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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, 2006                                                 
|  
|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 | 1,283,324,945 | 
| | --------------------------- | ------------- | 
| | Founders Share of £1        | 1             | 

Indicate
    by check mark if the registrant is a well-known seasoned issuer, as defined
in Rule 405 of the Securities Act.

|Yes | No
|--- | --

If this report is an annual or transition
    report, indicate by check mark if the registrant is not required to file
    reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of
    1934.

|Yes | No
|--- | --

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 whether the registrant is a large accelerated filer, an accelerated
    filer, or a non-accelerated filer. See definition of “accelerated filer
    and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
    one):

|Large accelerated
        filer | Accelerated filer | Non-accelerated filer
|------------------------------- | ----------------- | ---------------------

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

|Item 17 | Item 18
|------- | -------

If this is an annual report, indicate
    by check mark whether the registrant is a shell company (as defined in Rule
    12b-2 of the Exchange Act).

|Yes | No
|--- | --



|
|
|
|









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

Directors
        reportBusiness
        review02
      Explaining
        Reuters04
      CEOs
        review06
      Our
        strategy08
      Our
        performance10
      Our
        markets12
      Our
        resources13
      Our
        challenges14
      Chairmans
        statement15
      The
        speed of change16
      in the
        financial world18
      in the
        media world20
      in ReutersGovernance22
      Interview
        with the Chairman24
      Note
        to the Board25
      Board26
      Directors
        and senior managers29
      Remuneration
        report38
      Statements
        of directors responsibilities and complianceCompany
        information and OFR44
      Company
        information52
      Selected
        financial highlights54
      Operating
        and financial review (OFR)




FinancialsConsolidated
        Financial Statements73
      Intentionally
            left blank74
      United
        States audit opinion75
      Consolidated
        income statement75
      Consolidated
        statement of recognised income and expense76
      Consolidated
        balance sheet77
      Consolidated
        cash flow statement78
      Group
        accounting policies83
      Notes
        to the financial statements129
      Summary
        of differences between IFRS (as adopted by the EU) and US GAAP132
      Notes
        on the summary of differences between IFRS and US GAAP134
      Consolidated
        financial summary136
      Intentionally
            left blank137
      Intentionally
            left blank138
      Intentionally
            left blank139
      Intentionally
            left blank


Reference
        sectionInformation144
      Information
        for shareholders155
      Cross-reference
        guide to Form 20-F156
      Glossary157
      Financial
        diary157
      Where
        to find us


|                                                                                       
|---------------------------------------------------------------------------------------
|Welcome
      to the Reuters Group PLC Annual Report and Form 20-F 2006.               
|You will find
      the Directors report for shareholders on pages 0172. It includes:
|•                                                                                      
|•                                                                                      
|•                                                                                      
|•                                                                                      
|•                                                                                      
|•                                                                                      
|•                                                                                      
|                                                                                       

This report comprises the annual report of Reuters
  Group PLC in accordance with the requirements of the United States Securities
  and Exchange Commission (SEC) for 2006. A cross-reference guide setting out
  the information in this annual report that corresponds to the Form 20-F items
  is provided on page 155. 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. Key
  performance indicatorsReuters uses a number of performance
  measures to manage its business. Those that it considers key, and to which management
  remuneration was linked in 2006,




are revenue, trading profit,
    free cash flow, adjusted  EPS, adjusted profit before tax and customer satisfaction.
    For more information, see
  Definition of Key financial performance measures on page 67. Non-GAAP
  measuresA number of measures used in
  this document are non-GAAP figures, which are performance measures
  used to manage the business, supplementing the IFRS-based measures. These include
  underlying change, trading costs, trading profit,
  trading margin, adjusted EPS, free cash flow,
  trading cash flow and net debt/net funds. Detailed descriptions
  of these terms, including the rationale for using them and reconciliations to
  the most directly comparable IFRS indicator, are provided on pages 6768.


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 Risk

    Factors on pages 6567 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 or any of its directors
    are expressly qualified in their entirety by such factors.


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|   |                   
|-- | ------------------
|   |                   
|02 | Explaining Reuters
|   |                   
|   |                   



We run our business through
  four
        divisions,each
  meeting
  a specific set of customer needs.





Reuters Group PLCAnnual
  Report and Form 20-F 2006

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|                        |   
|----------------------- | --
|                        |   
|Business
        review | 03
|                        |   
|                        |   



|Total 2006 revenue |  |                                                                                    
|------------------ |  | -----------------------------------------------------------------------------------
|                   |  |                                                                                    
|£2,566m            |  | For more informationon
    our business
    divisions see the OFR on pages 5472.





Reuters Group PLCAnnual
  Report and Form 20-F 2006

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|   |             
|-- | ------------
|   |             
|04 | CEOs review
|   |             
|   |             

Our goal is toaccelerate
  the growth in revenuesbegun last
  year while bringing a greater proportion to the bottom line in profits.

| |  |  |  | 
| |  |  |  | 
| |  | 



2006 was a year of considerable achievement for Reuters. In last years annual report I stated that the key drivers for 2006 would 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 of the last few years. I am very happy to say that we achieved each of these goals and more. During 2006 we raised the
    pace of our Core Plus programme, and produced £32 million of new revenues
    from the four initiatives: electronic trading, high-value content, new enterprise
    services and new markets. This permitted us to exceed our 2006 target of one
    percentage point of additional revenue growth from Core Plus. In terms of overall revenue
    growth, we exceeded market expectations by delivering 6.5% growth at actual
    rates (4.8% underlying), which was very gratifying to me personally.




It was not so long ago that
    many in the market, while acknowledging our ability to cut costs, doubted
    that we could re-start growth after a long period of retrenchment. 2006 was also a year in
    which our significant investments to transform and simplify the company began
    to take shape. These investments will continue through 2007 with a focus on
    making our services more resilient. Finally, despite the increased
    investment in Core Plus growth and transformation activities, we continued
    to hold a tight line on cost. Looking ahead to 2007As I write this
    review we are already well into 2007  a year that has begun strongly
    for Reuters. Our principal goal this year is to accelerate the growth in revenues
    begun last year while bringing a greater proportion down to the bottom line
    in profits. This will be achieved, in part, as revenues from Core Plus increase
    through the year. Well also continue


our focus on improving customer
    service through investment in Reuters infrastructure and through instilling
    a service culture at Reuters. Towards this goal, I am personally leading a
    drive to simplify our processes, our technology and our organisation. In my recent meetings with
    customers around the world I have been encouraged both that general market
    conditions appear to be favourable and that the specific areas we are targeting
    under Core Plus are expected to be in high demand. In particular, the growth
    of electronic trading is now indisputable. Serving both people and
    machinesReuters has always
    served the needs of individual users in the financial community, as well as
    the machines that power their firms; however, this distinction is increasingly
    important. Reuters suite of trading room systems, risk management platforms,
    enterprise datafeeds and transaction services is perfectly aligned to the
    growth in machine-based activities such as algorithmic trading.




Reuters Group PLCAnnual
Report and Form 20-F 2006

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| |                         |   
| | ----------------------- | --
| |                         |   
| | Business
        review | 05
| |                         |   
| |                         |   





At the same time the human beings who are active in the financial services industry require ever-more sophisticated and comprehensive sets of information and analytics as they seek to differentiate their performance.
Reuters is uniquely skilled to serve this twin need. Managing our portfolioCapitalising on our strong position in the Treasury market, Reuters entered into a joint venture with the Chicago Mercantile Exchange (CME) in 2006 to launch a new electronic system to trade foreign currencies. The
venture, called FXMarketSpace, is launching in March 2007 and will offer the market the ability to trade foreign exchange on a cleared, central counterparty basis (like an exchange) for the first time. I view this as a great example of Reuters
innovative streak at work, as well as proof that we will not just complacently sit and milk our best assets, but seek to lead the market in new directions. We also moved swiftly in
    2006 to sell the majority of our 50% interest in the Factiva




joint venture to our partner Dow Jones. We concluded that we could achieve the most value for our shareholders by selling this deep online library of content before competition from free search engines eroded
Factivas advantage. Media and journalismOur Media business performed very well in 2006 across both its agency and consumer units. In the agency business we benefited as Western publishers and broadcasters retrenched and continued to pull back their
journalists to home base, and newspapers, in particular, scrambled to add video to their websites. Meanwhile, domestic demand in Asia and the Middle East grew strongly. Our direct-to-consumer unit, which mainly derives its revenues from advertising,
carried on reuters.com and associated mobile and online properties, grew 39% in 2006. At the core of what we do
    at Reuters is the work of our 2,400 journalists. We increased our editorial
    staff by over 130 in 2006 and


produced a slew of beats and exclusives from the ongoing war in Iraq, to the World Cup competition, to the Israel-Lebanon conflict. In my presentation to the Israel Business Conference, excerpted on Reuters corporate
website, I discuss how Reuters responded to a serious breach of our news photography standards which occurred in Lebanon. The bravery, quality and
    motivation of Reuters journalists around the world remain a great inspiration
    to me. More generally, it is the diversity, intelligence, compassion and determination
    of our people that make my job as CEO so personally rewarding.   Tom GlocerCEO




Reuters Group PLCAnnual
Report and Form 20-F 2006

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|   |             
|-- | ------------
|   |             
|06 | Our strategy
|   |             

|Our mission is to make
      Reuters the leading     
|-----------------------------------------------------
|provider of content
      and transaction services,  
|trusted by customers
      from the individual to    
|the most sophisticated
      institution.            
|As we move from restructuring
      to growth, our   
|aim is to deliver the shareholder
      value that we
|believe the company is
      capable of generating.  
|We are doing this in two
      ways:                 

|                                                                                                                                                                                                                                                                                     |                             |                                                                                                                                                                                    |   |                                                                                                                                                                                                          |  |   |                                          
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | --------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | -----------------------------------------
|1. Growth                                                                                                                                                                                                                                                                           
|We are growing
      our revenues faster,
      both within
      our core business and through our Core Plus initiatives.
      In the medium term we plan to deliver strong,
      sustainable revenue growth, assuming continued
      growth in the financial services industry.
|                                                                                                                                                                                                                                                                                     |                             |                                                                                                                                                                                    |   |                                                                                                                                                                                                          |  |   |                                          
|                                                                                                                                                                                                                                                                                     |                             |                                                                                                                                                                                    |   |                                                                                                                                                                                                          |  |   |                                          
|                                                                                                                                                                                                                                                                                     |                             |                                                                                                                                                                                    |   |                                                                                                                                                                                                          |  |   |                                          
|CoreSteady improvement in our
      next-generationproducts is helping us to attract new users,particularly
      among institutional investors.                                                                                                                                     |                             | Core PlusWe have started to see new
      revenues comethrough
      from the portfolio of Core Plusprojects
      we put in place to capitalise on four high-growth market areas. |   | Revenue
        growth targets We expect our
        core business to grow atleast as fast as the market.
      In addition, we have
        targeted new revenuefrom
        our Core Plus initiatives.
|                                                                                                                                                                                                                                                                                     |                             |                                                                                                                                                                                    |   |                                                                                                                                                                                                          |  |   |                                          
|Core products                                                                                                                                                                                                                                                                        |                             | Market areas                                                                                                                                                                       |   | Targets                                                                                                                                                                                                 
|•                                                                                                                                                                                                                                                                                    | Reuters 3000 Xtra           |                                                                                                                                                                                    | • | Electronic trading                                                                                                                                                                                       |  | • | 1 percentage point of new
      revenue  
|                                                                                                                                                                                                                                                                                     |                             |                                                                                                                                                                                    |   |                                                                                                                                                                                                          |  |   | in 2006 (exceeded)                       
|•                                                                                                                                                                                                                                                                                    | Reuters Knowledge           |                                                                                                                                                                                    | • | High-value content                                                                                                                                                                                       |  |   |                                          
|                                                                                                                                                                                                                                                                                     |                             |                                                                                                                                                                                    |   |                                                                                                                                                                                                          |  | • | 2+ percentage points of
      new revenue
|•                                                                                                                                                                                                                                                                                    | Reuters DataScope real-time |                                                                                                                                                                                    | • | New enterprise services                                                                                                                                                                                  |  |   | in 2007                                  
|                                                                                                                                                                                                                                                                                     | and reference datafeeds     |                                                                                                                                                                                    |   |                                                                                                                                                                                                          |  |   |                                          
|                                                                                                                                                                                                                                                                                     |                             |                                                                                                                                                                                    | • | New markets                                                                                                                                                                                              |  | • | 3 percentage points of
      new revenue 
|•                                                                                                                                                                                                                                                                                    | Reuters Trader              |                                                                                                                                                                                    |   |                                                                                                                                                                                                          |  |   | in 2008                                  
|                                                                                                                                                                                                                                                                                     |                             |                                                                                                                                                                                    |   |                                                                                                                                                                                                          |  |   |                                          
|•                                                                                                                                                                                                                                                                                    | Reuters Wealth Manager      |                                                                                                                                                                                    |   |                                                                                                                                                                                                          |  |   |                                          
|                                                                                                                                                                                                                                                                                     |                             |                                                                                                                                                                                    |   |                                                                                                                                                                                                          |  |   |                                          
|                                                                                                                                                                                                                                                                                     |                             |                                                                                                                                                                                    |   |                                                                                                                                                                                                          |  |   |                                          
|                                                                                                                                                                                                                                                                                     |                             |                                                                                                                                                                                    |   |                                                                                                                                                                                                          |  |   |                                          
|                                                                                                                                                                                                                                                                                     |                             |                                                                                                                                                                                    |   |                                                                                                                                                                                                          |  |   |                                          
|                                                                                                                                                                                                                                                                                     |                             |                                                                                                                                                                                    |   |                                                                                                                                                                                                          |  |   |                                          
|Reuters
      Group PLCAnnual
      Report and Form 20-F 2006                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                    

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|                        |   
|----------------------- | --
|                        |   
|Business
        review | 07
|                        |   
|                        |   

|                                                                                                                                                                                                                   
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
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|                                                                                                                                                                                                                   
|2. Simplification                                                                                                                                                                                                  
|We are becoming
      stronger, more competitive
      and more efficientas we continue
      to simplify our
      organisation. We are working hard to deliver better
      products and better customer service.
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
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|                                                                                                                                                                                                                   
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|                           |                                           |                             |                                                                                                                                                     |                             |                                                        
|-------------------------- | ----------------------------------------- | --------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------- | -------------------------------------------------------
|We
      are doing this by |                                           | Customer
      satisfaction |                                                                                                                                                     | Customer
      satisfaction
|•                          | Changing
      the way our product        |                             | We measure
      customer satisfaction through                                                                                                      |                             |                                                        
|                           | development
      teams work              |                             | a bi-annual
      survey of over 12,000 financial                                                                                                   |                            
|                           |                                           |                             | markets
      customers. Satisfaction has                                                                                                           |                            
|•                          | Simplifying
      our product delivery    |                             | increased
      over the last three years, with                                                                                                     |                            
|                           | infrastructure
      and making it        |                             | customers
      seeing particular improvements in                                                                                                   |                             |                                                        
|                           | more
      robust                         |                             | the quality
      of our training, support and                                                                                                      |                             | Calculatd
    on a 100-point scale                     
|                           |                                           |                             | account
      management.                                                                                                                           |                             |                                                        
|•                          | Transforming
      the way our content    |                             |                                                                                                                                                     |                             |                                                        
|                           | is
      created, collected and processed |                             | Projected
      cost savings                                                                                                                        |                             |                                                        
|                           |                                           |                             | As we
      continue to implement these                                                                                                             |                             |                                                        
|•                          | Modernising
      our customer            |                             | initiatives,
      we expect them to deliver                                                                                                        |                             |                                                        
|                           | administration
      systems              |                             | annualised
      cost savings reaching £150 million                                                                                                 |                             |                                                        
|                           |                                           |                             | by 2010.                                                                                                                                            |                             |                                                        
|                           |                                           |                             |                                                                                                                                                     |                             |                                                        
|                           |                                           |                             |                                                                                                                                                     |                             |                                                        
|                           |                                           |                             |                                                                                                                                                     |                             |                                                        
|                           |                                           |                             |                                                                                                                                                     |                             |                                                        
|                           |                                           |                             |                                                                                                                                                     |                             |                                                        
|                           |                                           |                             |                                                                                                                                                     |                             |                                                        
|                           |                                           |                             |                                                                                                                                                     |                             |                                                        
|                           |                                           |                             |                                                                                                                                                     |                             |                                                        
|                           |                                           |                             | For
      more informationabout our strategy,
      including details of our Core Plus initiatives, see Company information
      on pages 4451. |                             |                                                        
|                           |                                           |                             |                                                                                                                                                     |                             |                                                        
|                           |                                           |                             |                                                                                                                                                     |                             | Reuters Group PLCAnnual
      Report and Form 20-F 2006
|                           |                                           |                             |                                                                                                                                                     |                             |                                                        

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|   |                    
|-- | -------------------
|   |                    
|08 | Our
    performance
|   |                    
|   |                    

|                                            
|--------------------------------------------
|In 2006 weachieved
      our immediate      
|goal of restarting
      revenue growth.    
|Our Core Plus initiatives
      outperformed
|their target.                               
|                                            
|                                            
|                                            
|                                            
|                                            
|                                            

|Revenue£m                                                                                                                                                                                                                                                                                                                                                                    |  | Operating profit, trading
    profit
    and margins*£m                                                                                                                                                                                                                                                                                                                                 |  | Profit for the year£m                                                                                                                                                                                                                                                       
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                                                                                                                             
|Our 2006 revenue grew by 6.5% to £2,566
      million. Acquisitions, mainly Telerate, contributed 1.4 percentage points
      of growth. Exchange rate movements accounted for 0.3 percentage points.
      Excluding acquisitions, disposals and currency, revenue grew by 4.8% . 1.3
      percentage points of this growth came from Core Plus, ahead of our target.      |  | Our operating profit rose to £256
        million in 2006 (operating margin 10%), an increase of £49 million
        over 2005 (operating margin 9%). Trading profit declined to £308
        million (trading margin 12%), down £26 million over 2005 (trading
        margin 14%). This included £77 million of net new investment in
    Core Plus, partly offset by revenue growth. |  | Our 2006 profit was £305 million,
        a decrease of £177 million over the previous year. 2005 profit was
        boosted by profits of £191 million from the disposal of Instinet
    Group.                                                                            
|                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                                                                                                                             
|Earnings per
        share (EPS)
        and adjusted EPS*pence                                                                                                                                                                                                                                                                                                              |  | Dividendpence                                                                                                                                                                                                                                                                                                                                                                           |  | Net cash flow from continuing operating
      activities and free cash flow*£m                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                                                                                                                             
|Our reported EPS was 23.6p in 2006, down
        9p from the previous year, reflecting lower profits on disposals than
        in 2005 (when we disposed of our Instinet stake). Adjusted EPS was 17.1p
        in 2006, up 3.3p from the previous year. This reflected lower restructuring
    charges and fewer shares in circulation due to our share buy-back programme. |  | We increased our total regular dividend
        by 10%, the first increase since 2000, reflecting our growing confidence
    in future business performance.                                                                                                                                                                                                                            |  | Our net cash flow from continuing operating
        activities increased by £8 million to £258 million. Free cash
        flow was £225 million, an increase of £137 million, as our
        cash restructuring charges fell and we improved our working
capital management.

| | * | For definitions
      of trading profit, trading margin, adjusted EPS and free cash flow, see
      page 54.
| | - | ------------------------------------------------------------------------------------------------------------



Reuters Group PLCAnnual
  Report and Form 20-F 2006

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|                        |   
|Business
        review | 09
|                        |   
|                        |   



Operating
        highlights•
      Revenues growing ahead
        of target•
      New Core Plus initiatives
        making good progress•
      FXMarketSpace joint
        venture underway•
      Opening of Beijing development
        centre•
      Sale of Factiva stake
        to Dow Jones completed•
      Application Networks
        acquired to broaden our
        risk management product line•
      First Innovation Programme
        projects launched     For more informationabout
    FXMarketSpace, our Beijing development centre, the sale of our Factiva stake
    and our Innovation programme, see Company information on pages
    4451. For more informationabout our acquisition of Application Networks
    and our financial performance, see OFR on pages 5472. *
      Operating margins are
        expected to perform similarly but will be subject to additional impact
        from factors that cannot be predicted such as fair value movements in
        embedded derivatives. (See description of trading margin on
        page 54.)




2007 outlookWe
expect to deliver underlying revenue growth of 6% or better in 2007. This is
in line with our plan to deliver strong, sustainable revenue growth in the medium
term, assuming continued growth in the financial services industry. Trading margins
are expected to increase to 1314% in 2007, putting us on track to achieve our medium term trading margin target of 1720%*. We will also keep capital expenditure in 2007 at similar levels to 2006. We will actively manage our capital structure to maintain a strong investment grade rating of BBB+/Baa1 and, to the extent that we generate cash surplus to our needs, we will continue to seek to return that cash to
shareholders. Based on current investment plans, we expect to increase our share buy-back during 2007 to £400£425 million, which includes the £250 million remaining of the £1 billion buy-back announced in July 2005. In
future, share buy-backs will be considered periodically, based on business performance, investment opportunities and the BBB+/Baa1 ratings target.


Shareholder returns£661mreturned to shareholders in 2006 via buy-backs and dividends.




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  Report and Form 20-F 2006

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|   |            
|-- | -----------
|   |            
|10 | Our markets
|   |            
|   |            

Over90%
  of our revenuecomes from
  serving the rapidly evolving financial services marketplace. Our news and information
  reach one billion people every day.





Our marketsMore than 90% of our revenue comes from serving the rapidly evolving financial services marketplace, which includes investment and commercial banks, broker-dealers, asset and wealth managers, and commodities and energy
traders. The innovative financial
    markets are experiencing rapid structural change. We are adapting to meet
    their increasingly complex and time-sensitive demands. The media markets are
      also  undergoing dramatic change. We are well-positioned to address these
      marketplace
    dynamics with our recent innovations in user-generated content, including
       blogs, and our work to reach the next-generation of media consumers through
      new
    digital platforms such as mobile phones, online video and interactive television.




Key
    market trends•
    Market structures are continuing to evolve: foreign exchange is set to shift towards an exchange-traded model; bank and exchange consolidation is ongoing.•
    The rise in electronic trading is set to continue in 2007 and beyond.•
    The financial services industry is developing increasingly complex, highly structured financial products.•
    The hedge fund industry is expected to continue its growth and remain important to the financial markets ecosystem.•
    Wealth management is the fastest- growing segment of the financial services marketplace.•
    Financial information technology spending is expected to continue rising in 2007.


•
    New market regulations such as the Markets in Financial Instruments Directive (MiFID) in the EU and Regulation NMS in the US are creating requirements for more extensive disclosure of prices.•
    Traditional media companies are embracing user-generated content and online social networks as new ways of engaging with their audiences.•
    Online audiences and advertising revenues are growing rapidly, rivalling traditional media.




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|----------------------- | --
|                        |   
|Business
        review | 11
|                        |   
|                        |   
|                        |   



Our market share in financial
    marketsEach year, we
    publish findings from our market size and share study. This study looks at
    the £6 billion global market for financial information and services in
    which our business operates. 80% of our revenues are covered by the study.* Our market share by revenue
    in this market increased by one percentage point in 2005 to 27%, level with
    Bloomberg, our main competitor in the desktop products business. This share
    gain was largely driven by the acquisition of Telerate in June 2005. Analysis
    of our market share for the full year 2006 is being finalised and will be
    published in April 2007. As a result of our Core Plus
    strategy, which is taking us into new markets, our addressable market is expected
    to expand from £6 billion to £11 billion per year.




Our market share in consumer media marketsOver the last two years our reuters.com family of websites has attracted a growing number of users worldwide and now reaches 16.6 million visitors per month. Currently, our largest audiences are in the US and the UK.
Our website ranking in the financial information category as measured by Nielsen//NetRatings in the US improved from 8th to 5th (based on the number of unique visitors) between 2005 and 2006. Our website ranking in the Business News/Research
category as measured by comScore Media Metrix in the UK improved from 6th to 4th between 2005 and 2006.


US visitors to Reuters websites (millions)






|* | Excludes Media revenues,
      recoveries and some Enterprise revenues. |  | For
      more informationabout
      our markets, see Company information on pages 4451. |  | 
|- | ----------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------- |  | 



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|   |              
|-- | -------------
|   |              
|12 | Our resources
|   |              
|   |              
|   |              

Our people, ourbrand and ourcontent are keytoour ability to deliveron our strategy.







Employee engagement%  Distribution of employees
    by region     This page:Running
    barefoot,South Africas Dina Phakulasprints ahead of thecompetition at the 2006Commonwealth Games.(Photographer: Andy Clark)




Our peopleWe seek to attract and retain talented people who are knowledgeable about the markets we serve, customer focused, adaptable and committed to learning and development. Our diverse employee base,
    comprising over 100 nationalities, reflects the different cultures and markets
    we operate in and contributes innovative ways to serve our wide range of customers. As we have focused on making
    our products more competitive and extending our content, we have built up
    our development and content management centres in Bangkok, Beijing, Bangalore
    and Singapore. 30% of our employees are now based in Asia. We carry out an annual employee
    engagement survey. The results of our most recent survey (November 2006) showed
    year-on-year improvements across all the categories that make up our employee
    engagement index (leadership, customer orientation, performance, employee
    commitment and career development). Employees are given objectives which are
    aligned to the companys goals. Performance against these
    objectives is rewarded through the performance-related elements of remuneration
    such as bonuses and equity in the company. Employee turnover for our highest
    performers remains below the 3.5% target we have set.


Our brandOur
brand is a powerful asset, ranked as a Top 100 Global Brand by Interbrand. The
essence of our brand is Trust. Strong brands attract customers and help to drive
financial performance. As an organisation and as a brand, we are aligned to deliver
consistently on the Reuters Trust Principles of independence, integrity and freedom
from bias. For more information on how these principles inform our approach to
doing business, see Our commitment to ethics
and compliance and Corporate responsibility on pages 48-50. Our contentReuters
runs the worlds largest multimedia news operation, employing 2,400 journalists
who produce 250,000 news stories in 19 languages, 40,000 pictures and over 4,000
video stories each month. We also supply the data that powers the financial markets.
We offer insight into the markets by creating polls, analytics, indices and composite
prices. We aggregate price information collected from contributors for many asset
classes and we distribute trade data
published by exchanges and other trading venues. We add unique value to all
    this content by organising and labelling it within our data model, a framework
    which makes it easy for our customers to use the data within their own software
    applications.


| | For more informationabout our people andour content, see Company informationon pages 4748 and OFR on pages
      5859.
| | ----------------------------------------------------------------------------------------------------------------------------



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|               |                         |   
|-------------- | ----------------------- | --
|               |                         |   
|Our challenges | Business
        review | 13
|               |                         |   
|               |                         |   

Our risk radar,
        reviewed by the
  Board, captures key external and
  internal risksthat could affect Reuters
  ability to reach its full potential and
  the actions and
  plans in place to
mitigate them.

|Risk                                                                                                                                                        |  | Impact                                                                                                                                                                    |                                                                                                                                                 | Action
|----------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------- | ------
|                                                                                                                                                            |  |                                                                                                                                                                           |                                                                                                                                                 |       
|Financial
      markets are cyclical.                                                                                                                       |  | Downturn
      in the financial markets could
      make it more difficult for us to
      achieve our financial goals.                                                   |                                                                                                                                                 | •     
|                                                                                                                                                            |  | •                                                                                                                                                                         | Prioritise
         initiatives that help customers achieve greater efficiency
      through business automation.                              
|                                                                                                                                                            |  |                                                                                                                                                                           | See
      Strategy on pages 4445; Enterprise division
      on page 61.                                                                   
|                                                                                                                                                            |  |                                                                                                                                                                           |                                                                                                                                                 |       
|The
      financial services industry is undergoing
      rapid structural and regulatory
      evolution.                                                  |  | We
      need to keep pace with structural changes
      if we are to maintain a strong market
      position.                                                            |                                                                                                                                                 | •     
|                                                                                                                                                            |  | •                                                                                                                                                                         | Implement
      services which address MiFID and Reg NMS requirements.                                                                         
|                                                                                                                                                            |  | •                                                                                                                                                                         | Monitor industry shifts closely.                                                                                                               
|                                                                                                                                                            |  | •                                                                                                                                                                         | Engage with customers strategies and ensure our own strategy
      remains aligned with theirs.                                               
|                                                                                                                                                            |  | •                                                                                                                                                                         | Launch FXMarketSpace with CME.                                                                                                                 
|                                                                                                                                                            |  | •                                                                                                                                                                         | Experiment with new business models within our Innovation portfolio.                                                                           
|                                                                                                                                                            |  |                                                                                                                                                                           | See
      Markets on pages 4547; Divisional performance
      on pages 5862; Strategy on pages 4445.                                  
|                                                                                                                                                            |  |                                                                                                                                                                           |                                                                                                                                                 |       
|The
      integrity of our reputation is key to
      our ability to remain a trusted source of
      news and information.                                 |  | We
      need to protect our brand in order
      to sustain our credibility as a
      neutral supplier of content.                                                      |                                                                                                                                                 | •     
|                                                                                                                                                            |  | •                                                                                                                                                                         | Provide training on ethics and Reuters Trust Principles.                                                                                       
|                                                                                                                                                            |  | •                                                                                                                                                                         | Enforce clear accountability.                                                                                                                  
|                                                                                                                                                            |  | •                                                                                                                                                                         | Ensure regular Board review.                                                                                                                   
|                                                                                                                                                            |  |                                                                                                                                                                           | See
      Corporate governance on pages 2223; Our commitment
      to ethics and compliance on pages 4849; People on
      pages 4748.
|                                                                                                                                                            |  |                                                                                                                                                                           |                                                                                                                                                 |       
|Our
      customers demand high
      levels of service to help them
      perform effectively.                                                             |  | We
      need to anticipate and respond to
      our customers needs if we are to
      improve our competitiveness.                                                     |                                                                                                                                                 | •     
|                                                                                                                                                            |  | •                                                                                                                                                                         | Execute service improvement and content quality plans.                                                                                         
|                                                                                                                                                            |  | •                                                                                                                                                                         | Continue to promote a service-driven culture.                                                                                                  
|                                                                                                                                                            |  | •                                                                                                                                                                         | Complete investments in data centre and capacity improvements.                                                                                 
|                                                                                                                                                            |  |                                                                                                                                                                           | See
      Strategy on pages 4445; People on pages 4748.                                                                                  
|                                                                                                                                                            |  |                                                                                                                                                                           |                                                                                                                                                 |       
|We
      currently have both revenue growth
      and simplification programmes underway.                                                                   |  | We
      must ensure that we can resource and
      complete both revenue growth and simplification
      initiatives so that we can achieve
      our financial targets. |                                                                                                                                                 | •     
|                                                                                                                                                            |  | •                                                                                                                                                                         | Prioritise resources for strategic programmes.                                                                                                 
|                                                                                                                                                            |  | •                                                                                                                                                                         | Monitor the changing nature of our business by using fewer, larger processing
      venues.                                                    
|                                                                                                                                                            |  |                                                                                                                                                                           | See
      Corporate governance on pages 2223; see People
      on pages 4748.                                                            
|                                                                                                                                                            |  |                                                                                                                                                                           |                                                                                                                                                 |       
|Continuing
      to drive cultural change and attract
      and develop talented individuals is
      key to our success.                                   |  | Without
      the necessary skills and a
      faster, more responsive company culture,
      we will find it difficult to achieve our
      corporate potential.         |                                                                                                                                                 | •     
|                                                                                                                                                            |  | •                                                                                                                                                                         | Monitor our performance, employee demographics and turnover.                                                                                   
|                                                                                                                                                            |  | •                                                                                                                                                                         | Align achievement of organisational objectives more closely with
      remuneration.                                                           
|                                                                                                                                                            |  |                                                                                                                                                                           | See
      People on pages 4748; Corporate governance
      on pages 2223; Remuneration report on pages 2934.                          
|                                                                                                                                                            |  |                                                                                                                                                                           |                                                                                                                                                 |       
|For
      more informationabout
      our approach to managing risk,
      see Statements of directors responsibilities and compliance
      on page 41. |  |                                                                                                                                                                           |                                                                                                                                                



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|   |                     
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|   |                     
|14 | Chairmans statement
|   |                     
|   |                     



| |  | The continuous
      and rapid evolution of our markets meanswe
      must become even more agile to sustain
      a competitive edge.
| |  | --------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                       

When
           change is a constant, adaptability carries a premium. A stronger Reuters
          hasemerged from a period of fundamentalchange  in our products, in how weserve
     our customers and in how we areorganised. But the continuous and rapidevolution
     of our markets means we must
      become even more agile to sustaina
       competitive edge. Greater focus andradical
        simplification are crucial objectivesfor
         2007. I am confident that Tom Glocer and his team, in partnership with
        the
    Board, will address these challenges efficiently.




In the same way companies must evolve with their markets, business must evolve with society. Globalisation has driven unprecedented wealth creation, but not without a price. Political, economic, social and environmental imbalances threaten global stability, and the very conditions that have allowed global business to flourish. Society expects business to assume greater responsibility towards people and the communities in which it operates. It is entitled to expect business leadership that combines optimum returns for shareholders with responsibility for social and environmental performance. Companies are unlikely to succeed if society fails. The Board must bring an external perspective to the company. To do so, the Board must reflect the diversity of the society in which the business operates. I am proud of the range of experiences and backgrounds represented on the Reuters Board. In 2006 we announced that Nandan Nilekani, CEO of Infosys, would join the Reuters Board in January 2007.




Equally, the Board must continually scan the external horizons. In 2006, the Board and executive management met in Palo Alto, California to gain a first-hand understanding of new technology trends and evolving business models. High-performing boards need to evaluate their own performance. Last year we completed a comprehensive Board effectiveness review, and implementing the recommendations is an important objective for 2007. The Reuters Trust Principles are at the heart of our responsibility to society. They commit us to independence, integrity and freedom from bias in the gathering and dissemination of news and information. Guided by
these principles, I am confident we can provide the growth our shareholders expect, and fulfil the role society demands. They also attract and motivate the outstandingly talented people we need to build our future.  Niall FitzGeraldChairman




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|

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|   |                                            
|-- | -------------------------------------------
|   |                                            
|16 | Speed of changein
      the financial world
|   |                                            
|   |                                            

|                                                                                                                                                                                                                                                               |  | 13
      July 2006                                                                                                                                                |  |                                                                                                                                              
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                               |  |                                                                                                                                                                   |  |                                                                                                                                              
|Speed
      is the hallmark of todays global financial markets.
      Driven by new trading technologies, new regulations and rapidly shifting
      market structures, markets are creating and consuming more information at
      an ever-increasing rate. |  | Rising tension
      in Middle EastThe
      first rocket attacks on the Israelicity
      of Haifa heighten fears about global
      security and energy supply. |  | Reuters is
      first with the newsThe
      story spreads across our networksto
      trading rooms worldwide; markets react
      swiftly.
|                                                                                                                                                                                                                                                               | 
|                                                                                                                                                                                                                                                               | 
|                                                                                                                                                                                                                                                               |  |                                                                                                                                                                   |  |                                                                                                                                              



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|Business
      review | 17
|                      |   
|                      |   

|                                                                                                          |  |                                                                                                                                                           |  |                                                                                                      
|--------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------
|                                                                                                          |  |                                                                                                                                                           |  |                                                                                                      
|Crude oil
      prices soarOil
      surges to a high of $78 a barrelon worries about supply disruptions. |  | Stocks fall
      while bonds riseStock
      markets around the world rapidlybegin to slide as safe haven
      assetssuch as US treasury bonds climb. |  | Pump prices
      increaseFuel
      prices in several Europeancountries are driven to record levels.
|                                                                                                          |  |                                                                                                                                                           |  |                                                                                                      
|                                                                                                          |  |                                                                                                                                                           |  |                                                                                                      
|                                                                                                          |  |                                                                                                                                                           |  |                                                                                                      



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|   |                                               
|-- | ----------------------------------------------
|   |                                               
|18 | Speed
      of change in
      the media world
|   |                                               
|   |                                               

|                             |                              |                 |                            |  |  |  | 
|---------------------------- | ---------------------------- | --------------- | -------------------------- |  |  |  | 
|                             |                              | 05.45           | a
      Reuters journalist | 
|                             |                              |                 |                            |  |  | 
|                             | by
      the earthquake that |                
|                             |                              |                 |                            |  |  | 
|                             | Muzaffarabad,                |                 |                            | 
|                             |                              |                 |                            |  |  | 
|widespread
      destruction |                              |                
|                             |                              |                 |                            |  |  |  | 
|Reuters
      newsdesk       | 06.03                        | images
      of |                           
|                             |                              |                 |                            |  |  |  | 
|in India                     |                              | 06.30           | an
      image appears on  | 

|                       |                         |                                    |         |  |  |  |  |  | 
|---------------------- | ----------------------- | ---------------------------------- | ------- |  |  |  |  |  | 
|06.42                  |                         | a
      Canadian blogger questions |        
|                       |                         |                                    |         |  |  |  |  |  | 
|                       |                         | is
      reaching the              |        
|                       |                         |                                    |         |  |  | 
|                       | blogs
      appear      |                                   
|                       |                         |                                    |         |  |  | 
|                       | concerns
      over the |                                   
|                       |                         |                                    |         |  |  | 
|                       | Kashmir                 | 08.15                              | Reuters | 
|                       |                         |                                    |         |  |  | 
|                       | minister asking         |                                   
|                       |                         |                                    |         |  |  |  |  |  | 
|reconstruction costs a |                         |                                    |        
|                       |                         |                                    |         |  |  |  |  | 
|08.45                  |                         | the
      story is reported        |         | 
|                       |                         |                                    |         |  |  |  |  |  | 
|                       |                         | in newspapers and online, and      |        
|                       |                         |                                    |         |  |  |  |  |  | 
|                       |                         | is
      broadcast worldwide.      |        



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|                      |   
|Business
      review | 19
|                      |   
|                      |   



|takes photos
      of children orphaned
|---------------------------------------
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       

|                                 |                         |                                   
|-------------------------------- | ----------------------- | ----------------------------------
|                                 |                         | children
      appear on a website
|                                 |                         |                                   
|                                 | 22 sites
      globally |                                   
|                                 |                         |                                   
|the
      speed at which the aid
|                                

|victims of
      the disaster | 08.03 | six more
|----------------------------- | ----- | --------
|                              |       |         

|                                         |                              | expressing
      their
|---------------------------------------- | ---------------------------- | ----------------------
|                                         |                             
|                                         | humanitarian
      crisis in
|                                         |                             
|                                         | quotes
      a Pakistani    
|                                         |                              |                       
|for an extra
      $800 million to cover
|                                         |                              |                       
|year on from
      the earthquake       








As the commingling of
    professional and amateur content re-shapes the media world, Reuters
    journalists continue to bring something
    extremely important to each story they
    cover. They sift through the facts, provide
    perspective and give context. They
    are committed to an editorial code and
    brand that stand for independence,integrity and freedom from bias.


We
    can see that the pipe of news content
    is now flowing  in both directions. It ought  to be possible to integrate  professional journalism with  user-generated content in a  valuable
    way for our audiences.Tom Glocer, CEO, Reuters




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|   |                              
|-- | -----------------------------
|   |                              
|20 | Speed of changein
    Reuters
|   |                              
|   |                              

|                                                                                                                                                       
|-------------------------------------------------------------------------------------------------------------------------------------------------------
|And to keep ahead
      of the game
      we have to transform ourselves
      constantly. This requires bold
      thinking
      and smart execution.
|                                                                                                                                                       
|                                                                                                                                                       
|                                                                                                                                                       
|                                                                                                                                                       
|                                                                                                                                                       

Nandan M. Nilekani, CEO,
    Infosys and Non-executive director, Reuters, gives his perspective on the
    opportunities and challenges presented by globalisation. Over the last few years,
    Reuters has simplified and refocused its business. It has opened content centres
    in Bangalore and Gdansk. It has shifted development to Bangkok and Beijing.
    And it has increased its focus on growth markets such as India, China, the
    Middle East and Eastern Europe.         Opposite page:A
    bird flies
    past a giant globe-shaped
    building in Shanghai, China.
    (Photographer: Aly Song)




Global markets, global talentDeveloping countries have become more credible players in the global economy, together contributing more than half the global gross domestic product. It is a much larger economic world, with more places to do business,
and also more competition. In addition to new customers,
    there is a new pool of skilled workers in emerging economies. Ten years ago,
    few of these groups were part of the global workforce. The global distribution
    of revenue (customers) and costs (talent) is changing, and companies have
    no choice but to hire a more diverse, global workforce. This will be easier
    because the world is increasingly wired. Increases in technology and regulationsAs the cost of technology has plunged dramatically, its usage has soared. Emerging nations are leaping past the 20th century and landing squarely in the 21st. In four years, China will have more broadband connections
than there are US households. As large new populations
    gravitate toward the information highway, there are new expectations for information
    security and privacy, cutting across geo-political boundaries and leading
    to a plethora of regulation. High-profile regulations such as Markets in Financial
    Instruments Directive (MiFID) in Europe and Regulation NMS in the US will
    bring about sweeping change in the way companies like Reuters look at their
    business models and revenue streams.


These changes will require
    bold thinking and smart execution to operate successfully in the years ahead. Together, these trends 
    emerging economies, shifting demographics, increasing technology and proliferating
    regulations  are flattening the business landscape. New challengesMost companies now recognise the new challenges arising from these trends: in particular, the increasing competition, especially from industries and geographies previously considered insignificant. Reuters trading business
    is facing challenges from competition and changes in business models. Exchanges
    are being democratised, with regulation levelling the playing
    field, making location almost irrelevant. In the US, market regulations are
    driving some investors to other continental exchanges, causing a structural
    shift in revenues. In addition, as the types of instruments traded on exchanges
    rise and transactions across countries and markets rise, there is a need for
    new kinds of information, tools and solutions. Progressive, innovative companies
    are adopting new strategies to address such new opportunities and challenges.
    I believe that companies who want to win in this flattening world must shift
    their operational priorities to make the most of the new opportunities available
    to them.




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| |                         |   
| | Business
        review | 21
| |                         |   
| |                         |   
| |                         |   



Operational shiftsReuters has already taken significant steps in this direction. It is moving software development to Bangkok and Beijing, working to consolidate data centres from 250 down to 10 by 2010, and planning to move to a common
technology platform. It is increasing capacity and efficiency through new content management centres in Bangalore and Gdansk. Further, by focusing on the
    needs of markets such as India, China, the Middle East and Eastern Europe,
    Reuters is ensuring that it stays relevant to these growth markets. These operational shifts
    are positioning Reuters well for future growth and profitability. Reuters
    DataScope products, which enable computers to use real-time information for
    algorithmic trading, are an example of innovative use of technology to meet
    the needs of the more demanding financial services industry.




As its current IT-related
    initiatives evolve into comprehensive global sourcing capabilities, Reuters
    will benefit from improved cost and efficiency. With the increase in competitive
    intensity, the ability to respond quickly to changing customer behaviour will
    rise correspondingly. Companies have to focus on drawing market and operational
    insights from information collected from their operations and those of their
    partners. Accessing the global talent poolEqually important, its recent global initiatives also enable Reuters to access the global talent pool. This last point is especially important as industry after industry has shown that as global locations (such as
Asia) become global operations centres for certain activities and functions, a greater proportion of the innovation comes from the same regions. Investment in global talent pools today paves the way for tapping them for product and process
innovation in years to come.


As markets become increasingly
    price-driven, rapid innovation is the key to customer loyalty. Reuters has made substantial
    strides in becoming more focused and efficient. The global trends driving
    the business world are still in full swing. Over the next few years, as these
    trends further affect the business landscape, only companies that shift their
    operational priorities will win in the flat world. Rapidinnovation
    is the keyto customer
    loyalty.




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|-- | ---------------------------
|   |                            
|22 | Interview with the Chairman
|   |                            
|   |                            

Thestrength
  of the Groups corporate values, its reputation and its ability to
  deliver a successful businessdepend
  in
  part on the effectiveness of its corporate governance system.



The Role of the Board  Niall FitzGerald,
      Chairman, in discussion with Rosemary Martin, Reuters General Counsel and
      Company Secretary Rosemary:Niall, when you became Chairman of Reuters in 2004 you proposed a set of principles to guide the Reuters Board. Why did you do that and what are they? Niall:The Board needed to refine how it worked together. The company was in transition from survival to restructuring, and preparing for a new phase of growth. Board
membership, style and focus needed to change to be responsive to the challenges ahead. We needed a dialogue around the Board table about our role and how we could work together more effectively. We agreed some working principles, such as limiting
formal presentations and our desire for short and sharp Board papers. We needed our time and energy deployed on a few forward-looking issues of real substance. Rosemary:You say the principles are not a strict set of rules and yet you are adamant that Board papers are kept concise and that Board time is not consumed by formal
presentations. Why is this so important to you? Niall:Board time is limited and we have to use our time smartly. Formal presentations constrict dialogue and put walls around an issue. The deal is that executives and
advisers coming to a Board meeting can assume that the Directors have done their pre-reading and therefore there is no need




to go over the background and the facts. These are communicated in advance of the Board discussion. It is good discipline to be concise, distilling issues to their essence. No guff. Just the issues. But we can do better, so this year weve been working on improving the quality of information that the Board receives, in part in response to comments in the 2005 Board effectiveness review. Weve refined the
monthly performance report to make it less dense, more sharply focused and forward-looking. We still have some way to go. Rosemary:Looking back over 2006 what would you say were the main areas of attention for the Reuters Board? Niall:In
2006, beyond business as usual items such as monitoring financial
and operational performance, succession planning and approving the budget and
plan for the year ahead, we focused on a number of significant initiatives. These
included the creation of FXMarketSpace, acquisition of Application Networks
Inc, disposal of Reuters interest in Factiva and negotiations with the trustees
of Reuters two
UK final salary pension schemes to substantially fund the pension deficit. We
also examined our preparedness for any significant interruption to business,
such as a flu pandemic, and reviewed an incident in which Reuters inadvertently
published a photograph that had been digitally manipulated by a freelance photographer
working for us in Beirut.


The Audit Committee was very busy with Sarbanes-Oxley and preparations for compliance with section 404 of the Act. They briefed the full Board regularly. In June the Board met in Palo Alto, California to discuss strategy. Stepping outside our norms gave us the chance to spend more time with the executive management team and together consider new developments in
technology and business models. The visit reinforced the importance of continuous innovation and creative partnerships. As Asia is a growing source of technological innovation, and we are focused on growing our business across this region, the Board
is planning to visit Asia during 2007. Rosemary:This leads us to the question of how you ensure the Reuters Board has the right mix of Directors to lead Reuters in the first decade or so of the 21st
century? Niall:I chair the Nominations Committee which includes Dick Olver and Ian Strachan. We meet to review the structure, size and composition of the Board. We have a view as to
the ideal blend of experience and expertise. These include financial services, technology, media, government and regulatory affairs, general commercial acumen, a mix of geographic experience, knowledge of Reuters industry sectors and an
understanding of our customers.




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|Governance | 23
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| |  | Good
      governance shouldbe a powerful fuel forgrowth.
      I want Reuters touse the principles of goodgovernance in this way.Niall FitzGerald
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We identify which specific skills and experiences individual directors have and we look for any gaps. In 2005 we agreed it would be advantageous to add a Director who is currently a chief executive and with extensive
knowledge of business in Asia and of technology. We were delighted when Nandan Nilekani, one of the founders of Infosys, agreed to join Reuters Board from 1 January 2007. In addition the Nominations
    Committee has to ensure there are robust succession plans for Board Committees.
    During the year Dick Olver said he wanted to step down from the chairmanship
    of the Audit Committee, a role he filled with distinction since 2000.I
    discussed with Board colleagues the appointment of Lawton Fitt as his successor
    and this was unanimously approved by the Board in October. Continuity will
    be provided as Dick will remain a member of the Audit Committee. He is also
    remaining Reuters Senior Independent Director. Rosemary:What
about succession planning for senior executive roles during 2006? There have
been several changes in the senior executive team in the last year. What is the
Boards role in relation to this? Niall:Its the Chief Executives responsibility to ensure the best senior executives are appointed to help him manage the companys business. For many roles
the talent already exists within our ranks  for example, it was pleasing
to see the promotion of Mark Redwood to become




Head of the Sales & Trading Division, Michael Peace to Head of the Research 
& Asset
Management Division and David Schlesinger to Editor-in-Chief. It is also important
to bring in new talent to the firm. Last year Stephen Dando joined as Group HR Director from the BBC, Roy Lowrance
as Chief Technology Officer from Capital One, Gerry Campbell as Global Head of
Search and Strategic Development from AOL, and Lee Ann Daly as Chief Marketing
Officer from ESPN. In March, David Craig joined us from McKinsey as Group Strategy
Director. The Boards role is to oversee the quality of management and the processes
for finding and developing outstanding talent. We do that by meeting regularly
with managers below Board level and by reviewing twice a year the succession
plans and talent management process. In 2006 it was agreed that Board members
would each mentor one or more high-potential executives. Rosemary:One
of the principles that you have articulated for the Board is the requirement
to maintain a governance framework that facilitates substance and not merely
form. What do you mean by this? Niall:Governance is much discussed but often poorly understood. The directors must act in the long-term interests of shareholders. We will not be serving our
shareholders well if we become myopically focused on governance in a box ticking way
and fail to look at the wider picture of how to capture


and build sustained shareholder value. We need to use sound governance tools proper internal controls and processes, a full understanding of risk, a rigorous approach to performance management, insistence on
transparency and integrity  to help us create a high-performing company. Good governance should be a powerful fuel for growth. I want Reuters to use the principles of good governance in this way. Rosemary:One final question: at the end of 2006 the new Companies Act was introduced in the UK. Although it will take a while for the new law to be implemented in full, do
you see it as requiring any major changes to the way Reuters Board operates today? Niall:I have no doubt a great deal will be written and spoken about the implications of the new Companies Act for UK companies. There has already been much discussion about
the new requirement for directors to have regard in their decision making to such things as the impact on the environment and the interests of employees. All well-run companies focus on these and other issues which are key to sustainable business
performance. The Companies Act is about codifying existing best practice into law. Provided it is applied sensibly, little will change inside the boardrooms of high-performance companies. But lets see what happens  and please, no more
boxes to tick!




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|24 | Noteto the Board
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From the Chairmans note 
to the Board20 September 2004





We must be clear and agreed on the role of the Board. It is a unitary Board with one group sharing common objectives and united in purpose. The Board does not run the business but reviews how the business is run. It does this by:•
    Agreeing the strategic framework and keeping it under vigorous review•
    Monitoring the implementation of strategy through the operational plans•
    Focusing on long-term sustainable value creation•
    Safeguarding the longer-term values of the company, including the brand and corporate reputation•
    Overseeing the quality of management and how it is maintained at world class levels•
    Maintaining a governance framework that facilitates substance and not merely form•
    The over-riding theme of the Board should be profitable growth within an acceptable risk profile The Chairmans role is to lead the Board in a manner that allows the CEO to run the company effectively. This demands skilful motivation and management of the board to build a cohesive team. The Chairman must
support and counsel the CEO and be the ultimate judge as to his effectiveness.




This requires the correct balance between detachment  thereby avoiding
interference  and being sufficiently engaged and informed to know when
to intervene. The Chairman and CEO must work on a basis of trust, mutual respect
and understanding. ContentThe Board agenda must
      reflect its role. This will require at each meeting:•
    Report on operational and financial performance and progress against plan•
    Update on markets, competitors, customers and investors•
    Progress on strategic issues•
    Developments on important people issues•
    Review in depth one key strategic issue•
    Short presentation from one senior/high potential leader•
    Other matters that the CEO believes needs the engagement of the Board Periodically the Board will discuss:•
    The strategic framework•
    The brand•
    The principles•
    People and succession plans•
    Longer-term scenario development•
    Reports from audit and remuneration committees•
    Assessment of its own performance


Information
        to the Board will be:•
      Timely  a week
        prior to the meeting•
      Concise 
        exceeding two pages by exception•
      Open and transparent We will work on the assumption that all papers have been read and use our time for debate and discussion. Formal presentations to the Board will be rare and usually preceded by a background paper. At the end of each
Board meeting we will spend five minutes to review the effectiveness of the meeting. StyleBoard members should not intrude on the management of the business but must ensure that they are adequately informed to judge when intervention may be needed. Our discussions should always be open, candid and trusting.
We must be prepared to challenge, confront, disagree, and probe, but always in a way that is constructive and supportive of the business agenda. Nothing should be left unsaid within a team that is committed to team success. Consistent high quality
communication between the Executive and the Board is essential.




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|Board | Governance | 25
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|26 | Directors and senior managers
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|The directors and
      senior managers of Reuters Group at 9 March 2007 are:
|-----------------------------------------------------------------------------
|                                                                             
|Name                                                                         
|                                                                             
|Directors                                                                    
|                                                                             
|Niall FitzGerald, KBE                                                        
|                                                                             
|Thomas Glocer                                                                
|                                                                             
|David Grigson                                                                
|                                                                             
|Devin Wenig                                                                  
|                                                                             
|Lawton Fitt                                                                  
|                                                                             
|Penelope Hughes                                                              
|                                                                             
|Edward Kozel                                                                 
|                                                                             
|Sir Deryck Maughan                                                           
|                                                                             
|Nandan Nilekani                                                              
|                                                                             
|Kenneth Olisa                                                                
|                                                                             
|Richard Olver                                                                
|                                                                             
|Ian Strachan                                                                 
|                                                                             
|Senior managers (Group Leadership
      Team)                                
|                                                                             
|Chris Ahearn                                                                 
|                                                                             
|John Alcantara                                                               
|                                                                             
|David Craig                                                                  
|                                                                             
|Lee Ann Daly                                                                 
|                                                                             
|Stephen Dando                                                                
|                                                                             
|Joerg Floeck                                                                 
|                                                                             
|Christopher Hagman                                                           
|                                                                             
|Alex Hungate                                                                 
|                                                                             
|David Lister                                                                 
|                                                                             
|Roy Lowrance                                                                 
|                                                                             
|Rosemary Martin                                                              
|                                                                             
|Peter Moss                                                                   
|                                                                             
|Michael Peace                                                                
|                                                                             
|Mark Redwood                                                                 
|                                                                             
|Jon Robson                                                                   
|                                                                             
|David Schlesinger                                                            
|                                                                             
|Simon Walker                                                                 
|                                                                             



Directors Niall FitzGerald, KBE
     ChairmanChairman of the Nominations Committee.
    He is Chairman of the Nelson Mandela Legacy Trust (UK) and Chairman of the
    Board of Trustees of the British Museum.Niall co-chairs the Investment Climate
    Facility (ICF) for Africa and is a Trustee of the Leverhulme Trust. Niall
    chairs the International Business Council of the World Economic Forum and
    is a Member of the World Economic Forum Foundation Board. He is a member of
    various advisory bodies, including the President of South Africas International
    Investment Advisory Council, the Advisory Board of Tsinghua University and
    the Advisory Board of Spencer Stuart. He is a Senior Advisor to Morgan Stanley
    International. His past appointments include: Chairman of the Conference Board
    (20032005) and Co-Chairman of the Transatlantic Business Dialogue (20042005),
    Non-executive director of Merck (20002003), Ericsson (20002002),
    Bank of Ireland (19901999) and the Prudential Corporation (19921999),
    President of the Advertising Association (20002005). Age 61.




Thomas (Tom) Glocer 
    CEOPreviously 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. Former Non-executive director of Instinet Group. Age 47. David Grigson  CFOJoined Reuters in August 2000 from
    Emap PLC where he was Group Finance Director and Chairman of Emap Digital.
    He is a qualified chartered accountant. David sits on the Implementation Board
    and Culture Board of Legacy 2020. 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 and former Chairman of Radianz. Age 52. Devin Wenig  COOPreviously President, Business Divisions
    (20032006). 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 40. Lawton Fitt  Non-executive
    directorChairman of the Audit Committee.
    Non-executive director of CIENA Corporation and Citizen Communications. Senior
    Adviser and Member of the Board of Advisers at GSC Partners. Director and
    Trustee of Reuters Foundation. Previously a Partner and Managing Director
    of Goldman Sachs Group Inc. Trustee of several not-for-




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|Governance | 27
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profit organisations including contemporary arts centres in New York and Berlin. Former Secretary (Chief Executive) of the Royal Academy of Arts. Age 53. Penelope (Penny) Hughes
    
    Non-executive directorMember of the Remuneration Committee.
    Non-executive director of The GAP Inc., Skandinaviska Enskilda Banken, Home
    Retail Group PLC, Molton Brown Limited and a Member of the Advisory Board
    of Bridgepoint Capital. Former President, Coca Cola Great Britain and Ireland.
    Former Non-executive director of Bodyshop International PLC (19942000),
    Enodis PLC (19962001), SC Johnson (20022004), web-angel (20002003),
    Trinity Mirror PLC (19992005) and Vodafone PLC (19982006). Age
    47. Edward (Ed) Kozel 
    Non-executive directorMember of the Remuneration Committee.
    Chief Executive of Skyrider. Also a Non-executive director of Yahoo and NeTwork
    Appliance. Former 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 51. Sir Deryck Maughan 
    Non-executive directorManaging Director of Kohlberg Kravis
    Roberts & Co. and Chairman of KKR Asia. He was formerly Chairman and CEO
    of Citigroup International and Salomon Brothers Inc. He is a Non-executive
    director of GlaxoSmithKline plc and BlackRock Inc as well as serving on the
    Boards of Directors of Carnegie Hall, Lincoln Center and NYU Medical Center.
    He served as Vice Chairman of the New York Stock Exchange from 1996 to 2000.
    Age 59. Nandan Nilekani 
    Non-executive directorMember of the Audit Committee. Chief
    Executive of Infosys, a world leading provider of IT consulting and services,
    since March 2002. Nandan was one of the founders of Infosys and has served
    as a director of the company since 1981. He is a Member of the World Economic
    Forum Foundation Board, Vice-Chairman of The Conference Board, member of the
    National




Knowledge Commission (India), member of National Advisory Group on e-commerce, Co-Chairman of the IIT Bombay Heritage Fund and a Member of the Board of Governors of IIT Bombay. Former Chairman of the Government of
Indias IT Task Force for the Power Sector, former Member of the sub-committee of the Securities and Exchange Board of India and former member of the Reserve Bank of Indias Advisory Committee on Corporate Governance. Age 51. Kenneth (Ken) Olisa 
    Non-executive directorMember of the Audit Committee. Founder
    and Chairman of Restoration Partners Limited and a Non-executive director
    of BioWisdom and Open Text Corporation. Former Chairman (20002006) and
    CEO of Interregnum plc, which he founded in 1992. He worked for Wang Laboratories
    (19811992) and was General Manager of Wang Europe, Africa and the Middle
    East (19901992). His career began at IBM (19741981). Former Non-executive
    director of various information technology companies and former Postal Services
    Commissioner. He is a Liveryman of the Worshipful Company of Information Technologists,
    a Fellow of the British Computer Society, Chairman of homeless charity, Thames
    Reach, a Governor of the Peabody Trust and a Director and Trustee of Reuters
    Foundation. Age 55. Richard (Dick) Olver 
    Non-executive directorMember 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) and former Deputy Chairman of TNK-BP in Russia.
    A Fellow of the Royal Academy of Engineering and a Member of the Trilateral
    Commission. A Guardian of New Hall School. Age 60. Ian Strachan  Non-executive
    directorChairman 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 63. Senior managers Chris Ahearn  President,
    Reuters MediaChris joined Reuters in 2001 as
    Executive Vice President in charge of the Research & Advisory business.
    He was appointed to his current position in 2002. Prior to joining Reuters,
    Chris worked in investment banking at J.P. Morgan and Credit Suisse First
    Boston. He sits on the board of directors of Times Global Broadcasting Co.
    Limited, Pluck Corporation and The Kitchen. Age 40. John Alcantara Global Head
    of Service OperationsJohn joined Reuters in 1986 after
    ten years at Cable & Wireless. John has held a number of product management
    and business management roles in Reuters. He was the Managing Director of
    Reuters Iberia and later Managing Director for Reuters UK and Ireland until
    2005, when he took up his current role. Age 52. David Craig  Group
    Strategy DirectorDavid joined Reuters in March 2007
    from McKinsey and Company, where he was both a Partner in the Global Business
    Technology Office and worked in the media team. He has extensive experience
    of working with clients across many industries, in particular wholesale and
    corporate banks and trading institutions, on strategy, information technology
    and operational performance improvement. Prior to joining McKinsey, David
    was a Senior Principal at AMS where he developed risk and trading systems.
    Age 37. Lee Ann Daly  Chief
    Marketing OfficerLee Ann joined Reuters in January
    2007. She was previously Executive Vice President, Marketing for ESPN, Inc.
    Prior to joining ESPN, Lee Ann served in various management and planning roles
    at Ammirati, Puris/Lintas and Grey Advertising. She was co-founder and executive
    producer of an award-winning humour-based radio production company which directly
    serviced top brands and agencies. She was a Director and President of the
    Board of the American Marketing Association in New York. Age 45.




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|28 | Directorsand senior managers continued
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Senior managerscontinued Stephen Dando Group Human Resources
DirectorStephen
joined Reuters in 2006 in his current role. Prior to joining Reuters, Stephen
was Director, BBC People and a member of the BBCs Executive Committee and
Executive Board for five years. He held various appointments at Diageo over a
12 year period including Global HR Director, Guinness. Age 45. Joerg Floeck  Managing
    Director,
Europe, Middle East & AfricaJoerg joined Reuters in 1990 and is based in Geneva. He has held various senior sales and general business management positions in Germany, Austria, Italy, United States and the UK before being appointed to his current
post in June 2006. Prior to joining Reuters, Joerg worked in the financial industry, specialising in IT. Age 45. Christopher Hagman Managing Director,
    Global Sales
& Service
OperationsChristopher joined Reuters in 1987, based in Sweden, and 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 International Companies in December 2005. Age 48. Alex Hungate  Managing
Director, AsiaAlex
joined Reuters in a business development role in 1993. He started and managed
New Media businesses in the early days of the World Wide Web. He went on to become
co-CEO Reuters America, then President, Focus Group Accounts and most recently
Chief Marketing Officer for Reuters. He took up his current role in January 2006.
Prior to Reuters, Alex worked as a Media Analyst at Booz Allen & Hamilton.
He graduated with High Distinction from Harvard Business School in 1993. He was
a Board Director of Factiva until Reuters stake was sold to Dow Jones on 15 December
2006. Age 40. David Lister  Chief Information
OfficerDavid
joined Reuters in 2004. Prior to joining Reuters, David held senior IT leadership
roles at Boots Group, Glaxo Wellcome and Diageo after a period of management
consultancy with Coopers &




Lybrand. He is a member of several IT professional bodies and consultative boards. Age 48. Roy Lowrance Chief Technology
OfficerRoy
joined Reuters in 2006 as Chief Technology Officer, a role focused on developing
competitive technology strategies that help to drive and support the companys
business strategies. Prior to joining the company, he held technology management
positions at Capital One and Fleet Financial Group and was a partner at the Boston
Consulting Group. Age 56. Rosemary Martin  General
Counsel and Company SecretaryRosemary
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 the UK Listing Authority Advisory Committee. Age 46. Peter Moss Global Head of
Enterprise SolutionsPeter joined Reuters in 1989, based in the UK, and held various product management, marketing, sales management, strategy and business management positions across Reuters before being appointed to his current post in
September 2003. Before joining Reuters Peter worked in the information technology industry. Age 47. Michael Peace  Global Head of Research & Asset
ManagementMichael joined Reuters in 1987 on the Management Graduate Development scheme and held a variety of sales, marketing and management positions in the UK, Europe, Asia and the US before being appointed to his current
position in September 2006. Michael was Chief Executive of Lipper, a Reuters company, from 2001. Prior to joining Reuters, Michael held positions with Lloyds International Bank in Spain and as a sponsored undergraduate with Shell. Age 43. Mark Redwood Global Head of
Sales & TradingMark joined Reuters in December 2002 following the acquisition of AVT Technologies Limited, a specialist in FX trading technologies, where he was CEO. Prior to his current appointment, Mark was


responsible for Reuters transactions services across all asset classes. Before founding AVT, Mark worked for JP Morgan in London from 1983 to 1989, where he held a number of trading positions in fixed income and
exchange traded derivatives. Age 46. Jon Robson  President,
Focus Group Accounts and President, AmericasJon leads Reuters business in the United States, South America and Canada, and has global business responsibility for Reuters largest clients worldwide. Before joining Reuters Jon worked at BIS Banking Systems (now
Misys), Telerate and Dow Jones Markets. In 1997, Jon founded MoneyLine which acquired Telerate in 2001 to form MoneyLine Telerate, which was subsequently acquired by Reuters. Age 48. David Schlesinger  Editor-in-ChiefDavid
joined Reuters in 1987 as a journalist in Hong Kong after working as a teacher
and a reporter for other publications. He ran Reuters editorial operations in
Taiwan, China, the Greater China region and the Americas before becoming Global
Managing Editor & Head of Editorial Operations in 2003. He took up his current
role in January 2007. Age 46. Simon Walker Director of Corporate
AffairsSimon
joined Reuters in 2003. Prior to joining Reuters, Simon was Communications Secretary
at Buckingham Palace, Director of Communications at British Airways PLC and special
adviser to the Prime Minister in the Downing Street Policy Unit. Simon is a Trustee
of the charity, UK-NZ Link Foundation, the UK Jamestown Foundation and a Member
of the European Policy Forums Advisory Committee. He is a Director and
Trustee of Reuters Foundation and a Member of the Better Regulation Commission.
Age 53. Susan Taylor-Martin stepped down as a member
  of the Group Leadership Team (GLT) at the end of 2006 to take up her new role
  as Managing Director and Senior Company Officer for UK & Ireland from 1
  January 2007. Geert Linnebank also stepped down from GLT to take up his new
  role as Senior Adviser to the CEO with effect from 1 January 2007. David Craig
  joined Reuters as Group Strategy Director and a member of GLT
in March 2007.




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|Remuneration
      report | Governance | 29
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Remuneration policyThe
    Remuneration Committee believes that Reuters remuneration policy should be
    market-competitive, business performance-related and supportive of shareholders interests.
    With these considerations in
mind •
      The reward structure for executive directors
        is designed to attract, motivate
        and retain high-calibre individuals capable of successful leadership.•
      The Committee aims to ensure that the
        majority of executive remuneration
        is variable and performance-related with a significant portion
        linked to share price performance and delivered in shares. This policy will apply in 2007 and is expected to continue in future years. Remuneration CommitteeThe Committee is chaired by Ian Strachan and the other members are Ed Kozel and Penny Hughes. All members of the Remuneration Committee have been determined by the Board to be independent. The Company Secretary is
secretary to the Remuneration Committee. The Committee met six times in 2006. All members were present at each meeting except Penny Hughes and Ed Kozel who were each absent from one meeting. The Committee operates under formal terms of reference and under the powers delegated to it by the Board. The duties of the Committee include •
    determining the companys framework
      of executive remuneration and its
      cost, having a pragmatic regard to the companys position with
respect to other companies;•
    determining, on the Boards behalf,
      specific remuneration packages for each of the executive directors, the Chairman and such other members of the GLT as it is designated to consider;•
    recommending on the Boards behalf,
      the ordinary remuneration of the non-executive directors (in respect of remuneration permitted to be
    set by the directors by the companys articles of association) to be approved by the shareholders at the AGM;•
    determining, on the Boards behalf,
      any other remuneration issues which affect the interests of shareholders, in particular remuneration or option plans using shares; determining the targets for incentives plans; determining the provision of benefits and settlement of other provisions under
the terms of the service agreements or otherwise of executive directors where these are stated as being at the discretion of the Board; and•
    keeping apprised of and advising the Board of key changes in employee benefit structures with the Group. The Committees terms of reference can
  be found at about.reuters.com/csr/corporategovernance/committees.asp The Chairman ensures that the companys
  principal shareholders are kept informed as to remuneration matters, as appropriate. The Committee has appointed Towers Perrin to
  provide it with independent advice. Towers Perrin also provides industry and
  comparative salary data to Reuters management. The Committee has also consulted
  with the
companys Chairman and CEO (neither of whom has been present at any meeting
to decide matters relating to their own compensation or contracts), and with
the Group Human Resources Director and the Global Head of Performance and
Reward.


Executive directors  There are four key elements of executive compensation. •
    Basic salary•
    Annual bonus•
    Awards under equity incentive plans•
    Pension and other benefits The following bar chart shows the relative
    weight of basic salary, annual bonus and the expected value of equity incentive
    plans for each executive director in 2006.  As shown in the chart above, approximately three quarters of executive reward package is performance-related. Basic salaryThe main reference point in setting executive
    directors salaries is companies in the FTSE100 other than the five largest companies in this group and the five smallest. These companies have been selected to
  provide a stable comparator group which is relevant to the companys position
  in the market. This group is reviewed annually to confirm its appropriateness. Salaries earned in 2006 are shown in the table
  below: 2006Salary£000sTom Glocer
      
      842David Grigson
      
      469Devin Wenig
      
      454 Annual bonus  The Committee sets performance targets annually.
Tom Glocer is entitled to a maximum bonus of 150% of base salary and David Grigson
and Devin Wenig are each entitled to a maximum bonus of 125% of base salary.
The
executive directors annual bonus potential will remain the same in 2007. For 2006, the performance targets were focused
  80% on financial performance (trading profit1, revenue and free cash
  flow) and 20% on customer satisfaction measures. In February 2007, the Committee
  reviewed 2006  performance against the specified targets and determined that
  the executive directors had earned bonuses of 91% of bonus potential. 1 Trading profit is 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. Trading margin is
    trading profit expressed as a percentage of revenue.




Reuters Group PLCAnnual Report and Form 20-F 2006

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|   |                             
|30 | Remunerationreport continued
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The 2006 bonus awards are shown in the table below: 2006Bonus£000sTom Glocer
      
      1,149David Grigson
      
      534Devin Wenig
      
      516 For 2007, the performance targets will be focused solely on financial performance (trading profit, revenue and free cash flow). There is a profit threshold, based on trading profit, below which no bonuses will be paid.
The Remuneration Committee reviews the business plan and establishes this threshold each year. Equity incentive plans Overview: Executive
directors and other senior managers are entitled to participate in the share-related
incentive schemes operated by the company as detailed below. The Committee reviews
the schemes annually to ensure that they reflect best practice and are aligned
to the companys business plan. The Committee has reconfirmed its 2005 decision to continue to operate the Long Term Incentive Plan (LTIP) and the Discretionary Share Option Plan (DSOP) for executive directors. Awards are subject to specific
performance conditions. In 2006, the Committee decided to increase the proportion of performance shares and to reduce the number of share options awarded. LTIP:Reuters has operated the current long-term incentive plan since 1998. Contingent share awards are made annually to executive directors and to those senior managers
most accountable for corporate performance. Before 2006, the vesting of awards was based wholly upon Reuters Total Shareholder Return (TSR) relative to other FTSE100 companies. Since 2006 half of the award has been based on
Reuters TSR relative to other companies in the FTSE100 and half is based on the
aggregate level of adjusted profit before tax (PBT)1 achieved over the three
year  performance period. These measures were selected because growth in profit
is in itself a key element of the companys long term strategy and relative
TSR provides a market measure of the companys success in delivering against
its
strategy. TSR performance is measured independently prior to review by the Committee and the Committee annually reviews the comparator group. 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. The Committee continues to believe that the FTSE100, rather than one individual sector or a bespoke peer group remains the most appropriate peer group for
comparison. In respect of the TSR performance test, no shares vest if Reuters TSR is below the median of the comparator group. At median, one third of the shares vest and for upper quartile performance all shares vest. There is
proportionate vesting of awards if Reuters TSR falls between the median and the upper quartile. Vesting of 50% of the LTIP awards is subject to the PBT test and depends upon the level of PBT achieved by Reuters over the whole of the performance period. The Remuneration Committee sets a range of PBT performance at
the beginning of each performance period, taking into account the plans and prospects for the business and shareholder expectations. The minimum level, at which one third of the awards will vest, will be at least equal to the level which would be
achieved with an 8% compound annual growth rate over the performance period.


The maximum PBT level at which all shares will vest, represents a challenging but potentially achievable target for the business. Shares vest on a proportionate basis if actual PBT falls between the minimum and maximum
of the pre-set range. The 2006 awards, which are subject to the performance conditions detailed above, for Tom Glocer, David Grigson and Devin Wenig were 500,000 shares, 200,000 shares and 250,000 shares respectively. In 2007, the awards for Tom Glocer, David Grigson and Devin Wenig, which are also subject to the performance conditions detailed above, will be 500,000 shares, 200,000 shares and 300,000 shares respectively. DSOP:A global discretionary stock option plan was adopted by the Committee in October 2000 and approved by shareholders in April 2001. It aims to reward growth in earnings
and in the share price. Since 2004 participation has been confined to executive directors and members of the senior management team. The Committee divides participants annual entitlements into two awards, normally made following the announcement of preliminary annual and half-yearly results. As a result of changes made in 2006 (which apply to 2006 and future awards) options only vest to the extent that the following conditions are met over the three years following grant: •
    minimum 6% a year growth in adjusted EPS2will be required for 50% of options to
vest;•
    9% a year growth will be required for 100% of options to vest;•
    between 6% and 9% growth options will vest on a proportionate basis. Executive directors are only allowed 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. The 2006 share option awards for Tom Glocer, David Grigson and Devin Wenig were 1,250,000 options, 500,000 options and 650,000 options respectively. In 2007, the share option awards for Tom Glocer, David Grigson and Devin Wenig will be 1,250,000 options, 500,000 options and 750,000 options respectively. All employee savings plansExecutive directors, in common with
    other employees, may participate in the companys savings-related share
    option arrangements. For UK- and US-based employees this takes the form of
    a Save As You Earn plan. For the 2006 offer the fixed monthly saving amount
    was set at a maximum of £100 per month with a three year savings period. Personal shareholding policyThe
companys personal shareholding policy requires each executive director
to build and maintain a personal equity stake, worth twice his basic salary,
within five years. All executive directors are above or are approaching this
level of personal shareholding. 1 Adjusted profit before tax is calculated
    as profit before tax from continuing operations before impairments and amortisation
    of business combination intangibles, investment income, profit on disposals
    and fair value movements.
2 Adjusted EPS is 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.




Reuters Group PLCAnnual Report and Form 20-F 2006

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|Governance | 31
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|           |   
|           |   

Performance graphReuters TSR for the five years to 31 December
  2006 compared with the return achieved by the FTSE100 index of companies is
  shown below. As Reuters is a member of the FTSE100, the Committee believes it
  is the most appropriate market index for comparison. The calculations assume the reinvestment of dividends.  PensionsAll executive directors 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. 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 24% of salary up to a cap of £108,600. 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. Other benefitsMarket practice non-cash benefits are provided
  to executive directors and the Chairman as shown on page 32. All executive directors
  receive a company car or an allowance and private healthcare benefits. 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. Service contractsThe companys policy is for executive directors
  to have service contracts with notice periods of not more than one year. Notice to be given
    Date of service contractTom Glocer
    
      By Tom Glocer:
    23 July 200190 days without cause30 days with causeBy the company:30 days without causeImmediately with causeDevin Wenig
    
    12 months
    17 February 2003David Grigson
    
    12 months
    21 June 2001


In each case the unexpired term of the contract is equivalent to the notice period. In the event of company-instigated termination, amounts up to a maximum of 12 months salary, annual bonus and 12 months pension contributions are payable. In addition, 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. Tom Glocer and his family also retain the life assurance and private healthcare benefits provided by Reuters for one year following
termination. 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 146). 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. 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 and that these appointments
  can broaden the knowledge and experience of directors to the benefit of the
  company. Accordingly, it is Reuters policy to approve such appointments, provided
  there is no conflict of interest and the commitment required is not excessive. Devin Wenig was the only executive director who received fees for an external directorship during 2006. He received fees of $20,250, 4,500 shares of restricted stock and 9,500 options in his capacity as director of
Nastech Pharmaceutical Company. Chairman and non-executive
  directorsThe Chairmans and the non-executive directors
  ordinary remuneration is proposed by the Board and approved by the shareholders
  at the annual general meeting (AGM). In determining appropriate fee levels,
  the Board has regard to the remuneration arrangements of chairmen and non-executive
  directors 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. Non-executive director appointments are detailed
on page 38. Niall FitzGerald and the non-executive directors have letters of
engagement rather than service contracts. None is eligible to participate in
executive share
plans. Current annual fee levels in respect of the non-executive directors are shown in the table below: 2006Fees£000sBasic
    
      50Senior Independent Director
    
    5Chairing the Audit Committee
    
    15Chairing the Remuneration Committee
    
    10Chairing the Nominations Committee
    
    5
      1 1
    Niall FitzGerald has waived his £5,000
      Nominations Committee chairman fee.




Reuters Group PLCAnnual
  Report and Form 20-F 2006

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|   |                             
|32 | Remuneration reportcontinued
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|   |                             

Directors remuneration
     for 2006 (audited)The disclosures required by Part 3 of
   schedule 7A to the Companies Act 1985 (the auditable part) are
  contained within the following sections of The Remuneration report.

|                                |  |         |   |       |  |          |    |           |    |              |  | 2006  |  | 2005  |   
|------------------------------- |  | ------- | - | ----- |  | -------- | -- | --------- | -- | ------------ |  | ----- |  | ----- | --
|                                |  |         |   |       |  |          |    |           |    |              |  |       |  |       |   
|                                |  |         |   |       |  |          |    |           |    | Compensation |  |       |  |       |   
|                                |  | Salary/ |   |       |  |          |    |           |    | for Loss     |  |       |  |       |   
|                                |  | Fees    |   | Bonus |  | Benefits | 1  | Allowance | 2  | of Office    |  | Total |  | Total |   
|                                |  | £000    |   | £000  |  | £000     |    | £000      |    | £000         |  | £000  |  | £000  |   
|                                |  |         |   |       |  |          |    |           |    |              |  |       |  |       |   
|Niall FitzGerald, KBE3&4        |  | 500     |   |      |  | 3        |    |          |    |             |  | 503   |  | 523   |   
|                                |  |         |   |       |  |          |    |           |    |              |  |       |  |       |   
|Lawton Fitt                     |  | 53      | 6 |      |  |         |    | 35        | 5  |             |  | 88    |  | 75    |   
|                                |  |         |   |       |  |          |    |           |    |              |  |       |  |       |   
|Penny Hughes                    |  | 50      |   |      |  |         |    |          |    |             |  | 50    |  | 50    |   
|                                |  |         |   |       |  |          |    |           |    |              |  |       |  |       |   
|Ed Kozel                        |  | 50      |   |      |  |         |    | 35        | 5  |             |  | 85    |  | 80    |   
|                                |  |         |   |       |  |          |    |           |    |              |  |       |  |       |   
|Sir Deryck Maughan              |  | 50      |   |      |  |         |    | 20        | 5  |             |  | 70    |  | 14    |   
|                                |  |         |   |       |  |          |    |           |    |              |  |       |  |       |   
|Ken Olisa16                     |  | 50      |   |      |  |         |    |          |    |             |  | 50    |  | 51    |   
|                                |  |         |   |       |  |          |    |           |    |              |  |       |  |       |   
|Dick Olver                      |  | 68      | 7 |      |  |         |    |          |    |             |  | 68    |  | 70    |   
|                                |  |         |   |       |  |          |    |           |    |              |  |       |  |       |   
|Charles Sinclair15              |  | N/A     |   |      |  |         |    |          |    |             |  | N/A   |  | 55    |   
|                                |  |         |   |       |  |          |    |           |    |              |  |       |  |       |   
|Ian Strachan                    |  | 60      | 8 |      |  |         |    |          |    |             |  | 60    |  | 246   | 13
|                                |  |         |   |       |  |          |    |           |    |              |  |       |  |       |   
|Tom Glocer14                    |  | 842     |   | 1,149 |  | 274      | 9  |          |    |             |  | 2,265 |  | 1,966 |   
|                                |  |         |   |       |  |          |    |           |    |              |  |       |  |       |   
|David Grigson                   |  | 469     |   | 534   |  | 4        | 10 | 80        | 10 |             |  | 1,087 |  | 839   |   
|                                |  |         |   |       |  |          |    |           |    |              |  |       |  |       |   
|Devin Wenig                     |  | 454     |   | 516   |  | 20       | 11 | 11        | 11 |             |  | 1,001 |  | 639   |   
|                                |  |         |   |       |  |          |    |           |    |              |  |       |  |       |   
|Total emoluments of directors12 |  | 2,646   |   | 2,199 |  | 301      |    | 181       |    |             |  | 5,327 |  | 4,608 |   
|                                |  |         |   |       |  |          |    |           |    |              |  |       |  |       |   

|                                                                                                                 
|-----------------------------------------------------------------------------------------------------------------
|Notes:                                                                                                           
|                                                                                                                 
|All amounts have been rounded
      up to the nearest thousand.                                                  
|                                                                                                                 
|The following conversion rate
      was used: US$1.82: £1. This was the average rate in effect during
      2006.
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Other senior managers remuneration

|                                                                      |  |         |  |       |  |          |  |           |  |              |  | 2006  |  | 2005  | 
|--------------------------------------------------------------------- |  | ------- |  | ----- |  | -------- |  | --------- |  | ------------ |  | ----- |  | ----- | 
|                                                                      |  |         |  |       |  |          |  |           |  |              |  |       |  |       | 
|                                                                      |  |         |  |       |  |          |  |           |  | Compensation |  |       |  |       | 
|                                                                      |  | Salary/ |  |       |  |          |  |           |  | for Loss     |  |       |  |       | 
|                                                                      |  | Fees    |  | Bonus |  | Benefits |  | Allowance |  | of Office    |  | Total |  | Total | 
|                                                                      |  | £000    |  | £000  |  | £000     |  | £000      |  | £000         |  | £000  |  | £000  | 
|                                                                      |  |         |  |       |  |          |  |           |  |              |  |       |  |       | 
|Other senior managers as a
      group (17 persons) (2005: 6 persons) |  | 3,247   |  | 3,304 |  | 212      |  | 256       |  |             |  | 7,019 |  | 4,616 | 
|                                                                      |  |         |  |       |  |          |  |           |  |              |  |       |  |       | 

|                                                                                                                                                                       
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Notes:                                                                                                                                                                 
|                                                                                                                                                                       
|All amounts have been rounded up to the
      nearest thousand.                                                                                                        
|                                                                                                                                                                       
|The following conversion rates were used:
         US$ 1.82: £1, Swiss Franc 2.3: £1, Hong Kong $14.18: £1.
        These were the average rates in effect during 2006.



Reuters Group PLCAnnual
  Report and Form 20-F 2006

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|           |   
|Governance | 33
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Directors pensions (audited) Tom 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 2006 and 2007. He is entitled to a lump sum death-in-service
benefit 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


24% of salary up to a salary cap of £108,600.
He is entitled to a lump sum death-in-service benefit 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 2006 were:




|              |  |     |  | Company      | 
|------------- |  | --- |  | ------------ | 
|              |  |     |  | contribution | 
|              |  |     |  | in respect   | 
|              |  |     |  | of period    | 
|              |  | Age |  | £000         | 
|              |  |     |  |              | 
|Tom Glocer    |  | 47  |  | 214          | 
|              |  |     |  |              | 
|David Grigson |  | 52  |  | 30           | 
|              |  |     |  |              | 
|Devin Wenig   |  | 40  |  | 28           | 
|              |  |     |  |              | 



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 2006 to provide pension and similar benefits for the directors was £395,854 (2005: £307,310) and for the executive directors and the other senior managers
as a group was £1,178,386 (2005: £847,251).


These aggregate figures also include an accrual of £124,000 and £139,000 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.




Directors interests
      in long-term plans (audited)

|              |  |         |  |            |   | Number at    |  |         |  |           |        |           |            |   |          |   | Number at   |  |            |           | 
|------------- |  | ------- |  | ---------- | - | ------------ |  | ------- |  | --------- | ------ | --------- | ---------- | - | -------- | - | ----------- |  | ---------- | --------- | 
|              |  |         |  |            |   | 1 January    |  |         |  | Market    |        | Market    |            |   |          |   | 31 December |  |            |           | 
|              |  |         |  |            |   | 2006         |  | Number  |  | price per | Number | price per | Number     |   | Number   |   | 2006        |  |            |           | 
|              |  |         |  |            |   | (or later    |  | granted |  | share at  | vested | share at  | (released) |   | (lapsed) |   | (or earlier |  | End of     |           | 
|              |  |         |  | Date of    |   | date of      |  | during  |  | grant     | during | vesting   | during     |   | during   |   | date of     |  | qualifying | Expiry    | 
|              |  | Plan    |  | award      |   | appointment) |  | period  |  | (pounds)  | period | date      | period     | 4 | period   |   | departure)  |  | period     | date      | 
|              |  |         |  |            |   |              |  |         |  |           |        |           |            |   |          |   |             |  |            |           | 
|Tom Glocer    |  | LTIP1&2 |  | 25/06/2001 |   | 174,451      |  |        |  |          |       |          |           |   | (174,451 | ) |            |  | 31-Dec-05  | 01-Jan-06 | 
|              |  |         |  |            |   |              |  |         |  |           |        |           |            |   |          |   |             |  |            |           | 
|              |  |         |  | 20/02/2002 |   | 234,974      |  |        |  |          |       |          |           |   |         |   | 234,974     |  | 31-Dec-06  | 01-Jan-07 | 
|              |  |         |  |            |   |              |  |         |  |           |        |           |            |   |          |   |             |  |            |           | 
|              |  |         |  | 24/02/2003 |   | 1,731,277    |  |        |  |          |       |          |           |   |         |   | 1,731,277   |  | 31-Dec-07  | 01-Jan-08 | 
|              |  |         |  |            |   |              |  |         |  |           |        |           |            |   |          |   |             |  |            |           | 
|              |  |         |  | 23/02/2004 |   | 544,094      |  |        |  |          |       |          |           |   |         |   | 544,094     |  | 31-Dec-06  | 01-Jan-07 | 
|              |  |         |  |            |   |              |  |         |  |           |        |           |            |   |          |   |             |  |            |           | 
|              |  |         |  | 11/03/2005 |   | 417,228      |  |        |  |          |       |          |           |   |         |   | 417,228     |  | 31-Dec-07  | 01-Jan-08 | 
|              |  |         |  |            |   |              |  |         |  |           |        |           |            |   |          |   |             |  |            |           | 
|              |  |         |  | 15/03/2006 | 3 |             |  | 500,000 |  | £3.93     |       |          |           |   |         |   | 500,000     |  | 31-Dec-08  | 01-Jan-09 | 
|              |  |         |  |            |   |              |  |         |  |           |        |           |            |   |          |   |             |  |            |           | 
|Total         |  |         |  |            |   | 3,102,024    |  | 500,000 |  |          |       |          |           |   | (174,451 | ) | 3,427,573   |  |            |           | 
|              |  |         |  |            |   |              |  |         |  |           |        |           |            |   |          |   |             |  |            |           | 
|Devin Wenig   |  | PRSP1&2 |  | 29/03/2001 |   | 20,704       |  |        |  |          |       |          |           |   | (20,704  | ) |            |  | 31-Dec-05  | 01-Jan-06 | 
|              |  |         |  |            |   |              |  |         |  |           |        |           |            |   |          |   |             |  |            |           | 
|              |  | LTIP1&2 |  | 25/06/2001 |   | 2,295        |  |        |  |          |       |          |           |   | (2,295   | ) |            |  | 31-Dec-05  | 01-Jan-06 | 
|              |  |         |  |            |   |              |  |         |  |           |        |           |            |   |          |   |             |  |            |           | 
|              |  |         |  | 20/02/2002 |   | 22,047       |  |        |  |          |       |          |           |   |         |   | 22,047      |  | 31-Dec-06  | 01-Jan-07 | 
|              |  |         |  |            |   |              |  |         |  |           |        |           |            |   |          |   |             |  |            |           | 
|              |  |         |  | 24/02/2003 |   | 200,000      |  |        |  |          |       |          |           |   |         |   | 200,000     |  | 31-Dec-07  | 01-Jan-08 | 
|              |  |         |  |            |   |              |  |         |  |           |        |           |            |   |          |   |             |  |            |           | 
|              |  |         |  | 23/02/2004 |   | 200,000      |  |        |  |          |       |          |           |   |         |   | 200,000     |  | 31-Dec-06  | 01-Jan-07 | 
|              |  |         |  |            |   |              |  |         |  |           |        |           |            |   |          |   |             |  |            |           | 
|              |  |         |  | 11/03/2005 |   | 163,468      |  |        |  |          |       |          |           |   |         |   | 163,468     |  | 31-Dec-07  | 01-Jan-08 | 
|              |  |         |  |            |   |              |  |         |  |           |        |           |            |   |          |   |             |  |            |           | 
|              |  |         |  | 15/03/2006 | 3 |             |  | 250,000 |  | £3.93     |       |          |           |   |         |   | 250,000     |  | 31-Dec-08  | 01-Jan-09 | 
|              |  |         |  |            |   |              |  |         |  |           |        |           |            |   |          |   |             |  |            |           | 
|Total         |  |         |  |            |   | 608,514      |  | 250,000 |  |          |       |          |           |   | (22,999  | ) | 835,515     |  |            |           | 
|              |  |         |  |            |   |              |  |         |  |           |        |           |            |   |          |   |             |  |            |           | 
|David Grigson |  | LTIP1&2 |  | 25/06/2001 |   | 26,294       |  |        |  |          |       |          |           |   | (26,294  | ) |            |  | 31-Dec-05  | 01-Jan-06 | 
|              |  |         |  |            |   |              |  |         |  |           |        |           |            |   |          |   |             |  |            |           | 
|              |  |         |  | 20/02/2002 |   | 37,205       |  |        |  |          |       |          |           |   |         |   | 37,205      |  | 31-Dec-06  | 01-Jan-07 | 
|              |  |         |  |            |   |              |  |         |  |           |        |           |            |   |          |   |             |  |            |           | 
|              |  |         |  | 24/02/2003 |   | 200,000      |  |        |  |          |       |          |           |   |         |   | 200,000     |  | 31-Dec-07  | 01-Jan-08 | 
|              |  |         |  |            |   |              |  |         |  |           |        |           |            |   |          |   |             |  |            |           | 
|              |  |         |  | 23/02/2004 |   | 200,000      |  |        |  |          |       |          |           |   |         |   | 200,000     |  | 31-Dec-06  | 01-Jan-07 | 
|              |  |         |  |            |   |              |  |         |  |           |        |           |            |   |          |   |             |  |            |           | 
|              |  |         |  | 11/03/2005 |   | 163,468      |  |        |  |          |       |          |           |   |         |   | 163,468     |  | 31-Dec-07  | 01-Jan-08 | 
|              |  |         |  |            |   |              |  |         |  |           |        |           |            |   |          |   |             |  |            |           | 
|              |  |         |  | 15/03/2006 | 3 |             |  | 200,000 |  | £3.93     |       |          |           |   |         |   | 200,000     |  | 31-Dec-08  | 01-Jan-09 | 
|              |  |         |  |            |   |              |  |         |  |           |        |           |            |   |          |   |             |  |            |           | 
|Total         |  |         |  |            |   | 626,967      |  | 200,000 |  |          |       |          |           |   | (26,294  | ) | 800,673     |  |            |           | 
|              |  |         |  |            |   |              |  |         |  |           |        |           |            |   |          |   |             |  |            |           | 

|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Notes:
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|1      | See performance conditions attached to
         LTIP awards, as described on page 30.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|      
|       | The PRSP plan operated from 1995 to 2001
      and targeted senior executives not participating in the LTIP. Devin Wenig
      held awards granted before he became an executive director. All outstanding
      awards have now lapsed. The performance condition was the same as for LTIP,
      although vested shares could be released three years after grant.                                                                                                                                                                                                                                                                                                                                             
|      
|2      | LTIP 2001 and PRSP 2001 awards are available
      for exercise immediately on vesting. The qualifying period may be extended
      by up to two years where vesting does not occur or is only partial after
      the initial three-year period. LTIP awards to executive directors prior
      to 2004 are subject to a retention period of two years from vesting, save
      that this is reduced to one year where the performance period has been extended
      to five years. For awards made in or prior to 2003, the plan permits the
      measurement period to be extended by up to two years under a re-testing
      provision. For LTIP awards made from 2004 onwards no re-testing is permitted.
|      
|       | LTIP 2001 and PRSP 2001 did not meet performance
      conditions and therefore lapsed. Had they vested they would have been exercisable
      from 1 January 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|      
|3      | 2006 awards are described on page 30.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|      
|4      | Subject to performance conditions being
      met, share awards are due for release as soon as possible after vesting
      (subject to any restricted period).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  



Reuters Group PLCAnnual
  Report and Form 20-F 2006

---



Back to Contents

|   |                              
|-- | -----------------------------
|   |                              
|34 | Remuneration report continued
|   |                              
|   |                              

Senior managers interests
in long-term plans (audited)

|                   |  |         |  |            |  | Number at    |  |         |  |           |  |        |  | Market    |  |            |   |          |   | Number at   |  |            |  |           | 
|------------------ |  | ------- |  | ---------- |  | ------------ |  | ------- |  | --------- |  | ------ |  | --------- |  | ---------- | - | -------- | - | ----------- |  | ---------- |  | --------- | 
|                   |  |         |  |            |  | 1 January    |  |         |  | Market    |  |        |  | price per |  |            |   |          |   | 31 December |  |            |  |           | 
|                   |  |         |  |            |  | 2006         |  | Number  |  | price per |  | Number |  | share at  |  | Number     |   | Number   |   | 2006        |  |            |  |           | 
|                   |  |         |  |            |  | (or later    |  | granted |  | share at  |  | vested |  | vesting   |  | (released) |   | (lapsed) |   | (or earlier |  | End of     |  |           | 
|                   |  |         |  | Date of    |  | date of      |  | during  |  | grant     |  | during |  | date      |  | during     |   | during   |   | date of     |  | qualifying |  | Expiry    | 
|                   |  | Plan    |  | award      |  | appointment) |  | period  |  | (pounds)  |  | period |  | (pounds)  |  | period5    |   | period   |   | departure)  |  | period     |  | date      | 
|                   |  |         |  |            |  |              |  |         |  |           |  |        |  |           |  |            |   |          |   |             |  |            |  |           | 
|Other senior       |  |         |  |            |  |              |  |         |  |           |  |        |  |           |  |            |   |          |   |             |  |            |  |           | 
|managers as a      |  |         |  |            |  |              |  |         |  |           |  |        |  |           |  |            |   |          |   |             |  |            |  |           | 
|group (17 persons) |  |         |  |            |  |              |  |         |  |           |  |        |  |           |  |            |   |          |   |             |  |            |  |           | 
|(2005: 6 persons)6 |  | PRSP1&2 |  | 29/03/2001 |  | 13,884       |  |        |  |          |  |       |  |          |  |           |   | (13,884  | ) |            |  | 31-Dec-05  |  | 01-Jan-06 | 
|                   |  |         |  |            |  |              |  |         |  |           |  |        |  |           |  |            |   |          |   |             |  |            |  |           | 
|                   |  | LTIP1&2 |  | 25/06/2001 |  | 2,602        |  |        |  |          |  |       |  |          |  |           |   | (2,602   | ) |            |  | 31-Dec-05  |  | 01-Jan-06 | 
|                   |  |         |  |            |  |              |  |         |  |           |  |        |  |           |  |            |   |          |   |             |  |            |  |           | 
|                   |  |         |  | 20/02/2002 |  | 97,369       |  |        |  |          |  |       |  |          |  |           |   |         |   | 97,369      |  | 31-Dec-06  |  | 01-Jan-07 | 
|                   |  |         |  |            |  |              |  |         |  |           |  |        |  |           |  |            |   |          |   |             |  |            |  |           | 
|                   |  |         |  | 24/02/2003 |  | 807,463      |  |        |  |          |  |       |  |          |  |           |   |         |   | 807,463     |  | 31-Dec-07  |  | 01-Jan-08 | 
|                   |  |         |  |            |  |              |  |         |  |           |  |        |  |           |  |            |   |          |   |             |  |            |  |           | 
|                   |  |         |  | 23/02/2004 |  | 407,814      |  |        |  |          |  |       |  |          |  |           |   |         |   | 407,814     |  | 31-Dec-06  |  | 01-Jan-07 | 
|                   |  |         |  |            |  |              |  |         |  |           |  |        |  |           |  |            |   |          |   |             |  |            |  |           | 
|                   |  |         |  | 03/12/2004 |  | 92,368       |  |        |  |          |  |       |  |          |  |           |   |         |   | 92,368      |  | 31-Dec-06  |  | 01-Jan-07 | 
|                   |  |         |  |            |  |              |  |         |  |           |  |        |  |           |  |            |   |          |   |             |  |            |  |           | 
|                   |  |         |  | 11/03/2005 |  | 461,472      |  |        |  |          |  |       |  |          |  |           |   |         |   | 461,472     |  | 31-Dec-07  |  | 01-Jan-08 | 
|                   |  |         |  |            |  |              |  |         |  |           |  |        |  |           |  |            |   |          |   |             |  |            |  |           | 
|                   |  |         |  | 15/03/2006 |  | 268,146      |  | 368,208 |  | £3.93     |  |       |  |          |  |           |   |         |   | 636,354     |  | 31-Dec-08  |  | 01-Jan-09 | 
|                   |  |         |  |            |  |              |  |         |  |           |  |        |  |           |  |            |   |          |   |             |  |            |  |           | 
|                   |  |         |  | 02/08/2006 |  |             |  | 64,000  |  | £3.93     |  |       |  |          |  |           |   |         |   | 64,000      |  | 31-Dec-08  |  | 01-Jan-09 | 
|                   |  |         |  |            |  |              |  |         |  |           |  |        |  |           |  |            |   |          |   |             |  |            |  |           | 
|                   |  | RSP3    |  | 27/08/2004 |  | 70,647       |  |        |  | £3.21     |  | 21,507 |  | £3.95     |  | (21,507    | ) |         |   | 49,140      |  | 27-Aug-06  |  | 27-Aug-08 | 
|                   |  |         |  |            |  |              |  |         |  |           |  |        |  |           |  |            |   |          |   |             |  |            |  |           | 
|                   |  |         |  | 03/12/2004 |  | 25,857       |  |        |  | £3.89     |  | 8,619  |  | £4.50     |  | (8,619     | ) |         |   | 17,238      |  | 03-Dec-06  |  | 03-Dec-08 | 
|                   |  |         |  |            |  |              |  |         |  |           |  |        |  |           |  |            |   |          |   |             |  |            |  |           | 
|                   |  |         |  | 11/03/2005 |  | 159,347      |  |        |  | £4.19     |  | 1,838  |  | £3.92     |  | (1,838     | ) |         |   | 157,509     |  | 11-Mar-06  |  | 11-Mar-09 | 
|                   |  |         |  |            |  |              |  |         |  |           |  |        |  |           |  |            |   |          |   |             |  |            |  |           | 
|                   |  |         |  | 02/08/2005 |  | 19,632       |  |        |  | £3.89     |  | 4,908  |  | £3.87     |  | (4,908     | ) |         |   | 14,724      |  | 02-Aug-06  |  | 02-Aug-09 | 
|                   |  |         |  |            |  |              |  |         |  |           |  |        |  |           |  |            |   |          |   |             |  |            |  |           | 
|                   |  |         |  | 15/03/2006 |  | 264,855      |  | 11,648  |  | £3.93     |  |       |  |          |  |           |   |         |   | 276,503     |  | 15-Mar-07  |  | 15-Mar-10 | 
|                   |  |         |  |            |  |              |  |         |  |           |  |        |  |           |  |            |   |          |   |             |  |            |  |           | 
|                   |  | ABPSP4  |  | 11/03/2005 |  | 417          |  |        |  | £4.19     |  | 417    |  | £3.92     |  | (417       | ) |         |   |            |  | 11-Mar-06  |  | 11-Mar-06 | 
|                   |  |         |  |            |  |              |  |         |  |           |  |        |  |           |  |            |   |          |   |             |  |            |  |           | 
|Total              |  |         |  |            |  | 2,691,873    |  | 443,856 |  |          |  | 37,289 |  |           |  | (37,289    | ) | (16,486  | ) | 3,081,954   |  |            |  |           | 
|                   |  |         |  |            |  |              |  |         |  |           |  |        |  |           |  |            |   |          |   |             |  |            |  |           | 

|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Notes:
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|1      | See performance conditions attached to LTIP awards, as described on page 30 above.                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|      
|       | The PRSP plan operated from 1995 to 2001 and targeted senior executives not participating in the LTIP. All outstanding awards have now lapsed. The performance condition was the same as for LTIP, although vested shares
could be released three years after grant.                                                                                                                                                                                                                                                                         
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|2      | LTIP 2001 and PRSP 2001 awards are available for exercise immediately on vesting. The qualifying period may be extended by up to two years where vesting does not occur or is only partial after the initial three-year
period. For awards made in or prior to 2003, the plan permits the measurement period to be extended by up to two years under a re-testing provision. For LTIP awards made from 2004 onwards no re-testing is permitted.                                                                                              
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|       | LTIP 2001 and PRSP 2001 did not meet performance conditions and therefore lapsed. Had they vested they would have been exercisable from 1 January 2006.                                                                                                                                                                                                                                                                                                                                                                                      
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|3      | The restricted share plan was introduced in 2004. Restricted shares will not normally be granted for long-term incentive purposes to executive directors or members of the GLT. The indicated awards were made prior to
the appointment of the relevant individuals as GLT members. Awards are normally granted with a four year vesting period, vesting 25% each year. Therefore, 25% vested in 2006 on the anniversary of the date of grant. If this date fell on a non-trading
date, the shares vested at the next available trading date.
|      
|4      | The annual bonus profit sharing plan was introduced in 2004 to focus employees on reward for profit growth. From 2005, any payments under the plan are made in cash to simplify the operation of the plan. GLT members did
not participate in this plan in 2006.                                                                                                                                                                                                                                                                             
|      
|5      | Subject to performance conditions being met, share awards are due for release as soon as possible after vesting (subject to any restricted period).                                                                                                                                                                                                                                                                                                                                                                                          
|      
|6      | Other senior managers as a group were 6 persons at 1 January 2006 and were 16 persons at 31 December 2006 following the creation of the GLT in June 2006, which replaced the Group Management Committee (GMC).                                                                                                                                                                                                                                                                                                                               



Reuters Group PLCAnnual Report and Form 20-F 2006

---



Back to Contents

|           |   
|---------- | --
|           |   
|Governance | 35
|           |   
|           |   

Share options granted
      to directors (audited)

|               |  |       |  |            |     |          |  | Number at    |  |           |  |           |  |             |   |          |   | Number at   |  |           |  |           | 
|-------------- |  | ----- |  | ---------- | --- | -------- |  | ------------ |  | --------- |  | --------- |  | ----------- | - | -------- | - | ----------- |  | --------- |  | --------- | 
|               |  |       |  |            |     |          |  | 1 January    |  |           |  |           |  |             |   |          |   | 31 December |  |           |  |           | 
|               |  |       |  |            |     |          |  | 2006         |  | Number    |  | Number    |  | Number      |   | Number   |   | 2006        |  |           |  |           | 
|               |  |       |  |            |     | Exercise |  | (or later    |  | granted   |  | vested    |  | (exercised) |   | (lapsed) |   | (or earlier |  | Earliest  |  |           | 
|               |  |       |  | Date of    |     | price    |  | date of      |  | during    |  | during    |  | during      |   | during   |   | date of     |  | exercise  |  | Expiry    | 
|               |  | Plan  |  | grant      |     | (pounds) |  | appointment) |  | period    |  | period    |  | period      | 6 | period   |   | departure)  |  | date      |  | date      | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|Tom Glocer6    |  | DSOP3 |  | 25/06/2001 |     | £8.62    |  | 565,113      |  |          |  |          |  |            |   | (565,113 | ) |            |  | 25-Jun-06 |  | 25-Jun-11 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  |       |  | 20/02/2002 |     | £5.28    |  | 461,295      |  |          |  |          |  |            |   |         |   | 461,295     |  | 20-Feb-07 |  | 20-Feb-12 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  |       |  | 02/08/2002 |     | £2.66    |  | 915,654      |  |          |  |          |  |            |   |         |   | 915,654     |  | 02-Aug-07 |  | 02-Aug-12 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  |       |  | 24/02/2003 |     | £1.35    |  | 1,307,514    |  |          |  | 1,307,514 |  |            |   |         |   | 1,307,514   |  | 24-Feb-06 |  | 24-Feb-13 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  |       |  | 04/08/2003 |     | £2.45    |  | 706,594      |  |          |  | 706,594   |  |            |   |         |   | 706,594     |  | 04-Aug-06 |  | 04-Aug-13 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  |       |  | 23/02/2004 |     | £4.07    |  | 789,430      |  |          |  |          |  |            |   |         |   | 789,430     |  | 23-Feb-07 |  | 23-Feb-14 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  |       |  | 27/08/2004 |     | £3.21    |  | 1,000,928    |  |          |  |          |  |            |   |         |   | 1,000,928   |  | 27-Aug-07 |  | 27-Aug-14 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  |       |  | 11/03/2005 |     | £4.19    |  | 719,473      |  |          |  |          |  |            |   |         |   | 719,473     |  | 11-Mar-08 |  | 11-Mar-15 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  |       |  | 02/08/2005 |     | £3.89    |  | 774,959      |  |          |  |          |  |            |   |         |   | 774,959     |  | 02-Aug-08 |  | 02-Aug-15 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  |       |  | 15/03/2006 | 5   | £3.93    |  |             |  | 625,000   |  |          |  |            |   |         |   | 625,000     |  | 15-Mar-09 |  | 15-Mar-16 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  |       |  | 02/08/2006 | 5   | £3.93    |  |             |  | 625,000   |  |          |  |            |   |         |   | 625,000     |  | 02-Aug-09 |  | 02-Aug-16 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  | SAYE4 |  | 16/04/2003 |     | £0.90    |  | 4,200        |  |          |  | 4,200     |  | (4,200      | ) |         |   |            |  | 01-Jun-06 |  | 01-Dec-06 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  |       |  | 07/04/2004 |     | £3.14    |  | 1,200        |  |          |  |          |  |            |   |         |   | 1,200       |  | 01-Jun-07 |  | 01-Dec-07 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  |       |  | 14/04/2005 |     | £3.33    |  | 569          |  |          |  |          |  |            |   |         |   | 569         |  | 01-Jun-08 |  | 01-Dec-08 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  |       |  | 10/04/2006 | 5   | £3.14    |  |             |  | 1,191     |  |          |  |            |   |         |   | 1,191       |  | 01-Jun-09 |  | 01-Dec-09 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|Total          |  |       |  |            |     |          |  | 7,246,929    |  | 1,251,191 |  | 2,018,308 |  | (4,200      | ) | (565,113 | ) | 7,928,807   |  |           |  |           | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|Devin Wenig6   |  | DSOP3 |  | 27/12/2000 | 2&3 | £11.39   |  | 6,913        |  |          |  |          |  |            |   |         |   | 6,913       |  | 27-Dec-01 |  | 27-Dec-07 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  |       |  | 25/06/2001 | 2&3 | £8.62    |  | 9,135        |  |          |  |          |  |            |   |         |   | 9,135       |  | 25-Jun-02 |  | 25-Jun-11 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  |       |  | 20/02/2002 | 2&3 | £5.28    |  | 25,936       |  |          |  | 6,484     |  |            |   |         |   | 25,936      |  | 20-Feb-03 |  | 20-Feb-12 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  |       |  | 02/08/2002 | 2&3 | £2.66    |  | 200,000      |  |          |  | 50,000    |  |            |   |         |   | 200,000     |  | 02-Aug-03 |  | 02-Aug-12 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  |       |  | 24/02/2003 |     | £1.35    |  | 200,000      |  |          |  | 200,000   |  |            |   |         |   | 200,000     |  | 24-Feb-06 |  | 24-Feb-13 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  |       |  | 04/08/2003 |     | £2.45    |  | 200,000      |  |          |  | 200,000   |  |            |   |         |   | 200,000     |  | 04-Aug-06 |  | 04-Aug-13 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  |       |  | 23/02/2004 |     | £4.07    |  | 122,950      |  |          |  |          |  |            |   |         |   | 122,950     |  | 23-Feb-07 |  | 23-Feb-14 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  |       |  | 27/08/2004 |     | £3.21    |  | 155,892      |  |          |  |          |  |            |   |         |   | 155,892     |  | 27-Aug-07 |  | 27-Aug-14 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  |       |  | 11/03/2005 |     | £4.19    |  | 281,886      |  |          |  |          |  |            |   |         |   | 281,886     |  | 11-Mar-08 |  | 11-Mar-15 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  |       |  | 02/08/2005 |     | £3.89    |  | 303,625      |  |          |  |          |  |            |   |         |   | 303,625     |  | 02-Aug-08 |  | 02-Aug-15 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  |       |  | 15/03/2006 | 5   | £3.93    |  |             |  | 325,000   |  |          |  |            |   |         |   | 325,000     |  | 15-Mar-09 |  | 15-Mar-16 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  |       |  | 02/08/2006 | 5   | £3.93    |  |             |  | 325,000   |  |          |  |            |   |         |   | 325,000     |  | 02-Aug-09 |  | 02-Aug-16 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  | SAYE4 |  | 07/04/2004 | 1   | $7.27    |  | 1,200        |  |          |  |          |  |            |   |         |   | 1,200       |  | 01-Jun-07 |  | 01-Dec-07 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  |       |  | 14/04/2005 | 1   | $7.93    |  | 1,134        |  |          |  |          |  |            |   |         |   | 1,134       |  | 01-Jun-08 |  | 01-Dec-08 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|Total          |  |       |  |            |     |          |  | 1,508,671    |  | 650,000   |  | 456,484   |  |            |   |         |   | 2,158,671   |  |           |  |           | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|David Grigson6 |  | DSOP3 |  | 25/06/2001 |     | £8.62    |  | 92,807       |  |          |  |          |  |            |   | (92,807  | ) |            |  | 25-Jun-06 |  | 25-Jun-11 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  |       |  | 20/02/2002 |     | £5.28    |  | 75,757       |  |          |  |          |  |            |   |         |   | 75,757      |  | 20-Feb-07 |  | 20-Feb-12 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  |       |  | 02/08/2002 |     | £2.66    |  | 150,375      |  |          |  |          |  |            |   |         |   | 150,375     |  | 02-Aug-07 |  | 02-Aug-12 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  |       |  | 24/02/2003 |     | £1.35    |  | 200,000      |  |          |  | 200,000   |  |            |   |         |   | 200,000     |  | 24-Feb-06 |  | 24-Feb-13 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  |       |  | 04/08/2003 |     | £2.45    |  | 200,000      |  |          |  | 200,000   |  |            |   |         |   | 200,000     |  | 04-Aug-06 |  | 04-Aug-13 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  |       |  | 23/02/2004 |     | £4.07    |  | 122,950      |  |          |  |          |  |            |   |         |   | 122,950     |  | 23-Feb-07 |  | 23-Feb-14 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  |       |  | 27/08/2004 |     | £3.21    |  | 155,892      |  |          |  |          |  |            |   |         |   | 155,892     |  | 27-Aug-07 |  | 27-Aug-14 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  |       |  | 11/03/2005 |     | £4.19    |  | 281,886      |  |          |  |          |  |            |   |         |   | 281,886     |  | 11-Mar-08 |  | 11-Mar-15 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  |       |  | 02/08/2005 |     | £3.89    |  | 303,625      |  |          |  |          |  |            |   |         |   | 303,625     |  | 02-Aug-08 |  | 02-Aug-15 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  |       |  | 15/03/2006 | 5   | £3.93    |  |             |  | 250,000   |  |          |  |            |   |         |   | 250,000     |  | 15-Mar-09 |  | 15-Mar-16 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  |       |  | 02/08/2006 | 5   | £3.93    |  |             |  | 250,000   |  |          |  |            |   |         |   | 250,000     |  | 02-Aug-09 |  | 02-Aug-16 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  | SAYE4 |  | 16/04/2003 |     | £0.90    |  | 4,200        |  |          |  | 4,200     |  | (4,200      | ) |         |   |            |  | 01-Jun-06 |  | 01-Dec-06 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  |       |  | 07/04/2004 |     | £3.14    |  | 1,200        |  |          |  |          |  |            |   |         |   | 1,200       |  | 01-Jun-07 |  | 01-Dec-07 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|               |  |       |  | 14/04/2005 |     | £3.33    |  | 569          |  |          |  |          |  |            |   |         |   | 569         |  | 01-Jun-08 |  | 01-Dec-08 | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 
|Total          |  |       |  |            |     |          |  | 1,589,261    |  | 500,000   |  | 404,200   |  | (4,200      | ) | (92,807  | ) | 1,992,254   |  |           |  |           | 
|               |  |       |  |            |     |          |  |              |  |           |  |           |  |             |   |          |   |             |  |           |  |           | 

|       |                                                                                                                                                                                                                                                                                                                                  
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Notes:
|       |                                                                                                                                                                                                                                                                                                                                  
|1      | The options indicated are over American
      Depositary Shares (ADSs). Each ADS represents six ordinary shares, is denominated
      in 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      | Save as disclosed in note 2 above, exercise
      of each DSOP award is conditional on the performance criteria described
      on page 30. Performance conditions were varied during 2006 as described
      on page 30.                                                                                                        
|      
|4      | Options granted under the SAYE Plan have
      no performance conditions.                                                                                                                                                                                                                                                        
|      
|5      | 2006 awards are described on page 30.                                                                                                                                                                                                                                                                                            
|      
|6      | There were total gains of £27,384
      on the exercise of share options in 2006 (2005: £nil). The market price
      of the shares at the dates of exercise on 1 June 2006 and 8 November 2006
      were £3.78 and £4.55 respectively.                                                                                         
|      
|       | At 29 December 2006, the market price
      of our shares was 445.25 pence per share and $52.24 per ADS. The highest
      prices during the year were 475 pence per share and $54.25 per ADS and
      the lowest were 348.50 pence per share and $38.51 per ADS.                                                               



Reuters Group PLCAnnual
Report and Form 20-F 2006

---



Back to Contents

|   |                              
|-- | -----------------------------
|   |                              
|36 | Remuneration report continued
|   |                              
|   |                              

Share options granted to
    senior managers (audited)

|                        |  |       |  |            |  |          |  | Number at    |  |         |  |         |  |             |   |          |   | Number at   |  |           |  |           | 
|----------------------- |  | ----- |  | ---------- |  | -------- |  | ------------ |  | ------- |  | ------- |  | ----------- | - | -------- | - | ----------- |  | --------- |  | --------- | 
|                        |  |       |  |            |  |          |  | 1 January    |  |         |  |         |  |             |   |          |   | 31 December |  |           |  |           | 
|                        |  |       |  |            |  |          |  | 2006         |  | Number  |  | Number  |  | Number      |   | Number   |   | 2006        |  |           |  |           | 
|                        |  |       |  |            |  | Exercise |  | (or later    |  | granted |  | vested  |  | (exercised) |   | (lapsed) |   | (or earlier |  | Earliest  |  |           | 
|                        |  |       |  | Date of    |  | price    |  | date of      |  | during  |  | during  |  | during      |   | during   |   | date of     |  | exercise  |  | Expiry    | 
|                        |  | Plan  |  | grant      |  | (pounds) |  | appointment) |  | period  |  | period  |  | period      |   | period   |   | departure)  |  | date      |  | date      | 
|                        |  |       |  |            |  |          |  |              |  |         |  |         |  |             |   |          |   |             |  |           |  |           | 
|Other senior managers   |  |       |  |            |  |          |  |              |  |         |  |         |  |             |   |          |   |             |  |           |  |           | 
|as a group (17 persons) |  |       |  |            |  |          |  |              |  |         |  |         |  |             |   |          |   |             |  |           |  |           | 
|(2005: 6 persons)3      |  | DSOP2 |  | 27/12/2000 |  | £11.39   |  | 37,858       |  |        |  |        |  |            |   |         |   | 37,858      |  | 27-Dec-01 |  | 27-Dec-07 | 
|                        |  |       |  |            |  |          |  |              |  |         |  |         |  |             |   |          |   |             |  |           |  |           | 
|                        |  |       |  | 25/06/2001 |  | £8.62    |  | 5,800        |  |        |  |        |  |            |   | (5,800   | ) |            |  | 25-Jun-02 |  | 25-Jun-06 | 
|                        |  |       |  |            |  |          |  |              |  |         |  |         |  |             |   |          |   |             |  |           |  |           | 
|                        |  |       |  | 25/06/2001 |  | £8.62    |  | 76,243       |  |        |  |        |  |            |   |         |   | 76,243      |  | 25-Jun-02 |  | 25-Jun-11 | 
|                        |  |       |  |            |  |          |  |              |  |         |  |         |  |             |   |          |   |             |  |           |  |           | 
|                        |  |       |  | 21/12/2001 |  | £6.92    |  | 13,549       |  |        |  |        |  |            |   |         |   | 13,549      |  | 21-Dec-02 |  | 21-Dec-11 | 
|                        |  |       |  |            |  |          |  |              |  |         |  |         |  |             |   |          |   |             |  |           |  |           | 
|                        |  |       |  | 20/02/2002 |  | £5.28    |  | 5,697        |  |        |  | 1,424   |  |            |   |         |   | 5,697       |  | 20-Feb-03 |  | 20-Feb-07 | 
|                        |  |       |  |            |  |          |  |              |  |         |  |         |  |             |   |          |   |             |  |           |  |           | 
|                        |  |       |  | 20/02/2002 |  | £5.28    |  | 117,111      |  |        |  | 13,843  |  |            |   |         |   | 117,111     |  | 20-Feb-03 |  | 20-Feb-12 | 
|                        |  |       |  |            |  |          |  |              |  |         |  |         |  |             |   |          |   |             |  |           |  |           | 
|                        |  |       |  | 02/08/2002 |  | £2.66    |  | 150,000      |  |        |  | 37,500  |  | (150,000    | ) |         |   |            |  | 02-Aug-03 |  | 02-Aug-07 | 
|                        |  |       |  |            |  |          |  |              |  |         |  |         |  |             |   |          |   |             |  |           |  |           | 
|                        |  |       |  | 02/08/2002 |  | £2.66    |  | 736,954      |  |        |  | 198,813 |  |            |   |         |   | 736,954     |  | 02-Aug-03 |  | 02-Aug-12 | 
|                        |  |       |  |            |  |          |  |              |  |         |  |         |  |             |   |          |   |             |  |           |  |           | 
|                        |  |       |  | 24/02/2003 |  | £1.35    |  | 488,108      |  |        |  | 98,579  |  | (81,829     | ) |         |   | 406,279     |  | 24-Feb-04 |  | 24-Feb-13 | 
|                        |  |       |  |            |  |          |  |              |  |         |  |         |  |             |   |          |   |             |  |           |  |           | 
|                        |  |       |  | 01/04/2003 |  | £1.08    |  | 56,250       |  |        |  |        |  | (37,500     | ) |         |   | 18,750      |  | 01-Apr-04 |  | 01-Apr-13 | 
|                        |  |       |  |            |  |          |  |              |  |         |  |         |  |             |   |          |   |             |  |           |  |           | 
|                        |  |       |  | 04/08/2003 |  | £2.45    |  | 901,365      |  |        |  | 238,788 |  | (112,500    | ) |         |   | 788,865     |  | 04-Aug-04 |  | 04-Aug-13 | 
|                        |  |       |  |            |  |          |  |              |  |         |  |         |  |             |   |          |   |             |  |           |  |           | 
|                        |  |       |  | 23/02/2004 |  | £4.07    |  | 377,713      |  |        |  | 59,834  |  |            |   |         |   | 377,713     |  | 23-Feb-05 |  | 23-Feb-14 | 
|                        |  |       |  |            |  |          |  |              |  |         |  |         |  |             |   |          |   |             |  |           |  |           | 
|                        |  |       |  | 27/08/2004 |  | £3.21    |  | 343,608      |  |        |  | 85,902  |  |            |   |         |   | 343,608     |  | 27-Aug-05 |  | 27-Aug-14 | 
|                        |  |       |  |            |  |          |  |              |  |         |  |         |  |             |   |          |   |             |  |           |  |           | 
|                        |  |       |  | 11/03/2005 |  | £4.19    |  | 224,648      |  |        |  | 56,162  |  |            |   |         |   | 224,648     |  | 11-Mar-06 |  | 11-Mar-15 | 
|                        |  |       |  |            |  |          |  |              |  |         |  |         |  |             |   |          |   |             |  |           |  |           | 
|                        |  |       |  | 02/08/2005 |  | £3.89    |  | 241,968      |  |        |  | 60,492  |  |            |   |         |   | 241,968     |  | 02-Aug-06 |  | 02-Aug-15 | 
|                        |  |       |  |            |  |          |  |              |  |         |  |         |  |             |   |          |   |             |  |           |  |           | 
|                        |  |       |  | 15/03/2006 |  | £3.93    |  | 36,000       |  | 234,000 |  |        |  |            |   |         |   | 270,000     |  | 15-Mar-07 |  | 15-Mar-16 | 
|                        |  |       |  |            |  |          |  |              |  |         |  |         |  |             |   |          |   |             |  |           |  |           | 
|                        |  |       |  | 02/08/2006 |  | £3.93    |  |             |  | 355,000 |  |        |  |            |   |         |   | 355,000     |  | 02-Aug-07 |  | 02-Aug-16 | 
|                        |  |       |  |            |  |          |  |              |  |         |  |         |  |             |   |          |   |             |  |           |  |           | 
|                        |  | SAYE1 |  | 11/04/2002 |  | £4.48    |  | 4,022        |  |        |  |        |  |            |   |         |   | 4,022       |  | 01-Jun-05 |  | 01-Dec-05 | 
|                        |  |       |  |            |  |          |  |              |  |         |  |         |  |             |   |          |   |             |  |           |  |           | 
|                        |  |       |  | 16/04/2003 |  | £0.90    |  | 16,800       |  |        |  | 8,400   |  | (12,600     | ) |         |   | 4,200       |  | 01-Jun-06 |  | 01-Dec-06 | 
|                        |  |       |  |            |  |          |  |              |  |         |  |         |  |             |   |          |   |             |  |           |  |           | 
|                        |  |       |  | 07/04/2004 |  | £3.14    |  | 10,800       |  |        |  |        |  |            |   |         |   | 10,800      |  | 01-Jun-07 |  | 01-Dec-07 | 
|                        |  |       |  |            |  |          |  |              |  |         |  |         |  |             |   |          |   |             |  |           |  |           | 
|                        |  |       |  | 14/04/2005 |  | £3.33    |  | 4,779        |  |        |  |        |  |            |   |         |   | 4,779       |  | 01-Jun-08 |  | 01-Dec-08 | 
|                        |  |       |  |            |  |          |  |              |  |         |  |         |  |             |   |          |   |             |  |           |  |           | 
|                        |  |       |  | 10/04/2006 |  | £3.14    |  | 3,551        |  | 1,786   |  |        |  |            |   |         |   | 5,337       |  | 01-Jun-09 |  | 01-Dec-09 | 
|                        |  |       |  |            |  |          |  |              |  |         |  |         |  |             |   |          |   |             |  |           |  |           | 
|Total                   |  |       |  |            |  |          |  | 3,852,824    |  | 590,786 |  | 859,737 |  | (394,429    | ) | (5,800   | ) | 4,043,381   |  |           |  |           | 
|                        |  |       |  |            |  |          |  |              |  |         |  |         |  |             |   |          |   |             |  |           |  |           | 

|       |                                                                                                                                                                                                                                                                                                                   
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Notes:
|       |                                                                                                                                                                                                                                                                                                                   
|1      | Options granted under the SAYE Plan have no performance conditions.                                                                                                                                                                                                                                               
|      
|2      | The DSOP was approved by the shareholders in April 2001. Awards are normally granted with a four year vesting period, vesting 25% each year. Therefore, 25% vested in 2006 on the anniversary of the date of grant. If
this date fell on a non-trading date, the shares vested at the next available trading date.
|      
|3      | Other senior managers as a group were 6 persons at 1 January 2006 and were 16 persons at 31 December 2006 following the creation of the GLT in June 2006, which replaced the GMC.                                                                                                                                 
|      
|       | At 29 December 2006, the market price of our shares was 445.25 pence per share and $52.24 per ADS. The highest prices during the year were 475 pence per share and $54.25 per ADS and the lowest were 348.50 pence
per share and $38.51 per ADS.                                                                  



Reuters Group PLCAnnual Report and Form 20-F 2006

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|           |   
|Governance | 37
|           |   
|           |   
|           |   

Directors interests in ordinary
    sharesThe total interests of the current directors
    in issued share capital and in shares underlying options and incentive plans
    are shown below as at 9 March 2007. 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 2006 and 31 December 2006 are also shown for directors in office at 31 December 2006. 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 |  | Interests at |  | Interests at 9
      March 2007 | 
|                                                     |  | 1 January    |  | 31 December  |  |                                 |  |            |  |           | 
|                                                     |  | 2006         |  | 2006         |  |                                 |  | Long-term  |  |           | 
|                                                     |  | Shares1      |  | Shares       |  | Shares                          |  | incentives |  | Options   | 
|                                                     |  |              |  |              |  |                                 |  |            |  |           | 
|Niall FitzGerald, KBE                                |  | 50,000       |  | 80,000       |  | 80,000                          |  |           |  |          | 
|                                                     |  |              |  |              |  |                                 |  |            |  |           | 
|Tom Glocer                                           |  | 372,145      |  | 401,345      |  | 401,345                         |  | 3,192,599  |  | 6,551,858 | 
|                                                     |  |              |  |              |  |                                 |  |            |  |           | 
|David Grigson                                        |  | 63,430       |  | 67,630       |  | 67,630                          |  | 763,468    |  | 1,766,122 | 
|                                                     |  |              |  |              |  |                                 |  |            |  |           | 
|Devin Wenig                                          |  | 105,843      |  | 105,843      |  | 105,843                         |  | 813,468    |  | 2,158,671 | 
|                                                     |  |              |  |              |  |                                 |  |            |  |           | 
|Lawton Fitt                                          |  | 25,000       |  | 25,000       |  | 25,000                          |  |           |  |          | 
|                                                     |  |              |  |              |  |                                 |  |            |  |           | 
|Penny Hughes                                         |  |             |  | 2,392        |  | 2,392                           |  |           |  |          | 
|                                                     |  |              |  |              |  |                                 |  |            |  |           | 
|Ed Kozel                                             |  | 7,500        |  | 7,500        |  | 7,500                           |  |           |  |          | 
|                                                     |  |              |  |              |  |                                 |  |            |  |           | 
|Sir Deryck Maughan                                   |  |             |  |             |  |                                |  |           |  |          | 
|                                                     |  |              |  |              |  |                                 |  |            |  |           | 
|Nandan Nilekani3                                     |  | n/a          |  | n/a          |  |                                |  |           |  |          | 
|                                                     |  |              |  |              |  |                                 |  |            |  |           | 
|Ken Olisa                                            |  | 2,550        |  | 2,550        |  | 2,550                           |  |           |  |          | 
|                                                     |  |              |  |              |  |                                 |  |            |  |           | 
|Dick Olver                                           |  | 10,000       |  | 10,000       |  | 10,000                          |  |           |  |          | 
|                                                     |  |              |  |              |  |                                 |  |            |  |           | 
|Ian Strachan                                         |  | 15,500       |  | 15,500       |  | 15,500                          |  |           |  |          | 
|                                                     |  |              |  |              |  |                                 |  |            |  |           | 
|Other senior managers as a
      group (17 persons)2 |  | 327,718      |  | 415,678      |  | 394,611                         |  | 2,704,925  |  | 3,108,040 | 
|                                                     |  |              |  |              |  |                                 |  |            |  |           | 

|                                                                                                                                                              
|--------------------------------------------------------------------------------------------------------------------------------------------------------------
|None of the directors has notified
      the company of an interest in any other shares, or other transactions or
      arrangements which require disclosure.
|1                                                                                                                                                             
|2                                                                                                                                                             
|3                                                                                                                                                             
|                                                                                                                                                              
|                                                                                                                                                              
|                                                                                                                                                              





On behalf of the BoardIan StrachanChairman of the Remuneration Committee, 15 March
  2007



Reuters Group PLCAnnual
  Report and Form 20-F 2006

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|   |                                                               
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|   |                                                               
|38 | Statements of directors
      responsibilities and compliance
|   |                                                               
|   |                                                               
|   |                                                               

Corporate governance The following sections of this report deal with Reuters corporate governance and how the company complies with the requirements of the UKs Companies Act 1985 (the Companies Act) and Combined Code, the
NASDAQ listing rules and the SECs rules under the Sarbanes-Oxley Act. Compliance with the UK
    and US rules on governanceThe listing rules of the UK Listing Authority
    of the FSA require UK-listed companies to report on their governance practices
    and on the extent to which they comply with the provisions set out in the
    Combined Code on Corporate Governance. As Reuters shares are also traded on
    NASDAQ we are required to comply with NASDAQs listing rules and the
    SECs governance rules. In this section of the report we describe how
    we comply with these requirements and where we do not comply, we explain why
    not. Throughout 2006, Reuters has complied with
    the Combined Code on Corporate Governance, 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
    2628) and the Board considers that, collectively, the members have the
    attributes required to discharge properly the Committees responsibilities. Reuters 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
    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 Listing Rules. While the companys auditors, PricewaterhouseCoopers LLP, are not required to form an opinion on the effectiveness of the companys corporate governance procedures, they are required to review whether this
corporate governance statement reflects the companys compliance with nine of the Combined Codes provisions as specified by the Listing Rules. These provisions are contained within section C of the Combined Code, which relates to
Accountability and Audit. Having conducted a review, PricewaterhouseCoopers LLP are obliged to report if they consider that this statement does not reflect such compliance. No such report has been made. A. The Board  Composition of the
  Board   Every
company should be headed by an effective board, which is collectively responsible
for the success of the company. 
(Combined Code  Main Principle A.1) The board should include a balance of executive and non-executive directors (and in particular independent non-executive directors) such that no individual or small group
of individuals dominate the boards decision taking. (Combined Code  Main Principle A.3) The Board comprises a non-executive Chairman,
    8 non-executive directors and 3 executive directors. Further details of the
    Boards composition and the companys assessment of the independence
    of its directors are set out in the table below. Biographies of the directors
    and details of their other commitments are set out on pages 2627. Biographies
    of Reuters senior managers are set out on pages 2728.


Composition of the Board

|             |                                                                     |  |               |  | Independent    |  |               |   |               |   |               |  
|------------ | ------------------------------------------------------------------- |  | ------------- |  | -------------- |  | ------------- | - | ------------- | - | ------------- | -
|             |                                                                     |  | No. of years  |  | (as determined |  | Audit         |   | Nominations   |   | Remuneration  |  
|Name         | Position                                                            |  | on Board      |  | by the Board)  |  | Committee     |   | Committee     |   | Committee     |  
|             |                                                                     |  |               |  |                |  |               |   |               |   |               |  
|L Fitt       | Non-executive Director and
      Chairman of Audit Committee        |  | 2             |  | Yes            |  | Yes (Chairman | ) | No            |   | No            |  
|             |                                                                     |  |               |  |                |  |               |   |               |   |               |  
|N FitzGerald | Chairman and Chairman of Nominations
      Committee                |  | 4             |  | Yes            |  | No            |   | Yes (Chairman | ) | No            |  
|             |                                                                     |  |               |  |                |  |               |   |               |   |               |  
|T Glocer     | CEO                                                                 |  | 5             |  | No             |  | No            |   | No            |   | No            |  
|             |                                                                     |  |               |  |                |  |               |   |               |   |               |  
|D Grigson    | CFO                                                                 |  | 6             |  | No             |  | No            |   | No            |   | No            |  
|             |                                                                     |  |               |  |                |  |               |   |               |   |               |  
|P Hughes     | Non-executive Director                                              |  | 2             |  | Yes            |  | No            |   | No            |   | Yes           |  
|             |                                                                     |  |               |  |                |  |               |   |               |   |               |  
|E Kozel5     | Non-executive Director                                              |  | 6             |  | Yes            |  | No            |   | No            |   | Yes           |  
|             |                                                                     |  |               |  |                |  |               |   |               |   |               |  
|D Maughan6   | Non-executive Director                                              |  | 1             |  | Yes            |  | No            |   | No            |   | see note 6    |  
|             |                                                                     |  |               |  |                |  |               |   |               |   |               |  
|N Nilekani4  | Non-executive Director                                              |  | In first year |  | Yes            |  | Yes           |   | No            |   | No            |  
|             |                                                                     |  |               |  |                |  |               |   |               |   |               |  
|K Olisa      | Non executive Director                                              |  | 2             |  | Yes            |  | Yes           |   | No            |   | No            |  
|             |                                                                     |  |               |  |                |  |               |   |               |   |               |  
|D Olver1     | Non-executive Director and
      Senior Independent Director        |  | 9             |  | Yes            |  | Yes           |   | Yes           |   | No            |  
|             |                                                                     |  |               |  |                |  |               |   |               |   |               |  
|I Strachan2  | Non-executive Director and
      Chairman of Remuneration Committee |  | 6             |  | Yes            |  | No            |   | Yes           |   | Yes (Chairman | )
|             |                                                                     |  |               |  |                |  |               |   |               |   |               |  
|D Wenig3     | COO                                                                 |  | 3             |  | No             |  | No            |   | No            |   | No            |  
|             |                                                                     |  |               |  |                |  |               |   |               |   |               |  

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



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|           |   
|Governance | 39
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|           |   

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. Particular consideration was given to the assessment of Dick Olvers independence since he has now been on the Reuters Board for more than nine years.
Dick was asked by the Chairman to remain on the Board because of his experience, wisdom and his effectiveness as a non-executive director. Board responsibilities and
  processThere
  should be a clear division of responsibilities at the head of the company between
  the running of the board and the executive responsibility for running the companys
  business. No one individual should have unfettered powers of decision.
  (Combined Code  Main Principle A.2) 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. The 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. All directors are equally accountable for the proper stewardship of the company and share responsibility for maintaining the companys high standards of ethics and integrity. The non-executive directors contribute
particularly by challenging constructively the companys strategy and performance, managements assessment of risk, the integrity of internal controls and by ensuring appropriate remuneration and succession planning arrangements are in
place. The Senior Independent Director, Dick Olver, is responsible for undertaking the annual review of the Chairmans performance and he chairs the Nominations Committee when considering the role of


Chairman. The Senior Independent Director also makes himself available to shareholders to discuss any matters. The CEO is assisted by the GLT in managing the business. It comprises the three executive directors and the senior managers listed on page 26. A Disclosure Committee, chaired by the CEO, reviews the Groups
trading statements and financial results and considers the effectiveness of the Groups disclosure controls and procedures. Its members comprise the CEO, the CFO, the Director of Corporate Affairs, the General Counsel and Company Secretary, the
Global Head of Internal Audit, the Global Head of Finance, the Head of External Reporting, the General Counsel for the Americas, the Global Head of Investor Relations and the Global Head of External Communications. A sub-committee meets on an ad hoc
basis to address disclosure matters arising between reporting periods. 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. The Board delegates specific responsibilities
    to the Audit, Remuneration and Nominations 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.
    Reports of the Audit and Remuneration Committee are set out on pages 29 and
    42 and the activities of the Nominations Committee are described in the interview
    with Niall FitzGerald on pages 2223. All directors have access to the services of the Company Secretary who 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 2006. Reuters provides insurance cover and indemnities for its directors and officers. The Board met eight times in 2006 and held a two-day strategy meeting with senior management in Palo Alto, California. The Chairman routinely meets with non-executive directors, without the executive directors present,
after each Board meeting. Attendance by individual directors at Board and Committee meetings during 2006 is set out in the table below.


Attendance at meetings

|             |  | Attendance at    |  |                      |  | Attendance           |  | Attendance          | 
|------------ |  | ---------------- |  | -------------------- |  | -------------------- |  | ------------------- | 
|             |  | Board meetings   |  | Attendance at Audit  |  | at Remuneration      |  | at Nominations      | 
|             |  | (8 meetings +    |  | Committee meetings   |  | Committee meetings   |  | Committee meetings  | 
|Name         |  | Awayday in 2006) |  | (6 meetings in 2006) |  | (5 meetings in 2006) |  | (1 meeting in 2006) | 
|             |  |                  |  |                      |  |                      |  |                     | 
|L Fitt       |  | Full attendance  |  | Full attendance      |  | n/a                  |  | n/a                 | 
|             |  |                  |  |                      |  |                      |  |                     | 
|N FitzGerald |  | Full attendance  |  | n/a                  |  | n/a                  |  | Full attendance     | 
|             |  |                  |  |                      |  |                      |  |                     | 
|T Glocer     |  | Full attendance  |  | n/a                  |  | n/a                  |  | n/a                 | 
|             |  |                  |  |                      |  |                      |  |                     | 
|D Grigson    |  | Full attendance  |  | n/a                  |  | n/a                  |  | n/a                 | 
|             |  |                  |  |                      |  |                      |  |                     | 
|P Hughes     |  | Full attendance  |  | n/a                  |  | Absent 1             |  | n/a                 | 
|             |  |                  |  |                      |  |                      |  |                     | 
|E Kozel      |  | Absent 2         |  | n/a                  |  | Absent 1             |  | n/a                 | 
|             |  |                  |  |                      |  |                      |  |                     | 
|D Maughan    |  | Absent 2         |  | n/a                  |  | n/a                  |  | n/a                 | 
|             |  |                  |  |                      |  |                      |  |                     | 
|K Olisa      |  | Absent 1         |  | Full attendance      |  | n/a                  |  | n/a                 | 
|             |  |                  |  |                      |  |                      |  |                     | 
|D Olver      |  | Absent 1         |  | Absent 1             |  | n/a                  |  | Full attendance     | 
|             |  |                  |  |                      |  |                      |  |                     | 
|I Strachan   |  | Absent 1         |  | n/a                  |  | Full attendance      |  | Full attendance     | 
|             |  |                  |  |                      |  |                      |  |                     | 
|D Wenig      |  | Full attendance  |  | n/a                  |  | n/a                  |  | n/a                 | 
|             |  |                  |  |                      |  |                      |  |                     | 

Niall FitzGerald attended 5 Remuneration Committee
  meetings at the invitation of the Remuneration Committee chairman.The CEO attended 5 Remuneration Committee meetings
  at the invitation of the Remuneration Committee chairman and 3 Audit Committee
  meetings at the invitation of the Audit Committee chairman.



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  Report and Form 20-F 2006

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|   |                                                               
|-- | --------------------------------------------------------------
|   |                                                               
|40 | Statements of directors
      responsibilities and compliance
|   | continued                                                     
|   |                                                               
|   |                                                               

Appointments to the BoardThere should be a formal, rigorous
  and transparent procedure for the appointment of new directors to the board.(Combined Code  Main Principle
  A.4) The Nominations Committee leads the process for Board appointments and makes recommendations to the Board. Its work in 2006 is summarised above in the interview with Niall FitzGerald (see pages 2223). A director
may not 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. Information and directors
  induction and trainingThe
  board should be supplied in a timely manner with information in a form and of
  a quality appropriate to enable it to discharge its duties. All directors should
  receive induction on joining the board and should regularly update and refresh
  their skills and knowledge.
  (Combined Code  Main Principle A.5) Nandan Nilekani, who joined Reuters Board on 1 January 2007, received a directors manual which provides information about Reuters and the operation of the Board and its committees. During 2007 he will receive a
series of induction briefings to gain insights into the company. Nandan, like the other directors, is being supplied with Reuters products. Ongoing training for directors is available as appropriate. The companys legal advisers and auditors provide briefings to the directors from time to time. In the twelve months to March 2007 the directors received
information from the companys lawyers and auditors on aspects of Sarbanes-Oxley Act, the new UK Companies Act 2006, and on new legislation concerning disclosures to be made to the auditors. 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. The Chairman is responsible for ensuring that directors receive accurate, timely and clear information. Regular and ad hoc reports and presentations are prepared and circulated to the directors a week in advance of
Board meetings, together with minutes and papers relating to the Boards committees. The directors also receive a monthly Performance report which summarises financial and operational performance and provides updates on key programmes within
the business. Board performance evaluationThe
  board should undertake a formal and rigorous annual evaluation of its own performance
  and that of its committees and individual directors.
  (Combined Code  Main Principle A.6) In response to the findings of the 2005 Board effectiveness review, during the year the Board made some changes to the way it operates. It introduced time at the end of each meeting for the Chairman and non-executive
directors to meet on their own; it improved the flow of information about aspects of the business which might be of general interest to the directors; and it created an opportunity at its annual strategy meeting for the Board and senior management
to spend time together outside the usual environment of a Board meeting. The 2006 Board effectiveness review was similar in format to the 2005 review in that: •
    the Chairman reviewed the performance
      of the CEO and each individual director;


•
    the CEO reviewed the performance of the
      CFO and the COO;•
    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 of the Chairman and the CEO 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, the Board as a whole, as well as with the Chairman. In addition to agreeing actions relating to individual and collective effectiveness, the Board has decided to change the frequency and length of Board meetings to have six rather than
eight meetings each year but to extend each meeting over two days to allow the directors to become more deeply immersed in consideration of strategic issues. Re-election of directorsAll
  directors should be submitted for re-election at regular intervals, subject
  to continued satisfactory performance. The board should ensure planned and progressive
  refreshing of the board. (Combined
  Code  Main Principle A.7) 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 2007 AGM each of the directors will retire from office and offer himself or herself for
re-election, save for Ed Kozel who will retire from the Board with effect from the end of the AGM. B. Remuneration of directorsThe Combined Code has a section covering
  remuneration principles. Reuters compliance with those principles is described
  in the directors Remuneration report on pages 29 to 37. C. Accountability and audit:Directors statement
  of responsibilityThe
  board should present a balanced and understandable assessment of the companys
  position and prospects. (Combined
  Code  Main Principle C.1) The directors are responsible for ensuring that the Directors report
and the consolidated financial statements of the company and its subsidiaries
(the Group) and parent company financial statements for Reuters Group PLC are
prepared in accordance with applicable laws and regulations. The financial statements
for each financial year must give a true and fair view of the state of affairs
of the Group as at the end of the financial year and of the profit and
cash flows of the Group for the period. The company is also required to prepare
financial statements in accordance with the requirements of the SEC. The company has complied with both UK and US
  disclosure requirements in this report in order to present a true and fair view
  to




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|           |   
|Governance | 41
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all shareholders. In preparing the financial statements, applicable accounting standards have been followed, suitable accounting policies have been used and applied consistently, and reasonable and prudent judgements
and estimates have been made where appropriate.  The directors have reviewed the budget and cash
flow forecasts for the Group for the year to 31 December 2007 and outline projections
for the subsequent year in the light of the financial position and borrowing
facilities at 31 December 2006. On the basis of this review, the directors are
satisfied that Reuters Group is a going concern and have continued to adopt the
going concern basis in preparing the financial statements. Internal controlThe board should maintain
  a sound system of internal control to safeguard shareholders investment
  and the companys assets. (Combined Code  Main Principle
  C.2) The directors acknowledge their responsibility for the company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. The Board confirms that it has a process for identifying, evaluating and managing significant risks faced by the company. 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•
      review meetings by the
        CEO and CFO or COO with each GLT member
        which cover the performance, risks and controls for which the
        GLT 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 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 GLT 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 GLT and others to consider formally the operation and effectiveness
of the companys risk management and financial, operational and compliance internal control systems as well as its disclosure controls and procedures. This review includes consideration of compliance 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 39) supports the process by reviewing disclosure controls and procedures. In addition to the 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. In 2006 management commissioned a
report on Reuters internal control environment from Independent Audit Limited, an independent consultancy. The Audit Committee was satisfied with the reports findings. The Audit Committee also met the internal auditors and
PricewaterhouseCoopers LLP to discuss the results of their work. 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 the design and operation of these disclosure
controls and procedures were effective as at 31 December 2006 to a reasonable assurance level (within the meaning of the US federal securities laws). No 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. Managements report
    on internal control over financial reportingIn accordance with section 404 of the
    Sarbanes-Oxley Act, the following report is provided by management in respect
    of the companys internal control over financial reporting (as defined
    in Rules 13(a)  15(f) and 15d  15f of the US Securities Exchange
    Act of 1934). The management of the Group is responsible
  for establishing and maintaining adequate internal control over financial reporting
  for the company. The companys internal control over financial reporting
  is a process designed to provide reasonable assurance regarding the reliability
  of financial reporting and the preparation of the companys financial statements
  for external purposes in accordance with generally accepted accounting principles.




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The Groups internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions
and dispositions of the assets of the Group; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts
and expenditures of the Group are being made only in accordance with authorisations of management and directors of the Group; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use or
disposition of the Groups assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of the Groups internal control over financial reporting as of 31 December 2006, based on the framework set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) inInternal Control-Integrated Framework. Based on that assessment, management concluded that, as of 31 December 2006, the Groups internal
control over financial reporting was effective. PricewaterhouseCoopers LLP, which has audited the consolidated financial statements of the Group for the financial year ended 31 December 2006, has also audited managements assessment of the effectiveness of the
Groups internal control over financial reporting and the effectiveness of the Groups internal controls over financial reporting; their report is included herein. Audit Committee and auditorsThe
  board should establish formal and transparent arrangements for considering how
  they apply the financial reporting and internal control principles and for maintaining
  an appropriate relationship with the companys auditors
  (Combined Code  Main Principle C.3) Reuters adherence to this principle is described in the Audit Committee report below. Audit Committee report Members Members of the Committee during 2006
were Dick Olver (Chairman until 9 November 2006), Lawton Fitt (Chairman from 9
November 2006) and Ken Olisa. Nandan Nilekani joined the Committee on 1 January 2007. 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.  ResponsibilitiesEach 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. 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
      judgments 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. ActivitiesThe Committee met five times in 2006 with the
  CEO, the CFO, other officers and the auditors attending as required. The auditors
  have unrestricted access to the Audit Committee and met after five of the 2006
  Committee meetings privately with the Committee members, as did the Global Head
  of Internal Audit. The Chairman of the Audit Committee meets with
  the Global 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, except for Dick Olver, who was absent from one meeting.
  The Committee reports its activities and makes recommendations to the Board.
  During 2006 the Committee discharged the responsibilities set out in its terms
  of reference. 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 Global
      Head of Internal Audit on internal audit activities;•
    reviewing the effectiveness of internal
      control systems and the risk management
      process and considering how those were changing as a
      result of the introduction of centralised back-office functions;




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•
    paying particular attention throughout the year 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 sections
302 and 404 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;•
    considering the directors duties under Section 234ZA of the Companies Act 1985, regarding disclosure of information to the companys auditors;•
    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;•
    reviewing the compliance programme, including the whistleblower programme; 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 (revised in 2005), in addition to the companys general code of conduct. No material amendments to, or waivers in
respect of, either code were made during 2006. 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 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 85 and note 5 to the
summary of differences on page 133. 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.  Lawton FittChairman, Audit Committee 15 March 2007 Disclosure of information
  to the auditorsSo far as each director is aware, there is no relevant audit information of which the auditors are unaware; and each director has taken all


steps that he ought to have taken as a director to make himself or herself aware of any relevant audit information and to establish that the auditors are aware of that information. This confirmation is given pursuant
to section 234ZA Companies Act 1985. D. Relations with shareholdersThere should be a dialogue with shareholders based on the mutual understanding of objectives. The board as a whole has responsibility for ensuring that a satisfactory
dialogue with shareholders takes place (Combined Code  Main
Principle D.1) The 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. No shareholders asked to meet with Dick Olver, the Senior Independent Director, during the year. An investor relations department is dedicated to facilitating communications between the company and its shareholders. In the last three years, Reuters has received several awards for investor relations, including the
IR Magazine award in each of those years for best investor relations in the media sector. 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 2007 will be available at www.about.reuters.com. By order of the Board  Rosemary MartinGeneral Counsel & Company Secretary 15 March 2007




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This section of our Annual Report and Form 20-F provides more detailed information on •
      Strategy•
      Markets•
      People•
      Ethics and compliance•
      Corporate responsibility•
      Supply chain•
      Governmental regulation•
      Supplementary information 01 Strategy (See Business review on pages 6-7) Grow revenues, both from our Core business and through our Core Plus initiativesOur
Core business serves a £6 billion per annum market for financial information and related services, with an estimated growth rate of 24%. We are continuing to improve our product line by delivering regular upgrades to content and functionality. For example, in 2006 we extended our coverage of the credit derivatives markets. This approach of continuous
product enhancement is justifying increased prices and helping us to attract new users, particularly in the institutional investment community and at our largest clients. We are also evolving our commercial model to align pricing more closely with
customers use of our data, which is trending upwards. We believe that by continuing to develop our product line we can continue to grow our business at least as fast as the market. With Core Plus, we are aiming to become market leaders in electronic trading, new and hard-to-obtain information (what we call high value content), advanced technology solutions for financial services companies and
services for new markets. We are creating neutral, scaleable, open trading platforms to be used by both people and machines and we are seeking to be a recognised innovator in new asset classes, consumer media and high growth economies. Electronic tradingReuters has an established track record of providing electronic transaction services for the financial markets, such as our foreign exchange conversational dealing system, Reuters Dealing 3000, and our electronic
bid-and-offer matching service, Reuters Dealing Matching. We believe that the electronic trading trend is accelerating and as a result we have invested in electronic trading services by building a multi-asset trading platform. Reuters Trading for
Foreign Exchange and Reuters Trading for Fixed Income were the first services to be delivered over the platform, joined in October 2006 by Reuters Trading for Exchanges, which provides equity order routing facilities for institutions wanting to
trade. In January 2007 we announced that this service would be distributing trading algorithms and routing orders on behalf of the BNY ConvergEX Group (an affiliate of The Bank of New York), a leading agency broker. We believe this has the potential
to drive additional sales of our premium desktop products. Reuters Trade Notification Service, which helps customers streamline their trade confirmation operations, was launched in the second half of 2006 and has seen rapid growth in the number of
messages carried. 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 such as our arrangement to distribute the highly regarded University of Michigan Surveys of Consumers which are a lead indicator of US consumer confidence (a closely watched financial markets statistic). Our global coverage
of company fundamentals and the breadth and depth of our estimates helped to strengthen our products in 2006. In 2007 we are planning to launch a primary research product which will offer high-value proprietary content, both from Reuters sector
specialists and respected third party content providers. The first sectors will be healthcare and technology. New enterprise servicesIn a highly competitive market, our customers are turning to computer-driven trading and increasingly complex financial products in order to differentiate themselves from their competitors. Our Enterprise business
helps banks and other financial organisations to automate their businesses by managing 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 information and trading infrastructures. We are making our products more compelling to our customers by offering tools such as Reuters Tick History, which is used to back-test
clients algorithmic trading strategies, Reuters Tick Capture Engine, which stores details of price movements as they happen, and Reuters Wireless Delivery Network, which enables our customers to distribute content to their employees
mobile devices. Reuters NewsScope, launched in 2006, is an innovative service for financial institutions that want to use algorithms to drive automated trading from news reports. It categorises news events so that machines can read the
news and the information can then be used to generate inputs to trading algorithms and inform trading decisions. In 2007 we are planning to launch a Counterparty Data service, which will help banks to improve the efficiency of their trading
and settlement operations and reduce risk by verifying details of their trading counterparties. New marketsWe
are increasing our presence in high-growth geographic markets. In India in January
2006 TIMES NOW, a 24-hour English-language news television channel was launched.
The venture is owned jointly with Bennett, Coleman & Co, Indias largest publishers of English language news, and is helping us to build our consumer media presence in India. In China, we are sourcing content from our new Beijing centre to meet growing local demand, adding data from a range
of Chinese brokers [and providing coverage of local pension fund indices]. We are extending our coverage of financial markets in the Middle East, focusing on news, company fundamental data, funds information and broker research. We also see
opportunities to serve the growing market for Shariah-compliant finance
products. We have identified emerging asset classes with the potential to become liquid markets. These include real estate, environmental markets (including the rapidly growing emissions trading market) and freight derivatives
(an asset class tied directly to growth in China and India). In 2006, we appointed lead correspondents to focus and co-




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ordinate our editorial coverage for each of these markets, and enhanced it with content from key third-party sources. This coverage is now included in our premium desktop products and in our new web-based services such
as ReutersRealEstate.com. We are also continuing to target new types of customer such as a consumer media audience. We are building a fast-growing presence around the world with our reuters.com family of websites and our content services for
mobile devices and internet-delivered TV. Core Plus investment We are now halfway through an investment programme started in 2005 to drive revenue growth and have started to see Core Plus revenues coming through ahead of target. Creating future growth opportunitiesFXMarketSpaceIn
addition to our Core and Core Plus trading products, we are also investing in
an innovative new foreign exchange (FX) trading system, FXMarketSpace, which
we established with the Chicago Mercantile Exchange (CME) as a 50/50 joint venture.
FXMarketSpace, to be launched in March 2007, is helping to lead changes in FX
market structure by offering the worlds first centrally-cleared, global
FX marketplace. It will provide broader access to the FX market by making it
possible for non-bank financial institutions to participate, creating potential
for further growth in electronic trading volumes. FXMarketSpace will be accounted
for as a joint venture. For more information, see note 15 on page
96. Innovation programmeIn
    December 2005 we launched our Innovation Programme. Its aim is to identify
    opportunities to use our content and technology expertise in projects which
    have the potential to fuel our medium to long-term growth. The programme
    looks for transformational business ideas that represent a step out from
  or challenge to our existing activities. During 2006 we developed a portfolio of projects and a pipeline of ideas and were pleased to see one project, Reuters NewsScope (see ‘New enterprise services’, on page 44 above), start to deliver revenue. Initiatives
expected to contribute revenue in 2007/2008 include Reuters Market Light and Reuters Insight. Reuters Market Light takes us into an entirely new market, serving rural farming communities. Via their mobile phones, farmers receive accurate local
pricing for their goods, together with weather information that directly influences their choices of when to harvest and to which market town to take their crops. An early version of the service is currently being piloted in northern India. Reuters
Insight is aimed at mid-size companies looking to develop and sustain their international operations. It provides personalised content, together with access to relevant communities able to share expertise, which can help them to assess the
political, environmental and social risks they may face. The service is currently in client testing. Simplify our organisation in order to become stronger, more competitive and more efficientWe
are working to deliver further improvements in our products and our customer
service through a series of simplification initiatives and, through these, we
are aiming to deliver £150 million in annualised cost
savings by 2010. This is in addition to the £885 million of cost savings
already delivered since 2001.


Changing the way our product development teams workIn 2006 we completed the integration of our development organisation into the business divisions to bring it closer to our customers. We are also streamlining our software development as we move to a smaller number of
larger sites. By the end of 2006 over 40% of our development resource was in our centres in Bangkok and Beijing. Simplifying our product delivery infrastructure and making it more robustWe aim to consolidate our data centres from 250 to 10 by 2010 as we move our customers and our products to a modern IP telecommunications network. In 2007 we are also working to consolidate our product delivery
infrastructures into a common platform from which to deliver our products. We are aiming to deliver the first products over the new platform in 2008. Transforming the way our content is created, collected and processedWe are investing in extensive automation of our content production and in content quality improvements. In 2006, our content quality programme focused on improving the timeliness and accuracy of fixed income data. In
2007, we will extend the programme to other asset classes. Modernising our customer administration systemsWe are modernising our administration systems in order to make it faster and easier for us to provide customers with access to our products and to simplify our ordering and billing processes. 02 Markets  (See pages 10-11 in the ‘Business review’) Financial markets
    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 2006 as the backdrop to our
  performance during the year and highlight the key market trends we believe will influence our ability to achieve our goals in 2007. The global economy  The
global economy saw good growth in 2006, showing solid levels of employment and
consumer optimism during the year. In the US, concerns over inflation and consequent
interest rate increases tempered growth, but to a lesser extent than many market
watchers had predicted. Asia continued to thrive as China and India fuelled the
regions economic expansion and Japan showed steady, moderate growth. Economic
growth in the Euro Zone accelerated at its fastest
rate since 2000. The global macroeconomic outlook for 2007 is relatively strong, with the International Monetary Fund (IMF) projecting global economic growth of around 5%. However, concerns persist about geopolitical risks, including
intensifying inflationary pressures, a rebound in oil prices due to geopolitical uncertainty in the Middle East and elsewhere and the risk of a slowdown of the US economy.




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Financial services industry
    performance in 20062006 was a record year for investment
    banks whose revenues benefited from buoyant initial public offering and mergers
    & acquisitions markets, as well as from proprietary trading activities
    and increased services to hedge funds and private equity. However, financial
    services industry consolidation continued in Europe. Financial markets rebounded
    globally in the second half of the year after their earlier energy-driven
    sell-offs. Shares indices  FX volumes continued to increase, driven by
    hedge and pension funds. Celent has estimated that average FX daily trading
    volumes will reach $4 trillion by 2010, up from $1.9 trillion in
2004. Average daily turnover in traditional foreign
exchange marketsUS$ trillion  Trading in derivative financial instruments
    such as options and credit derivatives grew faster than any other asset class,
and commodity and energy prices remained volatile. Hedge funds continued to gain influence in
    the financial markets, now controlling more than $1 trillion in assets
    globally, and were some of the most active traders, accounting for up to half
    of total revenues at big equity brokers. The private equity industry also
    grew at an unprecedented rate. Market outlook for 2007Continued consolidation in Europe,
    together with the increasing automation of trading floors, is likely to put
    some pressure on front office jobs. US securities industry and UK City
    employment is expected by commentators to level out over the next two years. However, 2007 is still expected to be a good
    year for the financial markets. Commodity markets are likely to remain strong
    and volatile, and there seems to be no let-up in sight in the record growth
    of


derivatives and structured products. Global uncertainty will drive continued FX volatility and volume, and proprietary trading is expected to show double-digit growth in assets like credit. Key market trends Market structures are continuing to evolve•
      FX markets are preparing for the
        shift towards an exchange-traded model as demonstrated
        by the willingness of banks and prime brokers to trade
        on FXMarketSpace.•
      Exchange consolidation is ongoing:
        CME announced a merger with CBOT; London Stock Exchange
        may still face the possibility of a takeover.•
      Continuing banking consolidation
        could increase the number of European banks big enough
        to compete directly with the largest US institutions. The rise in electronic trading is set to continue in 2007 and beyond•
      Algorithmic trading, a key driver
        in the growth in electronic trading, is being more
        broadly adopted across asset classes and geographies.•
      By 2010 algorithmic trading is
        expected to account for more than half of all equities
        trading volume in the US.•
      Increasing automation of trading
        by investment banks and hedge funds is driving the
        demand for high speed, structured information and
        data management services. The financial services industry is developing increasingly complex,
        highly structured financial products•
      Trading in instruments such as
        property derivatives and freight derivatives is increasing.•
      New types of instruments, such
        as longevity risk, are being conceived and launched.•
      The need to tackle climate change
        is driving growth in emissions trading  the
        European Climate Exchange launched the first emissions
        options contract in 2006.•
      A Shariah-compliant derivatives
        market is under development, with the potential to
        transform the financial landscape in the Middle East. The hedge fund industry is expected to continue its growth and its
        importance to the financial markets ecosystem•
      Large funds are growing their
        assets much more rapidly than their smaller competitors.•
      Investment banks are likely to
        continue taking stakes in hedge funds as the distinction
        blurs between hedge funds and more traditional asset
        management firms.•
      Hedge funds are particularly active
        in driving demand for high-value content, including
        sources of market and company insight, as they look
        for trading advantage. The
          information needs of investment managers are changing as the investment
          profile of funds becomes increasingly polarised•
      Investment funds appear to be
        polarising, with demand for absolute return/alternative
        investment strategies at one end of the spectrum, and
        large passive index portfolios on the other.




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•
      Independent analysts are gaining
        market share as mutual funds seek more independent
        research. Wealth
        management is the fastest-growing segment of the financial services marketplace•
      Growing life expectancy and intensifying
        pressure on pension provision reform is underpinning
        demand for wealth management services. New
        market regulations are creating requirements for greater price transparency•
      Particular focus on the Markets
        in Financial Instruments Directive (MiFID) in the
        EU and Regulation NMS in the US: Reg NMS is expected
        to drive annual growth of over 70% in the number of trades
        routed inter-market.•
      Growing regulatory oversight across
        the world is likely to fuel demand for analytics,
        risk management, pricing, valuation, and data management
        tools. Financial
        information technology spending is expected to continue rising in 2007•
      Banks in the Asia Pacific region
        are expected to increase their investments faster
        than elsewhere, according to Celent.•
      Hedge funds are beginning to demand
        improved service levels from their prime brokers,
        which is likely to trigger prime brokers IT
        spending. Risk
        management systems are increasingly in demand•
      Recent hedge fund failures and
        concerns about systemic credit derivative risk have
        raised fears of market disruptions. In
        media, user-generated content and social networks are increasing in popularity•
      Harnessing these trends will be
        key to building and sustaining online communities,
        audiences and brands. Online
        advertising is growing rapidly•
      Online advertising is expected
        to grow seven times faster than traditional advertising
        in 2007, creating opportunities for brands with a
        strong online presence. Use
        of broadband connectivity, mobiles and smart phones is growing•
      Rapid consumer adoption of new
        technologies is facilitating greater use of multimedia
        news, information and entertainment. 03
      People (See ‘Business review’ on page 12) During 2006 our employees once more showed
    their adaptability, commitment and professionalism as the company continued
    to implement its growth and simplification plans. This has been demonstrated
    in several ways, including acquisition of new skills and experience, further
    improvements in customer satisfaction and the enduring focus on high standards
    to uphold our Trust Principles. With our business, markets and customers
    continuing to experience rapid change, we seek to employ people who are highly
    talented, knowledgeable about the markets we serve, customer focused, adaptable
    and committed to learning and development. Our diverse employee base comprises
    over 100 nationalities, reflecting the different cultures and markets we operate
    in and bringing a range of




perspectives that allow us to develop fresh
    and innovative ways to serve our diverse customers. This customer focus is
    also demonstrated in the improvement in our customer satisfaction scores which
    reflects the daily efforts of all our people. As we continue to focus on making our products
    more competitive and extending our content, we have continued to expand our
    Bangalore content centre and Bangkok development centre. During the year we
    also established two more strategic centres. By the end of the year, the number
    of people working in our content centre in Gdansk, Poland and our software
    development and content operations centre in Beijing grew to almost 400. Overall,
    these four centres accounted for around half of the growth in our employee
    numbers during the year, balanced with targeted recruitment in our longer-established
    centres. New hires into sales and service and into roles to help us deliver
    our growth strategies accounted for the other half. 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 provides
    an online multimedia information service covering news and events about the
    company and about our people. The CEO hosts webcasts, teleconference briefings
    and question & answer sessions for employees, and also meets informally
    with groups of Reuters employees around the world. At the start of the year,
    the CEOs overall mission for the year ahead 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 employees
    views can be taken into account when 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 survey We carry out annual employee surveys
  to identify issues that need to be addressed and areas to build on; the findings
  are communicated to employees. This year we have changed the external benchmarks
  against which we measure ourselves: instead of comparing ourselves to companies
  in transition, we now measure ourselves against the norms of high-performing
  companies. Although we have some way to go, we are closing the gap against this
  more challenging benchmark. The results of our most recent survey (November
  2006) again showed year on year improvements across all the groupings that make
  up our employee engagement index (leadership, customer orientation, performance,
  employee commitment and career development). There were also improvements in
  every category covered by the survey. See the ‘Business review’ on page 12 for
  more information. We have very strong scores on items related
    to the company brand and values  the three highest-scoring statements
    were: I fully support the values for which Reuters stands (90%
    favourable response), I am proud to be associated with Reuters
    and Reuters provides a working environment that is accepting of ethnic
    differences (both 89% favourable response). Highlighting areas for improvement,
    employees reinforced the need for further organisation simplification and
    improvements in performance management. The GLT has put in place a range of
    initiatives to continue to address these issues in 2007.




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Talent and performance managementWe remain committed to retaining and developing
    our talent. Our company-wide talent review process, updated in 2006, 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 nearly 6,000 people worldwide in 2006.
    We report regularly to the Board on these activities and the Board also reviews
    our succession plans for our most critical roles, to ensure that we have sufficient
    depth and breadth in our most senior talent pools (see pages 2223 for
    further information). Challenging ourselves to higher performance
    as a company has been mirrored by a renewed focus on the importance of performance
    management for individuals. New training has been made available to managers
    and in the lead up to annual performance reviews, training on how to give
    effective feedback was made available to all employees. Employee developmentWe are making increasing use of technology
    to deliver globally consistent and constantly available learning for employees.
    Increasing amounts of our training for front-line employees focuses on our
    customers, their workflows and their needs rather than simply our products
     and 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 recognise that employees benefit from
       developing their team-building and leadership skills through participation

    in activities that strengthen Reuters relationships with the communities
      in  which it is involved. For more information, see ‘Reuters in the community’    on
    page 49-50. In 2006, we substantially increased the amount
    of development for our managers with new programmes aimed at middle and emerging
    managers to complement the first level manager programme that was rolled out
    in 2005. In addition, during the year we introduced a suite of eLearning modules
    that support managers new to Reuters, regardless of their level. Our Innovation Programme, launched in December
    2005, (see page 45 for more information), provides opportunities for talented
    and ambitious employees to develop their entrepreneurial skills by taking
    on challenging roles as members and leaders of Innovation project teams. Employee safetyWe recognise the courage and professionalism
    shown by our employees operating in conflict zones. We regularly review our
    policies, training and procedures for all employees. 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 have also reviewed and upgraded our readiness
    to protect employee safety in the event of a range of situations from terrorist
    activities to a potential avian flu pandemic. Equal opportunities and diversityWe have extensive fair employment practices
    in place and, with the support of our Global Diversity Advisory Council, 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
    GLT on issues related to diversity. In 2006, we initiated a global reverse mentoring
    programme in which GLT members were paired with more junior diverse employees
    with the aim of increasing their awareness of diversity issues. A regional
    version of this programme has just completed its fourth cycle in the US. 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. 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 diversity has been formally
    recognised in several countries. For example, in the UK, we have been awarded
    the Two Ticks Disability Symbol User status, which recognises our good practice
    in employing disabled people and reinforces our commitment to creating a more
    diverse workforce. Reuters is also a member of the Employers Forum for Disability,
    and 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). At our Bangalore Business Service
    Centre we have started to work with Enable India, an organisation which helps
    people with disabilities to find jobs. We support the principles incorporated in
    South Africas Broad-Based Black Economic Empowerment (B-BBEE) Act of
    2003 and recognise our responsibilities as an employer to comply with both
    the spirit and the letter of all relevant B-BBEE legislation and development
    initiatives. We have a plan in place to achieve full compliance with the Act,
    including employment equity, skills development, preferential procurement,
    enterprise development and corporate social investment. 04
      Our commitment to ethics
        
        and compliance We 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. The companys
    policies cover a wide range of subjects and include policies which give guidance
    to our employees in fair dealings with customers, suppliers, governments,
    competitors and each other. The policies are made available to employees through
    a policy gateway which is a centralised online depositary of the
    policies and guidance on how to apply them. Our efforts to maintain an environment at
    Reuters that promotes and protects our 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,




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we train our employees on key ethics and compliance areas through online training programmes and face-to-face sessions; 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. 05 Corporate responsibility In our reporting on corporate responsibility we have sought to comply with the Association of British Insurers Guidelines on Responsible Investment Disclosure. In this Annual Report environmental matters are
covered in the Environmental impact section (see page 50), social matters are reported under People (see page 47) and Reuters in the community (see page 49), and governance matters are covered in the Governance
section (see pages 3843). Corporate 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 GLT and to the Board. As part of the risk management process which operates
throughout the company, when relevant, environmental, social and governance risks are identified and mitigation plans are put in place. However, given the non-industrial nature of our business, we have just begun to collect base data about our
environmental impact to assess the risks and opportunities presented. We have more work to do, including implementing an environmental impact recording system, to acquire this information. Further information about Reuters risk management processes
is set out on page 41. In 2006 we set the following corporate responsibility objectives: •
    Employees: increase employee satisfaction and develop mentoring programmes and affinity groups to raise awareness of diversity & inclusion
issues;•
    Marketplace: develop an ethical code for our suppliers to adhere to when working with us;•
    Community: increase employee participation in our community volunteering programme to 18% of employees (2005: 12%);•
    Environment: raise awareness on environmental issues with customers (through our reporting from around the world on environmental matters),
and with employees (through a Green Week to inform employees about how individual behaviours at work affect the environment); and•
    Governance: implement changes prompted by the 2005 Board effectiveness review and refresh the governance framework at below-Board
level.During the year we met each
    of these objectives.


For 2007, our objectives
    include:•
    Embedding our supply chain ethical
        code into our day-to-day sourcing activities (for information on the
    code, see Supply chain on page 50);•
    Raising employee participation in community engagement programmes to 20% worldwide by focusing on staff development opportunities and
involvement with environmental causes;•
    Extending best practice in health and safety and family friendly policies to our operations worldwide;•
    Implementing an environmental management system for recording Reuters impact on the environment;•
    Publishing a document explaining and positioning Reuters corporate responsibility programme to employees and external audiences. We are conscious that our system for measuring the impact of our corporate responsibility initiatives can be further developed. In 2006 we used the London Benchmarking Group reporting model for the first time to
calculate our contributions to good causes. This model provides a standardised way of managing and measuring a companys community involvement. Reuters is included in the Dow Jones Sustainability Index, the FTSE4Good Index, the Ethibel Sustainability Indices and the Ethibel Pioneer Investment Register. Reuters Hong Kong has been accredited with Caring
Company status for the third year running by the Hong Kong Council of Social Service. We make extensive information about our corporate responsibility programme available through our website. 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 and humanitarian workers from all over the world, providing journalism courses for over 750 journalists and media & communications
skills courses for over 550 aid workers from UN agencies. In February 2006 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. To build on our work in this area, Reuters Foundation ran its fourth annual workshop on HIV/AIDS reporting and hosted a panel debate in London on Keeping the Spotlight on HIV-AIDS, looking at the role of
the media. The Reuters Institute for the Study of Journalism was officially launched by Lord Patten, Chancellor of Oxford University, in November 2006. The institute will be a meeting point between academia and practising
journalism and will provide a detached and informed perspective on the practice and impact of journalism. Sponsored by Reuters Foundation, the Institute builds on the partnership created by the Reuters Foundation Journalists Fellowship Programme at
Green College, Oxford. Reuters Foundation will provide £1.75 million over five years to fund the international research  Reuters Group PLCAnnual
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centre. Its activities will include both short and long-term research, seminars, conferences and debates; its aim is to identify and understand the issues that journalism raises worldwide. Reuters AlertNet, established by the 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 disasters forgotten by the mainstream media are kept in the headlines. MediaBridge, a project designed to improve news coverage by providing online training for reporters and detailed briefings on countries and issues was launched in July 2006. It is jointly funded by Reuters and the UK
Department for International Development. Reuters Foundation also sponsors the Reuters Foundation Digital Vision Program at Stanford University which enables technologists and other social entrepreneurs to work at Stanford and in the field for an academic year
on projects designed to use technology to address issues in the developing world. 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 2006, over 3,000 employees from 58
locations participated, sharing their skills on projects ranging from hosted school visits, training workshops for community groups and fundraising work. Reuters volunteers also continued to work on house building projects run by Habitat for Humanity. In the twelve months to March 2007 volunteers worked on projects in Sri Lanka, India, New Orleans, and South
Africa. We also operate programmes in the US and UK which match the charitable donations and fundraising efforts of our employees. Under these schemes we matched gifts of time and money amounting to £30,000 in the UK and
just over $171,000 in the US. A similar scheme for employees across Asia was also launched in 2006. Charitable cash donations totalled £1.8 million during 2006 (2005: £1.7 million). It is the Groups policy not to make political contributions and none were made in 2006. Environmental impactWe are classified by Ethical Investment Research Services (EIRIS) as belonging to a sector with low environmental impact. We recognise that our business has a role to play in the effective dissemination of environmental information. We have a network of around 50 Reuters journalists who are an authoritative resource on environmental
issues, with a special focus on issues such as global warming, fossil fuel use and population growth. We also share our skills in the communication of environmental issues through the work of Reuters Foundation. Working with Com+ Alliance, a group
of international organisations that embraces and supports sustainable development projects, in 2006 and 2007 we are providing nine courses for journalists on environmental topics and a programme to prepare journalists for coverage of the G8+ Climate
Change Dialogue. We recognise we have a responsibility to seek to reduce our impact on the environment by managing our facilities efficiently and by raising employee awareness of environmentally friendly choices at work, at home and
when travelling. We have signed up to the new


global 3c (Combating Climate Change) initiative led by Swedish energy company Vattenfall so that by engaging with thought leaders in this area we can increase our understanding of alternative resource-efficient
technologies. There may be a role for these in the operation of our data centres which account for a significant proportion of our overall energy consumption. During 2006 we worked with Bureau Veritas, an independent environmental consultancy, to identify the indicators we should track in order to measure our environmental impact. These are: •
    Energy: Total electricity consumption;
    percentage of green tariff electricity purchased;•
    Greenhouse gas emissions (CO2):
    Total volume of carbon dioxide equivalent produced;•
    Water: Total consumption;•
    Waste: Total waste produced, total
    waste recycled, waste recycled as a percentage of total produced;•
    Paper: Total quantity of paper
    purchased and percentage of which containing recycled content. In 2006, we purchased a web-based environmental management system which we will implement in 2007, enabling us to collect data for the metrics identified above for our key office and data centre locations and to report
the consolidated data periodically. This will help us assess our environmental impact and set targets to reduce it. We recognise our business air travel has an impact on the environment. In 2006 we reduced it by 10% and wherever possible, we use alternatives to business travel, including video- and-teleconferencing. In 2007 we will
pilot the use of carbon offsets for air travel by some of our global groups. We continue to hold our annual staff awareness-raising event, Green Week, delivering information to staff in a variety of ways including films, visits, blogs, fundraising events, intranet briefings, exhibitions and
competitions. Over 15% of staff from 18 locations took part in the 2006 Week. Changes arising from Green Week 2006 included improvements to waste streaming in our New York office and a programme of printer and fax machine reduction in our London
offices. The initiative will be expanded in 2007 to deliver a 12-month rolling programme of Green Weeks around the world. 06 Supply chain SourcingAs a global
company, we source goods and services from an extensive range of suppliers. Over
the last 4 years we have reduced our supplier list, despite increasing the range
of services we outsource. In 2006 3% of vendors accounted for 85% of our third
party spend. The functions we outsource currently include telecommunications
and network services, travel, print services, IT support and elements of back
office administration. In 2006 we streamlined our
sourcing operations into one global function (excluding content sourcing, which
is managed by our Content group). During the year we received Chartered Institute
of Purchasing & Supply certification for excellence in our sourcing
processes. In addition to producing content in-house, we aggregate and distribute data sourced from 250 exchanges and 6,000 contributors within our products. Our extensive global customer base and




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distribution network make us an attractive distribution partner for content providers. We are implementing a content supplier management programme to raise the standard of contributed content to a level which meets our
customers high expectations. For more information, see ‘Overview of divisional performance’ on page 58. Supply chain ethical codeAs a company we are committed to developing relationships with suppliers whose standards are as high as our own. In September 2006 we launched our supply chain ethical code which forms the basis of our agreement with
suppliers. Based on the recognised and well-regarded Ethical Trading Initiative Base Code, our code endorses expected standards of behaviour and gives us an opportunity to drive our commitment to ethical and environmental improvements and
demonstrate a reduction of risk through our supply chain on a global basis. Suppliers will be required to confirm their adherence to the Code when selected as a supplier of goods and services to Reuters. If a supplier is found to be non-compliant,
we will require it to achieve compliance within a reasonable time frame and we will work with it to assist this process. Supplier payment termsWe
    agree terms of transactions, including payment terms, with suppliers in advance.
    Payment terms reflect country or regional norms throughout the world. In
    2006 we focused on cash management, clarifying our terms with suppliers.
    Our policy is to make payments in accordance with the agreed terms, provided
    that suppliers have also acted in accordance with them. In the UK, we have
    signed up to the Better Payment Practice Code. Group trade creditors at 31
    December
2006 were equivalent to 13 days purchases during the year (2005: 2 days).
The company had no trade creditors at 31 December 2006 or31 December 2005. Communications networksOur financial and media products are mainly delivered to customers over private secure high-speed communications networks. However, the public internet is becoming more accepted in many parts of the world and we use it
extensively for our consumer content and for other content that does not require ultra-low latency. 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 provides 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 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 page 152.


07 Governmental regulation We 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 our foreign exchange Matching products, equities order routing and our new suite of next generation transaction products such as Reuters Trading for Fixed Income and Reuters Trading for Exchanges, 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 throughout all
member countries of the European Economic Area. RTSL is also subject to similar regulatory approvals in Australia, Hong Kong and Singapore, where it is approved by the Australian Securities and Investments Commission, the Hong Kong Monetary
Authority and Securities and Futures Commission respectively, and by the Monetary Authority of Singapore. FXMarketSpace Limited, our 50/50 joint venture with the CME, is regulated by the FSA as an ATS. 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. It is also licensed to offer trading in other
instruments such as interest rate swaps. RTS LLC is subject to regulation by the National Association of Securities Dealers, Inc. (NASD). For its equity derivatives products as offered through Reuters Trading for Exchanges, RTS LLC has also been
approved by the National Futures Association and is a member of the Commodity Futures Trading Commission. 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 operate
appropriate know your customer systems and controls. 08 Supplementary information Details of our registered office and headquarters can be found on page 146. Details of substantial shareholdings can be found on page 144. Details of the waiver of dividends can be found in note 32 on page 119. Details of our share buy-back can be found on page 149. Details of our research and development activity and expenditure can be found on pages 79, 85 and 9394. The Auditors, PricewaterhouseCoopers LLP, have indicated their willingness to continue in office and a resolution that they be reappointed will be proposed at the AGM to be held on 26 April 2007.




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|52 | Selected financial highlights
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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
75128), as well as the OFR on pages 5472. Prior to 2005, the Group prepared its audited annual financial statements under UK Generally Accepted Accounting Principles (UK GAAP). From 1 January 2005, the Group has been 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 financial statements take account of the requirements and options in IFRS 1 First-time Adoption of International Financial Reporting Standards as those requirements
relate to the 2004 comparatives included in the financial statements.


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
129133. The consolidated financial statements of the Group included in this annual report are presented in pounds sterling (£). On 31 December 2006, 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 was $1.96 = £1; on 9 March 2007 the Noon Buying Rate was $1.93 = £1. Additional information on exchange rates between the pound sterling and the
US dollar is provided, on page 149.




|Consolidated
      income statement data                          | 
|----------------------------------------------------------------- | 
|for
      the year ended 31 December                              | 
|£m (except per share data)                                        | 
|                                                                  | 
|Amounts in accordance with
      IFRS                             | 
|                                                                  | 
|Continuing activities:                                            | 
|                                                                  | 
|Revenue                                                           | 
|                                                                  | 
|Operating profit                                                  | 
|                                                                  | 
|Profit before
      tax                                           | 
|                                                                  | 
|Profit after tax                                                  | 
|                                                                  | 
|Profit from discontinued activities                               | 
|                                                                  | 
|Profit for the year                                               | 
|                                                                  | 
|Basic earnings per ordinary
      share                           | 
|                                                                  | 
|Basic earnings per ordinary
      share  continuing activities   | 
|                                                                  | 
|Diluted earnings per ordinary
      share                         | 
|                                                                  | 
|Diluted earnings per ordinary
      share  continuing activities | 
|                                                                  | 
|Basic earnings per ADS                                            | 
|                                                                  | 
|Basic earnings per ADS 
      continuing activities              | 
|                                                                  | 
|Diluted earnings per ADS                                          | 
|                                                                  | 
|Diluted earnings per ADS 
      continuing activities            | 
|                                                                  | 
|Dividends declared per ordinary
      share                       | 
|                                                                  | 
|Dividends declared per ADS                                        | 
|                                                                  | 
|Expressed in UK
      currency                                    | 
|                                                                  | 
|Expressed in US
      currency                                    | 
|                                                                  | 
|Weighted average number of
      ordinary shares (in millions)    | 
|                                                                  | 



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|                                                                                     | 
|------------------------------------------------------------------------------------ | 
|Consolidated income statement datacontinued                                          | 
|for the year
    ended 31 December                                                   | 
|£m (except per share data)                                                           | 
|                                                                                     | 
|Amounts in accordance with US GAAP                                                   | 
|                                                                                     | 
|Continuing activities:                                                               | 
|                                                                                     | 
|Revenue                                                                              | 
|                                                                                     | 
|Income/(loss) before taxes on income                                                 | 
|                                                                                     | 
|Income after taxes on income                                                         | 
|                                                                                     | 
|Income/(loss) after taxes (including minority interest) from discontinued activities | 
|                                                                                     | 
|Net income/(loss)                                                                    | 
|                                                                                     | 
|Basic earnings/(loss) per ordinary share                                             | 
|                                                                                     | 
|Basic earnings per ordinary share  continuing activities                            | 
|                                                                                     | 
|Diluted earnings/(loss) per ordinary share                                           | 
|                                                                                     | 
|Diluted earnings per ordinary share  continuing activities                          | 
|                                                                                     | 
|Basic earnings/(loss) per ADS                                                        | 
|                                                                                     | 
|Basic earnings per ADS  continuing activities                                       | 
|                                                                                     | 
|Diluted earnings/(loss) per ADS                                                      | 
|                                                                                     | 
|Diluted earnings per ADS  continuing activities                                     | 
|                                                                                     | 
|Dividends declared per ordinary share                                                | 
|                                                                                     | 
|Dividends declared per ADS:                                                          | 
|                                                                                     | 
|Expressed in UK currency                                                             | 
|                                                                                     | 
|Expressed in US currency                                                             | 
|                                                                                     | 
|Weighted average number of ordinary shares (in millions)                             | 
|                                                                                     | 

|                                                  | 
|------------------------------------------------- | 
|Consolidated
      balance sheet
data             | 
|at
    31 December                                | 
|                                                  | 
|£m                                                | 
|                                                  | 
|Amounts in accordance with IFRS                   | 
|                                                  | 
|Total assets                                      | 
|                                                  | 
|Net assets                                        | 
|                                                  | 
|Shareholders equity (attributable to the parent) | 
|                                                  | 
|Share capital                                     | 
|                                                  | 

|                                         |  |       |  |       |  |       |  |       |  |       | 
|---------------------------------------- |  | ----- |  | ----- |  | ----- |  | ----- |  | ----- | 
|£m                                       |  | 2006  |  | 2005  |  | 2004  |  | 2003  |  | 2002  | 
|                                         |  |       |  |       |  |       |  |       |  |       | 
|Amounts in accordance with
      US GAAP |  |       |  |       |  |       |  |       |  |       | 
|                                         |  |       |  |       |  |       |  |       |  |       | 
|Total assets                             |  | 2,022 |  | 2,326 |  | 2,743 |  | 3,280 |  | 3,789 | 
|                                         |  |       |  |       |  |       |  |       |  |       | 
|Shareholders equity                     |  | 281   |  | 705   |  | 568   |  | 514   |  | 804   | 
|                                         |  |       |  |       |  |       |  |       |  |       | 

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



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|54 | Operating
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Financial reviewNon-GAAP measuresA
    number of measures used in the following commentary and elsewhere in this
    report are non-GAAP figures, which are business performance measures used to manage the business, that supplement the IFRS-based
headline numbers. These include underlying change, trading costs, trading profit, trading cash flow, 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 on pages
6772. Underlying changeis calculated by excluding the impact of currency fluctuations and the results of acquisitions and disposals. Constant currencychange is calculated by excluding the impact of currency fluctuations. Trading costsare calculated by excluding the following from operating costs from continuing operations: restructuring charges associated with Reuters completed business
transformation plans, which include Fast Forward (a three year business transformation programme completed in December 2005) 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. Trading margin is trading profit expressed as a percentage of revenue. Trading cashflow is
calculated by including capital expenditure and excluding the following from
cash generated from continuing operations: restructuring cash flows associated
with completed business transformation plans, which include Fast Forward and
acquisitions, cash effect of derivatives used for hedging purposes and cash flows
which are either discretionary in nature or unrelated to ongoing recurring operating
activities such as special contributions toward funding defined benefit pension
deficits, acquisitions and disposals and dividends paid out by Reuters. 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 either discretionary in nature or unrelated to ongoing recurring operating activities such
as special contributions toward funding defined benefit pension deficits, acquisitions and disposals and dividends paid out by Reuters. Net debt/net fundsrepresents cash, cash equivalents and short-term deposits, net of bank overdrafts and other borrowings.


Group
        performanceSummary
        results
      
      2006
      
      2005
      
      2004Year to 31 December
      
      £m
      
      £m
      
      £mContinuing operationsRevenue
      
      2,566
      
      2,409
      
      2,339Operating costs
      
      (2,351
      )
      (2,251
      )
      (2,187
      )Other operating income
      
      41
      
      49
      
      42Operating profit
      
      256
      
      207
      
      194Net finance costs
      
      (15
      )
      (12
      )
      (12
      )Profit on disposal of associates,
        joint ventures and available-for-sale financial assets
      
      76
      
      38
      
      203Share of post-tax (losses)/profit from
          associates and joint ventures
      
      (4
      )
      5
      
      11Profit before tax
      
      313
      
      238
      
      396Taxation
      
      (20
      )
      (9
      )
      (40
      )Profit for the year from
        continuingoperations
      
      293
      
      229
      
      356Profit for the year from
        discontinuedoperations
      
      12
      
      253
      
      19Profit for the year
      
      305
      
      482
      
      375Basic EPS
      
      23.6p
      
      32.6p
      
      26.0pAdjusted EPS
      
      17.1p
      
      13.8p
      
      11.8p Revenue, costs and profit
	
	2006
	
	2005*
	
	Actual
	
	Underlying
	
	2004*Year to 31 December
	
	£m
	
	£m
	
	change
	
	change
	
	£mRecurring
	
	2,363
	
	2,235
	
	6%
	
	4%
	
	2,158Usage
	
	132
	
	104
	
	26%
	
	24%
	
	92Outright
	
	71
	
	70
	
	3%
	
	4%
	
	89Total revenue
	
	2,566
	
	2,409
	
	7%
	
	5%
	
	2,339Operating costs
	
	(2,351
	)
	(2,251
	)
	4%
	
	
	
	(2,187
	)Operating profit
	
	256
	
	207
	
	24%
	
	
	
	194Operating margin
	
	10%
	  
	9%
	
	
	
	
	
	8%Trading costs
	
	(2,258
	)
	(2,075
	)
	9%
	
	7%
	
	(2,013
	)Trading profit
	
	308
	
	334
	
	(8%
	)
	(11%
	)
	326Trading margin
	
	12%
	
	14%
	
	
	
	
	
	14% *
	2005 and 2004 have been restated to reclassify £7 million and £6 million respectively of recurring revenue to usage revenue. RevenueFull
year revenue grew 6.5% to £2,566 million (2005: £2,409 million). Exchange
rate movements accounted for 0.3 percentage points of this growth, and acquisitions,
mainly the full year impact of the 2005 acquisition of Telerate, accounted for
1.4 percentage points of revenue growth. On an underlying basis, adjusting for exchange
rate movements and the impact of acquisitions and disposals, revenue growth was
4.8%. Core Plus initiatives contributed 1.3 percentage points (£32 million)
to
revenue growth. All four elements of Core Plus  electronic trading, high
value content, new enterprise services and new markets  contributed to
revenue
growth. Volume growth, the 2006 price increase and recoveries (exchange fees and specialist data) accounted for 3.5 percentage points of growth. The key drivers of volume growth were: new sales and migrations to Reuters 3000
Xtra; Reuters Knowledge (principally on the buy-side); Enterprise Datafeeds and Trade and Risk Management software. Recurring revenue, which represented 92% of our revenue in 2006 (93% in 2005), was £2,363 million (2005: £2,235 million). This represents an increase of 6% on an actual basis (4% underlying) compared to
2005.




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Usage revenue, 5% of our revenue in 2006 (4% in 2005), grew by 26% (24% underlying) to £132 million (2005: £104 million) compared to 2005. Outright revenue, 3% of our revenue in 2006 (3% in 2005), totalled £71 million, compared to the £70 million of 2005. Revenue grew in all divisions, as discussed more fully in the Divisional performance on pages 58-62. Revenue also grew in all geographical regions. The Americas saw growth of 9% (underlying 8%), driven by strong sales of Enterprise solutions and Media services and good progress with Reuters Knowledge. Asia grew 7%
(underlying 6%) benefiting from improved trading conditions in Japan, market-leading positions in China and India and the inclusion of Telerate revenues for the full 2006 year. Europe, Middle East & Africa revenues grew 5% (underlying 3%) with
strong trading in the Nordic region, Russia and the Gulf, counterbalanced by consolidation in the German, Swiss and Italian markets. In the 2005 Annual Report and Form 20-F, the 2006 Outlook noted an expected acceleration of revenue growth through Reuters Core Plus investment programme against a backdrop of favourable market conditions, and targeted
total revenue growth of around 5%. This target included 2005 acquisitions and a percentage point of growth from Core Plus, but excluded currency effects. Constant currency revenue growth for 2006 of 6.2% was ahead of our target. Operating costs and trading costsTotal
operating costs were £2,351 million, an increase of 4% from 2005. The drivers of this increase are largely explained in the context of the movement in trading costs (as defined above and reconciled to
operating costs on page 70). Trading costs totalled £2,258 million in 2006 (2005: £2,075 million), up 9% on 2005. New investment in Core Plus growth and transformation initiatives, net of early savings, contributed £109 million to
cost growth in 2006. Inflation added approximately 3% to base costs, and additional costs of £21 million were incurred to invest in service resilience. Acquisitions added a further £30 million, principally Telerate, and data recoveries
costs added a further £25 million. Offsetting these key drivers of cost increases were savings from the Fast Forward programme, totalling £80
million, as anticipated in the 2006 Outlook included within the 2005 Annual Report
and Form
20-F. Trading cost increases were partially offset by much lower Fast Forward restructuring and acquisition integration costs. Total restructuring charges in 2006 were £13 million, compared to £112 million in 2005.
2005 charges included £94 million in respect of the Fast Forward restructuring programme, which completed at the end of 2005, and £18 million in respect of Telerate acquisition integration. The £13 million charged in 2006 relates only
to acquisition integration, principally Telerate. Operating costs also include the impact of movements in the fair value of derivatives and other financial assets, including embedded derivatives within our revenue and supplier contracts. Movements in fair values added
£25 million to total operating costs in 2006, compared to £16 million in 2005. Operating profit and trading profitOperating
profit totalled £256 million in 2006 (2005: £207 million), an increase of £49
million over 2005, largely reflecting the lower Fast Forward restructuring costs.


Trading profit (as defined above and reconciled to operating profit on page 69) was £308 million in 2006 (2005: £334 million). Trading profit was largely driven by revenue growth, the last tranche of Fast
Forward savings, continued tight cost control and £10 million of benefit from acquisitions. However, these benefits were more than offset by the £77 million net new investment to drive Core Plus, taking into account revenues and early cost
savings generated by the initiatives during the year. The business delivered an operating profit margin of 10% (2005: 9%) and a trading margin of 12% (2005: 14%). Profit for the year from continuing operationsProfit
for the year from continuing operations was £293 million (2005: £229 million). The year-on-year increase of £64 million is largely due to the improved operating profit discussed above and the
increase in profits from asset disposals. The sale of the majority of our stake in Factiva realised a profit of £76 million, whereas the £38
million of disposal profits in 2005 came largely from further sales of our stake
in Tibco Software
Inc. (TSI). Net finance costs of £15 million increased by £3 million over the previous year, reflecting the net outflow of cash for the share buy-back programme and special contributions made towards funding the majority
of the deficit position on two UK defined benefit pension schemes. Income from our associates and joint ventures in 2006 generated a loss of £4 million, compared to a profit in 2005 of £5 million. The losses in 2006 largely reflected the expected initial losses in Reuters
new investments in FXMarketSpace and TIMES NOW, along with set-up costs incurred to establish FXMarketSpace. Profits in 2005 largely reflected the results of Factiva, which ceased to be accounted for as a joint venture in October 2006. The tax charge for the year was £20 million, compared to £9 million in 2005. As in 2005, the current year has benefited from the settlement of prior year tax matters. A reconciliation of the actual tax charge
to the tax charge expected by applying the standard 30% UK rate of corporation tax to the reported profits is provided in note 6 to the financial statements on pages 8687. Profit for the year from discontinued operationsWe
have no activities which are required to be classified as discontinued operations
in 2006. An additional gain of £12 million has been recognised in 2006 arising from the disposal of Instinet Group in 2005,
compared to the £253 million profit recognised in 2005. The 2005 result was largely made up of the post-tax profit of £191 million on the disposal of Instinet Group and £68 million profit after tax from Instinet Groups
business
operations prior to its sale in December 2005. Earnings per shareProfit
for the year was £305 million (2005: £482 million), resulting in basic
EPS of 23.6p, down 9p from the prior year, mainly due to the decrease in profits
from disposals for the period. Adjusted EPS (as defined above and reconciled
to basic EPS on page 69) was 17.1p in 2006, up 24% from the previous year, reflecting
lower net restructuring charges and a reduction in the number of shares in circulation,
due to the share buy-back
programme.




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Summarised cash flow and free
    cash flowSummarised Group cash flow
	
	2006
	
	2005
	
	2004Year to 31 December
	
	£m
	
	£m
	
	£mNet cash flow from operating activities
	
	258
	
	253
	
	226Acquisitions and disposals
	
	(2
	)
	206
	
	384Purchases of property, plant and equipment, and
intangibles
	
	(228
	)
	(185
	)
	(136
	)Proceeds from sale of property, plant and equipment
	
	5
	
	3
	
	66Dividends received
	
	3
	
	5
	
	5Proceeds from issue of shares
	
	32
	
	10
	
	6Share buy-back
	
	(527
	)
	(223
	)
	Equity dividends paid to shareholders
	
	(134
	)
	(140
	)
	(140
	)Equity dividends paid to minority interests
	
	
	
	(23
	)
	Other movements
	
	7
	
	21
	
	(8
	)Movement in net (debt)/funds
	
	(586
	)
	(73
	)
	403Opening net funds/(debt)
	
	253
	
	326
	
	(77
	)Closing net (debt)/funds
	
	(333
	)
	253
	
	326 Reconciliation of cash flow fromcontinuing operations to free cash flowfrom continuing operations
	
	2006
	
	2005
	
	2004Year to 31 December
	
	£m
	
	£m
	
	£mCash flow from continuing operations
	
	311
	
	268
	
	307Net interest paid
	
	(19
	)
	(7
	)
	(19
	)Tax paid
	
	(34
	)
	(11
	)
	(34
	)Special contributions to pension schemes
	
	187
	
	
	
	Capital expenditure
	
	(228
	)
	(178
	)
	(117
	)Proceeds
      from sale of property, plant and equipment
	
	5
	
	3
	
	49Dividends received
	
	3
	
	5
	
	4Interim funding repayment from Telerate
	
	
	
	(18
	)
	18Repayment of funds to BTC
	
	
	
	26
	
	Free
	        cash flow from continuing
      operations
	
	225
	
	88
	
	208Note: Refer to page 72 for
    reconciliation to Group cash flows. Cash generated from continuing operations was £311
million, compared to £268 million in 2005. The year-on-year improvement
of £43 million was driven by lower restructuring charges than 2005 and savings
 achieved under the Fast Forward programme. It was also driven by a movement
in working capital outflow of £50 million (2006: £115 million; 2005: £65
million), although excluding the contribution of £187 million towards funding

pension deficits, working capital improved significantly on 2005. Free cash flow from continuing operations was £225
million(2005: £88 million). This
reflects lower cash restructuring charges and management action to improve working
capital, partially offset by higher capital expenditure, cash tax and interest
charges. Movements in working capital
were £111 million positive, although some of this improvement was due to
timing around year-end cash flows which will reverse in 2007. Investment in software and development projects has increased by £66 million, reflecting higher levels of development under Core Plus. Tangible capital spend has reduced by £16 million, reflecting the
completion in 2005 of the move to Reuters head office in Londons Canary Wharf, partially offset by new investment in data centres. Total capex of £228 million was higher than the £220 million anticipated in the 2006 Outlook in the
2005 Annual Report and Form 20-F, reflecting additional investment to improve data centre resilience.


Trading cash conversion from continuing operations, (i.e. trading cash flow divided by trading profit) in 2006 was 111% (2005: 77%) with the increase in capital expenditure more than offset by working capital
improvements. Net debt was £333 million, compared to net funds of £253 million in 2005, a movement of £586 million. The significant movements in net debt include: •
    Free cash inflows of £225 million, as noted above;•
    Special contributions of £187 million towards funding the deficit in two UK defined benefit pension schemes;•
    The ongoing cost of the share buy-back programme, amounting to £527 million;•
    Dividend payments of £134 million; and•
    Net outflow from acquisitions and disposals of £2 million, including £79 million from the disposal of Factiva. DividendsDividends
paid in 2006 totalled £134 million. The final dividend to be proposed in
respect of 2006 is 6.9p per share, an increase of 12% on the prior year, reflecting
our continued confidence in the future performance of our business. The total
dividend in respect of 2006 is 11p, an increase over 2005 of 10%. We are committed to maintaining a progressive dividend policy, which reflects our long-term earnings potential, whilst moving towards minimum dividend cover of at least two times based on adjusted earnings. Balance sheetThe
net assets of the Group are £172 million, a reduction of £339 million
on the previous year. This reduction primarily reflects the return of funds to
shareholders through the share buy-back
programme. The main movements in the Group balance sheet between 2006 and 2005 are: •
    The capitalisation of property, plant and equipment and intangible assets of £290 million, offset by annual depreciation and amortisation charges of £141 million.•
    A change in the composition of our net debt (net funds in 2005), with lower cash holdings and higher debt being offset by lower pension obligations due to the special contributions towards funding the deficits in two UK defined benefit pension schemes. RestatedSummarised
        Group balance sheet
      
      2006
      
      2005
      
      2004Year to 31 December
      
      £m
      
      £m
      
      £mNon-current assets
      
      1,314
      
      1,179
      
      1,025Current assets
      
      606
      
      957
      
      1,410Non-current assets classified
        as held for sale
      
      
      
      1
      
      145Total assets
      
      1,920
      
      2,137
      
      2,580Current liabilities
      
      (913
      )
      (797
      )
      (1,249
      )Non-current liabilities
      
      (835
      )
      (829
      )
      (714
      )Liabilities
          associated with non-current assets classified as held for sale
      
      
      
      
      
      (47
      )Total liabilities
      
      (1,748
      )
      (1,626
      )
      (2,010
      )Net assets
      
      172
      
      511
      
      570Shareholders equity
      
      172
      
      511
      
      371Minority interest
      
      
      
      
      
      199Total equity
      
      172
      
      511
      
      570


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Our largest acquisition during the year was that of Application Networks for £22 million, which completed in June 2006. Other acquisitions included two small Telerate distributor businesses in India and Italy. We
also made a number of investments in associates and joint ventures, including a 26% holding in TIMES NOW of £11 million; and an initial contribution of £8 million to establish FXMarketSpace as a joint venture with the CME (an additional
£6 million was invested by each partner in early 2007 towards the total commitment of $45 million for each partner intended to bring the joint venture to a cash flow positive status; the partners evaluate on an ongoing basis whether
additional funding may be required). Disposal activity for the year included the sale of the majority of our 50% stake in Factiva to Dow Jones for net cash proceeds of £79 million, resulting in a gain on sale of £76 million. The 2005 IFRS balance sheet has been restated to recognise irrevocable commitments to repurchase shares during close periods as a liability. During the closed period following the 2006 year end, the Group repurchased
12.0 million shares (2005: 13.5 million shares, 2004: nil) under these commitments at a total cost of £53 million (2005: £59 million, 2004: £nil). The impact of recognising these commitments is to increase current liabilities and to
decrease shareholders equity by £53 million (2005: £59 million, 2004: £nil). There is no impact on reported profit, cash flow or earnings per share. Share repurchases under the buy-back programme totalling £137 million for
the period 1 January 2006 to 7 March 2006,
which included the £59 million described above, were disclosed previously under note 38 Post balance sheet events in
the 2005 Annual Report and Form 20-F. 2007 OutlookIn
2007, we expect to deliver underlying revenue growth of 6% or better, in line
with our plans for strong sustainable revenue growth in the medium term, assuming
continued growth in the financial services industry. Trading margins are expected
to increase to 1314% in 2007, putting us on track to achieve our medium term trading margin target of 1720%.
Operating margins are expected to perform similarly but will be subject to additional
impact from factors that cannot be predicted such as fair value movements in
embedded derivatives. We expect to keep capital expenditure in 2007 at similar levels to 2006. Although currency had a negligible effect on trading profit, the impact of sterling strength against the euro and US dollar is expected to be more material in 2007 if current rates persist. This is because major
sources of revenue growth  our largest accounts worldwide, for example  are typically dollar priced while the size of Reuters dollar denominated cost base has reduced. At current exchange rates and currency mix, a 5 cent
weakening/strengthening in either the US dollar or the euro would decrease/increase trading profit by approximately £10 million. We will actively manage our capital structure to maintain a strong investment grade rating of BBB+/Baa1 and, to the extent that we generate cash surplus to our needs, will continue to seek to return that cash to
shareholders. Based on current investment plans, Reuters expects to increase the buy-back during 2007 to £400£425 million, which includes £250 million remaining of the £1 billion buy-back announced in July 2005. In future,
share buy-backs will be considered periodically, based on business performance, investment opportunities and the BBB+/Baa1 ratings target. We invested a net £77 million in our Core Plus initiatives in 2006 taking into account revenues and early cost savings generated by the initiatives during the year. Looking forward, our targets for Core
Plus


are that the combination of increased revenues and new cost savings, net of the investment required to deliver these, will improve the impact on trading profit by £60 million in 2007 and by a further £105
million in 2008. Actual trading profit in each of these years will also be impacted by other factors such as the performance of our core business and currency movements. 2005 results compared with 2004RevenueFull
year revenue grew by 3% to £2,409 million (2004: £2,339 million). This
was our first full year of revenue growth since 2001. On an underlying basis,
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 was £2,235 million (2004: £2,158 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 revenue grew by 13% to £104 million (2004: £92 million). This was driven by strong performance from Reuters transaction services as well as higher advertising revenue from reuters.com. Outright revenue 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, which completed in 2005. Operating costs and trading costsTotal
operating costs were £2,251 million, an increase of 3% from 2004 (£2,187 million). The drivers of the increase are largely explained in the context of the movement in trading costs (as defined above).
Trading costs were £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. Additionally, Fast Forward restructuring costs
of £94 million were £26 million lower than the previous year. The Fast
Forward business transformation completed in 2005, with outsourcing communications
to  BT/Radianz, further headcount reductions and expansion in Bangalore and Bangkok
resulting in further annualised savings of £126 million. We also incurred £18 million of acquisition related integration costs, principally relating to Telerate. 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. Operating profit and trading profitOperating
profit rose from £194 million to £207 million, reflecting improved
trading performance. Trading profit was £334 million in 2005 (2004: £326 million). Trading margin remained at 14%, after expenditure on investments in the Core Plus programme. Profit for the year from continuing operationsProfit
in 2005 from continuing operations was £229 million, a decrease from £356
million in 2004 driven by a reduction in profits on asset


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disposal. Net finance costs were comparable to 2004 at £12 million due to a similar net debt position throughout the year, prior to the disposal of Instinet Group. The tax charge was £9 million compared to
£40 million in 2004 mainly due to the benefit of settling prior year tax matters. Profit for the year from discontinued operationsProfit
from discontinued operations rose from £19 million to £253 million, largely due to the post-tax profits of £191 million on the disposal of Instinet Group and £68 million profit after tax from
Instinets business operations prior to sale. This was partly offset by losses on the sale of Radianz to BT, and on the partial disposal of the Groups
interest in Bridge Trading Company (BTC) to Instinet Group. Earnings per shareProfit
for 2005 was £482 million (2004: £375 million), resulting in basic
EPS of 32.6p, up 6.6p from 2004. Adjusted EPS was 13.8p, up 2p from 2004, reflecting
a stronger trading profit and a reduction in the number of shares in circulation
due to the share buy-back programme. Summarised cash flowCash
generated from continuing operations was £268 million (2004: £307 million) and free cash flow was £88 million (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 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). Excluding£507 million of net funds from Instinet Group in 2004, 2005 shows a year-on-year improvement in net debt to net funds. This was largely due to cash flow from operations of £268 million and net cash proceeds
from disposals/acquisitions (mainly Instinet) of £710 million, partially offset by net purchases of assets of £182 million, dividend payments of £140 million, and payments made as part of the share buy-back programme of £223
million. DividendsDividends
paid were £140 million in 2005 and 2004. The final dividend was 6.15p per
share in line with 2004. Balance sheetThe
net assets of the Group reduced to £511 million in 2005, from £570
million in 2004. The main movements in the balance sheet were: •
    The disposal of Instinet Group  reducing both total assets and liabilities upon sale and reducing the minority interest in Instinet Group to zero.•
    The impact of the share buy-back programme, which decreased shareholder funds by £283 million (which includes £59 million in current
liabilities resulting from irrevocable commitments entered into during the close period).•
    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 decreased which resulted in a
larger present value liability).


The largest acquisition in 2005 was Telerate for £122 million. Other acquisitions included Action Images and Ecowin. Disposals included Reuters 62% stake in Instinet Group to NASDAQ. Prior to this disposal, Reuters had sold BTC to Instinet Group and had received a dividend from Instinet Group following the sale of its Lynch, Jones
& Ryan subsidiary to The Bank of New York. The net proceeds from all these transactions totalled approximately £630 million. Other disposals included the sale of 16 million shares in TSI for £63 million resulting in a profit of £33 million, and the sale of Radianz to BT for £115 million cash resulting in a loss of £4
million. Divisional performanceOverviewWe
  operate through four business divisions: Sales & Trading, Research & Asset
  Management, Enterprise and Media. They are closely aligned with the user communities
  they serve and they are responsible for defining, building and managing products.
  The business divisions have profit and loss responsibility. Revenues and trading
  profit for the two years to 31 December 2006 are analysed by business division
  in the following sections. Further information
on revenue by division and by geography is included in note 1 of the financial
  statements on page 84. During 2006, we transferred our development and data teams to become part of the business divisions, to align these teams more closely with our divisional plans. These plans are being further strengthened by our
investment in the quality and timeliness of Reuters data. Operationally, we have introduced a new end-to-end framework for managing products through their entire lifecycle, simplifying the process and enabling us to make the most of our resources
and maximise the return on our investments. Shared infrastructure design is provided by a technical architecture team tasked with providing technical coherence, scale efficiencies and compliance with standards. We face competition in most of 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. The business divisions serve customers through our Global Sales and Service Operations group which is split into geographic regions: the Americas, Asia, and Europe, Middle East & 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 travelling showcase for Reuters products called brightspot. Our Editorial and data groups support the work of all four business divisions by reporting, producing, collecting, quality-checking, packaging and delivering an extensive range of news and financial
information. Our financial data comes from an array of sources such as exchanges, over-the-counter markets, our customers, research services and other contributors such as energy and fixed income data providers, as well as from our
own news, research and data operations.




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Our editorial team of 2,400 text, television and photo journalists aims to report the news to the highest standards of accuracy, insight and timeliness. Representing some 90 nationalities, they report from nearly 200
bureaux in 19 languages. They filed 3 million news items in 2006 to customers in the form of text, pictures, TV, video and graphics. Our coverage includes data from 250 exchanges, more than 1.5 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 6,000 financial services contributors. In addition, our fundamentals and estimates data is recognised as a leading source of high quality financial information, covering over 45,000 companies worldwide. Sales & Trading division Overview Sales & Trading  our largest business division  serves the information, trading and post-trade connectivity requirements of buy and sell-side customers in the foreign exchange, fixed income, equities
and other exchange traded instruments, and commodities & energy markets. The divisions
major strategic focus is to become the leading provider of content and transaction
services for traders and salespeople worldwide, across a broad spectrum of asset
classes. Our customers include market makers, sales traders, traders at investment
firms and corporate treasurers. In addition, we continue to identify opportunities
in new asset classes. Our premium desktop product is Reuters 3000 Xtra. Its users are financial markets professionals who require a powerful combination of deep, global, cross-asset news and content combined with sophisticated pre-trade
decision-making, analytics and trade connectivity tools. It includes Reuters Messaging, which enables end-users to interact with their peers in the financial community. Our trading suite of products offers trade connectivity, electronic trading, order-routing and post-trade tools to enable customers to trade with each other and connect their systems to electronic markets. We now have
a range of trading and post-trade services for FX and money markets, fixed income and exchange traded instruments. Our strategic product set includes Reuters Dealing 3000, Reuters Trading for Foreign Exchange, Reuters Trading for Fixed Income and
Reuters Trading for Exchanges. Through Reuters Dealing 3000, our customers have access to a trading community of 18,000 FX and money market traders globally. Reuters Trader is our mid-tier product which we also offer in versions targeted at regional markets. Users of our mid-tier and domestic products typically require only a subset of Reuters overall content and
capabilities. We are working to complete the migration of our customers from older products to new Reuters Trader products, many of which are browser-based. Our Sales & Trading information products compete with Bloomberg, Thomson Financial, 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 exchanges, particularly in the energy and commodity markets; direct market access providers such as Lava and Sonic, now owned by banks (which
are also our customers); 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 (now owned by ICAP) and Bloomberg.


Financial performanceSales & Trading
    division summaryoperating and trading results 2006
	
	
	2005
	*
	Actual
	
	UnderlyingYear to 31 December
	
	£m
	
	
	£m
	
	change
	
	changeRevenue
	
	1,690
	
	
	1,613
	
	5%
	
	3%Trading costs
	
	(1,476
	)
	
	(1,373
	)
	8%
	
	6%Restructuring charges
	
	(12
	)
	
	(76
	)Other operating income (in
 trading costs)
	
	(20
	)
	
	(16
	)Impairments
          and amortisation of business combination intangibles
	
	(17
	)
	
	(14
	)Fair value movements in
 expenses
	
	(18
	)
	
	(16
	)Operating costs
	
	(1,543
	)
	
	(1,495
	)
	3%Other operating income
	
	27
	
	
	37Operating profit
	
	174
	
	
	155
	
	13%Operating margin
	
	10%
	  
	
	10%Trading margin
	
	13%
	  
	
	15% *
	In 2006, Reuters made changes to the allocation of revenue and trading costs between business divisions, to reflect changes in the management of certain products. 2005 comparatives have therefore been restated to
increase Sales & Trading revenue by £18 million and trading costs by £19 million. 2005 comparatives have also been restated to reallocate £1 million of amortisation on intangible assets arising on the acquisition of Telerate from
Enterprise to Sales & Trading, in line with the allocation of revenues from Telerate products.Reconciliations between the IFRS and non-GAAP measures are provided on pages 6972. Sales & Trading returned to underlying revenue growth in 2006 under a new management team led by Mark Redwood. The key to profitable growth lies in focusing on a small number of standard technology platforms, and
on high-margin transactions-related revenue. In 2006, revenue of £1,690 million was up 5% on an actual basis, and 3% on an underlying basis after accounting for growth generated by the acquisition of Telerate during 2005. The major drivers of
revenue growth were sales of 3000 Xtra, helped by favourable market conditions, and transaction revenues, helped by strong FX markets. Recurring revenue within Sales & Trading grew 4% on an actual basis and 2% on an underlying basis. The biggest growth driver was Reuters 3000 Xtra, which saw subscription revenue grow by 12% on an actual basis and
8% on an underlying basis. While this increase was driven in part by migrations from other Reuters desktop products, the highest proportion came from new sales, benefiting from favourable market conditions, new sales into areas such as credit
derivatives and customers wanting to trade on new transactions services. Reuters Trader for Commodities also saw encouraging growth, reflecting volatile energy and commodities markets. Strong foreign exchange markets, as well as new services such as prime brokerage, also drove growth of 23% on an actual and underlying basis in Sales & Trading usage revenues, taking them to £93 million.
Reuters conversational dealing services also saw revenue growth driven by an active global market and emerging markets expansion. Reuters leading position in FX is creating significant new growth opportunities such as the FXMarketSpace joint venture
with the CME. Transactions services were the major area of growth-focused Core Plus investment in Sales & Trading during 2006. Reuters Trading for Foreign Exchange saw encouraging volume growth, while Reuters Trade Notification
Service is beginning to establish itself as an industry standard for post-trade messaging among FX brokers and their clients. The launch of Reuters Trading for Exchanges, which enables customers to transact exchange-traded instruments, was recently
boosted by an agreement with BNY ConvergEx to offer its global trading services through this platform, bringing the number of brokers live on the platform to eight. Operating costs increased to £1,543 million
    in 2006 (up 3% on an actual basis), reflecting an increase in trading costs,
    partially offset by lower Fast Forward restructuring charges.




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Trading costs increased to £1,476 million in 2006 (up 8% on an actual basis and up 6% on an underlying basis), driven by significant investment in Core Plus initiatives such as transactions services and customer
service infrastructure, the effect of which was offset to some extent by operating efficiencies and reductions in communications costs. These initiatives are expected to deliver further underlying revenue growth, and margin improvement, in 2007 and
beyond. A key part of strengthening our position in Sales & Trading in 2006 was to migrate former Telerate customers to the latest Reuters products. In line with the integration plan, the Telerate migration was completed
in Europe and Asia by the end of 2006, and is due to be completed in the Americas and with our largest global customers in 2007. Telerate profits are in line with the original acquisition plan. A restructuring charge of £13 million relating to
the integration of Telerate was taken in 2006, with the majority (£12 million) incurred within the Sales & Trading division. Restructuring charges have reduced significantly compared to 2005 as the Fast Forward programme came to an
end. In 2006, operating profit was £174 million, up 13%. The reduction in the 2006 restructuring charge was the primary driver of this growth, as increased revenues were partially offset by the cost of Core Plus
investments. Trading profit declined by 10% on an actual basis and 17% on an underlying basis. Research & Asset Management divisionOverviewThe
Research & Asset Management division focuses on supporting portfolio managers,
wealth managers, investment bankers, research analysts and corporate executives
who make complex financial decisions outside the trading environment. There was
a smooth management transition at year end, with Michael Peace taking over responsibility
for the division on the retirement of Julie Holland. The Research & Asset Management division is responsible for the Reuters Knowledge and Reuters Wealth Manager product families. The Reuters Knowledge family is targeted at the research and advisory communities, including investment bankers and analysts, portfolio managers, company executives and others focused on company and industry-specific
research. Reuters Knowledge offers an integrated package of public and proprietary information about companies, securities, industries and markets plus economic data, news and other content. Knowledge can be integrated with Reuters flagship real
time information desktop product, Reuters 3000 Xtra, for users who require significant real-time, deep cross-asset coverage or transaction capabilities. The Reuters Wealth Manager family is targeted at wealth managers and retail brokers who require financial information services 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 content on a wide range of single asset and collective investment funds provided by our Lipper
subsidiary. Lipper is a global leader in the provision of independent fund research, analysis and ratings. As well as its core services, the Research & Asset Management division also receives a share of revenue from Reuters 3000 Xtra and the Reuters 2000/3000 range of legacy products, by reference to the nature of the
customer taking the product. In the Research & Asset Management arena, we compete withBloomberg,
Thomson Financial, Factset and Standard & Poors, as well as smaller
niche players. Our Lipper funds information business competes with Morningstar,
plus a number of local domestic
players.


Financial
    performance
          Research & Asset Managementdivision summary operating
  andtrading results 2006
	
	
	2005
	*
	Actual
	
	UnderlyingYear to 31 December
	
	£m
	
	
	£m
	
	change
	
	changeRevenue
	
	298
	
	
	258
	
	15%
	
	12%Trading costs
	
	(305
	)
	
	(276
	)
	10%
	
	8%Restructuring charges
	
	
	
	
	(11
	)Other operating income (in trading
        costs)
	
	(4
	)
	
	(3
	)Impairments
      and amortisation of business combination intangibles
	
	(3
	)
	
	(3
	)Fair value movements in
 expenses
	
	(3
	)
	
	Operating costs
	
	(315
	)
	
	(293
	)
	7%Other operating income
	
	5
	
	
	Operating loss
	
	(12
	)
	
	(35
	)
	(63%
	)Operating margin
	
	(4%
	)
	
	(13%
	)Trading margin
	
	(2%
	)
	
	(6%
	) *
    In 2006, Reuters made changes to the
        allocation of revenue and trading costs between business divisions, to
        reflect changes in the management of certain products. 2005 comparatives
        have therefore been restated
to
decrease Research & Asset Management revenue by £10 million and trading
costs by £12 million.Reconciliations between the IFRS and
      non-GAAP measures are provided on pages 69-72. The Research & Asset Management division made progress towards profitability in 2006, with revenues of £298 million up 15% (12% on an underlying basis) beginning to drive more significant economies of
scale. Research & Asset Management aims to provide independent content and insight to the following user communities: Investment Banking, Investment Management & Corporates and Wealth Management. Investment Banking, Investment Management & Corporates were the major revenue drivers for the division in 2006, with total revenues growing 27% on an actual basis and 22% on an underlying basis to £171
million. Revenues were driven by the addition of 3,000 standalone Reuters Knowledge positions (bringing the total to 14,000) and the sales of Reuters Knowledge embedded in Xtra and datafeeds. The superior quality of Reuters company fundamentals and
estimates data was key to driving growth in both feeds and desktops. Reuters also benefited as customers broadened their global coverage, by providing in-depth information on emerging markets such as China and India. Revenue from the Wealth Management customer base grew 2% on an actual basis and 1% on an underlying basis to £127 million. Ongoing management actions to restructure unprofitable low tier desktop business limited
top line growth, but moved this part of the business closer to profitability. Customer demand is growing for datafeed and online solutions within their wealth management workflow and for Lipper funds information. Simplification will remain a key
Wealth Management theme in 2007 with the beginning of convergence of several existing products onto the global Reuters Knowledge for Wealth Management platform. Operating costs were £315 million in 2006, up 7% driven primarily by trading cost increases, partially offset by lower Fast Forward restructuring charges. Trading costs were £305 million in 2006, up 10% on an
actual basis and 8% on an underlying basis. In 2006, the business saw significant investments under the Core Plus programme in high value content and new functionality for Reuters Knowledge. With Reuters Knowledge now on a quarterly release cycle,
new content can be released to customers more quickly. The 2005 acquisition of Ecowin also contributed profits in 2006. Partially offsetting the higher trading costs were lower Fast Forward restructuring charges.




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Research & Asset Management generated a net operating loss of £12 million in 2006, compared to a loss of £35 million in 2005, despite additional Core Plus investment costs in 2006. This improvement was
primarily driven by the improved revenue growth. In 2007, Research & Asset Management is expected to sustain its strong revenue growth, and improve profitability. Initiatives, such as the formation of a primary research group to create and sell proprietary
content, are expected to deliver benefit over a longer time horizon, and are being well received in early client testing. Enterprise division
    OverviewReuters aggregates information to give a single view of the financial markets and the events that move them. Our Enterprise division provides information and software that support business automation within the capital
  markets, for example, automated trading and regulatory compliance. Our
  products include: •
    Reuters DataScope real-time datafeeds, streams of machine- readable price data delivered over our networks at high speed for use in
customers information and trading services;•
    Reuters DataScope pricing and reference data which help banks and financial organisations achieve regulatory compliance by delivering accurate
financial instrument prices and reference material for the capital markets globally. In 2006 we launched a new distribution platform, Reuters DataScope Select, to support
back office and fund valuation processes;•
    Reuters Market Data System, a resilient content distribution software platform that enables banks to deliver high volume and low latency data
into a wide variety of financial systems;•
    Trade and Risk Management systems to help banks manage their trading position and monitor their exposure to trading risk. In 2006, we acquired
Application Networks Inc., whose coverage of credit derivatives and structured financial products complements our existing strengths in FX and treasury risk management;
and•
    Reuters Messaging, a secure online messaging service that connects financial professionals within and across existing communities of interest. 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 ACTIV Financial compete with us in the market data delivery arena. Our pricing and reference data 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, GL TRADE and a large number of smaller firms.


Financial
      performanceEnterprise division summary	operating and trading results2006
	
	2005
	*
	Actual
	
	UnderlyingYear to 31 December
	
	£m
	
	£m
	
	change
	
	changeRevenue
	
	408
	
	385
	
	6%
	
	6%Trading costs
	
	(323
	)
	(291
	)
	11%
	
	10%Restructuring charges
	
	(1
	)
	(17
	)Other operating income (in trading costs)
	
	(5
	)
	(5
	)Impairments
      and amortisation of business combinationintangibles
	
	(3
	)
	(4
	)Fair value movements in expenses
	
	(3
	)
	Operating costs
	
	(335
	)
	(317
	)
	6%Other operating income
	
	6
	
	8Operating profit
	
	79
	
	76
	
	3%Operating margin
	
	19%
	
	20%Trading margin
	
	21%
	
	24% *
	In 2006, Reuters made changes to the allocation of revenue and trading costs between business divisions, to reflect changes in the management of certain products. 2005 comparatives have therefore been restated to
decrease Enterprise revenue by £8 million and trading costs by £7 million. 2005 comparatives have also been restated to reallocate £1 million of amortisation on intangible assets arising on the acquisition of Telerate from Enterprise
to Sales & Trading, in line with the allocation of revenues from Telerate products.Reconciliations between the IFRS and non-GAAP measures are provided on pages 6972. The Enterprise division, under the leadership of Peter Moss, achieved a strong return to revenue growth in 2006. Revenue of £408 million was up 6% both on an actual and underlying basis. Our financial services customers are looking to grow revenues and cut costs through increased levels of business automation. The Enterprise division is well placed to help them achieve these goals, and has made
significant progress during 2006. Enterprise Information area saw the best revenue growth within the Enterprise division. On both an actual and an underlying basis revenues grew 13% to £220 million. Financial services customers are consuming more
and more data as they seek to provide a competitive edge for their customers, and become increasingly sophisticated in the valuation of financial instruments and funds and understanding of risk. The breadth, depth and reliability of Reuters
Enterprise Information make it a market leader in these fields. Trade and Risk Management also benefited from demand for business automation, and saw revenues grow 13% on an actual basis (12% on an underlying basis) to £92 million. The Kondor+ trade and risk management desktop
product was significantly upgraded in the course of the year, and the launch of Kondor+ Trade Processing added front-to-back office trade management capabilities to further the automation of trading businesses. Application Networks was acquired and
integrated during 2006. Although its initial contribution to revenues was small, the sales pipeline for 2007 is strong. Information Management Systems (IMS) continued to see revenue declines  by 11% on an actual basis (12% on an underlying basis)  to £96 million, driven by the move to desktop based solutions at smaller
sites, withdrawal from the hardware business and the fact that the majority of customers have now migrated from legacy platforms onto Reuters Market Data System (RMDS). By the end of 2006, IMS had seen the majority of the flow-through effect of
migrating customers from legacy TIB/Triarch systems to the RMDS, as well as from exiting other legacy business. New Core Plus products such as the Reuters Wireless Delivery System and Reuters Tick Capture Engine started to generate revenue in 2006,
and are expected to make a larger




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contribution in 2007. Widespread customer use of RMDS as a platform for making information available throughout an enterprise is of key strategic importance to Reuters. Enterprise operating costs in 2006 were £335 million, up 6% driven primarily by trading cost increases, partially offset by lower Fast Forward restructuring charges. Trading costs in 2006 were £323 million,
up 11% on an actual basis and 10% on an underlying basis. During 2006, the Enterprise division invested in a series of new initiatives under Core Plus to broaden its suite of business automation solutions. For example, Reuters Datafeed Direct,
Reuters DataScope Tick History, the Reuters Tick Capture Engine and Reuters NewsScope all support evolving trends in automated trading. Although Core Plus investment reduced 2006 trading profit, trading margin remained above 20%. Operating profit increased slightly in 2006 to £79 million, helped by the reduction in Fast Forward restructuring
charges, though the operating margin decreased to 19%. In 2007, Enterprise is targeting higher levels of revenue growth and improved profitability. Media division Overview  The Media division creates, packages and distributes
news and information services to the worlds newspapers, television and
cable networks, radio stations and websites, as well as directly to consumers
through Reuters-branded digital services across online, mobile, and IPTV platforms.
Reuters Media products provide comprehensive and timely news and information
as text, video, graphics and photos. Reuters Media targets media professionals
and influential
consumers who need fast, accurate and trusted news and information to keep them
informed. Reuters news and information reaches over 1 billion people every day
through our worldwide media partners, and Reuters online sites reach a unique
audience of
16 million individuals globally each month. In June 2006, we re-launched Reuters Pictures, our online photo product and archive used by media outlets worldwide. In September 2006, we launched the first virtual news bureau in Second Life, an online virtual world,
helping us to strengthen our online media brand and profile. We sold the majority of our 50% stake in our Factiva joint venture to Dow Jones (our joint venture partner) for £79 million in December 2006. 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, we compete with a variety of local and global
providers including the BBCs websites and Yahoo! Finance.


Financial performanceMedia division summary operatingand trading results
	
	2006
	
	2005
	
	Actual
	
	UnderlyingYear to 31 December
	
	£m
	
	£m
	
	change
	
	changeRevenue
	
	170
	
	153
	
	11%
	
	10%Trading costs
	
	(154
	)
	(135
	)
	13%
	
	12%Restructuring charges
	
	
	
	(8
	)Other operating income (in trading costs)
	
	(2
	)
	(2
	)Impairments
	      and amortisation of business
      combination intangibles
	
	(1
	)
	(1
	)Fair
      value movements in expenses
	
	(1
	)
	Operating costs
	
	(158
	)
	(146
	)
	8%Other operating income
	
	3
	
	4Operating profit
	
	15
	
	11
	
	43%Operating margin
	
	9%
	
	7%Trading margin
	
	10%
	
	12%Reconciliations between the
      IFRS and non-GAAP measures are provided on pages 6972. The Media division delivered strong growth in 2006, with revenues of £170 million up 11% on an actual basis (10% on an underlying basis). The major drivers of revenue growth were new sales of TV subscriptions and
growth in online advertising. Chris Ahearn strengthened his team during the year by adding online editorial, marketing, technology and advertising expertise. Revenue from Agency Services grew 7% on actual basis (6% on an underlying basis) to £143 million, driven principally by strong new sales of TV subscriptions, particularly in the Middle East and Central and Eastern
Europe, and increased customer use of picture services. As publishers and broadcasters retrench and seek to control their direct editorial costs, new revenue opportunities for Reuters News Agency have opened and continued to be pursued. In addition,
the demand for video for inclusion in the online properties of traditional newspaper clients has fuelled demand for Reuters television feeds. Consumer Media revenue grew 38% on an actual and
39% on an underlying basis to £27 million, driven principally by strong
growth
in
online advertising on the reuters.com sites. Trading profit declined on an actual basis, but remained stable on an underlying basis, with a strong performance from the Agency business offset by the investment under Core Plus to capitalise on the high growth rates
in interactive media. Operating profit increased in 2006 to £15 million, helped by the reduction in Fast Forward restructuring charges. In 2007, the division is expected to maintain similar levels of growth, at improved margins, as it begins to realise scale advantages in the newer businesses and benefits from the increased functionality of its new web
platform. Supporting financial informationManagement of risksDetails
of the financial risk management objectives and policies of the company and the
exposure of the company to financial risk are provided in Internal control on
page 41 and in the financial statements
within note 17 on page 99.




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Pending transactions and post balance sheet events There are no material pending transactions. Details of post balance sheet events are given on page 127. Treasury policies  Reuters 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 funding. At no time do we undertake speculative transactions or transactions without an underlying commercial rationale. 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 the business from a mixture of cash flows from operations, short-term borrowings from banks, commercial paper issuance, backed up as required by committed bank facilities, and debt issuance in the capital
markets. We manage our net debt position and interest costs to support our continued access to the full range of debt capital 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 deposits with financial institutions holding strong credit ratings or used to repurchase the companys own shares as part of an announced buy-back
programme designed to enhance shareholder returns. During 2006, £527 million was applied to market purchases of the companys own shares (for information about the companys share repurchases, see page 116). At 31 December 2006, the
Group had net debt of £333 million. Reuters is rated by the three principal credit rating agencies. As at 31 December 2006, our long- and short-term ratings were Fitch A/F1, Moodys A3/P-2 and Standard and Poors A/A-2. Following
the announcement on 1 March 2007 that Reuters expects to increase the buy-back during 2007 to £400425 million, which includes the £250 million remaining of the £1 billion buy-back announced in July 2005, Standard and Poors
and Fitch Ratings both revised downwards the long-term rating from A- to BBB+ and Moodys have put the rating under review for a possible downgrade. Going forward, we will actively manage our capital structure to maintain an investment grade
rating of BBB+/Baa1. 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, for accounting purposes, 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 debt position, a 1% increase in global interest rates would have reduced profit before tax in the year by approximately £2 million (2005: £2 million) before the impact of
hedging. Multicurrency revolving credit facilityIn
October 2006, we entered into a committed multicurrency revolving credit facility
for £680 million. This replaced an existing committed syndicated credit facility of £480
million and a bilateral loan
facility of


£24 million. At 31 December 2006, we had available £623 million under the facility, following utilisation of £57 million in the form of a standby letter of credit. There were no cash drawings from the
facility during 2006. The commitment expires, and any final repayment is due in October 2011, unless one-year extension options are exercised in October 2007 and October 2008 (at the banks discretion). In this instance, the latest expiry date
would be 2013. 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 no financial covenants. Euro Commercial Paper ProgrammeA £1.5 billion Euro Commercial Paper Programme is available in respect of which we had obligations of £122 million at 31 December 2006. The minimum outstanding during 2006 was nil and the maximum was
£319 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 2006, we had outstanding obligations of £510
million under the programme, repayable at various dates up to November 2010 including
a500
million (£337 million) public bond, issued in November 2003 and maturing
in November 2010, and a250
million (£168 million) floating rate note, issued in November 2006 and maturing in November 2008. The minimum outstanding during 2006 was £341 million and the maximum was
£510 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. 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 £117 million. At 31 December 2006, £24
million of
the facilities were utilised in the form of bank overdrafts. Contractual financial obligationsThe following table summarises our principal contractual financial obligations at 31 December 2006, certain of which are described in the consolidated financial statements and notes. We expect to be able to fund such
obligations from ongoing operations and external facilities.




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Contractual
        obligationsat 31 December
        2006
      
      
      
      
      
      Payments
          due by periodLess than
      
      1-3
      
      3-5
      
      After 5Total
      
      1 year
      
      years
      
      years
      
      years£m
      
      £m
      
      £m
      
      £m
      
      £mFinance lease
        payables
      
      4
      
      2
      
      2
      
      
      
      Debt obligations
        (includingfuture interest payments)
      
      907
      
      217
      
      299
      
      391
      
      Pension obligations*
      
      131
      
      68
      
      58
      
      5
      
      Other provisions
        and liabilities**
      
      95
      
      59
      
      23
      
      8
      
      5Operating leases
      
      652
      
      88
      
      149
      
      115
      
      300Purchase obligations
      
      981
      
      164
      
      293
      
      370
      
      154Total contractual obligations
      
      2,770
      
      598
      
      824
      
      889
      
      459 *
      Net pension obligations are recorded
        on the balance sheet at £131 million (£145 million pension obligations
        less £14 million pension funds in surplus). As there is 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.**
      Other provisions and liabilities (excluding
        net pension obligation) on the balance sheet total £119 million.
        Of this, £95 million are financial liabilities that require settlement
        in cash. Additionally, the balance sheet contains a deferred tax liability
        of £110 million. No estimate has been provided for these in the table
        above as they are not contractually obligated financial liabilities. Foreign exchangeAlmost 90% of our revenue is denominated
    in non-sterling currencies. We also have significant costs denominated in
    foreign currencies with a different mix from revenue. In some cases, product
    pricing is denominated in a foreign currency which gives rise to embedded
    derivatives, for which movements in value are recognised in profit or loss.
    Our profits are therefore exposed to currency fluctuations. In broad terms, using the 2006 mix of profits, a 5 cent weakening/ strengthening in either the US dollar or the euro would decrease/ increase 2007 trading profits by approximately £10 million. Exchange rate movements in 2006 had a £3 million net impact on operating profit. Operating
      
      OperatingRevenue
      
      cost
      
      profitCurrency impact
      
      £m
      
      £m
      
      £mImpact of:Weaker euro
      
      (3
      )
      1
      
      (2
      )Stable dollar
      
      4
      
      (3
      )
      1Weaker yen
      
      (9
      )
      4
      
      (5
      )Other currencies
      
      1
      
      (1
      )
      Exchange rate movements
      
      (7
      )
      1
      
      (6
      )Change in currency mix
      
      10
      
      (7
      )
      3Total currency movements
      
      3
      
      (6
      )
      (3
      ) No unremitted profits are hedged with foreign exchange contracts as the company judges 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 profits. Transaction exposure occurs when, as a result of trading
    activities, an entity receives cash in a currency different to its functional
    currency.


Critical accounting policiesOur accounting policies comply with
    IFRS as adopted by the EU. 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 2006 financial statements. Accounting policies involving
    management judgementIn preparing the 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 accounting policies underpinning the financial statements
    are outlined on pages 78-82, 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 9394 outlines the key assumptions. Management has determined that no impairments are required for 2006 (2005: nil; 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 ready for use is capitalised when 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 2006 for development and software total
£114 million (2005: £40 million; 2004: £26 million). Defined benefit pension plansWe operate 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
    and the income statement charge 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, 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 111114 provides further
details of the annual charges (£30 million) and the net outstanding pension obligation (£131 million), quantification of the underlying assumptions and an
estimate of the impact on the financial statements to changes in the most critical assumptions.


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Share-based paymentsIFRS 2 Share-based Payment,
    which we have elected to apply only to share awards granted after 7 November
    2002 which had not vested by1 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, historic volatility of Reuters shares and expected dividends for the life of the option. Management has considered historical data and made use of best practices in making these assumptions. The total cost of share schemes in 2006 was
    £30 million (2005:£30 million; 2004: £22 million).
    For additional information, refer to note 33 on page 120. 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 restructuring programmes, which cover primarily leasehold properties and severance. 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, we are subject to certain legal claims and actions (see note 35 on page 124 ). 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 reportingOur primary segmental reporting is by
    business division. We operate 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, operating costs, other operating income, 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 operating costs relate to a specific division, they are mapped directly to that division. Where operating costs are shared, activity-


based costing (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. Other operating income is allocated to divisions using a similar methodology to operating 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. In 2006, Reuters made changes to the allocation of revenue and costs
between business divisions, to reflect changes in the management of certain products. 2005 and 2004 comparatives have therefore been restated within relevant business divisions. TaxationWe are subject to tax in numerous jurisdictions.
    Significant judgement is required in determining the worldwide provision for
    tax. There are many transactions and calculations for which the ultimate tax
    determination is uncertain during the ordinary course of business. We recognise
    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. US GAAPReconciliations of net income and shareholders
  equity under IFRS and US GAAP are set out on page 132. A discussion of the relevant
  US accounting policies which differ materially from IFRS is given on pages 129-131
  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 133. Critical accounting policies as stated above are consistent with those under US GAAP. 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. Risk factorsForward-looking statementsThis document contains certain forward-looking
    statements within the meaning of the United States Private Securities Litigation
    Reform Act of 1995 with respect to the companys financial condition,
    results of




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operations and business, and our managements strategy, plans and objectives. In particular, all statements that express forecasts, expectations and projections with respect to certain matters, including trends in
results of operations, margins, growth rates, overall financial market trends, anticipated cost savings and synergies and the successful completion of transformation 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 company or on its behalf speak only as of the date they
are made. We do not undertake to update any forward-looking statements. We may not be able to realise
    the anticipated benefits of our Core Plus growth and transformation strategyThe Core Plus growth and transformation
    strategy includes investing in new revenue initiatives and transformation
    initiatives, including content and development transformation, common platform,
    customer administration 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 this programme will be realised. Unfavourable conditions in
    financial markets may have a significant adverse effect on our businessOur business is dependent upon the health
    of the financial markets and the participants in those markets. Our 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 our business. In addition,
    our business could be adversely affected by further consolidation among clients
    and competitors. Currency fluctuations and
    interest rate fluctuations may have a significant impact on our 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 impact on our operating profit in 2006. A strengthening
    of sterling from current levels, especially in relation to other currencies
    in which we derive significant revenues or hold significant assets, 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 our results in
    future periods. We may experience difficulties
    or delays in developing or responding to new customer demands or launching
    new productsOur business environment is characterised
    by rapid technological change, changing and increasingly sophisticated customer
    demands and evolving industry standards. If the company 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 company 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 we may develop and introduce
    may not achieve market acceptance. In the event any of the foregoing occurs,
    our financial results could be adversely affected.


We are dependent on third
    parties for the provision of certain network and other servicesWe have outsourced the day-to-day operation
    of most of our networks to BT/Radianz, which also provides network services
    to other companies. In connection with the 2001 acquisition of certain businesses
    and assets of Bridge Information Services (Bridge), we 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 we acquired with our acquisition of Telerate. Failure or inability of
    any third party that provides significant services to us, such as BT/Radianz
    or Savvis, to perform its obligations in a timely manner could adversely affect
    our financial results. Our business may be adversely
    affected if our networks or systems experience any significant failures or
    interruptions or cannot accommodate increased trafficOur business is dependent on the ability
    to rapidly handle substantial quantities of data and transactions on 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 our business and results of our 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. Changes in legislation and regulation
    pertaining to market structure and dissemination of market information, including
    the European implementation of MiFID, US implementation of Regulation NMS
    and a penny pricing pilot for quoting in options, may also increase update
    rates. While we have implemented a number of capacity management initiatives,
    there can be no assurance that the company and its network providers will
    be able to accommodate accelerated growth of peak traffic volumes or avoid
    other failures or interruptions. We are exposed to a decline
    in the valuation of companies in which we have investedWe have made strategic investments in
    a number of companies and intend to continue to do so, if and when favourable
    opportunities arise. The value of our 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. We have limited ability to influence the management and/or
    performance of some of these companies. Significant competition or
    structural changes in the financial information and trading industries could
    adversely affect our businessWe face 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 we serve are undergoing or may undergo structural changes as
    a result of competition, regulation or otherwise. If we are unable to cope
    effectively with increased competitive pressure or structural changes arising
    from the above or any other factors, our financial results could be adversely
    affected.




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Our business may be adversely
  affected by changes in legislation and regulationAspects of our business, such as the dissemination
  of market information in certain jurisdictions, are subject to regulatory requirements.
  Changes to requirements regarding the data that must be displayed or how it
  must be displayed may affect us adversely. We may be exposed to adverse
  governmental action in countries where we conduct reporting activitiesAs the worlds largest news and information
  company, we may suffer discriminatory tariffs, censorship or other forms of
  adverse government intervention due to the nature of our editorial and other
  reporting activities. We may not be able to realise
  the anticipated benefits of existing or future acquisitions, joint ventures,
  investments or disposalsTo achieve our strategic objectives, we
  have 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 we will realise, when anticipated or at all, the benefits
  we expect as a result of any acquisition, investment or disposal. Achieving
  the benefits of acquisitions 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 our products and
  services, these integration efforts may be difficult and time consuming. Achieving
  the benefits of joint ventures and investments will depend on many factors,
  including the success of the relevant joint venture or company in its particular
  business, and the degree to which Reuters is able to realise strategic, economic
  or other benefits from its relationship with such joint venture or company.
  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. We operate in an increasingly
  litigious environmentOur 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 we 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. Definition of key financial
  performance measuresReuters measures its financial performance
  by reference to revenue and profit, operating margin, EPS, cash flow and net
  funds. To supplement IFRS measures, Reuters 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 OFR. 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 IFRS
  results.


Underlying and constant
  currency resultsPeriod-on-period change in Reuters
  is measured in overall terms (i.e. actual reported results) and sometimes in
  underlying or constant currency terms as well. Constant currency change is calculated
  by excluding the impact of currency fluctuations. Underlying change is calculated
  by excluding the impact of currency fluctuations as well as the results of acquisitions
  and disposals. This enables comparison of Reuters operating results on a like-for-like
  basis between periods. •
    Constant currency results are calculated
      excluding the impact of currency fluctuations.
      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. Constant currency 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 actively manage currency
      exposure, and business division operating performance is managed
      against targets set on a constant currency basis. Currency exposure
      is described in Treasury Policies on pages 6364.•
    Underlying results are calculated excluding
      the impact of currency fluctuations
      as well as 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 currency movements and acquisition or
      disposal activity. Exclusion of restructuring
  chargesReuters results are reviewed before
  and after the costs of Reuters business transformation plans (which included
  the former 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 companys property portfolio. Fast Forward was 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. The Fast Forward programme was centrally managed, and its performance against targets was evaluated separately from the ongoing Reuters business. Fast Forward restructuring charges are therefore excluded from certain
profit, cash flow 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 and acquisition integration costs, 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.




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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, cash flow,
  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, Trading Margin
  and Trading Cash Flow. 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-tax 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 and trading 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 in 2005 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 were 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 are used to manage the
Groups exposure, but some may not qualify for hedge accounting and in these situations the reported impact of the underlying item and the derivative 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 either discretionary in nature or unrelated to ongoing
  recurring operating activities such as special contributions to fund defined
  benefit pension deficits, acquisitions and disposals 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 deposits, 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.




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

|                                                                         |  | 2006 |   | 2006 |  | 2005 |   | 2005 |  | 2004 |   | 2004 | 
|------------------------------------------------------------------------ |  | ---- | - | ---- |  | ---- | - | ---- |  | ---- | - | ---- | 
|Year to 31 December                                                      |  | £m   |   | %    |  | £m   |   | %    |  | £m   |   | %    | 
|                                                                         |  |      |   |      |  |      |   |      |  |      |   |      | 
|Operating profit/margin
      from continuing operations                 |  | 256  |   | 10%  |  | 207  |   | 9%   |  | 194  |   | 8%   | 
|                                                                         |  |      |   |      |  |      |   |      |  |      |   |      | 
|Excluding:                                                               |  |      |   |      |  |      |   |      |  |      |   |      | 
|                                                                         |  |      |   |      |  |      |   |      |  |      |   |      | 
|Restructuring
      charges                                              |  | 13   |   |     |  | 112  |   | 4%   |  | 120  |   | 5%   | 
|                                                                         |  |      |   |      |  |      |   |      |  |      |   |      | 
|Impairments
        and amortisation of business combination intangibles |  | 24   |   | 1%   |  | 22   |   | 1%   |  | 16   |   | 1%   | 
|                                                                         |  |      |   |      |  |      |   |      |  |      |   |      | 
|Investment
      income                                                  |  |     |   |     |  | (1   | ) |     |  |     |   |     | 
|                                                                         |  |      |   |      |  |      |   |      |  |      |   |      | 
|Profit on
      disposal of subsidiaries                                 |  | (4   | ) |     |  | (4   | ) |     |  | (4   | ) |     | 
|                                                                         |  |      |   |      |  |      |   |      |  |      |   |      | 
|Fair value
      movements                                               |  | 19   |   | 1%   |  | (2   | ) |     |  |     |   |     | 
|                                                                         |  |      |   |      |  |      |   |      |  |      |   |      | 
|Trading profit/margin                                                    |  | 308  |   | 12%  |  | 334  |   | 14%  |  | 326  |   | 14%  | 
|                                                                         |  |      |   |      |  |      |   |      |  |      |   |      | 

|                                                                                                                                                                                                                       |  |      |   |      |    |      |   |      |   |      |   |      |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | - | ---- | -- | ---- | - | ---- | - | ---- | - | ---- | -
|Reconciliation
      of profit before taxation from continuing operations to adjusted profit
      before tax                                                                                                         
|                                                                                                                                                                                                                       |  |      |   |      |    |      |   |      |   |      |   |      |  
|                                                                                                                                                                                                                       |  | 2006 |   | 2006 |    | 2005 |   | 2005 |   | 2004 |   | 2004 |  
|Year to 31 December                                                                                                                                                                                                    |  | £m   |   | %    |    | £m   |   | %    |   | £m   |   | %    |  
|                                                                                                                                                                                                                       |  |      |   |      |    |      |   |      |   |      |   |      |  
|Profit before tax/margin
      from continuing operations                                                                                                                                                              |  | 313  |   | 12%  |    | 238  |   | 10%  |   | 396  |   | 17%  |  
|                                                                                                                                                                                                                       |  |      |   |      |    |      |   |      |   |      |   |      |  
|Excluding:                                                                                                                                                                                                             |  |      |   |      |    |      |   |      |   |      |   |      |  
|                                                                                                                                                                                                                       |  |      |   |      |    |      |   |      |   |      |   |      |  
|Impairments
        and amortisation of business combination intangibles                                                                                                                                               |  | 24   |   | 1    | %  | 22   |   | 1%   |   | 16   |   | 1%   |  
|                                                                                                                                                                                                                       |  |      |   |      |    |      |   |      |   |      |   |      |  
|Investment
      income                                                                                                                                                                                                |  |     |   |     |    | (1   | ) |     |   |     |   |     |  
|                                                                                                                                                                                                                       |  |      |   |      |    |      |   |      |   |      |   |      |  
|Profit on
      disposal of subsidiaries, associates and joint ventures                                                                                                                                                |  | (80  | ) | (3   | %) | (42  | ) | (2%  | ) | (207 | ) | (9%  | )
|                                                                                                                                                                                                                       |  |      |   |      |    |      |   |      |   |      |   |      |  
|Fair value
      movements                                                                                                                                                                                             |  | 19   |   | 1    | %  | (2   | ) |     |   |     |   |     |  
|                                                                                                                                                                                                                       |  |      |   |      |    |      |   |      |   |      |   |      |  
|Profit
        before tax/margin before impairments and amortisation of business combination
        intangibles, investment income, profit on disposals and fair value movements
        (Adjusted profit before tax) |  | 276  |   | 11   | %  | 215  |   | 9%   |   | 205  |   | 9%   |  
|                                                                                                                                                                                                                       |  |      |   |      |    |      |   |      |   |      |   |      |  

|                                                                                                                                                                                                                                       |  |      |   |           |   |      |   |           |   |      |   |           |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | - | --------- | - | ---- | - | --------- | - | ---- | - | --------- | -
|Reconciliation
      of basic EPS to adjusted EPS                                                                                                                                                                                     
|                                                                                                                                                                                                                                       |  |      |   |           |   |      |   |           |   |      |   |           |  
|                                                                                                                                                                                                                                       |  | 2006 |   | 2006      |   | 2005 |   | 2005      |   | 2004 |   | 2004      |  
|Year to 31 December                                                                                                                                                                                                                    |  | £m   |   | EPS pence |   | £m   |   | EPS pence |   | £m   |   | EPS pence |  
|                                                                                                                                                                                                                                       |  |      |   |           |   |      |   |           |   |      |   |           |  
|Profit/basic EPS from continuing
      operations                                                                                                                                                                                      |  | 293  |   | 22.6      |   | 229  |   | 16.3      |   | 356  |   | 25.4      |  
|                                                                                                                                                                                                                                       |  |      |   |           |   |      |   |           |   |      |   |           |  
|Excluding:                                                                                                                                                                                                                             |  |      |   |           |   |      |   |           |   |      |   |           |  
|                                                                                                                                                                                                                                       |  |      |   |           |   |      |   |           |   |      |   |           |  
|Impairments
        and amortisation of business combination intangibles                                                                                                                                                               |  | 24   |   | 1.8       |   | 22   |   | 1.6       |   | 16   |   | 1.1       |  
|                                                                                                                                                                                                                                       |  |      |   |           |   |      |   |           |   |      |   |           |  
|Investment
      income                                                                                                                                                                                                                |  |     |   |          |   | (1   | ) | (0.1      | ) |     |   |          |  
|                                                                                                                                                                                                                                       |  |      |   |           |   |      |   |           |   |      |   |           |  
|Profit on
      disposal of subsidiaries, associates and joint ventures                                                                                                                                                                |  | (80  | ) | (6.3      | ) | (42  | ) | (2.9      | ) | (207 | ) | (14.7     | )
|                                                                                                                                                                                                                                       |  |      |   |           |   |      |   |           |   |      |   |           |  
|Fair value
      movements                                                                                                                                                                                                             |  | 19   |   | 1.5       |   | (2   | ) | (0.2      | ) |     |   |          |  
|                                                                                                                                                                                                                                       |  |      |   |           |   |      |   |           |   |      |   |           |  
|Adjustments
      to tax charge for tax effect of excluded items                                                                                                                                                                       |  | (34  | ) | (2.5      | ) | (13  | ) | (0.9      | ) |     |   |          |  
|                                                                                                                                                                                                                                       |  |      |   |           |   |      |   |           |   |      |   |           |  
|Profit/basic
        EPS from continuing operations before impairments and amortisation of
        business combination intangibles, investment income, profit on disposals,
        fair value movements and related taxation effects |  | 222  |   | 17.1      |   | 193  |   | 13.8      |   | 165  |   | 11.8      |  
|                                                                                                                                                                                                                                       |  |      |   |           |   |      |   |           |   |      |   |           |  

|                                                                                                          |  |            |   |           |   |              |  |        |  
|--------------------------------------------------------------------------------------------------------- |  | ---------- | - | --------- | - | ------------ |  | ------ | -
|                                                                                                          |  |            |   |           |   |              |  |        |  
|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 2005                                                         |  | change     |   | currency  |   | & disposals  |  | change |  
|                                                                                                          |  |            |   |           |   |              |  |        |  
|Recurring                                                                                                 |  | 2%         |   | 1%        |   | 1%           |  | 4%     |  
|                                                                                                          |  |            |   |           |   |              |  |        |  
|Usage                                                                                                     |  | 23%        |   | (1%       | ) |             |  | 22%    |  
|                                                                                                          |  |            |   |           |   |              |  |        |  
|Outright                                                                                                  |  | (13%       | ) | (5%       | ) |             |  | (18%   | )
|                                                                                                          |  |            |   |           |   |              |  |        |  
|Sales & Trading                                                                                           |  | 3%         |   | 1%        |   | 1%           |  | 5%     |  
|                                                                                                          |  |            |   |           |   |              |  |        |  
|Recurring                                                                                                 |  | 12%        |   |          |   | 3%           |  | 15%    |  
|                                                                                                          |  |            |   |           |   |              |  |        |  
|Usage                                                                                                     |  | 27%        |   | (1%       | ) |             |  | 26%    |  
|                                                                                                          |  |            |   |           |   |              |  |        |  
|Outright                                                                                                  |  | (37%       | ) | (2%       | ) |             |  | (39%   | )
|                                                                                                          |  |            |   |           |   |              |  |        |  
|Research & Asset Management                                                                               |  | 12%        |   |          |   | 3%           |  | 15%    |  
|                                                                                                          |  |            |   |           |   |              |  |        |  
|Recurring                                                                                                 |  | 6%         |   |          |   |             |  | 6%     |  
|                                                                                                          |  |            |   |           |   |              |  |        |  
|Outright                                                                                                  |  | 7%         |   | (2%       | ) | 1%           |  | 6%     |  
|                                                                                                          |  |            |   |           |   |              |  |        |  
|Enterprise                                                                                                |  | 6%         |   | (1%       | ) | 1%           |  | 6%     |  
|                                                                                                          |  |            |   |           |   |              |  |        |  
|Recurring                                                                                                 |  | 7%         |   | (1%       | ) |             |  | 6%     |  
|                                                                                                          |  |            |   |           |   |              |  |        |  
|Usage                                                                                                     |  | 29%        |   |          |   | 7%           |  | 36%    |  
|                                                                                                          |  |            |   |           |   |              |  |        |  
|Media                                                                                                     |  | 10%        |   |          |   | 1%           |  | 11%    |  
|                                                                                                          |  |            |   |           |   |              |  |        |  
|Recurring                                                                                                 |  | 4%         |   |          |   | 2%           |  | 6%     |  
|                                                                                                          |  |            |   |           |   |              |  |        |  
|Usage                                                                                                     |  | 24%        |   |          |   | 2%           |  | 26%    |  
|                                                                                                          |  |            |   |           |   |              |  |        |  
|Outright                                                                                                  |  | 4%         |   | (2%       | ) | 1%           |  | 3%     |  
|                                                                                                          |  |            |   |           |   |              |  |        |  
|Total revenue                                                                                             |  | 5%         |   |          |   | 2%           |  | 7%     |  
|                                                                                                          |  |            |   |           |   |              |  |        |  



Reuters Group PLCAnnual
  Report and Form 20-F 2006

---



Back to Contents

|   |                                       
|-- | --------------------------------------
|   |                                       
|70 | Operatingand financial reviewcontinued
|   |                                       
|   |                                       

Reconciliation of actual percentage change
to underlying change  revenue by type

|                                                  |  |            |   |           |  | Impact of    |  |        |  
|------------------------------------------------- |  | ---------- | - | --------- |  | ------------ |  | ------ | -
|                                                  |  | Underlying |   | Impact of |  | acquisitions |  | Actual |  
|% change versus year ended 31 December
      2004 |  | change     |   | currency  |  | & disposals  |  | change |  
|                                                  |  |            |   |           |  |              |  |        |  
|Recurring                                         |  | 1%         |   |          |  | 3%           |  | 4%     |  
|                                                  |  |            |   |           |  |              |  |        |  
|Outright                                          |  | (23%       | ) | 1%        |  |             |  | (22%   | )
|                                                  |  |            |   |           |  |              |  |        |  
|Usage                                             |  | 12%        |   |          |  | 1%           |  | 13%    |  
|                                                  |  |            |   |           |  |              |  |        |  
|Total revenue                                     |  |           |   |          |  | 3%           |  | 3%     |  
|                                                  |  |            |   |           |  |              |  |        |  

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

|                                                        |  |            |   |           |   | Impact of    |  |        |  
|------------------------------------------------------- |  | ---------- | - | --------- | - | ------------ |  | ------ | -
|                                                        |  | Underlying |   | Impact of |   | acquisitions |  | Actual |  
|% change versus year ended 31 December 2005             |  | change     |   | currency  |   | & disposals  |  | change |  
|                                                        |  |            |   |           |   |              |  |        |  
|Reuters Xtra*                                           |  | 7%         |   | 2%        |   | 1%           |  | 10%    |  
|                                                        |  |            |   |           |   |              |  |        |  
|Reuters Trader                                          |  | (12%       | ) | (1%       | ) | 4%           |  | (9%    | )
|                                                        |  |            |   |           |   |              |  |        |  
|Recoveries                                              |  | 7%         |   |          |   | 1%           |  | 8%     |  
|                                                        |  |            |   |           |   |              |  |        |  
|Sales & Trading                                         |  | 3%         |   | 1%        |   | 1%           |  | 5%     |  
|                                                        |  |            |   |           |   |              |  |        |  
|Reuters Xtra                                            |  | 26%        |   | (1%       | ) |             |  | 25%    |  
|                                                        |  |            |   |           |   |              |  |        |  
|Reuters Trader                                          |  | 7%         |   | (3%       | ) |             |  | 4%     |  
|                                                        |  |            |   |           |   |              |  |        |  
|Reuters Knowledge                                       |  | 20%        |   | (1%       | ) | 14%          |  | 33%    |  
|                                                        |  |            |   |           |   |              |  |        |  
|Investments Banking, Investment Management & Corporates |  | 22%        |   | (1%       | ) | 6%           |  | 27%    |  
|                                                        |  |            |   |           |   |              |  |        |  
|Reuters Wealth Manager                                  |  | 1%         |   |          |   | 1%           |  | 2%     |  
|                                                        |  |            |   |           |   |              |  |        |  
|Research & Asset Management                             |  | 12%        |   |          |   | 3%           |  | 15%    |  
|                                                        |  |            |   |           |   |              |  |        |  
|Enterprise Information                                  |  | 13%        |   |          |   |             |  | 13%    |  
|                                                        |  |            |   |           |   |              |  |        |  
|Information Management Systems                          |  | (12%       | ) |          |   | 1%           |  | (11%   | )
|                                                        |  |            |   |           |   |              |  |        |  
|Trade and Risk Management                               |  | 12%        |   | (1%       | ) | 2%           |  | 13%    |  
|                                                        |  |            |   |           |   |              |  |        |  
|Enterprise                                              |  | 6%         |   | (1%       | ) | 1%           |  | 6%     |  
|                                                        |  |            |   |           |   |              |  |        |  
|Agency Services                                         |  | 6%         |   | (1%       | ) | 2%           |  | 7%     |  
|                                                        |  |            |   |           |   |              |  |        |  
|Consumer Media                                          |  | 39%        |   | (1%       | ) |             |  | 38%    |  
|                                                        |  |            |   |           |   |              |  |        |  
|Media                                                   |  | 10%        |   |          |   | 1%           |  | 11%    |  
|                                                        |  |            |   |           |   |              |  |        |  
|Total revenue                                           |  | 5%         |   |          |   | 2%           |  | 7%     |  
|                                                        |  |            |   |           |   |              |  |        |  

|  |                                                                                                                                                                          
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | 3000 Xtra revenue in Sales & Trading
        grew 8% on an underlying basis. Currency and acquisition impacts were
    2% for each, resulting in an actual change of 12%.

Reconciliation of divisionaI operating costs
to trading costs

|                                                                 |  |                 |   |      |   |            |   |       |   | 2006  |  
|---------------------------------------------------------------- |  | --------------- | - | ---- | - | ---------- | - | ----- | - | ----- | -
|                                                                 |  |                 |   |      |   |            |   |       |   |       |  
|                                                                 |  | Sales & Trading |   | R&AM |   | Enterprise |   | Media |   | Group |  
|Year to 31 December                                              |  | £m              |   | £m   |   | £m         |   | £m    |   | £m    |  
|                                                                 |  |                 |   |      |   |            |   |       |   |       |  
|Operating costs                                                  |  | 1,543           |   | 315  |   | 335        |   | 158   |   | 2,351 |  
|                                                                 |  |                 |   |      |   |            |   |       |   |       |  
|Restructuring charges                                            |  | (12             | ) |     |   | (1         | ) |      |   | (13   | )
|                                                                 |  |                 |   |      |   |            |   |       |   |       |  
|Impairments and amortisation of business combination intangibles |  | (17             | ) | (3   | ) | (3         | ) | (1    | ) | (24   | )
|                                                                 |  |                 |   |      |   |            |   |       |   |       |  
|Fair value movements (in expenses)                               |  | (18             | ) | (3   | ) | (3         | ) | (1    | ) | (25   | )
|                                                                 |  |                 |   |      |   |            |   |       |   |       |  
|Other operating income                                           |  | (20             | ) | (4   | ) | (5         | ) | (2    | ) | (31   | )
|                                                                 |  |                 |   |      |   |            |   |       |   |       |  
|Trading costs                                                    |  | 1,476           |   | 305  |   | 323        |   | 154   |   | 2,258 |  
|                                                                 |  |                 |   |      |   |            |   |       |   |       |  

|                                                                       |  |                 |   |      |   |            |   |       |   |               |  
|---------------------------------------------------------------------- |  | --------------- | - | ---- | - | ---------- | - | ----- | - | ------------- | -
|                                                                       |  |                 |   |      |   |            |   |       |   | 2005 restated | *
|                                                                       |  |                 |   |      |   |            |   |       |   |               |  
|                                                                       |  | Sales & Trading |   | R&AM |   | Enterprise |   | Media |   | Group         |  
|Year to 31 December                                                    |  | £m              |   | £m   |   | £m         |   | £m    |   | £m            |  
|                                                                       |  |                 |   |      |   |            |   |       |   |               |  
|Operating costs                                                        |  | 1,495           |   | 293  |   | 317        |   | 146   |   | 2,251         |  
|                                                                       |  |                 |   |      |   |            |   |       |   |               |  
|Restructuring charges                                                  |  | (76             | ) | (11  | ) | (17        | ) | (8    | ) | (112          | )
|                                                                       |  |                 |   |      |   |            |   |       |   |               |  
|Impairments and amortisation
      of business combination intangibles |  | (14             | ) | (3   | ) | (4         | ) | (1    | ) | (22           | )
|                                                                       |  |                 |   |      |   |            |   |       |   |               |  
|Fair value movements (in expenses)                                     |  | (16             | ) |     |   |           |   |      |   | (16           | )
|                                                                       |  |                 |   |      |   |            |   |       |   |               |  
|Other operating income                                                 |  | (16             | ) | (3   | ) | (5         | ) | (2    | ) | (26           | )
|                                                                       |  |                 |   |      |   |            |   |       |   |               |  
|Trading costs                                                          |  | 1,373           |   | 276  |   | 291        |   | 135   |   | 2,075         |  
|                                                                       |  |                 |   |      |   |            |   |       |   |               |  

Reuters Group PLCAnnual
Report and Form 20-F 2006

---



Back to Contents

|                                    |   
|----------------------------------- | --
|                                    |   
|Company
        information and OFR | 71
|                                    |   
|                                    |   

Reconciliation of divisionaI operating costs
to trading costs continued

|                                                                 |  |                 |   |      |   |            |   |       |   | 2004 restated | *
|---------------------------------------------------------------- |  | --------------- | - | ---- | - | ---------- | - | ----- | - | ------------- | -
|                                                                 |  |                 |   |      |   |            |   |       |   |               |  
|                                                                 |  | Sales & Trading |   | R&AM |   | Enterprise |   | Media |   | Group         |  
|Year to 31 December                                              |  | £m              |   | £m   |   | £m         |   | £m    |   | £m            |  
|                                                                 |  |                 |   |      |   |            |   |       |   |               |  
|Operating costs                                                  |  | 1,396           |   | 289  |   | 360        |   | 142   |   | 2,187         |  
|                                                                 |  |                 |   |      |   |            |   |       |   |               |  
|Restructuring charges                                            |  | (63             | ) | (18  | ) | (27        | ) | (12   | ) | (120          | )
|                                                                 |  |                 |   |      |   |            |   |       |   |               |  
|Impairments and amortisation of business combination intangibles |  | (10             | ) | (3   | ) | (3         | ) |      |   | (16           | )
|                                                                 |  |                 |   |      |   |            |   |       |   |               |  
|Other income                                                     |  | (23             | ) | (5   | ) | (7         | ) | (3    | ) | (38           | )
|                                                                 |  |                 |   |      |   |            |   |       |   |               |  
|Trading costs                                                    |  | 1,300           |   | 263  |   | 323        |   | 127   |   | 2,013         |  
|                                                                 |  |                 |   |      |   |            |   |       |   |               |  

|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | In 2006, Reuters made changes to the allocation
      of revenue and operating costs between business divisions, to reflect changes
      in the management of certain products. Prior year comparatives have therefore
      been restated
to increase Sales & Trading revenue by £18 million (2004: £11 million) and decrease operating costs by £19 million in 2005 and £11 million in 2004. Research & Asset Management revenues decreased by £10 million (2004:
£3 million) and operating costs increased by £12 million in 2005 and £6 million in 2004. Enterprise revenue decreased by £8 million (2004: £8 million) and operating costs increased by £7 million in 2005 and £5
million in 2004. 2005 comparatives have been restated to reallocate £1 million of amortisation on intangible assets arising on the acquisition of Telerate from Enterprise to Sales & Trading,
in-line with the allocation of revenues from Telerate products. There is no change
to the overall Group results.

Reconciliation of divisional operating profit
to trading profit

|                                                                 |  |                 |   |      |   |            |  |       |   | 2006  |  
|---------------------------------------------------------------- |  | --------------- | - | ---- | - | ---------- |  | ----- | - | ----- | -
|                                                                 |  |                 |   |      |   |            |  |       |   |       |  
|                                                                 |  | Sales & Trading |   | R&AM |   | Enterprise |  | Media |   | Group |  
|Year to 31 December                                              |  | £m              |   | £m   |   | £m         |  | £m    |   | £m    |  
|                                                                 |  |                 |   |      |   |            |  |       |   |       |  
|Operating profit/(loss)                                          |  | 174             |   | (12  | ) | 79         |  | 15    |   | 256   |  
|                                                                 |  |                 |   |      |   |            |  |       |   |       |  
|Restructuring charges                                            |  | 12              |   |     |   | 1          |  |      |   | 13    |  
|                                                                 |  |                 |   |      |   |            |  |       |   |       |  
|Impairments and amortisation of business combination intangibles |  | 17              |   | 3    |   | 3          |  | 1     |   | 24    |  
|                                                                 |  |                 |   |      |   |            |  |       |   |       |  
|(Profit)/loss on disposal of subsidiaries                        |  | (3              | ) |     |   |           |  | (1    | ) | (4    | )
|                                                                 |  |                 |   |      |   |            |  |       |   |       |  
|Fair value movements                                             |  | 14              |   | 2    |   | 2          |  | 1     |   | 19    |  
|                                                                 |  |                 |   |      |   |            |  |       |   |       |  
|Trading profit/(loss)                                            |  | 214             |   | (7   | ) | 85         |  | 16    |   | 308   |  
|                                                                 |  |                 |   |      |   |            |  |       |   |       |  

|                                                                       |  |                 |   |      |   |            |   |       |   |               |  
|---------------------------------------------------------------------- |  | --------------- | - | ---- | - | ---------- | - | ----- | - | ------------- | -
|                                                                       |  |                 |   |      |   |            |   |       |   | 2005 restated | *
|                                                                       |  |                 |   |      |   |            |   |       |   |               |  
|                                                                       |  | Sales & Trading |   | R&AM |   | Enterprise |   | Media |   | Group         |  
|Year to 31 December                                                    |  | £m              |   | £m   |   | £m         |   | £m    |   | £m            |  
|                                                                       |  |                 |   |      |   |            |   |       |   |               |  
|Operating profit/(loss)                                                |  | 155             |   | (35  | ) | 76         |   | 11    |   | 207           |  
|                                                                       |  |                 |   |      |   |            |   |       |   |               |  
|Restructuring charges                                                  |  | 76              |   | 11   |   | 17         |   | 8     |   | 112           |  
|                                                                       |  |                 |   |      |   |            |   |       |   |               |  
|Impairments and amortisation
      of business combination intangibles |  | 14              |   | 3    |   | 4          |   | 1     |   | 22            |  
|                                                                       |  |                 |   |      |   |            |   |       |   |               |  
|Investment income                                                      |  | (1              | ) |     |   |           |   |      |   | (1            | )
|                                                                       |  |                 |   |      |   |            |   |       |   |               |  
|(Profit)/loss on disposal of
      subsidiaries                        |  | (7              | ) | 5    |   | (1         | ) | (1    | ) | (4            | )
|                                                                       |  |                 |   |      |   |            |   |       |   |               |  
|Fair value movements                                                   |  | 3               |   | (2   | ) | (2         | ) | (1    | ) | (2            | )
|                                                                       |  |                 |   |      |   |            |   |       |   |               |  
|Trading profit/(loss)                                                  |  | 240             |   | (18  | ) | 94         |   | 18    |   | 334           |  
|                                                                       |  |                 |   |      |   |            |   |       |   |               |  

|                                                                       |  |                 |  |      |   |            |  |       |  |               |  
|---------------------------------------------------------------------- |  | --------------- |  | ---- | - | ---------- |  | ----- |  | ------------- | -
|                                                                       |  |                 |  |      |   |            |  |       |  | 2004 restated | *
|                                                                       |  |                 |  |      |   |            |  |       |  |               |  
|                                                                       |  | Sales & Trading |  | R&AM |   | Enterprise |  | Media |  | Group         |  
|Year to 31 December                                                    |  | £m              |  | £m   |   | £m         |  | £m    |  | £m            |  
|                                                                       |  |                 |  |      |   |            |  |       |  |               |  
|Operating profit/(loss)                                                |  | 175             |  | (13  | ) | 28         |  | 4     |  | 194           |  
|                                                                       |  |                 |  |      |   |            |  |       |  |               |  
|Restructuring charges                                                  |  | 63              |  | 18   |   | 27         |  | 12    |  | 120           |  
|                                                                       |  |                 |  |      |   |            |  |       |  |               |  
|Impairments and amortisation
      of business combination intangibles |  | 10              |  | 3    |   | 3          |  |      |  | 16            |  
|                                                                       |  |                 |  |      |   |            |  |       |  |               |  
|(Profit)/loss on disposal of
      subsidiaries                        |  | 5               |  | (12  | ) | 2          |  | 1     |  | (4            | )
|                                                                       |  |                 |  |      |   |            |  |       |  |               |  
|Trading profit/(loss)                                                  |  | 253             |  | (4   | ) | 60         |  | 17    |  | 326           |  
|                                                                       |  |                 |  |      |   |            |  |       |  |               |  
|                                                                       |  |                 |  |      |   |            |  |       |  |               |  

|* | In 2006, Reuters made changes to the allocation
      of revenue and operating costs between business divisions, to reflect changes
      in the management of certain products. Prior year comparatives have therefore
      been restated
to increase Sales & Trading revenue by £18 million (2004: £11 million) and decrease operating costs by £19 million in 2005 and £11 million in 2004. Research & Asset Management revenues decreased by £10 million (2004:
£3 million) and operating costs increased by £12 million in 2005 and £6 million in 2004. Enterprise revenue decreased by £8 million (2004: £8 million) and operating costs increased by £7 million in 2005 and £5
million in 2004. 2005 comparatives have been restated to reallocate £1 million of amortisation on intangible assets arising on the acquisition of Telerate from Enterprise to Sales & Trading,
in-line with the allocation of revenues from Telerate products. There is no change
to the overall Group results.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Reuters Group PLCAnnual
Report and Form 20-F 2006

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|   |                                       
|-- | --------------------------------------
|   |                                       
|72 | Operatingand financial reviewcontinued
|   |                                       
|   |                                       

Reconciliation of cash flows from operating
activities to free cash flow and trading cash flow

|                                                    |  |            |   |              |  | 2006    |   |            |   |              |   | 2005    |   |            |   |              |   | 2004    |  
|--------------------------------------------------- |  | ---------- | - | ------------ |  | ------- | - | ---------- | - | ------------ | - | ------- | - | ---------- | - | ------------ | - | ------- | -
|                                                    |  |            |   |              |  |         |   |            |   |              |   |         |   |            |   |              |   |         |  
|                                                    |  | Continuing |   | Discontinued |  | Reuters |   | Continuing |   | Discontinued |   | Reuters |   | Continuing |   | Discontinued |   | Reuters |  
|                                                    |  | operations |   | operations   |  | Group   |   | operations |   | operations   |   | Group   |   | operations |   | operations   |   | Group   |  
|Year to 31 December                                 |  | £m         |   | £m           |  | £m      |   | £m         |   | £m           |   | £m      |   | £m         |   | £m           |   | £m      |  
|                                                    |  |            |   |              |  |         |   |            |   |              |   |         |   |            |   |              |   |         |  
|Cash flows from operating activities                |  | 311        |   |             |  | 311     |   | 268        |   | 3            |   | 271     |   | 307        |   | (27          | ) | 280     |  
|                                                    |  |            |   |              |  |         |   |            |   |              |   |         |   |            |   |              |   |         |  
|Interest received                                   |  | 42         |   |             |  | 42      |   | 42         |   | 13           |   | 55      |   | 10         |   | 9            |   | 19      |  
|                                                    |  |            |   |              |  |         |   |            |   |              |   |         |   |            |   |              |   |         |  
|Interest paid                                       |  | (61        | ) |             |  | (61     | ) | (49        | ) |             |   | (49     | ) | (29        | ) | (1           | ) | (30     | )
|                                                    |  |            |   |              |  |         |   |            |   |              |   |         |   |            |   |              |   |         |  
|Tax paid                                            |  | (34        | ) |             |  | (34     | ) | (11        | ) | (13          | ) | (24     | ) | (34        | ) | (9           | ) | (43     | )
|                                                    |  |            |   |              |  |         |   |            |   |              |   |         |   |            |   |              |   |         |  
|Net cash flow from operating activities             |  | 258        |   |             |  | 258     |   | 250        |   | 3            |   | 253     |   | 254        |   | (28          | ) | 226     |  
|                                                    |  |            |   |              |  |         |   |            |   |              |   |         |   |            |   |              |   |         |  
|Purchases of property, plant and equipment          |  | (122       | ) |             |  | (122    | ) | (138       | ) | (7           | ) | (145    | ) | (90        | ) | (19          | ) | (109    | )
|                                                    |  |            |   |              |  |         |   |            |   |              |   |         |   |            |   |              |   |         |  
|Proceeds from sale of property, plant and equipment |  | 5          |   |             |  | 5       |   | 3          |   |             |   | 3       |   | 49         |   | 17           |   | 66      |  
|                                                    |  |            |   |              |  |         |   |            |   |              |   |         |   |            |   |              |   |         |  
|Purchases of intangible assets                      |  | (106       | ) |             |  | (106    | ) | (40        | ) |             |   | (40     | ) | (27        | ) |             |   | (27     | )
|                                                    |  |            |   |              |  |         |   |            |   |              |   |         |   |            |   |              |   |         |  
|Interim funding payment from Telerate               |  |           |   |             |  |        |   | (18        | ) |             |   | (18     | ) | 18         |   |             |   | 18      |  
|                                                    |  |            |   |              |  |         |   |            |   |              |   |         |   |            |   |              |   |         |  
|Dividends received                                  |  | 3          |   |             |  | 3       |   | 5          |   |             |   | 5       |   | 4          |   | 1            |   | 5       |  
|                                                    |  |            |   |              |  |         |   |            |   |              |   |         |   |            |   |              |   |         |  
|Special contributions to pension schemes            |  | 187        |   |             |  | 187     |   |           |   |             |   |        |   |           |   |             |   |        |  
|                                                    |  |            |   |              |  |         |   |            |   |              |   |         |   |            |   |              |   |         |  
|Repayment of funds to/(from) BTC                    |  |           |   |             |  |        |   | 26         |   | (26          | ) |        |   |           |   |             |   |        |  
|                                                    |  |            |   |              |  |         |   |            |   |              |   |         |   |            |   |              |   |         |  
|Free cash flow                                      |  | 225        |   |             |  | 225     |   | 88         |   | (30          | ) | 58      |   | 208        |   | (29          | ) | 179     |  
|                                                    |  |            |   |              |  |         |   |            |   |              |   |         |   |            |   |              |   |         |  
|Interest received                                   |  | (42        | ) |             |  | (42     | ) | (42        | ) | (13          | ) | (55     | ) | (10        | ) | (9           | ) | (19     | )
|                                                    |  |            |   |              |  |         |   |            |   |              |   |         |   |            |   |              |   |         |  
|Interest paid                                       |  | 61         |   |             |  | 61      |   | 49         |   |             |   | 49      |   | 29         |   | 1            |   | 30      |  
|                                                    |  |            |   |              |  |         |   |            |   |              |   |         |   |            |   |              |   |         |  
|Tax paid                                            |  | 34         |   |             |  | 34      |   | 11         |   | 13           |   | 24      |   | 34         |   | 9            |   | 43      |  
|                                                    |  |            |   |              |  |         |   |            |   |              |   |         |   |            |   |              |   |         |  
|Restructuring                                       |  | 52         |   |             |  | 52      |   | 147        |   |             |   | 147     |   | 100        |   | 8            |   | 108     |  
|                                                    |  |            |   |              |  |         |   |            |   |              |   |         |   |            |   |              |   |         |  
|Other                                               |  | 13         |   |             |  | 13      |   | 3          |   | (4           | ) | (1      | ) | (14        | ) | (3           | ) | (17     | )
|                                                    |  |            |   |              |  |         |   |            |   |              |   |         |   |            |   |              |   |         |  
|Trading cash flow                                   |  | 343        |   |             |  | 343     |   | 256        |   | (34          | ) | 222     |   | 347        |   | (23          | ) | 324     |  
|                                                    |  |            |   |              |  |         |   |            |   |              |   |         |   |            |   |              |   |         |  
|Trading cash conversion*                            |  | 111%       |   |              |  |         |   | 77%        |   |              |   |         |   | 106%       |   |              |   |         |  
|                                                    |  |            |   |              |  |         |   |            |   |              |   |         |   |            |   |              |   |         |  

|  |                                                           
|- | ----------------------------------------------------------
|* | Trading cash conversion = trading cash flow/trading profit

Components of net debt/net funds

|                                       |  | 2006 |   | 2005 |   | 2004 |  
|-------------------------------------- |  | ---- | - | ---- | - | ---- | -
|As at 31 December                      |  | £m   |   | £m   |   | £m   |  
|                                       |  |      |   |      |   |      |  
|Cash and cash equivalents              |  | 129  |   | 662  |   | 578  |  
|                                       |  |      |   |      |   |      |  
|Bank overdrafts                        |  | (24  | ) | (25  | ) | (17  | )
|                                       |  |      |   |      |   |      |  
|                                       |  | 105  |   | 637  |   | 561  |  
|                                       |  |      |   |      |   |      |  
|Short-term deposits                    |  | 198  |   | 1    |   | 258  |  
|                                       |  |      |   |      |   |      |  
|Borrowings (excluding bank overdrafts) |  | (636 | ) | (385 | ) | (493 | )
|                                       |  |      |   |      |   |      |  
|Net (debt)/funds                       |  | (333 | ) | 253  |   | 326  |  
|                                       |  |      |   |      |   |      |  

Reuters Group PLCAnnual
Report and Form 20-F 2006

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|                                      |   
|                                      | 73
|                                      |   
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|                                      |   

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|   |                            
|-- | ---------------------------
|   |                            
|74 | United States audit opinion
|   |                            
|   |                            
|   |                            

Report of Independent Registered Public Accounting Firm to the Members of Reuters Group PLCWe
have completed an integrated audit of Reuters Group PLC 31 December 2006 consolidated
financial statements and of its internal control over financial reporting as
of 31 December 2006 and an audit of its 31 December 2005 and 31 December 2004
consolidated financial statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Our opinions, based on our
audits, are presented below. Consolidated financial statementsIn
our opinion, the accompanying consolidated income statement and the related consolidated
balance sheet, consolidated statement of cash flows and consolidated statement
of recognised income and expense present fairly, in all material respects, the
financial position of Reuters Group PLC and its subsidiaries at 31 December 2006
and 2005 and the results of their operations and cash flows for each of the three
years in the period ended 31 December 2006, in
conformity with International Financial Reporting Standards (IFRSs) as adopted
by the European Union. 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 financial
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 of financial statements 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 statements presentation.
We believe that our audits provide a reasonable basis for our opinion. As discussed in the accounting, the Group adopted
International Accounting Standards (IAS) 32 Financial Instruments: Disclosure and Presentations, 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. As discussed in the Basis of accounting, the Group
has restated its consolidated financial statements for the year ended 31 December
2005 to reflect the share buy-back agreement as a liability. IFRSs as adopted by the European Union 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) to the consolidated financial statements. Internal control over financial reportingAlso,
in our opinion, managements assessment, included in the accompanying Managements Evaluation
of Effectiveness of Internal Control, as set out in managements
report on internal control over financial reporting within the ‘Statements
of directors’ responsibilities and compliance’ section of
this
Annual
Report,
that
the Group
maintained effective internal control over financial reporting as of 31 December
2006 based on criteria established in Internal Control Integrated
Framework issued by the Committee of Sponsoring


Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the company maintained, in all material respects, effective internal
control over financial reporting as of 31 December 2006, based on criteria established in Internal Control  Integrated Framework issued by the COSO. The companys management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on managements assessment and on the effectiveness of the companys internal control
over financial reporting based on our audit. We conducted our audit of internal control over financial reporting 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 effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal
control over financial reporting, evaluating managements assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinions. A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting standards and principles. A companys internal control over financial reporting includes those policies
and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with generally accepted accounting standards and principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of
management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the companys assets that could have a material effect on the financial
statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.  PricewaterhouseCoopers
    LLPLondon
    15 March 2007




Reuters Group PLCAnnual
Report and Form 20-F 2006

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|           |   
|---------- | --
|           |   
|Financials | 75
|           |   
|           |   

Consolidated income statementFor the year ended 31 December

|                                                                                               |  |        |  | 2006   |   |  | 2005   |   | 2004   |  
|---------------------------------------------------------------------------------------------- |  | ------ |  | ------ | - |  | ------ | - | ------ | -
|                                                                                               |  | Notes  |  | £m     |   |  | £m     |   | £m     |  
|                                                                                               |  |        |  |        |   |  |        |   |        |  
|Revenue                                                                                        |  | 01, 02 |  | 2,566  |   |  | 2,409  |   | 2,339  |  
|                                                                                               |  |        |  |        |   |  |        |   |        |  
|Operating costs                                                                                |  | 03     |  | (2,351 | ) |  | (2,251 | ) | (2,187 | )
|                                                                                               |  |        |  |        |   |  |        |   |        |  
|Other operating income                                                                         |  | 04     |  | 41     |   |  | 49     |   | 42     |  
|                                                                                               |  |        |  |        |   |  |        |   |        |  
|Operating profit                                                                               |  |        |  | 256    |   |  | 207    |   | 194    |  
|                                                                                               |  |        |  |        |   |  |        |   |        |  
|Finance income                                                                                 |  | 05     |  | 72     |   |  | 41     |   | 15     |  
|                                                                                               |  |        |  |        |   |  |        |   |        |  
|Finance costs                                                                                  |  | 05     |  | (87    | ) |  | (53    | ) | (27    | )
|                                                                                               |  |        |  |        |   |  |        |   |        |  
|Profit on disposal of associates, joint ventures
      and available-for-sale financial assets |  |        |  | 76     |   |  | 38     |   | 203    |  
|                                                                                               |  |        |  |        |   |  |        |   |        |  
|Share of post-tax (losses)/profits from associates and joint ventures*                         |  | 15     |  | (4     | ) |  | 5      |   | 11     |  
|                                                                                               |  |        |  |        |   |  |        |   |        |  
|Profit before tax                                                                              |  |        |  | 313    |   |  | 238    |   | 396    |  
|                                                                                               |  |        |  |        |   |  |        |   |        |  
|Taxation                                                                                       |  | 06     |  | (20    | ) |  | (9     | ) | (40    | )
|                                                                                               |  |        |  |        |   |  |        |   |        |  
|Profit for the year from continuing operations                                                 |  |        |  | 293    |   |  | 229    |   | 356    |  
|                                                                                               |  |        |  |        |   |  |        |   |        |  
|Profit for the year from discontinued operations                                               |  | 07     |  | 12     |   |  | 253    |   | 19     |  
|                                                                                               |  |        |  |        |   |  |        |   |        |  
|Profit for the year                                                                            |  |        |  | 305    |   |  | 482    |   | 375    |  
|                                                                                               |  |        |  |        |   |  |        |   |        |  
|                                                                                               |  |        |  |        |   |  |        |   |        |  
|Attributable to:                                                                               |  |        |  |        |   |  |        |   |        |  
|                                                                                               |  |        |  |        |   |  |        |   |        |  
|Equity holders of the parent                                                                   |  | 11     |  | 305    |   |  | 456    |   | 364    |  
|                                                                                               |  |        |  |        |   |  |        |   |        |  
|Minority interest                                                                              |  | 11     |  |       |   |  | 26     |   | 11     |  
|                                                                                               |  |        |  |        |   |  |        |   |        |  
|                                                                                               |  |        |  |        |   |  |        |   |        |  
|Earnings per share                                                                             |  |        |  |        |   |  |        |   |        |  
|                                                                                               |  |        |  |        |   |  |        |   |        |  
|From continuing and discontinued operations:                                                   |  |        |  |        |   |  |        |   |        |  
|                                                                                               |  |        |  |        |   |  |        |   |        |  
|Basic earnings per ordinary share                                                              |  | 08     |  | 23.6p  |   |  | 32.6p  |   | 26.0p  |  
|                                                                                               |  |        |  |        |   |  |        |   |        |  
|Diluted earnings per ordinary share                                                            |  | 08     |  | 23.1p  |   |  | 31.7p  |   | 25.4p  |  
|                                                                                               |  |        |  |        |   |  |        |   |        |  
|From continuing operations:                                                                    |  |        |  |        |   |  |        |   |        |  
|                                                                                               |  |        |  |        |   |  |        |   |        |  
|Basic earnings per ordinary share                                                              |  | 08     |  | 22.6p  |   |  | 16.3p  |   | 25.4p  |  
|                                                                                               |  |        |  |        |   |  |        |   |        |  
|Diluted earnings per ordinary share                                                            |  | 08     |  | 22.2p  |   |  | 15.9p  |   | 24.8p  |  
|                                                                                               |  |        |  |        |   |  |        |   |        |  

|* | Share of post-tax (losses)/profits from
      associates and joint ventures includes a tax charge of £2 million (2005:
      £1 million, 2004: £2 million).
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

Dividends paid and proposed during the year
    were £134 million (2005: £140 million paid and proposed, 2004: £140
million paid and proposed). Please refer to note 32 on page 119.

Consolidated
  statement of recognised income and expenseFor the year ended 31
  December

|                                                                                                                       |  |        |  | 2006 |   |  | 2005 |   | 2004 |  
|---------------------------------------------------------------------------------------------------------------------- |  | ------ |  | ---- | - |  | ---- | - | ---- | -
|                                                                                                                       |  | Notes  |  | £m   |   |  | £m   |   | £m   |  
|                                                                                                                       |  |        |  |      |   |  |      |   |      |  
|Profit for the year                                                                                                    |  |        |  | 305  |   |  | 482  |   | 375  |  
|                                                                                                                       |  |        |  |      |   |  |      |   |      |  
|Actuarial gains/(losses) on defined benefit plans                                                                      |  | 11, 25 |  | 6    |   |  | (48  | ) | (205 | )
|                                                                                                                       |  |        |  |      |   |  |      |   |      |  
|Exchange differences taken directly to reserves                                                                        |  | 11, 28 |  | (95  | ) |  | 118  |   | (48  | )
|                                                                                                                       |  |        |  |      |   |  |      |   |      |  
|Exchange
    differences taken to the income statement on disposal of assets                                           |  | 11, 28 |  |     |   |  | (2   | ) | 6    |  
|                                                                                                                       |  |        |  |      |   |  |      |   |      |  
|Fair value gains/(losses) on available-for-sale financial assets                                                       |  | 11, 28 |  | 6    |   |  | (15  | ) |     |  
|                                                                                                                       |  |        |  |      |   |  |      |   |      |  
|Fair
	      value gains on available-for-sale financial assets taken to the income
    statement on disposal of assets |  | 11     |  |     |   |  | (73  | ) |     |  
|                                                                                                                       |  |        |  |      |   |  |      |   |      |  
|Fair value gains/(losses) on net investment hedges                                                                     |  | 11, 28 |  | 34   |   |  | (39  | ) |     |  
|                                                                                                                       |  |        |  |      |   |  |      |   |      |  
|Fair
	      value gains taken to the income statement on disposal of net investment
    hedges                         |  | 11, 28 |  |     |   |  | (14  | ) |     |  
|                                                                                                                       |  |        |  |      |   |  |      |   |      |  
|Tax on items taken directly to or transferred from equity                                                              |  | 11     |  | (4   | ) |  | 14   |   | 35   |  
|                                                                                                                       |  |        |  |      |   |  |      |   |      |  
|Net losses not recognised in income statement                                                                          |  | 11     |  | (53  | ) |  | (59  | ) | (212 | )
|                                                                                                                       |  |        |  |      |   |  |      |   |      |  
|Total recognised income for the year                                                                                   |  |        |  | 252  |   |  | 423  |   | 163  |  
|                                                                                                                       |  |        |  |      |   |  |      |   |      |  
|                                                                                                                       |  |        |  |      |   |  |      |   |      |  
|Attributable
      to:                                                                                                 |  |        |  |      |   |  |      |   |      |  
|                                                                                                                       |  |        |  |      |   |  |      |   |      |  
|Equity holders of the parent                                                                                           |  |        |  | 252  |   |  | 374  |   | 166  |  
|                                                                                                                       |  |        |  |      |   |  |      |   |      |  
|Minority interest                                                                                                      |  |        |  |     |   |  | 49   |   | (3   | )
|                                                                                                                       |  |        |  |      |   |  |      |   |      |  

The 2005 balance sheet has been restated to recognise irrevocable commitments to repurchase shares during close periods as a liability (see Basis of accounting on page 78). The impact of recognising these
commitments is to increase current liabilities and to decrease shareholders equity at 31 December 2005 by £59 million.

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 pages 9091.



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Report and Form 20-F 2006

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|-- | 
|   | 
|76 | 
|   | 
|   | 

Consolidated balance sheetAt 31 December

|                                                                                          |  |       |  |        |   | Restated |   |        |  
|----------------------------------------------------------------------------------------- |  | ----- |  | ------ | - | -------- | - | ------ | -
|                                                                                          |  |       |  | 2006   |   | 2005     |   | 2004   |  
|                                                                                          |  | Notes |  | £m     |   | £m       |   | £m     |  
|                                                                                          |  |       |  |        |   |          |   |        |  
|Assets                                                                                    |  |       |  |        |   |          |   |        |  
|Non-current assets:                                                                       |  |       |  |        |   |          |   |        |  
|                                                                                          |  |       |  |        |   |          |   |        |  
|Intangible assets                                                                         |  | 13    |  | 559    |   | 487      |   | 316    |  
|                                                                                          |  |       |  |        |   |          |   |        |  
|Property, plant and equipment                                                             |  | 14    |  | 371    |   | 358      |   | 354    |  
|                                                                                          |  |       |  |        |   |          |   |        |  
|Investments accounted for using
      the equity method:                                  |  |       |  |        |   |          |   |        |  
|                                                                                          |  |       |  |        |   |          |   |        |  
|Investments in
      joint ventures                                                       |  | 15    |  | 19     |   | 32       |   | 29     |  
|                                                                                          |  |       |  |        |   |          |   |        |  
|Investments in
      associates                                                           |  | 15    |  | 19     |   | 4        |   | 6      |  
|                                                                                          |  |       |  |        |   |          |   |        |  
|Deferred tax assets                                                                       |  | 26    |  | 281    |   | 276      |   | 292    |  
|                                                                                          |  |       |  |        |   |          |   |        |  
|Other financial assets and
      derivatives                                              |  | 16    |  | 47     |   | 22       |   | 28     |  
|                                                                                          |  |       |  |        |   |          |   |        |  
|Retirement benefit assets                                                                 |  | 25    |  | 18     |   |         |   |       |  
|                                                                                          |  |       |  |        |   |          |   |        |  
|                                                                                          |  |       |  | 1,314  |   | 1,179    |   | 1,025  |  
|                                                                                          |  |       |  |        |   |          |   |        |  
|Current assets:                                                                           |  |       |  |        |   |          |   |        |  
|                                                                                          |  |       |  |        |   |          |   |        |  
|Inventories                                                                               |  | 18    |  | 1      |   | 1        |   | 3      |  
|                                                                                          |  |       |  |        |   |          |   |        |  
|Trade and other receivables                                                               |  | 19    |  | 258    |   | 270      |   | 535    |  
|                                                                                          |  |       |  |        |   |          |   |        |  
|Other financial assets and
      derivatives                                              |  | 16    |  | 210    |   | 18       |   | 287    |  
|                                                                                          |  |       |  |        |   |          |   |        |  
|Current tax debtors                                                                       |  |       |  | 8      |   | 6        |   | 7      |  
|                                                                                          |  |       |  |        |   |          |   |        |  
|Cash and cash equivalents                                                                 |  | 20    |  | 129    |   | 662      |   | 578    |  
|                                                                                          |  |       |  |        |   |          |   |        |  
|                                                                                          |  |       |  | 606    |   | 957      |   | 1,410  |  
|                                                                                          |  |       |  |        |   |          |   |        |  
|Non-current assets classified
      as held for sale                                      |  | 21    |  |       |   | 1        |   | 145    |  
|                                                                                          |  |       |  |        |   |          |   |        |  
|                                                                                          |  |       |  |        |   |          |   |        |  
|                                                                                          |  |       |  |        |   |          |   |        |  
|Total assets                                                                              |  |       |  | 1,920  |   | 2,137    |   | 2,580  |  
|                                                                                          |  |       |  |        |   |          |   |        |  
|Liabilities                                                                               |  |       |  |        |   |          |   |        |  
|Current liabilities:                                                                      |  |       |  |        |   |          |   |        |  
|                                                                                          |  |       |  |        |   |          |   |        |  
|Trade and other payables                                                                  |  | 22    |  | (491   | ) | (456     | ) | (721   | )
|                                                                                          |  |       |  |        |   |          |   |        |  
|Current tax liabilities                                                                   |  | 23    |  | (196   | ) | (228     | ) | (260   | )
|                                                                                          |  |       |  |        |   |          |   |        |  
|Provisions for liabilities
      and charges                                              |  | 24    |  | (60    | ) | (64      | ) | (87    | )
|                                                                                          |  |       |  |        |   |          |   |        |  
|Other financial liabilities
      and derivatives                                         |  | 16    |  | (166   | ) | (49      | ) | (181   | )
|                                                                                          |  |       |  |        |   |          |   |        |  
|                                                                                          |  |       |  | (913   | ) | (797     | ) | (1,249 | )
|                                                                                          |  |       |  |        |   |          |   |        |  
|Non-current liabilities:                                                                  |  |       |  |        |   |          |   |        |  
|                                                                                          |  |       |  |        |   |          |   |        |  
|Provisions for liabilities
      and charges                                              |  | 24    |  | (204   | ) | (392     | ) | (340   | )
|                                                                                          |  |       |  |        |   |          |   |        |  
|Other financial liabilities
      and derivatives                                         |  | 16    |  | (521   | ) | (371     | ) | (329   | )
|                                                                                          |  |       |  |        |   |          |   |        |  
|Deferred tax liabilities                                                                  |  | 26    |  | (110   | ) | (66      | ) | (45    | )
|                                                                                          |  |       |  |        |   |          |   |        |  
|                                                                                          |  |       |  | (835   | ) | (829     | ) | (714   | )
|                                                                                          |  |       |  |        |   |          |   |        |  
|Liabilities directly associated
      with non-current assets classified as held for sale |  | 21    |  |       |   |         |   | (47    | )
|                                                                                          |  |       |  |        |   |          |   |        |  
|Total liabilities                                                                         |  |       |  | (1,748 | ) | (1,626   | ) | (2,010 | )
|                                                                                          |  |       |  |        |   |          |   |        |  
|                                                                                          |  |       |  |        |   |          |   |        |  
|                                                                                          |  |       |  |        |   |          |   |        |  
|Net assets                                                                                |  |       |  | 172    |   | 511      |   | 570    |  
|                                                                                          |  |       |  |        |   |          |   |        |  
|Shareholders
      equity                                                                |  |       |  |        |   |          |   |        |  
|                                                                                          |  |       |  |        |   |          |   |        |  
|Share capital                                                                             |  | 27    |  | 496    |   | 467      |   | 455    |  
|                                                                                          |  |       |  |        |   |          |   |        |  
|Other reserves                                                                            |  | 28    |  | (1,738 | ) | (1,692   | ) | (1,755 | )
|                                                                                          |  |       |  |        |   |          |   |        |  
|Retained earnings                                                                         |  | 11    |  | 1,414  |   | 1,736    |   | 1,671  |  
|                                                                                          |  |       |  |        |   |          |   |        |  
|Total parent shareholders
      equity                                                   |  |       |  | 172    |   | 511      |   | 371    |  
|                                                                                          |  |       |  |        |   |          |   |        |  
|Minority interest in equity                                                               |  |       |  |       |   |         |   | 199    |  
|                                                                                          |  |       |  |        |   |          |   |        |  
|Total equity                                                                              |  |       |  | 172    |   | 511      |   | 570    |  
|                                                                                          |  |       |  |        |   |          |   |        |  

2005 has been restated to recognise irrevocable commitments to repurchase shares during close periods as a liability (see Basis of accounting on page 78). The impact of recognising these commitments is to
increase current liabilities and to decrease shareholders equity at 31 December 2005 by £59 million.

The financial statements on pages 75128 and the summary of differences between IFRS and US GAAP on pages 129133 were approved by the Board of Directors on 15 March 2007.

|           |              
|---------- | -------------
|Tom Glocer | David Grigson
|CEO        | CFO          



Reuters Group PLCAnnual
  Report and Form 20-F 2006

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|           |   
|Financials | 77
|           |   
|           |   

Consolidated cash flow statementFor the year ended 31 December

|                                                                |  |       |  | 2006 |   | 2005 |   | 2004 |  
|--------------------------------------------------------------- |  | ----- |  | ---- | - | ---- | - | ---- | -
|                                                                |  | Notes |  | £m   |   | £m   |   | £m   |  
|                                                                |  |       |  |      |   |      |   |      |  
|Cash flows from operating
      activities                      |  |       |  |      |   |      |   |      |  
|                                                                |  |       |  |      |   |      |   |      |  
|Cash generated from operations                                  |  | 29    |  | 311  |   | 271  |   | 280  |  
|                                                                |  |       |  |      |   |      |   |      |  
|Interest received                                               |  |       |  | 42   |   | 55   |   | 19   |  
|                                                                |  |       |  |      |   |      |   |      |  
|Interest paid                                                   |  |       |  | (61  | ) | (49  | ) | (30  | )
|                                                                |  |       |  |      |   |      |   |      |  
|Tax paid                                                        |  |       |  | (34  | ) | (24  | ) | (43  | )
|                                                                |  |       |  |      |   |      |   |      |  
|Net cash flow from operating
      activities                   |  |       |  | 258  |   | 253  |   | 226  |  
|                                                                |  |       |  |      |   |      |   |      |  
|Cash flows from investing
      activities                      |  |       |  |      |   |      |   |      |  
|                                                                |  |       |  |      |   |      |   |      |  
|Acquisitions, net of cash acquired                              |  | 30    |  | (67  | ) | (124 | ) | (78  | )
|                                                                |  |       |  |      |   |      |   |      |  
|Disposals, net of cash disposed                                 |  | 30    |  | 65   |   | 246  |   | 438  |  
|                                                                |  |       |  |      |   |      |   |      |  
|Purchases of property, plant
      and equipment                |  |       |  | (122 | ) | (145 | ) | (109 | )
|                                                                |  |       |  |      |   |      |   |      |  
|Proceeds from sale of property,
      plant and equipment       |  |       |  | 5    |   | 3    |   | 66   |  
|                                                                |  |       |  |      |   |      |   |      |  
|Purchases of intangible assets                                  |  |       |  | (106 | ) | (40  | ) | (27  | )
|                                                                |  |       |  |      |   |      |   |      |  
|Purchases of available-for-sale
      financial assets          |  |       |  |     |   | (1   | ) | (1   | )
|                                                                |  |       |  |      |   |      |   |      |  
|Proceeds from sale of available-for-sale
      financial assets |  |       |  |     |   | 85   |   | 25   |  
|                                                                |  |       |  |      |   |      |   |      |  
|Dividends received                                              |  |       |  | 3    |   | 5    |   | 5    |  
|                                                                |  |       |  |      |   |      |   |      |  
|Net cash flow from investing
      activities                   |  |       |  | (222 | ) | 29   |   | 319  |  
|                                                                |  |       |  |      |   |      |   |      |  
|Cash flows from financing
      activities                      |  |       |  |      |   |      |   |      |  
|                                                                |  |       |  |      |   |      |   |      |  
|Proceeds from issue of shares                                   |  |       |  | 32   |   | 10   |   | 6    |  
|                                                                |  |       |  |      |   |      |   |      |  
|Share buy-back                                                  |  |       |  | (527 | ) | (223 | ) |     |  
|                                                                |  |       |  |      |   |      |   |      |  
|(Increase)/decrease in short-term
      deposits                |  |       |  | (196 | ) | 248  |   | (105 | )
|                                                                |  |       |  |      |   |      |   |      |  
|Increase/(decrease) in borrowings                               |  |       |  | 270  |   | (144 | ) | (225 | )
|                                                                |  |       |  |      |   |      |   |      |  
|Equity dividends paid to shareholders                           |  |       |  | (134 | ) | (140 | ) | (140 | )
|                                                                |  |       |  |      |   |      |   |      |  
|Equity dividends paid to minority
      interests               |  |       |  |     |   | (23  | ) |     |  
|                                                                |  |       |  |      |   |      |   |      |  
|Net cash flow from financing
      activities                   |  |       |  | (555 | ) | (272 | ) | (464 | )
|                                                                |  |       |  |      |   |      |   |      |  
|Exchange (losses)/gains on
      cash and cash equivalents      |  |       |  | (13  | ) | 66   |   | (33  | )
|                                                                |  |       |  |      |   |      |   |      |  
|Net (decrease)/increase
      in cash and cash equivalents      |  |       |  | (532 | ) | 76   |   | 48   |  
|                                                                |  |       |  |      |   |      |   |      |  
|Cash and cash equivalents
      at the beginning of the year    |  |       |  | 637  |   | 561  |   | 513  |  
|                                                                |  |       |  |      |   |      |   |      |  
|Cash and cash equivalents
      at the end of the year          |  | 31    |  | 105  |   | 637  |   | 561  |  
|                                                                |  |       |  |      |   |      |   |      |  



Reuters Group PLCAnnual Report and Form 20-F 2006

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|   |                          
|78 | Group 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 2006, 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. The areas which require a higher degree of judgement include impairments, intangible assets, defined benefit pension plans, share-based payments, provisions, segment reporting and taxation. The 2005 balance sheet has been restated to recognise irrevocable commitments to repurchase shares during close periods as a liability. During the close period following the 2006 year end, the Group repurchased 12.0
million shares (2005: 13.5 million shares, 2004: nil) under these commitments at a total cost of £53 million (2005: £59 million, 2004: £nil). The impact of recognising these commitments is to increase current liabilities and to
decrease shareholders equity at 31 December 2006 by £53 million (2005: £59 million, 2004: £nil). There is no impact on reported profit, cash flow or earnings per share. Share repurchases under the buy-back programme totalling
£137 million for the period 1 January 2006 to 7 March 2006, which included the £59 million described above, were previously disclosed under note 38 Post-balance sheet events in the 2005 Annual Report and Form 20-F. Adoption of International
    Financial Reporting
    Standards (IFRS)Prior to 2005, the Group prepared its annual
    consolidated financial statements under UK GAAP. From 1 January 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 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. These financial statements take account of the requirements and options in IFRS 1 First-time Adoption of International Financial Reporting Standards as those requirements and options relate to the 2004
comparatives included within these financial statements. 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 50% 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 and intangibles
  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. 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, the
  company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. Exchange 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 exchange 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.




Reuters Group PLCAnnual
  Report and Form 20-F 2006

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|           |   
|---------- | --
|           |   
|Financials | 79
|           |   
|           |   
|           |   

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. Pensions and similar obligationsThe 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 using an options pricing methodology and expensed over the vesting period of the award. At each balance sheet date, the Group reviews its estimate of the number of options that are expected to vest. 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
and intangibles 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. Internally generated intangible assetsExpenditure related to the development of new products or capabilities that is incurred between establishing technical feasibility and the asset becoming ready for use 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 or capability can be demonstrated and the Group is satisfied that it is probable that future
economic benefits will result from the product or capability once completed. Capitalisation ceases when the product or capability is ready for use. Expenditure on research activities, and on development activities that do not meet the above criteria, is charged to the income statement as incurred. Internally developed intangible assets are systematically amortised, on a straight line basis, over their useful economic lives which range from three to five years. Other intangiblesSoftware which forms an integral part of the related hardware is capitalised with that hardware and included within property, plant and equipment. Costs which are directly associated with the production of software for internal use in the business are capitalised as an intangible asset. Software assets are amortised on a straight line basis over their expected
useful economic lives which range from three to five years. Acquired intangible assets include software licences, customer relationships, trade names and trademarks. These assets are capitalised on acquisition and amortised over their expected useful economic lives which range
from five to fifteen years. Impairment of assetsGoodwill is not subject to amortisation and is tested annually for impairment. All other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. In addition, intangible assets under development and not yet ready for
use are reviewed for impairment annually. 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 separately identifiable cash flows exist (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
items of property, plant and equipment are stated at historical cost less depreciation
including 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 which are as follows: Freehold land
	Not depreciatedFreehold buildings
	Normally 50 yearsLeasehold property
	Over the term of the leaseComputer systems equipment, office equipment and
motor vehicles
	2 to 5 years The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.




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|80 | Group accounting policiescontinued
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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 is expected to 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. Investments (effective 1 January 2005)ClassificationThe Group classifies its investments
    in the following categories: •
    financial assets at fair value through profit and loss;•
    loans and receivables; 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 on the trade date and
subsequently remeasured at each reporting date. Transaction costs directly attributable to the acquisition of the asset are recognised immediately in the income statement. 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. Assets in this category are initially recognised on the trade date at fair value
plus transaction costs and subsequently measured at amortised cost, using the effective interest method. Available-for-sale financial assetsThe Group has classified all of its marketable securities as available-for-sale. Assets in this category are initially recognised on the trade date at fair value plus transaction costs and subsequently remeasured at
each reporting date. Unrealised gains and losses arising from changes in fair value are recognised in the statement of recognised income and expense. Impairment and derecognitionThe Group assesses at each balance sheet date whether there is objective evidence that a financial asset, or group of financial assets, is impaired. On impairment, the cumulative loss recognised in equity is removed
from equity and recognised in the income statement. On disposal of the asset, gains or losses recognised in equity are removed from equity and recognised in 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.


Trade receivablesTrade receivables do not carry interest and are initially measured at their fair value, as reduced by appropriate allowances for estimated irrecoverable amounts, and subsequently measured at amortised cost. 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 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. LeasingAssets under leasing contracts are classified as finance or operating leases at the inception of the lease or when changes are made to existing contracts. Assets classified as finance leases are recognised as assets of the Group at the present value of the minimum lease payments 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 recognised in the income statement 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 initially recognised at fair value, net of transaction costs incurred, and are subsequently stated at amortised cost, adjusted for fair value movements in respect of related fair value hedges. 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. 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




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|Financials | 81
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hedged risk. The gain or loss relating to the ineffective portion is recognised immediately in finance costs. 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 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
recognised in 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, subject to
effectiveness. Gains and losses accumulated in equity are recognised in the income statement on disposal of the foreign operation. Embedded derivativesEmbedded derivatives arise in certain revenue and purchase contracts where the currency of the contract is different from the functional currencies of the parties involved. Such derivatives are separated from the host
contracts when their economic characteristics and risks are not closely related to those of the host contract. The derivatives are measured at fair value at each balance sheet date using forward exchange market rates. Changes in the fair value are
recognised in the income statement. 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. Financial guaranteesFinancial
guarantees are non-derivative financial liabilities which are recognised initially
at fair value plus transaction costs and subsequently measured at the higher
of the amount determined in accordance with IAS
37 Provisions, Contingent Liabilities and Contingent Assets; and
the amount initially recognised. 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. 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. Interest in shares of Reuters Group PLCShares
held by the Reuters Employee Share Ownership Trusts and repurchased shares are
recorded in the balance sheet at cost and reported as a deduction from shareholders equity.


Irrevocable commitments to repurchase shares during close periods entered into before the balance sheet date are recorded in the balance sheet at estimated cost and reported as a current liability with a corresponding
deduction from shareholders equity. 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 reportingBusiness 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 83 outlines in detail the allocation approach in respect of divisional results, 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 the Group for accounting periods beginning on
or after 1 January 2007 or later periods but which have not yet been adopted
by the EU or which the Group has chosen not to adopt early. The new standards
which are expected to be relevant to the Groups operations are as follows: IFRS 7 Financial Instruments:
    Disclosures and IAS 1 (Amendment) Presentation of Financial Statements
     Capital Disclosures (effective from 1 January 2007)IFRS 7 introduces new disclosures relating to the information about the Groups
    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 the




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    Group PLCAnnual Report and Form 20-F 2006

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|82 | Group accounting policies
      continued
|   |                                          
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disclosure requirements in IAS 32 Financial
  Instruments: Disclosure andPresentation.
  The amendment to IAS 1 introduces disclosures about the level of an entitys
  capital and its objectives, policies and processes for managing its capital.
  The Group has assessed the impact of IFRS 7 and the amendment to IAS 1 and concluded
  that the exisiting disclosures on risk management policies in the OFR would
  be further expanded to include additional sensitivity analysis and management
  of the companys capital. The Group will apply IFRS 7 and the amendment
  to IAS 1 from 1 January 2007. IFRS 8 Operating Segments
  (effective from 1 January 2009)IFRS 8 replaces IAS 14 Segment Reporting
  and aligns segment reporting with the requirements of US accounting standard
  FAS 131 Disclosures about Segments of an Enterprise and Related Information.
  The new standard uses a management approach, under which segment
  information is presented on the same basis as that which used for internal reporting
  purposes. The Group has assessed the impact of IFRS 8 and concluded that segment
  reporting will continue to be focused on the business divisions with the distinction
  between primary and secondary segments being removed. IFRIC 7 Applying the Restatement Approach
under IAS 29 (effective from 1 January 2007)IFRIC 7 provides guidance in
respect of the first-time application of IAS 29 Financial Reporting in

Hyperinflationary Economies when an entity identifies the existence of
hyperinflation in the economy of its functional currency. 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 financial statements. IFRIC 8 Scope of IFRS
  2 (effective from 1 January 2007)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. 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 financial statements. IFRIC 9 Reassessment
  of Embedded Derivatives (effective from 1 January 2007)IFRIC 9 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 it will not have a significant
  effect on the Groups financial statements. IFRIC 10 Interim Financial
  Reporting and Impairment (effective from 1 January 2007)IFRIC 10 clarifies that a reporting entity
  shall not reverse an impairment loss recognised in a previous interim period
  in respect of goodwill or investment in either an equity instrument or a financial
  asset carried at cost. The Group will apply the requirements of IFRIC 10 if
  it chooses to prepare the interim financial statements under the requirements
  of IAS 34 in 2007. From 1 January 2008, the adoption of IAS 34 is mandatory.
  The Group does not currently apply IAS 34. Therefore, the interpretation currently
  has no impact on the Groups financial statements. IFRIC 11 IFRS 2 
  Group and Treasury Share Transactions (effective from 1 January 2008)IFRIC 11 addresses share-based payment
  arrangements in which (a) an entity grants its employees a right to equity instruments
  of the entity, and either chooses or is required to buy those equity instruments
  from another party or the shareholder provides the equity instruments needed
  to settle the share-based payment arrangement; and (b) a subsidiary entitys
  employees are granted rights to equity instruments of the parent entity (or
  another entity in the same group), in particular, arrangements in which the
  parent entity or the subsidiary entity grants those rights direct to the subsidiary
  entitys employees. 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
  financial statements.


Applicable accounting policies
    for 2004 comparativesIAS 32 and IAS 39 were 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.




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  PLCAnnual Report and Form 20-F 2006

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|                                              |            |   
|Notes
      to the
      financial statements | Financials | 83
|                                              |            |   
|                                              |            |   
|                                              |            |   

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 revenue, operating costs,
  other operating income, assets and liabilities to these 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 operating costs relate to a specific division, they are mapped directly to that division. Where operating 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 operating costs. Other operating income is allocated to divisions using a similar methodology to operating costs. Divisional results could alter with the application of other allocation approaches and as continuous improvements are made to the Profitability Insight model. When changes are made to the allocation methodology, prior
year comparatives are restated to ensure that divisional results are allocated on a consistent basis year-on-year. In 2006, Reuters made changes to the allocation of revenue and operating costs between business divisions to reflect changes in the management of certain products. 2005 comparatives have therefore been restated to
increase Sales & Trading revenue by £18 million (2004: £11 million) and operating costs by £19 million (2004: £11 million), decrease Research & Asset Management revenue by £10 million (2004: £3 million) and
operating costs by £12 million (2004: £6 million) and decrease Enterprise revenue by £8 million (2004: £8 million) and operating costs by £7 million (2004: £5 million). 2005 comparatives have also been restated to
reallocate £1 million of amortisation on intangible assets arising on the acquisition of Telerate from Enterprise to Sales & Trading, in line with the allocation of revenues from Telerate products.




The tables below show a segmental analysis of results for continuing operations. For information relating to discontinued operations, please refer to note 7 on pages 8788.

|                                                                                                       |  | 2006    |  
|------------------------------------------------------------------------------------------------------ |  | ------- | -
|                                                                                                       |  |         |  
|                                                                                                       |  |         |  
|                                                                                                       |  |         |  
|                                                                                                       |  | Sales & |  
|                                                                                                       |  | Trading |  
|                                                                                                       |  | £m      |  
|                                                                                                       |  |         |  
|Revenue                                                                                                |  | 1,690   |  
|                                                                                                       |  |         |  
|Operating costs                                                                                        |  | (1,543  | )
|                                                                                                       |  |         |  
|Other operating income                                                                                 |  | 27      |  
|                                                                                                       |  |         |  
|Operating profit/(loss)                                                                                |  | 174     |  
|                                                                                                       |  |         |  
|Finance income                                                                                         |  |         |  
|                                                                                                       |  |         |  
|Finance costs                                                                                          |  |         |  
|                                                                                                       |  |         |  
|Profit
          on disposal of associates, joint ventures and available-for-sale financial
    assets |  |         |  
|                                                                                                       |  |         |  
|Share of post-tax losses from
      associates and joint ventures                                      |  |         |  
|                                                                                                       |  |         |  
|Profit before tax                                                                                      |  |         |  
|                                                                                                       |  |         |  
|Taxation                                                                                               |  |         |  
|                                                                                                       |  |         |  
|Profit for the year from
      continuing operations                                                   |  |         |  
|                                                                                                       |  |         |  
|                                                                                                       |  |         |  

|                                                                                                       |  | Restated |  
|------------------------------------------------------------------------------------------------------ |  | -------- | -
|                                                                                                       |  | 2005     |  
|                                                                                                       |  |          |  
|                                                                                                       |  |          |  
|                                                                                                       |  |          |  
|                                                                                                       |  | Sales &  |  
|                                                                                                       |  | Trading  |  
|                                                                                                       |  | £m       |  
|                                                                                                       |  |          |  
|Revenue                                                                                                |  | 1,613    |  
|                                                                                                       |  |          |  
|Operating costs                                                                                        |  | (1,495   | )
|                                                                                                       |  |          |  
|Other operating income                                                                                 |  | 37       |  
|                                                                                                       |  |          |  
|Operating profit/(loss)                                                                                |  | 155      |  
|                                                                                                       |  |          |  
|Finance income                                                                                         |  |          |  
|                                                                                                       |  |          |  
|Finance costs                                                                                          |  |          |  
|                                                                                                       |  |          |  
|Profit
          on disposal of associates, joint ventures and available-for-sale financial
    assets |  |          |  
|                                                                                                       |  |          |  
|Share of post-tax profits from
      associates and joint ventures                                     |  |          |  
|                                                                                                       |  |          |  
|Profit before tax                                                                                      |  |          |  
|                                                                                                       |  |          |  
|Taxation                                                                                               |  |          |  
|                                                                                                       |  |          |  
|Profit for the year from continuing
      operations                                                   |  |          |  
|                                                                                                       |  |          |  



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|   |                                                        
|-- | -------------------------------------------------------
|   |                                                        
|84 | Notes
      to the
      financial statements continued
|   |                                                        
|   |                                                        

01 Segmental analysis 
  income statementcontinued

|                                                                                                       |  | Restated |  
|------------------------------------------------------------------------------------------------------ |  | -------- | -
|                                                                                                       |  | 2004     |  
|                                                                                                       |  |          |  
|                                                                                                       |  |          |  
|                                                                                                       |  |          |  
|                                                                                                       |  | Sales &  |  
|                                                                                                       |  | Trading  |  
|                                                                                                       |  | £m       |  
|                                                                                                       |  |          |  
|Revenue                                                                                                |  | 1,553    |  
|                                                                                                       |  |          |  
|Operating costs                                                                                        |  | (1,396   | )
|                                                                                                       |  |          |  
|Other operating income                                                                                 |  | 18       |  
|                                                                                                       |  |          |  
|Operating profit/(loss)                                                                                |  | 175      |  
|                                                                                                       |  |          |  
|Finance income                                                                                         |  |          |  
|                                                                                                       |  |          |  
|Finance costs                                                                                          |  |          |  
|                                                                                                       |  |          |  
|Profit
          on disposal of associates, joint ventures and available-for-sale financial
    assets |  |          |  
|                                                                                                       |  |          |  
|Share of post-tax profits from
      associates and joint ventures                                     |  |          |  
|                                                                                                       |  |          |  
|Profit before tax                                                                                      |  |          |  
|                                                                                                       |  |          |  
|Taxation                                                                                               |  |          |  
|                                                                                                       |  |          |  
|Profit for the year from continuing
      operations                                                   |  |          |  
|                                                                                                       |  |          |  

Divisional revenue comprises sales to external customers only. Divisional revenue from transactions with other segments is £nil (2005: £nil, 2004: £nil).

The following table shows the aggregate of each business divisions share of results of associates and joint ventures:

|                                                                            |  | 2006 |   | 2005 |  | 2004 | 
|--------------------------------------------------------------------------- |  | ---- | - | ---- |  | ---- | 
|                                                                            |  | £m   |   | £m   |  | £m   | 
|                                                                            |  |      |   |      |  |      | 
|Sales & Trading                                                             |  | (4   | ) | 2    |  | 2    | 
|                                                                            |  |      |   |      |  |      | 
|Research & Asset Management                                                 |  |     |   |     |  |     | 
|                                                                            |  |      |   |      |  |      | 
|Enterprise                                                                  |  |     |   |     |  | 3    | 
|                                                                            |  |      |   |      |  |      | 
|Media                                                                       |  |     |   | 3    |  | 6    | 
|                                                                            |  |      |   |      |  |      | 
|Share of post-tax (losses)/profits
      from associates and joint ventures |  | (4   | ) | 5    |  | 11   | 
|                                                                            |  |      |   |      |  |      | 

The following table provides information relating to depreciation, amortisation, impairments and other significant non-cash expenses included in the divisional operating costs above:

|                            |  |              |  |             |  |          |  |              |  |             |  | Restated |  |              |  |             |  |          | 
|--------------------------- |  | ------------ |  | ----------- |  | -------- |  | ------------ |  | ----------- |  | -------- |  | ------------ |  | ----------- |  | -------- | 
|                            |  |              |  |             |  | 2006     |  |              |  |             |  | 2005     |  |              |  |             |  | 2004     | 
|                            |  |              |  |             |  |          |  |              |  |             |  |          |  |              |  |             |  |          | 
|                            |  | Depreciation |  |             |  | Other    |  | Depreciation |  |             |  | Other    |  | Depreciation |  |             |  | Other    | 
|                            |  | and          |  |             |  | non-cash |  | and          |  |             |  | non-cash |  | and          |  |             |  | non-cash | 
|                            |  | amortisation |  | Impairments |  | expenses |  | amortisation |  | Impairments |  | expenses |  | amortisation |  | Impairments |  | expenses | 
|                            |  | £m           |  | £m          |  | £m       |  | £m           |  | £m          |  | £m       |  | £m           |  | £m          |  | £m       | 
|                            |  |              |  |             |  |          |  |              |  |             |  |          |  |              |  |             |  |          | 
|Sales & Trading             |  | 95           |  |            |  | 36       |  | 89           |  | 1           |  | 39       |  | 83           |  | 22          |  | 13       | 
|                            |  |              |  |             |  |          |  |              |  |             |  |          |  |              |  |             |  |          | 
|Research & Asset Management |  | 19           |  |            |  | 7        |  | 19           |  |            |  | 4        |  | 16           |  | 8           |  | 3        | 
|                            |  |              |  |             |  |          |  |              |  |             |  |          |  |              |  |             |  |          | 
|Enterprise                  |  | 22           |  |            |  | 8        |  | 20           |  | 1           |  | 2        |  | 35           |  | 5           |  | 5        | 
|                            |  |              |  |             |  |          |  |              |  |             |  |          |  |              |  |             |  |          | 
|Media                       |  | 5            |  |            |  | 3        |  | 4            |  | 1           |  | 1        |  | 6            |  |            |  | 1        | 
|                            |  |              |  |             |  |          |  |              |  |             |  |          |  |              |  |             |  |          | 
|Total                       |  | 141          |  |            |  | 54       |  | 132          |  | 3           |  | 46       |  | 140          |  | 35          |  | 22       | 
|                            |  |              |  |             |  |          |  |              |  |             |  |          |  |              |  |             |  |          | 

Impairments for 2004 exclude the £17 million impairment of the goodwill previously reported within the Sales & Trading division in respect of Bridge Trading Company (BTC), as this impairment has been reported
within discontinued operations (see note 7 on page 87).

Please refer to note 13 on page 94 for more information 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:

|                              |  | 2006  |  | %      |  | 2005  |  | %      |   | 2004  | 
|----------------------------- |  | ----- |  | ------ |  | ----- |  | ------ | - | ----- | 
|                              |  | £m    |  | change |  | £m    |  | change |   | £m    | 
|                              |  |       |  |        |  |       |  |        |   |       | 
|Europe, Middle East & Africa* |  | 1,396 |  | 5%     |  | 1,330 |  | (1%    | ) | 1,344 | 
|                              |  |       |  |        |  |       |  |        |   |       | 
|Americas                      |  | 709   |  | 9%     |  | 651   |  | 7%     |   | 609   | 
|                              |  |       |  |        |  |       |  |        |   |       | 
|Asia                          |  | 461   |  | 7%     |  | 428   |  | 11%    |   | 386   | 
|                              |  |       |  |        |  |       |  |        |   |       | 
|Total revenue                 |  | 2,566 |  | 7%     |  | 2,409 |  | 3%     |   | 2,339 | 
|                              |  |       |  |        |  |       |  |        |   |       | 

|* | To reflect the way Reuters was managed
      in 2006, UK & Ireland, EMEA West and EMEA East have been combined into
      one geographical location.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------



Reuters Group PLCAnnual
  Report and Form 20-F 2006

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|           |   
|---------- | --
|           |   
|Financials | 85
|           |   
|           |   

02 Revenue by type

An analysis of the Groups revenue from
  sale of goods and services by type is set out below:

|              |  |       |  |        |  | Restated |  |        |   | Restated | 
|------------- |  | ----- |  | ------ |  | -------- |  | ------ | - | -------- | 
|              |  | 2006  |  | %      |  | 2005     |  | %      |   | 2004     | 
|              |  | £m    |  | change |  | £m       |  | change |   | £m       | 
|              |  |       |  |        |  |          |  |        |   |          | 
|Recurring     |  | 2,363 |  | 6%     |  | 2,235    |  | 4%     |   | 2,158    | 
|              |  |       |  |        |  |          |  |        |   |          | 
|Usage         |  | 132   |  | 26%    |  | 104      |  | 13%    |   | 92       | 
|              |  |       |  |        |  |          |  |        |   |          | 
|Outright      |  | 71    |  | 3%     |  | 70       |  | (22%   | ) | 89       | 
|              |  |       |  |        |  |          |  |        |   |          | 
|Total revenue |  | 2,566 |  | 7%     |  | 2,409    |  | 3%     |   | 2,339    | 
|              |  |       |  |        |  |          |  |        |   |          | 

2005 and 2004 have been restated to reclassify £7 million and £6 million respectively of recurring revenue to usage revenue.

Customers 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 advertising
  revenues. Outright revenue comprises once-off sales including information and
  risk management solutions.

03 Operating costs

|                                                        |  | 2006  |  | %      |   | 2005  |  | %      |   | 2004  | 
|------------------------------------------------------- |  | ----- |  | ------ | - | ----- |  | ------ | - | ----- | 
|Cost by nature                                          |  | £m    |  | change |   | £m    |  | change |   | £m    | 
|                                                        |  |       |  |        |   |       |  |        |   |       | 
|Salaries, commission and allowances                     |  | 763   |  |       |   | 761   |  | (3%    | ) | 782   | 
|                                                        |  |       |  |        |   |       |  |        |   |       | 
|Social security costs                                   |  | 64    |  | (4%    | ) | 67    |  | 7%     |   | 63    | 
|                                                        |  |       |  |        |   |       |  |        |   |       | 
|Share-based payments (see note
      33)                |  | 30    |  | (1%    | ) | 30    |  | 38%    |   | 22    | 
|                                                        |  |       |  |        |   |       |  |        |   |       | 
|Pension costs (see note 25)                             |  | 61    |  | 14%    |   | 55    |  | 92%    |   | 28    | 
|                                                        |  |       |  |        |   |       |  |        |   |       | 
|Total staff costs                                       |  | 918   |  | 1%     |   | 913   |  | 2%     |   | 895   | 
|                                                        |  |       |  |        |   |       |  |        |   |       | 
|Services*                                               |  | 512   |  | 13%    |   | 455   |  | 15%    |   | 394   | 
|                                                        |  |       |  |        |   |       |  |        |   |       | 
|Depreciation                                            |  | 95    |  | (4%    | ) | 99    |  | (11%   | ) | 112   | 
|                                                        |  |       |  |        |   |       |  |        |   |       | 
|Data                                                    |  | 323   |  | 15%    |   | 281   |  | 14%    |   | 247   | 
|                                                        |  |       |  |        |   |       |  |        |   |       | 
|Communications                                          |  | 279   |  | (3%    | ) | 289   |  | (4%    | ) | 301   | 
|                                                        |  |       |  |        |   |       |  |        |   |       | 
|Space                                                   |  | 151   |  | (7%    | ) | 162   |  | (8%    | ) | 175   | 
|                                                        |  |       |  |        |   |       |  |        |   |       | 
|Amortisation of intangibles                             |  | 46    |  | 37%    |   | 33    |  | 15%    |   | 28    | 
|                                                        |  |       |  |        |   |       |  |        |   |       | 
|Impairments                                             |  |      |  |       |   | 3     |  | (90%   | ) | 35    | 
|                                                        |  |       |  |        |   |       |  |        |   |       | 
|Fair value movements on derivatives                     |  | 25    |  |       |   |      |  |       |   |      | 
|                                                        |  |       |  |        |   |       |  |        |   |       | 
|Fair value movements on other
      financial assets    |  |      |  |       |   | 16    |  |       |   |      | 
|                                                        |  |       |  |        |   |       |  |        |   |       | 
|Foreign exchange losses                                 |  | 2     |  |       |   |      |  |       |   |      | 
|                                                        |  |       |  |        |   |       |  |        |   |       | 
|Total operating costs                                   |  | 2,351 |  | 4%     |   | 2,251 |  | 3%     |   | 2,187 | 
|                                                        |  |       |  |        |   |       |  |        |   |       | 
|Operating costs include:                                |  |       |  |        |   |       |  |        |   |       | 
|                                                        |  |       |  |        |   |       |  |        |   |       | 
|Research and development expenditure                    |  | 83    |  | (9%    | ) | 92    |  | (13%   | ) | 105   | 
|                                                        |  |       |  |        |   |       |  |        |   |       | 
|Operating lease expenditure:                            |  |       |  |        |   |       |  |        |   |       | 
|                                                        |  |       |  |        |   |       |  |        |   |       | 
|Hire of equipment                                       |  | 6     |  | 6%     |   | 6     |  | (22%   | ) | 7     | 
|                                                        |  |       |  |        |   |       |  |        |   |       | 
|Other, principally
      property                       |  | 74    |  | 9%     |   | 67    |  | (4%    | ) | 70    | 
|                                                        |  |       |  |        |   |       |  |        |   |       | 
|Loss on disposal of property,
      plant and equipment |  |      |  |       |   |      |  |       |   | 1     | 
|                                                        |  |       |  |        |   |       |  |        |   |       | 
|Advertising                                             |  | 19    |  | 9%     |   | 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 fees payable by the Group to
  the companys auditors is set out below:

|                                                                                           |  | 2006 |  | 2005 | 
|------------------------------------------------------------------------------------------ |  | ---- |  | ---- | 
|                                                                                           |  | £m   |  | £m   | 
|                                                                                           |  |      |  |      | 
|Fees payable to the companys
      auditor for the audit of the companys annual accounts |  | 2.2  |  | 2.9  | 
|                                                                                           |  |      |  |      | 
|Fees payable to the companys
      auditor and its associates for other services:         |  |      |  |      | 
|                                                                                           |  |      |  |      | 
|The audit
      of the companys subsidiaries, pursuant to legislation                     |  | 1.3  |  | 1.3  | 
|                                                                                           |  |      |  |      | 
|Other services
      pursuant to legislation                                               |  | 0.6  |  | 0.4  | 
|                                                                                           |  |      |  |      | 
|Tax services                                                                               |  | 1.0  |  | 2.6  | 
|                                                                                           |  |      |  |      | 
|Services relating
      to corporate finance transactions                                  |  | 0.2  |  | 0.4  | 
|                                                                                           |  |      |  |      | 
|All other
      services                                                                   |  | 0.2  |  | 0.3  | 
|                                                                                           |  |      |  |      | 
|Total fees payable                                                                         |  | 5.5  |  | 7.9  | 
|                                                                                           |  |      |  |      | 
|United Kingdom                                                                             |  | 3.9  |  | 3.8  | 
|                                                                                           |  |      |  |      | 
|Overseas                                                                                   |  | 1.6  |  | 4.1  | 
|                                                                                           |  |      |  |      | 

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.

Reuters Group PLCAnnual
  Report and Form 20-F 2006

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Back to Contents

|   |                                                  
|-- | -------------------------------------------------
|   |                                                  
|86 | Notes to the financial
      statements continued
|   |                                                  
|   |                                                  

04 Other operating income

|                                                          |  | 2006 |  | %      |   | 2005 |  | %      |   | 2004 | 
|--------------------------------------------------------- |  | ---- |  | ------ | - | ---- |  | ------ | - | ---- | 
|                                                          |  | £m   |  | change |   | £m   |  | change |   | £m   | 
|                                                          |  |      |  |        |   |      |  |        |   |      | 
|Profit on disposal of subsidiaries                        |  | 4    |  | (4%    | ) | 4    |  | 5%     |   | 4    | 
|                                                          |  |      |  |        |   |      |  |        |   |      | 
|Fair value movements on derivatives                       |  | 6    |  | (69%   | ) | 18   |  |       |   |     | 
|                                                          |  |      |  |        |   |      |  |        |   |      | 
|Investment income                                         |  |     |  |       |   | 1    |  |       |   |     | 
|                                                          |  |      |  |        |   |      |  |        |   |      | 
|Foreign exchange gains                                    |  |     |  |       |   | 3    |  |       |   | 1    | 
|                                                          |  |      |  |        |   |      |  |        |   |      | 
|Profit on disposal of property,
      plant and equipment |  | 2    |  |       |   |     |  |       |   |     | 
|                                                          |  |      |  |        |   |      |  |        |   |      | 
|Other income                                              |  | 29   |  | 28%    |   | 23   |  | (39%   | ) | 37   | 
|                                                          |  |      |  |        |   |      |  |        |   |      | 
|Total other operating income                              |  | 41   |  | (16%   | ) | 49   |  | 16%    |   | 42   | 
|                                                          |  |      |  |        |   |      |  |        |   |      | 

Other income principally comprises amounts
  received in respect of services provided by Reuters to joint ventures and other
  parties.

05 Finance income and finance costs

|                                                 |  | 2006 |   | 2005 |   | 2004 |  
|------------------------------------------------ |  | ---- | - | ---- | - | ---- | -
|                                                 |  | £m   |   | £m   |   | £m   |  
|                                                 |  |      |   |      |   |      |  
|Interest receivable:                             |  |      |   |      |   |      |  
|                                                 |  |      |   |      |   |      |  
|Listed investments                               |  |     |   | 1    |   |     |  
|                                                 |  |      |   |      |   |      |  
|Unlisted investments                             |  | 16   |   | 18   |   | 15   |  
|                                                 |  |      |   |      |   |      |  
|Swap contracts                                   |  | 33   |   | 18   |   |     |  
|                                                 |  |      |   |      |   |      |  
|Fair value gains on financial
      instruments  |  | 16   |   | 1    |   |     |  
|                                                 |  |      |   |      |   |      |  
|Foreign exchange gains on borrowings             |  | 7    |   | 3    |   |     |  
|                                                 |  |      |   |      |   |      |  
|Total finance income                             |  | 72   |   | 41   |   | 15   |  
|                                                 |  |      |   |      |   |      |  
|Interest payable:                                |  |      |   |      |   |      |  
|                                                 |  |      |   |      |   |      |  
|Bank loans
      and overdrafts                  |  | (6   | ) | (4   | ) | (2   | )
|                                                 |  |      |   |      |   |      |  
|Other borrowings                                 |  | (23  | ) | (23  | ) | (24  | )
|                                                 |  |      |   |      |   |      |  
|Swap contracts                                   |  | (38  | ) | (22  | ) |     |  
|                                                 |  |      |   |      |   |      |  
|Fair value losses on financial
      instruments |  | (19  | ) | (2   | ) |     |  
|                                                 |  |      |   |      |   |      |  
|Unwinding of discounts                           |  | (1   | ) | (2   | ) | (1   | )
|                                                 |  |      |   |      |   |      |  
|Total finance costs                              |  | (87  | ) | (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 and 2006, 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

|                            |  | 2006 |   | 2005 |   | 2004 | 
|--------------------------- |  | ---- | - | ---- | - | ---- | 
|                            |  | £m   |   | £m   |   | £m   | 
|                            |  |      |   |      |   |      | 
|Current tax:                |  |      |   |      |   |      | 
|                            |  |      |   |      |   |      | 
|Continuing operations       |  | (10  | ) | (10  | ) | 17   | 
|                            |  |      |   |      |   |      | 
|Discontinued operations     |  | 12   |   | 50   |   | 21   | 
|                            |  |      |   |      |   |      | 
|                            |  | 2    |   | 40   |   | 38   | 
|                            |  |      |   |      |   |      | 
|Deferred tax (see note 26): |  |      |   |      |   |      | 
|                            |  |      |   |      |   |      | 
|Continuing operations       |  | 30   |   | 19   |   | 23   | 
|                            |  |      |   |      |   |      | 
|Discontinued operations     |  | (12  | ) | 13   |   | 1    | 
|                            |  |      |   |      |   |      | 
|                            |  | 18   |   | 32   |   | 24   | 
|                            |  |      |   |      |   |      | 
|Continuing operations       |  | 20   |   | 9    |   | 40   | 
|                            |  |      |   |      |   |      | 
|Discontinued operations     |  |     |   | 63   |   | 22   | 
|                            |  |      |   |      |   |      | 
|Total tax                   |  | 20   |   | 72   |   | 62   | 
|                            |  |      |   |      |   |      | 

Reuters Group PLCAnnual
  Report and Form 20-F 2006

---



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|           |   
|---------- | --
|           |   
|Financials | 87
|           |   
|           |   

Tax on items recognised in equity

|                                                                                |  |            |   | 2006         |  |            |   | 2005         |   |            |   | 2004         |  
|------------------------------------------------------------------------------- |  | ---------- | - | ------------ |  | ---------- | - | ------------ | - | ---------- | - | ------------ | -
|                                                                                |  |            |   |              |  |            |   |              |   |            |   |              |  
|                                                                                |  | Continuing |   | Discontinued |  | Continuing |   | Discontinued |   | Continuing |   | Discontinued |  
|                                                                                |  | £m         |   | £m           |  | £m         |   | £m           |   | £m         |   | £m           |  
|                                                                                |  |            |   |              |  |            |   |              |   |            |   |              |  
|Current tax (credit)/charge
      on unrealised exchange movements              |  | (7         | ) |             |  |           |   |             |   | 10         |   |             |  
|                                                                                |  |            |   |              |  |            |   |              |   |            |   |              |  
|Deferred tax charge/(credit)
      on actuarial losses on defined benefit plans |  | 1          |   |             |  | (10        | ) |             |   | (45        | ) |             |  
|                                                                                |  |            |   |              |  |            |   |              |   |            |   |              |  
|Deferred tax credit on stock
      options                                      |  | (1         | ) |             |  | (10        | ) | (1           | ) | (8         | ) | (1           | )
|                                                                                |  |            |   |              |  |            |   |              |   |            |   |              |  
|Current tax charge/(credit)
      on revaluations and fair value movements      |  | 10         |   |             |  | (4         | ) |             |   |           |   |             |  
|                                                                                |  |            |   |              |  |            |   |              |   |            |   |              |  

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:

|                                                                                                               |  | 2006 |   | 2005 |   | 2004 |  
|-------------------------------------------------------------------------------------------------------------- |  | ---- | - | ---- | - | ---- | -
|                                                                                                               |  | £m   |   | £m   |   | £m   |  
|                                                                                                               |  |      |   |      |   |      |  
|Profit before tax                                                                                              |  | 313  |   | 238  |   | 396  |  
|                                                                                                               |  |      |   |      |   |      |  
|Profit before tax multiplied
      by standard rate of corporation tax in the UK of 30% (2005: 30%, 2004: 30%) |  | 94   |   | 71   |   | 119  |  
|                                                                                                               |  |      |   |      |   |      |  
|Effects of:                                                                                                    |  |      |   |      |   |      |  
|                                                                                                               |  |      |   |      |   |      |  
|Non-tax deductible amortisation
      and impairment of intangibles                                            |  | 5    |   | 4    |   | 11   |  
|                                                                                                               |  |      |   |      |   |      |  
|Expenses not deductible for
      tax purposes                                                                 |  | 2    |   | 4    |   | 11   |  
|                                                                                                               |  |      |   |      |   |      |  
|Non-taxable investment disposals
      and impairments                                                         |  | (15  | ) | (13  | ) | (66  | )
|                                                                                                               |  |      |   |      |   |      |  
|Adjustments in respect of prior
      years                                                                    |  | (56  | ) | (23  | ) | (26  | )
|                                                                                                               |  |      |   |      |   |      |  
|Recognition of tax losses that
      arose in prior years                                                      |  | (4   | ) | (33  | ) |     |  
|                                                                                                               |  |      |   |      |   |      |  
|Other differences                                                                                              |  | (6   | ) | (1   | ) | (9   | )
|                                                                                                               |  |      |   |      |   |      |  
|Total tax for continuing
      operations                                                                      |  | 20   |   | 9    |   | 40   |  
|                                                                                                               |  |      |   |      |   |      |  

The tax charge for the year includes a tax credit of £34 million (2005: £16 million) in respect of UK taxation.

07 Discontinued operations

The Profit for the year from discontinued operations line within the income statement comprises the post-tax profit or loss of discontinued operations and the post-tax profit or loss on their
disposal.

The Group has no activities which are required to be classified as discontinued operations during 2006. However, an additional gain of £12 million has been recognised in 2006 relating to the disposal of Instinet
Group, which was classified as a discontinued operation during 2005.

|                                                                                                 |  | 2006 |  | 2005  |  | 2004 |  
|------------------------------------------------------------------------------------------------ |  | ---- |  | ----- |  | ---- | -
|                                                                                                 |  | £m   |  | £m    |  | £m   |  
|                                                                                                 |  |      |  |       |  |      |  
|Profits after tax of subsidiaries
      acquired with a view to resale                           |  |     |  |      |  | 1    |  
|                                                                                                 |  |      |  |       |  |      |  
|Profits after tax of subsidiaries
      (net of tax £nil, 2005: £20 million, 2004: £22 million)  |  |     |  | 69    |  | 39   |  
|                                                                                                 |  |      |  |       |  |      |  
|Profit/(loss) on disposal of
      subsidiaries (net of tax £nil, 2005: £43 million, 2004: £nil) |  | 12   |  | 184   |  | (1   | )
|                                                                                                 |  |      |  |       |  |      |  
|Impairment of subsidiaries
      (net of tax £nil, 2005: £nil, 2004: £nil)                       |  |     |  |      |  | (20  | )
|                                                                                                 |  |      |  |       |  |      |  
|Profit for the year from
      discontinued operations                                           |  | 12   |  | 253   |  | 19   |  
|                                                                                                 |  |      |  |       |  |      |  
|Basic earnings per ordinary
      share for discontinued operations                              |  | 1.0p |  | 16.3p |  | 0.6p |  
|                                                                                                 |  |      |  |       |  |      |  
|Diluted earnings per ordinary
      share for discontinued operations                            |  | 0.9p |  | 15.8p |  | 0.6p |  
|                                                                                                 |  |      |  |       |  |      |  

Basic and diluted earnings per share are calculated using the weighted average number of ordinary shares as disclosed in note 8 on pages 8889.

Discontinued operations in
  2005 and 2004Subsidiaries 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 tax 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 in 2004 includes £3 million in respect of impairment of
Radianzs net assets to fair value less costs to sell.

The disposal of Radianz in 2005 resulted in
  a loss on disposal of £4 million, which is presented within profit/(loss)
  on disposal of subsidiaries within discontinued operations.

Reuters Group PLCAnnual
  Report and Form 20-F 2006

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|   |                                               
|88 | Notes to the financial
    statementscontinued
|   |                                               
|   |                                               

07  Discontinued operationscontinued

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 8 December 2005, Reuters disposed of its investment in Instinet Group for gross proceeds of £612 million (including £37 million relating to Reuters share of an Instinet Group dividend received prior to
close). Reuters recorded a net gain on sale of £191 million in 2005 within profit/(loss) on disposal of subsidiaries within discontinued operations. Instinet Groups results up until sale, a profit after tax of £68 million
(before minority interest), are also included in the Group results as part of discontinued operations.

The results of Instinet Group and BTC are as follows:

|                                                          |  | 2006 |  | 2005 |   | 2004 |  
|--------------------------------------------------------- |  | ---- |  | ---- | - | ---- | -
|                                                          |  | £m   |  | £m   |   | £m   |  
|                                                          |  |      |  |      |   |      |  
|Revenue                                                   |  |     |  | 466  |   | 551  |  
|                                                          |  |      |  |      |   |      |  
|Operating costs                                           |  |     |  | (402 | ) | (517 | )
|                                                          |  |      |  |      |   |      |  
|Operating profit                                          |  |     |  | 64   |   | 34   |  
|                                                          |  |      |  |      |   |      |  
|Finance income                                            |  |     |  | 13   |   | 7    |  
|                                                          |  |      |  |      |   |      |  
|Profit on disposal of available-for-sale financial assets |  |     |  | 12   |   | 20   |  
|                                                          |  |      |  |      |   |      |  
|Profit before tax                                         |  |     |  | 89   |   | 61   |  
|                                                          |  |      |  |      |   |      |  
|Taxation                                                  |  |     |  | (20  | ) | (22  | )
|                                                          |  |      |  |      |   |      |  
|Profit for the period                                     |  |     |  | 69   |   | 39   |  
|                                                          |  |      |  |      |   |      |  

The net cash flow attributable to discontinued operations is as follows:

|                                                                              |  | 2006 |  | 2005 |   | 2004 |  
|----------------------------------------------------------------------------- |  | ---- |  | ---- | - | ---- | -
|                                                                              |  | £m   |  | £m   |   | £m   |  
|                                                                              |  |      |  |      |   |      |  
|Cash generated from discontinued operations (see note 29)                     |  |     |  | 3    |   | (27  | )
|                                                                              |  |      |  |      |   |      |  
|Tax paid                                                                      |  |     |  | (13  | ) | (9   | )
|                                                                              |  |      |  |      |   |      |  
|Interest received                                                             |  |     |  | 13   |   | 9    |  
|                                                                              |  |      |  |      |   |      |  
|Interest paid                                                                 |  |     |  |     |   | (1   | )
|                                                                              |  |      |  |      |   |      |  
|Net cash flow from operating activities                                       |  |     |  | 3    |   | (28  | )
|                                                                              |  |      |  |      |   |      |  
|Net cash flow from investing activities*                                      |  |     |  | (474 | ) | 28   |  
|                                                                              |  |      |  |      |   |      |  
|Net cash flow from financing activities                                       |  |     |  | (85  | ) | 129  |  
|                                                                              |  |      |  |      |   |      |  
|Exchange gains/(losses) on cash and cash equivalents                          |  |     |  | 57   |   | (30  | )
|                                                                              |  |      |  |      |   |      |  
|(Decrease)/increase in cash and cash equivalents from discontinued operations |  |     |  | (499 | ) | 99   |  
|                                                                              |  |      |  |      |   |      |  

|  |                                                                                                                                     
|- | ------------------------------------------------------------------------------------------------------------------------------------
|* | Net cash flow from investing activities 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
Reuters Employee Share Ownership Trusts and shares purchased as part of the ongoing buy-back programme and held as treasury 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                       |  | 2006  |   | 2005  |   | 2004  |  
|--------------------------------------------------------- |  | ----- | - | ----- | - | ----- | -
|                                                          |  |       |   |       |   |       |  
|Ordinary shares in issue                                  |  | 1,455 |   | 1,438 |   | 1,434 |  
|                                                          |  |       |   |       |   |       |  
|Non-vested shares held by Employee Share Ownership Trusts |  | (30   | ) | (32   | ) | (34   | )
|                                                          |  |       |   |       |   |       |  
|Shares repurchased                                        |  | (128  | ) | (10   | ) |      |  
|                                                          |  |       |   |       |   |       |  
|Basic earnings per share denominator                      |  | 1,297 |   | 1,396 |   | 1,400 |  
|                                                          |  |       |   |       |   |       |  
|Issuable under employee share schemes                     |  | 24    |   | 41    |   | 36    |  
|                                                          |  |       |   |       |   |       |  
|Diluted earnings per share denominator                    |  | 1,321 |   | 1,437 |   | 1,436 |  
|                                                          |  |       |   |       |   |       |  



|Earnings per share from continuing and discontinued operations |  | 2006  |  | 2005  |  | 2004  | 
|-------------------------------------------------------------- |  | ----- |  | ----- |  | ----- | 
|                                                               |  |       |  |       |  |       | 
|Profit attributable to equity holders of the company (£m)      |  | 305   |  | 456   |  | 364   | 
|                                                               |  |       |  |       |  |       | 
|Basic earnings per share                                       |  | 23.6p |  | 32.6p |  | 26.0p | 
|                                                               |  |       |  |       |  |       | 
|Diluted earnings per share                                     |  | 23.1p |  | 31.7p |  | 25.4p | 
|                                                               |  |       |  |       |  |       | 



Reuters Group PLCAnnual
Report and Form 20-F 2006

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|           |   
|Financials | 89
|           |   
|           |   



|Earnings per share from continuing operations             |  | 2006  |  | 2005  |  | 2004  | 
|--------------------------------------------------------- |  | ----- |  | ----- |  | ----- | 
|                                                          |  |       |  |       |  |       | 
|Profit attributable to equity holders of the company (£m) |  | 293   |  | 229   |  | 356   | 
|                                                          |  |       |  |       |  |       | 
|Basic earnings per share                                  |  | 22.6p |  | 16.3p |  | 25.4p | 
|                                                          |  |       |  |       |  |       | 
|Diluted earnings per share                                |  | 22.2p |  | 15.9p |  | 24.8p | 
|                                                          |  |       |  |       |  |       | 

09  Remuneration of directors

Section ‘Directors’ remuneration for 2006’ within
the Remuneration
report
includes
details
of
directors emoluments,
pension arrangements, long-term incentive plans and share option plans, details
of which form part of these financial statements.

Details of senior management remuneration are given in note 34 on pages 123124.

10  Employee information

The average number of employees during the year was as follows:

|                                    |  |        |  | Restated |  | Restated | 
|----------------------------------- |  | ------ |  | -------- |  | -------- | 
|                                    |  | 2006   |  | 2005     |  | 2004     | 
|                                    |  |        |  |          |  |          | 
|By business division:               |  |        |  |          |  |          | 
|                                    |  |        |  |          |  |          | 
|Sales & Trading                     |  | 1,062  |  | 491      |  | 305      | 
|                                    |  |        |  |          |  |          | 
|Research & Asset Management         |  | 800    |  | 658      |  | 699      | 
|                                    |  |        |  |          |  |          | 
|Enterprise                          |  | 1,241  |  | 925      |  | 296      | 
|                                    |  |        |  |          |  |          | 
|Media                               |  | 189    |  | 109      |  | 64       | 
|                                    |  |        |  |          |  |          | 
|Shared divisional resources*        |  | 3,383  |  | 3,605    |  | 3,507    | 
|                                    |  |        |  |          |  |          | 
|Total divisions                     |  | 6,675  |  | 5,788    |  | 4,871    | 
|                                    |  |        |  |          |  |          | 
|Global Sales & Service Organisation |  | 5,812  |  | 5,438    |  | 5,944    | 
|                                    |  |        |  |          |  |          | 
|Editorial                           |  | 2,321  |  | 2,210    |  | 2,220    | 
|                                    |  |        |  |          |  |          | 
|Corporate Services                  |  | 1,494  |  | 1,582    |  | 1,780    | 
|                                    |  |        |  |          |  |          | 
|Total continuing operations         |  | 16,302 |  | 15,018   |  | 14,815   | 
|                                    |  |        |  |          |  |          | 
|Discontinued operations             |  |       |  | 846      |  | 1,165    | 
|                                    |  |        |  |          |  |          | 
|Total average number of employees   |  | 16,302 |  | 15,864   |  | 15,980   | 
|                                    |  |        |  |          |  |          | 
|By geographical location:           |  |        |  |          |  |          | 
|                                    |  |        |  |          |  |          | 
|Europe, Middle East & Africa**      |  | 7,174  |  | 6,962    |  | 7,444    | 
|                                    |  |        |  |          |  |          | 
|Americas                            |  | 4,252  |  | 4,292    |  | 4,550    | 
|                                    |  |        |  |          |  |          | 
|Asia                                |  | 4,876  |  | 3,764    |  | 2,821    | 
|                                    |  |        |  |          |  |          | 
|Total continuing operations         |  | 16,302 |  | 15,018   |  | 14,815   | 
|                                    |  |        |  |          |  |          | 
|Discontinued operations             |  |       |  | 846      |  | 1,165    | 
|                                    |  |        |  |          |  |          | 
|Total average number of employees   |  | 16,302 |  | 15,864   |  | 15,980   | 
|                                    |  |        |  |          |  |          | 
|By function:                        |  |        |  |          |  |          | 
|                                    |  |        |  |          |  |          | 
|Production and communications       |  | 9,438  |  | 8,498    |  | 8,315    | 
|                                    |  |        |  |          |  |          | 
|Selling and marketing               |  | 4,572  |  | 4,179    |  | 3,878    | 
|                                    |  |        |  |          |  |          | 
|Support services and administration |  | 2,292  |  | 2,341    |  | 2,622    | 
|                                    |  |        |  |          |  |          | 
|Total continuing operations         |  | 16,302 |  | 15,018   |  | 14,815   | 
|                                    |  |        |  |          |  |          | 
|Discontinued operations             |  |       |  | 846      |  | 1,165    | 
|                                    |  |        |  |          |  |          | 
|Total average number of employees   |  | 16,302 |  | 15,864   |  | 15,980   | 
|                                    |  |        |  |          |  |          | 
|The above include:                  |  |        |  |          |  |          | 
|                                    |  |        |  |          |  |          | 
|Development staff                   |  | 2,670  |  | 2,332    |  | 2,282    | 
|                                    |  |        |  |          |  |          | 

|                                                                                                                                                                   
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2005 and 2004 have been restated to reflect the fact that Content has been split into Data and Editorial with Data now included within shared divisional resources.
|                                                                                                                                                                   
|*                                                                                                                                                                  
|**                                                                                                                                                                 
|                                                                                                                                                                   
|The average number of employees during 2006 included 168 temporary staff (2005: 181, 2004: 181).                                                                   



Reuters Group PLCAnnual
Report and Form 20-F 2006

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|   |                                                   
|-- | --------------------------------------------------
|   |                                                   
|90 | Notes to the financial
        statementscontinued
|   |                                                   
|   |                                                   

11  Consolidated reconciliation
    of changes
in equity

|                                                                                                                       | Attributable to equity |      | Minority |         | Total  |         
|---------------------------------------------------------------------------------------------------------------------- | ---------------------- | ---- | -------- | ------- | ------ | --------
|                                                                                                                       | holders of the parent  |      | interest |         | equity |         
|                                                                                                                       |                        |      |          |         |        |         
|                                                                                                                       |                        |      |          | Share   |        | Other   
|                                                                                                                       |                        |      |          | capital |        | reserves
|                                                                                                                       |                        | Note |          | £m      |        | £m      
|                                                                                                                       |                        |      |          |         |        |         
|1 January 2004                                                                                                         |                        |      |          | 449     |        | (1,717  
|                                                                                                                       |                        |      |          |         |        |         
|Actuarial losses on defined benefit plans                                                                              |                        | 25   |          |        |        |        
|                                                                                                                       |                        |      |          |         |        |         
|Exchange differences taken directly to reserves                                                                        |                        |      |          |        |        | (34     
|                                                                                                                       |                        |      |          |         |        |         
|Exchange differences taken to the income statement on disposal of assets                                               |                        |      |          |        |        | 6       
|                                                                                                                       |                        |      |          |         |        |         
|Tax on items taken directly to or transferred from equity                                                              |                        |      |          |        |        | (10     
|                                                                                                                       |                        |      |          |         |        |         
|Net expense recognised directly in equity                                                                              |                        |      |          |        |        | (38     
|                                                                                                                       |                        |      |          |         |        |         
|Profit for the year                                                                                                    |                        |      |          |        |        |        
|                                                                                                                       |                        |      |          |         |        |         
|Total recognised (expense)/income for 2004                                                                             |                        |      |          |        |        | (38     
|                                                                                                                       |                        |      |          |         |        |         
|Employee share schemes                                                                                                 |                        |      |          |        |        |        
|                                                                                                                       |                        |      |          |         |        |         
|Tax on employee share schemes                                                                                          |                        |      |          |        |        |        
|                                                                                                                       |                        |      |          |         |        |         
|Shares allotted during the year                                                                                        |                        | 27   |          | 6       |        |        
|                                                                                                                       |                        |      |          |         |        |         
|Proceeds from shares issued to minority shareholders of Instinet                                                       |                        |      |          |        |        |        
|                                                                                                                       |                        |      |          |         |        |         
|Dividends:                                                                                                             |                        | 32   |          |         |        |         
|                                                                                                                       |                        |      |          |         |        |         
|Final dividend for 2003                                                                                                |                        |      |          |        |        |        
|                                                                                                                       |                        |      |          |         |        |         
|Interim dividend for 2004                                                                                              |                        |      |          |        |        |        
|                                                                                                                       |                        |      |          |         |        |         
|Other movements in equity                                                                                              |                        |      |          |        |        |        
|                                                                                                                       |                        |      |          |         |        |         
|31 December 2004                                                                                                       |                        |      |          | 455     |        | (1,755  
|                                                                                                                       |                        |      |          |         |        |         
|                                                                                                                       |                        |      |          |         |        |         
|                                                                                                                       |                        |      |          |         |        |         
|1 January 2005                                                                                                         |                        |      |          | 455     |        | (1,755  
|Transitional adjustment on first-time adoption of IAS 39*                                                              |                        |      |          |        |        | 108     
|                                                                                                                       |                        |      |          |         |        |         
|1 January 2005 as adjusted                                                                                             |                        |      |          | 455     |        | (1,647  
|                                                                                                                       |                        |      |          |         |        |         
|Actuarial losses on defined benefit plans                                                                              |                        | 25   |          |        |        |        
|                                                                                                                       |                        |      |          |         |        |         
|Exchange differences taken directly to reserves                                                                        |                        |      |          |        |        | 97      
|                                                                                                                       |                        |      |          |         |        |         
|Exchange differences taken to the income statement on disposal of assets                                               |                        |      |          |        |        | (2      
|                                                                                                                       |                        |      |          |         |        |         
|Fair value losses on available-for-sale financial assets                                                               |                        | 16   |          |        |        | (22     
|                                                                                                                       |                        |      |          |         |        |         
|Fair
	      value gains on available-for-sale financial assets taken to the income
    statement on disposal of assets |                        | 16   |          |        |        | (68     
|                                                                                                                       |                        |      |          |         |        |         
|Fair value losses on net investment hedges                                                                             |                        | 16   |          |        |        | (39     
|                                                                                                                       |                        |      |          |         |        |         
|Fair value gains taken to the income statement on disposal of net investment hedges                                    |                        | 17   |          |        |        | (14     
|                                                                                                                       |                        |      |          |         |        |         
|Tax on items taken directly to or transferred from equity                                                              |                        |      |          |        |        | 4       
|                                                                                                                       |                        |      |          |         |        |         
|Net expense recognised directly in equity                                                                              |                        |      |          |        |        | (44     
|                                                                                                                       |                        |      |          |         |        |         
|Profit for the year                                                                                                    |                        |      |          |        |        |        
|                                                                                                                       |                        |      |          |         |        |         
|Total recognised (expense)/income for 2005                                                                             |                        |      |          |        |        | (44     
|                                                                                                                       |                        |      |          |         |        |         
|Employee share schemes                                                                                                 |                        |      |          |        |        |        
|                                                                                                                       |                        |      |          |         |        |         
|Tax on employee share schemes                                                                                          |                        |      |          |        |        |        
|                                                                                                                       |                        |      |          |         |        |         
|Repurchase of own shares                                                                                               |                        |      |          |        |        |        
|                                                                                                                       |                        |      |          |         |        |         
|Shares to be repurchased                                                                                               |                        |      |          |        |        |        
|                                                                                                                       |                        |      |          |         |        |         
|Shares allotted during the year                                                                                        |                        | 27   |          | 12      |        |        
|                                                                                                                       |                        |      |          |         |        |         
|Proceeds of shares issued to minority shareholders of Instinet                                                         |                        |      |          |        |        |        
|                                                                                                                       |                        |      |          |         |        |         
|Dividends:                                                                                                             |                        | 32   |          |         |        |         
|                                                                                                                       |                        |      |          |         |        |         
|Final dividend for 2004                                                                                                |                        |      |          |        |        |        
|                                                                                                                       |                        |      |          |         |        |         
|Interim dividend for 2005                                                                                              |                        |      |          |        |        |        
|                                                                                                                       |                        |      |          |         |        |         
|Share of Instinets dividend paid to minority shareholders                                                             |                        |      |          |        |        |        
|                                                                                                                       |                        |      |          |         |        |         
|Other movements in equity                                                                                              |                        |      |          |        |        | (1      
|                                                                                                                       |                        |      |          |         |        |         
|Minority interest in subsidiary disposed in the year                                                                   |                        |      |          |        |        |        
|                                                                                                                       |                        |      |          |         |        |         
|31 December 2005                                                                                                       |                        |      |          | 467     |        | (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 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 tax credit).



Reuters Group PLCAnnual
Report and Form 20-F 2006

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|           |   
|Financials | 91
|           |   
|           |   



|                                                          |  |      |  |         |   | Attributable to equity |   | Minority |   | Total  | 
|--------------------------------------------------------- |  | ---- |  | ------- | - | ---------------------- | - | -------- | - | ------ | 
|                                                          |  |      |  |         |   | holders of the parent  |   | interest |   | equity | 
|                                                          |  |      |  |         |   |                        |   |          |   |        | 
|                                                          |  |      |  | Share   |   | Other                  |   | Retained |   |        | 
|                                                          |  |      |  | capital |   | reserves               |   | earnings |   |        | 
|                                                          |  | Note |  | £m      |   | £m                     |   | £m       |   | £m     | 
|                                                          |  |      |  |         |   |                        |   |          |   |        | 
|1 January 2006 as previously stated                       |  |      |  | 467     |   | (1,692                 | ) | 1,795    |   |       | 
|                                                          |  |      |  |         |   |                        |   |          |   |        | 
|Prior year adjustment  share buy-back programme          |  |      |  |        |   |                       |   | (59      | ) |       | 
|                                                          |  |      |  |         |   |                        |   |          |   |        | 
|1 January 2006 as restated                                |  |      |  | 467     |   | (1,692                 | ) | 1,736    |   |       | 
|                                                          |  |      |  |         |   |                        |   |          |   |        | 
|Actuarial gains on defined benefit plans                  |  | 25   |  |        |   |                       |   | 6        |   |       | 
|                                                          |  |      |  |         |   |                        |   |          |   |        | 
|Exchange differences taken directly to reserves           |  |      |  |        |   | (95                    | ) |         |   |       | 
|                                                          |  |      |  |         |   |                        |   |          |   |        | 
|Fair value gains on available-for-sale financial assets   |  | 16   |  |        |   | 6                      |   |         |   |       | 
|                                                          |  |      |  |         |   |                        |   |          |   |        | 
|Fair value gains on net investment hedges                 |  | 16   |  |        |   | 34                     |   |         |   |       | 
|                                                          |  |      |  |         |   |                        |   |          |   |        | 
|Tax on items taken directly to or transferred from equity |  |      |  |        |   | (3                     | ) | (1       | ) |       | 
|                                                          |  |      |  |         |   |                        |   |          |   |        | 
|Net expense recognised directly in equity                 |  |      |  |        |   | (58                    | ) | 5        |   |       | 
|                                                          |  |      |  |         |   |                        |   |          |   |        | 
|Profit for the year                                       |  |      |  |        |   |                       |   | 305      |   |       | 
|                                                          |  |      |  |         |   |                        |   |          |   |        | 
|Total recognised (expense)/income for 2006                |  |      |  |        |   | (58                    | ) | 310      |   |       | 
|                                                          |  |      |  |         |   |                        |   |          |   |        | 
|Employee share schemes                                    |  |      |  |        |   |                       |   | 30       |   |       | 
|                                                          |  |      |  |         |   |                        |   |          |   |        | 
|Tax on employee share schemes                             |  |      |  |        |   |                       |   | 1        |   |       | 
|                                                          |  |      |  |         |   |                        |   |          |   |        | 
|Repurchase of own shares                                  |  |      |  |        |   |                       |   | (467     | ) |       | 
|                                                          |  |      |  |         |   |                        |   |          |   |        | 
|Shares to be repurchased                                  |  |      |  |        |   |                       |   | (53      | ) |       | 
|                                                          |  |      |  |         |   |                        |   |          |   |        | 
|Shares allotted during the year                           |  | 27   |  | 41      |   |                       |   | (9       | ) |       | 
|                                                          |  |      |  |         |   |                        |   |          |   |        | 
|Shares cancelled during the year                          |  | 27   |  | (12     | ) | 12                     |   |         |   |       | 
|                                                          |  |      |  |         |   |                        |   |          |   |        | 
|Dividends:                                                |  | 32   |  |         |   |                        |   |          |   |        | 
|                                                          |  |      |  |         |   |                        |   |          |   |        | 
|Final dividend for 2005                                   |  |      |  |        |   |                       |   | (81      | ) |       | 
|                                                          |  |      |  |         |   |                        |   |          |   |        | 
|Interim dividend for 2006                                 |  |      |  |        |   |                       |   | (53      | ) |       | 
|                                                          |  |      |  |         |   |                        |   |          |   |        | 
|31 December 2006                                          |  |      |  | 496     |   | (1,738                 | ) | 1,414    |   |       | 
|                                                          |  |      |  |         |   |                        |   |          |   |        | 

2005 has been restated to recognise irrevocable commitments to repurchase shares during close periods as a liability (see Basis of accounting on page 78). The impact of recognising these commitments is to
increase current liabilities and to decrease shareholders equity at 31 December 2005 by £59 million.

Please refer to note 27 on page 116 and note 28 on page 117 for more information on the nature of and movements in share capital and other reserves respectively.

Retained earnings is stated after deducting £1,002 million (2005 restated: £489 million, 2004: £213 million) in respect of treasury shares. This is composed of £750 million (2005: £224 million,
2004: £nil) which represents the cost of 187 million shares in Reuters Group PLC (2005: 57 million, 2004: nil) repurchased in the market as part of the ongoing share buy-back programme (see note 27 on page 116), £53 million (2005 restated:
£59 million, 2004: £nil) which represents the cost of 12.0 million shares in Reuters Group PLC (2005: 13.5 million, 2004: nil) that Reuters had an irrevocable commitment to repurchase during the year end close period and £199 million
(2005: £206 million, 2004: £213 million) which represents the cost of 30 million shares in Reuters Group PLC (2005: 32 million, 2004: 33 million) purchased in the market and held by Reuters Employee Share Ownership Trusts (ESOTs) to
satisfy certain options/awards under the Groups share incentive plans (see note 33 on page 120).

During 2006, Reuters cancelled 48 million shares repurchased as part of the ongoing share buy-back programme. An amount equal to the nominal value of these shares has been transferred from share capital to the capital
redemption reserve.



Reuters Group PLCAnnual
Report and Form 20-F 2006

---



Back to Contents

|   |                                           
|-- | ------------------------------------------
|   |                                           
|92 | Notes to the financial statementscontinued
|   |                                           
|   |                                           

12  Segmental analysis  balance sheet

Primary reportable segmentsThe tables below show assets, liabilities and capital expenditure by business division. The assets and liabilities are attributed to business divisions using methodologies consistent with those used to allocate
divisional results (see note 1 on page 83).

In 2006, Reuters made changes to the allocation of revenue and operating costs between business divisions to reflect changes in the management of certain products. These changes had an insignificant impact on the
balance sheet segmentation. 2005 comparatives have been restated to reallocate £44 million of intangibles arising on the acquisition of Telerate from Enterprise to Sales & Trading, in line with the allocation of revenues from Telerate
products. 2005 comparatives have also been restated to recognise irrevocable commitments to repurchase shares during close periods as a liability (see Basis of accounting on page 78).

|                                                               |  |         |   |            |   |            |   |       |   | 31 December 2006 |  
|-------------------------------------------------------------- |  | ------- | - | ---------- | - | ---------- | - | ----- | - | ---------------- | -
|                                                               |  |         |   |            |   |            |   |       |   |                  |  
|                                                               |  |         |   | Research & |   |            |   |       |   |                  |  
|                                                               |  | Sales & |   | Asset      |   |            |   |       |   |                  |  
|                                                               |  | Trading |   | Management |   | Enterprise |   | Media |   | Shared           |  
|                                                               |  | £m      |   | £m         |   | £m         |   | £m    |   | £m               |  
|                                                               |  |         |   |            |   |            |   |       |   |                  |  
|Assets (excluding investment in associates and joint ventures) |  | 743     |   | 249        |   | 186        |   | 48    |   | 656              |  
|                                                               |  |         |   |            |   |            |   |       |   |                  |  
|Investment in associates and joint ventures                    |  | 15      |   | 4          |   | 2          |   | 17    |   |                 |  
|                                                               |  |         |   |            |   |            |   |       |   |                  |  
|Total assets                                                   |  | 758     |   | 253        |   | 188        |   | 65    |   | 656              |  
|                                                               |  |         |   |            |   |            |   |       |   |                  |  
|Total liabilities                                              |  | (441    | ) | (108       | ) | (117       | ) | (52   | ) | (1,030           | )
|                                                               |  |         |   |            |   |            |   |       |   |                  |  
|Capital expenditure                                            |  | 172     |   | 32         |   | 76         |   | 10    |   |                 |  
|                                                               |  |         |   |            |   |            |   |       |   |                  |  

|                                                               |  |         |   |            |   |            |   |       |   |                  |   |          |  
|-------------------------------------------------------------- |  | ------- | - | ---------- | - | ---------- | - | ----- | - | ---------------- | - | -------- | -
|                                                               |  |         |   |            |   |            |   |       |   |                  |   | Restated |  
|                                                               |  |         |   |            |   |            |   |       |   | 31 December 2005 |  
|                                                               |  |         |   |            |   |            |   |       |   |                  |   |          |  
|                                                               |  |         |   | Research & |   |            |   |       |   |                  |   |          |  
|                                                               |  | Sales & |   | Asset      |   |            |   |       |   |                  |   |          |  
|                                                               |  | Trading |   | Management |   | Enterprise |   | Media |   | Shared           |   | Total    |  
|                                                               |  | £m      |   | £m         |   | £m         |   | £m    |   | £m               |   | £m       |  
|                                                               |  |         |   |            |   |            |   |       |   |                  |   |          |  
|Assets (excluding investment in associates and joint ventures) |  | 705     |   | 253        |   | 139        |   | 43    |   | 961              |   | 2,101    |  
|                                                               |  |         |   |            |   |            |   |       |   |                  |   |          |  
|Investment in associates and joint ventures                    |  | 11      |   | 5          |   | 3          |   | 17    |   |                 |   | 36       |  
|                                                               |  |         |   |            |   |            |   |       |   |                  |   |          |  
|Total assets                                                   |  | 716     |   | 258        |   | 142        |   | 60    |   | 961              |   | 2,137    |  
|                                                               |  |         |   |            |   |            |   |       |   |                  |   |          |  
|Total liabilities                                              |  | (506    | ) | (128       | ) | (146       | ) | (70   | ) | (776             | ) | (1,626   | )
|                                                               |  |         |   |            |   |            |   |       |   |                  |   |          |  
|Capital expenditure*                                           |  | 241     |   | 53         |   | 38         |   | 14    |   |                 |   | 346      |  
|                                                               |  |         |   |            |   |            |   |       |   |                  |   |          |  

|                                                                   |  |         |   |            |   |            |   |       |   |          |   |                  |  
|------------------------------------------------------------------ |  | ------- | - | ---------- | - | ---------- | - | ----- | - | -------- | - | ---------------- | -
|                                                                   |  |         |   |            |   |            |   |       |   |          |   | 31 December 2004 |  
|                                                                   |  |         |   |            |   |            |   |       |   |          |   |                  |  
|                                                                   |  |         |   | Research & |   |            |   |       |   |          |   |                  |  
|                                                                   |  | Sales & |   | Asset      |   |            |   |       |   |          |   |                  |  
|                                                                   |  | Trading |   | Management |   | Enterprise |   | Media |   | Instinet |   | Shared           |  
|                                                                   |  | £m      |   | £m         |   | £m         |   | £m    |   | £m       |   | £m               |  
|                                                                   |  |         |   |            |   |            |   |       |   |          |   |                  |  
|Assets
    (excluding investment in associates and joint ventures) |  | 629     |   | 184        |   | 182        |   | 34    |   | 919      |   | 597              |  
|                                                                   |  |         |   |            |   |            |   |       |   |          |   |                  |  
|Investment in associates and joint ventures                        |  | 9       |   | 5          |   | 3          |   | 18    |   |         |   |                 |  
|                                                                   |  |         |   |            |   |            |   |       |   |          |   |                  |  
|Total assets                                                       |  | 638     |   | 189        |   | 185        |   | 52    |   | 919      |   | 597              |  
|                                                                   |  |         |   |            |   |            |   |       |   |          |   |                  |  
|Total liabilities                                                  |  | (511    | ) | (120       | ) | (151       | ) | (66   | ) | (397     | ) | (765             | )
|                                                                   |  |         |   |            |   |            |   |       |   |          |   |                  |  
|Capital expenditure                                                |  | 71      |   | 20         |   | 28         |   | 6     |   | 19       |   |                 |  
|                                                                   |  |         |   |            |   |            |   |       |   |          |   |                  |  

|  |                                                                                                                                         
|- | ----------------------------------------------------------------------------------------------------------------------------------------
|* | Capital expenditure in 2005 excludes Instinet
        Group, which was classified as a discontinued operation prior to its
    disposal.

Shared assets consist principally of taxation,
    hedging derivatives, short-term deposits, cash and borrowings as these are
not managed separately by the divisions.

Capital expenditure includes additions of
intangible assets and additions of property, plant and equipment.

Secondary reportable segments

|                              |  | 31 December 2006 |  | 31 December 2005 |  | 31 December 2004 | 
|----------------------------- |  | ---------------- |  | ---------------- |  | ---------------- | 
|                              |  |                  |  |                  |  |                  | 
|                              |  | Total            |  | Capital          |  | Total            | 
|                              |  | assets           |  | expenditure      |  | assets           | 
|By geographical location      |  | £m               |  | £m               |  | £m               | 
|                              |  |                  |  |                  |  |                  | 
|Europe, Middle East & Africa* |  | 616              |  | 124              |  | 589              | 
|                              |  |                  |  |                  |  |                  | 
|Americas                      |  | 522              |  | 108              |  | 520              | 
|                              |  |                  |  |                  |  |                  | 
|Asia                          |  | 194              |  | 58               |  | 143              | 
|                              |  |                  |  |                  |  |                  | 
|Central                       |  | 588              |  |                 |  | 885              | 
|                              |  |                  |  |                  |  |                  | 
|Total                         |  | 1,920            |  | 290              |  | 2,137            | 
|                              |  |                  |  |                  |  |                  | 

|  |                                                                                                                                         
|- | ----------------------------------------------------------------------------------------------------------------------------------------
|* | To reflect the way Reuters was managed in 2006, UK & Ireland, EMEA West and EMEA East have been combined into one geographical location.

Central assets consist principally of investments in associates and joint ventures, taxation, hedging derivatives and centrally managed cash and short-term deposits.



Reuters Group PLCAnnual
Report and Form 20-F 2006

---



Back to Contents

|           |   
|---------- | --
|           |   
|Financials | 93
|           |   
|           |   

13  Intangible assets

|                             |  |          |   |       |   |               |   |            |   | Internally |   |           |   |       |  
|---------------------------- |  | -------- | - | ----- | - | ------------- | - | ---------- | - | ---------- | - | --------- | - | ----- | -
|                             |  |          |   | Trade |   | Customer      |   | Technology |   | generated  |   | Purchased |   |       |  
|                             |  | Goodwill |   | names |   | relationships |   | know-how   |   | software   |   | software  |   | Total |  
|                             |  | £m       |   | £m    |   | £m            |   | £m         |   | £m         |   | £m        |   | £m    |  
|                             |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|Cost:                        |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|                             |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|1 January 2004               |  | 243      |   | 30    |   |              |   | 153        |   | 21         |   | 53        |   | 500   |  
|                             |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|Exchange differences         |  | (14      | ) | (2    | ) |              |   | (9         | ) |           |   | (2        | ) | (27   | )
|                             |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|Additions:                   |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|                             |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|Acquisition of subsidiaries  |  | 5        |   | 1     |   | 1             |   |           |   |           |   |          |   | 7     |  
|                             |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|Other additions              |  |         |   |      |   |              |   |           |   | 23         |   | 3         |   | 26    |  
|                             |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|Disposals                    |  | (19      | ) |      |   |              |   |           |   |           |   |          |   | (19   | )
|                             |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|Adjustments*                 |  | (6       | ) |      |   |              |   |           |   |           |   |          |   | (6    | )
|                             |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|31 December 2004             |  | 209      |   | 29    |   | 1             |   | 144        |   | 44         |   | 54        |   | 481   |  
|                             |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|Exchange differences         |  | 24       |   | 3     |   | 4             |   | 6          |   | 1          |   | 2         |   | 40    |  
|                             |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|Additions:                   |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|                             |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|Acquisition of subsidiaries  |  | 103      |   | 4     |   | 59            |   | 4          |   |           |   |          |   | 170   |  
|                             |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|Other additions              |  |         |   |      |   |              |   |           |   | 29         |   | 11        |   | 40    |  
|                             |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|Reclassifications**          |  | (9       | ) | (3    | ) |              |   | (65        | ) |           |   | (3        | ) | (80   | )
|                             |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|31 December 2005             |  | 327      |   | 33    |   | 64            |   | 89         |   | 74         |   | 64        |   | 651   |  
|                             |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|Exchange differences         |  | (32      | ) | (4    | ) | (7            | ) | (7         | ) | (1         | ) | (2        | ) | (53   | )
|                             |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|Additions:                   |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|                             |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|Acquisition of subsidiaries  |  | 18       |   | 1     |   | 11            |   | 16         |   |           |   |          |   | 46    |  
|                             |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|Other additions              |  |         |   |      |   |              |   |           |   | 93         |   | 21        |   | 114   |  
|                             |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|Adjustments*                 |  | 2        |   |      |   |              |   |           |   |           |   |          |   | 2     |  
|                             |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|31 December 2006             |  | 315      |   | 30    |   | 68            |   | 98         |   | 166        |   | 83        |   | 760   |  
|                             |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|Amortisation and impairment: |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|                             |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|1 January 2004               |  |         |   | (9    | ) |              |   | (50        | ) | (2         | ) | (19       | ) | (80   | )
|                             |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|Exchange differences         |  |         |   |      |   |              |   | 4          |   |           |   | 1         |   | 5     |  
|                             |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|Charged 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         |   | 44    |  
|                             |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|31 December 2005             |  | (18      | ) | (13   | ) | (4            | ) | (46        | ) | (42        | ) | (41       | ) | (164  | )
|                             |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|Exchange differences         |  |         |   | 2     |   | 1             |   | 4          |   |           |   | 2         |   | 9     |  
|                             |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|Charged in the year:         |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|                             |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|Amortisation                 |  |         |   | (4    | ) | (7            | ) | (13        | ) | (10        | ) | (12       | ) | (46   | )
|                             |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|31 December 2006             |  | (18      | ) | (15   | ) | (10           | ) | (55        | ) | (52        | ) | (51       | ) | (201  | )
|                             |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|Carrying amount:             |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|                             |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|31 December 2004             |  | 191      |   | 18    |   | 1             |   | 78         |   | 6          |   | 22        |   | 316   |  
|                             |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|31 December 2005             |  | 309      |   | 20    |   | 60            |   | 43         |   | 32         |   | 23        |   | 487   |  
|                             |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  
|31 December 2006             |  | 297      |   | 15    |   | 58            |   | 43         |   | 114        |   | 32        |   | 559   |  
|                             |  |          |   |       |   |               |   |            |   |            |   |           |   |       |  

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*  | Adjustments of £2 million to goodwill
        in 2006 relate to the finalisation of fair valuation adjustments in respect
        of the acquisition of Telerate. 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 in 2005 relate to Instinet
        Group, which was classified as a discontinued operation prior to its
    disposal.                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

The carrying amount of intangibles, other than goodwill, internally-generated software and purchased software, at 31 December 2006 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 period | 
|------------------------- |  | ---------------------------- | - | ------------------- |  | ------------------ |  | ----------------------------- | 
|                          |  |                              |   |                     |  |                    |  |                               | 
|Telerate                  |  | Customer relationships       |   | June 2005           |  | 40                 |  | 8 years, 5 months             | 
|                          |  |                              |   |                     |  |                    |  |                               | 
|Application Networks      |  | Technology know-how          |   | June 2006           |  | 13                 |  | 4 years, 5 months             | 
|                          |  |                              |   |                     |  |                    |  |                               | 
|Bridge                    |  | Trade names                  |   | October 2001        |  | 12                 |  | 4 years, 9 months             | 
|                          |  |                              |   |                     |  |                    |  |                               | 
|Bridge                    |  | Technology know-how          |   | October 2001        |  | 11                 |  | 4 years, 9 months             | 
|                          |  |                              |   |                     |  |                    |  |                               | 



Reuters Group PLCAnnual
Report and Form 20-F 2006

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Back to Contents

|   |                                                    
|-- | ---------------------------------------------------
|   |                                                    
|94 | Notes to the financial
        statements continued
|   |                                                    
|   |                                                    

13 Intangible assetscontinued

Impairment tests of goodwillNo impairment losses in respect of goodwill have been recognised in 2006 or 2005.

For the purpose of performing impairment reviews, Reuters has identified seven cash generating units (CGUs). In prior years, Reuters identified eight CGUs, but disposed of BTC in 2005. Annual impairment reviews are
performed as at 1 July for all CGUs, which include goodwill. 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. The balances at 31 December 2005 have been restated to reallocate £25m of goodwill arising on the acquisition of Telerate from Enterprise to Sales & Trading, in
line with the allocation of revenues from Telerate products.

|                            |  |                                            |  | Carrying amount of goodwill at | 
|--------------------------- |  | ------------------------------------------ |  | ------------------------------ | 
|                            |  |                                            |  |                                | 
|                            |  |                                            |  |                                | 
|                            |  |                                            |  | 31 December 2006               | 
|Business division           |  | Cash generating unit                       |  | £m                             | 
|                            |  |                                            |  |                                | 
|Sales & Trading             |  | Sales & Trading                            |  | 146                            | 
|                            |  |                                            |  |                                | 
|                            |  | Bridge Trading Company                     |  |                               | 
|                            |  |                                            |  |                                | 
|Research & Asset Management |  | Investment Banking & Investment Management |  | 93                             | 
|                            |  |                                            |  |                                | 
|                            |  | Wealth Management                          |  |                               | 
|                            |  |                                            |  |                                | 
|                            |  | Lipper                                     |  | 28                             | 
|                            |  |                                            |  |                                | 
|Enterprise                  |  | Enterprise (excluding Risk)                |  | 3                              | 
|                            |  |                                            |  |                                | 
|                            |  | Risk                                       |  | 22                             | 
|                            |  |                                            |  |                                | 
|Media                       |  | Media                                      |  | 5                              | 
|                            |  |                                            |  |                                | 
|Total                       |  |                                            |  | 297                            | 
|                            |  |                                            |  |                                | 
|                            |  |                                            |  |                                | 

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 not yet underway. Cash flows beyond the five year period have been extrapolated using estimated terminal growth
rates. A pre-tax discount rate of 9% to 11% (2005: 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 2% to 3% (2005: 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 14%
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.




Reuters Group PLCAnnual
  Report and Form 20-F 2006

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|           |   
|---------- | --
|           |   
|Financials | 95
|           |   
|           |   

14 Property, plant and equipment

|                       |  |          |   |           |   |           |   | Office    |   |        |  
|---------------------- |  | -------- | - | --------- | - | --------- | - | --------- | - | ------ | -
|                       |  |          |   |           |   | Computer  |   | equipment |   |        |  
|                       |  | Freehold |   | Leasehold |   | systems   |   | and motor |   |        |  
|                       |  | property |   | property  |   | equipment |   | vehicles  |   | Total  |  
|                       |  | £m       |   | £m        |   | £m        |   | £m        |   | £m     |  
|                       |  |          |   |           |   |           |   |           |   |        |  
|Cost:                  |  |          |   |           |   |           |   |           |   |        |  
|                       |  |          |   |           |   |           |   |           |   |        |  
|1 January 2004         |  | 241      |   | 214       |   | 1,038     |   | 247       |   | 1,740  |  
|                       |  |          |   |           |   |           |   |           |   |        |  
|Exchange differences   |  | (6       | ) | (12       | ) | (34       | ) | (10       | ) | (62    | )
|                       |  |          |   |           |   |           |   |           |   |        |  
|Additions              |  | 1        |   | 32        |   | 69        |   | 9         |   | 111    |  
|                       |  |          |   |           |   |           |   |           |   |        |  
|Disposals              |  | (83      | ) | (47       | ) | (215      | ) | (53       | ) | (398   | )
|                       |  |          |   |           |   |           |   |           |   |        |  
|31 December 2004       |  | 153      |   | 187       |   | 858       |   | 193       |   | 1,391  |  
|                       |  |          |   |           |   |           |   |           |   |        |  
|Exchange differences   |  | 1        |   | 8         |   | 36        |   | 4         |   | 49     |  
|                       |  |          |   |           |   |           |   |           |   |        |  
|Additions              |  | 5        |   | 41        |   | 80        |   | 11        |   | 137    |  
|                       |  |          |   |           |   |           |   |           |   |        |  
|Acquisitions           |  |         |   |          |   | 1         |   | 1         |   | 2      |  
|                       |  |          |   |           |   |           |   |           |   |        |  
|Disposals              |  |         |   | (8        | ) | (91       | ) | (15       | ) | (114   | )
|                       |  |          |   |           |   |           |   |           |   |        |  
|Reclassifications*     |  | (1       | ) | (62       | ) | (41       | ) | (36       | ) | (140   | )
|                       |  |          |   |           |   |           |   |           |   |        |  
|31 December 2005       |  | 158      |   | 166       |   | 843       |   | 158       |   | 1,325  |  
|                       |  |          |   |           |   |           |   |           |   |        |  
|Exchange differences   |  | (5       | ) | (10       | ) | (57       | ) | (10       | ) | (82    | )
|                       |  |          |   |           |   |           |   |           |   |        |  
|Additions              |  | 9        |   | 37        |   | 75        |   | 9         |   | 130    |  
|                       |  |          |   |           |   |           |   |           |   |        |  
|Disposals              |  |         |   | (4        | ) | (193      | ) | (24       | ) | (221   | )
|                       |  |          |   |           |   |           |   |           |   |        |  
|31 December
      2006 |  | 162      |   | 189       |   | 668       |   | 133       |   | 1,152  |  
|                       |  |          |   |           |   |           |   |           |   |        |  
|Depreciation:          |  |          |   |           |   |           |   |           |   |        |  
|                       |  |          |   |           |   |           |   |           |   |        |  
|1 January 2004         |  | (95      | ) | (112      | ) | (853      | ) | (203      | ) | (1,263 | )
|                       |  |          |   |           |   |           |   |           |   |        |  
|Exchange differences   |  | 6        |   | 3         |   | 32        |   | 5         |   | 46     |  
|                       |  |          |   |           |   |           |   |           |   |        |  
|Charged in the year    |  | (8       | ) | (11       | ) | (95       | ) | (16       | ) | (130   | )
|                       |  |          |   |           |   |           |   |           |   |        |  
|Disposals              |  | 27       |   | 27        |   | 208       |   | 48        |   | 310    |  
|                       |  |          |   |           |   |           |   |           |   |        |  
|31 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        |   | 111    |  
|                       |  |          |   |           |   |           |   |           |   |        |  
|Reclassifications*     |  |         |   | 31        |   | 33        |   | 34        |   | 98     |  
|                       |  |          |   |           |   |           |   |           |   |        |  
|31 December 2005       |  | (75      | ) | (70       | ) | (688      | ) | (134      | ) | (967   | )
|                       |  |          |   |           |   |           |   |           |   |        |  
|Exchange differences   |  | 2        |   | 4         |   | 47        |   | 9         |   | 62     |  
|                       |  |          |   |           |   |           |   |           |   |        |  
|Charged in the year    |  | (4       | ) | (15       | ) | (67       | ) | (9        | ) | (95    | )
|                       |  |          |   |           |   |           |   |           |   |        |  
|Disposals              |  |         |   | 3         |   | 192       |   | 24        |   | 219    |  
|                       |  |          |   |           |   |           |   |           |   |        |  
|31 December
      2006 |  | (77      | ) | (78       | ) | (516      | ) | (110      | ) | (781   | )
|                       |  |          |   |           |   |           |   |           |   |        |  
|Carrying amount:       |  |          |   |           |   |           |   |           |   |        |  
|                       |  |          |   |           |   |           |   |           |   |        |  
|31 December 2004       |  | 83       |   | 94        |   | 150       |   | 27        |   | 354    |  
|                       |  |          |   |           |   |           |   |           |   |        |  
|31 December 2005       |  | 83       |   | 96        |   | 155       |   | 24        |   | 358    |  
|                       |  |          |   |           |   |           |   |           |   |        |  
|31 December
      2006 |  | 85       |   | 111       |   | 152       |   | 23        |   | 371    |  
|                       |  |          |   |           |   |           |   |           |   |        |  

|  |                                                                                                                                                                                                                                    
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Reclassifications in 2005 relate to Instinet Group, which was classified as a discontinued operation prior to its disposal, other assets held for sale at the balance sheet date and depreciation capitalised as
intangible assets.

The carrying amount of computer systems equipment includes an amount of £4 million (2005: £2 million, 2004: £nil) 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. 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.

The carrying amount of property, plant and equipment includes £16 million (2005: £nil, 2004: £nil) in respect of assets in the course of construction.

The carrying amount of leasehold property is analysed
as follows:

|                         |  | 2006 |  |  | 2005 |  | 2004 | 
|------------------------ |  | ---- |  |  | ---- |  | ---- | 
|                         |  | £m   |  |  | £m   |  | £m   | 
|                         |  |      |  |  |      |  |      | 
|Long-term leaseholds     |  | 66   |  |  | 33   |  | 32   | 
|                         |  |      |  |  |      |  |      | 
|Short-term leaseholds    |  | 45   |  |  | 63   |  | 62   | 
|                         |  |      |  |  |      |  |      | 
|Total leasehold property |  | 111  |  |  | 96   |  | 94   | 
|                         |  |      |  |  |      |  |      | 



Reuters Group PLCAnnual
  Report and Form 20-F 2006

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Back to Contents

|   |                                                    
|-- | ---------------------------------------------------
|   |                                                    
|96 | Notes to the financial
        statements continued
|   |                                                    
|   |                                                    

15 Investments accounted for using the equity
method

|                               |  | Interests |   |              |   |       |  
|------------------------------ |  | --------- | - | ------------ | - | ----- | -
|                               |  | in joint  |   | Interests in |   |       |  
|                               |  | ventures  |   | associates   |   | Total |  
|                               |  | £m        |   | £m           |   | £m    |  
|                               |  |           |   |              |   |       |  
|Net assets/cost:               |  |           |   |              |   |       |  
|                               |  |           |   |              |   |       |  
|1 January 2004                 |  | 72        |   | 207          |   | 279   |  
|                               |  |           |   |              |   |       |  
|Reclassifications*             |  | (47       | ) | (31          | ) | (78   | )
|                               |  |           |   |              |   |       |  
|Exchange differences           |  | (1        | ) |             |   | (1    | )
|                               |  |           |   |              |   |       |  
|Arising in year  share of:    |  |           |   |              |   |       |  
|                               |  |           |   |              |   |       |  
|Operating profits              |  | 5         |   | 8            |   | 13    |  
|                               |  |           |   |              |   |       |  
|Taxation                       |  |          |   | (2           | ) | (2    | )
|                               |  |           |   |              |   |       |  
|Dividends received             |  | (3        | ) | (1           | ) | (4    | )
|                               |  |           |   |              |   |       |  
|Loans repaid to joint ventures |  | 5         |   |             |   | 5     |  
|                               |  |           |   |              |   |       |  
|Disposals                      |  |          |   | (176         | ) | (176  | )
|                               |  |           |   |              |   |       |  
|Shareholder taxes              |  | (2        | ) |             |   | (2    | )
|                               |  |           |   |              |   |       |  
|31 December 2004               |  | 29        |   | 5            |   | 34    |  
|                               |  |           |   |              |   |       |  
|Exchange differences           |  | 2         |   |             |   | 2     |  
|                               |  |           |   |              |   |       |  
|Arising in year  share of:    |  |           |   |              |   |       |  
|                               |  |           |   |              |   |       |  
|Operating profits              |  | 5         |   |             |   | 5     |  
|                               |  |           |   |              |   |       |  
|Interest receivable            |  | 1         |   |             |   | 1     |  
|                               |  |           |   |              |   |       |  
|Taxation                       |  | (1        | ) |             |   | (1    | )
|                               |  |           |   |              |   |       |  
|Additions                      |  | 1         |   |             |   | 1     |  
|                               |  |           |   |              |   |       |  
|Dividends received             |  | (4        | ) |             |   | (4    | )
|                               |  |           |   |              |   |       |  
|Disposals                      |  | (1        | ) |             |   | (1    | )
|                               |  |           |   |              |   |       |  
|Impairments                    |  |          |   | (2           | ) | (2    | )
|                               |  |           |   |              |   |       |  
|31 December 2005               |  | 32        |   | 3            |   | 35    |  
|                               |  |           |   |              |   |       |  
|Reclassifications*             |  | (14       | ) |             |   | (14   | )
|                               |  |           |   |              |   |       |  
|Exchange differences           |  | (3        | ) | (1           | ) | (4    | )
|                               |  |           |   |              |   |       |  
|Arising in year  share of:    |  |           |   |              |   |       |  
|                               |  |           |   |              |   |       |  
|Operating profits              |  |          |   | 1            |   | 1     |  
|                               |  |           |   |              |   |       |  
|Interest receivable            |  | 1         |   |             |   | 1     |  
|                               |  |           |   |              |   |       |  
|Taxation                       |  | (2        | ) |             |   | (2    | )
|                               |  |           |   |              |   |       |  
|Additions                      |  | 8         |   |             |   | 8     |  
|                               |  |           |   |              |   |       |  
|Dividends received             |  | (3        | ) |             |   | (3    | )
|                               |  |           |   |              |   |       |  
|31 December
      2006         |  | 19        |   | 3            |   | 22    |  
|                               |  |           |   |              |   |       |  
|Goodwill:                      |  |           |   |              |   |       |  
|                               |  |           |   |              |   |       |  
|1 January 2004                 |  |          |   | 1            |   | 1     |  
|                               |  |           |   |              |   |       |  
|31 December 2004               |  |          |   | 1            |   | 1     |  
|                               |  |           |   |              |   |       |  
|31 December 2005               |  |          |   | 1            |   | 1     |  
|                               |  |           |   |              |   |       |  
|Additions                      |  |          |   | 15           |   | 15    |  
|                               |  |           |   |              |   |       |  
|31 December
      2006         |  |          |   | 16           |   | 16    |  
|                               |  |           |   |              |   |       |  
|Carrying amount:               |  |           |   |              |   |       |  
|                               |  |           |   |              |   |       |  
|31 December 2004               |  | 29        |   | 6            |   | 35    |  
|                               |  |           |   |              |   |       |  
|31 December 2005               |  | 32        |   | 4            |   | 36    |  
|                               |  |           |   |              |   |       |  
|31 December
      2006         |  | 19        |   | 19           |   | 38    |  
|                               |  |           |   |              |   |       |  

|  |                                                                                                                                                                                                                                                                                                                 
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Reclassifications in 2006 relate to the Groups investment in Factiva, which was classified as a non-current asset held for sale and sold during the year. Reclassifications in 2004 relate to the Groups
investment in Radianz, which was classified as a discontinued operation in 2004 and sold during 2005.

The Group holds a 51% interest in AFE Solutions Limited, a 38% interest in 3 Times Square Associates LLC and a 40% interest in Independent Research Network LLC, which are jointly controlled entities accounted for under
the equity method of accounting.

In July 2006, Reuters and the Chicago Mercantile Exchange (CME) formed a new joint venture, FXMarketSpace Limited, to create a centrally-cleared, global foreign exchange trading system. Reuters invested £8 million
in the joint venture during 2006.

In October 2006, Reuters acquired a 26% interest in Times Global Broadcasting Company Limited for £11 million relating to the launch of a new Indian TV News Channel, TIMES NOW, in association with the Times of
India.

In November 2006, Reuters acquired a 17% interest in Pluck Corporation for £4 million. This has been classified as an associate and accounted for under the equity method of accounting because Reuters has a seat on
the Board of Directors and therefore has significant influence over Pluck Corporation.

On 18 October 2006, Reuters agreed to sell
  the majority of its investment in Factiva to joint venture partner Dow Jones.
  In accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued
  Operations, Reuters reclassified its investment as a non-current asset
  held for sale on this date. The sale was completed on 15 December 2006.



Reuters Group PLCAnnual
  Report and Form 20-F 2006

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Back to Contents

|           |   
|---------- | --
|           |   
|Financials | 97
|           |   
|           |   

Share of post-tax (losses)/profits from associates
  and joint ventures is reconciled to the income statement as follows:

|                                                                            |  | 2006 |   | 2005 |   | 2004 |  
|--------------------------------------------------------------------------- |  | ---- | - | ---- | - | ---- | -
|                                                                            |  | £m   |   | £m   |   | £m   |  
|                                                                            |  |      |   |      |   |      |  
|Operating profits                                                           |  | 1    |   | 5    |   | 13   |  
|                                                                            |  |      |   |      |   |      |  
|Interest receivable                                                         |  | 1    |   | 1    |   |     |  
|                                                                            |  |      |   |      |   |      |  
|Taxation                                                                    |  | (2   | ) | (1   | ) | (2   | )
|                                                                            |  |      |   |      |   |      |  
|Set-up costs of FXMarketSpace                                               |  | (4   | ) |     |   |     |  
|                                                                            |  |      |   |      |   |      |  
|Share of post-tax (losses)/profits
      from associates and joint ventures |  | (4   | ) | 5    |   | 11   |  
|                                                                            |  |      |   |      |   |      |  

Summarised financial information in respect of the Groups interests in its joint ventures at 31 December is as follows:

|                        |  | 2006 |   | 2005 |   | 2004 |  
|----------------------- |  | ---- | - | ---- | - | ---- | -
|                        |  | £m   |   | £m   |   | £m   |  
|                        |  |      |   |      |   |      |  
|Income                  |  | 63   |   | 83   |   | 80   |  
|                        |  |      |   |      |   |      |  
|Expenses                |  | (64  | ) | (78  | ) | (75  | )
|                        |  |      |   |      |   |      |  
|(Loss)/profit           |  | (1   | ) | 5    |   | 5    |  
|                        |  |      |   |      |   |      |  
|                        |  |      |   |      |   |      |  
|                        |  |      |   |      |   |      |  
|Non-current assets      |  | 61   |   | 76   |   | 66   |  
|                        |  |      |   |      |   |      |  
|Current assets          |  | 18   |   | 37   |   | 37   |  
|                        |  |      |   |      |   |      |  
|Current liabilities     |  | (49  | ) | (20  | ) | (19  | )
|                        |  |      |   |      |   |      |  
|Non-current liabilities |  | (11  | ) | (61  | ) | (55  | )
|                        |  |      |   |      |   |      |  
|Carrying value          |  | 19   |   | 32   |   | 29   |  
|                        |  |      |   |      |   |      |  

Summarised financial information in respect of the Groups interests in its associates at 31 December is as follows:

|               |  | 2006 |   | 2005 |   | 2004 |  
|-------------- |  | ---- | - | ---- | - | ---- | -
|               |  | £m   |   | £m   |   | £m   |  
|               |  |      |   |      |   |      |  
|Revenues       |  | 10   |   | 21   |   | 43   |  
|               |  |      |   |      |   |      |  
|Profit         |  | 1    |   |     |   | 6    |  
|               |  |      |   |      |   |      |  
|               |  |      |   |      |   |      |  
|               |  |      |   |      |   |      |  
|Assets         |  | 48   |   | 19   |   | 17   |  
|               |  |      |   |      |   |      |  
|Liabilities    |  | (29  | ) | (15  | ) | (11  | )
|               |  |      |   |      |   |      |  
|Carrying value |  | 19   |   | 4    |   | 6    |  
|               |  |      |   |      |   |      |  

16 Other financial assets and liabilities

Other financial assets and liabilities, including derivative financial instruments, are stated at fair value in 2005 and 2006. 2004 comparatives have been presented under UK GAAP as noted in the accounting
policies.

Other financial assets include the following:

|                                                     |  | 2006 |   | 2005 |   | 2004 |  
|---------------------------------------------------- |  | ---- | - | ---- | - | ---- | -
|                                                     |  | £m   |   | £m   |   | £m   |  
|                                                     |  |      |   |      |   |      |  
|Available-for-sale financial
      assets:           |  |      |   |      |   |      |  
|                                                     |  |      |   |      |   |      |  
|Equity securities                                    |  | 17   |   | 13   |   | 47   |  
|                                                     |  |      |   |      |   |      |  
|Other available-for-sale
      financial assets      |  | 9    |   | 5    |   | 10   |  
|                                                     |  |      |   |      |   |      |  
|Short-term deposits                                  |  | 198  |   | 1    |   | 258  |  
|                                                     |  |      |   |      |   |      |  
|Derivative financial instruments
      (see note 17) |  | 33   |   | 21   |   |     |  
|                                                     |  |      |   |      |   |      |  
|Total                                                |  | 257  |   | 40   |   | 315  |  
|                                                     |  |      |   |      |   |      |  
|Less: Non-current portion                            |  | (47  | ) | (22  | ) | (28  | )
|                                                     |  |      |   |      |   |      |  
|Current portion                                      |  | 210  |   | 18   |   | 287  |  
|                                                     |  |      |   |      |   |      |  

Short-term deposits are managed by the Groups
  treasury function as part of the Groups overall financing strategy. Movements
  in short-term deposits are therefore classified within financing activities
  in the Consolidated cash flow statement.



Reuters Group PLCAnnual
  Report and Form 20-F 2006

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|   |                                                  
|-- | -------------------------------------------------
|   |                                                  
|98 | Notes to the financial
      statements continued
|   |                                                  
|   |                                                  

16 Other financial assets and liabilitiescontinued

Movements in the carrying value of available-for-sale financial assets are analysed as follows:

|                                                               |  | 2006 |   | 2005 |   | 2004 |  
|-------------------------------------------------------------- |  | ---- | - | ---- | - | ---- | -
|                                                               |  | £m   |   | £m   |   | £m   |  
|                                                               |  |      |   |      |   |      |  
|1 January                                                      |  | 18   |   | 57   |   | 54   |  
|                                                               |  |      |   |      |   |      |  
|Transitional adjustment on
      first-time adoption of IAS 39 |  |     |   | 101  |   |     |  
|                                                               |  |      |   |      |   |      |  
|1 January as adjusted                                          |  | 18   |   | 158  |   | 54   |  
|                                                               |  |      |   |      |   |      |  
|Exchange differences                                           |  |     |   |     |   | (1   | )
|                                                               |  |      |   |      |   |      |  
|Additions                                                      |  |     |   | 1    |   |     |  
|                                                               |  |      |   |      |   |      |  
|Fair value adjustments recognised
      in equity              |  | 6    |   | (50  | ) |     |  
|                                                               |  |      |   |      |   |      |  
|Reclassifications*                                             |  | 4    |   | (23  | ) | 31   |  
|                                                               |  |      |   |      |   |      |  
|Disposals                                                      |  | (2   | ) | (68  | ) | (27  | )
|                                                               |  |      |   |      |   |      |  
|31 December                                                    |  | 26   |   | 18   |   | 57   |  
|                                                               |  |      |   |      |   |      |  

|  |                                                                                                                                                                                                                                                                                                         
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Reclassifications in 2006 relate to a
      minority preference share interest in a Factiva entity that Reuters retained
      following the disposal of the majority of the Groups investment in
      Factiva.                                                                                       
|  | 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.
| 

|Other financial
      liabilities include the following: |  |      |   |      |   |      |  
|-------------------------------------------------------- |  | ---- | - | ---- | - | ---- | -
|                                                         |  | 2006 |   | 2005 |   | 2004 |  
|                                                         |  | £m   |   | £m   |   | £m   |  
|                                                         |  |      |   |      |   |      |  
|Borrowings:                                              |  |      |   |      |   |      |  
|                                                         |  |      |   |      |   |      |  
|Bank overdrafts                                          |  | 24   |   | 25   |   | 17   |  
|                                                         |  |      |   |      |   |      |  
|Bank loans                                               |  |     |   |     |   | 37   |  
|                                                         |  |      |   |      |   |      |  
|Term notes and commercial paper                          |  | 632  |   | 383  |   | 456  |  
|                                                         |  |      |   |      |   |      |  
|Finance lease payables                                   |  | 4    |   | 2    |   |     |  
|                                                         |  |      |   |      |   |      |  
|Total borrowings                                         |  | 660  |   | 410  |   | 510  |  
|                                                         |  |      |   |      |   |      |  
|Derivative financial instruments
      (see note 17)     |  | 27   |   | 10   |   |     |  
|                                                         |  |      |   |      |   |      |  
|Total                                                    |  | 687  |   | 420  |   | 510  |  
|                                                         |  |      |   |      |   |      |  
|Less: Non-current portion                                |  | (521 | ) | (371 | ) | (329 | )
|                                                         |  |      |   |      |   |      |  
|Current portion                                          |  | 166  |   | 49   |   | 181  |  
|                                                         |  |      |   |      |   |      |  

The term notes principally relate to a public bond of £337 million which is repayable in November 2010 and incurs interest at a fixed rate of 4.6% and a floating rate note of £169 million repayable in
November 2008 and at 31 December 2006 incurs interest at 3.7% . Commercial paper of £122 million incurs interest at 4.9% . All borrowings are unsecured.

The maturity profile of finance lease payables is as follows:

|                        |  | Minimum lease |  | Present value of
      minimum lease | 
|----------------------- |  | ------------- |  | ------------------------------------ | 
|                        |  | payments      |  | payments                             | 
|                        |  |               |  |                                      | 
|                        |  | 2006          |  | 2005                                 | 
|                        |  | £m            |  | £m                                   | 
|                        |  |               |  |                                      | 
|Within one year         |  | 2             |  | 1                                    | 
|                        |  |               |  |                                      | 
|One to five years       |  | 2             |  | 1                                    | 
|                        |  |               |  |                                      | 
|Greater than five years |  |              |  |                                     | 
|                        |  |               |  |                                      | 
|                        |  | 4             |  | 2                                    | 
|                        |  |               |  |                                      | 

The fair value of the Groups lease obligations approximates to their carrying amounts.

Fair value movements on other financial assets and liabilities recognised during 2006 and 2005 (see note 17) include the following:

|                                                                 |  |             |   | 2006        |  |             |   | 2005        |  
|---------------------------------------------------------------- |  | ----------- | - | ----------- |  | ----------- | - | ----------- | -
|                                                                 |  |             |   |             |  |             |   |             |  
|                                                                 |  | Fair value  |   |             |  | Fair value  |   |             |  
|                                                                 |  | gain/(loss) |   | Fair value  |  | gain/(loss) |   | Fair value  |  
|                                                                 |  | in income   |   | gain/(loss) |  | in income   |   | gain/(loss) |  
|                                                                 |  | statement   |   | in equity   |  | statement   |   | in equity   |  
|                                                                 |  | £m          |   | £m          |  | £m          |   | £m          |  
|                                                                 |  |             |   |             |  |             |   |             |  
|Available-for-sale financial
      assets                        |  |            |   | 6           |  |            |   | (50         | )
|                                                                 |  |             |   |             |  |             |   |             |  
|Embedded derivatives in revenue
      contracts                  |  | (24         | ) |            |  | 21          |   |            |  
|                                                                 |  |             |   |             |  |             |   |             |  
|Embedded derivatives in supplier
      contracts                 |  | 4           |   |            |  | (2          | ) |            |  
|                                                                 |  |             |   |             |  |             |   |             |  
|Hedging instruments:                                             |  |             |   |             |  |             |   |             |  
|                                                                 |  |             |   |             |  |             |   |             |  
|Cross-currency
      interest rate swaps  fair value hedges     |  | (3          | ) |            |  | (1          | ) |            |  
|                                                                 |  |             |   |             |  |             |   |             |  
|Cross-currency
      interest rate swaps  net investment hedges |  | 1           |   | 34          |  | (1          | ) | (39         | )
|                                                                 |  |             |   |             |  |             |   |             |  
|Other derivatives:                                               |  |             |   |             |  |             |   |             |  
|                                                                 |  |             |   |             |  |             |   |             |  
|Gains                                                            |  | 1           |   |            |  |            |   |            |  
|                                                                 |  |             |   |             |  |             |   |             |  
|Losses                                                           |  | (1          | ) |            |  |            |   |            |  
|                                                                 |  |             |   |             |  |             |   |             |  
|Other financial assets                                           |  |            |   |            |  | (16         | ) |            |  
|                                                                 |  |             |   |             |  |             |   |             |  
|Total                                                            |  | (22         | ) | 40          |  | 1           |   | (89         | )
|                                                                 |  |             |   |             |  |             |   |             |  



Reuters Group PLCAnnual
  Report and Form 20-F 2006

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|           |   
|---------- | --
|           |   
|Financials | 99
|           |   
|           |   
|           |   

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 and 2006 information below. Management of financial riskThe Groups activities expose it
  to a variety of financial risks. The main risks managed by the Group, under
  policies approved by the Board, are foreign currency risk, interest rate risk,
  liquidity risk, counterparty credit risk and price 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 Board periodically reviews Reuters treasury activities, policies
  and procedures. All treasury activity takes place within a formal control framework. Details of values of financial assets and liabilities, including derivative financial instruments, are shown on page 100. Foreign currency riskForeign exchange risks arise from cash
  flows relating to commercial transactions, recognised assets and liabilities
  and net investments in foreign operations. 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 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 is
held in currencies approximately proportionate to the currency profile of the Groups net assets. The currency of the debt may be altered by the use of currency swaps. The main currencies to which the Group is exposed are the US dollar, the
Swiss franc and the euro. Details of forward exchange contracts held for risk management purposes and an analysis of the sensitivity to rate changes of fair values of financial instruments are shown on page 101. 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 forecast core debt levels and prevailing market conditions. Based on this review, the Group manages its cash flow and fair value 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. An analysis by currency of interest rate swaps held for risk management purposes is shown on page 101. Details of the currency and interest rate profile of the Groups financial assets and liabilities and the
exposure of the Groups borrowings to interest rate changes are shown on pages 103104.


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 October 2006, Reuters entered into a committed multicurrency revolving credit facility for £680 million. This replaced an existing committed syndicated credit facility of £480 million and a bilateral loan
facility of £24 million. At 31 December 2006, Reuters had available £623 million under the facility, following utilisation of £57 million in the form of a standby letter of credit relating to an operating lease. There were no cash
drawings from the facility during 2006. The commitment expires, and any final repayment is due in October 2011, unless one-year extension options are exercised in October 2007 and October 2008 (at the banks discretion). In this instance, the
latest expiry date would be 2013. In March 1998, Reuters established a Euro commercial paper programme. This provides access to £1.5 billion of uncommitted short-term finance of which £1.4 billion was unused at 31 December 2006 (£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 £490 million was unused at 31 December 2006 (£631
million was unused at 31 December 2005, £613 million was unused at 31 December 2004). In addition, at 31 December 2006, the Group had unused, short-term, uncommitted bank borrowing facilities denominated in various currencies, the sterling equivalent of which was approximately £117 million,
available at money market rates. Details of the timing of repayment of borrowings and other financial liabilities are shown on page 104. Counterparty credit riskThe Group is exposed to concentrations
  of credit risk. Trade receivables are concentrated in the financial community.
  The Group estimates that approximately 65% of its subscribers are financial
  institutions, 21% are corporations in other sectors of the business community,
  11% are from the news media and 3% are government institutions and individuals
  worldwide (2005: 72%, 14%, 9% and 5%, 2004: 72%, 17%, 4% and 7%). The maximum exposure to credit risk at 31 December 2006 was as follows: trade receivables £110 million, amounts owed by associates and joint ventures £6 million, accrued income £38 million, short-term
deposits £198 million, cash and equivalents £129 million and derivative financial instruments £30 million (2005: £120 million, £4 million, £38 million, £1 million, £662 million and £21 million, 2004:
£131 million, £3 million, £38 million, £258 million, £578 million and £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. Credit risk may be managed by the use of credit default swaps and standby letters of credit. 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 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.




Reuters Group PLCAnnual
  Report and Form 20-F 2006

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|    |                                                  
|--- | -------------------------------------------------
|    |                                                  
|100 | Notes to the financial
      statements continued
|    |                                                  
|    |                                                  

17 Derivatives and other financial instrumentscontinued

Financial assets and liabilitiesCarrying and fair values of Group
  financial assets and liabilities at 31 December were:

|                                                                      |  |          |   | 2006       |   |          |   | 2005       |  
|--------------------------------------------------------------------- |  | -------- | - | ---------- | - | -------- | - | ---------- | -
|                                                                      |  |          |   |            |   |          |   |            |  
|                                                                      |  | Carrying |   |            |   | Carrying |   |            |  
|                                                                      |  | value    |   | Fair value |   | value    |   | Fair value |  
|                                                                      |  | £m       |   | £m         |   | £m       |   | £m         |  
|                                                                      |  |          |   |            |   |          |   |            |  
|Derivative financial instruments:                                     |  |          |   |            |   |          |   |            |  
|                                                                      |  |          |   |            |   |          |   |            |  
|Cross-currency interest rate
      swaps  fair value hedges < 1 year |  |         |   |           |   | 2        |   | 2          |  
|                                                                      |  |          |   |            |   |          |   |            |  
|Cross-currency interest rate
      swaps  fair value hedges > 1 year |  | (9       | ) | (9         | ) | 12       |   | 12         |  
|                                                                      |  |          |   |            |   |          |   |            |  
|Embedded derivatives in revenue
      contracts                       |  | (18      | ) | (18        | ) | 6        |   | 6          |  
|                                                                      |  |          |   |            |   |          |   |            |  
|Embedded derivatives in supplier
      contracts                      |  | 3        |   | 3          |   | (1       | ) | (1         | )
|                                                                      |  |          |   |            |   |          |   |            |  
|Cross-currency interest rate
      swaps  net investment hedges      |  | 30       |   | 30         |   | (8       | ) | (8         | )
|                                                                      |  |          |   |            |   |          |   |            |  
|Financial assets:                                                     |  |          |   |            |   |          |   |            |  
|                                                                      |  |          |   |            |   |          |   |            |  
|Available-for-sale assets financial
      assets (see note 16)        |  | 26       |   | 26         |   | 18       |   | 18         |  
|                                                                      |  |          |   |            |   |          |   |            |  
|Trade receivables less provision
      for impairment (see note 19)   |  | 110      |   | 110        |   | 120      |   | 120        |  
|                                                                      |  |          |   |            |   |          |   |            |  
|Amounts owed by associates
      and joint ventures (see note 19)     |  | 6        |   | 6          |   | 4        |   | 4          |  
|                                                                      |  |          |   |            |   |          |   |            |  
|Other receivables (see note
      19)                                 |  | 80       |   | 80         |   | 68       |   | 68         |  
|                                                                      |  |          |   |            |   |          |   |            |  
|Accrued income*                                                       |  | 38       |   | 38         |   | 38       |   | 38         |  
|                                                                      |  |          |   |            |   |          |   |            |  
|Short-term deposits (see note
      16)                               |  | 198      |   | 198        |   | 1        |   | 1          |  
|                                                                      |  |          |   |            |   |          |   |            |  
|Cash and cash equivalents (see
      note 20)                         |  | 129      |   | 129        |   | 662      |   | 662        |  
|                                                                      |  |          |   |            |   |          |   |            |  
|Financial liabilities:                                                |  |          |   |            |   |          |   |            |  
|                                                                      |  |          |   |            |   |          |   |            |  
|Borrowings (see note 16)                                              |  | (660     | ) | (660       | ) | (410     | ) | (410       | )
|                                                                      |  |          |   |            |   |          |   |            |  
|Trade payables (see note 22)                                          |  | (56      | ) | (56        | ) | (14      | ) | (14        | )
|                                                                      |  |          |   |            |   |          |   |            |  
|Accruals**                                                            |  | (274     | ) | (274       | ) | (262     | ) | (262       | )
|                                                                      |  |          |   |            |   |          |   |            |  
|Amounts owed to associates
      and joint ventures (see note 22)     |  | (1       | ) | (1         | ) | (11      | ) | (11        | )
|                                                                      |  |          |   |            |   |          |   |            |  
|Other payables***                                                     |  | (87      | ) | (87        | ) | (95      | ) | (95        | )
|                                                                      |  |          |   |            |   |          |   |            |  
|Other taxation and social security
      (see note 22)                |  | (33      | ) | (33        | ) | (35      | ) | (35        | )
|                                                                      |  |          |   |            |   |          |   |            |  
|Other provisions for liabilities
      and charges****                |  | (95      | ) | (95        | ) | (113     | ) | (113       | )
|                                                                      |  |          |   |            |   |          |   |            |  
|Total                                                                 |  | (613     | ) | (613       | ) | (18      | ) | (18        | )
|                                                                      |  |          |   |            |   |          |   |            |  

|*    | Prepayments and accrued income in note
      19 (£62 million) include £24 million of prepayments that are not
      financial assets (2005: Prepayments and accrued income in note 19 (£78
      million) include £40 million of prepayments that are not financial
      assets).                                                                                                             
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|**   | Accruals in note 22 (£276 million)
      include £2 million of non-financial liabilities (2005: Accruals in
      note 22 (£264 million) include £2 million of non-financial liabilities).                                                                                                                                                                                                     
|***  | Other payables in note 22 (£94 million)
      include £2 million of progress payments on contracts and £5 million
      of subscriptions in advance which are non-financial liabilities (2005: Other
      payables in note 22 (£107 million) include £3 million of progress
      payments on contracts and £9 million of subscriptions in advance which
      are non-financial liabilities).
|**** | Other provisions for liabilities and charges
      in note 24 (£119 million) includes £24 million of non-financial
      liabilities (2005: Other provisions for liabilities and charges in note
      24 (£139 million) includes £26 million of non-financial liabilities).                                                                                                                   

Derivative financial instrumentsDerivative financial instruments
  held at 31 December were:

|                                                                 |  |          |  |        |  | 2006        |  |          |  |        |  | 2005        | 
|---------------------------------------------------------------- |  | -------- |  | ------ |  | ----------- |  | -------- |  | ------ |  | ----------- | 
|                                                                 |  |          |  |        |  |             |  |          |  |        |  |             | 
|                                                                 |  | Gross    |  |        |  |             |  | Gross    |  |        |  |             | 
|                                                                 |  | contract |  |        |  |             |  | contract |  |        |  |             | 
|                                                                 |  | amounts  |  | Assets |  | Liabilities |  | amounts  |  | Assets |  | Liabilities | 
|                                                                 |  | £m       |  | £m     |  | £m          |  | £m       |  | £m     |  | £m          | 
|                                                                 |  |          |  |        |  |             |  |          |  |        |  |             | 
|Maturing in less than one
      year:                            |  |          |  |        |  |             |  |          |  |        |  |             | 
|                                                                 |  |          |  |        |  |             |  |          |  |        |  |             | 
|Cross-currency interest rate
      swaps  fair value hedges     |  |         |  |       |  |            |  | 19       |  | 2      |  |            | 
|                                                                 |  |          |  |        |  |             |  |          |  |        |  |             | 
|Forward foreign exchange contracts
       fair value hedges     |  | 27       |  |       |  |            |  |         |  |       |  |            | 
|                                                                 |  |          |  |        |  |             |  |          |  |        |  |             | 
|Forward foreign exchange contracts
       held for trading      |  | 242      |  |       |  |            |  | 131      |  |       |  |            | 
|                                                                 |  |          |  |        |  |             |  |          |  |        |  |             | 
|Embedded derivatives in revenue
      contracts                  |  | 609      |  |       |  | 18          |  | 440      |  | 6      |  |            | 
|                                                                 |  |          |  |        |  |             |  |          |  |        |  |             | 
|Embedded derivatives in supplier
      contracts                 |  | 41       |  | 3      |  |            |  | 26       |  |       |  | 1           | 
|                                                                 |  |          |  |        |  |             |  |          |  |        |  |             | 
|                                                                 |  | 919      |  | 3      |  | 18          |  | 616      |  | 8      |  | 1           | 
|                                                                 |  |          |  |        |  |             |  |          |  |        |  |             | 
|Maturing in greater than
      one year:                         |  |          |  |        |  |             |  |          |  |        |  |             | 
|                                                                 |  |          |  |        |  |             |  |          |  |        |  |             | 
|Cross currency interest rate
      swaps  net investment hedges |  | 426      |  | 30     |  |            |  | 304      |  | 1      |  | 9           | 
|                                                                 |  |          |  |        |  |             |  |          |  |        |  |             | 
|Cross currency interest rate
      swaps  fair value hedges     |  | 506      |  |       |  | 7           |  | 337      |  | 12     |  |            | 
|                                                                 |  |          |  |        |  |             |  |          |  |        |  |             | 
|Interest rate swaps 
      fair value hedges                    |  | 10       |  |       |  | 2           |  | 10       |  |       |  |            | 
|                                                                 |  |          |  |        |  |             |  |          |  |        |  |             | 
|                                                                 |  | 942      |  | 30     |  | 9           |  | 651      |  | 13     |  | 9           | 
|                                                                 |  |          |  |        |  |             |  |          |  |        |  |             | 
|Total                                                            |  | 1,861    |  | 33     |  | 27          |  | 1,267    |  | 21     |  | 10          | 
|                                                                 |  |          |  |        |  |             |  |          |  |        |  |             | 

Gross contract amounts are calculated at historical
  exchange rates.

During 2005 and 2006 certain derivative contracts
  were entered into for the purpose of managing foreign exchange risks associated
  with the Groups commercial paper programme and its short-term intercompany
  balances, that did not meet the criteria to be accounted for as hedges and consequently
  are classified as forward exchange contracts  held for trading.



Reuters Group PLCAnnual
  Report and Form 20-F 2006

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|           |    
|---------- | ---
|           |    
|Financials | 101
|           |    
|           |    

The following table provides an analysis by currency of interest rate swaps held for risk management purposes at 31 December:

|                       |                      |  | 2006           |  | 2005           | 
|---------------------- | -------------------- |  | -------------- |  | -------------- | 
|                       |                      |  | Gross contract |  | Gross contract | 
|                       |                      |  | amount         |  | amount         | 
|Received               | Paid                 |  | £m             |  | £m             | 
|                       |                      |  |                |  |                | 
|Net investment hedges: |                      |  |                |  |                | 
|                       |                      |  |                |  |                | 
|Sterling floating      | US dollar floating   |  | 382            |  | 280            | 
|                       |                      |  |                |  |                | 
|Sterling floating      | Swiss franc floating |  | 34             |  | 24             | 
|                       |                      |  |                |  |                | 
|Sterling floating      | Euro floating        |  | 10             |  |               | 
|                       |                      |  |                |  |                | 
|Fair value hedges:     |                      |  |                |  |                | 
|                       |                      |  |                |  |                | 
|Japanese yen fixed     | Sterling floating    |  | 5              |  | 5              | 
|                       |                      |  |                |  |                | 
|Euro fixed             | Sterling floating    |  | 332            |  | 351            | 
|                       |                      |  |                |  |                | 
|Euro fixed             | Sterling floating    |  | 10             |  | 10             | 
|                       |                      |  |                |  |                | 
|Euro floating          | Sterling floating    |  | 169            |  |               | 
|                       |                      |  |                |  |                | 
|Total                  |                      |  | 942            |  | 670            | 
|                       |                      |  |                |  |                | 

Interest is receivable under swap contracts at rates between 0.6% and 5.9% and is payable at rates between 2.0% and 6.0% . Interest rate swaps are due to mature at various dates between June 2008 and November
2010.

The following table provides an analysis by currency of forward exchange contracts held for risk management purposes at 31 December:

|                                                             |  | 2006           |  | 2005           | 
|------------------------------------------------------------ |  | -------------- |  | -------------- | 
|                                                             |  | Gross contract |  | Gross contract | 
|                                                             |  | amount         |  | amount         | 
|                                                             |  | £m             |  | £m             | 
|                                                             |  |                |  |                | 
|Sales:                                                       |  |                |  |                | 
|                                                             |  |                |  |                | 
|Swiss franc                                                  |  | 86             |  |               | 
|                                                             |  |                |  |                | 
|US dollar                                                    |  | 60             |  | 22             | 
|                                                             |  |                |  |                | 
|Thai baht                                                    |  | 11             |  |               | 
|                                                             |  |                |  |                | 
|Japanese yen                                                 |  | 7              |  | 12             | 
|                                                             |  |                |  |                | 
|Hong Kong dollar                                             |  | 7              |  | 8              | 
|                                                             |  |                |  |                | 
|Canadian dollar                                              |  | 6              |  | 7              | 
|                                                             |  |                |  |                | 
|Swedish krona                                                |  | 5              |  |               | 
|                                                             |  |                |  |                | 
|Australian dollar                                            |  | 1              |  | 8              | 
|                                                             |  |                |  |                | 
|Euro                                                         |  |               |  | 14             | 
|                                                             |  |                |  |                | 
|Purchases:                                                   |  |                |  |                | 
|                                                             |  |                |  |                | 
|Euro                                                         |  | 40             |  |               | 
|                                                             |  |                |  |                | 
|South African rand                                           |  | 24             |  | 23             | 
|                                                             |  |                |  |                | 
|Singapore dollar                                             |  | 18             |  | 24             | 
|                                                             |  |                |  |                | 
|Swiss franc                                                  |  |               |  | 9              | 
|                                                             |  |                |  |                | 
|Other                                                        |  | 4              |  | 4              | 
|                                                             |  |                |  |                | 
|Total                                                        |  | 269            |  | 131            | 
|                                                             |  |                |  |                | 
|Composed of:                                                 |  |                |  |                | 
|                                                             |  |                |  |                | 
|Forward foreign
      exchange contracts  fair value hedges |  | 27             |  |               | 
|                                                             |  |                |  |                | 
|Forward foreign
      exchange contracts  held for trading  |  | 242            |  | 131            | 
|                                                             |  |                |  |                | 
|Total                                                        |  | 269            |  | 131            | 
|                                                             |  |                |  |                | 

Foreign exchange forward contracts held at 31 December 2006 matured in January 2007.

Hedges of net investment
  in foreign entityThe Groups long-term borrowings undertaken
  in November 2003 and November 2006 were 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 $694 million (2005: $498 million) is designated against the
  foreign investment in US subsidiaries, goodwill arising on acquisitions, and
  certain intangible assets. The resulting Swiss franc debt of 79 million Swiss
  francs (2005: 55 million Swiss francs) is designated as a hedge of the foreign
  investment in Reuters SA. A further debt of 15 million (2005: nil)
  was designated against the foreign investment in European subsidiaries. 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 euro floating rate interest.


The foreign exchange risk arising from the retranslation of the500 million fixed rate bond issued by Reuters Finance PLC and the250 million floating rate note issued by Reuters Group PLC was hedged by being swapped into sterling floating rate. The foreign exchange risk arising from the
retranslation and the interest rate risk arising from the impact of changes in interest rates on the fair values of foreign currency medium-term notes amounting to £4 million and maturing in 2008 were also swapped into floating rate sterling
interest. The above hedges were executed in the form of cross-currency interest rate swaps. The weighted average variable rate payable
  on all interest rate swaps used to alter the currency and interest rate profile
  of debt issued at 31 December 2006 was 6% (2005: 5%). The weighted average variable
  rate is based on the rate implied in the yield curve at the balance sheet date.




Reuters Group PLCAnnual
  Report and Form 20-F 2006

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Back to Contents

|    |                                                  
|--- | -------------------------------------------------
|    |                                                  
|102 | Notes to the financial
      statements continued
|    |                                                  
|    |                                                  

17 Derivatives and other financial
  instrumentscontinued Embedded derivativesForward exchange contracts implicitly contained
  in subscription-based revenue commitments priced in currencies different from
  both the functional currency of the Reuters entity and that of the customer
  are separated from their host contracts and held on the balance sheet at fair
  value. These revenue commitments extend two years from the balance sheet date.
  The majority of embedded derivatives in sales contracts arise through US dollar
  pricing. Forward exchange contracts implicitly contained in purchase commitments priced in currencies different from both the functional currency of the Reuters entity and that of the supplier are also separated from their host
contracts and held on the balance sheet at fair value. These purchase commitments expire at various times between 2007 and 2010. The majority of embedded derivatives in supplier contracts are US dollar-priced purchase commitments.


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
      2006 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 2006 with all other variables remaining
      constant.




|                                                                    |  |            |   |             |   | 2006       |   |            |   |             |   | 2005       |  
|------------------------------------------------------------------- |  | ---------- | - | ----------- | - | ---------- | - | ---------- | - | ----------- | - | ---------- | -
|                                                                    |  |            |   |             |   |            |   |            |   |             |   |            |  
|                                                                    |  |            |   |             |   | 10%        |   |            |   |             |   | 10%        |  
|                                                                    |  |            |   | 1%          |   | weakening  |   |            |   | 1%          |   | weakening  |  
|                                                                    |  |            |   | increase in |   | in other   |   |            |   | increase in |   | in other   |  
|                                                                    |  |            |   | interest    |   | currencies |   |            |   | interest    |   | currencies |  
|                                                                    |  | Fair value |   | rates       |   | against £  |   | Fair value |   | rates       |   | against £  |  
|                                                                    |  | £m         |   | £m          |   | £m         |   | £m         |   | £m          |   | £m         |  
|                                                                    |  |            |   |             |   |            |   |            |   |             |   |            |  
|Derivative financial instruments:                                   |  |            |   |             |   |            |   |            |   |             |   |            |  
|                                                                    |  |            |   |             |   |            |   |            |   |             |   |            |  
|Currency and interest rate
      swaps                              |  | 21         |   | (17         | ) | (10        | ) | 6          |   | (22         | ) | 4          |  
|                                                                    |  |            |   |             |   |            |   |            |   |             |   |            |  
|Forward contracts                                                   |  |           |   |            |   | 11         |   |           |   |            |   | (1         | )
|                                                                    |  |            |   |             |   |            |   |            |   |             |   |            |  
|Embedded derivatives in revenue
      contracts                     |  | (18        | ) |            |   | (19        | ) | 6          |   |            |   | (44        | )
|                                                                    |  |            |   |             |   |            |   |            |   |             |   |            |  
|Embedded derivatives in supplier
      contracts                    |  | 3          |   |            |   | 3          |   | (1         | ) |            |   | 3          |  
|                                                                    |  |            |   |             |   |            |   |            |   |             |   |            |  
|Financial assets:                                                   |  |            |   |             |   |            |   |            |   |             |   |            |  
|                                                                    |  |            |   |             |   |            |   |            |   |             |   |            |  
|Available-for-sale financial
      assets (see note 16)             |  | 26         |   |            |   | (2         | ) | 18         |   |            |   | (2         | )
|                                                                    |  |            |   |             |   |            |   |            |   |             |   |            |  
|Trade receivables less provision
      for impairment (see note 19) |  | 110        |   |            |   | (10        | ) | 120        |   |            |   | (12        | )
|                                                                    |  |            |   |             |   |            |   |            |   |             |   |            |  
|Amounts owed by associates
      and joint ventures (see note 19)   |  | 6          |   |            |   | (1         | ) | 4          |   |            |   |           |  
|                                                                    |  |            |   |             |   |            |   |            |   |             |   |            |  
|Other receivables (see note
      19)                               |  | 80         |   |            |   | (6         | ) | 68         |   |            |   | (4         | )
|                                                                    |  |            |   |             |   |            |   |            |   |             |   |            |  
|Accrued income*                                                     |  | 38         |   |            |   | (2         | ) | 38         |   |            |   | (3         | )
|                                                                    |  |            |   |             |   |            |   |            |   |             |   |            |  
|Short-term deposits (see note
      16)                             |  | 198        |   | (2          | ) |           |   | 1          |   |            |   |           |  
|                                                                    |  |            |   |             |   |            |   |            |   |             |   |            |  
|Cash and cash equivalents (see
      note 20)                       |  | 129        |   |            |   | (9         | ) | 662        |   |            |   |           |  
|                                                                    |  |            |   |             |   |            |   |            |   |             |   |            |  
|Financial liabilities:                                              |  |            |   |             |   |            |   |            |   |             |   |            |  
|                                                                    |  |            |   |             |   |            |   |            |   |             |   |            |  
|Borrowings (see note 16)                                            |  | (660       | ) | 17          |   | 56         |   | (410       | ) | 22          |   | 38         |  
|                                                                    |  |            |   |             |   |            |   |            |   |             |   |            |  
|Trade payables (see note 22)                                        |  | (56        | ) |            |   | 3          |   | (14        | ) |            |   | 1          |  
|                                                                    |  |            |   |             |   |            |   |            |   |             |   |            |  
|Accruals**                                                          |  | (274       | ) |            |   | 17         |   | (262       | ) |            |   | 16         |  
|                                                                    |  |            |   |             |   |            |   |            |   |             |   |            |  
|Amounts owed to associates
      and joint ventures (see note 22)   |  | (1         | ) |            |   |           |   | (11        | ) |            |   |           |  
|                                                                    |  |            |   |             |   |            |   |            |   |             |   |            |  
|Other payables***                                                   |  | (87        | ) |            |   | 2          |   | (95        | ) |            |   | 2          |  
|                                                                    |  |            |   |             |   |            |   |            |   |             |   |            |  
|Other taxation and social security
      (see note 22)              |  | (33        | ) |            |   | 2          |   | (35        | ) |            |   | 2          |  
|                                                                    |  |            |   |             |   |            |   |            |   |             |   |            |  
|Other provisions for liabilities
      and charges****              |  | (95        | ) |            |   | 6          |   | (113       | ) |            |   | 9          |  
|                                                                    |  |            |   |             |   |            |   |            |   |             |   |            |  
|Total                                                               |  | (613       | ) | (2          | ) | 41         |   | (18        | ) |            |   | 9          |  
|                                                                    |  |            |   |             |   |            |   |            |   |             |   |            |  

|*    | Prepayments and accrued income in note
      19 (£62 million) include £24 million of prepayments that are not
      financial assets (2005: Prepayments and accrued income in note 19 (£78
      million) include £40 million of prepayments that are not financial
      assets).                                                                                                             
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|**   | Accruals in note 22 (£276 million)
      include £2 million of non-financial liabilities (2005: Accruals in
      note 22 (£264 million) include £2 million of non-financial liabilities).                                                                                                                                                                                                     
|***  | Other payables in note 22 (£94 million)
      include £2 million of progress payments on contracts and £5 million
      of subscriptions in advance which are non-financial liabilities (2005: Other
      payables in note 22 (£107 million) include £3 million of progress
      payments on contracts and £9 million of subscriptions in advance which
      are non-financial liabilities).
|**** | Other provisions for liabilities and charges
      in note 24 (£119 million) includes £24 million of non-financial
      liabilities (2005: Other provisions for liabilities and charges in note
      24 (£139 million) includes £26 million of non-financial liabilities).                                                                                                                   



Reuters Group PLCAnnual
  Report and Form 20-F 2006

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|           |    
|---------- | ---
|           |    
|Financials | 103
|           |    
|           |    

Profile of financial assets and liabilitiesThe
currency and interest rate profile of the Groups financial assets and liabilities,
after the impact of derivatives, that are subject to interest rate risk at 31
December was:

|                             |  | 2006                                        | 
|---------------------------- |  | ------------------------------------------- | 
|                             |  | Classes of financial assets and liabilities | 
|                             |  |                                             | 
|                             |  |                                             | 
|                             |  |                                             | 
|                             |  | Short-term                                  | 
|                             |  | deposits                                    | 
|                             |  | £m                                          | 
|                             |  |                                             | 
|By currency:                 |  |                                             | 
|                             |  |                                             | 
|Sterling:                    |  |                                             | 
|                             |  |                                             | 
|Floating                     |  |                                            | 
|                             |  |                                             | 
|Fixed                        |  | 197                                         | 
|                             |  |                                             | 
|US dollar:                   |  |                                             | 
|                             |  |                                             | 
|Floating                     |  |                                            | 
|                             |  |                                             | 
|Fixed                        |  |                                            | 
|                             |  |                                             | 
|Euro:                        |  |                                             | 
|                             |  |                                             | 
|Floating                     |  |                                            | 
|                             |  |                                             | 
|Other:                       |  |                                             | 
|                             |  |                                             | 
|Floating                     |  | 1                                           | 
|                             |  |                                             | 
|Total                        |  | 198                                         | 
|                             |  |                                             | 
|By maturity:                 |  |                                             | 
|                             |  |                                             | 
|Within one year              |  | 198                                         | 
|                             |  |                                             | 
|Between one and two years    |  |                                            | 
|                             |  |                                             | 
|Between two and three years  |  |                                            | 
|                             |  |                                             | 
|Between three and four years |  |                                            | 
|                             |  |                                             | 
|Between four and five years  |  |                                            | 
|                             |  |                                             | 
|Over five years              |  |                                            | 
|                             |  |                                             | 
|Total                        |  | 198                                         | 
|                             |  |                                             | 



Reuters Group PLCAnnual
Report and Form 20-F 2006

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|    |                                                    
|--- | ---------------------------------------------------
|    |                                                    
|104 | Notes to the financial
        statements continued
|    |                                                    
|    |                                                    

|17 | Derivatives and other
      financial instrumentscontinued
|-- | ----------------------------------------------------------

|                             |  | 2005                                        | 
|---------------------------- |  | ------------------------------------------- | 
|                             |  | Classes of financial assets and liabilities | 
|                             |  |                                             | 
|                             |  |                                             | 
|                             |  |                                             | 
|                             |  | Short-term                                  | 
|                             |  | deposits                                    | 
|                             |  | £m                                          | 
|                             |  |                                             | 
|By currency:                 |  |                                             | 
|                             |  |                                             | 
|Sterling:                    |  |                                             | 
|                             |  |                                             | 
|Floating                     |  |                                            | 
|                             |  |                                             | 
|US dollar:                   |  |                                             | 
|                             |  |                                             | 
|Floating                     |  |                                            | 
|                             |  |                                             | 
|Fixed                        |  |                                            | 
|                             |  |                                             | 
|Euro:                        |  |                                             | 
|                             |  |                                             | 
|Floating                     |  |                                            | 
|                             |  |                                             | 
|Other:                       |  |                                             | 
|                             |  |                                             | 
|Floating                     |  | 1                                           | 
|                             |  |                                             | 
|Total                        |  | 1                                           | 
|                             |  |                                             | 
|By maturity:                 |  |                                             | 
|                             |  |                                             | 
|Within one year              |  | 1                                           | 
|                             |  |                                             | 
|Between one and two years    |  |                                            | 
|                             |  |                                             | 
|Between two and three years  |  |                                            | 
|                             |  |                                             | 
|Between three and four years |  |                                            | 
|                             |  |                                             | 
|Between four and five years  |  |                                            | 
|                             |  |                                             | 
|Over five years              |  |                                            | 
|                             |  |                                             | 
|Total                        |  | 1                                           | 
|                             |  |                                             | 

Maturity of financial liabilitiesFinancial liabilities, excluding derivative financial instruments, at 31 December are repayable as follows:

|                             |  | 2006       |  | 2005        | 
|---------------------------- |  | ---------- |  | ----------- | 
|                             |  |            |  |             | 
|                             |  |            |  | Other       | 
|                             |  |            |  | financial   | 
|                             |  | Borrowings |  | liabilities | 
|                             |  | £m         |  | £m          | 
|                             |  |            |  |             | 
|Within one year              |  | 148        |  | 507         | 
|                             |  |            |  |             | 
|Between one and two years    |  | 175        |  | 19          | 
|                             |  |            |  |             | 
|Between two and three years  |  |           |  | 7           | 
|                             |  |            |  |             | 
|Between three and four years |  | 337        |  | 5           | 
|                             |  |            |  |             | 
|Between four and five years  |  |           |  | 3           | 
|                             |  |            |  |             | 
|Over five years              |  |           |  | 5           | 
|                             |  |            |  |             | 
|Total                        |  | 660        |  | 546         | 
|                             |  |            |  |             | 

The exposure of the Groups borrowings to interest rate changes and the contractual re-pricing dates are as follows:

|                                |  | 2006             | 
|------------------------------- |  | ---------------- | 
|                                |  |                  | 
|                                |  | 6 months or less | 
|                                |  | £m               | 
|                                |  |                  | 
|Bank overdrafts                 |  | 24               | 
|                                |  |                  | 
|Term notes and commercial paper |  | 291              | 
|                                |  |                  | 
|Finance lease creditors         |  | 1                | 
|                                |  |                  | 
|Effect of interest rate swaps   |  | 341              | 
|                                |  |                  | 
|Total                           |  | 657              | 
|                                |  |                  | 
|                                |  |                  | 
|                                |  |                  | 
|                                |  |                  | 
|                                |  | 6 months or less | 
|                                |  | £m               | 
|                                |  |                  | 
|Bank overdrafts                 |  | 25               | 
|                                |  |                  | 
|Term notes and commercial paper |  | 22               | 
|                                |  |                  | 
|Finance lease creditors         |  | 1                | 
|                                |  |                  | 
|Effect of interest rate swaps   |  | 361              | 
|                                |  |                  | 
|Total                           |  | 409              | 
|                                |  |                  | 



Reuters Group PLCAnnual
Report and Form 20-F 2006

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Back to Contents

|           |    
|---------- | ---
|           |    
|Financials | 105
|           |    
|           |    
|           |    

Derivatives and other financial instruments
(2004 UK GAAP comparatives)The applicable accounting policies relevant to the 2004 comparatives prepared under UK GAAP are given on page 82. The following disclosure for Derivatives and other financial instruments was made in the 2004 Annual Report and Form 20-F 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 financial instruments held at 31
December 2004 were:

|                                    |  | 2004     | 
|----------------------------------- |  | -------- | 
|                                    |  |          | 
|                                    |  | Gross    | 
|                                    |  | contract | 
|                                    |  | amounts  | 
|                                    |  | £m       | 
|                                    |  |          | 
|Foreign exchange forward contracts: |  |          | 
|                                    |  |          | 
|Contracts in profit                 |  | 124      | 
|                                    |  |          | 
|Contracts in loss                   |  | 271      | 
|                                    |  |          | 
|Foreign currency options:           |  |          | 
|                                    |  |          | 
|Contracts in profit                 |  |         | 
|                                    |  |          | 
|Contracts in loss                   |  |         | 
|                                    |  |          | 
|Currency and interest rate swaps:   |  |          | 
|                                    |  |          | 
|Contracts in profit                 |  | 373      | 
|                                    |  |          | 
|Contracts in loss                   |  | 5        | 
|                                    |  |          | 
|Total                               |  | 773      | 
|                                    |  |          | 

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

An analysis by currency of derivative contracts held for currency hedging purposes at 31 December 2004 is set out below:

|             |  | 2004  | 
|------------ |  | ----- | 
|             |  |       | 
|             |  | Swaps | 
|             |  | %     | 
|             |  |       | 
|Euro         |  | 8     | 
|             |  |       | 
|Japanese yen |  | 3     | 
|             |  |       | 
|Swiss franc  |  | 19    | 
|             |  |       | 
|US dollar    |  | 70    | 
|             |  |       | 
|Other        |  |      | 
|             |  |       | 
|Total        |  | 100   | 
|             |  |       | 

Foreign 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:

|                      |  | 2004 | 
|--------------------- |  | ---- | 
|Recognised gains      |  | £m   | 
|                      |  |      | 
|Currency hedging      |  | 29   | 
|                      |  |      | 
|Interest rate hedging |  | 10   | 
|                      |  |      | 

Recognised 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.



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Report and Form 20-F 2006

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|    |                                                    
|--- | ---------------------------------------------------
|    |                                                    
|106 | Notes to the financial
        statements continued
|    |                                                    
|    |                                                    

|   |                                                           
|-- | ----------------------------------------------------------
|17 | Derivatives and other
      financial instrumentscontinued

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:

|                                           |  |      |  |          |   | 2004 |  
|------------------------------------------ |  | ---- |  | -------- | - | ---- | -
|                                           |  |      |  |          |   |      |  
|                                           |  | Gain |  | (Losses) |   | Net  |  
|Hedging                                    |  | £m   |  | £m       |   | £m   |  
|                                           |  |      |  |          |   |      |  
|Unrecognised at 1 January 2004             |  | 5    |  | (4       | ) | 1    |  
|                                           |  |      |  |          |   |      |  
|Arising in previous years:                 |  |      |  |          |   |      |  
|                                           |  |      |  |          |   |      |  
|Recognised in 2004                         |  | 4    |  | (2       | ) | 2    |  
|                                           |  |      |  |          |   |      |  
|Not recognised in 2004                     |  | 1    |  | (2       | ) | (1   | )
|                                           |  |      |  |          |   |      |  
|Arising in 2004:                           |  |      |  |          |   |      |  
|                                           |  |      |  |          |   |      |  
|Not recognised in 2004                     |  | 11   |  |         |   | 11   |  
|                                           |  |      |  |          |   |      |  
|Unrecognised at 31 December 2004           |  | 12   |  | (2       | ) | 10   |  
|                                           |  |      |  |          |   |      |  
|Of which:                                  |  |      |  |          |   |      |  
|                                           |  |      |  |          |   |      |  
|Expected to be recognised in 2005          |  | 1    |  | (1       | ) |     |  
|                                           |  |      |  |          |   |      |  
|Expected to be recognised in 2006 or later |  | 11   |  | (1       | ) | 10   |  
|                                           |  |      |  |          |   |      |  

Net 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:

|                                   |  |                |   | 2004       |  
|---------------------------------- |  | -------------- | - | ---------- | -
|                                   |  |                |   |            |  
|                                   |  | Carrying value |   | Fair value |  
|                                   |  | £m             |   | £m         |  
|                                   |  |                |   |            |  
|Derivative financial instruments   |  | 54             |   | 64         |  
|                                   |  |                |   |            |  
|Other financial assets:            |  |                |   |            |  
|                                   |  |                |   |            |  
|Fixed asset investments            |  | 28             |   | 34         |  
|                                   |  |                |   |            |  
|Long-term debtors                  |  | 20             |   | 20         |  
|                                   |  |                |   |            |  
|Investments held for resale        |  | 108            |   | 194        |  
|                                   |  |                |   |            |  
|Other short-term deposits and cash |  | 836            |   | 836        |  
|                                   |  |                |   |            |  
|Other 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 deposits 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.



Reuters Group PLCAnnual
Report and Form 20-F 2006

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|           |    
|---------- | ---
|           |    
|Financials | 107
|           |    
|           |    
|           |    

|                                 |  |            |  |  | Fair value changes arising from |               
|-------------------------------- |  | ---------- |  |  | ------------------------------- | --------------
|                                 |  |            |  |  |                                 |               
|                                 |  |            |  |  |                                 |               
|                                 |  |            |  |  |                                 | 1% increase in
|                                 |  |            |  |  |                                 | interest rates
|                                 |  | Fair value |  |  |                                 | (adverse)     
|                                 |  | £m         |  |  |                                 | £m            
|                                 |  |            |  |  |                                 |               
|Currency and interest rate swaps |  | 64         |  |  |                                 | (27           
|                                 |  |            |  |  |                                 |               
|Forward contracts                |  |           |  |  |                                 |              
|                                 |  |            |  |  |                                 |               
|Total                            |  | 64         |  |  |                                 | (27           
|                                 |  |            |  |  |                                 |               

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) |  
|--------------------------------- |  | -------- | - | --------- | - | ---- | - | ----------- | - | -------------------------------------------------- | -
|                                  |  |          |   |           |   |      |   |             |   |                                                    |  
|                                  |  |          |   |           |   |      |   |             |   | Japanese                                           |  
|                                  |  | Sterling |   | US dollar |   | Euro |   | Swiss franc |   | yen                                                |  
|                                  |  | £m       |   | £m        |   | £m   |   | £m          |   | £m                                                 |  
|                                  |  |          |   |           |   |      |   |             |   |                                                    |  
|Functional currency of operation: |  |          |   |           |   |      |   |             |   |                                                    |  
|                                  |  |          |   |           |   |      |   |             |   |                                                    |  
|Sterling                          |  |         |   | (71       | ) | 42   |   | (6          | ) | 1                                                  |  
|                                  |  |          |   |           |   |      |   |             |   |                                                    |  
|US dollar                         |  | (15      | ) |          |   | (21  | ) | (16         | ) |                                                   |  
|                                  |  |          |   |           |   |      |   |             |   |                                                    |  
|Euro                              |  |         |   | (4        | ) |     |   |            |   |                                                   |  
|                                  |  |          |   |           |   |      |   |             |   |                                                    |  
|Swiss franc                       |  | (23      | ) | 2         |   | 3    |   |            |   | (1                                                 | )
|                                  |  |          |   |           |   |      |   |             |   |                                                    |  
|Japanese yen                      |  | 1        |   |          |   |     |   |            |   |                                                   |  
|                                  |  |          |   |           |   |      |   |             |   |                                                    |  
|Hong Kong dollar                  |  | 1        |   | 18        |   |     |   |            |   | 5                                                  |  
|                                  |  |          |   |           |   |      |   |             |   |                                                    |  
|Other                             |  |         |   | 4         |   | (1   | ) |            |   |                                                   |  
|                                  |  |          |   |           |   |      |   |             |   |                                                    |  
|Total                             |  | (36      | ) | (51       | ) | 23   |   | (22         | ) | 5                                                  |  
|                                  |  |          |   |           |   |      |   |             |   |                                                    |  

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 deposits |  | Fixed rate investments | 
|---------------- |  | ----- |  | ---------------------------- |  | ---------------------- | 
|                 |  |       |  |                              |  |                        | 
|                 |  |       |  |                              |  |                        | 
|                 |  |       |  |                              |  |                        | 
|                 |  |       |  | Non-interest                 |  | Floating rate          | 
|                 |  | Total |  | bearing assets               |  | investments            | 
|                 |  | £m    |  | £m                           |  | £m                     | 
|                 |  |       |  |                              |  |                        | 
|Sterling         |  | 416   |  | 80                           |  | 336                    | 
|                 |  |       |  |                              |  |                        | 
|US dollar        |  | 469   |  | 58                           |  | 411                    | 
|                 |  |       |  |                              |  |                        | 
|Euro             |  | 33    |  | 7                            |  | 26                     | 
|                 |  |       |  |                              |  |                        | 
|Other            |  | 74    |  | 11                           |  | 58                     | 
|                 |  |       |  |                              |  |                        | 
|31 December 2004 |  | 992   |  | 156                          |  | 831                    | 
|                 |  |       |  |                              |  |                        | 

Interest 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:

|                 |  |       |  |             |  | Borrowings | 
|---------------- |  | ----- |  | ----------- |  | ---------- | 
|                 |  |       |  |             |  |            | 
|                 |  |       |  | Other       |  | Floating   | 
|                 |  |       |  | financial   |  | rate       | 
|                 |  | Total |  | liabilities |  | borrowings | 
|                 |  | £m    |  | £m          |  | £m         | 
|                 |  |       |  |             |  |            | 
|Sterling         |  | 280   |  | 60          |  | 220        | 
|                 |  |       |  |             |  |            | 
|US dollar        |  | 271   |  | 21          |  | 250        | 
|                 |  |       |  |             |  |            | 
|Euro             |  | 25    |  | 13          |  | 12         | 
|                 |  |       |  |             |  |            | 
|Swiss francs     |  | 27    |  | 2           |  | 25         | 
|                 |  |       |  |             |  |            | 
|Other            |  | 4     |  | 1           |  | 3          | 
|                 |  |       |  |             |  |            | 
|31 December 2004 |  | 607   |  | 97          |  | 510        | 
|                 |  |       |  |             |  |            | 

The floating rate borrowings comprise bank
  loans and overdrafts bearing interest at rates based on local money market rates,
  commercial paper and medium-term notes. The weighted average 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.



Reuters Group PLCAnnual
Report and Form 20-F 2006

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|    |                                                    
|--- | ---------------------------------------------------
|    |                                                    
|108 | Notes to the financial
        statements continued
|    |                                                    
|    |                                                    

|   |                                                           
|-- | ----------------------------------------------------------
|17 | Derivatives and other
      financial instrumentscontinued

Total financial liabilities at 31 December 2004 are repayable as follows:

|                           |  |            |  | Other financial | 
|-------------------------- |  | ---------- |  | --------------- | 
|                           |  | Borrowings |  | liabilities     | 
|                           |  | £m         |  | £m              | 
|                           |  |            |  |                 | 
|Within one year            |  | 181        |  | 32              | 
|                           |  |            |  |                 | 
|Between one and two years  |  | 19         |  | 19              | 
|                           |  |            |  |                 | 
|Between two and five years |  | 5          |  | 18              | 
|                           |  |            |  |                 | 
|Over five years            |  | 305        |  | 28              | 
|                           |  |            |  |                 | 
|Total                      |  | 510        |  | 97              | 
|                           |  |            |  |                 | 

In April 2003, Reuters entered into a committed syndicated credit facility for £1 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
|-- | -----------
|   |            

|                              |  | 2006 |  | 2005 |  | 2004 | 
|----------------------------- |  | ---- |  | ---- |  | ---- | 
|                              |  | £m   |  | £m   |  | £m   | 
|                              |  |      |  |      |  |      | 
|Work in progress on contracts |  | 1    |  | 1    |  | 3    | 
|                              |  |      |  |      |  |      | 
|                              |  |      |  |      |  |      | 

|19 | Trade and other receivables
|-- | ---------------------------
|   |                            

|                                              |  | 2006 |   | 2005 |   | 2004 |  
|--------------------------------------------- |  | ---- | - | ---- | - | ---- | -
|                                              |  | £m   |   | £m   |   | £m   |  
|                                              |  |      |   |      |   |      |  
|Trade receivables                             |  | 123  |   | 138  |   | 162  |  
|                                              |  |      |   |      |   |      |  
|Less: Provision for impairment                |  | (13  | ) | (18  | ) | (31  | )
|                                              |  |      |   |      |   |      |  
|Net trade receivables                         |  | 110  |   | 120  |   | 131  |  
|                                              |  |      |   |      |   |      |  
|Instinet counterparty debtors                 |  |     |   |     |   | 216  |  
|                                              |  |      |   |      |   |      |  
|Amounts owed by associates and joint ventures |  | 6    |   | 4    |   | 3    |  
|                                              |  |      |   |      |   |      |  
|Other receivables                             |  | 80   |   | 68   |   | 111  |  
|                                              |  |      |   |      |   |      |  
|Prepayments and accrued income                |  | 62   |   | 78   |   | 74   |  
|                                              |  |      |   |      |   |      |  
|Total trade and other receivables             |  | 258  |   | 270  |   | 535  |  
|                                              |  |      |   |      |   |      |  

The 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 £1 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 99.



Reuters Group PLCAnnual
Report and Form 20-F 2006

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|           |    
|---------- | ---
|           |    
|Financials | 109
|           |    
|           |    

20  Cash and cash equivalents

|                                       |  | 2006 |  | 2005 |  | 2004 | 
|-------------------------------------- |  | ---- |  | ---- |  | ---- | 
|                                       |  | £m   |  | £m   |  | £m   | 
|                                       |  |      |  |      |  |      | 
|Cash:                                  |  |      |  |      |  |      | 
|                                       |  |      |  |      |  |      | 
|Cash in hand and at bank               |  | 79   |  | 98   |  | 83   | 
|                                       |  |      |  |      |  |      | 
|Listed cash equivalents:               |  |      |  |      |  |      | 
|                                       |  |      |  |      |  |      | 
|Government securities 
      overseas |  |     |  |     |  | 8    | 
|                                       |  |      |  |      |  |      | 
|Unlisted cash equivalents:             |  |      |  |      |  |      | 
|                                       |  |      |  |      |  |      | 
|Term deposits  UK                     |  | 2    |  | 12   |  | 84   | 
|                                       |  |      |  |      |  |      | 
|Term deposits  overseas               |  | 5    |  | 3    |  | 31   | 
|                                       |  |      |  |      |  |      | 
|Other investments  UK                 |  | 37   |  | 546  |  |     | 
|                                       |  |      |  |      |  |      | 
|Other investments  overseas           |  | 6    |  | 3    |  | 372  | 
|                                       |  |      |  |      |  |      | 
|Cash and cash equivalents              |  | 129  |  | 662  |  | 578  | 
|                                       |  |      |  |      |  |      | 

The following cash balances
    are held by subsidiaries in countries where exchange control restrictions
are in force, such that cash is not freely transferable around the Group:

|                      |  | 2006 |  | 2005 |  | 2004 | 
|--------------------- |  | ---- |  | ---- |  | ---- | 
|                      |  | £m   |  | £m   |  | £m   | 
|                      |  |      |  |      |  |      | 
|Brazil                |  | 1    |  | 2    |  | 2    | 
|                      |  |      |  |      |  |      | 
|China                 |  |     |  | 1    |  | 1    | 
|                      |  |      |  |      |  |      | 
|Venezuela             |  | 3    |  | 2    |  | 1    | 
|                      |  |      |  |      |  |      | 
|Total restricted cash |  | 4    |  | 5    |  | 4    | 
|                      |  |      |  |      |  |      | 

21  Non-current assets and liabilities held for
  saleThe following are assets and liabilities
  classified as held for sale at 31 December:

|                                                                                           |  | 2006 |  | 2005 |  | 2004 |  
|------------------------------------------------------------------------------------------ |  | ---- |  | ---- |  | ---- | -
|                                                                                           |  | £m   |  | £m   |  | £m   |  
|                                                                                           |  |      |  |      |  |      |  
|Non-current assets classified
      as held for sale:                                      |  |      |  |      |  |      |  
|                                                                                           |  |      |  |      |  |      |  
|Property, plant and equipment                                                              |  |     |  | 1    |  |     |  
|                                                                                           |  |      |  |      |  |      |  
|Assets of subsidiary held exclusively
      for resale*                                    |  |     |  |     |  | 145  |  
|                                                                                           |  |      |  |      |  |      |  
|Total assets classified
      as held for sale                                             |  |     |  | 1    |  | 145  |  
|                                                                                           |  |      |  |      |  |      |  
|Liabilities 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.

On 18 October 2006, the Group classified its investment in Factiva as a non-current asset held for sale. The disposal of the majority of this investment was completed on 15 December 2006. Reuters retained a minority
preference share interest in a Factiva entity which has been reclassified as an available-for-sale financial asset.

In 2005, a property with a net book value of £1 million was classified as a non-current asset held for sale. The sale of this property was completed in 2006.

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 87.

22  Trade and other payables

|                                                    |  |      |  | Restated |  |      | 
|--------------------------------------------------- |  | ---- |  | -------- |  | ---- | 
|                                                    |  | 2006 |  | 2005     |  | 2004 | 
|                                                    |  | £m   |  | £m       |  | £m   | 
|                                                    |  |      |  |          |  |      | 
|Trade payables                                      |  | 56   |  | 14       |  | 71   | 
|                                                    |  |      |  |          |  |      | 
|Accruals                                            |  | 276  |  | 264      |  | 346  | 
|                                                    |  |      |  |          |  |      | 
|Instinet counterparty creditors                     |  |     |  |         |  | 197  | 
|                                                    |  |      |  |          |  |      | 
|Deferred income                                     |  | 31   |  | 25       |  | 21   | 
|                                                    |  |      |  |          |  |      | 
|Amounts owed to associates
      and joint ventures |  | 1    |  | 11       |  | 12   | 
|                                                    |  |      |  |          |  |      | 
|Other payables                                      |  | 94   |  | 107      |  | 39   | 
|                                                    |  |      |  |          |  |      | 
|Other taxation and social security                  |  | 33   |  | 35       |  | 35   | 
|                                                    |  |      |  |          |  |      | 
|Total trade and other payables                      |  | 491  |  | 456      |  | 721  | 
|                                                    |  |      |  |          |  |      | 

2005 has been restated to recognise irrevocable commitments to repurchase shares during close periods as a liability (see Basis of accounting on page 78). The impact of recognising these commitments is to
increase other payables at 31 December 2005 by £59 million.

The 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.



Reuters Group PLCAnnual
  Report and Form 20-F 2006

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|    |                                                  
|--- | -------------------------------------------------
|    |                                                  
|110 | Notes to the financial
      statements continued
|    |                                                  
|    |                                                  

23  Current tax liabilities

|                        |  | 2006 |  | 2005 |  | 2004 | 
|----------------------- |  | ---- |  | ---- |  | ---- | 
|                        |  | £m   |  | £m   |  | £m   | 
|                        |  |      |  |      |  |      | 
|Current tax liabilities |  | 196  |  | 228  |  | 260  | 
|                        |  |      |  |      |  |      | 

The 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.

24  Provisions for liabilities and charges

|                                                            |  | 2006 |   | 2005 |   | 2004 |  
|----------------------------------------------------------- |  | ---- | - | ---- | - | ---- | -
|                                                            |  | £m   |   | £m   |   | £m   |  
|                                                            |  |      |   |      |   |      |  
|Provisions for post-employment
      benefits (see note 25) |  | 145  |   | 317  |   | 263  |  
|                                                            |  |      |   |      |   |      |  
|Other provisions for liabilities
      and charges          |  | 119  |   | 139  |   | 164  |  
|                                                            |  |      |   |      |   |      |  
|Total provisions                                            |  | 264  |   | 456  |   | 427  |  
|                                                            |  |      |   |      |   |      |  
|Less: Non-current portion                                   |  | (204 | ) | (392 | ) | (340 | )
|                                                            |  |      |   |      |   |      |  
|Current portion                                             |  | 60   |   | 64   |   | 87   |  
|                                                            |  |      |   |      |   |      |  

The movement in other provisions for liabilities and charges during 2006 was as follows:

|                       |  |                 |   | Legal/     |   | Other    |   |       |   |       |  
|---------------------- |  | --------------- | - | ---------- | - | -------- | - | ----- | - | ----- | -
|                       |  | Rationalisation |   | compliance |   | property |   | Other |   | Total |  
|                       |  | £m              |   | £m         |   | £m       |   | £m    |   | £m    |  
|                       |  |                 |   |            |   |          |   |       |   |       |  
|1 January 2006         |  | 110             |   | 7          |   | 5        |   | 17    |   | 139   |  
|                       |  |                 |   |            |   |          |   |       |   |       |  
|Exchange differences   |  | (2              | ) |           |   |         |   | (1    | ) | (3    | )
|                       |  |                 |   |            |   |          |   |       |   |       |  
|Charged in the year    |  | 37              |   | 1          |   |         |   | 5     |   | 43    |  
|                       |  |                 |   |            |   |          |   |       |   |       |  
|Utilised in the year   |  | (47             | ) | (1         | ) | (2       | ) | (5    | ) | (55   | )
|                       |  |                 |   |            |   |          |   |       |   |       |  
|Released               |  | (4              | ) |           |   | (1       | ) | (1    | ) | (6    | )
|                       |  |                 |   |            |   |          |   |       |   |       |  
|Unwinding of discounts |  | 1               |   |           |   |         |   |      |   | 1     |  
|                       |  |                 |   |            |   |          |   |       |   |       |  
|31 December
      2006 |  | 95              |   | 7          |   | 2        |   | 15    |   | 119   |  
|                       |  |                 |   |            |   |          |   |       |   |       |  
|                       |  |                 |   |            |   |          |   |       |   |       |  

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 restructuring programmes, 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 (see note 35 on page 124). Provisions for specific
    claims or actions are only made when the outcome is considered probable
    that there will be a future outflow of funds, including 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 majority of charges in 2006 relate to the Core Plus programme which was announced in July 2005 and includes headcount reduction, data centre rationalisation and development transformation. These provisions will be
primarily utilised over the next three years. Also included within rationalisation provisions at the end of 2006 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 2007 and property-related provisions will be utilised over the remaining lease periods. Legal/compliance provisions represent 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. 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 over the remaining
lease periods.




Reuters Group PLCAnnual
  Report and Form 20-F 2006

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|---------- | ---
|           |    
|Financials | 111
|           |    
|           |    

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 35 defined contribution plans covering approximately 57% of its employees, of which the largest plans are the Reuters Retirement Plan and the Reuters 401(k) Plans. The percentage of total
employees covered and the company contribution to these plans were:

|                        |  |                |  | Company contribution |  
|----------------------- |  | -------------- |  | -------------------- | -
|                        |  | % of employees |  | % of basic salary    |  
|                        |  |                |  |                      |  
|Reuters Retirement Plan |  | 16.4%          |  | 11.0%                | *
|                        |  |                |  |                      |  
|Reuters 401(k) Plans    |  | 24.4%          |  | 6.0%                 |  
|                        |  |                |  |                      |  

|* | 7.0% plus 4.0% through salary sacrifice
    arrangements.
|- | ---------------------------------------------------------

The Group contributed £29 million to defined contribution plans in 2006 (2005: £25 million, 2004: £19 million) and expects to contribute £30 million in 2007.

|Defined benefit plans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|The Group also operates 28 defined
    benefit plans and post retirement medical plans covering approximately 21%
    of employees. All significant plans are valued under
IAS 19 Employee Benefits by independently qualified actuaries using
the Projected Unit Credit Method.                                                                                                                                                                                                                                                                                                                                               |  | benefits. The SPS is a smaller
            defined benefit plan with benefits related to final salary and length
        of service.
      Both the RPF and the SPS are set up under
                  trust, and as such are independent of the company. Both trusts have a
                  single corporate trustee, with the directors of the corporate trustee
                  operating as the managing committee of the pension plan. The RPF and
                  the SPS trustee companies both have directors appointed by the members,
                  and directors, plus the chairman, appointed by the company. No senior
                  company officers are directors of the corporate trustees. Both schemes
                  are prohibited from investing directly in the shares or debt of the company
    except to the extent that these form part of pooled fund investments.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|The largest defined benefit plans are
        the Reuters Pension Fund (RPF) and the Reuters Supplementary Pension
        Scheme (SPS). The total defined benefit obligation for all significant
        plans at 31 December 2006 was £1,417 million (2005: £1,346
        million, 2004: £1,158 million), of which £1,075 million (2005: £985
        million, 2004: £836 million) related to the RPF and £158 million
        (2005: £162 million, 2004: £141 million) related to the SPS.
        The RPF is a complex, hybrid pension fund, with both defined company
    and employee contributions, and defined employee | 

Movement on pension provisions and similar obligations

|                                                              |                                  |      | 2006 |      | 2005 |      | 2004 |  
|------------------------------------------------------------- | -------------------------------- | ---- | ---- | ---- | ---- | ---- | ---- | -
|                                                              |                                  |      | £m   |      | £m   |      | £m   |  
|                                                              |                                  |      |      |      |      |      |      |  
|1 January                                                     |                                  | (317 | )    | (263 | )    | (77  | )   
|                                                              |                                  |      |      |      |      |      |      |  
|Income statement
      (see note 3):                          |                                  |      |      |      |      |      |     
|                                                              |                                  |      |      |      |      |      |      |  
|                                                              | Defined benefit plans*           |      | (30  | )    | (27  | )    | (11  | )
|                                                              |                                  |      |      |      |      |      |      |  
|                                                              | Post-retirement medical benefits |      |     |      | (3   | )    | 2    |  
|                                                              |                                  |      |      |      |      |      |      |  
|Actuarial gains
      and losses taken directly to reserves:  |                                  |      |      |      |      |      |     
|                                                              |                                  |      |      |      |      |      |      |  
|                                                              | Defined benefit plans*           |      | 8    |      | (46  | )    | (206 | )
|                                                              |                                  |      |      |      |      |      |      |  
|                                                              | Post-retirement medical benefits |      | (2   | )    | (2   | )    | 1    |  
|                                                              |                                  |      |      |      |      |      |      |  
|Exchange differences:                                         |                                  |      |      |      |      |      |     
|                                                              |                                  |      |      |      |      |      |      |  
|                                                              | Defined benefit plans*           |      | 1    |      |     |      |     |  
|                                                              |                                  |      |      |      |      |      |      |  
|                                                              | Post-retirement medical benefits |      | 1    |      |     |      |     |  
|                                                              |                                  |      |      |      |      |      |      |  
|                                                              |                                  |      | (339 | )    | (341 | )    | (291 | )
|                                                              |                                  |      |      |      |      |      |      |  
|Contributions paid                                            |                                  | 208  |      | 24   |      | 28   |     
|                                                              |                                  |      |      |      |      |      |      |  
|Schemes in surplus
      recognised within non-current assets |                                  | (14  | )    |     |      |     |     
|                                                              |                                  |      |      |      |      |      |      |  
|31 December                                                   |                                  | (145 | )    | (317 | )    | (263 | )   
|                                                              |                                  |      |      |      |      |      |      |  
|Composed of:                                                  |                                  |      |      |      |      |      |     
|                                                              |                                  |      |      |      |      |      |      |  
|                                                              | Defined benefit plans*           |      | (129 | )    | (302 | )    | (252 | )
|                                                              |                                  |      |      |      |      |      |      |  
|                                                              | Post-retirement medical benefits |      | (9   | )    | (8   | )    | (4   | )
|                                                              |                                  |      |      |      |      |      |      |  
|                                                              | Other                            |      | (7   | )    | (7   | )    | (7   | )
|                                                              |                                  |      |      |      |      |      |      |  
|31 December                                                   |                                  | (145 | )    | (317 | )    | (263 | )   
|                                                              |                                  |      |      |      |      |      |      |  

|* | The figures for defined benefit plans
        include a number of immaterial schemes which have not been valued under
    IAS 19.
|- | ---------------------------------------------------------------------------------------------------------------------------------



Reuters Group PLCAnnual
  Report and Form 20-F 2006

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|    |                                                    
|--- | ---------------------------------------------------
|    |                                                    
|112 | Notes to the financial
        statements continued
|    |                                                    
|    |                                                    

|25 | Retirement benefitscontinued
|-- | ----------------------------

Amounts recognised in respect of material defined benefit plansThe
    following disclosures only refer to the Groups material defined benefit
plans:

Defined benefit assets/(liabilities) recognised in the balance sheet

|                                                                          |  |          |   |                |   | Post retirement  |   |       |  
|------------------------------------------------------------------------- |  | -------- | - | -------------- | - | ---------------- | - | ----- | -
|                                                                          |  | UK Plans |   | Overseas Plans |   | medical benefits |   | Total |  
|                                                                          |  |          |   |                |   |                  |   |       |  
|                                                                          |  | 2006     |   | 2005           |   | 2004             |   | 2006  |  
|                                                                          |  | £m       |   | £m             |   | £m               |   | £m    |  
|                                                                          |  |          |   |                |   |                  |   |       |  
|Present value of funded obligations                                       |  | (1,233   | ) | (1,148         | ) | (977             | ) | (157  | )
|                                                                          |  |          |   |                |   |                  |   |       |  
|Fair value of plan assets                                                 |  | 1,158    |   | 902            |   | 781              |   | 140   |  
|                                                                          |  |          |   |                |   |                  |   |       |  
|                                                                          |  | (75      | ) | (246           | ) | (196             | ) | (17   | )
|                                                                          |  |          |   |                |   |                  |   |       |  
|Present value of unfunded obligations                                     |  | (15      | ) | (19            | ) | (18              | ) | (3    | )
|                                                                          |  |          |   |                |   |                  |   |       |  
|                                                                          |  | (90      | ) | (265           | ) | (214             | ) | (20   | )
|                                                                          |  |          |   |                |   |                  |   |       |  
|Plan asset not recognised in the balance sheet                            |  |         |   |               |   |                 |   | (3    | )
|                                                                          |  |          |   |                |   |                  |   |       |  
|IAS 19 deficit recognised in the balance sheet                            |  | (102     | ) | (265           | ) | (214             | ) | (25   | )
|                                                                          |  |          |   |                |   |                  |   |       |  
|IAS 19 surplus recognised in the balance sheet                            |  | 12       |   |               |   |                 |   | 2     |  
|                                                                          |  |          |   |                |   |                  |   |       |  
|                                                                          |  |          |   |                |   |                  |   |       |  
|Fair value of reimbursement rights not recognised
 as pension plan assets |  |         |   |               |   |                 |   | 4     |  
|                                                                          |  |          |   |                |   |                  |   |       |  

The assets and obligations reported under UK plans include the RPF, the SPS and a number of smaller unfunded early retirement, ill health and retirement benefit schemes.

The reimbursement rights reported under overseas plans relate to insurance policies held by Reuters in respect of a plan in Germany which do not meet the definition of plan assets under IAS 19. These are recognised in
non-current assets.

|Amounts
    recognised in the income statement                                            | 
|----------------------------------------------------------------------------------------- | 
|                                                                                          | 
|                                                                                          | 
|                                                                                          | 
|                                                                                          | 
|                                                                                          | 
|                                                                                          | 
|Current service cost                                                                      | 
|                                                                                          | 
|Interest cost                                                                             | 
|                                                                                          | 
|Expected gain on plan assets                                                              | 
|                                                                                          | 
|Past service cost                                                                         | 
|                                                                                          | 
|Gains on curtailments                                                                     | 
|                                                                                          | 
|Gains on settlements                                                                      | 
|                                                                                          | 
|Total recognised in the income statement                                                  | 
|                                                                                          | 
|Included within:                                                                          | 
|                                                                                          | 
|Operating profit                                                                          | 
|                                                                                          | 
|Profit on disposal of associates,
 joint ventures andavailable-for-sale
 financial assets | 
|                                                                                          | 
|Profit for the year from discontinued operations                                          | 
|                                                                                          | 
|Total recognised in the income statement                                                  | 
|                                                                                          | 
|Actual return on plan assets                                                              | 
|                                                                                          | 

|                                                                                                                       | 
|---------------------------------------------------------------------------------------------------------------------- | 
|Further amounts recognised in the statement of recognised income and expense                                           | 
|                                                                                                                       | 
|                                                                                                                       | 
|                                                                                                                       | 
|                                                                                                                       | 
|                                                                                                                       | 
|                                                                                                                       | 
|                                                                                                                       | 
|Actuarial losses/(gains)                                                                                               | 
|                                                                                                                       | 
|Effect of asset ceiling                                                                                                | 
|                                                                                                                       | 
|                                                                                                                       | 
|                                                                                                                       | 
|Deferred tax impact of actuarial gains and losses recognised in the statement
        of recognised income and expense | 
|                                                                                                                       | 
|Total
    recognised in the statement of recognised income and expense                                                 | 
|                                                                                                                       | 



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Report and Form 20-F 2006

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|           |    
|Financials | 113
|           |    
|           |    

|                                                                                    | 
|----------------------------------------------------------------------------------- | 
|Cumulative
    amounts recognised in the statement of recognised income and expense | 
|                                                                                    | 
|                                                                                    | 
|                                                                                    | 
|                                                                                    | 
|                                                                                    | 
|                                                                                    | 
|Balance of actuarial losses at 1 January                                            | 
|                                                                                    | 
|Net actuarial losses/(gains) recognised in year                                     | 
|                                                                                    | 
|Balance of actuarial losses/(gains) at 31 December                                  | 
|                                                                                    | 
|Balance of asset limit effects at 1 January                                         | 
|                                                                                    | 
|Effects of the asset ceiling in the year                                            | 
|                                                                                    | 
|Balance of asset limit effects at 31 December                                       | 
|                                                                                    | 

|                                                                       | 
|---------------------------------------------------------------------- | 
|Changes
        in the present value of the defined
benefit obligation | 
|                                                                       | 
|                                                                       | 
|                                                                       | 
|                                                                       | 
|                                                                       | 
|                                                                       | 
|                                                                       | 
|Opening defined benefit obligation                                     | 
|                                                                       | 
|Current service cost                                                   | 
|                                                                       | 
|Past service cost                                                      | 
|                                                                       | 
|Interest cost                                                          | 
|                                                                       | 
|Gains on curtailments                                                  | 
|                                                                       | 
|Liabilities extinguished on settlements                                | 
|                                                                       | 
|Actuarial gains/(losses)                                               | 
|                                                                       | 
|Contributions by employees                                             | 
|                                                                       | 
|Benefits paid                                                          | 
|                                                                       | 
|Exchange differences on overseas plans                                 | 
|                                                                       | 
|Closing defined benefit obligation                                     | 
|                                                                       | 

|                                             | 
|-------------------------------------------- | 
|Changes
    in the fair value of plan assets | 
|                                             | 
|                                             | 
|                                             | 
|                                             | 
|                                             | 
|                                             | 
|Opening fair value of plan assets            | 
|                                             | 
|Expected return                              | 
|                                             | 
|Assets transferred on settlements            | 
|                                             | 
|Actuarial gains/(losses)                     | 
|                                             | 
|Contributions by employer                    | 
|                                             | 
|Contributions by employees                   | 
|                                             | 
|Benefits paid                                | 
|                                             | 
|Exchange differences on overseas plans       | 
|                                             | 
|Closing fair value of plan assets            | 
|                                             | 

The weighted average duration of the scheme obligations were 25 years and 15 years for the RPF and the SPS respectively.

Following discussions with the trustees of the RPF and the SPS, £181 million was contributed towards funding the deficit in the plans in 2006 with a further £40 million due to the RPF in 2007 and payments of
£1.5 million per year due to the SPS in each of the years from 2007 until 2010. A further special contribution of £6 million was made to the SPS in respect of some previously unfunded arrangements. In addition to these special
contributions, employers contribution rates have been agreed at between 19.0% and 25.8% of pensionable salary (including 6% and 9% respectively through salary sacrifice arrangements) from 1 April 2007 for RPF members and 34.2% for SPS members
(including 6% through salary sacrifice arrangements).

The Group expects to contribute £68 million to its defined benefit schemes in 2007, including the special contributions referred to above.

Major categories of plan
  assets as a percentage of total plan assets

|         |  |          |  |                |  | Post retirement  |  |       | 
|-------- |  | -------- |  | -------------- |  | ---------------- |  | ----- | 
|         |  | UK Plans |  | Overseas Plans |  | medical benefits |  | Total | 
|         |  |          |  |                |  |                  |  |       | 
|         |  | 2006     |  | 2005           |  | 2004             |  | 2006  | 
|         |  | %        |  | %              |  | %                |  | %     | 
|         |  |          |  |                |  |                  |  |       | 
|Equities |  | 44       |  | 55             |  | 55               |  | 45    | 
|         |  |          |  |                |  |                  |  |       | 
|Bonds    |  | 45       |  | 36             |  | 37               |  | 47    | 
|         |  |          |  |                |  |                  |  |       | 
|Property |  | 7        |  | 7              |  | 7                |  |      | 
|         |  |          |  |                |  |                  |  |       | 
|Cash     |  | 1        |  | 2              |  | 1                |  | 4     | 
|         |  |          |  |                |  |                  |  |       | 
|Other    |  | 3        |  |               |  |                 |  | 4     | 
|         |  |          |  |                |  |                  |  |       | 

The trustees of the RPF and the SPS have responsibility for the operation of the funds including strategic decision making on investment matters. A statement of investment principles has been made by the trustees of
the schemes.

The strategic asset allocation of the funds is driven by the financial characteristics of the funds, in particular the funds liabilities and the risk tolerance of the trustees. In setting the investment policy,
the trustees of the RPF and the SPS sought the views of the company.



Reuters Group PLCAnnual
Report and Form 20-F 200

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|    |                                                    
|--- | ---------------------------------------------------
|    |                                                    
|114 | Notes to the financial
        statements continued
|    |                                                    
|    |                                                    

|25 | Retirement benefitscontinued
|-- | ----------------------------

Principal actuarial assumptions at the
balance sheet date (expressed as a weighted average)

|                                                |  |          |  |                |  | Post retirement  | 
|----------------------------------------------- |  | -------- |  | -------------- |  | ---------------- | 
|                                                |  | UK Plans |  | Overseas Plans |  | medical benefits | 
|                                                |  |          |  |                |  |                  | 
|                                                |  | 2006     |  | 2005           |  | 2004             | 
|                                                |  | %        |  | %              |  | %                | 
|                                                |  |          |  |                |  |                  | 
|Discount rate                                   |  | 4.93     |  | 4.75           |  | 5.25             | 
|                                                |  |          |  |                |  |                  | 
|Inflation assumption                            |  | 3.00     |  | 2.75           |  | 2.75             | 
|                                                |  |          |  |                |  |                  | 
|Rate of increase in salaries                    |  | 4.25     |  | 4.00           |  | 4.00             | 
|                                                |  |          |  |                |  |                  | 
|Rate of increase in pensions in payment         |  | 3.00     |  | 2.75           |  | 2.75             | 
|                                                |  |          |  |                |  |                  | 
|Medical cost trend                              |  |         |  |               |  |                 | 
|                                                |  |          |  |                |  |                  | 
|Expected rate of return on reimbursement rights |  | 5.10     |  |               |  |                 | 
|                                                |  |          |  |                |  |                  | 
|Expected rate of return on assets:              |  |          |  |                |  |                  | 
|                                                |  |          |  |                |  |                  | 
|Equities                                        |  | 8.10     |  | 8.00           |  | 8.25             | 
|                                                |  |          |  |                |  |                  | 
|Bonds                                           |  | 4.49     |  | 4.00           |  | 4.40             | 
|                                                |  |          |  |                |  |                  | 
|Property                                        |  | 6.20     |  | 6.00           |  | 6.50             | 
|                                                |  |          |  |                |  |                  | 
|Cash                                            |  | 4.25     |  | 4.00           |  | 4.00             | 
|                                                |  |          |  |                |  |                  | 
|Other                                           |  | 4.25     |  |               |  |                 | 
|                                                |  |          |  |                |  |                  | 

For the RPF and the SPS, the two largest schemes, a 0.25% increase in the discount rate would result in a £61 million decrease in the defined benefit obligation at the balance sheet date. A 0.25% decrease in the
discount rate would result in a £66 million increase in the defined benefit obligation at the balance sheet date. The effects of such a change are partially hedged by the schemes asset portfolios.

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 at31 December 2005 and 31 December 2006 is stated gross of the expected levy to the UK Pension Protection Fund.

UK mortality assumptionsThe mortality assumptions used to assess the defined benefit obligation for the RPF and the SPS, the largest plans, at 31 December 2006, 31 December 2005 and 31 December 2004 are based on the 92 series tables issued by
the Continuous Mortality Investigation Bureau with allowance for projected longevity improvements to calendar year 2025 and adjustment for the short cohort effect.

The following table illustrates the expectation of life of an average member reaching age 65 at the balance sheet date and member reaching 65 at the same date plus 25 years:

|                                               |  | Life expectation in years | 
|---------------------------------------------- |  | ------------------------- | 
|                                               |  |                           | 
|                                               |  | Male                      | 
|                                               |  |                           | 
|Retiring at reporting date at age 65           |  | 21                        | 
|                                               |  |                           | 
|Retiring at reporting date +25 years at age 65 |  | 22                        | 
|                                               |  |                           | 

For the RPF and the SPS, an increase in life expectancy of 1 year across all age groups would result in a £62 million increase in the defined benefit obligation.

History of experience gains
  and losses

|                                           |  |        |   |          |   |            |   | 2006   |   |        |   |          |   |            |   | 2005   |   |       |   |          |   |            |   | 2004   |  
|------------------------------------------ |  | ------ | - | -------- | - | ---------- | - | ------ | - | ------ | - | -------- | - | ---------- | - | ------ | - | ----- | - | -------- | - | ---------- | - | ------ | -
|                                           |  |        |   |          |   |            |   |        |   |        |   |          |   |            |   |        |   |       |   |          |   |            |   |        |  
|                                           |  |        |   |          |   | Post       |   |        |   |        |   |          |   | Post       |   |        |   |       |   |          |   | Post       |   |        |  
|                                           |  |        |   |          |   | retirement |   |        |   |        |   |          |   | retirement |   |        |   |       |   |          |   | retirement |   |        |  
|                                           |  | UK     |   | Overseas |   | medical    |   |        |   | UK     |   | Overseas |   | medical    |   |        |   | UK    |   | Overseas |   | medical    |   |        |  
|                                           |  | Plans  |   | Plans    |   | benefits   |   | Total  |   | Plans  |   | Plans    |   | benefits   |   | Total  |   | Plans |   | Plans    |   | benefits   |   | Total  |  
|                                           |  | £m     |   | £m       |   | £m         |   | £m     |   | £m     |   | £m       |   | £m         |   | £m     |   | £m    |   | £m       |   | £m         |   | £m     |  
|                                           |  |        |   |          |   |            |   |        |   |        |   |          |   |            |   |        |   |       |   |          |   |            |   |        |  
|Defined benefit obligation                 |  | (1,248 | ) | (160     | ) | (9         | ) | (1,417 | ) | (1,167 | ) | (171     | ) | (8         | ) | (1,346 | ) | (995  | ) | (160     | ) | (3         | ) | (1,158 | )
|                                           |  |        |   |          |   |            |   |        |   |        |   |          |   |            |   |        |   |       |   |          |   |            |   |        |  
|Plan assets                                |  | 1,158  |   | 140      |   |           |   | 1,298  |   | 902    |   | 139      |   |           |   | 1,041  |   | 781   |   | 124      |   |           |   | 905    |  
|                                           |  |        |   |          |   |            |   |        |   |        |   |          |   |            |   |        |   |       |   |          |   |            |   |        |  
|Deficit                                    |  | (90    | ) | (20      | ) | (9         | ) | (119   | ) | (265   | ) | (32      | ) | (8         | ) | (305   | ) | (214  | ) | (36      | ) | (3         | ) | (253   | )
|                                           |  |        |   |          |   |            |   |        |   |        |   |          |   |            |   |        |   |       |   |          |   |            |   |        |  
|Experience adjustments on plan liabilities |  | 14     |   | (3       | ) | 3          |   | 14     |   | (16    | ) | 6        |   | (1         | ) | (11    | ) | (100  | ) | 5        |   | 1          |   | (94    | )
|                                           |  |        |   |          |   |            |   |        |   |        |   |          |   |            |   |        |   |       |   |          |   |            |   |        |  
|Experience adjustments on plan assets      |  | 31     |   | 4        |   |           |   | 35     |   | 95     |   | 11       |   |           |   | 106    |   | 24    |   | (1       | ) |           |   | 23     |  
|                                           |  |        |   |          |   |            |   |        |   |        |   |          |   |            |   |        |   |       |   |          |   |            |   |        |  



Reuters Group PLCAnnual Report and Form 20-F 2006

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|           |    
|Financials | 115
|           |    
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26 Deferred tax

The movement on the deferred tax account is as shown below:

|                                                                          |  | 2006 |   | 2005 |   | 2004 |  
|------------------------------------------------------------------------- |  | ---- | - | ---- | - | ---- | -
|                                                                          |  | £m   |   | £m   |   | £m   |  
|                                                                          |  |      |   |      |   |      |  
|1 January                                                                 |  | 210  |   | 247  |   | 219  |  
|                                                                          |  |      |   |      |   |      |  
|Acquisitions/disposals                                                    |  | (11  | ) | (46  | ) |     |  
|                                                                          |  |      |   |      |   |      |  
|Income statement charge                                                   |  | (18  | ) | (19  | ) | (23  | )
|                                                                          |  |      |   |      |   |      |  
|Deferred tax (charge)/credit on pension revaluations recognised in equity |  | (1   | ) | 10   |   | 45   |  
|                                                                          |  |      |   |      |   |      |  
|Deferred tax on stock options recognised in equity                        |  | 1    |   | 10   |   | 8    |  
|                                                                          |  |      |   |      |   |      |  
|Exchange differences                                                      |  | (10  | ) | 8    |   | (2   | )
|                                                                          |  |      |   |      |   |      |  
|31 December                                                               |  | 171  |   | 210  |   | 247  |  
|                                                                          |  |      |   |      |   |      |  

Deferred 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 £101 million carried forward at the balance sheet date. The deferred tax asset not recognised in respect of
these losses is £39 million.

Deferred tax assets of £184 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 £991 million would be payable.

The movements of deferred tax assets and liabilities are shown below:

Deferred tax liabilities

|                            |  | Property, |   |       |   |       |  
|--------------------------- |  | --------- | - | ----- | - | ----- | -
|                            |  | plant and |   |       |   |       |  
|                            |  | equipment |   | Other |   | Total |  
|                            |  | £m        |   | £m    |   | £m    |  
|                            |  |           |   |       |   |       |  
|1 January 2006              |  | (12       | ) | (54   | ) | (66   | )
|                            |  |           |   |       |   |       |  
|Acquisitions                |  |          |   | (11   | ) | (11   | )
|                            |  |           |   |       |   |       |  
|Charged to income statement |  |          |   | (33   | ) | (33   | )
|                            |  |           |   |       |   |       |  
|31 December 2006            |  | (12       | ) | (98   | ) | (110  | )
|                            |  |           |   |       |   |       |  

Deferred tax assets

|                                       |  |           |   |        |  |         |   |       |   |       |  
|-------------------------------------- |  | --------- | - | ------ |  | ------- | - | ----- | - | ----- | -
|                                       |  | Property, |   |        |  |         |   |       |   |       |  
|                                       |  | plant and |   |        |  | Stock   |   |       |   |       |  
|                                       |  | equipment |   | Losses |  | options |   | Other |   | Total |  
|                                       |  | £m        |   | £m     |  | £m      |   | £m    |   | £m    |  
|                                       |  |           |   |        |  |         |   |       |   |       |  
|1 January 2006                         |  | 40        |   | 88     |  | 22      |   | 126   |   | 276   |  
|                                       |  |           |   |        |  |         |   |       |   |       |  
|Credited/(charged) to income statement |  | 24        |   | 16     |  | 1       |   | (26   | ) | 15    |  
|                                       |  |           |   |        |  |         |   |       |   |       |  
|Recognised in equity                   |  |          |   |       |  | 1       |   | (1    | ) |      |  
|                                       |  |           |   |        |  |         |   |       |   |       |  
|Realisation of stock option deductions |  |          |   | 7      |  | (7      | ) |      |   |      |  
|                                       |  |           |   |        |  |         |   |       |   |       |  
|Exchange differences                   |  | (2        | ) |       |  |        |   | (8    | ) | (10   | )
|                                       |  |           |   |        |  |         |   |       |   |       |  
|31 December 2006                       |  | 62        |   | 111    |  | 17      |   | 91    |   | 281   |  
|                                       |  |           |   |        |  |         |   |       |   |       |  

The deferred tax asset expected to be recovered after more than one year is £183 million (2005: £135 million, 2004: £186 million).



Reuters Group PLCAnnual
Report and Form 20-F 2006

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|    |                                                    
|--- | ---------------------------------------------------
|    |                                                    
|116 | Notes to the financial
        statements continued
|    |                                                    
|    |                                                    

27 Share capital

Movements in share capital
during the year ended 31 December were as below:

|                                 |  |               |   |         |  |         |  
|-------------------------------- |  | ------------- | - | ------- |  | ------- | -
|                                 |  | Called up     |   | Share   |  | Share   |  
|                                 |  | share capital |   | premium |  | capital |  
|                                 |  | £m            |   | £m      |  | £m      |  
|                                 |  |               |   |         |  |         |  
|1 January 2004                   |  | 358           |   | 91      |  | 449     |  
|                                 |  |               |   |         |  |         |  
|Shares allotted during the year  |  | 1             |   | 5       |  | 6       |  
|                                 |  |               |   |         |  |         |  
|31 December 2004                 |  | 359           |   | 96      |  | 455     |  
|                                 |  |               |   |         |  |         |  
|Shares allotted during the year  |  | 1             |   | 11      |  | 12      |  
|                                 |  |               |   |         |  |         |  
|31 December 2005                 |  | 360           |   | 107     |  | 467     |  
|                                 |  |               |   |         |  |         |  
|Shares allotted during the year  |  | 7             |   | 34      |  | 41      |  
|                                 |  |               |   |         |  |         |  
|Shares cancelled during the year |  | (12           | ) |        |  | (12     | )
|                                 |  |               |   |         |  |         |  
|31 December 2006                 |  | 355           |   | 141     |  | 496     |  
|                                 |  |               |   |         |  |         |  

An analysis of called up share capital is set
out below:

|                                                                                                                                                                                                                                           |  |       |  |       |  |       | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----- |  | ----- |  | ----- | 
|                                                                                                                                                                                                                                           |  | 2006  |  | 2005  |  | 2004  | 
|                                                                                                                                                                                                                                           |  | £m    |  | £m    |  | £m    | 
|                                                                                                                                                                                                                                           |  |       |  |       |  |       | 
|Authorised:                                                                                                                                                                                                                                |  |       |  |       |  |       | 
|                                                                                                                                                                                                                                           |  |       |  |       |  |       | 
|One Founders Share of £1                                                                                                                                                                                                                   |  |      |  |      |  |      | 
|                                                                                                                                                                                                                                           |  |       |  |       |  |       | 
|2,100 million ordinary shares of 25p each                                                                                                                                                                                                  |  | 525   |  | 525   |  | 525   | 
|                                                                                                                                                                                                                                           |  |       |  |       |  |       | 
|                                                                                                                                                                                                                                           |  | 525   |  | 525   |  | 525   | 
|                                                                                                                                                                                                                                           |  |       |  |       |  |       | 
|Allotted, called up and fully paid:                                                                                                                                                                                                        |  |       |  |       |  |       | 
|                                                                                                                                                                                                                                           |  |       |  |       |  |       | 
|One Founders Share of £1                                                                                                                                                                                                                   |  |      |  |      |  |      | 
|                                                                                                                                                                                                                                           |  |       |  |       |  |       | 
|Ordinary shares of 25p each                                                                                                                                                                                                                |  | 355   |  | 360   |  | 359   | 
|                                                                                                                                                                                                                                           |  |       |  |       |  |       | 
|                                                                                                                                                                                                                                           |  | 355   |  | 360   |  | 359   | 
|                                                                                                                                                                                                                                           |  |       |  |       |  |       | 
|Number of ordinary shares of 25p each (millions)                                                                                                                                                                                           |  | 1,422 |  | 1,441 |  | 1,436 | 
|                                                                                                                                                                                                                                           |  |       |  |       |  |       | 
|Shares allotted during the year in millions                                                                                                                                                                                                |  |       |  |       |  |       | 
|                                                                                                                                                                                                                                           |  |       |  |       |  |       | 
|28,876,537 shares in Reuters
	    Group PLC were issued under employee share schemes at prices
      ranging from £nil

	  to 419p per share. Transaction costs incurred
	  on issue of shares amounted to £nil
 (2005: £nil,
 2004: £nil) |  | 29    |  | 6     |  | 3     | 
|                                                                                                                                                                                                                                           |  |       |  |       |  |       | 

During 2006, Reuters cancelled 48 million shares repurchased as part of the ongoing share buy-back programme.

Called up share capital includes £1 million for shares granted to employees on exercise of share options/awards in respect of which no cash had been received at the balance sheet date (2005, £1 million, 2004:
£1 million).

The rights attaching to the Founders Share are set out on pages 147148.

The following table provides a summary of the shares repurchased under the buy-back programme from its announcement in July 2005 until December 2006:

|          |  | Total number     |  |               |  | Approximate     | 
|--------- |  | ---------------- |  | ------------- |  | --------------- | 
|          |  | of shares        |  |               |  | value of shares | 
|          |  | purchased as     |  |               |  | that may        | 
|          |  | part of publicly |  | Average price |  | be purchased    | 
|          |  | announced        |  | paid per      |  | under the       | 
|Month     |  | programme        |  | share (£)     |  | programme (£m)  | 
|          |  |                  |  |               |  |                 | 
|2005:     |  |                  |  |               |  |                 | 
|          |  |                  |  |               |  |                 | 
|July      |  | 1,500,000        |  | 3.89          |  | 994             | 
|          |  |                  |  |               |  |                 | 
|August    |  | 8,500,000        |  | 3.70          |  | 962             | 
|          |  |                  |  |               |  |                 | 
|September |  | 7,150,000        |  | 3.73          |  | 936             | 
|          |  |                  |  |               |  |                 | 
|October   |  | 2,800,000        |  | 3.53          |  | 926             | 
|          |  |                  |  |               |  |                 | 
|November  |  | 22,800,000       |  | 3.89          |  | 836             | 
|          |  |                  |  |               |  |                 | 
|December  |  | 14,650,000       |  | 4.08          |  | 776             | 
|          |  |                  |  |               |  |                 | 
|2006:     |  |                  |  |               |  |                 | 
|          |  |                  |  |               |  |                 | 
|January   |  | 10,500,000       |  | 4.32          |  | 731             | 
|          |  |                  |  |               |  |                 | 
|February  |  | 18,450,000       |  | 4.06          |  | 655             | 
|          |  |                  |  |               |  |                 | 
|March     |  | 13,725,000       |  | 3.89          |  | 601             | 
|          |  |                  |  |               |  |                 | 
|April     |  | 6,000,000        |  | 3.98          |  | 577             | 
|          |  |                  |  |               |  |                 | 
|May       |  | 9,435,000        |  | 3.86          |  | 541             | 
|          |  |                  |  |               |  |                 | 
|June      |  | 17,750,000       |  | 3.67          |  | 475             | 
|          |  |                  |  |               |  |                 | 
|July      |  | 6,770,000        |  | 3.75          |  | 450             | 
|          |  |                  |  |               |  |                 | 
|August    |  | 13,000,000       |  | 3.89          |  | 399             | 
|          |  |                  |  |               |  |                 | 
|September |  | 9,750,000        |  | 4.11          |  | 358             | 
|          |  |                  |  |               |  |                 | 
|October   |  | 8,725,000        |  | 4.43          |  | 319             | 
|          |  |                  |  |               |  |                 | 
|November  |  | 9,500,000        |  | 4.57          |  | 276             | 
|          |  |                  |  |               |  |                 | 
|December  |  | 5,594,000        |  | 4.55          |  | 250             | 
|          |  |                  |  |               |  |                 | 

The current £1 billion share buy-back
  programme was announced on 26 July 2005 and was due to run for two years. Based
  on current investment plans, Reuters expects to increase the buy-back during
  2007 to £400£425 million, which includes £250 million remaining
  of the £1 billion buy-back. 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 2006

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|           |    
|Financials | 117
|           |    
|           |    

28 Other reserves

An analysis of the movement in other reserves is set out below:

|                                                                                                              |  | Capital    |  |         |   | Available- |   |         |   |             |   | Total    |  
|------------------------------------------------------------------------------------------------------------- |  | ---------- |  | ------- | - | ---------- | - | ------- | - | ----------- | - | -------- | -
|                                                                                                              |  | redemption |  | Other   |   | for-sale   |   | Hedging |   | Translation |   | other    |  
|                                                                                                              |  | reserve    |  | reserve |   | reserve    |   | reserve |   | reserve     |   | reserves |  
|                                                                                                              |  | £m         |  | £m      |   | £m         |   | £m      |   | £m          |   | £m       |  
|                                                                                                              |  |            |  |         |   |            |   |         |   |             |   |          |  
|1 January 2004                                                                                                |  | 1          |  | (1,718  | ) |           |   |        |   |            |   | (1,717   | )
|                                                                                                              |  |            |  |         |   |            |   |         |   |             |   |          |  
|Exchange differences taken directly to reserves                                                               |  |           |  |        |   |           |   |        |   | (34         | ) | (34      | )
|                                                                                                              |  |            |  |         |   |            |   |         |   |             |   |          |  
|Exchange differences taken to the income statement on disposal of assets                                      |  |           |  |        |   |           |   |        |   | 6           |   | 6        |  
|                                                                                                              |  |            |  |         |   |            |   |         |   |             |   |          |  
|Tax on items taken directly to or transferred from reserves                                                   |  |           |  |        |   |           |   |        |   | (10         | ) | (10      | )
|                                                                                                              |  |            |  |         |   |            |   |         |   |             |   |          |  
|31 December 2004                                                                                              |  | 1          |  | (1,718  | ) |           |   |        |   | (38         | ) | (1,755   | )
|                                                                                                              |  |            |  |         |   |            |   |         |   |             |   |          |  
|Transitional adjustment on first-time adoption of IAS 39*                                                     |  |           |  |        |   | 94         |   | 30      |   | (16         | ) | 108      |  
|                                                                                                              |  |            |  |         |   |            |   |         |   |             |   |          |  
|Exchange differences taken directly to reserves                                                               |  |           |  |        |   |           |   |        |   | 97          |   | 97       |  
|                                                                                                              |  |            |  |         |   |            |   |         |   |             |   |          |  
|Exchange 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 ondisposal

 of assets |  |           |  |        |   | (68        | ) |        |   |            |   | (68      | )
|                                                                                                              |  |            |  |         |   |            |   |         |   |             |   |          |  
|Fair value losses on net investment hedges                                                                    |  |           |  |        |   |           |   | (39     | ) |            |   | (39      | )
|                                                                                                              |  |            |  |         |   |            |   |         |   |             |   |          |  
|Fair value gains taken to the income statement on disposal of net investment hedges                           |  |           |  |        |   |           |   | (14     | ) |            |   | (14      | )
|                                                                                                              |  |            |  |         |   |            |   |         |   |             |   |          |  
|Other movements                                                                                               |  |           |  | (1      | ) |           |   |        |   |            |   | (1       | )
|                                                                                                              |  |            |  |         |   |            |   |         |   |             |   |          |  
|Tax on items taken directly to or transferred from reserves                                                   |  |           |  |        |   |           |   | 16      |   | (12         | ) | 4        |  
|                                                                                                              |  |            |  |         |   |            |   |         |   |             |   |          |  
|31 December 2005                                                                                              |  | 1          |  | (1,719  | ) | 4          |   | (7      | ) | 29          |   | (1,692   | )
|                                                                                                              |  |            |  |         |   |            |   |         |   |             |   |          |  
|Exchange differences taken directly to reserves                                                               |  |           |  |        |   |           |   |        |   | (95         | ) | (95      | )
|                                                                                                              |  |            |  |         |   |            |   |         |   |             |   |          |  
|Fair value gains on available-for-sale financial assets                                                       |  |           |  |        |   | 6          |   |        |   |            |   | 6        |  
|                                                                                                              |  |            |  |         |   |            |   |         |   |             |   |          |  
|Fair value gains on net investment hedges                                                                     |  |           |  |        |   |           |   | 34      |   |            |   | 34       |  
|                                                                                                              |  |            |  |         |   |            |   |         |   |             |   |          |  
|Shares cancelled during the year                                                                              |  | 12         |  |        |   |           |   |        |   |            |   | 12       |  
|                                                                                                              |  |            |  |         |   |            |   |         |   |             |   |          |  
|Tax on items taken directly to or transferred from reserves                                                   |  |           |  |        |   |           |   | (10     | ) | 7           |   | (3       | )
|                                                                                                              |  |            |  |         |   |            |   |         |   |             |   |          |  
|31 December 2006                                                                                              |  | 13         |  | (1,719  | ) | 10         |   | 17      |   | (59         | ) | (1,738   | )
|                                                                                                              |  |            |  |         |   |            |   |         |   |             |   |          |  

|  |                                                                                                                                                                              
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | The transitional adjustment on first-time adoption
      of IAS 39 primarily comprises recognition of the fair value of the Groups investment 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 capital redemption reserve is used to record an amount equal to the nominal value of treasury shares that have been cancelled.

The available-for-sale reserve is used to record the cumulative fair value gains and losses on available-for-sale financial assets. The cumulative gain or loss is recognised in the income statement on disposal of the
asset.

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 the hedges were effective. The cumulative gain or loss is
recognised in the income statement on disposal of the foreign operation.

The translation reserve is used to record cumulative exchange differences on the assets and liabilities of foreign operations. The cumulative exchange difference is recognised in the income statement on disposal of the
foreign operation.



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Report and Form 20-F 2006

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|118 | Notes to the financial
        statements continued
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29 Net cash flow from operating activities

Profit for the year is reconciled
  to cash generated from operations as follows:

|                                                                     |  |      |   |  |      |   |      |  
|-------------------------------------------------------------------- |  | ---- | - |  | ---- | - | ---- | -
|                                                                     |  | 2006 |   |  | 2005 |   | 2004 |  
|                                                                     |  | £m   |   |  | £m   |   | £m   |  
|                                                                     |  |      |   |  |      |   |      |  
|Profit for the year from continuing operations                       |  | 293  |   |  | 229  |   | 356  |  
|                                                                     |  |      |   |  |      |   |      |  
|Adjustments for:                                                     |  |      |   |  |      |   |      |  
|                                                                     |  |      |   |  |      |   |      |  
|Depreciation                                                         |  | 95   |   |  | 99   |   | 112  |  
|                                                                     |  |      |   |  |      |   |      |  
|Impairment of associates and joint ventures                          |  |     |   |  | 2    |   |     |  
|                                                                     |  |      |   |  |      |   |      |  
|Impairment of intangibles                                            |  |     |   |  | 1    |   | 35   |  
|                                                                     |  |      |   |  |      |   |      |  
|Amortisation of intangibles                                          |  | 46   |   |  | 33   |   | 28   |  
|                                                                     |  |      |   |  |      |   |      |  
|(Profit)/loss on disposal of property, plant and equipment           |  | (2   | ) |  |     |   | 1    |  
|                                                                     |  |      |   |  |      |   |      |  
|Employee share scheme charges                                        |  | 30   |   |  | 30   |   | 22   |  
|                                                                     |  |      |   |  |      |   |      |  
|Foreign exchange (gains)/losses                                      |  | (14  | ) |  | (8   | ) | 9    |  
|                                                                     |  |      |   |  |      |   |      |  
|Fair value movements on derivatives                                  |  | 19   |   |  | (18  | ) |     |  
|                                                                     |  |      |   |  |      |   |      |  
|Fair value movements on other financial assets                       |  |     |   |  | 16   |   |     |  
|                                                                     |  |      |   |  |      |   |      |  
|Profits on disposals                                                 |  | (80  | ) |  | (42  | ) | (207 | )
|                                                                     |  |      |   |  |      |   |      |  
|Income from investments                                              |  |     |   |  | (1   | ) |     |  
|                                                                     |  |      |   |  |      |   |      |  
|Share of post-tax losses/(profits) of associates and joint ventures  |  | 4    |   |  | (5   | ) | (11  | )
|                                                                     |  |      |   |  |      |   |      |  
|Finance income                                                       |  | (72  | ) |  | (41  | ) | (15  | )
|                                                                     |  |      |   |  |      |   |      |  
|Finance costs                                                        |  | 87   |   |  | 53   |   | 27   |  
|                                                                     |  |      |   |  |      |   |      |  
|Taxation                                                             |  | 20   |   |  | 9    |   | 40   |  
|                                                                     |  |      |   |  |      |   |      |  
|Movements in working capital:                                        |  |      |   |  |      |   |      |  
|                                                                     |  |      |   |  |      |   |      |  
|Decrease/(increase) in inventories                                   |  |     |   |  | 2    |   | (1   | )
|                                                                     |  |      |   |  |      |   |      |  
|Decrease in trade and other receivables                              |  | 23   |   |  | 3    |   | 2    |  
|                                                                     |  |      |   |  |      |   |      |  
|Increase/(decrease) in trade and other payables                      |  | 51   |   |  | (52  | ) | (98  | )
|                                                                     |  |      |   |  |      |   |      |  
|Increase/(decrease) in pensions deficit                              |  | (176 | ) |  | 9    |   | (17  | )
|                                                                     |  |      |   |  |      |   |      |  
|(Decrease)/increase in provisions                                    |  | (13  | ) |  | (27  | ) | 16   |  
|                                                                     |  |      |   |  |      |   |      |  
|(Decrease)/increase in amounts payable to discontinued operations    |  |     |   |  | (24  | ) | 8    |  
|                                                                     |  |      |   |  |      |   |      |  
|Cash generated from continuing operations                            |  | 311  |   |  | 268  |   | 307  |  
|                                                                     |  |      |   |  |      |   |      |  
|Profit for the year from discontinued operations                     |  | 12   |   |  | 253  |   | 19   |  
|                                                                     |  |      |   |  |      |   |      |  
|Adjustments for:                                                     |  |      |   |  |      |   |      |  
|                                                                     |  |      |   |  |      |   |      |  
|Profits after tax of subsidiaries acquired with a view to resale     |  |     |   |  |     |   | (1   | )
|                                                                     |  |      |   |  |      |   |      |  
|Depreciation                                                         |  |     |   |  | 4    |   | 18   |  
|                                                                     |  |      |   |  |      |   |      |  
|Impairment of intangibles                                            |  |     |   |  |     |   | 23   |  
|                                                                     |  |      |   |  |      |   |      |  
|Amortisation of intangibles                                          |  |     |   |  | 2    |   | 7    |  
|                                                                     |  |      |   |  |      |   |      |  
|Loss on disposal of property, plant and equipment                    |  |     |   |  | 4    |   | 2    |  
|                                                                     |  |      |   |  |      |   |      |  
|Employee share scheme charges                                        |  |     |   |  | 18   |   | 11   |  
|                                                                     |  |      |   |  |      |   |      |  
|Profits on disposals                                                 |  | (12  | ) |  | (278 | ) | (19  | )
|                                                                     |  |      |   |  |      |   |      |  
|Income from investments                                              |  |     |   |  |     |   | (1   | )
|                                                                     |  |      |   |  |      |   |      |  
|Finance income                                                       |  |     |   |  | (13  | ) | (7   | )
|                                                                     |  |      |   |  |      |   |      |  
|Taxation                                                             |  |     |   |  | 20   |   | 22   |  
|                                                                     |  |      |   |  |      |   |      |  
|Movements in working capital:                                        |  |      |   |  |      |   |      |  
|                                                                     |  |      |   |  |      |   |      |  
|(Increase)/decrease in trade and other receivables                   |  |     |   |  | (28  | ) | 146  |  
|                                                                     |  |      |   |  |      |   |      |  
|Decrease 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                                       |  | 311  |   |  | 271  |   | 280  |  
|                                                                     |  |      |   |  |      |   |      |  



Reuters Group PLCAnnual
  Report and Form 20-F 2006

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|Financials | 119
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30 Cash flow from acquisitions and disposals

|                                                        |  | 2006 |   |  | 2005 |   | 2004 |  
|------------------------------------------------------- |  | ---- | - |  | ---- | - | ---- | -
|                                                        |  | £m   |   |  | £m   |   | £m   |  
|                                                        |  |      |   |  |      |   |      |  
|Acquisitions (including joint ventures and associates): |  |      |   |  |      |   |      |  
|                                                        |  |      |   |  |      |   |      |  
|Subsidiary undertakings (see note 36)                   |  | (32  | ) |  | (135 | ) | (66  | )
|                                                        |  |      |   |  |      |   |      |  
|Joint ventures and associates                           |  | (27  | ) |  | (1   | ) |     |  
|                                                        |  |      |   |  |      |   |      |  
|Loans repaid to joint ventures and associates           |  |     |   |  |     |   | (5   | )
|                                                        |  |      |   |  |      |   |      |  
|Deferred payments for acquisitions in prior years       |  | (9   | ) |  | (8   | ) | (8   | )
|                                                        |  |      |   |  |      |   |      |  
|                                                        |  | (68  | ) |  | (144 | ) | (79  | )
|                                                        |  |      |   |  |      |   |      |  
|Less: cash acquired                                     |  | 1    |   |  | 20   |   | 1    |  
|                                                        |  |      |   |  |      |   |      |  
|Acquisitions, net of cash acquired                      |  | (67  | ) |  | (124 | ) | (78  | )
|                                                        |  |      |   |  |      |   |      |  
|Disposals (including joint ventures and associates):    |  |      |   |  |      |   |      |  
|                                                        |  |      |   |  |      |   |      |  
|Subsidiary undertakings*                                |  | (15  | ) |  | 824  |   | 70   |  
|                                                        |  |      |   |  |      |   |      |  
|Joint ventures and associates                           |  | 80   |   |  | 1    |   | 379  |  
|                                                        |  |      |   |  |      |   |      |  
|Instinet (deemed disposal)                              |  |     |   |  | 3    |   | 5    |  
|                                                        |  |      |   |  |      |   |      |  
|                                                        |  | 65   |   |  | 828  |   | 454  |  
|                                                        |  |      |   |  |      |   |      |  
|Add: cash disposed                                      |  |     |   |  | (582 | ) | (16  | )
|                                                        |  |      |   |  |      |   |      |  
|Disposals, net of cash disposed                         |  | 65   |   |  | 246  |   | 438  |  
|                                                        |  |      |   |  |      |   |      |  

|  |                                                                                                                                                                                     
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | The cash outflow of £15 million for subsidiary undertakings in 2006 principally represents transaction fees on the disposal of Instinet Group, which was completed in December 2005.

31 Reconciliation of cash and cash equivalents

Cash and cash equivalents
  included in the cash flow statement comprise the following balance sheet amounts:

|                                        |  | 2006 |   |  | 2005 |   | 2004 |  
|--------------------------------------- |  | ---- | - |  | ---- | - | ---- | -
|                                        |  | £m   |   |  | £m   |   | £m   |  
|                                        |  |      |   |  |      |   |      |  
|Cash and cash equivalents (see note 20) |  | 129  |   |  | 662  |   | 578  |  
|                                        |  |      |   |  |      |   |      |  
|Bank overdrafts                         |  | (24  | ) |  | (25  | ) | (17  | )
|                                        |  |      |   |  |      |   |      |  
|Total cash and cash equivalents         |  | 105  |   |  | 637  |   | 561  |  
|                                        |  |      |   |  |      |   |      |  

32 Dividends

|                          |  | 2006 |  |  | 2005 |  | 2004 | 
|------------------------- |  | ---- |  |  | ---- |  | ---- | 
|                          |  | £m   |  |  | £m   |  | £m   | 
|                          |  |      |  |  |      |  |      | 
|Prior year final paid     |  | 81   |  |  | 86   |  | 86   | 
|                          |  |      |  |  |      |  |      | 
|Current year interim paid |  | 53   |  |  | 54   |  | 54   | 
|                          |  |      |  |  |      |  |      | 
|                          |  | 134  |  |  | 140  |  | 140  | 
|                          |  |      |  |  |      |  |      | 

|                          |  |       |  |  |       |  |       | 
|------------------------- |  | ----- |  |  | ----- |  | ----- | 
|Per ordinary share        |  | pence |  |  | pence |  | pence | 
|                          |  |       |  |  |       |  |       | 
|Prior year final paid     |  | 6.15  |  |  | 6.15  |  | 6.15  | 
|                          |  |       |  |  |       |  |       | 
|Current year interim paid |  | 4.10  |  |  | 3.85  |  | 3.85  | 
|                          |  |       |  |  |       |  |       | 

A final dividend in respect of 2006 of 6.90p per ordinary share, amounting to a total dividend of £86 million, is to be proposed at the AGM on 26 April 2007. These financial statements do not reflect this proposed
dividend payable.

At 31 December 2006, 30.4 million shares, representing
  2.1% of Reuters Group PLCs shares, were held by Reuters Employee Share
  Ownership Trusts 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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|    |                                                    
|120 | Notes to the financial
        statements continued
|    |                                                    
|    |                                                    
|    |                                                    

33 Employee share plans The Group operates a number of share incentive 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: Long-Term Incentive Plan (LTIP):Since 1993, Reuters has operated an LTIP 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. For awards prior to 2006, 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 and are released
after three 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. 50% of the 2006 awards had TSR performance conditions attached. However, the remaining 50% have performance conditions based on adjusted PBT targets. These targets are explained in the Remuneration report on page
30. From 2003, charges for these awards have been
based on the fair market value per share using option pricing methodology. The
fair market value ascribed to each TSR LTIP award in 2006 was 55.9% of the market
value at  the date of grant. The fair market value ascribed to each PBT LTIP
award in 2006 was 93.9%. All of the LTIP awards are settled in equity. 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 GLT*(prior to 2006, the GMC). Other employees may be eligible to
participate in the Restricted Share Plan (see below). Performance conditions apply to those options granted 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 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. For awards granted in 2005 and prior years, full
vesting is achieved if adjusted EPS growth exceeds the percentage growth in the
retail price index (RPI) by 9% over the three year performance period. For awards
granted  in 2006, 50% of the awards vest if adjusted EPS growth exceeds RPI growth
by 6% over three years, with 9% growth required for full vesting, and awards
vesting proportionally for growth of between 6% and 9%. Of those options which
vest under the
2006 plan, only 50% can be exercised immediately. A further 25% can be exercised
after one year, and another 25% can be exercised after two years. All options are subject to a maximum ten year life and are typically settled in equity.


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. Options are subject to a maximum life of three years and six months and are settled in equity. Annual Bonus Profit Sharing Plan
(ABPSP):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. In 2006, this plan was operated as a cash-only plan and no shares will be issued to employees. Executive directors and members of the GLT did not participate in this plan in 2006. A decision is taken on an annual basis
whether to operate the plan for the year. A decision has not yet been taken whether to operate the plan in 2007. 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 GLT (prior to 2006, the GMC). It is intended that, other than for executive directors and GLT 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. Awards are typically settled in equity. The following plans are legacy plans which are no longer operated by the Group: Performance Related Share Plan
(PRSP):This plan operated from 1995 to 2001 and targeted senior executives not participating in the LTIP. 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 expired in
September 2005. A small supplementary grant was made to new employees in March 1999, at an option price of £8.14, and these expired in March 2006. *For a list of GLT members, see Directors and senior managers on pages 2728.




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|Financials | 121
|           |    
|           |    

Activity relating to share options/awards during 2006, 2005 and 2004 was as follows:

|                                                           |  |       |   |       |   |       |   |       |   |        |   |       |   | Weighted  | 
|---------------------------------------------------------- |  | ----- | - | ----- | - | ----- | - | ----- | - | ------ | - | ----- | - | --------- | 
|                                                           |  |       |   |       |   |       |   |       |   |        |   |       |   | average   | 
|                                                           |  |       |   |       |   |       |   |       |   |        |   |       |   | exercise  | 
|                                                           |  |       |   |       |   |       |   |       |   |        |   |       |   | price for | 
|                                                           |  |       |   |       |   |       |   |       |   |        |   |       |   | option    | 
|                                                           |  | SAYE  |   | Plan  |   | DSOP  |   |       |   | LTIP & |   |       |   | plans     | 
|                                                           |  | Plan  |   | 2000  |   | & RSP |   | ABPSP |   | PRSP   |   | Total |   | £         | 
|                                                           |  |       |   |       |   |       |   |       |   |        |   |       |   |           | 
|Ordinary shares under option in millions (including ADSs): |  |       |   |       |   |       |   |       |   |        |   |       |  
|                                                           |  |       |   |       |   |       |   |       |   |        |   |       |   |           | 
|1 January 2004                                             |  | 30.2  |   | 14.1  |   | 56.4  |   |      |   | 13.5   |   | 114.2 |   | 2.86      | 
|                                                           |  |       |   |       |   |       |   |       |   |        |   |       |   |           | 
|Granted                                                    |  | 4.6   |   |      |   | 10.3  |   |      |   | 2.6    |   | 17.5  |   | 2.45      | 
|                                                           |  |       |   |       |   |       |   |       |   |        |   |       |   |           | 
|Forfeited                                                  |  | (0.3  | ) | (0.3  | ) | (0.8  | ) |      |   | (0.2   | ) | (1.6  | ) | 3.42      | 
|                                                           |  |       |   |       |   |       |   |       |   |        |   |       |   |           | 
|Exercised                                                  |  | (0.5  | ) |      |   | (2.5  | ) |      |   | (0.9   | ) | (3.9  | ) | 1.62      | 
|                                                           |  |       |   |       |   |       |   |       |   |        |   |       |   |           | 
|Expired or lapsed                                          |  | (4.1  | ) | (2.4  | ) | (4.2  | ) |      |   | (0.4   | ) | (11.1 | ) | 4.27      | 
|                                                           |  |       |   |       |   |       |   |       |   |        |   |       |   |           | 
|31 December 2004                                           |  | 29.9  |   | 11.4  |   | 59.2  |   |      |   | 14.6   |   | 115.1 |   | 2.71      | 
|                                                           |  |       |   |       |   |       |   |       |   |        |   |       |   |           | 
|Granted                                                    |  | 3.4   |   |      |   | 7.5   |   | 2.3   |   | 2.2    |   | 15.4  |   | 2.07      | 
|                                                           |  |       |   |       |   |       |   |       |   |        |   |       |   |           | 
|Forfeited                                                  |  | (2.5  | ) | (0.4  | ) | (2.5  | ) | (0.1  | ) | (0.4   | ) | (5.9  | ) | 4.60      | 
|                                                           |  |       |   |       |   |       |   |       |   |        |   |       |   |           | 
|Exercised                                                  |  | (1.2  | ) |      |   | (4.8  | ) | (0.1  | ) | (0.7   | ) | (6.8  | ) | 1.66      | 
|                                                           |  |       |   |       |   |       |   |       |   |        |   |       |   |           | 
|Expired or lapsed                                          |  | (1.4  | ) | (10.3 | ) | (4.0  | ) |      |   | (4.4   | ) | (20.1 | ) | 3.88      | 
|                                                           |  |       |   |       |   |       |   |       |   |        |   |       |   |           | 
|31 December 2005                                           |  | 28.2  |   | 0.7   |   | 55.4  |   | 2.1   |   | 11.3   |   | 97.7  |   | 2.70      | 
|                                                           |  |       |   |       |   |       |   |       |   |        |   |       |   |           | 
|Granted                                                    |  | 5.3   |   |      |   | 9.0   |   |      |   | 2.8    |   | 17.1  |   | 1.68      | 
|                                                           |  |       |   |       |   |       |   |       |   |        |   |       |   |           | 
|Forfeited                                                  |  | (0.9  | ) |      |   | (1.6  | ) | (0.1  | ) | (0.2   | ) | (2.8  | ) | 1.64      | 
|                                                           |  |       |   |       |   |       |   |       |   |        |   |       |   |           | 
|Exercised                                                  |  | (20.7 | ) |      |   | (7.7  | ) | (2.0  | ) |       |   | (30.4 | ) | 1.08      | 
|                                                           |  |       |   |       |   |       |   |       |   |        |   |       |   |           | 
|Expired or lapsed                                          |  | (0.6  | ) | (0.7  | ) | (4.1  | ) |      |   | (0.6   | ) | (6.0  | ) | 4.12      | 
|                                                           |  |       |   |       |   |       |   |       |   |        |   |       |   |           | 
|31 December 2006                                           |  | 11.3  |   |      |   | 51.0  |   |      |   | 13.3   |   | 75.6  |   | 2.56      | 
|                                                           |  |       |   |       |   |       |   |       |   |        |   |       |   |           | 
|Of which exercisable                                       |  | 0.2   |   |      |   | 30.6  |   |      |   | 2.4    |   | 33.2  |   |           | 
|                                                           |  |       |   |       |   |       |   |       |   |        |   |       |   |           | 
|Number of participants at 31 December 2006                 |  | 6,601 |   |      |   | 6,075 |   |      |   | 154    |   |       |   |           | 
|                                                           |  |       |   |       |   |       |   |       |   |        |   |       |   |           | 

|                                                        |  |    |  |    |  |    |  |    |  |    |  |    |  |  | 
|------------------------------------------------------- |  | -- |  | -- |  | -- |  | -- |  | -- |  | -- |  |  | 
|Expense included in the income statement for year ended |  | £m |  | £m |  | £m |  | £m |  | £m |  | £m |  |  | 
|                                                        |  |    |  |    |  |    |  |    |  |    |  |    |  |  | 
|31 December 2004                                        |  | 4  |  |   |  | 9  |  | 5  |  | 4  |  | 22 |  |  | 
|                                                        |  |    |  |    |  |    |  |    |  |    |  |    |  |  | 
|31 December 2005                                        |  | 5  |  |   |  | 18 |  | 2  |  | 5  |  | 30 |  |  | 
|                                                        |  |    |  |    |  |    |  |    |  |    |  |    |  |  | 
|31 December 2006                                        |  | 6  |  |   |  | 16 |  | 1  |  | 7  |  | 30 |  |  | 
|                                                        |  |    |  |    |  |    |  |    |  |    |  |    |  |  | 

Options were exercised on a regular basis throughout
the year and the weighted average share price was £3.96 (2005: £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 2006:

|                         |  |              |  |                  |  |                |  |                |  |                |  | Exercisable       | 
|------------------------ |  | ------------ |  | ---------------- |  | -------------- |  | -------------- |  | -------------- |  | ----------------- | 
|                         |  |              |  | Weighted         |  | Options        |  | Options        |  | Options        |  | weighted          | 
|                         |  |              |  | average          |  | exercisable at |  | exercisable at |  | exercisable at |  | average exercise  | 
|                         |  | Total shares |  | remaining        |  | 31 December    |  | 31 December    |  | 31 December    |  | price for options | 
|                         |  | under option |  | contractual life |  | 2006           |  | 2005           |  | 2004           |  | exercisable at    | 
|Range of exercise prices |  | (million)    |  | (months)         |  | (million)      |  | (million)      |  | (million)      |  | 31 December 2006  | 
|                         |  |              |  |                  |  |                |  |                |  |                |  |                   | 
|Ordinary shares          |  |              |  |                  |  |                |  |                |  |                |  |                   | 
|                         |  |              |  |                  |  |                |  |                |  |                |  |                   | 
|£0.00  £2.00            |  | 28.6         |  | 33               |  | 6.8            |  | 2.5            |  | 2.5            |  | £0.85             | 
|                         |  |              |  |                  |  |                |  |                |  |                |  |                   | 
|£2.01  £5.00            |  | 36.6         |  | 66               |  | 17.1           |  | 12.0           |  | 9.2            |  | £2.90             | 
|                         |  |              |  |                  |  |                |  |                |  |                |  |                   | 
|£5.01  £7.00            |  | 5.7          |  | 58               |  | 5.7            |  | 5.1            |  | 14.2           |  | £5.58             | 
|                         |  |              |  |                  |  |                |  |                |  |                |  |                   | 
|£7.01  £9.00            |  | 3.6          |  | 54               |  | 3.6            |  | 4.6            |  | 3.7            |  | £8.62             | 
|                         |  |              |  |                  |  |                |  |                |  |                |  |                   | 
|£9.01  £11.00           |  |             |  |                 |  |               |  | 0.4            |  | 0.3            |  |                  | 
|                         |  |              |  |                  |  |                |  |                |  |                |  |                   | 
|ADSs*                    |  |              |  |                  |  |                |  |                |  |                |  |                   | 
|                         |  |              |  |                  |  |                |  |                |  |                |  |                   | 
|$10.01  $30.00          |  |             |  |                 |  |               |  | 0.1            |  |               |  |                  | 
|                         |  |              |  |                  |  |                |  |                |  |                |  |                   | 
|$30.01  $50.00          |  | 1.1          |  | 24               |  |               |  |               |  |               |  | $42.86            | 
|                         |  |              |  |                  |  |                |  |                |  |                |  |                   | 
|                         |  | 75.6         |  |                  |  | 33.2           |  | 24.7           |  | 29.9           |  |                   | 
|                         |  |              |  |                  |  |                |  |                |  |                |  |                   | 

|  |                                              
|- | ---------------------------------------------
|* | One ADS is equivalent to six ordinary shares.

The fair values of options granted during the period were determined using options pricing models.



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|122 | Notes to the financial
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33 Employee share plans continued

The following tables summarise the models
and key assumptions used for grants made during 2006, 2005 and 2004:

|                                     | 2006 | 
|------------------------------------ | ---- | 
|                                     |      | 
|                                     |      | 
|                                     |      | 
|Weighted average fair value (£)      |      | 
|                                     |      | 
|Options pricing model used           |      | 
|                                     |      | 
|                                     |      | 
|                                     |      | 
|                                     |      | 
|Key assumptions used:                |      | 
|                                     |      | 
|Weighted average share price (£)     |      | 
|                                     |      | 
|Range of exercise prices (£)         |      | 
|                                     |      | 
|Range of expected volatility (%)     |      | 
|                                     |      | 
|Range of risk-free rates (%)         |      | 
|                                     |      | 
|Range of expected option term (life) |      | 
|                                     |      | 
|Expected dividends (per year)        |      | 
|                                     |      | 

|                                     |      |              
|------------------------------------ | ---- | -------------
|                                     | 2005 |              
|                                     |      |              
|                                     |      | SAYE Plan    
|                                     |      |              
|Weighted average fair value (£)      |      | 1.61         
|                                     |      |              
|Options pricing model used           |      | Black Scholes
|                                     |      | options      
|                                     |      | pricing model
|                                     |      |              
|                                     |      |              
|Key assumptions used:                |      |              
|                                     |      |              
|Weighted average share price (£)     |      | 4.12         
|                                     |      |              
|Range of exercise prices (£)         |      | 3.33         
|                                     |      |              
|Range of expected volatility (%)     |      | 47%          
|                                     |      |              
|Range of risk-free rates (%)         |      | 5%           
|                                     |      |              
|Range of expected option term (life) |      | 3 years      
|                                     |      |              
|Expected dividends (per year)        |      | 10p          
|                                     |      |              

|                                     |      | 
|------------------------------------ | ---- | 
|                                     | 2004 | 
|                                     |      | 
|                                     |      | 
|                                     |      | 
|Weighted average fair value (£)      |      | 
|                                     |      | 
|Options pricing model used           |      | 
|                                     |      | 
|                                     |      | 
|                                     |      | 
|                                     |      | 
|Key assumptions used:                |      | 
|                                     |      | 
|Weighted average share price (£)     |      | 
|                                     |      | 
|Range of exercise prices (£)         |      | 
|                                     |      | 
|Range of expected volatility (%)     |      | 
|                                     |      | 
|Range of risk-free rates (%)         |      | 
|                                     |      | 
|Range of expected option term (life) |      | 
|                                     |      | 
|Expected dividends (per year)        |      | 
|                                     |      | 

Assumptions 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. Volatility is based on
daily observations. 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 recorded a liability for National Insurance and other social security taxes of £7 million (2005: £11 million, 2004: £9 million) in respect of share-based payment transactions.



Reuters Group PLCAnnual Report and Form 20-F 2006

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|Financials | 123
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34 Related party transactions

The parent company of the Group is Reuters Group PLC (incorporated in the United Kingdom). Reuters Group PLC owns 9.7% of its own shares, relating to the ongoing share buy-back programme (see note 27 on page 116). In
addition, 2.1% of Reuters Group PLC is owned by Reuters Employee Share Ownership Trusts (ESOTs).

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 Group PLC. 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 ESOTs, which are deducted from shareholders equity on the consolidated balance sheet, are used to satisfy certain options/awards
under the Groups share incentive plans.

Key management personnel compensation, including
the Groups directors, is shown in the table below:

|                                          |  | 2006 |  | 2005 |  | 2004 | 
|----------------------------------------- |  | ---- |  | ---- |  | ---- | 
|                                          |  | £m   |  | £m   |  | £m   | 
|                                          |  |      |  |      |  |      | 
|Salaries and short-term employee benefits |  | 12   |  | 8    |  | 10   | 
|                                          |  |      |  |      |  |      | 
|Post-employment benefits                  |  | 1    |  | 1    |  | 2    | 
|                                          |  |      |  |      |  |      | 
|Termination benefits                      |  |     |  | 1    |  |     | 
|                                          |  |      |  |      |  |      | 
|Share-based payments                      |  | 8    |  | 6    |  | 4    | 
|                                          |  |      |  |      |  |      | 
|Total                                     |  | 21   |  | 16   |  | 16   | 
|                                          |  |      |  |      |  |      | 

More details of directors remuneration and
senior management compensation are given in the ‘Directors’ remuneration
for 2006’ section of the Remuneration
report, details of which form part of these financial statements.

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 December |  | Amounts  |  | Amounts   |   | 31 December | 
|------------------------- |  | ----------- |  | -------- |  | --------- | - | ----------- |  | -------- |  | --------- | - | ----------- | 
|                          |  | 2004        |  | invoiced |  | collected |   | 2005        |  | invoiced |  | collected |   | 2006        | 
|                          |  | £m          |  | £m       |  | £m        |   | £m          |  | £m       |  | £m        |   | £m          | 
|                          |  |             |  |          |  |           |   |             |  |          |  |           |   |             | 
|Amounts receivable:       |  |             |  |          |  |           |   |             |  |          |  |           |   |             | 
|                          |  |             |  |          |  |           |   |             |  |          |  |           |   |             | 
|Joint ventures:           |  |             |  |          |  |           |   |             |  |          |  |           |   |             | 
|                          |  |             |  |          |  |           |   |             |  |          |  |           |   |             | 
|Factiva*                  |  | 3           |  | 39       |  | (38       | ) | 4           |  | 30       |  | (33       | ) | 1           | 
|                          |  |             |  |          |  |           |   |             |  |          |  |           |   |             | 
|FXMarketSpace             |  |            |  |         |  |          |   |            |  | 6        |  |          |   | 6           | 
|                          |  |             |  |          |  |           |   |             |  |          |  |           |   |             | 
|Other                     |  |            |  | 1        |  | (1        | ) |            |  | 1        |  | (1        | ) |            | 
|                          |  |             |  |          |  |           |   |             |  |          |  |           |   |             | 
|Associates                |  |            |  | 3        |  | (3        | ) |            |  |         |  |          |   |            | 
|                          |  |             |  |          |  |           |   |             |  |          |  |           |   |             | 
|Total amounts receivable  |  | 3           |  | 43       |  | (42       | ) | 4           |  | 37       |  | (34       | ) | 7           | 
|                          |  |             |  |          |  |           |   |             |  |          |  |           |   |             | 
|Amounts payable:          |  |             |  |          |  |           |   |             |  |          |  |           |   |             | 
|                          |  |             |  |          |  |           |   |             |  |          |  |           |   |             | 
|Joint ventures:           |  |             |  |          |  |           |   |             |  |          |  |           |   |             | 
|                          |  |             |  |          |  |           |   |             |  |          |  |           |   |             | 
|Factiva                   |  | 1           |  | 4        |  | (4        | ) | 1           |  | 4        |  | (5        | ) |            | 
|                          |  |             |  |          |  |           |   |             |  |          |  |           |   |             | 
|3 Times Square Associates |  |            |  | 18       |  | (18       | ) |            |  | 19       |  | (19       | ) |            | 
|                          |  |             |  |          |  |           |   |             |  |          |  |           |   |             | 
|Associates                |  |            |  | 2        |  | (2        | ) |            |  | 2        |  | (2        | ) |            | 
|                          |  |             |  |          |  |           |   |             |  |          |  |           |   |             | 
|Total amounts payable     |  | 1           |  | 24       |  | (24       | ) | 1           |  | 25       |  | (26       | ) |            | 
|                          |  |             |  |          |  |           |   |             |  |          |  |           |   |             | 

|  |                                                                                                                                                                                                                    
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Reuters disposed of the majority of its investment in Factiva in December 2006. Consequently, the £1 million receivable from Factiva at 31 December 2006 has been presented within other receivables (see note
19).

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.

During 2006, Reuters paid £237 million (2005: £47 million, 2004: £42 million) to the Groups pension funds, including £187 million towards funding the deficit in the Reuters Pension Fund and
the Reuters Supplementary Pension Scheme.



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|    |                                                  
|124 | Notes to the financial
      statements continued
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34 Related party transactionscontinued FactivaOn 15 December 2006, Reuters disposed
  of the majority of its investment in Factiva. Prior to this disposal, Factiva
  and Reuters each provided a variety of services to the other through a number
  of commercial arrangements. Factiva hosted and maintained Reuters pictures archiving
  service, permitted Reuters to incorporate Factiva content in certain Reuters
  products, and permitted Reuters staff to access Factiva content. The total value
  of the services provided by Factiva to Reuters in 2006 was £4 million (2005:
  £4 million, 2004: £9 million). Reuters provided Factiva with technical and administrative support services, including use of Reuters premises, facilities, finance and payroll services, provided content, primarily its newswires, to Factiva for
incorporation in certain Factiva services, and granted Factiva a trademark licence permitting Factiva to use Reuters name. The total value of the services provided by Reuters to Factiva in 2006 was £30 million (2005: £39 million, 2004:
£23 million). Following the disposal of the majority of the investment in Factiva, Reuters will continue to supply content to Factiva under an agreement as a paid supplier and has entered into or continued a number of commercial
arrangements with Factiva and Dow Jones, including some of those described above. In addition to the above amounts, Reuters held a loan payable to Factiva of £10 million at the start of 2006, on which interest was payable at LIBOR. This loan was increased to £12 million during the year and
it was all repaid prior to the disposal of the majority of Reuters investment in Factiva. There are no loans outstanding at 31 December 2006. FXMarketSpaceOn 4 May 2006, Reuters and the Chicago
  Mercantile Exchange (CME) entered into an agreement to form FXMarketSpace, a
  50/50 joint venture to create a centrally-cleared, global foreign exchange trading
  system. Following shareholder approval, the joint venture was formed on 20 July
  2006. Reuters has entered into agreements to provide trading access to and trade
  notification services for, and distribute market data from, FXMarketSpace, among
  various other services and arrangements. The total value of the services provided
  by Reuters to FXMarketSpace was £6 million. 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 remaining term
  of approximately 15 years expiring in 2021, with an option to terminate ten
  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 to 3XSQ Associates of
  $35 million (£19 million) during 2006 and $33 million (£18
  million) during both 2005 and 2004 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.


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. 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. On30 January
    2006, the defendants filed a motion to dismiss the case in its entirety on
    forum non conveniens grounds. On 27 July 2006, the Court dismissed the complaint
    holding that England is the proper forum for this matter. On 25 August 2006,
    plaintiffs filed an appeal of the dismissal with the US Court of Appeals for
    the Second Circuit. A date for oral argument on the appeal has not yet been
    set. Separately, on 7 December 2006 Douglas Gilstrap, along with former Radianz
    executives Brian Dillon and John Madigan, filed a new lawsuit in the US District
    Court, Southern District of New York in their individual capacities against
    Radianz Limited and Radianz Americas for essentially the same claims asserted
    in the dismissed class action complaint. Gilstrap, Dillon and Madigan have
    agreed to stay proceedings on this new lawsuit pending the resolution of the
    appeal of the dismissed class action lawsuit. 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 Transaction 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. Reuters answered the complaint and filed a motion to dismiss the
  case, which was granted on 31 October 2006, dismissing the copyright claims
  with prejudice and the state law contract claims for lack of jurisdiction. Ariel
  appealed to the US Court of Appeals for the Second Circuit. The Group believes
  the claims are without merit and intends to defend them vigorously.




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  Report and Form 20-F 2006

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|           |    
|Financials | 125
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Capital commitmentsCapital expenditure contracted for at
  the balance sheet date but not yet incurred is as follows:

|                              |  | 2006 |  | 2005 |  | 2004 | 
|----------------------------- |  | ---- |  | ---- |  | ---- | 
|                              |  | £m   |  | £m   |  | £m   | 
|                              |  |      |  |      |  |      | 
|Property, plant and equipment |  | 10   |  | 16   |  | 37   | 
|                              |  |      |  |      |  |      | 
|Intangible assets             |  | 9    |  | 13   |  |     | 
|                              |  |      |  |      |  |      | 
|Total capital commitments     |  | 19   |  | 29   |  | 37   | 
|                              |  |      |  |      |  |      | 

Group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 (2005: £nil, 2004: £nil).

Warranties and indemnitiesDuring 2005, the Group 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:

|                               |  | 2006 |  | 2005 |  | 2004 | 
|------------------------------ |  | ---- |  | ---- |  | ---- | 
|Year ended 31 December         |  | £m   |  | £m   |  | £m   | 
|                               |  |      |  |      |  |      | 
|2005                           |  |     |  |     |  | 103  | 
|                               |  |      |  |      |  |      | 
|2006                           |  |     |  | 79   |  | 81   | 
|                               |  |      |  |      |  |      | 
|2007                           |  | 88   |  | 74   |  | 74   | 
|                               |  |      |  |      |  |      | 
|2008                           |  | 79   |  | 63   |  | 67   | 
|                               |  |      |  |      |  |      | 
|2009                           |  | 70   |  | 54   |  | 61   | 
|                               |  |      |  |      |  |      | 
|2010                           |  | 60   |  | 51   |  | 55   | 
|                               |  |      |  |      |  |      | 
|2011                           |  | 55   |  | 47   |  | 36   | 
|                               |  |      |  |      |  |      | 
|2012 and thereafter            |  | 300  |  | 305  |  | 216  | 
|                               |  |      |  |      |  |      | 
|Total operating lease payables |  | 652  |  | 673  |  | 693  | 
|                               |  |      |  |      |  |      | 

At 31 December 2006, future minimum sublease payments expected to be received under non-cancellable subleases were £96 million (2005: £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.



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  Report and Form 20-F 2006

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|    |                                                  
|126 | Notes to the financial
      statements continued
|    |                                                  
|    |                                                  
|    |                                                  

36 Acquisitions

Acquisition of Application
  Networks, IncOn 12 June 2006, a Group company merged
  with Application Networks, Inc. In accordance with IFRS 3 Business Combinations,
  this transaction has been accounted for as an acquisition.

|                                  |  | Book  |   | Fair value  |   | Provisional |  
|--------------------------------- |  | ----- | - | ----------- | - | ----------- | -
|                                  |  | value |   | adjustments |   | fair value  |  
|                                  |  | £m    |   | £m          |   | £m          |  
|                                  |  |       |   |             |   |             |  
|Non-current assets:               |  |       |   |             |   |             |  
|                                  |  |       |   |             |   |             |  
|Intangible
      assets           |  |      |   | 17          |   | 17          |  
|                                  |  |       |   |             |   |             |  
|Current assets:                   |  |       |   |             |   |             |  
|                                  |  |       |   |             |   |             |  
|Other current
      assets        |  | 1     |   |            |   | 1           |  
|                                  |  |       |   |             |   |             |  
|Current liabilities               |  | (2    | ) |            |   | (2          | )
|                                  |  |       |   |             |   |             |  
|Non-current liabilities           |  |      |   | (7          | ) | (7          | )
|                                  |  |       |   |             |   |             |  
|Net assets acquired               |  | (1    | ) | 10          |   | 9           |  
|                                  |  |       |   |             |   |             |  
|Goodwill                          |  |       |   |             |   | 13          |  
|                                  |  |       |   |             |   |             |  
|Total
      consideration         |  |       |   |             |   | 22          |  
|                                  |  |       |   |             |   |             |  
|Consideration satisfied
      by: |  |       |   |             |   |             |  
|                                  |  |       |   |             |   |             |  
|Cash                              |  |       |   |             |   | 22          |  
|                                  |  |       |   |             |   |             |  

The fair value adjustments in respect of intangible
  assets are due to the recognition of £1 million in respect of trademarks
  and £16 million in respect of technology know-how, which have been independently
  valued. The fair value adjustments in respect of non-current liabilities are
  due to the recognition of a deferred tax liability arising from these intangible
  assets. Goodwill represents the value of synergies arising from the acquisition
  and the acquirees assembled work force.

The outflow of cash and cash equivalents on
  the acquisition can be calculated as follows:

|                   |  |    | 
|------------------ |  | -- | 
|                   |  | £m | 
|                   |  |    | 
|Cash consideration |  | 22 | 
|                   |  |    | 

From the date of acquisition to 31 December 2006, the acquisition contributed £1 million to revenue, incurred a £2 million loss before interest and amortisation of intangibles and incurred a £2 million
loss before amortisation, but after interest.

If the acquisition had been made at the beginning of the financial year, Application Networks would have contributed £2 million to revenue and incurred a £5 million loss. This information takes into account
the amortisation of acquired intangible assets and the effect of taxation.

Other acquisitionsReuters acquired certain trade and assets
  of India Quotation Systems Private Limited (IQS) in June 2006 and purchased
  the share capital of Telerate Italia SrL in July 2006.

|                                |  | Book  |   | Fair value  |   | Provisional |  
|------------------------------- |  | ----- | - | ----------- | - | ----------- | -
|                                |  | value |   | adjustments |   | fair value  |  
|                                |  | £m    |   | £m          |   | £m          |  
|                                |  |       |   |             |   |             |  
|Non-current assets:             |  |       |   |             |   |             |  
|                                |  |       |   |             |   |             |  
|Intangible
      assets         |  |      |   | 11          |   | 11          |  
|                                |  |       |   |             |   |             |  
|Current assets:                 |  |       |   |             |   |             |  
|                                |  |       |   |             |   |             |  
|Cash and cash
      equivalents |  | 1     |   |            |   | 1           |  
|                                |  |       |   |             |   |             |  
|Other current
      assets      |  | 2     |   |            |   | 2           |  
|                                |  |       |   |             |   |             |  
|Current liabilities             |  | (3    | ) |            |   | (3          | )
|                                |  |       |   |             |   |             |  
|Non-current liabilities         |  |      |   | (4          | ) | (4          | )
|                                |  |       |   |             |   |             |  
|Net assets acquired             |  |      |   | 7           |   | 7           |  
|                                |  |       |   |             |   |             |  
|Goodwill                        |  |       |   |             |   | 5           |  
|                                |  |       |   |             |   |             |  
|Total
      consideration       |  |       |   |             |   | 12          |  
|                                |  |       |   |             |   |             |  
|Consideration satisfied by:     |  |       |   |             |   |             |  
|                                |  |       |   |             |   |             |  
|Cash                            |  |       |   |             |   | 10          |  
|                                |  |       |   |             |   |             |  
|Deferred consideration          |  |       |   |             |   | 2           |  
|                                |  |       |   |             |   |             |  
|Total
      consideration       |  |       |   |             |   | 12          |  
|                                |  |       |   |             |   |             |  

The fair value adjustments in respect of intangible assets are due to the recognition of £11 million in respect of customer relationships. The fair value adjustments in respect of non-current liabilities are due
to the recognition of a deferred tax liability arising from these intangible assets. Goodwill represents the value of synergies arising from the acquisition.



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|           |    
|---------- | ---
|           |    
|Financials | 127
|           |    
|           |    

The outflow of cash and cash equivalents on the acquisitions can be calculated as follows:

|                                                 |  | £m |  
|------------------------------------------------ |  | -- | -
|                                                 |  |    |  
|Cash consideration                               |  | 10 |  
|                                                 |  |    |  
|Cash acquired                                    |  | (1 | )
|                                                 |  |    |  
|Total
      outflow of cash and cash equivalents |  | 9  |  
|                                                 |  |    |  

From the date of acquisition to 31 December 2006, the acquisitions contributed £3 million to revenue, £2 million profit before interest and amortisation of intangibles and incurred a £2 million profit
before amortisation, but after interest.

If the acquisitions had been made at the beginning of the financial year, they would have contributed £6 million to revenue and incurred a £4 million profit. This information takes into account the
amortisation of acquired intangible assets and the effect of taxation.

37 Disposals

Realised net gains, all of which were recorded in the income statement within continuing operations, were:

|                                                                                        |  | 2006 |  |  | 2005 |  | 2004 | 
|--------------------------------------------------------------------------------------- |  | ---- |  |  | ---- |  | ---- | 
|                                                                                        |  | £m   |  |  | £m   |  | £m   | 
|                                                                                        |  |      |  |  |      |  |      | 
|On disposal of subsidiary undertakings                                                  |  | 4    |  |  | 4    |  | 4    | 
|                                                                                        |  |      |  |  |      |  |      | 
|On disposal of associates,
      joint ventures and available-for-sale financial assets |  | 76   |  |  | 38   |  | 203  | 
|                                                                                        |  |      |  |  |      |  |      | 
|Recorded in the income statement                                                        |  | 80   |  |  | 42   |  | 207  | 
|                                                                                        |  |      |  |  |      |  |      | 

In 2006, gains on disposal of associates, joint ventures and available-for-sale financial assets principally relate to the Groups disposal of the majority of its holding in Factiva. Gains on disposal of
subsidiary undertakings relate to a number of small disposals and include £2 million deferred proceeds from the disposal of RVC in 2004.

In 2005, gains on disposal of associates, joint ventures and available-for-sale financial assets include £4 million arising from the Groups disposal of its 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. In 2005, Reuters also disposed of its holdings in Radianz and Instinet Group. These subsidiaries were treated as discontinued operations in accordance with IFRS 5 and are therefore disclosed separately in
note 7.

In 2004, gains on disposal of associates, joint ventures and available-for-sale financial assets principally relate to the Groups 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). Gains on disposal of subsidiary undertakings relate to the disposal of a number of wholly-owned subsidiaries, including TowerGroup, Yankee and ORT.

38 Post balance sheet events

During the period 1 January 2007 to 9 March
  2007, the Group purchased 15.5 million shares for total consideration of £68
  million, as a part of its ongoing share buy-back programme announced in July
  2005.

The following table provides a summary of the
  shares bought back during this period:

|         |  | Total number     |  |               |  | Approximate     | 
|-------- |  | ---------------- |  | ------------- |  | --------------- | 
|         |  | of shares        |  |               |  | value of shares | 
|         |  | purchased as     |  |               |  | that may yet    | 
|         |  | part of publicly |  | Average price |  | be purchased    | 
|         |  | announced        |  | paid per      |  | under the       | 
|Month    |  | programme        |  | share (£)     |  | programme (£m)  | 
|         |  |                  |  |               |  |                 | 
|January  |  | 5,700,000        |  | 4.43          |  | 225             | 
|         |  |                  |  |               |  |                 | 
|February |  | 6,300,000        |  | 4.32          |  | 197             | 
|         |  |                  |  |               |  |                 | 
|March    |  | 3,450,000        |  | 4.30          |  | 182             | 
|         |  |                  |  |               |  |                 | 

Included above are 12.0 million shares which the Group has irrevocable commitments to purchase at 31 December 2006. In accordance with the Groups accounting policy, the cost of these shares (£53 million) has
been recorded in the balance sheet at 31 December 2006 and reported as a current liability with a corresponding deduction from shareholders equity.

On 1 March 2007, the Group announced that it expects
to increase the buy-back during 2007 to £400425 million, which includes £250
million remaining of the £1
billion buy-back announced in July 2005 and that it will
actively manage its capital structure to maintain an investment grade rating
of BBB+/Baa1. Following this announcement, Standard and Poors and Fitch
Ratings both revised downwards the long-term ratings from A- to BBB+ and Moodys
have put the rating under review for a possible downgrade.

An additional £6 million was contributed
by
each
partner
in FXMarketSpace in early 2007.



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|    |                                                  
|128 | Notes to the financial
      statements continued
|    |                                                  
|    |                                                  

39 Significant subsidiary undertakings, joint
  ventures and associates

The principal subsidiary undertakings, joint ventures and associates at 31 December 2006, 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
      held |   
|----------------------------------------------- |  | ------------------------ |  | --------------------------- |  | -------------------------------------- | --
|                                                |  |                          |  |                             |  |                                        |   
|Reuters AG                                      |  | Germany                  |  | Germany                     |  | 100                                    |   
|                                                |  |                          |  |                             |  |                                        |   
|Reuters America Holdings Inc*                   |  | USA                      |  | Worldwide                   |  | 100                                    |   
|                                                |  |                          |  |                             |  |                                        |   
|Reuters America LLC                             |  | USA                      |  | USA                         |  | 100                                    |   
|                                                |  |                          |  |                             |  |                                        |   
|Reuters Australia Pty Limited                   |  | Australia                |  | Australia                   |  | 100                                    |   
|                                                |  |                          |  |                             |  |                                        |   
|Reuters BV                                      |  | Netherlands              |  | Netherlands                 |  | 100                                    |   
|                                                |  |                          |  |                             |  |                                        |   
|Reuters Canada Limited                          |  | Canada                   |  | Canada/USA                  |  | 100                                    |   
|                                                |  |                          |  |                             |  |                                        |   
|Reuters Europe SA                               |  | Switzerland              |  | Spain/Portugal              |  | 100                                    |   
|                                                |  |                          |  |                             |  |                                        |   
|Reuters France SNC                              |  | France                   |  | France                      |  | 100                                    |   
|                                                |  |                          |  |                             |  |                                        |   
|Reuters Finance PLC*                            |  | UK                       |  | UK                          |  | 100                                    |   
|                                                |  |                          |  |                             |  |                                        |   
|Reuters Group Overseas Holdings
      Limited*  |  | UK                       |  | Worldwide                   |  | 100                                    |   
|                                                |  |                          |  |                             |  |                                        |   
|Reuters Holdings Limited*                       |  | UK                       |  | UK                          |  | 100                                    |   
|                                                |  |                          |  |                             |  |                                        |   
|Reuters Hong Kong Limited                       |  | Cook Islands             |  | Hong Kong                   |  | 100                                    |   
|                                                |  |                          |  |                             |  |                                        |   
|Reuters International Holdings
      SARL*      |  | Switzerland              |  | Worldwide                   |  | 100                                    |   
|                                                |  |                          |  |                             |  |                                        |   
|Reuters Investments Limited*                    |  | UK                       |  | UK                          |  | 100                                    |   
|                                                |  |                          |  |                             |  |                                        |   
|Reuters Italia SpA                              |  | Italy                    |  | Italy                       |  | 100                                    |   
|                                                |  |                          |  |                             |  |                                        |   
|Reuters Japan Kabushiki Kaisha                  |  | Japan                    |  | Japan                       |  | 100                                    |   
|                                                |  |                          |  |                             |  |                                        |   
|Reuters Limited                                 |  | UK                       |  | Worldwide                   |  | 100                                    |   
|                                                |  |                          |  |                             |  |                                        |   
|Reuters Middle East Limited                     |  | Cook Islands             |  | Middle East                 |  | 100                                    |   
|                                                |  |                          |  |                             |  |                                        |   
|Reuters Nederland BV*                           |  | Netherlands              |  | Netherlands                 |  | 100                                    |   
|                                                |  |                          |  |                             |  |                                        |   
|Reuters Research Inc                            |  | USA                      |  | USA                         |  | 100                                    |   
|                                                |  |                          |  |                             |  |                                        |   
|Reuters SA                                      |  | Switzerland              |  | Worldwide                   |  | 100                                    |   
|                                                |  |                          |  |                             |  |                                        |   
|Reuters Singapore Limited                       |  | Singapore                |  | Singapore                   |  | 100                                    |   
|                                                |  |                          |  |                             |  |                                        |   
|Reuters Transaction Services
      Limited      |  | UK                       |  | Worldwide                   |  | 100                                    |   
|                                                |  |                          |  |                             |  |                                        |   
|                                                |  |                          |  |                             |  |                                        |   
|Joint ventures and associates                   |  | Country of incorporation |  | Principal area of operation |  | Percentage of equity shares
      held |   
|                                                |  |                          |  |                             |  |                                        |   
|3 Times Square Associates LLC                   |  | USA                      |  | USA                         |  | 50                                     | **
|                                                |  |                          |  |                             |  |                                        |   
|FXMarketSpace Limited                           |  | UK                       |  | Worldwide                   |  | 50                                     |   
|                                                |  |                          |  |                             |  |                                        |   
|Times Global Broadcasting Company
      Limited |  | India                    |  | India                       |  | 26                                     |   
|                                                |  |                          |  |                             |  |                                        |   

|*  | Denotes investment companies. All other
      entities are operating companies.                                                                                            
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|** | The Group has an equity shareholding of
      50% in 3 Times Square Associates LLC. However, the Group has an effective
      economic interest of 38% at 31 December 2006.

The financial years for all of the above undertakings
  end on 31 December, except for Times Global Broadcasting Company Limited whose
  financial year ends on 31 March.

3 Times Square Associates LLC is a joint venture
    with Rudin Times Square Associates LLC formed to acquire, develop and operate
  the 3 Times Square property andbuilding.

FXMarketSpace Limited is a new joint venture with the Chicago Mercantile Exchange formed to create a centrally-cleared, global foreign exchange trading system.

Times Global Broadcasting Company Limited is an association with the Times of India relating to the launch of a new Indian TV News Channel, TIMES NOW.



Reuters Group PLCAnnual
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|                                                      |            |    
|----------------------------------------------------- | ---------- | ---
|                                                      |            |    
|Summary of
      differences                          | Financials | 129
|between IFRS (as adopted
      by the EU) and US GAAP |            |    
|                                                      |            |    
|                                                      |            |    

Accounting 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; differences in the application of EITF 95-3 Recognition of liabilities
in connection with a purchase combination, as discussed in section h; 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 associates and 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
  was greater than the book value, the difference was 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. Profit or loss on disposal
  of subsidiary undertakings, joint ventures and associatesOn the disposal of subsidiary undertakings, joint
  ventures and associates, 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 2006, there was a US GAAP adjustment of £5 million to reduce the profit on disposal of Factiva. 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 qualified 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 on 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 financial 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.




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|    |                                                             
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|    |                                                             
|130 | Summary of differences                                      
|    | between IFRS (as adopted
    by the EU) and US GAAPcontinued
|    |                                                             
|    |                                                             

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
over the vesting period of the award to match the services received. 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. Prior to 1 January 2006, under US GAAP, the Group applied the measurement provisions of APB 25 Accounting for Stock Issued to Employees and recognised the intrinsic value of options granted, as determined
on the measurement date, over the vesting period. Additional compensation cost was recognised when the vesting of an option was accelerated and those options would otherwise have been forfeited unvested. Additional compensation cost was also
recognised where a new measurement date was 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. On 1 January 2006, the Group adopted FAS 123 (revised 2004) Share-Based Payment (FAS 123(R)). Under FAS 123(R), compensation charges relating to share awards are based on the fair value of awards in a
similar way as under IFRS. Differences which affect the Group relate to the classification of certain awards between equity and liabilities, the date of grant of certain awards, and the accounting for awards held by non employees. The Group has adopted FAS 123(R) on a modified prospective basis. This means that it was applied to new awards granted after 1 January 2006, any portion of awards that were granted after 1 January 1994 that
had not vested as at 1 January 2006 and any outstanding liability classified awards. As a result, there are certain schemes for which FAS 123(R) charges apply, which do not have IFRS charges. FAS 123(R) resulted in a net income statement charge of £1 million greater than under IFRS in 2006. £3 million of this charge was a cumulative effect of adoption relating to the recognition of forfeitures and
certain liability-classified awards. An offsetting £2 million credit relates to the differences noted above. On adoption of FAS 123(R), an increase in net equity, compared to that stated under IFRS, of £64 million was recorded, resulting
from the transfer to equity of awards previously classified as liabilities. National Insurance on stock optionsUnder IFRS, the liability for National Insurance on stock options/awards is accrued based on the fair value of the options/awards 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/awards. g. PensionsFor
the reporting period to 31 December 2006, Reuters adopted FAS 158 Employers accounting for defined benefit pension and other post retirement plans. In 2005 and 2004, FAS 87 Employers
Accounting for Pensions was applied in calculating the balance sheet position
and charge to the income statement. Under both IFRS and US GAAP, pension assets, defined benefit pension liabilities and pension expense are determined using the Projected Unit Credit Method. Under IFRS a provision or asset equal to the difference between the fair value of scheme assets and the present value of the defined benefit liability is recognised in full on the balance sheet. 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. A scheme surplus is recognised only to the extent
that it is recoverable through reduction in future contributions or return of scheme assets. Under FAS 87, the accrual or prepayment recognised on the balance sheet in respect of pensions represents the cumulative income statement charges net of contributions to the scheme since transition to the standard. In
addition to this amount, FAS 87 requires that an additional minimum liability is recorded for any plan where the accumulated benefit obligation exceeds the fair value of the plan assets by an amount greater than the liability recognised in the
balance sheet.


Under FAS 158, the provision or surplus recognised on the balance sheet represents the difference between the fair value of plan assets and the projected benefit obligation. Under both FAS 158 and FAS 87, in addition to the pension expense items recognised under IFRS, actuarial gains and losses in excess of the corridor are recognised over the average remaining service life of the
employees. In addition, there is a transition asset or obligation, not recognised on the balance sheet, arising on the adoption of FAS 87. This amount is also released to the income statement over the average remaining service lives of the
employees. In 2006, prior to the adoption of FAS 158,
movements in the additional minimum liability required under FAS 87 amounted
to an increase in net assets of £374 million (2005: increase of £14 million, 2004:
decrease of £389 million). This movement was recognised directly in equity. The adoption of FAS 158 resulted in a reduction
in the net asset position at 31
December 2006 in respect of pensions of £497 million. This loss is recognised
in shareholder equity and will be released to the income statement over the average
remaining service lives of the employees. There is no difference between the
expense recognised in the income statement under FAS 158 and that which would
have been recognised under FAS 87. h. RestructuringUnder IFRS, the Group 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 financial instrumentsIn
2004, under IFRS (prior to the adoption of IAS 39 Financial Instruments: Recognition and Measurement and IAS 32 Financial Instruments: Disclosure and Presentation),
the Group applied hedge accounting rules for its derivative financial instruments
used to manage interest rate and foreign exchange risk. Under these rules, the
Group was not required to identify separately these financial instruments, nor
to record changes in their fair
value through the income statement. Also under these rules, 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 these instruments were recognised directly in equity. Further
in 2004, Reuters was not required to separate embedded derivatives from their
host contracts and recognise them on the balance sheet at fair value. From 1 January 2005, the Group 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.




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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, the Group 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. 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 the Group 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. Shares to be repurchasedUnder
IFRS, the Group is required to recognise a liability in respect of irrevocable
commitments made to purchase Reuters Group PLC shares as part of its publicly-announced
buy-back programme during the post-balance sheet close period. A corresponding
reduction in shareholders equity is also recorded. Under US GAAP, this commitment is not recorded
as a liability and reduction to shareholders’ equity as there is no fixed
price or fixed number of shares and the counterparty has not purchased any shares
as at the balance sheet date. n. 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. In addition, IFRS and US GAAP adopt difference
bases for recognising deferred tax on employee share awards. Under FAS 123(R)
deferred tax assets are recognised over the service period based on the compensation
charge.  Any realised tax deductions which exceed the related compensation charge
is recognised in additional paid in capital (APIC). These windfall tax
benefits are pooled and can be used to offset shortfalls in deductions related
to other share  awards. Windfall tax benefits can only enter the APIC pool to
the extent they are realised. Where these benefits form part of tax losses carried
forward, they are not recognised until they reduce taxes payable. The APIC pool
as at 1
January 2006 has been calculated using the short-cut method option
available under FSP FAS 123(R)-3. Tax adjustments also arise in respect of the timing of recognition of current tax benefits. o. 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. Under IFRS, certain directly attributable costs are capitalised as part of the cost of both external and internal software development and amortised over the life of the asset. Under US GAAP, these costs are not
capitalised on internal software development, but expensed as incurred.




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|    |                                                             
|--- | ------------------------------------------------------------
|    |                                                             
|132 | Notes on the summary
    of differences                     
|    | between IFRS (as adopted
    by the EU) and US GAAPcontinued
|    |                                                             

01 Adjustments to net income

|                                                                                   |  |       |  | 2006 |   | 2005 |   | 2004 |  
|---------------------------------------------------------------------------------- |  | ----- |  | ---- | - | ---- | - | ---- | -
|                                                                                   |  | Notes |  | £m   |   | £m   |   | £m   |  
|                                                                                   |  |       |  |      |   |      |   |      |  
|Profit/(loss) attributable to ordinary shareholders in accordance with IFRS        |  |       |  | 305  |   | 456  |   | 364  |  
|                                                                                   |  |       |  |      |   |      |   |      |  
|US GAAP adjustments:                                                               |  |       |  |      |   |      |   |      |  
|                                                                                   |  |       |  |      |   |      |   |      |  
|Intangible amortisation and impairment                                             |  | a     |  | (4   | ) | (4   | ) | 21   |  
|                                                                                   |  |       |  |      |   |      |   |      |  
|Amortisation of gain on assets contributed to joint ventures                       |  | c     |  |     |   |     |   | 6    |  
|                                                                                   |  |       |  |      |   |      |   |      |  
|Profit/(loss) on disposal of subsidiaries                                          |  | d     |  |     |   | (32  | ) | (18  | )
|                                                                                   |  |       |  |      |   |      |   |      |  
|Profit/(loss) on disposal of joint ventures                                        |  | d     |  | (5   | ) |     |   |     |  
|                                                                                   |  |       |  |      |   |      |   |      |  
|Profit/(loss) on disposal of associates                                            |  | d     |  |     |   |     |   | (35  | )
|                                                                                   |  |       |  |      |   |      |   |      |  
|Profit/(loss) on disposal of available-for-sale and other financial assets         |  | e     |  |     |   | 42   |   | (18  | )
|                                                                                   |  |       |  |      |   |      |   |      |  
|Stock options                                                                      |  | f     |  | (2   | ) | (1   | ) | 18   |  
|                                                                                   |  |       |  |      |   |      |   |      |  
|Cumulative effect of change in accounting principle for FAS 123(R)                 |  | f     |  | (3   | ) |     |   |     |  
|                                                                                   |  |       |  |      |   |      |   |      |  
|Pensions                                                                           |  | g     |  | (29  | ) | (28  | ) | 1    |  
|                                                                                   |  |       |  |      |   |      |   |      |  
|Restructuring                                                                      |  | h     |  | 59   |   | (9   | ) | 105  |  
|                                                                                   |  |       |  |      |   |      |   |      |  
|Derivative financial instruments                                                   |  | i     |  | 14   |   | (42  | ) | 58   |  
|                                                                                   |  |       |  |      |   |      |   |      |  
|Consolidation of subsidiary undertakings                                           |  | j     |  |     |   |     |   | (7   | )
|                                                                                   |  |       |  |      |   |      |   |      |  
|Sale and leaseback                                                                 |  | k     |  |     |   | (1   | ) | (1   | )
|                                                                                   |  |       |  |      |   |      |   |      |  
|Taxation                                                                           |  | n     |  | (29  | ) | 18   |   | (62  | )
|                                                                                   |  |       |  |      |   |      |   |      |  
|Minority interest in respect of US GAAP adjustments                                |  | o     |  |     |   | (3   | ) | 7    |  
|                                                                                   |  |       |  |      |   |      |   |      |  
|Net income/(loss) attributable to ordinary shareholders in accordance with US GAAP |  |       |  | 306  |   | 396  |   | 439  |  
|                                                                                   |  |       |  |      |   |      |   |      |  

|                                                                           |  |  |  | 2006  |  | 2005  |  | 2004  | 
|-------------------------------------------------------------------------- |  |  |  | ----- |  | ----- |  | ----- | 
|                                                                           |  |  |  | pence |  | pence |  | pence | 
|                                                                           |  |  |  |       |  |       |  |       | 
|Earnings and dividends:                                                    |  |  |  |       |  |       |  |       | 
|                                                                           |  |  |  |       |  |       |  |       | 
|Basic earnings per ADS* in accordance with US GAAP                         |  |  |  | 142   |  | 170   |  | 188   | 
|                                                                           |  |  |  |       |  |       |  |       | 
|Diluted earnings per ADS* in accordance with US GAAP                       |  |  |  | 139   |  | 165   |  | 183   | 
|                                                                           |  |  |  |       |  |       |  |       | 
|Dividend paid per ADS*                                                     |  |  |  | 61.5  |  | 60    |  | 60    | 
|                                                                           |  |  |  |       |  |       |  |       | 
|Weighted average number of shares used in basic EPS calculation (millions) |  |  |  | 1,297 |  | 1,396 |  | 1,400 | 
|                                                                           |  |  |  |       |  |       |  |       | 
|Dilutive shares                                                            |  |  |  | 24    |  | 41    |  | 36    | 
|                                                                           |  |  |  |       |  |       |  |       | 
|Used in diluted EPS calculation                                            |  |  |  | 1,321 |  | 1,437 |  | 1,436 | 
|                                                                           |  |  |  |       |  |       |  |       | 

|* | One ADS is eqivalent to six ordinary shares.
|- | --------------------------------------------

02 Adjustments to shareholders equity

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |       |  |      |   | Restated |   |      |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----- |  | ---- | - | -------- | - | ---- | -
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |       |  | 2006 |   | 2005     |   | 2004 |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | Notes |  | £m   |   | £m       |   | £m   |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |       |  |      |   |          |   |      |  
|Shareholders equity in accordance with IFRS                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |       |  | 172  |   | 511      |   | 371  |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |       |  |      |   |          |   |      |  
|US GAAP adjustments:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |       |  |      |   |          |   |      |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |       |  |      |   |          |   |      |  
|Goodwill and other intangibles                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | a     |  | 111  |   | 128      |   | 119  |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |       |  |      |   |          |   |      |  
|Joint ventures and associates                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | b     |  | 1    |   | 6        |   | 8    |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |       |  |      |   |          |   |      |  
|Deferred gain on assets contributed to joint ventures                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | c     |  |     |   |         |   | (31  | )
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |       |  |      |   |          |   |      |  
|Profit/(loss) on disposal of available-for-sale and other financial assets                                                                                                                                                                                                                                                                                                                                                                                                                              |  | e     |  | (7   | ) | (2       | ) | 89   |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |       |  |      |   |          |   |      |  
|Stock options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | f     |  | 1    |   | (57      | ) | (33  | )
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |       |  |      |   |          |   |      |  
|Pensions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | g     |  | 19   |   | 177      |   | 143  |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |       |  |      |   |          |   |      |  
|Restructuring                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | h     |  | (12  | ) | (71      | ) | (45  | )
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |       |  |      |   |          |   |      |  
|Derivative financial instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | i     |  | (13  | ) | 6        |   | (8   | )
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |       |  |      |   |          |   |      |  
|Consolidation of subsidiary undertakings                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | j     |  |     |   |         |   | (7   | )
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |       |  |      |   |          |   |      |  
|Sale and leaseback                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  | k     |  | (2   | ) | (2       | ) | (1   | )
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |       |  |      |   |          |   |      |  
|Property, plant and equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | l     |  | 1    |   | 1        |   | 1    |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |       |  |      |   |          |   |      |  
|Shares to be repurchased                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | m     |  | 53   |   | 59       |   |     |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |       |  |      |   |          |   |      |  
|Taxation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | n     |  | (43  | ) | (51      | ) | (39  | )
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |       |  |      |   |          |   |      |  
|Minority interest in respect of US GAAP adjustments                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | o     |  |     |   |         |   | 1    |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |       |  |      |   |          |   |      |  
|Shareholders equity in accordance with US GAAP                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |       |  | 281  |   | 705      |   | 568  |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |       |  |      |   |          |   |      |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | 
|Shareholders equity in
      accordance with IFRS in 2005 has been restated to reflect irrevocable commitments
      to repurchase shares during close periods as a liability (see Basis
      of accounting on page 78). This IFRS restatement results in an additional
      US GAAP adjustment (Shares to be repurchased) in 2005 as shareholders equity
      in accordance with US GAAP in 2005 is unchanged. There was no impact on
      amounts reported in accordance with
IFRS in 2004. | 



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03 Discontinued operationsUnder
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 8788, there were no discontinued
operations in 2006 under IFRS, but Radianz, Instinet and BTC were classified
as discontinued operations in 2004 and 2005. 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 determined that it had not eliminated significant cash flows related to Radianz and therefore Radianz did 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 did meet the criteria and have been classified within discontinued operations. The disposal of Factiva in 2006 did not meet the criteria for discontinued operations under IFRS or US GAAP. Under US GAAP the key data for the operations classed as discontinuing operations are analysed below: 2006
    
    2005
    
    2004Discontinued operations under
      US GAAP
    
    £m
    
    £m
    
    £mOperating income
    
      
      
      96
    
      66Income tax charge
    
      
      
    (15
    )
    (18
    )Profit on disposal
    
      12
      
    133
    
    Minority interest
    
      
      
    (29
    )
    (4
    )Net income
    
      12
      
    185
    
    44Basic profit per ADS
    
      5.8p
      
    79.4p
    
      19.7pDiluted profit per ADS
    
      5.7p
      
    77.2p
    
      18.9p 04 Additional disclosures required by US
      GAAP Derivative financial instrumentsThe current year loss on derivative financial
  instruments is £8 million (2005: £41 million loss, 2004: £58
  million gain). At 31 December 2006, the balance sheet includes a derivative
  asset of £33 million and a derivative liability of £40 million. The
  current year loss includes a loss of £25 million (2005: £17 million
  gain, 2004: £21 million gain) relating to currency forward contracts embedded
  within customer and supplier contracts. Recent accounting pronouncementsSAB 108 Considering
  the effects of prior year misstatments when quantifying misstatements in current
  year financial statementsIn September 2006, the SEC issued SAB 108 which
  provided guidance in respect of the correction of accounting errors. This requires
  the quantification of financial statement errors under US GAAP based on the
  effect of applying both the iron-curtain and the roll-over methods on each of
  the entitys primary statements and related disclosures. The iron-curtain
  method quantifies an error as the amount by which the balance sheet is misstated
  whereas the roll-over method quantifies an error as the amount by which the
  income statement is misstated. The adoption of this guidance by the Group in
  2006 has not resulted in any previously immaterial errors now being assessed
  as material and requiring retrospective adjustment under either IFRS or US GAAP.


FASB Statement No. 155
    Accounting for Certain Hybrid Financial Instruments (FAS 155)In February 2006, the FASB issued FAS 155, which
  is an amendment to FAS 133 and FAS 140. It simplifies accounting for certain
  hybrid financial instruments by permitting fair value remeasurement for any
  hybrid financial instrument that contains an embedded derivative that otherwise
  would require bifurcation. FAS 155 is effective for Reuters for all financial
  instruments acquired, issued, or subject to a remeasurement (new basis) event
  occurring after 1 January 2007. The adoption of FAS 155 is not expected to have
  a material impact on the Groups financial position or the results of its
  operations. FASB Statement No. 157 Fair
  Value Measurement (FAS 157)In October 2006, the FASB issued FAS 157, which
  addresses how companies should measure fair value when they are required to
  use a fair value measure for recognition or disclosure purposes and move towards
  a market-based measure instead of an entity-based measure, and expands disclosure
  requirements about fair value measurements. It is effective for fiscal years
  beginning after 15 November 2007 and will be adopted by Reuters as at 1 January
  2008. The adoption of FAS 157 is not expected to have a significant impact on
  the Groups financial position or the results of its operations. FASB Statement No. 159 The
  Fair Value Option for Financial Assets and Liabilities (FAS 159) 
  including an amendment of FAS 115In February 2007, the FASB issued FAS 159 which
  permits entities to choose to measure many financial instruments and certain
  other items at fair value. This statement is effective as of the beginning of
  fiscal periods beginning after 15 November 2007. The adoption of FAS 159 is
  not expected to have a significant impact on the Groups financial position
  or the results of its operations. FASB Interpretation No.
  48 Accounting for Uncertainty in Income Taxes (FIN 48)In June 2006, the FASB issued FIN 48, which provides
  an interpretation on FAS 109 and prescribes a recognition threshold and measurement
  attribute for the financial statement recognition and measurement of uncertain
  tax positions. FIN 48 applies to fiscal periods beginning after 15 December
  2006. The Group is in the process of assessing the impact on the Groups
  financial position. 05 Audit and non-audit feesAn analysis of fees payable
  to the companys auditors is set out below: 2006
    
    2005£m
    
    £mAudit fees
    
      3.9
      
      3.0Audit-related fees
    
      0.4
      
      2.2Tax fees
    
      1.0
      
      2.6All other fees
    
      0.2
      
      0.1Total fees
    
      5.5
      
      7.9 Audit-related fees include accounting advice,
    due diligence activities relating to acquisitions and disposals and, in 2005,
    advice on preparation for compliance with section 404 of the Sarbanes-Oxley
    Act. Tax fees include advisory services relating to tax planning and employee-related
  issues and assistance with corporation and other tax returns.




Reuters Group PLCAnnual
  Report and Form 20-F 2006

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|    |                                     
|--- | ------------------------------------
|    |                                     
|134 | Consolidated financial
      summary
|    |                                     
|    |                                     

Three year consolidated financial summary (IFRS)

|                                                                                          |  |         |   | Restated |   |         |  
|----------------------------------------------------------------------------------------- |  | ------- | - | -------- | - | ------- | -
|                                                                                          |  | IFRS    |   | IFRS     |   | IFRS    |  
|                                                                                          |  | 2006    |   | 2005     |   | 2004    |  
|For the year ended 31 December                                                            |  | £m      |   | £m       |   | £m      |  
|                                                                                          |  |         |   |          |   |         |  
|Results:                                                                                  |  |         |   |          |   |         |  
|                                                                                          |  |         |   |          |   |         |  
|Revenue1                                                                                  |  | 2,566   |   | 2,409    |   | 2,339   |  
|                                                                                          |  |         |   |          |   |         |  
|Net finance costs                                                                         |  | (15     | ) | (12      | ) | (12     | )
|                                                                                          |  |         |   |          |   |         |  
|Profit before tax                                                                         |  | 313     |   | 238      |   | 396     |  
|                                                                                          |  |         |   |          |   |         |  
|Taxation                                                                                  |  | (20     | ) | (9       | ) | (40     | )
|                                                                                          |  |         |   |          |   |         |  
|Profit attributable to equity
      holders of the parent                                 |  | 305     |   | 456      |   | 364     |  
|                                                                                          |  |         |   |          |   |         |  
|Net assets:                                                                               |  |         |   |          |   |         |  
|                                                                                          |  |         |   |          |   |         |  
|Non-current assets                                                                        |  | 1,314   |   | 1,179    |   | 1,025   |  
|                                                                                          |  |         |   |          |   |         |  
|Current assets                                                                            |  | 606     |   | 957      |   | 1,410   |  
|                                                                                          |  |         |   |          |   |         |  
|Current liabilities                                                                       |  | (913    | ) | (797     | ) | (1,249  | )
|                                                                                          |  |         |   |          |   |         |  
|Non-current liabilities                                                                   |  | (835    | ) | (829     | ) | (714    | )
|                                                                                          |  |         |   |          |   |         |  
|Non-current assets classified
      as held for sale                                      |  |        |   | 1        |   | 145     |  
|                                                                                          |  |         |   |          |   |         |  
|Liabilities directly associated
      with non-current assets classified as held for sale |  |        |   |         |   | (47     | )
|                                                                                          |  |         |   |          |   |         |  
|                                                                                          |  | 172     |   | 511      |   | 570     |  
|                                                                                          |  |         |   |          |   |         |  
|Property, plant and equipment:                                                            |  |         |   |          |   |         |  
|                                                                                          |  |         |   |          |   |         |  
|Additions                                                                                 |  | 130     |   | 137      |   | 111     |  
|                                                                                          |  |         |   |          |   |         |  
|Depreciation                                                                              |  | 95      |   | 103      |   | 130     |  
|                                                                                          |  |         |   |          |   |         |  
|                                                                                          |  |         |   |          |   |         |  
|                                                                                          |  | 2006    |   | 2005     |   | 2004    |  
|                                                                                          |  |         |   |          |   |         |  
|Ratios:                                                                                   |  |         |   |          |   |         |  
|                                                                                          |  |         |   |          |   |         |  
|Basic earnings per ordinary
      share from continuing operations                        |  | 22.6p   |   | 16.3p    |   | 25.4p   |  
|                                                                                          |  |         |   |          |   |         |  
|Dividends per ordinary share                                                              |  | 10.25p  |   | 10.0p    |   | 10.0p   |  
|                                                                                          |  |         |   |          |   |         |  
|Book value per ordinary share2                                                            |  | 13.7p   |   | 37.8p    |   | 26.5p   |  
|                                                                                          |  |         |   |          |   |         |  
|Profit before tax as a percentage
      of revenue (%)                                    |  | 12.2    |   | 9.9      |   | 16.9    |  
|                                                                                          |  |         |   |          |   |         |  
|Return on property, plant and
      equipment3(%)                                         |  | 80.4    |   | 64.2     |   | 85.7    |  
|                                                                                          |  |         |   |          |   |         |  
|Return on equity4(%)                                                                      |  | 89.5    |   | 103.4    |   | 108.5   |  
|                                                                                          |  |         |   |          |   |         |  
|                                                                                          |  |         |   |          |   |         |  
|UK corporation tax rate (%)                                                               |  | 30      |   | 30       |   | 30      |  
|                                                                                          |  |         |   |          |   |         |  
|Infrastructure:                                                                           |  |         |   |          |   |         |  
|                                                                                          |  |         |   |          |   |         |  
|Shares issued (millions)                                                                  |  | 1,470   |   | 1,441    |   | 1,436   |  
|                                                                                          |  |         |   |          |   |         |  
|Employees                                                                                 |  | 16,900  |   | 15,300   |   | 14,465  |  
|                                                                                          |  |         |   |          |   |         |  
|User accesses                                                                             |  | 342,000 |   | 346,000  |   | 328,000 |  
|                                                                                          |  |         |   |          |   |         |  

|2005
      has been restated to recognise irrevocable commitments to repurchase shares
      during close periods as a liability (see Basis of accounting
      on page 78). The impact of recognising these commitments
      is to increase current liabilities and to decrease shareholders equity
      at 31 December 2005 by £59 million.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                  
|Notes:                                                                                                                                                                                                                                                                                                                                            
|1                                                                                                                                                                                                                                                                                                                                                 
|Ratios:                                                                                                                                                                                                                                                                                                                                           
|2                                                                                                                                                                                                                                                                                                                                                 
|3                                                                                                                                                                                                                                                                                                                                                 
|4                                                                                                                                                                                                                                                                                                                                                 



Reuters Group PLCAnnual
  Report and Form 20-F 2006

---



Back to Contents

|           |    
|---------- | ---
|           |    
|Financials | 135
|           |    
|           |    

Nine year consolidated financial summary (UK
  GAAP)

|                                                          |  | UK GAAP |   | UK GAAP |   | UK GAAP |   | UK GAAP |   | UK GAAP |   | UK GAAP |   | UK GAAP |   | UK GAAP |   | UK GAAP |  
|--------------------------------------------------------- |  | ------- | - | ------- | - | ------- | - | ------- | - | ------- | - | ------- | - | ------- | - | ------- | - | ------- | -
|                                                          |  | 2003    |   | 2002    |   | 2001    |   | 2000    |   | 1999    |   | 1998    |   | 1997    |   | 1996    |   | 1995    |  
|For the year ended 31 December                            |  | £m      |   | £m      |   | £m      |   | £m      |   | £m      |   | £m      |   | £m      |   | £m      |   | £m      |  
|                                                          |  |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |  
|Results:                                                  |  |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |  
|                                                          |  |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |  
|Revenue                                                   |  | 3,235   |   | 3,593   |   | 3,885   |   | 3,592   |   | 3,125   |   | 3,032   |   | 2,882   |   | 2,914   |   | 2,703   |  
|                                                          |  |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |  
|Net interest (payable)/receivable                         |  | (29     | ) | (20     | ) | (9      | ) | 3       |   | (4      | ) | 2       |   | 80      |   | 61      |   | 60      |  
|                                                          |  |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |  
|Profit/(loss) before tax                                  |  | 56      |   | (344    | ) | 158     |   | 657     |   | 632     |   | 580     |   | 626     |   | 652     |   | 558     |  
|                                                          |  |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |  
|Taxation                                                  |  | 22      |   | 23      |   | 107     |   | 136     |   | 196     |   | 196     |   | 236     |   | 210     |   | 185     |  
|                                                          |  |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |  
|Profit/(loss) attributable
      to ordinary shareholders |  | 50      |   | (255    | ) | 46      |   | 521     |   | 436     |   | 384     |   | 390     |   | 442     |   | 373     |  
|                                                          |  |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |  
|Net assets:                                               |  |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |  
|                                                          |  |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |  
|Fixed assets                                              |  | 1,192   |   | 1,448   |   | 1,963   |   | 1,868   |   | 1,205   |   | 1,098   |   | 1,046   |   | 1,026   |   | 999     |  
|                                                          |  |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |  
|Net current (liabilities)/assets                          |  | (89     | ) | (190    | ) | (134    | ) | (293    | ) | (170    | ) | (577    | ) | 790     |   | 525     |   | 387     |  
|                                                          |  |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |  
|Long-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   |   | 1,212   |  
|                                                          |  |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |  
|Tangible fixed assets:                                    |  |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |  
|                                                          |  |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |  
|Additions                                                 |  | 130     |   | 154     |   | 276     |   | 282     |   | 244     |   | 296     |   | 361     |   | 372     |   | 304     |  
|                                                          |  |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |  
|Depreciation                                              |  | 193     |   | 227     |   | 246     |   | 276     |   | 310     |   | 331     |   | 312     |   | 283     |   | 250     |  
|                                                          |  |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |  
|Development expenditure                                   |  | 171     |   | 200     |   | 294     |   | 323     |   | 197     |   | 200     |   | 235     |   | 202     |   | 191     |  
|                                                          |  |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |   |         |  

|                                                              |  |         |  |         |   |         |  |         |  |         |  |         |  |         |  |         |  |         | 
|------------------------------------------------------------- |  | ------- |  | ------- | - | ------- |  | ------- |  | ------- |  | ------- |  | ------- |  | ------- |  | ------- | 
|                                                              |  | 2003    |  | 2002    |   | 2001    |  | 2000    |  | 1999    |  | 1998    |  | 1997    |  | 1996    |  | 1995    | 
|                                                              |  |         |  |         |   |         |  |         |  |         |  |         |  |         |  |         |  |         | 
|Ratios:                                                       |  |         |  |         |   |         |  |         |  |         |  |         |  |         |  |         |  |         | 
|                                                              |  |         |  |         |   |         |  |         |  |         |  |         |  |         |  |         |  |         | 
|Earnings/(loss) per ordinary
      share                      |  | 3.6p    |  | (18.3p  | ) | 3.3p    |  | 37.1p   |  | 30.9p   |  | 26.7p   |  | 24.0p   |  | 27.3p   |  | 23.2p   | 
|                                                              |  |         |  |         |   |         |  |         |  |         |  |         |  |         |  |         |  |         | 
|Dividends per ordinary share                                  |  | 10.0p   |  | 10.0p   |   | 10.0p   |  | 16.0p   |  | 14.65p  |  | 14.4p   |  | 13.0p   |  | 11.75p  |  | 9.8p    | 
|                                                              |  |         |  |         |   |         |  |         |  |         |  |         |  |         |  |         |  |         | 
|Book value per ordinary share1                                |  | 15.2p   |  | 30.7p   |   | 68.2p   |  | 73.7p   |  | 40.5p   |  | 23.3p   |  | 99.9p   |  | 88.3p   |  | 73.7p   | 
|                                                              |  |         |  |         |   |         |  |         |  |         |  |         |  |         |  |         |  |         | 
|Profit/(loss) before tax as
      a percentage of revenue (%) |  | 1.7     |  | (9.6    | ) | 4.1     |  | 18.3    |  | 20.2    |  | 19.1    |  | 21.7    |  | 22.4    |  | 20.6    | 
|                                                              |  |         |  |         |   |         |  |         |  |         |  |         |  |         |  |         |  |         | 
|Return on tangible fixed assets2(%)                           |  | 6.3     |  | (56.8   | ) | 7.8     |  | 78.3    |  | 59.1    |  | 48.2    |  | 49.0    |  | 60.0    |  | 55.2    | 
|                                                              |  |         |  |         |   |         |  |         |  |         |  |         |  |         |  |         |  |         | 
|Return on equity3(%)                                          |  | 15.7    |  | (36.8   | ) | 4.6     |  | 65.0    |  | 92.2    |  | 78.5    |  | 25.6    |  | 33.7    |  | 34.8    | 
|                                                              |  |         |  |         |   |         |  |         |  |         |  |         |  |         |  |         |  |         | 
|                                                              |  |         |  |         |   |         |  |         |  |         |  |         |  |         |  |         |  |         | 
|                                                              |  |         |  |         |   |         |  |         |  |         |  |         |  |         |  |         |  |         | 
|UK corporation tax rate (%)                                   |  | 30      |  | 30      |   | 30      |  | 30      |  | 30      |  | 31      |  | 32      |  | 33      |  | 33      | 
|                                                              |  |         |  |         |   |         |  |         |  |         |  |         |  |         |  |         |  |         | 
|Infrastructure:                                               |  |         |  |         |   |         |  |         |  |         |  |         |  |         |  |         |  |         | 
|                                                              |  |         |  |         |   |         |  |         |  |         |  |         |  |         |  |         |  |         | 
|Shares issued (millions)                                      |  | 1,433   |  | 1,433   |   | 1,431   |  | 1,429   |  | 1,423   |  | 1,422   |  | 1,694   |  | 1,689   |  | 1,677   | 
|                                                              |  |         |  |         |   |         |  |         |  |         |  |         |  |         |  |         |  |         | 
|Employees                                                     |  | 16,744  |  | 17,414  |   | 19,429  |  | 18,082  |  | 16,546  |  | 16,938  |  | 16,119  |  | 15,478  |  | 14,348  | 
|                                                              |  |         |  |         |   |         |  |         |  |         |  |         |  |         |  |         |  |         | 
|User accesses                                                 |  | 338,000 |  | 388,000 |   | 592,000 |  | 558,000 |  | 520,858 |  | 482,380 |  | 429,000 |  | 362,000 |  | 327,100 | 
|                                                              |  |         |  |         |   |         |  |         |  |         |  |         |  |         |  |         |  |         | 

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



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|    |                             
|--- | ----------------------------
|    |                             
|144 | Information for shareholders
|    |                             
|    |                             

Ordinary shares

As of 9 March 2007, there were 1,242,432,092 ordinary shares outstanding, excluding 30,431,547 ordinary shares held in employee share ownership trusts and 138,360,000 held in treasury (see note 33 on page
120).

Major shareholders

The company had received notice under section 198 of the UK Companies Act 1985 or under the Transparency Obligations Directive(Disclosure and Transparency Rules) Instrument 2006 (DTRs) DTR 5, as at 9 March 2007 that the following parties held notifiable interests in its shares or voting rights:

|                                      |  | Number of      |  | Percentage of |  | Number of      |   | Number of      |  | Number of      | 
|------------------------------------- |  | -------------- |  | ------------- |  | -------------- | - | -------------- |  | -------------- | 
|                                      |  | shares held on |  | issued share  |  | shares held on |   | shares held on |  | shares held on | 
|                                      |  | 9 March 2007   |  | capital       |  | 7 March 2006   |   | 2 March 2005   |  | 3 March 2004   | 
|                                      |  |                |  |               |  |                |   |                |  |                | 
|Schroders Plc                         |  | 99,602,990     |  | 7.8           |  |               |   |               |  |               | 
|                                      |  |                |  |               |  |                |   |                |  |                | 
|ValueAct Capital Master Fund L.P.     |  | 83,551,212     |  | 6.6           |  |               |   |               |  |               | 
|                                      |  |                |  |               |  |                |   |                |  |                | 
|Fidelity International Limited*       |  | 82,177,979     |  | 6.5           |  | 150,753,687    | * | 130,364,252    |  | 94,238,074     | 
|                                      |  |                |  |               |  |                |   |                |  |                | 
|AMVESCAP plc                          |  | 62,194,192     |  | 4.9           |  |               |   |               |  |               | 
|                                      |  |                |  |               |  |                |   |                |  |                | 
|BlackRock Inc.**                      |  | 48,978,642     |  | 3.8           |  | 48,978,642     |   | 48,978,642     |  | 48,978,642     | 
|                                      |  |                |  |               |  |                |   |                |  |                | 
|Legal & General Investment Management |  | 44,901,479     |  | 3.5           |  | 55,230,590     |   | 58,006,887     |  | 43,076,669     | 
|                                      |  |                |  |               |  |                |   |                |  |                | 
|Barclays PLC                          |  | 40,069,073     |  | 3.1           |  |               |   | 53,902,608     |  | 46,046,872     | 
|                                      |  |                |  |               |  |                |   |                |  |                | 
|Capital Group of Companies, Inc.      |  | 39,399,900     |  | 3.1           |  | 42,135,514     |   |               |  |               | 
|                                      |  |                |  |               |  |                |   |                |  |                | 

|*  | shares held by Fidelity Investments         
|-- | --------------------------------------------
|** | Formerly Merrill Lynch Investment Management
|   |                                             

The companys major shareholders do not
    have any different voting rights from the other ordinary shareholders. There
    have been some changes in the holdings of the companys major shareholders
    during the last three years. Most notably, Fidelity no longer holds in excess
    of 10% of the companys voting capital as was the case during 2005 and
    2006. Fidelity increased its holding throughout the year by a total of approximately
    3% but then sold approximately 6% at the beginning of 2007. The Capital Group
    of Companies, Inc. held around 3% throughout 2006, first notifying the company
    in January 2006; it fell below the 3% notification threshold in January 2007
    and notified the company again in March 2007 of a 3.1% holding. Barclays
    PLC, Legal& General Investments
    and BlackRock Inc. (previously Merrill Lynch Investment Management) have
    held notifiable holdings for the last three years and continue to do so.
    Following the implementation of the new DTRs on 20 January 2007, Schroders
    Plc, ValueAct Capital Master Fund, L.P. and AMVESCAP plc notified the company
    of their
voting rights in Reuters shares. The Founders Share
  Independence, 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
146-149). The Founders Share Companys directors are nominated by aNomination 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: Trustee sinceThe Honourable Mrs Anson Chan, 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)
	
	1997Alejandro Junco de la Vega
	
	2006Joseph 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
	
	2001 Founders Share Company directors 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
reappointment 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.




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Corporate structure The 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 128. Trading markets The 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 prices2002
	
	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
	
	37.332006
	
	4.75
	
	3.49
	
	54.25
	
	38.51Quarterly 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
	
	37.33Quarterly market prices2006First quarter
	
	4.61
	
	3.80
	
	48.44
	
	39.67Second quarter
	
	4.10
	
	3.54
	
	45.71
	
	38.67Third quarter
	
	4.43
	
	3.49
	
	50.06
	
	38.51Fourth quarter
	
	4.75
	
	4.31
	
	54.25
	
	48.20Monthly market prices2006August
	
	4.04
	
	3.77
	
	46.14
	
	42.50September
	
	4.43
	
	3.98
	
	50.06
	
	44.85October
	
	4.61
	
	4.31
	
	52.46
	
	48.20November
	
	4.75
	
	4.41
	
	53.91
	
	50.15December
	
	4.63
	
	4.37
	
	54.25
	
	51.20Monthly market prices2007
	
	4.75
	
	3.49
	
	54.25
	
	38.51January
	
	4.56
	
	4.32
	
	53.06
	
	50.70February
	
	4.45
	
	4.24
	
	52.53
	
	49.55March (to 9 March)
	
	4.44
	
	4.22
	
	51.66
	
	48.18


Analysis of shareholdersAs of 9 March 2007, there were 1,242,432,092 Reuters ordinary shares in issue, including the shares referred to below but excluding ordinary shares held by employee share ownership trusts and shares held in treasury.
There were 26,506 shareholders on the ordinary share register analysed in the chart below. As of the same date, 1,004,081 ordinary shares and 16,199,871 ADSs (representing 97,199,226 ordinary shares) were held on the record in the US. These ordinary shares and ADSs were held by 946 record holders and 2,612
record holders respectively, and represented or evidenced ADSs respectively, representing 7.7% 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.  DividendsThe table below sets forth the amounts of interim, final and total dividends (excluding any associated UK tax credit discussed on page 150) paid in respect of each fiscal year indicated. Pound sterling amounts per
share have been translated into US cents per ADS 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
	
	Total2002
	
	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
	
	68.20
	
	109.382006
	
	4.10
	
	6.90
	
	11.00
	
	46.87
	
	
	
	See page 68 for a discussion
        of the Groups dividend policy. An interim dividend of 4.10 pence per ordinary
    share was paid on 30 August 2006. The directors recommend a final dividend
    of 6.90 pence per ordinary share, giving a total of 11 pence per ordinary
    share for the year (2005: 10 pence). Subject to shareholders approval
at the AGM to be held on 26 April 2007, the final dividend will be paid on3 May 2007 to members on the register holding ordinary shares at the close of business on 16 March 2007. It will be paid on 10 May 2007 to ADS holders on the register at the close of business on 16 March 2007 and will
be converted into US dollars from sterling at the rate prevailing on 10 May 2007. Details of the changes in the authorised and called up share capital are set out in note 27 on page 116.




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History and development The 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. Memorandum and Articles
of Association The 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 1985. 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 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. 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 1985 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 who constitute both its members and directors.
The Founders Share empowers the Founders Share Company to cast such number of votes as will pass any resolution supported by and defeat any resolution opposed by, the Founders Share Company if it believes that any person or persons have obtained, or
are seeking to obtain, control of 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.




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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 1985, 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 Statements of directors responsibilities and
compliance on page 40. The Amended Articles for which shareholder approval is being sought at the 2007 AGM remove the requirement that a director should retire when he reaches the age of 70 in order to comply with the new Employment Equality
(Age) Regulations 2006. 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. For further information on Reuters
personal shareholding policy refer to the Remuneration report on page 30.


Rights and restrictions attaching
    to sharesDividendsHolders 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. The Company now chooses to put all resolutions at the AGM to a poll vote. 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, 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




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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 Founders Share Company directors present at the relevant Founders Share Company directors 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 Founders Share Company directors (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 Founders Share
Company directors 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 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 1985. Disclosure of interests in
  ordinary sharesThe Articles provide for
  the disclosure of interests in Reuters ordinary shares by reference to the Companies
  Act 1985 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 1985 (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 1985, 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 1985 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 26 April 2007, a resolution will be proposed to authorise the directors to allot relevant securities, as defined in the Companies Act 1985, including any equity securities, up to an
aggregate nominal amount of £105 million until the earlier to occur of the AGM in 2008 or 26 July 2008. A resolution will also be




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proposed to authorise equity securities as defined
  in the Companies Act 1985 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 £16 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 207 million ordinary shares. At the Reuters AGM on 26 April 2007, a
resolution will be proposed to renew this authority up to a maximum of 192 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 buy-back 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. During 2006 Reuters continued to operate the £1 billion share buy-back programme it announced on 26 July 2005. During 2006, 129,200,000 shares with a nominal value of £32,300,000 (representing 9% of called-up
share capital) were repurchased at a cost of £526 million. 48 million of these shares were cancelled. In future, share buy-backs will be considered periodically, based on business performance, investment opportunities and maintaining a strong
investment grade credit rating. 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 1985, 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 1985. 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. Exchange control Under 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. Exchange rates The 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
    
    Low2002
    
    1.51
    
      August 2006
    
    1.91
    
    1.872003
    
    1.64
    
    September 2006
    
    1.91
    
    1.862004
    
    1.84
    
    October 2006
    
    1.90
    
    1.852005
    
    1.83
    
    November 2006
    
    1.96
    
    1.892006
    
    1.86
    
    December 2006
    
    1.98
    
    1.952007 (to 9 March)
    
    1.96
    
    January 2007
    
    1.98
    
    1.93February 2007
    
    1.97
    
    1.94 *
    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 9 March 2007 the Noon Buying Rate was $1.93 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 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, see the OFR on page 54.




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Taxation information for US shareholders The following discussion of taxation is intended only as a descriptive summary and does not purport to be a complete technical analysis or listing of all potential tax effects relevant to 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 Revenue and Customs 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 Revenue and Customs
  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 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 the dividend-paying corporation is treated for the tax year
  in which dividends are paid (or for the prior year), as a passive foreign
  investment company (a PFIC) for US federal income tax purposes. The Company
  does not believe it is a PFIC or was a PFIC for 2006. 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.




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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 2006 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. Material contracts and transactions FXMarketSpaceOn
4 May 2006, Reuters and CME entered into an agreement to form FXMarketSpace,
a 50/50 joint venture to create a centrally-cleared, global foreign exchange
trading system. The joint venture was formed on 20 July 2006. Under the joint
venture agreement, Reuters and CME have committed to invest up to $45 million
each, subject to the joint venture meeting certain performance milestones. Reuters
and CME each have an equal number of representatives on the board of directors,
and board actions generally require approval of at least one representative of
each party. The parties agreed to share all profits derived from the joint venture, including those profits derived through the provision of services by the parties to the joint venture, in proportion to their ownership interest.
This is achieved by the joint venture paying a preferential dividend to the shareholder with the lesser profits (subject to accrual in years during which the joint venture does not have sufficient profits, and to the other shareholder making direct
payment of its portion of any accrued amount where either party is exiting from the joint venture in certain circumstances).




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The joint venture agreement contains limited transfer, put/call, and termination provisions, including: termination rights if certain volume and financial thresholds are not met in the fifth year after public launch of
trading, subject to a call right of the non-terminating partner; put/call rights by the non-defaulting party in the event of certain key defaults; and transfer rights, including the right to transfer an interest in or require the sale of the entire
joint venture, beginning only after ten years following public launch of trading, and subject to a right of first refusal by the other partner. Subject to certain exceptions, CME and Reuters
each agreed not to operate, have any significant interest in, or provide certain
key services to, a competing, cleared platform for electronic trading of FX products
 (other than futures and futures options). If the venture requires funding beyond
the committed amounts and only one partner is willing to provide such funding,
the other party will have a right to terminate these restrictions subject to
a call right
of the nonterminating party. Reuters has entered into agreements to provide trading access to and trade notification services for, and distribute market data from, FXMarketSpace, among various other services and arrangements. For further
information, see note 34 on pages 123124. Radianz/BTSale of Radianz to BT.
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, funding obligations from Reuters to Radianz of $44
million were novated to BT. Network Services Agreement.Reuters entered into a contract with BT effective 29 April 2005 under which BT became a supplier of network services to Reuters. Under this
network services agreement, which has since been amended, BT provides and manages secure data networks for Reuters products and services worldwide and Reuters is currently expected to spend in the region of $3 billion from 2005 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 of substantially all existing connections in the second quarter of 2008 (although a
limited number of countries will be completed in 2010). 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
completion of the migration, based on a declining percentage of the charges in the previous year, and obliges BT to meet certain quality of service levels. In addition, the agreement gives BT the opportunity to tender for any future
telecommunication services needed by Reuters.


Savvis Network Services AgreementsReuters
is party to a three-year network services agreement, dated 19 May 2005, with
Savvis for internet protocol network services, internet access, co-location and
other services. The agreement contains no minimum spend commitments and obliges
Savvis to meet certain quality of service levels. 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, co-location and other services
to support the acquired Telerate business. The agreement expires 1 October 2009
and is an exclusive arrangement for the Telerate business so long as Savvis remains
in material compliance with its obligations. Sale of FactivaOn
18 October 2006, Reuters agreed to sell the majority of its 50% stake in Factiva
to Dow Jones. The sale occurred on 15 December 2006 and Reuters received cash
consideration of $178 million. Reuters retained a
minority preference share interest valued at $7 million in a Factiva entity. In connection with the sale, Reuters entered into or continued a number of commercial arrangements with Factiva and Dow Jones, and agreed not to compete with
Factivas core business for a two-year period and to continue exclusivity
arrangements with respect to certain Reuters content provided to Factiva. Sale of Instinet GroupOn
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. At the same time, Instinet Group agreed to sell its Lynch Jones & Ryan (LJR) subsidiary to The Bank of New York, and NASDAQ agreed to
subsequently sell Instinet, the institutional brokerage business, to Silver Lake Partners. The sale of LJR to The Bank of New York was completed on 30 June 2005, and the sales of Instinet Group to NASDAQ and of the Instinet brokerage business to
Silver Lake Partners were completed on 8 December 2005. Reuters received an aggregate of approximately $1.13
billion for its 62% interest (including a dividend Instinet Group had made to
its shareholders from the sale of LJR which was deducted from the NASDAQ purchase
price). Pension plan deficit fundingOn
24 May 2006, Reuters announced that it had agreed a package of measures with
the trustees of its two UK final salary pension plans that will substantially
fund the pension deficit, enhance the security of the
members existing benefits and reduce the risk associated with managing the plans. Under the agreement, in addition to its ordinary pension contributions, Reuters paid a cash sum of £187 million into the two pension funds in 2006 and will
pay a further £42 million in 2007. Financing arrangementsFor
a discussion of other material contracts, see Treasury Policies on pages 6365.




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Capital investments, expenditure and divestments During the last three years, Reuters has made a number of acquisitions and invested in new businesses. The principal acquisitions, investments and disposals (none of which exceeded £50 million, save where
otherwise stated) were: Acquisitions2006Application
Networks Inc., a leading risk management software provider, in June 2006 for £22
million. The Telerate distribution business of Indian Quotation Systems Private Limited in June 2006. Telerate Italia SrL, a distributor of Telerates products in Italy, in July 2006. In July 2006, Reuters and the Chicago Mercantile Exchange formed a new joint venture, FXMarketSpace Limited, to create a centrally-cleared, global foreign exchange trading system. Reuters invested £8 million in
the joint venture during 2006 (an additional £6 million was invested by each partner in early 2007). In October 2006, Reuters acquired a 26% interest in Times Global Broadcasting Company Limited for £11 million relating to the launch of a new Indian TV News Channel, TIMES NOW, in association with the Times of
India. In November 2006, Reuters acquired an interest in Pluck Corporation, an early stage social media solutions company, for £4 million. Total capital expenditure, including transaction fees, for acquisitions of subsidiaries, joint ventures, associates and available-for-sale financial assets during 2006 was £68 million. 2005Telerate,
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 June 2005, Reuters and NASDAQ announced the formation of a new joint venture, Independent Research Network Inc., to 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, joint ventures, associates and available-for-sale financial assets during 2005 was £145 million.


2004Fitzrovia International plc, a leading investment fund research company, was acquired in October 2004 by Lipper Limited, a wholly owned subsidiary of Reuters. Radianz, a network services/financial extranet company in which Reuters acquired the 49% voting interest it did not already own from joint venture partner Equant in November 2004 for £60 million. Total capital expenditure including transaction fees for acquisitions of subsidiaries, joint ventures, associates and available-for-sale financial assets during 2004 was £80 million. Divestments2006Reuters
disposed or closed a total of three units during 2006 for cash consideration
of £80 million, net of transaction fees. The principal disposal or closure
was: Factiva, a provider of a broad range of archived news and business information in which Reuters 50% stake was sold to joint venture partner Dow Jones for net cash consideration of £79 million. 2005Reuters
disposed or closed a total of five units during 2005 for cash consideration of £895
million, net of transaction fees. The principal disposals or closures were: Instinet Group, in which Reuters 62% stake was sold for £612 million in December 2005. Prior to the sale Reuters had sold Bridge Trading Company, a soft dollar execution broker, to Instinet for approximately 3.8
million shares of Instinet stock, valued at £12 million. Instinet had 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, 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 33% stake was sold in November 2005. 2004Reuters
disposed of or closed a total of 12 units during 2004 for cash consideration
of £474 million, net of transaction fees. The principal disposals or closures
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 £310 million. GL TRADE, a financial software company in which Reuters 34.2% shareholding was divested in June 2004 for consideration of £59 million. ORT SAS, a wholly owned credit rating subsidiary of Reuters, was sold in June 2004 for consideration of £29 million. TowerGroup, a financial services research company in which Reuters held a 98% holding, was sold in February 2004.




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Yankee, a wholly-owned telecommunications research company, was sold in May 2004. Riskmetrics, a company specialising in portfolio credit risk evaluation, in which Reuters 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. Property, plant and equipment During 2005 the Groups principal facilities were relocated to the Canary Wharf area of London, thereby down-sizing its London-based operations from 340,000 sq. ft. to 281,000 sq. ft. The Canary Wharf building is
leased through 2020. Reuters other significant sites include: •
	the US headquarters at 3 Times Square in New York City (692,000 sq. ft., of which 288,000 sq. ft. are sub-let) (see below);•
	technical centres in:•
	London (324,000 sq. ft. owned);•
	Hazelwood, Missouri (109,000 sq. ft. leased through 2024, with options to extend through 2039);•
	Geneva (144,000 sq. ft. owned on property leased through 2095), which also includes the regional office for EMEA;•
	Singapore (180,000 sq. ft. owned on property leased through 2020, with options to extend through 2050), which also includes the regional office and main data centre for Asia; and•
	Hauppauge, New York (50,000 sq. ft. owned);•
	an office facility in Hauppauge (140,000 sq. ft. owned) used by development and internal support groups which is located next to Reuters Hauppauge data Centre;•
	four adjacent corporate office buildings located in St Louis County, Missouri (total 211,000 sq. ft.), two of which are owned and two of which are leased through 2014, with options to extend through 2034;•
	office space in Bangkok (178,000 sq. ft.) under lease expiring for most of the space in 2007;•
	space in three office buildings in Bangalore, India (total: 212,622 sq. ft.) under leases expiring in 2008, 2009 and 2011, with options to extend through 2012, 2012 and 2015, respectively; and•
	a development facility in Zhongguancun Software Park, Haidian District, Beijing, China (50,000 sq. ft.) under a lease through 2011, with options to extend through 2016; Reuters is in the final phases of further
expanding that operation by an additional 50,000 sq. ft.




The Reuters Building at 3 Times Square is owned, and was developed, by 3 Times Square Associates LLC, which is a joint venture between Reuters and Rudin Times Square Associates LLC, Reuters leases 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 subject to three ten-year extension periods.
See 3 Times Square Associates LLC in Note 34 on page 123 for further information. The 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. Legal proceedings Except as described above in note 35 on page 124, 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.




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Item
	Description
	Annual Report
    Page Ref1.
	Identity of Directors, Senior
    Management and Advisers
	n/a2.
	Offer Statistics and Expected Timetable
	n/a3.
	Key InformationA.
	Selected financial data
	5253,149B.
	Capitalisation and indebtedness
	n/aC.
	Reasons for the offer and use of proceeds
	n/aD.
	Risk factors
	65
674.
	Information on the CompanyA.
	History and development of the company
	611, 4445, 153B.
	Business overview
	813, 4445, 5862,
    83
    84C.
	Organisational structure
	128, 145D.
	Property, plant and equipment
	50, 1544A.
	Unresolved Staff Comments
	n/a5.
	Operating and financial review and ProspectsA.
	Operating results
	54
62B.
	Liquidity and capital resources
	63C.
	Research and development, patents and licences, etc.
	44
45D.
	Trend information
	45
47E.
	Off-balance sheet arrangements
	65F.
	Tabular disclosure of contractual obligations
	63
646.
	Directors, Senior Management and EmployeesA.
	Directors and senior management
	25
28B.
	Compensation
	29
37C.
	Board practices
	26, 29, 31, 4243, 147D.
	Employees
	12, 3031, 4748,
    143E.
	Share ownership
	30, 377.
	Major shareholders and Related Party TransactionsA.
	Major shareholders
	144145B.
	Related party transactions
	123124C.
	Interests of experts and counsel
	n/a8.
	Financial InformationA.
	Consolidated Statements andOther Financial Information
	See Item 17Litigation
  124Dividend Policy
  68B.
	Significant Changes
	1279.
	The Offer and ListingA.
	Offer and listing details  price history of shares
	145B.
	Plan of distribution
	n/aC.
	Markets
	145D.
	Selling shareholders
	n/aE.
	Dilution
	n/aF.
	Expenses of the issue
	n/a




Item
	Description
	Annual Report Page
    Ref10.
	Additional InformationA.
	Share capital
	n/aB.
	Memorandum and articles of association
	146
148C.
	Material contracts
	151
152D.
	Exchange controls
	149E.
	Taxation
	150
151F.
	Dividends and paying agents
	n/aG.
	Statement by experts
	n/aH.
	Documents on display
	157I.
	Subsidiary Information
	n/a11.
	Quantitative and Qualitative Disclosures About
Market Risk
	62, 99 10812.
	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
	4142, 7416A.
	Audit committee financial expert
	4216B.
	Code of Ethics
	38, 4316C.
	Principal Accountant Fees and Services
	42, 13316D.
	Exemptions from the Listing Standards for Audit Committees
	n/a16E.
	Purchases of Equity Securities by the Issuer
      and
Affiliated Purchasers
	11617.
	Financial Statements
	n/aReport of the auditors
	74Consolidated income statement for each of the
three years in the period ended 31 December 2006
	75Consolidated statement of recognized income and
expense for the three years in the period ended 31 December 2006
	75Consolidated balance sheet at 31 December 2006,
2005 and 2004
	76Consolidated cash flow statement for each of the three years
in the period ended 31 December 2006
	77Accounting policies
	78
82Notes to the financial statements
	83
128Summary of differences between IFRS (as adopted
by the EU) and US GAAP and related notes
	129 13318.
	Financial Statements
	n/a






Reuters Group PLCAnnual
 Report and Form 20-F 2006

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Back to Contents

|    |         
|--- | --------
|    |         
|156 | Glossary
|    |         
|    |         
|    |         

|Term used in annual report                                           |  | US equivalent or brief description                                                                            | 
|-------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------- | 
|                                                                     |  |                                                                                                               | 
|Allotted                                                             |  | Issued                                                                                                        | 
|                                                                     |  |                                                                                                               | 
|Associates                                                           |  | Affiliates accounted for under the equity method                                                              | 
|                                                                     |  |                                                                                                               | 
|Business segment                                                     |  | Industry segment                                                                                              | 
|                                                                     |  |                                                                                                               | 
|Called up share capital                                              |  | Ordinary shares, issued and fully paid                                                                        | 
|                                                                     |  |                                                                                                               | 
|Capital allowances                                                   |  | Tax term equivalent to US tax depreciation allowances                                                         | 
|                                                                     |  |                                                                                                               | 
|Combined Code                                                        |  | A set of corporate governance principles and detailed codes of practice                                       | 
|                                                                     |  |                                                                                                               | 
|Destination (of revenue)                                             |  | The geographical area to which goods or services are supplied                                                 | 
|                                                                     |  |                                                                                                               | 
|Finance income                                                       |  | Interest income                                                                                               | 
|                                                                     |  |                                                                                                               | 
|Freehold                                                             |  | Ownership with absolute rights in perpetuity                                                                  | 
|                                                                     |  |                                                                                                               | 
|Origin (of revenue)                                                  |  | The geographical area from which goods or services are supplied to a third party
or another geographical area | 
|                                                                     |  |                                                                                                               | 
|Profit                                                               |  | Income                                                                                                        | 
|                                                                     |  |                                                                                                               | 
|Profit for the year attributable to the equity holders of the parent |  | Net income                                                                                                    | 
|                                                                     |  |                                                                                                               | 
|Share capital                                                        |  | Ordinary shares, capital stock or common stock issued and fully paid                                          | 
|                                                                     |  |                                                                                                               | 
|Shares in issue                                                      |  | Shares outstanding                                                                                            | 
|                                                                     |  |                                                                                                               | 
|Share premium                                                        |  | Additional paid-in capital or paid-in surplus (not distributable)                                             | 
|                                                                     |  |                                                                                                               | 
|Trade payables                                                       |  | Accounts payable                                                                                              | 
|                                                                     |  |                                                                                                               | 
|Trade receivables                                                    |  | Accounts receivable                                                                                           | 
|                                                                     |  |                                                                                                               | 
|                                                                     |  |                                                                                                               | 



Reuters Group PLCAnnual
Report and Form 20-F 2006

---



Back to Contents

|                                           |             |    
|------------------------------------------ | ----------- | ---
|                                           |             |    
|Financial
      diary and Where to find us | Information | 157
|                                           |             |    
|                                           |             |    

|                               |  |                        |  | 
|------------------------------ |  | ---------------------- |  | 
|Financial diary for
      2007 |  | Where to
      find us |  | 
|                               |  |                        |  | 

Thursday1 MarchResults for full year 2006 announced Wednesday14 MarchOrdinary
  shares and ADSs go ex-dividend Wednesday25 AprilFirst quarter
  trading
  statement issued Thursday26 AprilAnnual General
  Meeting
  Time: 11:30 am
  Venue: The Reuters
  Building,
  South Colonnade, Canary Wharf,
  London
  E14 5EP Thursday3 MayFinal dividend for
    2006 payable to ordinary shareholders on the register as at 16 March 2007 Thursday10 MayFinal dividend payable
    to ADS holders on the record as at 16 March 2007 Tuesday31 JulyResults for first
    six months of 2007 announced Wednesday8 AugustOrdinary shares
    and ADSs go ex-dividend Wednesday5 SeptemberInterim dividend
  for 2007 payable
  to ordinary shareholders
  on the register
  as at 10 August
  2007 Wednesday12 SeptemberInterim dividend
    payable to ADS holders on the record as at 10 August 2007 Thursday25 OctoberThird quarter
  trading
  statement issued




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  (for callers within the UK)
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  (for callersoutside
  the UK)
  Fax: +44 (0)1903 833 482
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AmericanDepositary SharesDeutsche Bank ADR
    Service Center
    c/o Mellon Investor Services
    480 Washington Boulevard
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    NJ 07310
    USA
    Tel: +1 866 282 4011
    Website: adr.db.com ElectroniccopiesThe Annual Report
    and Form 20-F and the Annual Review are available on the internet at about.reuters.com/reports/ar2006 ListingsLondon Stock Exchange
    (RTR.L) and Nasdaq (RTRSY.O) Options on ordinary shares
    are traded on Euronext Liffe. Futures contracts on ordinary shares 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. CorporatebrokersCitigroup and JPMorgan
    Cazenove Limited FinancialPRBrunswick
  Group Limited






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    logo and Reuters product names referred to in this review 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
      2006
|-------------------------------------------------------------

---





---



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 (“NSA”), 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)

4.1.1+
      Amendments to NSA, dated 31 March 2006 and 19 December 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)

4.3+ Funding Agreement
    for the Reuters Pension Fund dated 23 May 2006 among Reuters Limited, the
    Managing Committee of Reuters Pension Fund, and Reuters Pension Fund Limited

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 9 June 2006 among Reuters Group
      PLC (as Issuer and Guarantor),
    Reuters Finance PLC (as Issuer) and the various Initial Dealers named therein
    relating to the June 2006 update of the £1,000,000,000 Euro Medium
    Term Note Programme

4.6.1+
      Amended and Restated Trust Deed dated 9 June 2006 between Reuters Group
      PLC (as Issuer and Guarantor),
    Reuters Finance PLC (as Issuer) and Citicorp Trustee Company Limited (as
    Trustee) relating to the £1,000,000,000 Euro Medium Term Note Programme

4.6.2+
      Amended and Restated Agency Agreement dated 9 June 2006 between Reuters
      Group PLC (as Issuer and Guarantor),
    Reuters Finance PLC (as Issuer), Citibank, N.A. (as Agent), Citibank Global
    Capital Markets Deutschland AG & Co. KGaA (as Paying Agent) and Citicorp
    Trustee Company Limited (as Trustee) relating to the £1,000,000,000
    Euro Medium Term Note Programme

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

4.6.7+
      Final Terms dated 24 November 2006 relating to Reuters Group PLC Issue
      of €250,000,000
    Floating Rate Notes due November 2008 under the £1,000,000,000 Euro
    Medium Term Note Programme

4.6.8+
      Subscription Agreement dated 24 November 2006 between Reuters Group PLC
      and Citigroup
    Global Markets Limited and UBS Limited (as Lead Managers) relating to €250,000,000
    Floating Rate Notes due November 2008 under the £1,000,000,000 Euro
    Medium Term Note Programme

4.7+ £680,000,000
      Multicurrency Revolving Facility Agreement, dated 26 October 2006, among
      Reuters Group
    PLC, the financial institutions listed therein and HSBC 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 9 March 2007

4.10.2+ Service Agreement of David
    Grigson with Reuters Group PLC dated 5 February 2006

4.10.3+ Service Agreement of Devin
    Wenig with Reuters Group PLC dated 31 January 2006

4.10.4+ Service Agreement of Devin
    Wenig with Reuters America LLC 31 January 2006

4.10.5* Engagement Letter of Niall
    FitzGerald with Reuters Group PLC dated 2 March 2004

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      Shareholders
    Agreement dated May 4, 2006 and amended and restated on July 20, 2006 by
    and between Reuters Holdings Limited, CME FX Marketplace Inc., FXMarketSpace
    Limited (f/k/a RCFX Limited), Reuters Group PLC, Reuters Limited, Chicago
    Mercantile Exchange Holdings Inc. and Chicago Mercantile Exchange Inc. (incorporated
    by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q filed by
    Chicago Mercantile Exchange Holdings Inc. on 7 August 2006) (portions of
    this exhibit have been omitted pursuant to a request for confidential treatment)

4.14      (i)
    Share Purchase Agreement by and among Reuters Limited, Reuters JV Switzerland,
    Sarl (“Reuters”), Dow Jones & Company, Inc., DJBI, LLC, and
    Dow Jones Reuters Business Interactive LLC, a Delaware limited liability
    company (“Factiva”); (ii) Unit Purchase Agreement by and among
    Reuters Holdings Limited, Reuters Limited, Reuters JV Switzerland, Sarl,
    Dow Jones & Company, Inc., DJBI, LLC, Factiva, and Dow Jones Reuters
    Business Interactive Ltd.; and (iii) Formation and Contribution Agreement
    by and among Factiva, Reuters Limited, Reuters JV Switzerland, Sarl, Dow
    Jones & Company, Inc., and DJBI, LLC (incorporated by reference to Exhibits
    99.1, 99.2 and 99.3 to the Current Report on Form 8-K/A filed by Dow Jones & Company,
    Inc. on 24 October 2006)

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 15 March
      2007

+ Filed herewith

* 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.

*** Incorporated by reference to
    the identically numbered exhibit to the Annual Report on Form 20-F filed
    on 17 March 2006 by Reuters Group PLC with respect to the fiscal year ended
    31 December 2005.



---



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: 16 March 2007

By: /s/ David Grigson

David Grigson,CFO

---



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 (“NSA”), 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)

4.1.1+      Amendments
    to NSA, dated 31 March 2006 and 19 December 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)

4.3+      Funding
    Agreement for the Reuters Pension Fund dated 23 May 2006 among Reuters Limited,
    the Managing Committee of Reuters Pension Fund, and Reuters Pension Fund
    Limited

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 9 June 2006 among Reuters Group
      PLC (as Issuer and Guarantor),
    Reuters Finance PLC (as Issuer) and the various Initial Dealers named therein
    relating to the June 2006 update of the £1,000,000,000 Euro Medium
    Term Note Programme

4.6.1+
      Amended and Restated Trust Deed dated 9 June 2006 between Reuters Group
      PLC (as Issuer and Guarantor),
    Reuters Finance PLC (as Issuer) and Citicorp Trustee Company Limited (as
    Trustee) relating to the £1,000,000,000 Euro Medium Term Note Programme

4.6.2+
      Amended and Restated Agency Agreement dated 9 June 2006 between Reuters
      Group PLC (as Issuer and Guarantor),
    Reuters Finance PLC (as Issuer), Citibank, N.A. (as Agent), Citibank Global
    Capital Markets Deutschland AG & Co. KGaA (as Paying Agent) and Citicorp
    Trustee Company Limited (as Trustee) relating to the £1,000,000,000
    Euro Medium Term Note Programme

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

4.6.7+      Final
    Terms dated 24 November 2006 relating to Reuters Group PLC Issue of €250,000,000
    Floating Rate Notes due November 2008 under the £1,000,000,000 Euro
    Medium Term Note Programme

4.6.8+      Subscription
    Agreement dated 24 November 2006 between Reuters Group PLC and Citigroup
    Global Markets Limited and UBS Limited (as Lead Managers) relating to €250,000,000
    Floating Rate Notes due November 2008 under the £1,000,000,000 Euro
    Medium Term Note Programme

4.7+ £680,000,000
      Multicurrency Revolving Facility Agreement, dated 26 October 2006, among
      Reuters Group
    PLC, the financial institutions listed therein and HSBC 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 9 March 2007

4.10.2+ Service Agreement of David
    Grigson with Reuters Group PLC dated 5 February 2006

4.10.3+ Service Agreement of Devin
    Wenig with Reuters Group PLC dated 31 January 2006

4.10.4+ Service Agreement of Devin
    Wenig with Reuters America LLC 31 January 2006

4.10.5* Engagement Letter of Niall
    FitzGerald with Reuters Group PLC dated 2 March 2004

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      Shareholders
    Agreement dated May 4, 2006 and amended and restated on July 20, 2006 by
    and between Reuters Holdings Limited, CME FX Marketplace Inc., FXMarketSpace
    Limited (f/k/a RCFX Limited), Reuters Group PLC, Reuters Limited, Chicago
    Mercantile Exchange Holdings Inc. and Chicago Mercantile Exchange Inc. (incorporated
    by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q filed by
    Chicago Mercantile Exchange Holdings Inc. on 7 August 2006) (portions of
    this exhibit have been omitted pursuant to a request for confidential treatment)

4.14      (i)
    Share Purchase Agreement by and among Reuters Limited, Reuters JV Switzerland,
    Sarl (“Reuters”), Dow Jones & Company, Inc., DJBI, LLC, and
    Dow Jones Reuters Business Interactive LLC, a Delaware limited liability
    company (“Factiva”); (ii) Unit Purchase Agreement by and among
    Reuters Holdings Limited, Reuters Limited, Reuters JV Switzerland, Sarl,
    Dow Jones & Company, Inc., DJBI, LLC, Factiva, and Dow Jones Reuters
    Business Interactive Ltd.; and (iii) Formation and Contribution Agreement
    by and among Factiva, Reuters Limited, Reuters JV Switzerland, Sarl, Dow
    Jones & Company, Inc., and DJBI, LLC (incorporated by reference to Exhibits
    99.1, 99.2 and 99.3 to the Current Report on Form 8-K/A filed by Dow Jones & Company,
    Inc. on 24 October 2006)

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 15 March 2007

+ Filed herewith

* 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.

*** Incorporated by reference to
    the identically numbered exhibit to the Annual Report on Form 20-F filed
    on 17 March 2006 by Reuters Group PLC with respect to the fiscal year ended
    31 December 2005.



---