of the consideration for the transfer if an agreement is made for the transfer of ordinary shares, unless an instrument of transfer of the ordinary
shares in favour of the purchaser, or its nominee, is executed and duly stamped within six years of the day that the agreement is made (or, in a case where the agreement is conditional, the day that the condition is satisfied) in which case, any
SDRT paid will be repaid (together with interest where the SDRT is not less than £25) on a claim for repayment or, to the extent not paid, the charge to SDRT will be cancelled. SDRT is in general payable by the purchaser of ordinary shares, but
there are regulations which provide for collection from other persons in certain circumstances, including from CREST where the relevant ordinary shares are held in CREST. UK stamp duty or SDRT will generally be imposed on any instrument transferring
ordinary shares to a person, or to a nominee or agent for such a person, whose business is or includes issuing depositary receipts (such as the ADSs) for relevant securities. In these circumstances, stamp duty or SDRT will be charged at the rate of
approximately 1.5% of the amount or value of the consideration for the conveyance or transfer on sale or, otherwise, 1.5% of the value of the security transferred at the date the instrument is executed.
  A transfer into
    CREST will not be subject to this charge. A transfer of ordinary shares from
    a depositary, or its agent or nominee, to a transferee, which results in the
    cancellation of the ADS, which cancellation is liable to stamp duty as a conveyance
    or transfer on sale because it completes a sale of such ordinary shares,
    will be liable to ad valorem stamp duty, at the rate of 0.5% of the amount
    or value of the consideration, if any, for the transfer. A transfer of ordinary
    shares from a depositary, or its agent or nominee, to the ADS holder, which
    results in cancellation of the ADS but where there is no transfer of beneficial
    ownership, is not liable to duty as a conveyance or transfer on sale,
    but will be liable to a fixed stamp duty of £5.
US PFIC statusIf a
    foreign company is a PFIC, based on either an income test or an asset test
    then certain distributions and gains can be allocated rateably over a US shareholders
    holding period, with the effect that the amount allocated to the current taxable
    year and any taxable year before the company became a PFIC would be taxable
    as ordinary income in the current year and the amount allocated to other taxable
    years would be taxed at the highest rate in effect for that year on ordinary
    income. The tax is also subject to an interest charge to recover the deemed
    benefit from the deferred payment of the tax attributable to each such year.
    As referred to under the heading Taxation of capital gains US
    federal income taxation, the company reasonably believes that it was
    not a PFIC in 2005 and does not anticipate becoming a PFIC. However, the tests
    for determining PFIC status are applied annually and it is difficult to make
    accurate predictions of future income and assets, which are relevant to this
    determination. Accordingly, we cannot assure US holders that the IRS would
    agree with our belief, nor can the company assure US holders that it will
    not become a PFIC. US holders are urged to consult their own tax advisors
    about the PFIC rules, including the consequences to them of making a mark-to-market
    election with respect to our ordinary shares and ADSs in the event that we
    qualify as a PFIC.
US information reporting and backup withholdingA
    US holder is generally subject to information reporting requirements with
    respect to dividends paid in the US on ordinary shares or ADSs and disposal
    proceeds realised from the sale, exchange, redemption or other disposal of
    ordinary shares or ADSs. In addition, a US holder is subject to backup withholding
    (currently at a rate of 28%) on dividends paid in the US on ordinary shares
    or ADSs and disposal proceeds realised from the sale, exchange, redemption
    or other disposal of ordinary shares or ADSs unless the US holder is a corporation,
    provides an IRS Form W-9 or otherwise establishes a basis for exemption. Backup
    withholding is not an additional tax. The amount of any backup withholding
    will be allowed as a credit against a US holders US federal income tax
    liability and may be refunded, provided that certain information is furnished
    to the IRS.  10
    Related party transaction and material contractsRelated
    party transactions  generalReuters has entered into arrangements with its joint ventures and associates, and has in addition provided financial information services to, and purchased services from, many of the
companies with which it shares a common director. Except as otherwise indicated, all of these transactions are in the normal course of business on commercial terms. Related party transactions during 2005, 2004 and 2003 were principally with Radianz,
Factiva, TSI and Instinet Group, each as described below.
  Only in the
    case of the transactions with Radianz, Factiva, 3XSQ Associates, TSI and Instinet
    Group were any of the amounts involved material to either party. Except as
    noted below, these services are ongoing and continued at historical levels
    to the date of this report. TSI ceased to be a related party in 2004, and
    Radianz and Instinet Group ceased to be related parties in 2005.
Radianz/BTFrom
1 January through 29 April 2005, the date on which Radianz was sold to BT (see Network Services Agreement with, and Sale of Radianz to, BT below) and in accordance with
inter-company agreements including those described below, Radianz provided the Group with network services totalling £65 million (2004: £277 million, 2003: £304 million). During this same period in 2005, Reuters Group provided Radianz
with certain technical, field engineering, IT systems, property and human resource services for a total cost of £15 million (2004: £66 million, 2003: £82
million).
  Network Services AgreementTo
    secure the long-term availability of the Radianz network for the Group, Reuters
    entered into a Network Services Agreement (the Radianz NSA) with Radianz in
    May 2000 in connection with the formation of Radianz. Reuters generally agreed
    to continue to use Radianz for its network services in support of global and
    strategic products during the term of the agreement. Detailed provisions in
    respect of rates and charges were agreed between Radianz and Reuters. Radianz
    agreed that it would provide the network services to Reuters on terms which
    were no less favourable than reasonably comparable services offered to any
    other customer of Radianz, and Reuters agreed to spend an agreed amount with
    Radianz annually. The Radianz NSA was terminated and superseded by the network
    services agreement with BT, described below.
  Purchase of Equant StakeOn
    21 October 2004, Reuters entered into an agreement to purchase Equants
    entire stake in Radianz for £60 million

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Information for shareholderscontinued

($110 million) in cash together with the release of future funding obligations. The transaction completed on 16 November 2004. The purchase agreement included standard corporate
  representations and warranties by each of Equant and Reuters as to itself, and was otherwise generally on customary terms and conditions for a transaction of this nature.
  Network Services Agreement with, and sale of Radianz to, BTReuters
    entered into a contract with BT effective 29 April 2005 under which BT became
    supplier of network services to Reuters. Under this network services agreement,
    BT will provide and manage secure data networks for Reuters products and services
    world wide and Reuters is currently expected to spend in the region of $3
    billion through 2013. The agreement sets out the responsibilities of the parties
    to achieve the migration of all existing connections to BTs new IP network
    and contemplates completion around May 2008. The agreement sets out a mechanism
    where liquidated damages will be payable on a sliding scale if a party fails
    to achieve its migration responsibilities. The agreement contains minimum
    spend commitments for each year following the third year of the agreement,
    based on a declining percentage of the charges in the previous year, and obliges
    BT to meet certain quality of service levels. Reuters is entitled to service
    credits and, in the event of a material breach of such quality of service
    levels, Reuters is entitled to terminate the agreement. In addition, the agreement
    gives BT the opportunity to tender for any future telecommunication services.
    Also on 29 April 2005, Reuters sold Radianz to BT for cash consideration of
    $175 million (£95 million) plus any cash remaining on the balance
    sheet, net of working capital adjustments, at the date of completion. The
    purchase agreement included standard warranties and indemnities from Reuters,
    and was otherwise generally on customary terms and conditions for a transaction
    of this nature. As a result of the sale of Radianz to BT, future funding obligations
    from Reuters to Radianz of $44 million were novated to BT.
FactivaFor information regarding transactions with Factiva, see note 34 on pages 95 to 96.
TSIOn
3 February 2004, Reuters reduced its stake in TSI from 48.4% to 8.8%, and has
since further reduced it to less than 1%. During 2004, Reuters purchased £13 million of services from
TSI (2003: £16 million).
  LicencesReuters
    owns the underlying intellectual property and technology that was in existence
    at 31 December 1996 and that is incorporated into many of TSIs products.
    Reuters licenses this technology to TSI. TSI owns all technology and related
    intellectual property rights independently developed by TSI since 1 January
    1997, including enhancements and improvements to the licensed technology,
    which TSI itself licenses to Reuters.

  Through the
    third quarter of 2003, Reuters had a licence, distribution and maintenance
    agreement with TSI pursuant to which Reuters was required to pay TSI certain
    minimum distribution fees related to sales of TSIs products to financial
    services market customers. Under this agreement, Reuters obligations with
    respect to the minimum distribution fees were to expire at the end of 2003,
    and TSI was restricted until May 2004 from selling its products and providing
    consulting services directly to companies in the financial services market,
    except in limited circumstances, if Reuters continued to pay the minimum distribution
    fees until that date. In October 2003, Reuters entered into a revised commercial
    agreement with TSI. Pursuant to the revised agreement, TSI has the right to
    market and sell its products to customers in the financial services market,
    except that TSI will not be able to market or sell risk management applications
    or market data systems for financial services companies or to sell to financial
    services customers through four specified resellers until May 2008. Reuters
    will continue to have the right to use TSI technology internally and embedded
    within its products, and TSI will provide certain fee-based support services
    to Reuters. The agreement provided that Reuters and TSI would work together
    to migrate Reuters existing customers maintenance contracts to TSI,
    and that Reuters rights to re-sell ended in October 2003, subject to completion
    of a limited number of then in progress opportunities. From October 2003 until
    March 2005, Reuters made quarterly payments of $5 million to TSI, subject
    to reduction based on TSIs direct revenues from products and support
    sold to financial services customers.
On 27 February 2005, Reuters and TSI entered into an amendment to the commercial agreement under which TSI granted Reuters new rights to resell a defined set of TSI software products solely
in conjunction with the sale by Reuters of its market data delivery solutions in return for Reuters paying TSI licence fees in minimum annual amount of $11 million. The reseller rights
had an initial
    term of one year which Reuters was entitled to elect to extend for two further
    one-year terms. Reuters did not extend the reseller rights, and so no longer
    has any minimum payment obligations to TSI. The amendment also extended the
    time during which Reuters has the right to use TSI technology internally and
    embedded within its products by one year, to 31 December 2012.
  Repurchase by TSIAt
    the same time as the licence agreement revision in October 2003, Reuters and
    TSI entered into an agreement pursuant to which TSI agreed to register sales
    by Reuters of its TSI shares under US securities laws, and to repurchase up
    to $115 million of its shares from Reuters upon Reuters completing a single
    public offering of at least $100 million of TSI shares. In February 2004,
    Reuters completed a registered public offering of 69 million TSI shares for
    $473 million (£261 million), and TSI repurchased an additional 17
    million shares for $115 million, resulting in aggregate net proceeds to
    Reuters, after underwriting and transaction fees, of approximately $563
    million (£310 million).
Instinet GroupSale of BTCOn
31 March 2005, Reuters entered into an agreement to sell BTC to Instinet Group
for $22 million in
Instinet Group stock, subject to adjustment for working capital and net capital. The transaction completed 31 March 2005, and Reuters received 3,751,527 shares of Instinet common stock, plus a subsequent 74,258 shares in respect of a post-closing
purchase price adjustment, in each case valued based on the average daily closing prices over the ten trading days ending on the second trading day prior to the date of determination for the payment. Pursuant to the agreement, until 31 December 2005
BTC continued to have exclusive rights to allow its existing clients to pay for Reuters Station through soft dollar credits
generated by trading activity. In addition, Reuters agreed for a period of one
year not to operate a US broker dealer which allows its customers to pay for
Reuters Station on a soft dollar basis, and not to solicit BTC employees, in
each case subject to certain exceptions. The agreement otherwise included representations
and warranties, covenants and other
terms customary for a transaction of this nature. Following the sale, Reuters
continued to provide certain transitional services to BTC, including a lease
arrangement for space currently occupied by BTC, various administrative, technology
and other support services, and a royalty-free licence to the BTC trademark.
Other than the licence, such arrangements include fees generally based on allocated
or attributable costs.
  Sale of Instinet Group to NASDAQOn
    22 April 2005, Instinet Group and NASDAQ entered into a definitive agreement
    for NASDAQ to acquire Instinet Group for approximately $1.88 billion in
    cash. In connection with the transaction, Reuters entered into an agreement
    with NASDAQ agreeing to vote its 62% interest in Instinet Group in favour
    of the acquisition, subject to certain conditions and exceptions. The acquisition
    was completed on 8 December 2005, and Reuters received approximately $1.13
    billion (including the dividend from the sale of LJR described below).
  Sale of Instinet Institutional Brokerage to Silver Lake PartnersAt
    the same time as it agreed to acquire Instinet Group, NASDAQ agreed to subsequently
    sell Instinet, the institutional brokerage business, to Silver Lake Partners.
    As a condition to NASDAQ agreeing to acquire Instinet Group, Reuters agreed
    to consent to the assignment of certain of its agreements relating to the
    Instinet brokerage business and waive its termination rights under certain
    of its agreements relating to the Instinet business which resulted from the
    sale of Instinet Group, while certain other agreements were agreed to be terminated
    or extended. In addition, subject to certain conditions, Reuters agreed to
    provide certain transition services to the Instinet brokerage business. Reuters
    also agreed to indemnify the Instinet brokerage business against certain UK
    pension liabilities that may arise in connection with Instinet employees
    participation in one of Reuters UK pension funds.
  Sale of LJR to The Bank of New YorkAt
    the same time as it entered into the agreement to be acquired by NASDAQ, Instinet
    Group also agreed to sell its LJR subsidiary to The Bank of New York. The
    sale was completed on 30 June 2005, and the net proceeds of the transaction
    were distributed as a dividend to Instinet Groups stockholders and deducted
    from the NASDAQ purchase price. As a condition to the transactions, Reuters
    agreed to assume indemnity obligations of Instinet Group in the sale agreement
    for certain pre-closing liabilities, breaches of representations and warranties,
    and certain taxes, effective only upon completion of the sale of Instinet
    Group and subject to certain limitations. Instinet Group agreed to obtain,
    and has obtained, an insurance policy in respect of certain of these liabilities,
    of which Reuters is a beneficiary.

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Intercompany
  AgreementsDuring
  the time that Reuters owned a majority stake in Instinet Group, Reuters and
  Instinet Group were party to numerous agreements and arrangements, including
  those described above and below, under which they provided each other with various
  products, services, licences and other transactions.
Reuters Order RoutingUnder agreements between Reuters and Instinet Group, Instinet Group customers gained the ability to
submit orders to Instinet Group and to receive indications of interest from Instinet Group over the Reuters Order Routing network without charge to Instinet Group.
NewportSMUnder
    an agreement with Instinet Group, Reuters had the exclusive right to provide
    the real-time market data for Instinet Groups NewportSM(patent
  pending) program trading application.
Market dataReuters had been entitled to redistribute certain proprietary equity securities data from Instinet Group under
two data distribution agreements. Under a data distribution agreement entered into at the time of the Instinet initial public offering (IPO) in May 2001, Reuters had the limited right to be the exclusive data vendor distributing some of Instinet
Groups proprietary equity securities data; however, this agreement terminated on 17 May 2004. Under a separate agreement originally entered into with Island ECN (which was acquired by Instinet Group in September 2002), Reuters has the right to
redistribute a broader set of proprietary equity securities data from Instinet Group. This agreement continued in effect notwithstanding the termination of the exclusive arrangement described above and Reuters was not required to make payments in
connection with any such redistribution.
Customer agreementInstinet Group received certain Reuters information services and related hardware, software and support
on terms similar to those given to Reuters independent third-party customers, and had the right to redistribute certain Reuters information both internally and to its customers.
Preferred soft-dollar arrangementThis agreement established a preferred commercial and soft-dollar arrangement for
certain Instinet Group customers that purchase Reuters products and services. It provided that Reuters would compensate Instinet Groups sales personnel for new sales of Reuters products and services, and Instinet Group would pay Reuters an
annual fee for various administrative and marketing services related to training of Instinet Groups personnel.
Commission
  sharing agreementBefore
  the purchase of BTC by Instinet Group, Instinet Group had agreed to open accounts
  for some institutional clients that BTC introduced to Instinet Group, and to
  rebate BTC portions of the commissions these customers paid at a commercially
  reasonable rate.
TriadReuters gave
  Instinet Group the ability to deliver indications of interest and advertised
  trades to its customers and potential customers through Reuters Triad network.
  Instinet Group paid standard commercial rates for indications of interest and
  advertised trades it delivered through Triad.
Data Center Hosting AgreementReuters provided certain data centre hosting services to Instinet Global Services Limited at
two sites in London: Docklands and Great Sutton Street.
3
  Times Square SubleaseInstinet
  Group is subject to an agreement with Reuters to sublease office space at 3
  Times Square in New York City. In connection with the purchase of Instinet Group
  by NASDAQ, the sublease was assigned to Instinet, the institutional brokerage
  business sold by NASDAQ to Silver Lake Partners (with Instinet Group also remaining
  obligated under the sublease), and the space sublet was reduced from 360,392
  rentable square feet to 284,537 rentable square feet. In addition, Instinet
  Group agreed to terminate the rights to utilize, and receive 50% of the revenues
  from, the buildings signage. In connection with these and related changes
  to the sublease, Instinet Group paid Reuters $3.5 million. The remaining
  sublease term is until 2021, with a one-time right of termination in 2011 as
  to 68,264 rentable square feet of the space. Instinet Group is required to post
  a letter of credit for $49 million, based on its pro rata portion of the
  3 Times Square space leased by Reuters, to secure its obligations under the
  sublease.
3XSQ
  AssociatesFor information
  regarding transactions with 3XSQ Associates, see note 34 on page 95 to 96.
  Other
  material contractsSavvis
  Network Services AgreementIn
  connection with the Bridge acquisition in 2001, Reuters entered into a five-year
  network services agreement with Savvis, Bridges network service provider,
  under which Savvis agreed to provide internet protocol network services, internet
  access and co-location services necessary to continue network services for the
  Bridge business and customers Reuters was acquiring. The agreement contained
  minimum spend commitments for each year and obliged Savvis to meet certain quality
  of service levels. The agreement was amended on a number of occasions to reflect
  the on going business relationship between the parties, culminating in a termination
  of the original agreement and the execution of new agreement between the parties
  on 19 May 2005. The new agreement, which has a three-year term, contains no
  minimum revenue commitments, but continues to oblige Savvis to meet newly defined
  quality of service levels which are designed to more accurately reflect the
  services which are and will be provided by Savvis. Reuters is entitled to service
  credits and, in the event of a material breach of such quality of service levels,
  Reuters is entitled to terminate the agreement.
In addition, on 3 June 2005, in connection with the acquisition of the Telerate business, Reuters acquired Telerates agreement with Savvis for the provision of internet protocol
network services, internet access and co-location services to support the acquired Telerate business. This agreement, which expires 1 October 2009 and is an exclusive arrangement for the Telerate business so long as Savvis remains in material
compliance with its obligations, contains minimum annual spend commitments ending 1 November 2006, including a $20 million spend commitment by Reuters for the one-year period ending 1 November 2006. If Savvis does not meet certain quality of
service levels, Reuters is entitled to service credits and, in the event of a material breach of such levels, to terminate the agreement.
Telerate Acquisition AgreementOn 20 December 2004, Reuters entered into an agreement to acquire substantially all of the
business of Telerate. The total purchase price for Telerate was $145 million (£79 million) in cash and Reuters 14% holding in Savvis. The cash purchase price comprised a $100 million initial purchase price, a $21 million working
capital adjustment and a $24 million increase for pre-close actions by Telerate which reduced Reuters anticipated restructuring costs. At the signing of the agreement, Reuters provided an interim funding payment of $34 million (£18
million) in funding to Telerate, which, together with interest, was repaid on the closing date of 3 June 2005. In addition, at the closing Reuters received a payment of $22 million (£12 million) in satisfaction of all outstanding invoicing
and payment disputes under a Transitional Services Agreement (TSA) between the parties under which each had provided the other certain software and/or services for a transitional period following their respective acquisitions of the inter-connected
Bridge and Telerate businesses out of bankruptcy in late 2001. The payment consisted of $10 million (£5 million) paid by Telerate and $12 million (£7 million) released from an escrow which had been established for payments of
disputed amounts by the parties during the term of the TSA.
The Telerate Acquisition Agreement was generally on customary terms including representations, warranties, covenants, conditions and indemnities by each of the parties. A portion of the
purchase price, consisting of $30 million cash and $15 million worth of Savvis stock valued at the closing, was put into escrow for two years to serve, in general, as the sole source of funding for any post-closing claims by
Reuters.
Financing arrangementFor a discussion of other material contracts, see Treasury Policies on pages 20 to
22.
11
  Capital investments, expenditure and divestmentsDuring
  the last three years Reuters has made a number of acquisitions and invested
  in new businesses. Reuters also completed its divestment of Radianz and Instinet
  Group during 2005. The principal acquisitions, investments and disposals (none
  of which exceeded £50 million, save where otherwise stated) were:
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Information
  for shareholderscontinued

Acquisitions2005Telerate,
  a leading financial information provider in the fixed income sector, in June
  2005 for £79 million in cash plus Reuters investment in Savvis convertible
  preference shares (valued at £31 million).
Quick Telerate Corp, a distributor of Telerates products in Japan, in June 2005.
Image Group Limited (trading as Action Images), a media company in the sports pictures market, in September 2005.
EcoWin AB, a data provider specialising in global and macroeconomic data, in November 2005.
Tremont Capital Managements TASS research hedge fund database and the Hedgeworld Group in March 2005.
In April 2005, Reuters announced that it would launch a new Indian TV News Channel, TIMES NOW, in association with the Times of India. It was agreed that Reuters would take a 26% interest
in the new company, the Times Global Broadcasting Company Limited, subject to receiving regulatory approval during 2006.
In June 2005, Reuters and NASDAQ announced the formation of a new joint venture, Independent Research Network Inc. The new company will provide and distribute equity research to the analyst
community. Reuters invested £1 million in the joint venture during 2005.
Total capital expenditure including transaction fees for acquisitions of subsidiaries and investments in joint ventures and associates was £145 million during 2005.
2004Fitzrovia
  International plc, a leading investment fund research company, was acquired
  in October 2004 by Lipper Limited, a wholly owned subsidiary of Reuters.
Radianz, in which Reuters acquired the 49% voting interest it did not already own, was acquired from Equant in November 2004 for £60 million.
Total capital expenditure for acquisitions, investments in joint ventures and associates and other investments during 2004 was £80 million.
2003Multex.com
  Inc., a leading provider of investment research, was acquired in March 2003
  for £158 million.
Divestments2005Reuters disposed
  or closed a total of five units for consideration of £910 million, net
  of transaction fees. The principal disposals or closures were:
Instinet Group, in which Reuters had a stake of 62%, for £612 million in December 2005. Prior to the sale Instinet acquired Reuters 100% stake in BTC, a soft dollar execution broker,
for approximately 3.8 million shares of Instinet Group stock, valued at £12m. Instinet also disposed of its wholly-owned subsidiary, LJR, in July 2005 for total consideration of £96 million and its 2% interest in Archipelago Holdings LLC
in May 2005.
Radianz, in which Reuters had a 100% stake was sold to BT for total consideration of £115 million in April 2005.
TSI, in which Reuters reduced its stake from 8.8% to below 1% by 31 December 2005, for total consideration of £63 million.
Deutsche Gesellschaft für Ad-Hoc-Publizitat GmbH (DGAP), a media company in which Reuters held a 33% stake, was sold in November 2005.
2004Reuters disposed
  of or closed a total of 12 units in 2004 for consideration totalling £474
  million. The principal disposals or closures in 2004 were:
TSI, in which Reuters
  reduced its stake from 48.4% to 8.8% in February 2004 through completion of
  a public offering of 69 million TSI shares and sale of an additional 17 million
  shares back to TSI for aggregate net proceeds of approximately £310 million.
GL TRADE, a financial software company in which Reuters held a 34.2% shareholding, was divested in June 2004 for a consideration of £59 million.
ORT SAS, a wholly-owned credit rating subsidiary of Reuters, was sold in June 2004 for a total consideration of £29 million.
TowerGroup, a financial services research company in which Reuters held a 98% holding, was sold in February 2004.
Yankee, a wholly-owned telecommunications research company, was sold in May 2004.
Riskmetrics, a company specialising in portfolio credit risk evaluation, in which Reuters held a 24% stake, was divested in January and June 2004.
Reuters remaining Greenhouse Fund investment portfolio was sold in June 2004 to a company established by RVC, the independent fund management company created by former Reuters employees in
2001 to manage the Greenhouse Fund.
2003Reuters disposed
  of or closed a total of 17 units in 2003 for consideration totalling £41
  million. The principal disposals in 2003 were:
Synetix Solutions Limited, a joint venture focusing on data management solutions, sold in January 2003.
Wall Street on Demand, a wholly-owned subsidiary providing research, acquired as part of the acquisition of Bridge, sold in March 2003.
Informa SA, a provider of on-line credit and financial information, in which Reuters held a 40% shareholding, sold in September 2003.
Datamonitor plc, a research company specialising in industry analysis in which Reuters held a 20.5% ordinary shareholding, sold on a piecemeal basis between July 2003 and November
2003.
The Thai Apex services business, a domestic equities information service in Thailand, sold into a new joint venture formed by Reuters and Systex Corporation in December 2003.
Agence de Presse Médicale International SAS, a health information provider in France, a wholly-owned subsidiary, sold in December 2003.
12
  Property, plant and equipmentThe computer
  equipment that Reuters uses to create, manage and deliver its products to customers
  across the world forms the bulk of its tangible fixed assets. This equipment
  is distributed across global sites with greater concentration at the major global
  and regional technical centres. As Reuters extends its use of hosting services
  and browser delivery for its products, the quantity of equipment located at
  customer sites is being reduced.
The Groups
  principal facilities were relocated to a newly refurbished building located
  at The Reuters Building, South Colonnade in the Canary Wharf area of London
  during mid-2005. In September 2003, Reuters announced arrangements to consolidate
  its London-based operations to Canary Wharf during 2005. Under the agreement
  signed with the ownership of Canary Wharf, Reuters entered into a 281,000 sq.
  ft. office lease and transferred approximately 340,000 sq. ft. of redundant
  offices, including 85 Fleet Street, to Canary Wharf Group for cash consideration
  of approximately £30 million. Reuters other significant sites include:
•
    the US headquarters
      at 3 Times Square in New York City (692,000 rentable sq. ft.),
      of which 288,000 rentable sq. ft. are sub-let;•
    the technical
      centres in London (324,000 sq. ft.), Hazelwood, Missouri (109,000
      sq. ft.), Geneva
      (144,000 sq.ft.), which also includes the regional office for EMEA,
      Singapore (180,000 sq. ft.), which also includes the regional office for
      Asia, and Hauppauge, New York (50,000
      sq. ft.); and
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•
      the four
        corporate office buildings located in St. Louis County, Missouri
        (aggregate
        of 211,000 sq. ft.).Reuters owns the land on which its London and Hauppauge technical centres are situated, whereas its buildings in Geneva and Singapore were built on leased land. The leases, including
periods covered by options to extend, expires in 2095 and 2050, respectively.
The Reuters Building at 3 Times Square is owned, and was developed, by 3XSQ Associates, which is owned by Reuters and Rudins Times Square Associates LLC. In May 2001, Reuters commenced its
lease of 692,000 sq. ft. from the venture, of which 288,000 sq. ft. is subleased to Instinet Group, which in turn has subleased approximately 180,000 sq. ft. to third parties. The principal part of Reuters lease will expire in 2021. See 3XSQ
Associates sublease on page 96 for further information.
In 2003, the major technical centre building in Hazelwood, Missouri was acquired from Savvis for a total consideration of £24 million. Reuters subsequently entered into a sale and
leaseback for the facility, receiving £23 million under a 20 year arrangement.
During 2004, Reuters extended its facilities in Bangkok to 100,000 sq. ft.
Reuters has two office buildings in Bangalore which are leased and provide a total of approximately 138, 000 sq. ft. The leases on these facilities, including periods covered by options to
extend, expire in 2009. In January 2006 Reuters signed a lease for an additional facility in bangalore, providing 59,000 sq. ft. and an option to expand by a further 15,000 sq. ft., which expects to occupy in April 2006. The lease on this facility
expires in 2011.
Reuters facilities in Bangkok which are leased provide a total of 120,500 sq. ft. The lease for this property, including the period covered by an option to extend, expires in
2010.
13
  Legal proceedingsExcept
  as described above in note 35 on page 97, neither the Group, nor any of its
  directors, members of senior management or affiliates, is subject to any legal
  or arbitration proceedings which may have, or have had in the recent past, significant
  effects on the Groups financial performance or profitability. A description
  of certain legal proceedings relating to Instinet Group was included in the
  2004 annual report and Form 20-F but is not included in this annual report in
  light of Instinet Groups acquisition by NASDAQ in December 2005.
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Cross-reference
    guide to Form 20-F
Item
        Description
        Page1
        Identity of directors, senior management and advisers
        n/a2
        Offer statistics and expected timetable
        n/a3
        Key informationSelected financial data
        5-6Exchange rates
        122Capitalisation and indebtedness
        n/aReasons for offer and use of proceeds
        n/aRisk factors
        24-254
        Information on the companyHistory and development of the company
        7-13, 119, 125-126, 130Business overview
        7-12, 16-20, 58-59, 66Organisational structure
        16-20, 100Property, plant and equipment
        126-1274A
        Unresolved staff comments
        n/a5
        Operating and financial review and prospectsOperating results
        7-30Liquidity and capital resources
        20-22Research and development, patents and licenses etc
        60Trend information
        2, 13-20Off-balance sheet arrangements
        24Tabular disclosure of contracted obligations
        216
        Directors, senior management and employeesDirectors and senior management
        32-33Compensation
        39-48Board practices
        31, 34-37, 39, 43Employees
        10-11, 64Share ownership
        40-42, 46-48, 93-957
        Major shareholders and related party transactionsMajor shareholders
        118-119Related party transactions
        95-96, 123-125Interests of experts and counsel
        n/a8
        Financial informationConsolidated accounts and other financial information
        See Item 17Litigation
        97, 127Dividend policy
        26, 119Significant changes
        1009
        The offer and listingOffer and listing details  price history of shares
        118Plan of distribution
        n/aMarkets
        118Selling shareholders
        n/aDilution
        n/aExpenses of the issue
        n/a10
        Additional informationShare capital
        n/aMemorandum and articles of association
        39-40, 119-121Material contracts
        123-125Exchange controls
        122Taxation
        122-123Dividends and paying agents
        n/aStatement by experts
        n/aDocuments on display
        130Subsidiary information
        n/a11
        Quantitative and qualitative disclosures about market risk
        20, 22, 73-8112
        Description of securities other than equity securities
        n/a13
        Defaults, dividend arrearages and delinquencies
        n/a14
        Material modifications to the rights of security holders and use of proceeds
        n/a15
        Controls and procedures
        37-38
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Item
        Description
        Page16A
        Audit committee financial expert
        3616B
        Code of ethics
        3616C
        Principal accountant fees and services
        36, 6016D
        Exemptions from the listing standards for audit committees
        n/a16E
        Purchases of equity securities by the issuer and affiliated purchasers
        8917
        Financial statementsReport of the auditors
        49Consolidated income statement for each of the two years in the period ended 31 December 2005
        50Consolidated statement of recognised income and expense for the two years in the period ended 31 December 2005
        50Consolidated balance sheet at 31 December 2005 and 2004
        51Consolidated cash flow statement for each of the two years in the period ended 31 December 2005
        52Accounting policies
        52-57Notes to the financial statements
        58-103Summary of differences between IFRS (as adopted by the EU) and US GAAP and related notes
        104-10818
        Financial statements
        n/a`
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Glossary
Term
      used in annual report
    US
      equivalent or brief descriptionAllotted
    IssuedAssociates
    Affiliates
      accounted for under the equity methodBusiness
      segment
    Industry
      segmentCalled
      up share capital
    Ordinary
      shares, issued and fully paidCapital
      allowances
    Tax
      term equivalent to US tax depreciation allowancesCombined
      Code
    A
      set of corporate governance principles and detailed codes of practiceDestination
      (of revenue)
    The
      geographical area from which goods or services are suppliedFinance
      income
    Interest
      incomeFreehold
    Ownership
      with absolute rights in perpetuityOrigin
      (of revenue)
    The
         geographical area from which goods or services are supplied to a third
        party or another geographical areaProfit
    IncomeProfit
      for the year attributable to the equity holders of the parent
    Net
      incomeShare
      capital
    Ordinary
      shares, capital stock or common stock issued and fully paidShares
      in issue
    Shares
      outstandingShare
      premium
    Additional
      paid-in capital or paid-in surplus (not distributable)Trade
      payables
    Accounts
      payableTrade
      receivables
    Accounts
      receivable
130
    
    Reuters
          Group PLCAnnual
          Report and Form 20-F 2005Back to Contents
Financial diary for 2006
Wednesday 26 AprilFirst quarter trading statement issued
Thursday 27 AprilAnnual General MeetingTime: 11:30 amVenue: The Reuters Building,South Colonnade, Canary Wharf,London E14 5EP
Thursday 4 MayFinal dividend for 2005 payable toordinary shareholders on the registeras at 17 March 2006

  Thursday 11 MayFinal dividend payable to ADS holders on the record as at 17 March 2006
Wednesday 26 JulyInterim 2006 results announced
Wednesday 2 AugustOrdinary shares go ex-dividend
Wednesday 2 AugustADSs go ex-dividend

Wednesday 30 AugustInterim dividend for 2006 payable toordinary shareholders on the registeras at 4 August 2006
Wednesday 6 SeptemberInterim dividend payable to ADS holders onthe record as at 4 August 2006
Thursday 18 OctoberThird quarter trading statement issued
Where to find us
Corporate HeadquartersThe Reuters BuildingSouth ColonnadeCanary WharfLondon E14 5EPTel: +44 (0)20 7250 1122www.about.reuters.com
Registered in EnglandNo: 3296375
Investor queriesMiriam McKayTel: +44 (0)20 7542 7057Fax: +44 (0)20 7542 4835Email: miriam.mckay@reuters.com
Media queriesSimon WalkerTel: +44 (0)20 7542 7800Fax: +44 (0)20 7542 4835Email: simon.walker@reuters.com
Registrar/DepositaryFor dividend queries, duplicate mailings and change of address
Ordinary sharesLloyds TSB RegistrarThe CausewayWorthingWest Sussex BN99 6DAUKTel: +44 (0)870 600 3970(for callers within the UK)Tel: +44 121 415 7047(for callers outside the UK)Fax: +44 (0)1903 833 482

American Depositary SharesDeutsche Bank ADR Service Centerc/o Mellon Investor Services480 Washington BoulevardJersey CityNJ 07310USATel: + 1 866 282 4011Website: www.adr.db.com
Electronic copiesThe Annual Report and Form 20-F and the Annual Review are available on the internet at www.about.reuters.com/ar2005
ListingsLondon Stock Exchange (RTR.L) and Nasdaq (RTRSY.O)
Options on ordinary shares are traded on Euronext Liffe. Futures contracts on
ordinary share are traded on the Euronext Liffe Universal Stock Futures market.
The American Stock Exchange in New York lists options on American Depositary
Shares of Reuters. Options on American Depositary shares are traded on ArcaEx.
Corporate brokersCitigroup and JPMorgan Cazenove Limited
Financial PRBrunswick Group Limited

Picture on cover9 November 2005. A protester waves an orange flag in Baku, Azerbaijan. Reuters photographer: David Mdzinarishvili.
©Reuters
(2006)
All rights reserved
  Reuters, the
    sphere logo and Lipper are the trade marks or registered trade marks of the
    Reuters Group around the world.
This report is printed on paper made from 100% recycled fibres sourced only from post-consumer waste.
Reuters
          Group PLCAnnual
          Report and Form 20-F 2005
    
    131Back to Contents
Notes


132
    
    Reuters
          Group PLCAnnual
          Report and Form 20-F 2005Back to Contents



Designed and produced
  by salterbaxter
  Printed by CTD Printers Limited

Back to Contents



  Back to Contents
  Item 19 Exhibits
  Exhibit Index
  1.1**     Memorandum
      and Articles of Association of Reuters Group PLC
  2.1     Deposit
      Agreement, dated 18 February 1998 among Reuters Group PLC, Deutsche Bank
      Trust Company Americas (in substitution for Morgan Guaranty Trust Company
      of New York), as depositary, and all holders from time to time of American
      Depositary Receipts issued thereunder (incorporated by reference to Exhibit
      2.2 to the Annual Report on Form 20-F filed by Reuters Group PLC with respect
      to the fiscal year ended 31 December 1997), as supplemented by the Supplemental
      Agreement to Deposit Agreement, dated as of 16 December 2005 (incorporated
      by reference to Exhibit (a)(2) to the Registration Statement on Form F-6
      filed by Reuters Group PLC on December 9, 2005)
  4.1     Network
        Services Agreement, dated as of March 9, 2005, by and between Reuters
        Limited and British Telecommunications plc, inter alia, as amended by
        side letters dated 29 April 2005 and 31 May 2005, and amendments dated
        31 May 2005, 6 December 2005, 17 August 2005, and 23 February 2006 (portions
        of this exhibit have been omitted pursuant to a request for confidential
        treatment)
  4.2     Share
        Purchase Agreement, dated as of March 9, 2005, by and between Reuters
        Limited and British Telecommunications plc, inter alia, as amended by
        Amendment Agreements dated 29 April 2005 and 26 May 2005 respectively
        (portions of this exhibit have been omitted pursuant to a request for
        confidential treatment)
  4.5*     Deed
      of Covenant dated 11 October 2002 made by Reuters Group PLC relating to
      the £1,500,000,000 Euro-commercial Paper Programme
  4.5.1*     Amended
      and Restated Note Agency Agreement dated 11 October 2002 among Reuters
      Group PLC (as Issuer), Citibank, N.A. (as Issue Agent and Principal Paying
      Agent) and Dexia Banque Internationale a Luxembourg S.A. (as Paying Agent)
  4.5.2*     Dealer
      Agreement dated 11 October 2002 among Reuters Group PLC (as Issuer), Citibank
      International plc (as Arranger) and the various Dealers named therein
  4.6*     Amended
      and Restated Programme Agreement dated 7 November 2003 among Reuters Group
      PLC (as Issuer and Guarantor), Reuters Finance PLC (as Issuer) and the
      various Initial Dealers named therein relating to the November 2003 update
      of the £1,000,000,000 Euro Medium Term Note Programme
  4.6.1*     Amended
      and Restated Trust Deed dated 7 November 2003 between Reuters Group PLC
      (as Issuer and Guarantor), Reuters Finance PLC (as Issuer) and Citicorp
      Trustee Company Limited (as Trustee)
  4.6.2*     Amended
      and Restated Agency Agreement dated 7 November 2003 between Reuters Group
      PLC (as Issuer and Guarantor), Reuters Finance PLC (as Issuer), Citibank
      NA (as Agent), Citibank AG and BNP Paribas Luxembourg (as Paying Agents)
      and Citicorp Trustee Company Limited (as Trustee)
  
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  4.6.3*     Pricing
      Supplement dated 17 November 2003 relating to the issue by Reuters Finance
      PLC of €500,000,000 4.625% Guaranteed Notes due 19 November 2010 under
      the £1,000,000,000 Euro Medium Term Note Programme
  4.6.4*     Form
      of Permanent Global Note in respect of the issue by Reuters Finance PLC
      of €500,000,000 4.625% Guaranteed Notes due 19 November 2010 under
      the £1,000,000,000 Euro Medium Term Note Programme
  4.6.5*     Pricing
      Supplement dated 24 March 1999 relating to the issue by Reuters Group PLC
      of £200,000,000 5.375% Notes due 26 November 2004 under the £1,000,000,000
      Euro Medium Term Note Programme
  4.6.6*     Permanent
      Global Note dated 24 March 1999 relating to the issue by Reuters Group
      PLC of £200,000,000 5.375% Notes due 26 November 2004 under the £1,000,000,000
      Euro Medium Term Note Programme
  4.7*     Syndicated
      Credit Facility Agreement, dated 25 April 2003, among Reuters Group PLC,
      HSBC Bank plc and J.P. Morgan plc, as arrangers, the financial institutions
      listed therein and HSBC Investment Bank Plc, as agent
  4.8**     Acquisition
      Agreement dated 21 October 2004 among Equant Proton Holdings Limited, Equant
      N.V., Equant Inc., and Reuters Limited
  4.10.1*     Service
      Agreement of Thomas H. Glocer with Reuters Group PLC dated 10 February
      2004
  4.10.2*     Service
      Agreement of David Grigson with Reuters Group PLC dated 21 June 2001, as
      amended 3 March 2004
  4.10.3*     Service
      Agreement of Devin Wenig with Reuters Group PLC dated 3 March 2004
  4.10.4*     Service
      Agreement of Devin Wenig with Reuters America LLC dated 3 March 2004
  4.10.5* Engagement Letter of Niall
      FitzGerald with Reuters Group PLC dated 2 March 2004
  4.10.6     Non-Executive
      Chairman Compensation Letter between Instinet Group Incorporated and Ian
      Strachan, dated January 1, 2003 (incorporated by reference to Exhibit 10.6
      to the Annual Report on Form 10-K filed by Instinet Group on 28 March 2002)
  
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  4.11     Rules
        of The Reuters Group PLC Long-Term Incentive Plan 1997
  4.12*     Rules
      of the Reuters Group PLC Discretionary Stock Option Plan, as amended
  4.13**     Stock
      and Asset Purchase Agreement dated as of 20 December 2004 by and among
      Reuters Limited, Reuters S.A, Moneyline Telerate Holdings, Inc., the subsidaries
      of Moneyline Telerate Holdings named therein and One Equity Partners LLC
      (portions of this exhibit have been omitted pursuant to a request for confidential
      treatment)
  8.1     List
      of Subsidiaries  See Note 39 of the Notes to the Consolidated Financial
      Statements of Reuters Group PLC contained in the Annual Report
  12.1     Certification
        of Thomas H. Glocer filed pursuant to 17 CFR 240.13a-14(a)
  12.2     Certification
        of David J. Grigson filed pursuant to 17 CFR 240.13a-14(a)
  13.1     Certification
        of Thomas H. Glocer furnished pursuant to 17 CFR 240.13a-14(b) and 18
        U.S.C.§1350
  13.2     Certification
        of David J. Grigson furnished pursuant to 17 CFR 240.13a-14(b) and 18
        U.S.C.§1350
  15     Consent
        of PricewaterhouseCoopers for incorporation by reference in the Registration
        Statements on Form S-8 of Reuters Group PLC of their report dated 10
        March 2006
  *
      Incorporated by reference to the identically numbered exhibit to the Annual
      Report on Form 20-F filed on 16 March 2004 by Reuters Group PLC with respect
      to the fiscal year ended 31 December 2003.
  ** Incorporated by reference to
      the identically numbered exhibit to the Annual Report on Form 20-F filed
      on 9 March 2005 by Reuters Group PLC with respect to the fiscal year ended
      31 December 2004.
  
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SIGNATURES
The registrant hereby certifies that
    it meets all of the requirements for filing on Form 20-F and that it has
    duly caused and authorized the undersigned to sign the annual report on its
    behalf.
REUTERS GROUP PLC(Registrant)
Date: 17 March 2006
By: /s/ David GrigsonDavid Grigson,Chief Financial Officer
Back to Contents
  Exhibit Index
  1.1**     Memorandum and Articles of Association
    of Reuters Group PLC
2.1     Deposit Agreement, dated 18 February
    1998 among Reuters Group PLC, Deutsche Bank Trust Company Americas (in substitution
    for Morgan Guaranty Trust Company of New York), as depositary, and all holders
    from time to time of American Depositary Receipts issued thereunder (incorporated
    by reference to Exhibit 2.2 to the Annual Report on Form 20-F filed by Reuters
    Group PLC with respect to the fiscal year ended 31 December 1997), as supplemented
    by the Supplemental Agreement to Deposit Agreement, dated as of 16 December
    2005 (incorporated by reference to Exhibit (a)(2) to the Registration Statement
    on Form F-6 filed by Reuters Group PLC on December 9, 2005)
4.1     Network
      Services Agreement, dated as of March 9, 2005, by and between Reuters Limited
      and British Telecommunications
    plc, inter alia, as amended by side letters dated 29 April 2005 and 31 May
    2005, and amendments dated 31 May 2005, 6 December 2005, 17 August 2005,
    and 23 February 2006 (portions of this exhibit have been omitted pursuant
    to a request for confidential treatment)
4.2     Share
    Purchase Agreement, dated as of March 9, 2005, by and between Reuters Limited
    and British Telecommunications plc, inter alia, as amended by Amendment Agreements
    dated 29 April 2005 and 26 May 2005 respectively (portions of this exhibit
    have been omitted pursuant to a request for confidential treatment)
4.5*     Deed of Covenant dated 11 October
    2002 made by Reuters Group PLC relating to the £1,500,000,000 Euro-commercial
    Paper Programme
4.5.1*     Amended and Restated Note Agency
    Agreement dated 11 October 2002 among Reuters Group PLC (as Issuer), Citibank,
    N.A. (as Issue Agent and Principal Paying Agent) and Dexia Banque Internationale
    a Luxembourg S.A. (as Paying Agent)
4.5.2*     Dealer Agreement dated 11 October
    2002 among Reuters Group PLC (as Issuer), Citibank International plc (as
Arranger) and the various Dealers named therein
4.6*     Amended and Restated Programme
    Agreement dated 7 November 2003 among Reuters Group PLC (as Issuer and Guarantor),
    Reuters Finance PLC (as Issuer) and the various Initial Dealers named therein
    relating to the November 2003 update of the £1,000,000,000 Euro Medium
    Term Note Programme
4.6.1*     Amended and Restated Trust
    Deed dated 7 November 2003 between Reuters Group PLC (as Issuer and Guarantor),
    Reuters Finance PLC (as Issuer) and Citicorp Trustee Company Limited (as
    Trustee)
4.6.2*     Amended and Restated Agency
    Agreement dated 7 November 2003 between Reuters Group PLC (as Issuer and
    Guarantor), Reuters Finance PLC (as Issuer), Citibank NA (as Agent), Citibank
    AG and BNP Paribas Luxembourg (as Paying Agents) and Citicorp Trustee Company
    Limited (as Trustee)

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4.6.3*     Pricing Supplement dated 17
    November 2003 relating to the issue by Reuters Finance PLC of €500,000,000
    4.625% Guaranteed Notes due 19 November 2010 under the £1,000,000,000
    Euro Medium Term Note Programme
4.6.4*     Form of Permanent Global Note in respect of the issue by Reuters Finance PLC of €500,000,000 4.625% Guaranteed Notes due 19 November 2010 under the £1,000,000,000 Euro Medium Term Note Programme
4.6.5*     Pricing Supplement dated 24
    March 1999 relating to the issue by Reuters Group PLC of £200,000,000
    5.375% Notes due 26 November 2004 under the £1,000,000,000 Euro Medium
    Term Note Programme
4.6.6*     Permanent Global Note dated
    24 March 1999 relating to the issue by Reuters Group PLC of £200,000,000
    5.375% Notes due 26 November 2004 under the £1,000,000,000 Euro Medium
    Term Note Programme
4.7*     Syndicated Credit Facility Agreement,
    dated 25 April 2003, among Reuters Group PLC, HSBC Bank plc and J.P. Morgan
    plc, as arrangers, the financial institutions listed therein and HSBC Investment
    Bank Plc, as agent
4.8**     Acquisition Agreement dated
    21 October 2004 among Equant Proton Holdings Limited, Equant N.V., Equant
    Inc., and Reuters Limited
4.10.1*     Service Agreement of Thomas
    H. Glocer with Reuters Group PLC dated 10 February 2004
4.10.2*     Service Agreement of David
    Grigson with Reuters Group PLC dated 21 June 2001, as amended 3 March 2004
4.10.3*     Service Agreement of Devin
    Wenig with Reuters Group PLC dated 3 March 2004
4.10.4*     Service Agreement of Devin
    Wenig with Reuters America LLC dated 3 March 2004
4.10.5*     Engagement Letter of Niall FitzGerald with Reuters Group PLC dated 2 March 2004
4.10.6     Non-Executive Chairman Compensation
    Letter between Instinet Group Incorporated and Ian Strachan, dated January
    1, 2003 (incorporated by reference to Exhibit 10.6 to the Annual Report on
    Form 10-K filed by Instinet Group on 28 March 2002)

Back to Contents
4.11     Rules
    of The Reuters Group PLC Long-Term Incentive Plan 1997
4.12*     Rules of the Reuters Group PLC
    Discretionary Stock Option Plan, as amended
4.13**     Stock and Asset Purchase Agreement
    dated as of 20 December 2004 by and among Reuters Limited, Reuters S.A, Moneyline
    Telerate Holdings, Inc., the subsidaries of Moneyline Telerate Holdings named
    therein and One Equity Partners LLC (portions of this exhibit have been omitted
    pursuant to a request for confidential treatment)
8.1     List of Subsidiaries  See
    Note 39 of the Notes to the Consolidated Financial Statements of Reuters
    Group PLC contained in the Annual Report
12.1     Certification
    of Thomas H. Glocer filed pursuant to 17 CFR 240.13a-14(a)
12.2     Certification
    of David J. Grigson filed pursuant to 17 CFR 240.13a-14(a)
13.1     Certification of Thomas H. Glocer
    furnished pursuant to 17 CFR 240.13a-14(b) and 18 U.S.C.§1350
13.2     Certification of David J. Grigson
    furnished pursuant to 17 CFR 240.13a-14(b) and 18 U.S.C.§1350
15     Consent
      of PricewaterhouseCoopers for incorporation by reference in the Registration
      Statements on Form S-8 of Reuters Group PLC of their report dated 10 March
2006
* Incorporated by reference to the identically numbered exhibit to the Annual Report on Form 20-F filed on 16 March 2004 by Reuters Group PLC with respect to the fiscal year ended 31 December 2003.
** Incorporated by reference to the identically numbered exhibit to the Annual Report on Form 20-F filed on 9 March 2005 by Reuters Group PLC with respect to the fiscal year ended 31 December 2004.