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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, 2004                                                 
|  
|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)

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(Translation of Registrant’s
    name into English)

England(Jurisdiction of incorporation or organization)

85 Fleet Street, London
      EC4P 4AJ, England
  (Address of Principal Executive Offices)

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

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

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

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

| | Ordinary Shares of 25p each | 1,435,492,506 | 
| | --------------------------- | ------------- | 
| | Founders Share of £1        | 1             | 

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

Yes                                No

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

Item 17                               Item
    18

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| | Reuters
        Group PLCAnnual Report and Form 20-F 2004
| | ---------------------------------------------------------
| |                                                          
| |                                                          
| |                                                          
| |                                                          
| |                                                          
| | Tell
      it straight                                   
| |                                                          
| | Reuters
        Annual Report and Form 20-F 2004         
| |                                                          
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| |                                                          









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|Contents
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|11      
|26      
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|29      
|32      
|41      
|42      
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|51      
|56      
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|74      
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|93      
|94      
|95      
|96      
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FINANCIAL HIGHLIGHTS

|                                            |  |        |   | Restated | 3 |        |   
|------------------------------------------- |  | ------ | - | -------- | - | ------ | --
|                                            |  | 2004   |   | 2003     |   | %      |   
|Reuters
      Group                         |  | £m     |   | £m       |   | change |   
|                                            |  |        |   |          |   |        |   
|Revenue                                     |  | 2,885  |   | 3,235    |   | (11    | %)
|Operating profit                            |  | 197    |   | 130      |   | 51     | % 
|Profit before
      tax                     |  | 437    |   | 56       |   |       |   
|Profit
      after tax                      |  | 364    |   | 34       |   |       |   
|Return on equity
      (%)                  |  | 112.5% |   | 15.7%    |   |       |   
|Net funds/(debt)                            |  | 326    |   | (77      | ) |       |   
|                                            |  |        |   |          |   |        |   
|Basic earnings
      per ordinary share     |  | 25.1   | p | 3.6      | p |       |   
|Diluted earnings
      per share            |  | 24.5   | p | 3.5      | p |       |   
|Earnings per
      ADS1,2                   |  | 288.9  | c | 41.3     | c |       |   
|Dividends per
      ordinary share          |  | 10.0   | p | 10.0     | p |       |   
|Dividends per
      ADS1(see page
      82) |  | 60.0   | p | 60.0     | p |       |   
|                                            |  |        |   |          |   |        |   
|

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

This report comprises
  the annual report of Reuters Group PLC in accordance with the United Kingdom
  requirements and its annual report on Form 20-F in accordance with the requirements
  of the United States Securities and Exchange Commission (SEC) for 2004. A cross-reference
  guide setting out the information in this report that corresponds to the Form
  20-F items is provided on pages 94-95.

As used in this
  report, Reuters Group and Group refer to Reuters Group
  PLC and its subsidiary undertakings, including Instinet Group Incorporated (Instinet
  Group), joint ventures and associates. The company refers to the
  parent Reuters Group PLC. Reuters refers to Reuters Group excluding
  Instinet Group.

The consolidated
  financial statements of Reuters Group included in this report are presented
  in pounds sterling (£). On 31 December 2004, the noon buying rate in New
  York City for cable transfers in foreign currencies as announced for customs
  purposes by the Federal Reserve Bank of New York (Noon Buying Rate) was US$1.92
  = £1; on 4 March 2005 the Noon Buying Rate was US$1.92 = £1. For
  additional information on exchange rates between the pound sterling and the
  US dollar, see exchange rates on page 85.

Reuters Groups
  consolidated financial statements are prepared in accordance with accounting
  principles generally accepted in the United Kingdom (UK GAAP). UK GAAP differs
  in certain respects from accounting principles generally accepted in the United
  States (US GAAP). The material differences between UK GAAP and US GAAP relevant
  to Reuters Group are explained on pages 74-80.

This report contains
  forward-looking statements within the meaning of the United States Private Securities
  Litigation Reform Act of 1995 with respect to Reuters Groups financial
  condition, results of operations, business and management strategy and plans
  and objectives. For a discussion of risks associated with these statements see
  Risk Factors on pages 23-25.

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















|Reuters
        Group PLC Annual Report and Form 20-F 2004 |  | 01
|---------------------------------------------------------- |  | --

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CHAIRMANS STATEMENT

It is a privilege to follow in the footsteps of Sir Christopher Hogg. I am grateful for the warm and open welcome I have received from Tom Glocer and his team and my Board colleagues. I hope
to justify their confidence. Reuters is one of the worlds great brands. The principles which govern the company are special. The people who work here are a unique blend. And yet the business stumbled. But a
resolute team has fought back, focused again on the core and rebuilt confidence and strength. The benefits of Fast Forward are clear and will grow. Momentum will be maintained in 2005 but we must also put in place a strategic framework for sustained
growth in the years ahead. There is growth potential in our core business, in adjacent markets and in new sectors and geographies. Our task is to identify opportunities which play to our competitive strengths and encompass risk which we understand. In doing so we must start with the extraordinary brand that is Reuters. What does it stand for today and to what can it realistically aspire? How do we grow the company to fill the space
occupied by the brand? Where are the multiple skills and special values of Reuters people best deployed? When can this deliver value to our shareholders and worth to society? As Chairman, my role is to lead the Board in a manner that allows the CEO to run the company effectively. This requires the correct balance between detachment, thereby avoiding interference,
and being sufficiently engaged to know when to intervene. Our Board 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. As a Board we should be judged through the sustained success of the business. I am excited by the challenge, yet humbled by the responsibility. We
    must put in place a strategic framework for sustained growth in the years
    ahead.  Niall FitzGerald,
    KBE Chairman




|02 |  | Reuters Group
      PLC Annual Report and Form 20-F 2004
|-- |  | --------------------------------------------------------

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CHIEF EXECUTIVES REVIEW

ONE
    TO ONE WITH TOM GLOCER Our CEO answers
    the key questions about Reuters Q
    What was the high point of 2004?We increased
    Group operating profit by 51% to £197 million as our sales began to
    recover. User accesses also started to climb again during the year, reaching
    328,000, an increase of 14,000 since the end of the first quarter. and the low point?Unfortunately,
    our journalists and photographers are all too often exposed to danger as they
    report world events. I deeply regret that in the last year, three have lost
    their lives: Adlan Khasanov in Chechnya and Dhia Najim and Rashid Khaled in
    Iraq. Their deaths are a searing reminder of the heroism of Reuters journalists
    who put their lives on the line to report the reality of conflict to those
    of us who live in a safer environment. Q
    You say Reuters is being transformed  from what to what?In short, from
    a company at the edge to a great company again. The Reuters of three years
    ago was at a crisis point. Our revenues were falling rapidly, we were losing
    market share, our costs were too high, and our organisation was too complex.
    Today, two-thirds of the way through Fast Forward, Im pleased with our
    progress. We have strengthened our product line, we are meeting our cost savings
    targets and we have done much to simplify the company and reduce our portfolio.
    Its a tough process, and one that will continue this year, but its
    worth it because I truly believe we are on the way to making Reuters a great
    company again. Q
    What is being done to improve Reuters products?The answer, and
    our approach, begins with identifying and understanding customer needs. I
    think we are doing a much better job at this, and the results show in new
    or significantly improved products such as Reuters 3000 Xtra, Reuters Knowledge
    and Reuters Station. What I believe we need to improve is speed of execution
    and responsiveness to customers. Part of the answer lies in the cultural transformation
    we have underway at Reuters, and part lies in organising ourselves better.
    Towards this end, we reorganised our Development and Operations groups at
    the beginning of 2005 to integrate our software developers directly into the
    Customer Segment business teams and focus on Customer Service.


Q
    What more can be done to improve customer satisfaction?Our customer satisfaction
    score continued to improve during 2004, and I am proud of the way the Reuters
    culture is changing to put the customer at the heart of everything we do.
    However, our customer satisfaction took a hit in the fourth quarter in the
    wake of the power disruption we experienced last October at our London data
    centre. It brought home to me just how integral we are to the way our customers
    run their businesses and how we can create a competitive advantage for Reuters
    by increasing our investment in business continuity and disaster recovery. Q
    Where do you expect Reuters growth to come from in the next few years?Our dialogue with customers, investors and Reuters own staff has shifted from
    one of recovery to growth. This is a challenge I take up eagerly. We are hard
    at work on an ambitious growth strategy which will follow the completion of
    the Fast Forward transformation plan in 2005. We start from a
  good base. Our financial services market is returning to growth after several
  difficult years; we will seek to outgrow the market by increasing share. We
  are launching innovative trading systems to grow usage revenues alongside subscription
  revenues. We are investing in parts of our business with high growth potential
  such as risk management systems and enterprise information products, and we
  are expanding our business in emerging markets such as China and India. Finally,
  as we take steps to reinforce the power of the Reuters brand, we believe there
  is more we can aspire to in the provision of information direct to consumers. I am proud of the way the Reuters culture is changing to put the customer at the heart of everything we do.  Tom Glocer
    CEO


|Reuters
      Group PLC Annual Report and Form 20-F 2004 |  | 03
|-------------------------------------------------------- |  | --

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REUTERS GROUP FIVE YEAR SUMMARY









REUTERS CUSTOMER SEGMENTS AND INSTINET GROUP
THREE YEAR REVENUE SUMMARY




2003 and 2002 revenues, profit/(loss) before tax and earnings/(loss) per ordinary
share have been restated following the adoption of UITF17 and UITF38, and the
reclassification of transaction-related regulatory fees following recently issued
SEC guidance (see Accounting Basis on
page 72). Reuters customer segment revenues exclude recoveries (see note 1 on page 44).


|04 |  | Reuters
    Group PLC Annual Report and Form 20-F 2004
|-- |  | ------------------------------------------------------



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SELECTED FINANCIAL HIGHLIGHTS

SELECTED FINANCIAL DATA

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

The consolidated financial statements are
    prepared in accordance with UK GAAP, which differs in certain respects from
    US GAAP. For a summary of the material differences between UK and US GAAP
    and related information relevant to Reuters Group, see pages 74-80 of this
    report.

CONSOLIDATED PROFIT AND
      LOSS ACCOUNT
  for the year ended 31 December

|                                                                   |  |       |  |                                |  |          |     |          |     |          |     |          |    
|------------------------------------------------------------------ |  | ----- |  | ------------------------------ |  | -------- | --- | -------- | --- | -------- | --- | -------- | ---
|                                                                   |  |       |  |                                |  | Restated | 3,4 | Restated | 3,4 | Restated | 3,4 | Restated | 3,4
|                                                                   |  |       |  | 2004                           |  | 2003     |     | 2002     |     | 2001     |     | 2000     |    
|                                                                   |  | Notes |  | £m (except per
    share data)
|                                                                   |  |       |  |                                |  |          |     |          |     |          |     |          |    
|Amounts in accordance with UK GAAP:                                |  |       |  |                                |  |          |     |          |     |          |     |          |    
|Revenue                                                            |  |       |  | 2,885                          |  | 3,235    |     | 3,593    |     | 3,885    |     | 3,592    |    
|Operating profit/(loss)                                            |  |       |  | 197                            |  | 130      |     | (142     | )   | 302      |     | 411      |    
|Profit/(loss) on ordinary activities before taxation               |  |       |  | 437                            |  | 56       |     | (344     | )   | 158      |     | 657      |    
|Profit/(loss) on ordinary activities after taxation                |  |       |  | 364                            |  | 34       |     | (367     | )   | 51       |     | 521      |    
|Basic earnings/(loss) per ordinary share                           |  |       |  | 25.1p                          |  | 3.6p     |     | (18.3p   | )   | 3.3p     |     | 37.1p    |    
|Diluted earnings/(loss) per ordinary share                         |  |       |  | 24.5p                          |  | 3.5p     |     | (18.3p   | )   | 3.2p     |     | 36.5p    |    
|Basic earnings/(loss) per ADS                                      |  |       |  | 150.5p                         |  | 21.5p    |     | (109.7p  | )   | 19.7p    |     | 222.8p   |    
|Diluted earnings/(loss) per ADS                                    |  |       |  | 146.9p                         |  | 21.2p    |     | (109.7p  | )   | 19.3p    |     | 219.1p   |    
|Dividends declared per ordinary share                              |  | 1     |  | 10.0p                          |  | 10.0p    |     | 11.1p    |     | 11.1p    |     | 17.8p    |    
|Dividends declared per ADS:                                        |  | 1     |  |                                |  |          |     |          |     |          |     |          |    
|Expressed in UK currency                                           |  |       |  | 60.0p                          |  | 60.0p    |     | 66.7p    |     | 66.7p    |     | 106.7p   |    
|Expressed in US currency                                           |  | 2     |  | 112.0c                         |  | 103.2c   |     | 105.1c   |     | 95.6c    |     | 157.7c   |    
|Weighted average number of ordinary shares (in millions)           |  |       |  | 1,400                          |  | 1,396    |     | 1,395    |     | 1,404    |     | 1,404    |    
|                                                                   |  |       |  |                                |  |          |     |          |     |          |     |          |    
|Amounts in accordance with US GAAP:                                |  |       |  |                                |  |          |     |          |     |          |     |          |    
|Revenue                                                            |  |       |  | 3,037                          |  | 3,421    |     | 3,789    |     | 4,045    |     | 3,704    |    
|Operating profit/(loss)                                            |  |       |  | 395                            |  | 1        |     | (271     | )   | (215     | )   | 462      |    
|Income/(loss) before taxes on income                               |  |       |  | 565                            |  | (51      | )   | (233     | )   | 207      |     | 656      |    
|Net income/(loss)                                                  |  |       |  | 436                            |  | (23      | )   | (111     | )   | 93       |     | 537      |    
|Basic earnings/(loss) per ordinary share                           |  |       |  | 31.1p                          |  | (1.6p    | )   | (7.9p    | )   | 6.6p     |     | 38.2p    |    
|Diluted earnings/(loss) per ordinary share                         |  |       |  | 30.4p                          |  | (1.6p    | )   | (7.9p    | )   | 6.5p     |     | 37.6p    |    
|Basic earnings/(loss) per ADS                                      |  |       |  | 186.9p                         |  | (9.5p    | )   | (47.6p   | )   | 39.7p    |     | 229.4p   |    
|Diluted earnings/(loss) per ADS                                    |  |       |  | 182.4p                         |  | (9.5p    | )   | (47.6p   | )   | 38.9p    |     | 225.5p   |    
|Dividends declared per ordinary share                              |  | 1     |  | 10.0p                          |  | 10.0p    |     | 11.1p    |     | 18.0p    |     | 16.3p    |    
|Dividends declared per ADS:                                        |  | 1     |  |                                |  |          |     |          |     |          |     |          |    
|Expressed in UK currency                                           |  |       |  | 60.0p                          |  | 60.0p    |     | 66.7p    |     | 108.0p   |     | 97.7p    |    
|Expressed in US currency                                           |  | 2     |  | 105.8c                         |  | 105.1c   |     | 99.6c    |     | 155.3c   |     | 150.8c   |    
|Weighted average number of ordinary shares (in millions)           |  |       |  | 1,400                          |  | 1,396    |     | 1,395    |     | 1,404    |     | 1,404    |    
|                                                                   |  |       |  |                                |  |          |     |          |     |          |     |          |    
|                                                                   |  |       |  |                                |  |          |     |          |     |          |     |          |    
|                                                                   |  |       |  |                                |  |          |     |          |     |          |     |          |    
|CONSOLIDATED BALANCE SHEET DATAat
     31 December                 |  |       |  |                                |  |          |     |          |     |          |     |          |    
|                                                                   |  |       |  |                                |  |          |     |          |     |          |     |          |    
|                                                                   |  |       |  |                                |  | Restated | 3,4 | Restated | 3,4 | Restated | 4   | Restated | 4  
|                                                                   |  |       |  | 2004                           |  | 2003     |     | 2002     |     | 2001     |     | 2000     |    
|                                                                   |  |       |  | £m                             |  | £m       |     | £m       |     | £m       |     | £m       |    
|                                                                   |  |       |  |                                |  |          |     |          |     |          |     |          |    
|Amounts in accordance with UK GAAP:                                |  |       |  |                                |  |          |     |          |     |          |     |          |    
|Total assets                                                       |  |       |  | 2,459                          |  | 2,869    |     | 3,456    |     | 4,538    |     | 3,870    |    
|Long-term debt and provisions for charges (excluding deferred tax) |  |       |  | 561                            |  | 663      |     | 572      |     | 526      |     | 394      |    
|Net assets                                                         |  |       |  | 612                            |  | 407      |     | 659      |     | 1,273    |     | 1,153    |    
|Shareholders equity                                               |  |       |  | 412                            |  | 212      |     | 428      |     | 1,109    |     | 1,153    |    
|Share capital                                                      |  |       |  | 359                            |  | 358      |     | 358      |     | 358      |     | 357      |    
|                                                                   |  |       |  |                                |  |          |     |          |     |          |     |          |    
|Amounts in accordance with US GAAP:                                |  |       |  |                                |  |          |     |          |     |          |     |          |    
|Total assets                                                       |  |       |  | 2,725                          |  | 3,031    |     | 3,542    |     | 4,382    |     | 3,787    |    
|Long-term debt                                                     |  |       |  | 528                            |  | 568      |     | 552      |     | 572      |     | 458      |    
|Net assets                                                         |  |       |  | 817                            |  | 468      |     | 793      |     | 1,131    |     | 1,189    |    
|Shareholders equity                                               |  |       |  | 619                            |  | 266      |     | 551      |     | 965      |     | 1,189    |    
|                                                                   |  |       |  |                                |  |          |     |          |     |          |     |          |    

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



|Reuters Group PLC Annual Report and Form 20-F 2004 |  | 05
|-------------------------------------------------- |  | --

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COMPANY INFORMATION

OVERVIEWReuters Group incorporates Reuters core financial business and Instinet
Group, a 62%-owned public subsidiary which operates an institutional broker and
INET®, the electronic market
place. At Reuters we specialise in providing indispensable information tailored for
    professionals in the financial services, media and corporate markets. We
    also provide news and information direct to the consumer. We provide the
    content, analytics, trading and collaboration tools needed by financial professionals
    and news in the form of text, graphics, video and pictures, to media organisations
    across the globe. Our trusted information drives
decision-making around the world, based on our reputation for speed, accuracy
    and independence. We provide tools to enable traders to perform fast and accurate analysis of financial
    data and to manage trading risk. Our electronic trading services connect
    financial communities, helping them to gain access to the best prices and
    to trade efficiently and cost effectively. At 31 December 2004, we had approximately 14,500 staff in 91 countries, including
    some 2,300 editorial staff in 196 bureaux serving 129 countries, making Reuters
    the largest multimedia news agency. In addition, Instinet Group had approximately
    1,000 employees in ten countries. 01 THE MARKETS WE SERVEReuters serves the global financial and media markets. In 2004, these markets
    continued to recover after a three year decline, with the rate of progress
    faster in the US than in other regions. Key performance indicators and market
    drivers include industry headcount, trading volumes, regulation and levels
    of consolidation. Employment levels at our key customers increased in 2004 after significant declines
    in 2002 and 2003. For example, in the US, the Securities Industry Assocation
    recorded a 4% increase in industry headcount in 2004. However, headcount
    recovery remains fragile, with more job losses announced in the banking industry
    in the fourth quarter of 2004. Employment is not currently predicted to return
    to the peak levels seen in 2001. We are
making our business less dependent on industry headcount as we align it more
    closely with growth areas like electronic trading. Growth in electronic trading is being driven by lower spreads in traditional
    cash equities markets and a quest for greater efficiency as firms seek to
    grow their trading platforms to handle an ever-increasing number of trades
    whilst employing fewer people. On the New York Stock Exchange (NYSE), programme
    trading rose from 41% of total trading volume at the beginning of the year
    to 54% by the end of 2004. A notable driver in our market place is increased regulation. Proposed Regulation
    NMS in the United States and the Markets in Financial Instruments Directive
    (MiFiD) in Europe are likely to change the way many instruments are traded.
    Worldwide, markets are undergoing greater levels of regulatory scrutiny and
    we are positioned to benefit with our increased focus on our risk business
    and enterprise data products as our customers spend
more on compliance. Concentration of trading liquidity and increased regulation are in turn driving
    the trend towards consolidation. We see a polarising market, where big customers
    are getting bigger but at the same time, smaller specialised boutiques are
    also thriving. This applies both to banks and brokers on the sell side, and
    to investment management firms on the buy side. Our challenge is to supply
    the right products at the right price for each of
these categories of customer. 02 STRATEGYReuters goal is to be the information company our customers value most, by offering
    indispensable content, innovative trading services and great customer service. There are three stages to achieve this goal: 
   First, complete and realise
    the benefits of Fast Forward, our business transformation programme  Fix it
   Second, complete the migration
       of our customers to our latest products, expand into areas of our market
       closely related to our current business, and make our business
more resilient  Strengthen it



   Third, reposition our business
       over the longer term to take advantage of the structural changes and new
    opportunities in the global markets  Grow it. Fix it through Fast ForwardThe Fast Forward programme aims to transform Reuters into a more competitive,
    simpler, more customer service-driven and more efficient organisation. We
    have now completed two-thirds of the Fast Forward programme and have made
    real progress in each of these areas. Our drive to become more competitive delivered a successful defence of our foreign
    exchange information and trading franchise, where the number of user positions
    grew in 2004 for the first
time in seven years, despite increased competition. To simplify the way we do business, we have made major changes to our product
    line and cut the number of products being actively sold by two-thirds, on
    the way to our target of 50 desktop
financial information products. We also continued to clear out our portfolio, and have now divested over 80 holdings.
    The most significant of these in 2004 was the sale of the majority of our
    stake in TIBCO Software Inc.
(TSI). To make Reuters more efficient, we exceeded our cost savings targets.
At the end of 2004, we had cumulative savings of £234 million towards our goal of £440
million by the end of
2006. We conduct an annual survey of 12,000 customers to measure their satisfaction
    with our products and service. Customer satisfaction continued to increase
    in 2004, following the trend from 2003, with users of the latest versions
    of our products ranking us more highly than users of our older products.
    However, a power disruption at our UK Docklands data centre in October caused
    a setback in the fourth quarter, and we immediately took
corrective action to improve data centre resilience. Strengthen it  expand into related business areas and
  improve service resilienceWe will continue to invest in 2005 to make service resilience a competitive advantage
    by providing world-class service continuity and back-up. Customers are investing
    in building greater resilience in their own systems, and are encouraged to
    see Reuters undertake similar initiatives. We are continuing to work with our customers to complete the migration from legacy
    products such as the 2000 and 3000 series to our latest products. In November, we announced the development of new transactions services
for fixed income and equities which build on our successful foreign exchange
trading franchise and position us to benefit from the rapid growth in electronic
trading. On 21 February 2005 we launched Reuters Trading for Fixed Income with
tradeable prices from six banks. Being at the centre of our customers trading
activities will not only make us more competitive, but also allow us to benefit
from growth in trading volumes. Building on the content and expertise we gained through our acquisition of Multex
    in 2003, we have strengthened our product offer for the buy side and we are
    increasing our penetration of
investment management firms. Our pending acquisition of Moneyline Telerate (Telerate) would strengthen our
    fixed income content and end user community. For more details, see the following
    page. We are also strengthening our Enterprise Information Products and Risk Management
    software offerings, to capitalise on increases in compliance spend. Grow it  capitalise on structural
changes in global marketsThe third element of our strategy involves making inroads into growth areas in
    the financial markets, transforming our media business from a largely wholesale
    model to include direct-to-consumer initiatives and exploring opportunities
    in other markets. China, we believe, is poised for significant financial markets growth.
Reuters has operated in China for almost 150 years, and in 2004 we sought to
build on our established position so that we can participate in future growth.
We reached an agreement with the China Foreign Exchange Trading System (CFETS),
the operator of Chinas interbank foreign exchange system, to provide an
internet-based foreign exchange trading service. We also tapped the growing market
for risk management services, selling systems to five banks


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and signing an agreement to open a new financial risk research laboratory with
    the Chinese Academy of Sciences. Widespread use of the internet is changing the way in which individuals access
    information. With our trusted global news and information brand, we are well
    positioned to build our consumer media offer. We have cut back distribution
    of our highly-respected financial news to other websites in order to draw
    more visitors directly to our own sites. In 2004, this has contributed to
    a doubling in the average number of unique visitors per
month to 12 million and reinforced the value of our content. We are taking advantage of the rapid adoption of new media technologies
to deliver our content. In 2004, we launched a business information service on
Vodafones UK mobile phone service
and an interactive TV news channel in the US on Microsofts new Windows®XP Media Center,
offering packaged business, market and breaking world news in streaming video format. Pending acquisition of TelerateOn 20 December 2004, we entered into agreements to acquire substantially
all of the business of Telerate as well as a subsidiary of QUICK Corp. (Quick)
that serves as the exclusive distributor of Telerate products in Japan. Based
in New York, Telerate is a global provider of benchmark content for the capital
markets primarily focused on money markets, fixed income, foreign exchange and
over-the-counter derivatives, and
providing services to more than 3,500 customers with more than 30,000 user accesses
in 85 countries and territories around the world. With the acquisition of Telerate,
we would extend our presence among core financial customers, including fixed
income, buy side firms and regional dealers. The acquisition is expected to provide
further impetus to our goal to be the best-in-class provider of financial content,
electronic transactions and distribution to market participants, and to strengthen
our recently-announced effort to add trading capabilities to Reuters desktops,
especially in the fixed income markets, where the substantial Telerate client
base would benefit our growing trading community. We are uniquely placed to achieve
cost
synergies from the acquisition because Telerates information distribution
infrastructure already operates on our systems. Both transactions are anticipated
to complete in mid-2005, subject to regulatory approvals for the Telerate acquisition
and other customary conditions. For more information, see pages 20 and 89. 03 OUR MARKETS DRIVE OUR ORGANISATIONAL STRUCTUREAt Reuters, we operate our business through our four Customer Segments, which
    are closely aligned with the user communities they serve. 
   Sales & Tradingfocuses on salespeople and traders who deal in the foreign exchange,
fixed income, equities, commodities and energy and related markets.
   Research & Asset
       Managementfocuses on supporting portfolio managers, wealth
managers, brokers, investment bankers and research analysts who make complex financial decisions outside the core sales and trading environment.
   Enterprisetargets the complete business enterprise, as distinct from the
end-user.
   Mediafocuses
       on the needs of the worlds newspapers, television and cable
networks, radio stations, websites and consumers. It is also working to create
       a new avenue of growth in direct-to-consumer services, principally through
    the reuters.com family of websites. Customer Segment businesses also include the management of recoveries, which
    arise when Reuters recharges costs, primarily exchange fees and communication
    costs, to customers. The revenues received from customers almost exactly
    match the exchange fees and communications costs incurred within the Channel. During 2005, the Segments will evolve into business divisions with full profit
    and loss responsibility. The software development teams who build and support our products and infrastructure
    are being integrated with the business divisions, to bring developers closer
    to customers and improve our
responsiveness to consumer needs. Within Development, product development teams develop, build and maintain our
    products and delivery platforms, driven by customer requirements.


The infrastructure development team provides Reuters with its shared infrastructure
        design to provide scale efficiencies and compliance with standards and the
        Chief Technology Office drives standards and technical coherence in our technical
        architecture and brings innovation into the business through technology leadership. Geographic Sales and Service ChannelWe serve our customers through a global Sales and Service Channel split into
    geographic regions: the Americas, Asia, and Europe, Middle East and Africa.
    In addition our Focus Group Accounts team serves our largest customers with
    truly global relationship management. Locally, members of our sales and service
    teams work with customers to build relationships and to identify the correct
    products to meet customer needs. Through regular
training visits, our customer training staff work with end-users to ensure they
    get full value from our products. We also offer a help desk service and pro-active
    telephone support out of three regional support hubs, one based in each time
    zone. The Channel supplies feedback to the Customer Segments on how products
    are performing and how they could be enhanced to meet future customer needs. During 2005 the Operations group, which manages our data centres, central systems
    and distribution networks, will be integrated into the Sales and Service
    Channel to bring our customer service and support activities under a single
    unified management team. We believe this and other initiatives will improve
    the service we offer to customers across the world. Revenues for the three years to 31 December 2004 are analysed by segment on pages
    18-19 of the Operating and Financial Review and by geography and by segment
    on pages 44-45 in note 1 on the
consolidated profit and loss account. Communications networksWe distribute our products using multiple communications networks. During 2004,
    we continued to migrate our main products on to global IP-based networks,
    principally provided by Radianz Limited (Radianz), in order to deliver greater
    resilience, capability and flexibility, achieved through the use of industry
    standards. We have major technical centres in the Asian, European and American time zones,
    supported by many smaller local data centres. The data centres are linked
    by communications services provided principally by Radianz and SAVVIS Communications
    Corporation (Savvis), using a range of communications technologies. Communications
    between data centres and subscribers are provided by Radianz in 20 countries
    and by Reuters directly or by third
parties elsewhere. Radianz was formed in 2000 to develop a secure extranet network
for use by the financial services industry, as a joint venture between Reuters
and the Equant Group BV (Equant). Radianz connects all categories of market participants:
brokers, institutions, exchanges, custodians, and clearing and settlement houses.
For further information regarding Radianz and our relationship with Radianz,
see Related party transactions and
material contracts  Radianz on page 87. In November 2004, we purchased Equants stake in Radianz with a view to selling Radianz to BT Group PLC (BT). See Pending transactions  Proposed disposal of Radianz on
page
10. The services agreements with Radianz and with Savvis are important
to our ability to deliver products and services to customers. Although we take
reasonable steps with Radianz and Savvis to ensure continuity of service, any
failure or interruption of such systems could have a significant effect on our
business. See Risk Factors on pages 23-25. Summaries of these network
services agreements are given on pages 87 and
89. 04 PRODUCTSMillions of consumers see and hear news from Reuters in the worlds
media and over 300,000 financial professionals across the globe each day receive
market data, in-depth news, quotes, statistics and analytics on financial and
commodities markets from Reuters. We are the largest financial information provider
in the world. We collect financial information from an array of sources such as exchanges,
    over-the-counter markets, research services and other contributors such as
    energy and fixed income data providers, as well as from our own news, research
    and data operations. Our data is available through various delivery platforms
    such as workstations, datafeeds, internet and wireless solutions.




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COMPANY INFORMATIONcontinued

We offer systems to help our customers
      manage trade processing, financial content and internal business processes
      more effectively throughout their organisations. Our customers have access to a trading
      community of around 18,000 foreign exchange and money market traders globally,
      and can use Reuters large equities order routing network to gain electronic
      access to a variety of brokers. Product familiesWe group our products into families,
      each of which serves the needs of a distinct set of customers. Financial
      desktop products
      Reuters
          Xtra family targeted at
          the most sophisticated end-users within sales, trading and portfolio
          management. It includes cross-asset class, cross-geography information,
          advanced integrated analytics and trading capabilities.
      Reuters
          Trader family targeted
          at sales staff and traders who do not need the sophistication and full
          integration capability offered by the Reuters Xtra family of products,
          including those who focus on domestic and regional financial instruments.
          In 2004, we launched new browser-based Reuters Trader products, and
          we are working with our customers to migrate them from older products
          such as the 2000 and 3000 series.
      Reuters
          Knowledge family targeted
          at the research and advisory business (including investment bankers
          and analysts), portfolio managers, and others focused on company and
          industry-specific research. Reuters Knowledge offers an integrated
          package of public and proprietary fundamental information about companies
          along with basic access to markets information, news and other content.
      Reuters
          Wealth Manager family targeted
          at private client advisors and retail brokers who require products
          that can be integrated closely with their in-house systems. The Reuters
          Wealth Manager family includes portfolio management tools and information
          on a wide range of managed funds. In 2004, our Lipper subsidiary strengthened
          its offering by acquiring Fitzrovia International PLC, which analyses
          mutual fund fees and expenses.  Enterprise
      products
      Datafeeds broad-ranging,
          in-depth data in machine-readable format  from high-volume exchange
          data to deep company estimates and fundamental data  which companies
          use to power mission-critical systems like programme trading and portfolio
          management.
      Market
          Data Systems provides
          the enterprise with a range of applications, tools and infrastructure
          components to manage financial content in real-time across the customer
          trading environment with a high degree of scalability and resilience.
      Enterprise
          Information Products feeds
          of reference data often used for compliance purposes, including end-of-day
          and intra-day instrument prices, corporate actions, price histories
          and terms and conditions.
      Risk Management provides
          the enterprise with a range of products to help manage order flow,
          make trade decisions and control risk. Media productsThese products target our traditional
      publishing and broadcasting customers newspapers and magazines, news
      and information websites and TV channels with comprehensive, accurate
      and immediate broadcast news, video and photographic coverage. Our consumer products target business
      professionals, individual investors and world citizens with fast, accurate
      news and financial data, enabling them to stay informed about world events,
      manage their financial portfolios and perform better professionally. Advertising
      services is a relatively new business offering advertising space in our
      consumer products, such as the reuters.com network of websites. Factiva, our 50% owned joint venture with
      Dow Jones, provides a broad range of global news and a deep historical
      archive of business information which client organisations can integrate
      into their business applications and intranet portals. Around 70% of Factivas
      revenue is derived from sources outside the financial services sector.


CustomersCustomers generally pay for Reuters products
      and services in one of three ways: subscription fees to cover accesses
      and maintenance fees for software (recorded as recurring revenue); one-off
      software purchases (outright revenue); and fees based on transaction volumes
      (usage revenue). In 2004, 92% of Reuters revenue was recurring, 4% was
      outright and 4% usage. Our increasing focus on transactions means that
      we anticipate a shift in the mix of subscription and usage revenues over
      time. The numbers of accesses for Reuters at the end of the last three
      years are shown below. During 2004, user accesses increased for the first
      time in three years after dipping to 314,000 in March. 31
          DecemberRestated
      
      Restated2004
      
      2003
      
      2002Accesses by product family
      
      000s
      
      000s
      
      000sReuters Xtra family
      
      108
      
      88
      
      70Reuters Trader family
      
      100
      
      133
      
      194Reuters Knowledge & WealthManager families
      
      120
      
      117
      
      124Total
      
      328
      
      338
      
      388 2002 and 2003 user accesses
      have been restated, to reflect the exclusion of mobile and other low-cost
      accesses. 05 RESOURCESOur business is built on three key resources:
      our brand, our people and our content. Our ability to realise the potential
      of these assets determines the extent to which we can achieve our strategic
      goals. BrandThe starting point for growth is the Reuters
      brand and the relationship it has with our stakeholders. Financial and
      media professionals make critical decisions every day with confidence because
      they trust the accuracy of the information that they get from Reuters.
      Millions of consumers see and hear news, information and pictures attributed
      to Reuters in the worlds media as we report on important events unfolding
      around the world. Reuters news and information is trusted for its objectivity
      and authenticity because the Reuters Trust Principles safeguard the integrity
      of everything that we do. Financial institutions also rely upon Reuters
      to feed their financial applications directly with market data so that
      they can keep pace with the significant growth of programme trading, electronic
      pricing and risk management. These traditional brand strengths provide
      the springboard for growth within core markets as well as new sectors and
      new geographies. People increasingly access information through a variety
      of new media channels. There is a growing distrust in the accuracy of some
      sectors of the media and an increasing scepticism in the independence of
      investment research. With our reputation as a trusted source, we have the
      opportunity to build and develop the Reuters brand for individual people
      as well as businesses. We will focus particularly on growing in financial
      markets such as China and India, where the media opportunity will be significant. In all of these developments we will be
      giving the Reuters brand more impact, making it more inspirational and
      using it more consistently. This will ensure that the brand is playing
      its full part in the future vision of the Reuters business. PeopleOur people are critical to the success
      of our business, notwithstanding the reductions we have made over the last
      several years to our headcount, and we are committed to retaining and developing
      the talent we need. To do this effectively, we have remuneration, organisation
      and people development systems and processes to ensure that we have the
      right people in the right jobs, equipped with the necessary skills. We
      place a significant emphasis on leadership and, in keeping with the Reuters
      Trust Principles, we have extensive fair employment practices in place. If we are to achieve the business transformation
      we have undertaken with Fast Forward, every part of the organisation must
      be aligned with our strategy. Our objective-setting process for employees
      is fundamental to this alignment. The CEOs mission and goals form
      the starting point of this process, flowing through the members of our
      Group Management Committee and then translating into an appropriate set
      of objectives for each business unit and each employee.


|08 |  | Reuters Group PLC Annual Report and Form
        20-F 2004
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We have created
  learning and development programmes to raise our employees levels of
  product and market knowledge and ensure that they have access to the latest
  developments in their areas of specialism. We have a process to review talent,
  organisational capability and succession planning for key positions. We also
  have a long-established relationship with the University of Michigan for the
  development and delivery of leadership
development programmes. We regularly undertake employee surveys to evaluate morale and to identify any
employee issues that need to be addressed. These surveys measure opinion in a
number of key areas, including leadership, customer orientation, performance
culture and career development. Despite the challenges of Fast Forward, the survey
showed an improvement in overall employee engagement in 2004. The results are
communicated to employees. We place a strong emphasis on communicating with our
employees and won a Communicators in Business award for excellence
in employee communications during 2004. We want to ensure that everyone in Reuters has a fair opportunity to contribute
to our business, and in 2004 we established a Global Diversity Advisory Council,
chaired by the CEO, to advise on diversity issues and to help drive related initiatives.
For additional information concerning our people, see Employees on page 26. Content
    Content brings
    together all of Reuters news, data and other information. The role of our
    editorial group is to cover and edit the news to the highest standards of
    accuracy and timeliness. Our journalists and photographers file over two and
    a half million news items a year to customers in the form of text, pictures,
    TV, video and graphics and we publish news in 18 languages. Our data group
    is responsible for acquiring, producing, packaging and delivering an extensive
    range of content, including research, market data and other information. Our
    coverage includes data from over 300 exchanges, more than 1.2 million bonds,
    250,000 foreign exchange and money market instruments and award-winning commodities
    and energy content. This is further complemented by data from over 4,000 contributors.
    In addition, our fundamentals and estimates data is recognised as a leading
    source of high quality financial information covering over 35,000 companies
    worldwide. In 2004, we opened a new content facility in Bangalore, India, where over 500
highly-skilled data staff have already taken on the task of managing some of
our content and are developing our new investments in data. The investment in
our Bangalore data management operation is achieving operational efficiencies
in line with our Fast Forward objectives. Additional activities will be migrating
to Bangalore in 2005 as we build on our initial success and continue our investment
in new content to meet our customers needs. 06INSTINET
    GROUPOur subsidiary,
    Instinet Group, is the largest global electronic agency securities broker
    and has been providing investors with electronic trading solutions and execution
    services for more than 30 years. Instinet Group operates two major businesses:
    Instinet, the institutional broker, and INET, the electronic market place. Instinet Group completed an initial public offering in May 2001 and its common
stock is listed on the NASDAQ Stock Market (symbol INGP.O). As a result of the
initial public offering, exercise of stock options, and acquisitions in which
Instinet Group shares were used as consideration, the largest of which was the
purchase of Island ECN (Island) in 2002, our shareholding of Instinet Group is
approximately 62%. Instinet is a global electronic agency securities broker that provides sophisticated
electronic trading solutions and execution services to enable buyers and sellers
worldwide to trade securities directly and anonymously with each other. Instinet
also gives customers the opportunity to use its sales-trading expertise and sophisticated
technology tools to interact with global securities markets, improve their trading
and investment
performance and lower their overall trading costs. Through Instinets electronic
platforms, customers can access other US trading venues, including NASDAQ and
NYSE, and almost 30 securities markets throughout the world, including stock
exchanges in Frankfurt, Hong Kong, London, Paris, Sydney, Tokyo, Toronto and
Zürich. Instinets customers primarily consist of institutional investors,
such as mutual funds, pension funds, insurance companies and hedge funds. INET
is an electronic communications network (ECN) that provides execution and routing
services to US broker-dealer
customers and enables buyers and sellers


to trade securities directly and anonymously with each other. INET represents
the consolidation of the order flow of the former Instinet ECN and former Island
ECN, providing its US broker-dealer customers one of the largest liquidity pools
in NASDAQ-listed securities. In November 2004, we announced that we would consider opportunities to extract
value from our holding in Instinet Group. Reuters and Instinet Group are considering
strategic alternatives, including a possible sale, merger or other business combination
or corporate transaction. There can be no assurance that any transaction will
be effected at all (for any particular value) or in any specific time period.
See Risk Factors  Reuters Group may not be able to realise the anticipated
benefits of existing or future acquisitions or disposals on
page 24. 07COMPETITORS We face significant
    competition in all the market sectors and geographical areas in which we operate.
    We actively monitor the competitive landscape in order to be able to respond
    to market developments. Bloomberg, Thomson Financial (a division of The Thomson Corporation), Telerate,
Quick, Telekurs, IDC, Dow Jones and Factset, plus a number of smaller local and
regional competitors, offer information products for the financial markets. Several
exchanges compete with our datafeed business by providing low-latency real time
feeds of their data direct to banks and financial institutions. Our Lipper funds information business competes with Morningstar, the Micropal
unit of Standard & Poors, a division of the McGraw-Hill Companies,
Value Line and The Thomson
Corporations CDA Weisenberger. Our foreign exchange spot dealing services compete with voice brokers and with
the Electronic Broking Service and Bloomberg, which have formed an alliance in
this area. Competitors in the supply of risk products and market data systems or related
components include Algorithmics, Murex, Summit Systems, Sungard Data Systems,
IBM, TSI, GL TRADE and a large
number of smaller firms. Our main competitors in the supply of news to the media are Associated Press,
Agence France Presse, Dow Jones and Bloomberg News. Instinet Group competes with the following, among others: market makers and other
traditional broker-dealers acting as agent or principal; traditional and electronic
trading methods in use on US and international exchanges, including NYSE specialists
and the electronic matching systems of international exchanges; the trading platform
for the NASDAQ market. 08GOVERNMENT
    REGULATIONWe are regulated
    by several bodies in the various jurisdictions in which we operate: The UK Financial Services Authority (FSA) under the Financial Services and Markets
Acts 2000 regulates Reuters Limited, our principal operating company, as a service
company. Reuters Transaction Services Limited (RTSL), through which Dealing 3000
Spot, Forwards, FX Options, Matching for Interest Rates and our new suite of
next generation transaction products such as Reuters Trading for Fixed Income
are operated, is subject to regulation by the FSA equivalent to that applied
to broking participants in the London market. In addition, from 1 April 2004
RTSL has been classified by the FSA as an Alternative Trading System (ATS). RTSL
provides services throughout the European Economic Area (EEA) in accordance with
the provisions of the EU
Investment Services Directive. RTSLs operations in Singapore and Hong Kong
are approved and subject to oversight by the Monetary Authority of Singapore
and the Hong Kong Monetary Authority, respectively. In 2004 RTSL was granted
an Australian Market Licence by the Australian Securities and Investments Commission. Reuters Global Routing Services
Limited (RGRS UK), is the Groups other authorised firm in the UK. It is
responsible for an order routing and indications of interest network. Under the
passporting provisions of the ISD, RGRS UK may provide its services across the
EEA. The RGRS UK order routing network is also offered in the US through Reuters
Global Routing Services (US) LLC (RGRS US) where it is subject to regulation
by the SEC and the National Association of Securities Dealers, Inc. (NASD). Under
the passporting provisions of the EU Investment Services Directive, RGRS UK may
provide its services
across the EEA


|Reuters
      Group PLC Annual Report and Form 20-F 2004 |  | 09
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COMPANY
  INFORMATIONcontinued



and, in addition,
  introduce UK and EU clients directly to our subsidiary, Bridge Trading Company
  (Bridge Trading) in the US. For information regarding the pending sale of Bridge
  Trading to
Instinet Group, see Pending Transactions, below. In order to comply with anti-money laundering regulations and to reduce the opportunity
for Reuters trading products to be used as a conduit for money laundering operations,
all regulated firms
have put in place appropriate know your customer systems and controls. As registered broker-dealers, members of self-regulatory organisations in the
US and other countries in which they operate and, in the case of the Instinet
ATSs and the INET ATS, as operators of electronic communications networks and/or
alternative trading systems in the US, Instinet Group, Bridge Trading and RGRS
US are subject to regulation under the US securities laws and their equivalents
in other countries, including but not limited to net capital requirements, and
to possible increased levels of regulation in the future. In December 2001, Island ECN submitted to the SEC an application in draft form
for registration as a national securities exchange. INET submitted a new draft
application to the SEC for registration as a national securities exchange in
May 2004 and continues to work with the SEC towards the filing of a formal application.
See Related party transactions and material contracts  Instinet Group  Corporate
Agreement on page 89 and Risk Factors  Changes in the regulatory
environment could have an adverse effect on Instinet Groups business on
page 24. 09 PENDING
    TRANSACTIONSFor information
    about the pending acquisition of Telerate, see page 7. Proposed
        disposal of RadianzInitially, Radianz
    was a joint venture with Equant, in which Reuters owned 51% of the voting
    shares and Equant owned 49%. However, through shareholders agreements,
    Reuters shared effective control with Equant and therefore did not consolidate
  Radianz as a subsidiary for accounting purposes. On 16 November 2004, Reuters
purchased Equants entire stake in Radianz for £60 million (US$110
million) in cash, together with the release of future funding obligations and,
as a result, all joint venture arrangements came to an end. Reuters also announced
that exclusive discussions were taking place with BT to secure a long-term agreement
for the provision of network services, involving the sale of Radianz to BT. Both
the commercial arrangements and the sale are subject to due diligence, regulatory
approvals and the negotiation of definitive agreements. These transactions are
expected to complete during the first half of 2005. For more information, see Related
party transactions and material contracts  Radianz on page 87. Pending
        disposal of Bridge TradingOn 28 February
    2005 Reuters entered into an agreement to sell Bridge Trading, its soft dollar
    institutional broker, to Instinet Group. Reuters acquired Bridge Trading
    in 2001 as part of its acquisition of certain businesses and assets of Bridge
    Information Systems (Bridge). This sale combines the Reuters Groups
    equity brokerage business into one unit and is consistent with the Fast Forward
    strategy of divesting non-core assets. The transaction is expected to complete
    by the end of April 2005, subject to approval from the NASD and other customary
    conditions. For more information, see Related party transactions and
    material contracts  Instinet Group  sale of Bridge Trading on
  page 88. 10 INTERNATIONAL
    FINANCIAL REPORTING STANDARDS (IFRS)Reuters Group
    will be required to comply with IFRS with effect from 1 January 2005. An evaluation of the impact on the financial statements of Reuters
Group, and on its financial processes and systems, has been made. A programme
of work is underway to enable the preparation of financial statements, which
comply with IFRS, for the year ended 31 December 2004, as well as from 1 January
2005 onwards. For more information, see pages 22-23.




|10 |  | Reuters
      Group PLC Annual Report and Form 20-F 2004
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OPERATING AND FINANCIAL REVIEW

REVIEW
    OF YEAR END RESULTSUnder US law,
    all statements other than statements of historical fact included in this
    review are, or may be deemed to be, forward-looking statements within the
    meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
    Securities Exchange Act of 1934. Certain important factors that could cause
    actual results to differ materially from those discussed in such forward-looking
    statements are described under Section 9 Risk Factors on pages
    23-25 as well as elsewhere in this review. All written and oral forward-looking
    statements made on or after the date of this report and attributable to Reuters
    are expressly qualified in their entirety by such factors. 01 KEY
    FINANCIAL PERFORMANCE MEASURESReuters Group
    measures its performance by reference to revenue and profit, operating margin,
    earnings per share (EPS) and cash flow. To supplement these UK GAAP measures, Reuters undertakes further analysis to
break them out into their component parts, which results in the creation of certain
non-GAAP measures. The rationale for this analysis is outlined below and reconciliations
of the non-GAAP measures used to UK GAAP are included within the review of results.
These measures are used by management to assess the performance of the business
and should be seen as complementary to, rather than replacements for, reported
statutory results. Underlying
        resultsPeriod-on-period
    change in Reuters is measured both in overall terms (i.e. actual reported
    results under UK GAAP) and in underlying terms. Underlying change is calculated
    by excluding the impact of currency fluctuations and the results of acquisitions
  and disposals. The impact of currency fluctuations is excluded from underlying results to enable
period-on-period comparison of the operating results of Reuters on a like-for-like
basis. 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 the reported numbers
to a greater or lesser extent, and therefore they are discussed separately from
the underlying results to make clear their impact on the overall growth or decline
in operations. Underlying
results are calculated by restating the prior periods results using the
current periods exchange rates. This also reflects the variables over which
management has control, as business units do not manage currency exposure, and
business unit operating performance is managed against targets set on a constant
currency basis. Currency exposure is described in Section 6 Treasury Policies,
Financing and Foreign Exchange on
pages 21-22. The impact of acquisitions and disposals is also excluded from underlying results
to enable period-on-period comparison of the operating results of Reuters on
a like-for-like basis. Underlying results are calculated by excluding the results
of entities acquired or disposed of during either the current or prior period
from the results of each period under review. Underlying results reflect the
operating results of the ongoing elements of each business unit, and measure
the performance of management against variables over which they have control,
without the year-on-year impact of a step change in revenue and costs that can
result from acquisition or disposal
activity. Underlying figures also allow investors to compare the reported Reuters results
with the forward-looking guidance issued by Reuters to the investor community.
Because Reuters is not able to forecast currency movements or the exact timing
and impact of acquisition and disposal activity, it communicates its revenue
guidance to investors on an underlying basis. Therefore, providing the underlying
results in addition to the actual reported results assists investors in making
their own assessment of Reuters performance against the guidance given by management. Exclusion
        of restructuring chargesReuters results
    are reviewed before and after the impact of Reuters business transformation
    plan, which includes the Fast Forward programme. Under the Fast Forward programme,
  Reuters is incurring restructuring costs relating


primarily to headcount
  reduction and rationalisation of the companys property portfolio. Fast
  Forward is a three-year programme implemented to accelerate and expand on Reuters
  five-year business transformation plan which was launched in 2001; the programme
  is scheduled to complete in 2005 as originally envisaged. The Fast Forward programme is centrally managed, and its performance against
targets is evaluated separately from the normal day-to-day business of Reuters. As the restructuring charges are incurred as part of centrally managed programmes
of activity, they do not form part of Reuters ongoing business. Restructuring
charges are therefore excluded from certain profit and margin measures, so as
to provide a more detailed analysis and understanding of the ongoing business.
Restructuring charges are considered exceptional under UK GAAP and are separately
identified in note 2 on the consolidated profit and loss account, but because
the charges are being incurred over more
than two years they are considered recurring. However, because of
their time-limited and defined nature, Reuters believes presenting certain profit
measures both including and excluding such charges gives investors a more detailed
insight into the performance of management and the business. In addition, Reuters
management uses both measures to assess the performance of management and the
business. Exclusion
        of amortisation of goodwill and other intangibles, impairments and disposalsFor certain
    cost, profit, margin and earnings per share measures, Reuters analyses its
    results both before and after the impact of restructuring, amortisation of
    goodwill and other intangibles, impairments and disposals. The rationale
    for isolating restructuring charges is explained above. Reuters also isolates
    the impact of income and charges in respect of its investments. These charges
    relate to goodwill and other intangibles, amortisation and impairments of
    subsidiaries, associates and joint ventures and amounts written off investments. Income and charges from investments relate to pre-tax profits and losses on disposal
of subsidiaries, associates, joint ventures and investments. The non-GAAP EPS
measure also eliminates the earnings impact of non-recurring tax charges and
credits related to impairments, reorganisations and disposals. Such charges and
income arise from corporate acquisition and disposal activity, rather than from
the ongoing operations of the business units. 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. Acquisition and disposal activity does not
form part of the operations controlled by business unit management, and decisions
around such activity are usually determined centrally. Presenting earnings before amortisation of goodwill and other intangibles, impairments
and disposals and the above non-recurring tax items also helps investors measure
performance in
relation to the Groups dividend policy. In 2001, Reuters Group defined
the long-term goal of its dividend policy to be a dividend cover of at least
two times, based on Reuters earnings before amortisation of goodwill and other
intangibles,
impairments and disposals. Free
        cash flowReuters free
    cash flow is used as a performance measure and to assess the extent of the
    Groups dividend cover from a cash perspective. Free cash flow is intended
    to measure all Reuters cash movements other than those which are both discretionary
    in nature and unrelated to ongoing operating activities such as purchases
    of shares by the Employee Share Option Trusts (ESOTs), loans to associates
    and dividends paid by the Group. 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.


|Reuters
      Group PLC Annual Report and Form 20-F 2004 |  | 11
|-------------------------------------------------------- |  | --

---



Back to Contents

OPERATING
  AND FINANCIAL REVIEWcontinued



|02
      FINANCIAL AND BUSINESS OVERVIEW                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|-------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|Reuters
      Group revenue decline slowed significantly during 2004 |                                                                                                                                                                                                                                                                                                                                                                                                                                                
|•                                                                    | Reuters Group
        revenue in 2004 was £2,885 million, falling 11% compared to 2003,
        driven in large part by US dollar depreciation and continued difficult
        trading conditions.                                                                                                                                                                                                                                              | 
|                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|•                                                                    | Reuters revenue
        was £2,361 million, down 11% of which 5 percentage points were due
        to the impact of currency, primarily US dollar weakness. Underlying revenue
        decline was 5% in 2004.                                                                                                                                                                                                                                  | 
|                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|•                                                                    | Instinet
        Group revenue was £530 million, 8% lower than 2003 but slightly
        higher if adjusted to reflect the negative impact of the weaker US dollar
        on revenue.                                                                                                                                                                                                                                                          | 
|                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|Reuters
      Group operating profit increased by 51%                |                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|•                                                                    | Reuters Group
        operating profit in 2004 was £197 million compared to £130
        million in 2003, representing a margin of 6.8% compared with 4.0% in 2003.                                                                                                                                                                                                                                                                             | 
|                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|•                                                                    | In Reuters,
        £234 million of cumulative Fast Forward savings helped to deliver
        an operating profit (before amortisation of goodwill and intangibles,
        impairments and restructuring) of £357 million, with a margin of
        15.1%. Reuters took a restructuring charge of £120 million in 2004,
        which along with other non-trading costs reduced operating profit to £168
        million at a margin of 7.1%. | 
|                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|•                                                                    | Instinet
        Group operating costs continued to fall at a faster rate than revenue,
        driven by a 17% reduction in headcount. As a result, operating profit
        was £29 million compared to an operating loss of £48 million
        in 2003.                                                                                                                                                                                     | 
|                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|Reuters
      Group profit before taxation increased by £381 million |                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|•                                                                    | Reuters Group
        profit before taxation was £437 million in 2004 compared to £56
        million in 2003.                                                                                                                                                                                                                                                                                                                                  | 
|                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|•                                                                    | Reuters profit
        before taxation increased by £279 million, driven mainly by profits
        on disposals, which included the majority of Reuters stake in TSI as well
        as its holdings in GL TRADE, Riskmetrics, TowerGroup, Yankee Group Research
        Inc. (Yankee) and ORT SAS Group (ORT).                                                                                                                                 | 
|                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|•                                                                    | Instinet
        Group profit before taxation was £56 million in 2004 compared to
        a loss of £46 million in 2003, mainly driven by a return to operating
        profit and profits on disposal of its stakes in Euronext, the London Stock
        Exchange and Archipelago.                                                                                                                                                            | 
|                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|Reuters
      Group earnings per share (EPS) increased               |                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|•                                                                    | Reuters Group
        EPS in 2004 was 25.1 pence compared to 3.6 pence in 2003.                                                                                                                                                                                                                                                                                                                                                                 | 
|                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|•                                                                    | Reuters EPS
        in 2004 was 23.5 pence compared to 5.5 pence in 2003.                                                                                                                                                                                                                                                                                                                                                                       | 
|                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|•                                                                    | Instinet
        Group EPS was 1.6 pence in 2004 compared to a loss of 1.9 pence in 2003.                                                                                                                                                                                                                                                                                                                                                       | 
|                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|Reuters
      Group dividend per share maintained at 10 pence        |                                                                                                                                                                                                                                                                                                                                                                                                                                                
|•                                                                    | A final dividend
        of 6.15 pence has been proposed which, when added to the interim dividend
        of 3.85 pence, amounts to 10 pence per share, consistent with both 2003
        and 2002.                                                                                                                                                                                                                                            | 
|                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|Reuters
      Group net debt became net funds                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|•                                                                    | Reuters Group
        net funds increased significantly in 2004 to £326 million compared
        to net debt of £77 million in 2003.                                                                                                                                                                                                                                                                                                            | 
|                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|•                                                                    | Reuters net
        debt reduced significantly to £169 million from £610 million
        in 2003, mainly driven by net disposal proceeds.                                                                                                                                                                                                                                                                                                       | 
|                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|•                                                                    | Instinet
        Group net funds decreased from £533 million in 2003 to £495
        million in 2004.                                                                                                                                                                                                                                                                                                                                           | 
|                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|                                                                     | For information
          concerning the market environment during 2004, see Company information  The
        markets we serve on page 6.                                                                                                                                                                                                                                                                                                    | 



|12 |  | Reuters
      Group PLC Annual Report and Form 20-F 2004
|-- |  | --------------------------------------------------------

---



Back to Contents

|RECONCILIATION
      OF NON-GAAP OPERATING PROFIT AND MARGIN MEASURES     |      |                             |      |      |    |          |   |      |   |          |   |       |  
|------------------------------------------------------------------------- | ---- | --------------------------- | ---- | ---- | -- | -------- | - | ---- | - | -------- | - | ----- | -
|                                                                         
|                                                                          |      | Year
        to 31 December |     
|                                                                          |      |                             |      |      |    |          |   |      |   |          |  
|                                                                          |      |                             |      |      |    | Restated | 1 |      |   | Restated | 1
|                                                                          | 2004 |                             | 2003 |      |    | 2002     |  
|£m                                                                        | %    | £m                          | %    |      | £m | %        |  
|                                                                          |      |                             |      |      |    |          |   |      |   |          |   |       |  
|Reuters
      Group operating profit/(loss)/margin                        |      | 197                         |      | 6.8  | %  | 130      |   | 4.0  | % | (142     | ) | (3.9% | )
|Exclude Instinet
      Group operating (profit)/loss/margin               |      | (29                         | )    | (5.4 | %) | 48       |   | 8.2  | % | 339      |   | 55.6% |  
|                                                                          |      |                             |      |      |    |          |   |      |   |          |   |       |  
|Reuters operating
      profit/margin                                     |      | 168                         |      | 7.1  | %  | 178      |   | 6.7  | % | 197      |   | 6.6%  |  
|Exclude:                                                                  |      |                             |      |      |    |          |   |      |   |          |   |       |  
|Restructuring
      charges                                               |      | 120                         |      | 5.1  | %  | 134      |   | 5.0  | % | 112      |   | 3.7%  |  
|Amortisation
      of goodwill and other intangibles                      |      | 55                          |      | 2.3  | %  | 89       |   | 3.3  | % | 86       |   | 2.9%  |  
|Impairment
      of goodwill and other intangibles                        |      | 14                          |      | 0.6  | %  | 7        |   | 0.3  | % |         |   |      |  
|                                                                          |      |                             |      |      |    |          |   |      |   |          |   |       |  
|Reuters
      operating profit/margin before amortisation of goodwill and |      |                             |      |      |    |          |   |      |   |          |   |       |  
|other intangibles,
      impairments and restructuring                    |      | 357                         |      | 15.1 | %  | 408      |   | 15.3 | % | 395      |   | 13.2% |  
|                                                                          |      |                             |      |      |    |          |   |      |   |          |   |       |  



|RECONCILIATION
      OF NON-GAAP PROFIT BEFORE TAXATION                 
|------------------------------------------------------------------------
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|2004                                                                    
|£m                                                                      
|                                                                        
|Reuters
      Group profit/(loss) before taxation                       
|Exclude:                                                                
|Amortisation
      of goodwill and other intangibles                    
|Impairments                                                             
|Disposals                                                               
|                                                                        
|Reuters
      Group profit before taxation, amortisation of goodwill and
|other intangibles,
      impairments and disposals                      
|                                                                        
|                                                                        
|Reuters
      Group profit/(loss) before taxation                       
|Exclude Instinet
      Group (profit)/loss before taxation              
|                                                                        
|Reuters profit
      before taxation                                    
|Exclude:                                                                
|Amortisation
      of goodwill and other intangibles                    
|Impairments                                                             
|Disposals                                                               
|                                                                        
|Reuters
      profit before taxation, amortisation of goodwill and      
|other intangibles,
      impairments and disposals                      
|                                                                        



|RECONCILIATION
      OF EPS                                                                                                                                                                        
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                   
|                                                                                                                                                                                                   
|                                                                                                                                                                                                   
|                                                                                                                                                                                                   
|2004                                                                                                                                                                                               
|pence                                                                                                                                                                                              
|                                                                                                                                                                                                   
|Reuters
      Group EPS                                                                                                                                                                            
|Exclude:                                                                                                                                                                                           
|Amortisation
      of goodwill and other intangibles                                                                                                                                               
|Impairments                                                                                                                                                                                        
|Disposals                                                                                                                                                                                          
|Adjustment
      to tax charge for non-recurring tax effects of impairments, reorganisations
      and disposals                                                                                   
|Adjustment
         to minority interest for effect of amortisation of goodwill and other
        intangibles,impairments
         and disposals                                                   
|                                                                                                                                                                                                   
|Reuters
           Group EPS before amortisation of goodwill and other intangibles, impairments,

      disposals andnon-recurring
       tax effects of impairments, reorganisations and disposals
|                                                                                                                                                                                                   
|                                                                                                                                                                                                   
|Reuters
      Group EPS                                                                                                                                                                            
|Exclude: Instinet
      Group EPS                                                                                                                                                                  
|                                                                                                                                                                                                   
|Reuters EPS                                                                                                                                                                                        
|Exclude:                                                                                                                                                                                           
|Amortisation
      of goodwill and other intangibles                                                                                                                                               
|Impairments                                                                                                                                                                                        
|Disposals                                                                                                                                                                                          
|Adjustment
      to tax charge for non-recurring tax effects of impairments, reorganisations
      and disposals                                                                                   
|                                                                                                                                                                                                   
|Reuters
           EPS before amortisation of goodwill and other intangibles, impairments,

      disposals andnon-recurring
       tax effects of impairments, reorganisations and disposals      
|                                                                                                                                                                                                   

|Note:
|-----
|1    
|     



|Reuters
      Group PLC Annual Report and Form 20-F 2004 |  | 13
|-------------------------------------------------------- |  | --

---



Back to Contents

OPERATING
  AND FINANCIAL REVIEWcontinued



03 FINANCIAL REVIEW

|                                                                       |      |        |      |  | Year
      to 31 December |  
|---------------------------------------------------------------------- | ---- | ------ | ---- |  | ------------------------- | -
|                                                                       |      |        |      |  |                           |  
|Summary
          of results                                           |      |        |      |  | Restated                  | 1
|2004                                                                   | 2003 |        | 2002 | 
|£m                                                                     | £m   |        | £m   | 
|                                                                       |      |        |      |  |                           |  
|Revenue:                                                               |      |        |      |  |                           |  
|Reuters                                                                |      | 2,361  |      |  | 2,664                     |  
|Instinet
      Group                                                   |      | 530    |      |  | 578                       |  
|Intra-Group                                                            |      | (6     | )    |  | (7                        | )
|                                                                       |      |        |      |  |                           |  
|Reuters Group
      revenue                                            |      | 2,885  |      |  | 3,235                     |  
|                                                                       |      |        |      |  |                           |  
|Operating costs:                                                       |      |        |      |  |                           |  
|Reuters                                                                |      | (2,193 | )    |  | (2,486                    | )
|Instinet
      Group                                                   |      | (501   | )    |  | (626                      | )
|Intra-Group                                                            |      | 6      |      |  | 7                         |  
|                                                                       |      |        |      |  |                           |  
|Reuters Group
      operating costs                                    |      | (2,688 | )    |  | (3,105                    | )
|                                                                       |      |        |      |  |                           |  
|Operating profit/(loss):                                               |      |        |      |  |                           |  
|Reuters                                                                |      | 168    |      |  | 178                       |  
|Instinet
      Group                                                   |      | 29     |      |  | (48                       | )
|                                                                       |      |        |      |  |                           |  
|Reuters
      Group operating profit/(loss)                            |      | 197    |      |  | 130                       |  
|                                                                       |      |        |      |  |                           |  
|Affiliates/investment
      income                                     |      | 6      |      |  | (28                       | )
|Net interest
      payable                                             |      | (4     | )    |  | (29                       | )
|Amortisation/impairment
      of affiliate intangibles and investments |      | (5     | )    |  | (19                       | )
|Profit/(loss)
      on disposals                                       |      | 243    |      |  | 2                         |  
|                                                                       |      |        |      |  |                           |  
|Profit/(loss)
      before taxation:                                   |      |        |      |  |                           |  
|Reuters                                                                |      | 381    |      |  | 102                       |  
|Instinet
      Group                                                   |      | 56     |      |  | (46                       | )
|                                                                       |      |        |      |  |                           |  
|Reuters
      Group profit/(loss) before taxation                      |      | 437    |      |  | 56                        |  
|                                                                       |      |        |      |  |                           |  
|Taxation                                                               |      | (73    | )    |  | (22                       | )
|                                                                       |      |        |      |  |                           |  
|Profit/(loss)
      after taxation                                     |      |        |      |  |                           |  
|Reuters                                                                |      | 329    |      |  | 77                        |  
|Instinet
      Group                                                   |      | 35     |      |  | (43                       | )
|                                                                       |      |        |      |  |                           |  
|Reuters
      Group profit/(loss) after taxation                       |      | 364    |      |  | 34                        |  
|                                                                       |      |        |      |  |                           |  
|EPS                                                                    |      | 25.1   | p    |  | 3.6                       | p
|                                                                       |      |        |      |  |                           |  
|                                                                       |      |        |      |  |                           |  

|Note:
|-----
|1    



2004
  RESULTS COMPARED WITH 2003 Reuters
    GroupRevenue
    Reuters Group revenue
  in 2004 was £2,885 million, falling 11% compared to 2003, driven largely
  by US dollar depreciation which had an adverse impact on both Reuters and Instinet
  Group revenue. Operating
  costs As a consequence
  of declining revenues over the past three years, actions have been taken at
  both Reuters and Instinet Group to reduce the operating cost base. Cost savings
  were primarily driven by greater cost discipline across all functions including
  a reduction in staff numbers of 7% at Reuters and 17% at Instinet Group. 2004
  Reuters Group restructuring costs reduced by £50 million to £128
  million. In addition, impairment charges and goodwill amortisation dropped from
  £121 million to £76 million due to the decision to dispose of certain
  non-core subsidiaries in 2004 and impairments taken in 2003. As a result, Reuters
  Group operating costs were £2,688 million in 2004, a reduction of 13%
  compared to 2003. Operating
  profit and margin Reuters Group operating
  profit in 2004 was £197 million, an increase of 51% compared to 2003.
  This improvement was primarily driven by a return to operating profit by Instinet
  Group, where an operating loss of £48 million in 2003 was turned into
  an operating profit of £29 million in 2004. Reuters Group operating
  margin was 6.8% in 2004, compared to 4.0% in 2003. The improvement was primarily
  driven by a reduction in other non-trading operating costs.


Non-operating
  income/(costs) Reuters Group share
  of affiliates losses of £28 million in 2003 was turned into a profit
  of £6 million in 2004. This reflected the Reuters Group portfolio rationalisation
  programme and the improvement in performance at Radianz. Lower restructuring
  and impairment charges within the affiliates compared to 2003 were also significant
  drivers. Reuters Group net
  interest charge reduced from £29 million in 2003 to £4 million in
  2004, due to the movement from net debt in 2003 to net funds in 2004. This was
  primarily driven by the portfolio rationalisation and reduced capital expenditure. Amortisation/impairment
  of affiliates intangibles and investments have decreased from £19 million
  in 2003 to £5 million in 2004. Charges in 2004 included a £3 million
  impairment charge relating to Radianz. Reuters Group profits
  on disposals were £243 million in 2004 compared to £2 million in
  2003. The disposals included the majority of Reuters stake in TSI as well as
  its holdings in GL TRADE, Riskmetrics, TowerGroup, Yankee and ORT. Instinet
  Group disposed of its stakes in Euronext, the London Stock Exchange and Archipelago. Profit
  before taxation Reuters Group reported
  a profit before taxation of £437 million in 2004 compared to £56
  million in 2003, comprising a £381 million profit in Reuters and a £56
  million profit in Instinet Group. The improvement was primarily driven by a
  return to operating profit in Instinet Group and profits on disposals generated
  by the portfolio rationalisation programme in Reuters.




|14 |  | Reuters Group
      PLC Annual Report and Form 20-F 2004
|-- |  | --------------------------------------------------------

---



Back to Contents

Taxation
  charge Reuters Group taxation
  charge for 2004 was £73 million, up from £22 million in 2003, reflecting
  the higher level of profit before taxation at Reuters and Instinet Groups
  return to profitability. The rate of increase in taxation was lower than the
  growth in profitability due to the lower level of taxation payable on asset
  disposals (£9 million charge). A reconciliation of the actual taxation
  charge to the taxation charge expected by applying the standard 30% UK rate
  of corporation tax to the reported profits is provided in note 4 on the consolidated
  profit and loss account. EPS
  Reuters Group recorded
  basic earnings per share of 25.1 pence in 2004 as compared to 3.6 pence per
  share in 2003. This follows the higher level of Group profit after taxation
  of £364 million (2003: £34 million). ReutersRevenue Year
           to 31 December2004
      
      2003
      
      2002£m
      
      £m
      
      £mRevenue
      
      
      
      2,361
      
      2,664
      
      2,992Reconciliation
        of UK GAAPpercentage
        change tounderlying
        2004 over 2003
      Underlyingchange
      
      
      Impact
ofcurrency
      
      Impact
        ofacquisitions&
        disposals
      
      ActualchangeRevenue
      (5%)
      
      
      (5
      %)
      (1
      %)
      (11
      %) Reuters revenue
  was £2,361 million, a decrease of 11% compared to the previous year. On
  an underlying basis, the decline was 5% compared to 12% in 2003. Exchange rate
  movements accounted for 4.7 of the 6.3 percentage point difference between actual
  and underlying declines in 2004. Operating
        costsYear
        to 31 DecemberRestated1
      
      Restated12004
      
      
      2003
      
      2002£m
      
      
      £m
      
      £mTrading
        costs
      
      2,004
      
      
      2,256
      
      2,597Restructuring
        costs
      
      120
      
      
      134
      
      112Amortisation
        of goodwill and otherintangibles
        of subsidiaries
      
      55
      
      
      89
      
      86Impairment
        of subsidiaries
      
      14
      
      
      7
      
      Operating
        costs
      
      2,193
      
      
      2,486
      
      2,795 Note:1
    Restated
        following adoption of UITF17 and UITF38. (See Accounting Basis on
      page 72) Reconciliation
        of UK GAAPpercentage
        change tounderlying
        2004 over 2003
      Underlyingchange
      
      Impact ofcurrency
      
      Impact
        ofacquisitions&
        disposals
      
      ActualchangeOperating
        costs
      (5
      %)
      (5
      %)
      (2
      %)
      (12
      %) Reuters operating
  costs were £2,193 million in 2004, a decrease of 12% from 2003, or 5%
  on an underlying basis. Costs reduced as Reuters delivered a further £159
  million of Fast Forward savings in 2004. Currency movements, particularly the
  weak US dollar, contributed £113 million of the decline. Operating costs,
  excluding restructuring charges, amortisation of goodwill and other intangibles
  and goodwill impairment, reduced by 11%. Amortisation charges
  of £55 million in 2004 were lower than in 2003, principally due to the
  disposals of TowerGroup, Yankee and ORT. There was a £14 million charge
  related to Bridge Trading for the impairment of subsidiaries in 2004 (2003:
  £7 million). Operating
        profit and margin2003
      
      20022004
      
      
      Restated
      
      Restated£m
      
      
      £m
      
      £mOperating
        profit
      
      168
      
      
      178
      
      197Operating
        margin
      
      7.1
      %
      
      6.7
      %
      6.6
      %




Reuters operating
  profit of £168 million was down 5% against 2003. Cost efficiencies and
  lower restructuring and impairment charges mitigated the impact of reduced revenues
  at the operating profit level. As a result, Reuters
  operating margin was 7.1% in 2004 compared to 6.7% in 2003. Profit
        before taxationYear
        to 31 DecemberRestated
      
      Restated2004
      
      
      2003
      
      2002£m
      
      
      £m
      
      £mAffiliates/investment
        income
      
      5
      
      
      (28
      )
      (61
      )Net interest
        payable
      
      (10
      )
      
      (34
      )
      (26
      )Amortisation/impairment
        of affiliateintangibles
        and investments
      
      (5
      )
      
      (17
      )
      (54
      )Profit/(loss)
        on disposals
      
      223
      
      
      3
      
      (30
      )Profit
        before taxation
      
      381
      
      
      102
      
      26 Reuters share of
  income from affiliates and investments was £5 million in 2004. This was
  a £33 million improvement on the £28 million operating loss reported
  in 2003. The most important contributor to this turnaround was Radianz, where
  losses fell from £27 million in 2003 to £6 million in 2004. Other
  factors were a profit of £4 million from Factiva (2003: £4 million),
  a profit of £3 million from TSI (2003: £10 million loss) and a profit
  of £2 million from GL TRADE (2003: £5 million profit), which was
  sold during the year. Other associates contributed a profit of £2 million
  in aggregate (2003: £nil). Reuters total amortisation
  and impairment of affiliate intangibles and investments was £5 million.
  The reduction from prior years largely reflects the disposal of companies from
  Reuters portfolio. Profit on disposals
  at Reuters totalled £223 million. As part of the Fast Forward programme,
  the portfolio of companies continues to be scaled back. During 2004, Reuters
  sold its holdings in a number of companies including TowerGroup, Yankee, ORT,
  GL TRADE and Riskmetrics and significantly reduced its stake in TSI. Reuters net interest
  expense was £10 million in 2004. The reduction from prior years primarily
  relates to lower net debt as a result of proceeds from the rationalisation of
  the portfolio of companies. In 2004, Reuters
  profit before taxation was £381 million, up from £102 million in
  2003. This growth was primarily driven by a £220 million increase in profits
  from asset disposals, a £33 million improvement in affiliate and investment
  income, lower net interest charges (£24 million) and reductions in amortisation
  and impairment charges (£12 million). EPS
  Reuters recorded
  basic earnings per share of 23.5 pence in 2004, compared to 5.5 pence in 2003.
  This follows the higher level of Reuters profit after taxation of £329
  million (2003: £77 million). Instinet
    GroupRevenue,
    operating costs, operating result and margin Year
        to 31 DecemberRestated
      
      Restated2004
      
      
      2003
      
      2002£m
      
      
      £m
      
      £mRevenue
      
      530
      
      
      578
      
      610Trading costs
      
      (486
      )
      
      (557
      )
      (624
      )Restructuring
        costs
      
      (8
      )
      
      (44
      )
      (96
      )Amortisation
        of goodwill and otherintangibles
        of subsidiaries
      
      (7
      )
      
      (12
      )
      (21
      )Impairment
        of subsidiaries
      
      
      
      
      (13
      )
      (208
      )Operating
        costs
      
      (501
      )
      
      (626
      )
      (949
      )Operating
        profit/(loss)
      
      29
      
      
      (48
      )
      (339
      )Operating
        margin
      
      5.4
      %
      
      (8.2
      %)
      (55.6
      %) Note:1
    Restated
      following the reclassification of transaction-related regulatory fees following
      recently issued SEC guidance (See Accounting Basis on page 72).




|Reuters
      Group PLC Annual Report and Form 20-F 2004 |  | 15
|-------------------------------------------------------- |  | --

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OPERATING
  AND FINANCIAL REVIEWcontinued

Instinet Groups
  revenue was £530 million in 2004, 8% lower than 2003, reflecting improved
  trading performance offset by the negative impact of a weaker US dollar. Revenue
  rose in the fourth quarter of 2004, both at Instinet, the institutional broker,
  and at INET, the electronic market place, reflecting higher equity market volumes. Operating costs
  continued to fall, driven by a 17% reduction in headcount to around 1,000 people
  at year end. In 2004, restructuring
  charges totalled £8 million, down from £44 million in the prior
  year. Amortisation and impairment of subsidiaries goodwill was £7 million,
  compared to £25 million in 2003. The higher 2003 charge primarily reflected
  impairment charges taken against Island ECN technology assets. Instinet Groups
  2004 operating profit was £29 million, compared to a loss of £48
  million in 2003. This reflects strong cost control ensuring that efficiency
  gains exceeded the decline in revenues. The operating margin at Instinet Group
  was 5.4% in 2004 and represents an improvement over 2003. Profit/(loss)
        before taxationYear
        to 31 DecemberRestated
      
      Restated2004
      
      
      2003
      
      2002£m
      
      
      £m
      
      £mAffiliates/investment
        income
      
      1
      
      
      
      
      (1
      )Net interest
        receivable
      
      6
      
      
      5
      
      6Amortisation/impairment
        ofaffiliate
        intangibles and investments
      
      
      
      
      (2
      )
      (38
      )Profit/(loss)
        on disposals
      
      20
      
      
      (1
      )
      2Profit/(loss)
        before taxation
      
      56
      
      
      (46
      )
      (370
      ) Instinet Group
  reported £1 million of income from affiliates and investments (2003: £nil).
  This relates to dividends received from the London Stock Exchange. Net interest income
  was £6 million in 2004, compared to income of £5 million in 2003,
  due to higher US dollar interest rates in the second half of 2004. Instinet Group
  reported no amortisation or impairment of affiliate intangibles and investments
  in 2004 (2003: £2 million). The 2003 results contained impairment charges
  relating to Tradeware and Instinet Group Exchange, both of which were written
  down in 2003 to nil carrying value. Instinet Group
  reported £20 million of profit on disposals in 2004 compared to a £1
  million loss in 2003. The 2004 sales are of stakes in Euronext, the London Stock
  Exchange and Archipelago. Instinet Groups
  profit before taxation was £56 million in 2004, compared to a loss of
  £46 million in 2003. This movement is largely due to improvements in operating
  profit combined with higher profit from disposals. 2004
        CASH FLOWSummarised
        Reuters Group cash flowYear
        to31
        December2004
      
      
      2003£m
      
      
      £mNet cash
        inflow from operating activities
      
      253
      
      
      429Dividends
        received from joint ventures and associates
      
      4
      
      
      3Returns on
        investments and servicing of finance
      
      (10
      )
      
      (28
      )Taxation
        paid
      
      (43
      )
      
      (33
      )Capital expenditure
        and financial investment
      
      (19
      )
      
      (110
      )Acquisitions
        and disposals
      
      362
      
      
      (106
      )Equity dividends
        paid
      
      (140
      )
      
      (140
      )Proceeds
        from the issue of shares
      
      6
      
      
      Other movements1
      
      (10
      )
      
      (26
      )Movement
        in net funds/(debt)
      
      403
      
      
      (11
      )Opening net
        debt
      
      (77
      )
      
      (66
      )Closing
        net funds/(debt)
      
      326
      
      
      (77
      ) Notes:1
    Other
      movements relates to net debt/funds arising on acquisition/disposals, non-cash
      movements and translation differences (see the Reconciliation of net
      cash flow to movement in net funds/(debt) on page 50).


Reuters
  GroupReuters Group had
  net funds of £326 million as at 31 December 2004 (2003: net debt of £77
  million) consisting of net funds in Instinet Group of £495 million (a
  significant portion of which is required to be held for regulatory capital and/or
  business purposes) and net debt in Reuters of £169 million. Reuters Group net
  cash inflow from operating activities was £253 million compared to £429
  million in 2003. This difference was mainly due to working capital movements
  arising from a decrease in creditors due to a reduction in operating costs at
  Reuters of 12%, a reduction in provisions, and movements in counterparty debtors
  and creditors in Instinet Group. Additionally, Reuters experienced an increase
  in debtors of £18 million relating to an interim funding payment in connection
  with the pending acquisition of Telerate (see Related party transactions
  and material contracts  Other material contracts  Telerate acquisition
  agreement on page 89). ReutersReuters net debt
  position as at 31 December 2004 was £169 million, compared to £610
  million as at 31 December 2003. The movement of £441 million was primarily
  due to net cash proceeds from disposals of £434 million, with the largest
  contributor being the sale of a majority of the holding in TSI. The net debt
  position was also improved by: reduced capital expenditure due to a reduction
  in subscriber equipment spend and the phasing of some major project expenditure;
  cash inflows from property disposals in connection with the relocation of Reuters
  London operations to Canary Wharf; cash inflows from property sale and leaseback
  transactions in the US; lower interest payments due to the reduction in net
  debt; and reduced taxation payments. These cash flows offset the reduction in
  net cash inflow from operating activities and cash payments for acquisitions
  of £78 million, with the largest contributor being the purchase of the
  remaining 49% of Radianz. Instinet
  GroupInstinet Groups
  net funds position reduced by £38 million from £533 million as at
  31 December 2003 to £495 million as at 31 December 2004. This movement
  was driven by net cash outflows from operating activities, increased capital
  expenditure and increased taxation payments offset by proceeds from the disposal
  of fixed asset investments. Reuters
  free cash flowReuters generated
  free cash flow of £211 million in 2004 (2003: £197 million), providing
  funds of 1.5 times the dividend of £140 million. The interim funding payment
  represents payments made to Telerate in respect of the planned acquisition (see
  Telerate Acquisition Agreement on page 89). A reconciliation of
  net cash inflow from operating activities to free cash flow is shown below: Year
      to 31 December 2004Instinet
    
    ReutersReuters
      Group reconciliation of net cash inflow
    
    Reuters
    
    
    Group
    
    Groupfrom
      operating activities to free cash flow
    
    £m
    
    
    £m
    
    £mNet cash
      inflow/(outflow)from
      operating activities
    
    287
    
    
    (34
    )
    253Dividends received
      from joint venturesand
      associates
    
    4
    
    
    
    
    4Returns on
      investment and servicing of finance
    
    (19
    )
    
    9
    
    (10
    )Taxation paid
    
    (38
    )
    
    (5
    )
    (43
    )Capital expenditure
      and financial investments
    
    (41
    )
    
    22
    
    (19
    )Interim funding
      payment
    
    18
    
    
    
    
    18Free
      cash flow
    
    211
    
    
    (8
    )
    203Year
      to 31 December 2003Net cash
      inflow from operating activities
    
    401
    
    
    28
    
    429Dividends received
      from associates
    
    3
    
    
    
    
    3Returns on
      investment and servicing of finance
    
    (35
    )
    
    7
    
    (28
    )Taxation paid
    
    (65
    )
    
    32
    
    (33
    )Capital expenditure
      and financial investments
    
    (107
    )
    
    (3
    )
    (110
    )Free
      cash flow
    
    197
    
    
    64
    
    261




|16 |  | Reuters Group
      PLC Annual Report and Form 20-F 2004
|-- |  | --------------------------------------------------------

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2003
      RESULTS COMPARED WITH 2002Reuters
  GroupRevenue
  Reuters Group revenue
  declined by 10% in 2003 to £3,235 million. Operating
  costs Reuters Group operating
  costs in 2003 were £3,105 million, a reduction of 17% over 2002. This
  was the result of actions taken at both Reuters and Instinet Group in 2003 to
  reduce the operating cost base. Impairment and goodwill amortisation also fell
  from £315 million in 2002 to £121 million in 2003. Operating
  profit and margin Reuters Group operating
  loss of £142 million in 2002 was converted to a £130 million profit
  in 2003. Reuters Group operating margin was 4.0% in 2003. Profit
  before taxation Reuters Group share
  of affiliates losses decreased from £62 million in 2002 to £28
  million in 2003. The main driver of this was a £31 million improvement
  in TSI, due to stronger cost control, minimal restructuring charges compared
  to 2002 and a £2 million gain on investments compared to a £4 million
  loss in 2002. The other key affiliates, Radianz and Factiva, contributed a broadly
  similar performance in 2003 as in 2002. The net interest
  charge increased from £20 million in 2002 to £29 million in 2003.
  This was partly due to the Multex acquisition and also to a £4 million
  reduction in the interest receivable by affiliates due to the falling value
  of US dollar interest earnings. Included in the interest charge was a write-off
  of front-end fees of £4 million attached to Reuters syndicated loan facility. Impairment charges
  and net disposal losses decreased from £109 million in 2002 to £10
  million in 2003. Losses in 2003 included a £17 million provision in respect
  of the disposal of two London-based properties as part of the Fast Forward programme.
  In 2002, there were £81 million of charges taken to reflect a reduction
  in the carrying value of various investments held by the Group and net losses
  on disposal of £28 million. The losses included a £19 million loss
  on the deemed disposal of a portion of the Groups investment in Instinet
  Group, following the Island acquisition. Reuters Group reported
  a profit before taxation of £56 million in 2003 compared to a loss of
  £344 million in 2002. The 2003 profit was made up of a £102 million
  profit in Reuters, partly offset by a £46 million loss in Instinet Group.
  Excluding amortisation of goodwill and other intangibles, impairments and disposals,
  Reuters Group profit before taxation was £194 million, up from £91
  million in 2002. Taxation
  charge The taxation charge
  for 2003 was £22 million, £1 million lower than 2002, when a charge
  arose due to the non-deductible nature of amortisation charges, and certain
  write downs, as well as from a dividend paid by Instinet Group. EPS
  Reuters Group recorded
  basic earnings per share of 3.6 pence, as compared to a 18.3 pence loss per
  share in 2002. The 2003 EPS reflected the Reuters Groups return to a net
  profit. The loss in 2002 primarily reflected the £317 million non-cash
  impairment charges in that year. Reuters Group EPS
  before amortisation of goodwill and other intangibles, impairment of goodwill,
  disposals and non-recurring tax effects of impairments, reorganisations and
  disposals was 11.4 pence (2002: 6.9 pence). The improvement in EPS was largely
  due to cost savings outstripping revenue decline. Cash
  Flow Reuters Group had
  net debt of £77 million as at 31 December 2003, an increase of £11
  million from 2002. This consisted of net funds in Instinet Group of £533
  million (2002: £518 million) and net debt in Reuters of £610 million
  (2002: £584 million). Reuters Group net cash inflow from operating activities
  was £429 million in 2003 compared to £355 million in 2002. The improvement
  in Reuters Group net cash inflow was due to a £117 million increase in
  Instinet Groups net cash inflow, due to movements in net counterparty
  debtors and creditors. Reuters net cash inflow of £401 million was £43
  million lower than in 2002, mainly due to lower revenues.


ReutersRevenue
  Reuters revenue was
  down 11% to £2,664 million in 2003, reflecting weak trading conditions
  in global financial markets. Operating
  costs Reuters operating
  costs were £2,486 million in 2003, a reduction of £309 million (11%)
  from 2002. This decrease was driven by savings from Fast Forward and earlier
  transformation programmes. Operating
  profit and margin Reuters operating
  profit decreased by £19 million in 2003 to £178 million, largely
  driven by an increase in restructuring charges. Excluding amortisation of goodwill
  and other intangibles, impairments and restructuring charges, Reuters generated
  an operating profit of £408 million (2002: £395 million), with the
  3% increase reflecting strong cost control across all business units. Reuters operating
  margin was 6.7% in 2003 on an actual basis (2002: 6.6%), and increased from
  13.2% to 15.3% before amortisation of goodwill and other intangibles, impairments
  and restructuring. Instinet
      GroupRevenue
  Instinet Group revenue
  was down 5% to £578 million, largely reflecting the adverse impact of
  the weaker US dollar on Instinet Group revenues. Operating
  loss Instinet Groups
  operating loss decreased from £339 million in 2002 to £48 million
  in 2003, mainly due to once-off goodwill amortisation and impairment charges
  of £229 million in 2002. 04
        OPERATING REVIEWReutersRevenueYear
        to 31 DecemberRevenue
      by type
      
      
      2004£m
      
      
      2003£m
      
      2002£mRecurring
      
      
      2,164
      
      
      2,456
      
      2,707Usage
      
      
      108
      
      
      103
      
      122Outright
      
      
      89
      
      
      105
      
      163Total
        Reuters
      
      
      2,361
      
      
      2,664
      
      2,992Reconciliation
        ofUK
        GAAP percentage changeto
        underlying 2004 over 2003
      Underlyingchange
      
      Impact
      ofcurrency
      
      
      Impact
        ofacquisitions&
        disposals
      
      ActualchangeRecurring
      (5
      %)
      (5
      %)
      
      (2
      %)
      (12
      %)Usage
      11
      %
      (11
      %)
      
      5
      %
      5
      %Outright
      (10
      %)
      (5
      %)
      
      
      
      (15
      %)Total
        Reuters
      (5
      %)
      (5
      %)
      
      (1
      %)
      (11
      %) Reuters classifies
  revenue into three distinct types  recurring, outright and usage. Recurring
  revenue, which makes up approximately 92% of Reuters 2004 revenues, refers to
  the sale of subscription products and includes maintenance fees from solutions
  sales. Recurring revenue declined by 11.9% on an actual basis to £2,164
  million and by 5.4% on an underlying basis, reflecting a gradually improving
  market environment. This compares with a decline in the previous year of 9.3%
  on an actual basis and 10.2% on an underlying basis. Outright revenue,
  comprising approximately 4% of Reuters 2004 revenues, is principally derived
  from the sale of software and hardware solutions. Outright revenue declined
  by 15% on an actual basis, or 10% on an underlying basis, to £89 million
  as we exited bespoke solutions sales as part of Fast Forward and market conditions
  continued to be difficult. Usage revenue,
  approximately 4% of Reuters 2004 revenues, is principally derived from Dealing
  Matching and Bridge Trading products where revenue is generated based on trading
  volumes. In 2004, usage revenue grew by 5% on an actual basis and 11% on an
  underlying basis, to £108 million.




|Reuters
      Group PLC Annual Report and Form 20-F 2004 |  | 17
|-------------------------------------------------------- |  | --

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OPERATING
      AND FINANCIAL REVIEWcontinued

Trends
  in user accesses and average revenue per access (ARPA) User accesses declined
  by approximately 10,000 over the year as a whole. However, they have increased
  since a low point at the end of Q1, increasing by 14,000 since March 2004. User
  accesses were restated to reflect the exclusion of mobile and other low-cost
  accesses. ARPA decreased 1% on an actual basis, but increased 2% on an underlying
  basis over 2003, reflecting a higher proportion of premium products, primarily
  due to upgrades and the removal of accesses at the lower end of the price range. Revenue
        by customer segmentYear
        to 31 DecemberRestated
      
      Restated2004
      
      
      2003
      
      2002£m
      
      
      £m
      
      £mSales &
        Trading
      
      1,180
      
      
      1,300
      
      1,461Research
        & Asset Management
      
      235
      
      
      290
      
      283Enterprise
      
      481
      
      
      560
      
      666Media
      
      144
      
      
      153
      
      155Recoveries
      
      321
      
      
      361
      
      427Total
        Reuters
      
      2,361
      
      
      2,664
      
      2,992 Prior year comparatives
  have been restated to reflect the organisational structure in place during 2004. Reconciliation
      of UK GAAPpercentage
      change tounderlying
      2004 over 2003
    Underlyingchange
    
    Impact
      ofcurrency
    
    Impact
      ofacquisitions& disposals
    
    ActualchangeReuters Xtra
    12%
    
    (5%
    )
    
    
    7%Reuters Trader
    (25%
    )
    (4%
    )
    
    
    (29%
    )Sales
      & Trading
    (4%
    )
    (5%
    )
    
    
    (9%
    )Reuters Xtra
    9%
    
    (7%
    )
    
    
    2%Reuters Trader
    (43%
    )
    (2%
    )
    
    
    (45%
    )Knowledge
    56%
    
    (4%
    )
    (91%
    )
    (39%
    )Wealth Manager
    2%
    
    (7%
    )
    
    
    (5%
    )Research
      & Asset Management
    2%
    
    (6%
    )
    (15%
    )
    (19%
    )Datafeeds
    (15%
    )
    (4%
    )
    
    
    (19%
    )Market Data
      Systems
    (10%
    )
    (3%
    )
    
    
    (13%
    )Risk
    (2%
    )
    (4%
    )
    
    
    (6%
    )EIP
    57%
    
    (14%
    )
    
    
    43%Other
    (15%
    )
    (6%
    )
    (6%
    )
    (27%
    )Enterprise
    (9%
    )
    (4%
    )
    (1%
    )
    (14%
    )Media
    (2%
    )
    (5%
    )
    1%
    
    (6%
    )Recoveries
    (7%
    )
    (4%
    )
    
    
    (11%
    )Total
      Reuters revenue
    (5%
    )
    (5%
    )
    (1%
    )
    (11%
    ) In 2004, Reuters
  redefined its Customer Segments and organised its products into product families.
  For details see pages 7-8 in Company information. Revenue from the
  Xtra product family is divided between Sales & Trading (93%) and Research
  & Asset Management ( 7%). For details, see Segmental analysis
  note on pages 44-45. The performance of the Xtra product family is discussed
  under Sales & Trading. Sales
  & Trading Revenue from Sales
  & Trading, which accounts for 50% of Reuters revenues, was £1,180
  million, a decline of 9% on an actual basis and 4% on an underlying basis. Within
  Sales & Trading, revenues are derived from the Reuters Xtra and Reuters
  Trader product families. Revenue from the
  Reuters Xtra product family (which comprises 3000 Xtra, Dealing, Reuters Station,
  Reuters Electronic Trading and Securities Transactions) increased by £51
  million to £837 million. Total revenue from Reuters 3000 Xtra was £494
  million, up 18% on an actual basis. Dealing revenues of £238 million,
  which include both subscription and matching revenues, decreased by 8% on an
  actual basis. The installed base
  of 3000 Xtra grew steadily through 2004 and reached 88,000 at the end of the
  year, a 27% year-on-year increase. This reflected increased traction from the
  enterprise-wide deals signed with some of our largest


customers. Around
  16,000 of the 19,000 additional positions of Reuters 3000 Xtra installed in
  2004 were upgrades of existing accesses, with the balance made up by new business.
  There were around 18,000 Dealing user accesses at the end of the year. Access
  numbers grew by more than 100 during the year, despite competitive pressure
  from the EBS/Bloomberg alliance. This reflected the success of the vigorous
  sales campaign to defend this revenue stream. ARPA for the Reuters
  Xtra product family declined by 13% year-on-year on an actual basis, or 9% on
  an underlying basis. The factors driving this were an increased proportion of
  Reuters 3000 Xtra accesses (including some upgrades offered on a temporary basis
  to mitigate the delay in Reuters Trader), more customers moving into higher
  discount bands as their installed base increased and the impact of the weaker
  US dollar on revenues generated from some larger customers whose 3000 Xtra accesses
  are priced in US dollars. Revenue from the
  Reuters Trader product family (which comprises Reuters Trader, 2000/3000 series
  products and regional products), fell by £177 million, to £416 million,
  a decline of 26% on an underlying basis. This was caused primarily by the migration
  of users of legacy products to 3000 Xtra and, to a lesser extent, by cancellations
  and by competitive losses. Recurring revenue from legacy 2000/3000 series products
  totalled £212 million, falling 42% on an actual basis. Reuters Trader
  family accesses declined by 24% during the period. 2000/3000 series product
  accesses declined by 35% year-on-year, driven by migration activities. The rollout
  of the new Reuters Trader product in Europe was slower than expected due to
  post-launch product issues, and further work is underway to optimise overall
  product performance. In total, there were 4,300 Reuters Trader accesses installed
  by the end of 2004. ARPA for the Reuters Trader family declined by 4% year-on-year
  on an actual basis or 2% on an underlying basis. Usage revenue in
  Sales & Trading was down 3% on an actual basis but showed growth on an underlying
  basis compared to 2003. Volatility in the foreign exchange markets and an extension
  of the product to support trading in derivatives drove 4% growth in Dealing
  Matching revenues compared to 2003. Research
  & Asset Management Revenue from Research
  & Asset Management accounts for 10% of Reuters revenues. In 2004, revenue
  fell by £55 million to £235 million. This reflected the impact of
  the disposals of ORT, TowerGroup and Yankee which caused actual revenues to
  decline by 19%. On an underlying basis, the segments revenue increased
  by 2%. Within Research & Asset Management, revenue is derived from the Reuters
  Knowledge and Reuters Wealth Manager product families. The Research & Asset
  Management segment also generated £73 million in revenue from the Reuters
  Xtra and Reuters Trader product families. The Reuters Knowledge
  product family comprises Reuters Knowledge for Investment Management, Reuters
  Knowledge for Corporates and Reuters Research. Disposals drove an actual decline
  of 39% in Knowledge family revenue to £65 million, but a strong product
  line and a global sales campaign among investment management firms drove excellent
  underlying growth of 56%. The Reuters Wealth Manager product family includes
  Reuters Wealth Manager, Reuters Plus and Lipper. Revenue fell by £6 million
  to £97 million, but increased by 2% on an underlying basis. The actual
  decline was driven mainly by the effect of the weaker US dollar on Reuters Plus
  revenue. Reuters Plus revenue increased by 11% on an underlying basis and Lipper
  revenue by 9% on an underlying basis. 8,400 positions
  of Reuters Knowledge were installed at the end of 2004. Within the Reuters Wealth
  Manager family, access growth was level. Good growth in Reuters Plus accesses
  was offset by a decline in Reuters Market Monitor (RMM) accesses. Reuters Wealth
  Manager, launched in September 2004, provides a migration path for RMM accesses
  and achieved around 4,400 sold accesses at the end of the year. ARPA across the
  Reuters Knowledge and Reuters Wealth Manager families remained the same in 2004
  on an actual basis, but increased 8% on an underlying basis, driven by the successful
  rollout of higher-priced Reuters Knowledge products. Enterprise
  Revenue from the
  Enterprise segment, which accounts for 20% of Reuters revenues, fell by £79
  million to £481 million, a decline of 14% on an actual




|18 |  | Reuters Group
      PLC Annual Report and Form 20-F 2004
|-- |  | --------------------------------------------------------

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basis and 9% on
  an underlying basis. Within Enterprise, revenues are derived from four product
  lines, offering customers fully integrated business solutions. Risk Management
  and Enterprise Information Products both have good potential for growth, and
  account for 24% of total Enterprise revenues. Datafeeds and Market Data Systems
  are more established businesses with strategically vital capabilities, that
  sit at the heart of Reuters new transactions offer. Enterprise Information
  Products generated revenue of £34 million and grew by 43% on an actual
  basis and 57% on an underlying basis in 2004, driven by a solid product offering
  and renewed market focus on data usage compliance. Risk Management
  acquired 30 new customers during 2004 and continued to show good potential despite
  a 6% actual decline or a 2% underlying decline in revenues this year. Datafeed revenues
  showed an annual decline of 19% on an actual basis and 15% on an underlying
  basis while Market Data Systems declined 13% on an actual basis and 10% on an
  underlying basis. These declines were driven by Reuters withdrawal from its
  consulting business as part of Fast Forward, major customers consolidating systems
  into larger centres and an aggressive campaign by Reuters to migrate small and
  medium sized customers to newer, desktop-based offerings. Nevertheless, Reuters
  continues to be uniquely placed to supply sophisticated enterprise solutions
  to customers with technology-intensive businesses. Media Revenue from Media,
    which accounts for 6% of Reuters revenues, declined by £9 million to
    £144 million, an actual decline of 6% and an underlying decline of 2%.
    Within Media, revenues are derived from the Text, Visuals, Consumer and Advertising
    Services product lines. The main driver
  of the decline in Media revenue was Reuters decision to restrict access to premium
  news distributed through internet content aggregators, and to retain it exclusively
  for distribution through Reuters own consumer websites. This policy has resulted
  in an increase in reuters.com site traffic which has helped to increase consumer
  revenues to £7 million in 2004, compared to £2 million in 2003. Recoveries
    Recurring revenue
    from recoveries, including exchange fees and last mile communications
    costs totalled £321 million, a decline of 11% on an actual basis and
    7% on an underlying basis. Operating
  costs Year
        to 31 DecemberRestated
      1
      Restated
      12004
      
      2003
      
      2002£m
      
      £m
      
      £mCustomer
        Segments
      
      166
      
      250
      
      278Channels
      
      822
      
      940
      
      1,093Operations
        & Technology
      
      630
      
      674
      
      728Content
      
      262
      
      278
      
      295Corporate
        services/other
      
      124
      
      114
      
      203Trading
        costs
      
      2,004
      
      2,256
      
      2,597Restructuring
        costs
      
      120
      
      134
      
      112Amortisation
        of goodwill and otherintangibles
        of subsidiaries
      
      55
      
      89
      
      86Impairment
        of subsidiaries
      
      14
      
      7
      
      Operating
        costs
      
      2,193
      
      2,486
      
      2,795 Note:1
   Restated to reflect the new management structure and following adoption of UITF17 and UITF38 (see Accounting Basis on page 72). Reconciliation
             of UK GAAPpercentage
              change tounderlying
               2004 over 2003
      
      Underlyingchange
      
      Impact
      ofcurrency
      
      Impact
        ofacquisitions&
        disposals
      
      Actual
      changeCustomer
        Segments
      
      (14
      %)
      (4
      %)
      (15
      %)
      (33
      %)Channels
      
      (8
      %)
      (4
      %)
      
      
      (12
      %)Operations
        & Technology
      
      
      
      (7
      %)
      
      
      (7
      %)Content
      
      (1
      %)
      (6
      %)
      1
      %
      (6
      %)Corporate
        services/other
      
      15
      %
      (5
      %)
      (2
      %)
      8
      %Trading
        costs
      
      (4
      %)
      (5
      %)
      (2
      %)
      (11
      %)


Operating costs were £2,193 million in 2004 compared to £2,486 million in 2003. The principal drivers of the reduction in operating costs of £293 million were the Fast
Forward transformation programme and the impact of currency movements. Employee costs fell by a net 10%, with reductions in headcount through Fast Forward initiatives and divestments partly offset by more employees being hired into customer-facing
roles and increased numbers of content production and product development staff in lower-cost locations. Property costs reduced by £25 million, or 13% on an actual basis, as consolidation of office space continued. Communications costs
declined by £46 million, or 13% on an actual basis, as a result of the weakened US dollar and Fast Forward initiatives. Research and development expenditure totalled £128 million in 2004 compared with £136 million in 2003 and
£154 million in 2002. The decline in Reuters research and development costs largely reflects the impact of efficiency and cost reduction measures across the development organisation and has been driven partly by moving development resources
into lower-cost locations. In 2004, notable areas of spend included electronic trading systems and enhancements to products within the Xtra Family and Risk. Customer
    Segments Customer Segments
    expenditure totalled £166 million, and accounted for 8% of trading costs
    in 2004. This reduced by £84 million over 2003, 33% on an actual basis
    and 14% on an underlying basis. The reduction was primarily driven by divestment
    of subsidiaries and net headcount reductions. Channel
    Channel costs totalled
    £822 million, and accounted for 41% of 2004 trading costs, a reduction
    of £118 million from 2003, 12% on an actual basis and 8% on an underlying
    basis. Close to half of Channel costs consist of recoveries and employee-related
    costs. The majority of underlying cost savings in 2004 came from staff cost
    reductions. Property rationalisation also contributed to savings. Increased
    investment in client training and customer support activities was outweighed
    by streamlining and efficiency gains. Operations
    & Technology Operations &
    Technology costs totalled £630 million, accounting for 31% of 2004 trading
    costs, a reduction of £44 million versus the prior year. Costs fell
    7% on an actual basis but remained flat on an underlying basis. This compared
    with an actual reduction in 2003 of 7%. The underlying savings were achieved
    mainly in product development, principally from headcount reduction and through
    relocating resources to more cost-efficient locations and continuing to close
    down certain development facilities. Content
    Content costs,
    comprising Data and Editorial, totalled £262 million in 2004, representing
    13% of trading costs, a decrease of £16 million from the prior year,
    or 6% on an actual basis and 1% on an underlying basis, compared with a reduction
    of 6% on an actual basis in 2003. Productivity improvements and efficiencies
    in third party data expenditure were partly offset by investment in coverage
    of the years major news events, such as the US Elections and the Olympics. Corporate
    services/other Costs from Corporate
    services, which comprises corporate head office functions and internal services,
    and other costs totalled £124 million, and accounted for 7% of trading
    costs in 2004. An increase of £10 million from the prior year, or 8%
    on an actual basis and 15% on an underlying basis, was driven mainly by a
    reduction in currency gains relative to 2003. Restructuring
    The Fast Forward
    programme resulted in a restructuring charge of £120 million in 2004
    within operating profit. This compared with Fast Forward restructuring charges
    of £134 million, net of a £10 million release of legacy programme
    provisions, in 2003, and to previous business transformation plan charges
    of £112 million in 2002. In 2004, Fast Forward delivered a further £159 million in cost savings leading to cumulative savings from the programme of £234 million. 900 employees were made redundant during
the course of 2004, most of whom have already left the company, with the rest expected to leave in 2005.




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      Report and Form 20-F 2004 |  | 19
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OPERATING
  AND FINANCIAL REVIEW continued



Instinet
  Group   A key driver of Instinet Groups business is average daily trading volume in the US securities markets, which increased in 2004 after moderate annual decreases over the previous five
years. From 2000 through to early 2003, these markets experienced significant volatility and declines in volume associated with the weaker economic climate, a reduction in corporate transactions and a generally more difficult business environment.
Overall trading volume increased in 2004 over 2003 levels primarily due to the continuing economic recovery, an increase in the level of corporate transactions and increased investor confidence. Instinet Groups business is also affected,
though to a lesser extent, by changes in trading volumes in non-US markets, which experienced considerable volatility and significant declines in volume from 2000 through to 2003, followed by recent increases in stock prices. Overall, non-US markets
grew in 2004 compared to 2003, with very strong year-on-year gains in Asian markets. A significant portion of securities traded in Instinet Groups business are NASDAQ-listed securities. Average daily trading volume in NASDAQ-listed stocks was down 3.7% for the full
year 2003 compared to 2002, but increased 6.4% in 2004, and has continued to increase in the first two months of 2005 compared to average 2004 levels. Average daily trading volume in US exchange-listed stocks has grown steadily over the past five
years, although the growth has slowed since 2001. For 2004, average daily volume of US exchange-listed stocks increased 9.0% over 2003 levels. Overall market share for INET, the electronic market place, increased slightly to 13.4% of total US market share volume for 2004 from 13.3% in 2003, while the actual number of shares matched
in INETs marketplace increased by 9.2% to 131 billion shares in 2004 compared to 120 billion shares in 2003. In 2002, including the acquisition of Island at the end of the third quarter, INETs overall market share was 8.4%, or 76 billion
shares, of total US market share volume. Overall market share for Instinet, the institutional broker, decreased to 2.7%, or 26 billion shares, of total US equity trading volume for 2004 compared to 2.8%, or 25 billion shares, in 2003 and 2.5%, or 23
billion shares in 2002. The volatility in market share reflects the intense competitive environment within the brokerage business, which has resulted in price reductions since 2001. In September 2001, INET reduced
average prices by 11% with a new pricing schedule for US broker-dealer customers. In March 2002, INET began offering broker-dealer rebates. In October 2003, it reduced pricing for routing orders in NASDAQ-listed stocks to other trading venues
through its automated smart order-routing system by 37% and introduced tiered pricing offering lower prices to customers based on volume levels. In October 2004, INET introduced a new pricing schedule for transactions in US exchange-listed stocks.
In January 2005, INET announced that it would share up to 50% of its market data revenue for certain American Stock Exchange transactions. Instinet also operates in a highly competitive environment. Traditional brokerages have also been severely impacted by tighter spreads, smaller


commissions, the
    decrease of NASDAQ market making and diminished investment banking fee revenues,
    which have compelled them to spend more time looking for additional profit-generating
    opportunities. This has led traditional brokerage firms to increase their
    focus on offering algorithmic trading, program trading and direct market access
    to institutional customers. These firms now directly compete with Instinet
    in price and technology to provide these services to customers. As a result,
    customers have become more demanding and cost conscious. Instinet pricing
    for US equities, measured in cents per share, declined 2.6% in 2004 and 10.1%
    in 2003, and pricing for non-US equities, measured as a percentage of the
    total consideration of the trade, declined 5.4% in 2004 and 1.7% in 2003.
    Going forward, Instinet expects institutional pricing to continue to decline
    amid strong competition for customer business. Instinet Group continues to monitor future price competition and evaluate its pricing structures as part of its ongoing efforts to allow its businesses to remain competitive. The Reuters
Group is unable to anticipate whether the changes in trading volumes and pricing are indicative of future trends, although management expectation is that the intense competition may continue, and if it or the other adverse factors continue or
intensify, Instinet Groups revenues could be adversely affected. 05
        EXPECTED FUTURE PERFORMANCEReutersReuters expects
    underlying recurring revenues for the first quarter of 2005 to decline by
    around 1.5% compared to the same period in 2004. With net sales off to a good
    start early in 2005, the company expects further gradual improvement in the
  decline in recurring revenues in the second quarter. Reuters will continue to reduce its operating expenditure in 2005, with over £100 million of cost savings expected to be delivered under the Fast Forward transformation programme this
year. This will bring the cumulative total cost savings to approximately £340 million by the end of 2005, on track to realise the full £440 million of promised savings by the end of 2006. The Fast Forward restructuring charge for 2005 is
expected to be around £80 million. This figure is higher than originally expected because the Fast Forward restructuring charge now includes certain once-off expenditure associated with completing the move of Reuters London operations to
Canary Wharf. In 2005, Reuters expects an increase in capital expenditure to reflect approximately £30 million of fit-out costs for the companys new London headquarters in Canary Wharf and an
additional £30 to £40 million to build data centre capacity and improve service resilience. Instinet
        GroupInstinet remains
    committed to bringing down its fixed costs throughout the year. Its cost reduction
    plan for 2005 includes reducing its spending on technology, consolidating
    office space and reducing discretionary expenses which collectively are expected
    to reduce annualised costs (excluding staff costs) by approximately £26
    million by the end of the fourth quarter of 2005 when compared to the third
  quarter of 2004. Pending
        acquisition of TelerateOn 20 December
    2004, Reuters entered into agreements to acquire substantially all of the
    business of Telerate as well as a subsidiary of Quick that serves as the exclusive
    distributor of Telerate products in Japan. The Telerate purchase price will
    be US$100 million (£52 million), subject to adjustment for working capital
    and an increase by an amount currently estimated to be US$28 million (£15
    million) to the extent certain actions Telerate may independently take prior
    to closing result in corresponding reduction of Reuters anticipated post-closing
    restructuring costs, plus Reuters 14% stake in Savvis (which is currently
    convertible into approximately 76 million shares of Savvis common stock).
    The purchase price for the Quick subsidiary will be JPY1.1 billion (£5
    million) in cash, subject to certain adjustments, and Reuters current 4.85%
    holding in Quick. Telerates 2003 revenue was US$292 million (£152
    million). For 2004 (unaudited and based on information from Telerate management),
    Telerates revenue was US$274 million (£143 million), with an operating
    loss of US$42 million (£22 million) before depreciation and amortisation.
    Reuters expects to spend around £40 to £45 million, including
    approximately £15 million as part of the purchase price described above,
    to integrate Telerate fully. The result is that the acquisition is expected
    to be dilutive to Reuters EPS during the integration period. Upon completion
    of integration, which is expected to take around 18 months, the acquisition
  is expected to




|20 |  | Reuters
      Group PLC Annual Report and Form 20-F 2004
|-- |  | --------------------------------------------------------

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become accretive
    to Reuters EPS before amortisation of goodwill and other intangibles, impairments,
    disposals and non-recurring tax effects of impairments, reorganisations and
    disposals and to Reuters operating margins before amortisation of goodwill
    and intangibles, impairments and restructuring charges. Both the EPS and margin
    calculations are based on UK GAAP per Reuters current reporting. Starting
    in 2005, Reuters will be reporting under the new IFRS standards, which are
    not expected to significantly affect the amount of EPS accretion or the impact
    of margin from the acquisition, but may affect Reuters core EPS calculation.
    The transactions are expected to complete around mid-2005, subject to regulatory
    approvals for the Telerate acquisition and other customary conditions. For
    more information, see pages 7 and 89. 06 TREASURY
        POLICIES, FINANCING AND FOREIGN EXCHANGEReuters Group treasury
    function is a cost rather than profit centre. As such, all transactions which
    are undertaken are designed to mitigate risk within the business or to secure
    committed funding. At no time are speculative transactions undertaken nor
  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
    Reuters Groups operations and its sources of finance. All treasury activity
    takes place within a formal control framework under policies approved by the
    Board. A separate treasury function exists within Instinet Group. FINANCINGReuters finances
    its operations by a mixture of cash flows from operations, short-term borrowings
    from banks and commercial paper markets, backed up as required by committed
    bank facilities and finance from capital markets. Reuters manages its net
    debt position and interest costs to support its continued access to the full
    range of debt capital markets. Reuters expects to be able to finance its current
    business plans, including the Telerate acquisition (in connection with which
    Reuters expects to receive approximately US$22 million; see Related
    party transactions and material contracts  other material contracts
     Telerate transitional services agreement on page 90), from ongoing
  operations and its external facilities. Net cash flows
    are generally either applied to reduce debt or placed in short-term investments
    with financial institutions holding strong credit ratings within pre-agreed
    limits set by the Board. As at 31 December 2004, the Group held cash and short-term
    investment balances of £836 million, of which £503 million was
    held by Instinet Group. Reuters borrows
    in various currencies, at both fixed and floating rates, and uses derivative
    contracts to create the desired currency and interest rate basis. The conversion
    of net investments in overseas subsidiaries into the Groups reporting
    currency of sterling creates translation exposure. To help 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, including its net investment in Instinet Group. In broad terms,
    using the average net funds position, a 1% increase in global interest rates
    would have reduced profit before tax in the year by approximately £2
    million (2003: £2 million, 2002: £1 million) excluding the impact
    of hedging. Syndicated
        credit facilityIn April 2003,
    Reuters entered into a committed syndicated credit facility for £1.0
    billion. £520 million of the facility either expired or was voluntarily
    cancelled in 2004. At 31 December 2004, Reuters had £480 million available
    under the facility. The facility was undrawn during 2004. The commitment expires
  and final repayment is due in April 2008. The facility
    is generally 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 Reuters Group. The facility cross-defaults upon default by
    Reuters in payment or acceleration of any other borrowings in excess of £20
    million. The facility contains two financial covenants: that Reuters operating
    profit before interest, tax and amortisation (subject to certain adjustments)
    should be greater than 2.75 times net finance charges and that Reuters net
    borrowings should not be greater than 3.50 times Reuters operating profit
    before depreciation and amortisation (subject to certain adjustments). As
    at 31 December 2004, Reuters complied with these covenants.


Bilateral
    loan facilities 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. The facility
    was undrawn during 2004. Euro
        Commercial Paper ProgrammeA £1.5 billion
    Euro Commercial Paper Programme is available, in respect of which Reuters
    had outstanding obligations of £70 million at 31 December 2004, repaid
    in January 2005. The minimum outstanding during 2004 was £nil and the
  maximum was £70 million. The programme
    is generally on customary terms and conditions, including a condition that
    the company should not be in default on any other debt or similar obligation.
    The programme has no final maturity date and there is no requirement to update
    the programme documentation. Debt is issued at market rates agreed between
    the issuer and the dealer. The programme documentation contains no financial
    covenants. Euro
        Medium Term Note ProgrammeReuters also has
    available a £1 billion Euro Medium Term Note Programme. At 31 December
    2004, Reuters had outstanding obligations of £387 million under the
    programme, repayable at various dates up to November 2010 including a€500
    million public bond, issued in November 2003 and maturing in November 2010.
    The minimum outstanding during 2004 was £387 million and the maximum
  was £727 million. The programme
    is generally on customary terms and conditions. The programme has no final
    maturity date but the offering circular, containing financial information,
    is updated each year to allow issuance to continue. Debt is issued at market
    rates agreed between the issuer and the dealer. The programme documentation
    contains no financial covenants and notes in issue have no cross-default provision. Short-term
        uncommitted facilitiesIn addition, Reuters
    has short-term uncommitted bank borrowing facilities denominated in various
    currencies, the sterling equivalent of which was approximately £155
    million. Drawings under these lines were £45 million at 31 December
    2004. Instinet Group has access to the equivalent of US$189 million short-term
    uncommitted bank facilities of which US$15 million were drawn at 31 December
  2004. Contractual
        financial obligationsThe following table
    summarises Reuters Groups principal contractual financial obligations
    at 31 December 2004, certain of which are described in the consolidated financial
    statements and notes. Reuters Group expects to be able to fund such obligations
  from ongoing operations and its external facilities. Payments
        due by periodContractual
      obligationsat 31
      December 2004
      Total£m
      
      Less
        than1
        year£m
      
      1-3years£m
      
      4-5years£m
      
      After
        5years£mShort-term
        debt
      181
      
      181
      
      
      
      
      
      Long-term
        debt
      329
      
      
      
      24
      
      
      
      305Operating
        leases
      756
      
      94
      
      155
      
      128
      
      379Purchase
        obligations
      285
      
      209
      
      55
      
      15
      
      6Total
        contractual obligations
      1,551
      
      484
      
      234
      
      143
      
      690 Significant purchase obligations entered into during the year include commitments in respect of outsourcing arrangements, communication networks and contracts in connection with the move of
Reuters headquarters to Canary Wharf.




|Reuters Group PLC Annual
      Report and Form 20-F 2004 |  | 21
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OPERATING
  AND FINANCIAL REVIEW continued

FOREIGN
    EXCHANGE Almost 90% of Group
    revenue is denominated in non-sterling currencies. The Group also has significant
    costs denominated in foreign currencies with a different mix from revenue.
    Group profits are therefore exposed to currency fluctuations. The approximate
    proportions of operating profit excluding goodwill amortisation and currency
    gains received in each key currency group were as follows: Year
        to 31 DecemberAdjusted
      Group operating profit by currency
      
      2004
      
      2003
      
      2002%
      
      %
      
      %Euro
      
      137
      
      171
      
      296US dollar
      
      8
      
      (5
      )
      (71
      )Japanese
        yen
      
      28
      
      32
      
      53Sterling
      
      (103
      )
      (133
      )
      (283
      )Other
      
      30
      
      35
      
      105Total
      
      100
      
      100
      
      100 Sterling costs
  exceeded sterling revenue due to the level of restructuring costs and UK-based
  marketing, development, operational and central services costs. In broad terms,
  using the 2004 mix of profits, the impact of an additional unilateral 1% strengthening
  of sterling would have been a reduction of approximately £5 million in
  operating profits before hedging (2003: £4 million, 2002: £7 million). Exchange rate movements
  in 2004 had an £8 million net impact on operating profit. Currency
      impact
      Revenue£m
      
      Operatingcost£m
      
      Operatingprofit£mImpact of:Weaker
        dollar
      (159
      )
      157
      
      (2
      )Weaker
        euro
      (8
      )
      4
      
      (4
      )Other
        currencies
      (12
      )
      8
      
      (4
      )Exchange
        rate movements
      (179
      )
      169
      
      (10
      )Change in
        currency mix
      (1
      )
      3
      
      2Total
        currency movements
      (180
      )
      172
      
      (8
      ) No unremitted profits are hedged with foreign exchange contracts as Reuters 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 Group profits. Transaction exposure occurs when, as a result of trading activities, an entity receives cash in a currency different from its functional currency. 07 MANAGEMENT
        OF RISKSReuters Groups
    Board has adopted a process for identifying, evaluating and managing significant
    risks faced by Reuters Group. The process is described in Risk Management,
  Internal Controls and Disclosure Controls and Procedures on page 41. 08ACCOUNTING
    POLICIES, US GAAP AND INTERNATIONALFINANCIAL
    REPORTING STANDARDSGroup accounting
    policies conform with UK GAAP. In accordance with the requirements of Financial
    Reporting Standard 18 (FRS18), these policies and any applicable estimation
    techniques have been reviewed by the directors, who have confirmed them to
  be the most appropriate for the preparation of the 2004 financial statements. Critical
        accounting policiesIn preparing these
    financial statements, management has made its best estimates and judgements
    of certain amounts included in the financial statements. The most significant
  judgemental areas in 2004 related to: The
    impairment of fixed assets, current asset investments and goodwillUnder
    UK accounting standards, impairment is measured by comparing the carrying
    value of an asset with the higher of its net realisable value and value in
    use. These comparisons sometimes 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. As a result, some current asset investments and goodwill have been written down to net
realisable value. Accounting
    for long-term incentive plans (LTIP) The costs of shares
    acquired to cover LTIP awards are charged in the profit and loss account over
    the period to which the performance criteria relate. Adjustments are made
    during the three to five-year vesting period of each plan to reflect changes
    in the possibility of performance criteria being met. These adjustments are
    to some extent subjective as performance is based on Reuters Groups
    Total Shareholder Return (TSR) relative to the TSR of the other companies
    in the FTSE 100 at the start of the measurement period. As a result of Reuters
    Groups low TSR ranking for the relevant periods, it has now been assumed
    that the 2001 and 2002 LTIP schemes are unlikely to deliver any value to the
    participants, and that the 2003 LTIP scheme is likely to only vest partially.
    For additional information concerning the LTIP, see Equity incentive
    plans  LTIP on page 33. Provisions
    The 2004 restructuring
    charges cover primarily leasehold properties and severances. A number of leasehold
    properties have been identified as being surplus to requirements. Although
    efforts are being made to sub-let this vacant space, management recognises
    that this may not be possible immediately given the current economic climate.
    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 the Group. A judgement has also been made in respect
    of the discount factor, based on a risk-free rate, that is applied to the
    rent shortfalls. For severance provisions, we book amounts 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. Allowances
    for doubtful accounts For all trade debtors,
    Reuters management makes a judgement regarding the ability of customers to
    pay and accordingly establishes an allowance for estimated losses arising
    from non-payment. In evaluating this allowance, customer credit worthiness,
    current economic conditions and previous experience are taken into account.
    If actual collections differ from estimates, this will affect future profit. Deferred
    taxation Under UK and US
    accounting standards, in assessing which deferred tax assets to record on
    the balance sheet, management has made subjective judgements over projected
    future profitability of certain legal entities. Assets
    held for sale As permitted by
    the Companies Act and UK GAAP, where an acquisition has been made exclusively
    with a view to subsequent resale and has not previously been consolidated
    in the Groups accounts, it has been treated as a current asset investment.
    Where it is not managements intention to retain a long-term interest
    in a fixed asset investment, the investment has been reclassified as a current
    asset. US
        GAAPA reconciliation
    of net income under UK and US GAAP is set out on page 78. A discussion of
    the relevant US accounting policies which differ materially from UK GAAP is
    given on pages 74-77 in the Summary of differences between UK and US
    Generally Accepted Accounting Principles. Details of recent US GAAP
  accounting pronouncements are given on page 80. 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. International
        Financial Reporting Standards (IFRS)Reuters Group,
    along with all companies listed on an EU Stock Exchange, will be required
    to prepare its consolidated financial statements in accordance with IFRS in
    respect of accounting periods commencing on or after 1 January 2005. The first-time
    adoption rules of IFRS require the comparative financial information presented
    in the first set of IFRS financial statements to be prepared on a consistent
    basis. This will require Reuters Group to restate its 2004 financial statements
  and present a series of reconciliations to the previous reported UK GAAP numbers.




|22 |  | Reuters
      Group PLC Annual Report and Form 20-F 2004
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Reuters will provide
  indicative external guidance on the anticipated impact that IFRS is expected
  to have on Reuters 2004 performance, excluding Instinet Group (who are yet to
  quantify fully the impact of IFRS). The material presented will be available
  on Reuters website from 10 March 2005. This indicative guidance was prepared
  on the basis of current IFRS standards and interpretations issued by the International
  Accounting Standards Board (IASB). These standards are subject to ongoing amendment
  by the IASB and subsequent endorsement by the European Commission and are therefore
  subject to change. There may also be new standards that Reuters may wish to
  adopt early. As a result, the numbers reported in Reuters Groups 2005
  Annual Report and Form 20-F may vary from those included in the guidance provided. Our indicative
  unaudited guidance highlights the following key impacts of IFRS on Reuters 2004
  UK GAAP financial statements: (i) no impact on revenue, (ii) an increase of
  approximately £4 million on 2004 pre-tax profit, (iii) consolidation of
  Radianz from 16 November 2004 (but treated as a discontinued operation), (iv)
  no impact on cash flow other than from consolidation of Radianz and (v) an increase
  of close to £100 million in net assets assuming an adoption date of 1
  January 2004 which is subject to approval by the SEC. However, the impact of
  IFRS on 2005 reported results could be materially different from 2004 due to
  a number of factors including the following: 
      IAS32
        and 39, which relate to the recognition of financial instruments, is applicable
        from 1 January 2005 with no retrospective application. As a result Reuters
        will be recognising movements in the fair value of financial assets, liabilities
        and embedded derivatives in 2005 for the first time.
      IFRS
        2, relating to share-based payments, provides that only costs associated
        with options granted after 7 November 2002 and not vested by 1 January
        2005 need to be recognised under IFRS. Consequently the full annual impact
        of this standard will not be seen until 2006.
      The
        level of impairment of goodwill, which may vary significantly from year
        to year as it is no longer amortised but subject to annual impairment
        testing.
      The
        greater emphasis being placed on recording assets and liabilities at fair
        value under IFRS, which could lead to increased volatility in the income
        statement. Other material
  issues may become apparent during the transition process and therefore the above
  list should not be regarded as definitive. Reuters does not expect the change
  to IFRS to alter the specific future guidance for Reuters as set out on page
  20 under Expected future performance  Reuters. 09 RISK
        FACTORSForward-looking
    statements This document contains
    certain forward-looking statements within the meaning of the United States
    Private Securities Litigation Reform Act of 1995 with respect to Reuters Groups
    financial condition, results of operations and business and 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, product releases, the impact of interest rates or exchange
    rates, anticipated cost savings and synergies and the completion of strategic
    transactions or restructuring programmes 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 Reuters Group or on its behalf speak
    only as of the date they are made. Reuters Group does not undertake to update
  any forward-looking statements. Reuters
    may not be able to realise the anticipated benefits of its Fast Forward transformation
    plan. The Fast Forward
    plan includes investing in new information, streamlining the way information
    is delivered, offering a simpler and segmented product line, rationalising
    the non-core elements of the business, reshaping the cost base and reinvigorating
    the company culture. There can be no assurance of achievement of these objectives
    or of the exact timing or extent to which the anticipated benefits of the
    Fast Forward programme will be realised.


Unfavourable
    conditions in financial markets may have a significant adverse effect on the
    Groups business. Reuters Groups
    business is dependent upon the health of the financial markets and the participants
    in those markets. Reuters Groups foreign exchange Dealing products are
    dependent on the level of activity in the foreign exchange market. Similarly,
    the businesses of Bridge Trading and Instinet Group are dependent upon the
    level of activity in the equity markets. While market conditions improved
    in 2004, the economic downturn which began in 2001 continued to negatively
    impact Reuters Groups results. If these conditions were to worsen or
    in the event of significant trading market disruptions or suspensions there
    could be further adverse effects on Reuters Groups business. In addition,
    Reuters Groups business could be adversely affected by further consolidations
    among clients and competitors. Currency
    fluctuations and interest rate fluctuations may have a significant impact
    on the Groups reported revenue and earnings. Reuters 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 negative impact on
    Reuters Group operating profit in 2004. A strengthening of sterling from current
    levels, especially in relation to other currencies in which Reuters Group
    derives significant revenues or holds significant assets such as the euro
    or the US dollar, could adversely affect results in future periods. To the
    extent that these currency exposures are not hedged, exchange rate movements
    may cause fluctuations in Reuters Groups consolidated financial statements.
    In addition, an increase in interest rates from current levels could adversely
    affect the Groups results in future periods. Reuters
    Group may experience difficulties or delays in developing or responding to
    new customer demands or launching new products.Reuters Groups business environment is characterised by rapid technological
    change, changing and increasingly sophisticated customer demands and evolving
    industry standards. If Reuters Group is unable to anticipate and respond to
    the demand for new services, products and technologies on a timely and cost-effective
    basis and to respond and adapt to technological advancements and changing
    standards, its business may be adversely affected. In addition, Reuters Group
    may delay or halt the launch of new products and services; its existing products
    and services may cease to be attractive to customers; and new products and
    services that Reuters Group may develop and introduce may not achieve market
    acceptance. In the event any of the foregoing occurs, Reuters Groups
    financial results could be adversely affected. Reuters
    Group is dependent on third parties for the provision of certain network and
    other services. Reuters Group has
    outsourced the day-to-day operation of most of its networks to Radianz, which
    also provides network services to companies in addition to Reuters Group.
    Although Reuters currently owns all the voting shares of Radianz, it intends
    to transfer ownership of Radianz to BT and conclude a long-term network services
    agreement currently being negotiated with BT. Accordingly, Reuters ability
    to affect the performance of Radianz may be limited and its business could
    be adversely affected as a result. In connection with
  the 2001 acquisition of certain businesses and assets of Bridge, Reuters entered
  into a network services agreement with Savvis which was the primary provider
  of network services to Bridge. Reuters currently holds approximately 14% of
  Savvis voting share capital, which it has agreed to transfer as partial
  consideration for Telerate. In addition, Savvis has a network services agreement
  with Telerate, which Reuters would acquire in its pending acquisition of Telerate.
  Savvis has a majority controlling shareholder, and Reuters has very limited,
  if any, ability to affect the performance of Savvis. Failure or inability
  of any third party that provides significant services to Reuters Group, such
  as Radianz or Savvis, to perform its obligations could adversely affect Reuters
  Groups financial results. The
    Groups business may be adversely affected if its networks or systems
    experience any significant failures or interruptions or cannot accommodate
    increased traffic. Reuters Groups
    business is dependent on the ability to rapidly handle substantial quantities
    of data and transactions on its computer-based networks and systems and those
    of Radianz, Savvis and others. Any significant failure or interruption of
    such systems, including terrorist activities, could have a material adverse
    effect on its business and results of its operations. The continuing


|Reuters Group PLC Annual
      Report and Form 20-F 2004 |  | 23
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OPERATING AND FINANCIAL REVIEWcontinued

increase in the update rates of market data may impact product and network performance from time to time. Factors that have significantly increased the market data update rates include: the
emergence of proprietary data feeds from other markets; high market volatility; decimalisation; reductions in trade sizes resulting in more transactions; new derivative instruments; increased automatically-generated algorithmic and program trading;
market fragmentation resulting in an increased number of trading venues; and multiple listings of options and other securities. While Reuters Group has implemented a number of capacity management initiatives, there can be no assurance that Reuters
Group and its network providers will be able to accommodate accelerated growth of peak traffic volumes or avoid other failures or interruptions. Reuters Group is exposed to a decline in the valuation of companies in which it has invested.Reuters
Group has entered into joint ventures with, and made strategic investments in,
a number of companies and also has significant interests in companies and joint
ventures such as Instinet Group and Factiva. The value of a number of these companies
fluctuated widely from 2002 through to 2004, in part as a result of external
market factors. The value of Reuters interests in these companies is dependent
on, among other things, the performance of these companies generally, whether
such performance meets
investors expectations, and external market and economic conditions. Reuters
Group has limited ability to influence the management or performance of these
companies. Significant
competition in the financial information and trading industries could adversely
affect Reuters Groups business.Reuters
Group faces significant competition in the financial information industry. The
availability of public internet technology reduces barriers to entry and increases
the availability of commoditised data in less expensive forms and loss of control
over intellectual property. Instinet Group and Bridge Trading face competition
from securities brokers, trading venues and other financial service providers,
including many that are well-capitalised and substantially larger than Instinet
Group or Bridge Trading, as the case may be, and have substantially greater financial,
technical, marketing and other resources. If Reuters Group is unable to cope
effectively with increased competitive pressure arising from the above or any
other factors, its financial results could be adversely affected. Changes in the regulatory environment could have an adverse effect on Reuters
business.The Securities Exchange
Act of 1934 authorises brokers to provide research as well as trade executions
to their clients in return for brokerage commissions. The payment of brokerage
commissions to brokers who also provide proprietary or independent research is
sometimes
referred to as soft dollars. The SEC has been reviewing the operation
and regulation of mutual funds and, as part of that review, may propose rules
addressing the scope of information and other services that may be considered research for
this purpose. The UK FSA is also reviewing the regulatory requirements addressing
the provision to institutional investors of brokerage and other services, including
research and information services. The FSA has issued a policy statement on the
definition of research expressing its belief that raw data and market
information generally do not constitute research. The FSA is expected
later this year to propose rule changes to implement this
policy. The SEC and the US Congress are considering changes to the structure of US securities
markets. On 15 December 2004, the SEC published for public comment an amended
version of proposed Regulation NMS. Among other things, the proposed
regulation would address access to and relations between trading centres and
update the requirements for consolidating, distributing, and displaying market
information. The SECs efforts in this area could result in additional regulation
of or reduced operational flexibility for the provision of US market information
by Reuters. Financial services regulators in the United States and other jurisdictions continue
to review business continuity and disaster recovery requirements for the institutions
they regulate. To the extent that Reuters provides such institutions with services
in areas subject to such requirements, Reuters services may have to meet such
requirements. At this time, Reuters Group is unable to predict the impact on its business or
results of operations of any potential or proposed regulatory changes.


Changes in
regulatory environment could have an adverse effect on Instinet Groups
business.As
a result of their compliance with the requirements of Regulation ATS, none of
Instinet Groups ATSs is currently required to register as a US national
securities exchange. In May 2004, INET submitted a draft application to the SEC
for registration as a national securities exchange and continues to discuss with
the SEC issues related to the filing of a formal application for exchange registration.
If INET or any of Instinet
Groups subsidiaries were to register voluntarily as a national securities
exchange, or if the SEC were to require INET to do so, Instinet Group could become
subject to substantial additional regulation, which might reduce its operational
flexibility in ways that could have a material adverse effect on its business.
Among other consequences, Instinet Group might be required to comply with fair
representation or ownership requirements. These and other requirements could
adversely affect its operations and could also result in material limitations
or restrictions on Reuters equity interest in Instinet Group or Reuters ability
to exercise its voting and other governance rights with respect to Instinet Group.
Instinet
Groups ATSs are also subject to Regulation ATS and certain other rules,
which require ATSs meeting certain trading volume criteria to provide quotation
data to an SRO and to provide other broker-dealers execution access to such quotes. Compliance with Regulation
ATS could have an adverse effect on Instinet Groups business, financial
condition and operating results. In July 2002, the SEC also took action that
resulted in the suspension of market data revenue sharing programmes in which
INET (then known as Island ECN) participated and led to INETs suspension
of its own programme. These programmes were subsequently reinstated, but only
for US exchange-listed securities. Regulation NMS proposes changes to the NMS
Plan formulas governing the allocation of market data revenue among SROs, and
thus the revenues available for SRO revenue-sharing programmes. The SEC has also
indicated that it could allow the reinstatement of such programmes in NASDAQ-listed
stocks in the future if its proposed allocation formulas were adopted. In January
2005, INET began sharing with subscribers a portion of the market data revenues
it receives from SROs in American Stock Exchange-listed securities. Instinet
Group is unable to determine whether the adoption of the proposed formulas would
adversely impact the value of INETs market data for purposes of determining
an SROs share of market data revenue, and thus affect the revenues INET
would be eligible to receive through SRO revenue sharing programmes. Instinet
Group has been from time to time, and is currently, involved in discussions and
proceedings with the SEC and some if its customers regarding the application
of these and other SEC rules, which may have a material adverse effect on Instinet
Groups pricing policies and business operations. Future SEC rule-makings
or interpretations relating to equities securities markets and market conditions
could adversely affect Instinet Groups business, financial condition and
operating results. The NASD regulates the activities of Instinet Groups
US broker-dealer subsidiaries and its NASDAQ subsidiary competes with Instinet
Group. The NASD, either directly or through subsidiaries, is able to propose,
and often obtain SEC approval of rule changes that the Group believes can be
to NASDAQs competitive benefit as a securities marketplace and to
Instinets competitive disadvantage. Reuters Group is unable to predict
at this time the impact of any proposed or potential changes to the regulatory
environment in which Instinet Group and its affiliates operate, which may include
additional changes to the NASDAQ marketplace considered by the NASD or the adoption
by authorities in other jurisdictions of new methods for regulating electronic
over-the-counter trading. Reuters Group may be exposed to adverse governmental action in countries where Reuters conducts reporting activities.As
the worlds largest news and information company, Reuters Group may suffer
discriminatory tariffs or other forms of adverse government intervention due
to the nature of its editorial
and other reporting activities. Reuters Group may not be able to realise the anticipated benefits of existing or future acquisitions and disposals.To
achieve its strategic objectives, Reuters Group has acquired, invested in and/or
disposed of, and in the future may seek to acquire, invest in and/or dispose
of various companies and businesses. No assurance can be given that Reuters Group
will realise, when anticipated or at all, the benefits it expects as a result
of any acquisition, investment or disposal. Achieving the benefits of acquisitions
and investments will depend on many factors, including the successful and timely
integration, and in some cases the consolidation of products, technology, operations
and administrative functions, of companies




|24 |  | Reuters Group PLC Annual Report and Form 20-F 2004
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that have previously
  operated separately. Considering the highly technical and complex nature of
  Reuters Group's products and services, these integration efforts may be difficult
  and time-consuming. In particular, the ability of Reuters to complete the Telerate
  acquisition and realise the anticipated benefits is subject to the risks that
  necessary regulatory approvals are not obtained; risks related to the integration
  of the
companies operations and products following completion, including achieving expected synergies; and general risks associated with the companies businesses. Achieving benefits of disposals will likewise depend on many factors, including
realisation of appropriate value, successful separation of the businesses and
operations and management of related costs, and achievement of any benefits sought
in connection with the transaction. The ability of Reuters to complete the sale
of Radianz to BT and realise the anticipated benefits is subject to the risks
that the parties agree to a satisfactory price and other terms, that the conditions
to such transactions will not be satisfied and that BT's acquisition and operation
of Radianz results in the anticipated benefits and efficiencies to Reuters. There
can be no assurance that Reuters will successfully sell all or any part of its
stake in Radianz or that it will receive any particular price for it. Reuters Group may identify issues with controls over financial reporting, as
a result of the implementation project to achieve compliance with Sarbanes Oxley
Act, section
404.Reuters Group PLC
Annual Report and Form 20-F for the year ended 31 December 2006 will be required
to comply with section 404 of the US Sarbanes-Oxley Act of 2002. This requires
that companies evaluate and report on their systems of internal control over
financial
reporting. In addition, Reuters Groups independent auditors must report
on managements evaluation of those controls. Reuters Group began working
on necessary activities in 2003 and is in the process of documenting and testing
its systems of internal controls over financial reporting to provide the basis
for its certification. During this process, Reuters Group may identify deficiencies
in its system of internal controls over financial reporting that may require
remediation. At this stage, due to the ongoing evaluation and testing of Reuters
Groups internal controls, there can be no assurance that any such deficiencies
identified may not be significant deficiencies or material weaknesses that would
be required to be reported. Reuters Group complies with other elements of the
Act that are
already in force. Reuters Groups financial reporting will be impacted by compliance with
International Financial Reporting Standards (effective 1 January 2005) or other
changes mandated by regulatory
authorities.Reuters Group,
along with all companies listed on an EU Stock Exchange, will be required to
report its consolidated financial statements in accordance with International
Financial Reporting standards (IFRS) in respect of accounting periods commencing
on or after 1 January 2005. The first-time adoption rules of IFRS require the
comparative financial information presented in the first set of IFRS financial
statements to be prepared on a consistent basis. This will require us to restate
our 2004 financial statemtents and present a series of reconciliations to the
previously reported UK GAAP numbers. For US GAAP reporting, the US SEC has yet
to determine whether we are required to present comparatives for the year ended
31 December 2002. Other material issues may become apparent during the conversion
process. For additional information, see Section 8  Accounting Policies,
US GAAP and International
Financial Reporting Standards.




|Reuters Group PLC Annual Report and Form 20-F 2004 |  | 25
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DIRECTORS REPORT

The directors submit their annual report and audited financial statements for the year ended 31 December 2004. 01 ACTIVITIESReuters
Groups business is described on page 6. A detailed review of activities
during 2004 and likely future developments is given on pages 6-10. Details of
our research and development
activity and expenditure is given on page 19. 02 SHARE CAPITAL AND DIVIDENDSDetails
of the changes in the authorised and called-up share capital are set out in notes
26 and 27 on pages 66-67. Details of significant shareholdings are given on page
81. An interim dividend of 3.85 pence per ordinary share was paid on 1 September
2004. The directors recommend a final dividend of 6.15 pence per ordinary share,
giving a total of 10.0 pence per ordinary share for the year (2003: 10.0 pence).
Subject to shareholders approval at the annual general meeting (AGM) to
be held on 21 April 2005, the final dividend will be paid on 28 April 2005 to
members on the register at the close of business
on 11 March 2005. 03 EMPLOYEESThe total number
of employees at 31 December 2004 was Reuters: 14,465; Instinet Group: 1,010 (31
December 2003: Reuters: 15,521; Instinet Group: 1,223). Details of average number
of
employees by segment are given on page 49. Reuters policy is that selection of employees, including for recruitment, training,
development and promotion, should be determined solely on their skills, abilities
and other requirements which are relevant to the job and in accordance with the
laws in the country concerned. Reuters equal opportunities policy is designed
to ensure that disabled people are given the same consideration as others and
enjoy the same training, development
and prospects as other employees. In the UK, as well as being a member of the Employers Forum for Disability, Reuters
has made use of the services of both AbilityNet (which supplies technology for
disabled users) and Employment Opportunities (a UK charity helping people with
disabilities find and retain work). Reuters has successfully retained staff who
have become disabled as well as integrated those who are disabled when they join
the company. This has been possible by using innovative technological solutions
and re-design of the way that jobs are handled, enabling individuals to contribute
actively to business needs. Reuters makes extensive use of its intranet as a communication tool to provide
employees with the information
they need to understand and achieve the companys business objectives. Meetings
are regularly held between management, employees union representatives
and less formal groups of employees so that the views of employees can be taken
into account in making decisions which may affect their interests. Reuters European
Employee Forum operates as a pan-European works council. The CEO or other executive
directors meet with the Forum regularly. Reuters regularly undertakes employee
surveys to evaluate morale and to identify any employee issues that need to be
addressed. The results are communicated to employees. The Board values the courage and professionalism shown by employees operating
in zones of conflict. Reuters keeps under review the adequacy of its policies,
training and procedures for employees generally and for those working in dangerous
places in particular. Reuters has reaffirmed the standing instructions to its
employees to avoid risks wherever possible and for hostile environment training,
protective equipment and post traumatic stress disorder training programmes to
be provided to all employees who may need them. 04 CHARITABLE CONTRIBUTIONSIn 2004, Reuters
continued to support community initiatives and charitable causes, mainly through
the work of the Reuters Foundation charitable trust. A report on the activities
of the Foundation and Reuters wider corporate social responsibility programme
can be found in the Reuters Annual Review 2004 on pages 16-19 or at www.about.reuters.com/csr.
Reuters donated cash totalling £2.4 million during 2004 (2003: £2.5
million). Reuters 2004 donations included a contribution of £500,000 to
assist tsunami relief efforts. In addition to these cash contributions, employees
are encouraged to give their time and skills to a variety of causes and Reuters
provides
equipment and information services free of charge.


It is Reuters Groups policy not to make political contributions and none
was made in 2004. 05 CREDITOR PAYMENT TERMSIt is
Reuters normal procedure to agree terms of transactions, including payment terms,
with suppliers in advance. Payment terms vary, reflecting local practice throughout
the world. In the UK Reuters has signed up to the Better Payment Practice Code.
Reuters policy is to make payments on time, provided suppliers perform in accordance
with the agreed terms. Group trade creditors at 31 December 2004 were equivalent
to 19 days purchases
during the year (2003: 18 days). 06 AUTHORITY FOR COMPANY TO PURCHASE OWN SHARESAt the
AGM held on 22 April
2004, shareholders renewed the companys authority under section 166 of
the Companies Act 1985 to make purchases of up to 143,254,000 ordinary shares
at a price of not more than 5% above their average middle market quotation in
the London Stock Exchange Daily Official List for the five business days prior
to the date of purchase. The company did not repurchase any of its own shares
during 2004. 07 POST BALANCE SHEET EVENTSDetails of post
balance sheet events are given on page 70. 08 DIRECTORSThe names and biographical
details of current directors are given on pages 27-28. The following Board changes occurred during 2004: 22 April 2004Ken Olisa joined the Board as a non-executive director. Sir John Craven stepped down from the
Board and Dick Olver took on his role as senior independent non-executive director. 6 July 2004Penny Hughes and Lawton Fitt were appointed as non-executive directors and Roberto Mendoza
retired from the Board after six years of service. 1 October 2004Niall FitzGerald succeeded Sir Christopher Hogg as Chairman of the Board. 16 December 2004Ken Olisa was appointed to the Audit Committee and Ian Strachan joined the Remuneration
Committee. 7 February 2005Ian
Strachan stood down from the Audit Committee. Details of directors interests in the companys shares, the remuneration
of the non-executive directors and information on the service contracts and remuneration
of the executive directors are set out on pages 32-40. A non-executive director
is not required to hold ordinary shares
in order to qualify as a director. 09 AUDITORSThe auditors, PricewaterhouseCoopers
LLP, have indicated their willingness to continue in office and a resolution
that they be reappointed will be proposed at the Annual General
Meeting. By order of the Board  Rosemary MartinGeneral
Counsel and Company Secretary7 March 2005




|26 |  | Reuters
        Group PLC Annual Report and Form 20-F 2004
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DIRECTORS AND SENIOR MANAGERS



The
  directors and senior managers of Reuters Group at 7 March 2005 are:

|Name                    | Position                                   | Position
    held since | 
|----------------------- | ------------------------------------------ | ----------------------- | 
|                        |                                            |                         | 
|Directors               |                                            |                         | 
|Niall FitzGerald, KBE   | Chairman; Director1                        | 2004; 2003              | 
|Thomas Glocer           | CEO; Director                              | 2001; 2000              | 
|David Grigson           | CFO; Director                              | 2000                    | 
|Devin Wenig             | President of Business Divisions; Director  | 2003                    | 
|Lawton Fitt             | Director1                                  | 2004                    | 
|Penelope Hughes         | Director1                                  | 2004                    | 
|Edward Kozel            | Director1                                  | 2000                    | 
|Kenneth Olisa           | Director1                                  | 2004                    | 
|Richard Olver           | Director1                                  | 1997                    | 
|Charles Sinclair        | Director1                                  | 1994                    | 
|Ian Strachan            | Director1                                  | 2000                    | 
|                        |                                            |                         | 
|Senior
    Managers     |                                            |                         | 
|Christopher Hagman      | Global Head of Channels                    | 2003                    | 
|Alexander Hungate       | Global Head of Marketing                   | 2001                    | 
|Geert Linnebank         | Editor-in-Chief                            | 2000                    | 
|Rosemary Martin         | General Counsel and Company Secretary      | 2003; 1999              | 
|Michael Sayers          | Global Head
    of Operations & Technology | 2003                    | 
|Susan Taylor-Martin     | Global Head of Strategy                    | 2004                    | 
|Christian Verougstraete | Global Head of Human Resources             | 2003                    | 
|Simon Walker            | Global Head of Corporate Affairs           | 2003                    | 
|                        |                                            |                         | 
|                        |                                            |                         | 

|Notes:
|------
|1     



DirectorsNiall
FitzGerald, KBEChairman;
Chairman of the Nominations Committee. He is President of the Advertising Association,
a Member of the World Economic Forums Foundation Board, Co-Chairman of The TransAtlantic Business Dialogue, Chairman of The Conference Board, Inc., a Fellow of the Royal Society for the encouragement of Arts, Manufactures & Commerce
and the Association of Corporate Treasurers and a non-executive director of the
Nelson Mandela Legacy Trust (UK). Former chairman and chief executive officer
of Unilever PLC (1996-2004). Former non-executive director of Merck, Ericsson,
Bank of Ireland and Prudential PLC. Age 59. Thomas (Tom) GlocerCEO.
Former CEO of Reuters Information (2000) and president & 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.
Non-executive director of Instinet. 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 of the International Advisory Panel of the Monetary Authority
of Singapore. Age 45. David GrigsonCFO. Joined Reuters in August 2000 from Emap PLC where he was group finance director and
chairman of Emap Digital. He is a qualified chartered accountant and a member of the FSA Practitioners Panel. Formerly held senior finance roles in the UK and US at Saatchi and Saatchi PLC (1984-1989). Held a number of financial positions at Esso UK
from 1980 to 1984. Also a non-executive director of Instinet. Age 50. Devin WenigExecutive
director and President of Business Divisions. Former 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 Instinet and Nastech
Pharmaceutical Company. Age 38. Lawton FittNon-executive
director; member of the Audit Committee. Secretary (Chief Executive) of the Royal
Academy of Arts. Non-executive director of CIENA Corporation and Citizen Communications.
Previously a partner and managing director in Goldman Sachs & Co. Trustee
of several not-for-profit organisations including contemporary arts centres in
New
York and Berlin. Age 51.


Penelope (Penny) HughesNon-executive director; member of the Remuneration Committee. Director of The GAP
Inc., Vodafone PLC, Skandinaviska Enskilda Banken, Trinity Mirror PLC, Molton Brown Limited and a Member of the Advisory Board of Bridgepoint Capital. Former president, Coca Cola Great Britain and Ireland. Former director of Bodyshop International
PLC (1994-2000), Enodis PLC (1996-2001), SC Johnson (2002-2004) and web-angel (2000-2003). Age 45. Edward (Ed) KozelNon-executive director; member of the Remuneration Committee. Managing Director of
Integrated Finance Limited, a financial advisory firm based in New York and director of Open Range Ventures LLC. Also a director of Yahoo!, Symbol Technology and Red Hat Inc. Formerly, a non-executive director of Cisco Systems Inc. (2000-2001),
where he worked from 1989-2000 in a number of roles, including chief technology officer and senior vice president for business development. Also a former non-executive of TSI (2000-2001) and Narus Inc. (1999-2003). Prior to 1989 he worked with SRI
International in California. Age 49. Kenneth (Ken) OlisaNon-executive director; member of the Audit Committee. Chairman and CEO since February
2000 of Interregnum plc which he founded in 1992. Non-executive director of Adaptive Inc, BioWisdom, Open Text Corporation and Yospace Technologies Ltd. Ken is a Liveryman of the Worshipful Company of Information Technologists; a Freeman of the City
of London; Chairman of homelessness charity, Thames Reach Bondway; a Governor of the Peabody Trust. Former Senior Vice President and General Manager of Wang Europe, Africa and the Middle East (1981-1992) and his career began at IBM (1974-1981).
Former director of uDate.com and Metapraxis and former Postal Services Commissioner. Age 53. Richard (Dick) OlverNon-executive
director; Chairman of the Audit Committee; member of the Nominations Committee
and Senior Independent Director. Chairman of BAe Systems PLC since July 2004.
He worked for BP PLC and was deputy group chief executive (2003-2004) and CEO
of BP Exploration & Production Division (1998-2002). A Member of the Institute
of Civil Engineers. A Governor of New Hall School. Age 58. Charles SinclairNon-executive director; Chairman of the Remuneration Committee and member of the
Nominations Committee. Group Chief Executive of Daily Mail and General Trust PLC since 1988. Joined Associated Newspapers in 1975 and held a number of roles prior to its merger into the Daily Mail Group in 1988. Non-executive director of Euromoney
Institutional Investor, SVG Capital PLC and Medialaser. Former non-executive director of Schroders PLC (1999-2004). Fellow of the Institute of Chartered Accountants. Age 56.




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DIRECTORS AND SENIOR MANAGERScontinued

Ian StrachanNon-executive director; member of the Remuneration Committee. Chairman of Instinet since 1
January 2003. Non-executive director of Transocean Inc., Johnson Matthey PLC, Xstrata PLC and Rolls Royce Group PLC. 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 (1987-1991) of Rio Tinto PLC. Also a former non-executive director of Commercial Union PLC (1991-1995). Age 61. Sir John Craven, Roberto MendozaandSir Christopher Hoggretired from the Board on 22 April 2004, 6 July 2004 and 30 September 2004 respectively. Sir John CravenNon-executive
chairman of Lonmin PLC since 1997. Non-executive chairman of Fleming Family & Partners. Former member of the Board of Managing Directors of Deutsche Bank AG and former executive chairman of Morgan Grenfell Group PLC (1989-1997). Former non-executive director of Gleacher & Co LLC (2000-2003), Rothmans International
BV (1998-2000), Ducati SpA (1999-2000) and Société Générale
de Surveillance SA. He is a Member of the Canadian and Ontario Institute of Chartered
Accountants. Age 64. Roberto MendozaChairman
of Egg PLC and non-executive director of Prudential
PLC, Vitro SA, The BOC Group PLC and Integrated Finance Limited. Former non-executive
director
of The BOC Group PLC (2002-2004) vice-chairman and director of JP Morgan & Co
Inc. (1990-2000) and managing director of Goldman Sachs & Co (2000). Joined
JP Morgan in 1967 with successive assignments in London and New York. Age 59. Sir Christopher HoggChairman until 30 September 2004. Non-executive director of Air Liquide SA. Former
non-executive chairman of GlaxoSmithKline PLC (2002-2004) (non-executive director since 1993) and of the Royal National Theatre (1995-2004). Former member of the International Council of JP Morgan (1988-2003). Former chairman of Courtaulds PLC
(1980-1996) (chief executive 1979-1991) and of Allied Domecq PLC (1996-2002). Former non-executive director of the Bank of England (1992-1996). Age 68. Senior managersChristopher
HagmanGlobal Head of Channels. Christopher joined Reuters in 1987 based in Sweden and has held
various senior sales and general business management positions in Sweden, Netherlands and the UK before being appointed to his current post in April 2001. Age 46. Alexander HungateGlobal
Head of Marketing. In 1993, Alex joined Reuters in London as a business development
executive. From 1996 to 1998, he was executive vice president of Reuters Marketing
before being appointed chief operating officer, Reuters America in 1999 and chief
executive officer, Reuters America in 2000. Alex is also a Trustee of the Reuters
Foundation. Before joining Reuters Alex worked at Booz Allen & Hamilton as
a strategy consultant. Non-executive director of British America Business Inc.
Age 38. Geert LinnebankEditor-in-Chief.
Geert became Editor-in-Chief in 2000 having held various editorial roles. Before
he joined Reuters in 1983 he was a correspondent, EC and Belgium, for AP-Dow
Jones  Brussels. Age 48. Rosemary MartinGeneral
Counsel and Company Secretary. Rosemary joined Reuters in 1997 as Deputy Company
Secretary and became Company Secretary in 1999. Appointed General Counsel in
2003. Rosemary has been the director of Reuters Foundation since 2000. Former
partner at Mayer, Brown, Rowe & Maw for nine years. Member of Financial Services Authority
Listing Authority Advisory Committee and a member of the Financial Review Councils
Turnbull Review Group. Age 44. Michael SayersGlobal Head of Operations and Technology. Michael joined Reuters in 1977 and has held a
number of positions in both information technology and product management including Chief Technology Officer from 1998 until 2003. In 2003 he was appointed Global Head of Operations and Technology. He will be leaving the company during 2005. Age
51. Susan Taylor-MartinGlobal
Head of Strategy. Susan joined Reuters in 1993 in business development. She has
held management positions in UK marketing, global product management and corporate
strategy. Susan was appointed to her current role on 1 January 2004. Before joining
Reuters, Susan worked in corporate finance for Smith Barney, Harris, Upham & Co.
Age 41.


Christian (Chris) VerougstraeteGlobal Head of Human Resources. Chris joined Reuters in 2003. He has
executive responsibility for human resources strategy and operations throughout Reuters. Prior to joining Reuters Chris was executive vice president for Human Resources at S.A. Interbrew. Age 54. Simon WalkerGlobal Head of Corporate Affairs. Simon joined Reuters in 2003. Prior to joining Reuters, Simon
was Communications Secretary at Buckingham Palace and director of communications at British Airways PLC. Age 51. Graham AlbuttFormer
president  Business Programmes. Graham joined Reuters in London in 1987.
Held various posts in central and operational business functions. Non-executive
director of Datamonitor PLC. Graham stepped down from the General Management
Committee at the end of 2004 and left the company on 28 February 2005. Age 51.




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CORPORATE GOVERNANCE



01 STATEMENT
      ON CORPORATE GOVERNANCE COMPLIANCECorporate governance  the
  system by which the company is directed and controlled  is an important
  subject for Reuters Group. The strength of the companys corporate values,
  its reputation and its ability to deliver its business objectives depends,
  amongst other things, on the effectiveness of its corporate governance system. External influences on the Groups approach to corporate governance are: 
   the laws to which it is subject;
   the rules which apply as a company listed on the London Stock Exchange and on NASDAQ in the US;
   the regulations applied by financial services regulators around the world; and
   the guidance given by investors and others interested in governance best practice. Reuters monitors and responds to these, particularly in the UK and USA which
  are where most of the companys shareholders are located, continuously
  improving the companys internal governance systems as part of its business
  transformation. Since 1 January 2004, the company has complied with the Combined Code on Corporate
  Governance published in July 2003 save that: 
   as described below, in 2004 the company modified its approach to performance evaluation of the Board to take account of the fact that a new Chairman and three new
non-executive Directors were appointed during the year (code principle A6); and
   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 all experienced and influential individuals, having the skills described in their biographies in Directors (see pages 27 and 28) and the Board
considers that, collectively, the members have the attributes required to discharge properly the Committees
responsibilities. The company also complies with all SEC and (with the exception of two waivers
  and one notification described below) NASDAQ governance requirements. The company
  has received waivers from NASDAQ from two provisions of its governance rules,
  in both cases on the basis that compliance with the rules would be contrary
  to standard UK business practice. For approximately fifteen years the company
  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
provide, as is typical for English public companies, that a quorum shall consist
of any
two shareholders. The company has also received a waiver from NASDAQs provisions requiring
  shareholder approval of employee share-based incentive schemes. The company
  does seek and has received shareholder approval of its employee share-based
  incentive schemes to the extent required by UK regulation, including the UKLA
  Listing Rules. In addition, during 2004 the company notified NASDAQ that for
  a brief period from April to July 2004 it did not have three Audit Committee
  members as required by NASDAQ. One of the Audit Committee seats became vacant
  when Sir John Craven retired at the AGM in April 2004. The vacancy was filled
  when Lawton Fitt joined the Audit Committee in July 2004. During the interval
  the Audit Committee, which then comprised Dick Olver and Ian Strachan, met
  once on routine matters. 02 REUTERS
TRUST PRINCIPLESThe
companys internal system of governance begins with the Reuters Trust Principles
(see Information for shareholders  Memorandum and articles of association  the
Reuters Trust principles and The Founders Share Company on pages 82-83)
which are designed to protect Reuters integrity and independence and represent
the core values at the heart of Reuters business. They are set out in the companys
constitutional documents and in the Code of Conduct which applies to every Reuters
employee. The Trust Principles are a fundamental part of our brand. The directors are required by the articles to have due regard to the Trust
  Principles insofar as they are capable of being observed in accordance with
  their other duties as directors. Thus the Trust Principles are integral to
  the Boards approach to the Groups
business.


03 THE
      BOARD
Board
composition and directors independenceNiall FitzGerald
chairs the companys Board. He met the independence criteria set out in
the Combined Code when he was appointed. His significant commitments, other than
Reuters, are
being a member of the World Economic Forums Foundation Board, Co-chairman
of the TransAtlantic Business Dialogue and Chairman of The Conference Board.
In addition, on 22 November 2004 he was appointed Chairman of the Nelson Mandela
Legacy
Trust (UK). Reuters Groups CEO is Tom Glocer, its CFO is David Grigson and its third
  executive director is Devin Wenig, President of Business Divisions. There are seven non-executive directors on the Board, including Dick Olver
  who is the senior independent non-executive director. He is available to shareholders
  if they have concerns. No shareholder contacted him, or his predecessor, Sir
  John Craven, during 2004. The quality of the individual directors, the balance of the Boards composition
  and the dynamics of the Board as a group, ensure both the Boards effectiveness
  and the inability of
an individual or small group to dominate the Boards decision making. The
Board has determined that each of the non-executive directors is independent
in character and judgement by reason of his or her personal qualities, and that
each of the
non-executive directors is independent as that term is defined in
NASDAQ and SEC governance requirements. Each executive director receives a service contract on appointment (see the
  Remuneration Report for further information) and each non-executive director
  receives a letter setting out the terms of the appointment and specifying that
  the appointment is for a term of six years, subject to review after three years.
  Dick Olver and Charles Sinclair have continued to hold office beyond the initial
  six year term by agreement with the Board. Copies of the service contracts
  and non-executive directors letters of appointment are available to shareholders
  from the Company Secretary on request. The articles of association provide that at each AGM any director appointed
  since the last annual general meeting 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. To recognise that some shareholders
  prefer all the directors to stand for re-election each year, at the 2005 annual
  general meeting each of the directors will retire from office and offer himself
  or herself for re-election. Role of the Board and its committeesThe
Board is responsible for the success of the company within a framework of controls
which enables risk to be assessed and managed. Its aim is for the group to achieve
profitable growth within an acceptable risk profile. It seeks to achieve this
by: 
   agreeing the strategic framework and keeping it under 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 its 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. A schedule of matters reserved for the Boards decision identifies those
  matters that the Board does not delegate. It includes the approval of corporate
  objectives, strategy and the budget, significant transactions and matters relating
  to share capital. The Board is assisted by its committees. Through the Audit Committee, it satisfies
  itself on the integrity of financial information and that the financial, operational
  and compliance controls and systems of risk management are robust. Through
  its Remuneration Committee, the Board determines appropriate levels of remuneration
  of executive directors and other senior managers. The Nominations Committee
  is the forum through which the Board discharges its role in nominating new
  directors and succession planning. These committees are described in more detail
  below.




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CORPORATE GOVERNANCEcontinued



There is a clear division
  of responsibilities between the running of the Board, which is the Chairmans responsibility, and the running of the Reuters Groups business, which is
the CEOs responsibility with the Board having oversight. The division of
responsibilities is set out in a document approved by the Board. Directors induction,
training and informationOn
becoming Chairman, Niall FitzGerald began a comprehensive induction into Reuters
Group, building on the knowledge he had previously acquired in his capacity as
a non-executive director. Since becoming Chairman, he has met with employees,
customers, shareholders and associates of Reuters Group and he has received briefings
from the management team on their respective areas of responsibility. Ken Olisa, Lawton Fitt and Penny Hughes are also receiving information and
  briefings as part of their induction into Reuters. They have each received
  a Directors Manual which provides them with information about Reuters
  and the operation of the Board and its committees. In addition, a series of
  briefings and site visits is being undertaken to gain insights into the group
  and to enable the directors to see business operations first hand. All directors
  are 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 2004 briefing topics included the new ethics and compliance guidelines
  for companies in the US, Sarbanes-Oxley Act 2002 which affects the company
  because its securities are registered with the SEC, and the new International
  Financial Reporting Standards. In addition, guest speakers are occasionally
  invited to join Board dinners to discuss topics of interest with the directors
  and opportunities are provided for non-executive directors to meet with shareholders,
  customers and others involved in Reuters business. Monthly financial information is provided to the directors. Regular and ad
  hoc reports and presentations are prepared and circulated to the directors
  in advance of Board meetings, together with minutes and papers relating to
  the Boards committees, to ensure the directors are supplied, in a timely
  fashion, with the information they need. They also have access to the Company
  Secretary who is responsible for advising the Board through the Chairman on
  all governance matters. The Company Secretary is appointed by, and can only
  be removed by, the Board. The directors may take independent professional advice
  at the companys
expense, although no such advice was sought
during 2004. Frequency of meetingsThe Board
met six times in 2004 and, in addition, held a strategy review meeting in June.
The directors attended all the Board meetings in 2004 save that, by prior arrangement,
Niall FitzGerald was absent from the February meeting and Roberto Mendoza, Charles
Sinclair and Ed Kozel were each absent from one meeting. Board effectivenessUsually
each year the Chairman meets at least once with the non-executive directors without
the executive directors present. No such meeting was held in 2004 because of
the change in the chairmanship of the Board but such meetings are being held
in 2005. Also, usually the senior independent non-executive director conducts a chairmanship
  review meeting at which the Chairmans remuneration and performance are
  reviewed. However, no such meeting was held in 2004 since it was not considered
  that it would serve any useful purpose in view of Sir Christopher Hoggs
  retirement as Chairman in October and replacement by Niall FitzGerald. The
  review
will be reintroduced for
2005. Each year the Chairman and the non-executive directors review the CEOs
  performance and the CEO reviews the performance of the other executive directors
  as part of the company-wide employee performance review process. In view of the Board alterations in 2004, namely the change in Chairman, the
  retirement of three non-executive directors and the appointment of three new
  non-executive directors, rather than having a retrospective effectiveness review
  for 2004 the Board concentrated on considering and determining how it should
  function, going forward. It plans an in-depth review of its effectiveness during
  2005 using an external professional facilitator. The facilitated review in
  2005 will also cover the effectiveness of the Boards committees.


The Audit Committee did not conduct an effectiveness review for 2004 since
  it will be covered by the in-depth review being undertaken in 2005. However,
  the Remuneration Committee did undertake an evaluation of its performance during
  2004. A questionnaire was circulated to the Committee members and the collated
  responses were discussed by the Committee and reported to the Board. Account
  will be taken of the results in the way the
Committee is managed henceforth. Board CommitteesThe
Board delegates specific responsibilities to certain committees. Each Committee
has its own terms of reference set by the Board. These are available on request
from the Company Secretary
or at www.about.reuters.com/csr/corporategovernance. The Audit CommitteeThe
  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. Members of the committee during 2004 were Dick Olver (Chairman), Lawton Fitt
  and Ken Olisa (since their appointments to the committee on6
  July 2004 and 16 December 2004 respectively), and Sir John Craven and Ian Strachan
  (until their retirements from the committee on 21 April 2004 and 8 February
  2005 respectively). Each member of the committee is considered by the Board
  to be independent including under the SEC and NASDAQ definitions. The Audit Committee does not include a member who is a financial expert,
  as defined in the Sarbanes-Oxley Act of 2002 and related SEC rules because
  the Board considers that none of the members clearly meets all the criteria
  set out in the relevant definitions nor has the Board identified a member of
  the committee as having recent and relevant financial experience. However,
  the Board considers that collectively the members have the requisite skills
  and attributes to enable the committee properly to discharge its responsibilities.
  The Company Secretary is secretary to the committee. The Audit Committees remit, which is set out in its terms of reference,
  includes responsibility for: 
   the oversight
       responsibilities described in the above paragraphs and for reviewing compliance
       with laws, regulations, the companys code of conduct and
policies;
   approving related party transactions to the extent required under NASDAQ rules;
   monitoring
       the integrity of the companys financial statements and any announcements relating to the companys
       financial performance and reviewing significant financial reporting judgements
    contained in them;
   monitoring
    and reviewing the effectiveness of the companys internal audit function;
   making recommendations to the Board, for it to put to the shareholders for their approval, regarding the appointment, re-appointment and removal of the external auditor
and approving the remuneration and terms of engagement of the external auditor;
   reviewing
       and monitoring the external auditors independence and the effectiveness
       of the audit process and developing and implementing policy on the engagement
       of
the external auditor to supply non-audit services; and
   overseeing
       the receipt, review and treatment of complaints received regarding accounting,
       internal accounting controls, auditing and compliance matters, whether
       through
the companys whistleblower confidential helpline or otherwise. The committee met four times in 2004 with the CEO, the CFO, other officers
  and the auditors attending as required. The auditors have unrestricted access
  to the Audit Committee and, in accordance with usual practice, met twice during
  the year privately with the committee, as did the Head of Audit.




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The Chairman of the Audit Committee meets with the Head of Audit and with the external auditors before each Audit Committee meeting. All members of the Audit Committee attended every
committee meeting during the year. The committee reports its activities and makes recommendations to the Board.
  During 2004, the committee discharged the responsibilities described above.
  Its activities included: 
   formally reviewing the draft annual report and interim statement respectively and associated announcements, focusing on the main areas of judgement and critical
accounting policies;
   reviewing the findings of the external auditors and the report of the Head of Audit on internal audit activities;
   reviewing the effectiveness of internal control systems, the risk management process and the compliance programme (including the whistleblower programme), paying
particular attention to the work being undertaken in connection with section 404 of the Sarbanes-Oxley Act;
   receiving the report of the CEO and the CFO on the processes followed prior to certification being given by them in accordance with Sarbanes-Oxley Act;
   reviewing
       the external audit strategy and the external auditors report to
    the committee in respect of the annual report and interim statement;
   keeping under review the proportion of non-audit fees to audit fees paid to the auditors and giving pre-approval to non-audit work undertaken by the auditors;
   reviewing
       the effectiveness of the auditors and undertaking a competitive audit
       tender process which resulted in a recommendation being made to the Board
       to propose to shareholders that PricewaterhouseCoopers be retained as
    the companys auditors; and
   reviewing
    a report on the companys corporate social responsibility activities. The committee adopted a code of conduct for the companys CEO and senior
  financial officers in 2003, in addition to the companys general code
  of conduct. No amendments to, or waivers in respect of, either code were made
  during 2004. A copy of the codes is available on request from the Company Secretary
  and can be viewed at www.about.reuters.com. Instinet Group has also adopted
  a code of conduct which can be viewed at
www.instinetgroup.com The committee monitors adherence to the companys Auditor Independence
  policy, which it prohibits Group entities from engaging the auditors in activities
  prohibited by the SEC. The policy permits the auditors to be engaged for other
  services provided the engagement is specifically approved in advance by the
  committee or 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. The exception
  to this is Instinet Group, which uses the same auditors as Reuters and, as
  a US publicly traded company, is separately subject to the auditor independence
  requirements and has an audit committee which oversees the use by Instinet
  of the independent auditors, under its own policy. For details regarding fees paid to the Groups auditors, see note 2 on
  the consolidated profit and loss account on page 47. The committee may engage, at the companys expense, independent counsel
  and other advisers as it deems necessary to carry out its duties. None was
  engaged during the year. The Remuneration Committeehas oversight of executive remuneration policy. Information concerning the
Remuneration Committee is set out in the Remuneration Report on page 32. The Nominations Committeemakes
  recommendations to the Board about future appointments of non-executive directors,
  the Chairman and the CEO and considers recommendations from the CEO to the
  Board about the future appointment of executive directors. The committee gives
  due consideration to the Combined Codes provisions relating to directors
  when making appointments to the Board. The terms of reference for the committee
  are available from the Company Secretary on request and can be viewed at www.about.reuters.com


In 2004, the composition of the committee was Sir Christopher Hogg (until his
  retirement in October), Dick Olver, Niall FitzGerald and Charles Sinclair (since
  his appointment to the committee in September 2004). The committee is chaired
  by Niall FitzGerald. The Board has determined that these directors are independent
  according to the NASDAQ and SEC definitions. The terms of reference require
  the committee to meet at least twice a year and it did so in 2004. A director
  may not attend or be involved in any decision concerning him or his successor.
  The committee has appointed an external adviser to assist it in its work in
  identifying potential candidates for
non-executive directorships. During 2004, the Nominations Committee recommended to the Board the appointments
  of Penny Hughes, Lawton Fitt and Ken Olisa. It also recommended the changes
  that were made to the
Boards committees membership during 2004 and the appointment of Dick
Olver as senior independent non-executive director on Sir John Cravens
retirement from the Board. 04 EXECUTIVE
COMMITTEESThe Group
Management Committee (GMC), which is chaired by the CEO, implements strategy
and manages the Group. It comprises the three executive directors and the senior
managers listed on
page 27. It met twenty-two times in 2004. A Disclosure Committee, chaired by the CEO was set up in 2002. Its members,
  comprise the CEO, the CFO, the Global Head of Corporate Affairs, the General
  Counsel & Company Secretary, the Head of Audit, the Head of Global Finance,
  the Head of External Reporting, the Area General Counsel for the Americas and
  the Head of Investor Relations. The Committee meets formally five times a year
  to review the Groups trading statements and financial results and to
  consider the adequacy of the Groups disclosure controls and procedures.
  A sub-committee meets on an ad hoc basis to address disclosure matters arising
  between reporting periods. 05 RELATIONS
WITH SHAREHOLDERSThe executive
directors meet regularly with institutional shareholders and analysts. Non-executive
directors are offered the opportunity to attend meetings with major shareholders
and from time to time some attend the presentations of the annual results to
analysts. When Niall FitzGerald became chairman he met with investors who expressed
general satisfaction with the direction, performance and governance of the business. An investor relations department is dedicated to facilitating communications
  between the company and its shareholders. It provides a regular report on investor
  relations as part of the routine Board report materials. In 2004 the companys
  brokers carried out a survey of investors views and the results of this
  survey were communicated to the Board. 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 we will be introducing voting
  by proxy to replace voting by a show of hands as we consider proxy voting gives
  a better representation of shareholders views. The results of voting
  at the AGM in 2005 will be available at
www.about.reuters.com 06 DIRECTORS RESPONSIBILITIES, INTERNAL CONTROLS AND FINANCIAL
REPORTINGThe
directors responsibilities and information on internal controls and financial
reporting can be found on page 41.




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REMUNERATION REPORT



This report sets out the Reuters Group executive remuneration policy, structure
  and details of the remuneration received by directors and senior managers in
  respect of the year ended 31 December 2004. Shareholders will be invited to
  approve this report at the AGM on 21 April 2005. 01 CONSIDERATION
OF REMUNERATION MATTERSThe
Board has overall responsibility for determining the framework of executive remuneration
and its cost, and is required to take account of any recommendations made by
the Remuneration Committee. Through formal terms of reference, the Board has
delegated to the Remuneration Committee oversight of the specific remuneration
packages for the executive directors and consideration of executive remuneration
issues generally, including
the use of equity incentive plans in particular. The Remuneration Committee consists solely of non-executive directors. All
  members of the Remuneration Committee have been determined by the Board to
  be independent as defined by NASDAQ. Its current members are Charles Sinclair
  (Chairman), Ed Kozel, Penny Hughes (from 6 July 2004) and Ian Strachan (from
  16 December 2004). Roberto Mendoza ceased to be a member of the Remuneration
  Committee on 6 July 2004. The Company Secretary is secretary to the Remuneration
  Committee. The Remuneration Committee met four times in 2004. All members were
  present at each meeting. The CEO and the Chairman normally attend meetings of the Remuneration Committee.
  Neither is present at any discussion concerning his own remuneration. During
  2004, the Remuneration Committee was advised internally by the Global Head
  of Human Resources and the Global Head of Performance & Reward. The terms
  of reference permit the Remuneration Committee to obtain its own external advice
  on any matter, at the companys expense. These executives take external
  advice and information from many sources in preparing proposals for the Remuneration
  Committee and received information from Towers Perrin, Mercer HR Consulting,
  Watson Wyatt and Kepler Associates in relation to remuneration decisions made
  during 2004. In addition, to ensure compliance with relevant laws and regulations,
  executives were provided with advice from Deloitte & Touche LLP, Linklaters
  and Shearman and Sterling LLP in respect of the two new share plans introduced
  in 2004, the Annual Bonus Profit Sharing Plan and the Restricted
Share Plan. 02  DIRECTORSThe
Remuneration Committee aims to ensure that remuneration and incentive arrangements
are market-competitive, consistent with best practice and support the interests
of shareholders. In practical terms, this means that the reward structure for directors should
  attract, motivate and retain high-calibre individuals capable of successful
  leadership. To achieve this in a global business environment, Reuters executive
  remuneration must reflect the competitive practices of its principal competitors
  and the other multi-national businesses with which it competes for talent.
  The Remuneration Committee believes that market-determined executive compensation,
  with a heavy emphasis on the variable remuneration elements, is the best way
  to ensure that Reuters has the high performing executives necessary to achieve
  its immediate and longer-term strategic objectives. The Remuneration Committee
  has established a structure that ensures that the quantum of remuneration received
  by executives is commensurate with returns to shareholders. Total executive remuneration is calibrated to deliver mid-market rewards at
  formally targeted levels of personal and corporate performance. Variable reward
  components provide an opportunity for much higher levels of remuneration where
  this is supported by above-target performance, whether on an individual level
  or in relation to short-term and longer-term business priorities. The annual
  cash bonus plan supports operational objectives over the financial year, while
  the long-term incentive plan will reward superior performance relative to competitors
  over the medium term and share options complement growth objectives. Reuters continues to ensure that an increasing proportion of executive reward
  is variable and wholly dependent upon performance. As such, the structure of
  the individual packages currently in place includes a significant proportion
  of variable reward that is performance related, with basic pay representing
  well under a third of the target earnings potential. In 2004, excluding pension
  entitlements, the targeted composition of each
executive directors remuneration was as follows:


Fixed
   
   
   
      VariableLong-termBase
        pay
   
      Bonus
   
      incentives
   
      Total%
   
      %
   
      %
   
      %Tom Glocer
   17%
   
   26%
   
   57%
   
   100%David Grigson
   29%
   
   29%
   
   42%
   
   100%Devin Wenig
   29%
   
   29%
   
   42%
   
   100% Executive directors are required to build and maintain a personal equity stake
  in the company. The personal shareholding policy requires each executive director
  to accumulate a personal
holding worth twice his basic salary within five years. 03 NON-EXECUTIVE
DIRECTORSDetails
of non-executive director appointments are contained on page 26. Non-executive directors have letters of engagement rather than service contracts
  and are not eligible to participate in executive share plans. Charles Sinclair
  was invited to join the Board in October 1993, Dick Olver in September 1997,
  Ed Kozel in February 2000, Ian Strachan in April 2000, Niall FitzGerald in
  January 2003, Ken Olisa in April 2004, and Penny Hughes and Lawton Fitt in
  July 2004. Sir John Craven, who had been a non-executive director since February
  1997, resigned from the Board on 22 April 2004 and Roberto Mendoza, who had
  been a non-executive director since February 1998, resigned on 6 July 2004.
  No letter of engagement contains any provision for compensation in the event
  of termination outside of the periods referred to above. The Chairmans remuneration is determined by the Board who, in reaching
  future decisions on appropriate fee levels, will continue to have regard to
  the remuneration arrangements of chairmen of other UK listed companies of a
  similar size and complexity. Sir Christopher Hogg was Chairman from 1985 until 30 September 2004, when he
  also retired from the Board. His annual fee was £290,000. In addition,
  he received a pension entitlement as detailed on page 37. On 1 October 2004,
  Niall FitzGerald succeeded Sir Christopher Hogg 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 Niall FitzGerald. Our shareholders determine the remuneration paid to the non-executive directors.
  From 1 January 2004, this is set at £50,000. The Board determines the fees payable to each non-executive director who chairs
  a Board committee. For 2004, these were £15,000 per annum, £10,000
  per annum and £5,000 per annum for chairing the Audit, Remuneration and
  Nominations Committees respectively. Until his retirement on 30 September 2004,
  Sir Christopher Hogg was Chairman of the Nominations Committee: he waived receipt
  of any fees. Niall FitzGerald succeeded Sir Christopher Hogg and he has also
  waived receipt of any committee chairmanship fees. Dick Olver, who replaced
  Sir John Craven as senior independent non-executive director, receives an additional £5,000
  per annum for this role. From 2004, non-executive directors who are resident
  outside of Europe are eligible to receive a travel allowance of £5,000
  for each Board meeting attended in the UK. 04 REMUNERATION
STRUCTUREIt is
Reuters general policy to construct executive remuneration packages as described
below. However, in order to safeguard Reuters ability to recruit and retain the
best senior executives, the Remuneration Committee believes it needs to maintain
the freedom to negotiate terms of employment on an individual basis, taking account
of the circumstances of each case. Where it is necessary, special arrangements
will also be made to accommodate the needs of, for example, international executives
who are required to relocate. Basic salary and benefitsIn
formulating and reviewing pay packages for the executive directors, the Remuneration
Committee receives comparator group information and assistance from independent
remuneration consultants. In 2004, the Remuneration Committee reviewed the comparator
group and reaffirmed its relevance. Reuters policy is to maintain a salary structure
with salary ranges based upon the mid-market of this comparator group of companies.
Individual salaries are positioned at an appropriate point within the salary
range. In recognition of a reliance on the intellectual capital of its people,
where appropriate, actual salaries are centred around the upper quartile position.




|32 |  | Reuters Group PLC Annual Report and Form 20-F 2004
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The Remuneration Committee takes account of the salary levels of other executives and senior managers. The executive directors indicated that they did not wish to receive a salary increase
in 2004 and this was affirmed by the Remuneration Committee. Non-cash benefits are provided to executive directors and the Chairman in line
  with normal market practice and detailed on pages 36-37. All executive directors
  receive a company car or an allowance and private healthcare benefits. Death
  and disability benefits are also provided to each executive director. Niall
  FitzGerald does not receive any death and disability or other benefits. Under
  the terms of Tom Glocers relocation agreement, Reuters Group provides
  accommodation in the UK and pays home leave expenses for him and his family. PensionsAll
executive directors participate in defined contribution arrangements. Since April
1999 it has been Reuters policy that all new UK employees, including executive
directors, are offered participation in a defined contribution pension plan.
In the case of UK executive directors, in lieu of pension provisions above the
statutory earnings cap (where applicable) an additional taxable allowance is
granted. The Remuneration Committee may substitute certain benefits following
changes to UK pensions legislation. However, there is no intention to provide
any additional compensation as a consequence of such changes. In the US, all
employees are offered participation in a defined contribution (401K) plan. In
lieu of a contribution on salary above the tax qualified limit, an additional
contribution is granted to a Supplemental Employee Executive Retirement Plan
(SERP). The SERP is unfunded. Annual performance-related bonusContractual
bonus arrangements are negotiated individually. The Remuneration Committee determines
performance targets annually. Bonus payments are non-pensionable. In 2004, the executive directors were eligible for an annual cash bonus, with
  a maximum level of 100% of base salary for all but Tom Glocer, whose maximum
  level was 150% of salary. Bonus targets were set on a sliding scale and included
  a mix of financial and strategic measures: 60% of the bonus potential was based
  on performance against financial measures (30% of which was dependent on our
  budgeted operating profit before restructuring, amortisation of goodwill and
  other intangibles and impairments  Target Operating Profit; 15% on our
  budgeted revenue; and 15% on a free cash flow target). The remainder of the
  bonus potential was divided equally between a target to improve the customer
  satisfaction survey result and the achievement of the Fast Forward programme
  transformational targets. In addition, stretch targets were established on
  the revenue measure and customer satisfaction result where, for significant
  out-performance, there was the potential for an additional 17.5% of bonus target.
  In February 2005, the Remuneration Committee considered 2004 performance, relative
  to the specified targets, and determined that the executive directors had earned
  bonuses of 99.4% of bonus potential. Given that 2005 is the final year of the Fast Forward programme, the Remuneration
  Committee has increased the focus on achieving the financial results associated
  with the Fast Forward programme. In 2005, the Remuneration Committee will increase
  the emphasis on financial performance, with 80% of the maximum bonus potential
  being measured against Target Operating Profit, budgeted revenue and free cash
  flow targets with the remainder on customer satisfaction results. There is
  the potential to earn additional bonus payments based on significant out-performance
  against Target Operating Profit and customer satisfaction targets. The Remuneration Committee retained the profit threshold, based on Target Operating
  Profit, below which no bonuses will be paid. The Remuneration Committee reviewed
  the shareholding requirements for the executive directors. Taking this into
  account, together with the changes in the tax treatment of deferred compensation
  in the US, the Remuneration Committee decided that no share-based deferral
  will apply to bonus payments. However, Tom Glocer has committed to increase
  his investment in Reuters shares by an amount at least equivalent in value
  to the post-tax component that would otherwise have been deferred.


Equity incentive plansThe executive
directors also participate in a discretionary stock option plan (DSOP) and a
long-term incentive plan (LTIP) designed to reward longer-term performance. Details
of all share incentive awards outstanding for each executive director serving
during 2004 are set out on pages 38 and 39. All executive directors future entitlements are subject to the performance
  conditions applicable to the relevant plan. The Remuneration Committee has
  initiated a review of remuneration arrangements, including the structure of
  equity plans, to ensure that these are aligned with the achievement of the
  objectives to be established in Reuters growth strategy post the Fast Forward
  programme. Until completion of this review, other than as described below,
  Reuters has no present intention of making any significant change to the executive
  directors existing
entitlements under these plans. In 2004, the Remuneration Committee introduced an Annual Bonus Profit Sharing
  Plan and a Restricted Share Plan as discussed below. LTIP:since 1993, Reuters has operated a long-term incentive plan which seeks to encourage and reward
long-term growth in shareholder value. It is Reuters practice to make an annual award of contingent share rights to executive directors and to those senior managers most able to influence corporate performance. From 2003, awards have been based on
the fair market value per share using option pricing methodology. The fair market value ascribed to each share for LTIP purposes is presently 43.8% of current market value. The Remuneration Committee considers that relative total shareholder return
  (TSR) remains the most appropriate measurement criterion for the LTIP. Whilst
  endorsing relative TSR as a measure, the Remuneration Committee recognises
  that we do not fall naturally into any one of the existing FTSE industrial
  sectors. Accordingly, following a review of the comparator group, the Remuneration
  Committee believes that the FTSE 100 generally, rather than one individual
  sector or a bespoke peer group e.g. media and photography, remains the most
  appropriate peer group for comparison purposes. Under the terms of his service contract, annual equity awards to Tom Glocer
  will be based on a fair market value, calibrated by reference to the average
  of the mid-market position of a comparator group of FTSE 100 companies, with
  significant international operations (excluding the top and bottom five companies
  measured by market capitalisation) and the mid-market position of a US comparator
  group comprising media companies. For both comparator groups, the data has
  been provided by Towers Perrin. LTIP awards will form part of the total equity
  grant. Details of the grants for 2004 are set out in the table on page 38. For 2005, it is anticipated that the fair market value of Tom Glocers
  LTIP award will be approximately 100% of basic salary. David Grigson and Devin
  Wenig will receive awards of equivalent value: due to exchange rate fluctuations
  this represents a fair market value of around 67% and 85% of basic salary for
  David Grigson and Devin Wenig respectively. To be consistent with the objectives
  of the plan, and to ensure growth is measured relative to other major UK companies,
  performance is measured over a three-year period by comparing Reuters TSR with
  that of other companies comprising the FTSE 100 at the beginning of the period.
  The companies are ranked according to their TSR for the measurement period
  with the company having the highest TSR ranked first. As a matter of good practice,
  the measurements are verified independently before being presented to the Remuneration
  Committee for approval. For 2004 awards, Reuters position on the list determines the extent to which
  plan awards will vest. Reuters must achieve median TSR performance for a proportion
  of the award to vest: full vesting only occurs for top quartile performance.
  At the 2004 AGM and from 2004, the shareholders approved the removal of the
  re-testing provision and accordingly the plan will not permit any extension
  of the measurement period if the awards do not, or only partially, vest. Awards
  that do not meet at least the median performance condition on completion of
  the performance period will lapse. Future awards shall continue to vest in
  full for top quartile performance, with one-third of the initial award vesting
  for median performance, with proportionate vesting for incremental performance
  between these points. For awards made prior to 2003 that do not vest or only partially vest after
  three years, the plan permits the measurement period to be extended by up to
  two years under a re-testing provision. Awards granted in 2000 did not meet
  the performance condition required for vesting and accordingly, these awards
  lapsed.




|Reuters Group PLC Annual Report and Form 20-F 2004 |  | 33
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REMUNERATION
  REPORT continued

The pre-set vesting
  criteria for awards which vested during 2004 or which have not yet vested are
  shown in the table below together with the actual ranking at 31 December 2004
  (or on vesting if earlier). Awards granted prior to 2004 that vest under the
  plan are not released until at least five years from the date of grant. Pre-set
        vesting criteriaDate
        measurement
      Rankings
        for
      
      Rankings
        for
      
      Ranking
        atperiod
        commenced
      100%
        vesting
      zero
        vesting
      31
        December 20041 January
        2000
      1
        to 26
      
      66
        to 100
      
      851 January
        2001
      1
        to 25
      
      51
        to 100
      
      851 January
        2002
      1
        to 25
      
      51
        to 100
      
      941 January
        2003
      1
        to 25
      
      51
        to 100
      
      701 January
        2004
      1
        to 25
      
      51
        to 100
      
      1 In order to smooth
  the opening and closing points of measurement, the average of the daily closing
  prices for the immediately preceding twelve months is used as the initial and
  final share prices when calculating the TSR. Shares awarded under the plan will
  continue to be met from existing shares held by Reuters employee share ownership
  trusts (ESOTs). The costs are charged to the profit and loss account over the
  vesting periods. DSOP:a global discretionary
  stock option plan was adopted by the Remuneration Committee in October 2000
  and approved by shareholders in April 2001. It aims to reward growth in earnings
  and in the share price. Therefore, the options granted to executive directors
  can only vest if the percentage growth in our basic earnings per share (EPS)
  exceeds the percentage growth in the retail price index by more than 9% over
  the three year performance period. For awards made prior to 2004, if the target
  is not met, the performance period may be extended by up to two years with an
  increase of 3% in the hurdle rate of EPS growth for each year added to the performance
  period. If the target rate is not met by the end of the fifth year, the options
  will lapse. These performance
  conditions were established in 2001 to retain management focus on earnings in
  a particularly challenging market. The Remuneration Committee believes that
  it is appropriate to retain these performance conditions for executive directors
  until the completion of the remuneration review referred to above. The review
  will determine whether it is appropriate to continue to operate the DSOP and
  if so, to determine whether an EPS performance condition is appropriate. The
  review will also consider whether it is more appropriate to use alternative
  equity related arrangements for the executive directors as Reuters looks beyond
  the Fast Forward programme. 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. The performance
  conditions have been measured for the 2001 and 2002 grants: the first grants
  to executive directors with these performance conditions. The performance conditions
  were not met for either grant. The executive directors
  are contractually entitled to participate in the DSOP. Under the terms of his
  service contract, annual equity awards to Tom Glocer are based on a fair market
  value using the option pricing methodology which currently ascribes to each
  share a value of 25.4% of the market price. 2004 awards are detailed in the
  table set out on page 39. For 2005, it is anticipated that the fair market value
  of Tom Glocers DSOP award will be approximately 200% of basic salary.
  David Grigson and Devin Wenig will receive awards of equivalent value. As the
  awards are calculated in sterling and Devin Wenigs salary is denominated
  in US dollars, the proportion of his salary actually awarded is impacted by
  the exchange rate. At present, these awards represent a fair market value of
  approximately 133% and 170% of basic salary for David Grigson and Devin Wenig
  respectively. It is the Remuneration Committees practice to divide participants
  annual entitlements into two awards, normally made following the announcement
  of preliminary annual and half-yearly results. With effect from
  2004, to reduce the dilutive impact DSOPs have on shareholders interests,
  the number of participants was reduced significantly. Any participation will
  normally be confined to executive directors and members of the GMC. Other employees
  may be eligible to participate in the Restricted Share Plan (see following).


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. For the 2004 offer, the fixed monthly savings amount
  was established at a maximum of £100 per month with a three year savings
  period. Legacy
  plans:the
  following four plans are legacy plans under which Tom Glocer and Devin Wenig
  received awards prior to becoming executive directors. It is not intended that
  executive directors should receive any further awards under these plans. Performance
  related share plan (PRSP):this
  plan operated from 1995 to 2001 and targeted senior executives not participating
  in the LTIP. Tom Glocer and Devin Wenig hold awards granted before they became
  executive directors. The performance condition is the same as for the LTIP,
  although vested shares can be released three years after grant. Deferred
  bonus share plan (DBSP):restricted
  share awards were made in 2000 as a special retention bonus to a total of around
  100 senior managers, excluding the executive directors in office at that time.
  As a retention tool, and in line with the then market practice, they were made
  conditional only on remaining in employment until the shares vested. These awards
  vested in February 2002 and February 2003. Tom Glocer has previously deferred
  the vesting of his shares under the plans: these are due to vest in April 2005.
  The shares awarded under the plan are satisfied by existing shares from ESOTs. Executive
  stock option plan (ESOP):Tom
  Glocer participated in an executive stock option plan operated in 1993 and 1994
  prior to being appointed to the Board. Options under the plan carry no performance
  conditions and vested automatically on the third anniversary of grant. Plan
  2000:a one-off
  all-employee option grant was made in 1998 in order to support the retention
  of employees over the millennium period. In common with such all-employee plans,
  there is no performance condition to be satisfied. All employees, including
  the executive directors, were given the opportunity to apply for an option to
  acquire 2,000 shares at an exercise price of £5.50 per share. These options
  became exercisable in September 2001 and will normally expire in September 2005.
  A small supplementary grant was made to new employees in March 1999, at an option
  price of £8.14 and these will normally expire in March 2006. We may issue
  new shares to satisfy options granted under this plan. Annual
  Bonus Profit Sharing Plan:on
  18 December 2003, Reuters announced its intention to introduce a new profit-sharing
  plan across the all-employee population. This plan was introduced to focus employees
  on reward for profit growth. Executive directors and members of the GMC did
  not participate in this plan in 2004. For 2005, participation in this plan will
  exclude other senior executives. For 2004 performance awards will be made equivalent
  to 2% of the basic salary. Payments under the plan will typically be made in
  the form of shares which will normally be subject to a 12 month vesting period. Restricted
  Share Plan (RSP):on
  17 April 2004, at the AGM, the shareholders approved the introduction in 2004
  of the RSP. Currently restricted shares will not normally be granted for long-term
  incentive purposes to executive directors or members of the GMC. It is intended
  that, other than for executive directors and GMC members, employees will be
  eligible to participate in this plan instead of the DSOP. This plan enables
  Reuters to provide market-competitive remuneration, whilst reducing the dilution
  impact to shareholders. Other than in 2004, the year of introduction, employees
  would generally not be eligible to participate in the DSOP and the RSP in the
  same year. Following the introduction of the Annual Bonus Profit Sharing Plan,
  for 2005, the number of participants in the RSP will be significantly lower
  than in 2004. This will reduce the dilutive impact of the RSP.




|34 |  | Reuters
      Group PLC Annual Report and Form 20-F 2004
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05 PERFORMANCE GRAPHReuters TSR for
the five years to 31 December 2004 compared with the return achieved by the FTSE
100 index of companies is shown below. This index is used as the comparator group
for the performance conditions attached to the LTIP and PRSP referred to above.
The calculations assume the reinvestment of dividends. Performance in respect
of individual awards is shown on page 34.  06 SUBSIDIARY UNDERTAKING SHARE PLANSA few subsidiary
undertakings operate share plans over new or existing shares for their directors
and employees. Of these, only the stock option plans operated by the Instinet
Group are
significant for the Group. The Instinet 2000 Stock Option Plan permits the grant of options up to a maximum
of 44.1 million shares of the common stock outstanding. Options may be granted
to directors and employees of Instinet Group at an exercise price of not less
than fair market value at the date of grant. Options normally vest in instalments
over a three- or four-year period and may not exceed a term of ten years. Approximately
885 employees and directors of Instinet Group participate in the plan. At 31
December 2004, options were outstanding over approximately 25.8 million Instinet
Group shares, equivalent to 7.7% of
Instinet Groups outstanding common stock. These options have exercise prices
ranging from US$3.25 to US$18.70 per share with a term of seven years from grant. As a result of the acquisition by the Instinet Group of Island in 2002, a further
416,406 shares under option were outstanding under the Island stock option plan
(and are now exercisable into Instinet Group common stock) as at 31 December
2004. Exercise prices range from US$0.91 to US$9.23 (on an adjusted basis) with
a term of ten years from grant. In 2004 Instinet obtained shareholder approval
for a new Performance Share Plan, whereupon shares may vest to participants if
Instinet achieves certain specified performance objectives over a three year
period. For 2004 grants, the performance condition related to the achievement
of a target return on equity. 07 SERVICE CONTRACTSIt is Reuters policy
that new executive directors be offered notice periods of not more than one year.
Reuters recognises, however, that, in the case of appointments from outside the
company, a longer notice period may initially be necessary, reducing to one year
subsequently. The Remuneration Committee ensures that appropriate provisions
are in place in the event of the termination of any directors service
contract. Tom Glocer has a service contract, with an effective date of 23 July 2001, normally
terminable by him
on 90 days notice or, where due to our fault, on 30 days notice.
We may
terminate without cause on 30 days notice. In the event of termination
by Tom Glocer due to our fault or by us without cause, Tom Glocers compensation
will be limited to a maximum of 12 months accrued benefits being annual
salary,
annual bonus and pension contributions. However, in the event of a change in control of the company, Tom Glocer would
have been entitled to a
maximum amount of compensation based on 20 months salary, annual bonus
and pension contributions, if such change of control had occured prior to 1 July
2004. He will be entitled to 16 months salary, annual bonus and pension
contributions, if such event occurs prior to 1 July 2005 and 12 months salary,
annual bonus and
pension contributions thereafter.


In the event of termination at any time which is not due to the fault of Tom
Glocer, he retains the benefit of any outstanding share plan awards as if his
employment had not ceased. In addition, Tom Glocer and his family retain the
life assurance and private healthcare benefits provided by Reuters for one year
following termination. David Grigsons and Devin Wenigs contracts have effective dates of
21 June 2001 and 17 February 2003 respectively, and can be terminated on one
years notice. Any termination payment will not exceed an amount equal to
the sum of annual salary, bonus and 12 months pension contributions paid
by Reuters. On a change of control of the company, all the executive directors are entitled
to terminate their contracts
on one months notice unless the acquiring party has, within three months
of the change of control, agreed to adopt and uphold the Reuters Trust Principles
(see page 82). Termination payments of a maximum of 12 months salary, annual
bonus and 12 months pension contributions are payable to David Grigson
and Devin Wenig (and to Tom Glocer
as previously detailed) in such circumstances. All executive directors have contractual terms that limit the ability of an executive
director to work for a defined list of competitor companies for a period of time.
These provisions are in place to protect intellectual property and commercially
sensitive information. 08 POLICY ON EXTERNAL APPOINTMENTSReuters recognises
that executive directors may be invited to become non-executive directors of
other companies or to become involved in charitable or public service organisations.
As the Board believes that this can broaden the knowledge and experience of directors
to its benefit, it is Reuters policy to approve such appointments, provided there
is no conflict of interest and the commitment required is not excessive. Board
approval is required and directors are permitted to retain cash-only fees paid
for such appointments. No executive directors retained any fees for external
directorships during 2004 except for Devin Wenig who received fees of US$19,125,
which includes an annual fee of US$3,000 and US$16,125 in fees for attending
board and committee meetings, and US$3,913 in travel expenses, in his capacity
as director of Nastech Pharmaceutical Company.




|Reuters Group PLC Annual Report and Form 20-F 2004 |  | 35
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REMUNERATION REPORTcontinued

09
DIRECTORS REMUNERATION FOR 2004

|                                                                  |  |         |  |       |  |          |   |            |   |              |  |       |    |       | 
|----------------------------------------------------------------- |  | ------- |  | ----- |  | -------- | - | ---------- | - | ------------ |  | ----- | -- | ----- | 
|                                                                  |  |         |  |       |  |          |   |            |   |              |  | 2004  |    | 2003  | 
|                                                                  |  |         |  |       | 
|                                                                  |  |         |  |       |  |          |   |            |   | Compensation |  |       |    |       | 
|                                                                  |  | Salary/ |  |       |  |          |   | Expense    |   | for loss     |  |       |    |       | 
|                                                                  |  | fees    |  | Bonus |  | Benefits | 7 | allowances | 8 | of office    |  | Total | 12 | Total | 
|                                                                  |  | £000    |  | £000  |  | £000     |   | £000       |   | £000         |  | £000  |    | £000  | 
|                                                                  |  |         |  |       |  |          |   |            |   |              |  |       |    |       | 
|Chairman                                                          |  |         |  |       |  |          |   |            |   |              |  |       |    |       | 
|Sir Christopher Hogg1                                             |  | 218     |  |      |  | 66       |   |           |   |             |  | 284   |    | 278   | 
|Niall FitzGerald, KBE2                                            |  | 163     |  |      |  |         |   |           |   |             |  | 163   |    | 35    | 
|                                                                  |  |         |  |       |  |          |   |            |   |              |  |       |    |       | 
|Non-executive directors                                           |  |         |  |       |  |          |   |            |   |              |  |       |    |       | 
|Sir John Craven                                                   |  | 19      |  |      |  |         |   |           |   |             |  | 19    |    | 45    | 
|Lawton Fitt3                                                      |  | 25      |  |      |  |         |   |           |   |             |  | 25    |    | n/a   | 
|Penny Hughes3                                                     |  | 25      |  |      |  |         |   |           |   |             |  | 25    |    | n/a   | 
|Ed Kozel4                                                         |  | 50      |  |      |  |         |   | 15         |   |             |  | 65    |    | 35    | 
|Roberto Mendoza                                                   |  | 26      |  |      |  |         |   |           |   |             |  | 26    |    | 35    | 
|Ken Olisa5                                                        |  | 35      |  |      |  |         |   |           |   |             |  | 35    |    | n/a   | 
|Dick Olver                                                        |  | 69      |  |      |  |         |   |           |   |             |  | 69    |    | 50    | 
|Charles Sinclair                                                  |  | 60      |  |      |  |         |   |           |   |             |  | 60    |    | 45    | 
|Ian Strachan6                                                     |  | 243     |  |      |  |         |   |           |   |             |  | 243   |    | 204   | 
|                                                                  |  |         |  |       |  |          |   |            |   |              |  |       |    |       | 
|Executive directors                                               |  |         |  |       |  |          |   |            |   |              |  |       |    |       | 
|Tom Glocer9                                                       |  | 816     |  | 1,217 |  | 289      |   |           |   |             |  | 2,322 |    | 1,898 | 
|David Grigson10                                                   |  | 400     |  | 398   |  | 6        |   | 68         |   |             |  | 872   |    | 785   | 
|Devin Wenig11                                                     |  | 330     |  | 328   |  | 17       |   | 11         |   |             |  | 686   |    | 609   | 
|                                                                  |  |         |  |       |  |          |   |            |   |              |  |       |    |       | 
|Total emoluments of directors12                                   |  | 2,479   |  | 1,943 |  | 378      |   | 94         |   |             |  | 4,894 |    | 4,019 | 
|                                                                  |  |         |  |       |  |          |   |            |   |              |  |       |    |       | 
|Other senior managers as a group (9 persons) (2003: 10 persons)13 |  | 2,623   |  | 1,959 |  | 255      |   | 189        |   |             |  | 5,026 |    | 5,957 | 
|                                                                  |  |         |  |       |  |          |   |            |   |              |  |       |    |       | 



|Notes:
      (For disclosure purposes, all amounts have been rounded up to the nearest
      thousand. The following conversion rates were used: US$1.82: £1 and
    CHF2.28: £1).
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                  
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|13                                                                                                                                                                                



|36 |  | Reuters Group PLC Annual Report and Form 20-F 2004
|-- |  | --------------------------------------------------

---



Back to Contents

Directors pensionsTom Glocer, David
Grigson and Devin Wenig participate in defined contribution pension arrangements.

Tom Glocer participates in Reuters US pension arrangements and is entitled to
a pension allowance of 25% of his base salary during 2004 and 25% of his base
salary for 2005. David Grigson is a member of the Reuters Retirement Plan in
the UK and receives a contribution in respect of pension benefits equal to 20%
of the UK earnings cap. Both are 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 US$1
million.

Our contributions
    and allocations (including the cost of life cover) in respect of these directors
in 2004 were:

|              |     |  | Company contribution          | 
|------------- | --- |  | ----------------------------- | 
|              | Age |  | in
    respect of period £000 | 
|              |     |  |                               | 
|Tom Glocer    | 45  |  | 208                           | 
|David Grigson | 50  |  | 24                            | 
|Devin Wenig   | 38  |  | 21                            | 
|              |     |  |                               | 

Details of the pension earned by Sir Christopher Hogg during 2004 and the benefits provided on his retirement are as set out in the following table.

|                     |     |  |            |  |               |  |            |  | Increase     |  |             |   |                |   |                |   |                       |  
|-------------------- | --- |  | ---------- |  | ------------- |  | ---------- |  | ------------ |  | ----------- | - | -------------- | - | -------------- | - | --------------------- | -
|                     |     |  |            |  |               |  | Increase   |  | in accrued   |  |             |   | Transfer value |   | Transfer value |   | Change in             |  
|                     |     |  |            |  | Directors    |  | in accrued |  | pension      |  | Accrued     |   | of accrued     |   | of accrued     |   | transfer value        |  
|                     |     |  | Accrued    |  | contributions |  | pension    |  | during the   |  | pension at  |   | pension        |   | pension        |   | over the year,        |  
|                     |     |  | pension at |  | during        |  | during     |  | year (net of |  | 31 December |   | 31 December    |   | 31 December    |   | net
    of directors |  
|                     |     |  | retirement |  | the year      |  | the year   |  | inflation)   |  | 2004        | 1 | 2003           | 1 | 2004           | 1 | contributions         |  
|                     | Age |  | £000       |  | £000          |  | £000       |  | £000         |  | £000        |   | £000           |   | £000           |   | £000                  |  
|                     |     |  |            |  |               |  |            |  |              |  |             |   |                |   |                |   |                       |  
|Sir Christopher Hogg | 68  |  | 141        |  |              |  | 18         |  | 18           |  |            |   | 1,878          |   |               |   | (1,878                | )
|                     |     |  |            |  |               |  |            |  |              |  |             |   |                |   |                |   |                       |  
|                    

|Notes:
|------
|1     

Reuters also paid
  an amount of £3,600 in respect of life cover for Sir Christopher Hogg.

The information shown complies with requirements under both the UK Listing Authority
and the Directors Remuneration Report Regulations 2002. The transfer value
at the start of the year has been calculated in accordance with the guidance
note GN11 published by the Institute of Actuaries and Faculty of
Actuaries.

The total amount of contributions or accruals made in 2004 to provide pension
and similar benefits for the directors
was £693,315 (2003: £368,000) and for the directors and the other
senior managers as a group was £1,622,626 (2003: £1,024,000). These
figures include the increase in the value of Sir Christopher Hoggs accrued
benefits over the nine months to his retirement and the contribution of £460,000
paid into the Reuters Supplementary Pension Scheme in respect of David Ure (see
the past directors section below for further details). These aggregate figures
also include an accrual of £58,000 and £65,000 respectively for the
investment returns within the US executive pension arrangements. These investment
returns are calculated based on each individuals notional fund choices
made by reference to actual investment funds and the actual investment returns
achieved on these funds.

|Reuters Group PLC Annual Report and Form 20-F 2004 |  | 37
|-------------------------------------------------- |  | --

---



Back to Contents

REMUNERATION REPORTcontinued



|Directors interests
    in long-term incentive plans5 | 
|------------------------------------------------------ | 
|                                                       | 
|                                                       | 
|                                                       | 
|                                                       | 
|                                                       | 
|                                                       | 
|                                                       | 
|                                                       | 
|                                                       | 
|Tom Glocer5                                            | 
|                                                       | 
|                                                       | 
|                                                       | 
|                                                       | 
|                                                       | 
|                                                       | 
|                                                       | 
|Total                                                  | 
|                                                       | 
|David Grigson5                                         | 
|                                                       | 
|                                                       | 
|                                                       | 
|                                                       | 
|                                                       | 
|Total                                                  | 
|                                                       | 
|Devin Wenig5                                           | 
|                                                       | 
|                                                       | 
|                                                       | 
|                                                       | 
|                                                       | 
|                                                       | 
|                                                       | 
|Total                                                  | 
|                                                       | 
|Other senior                                           | 
|managers as a                                          | 
|group (9 persons)                                      | 
|(2003: 10 persons)6                                    | 
|                                                       | 
|                                                       | 
|                                                       | 
|                                                       | 
|                                                       | 
|                                                       | 
|                                                       | 
|                                                       | 
|                                                       | 
|                                                       | 
|Total                                                  | 
|                                                       | 

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



|38 |  | Reuters Group PLC Annual Report and Form 20-F 2004
|-- |  | --------------------------------------------------



Back to Contents

|Directors
        share options |      |                     |  |                   |          |       |                 |        |                 |   |           |       |             |   |          |   |                   |        |                 |                   |                  
|-------------------------------- | ---- | ------------------- |  | ----------------- | -------- | ----- | --------------- | ------ | --------------- | - | --------- | ----- | ----------- | - | -------- | - | ----------------- | ------ | --------------- | ----------------- | -----------------
|                                 |      |                     |  |                   |          |       |                 |        |                 |   |           |       |             |   |          |   |                   |        |                 |                   |                  
|                                 |      |                     |  |                   |          |       |                 |        | Number
      at |   |           |       |             |   |          |   |                   |        | Number
      at |                   |                  
|                                 |      |                     |  |                   |          |       | 1
      January |        |                 |   |           |       |             |   |          |   | 31
      December |        |                 |                   |                  
|                                 |      |                     |  |                   |          |       | 2004            |        | Number          |   | Number    |       | Number      |   | Number   |   | 2004              |        |                 |                   |                  
|                                 |      |                     |  |                   | Exercise |       | (or
      later |        | granted         |   | vested    |       | (exercised) |   | (lapsed) |   | (or
      earlier |        | Earliest        |                   |                  
|                                 |      |                     |  |                   | price    | 4     | date
      of   |        | during          |   | during    |       | during      |   | during   |   | date
      of     |        | exercise        |                   | Expiry           
|                                 | Plan | Date
      of grant |  |                   | (pence)  |       | appointment)    |        | period          |   | period    | 5     | period      | 5 | period   |   | departure)        |        | date            |                   | date             
|                                 |      |                     |  |                   |          |       |                 |        |                 |   |           |       |             |   |          |   |                   |        |                 |                   |                  
|Sir                              |      |                     |  |                   |          |       |                 |        |                 |   |           |       |             |   |          |   |                   |        |                 |                   |                  
|Christopher                      |      |                     |  |                   |          |       |                 |        |                 |   |           |       |             |   |          |   |                   |        |                 |                   |                  
|Hogg                             |      | SAYE3               |  | 11
      Mar 1999 |          |       | 667             |        | 1,011           |   |          |       | 1,011       |   |         |   | (1,011            | )      |                |                   | 21
      May 2004
|                                 |      |                     |  |                   |          |       |                 |        |                 |   |           |       |             |   |          |   |                   |        |                 |                   |                  
|Total                            |      |                     |  |                   |          |       |                 |        | 1,011           |   |          |       | 1,011       |   |         |   | (1,011            | )      |                |                   |                  
|                                 |      |                     |  |                   |          |       |                 |        |                 |   |           |       |             |   |          |   |                   |        |                 |                   |                  
|Tom
      Glocer6                |      | DSOP3               |  | 25
      Jun 2001 |          |       | 862             |        | 565,113         |   |          |       |            |   |         |   |                  |        | 565,113         |                   | 25
      Jun 2005
|                                 |      |                     |  | 20
      Feb 2002 |          |       | 528             |        | 461,295         |   |          |       |            |   |         |   |                  |        | 461,295         |                   | 20
      Feb 2006
|                                 |      |                     |  | 2
      Aug 2002  |          |       | 266             |        | 915,654         |   |          |       |            |   |         |   |                  |        | 915,654         |                   | 2
      Aug 2006 
|                                 |      |                     |  | 24
      Feb 2003 |          |       | 135             |        | 1,307,514       |   |          |       |            |   |         |   |                  |        | 1,307,514       |                   | 24
      Feb 2006
|                                 |      |                     |  | 4
      Aug 2003  |          |       | 245             |        | 706,594         |   |          |       |            |   |         |   |                  |        | 706,594         |                   | 4
      Aug 2006 
|                                 |      |                     |  | 23
      Feb 2004 |          |       | 407             |        |                |   | 789,430   |       |            |   |         |   |                  |        | 789,430         |                   | 23
      Feb 2007
|                                 |      |                     |  | 27
      Aug 2004 |          |       | 321             |        |                |   | 1,000,928 |       |            |   |         |   |                  |        | 1,000,928       |                   | 27
      Aug 2007
|                                 |      | ESOP3               |  | 9
      Feb 1994  | 1&2      |       | US$7.28         |        | 13,716          |   |          |       |            |   |         |   |                  |        | 13,716          |                   | 9
      Feb 1997 
|                                 |      | SAYE3               |  | 16
      Apr 2003 |          |       | 90              |        | 4,200           |   |          |       |            |   |         |   |                  |        | 4,200           |                   | 1
      Jun 2006 
|                                 |      |                     |  | 7
      Apr 2004  |          |       | 314             |        |                |   | 1,200     |       |            |   |         |   |                  |        | 1,200           |                   | 1
      Jun 2007 
|                                 |      | Plan
      20003    |  | 24
      Sep 1998 | 2        |       | 550             |        | 2,000           |   |          |       |            |   |         |   |                  |        | 2,000           |                   | 24
      Sep 2001
|                                 |      |                     |  |                   |          |       |                 |        |                 |   |           |       |             |   |          |   |                   |        |                 |                   |                  
|Total                            |      |                     |  |                   |          |       |                 |        | 3,976,086       |   | 1,791,558 |       |            |   |         |   |                  |        | 5,767,644       |                   |                  
|                                 |      |                     |  |                   |          |       |                 |        |                 |   |           |       |             |   |          |   |                   |        |                 |                   |                  
|David
      Grigson6             |      | DSOP3               |  | 25
      Jun 2001 |          |       | 862             |        | 92,807          |   |          |       |            |   |         |   |                  |        | 92,807          |                   | 25
      Jun 2005
|                                 |      |                     |  | 20
      Feb 2002 |          |       | 528             |        | 75,757          |   |          |       |            |   |         |   |                  |        | 75,757          |                   | 20
      Feb 2006
|                                 |      |                     |  | 2
      Aug 2002  |          |       | 266             |        | 150,375         |   |          |       |            |   |         |   |                  |        | 150,375         |                   | 2
      Aug 2006 
|                                 |      |                     |  | 24
      Feb 2003 |          |       | 135             |        | 200,000         |   |          |       |            |   |         |   |                  |        | 200,000         |                   | 24
      Feb 2006
|                                 |      |                     |  | 4
      Aug 2003  |          |       | 245             |        | 200,000         |   |          |       |            |   |         |   |                  |        | 200,000         |                   | 4
      Aug 2006 
|                                 |      |                     |  | 23
      Feb 2004 |          |       | 407             |        |                |   | 122,950   |       |            |   |         |   |                  |        | 122,950         |                   | 23
      Feb 2007
|                                 |      |                     |  | 27
      Aug 2004 |          |       | 321             |        |                |   | 155,892   |       |            |   |         |   |                  |        | 155,892         |                   | 27
      Aug 2007
|                                 |      | SAYE3               |  | 11
      Apr 2002 |          |       | 448             |        | 2,216           |   |          |       |            |   |         |   | (2,216            | )      |                |                   | 1
      Jun 2007 
|                                 |      |                     |  | 16
      Apr 2003 |          |       | 90              |        | 4,200           |   |          |       |            |   |         |   |                  |        | 4,200           |                   | 1
      Jun 2006 
|                                 |      |                     |  | 7
      Apr 2004  |          |       | 314             |        |                |   | 1,200     |       |            |   |         |   |                  |        | 1,200           |                   | 1
      Jun 2007 
|                                 |      |                     |  |                   |          |       |                 |        |                 |   |           |       |             |   |          |   |                   |        |                 |                   |                  
|Total                            |      |                     |  |                   |          |       |                 |        | 725,355         |   | 280,042   |       |            |   |         |   | (2,216            | )      | 1,003,181       |                   |                  
|                                 |      |                     |  |                   |          |       |                 |        |                 |   |           |       |             |   |          |   |                   |        |                 |                   |                  
|Devin
      Wenig6               |      | DSOP3               |  | 27
      Dec 2000 | 2,3      | 1,139 |                 | 6,913  |                 |  |           | 1,729 |             |  |          |  |                   | 6,913  |                 | 27
      Dec 2001 |                  
|                                 |      |                     |  | 25
      Jun 2001 | 2,3      |       | 862             |        | 9,135           |   |          |       | 2,284       |   |         |   |                  |        | 9,135           |                   | 25
      Jun 2002
|                                 |      |                     |  | 20
      Feb 2002 | 2,3      |       | 528             |        | 25,936          |   |          |       | 6,484       |   |         |   |                  |        | 25,936          |                   | 20
      Feb 2003
|                                 |      |                     |  | 2
      Aug 2002  | 2,3      |       | 266             |        | 200,000         |   |          |       | 50,000      |   |         |   |                  |        | 200,000         |                   | 2
      Aug 2003 
|                                 |      |                     |  | 24
      Feb 2003 |          |       | 135             |        | 200,000         |   |          |       |            |   |         |   |                  |        | 200,000         |                   | 24
      Feb 2006
|                                 |      |                     |  | 4
      Aug 2003  |          |       | 245             |        | 200,000         |   |          |       |            |   |         |   |                  |        | 200,000         |                   | 4
      Aug 2006 
|                                 |      |                     |  | 23
      Feb 2004 |          |       | 407             |        |                |   | 122,950   |       |            |   |         |   |                  |        | 122,950         |                   | 23
      Feb 2007
|                                 |      |                     |  | 27
      Aug 2004 |          |       | 321             |        |                |   | 155,892   |       |            |   |         |   |                  |        | 155,892         |                   | 27
      Aug 2007
|                                 |      | SAYE3               |  | 7
      Apr 2004  | 1        |       | US$7.27         |        |                |   | 1,200     |       |            |   |         |   |                  |        | 1,200           |                   | 1
      Jun 2007 
|                                 |      | Plan
      20003    |  | 24
      Sep 1998 | 2        |       | 550             |        | 2,000           |   |          |       |            |   |         |   |                  |        | 2,000           |                   | 24
      Sep 2001
|                                 |      |                     |  |                   |          |       |                 |        |                 |   |           |       |             |   |          |   |                   |        |                 |                   |                  
|Total                            |      |                     |  |                   |          |       |                 |        | 643,984         |   | 280,042   |       | 60,497      |   |         |   |                  |        | 924,026         |                   |                  
|                                 |      |                     |  |                   |          |       |                 |        |                 |   |           |       |             |   |          |   |                   |        |                 |                   |                  
|Other
      senior               |      |                     |  |                   |          |       |                 |        |                 |   |           |       |             |   |          |   |                   |        |                 |                   |                  
|managers                         |      |                     |  |                   |          |       |                 |        |                 |   |           |       |             |   |          |   |                   |        |                 |                   |                  
|as
      a group                 |      |                     |  |                   |          |       |                 |        |                 |   |           |       |             |   |          |   |                   |        |                 |                   |                  
|(9
      persons)                |      |                     |  |                   |          |       |                 |        |                 |   |           |       |             |   |          |   |                   |        |                 |                   |                  
|(2003:
      10                  |      |                     |  |                   |          |       |                 |        |                 |   |           |       |             |   |          |   |                   |        |                 |                   |                  
|persons)7                        |      |                     |  |                   |          |       |                 |        |                 |   |           |       |             |   |          |   |                   |        |                 |                   |                  
|                                 |      | SAYE3               |  | 11
      Mar 1999 |          |       | 667             |        | 1,011           |   |          |       | 1,011       |   |         |   | (1,011            | )      |                |                   | 1
      May 2004 
|                                 |      |                     |  | 12
      Apr 2001 |          |       | 832             |        | 814             |   |          |       | 814         |   |         |   | (814              | )      |                |                   | 1
      Jun 2004 
|                                 |      |                     |  | 11
      Apr 2002 |          |       | 448             |        | 6,032           |   |          |       |            |   |         |   | (4,760            | )      | 1,272           |                   | 1
      Jun 2005 
|                                 |      |                     |  | 16
      Apr 2003 |          |       | 90              |        | 16,800          |   |          |       |            |   |         |   |                  |        | 16,800          |                   | 1
      Jun 2006 
|                                 |      |                     |  | 7
      Apr 2004  |          |       | 314             |        |                |   | 8,400     |       |            |   |         |   |                  |        | 8,400           |                   | 1
      Jun 2007 
|                                 |      | DSOP3               |  | 27
      Dec 2000 |          | 1,139 |                 | 34,764 |                 |  |           | 8,693 |             |  |          |  |                   | 34,764 |                 | 27
      Dec 2001 |                  
|                                 |      |                     |  | 25
      Jun 2001 |          |       | 862             |        | 5,800           |   |          |       | 1,450       |   |         |   |                  |        | 5,800           |                   | 25
      Jun 2002
|                                 |      |                     |  | 25
      Jun 2001 |          |       | 862             |        | 43,500          |   |          |       | 10,874      |   |         |   |                  |        | 43,500          |                   | 25
      Jun 2002
|                                 |      |                     |  | 21
      Dec 2001 |          |       | 692             |        | 2,025           |   |          |       | 506         |   |         |   |                  |        | 2,025           |                   | 21
      Dec 2002
|                                 |      |                     |  | 20
      Feb 2002 |          |       | 528             |        | 5,697           |   |          |       | 1,424       |   |         |   |                  |        | 5,697           |                   | 20
      Feb 2003
|                                 |      |                     |  | 20
      Feb 2002 |          |       | 528             |        | 95,484          |   |          |       | 23,871      |   |         |   |                  |        | 95,484          |                   | 20
      Feb 2003
|                                 |      |                     |  | 2
      Aug 2002  |          |       | 266             |        | 150,000         |   |          |       | 37,500      |   |         |   |                  |        | 150,000         |                   | 2
      Aug 2003 
|                                 |      |                     |  | 2
      Aug 2002  |          |       | 266             |        | 700,000         |   |          |       | 175,000     |   |         |   |                  |        | 700,000         |                   | 2
      Aug 2003 
|                                 |      |                     |  | 24
      Feb 2003 |          |       | 135             |        | 612,315         |   |          |       | 153,078     |   | (56,828  | ) |                  |        | 555,487         |                   | 24
      Feb 2004
|                                 |      |                     |  | 1
      Apr 2003  |          |       | 108             |        | 350,208         |   |          |       | 87,552      |   |         |   |                  |        | 350,208         |                   | 1
      Apr 2004 
|                                 |      |                     |  | 4
      Aug 2003  |          |       | 245             |        | 792,550         |   |          |       | 198,137     |   | (37,500  | ) |                  |        | 755,050         |                   | 4
      Aug 2004 
|                                 |      |                     |  | 23
      Feb 2004 |          |       | 407             |        |                |   | 429,625   |       |            |   |         |   |                  |        | 429,625         |                   | 23
      Feb 2005
|                                 |      |                     |  | 27
      Aug 2004 |          |       | 321             |        |                |   | 487,676   |       |            |   |         |   |                  |        | 487,676         |                   | 27
      Aug 2005
|                                 |      | Plan
      20003    |  | 24
      Sep 1998 |          |       | 550             |        | 14,000          |   |          |       |            |   |         |   |                  |        | 14,000          |                   | 24
      Sep 2001
|                                 |      |                     |  |                   |          |       |                 |        |                 |   |           |       |             |   |          |   |                   |        |                 |                   |                  
|Total                            |      |                     |  |                   |          |       |                 |        | 2,831,000       |   | 925,701   |       | 699,910     |   | (94,328  | ) | (6,585            | )      | 3,655,788       |                   |                  
|                                 |      |                     |  |                   |          |       |                 |        |                 |   |           |       |             |   |          |   |                   |        |                 |                   |                  
|                                 |      |                     |  |                   |          |       |                 |        |                 |   |           |       |             |   |          |   |                   |        |                 |                   |                  



|Reuters
      Group PLC Annual Report and Form 20-F 2004 |  | 39
|-------------------------------------------------------- |  | --

---



Back to Contents

REMUNERATION REPORT
  continued

Directors
  share optionscontinued

|Notes: |                                                                                                                                                                                                                                                                                                                                    
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1      | The
      options indicated are over American Depositary Shares (ADSs). Each ADS represents
      six ordinary shares, is denominated is US dollars and trades on NASDAQ.
      For the purposes of this disclosure, ADSs have been converted into the equivalent
      number of ordinary shares and an equivalent option price.  
|2      | The
      indicated awards were made prior to the appointment of the relevant individual
      as an executive director. The DSOP options granted prior to the appointment
      as an executive director have no performance condition.                                                                                           
|3      | Options
      granted under the SAYE Plan, Plan 2000 and the ESOP have no performance
      conditions. Save as disclosed in note 2 above, exercise of each DSOP award
      is conditional on the performance criteria described in the remuneration
      policy section 2 and no performance conditions were varied during 2004.
|4      | At
      31 December 2004, the market price of our shares was 377.50 pence per share
      and US$42.95 per ADS. The highest prices during the year were 429.25 pence
      per share and US$49.15 per ADS and the lowest were 241.25 pence per share
      and US$25.72 per ADS.                                                  
|5      | There
      were gains of £306,526 on the exercise of share options in 2004 (2003:
      £nil). There were hypothetical gains of £940,231 made on the
      vesting of shares at the market value share price on the date of vesting.                                                                                              
|6      | 2005
      awards are described on page 34.                                                                                                                                                                                                                                                                                        
|7      | Graham
      Albutt left the company on 28 February 2005. He was awarded a cash sum of
      £28,388 in lieu of a further DSOP grant on 27 August 2004.                                                                                                                                                                            

10DIRECTORS
  INTERESTS IN ORDINARY SHARESThe total
  interests of the current directors and other senior management in issued share
  capital and in shares underlying options and incentive plans are shown below
  as at 7 March 2005. No director or senior manager beneficially owns 1% or more
  of our issued share capital. Interests in ordinary shares (excluding options
  and interests in long-term incentive plans disclosed above) held at 1 January
  2004 and 31 December 2004 are also shown for directors in office at 31 December
  2003. Directors were the beneficial owners of all shares except for 814 shares,
  35,000 shares and 16,875 shares held by family members of Sir Christopher Hogg,
  Charles Sinclair and David Grigson respectively and for 52,451 shares held by
  a trust of which Tom Glocer and his family are beneficiaries.

|                                                    |                        |        |         | 1          |           |  | Interests
        at 7
      March 2005 |  
|--------------------------------------------------- | ---------------------- | ------ | ------- | ---------- | --------- |  | --------------------------------------- | -
|Interests
      at                                  | Interests
      at     |        |         |            |          
|1
      January 2004                                | 31
      December 2004 |        |         |            | Long-term
|Shares                                              | Shares                 | Shares | Options | incentives
|                                                    |                        |        |         |            |           |  |                                         |  
|Directors                                           |                        |        |         |            |           |  |                                         |  
|Sir Christopher
      Hogg                          | 63,321                 |        | 63,321  |            | n/a       |  |                                        |  
|Niall FitzGerald,
      KBE                         | 30,000                 |        | 30,000  |            | 30,000    |  |                                        |  
|Tom Glocer                                          | 217,058                |        | 217,113 |            | 217,113   |  | 5,767,644                               |  
|David Grigson                                       | 48,430                 |        | 48,430  |            | 48,430    |  | 1,003,181                               |  
|Devin Wenig                                         | 78,354                 |        | 78,354  |            | 78,354    |  | 924,026                                 |  
|Sir John Craven                                     | 6,846                  |        | 6,846   |            | n/a       |  |                                        |  
|Lawton Fitt                                         | n/a                    |        |        |            |          |  |                                        |  
|Penny Hughes                                        | n/a                    |        |        |            |          |  |                                        |  
|Ed Kozel                                            | 90,000                 |        | 7,500   |            | 7,500     |  |                                        |  
|Roberto Mendoza                                     | 53,000                 |        | 53,000  |            | n/a       |  |                                        |  
|Ken Olisa                                           | n/a                    |        |        |            |          |  |                                        |  
|Dick Olver                                          | 10,000                 |        | 10,000  |            | 10,000    |  |                                        |  
|Charles Sinclair                                    | 35,000                 |        | 35,000  |            | 35,000    |  |                                        |  
|Ian Strachan                                        | 15,500                 |        | 15,500  |            | 15,500    |  |                                        |  
|                                                    |                        |        |         |            |           |  |                                         |  
|Other
      senior managers as a group (9 persons)2 | 235,721                |        | 242,102 |            | 162,124   |  | 3,220,664                               | 2
|                                                    |                        |        |         |            |           |  |                                         |  

As at the date of this report, Tom Glocer, David Grigson, Devin Wenig and Ed Kozel each held 1,000 shares and Ian Strachan held 38,498 shares in Instinet Group. The other
senior managers as a group held interests in 3,000 shares of Instinet Group.

None
  of the directors has notified the company of an interest in any other shares,
  or other transactions or arrangements which require disclosure. There have been
  no movements in the interests of the directors in the share capital of the Group
  companies since 31 December 2004 save as otherwise disclosed in this report.

|Notes: |                                                                                                                          
|------ | -------------------------------------------------------------------------------------------------------------------------
|1      | Or
      as at date of retirement.                                                                                       
|2      | Other
      senior managers as a group are 8 persons following the departure of Graham
      Albutt, on 28 February 2005.

11PENSION
    ARRANGEMENTS FOR PAST DIRECTORSDavid Ure
    served as a director between June 1989 and July 2000. He retired from employment
    on 5 August 2004 and, in accordance with the rules of the Reuters Supplementary
    Pension Scheme, was entitled to an early retirement pension of two-thirds
    of final pensionable salary, without reduction. Final pensionable salary under
    the scheme is defined as the highest basic salary over any twelve months in
    the five years prior to retirement, with the full-time equivalent of basic
    salary being used for any periods of part-time employment. Reuters made a
    special contribution of £460,000 to the Reuters Supplementary Pension
    Scheme to allow for the funding cost of these early retirement benefits. Reuters carried
  out a partial restructuring of its UK approved pension arrangements for senior
  employees during the year. As part of this rearrangement, the pension liabilities
  within the Reuters Pension Fund for a number of retired past directors were
  transferred to the Reuters Supplementary Pension Scheme in November 2004. There
  was no change to the benefits




payable to the
  individuals as a result of the transfer. The past directors involved were Sir
  Peter Job, Jean-Claude Marchand, John Parcell, Robert Rowley, David Ure, André
  Villeneuve, Geoffrey Weetman and Mark Wood. On behalf of the
  Board,  Niall
    FitzGerald, KBEChairman
    7March
    2005


|40 |  | Reuters Group
      PLC Annual Report and Form 20-F 2004
|-- |  | --------------------------------------------------------

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STATEMENT OF DIRECTORS RESPONSIBILITIES

01
  FINANCIAL REPORTING The directors are
  required by UK company law to prepare financial statements for each financial
  year which give a true and fair view of the state of affairs of the company
  and the Group as at the end of the financial year and of the profit and cash
  flows of the Group for the period. Reuters Group is also required to prepare
  financial statements in accordance with the requirements of the SEC. Reuters Group has complied with both UK and US disclosure requirements in this report in order to present a true and fair view to all shareholders. In preparing the financial statements,
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 and the company for the year to 31 December 2005 and outline projections for the subsequent year in the light of
the financial position and borrowing facilities at 31 December 2004. 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. 02
  RISK MANAGEMENT, INTERNAL CONTROLS AND DISCLOSURE CONTROLS AND PROCEDURESThe directors
  acknowledge their responsibility for the Groups system of internal control
  and confirm they have reviewed its effectiveness. In doing so, the Board has
  taken note of the Guidance on Internal Control (the Turnbull Guidance) contained
  in the Combined Code. The Board confirms that it has adopted a process for identifying, evaluating and managing significant risks faced by the Group. This process, which accords with the Turnbull guidance, has
been in place for the full financial year and is ongoing. The control system includes: 
      objective
        setting, risk assessment and monitoring of performance at both strategic
        and business unit levels though a process known within the company as
        mission analysis;
      the
        use of balanced scorecards to track performance against targets
        relating to the financial, business, people and customer aspects of the
        companys business;
      written
        policies and control procedures;
      monthly
        financial reporting to the Board and senior management which, amongst
        other things, tracks performance against the annual budget; and
      systems
        to communicate rapidly to appropriate managers incidents requiring immediate
        attention. 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, operational and financial risks
that have been identified. This document is reviewed by the Group Management Committee (GMC) and the Board. At the year end, before producing the statement on internal control in the annual report and Form 20-F, the CEO and CFO meet with members of the GMC and others to consider formally the
operation and effectiveness of the companys risk management and financial, operational and compliance internal control systems. This review includes consideration of self-assessment reports from line management and covers each of the most
significant risks the company faces and how well these are controlled and managed. The CEO and the CFO report on the results of this review to the Audit Committee and to the Board. The Disclosure Committee (described on page 31) supports the process
by reviewing disclosure controls and procedures.




Instinet Group, which is listed on NASDAQ, has its own systems of risk management and internal controls on which it reports to its shareholders. Reuters executive directors are members of
the Instinet Group board. The boards of Radianz Limited and Factiva, which include Reuters representatives, have responsibility for adopting processes for identifying, evaluating and managing significant risks in their respective businesses. Reuters
assessment of the main risks relating to its affiliate companies and Instinet Group are reviewed by the CEO and the CFO who also report on the results of these reviews to the Audit Committee and to the Board. In addition to the self-assessment and management review procedures, Reuters 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 annually the assurance procedures, including compliance controls, and reports their findings to the
Board. The Groups external auditors, PricewaterhouseCoopers LLP, have audited the financial statements and have reviewed the work of internal auditors and the internal control systems to the
extent they consider necessary to support their audit report. The Audit Committee has met the internal auditors and PricewaterhouseCoopers LLP to discuss the results of their work. During 2004, the directors were not aware of any control breakdowns that resulted in a material loss. At the end of the period, 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 2004 to a reasonable assurance level (within the meaning of the US federal securities laws). During the year, two
accounting adjustments were identified by management which related to prior accounting
periods, and together were considered material. The 2003 and 2002 UK to US GAAP
 reconciliations have been restated accordingly. These adjustments are discussed
on page 74 and have the effect of increasing the Groups profits in each
of 2002 and 2003 as stated under US GAAP. No adjustments are required in respect
of the
Groups primary UK GAAP financial statements and no issues of governance
arise as a consequence of making these adjustments.
The
CEO
and
the
CFO
believe that the need for this restatement constitutes a significant control
deficiency
but not a material control weakness (as such terms are used in the US federal
securities  laws) for the period under review. This conclusion is based on the
fact that control procedures have improved year on year leading to the identification
and correction of the issues for the 2004 year end. No significant changes were made in the Groups internal controls over financial reporting during the period covered by this report that materially affected, or are reasonably likely to
affect materially, the Groups internal control over financial reporting. Instinet Groups annual report for 2004 will contain an internal control report as required by section 404 of the Sarbanes-Oxley Act. Please refer to Instinets annual report for
its internal control report. Reuters Groups Annual Report and Form 20-F for 2006 is also expected to contain an internal control report, so Reuters management and auditors have taken during 2004, and will be taking throughout 2005 and 2006,
steps in preparation for the section 404 reporting and attestation requirements that are scheduled to be met in respect of the financial year ending 31 December 2006. By order of the Board  Rosemary
    MartinGeneral
    Counsel and Company Secretary 7March
    2005


|Reuters
      Group PLC Annual Report and Form 20-F 2004 |  | 41
|-------------------------------------------------------- |  | --

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UNITED
STATES OPINION

UNITED
            STATES OPINIONReport
      of Independent Registered Public Accounting FirmIn our
      opinion, the accompanying consolidated balance sheets and the related consolidated
      profit and loss account, consolidated cash flow statement and statement
      of total recognised gains and losses present fairly, in all material respects,
      the financial position of the Reuters Group PLC and its subsidiaries at
      31 December, 2004, 2003 and 2002, and the results of their operations and
      their cash flows for each of the three years in the period ended 31 December,
      2004 in conformity with accounting principles generally accepted in the
      United Kingdom. These financial statements are the responsibility of the
      Groups management; our responsibility is to express an opinion on
      these financial statements based on our audits. We conducted our audits
      of these statements in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that
      we plan and perform the audit to obtain reasonable assurance about whether
      the financial statements are free of material misstatement. An audit includes
      examining, on a test basis, evidence supporting the amounts and disclosures
      in the financial statements, assessing the accounting principles used and
      significant estimates made by management, and evaluating the overall financial
      statement presentation. We believe that our audits provide a reasonable
      basis for our opinion. As discussed
        in the Accounting policies, the Group changed its method of accounting
        for employee share ownership trusts, employee share schemes and transaction-related
        regulatory fees in 2004, in accordance with accounting principles generally
        accepted in the United Kingdom. The change has been accounted for by
        restating comparative information at 31 December 2003 and 2002 and for
        the years then ended.


Accounting principles
      generally accepted in the United Kingdom 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 UK and US generally accepted accounting
  principles, as restated in the consolidated financial statements.  PricewaterhouseCoopers
          LLPLondon 7March
    2005




|42 |  | Reuters Group
      PLC Annual Report and Form 20-F 2004
|-- |  | --------------------------------------------------------

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CONSOLIDATED
  PROFIT AND LOSS ACCOUNT for
  the year ended 31 December

|                                                                   |  |       |  |        |   | Restated |   | Restated |  
|------------------------------------------------------------------ |  | ----- |  | ------ | - | -------- | - | -------- | -
|                                                                   |  |       |  | 2004   |   | 2003     |   | 2002     |  
|                                                                   |  | Notes |  | £m     |   | £m       |   | £m       |  
|                                                                   |  |       |  |        |   |          |   |          |  
|Revenue:                                                           |  |       |  |        |   |          |   |          |  
|Group
      and share of joint ventures                            |  |       |  | 2,984  |   | 3,335    |   | 3,700    |  
|less
      share of joint ventures revenue                         |  |       |  | (99    | ) | (100     | ) | (107     | )
|                                                                   |  |       |  |        |   |          |   |          |  
|Group revenue                                                      |  | 1     |  | 2,885  |   | 3,235    |   | 3,593    |  
|Operating costs                                                    |  | 2     |  | (2,688 | ) | (3,105   | ) | (3,735   | )
|                                                                   |  |       |  |        |   |          |   |          |  
|Operating
      profit/(loss)                                      |  |       |  | 197    |   | 130      |   | (142     | )
|Share of operating
      losses of joint ventures                  |  | 16    |  | (2     | ) | (27      | ) | (35      | )
|Impairment
      of investments in joint ventures                  |  | 16    |  |       |   | (8       | ) | (6       | )
|Share of operating
      profits/(losses) of associates            |  | 16    |  | 6      |   | (8       | ) | (39      | )
|Impairment
      of investment in associate                        |  | 16    |  |       |   | (1       | ) |         |  
|Profit/(loss)
      on disposal of subsidiary undertakings         |  | 31    |  | 9      |   | 3        |   | (29      | )
|Profit on disposal
      of joint ventures and associates          |  | 31    |  | 206    |   | 10       |   | 3        |  
|Share of profit
      on disposal of a business by a joint venture |  | 16    |  | 9      |   |         |   |         |  
|Loss on disposal
      of tangible fixed assets                    |  |       |  |       |   | (17      | ) |         |  
|Profit/(loss)
      on disposal of other fixed asset investments   |  | 31    |  | 19     |   | 6        |   | (2       | )
|Income from
      fixed asset investments                          |  |       |  | 1      |   |         |   | 1        |  
|Amounts written
      off investments                              |  | 16    |  | (4     | ) | (3       | ) | (75      | )
|Net interest
      payable                                         |  | 3     |  | (4     | ) | (29      | ) | (20      | )
|                                                                   |  |       |  |        |   |          |   |          |  
|Profit/(loss)
      on ordinary activities before taxation         |  |       |  | 437    |   | 56       |   | (344     | )
|Taxation on
      profit/(loss) on ordinary activities             |  | 4     |  | (73    | ) | (22      | ) | (23      | )
|                                                                   |  |       |  |        |   |          |   |          |  
|Profit/(loss)
      on ordinary activities after taxation          |  |       |  | 364    |   | 34       |   | (367     | )
|Equity minority
      interests                                    |  |       |  | (13    | ) | 16       |   | 112      |  
|                                                                   |  |       |  |        |   |          |   |          |  
|Profit/(loss)
      attributable to ordinary shareholders          |  |       |  | 351    |   | 50       |   | (255     | )
|Dividends                                                          |  | 5     |  | (140   | ) | (140     | ) | (139     | )
|                                                                   |  |       |  |        |   |          |   |          |  
|Retained
      profit/(loss) for the period                        |  |       |  | 211    |   | (90      | ) | (394     | )
|                                                                   |  |       |  |        |   |          |   |          |  
|Basic earnings/(loss)
      per ordinary share                     |  | 6     |  | 25.1p  |   | 3.6p     |   | (18.3p   | )
|Diluted earnings/(loss)
      per ordinary share                   |  | 6     |  | 24.5p  |   | 3.5p     |   | (18.3p   | )
|                                                                   |  |       |  |        |   |          |   |          |  

Consolidated revenue
  and operating profit derive from continuing operations in all material respects.

The result for
  the year has been computed on an unmodified historical cost basis.

2003 and 2002 have
  been restated following the adoption of UITF17 and UITF38, and the reclassification
  of transaction-related regulatory fees following recently issued SEC guidance
  (see Accounting Basis on page 72).

CONSOLIDATED
  STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSESfor
  the year ended 31 December

|                                                                            |  |       |  |      |   | Restated |   | Restated |  
|--------------------------------------------------------------------------- |  | ----- |  | ---- | - | -------- | - | -------- | -
|                                                                            |  |       |  | 2004 |   | 2003     |   | 2002     |  
|                                                                            |  | Notes |  | £m   |   | £m       |   | £m       |  
|                                                                            |  |       |  |      |   |          |   |          |  
|Profit/(loss)
      attributable to ordinary shareholders                   |  |       |  | 351  |   | 50       |   | (255     | )
|Unrealised
      gain on deemed partial disposal of subsidiary undertakings |  |       |  |     |   |         |   | 1        |  
|Unrealised
      gain on deemed partial disposal of associates              |  |       |  |     |   |         |   | 12       |  
|Unrealised
      gains on disposal of fixed asset investments               |  |       |  |     |   |         |   | 10       |  
|Translation
      differences taken directly to reserves                    |  |       |  | (25  | ) | (113     | ) | (95      | )
|Taxation on
      translation differences taken directly to reserves        |  | 4     |  | (10  | ) |         |   |         |  
|                                                                            |  |       |  |      |   |          |   |          |  
|Total recognised
      gains and losses relating to the year                |  |       |  | 316  |   | (63      | ) | (327     | )
|                                                                            |  |       |  |      |   |          |   |          |  
|Prior period
      adjustment (see Accounting Basis on page 72)           |  |       |  | 151  |   |         |   |         |  
|                                                                            |  |       |  |      |   |          |   |          |  
|Total gains
      and losses since last annual report                       |  |       |  | 467  |   |         |   |         |  
|                                                                            |  |       |  |      |   |          |   |          |  

2003 and 2002 have
  been restated following the adoption of UITF17 and UITF38 (see Accounting
  Basis on page 72).

A detailed statement
  showing the movement in capital and reserves is set out in note 26.







|Reuters
      Group PLC Annual Report and Form 20-F 2004 |  | 43
|-------------------------------------------------------- |  | --

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NOTES ON THE CONSOLIDATED PROFIT AND LOSS ACCOUNT



|01 | SEGMENTAL
    ANALYSIS
|-- | ----------------------

The tables below show a segmental analysis of revenue, costs and results which
  reflect the way Reuters was managed during 2004 and the management of Instinet
  Group as a separate business within the Reuters Group. From 1 January 2004,
  management changed the structure of its Customer Segments to more closely reflect
  the communities they serve. This is explained in more detail on pages 7-8.
  Prior periods have been restated to reflect changes in the management of costs
  and revenues resulting from the change in segment structure, the adoption of
  UITF17 and UITF38, and the reclassification of transaction-related regulatory
  fees following recently issued SEC guidance (see Accounting Basis on
  page 72).

Reuters revenue is allocated to Customer Segments by reference to product families
  which map directly to only one Customer Segment with two exceptions. Reuters
  Xtra family and Reuters Trader family revenues are initially fully attributed
  to the Sales & Trading Customer Segment. Those revenues earned from Research & Asset
  Management customers are then re-allocated to that Customer Segment based on
  management judgement and by reference to the activities at particular customer
  sites. Recoveries revenues arise when Reuters recharges costs, primarily exchange
  fees and communication costs, to customers. The revenues received from customers
  almost exactly match the exchange fees and communication costs incurred within
  Channel costs.

Segmental revenue less direct Customer Segment costs does not purport to represent
  segmental profitability. Direct Customer Segment costs include the costs of
  global Customer Segment management, marketing, non-integrated businesses and
  specific revenue related activities. The majority of revenue related costs
  are included within the Channels, Operations & Technology, Content and
  Corporate Services.

|                                                     |  |        |   |        |    | Restated |   |        |    | Restated |  
|---------------------------------------------------- |  | ------ | - | ------ | -- | -------- | - | ------ | -- | -------- | -
|                                                     |  | 2004   |   | %      |    | 2003     |   | %      |    | 2002     |  
|                                                     |  | £m     |   | change |    | £m       |   | change |    | £m       |  
|                                                     |  |        |   |        |    |          |   |        |    |          |  
|Revenue                                              |  |        |   |        |    |          |   |        |    |          |  
|Sales & Trading                                      |  | 1,180  |   | (9     | %) | 1,300    |   | (11    | %) | 1,461    |  
|Research & Asset
    Management                      |  | 235    |   | (19    | %) | 290      |   | 3      | %  | 283      |  
|Enterprise                                           |  | 481    |   | (14    | %) | 560      |   | (16    | %) | 666      |  
|Media                                                |  | 144    |   | (6     | %) | 153      |   | (2     | %) | 155      |  
|Recoveries                                           |  | 321    |   | (11    | %) | 361      |   | (15    | %) | 427      |  
|                                                     |  |        |   |        |    |          |   |        |    |          |  
|Reuters                                              |  | 2,361  |   | (11    | %) | 2,664    |   | (11    | %) | 2,992    |  
|Instinet Group                                       |  | 530    |   | (8     | %) | 578      |   | (5     | %) | 610      |  
|                                                     |  |        |   |        |    |          |   |        |    |          |  
|                                                     |  | 2,891  |   | (11    | %) | 3,242    |   | (11    | %) | 3,602    |  
|Share of joint ventures revenue                      |  | 99     |   | (1     | %) | 100      |   | (6     | %) | 107      |  
|Intra-Group revenue                                  |  | (6     | ) | (22    | %) | (7       | ) | (26    | %) | (9       | )
|                                                     |  |        |   |        |    |          |   |        |    |          |  
|Gross revenue                                        |  | 2,984  |   | (11    | %) | 3,335    |   | (10    | %) | 3,700    |  
|Less share of joint ventures revenue                 |  | (99    | ) | (1     | %) | (100     | ) | (6     | %) | (107     | )
|                                                     |  |        |   |        |    |          |   |        |    |          |  
|Group
    revenue                                    |  | 2,885  |   | (11    | %) | 3,235    |   | (10    | %) | 3,593    |  
|                                                     |  |        |   |        |    |          |   |        |    |          |  
|Operating
    costs                                  |  |        |   |        |    |          |   |        |    |          |  
|Sales & Trading                                      |  | (101   | ) | (6     | %) | (107     | ) | 6      | %  | (101     | )
|Research & Asset
    Management                      |  | (75    | ) | (49    | %) | (148     | ) | 10     | %  | (135     | )
|Enterprise                                           |  | (42    | ) | (44    | %) | (74      | ) | (26    | %) | (101     | )
|Media                                                |  | (17    | ) | (2     | %) | (17      | ) | (38    | %) | (27      | )
|                                                     |  |        |   |        |    |          |   |        |    |          |  
|Direct customer segment                              |  | (235   | ) | (32    | %) | (346     | ) | (5     | %) | (364     | )
|Channels                                             |  | (822   | ) | (12    | %) | (940     | ) | (14    | %) | (1,093   | )
|Operations & Technology                              |  | (630   | ) | (7     | %) | (674     | ) | (7     | %) | (728     | )
|Content                                              |  | (262   | ) | (6     | %) | (278     | ) | (6     | %) | (295     | )
|Corporate Services                                   |  | (124   | ) | 8      | %  | (114     | ) | (43    | %) | (203     | )
|                                                     |  |        |   |        |    |          |   |        |    |          |  
|Reuters                                              |  | (2,073 | ) | (12    | %) | (2,352   | ) | (12    | %) | (2,683   | )
|Instinet Group                                       |  | (493   | ) | (15    | %) | (582     | ) | (32    | %) | (853     | )
|Restructuring costs                                  |  | (128   | ) | (28    | %) | (178     | ) | (15    | %) | (208     | )
|Intra-Group costs                                    |  | 6      |   | (22    | %) | 7        |   | (26    | %) | 9        |  
|                                                     |  |        |   |        |    |          |   |        |    |          |  
|Group
    operating costs                            |  | (2,688 | ) | (13    | %) | (3,105   | ) | (17    | %) | (3,735   | )
|                                                     |  |        |   |        |    |          |   |        |    |          |  
|Operating
    profit                                 |  |        |   |        |    |          |   |        |    |          |  
|Sales & Trading                                      |  | 1,079  |   | (9     | %) | 1,193    |   | (12    | %) | 1,360    |  
|Research & Asset
    Management                      |  | 160    |   | 12     | %  | 142      |   | (4     | %) | 148      |  
|Enterprise                                           |  | 439    |   | (10    | %) | 486      |   | (14    | %) | 565      |  
|Media                                                |  | 127    |   | (6     | %) | 136      |   | 6      | %  | 128      |  
|                                                     |  |        |   |        |    |          |   |        |    |          |  
|Segmental revenue less direct customer segment costs |  | 1,805  |   | (8     | %) | 1,957    |   | (11    | %) | 2,201    |  
|Channels                                             |  | (501   | ) | (13    | %) | (579     | ) | (13    | %) | (666     | )
|Operations & Technology                              |  | (630   | ) | (7     | %) | (674     | ) | (7     | %) | (728     | )
|Content                                              |  | (262   | ) | (6     | %) | (278     | ) | (6     | %) | (295     | )
|Corporate Services                                   |  | (124   | ) | 8      | %  | (114     | ) | (43    | %) | (203     | )
|                                                     |  |        |   |        |    |          |   |        |    |          |  
|Reuters                                              |  | 288    |   | (8     | %) | 312      |   | 1      | %  | 309      |  
|Instinet Group                                       |  | 37     |   |       |    | (4       | ) | (98    | %) | (243     | )
|Restructuring costs                                  |  | (128   | ) | (28    | %) | (178     | ) | (15    | %) | (208     | )
|                                                     |  |        |   |        |    |          |   |        |    |          |  
|Group
    operating profit/(loss)                    |  | 197    |   | 51     | %  | 130      |   |       |    | (142     | )
|                                                     |  |        |   |        |    |          |   |        |    |          |  

Operating costs include amortisation and impairment of goodwill and other intangibles.



|44 |  | Reuters Group PLC Annual Report and Form 20-F 2004
|-- |  | --------------------------------------------------

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Back to Contents

|01 | SEGMENTAL
    ANALYSIScontinued
|-- | -------------------------------

Revenue is normally
  invoiced in the geographical area in which the customer is located. Revenue
  earned, therefore, generally represents revenue both by origin and by destination.

The geographical analysis of performance reflects the revenues earned and operating
  costs incurred in each area excluding amortisation and impairment of goodwill
  and other intangibles and
net currency gain.

|                                   |    |        |        |     |    | Restated |        |     |    | Restated |  
|---------------------------------- | -- | ------ | ------ | --- | -- | -------- | ------ | --- | -- | -------- | -
|By geography                       |    | 2004   |        | %   |    | 2003     |        | %   |    | 2002     |  
|                                   | £m |        | change |     | £m |          | change |     | £m |         
|                                   |    |        |        |     |    |          |        |     |    |          |  
|Revenue                            |    |        |        |     |    |          |        |     |    |          |  
|Europe, Middle East and Africa     |    | 1,405  |        | (9  | %) | 1,552    |        | (9  | %) | 1,714    |  
|The Americas                       |    | 1,075  |        | (13 | %) | 1,242    |        | (9  | %) | 1,372    |  
|Asia/Pacific                       |    | 405    |        | (8  | %) | 441      |        | (13 | %) | 507      |  
|                                   |    |        |        |     |    |          |        |     |    |          |  
|                                   |    | 2,885  |        | (11 | %) | 3,235    |        | (10 | %) | 3,593    |  
|                                   |    |        |        |     |    |          |        |     |    |          |  
|Operating
    costs where incurred |    |        |        |     |    |          |        |     |    |          |  
|Europe, Middle East and Africa     |    | (1,349 | )      | (8  | %) | (1,470   | )      | (5  | %) | (1,555   | )
|The Americas                       |    | (1,024 | )      | (19 | %) | (1,270   | )      | (19 | %) | (1,566   | )
|Asia/Pacific                       |    | (241   | )      | (5  | %) | (253     | )      | (18 | %) | (307     | )
|                                   |    |        |        |     |    |          |        |     |    |          |  
|                                   |    | (2,614 | )      | (13 | %) | (2,993   | )      | (13 | %) | (3,428   | )
|                                   |    |        |        |     |    |          |        |     |    |          |  
|Contribution                       |    |        |        |     |    |          |        |     |    |          |  
|Europe, Middle East and Africa     |    | 56     |        | (32 | %) | 82       |        | (48 | %) | 159      |  
|The Americas                       |    | 51     |        |    |    | (28      | )      | (85 | %) | (194     | )
|Asia/Pacific                       |    | 164    |        | (13 | %) | 188      |        | (5  | %) | 200      |  
|                                   |    |        |        |     |    |          |        |     |    |          |  
|                                   |    | 271    |        | 12  | %  | 242      |        | 46  | %  | 165      |  
|                                   |    |        |        |     |    |          |        |     |    |          |  
|Other
    costs                    |    |        |        |     |    |          |        |     |    |          |  
|Goodwill and other intangibles:    |    |        |        |     |    |          |        |     |    |          |  
|Amortisation                       |    | (62    | )      | (38 | %) | (101     | )      | (5  | %) | (107     | )
|Impairment                         |    | (14    | )      | (29 | %) | (20      | )      | (90 | %) | (208     | )
|Net currency gain                  |    | 2      |        | (82 | %) | 9        |        | 24  | %  | 8        |  
|                                   |    |        |        |     |    |          |        |     |    |          |  
|Operating
    profit/(loss)        |    | 197    |        | 51  | %  | 130      |        |    |    | (142     | )
|                                   |    |        |        |     |    |          |        |     |    |          |  

United Kingdom and Ireland revenue was £380 million (2003: £428
  million, 2002: £485 million). With the exception of Instinet Group, Reuters
  products are delivered and sold primarily through a common geographical infrastructure
  and delivered over a number of communications networks.

The impact of the Multex acquisition in 2003 and the Island acquisition in
  2002 are reflected primarily in the Americas.

|          |  |       |  |        |    | Restated |  |        |    | Restated | 
|--------- |  | ----- |  | ------ | -- | -------- |  | ------ | -- | -------- | 
|          |  | 2004  |  | %      |    | 2003     |  | %      |    | 2002     | 
|By type   |  | £m    |  | change |    | £m       |  | change |    | £m       | 
|          |  |       |  |        |    |          |  |        |    |          | 
|Recurring |  | 2,158 |  | (12    | %) | 2,449    |  | (9     | %) | 2,699    | 
|Usage     |  | 638   |  | (6     | %) | 681      |  | (7     | %) | 731      | 
|Outright  |  | 89    |  | (15    | %) | 105      |  | (36    | %) | 163      | 
|          |  |       |  |        |    |          |  |        |    |          | 
|Revenue   |  | 2,885 |  | (11    | %) | 3,235    |  | (10    | %) | 3,593    | 
|          |  |       |  |        |    |          |  |        |    |          | 

Recurring revenue is derived from the sale of subscription services, including
  maintenance contracts. Usage revenue is principally derived from Instinet Group,
  Dealing 2000-2, Dealing 3000 Spot Matching and Bridge Trading Company. Outright
  revenue comprises one-off sales including information and risk management solutions.

|Reuters Group PLC Annual Report and Form 20-F 2004 |  | 45
|-------------------------------------------------- |  | --

---



Back to Contents

NOTES ON THE CONSOLIDATED PROFIT AND LOSS ACCOUNTcontinued



|02 | OPERATING
    COSTS
|-- | -------------------

|                                                          |  |       |   |        |    |          |   |        |    |          |  
|--------------------------------------------------------- |  | ----- | - | ------ | -- | -------- | - | ------ | -- | -------- | -
|                                                          |  |       |   |        |    | Restated |   |        |    | Restated |  
|                                                          |  | 2004  |   | %      |    | 2003     |   | %      |    | 2002     |  
|                                                          |  | £m    |   | change |    | £m       |   | change |    | £m       |  
|                                                          |  |       |   |        |    |          |   |        |    |          |  
|Costs
    by type                                         |  |       |   |        |    |          |   |        |    |          |  
|Salaries, commission and allowances                       |  | 916   |   | (9     | %) | 1,011    |   | (14    | %) | 1,178    |  
|Social security costs                                     |  | 70    |   | (3     | %) | 73       |   | (8     | %) | 79       |  
|Pension costs (see note 23)                               |  | 34    |   | (34    | %) | 50       |   | (21    | %) | 65       |  
|                                                          |  |       |   |        |    |          |   |        |    |          |  
|Staff costs                                               |  | 1,020 |   | (10    | %) | 1,134    |   | (14    | %) | 1,322    |  
|Services                                                  |  | 699   |   | (3     | %) | 722      |   | (11    | %) | 811      |  
|Depreciation                                              |  | 133   |   | (31    | %) | 193      |   | (15    | %) | 227      |  
|Data                                                      |  | 257   |   | (14    | %) | 300      |   | (13    | %) | 343      |  
|Communications                                            |  | 313   |   | (17    | %) | 376      |   | (10    | %) | 420      |  
|Space                                                     |  | 202   |   | (25    | %) | 269      |   | (14    | %) | 312      |  
|Cost of sales and other                                   |  | 41    |   | (13    | %) | 48       |   | (25    | %) | 64       |  
|Goodwill and other intangibles (see note 14):             |  |       |   |        |    |          |   |        |    |          |  
|Amortisation                                              |  | 62    |   | (38    | %) | 101      |   | (5     | %) | 107      |  
|Impairment                                                |  | 14    |   | (29    | %) | 20       |   | (90    | %) | 208      |  
|Other operating income                                    |  | (51   | ) | 6      | %  | (48      | ) | (32    | %) | (71      | )
|Currency hedging
       activities  net
    loss/(gain)  |  |      |   | (100   | %) | 11       |   |       |    | (10      | )
|Foreign exchange
       differences  net
    (gain)/loss |  | (2    | ) | (92    | %) | (21      | ) |       |    | 2        |  
|                                                          |  |       |   |        |    |          |   |        |    |          |  
|Total
    costs by type                                   |  | 2,688 |   | (13    | %) | 3,105    |   | (17    | %) | 3,735    |  
|                                                          |  |       |   |        |    |          |   |        |    |          |  

Prior periods have been restated following the adoption of UITF17 and UITF38,
  and the reclassification of transaction-related regulatory fees following recently
  issued SEC guidance (see Accounting Basis on page 72).

The directors believe that the nature of Reuters Groups business is such
  that the format of the analysis of operating costs required by the Companies
  Act 1985 is not appropriate. The format has been adopted in a manner consistent
  with Reuters Groups activities. Services include equipment hire and bought-in
  services, including consultancy and contractors, advertising and publicity,
  professional fees and staff-related expenses. Other operating income primarily
  comprises amounts received from joint ventures in respect of costs incurred
  by Reuters on their behalf.

|                                          |  |       |   |        |    | Restated |   |        |    | Restated |  
|----------------------------------------- |  | ----- | - | ------ | -- | -------- | - | ------ | -- | -------- | -
|                                          |  | 2004  |   | %      |    | 2003     |   | %      |    | 2002     |  
|                                          |  | £m    |   | change |    | £m       |   | change |    | £m       |  
|                                          |  |       |   |        |    |          |   |        |    |          |  
|Costs
    by function                     |  |       |   |        |    |          |   |        |    |          |  
|Production and communications             |  | 1,519 |   | (9     | %) | 1,661    |   | (15    | %) | 1,947    |  
|Selling and marketing                     |  | 529   |   | (9     | %) | 580      |   | 1      | %  | 574      |  
|Support services and administration       |  | 438   |   | (24    | %) | 575      |   | (18    | %) | 699      |  
|Goodwill and other intangibles:           |  |       |   |        |    |          |   |        |    |          |  
|Amortisation                              |  | 62    |   | (38    | %) | 101      |   | (5     | %) | 107      |  
|Impairment                                |  | 14    |   | (29    | %) | 20       |   | (90    | %) | 208      |  
|Restructuring costs                       |  | 128   |   | (28    | %) | 178      |   | (15    | %) | 208      |  
|Net currency gain                         |  | (2    | ) | (82    | %) | (10      | ) | 25     | %  | (8       | )
|                                          |  |       |   |        |    |          |   |        |    |          |  
|Total
    costs by function               |  | 2,688 |   | (13    | %) | 3,105    |   | (17    | %) | 3,735    |  
|                                          |  |       |   |        |    |          |   |        |    |          |  
|Costs
    include                         |  |       |   |        |    |          |   |        |    |          |  
|Development expenditure                   |  | 128   |   | (25    | %) | 171      |   | (15    | %) | 200      |  
|Operating lease expenditure:              |  |       |   |        |    |          |   |        |    |          |  
|Hire of equipment                         |  | 7     |   | (14    | %) | 8        |   | (11    | %) | 9        |  
|Other, principally property               |  | 90    |   | (16    | %) | 107      |   | (4     | %) | 112      |  
|Loss on disposal of tangible fixed assets |  | 3     |   |       |    |         |   |       |    | 1        |  
|Advertising                               |  | 29    |   | (22    | %) | 37       |   | 18     | %  | 32       |  
|                                          |  |       |   |        |    |          |   |        |    |          |  



|46 |  | Reuters Group PLC Annual Report and Form 20-F 2004
|-- |  | --------------------------------------------------

---



Back to Contents

|02 | OPERATING
            COSTScontinued
|-- | ------------------------------------

Fees payable to
PricewaterhouseCoopers LLP were as follows:

|                           |  | 2004 |  | %      |    | 2003 |  | %      |    | 2002 | 
|-------------------------- |  | ---- |  | ------ | -- | ---- |  | ------ | -- | ---- | 
|                           |  | £m   |  | change |    | £m   |  | change |    | £m   | 
|                           |  |      |  |        |    |      |  |        |    |      | 
|Audit services:            |  |      |  |        |    |      |  |        |    |      | 
|Statutory audit            |  | 3.2  |  | 7      | %  | 3.0  |  | 30     | %  | 2.3  | 
|                           |  |      |  |        |    |      |  |        |    |      | 
|Audit related services:    |  |      |  |        |    |      |  |        |    |      | 
|Regulatory reporting       |  | 0.2  |  | 100    | %  | 0.1  |  | (50    | %) | 0.2  | 
|Further assurance services |  | 1.7  |  |       |    | 1.7  |  | 6      | %  | 1.6  | 
|                           |  |      |  |        |    |      |  |        |    |      | 
|Tax services:              |  |      |  |        |    |      |  |        |    |      | 
|Compliance services        |  | 0.3  |  | (63    | %) | 0.8  |  | (11    | %) | 0.9  | 
|Advisory services          |  | 2.0  |  | 150    | %  | 0.8  |  | 14     | %  | 0.7  | 
|                           |  |      |  |        |    |      |  |        |    |      | 
|Other services:            |  |      |  |        |    |      |  |        |    |      | 
|Management consultancy     |  |     |  |       |    |     |  |       |    | 3.4  | 
|                           |  |      |  |        |    |      |  |        |    |      | 
|Total fees                 |  | 7.4  |  | 16     | %  | 6.4  |  | (30    | %) | 9.1  | 
|                           |  |      |  |        |    |      |  |        |    |      | 
|United Kingdom             |  | 2.8  |  | 8      | %  | 2.6  |  | (60    | %) | 5.8  | 
|Overseas                   |  | 4.6  |  | 21     | %  | 3.8  |  | 15     | %  | 3.3  | 
|                           |  |      |  |        |    |      |  |        |    |      | 

The statutory audit
  fee includes £10,000 (2003: £10,000, 2002: £10,000) in respect
  of the parent company audit.

Also included above are fees paid to PricewaterhouseCoopers LLP in respect
  of non-audit services in the UK of £1.4 million (2003: £0.9 million,
  2002: £4.9 million).

Further assurance services include assistance with Sarbanes-Oxley S404 compliance
  (including the attest work in relation to Instinet Groups 2004 reporting
  requirements under the Act) and conversion to International Financial Reporting
  Standards (IFRS) as well as due diligence activities related to acquisitions
  and disposals. Tax compliance services include assistance with corporation
  and other tax returns. Tax advisory services relate to tax planning and employee-related
  issues.

Management consultancy fees include amounts earned in 2002 by PwC Consulting,
  which ceased to be part of PricewaterhouseCoopers LLP on 1 October 2002.

The directors consider it important that Reuters Group has access to a broad
  range of external advice, including from PricewaterhouseCoopers LLP. Where
  appropriate, work is put out to competitive tender. The Audit Committee monitors
  the relationship with PricewaterhouseCoopers LLP, including the level of non-audit
fees.

|03 | NET
    INTEREST RECEIVABLE/(PAYABLE)
|-- | -------------------------------------

|                                                              |  |      |   |      |   |      |  
|------------------------------------------------------------- |  | ---- | - | ---- | - | ---- | -
|                                                              |  | 2004 |   | 2003 |   | 2002 |  
|                                                              |  | £m   |   | £m   |   | £m   |  
|                                                              |  |      |   |      |   |      |  
|Interest receivable:                                          |  |      |   |      |   |      |  
|Listed investments                                            |  |     |   |     |   | 1    |  
|Unlisted investments                                          |  | 22   |   | 13   |   | 19   |  
|Share of joint ventures and associates interest (see note 16) |  | 1    |   | 5    |   | 9    |  
|                                                              |  |      |   |      |   |      |  
|Interest
    receivable                                       |  | 23   |   | 18   |   | 29   |  
|                                                              |  |      |   |      |   |      |  
|Interest payable:                                             |  |      |   |      |   |      |  
|Bank loans and overdraft                                      |  | (2   | ) | (10  | ) | (4   | )
|Other borrowings                                              |  | (24  | ) | (36  | ) | (45  | )
|Unwinding of discounts                                        |  | (1   | ) | (1   | ) |     |  
|                                                              |  |      |   |      |   |      |  
|Interest
    payable                                          |  | (27  | ) | (47  | ) | (49  | )
|                                                              |  |      |   |      |   |      |  
|Total
    net interest payable                                |  | (4   | ) | (29  | ) | (20  | )
|                                                              |  |      |   |      |   |      |  



|Reuters Group PLC Annual Report and Form 20-F 2004 |  | 47
|-------------------------------------------------- |  | --

---



Back to Contents

NOTES
      ON THE CONSOLIDATED PROFIT AND LOSS ACCOUNTcontinued



|04 | TAXATION
    ON PROFIT ON ORDINARY ACTIVITIES
|-- | ---------------------------------------------

|                                                         |  |      |   |      |   |      |  
|-------------------------------------------------------- |  | ---- | - | ---- | - | ---- | -
|                                                         |  | 2004 |   | 2003 |   | 2002 |  
|                                                         |  | £m   |   | £m   |   | £m   |  
|                                                         |  |      |   |      |   |      |  
|UK corporation
    tax                                   |  |      |   |      |   |      |  
|UK corporation tax on profits of the period              |  | 25   |   | 68   |   | 43   |  
|Share of joint ventures and associates tax (see note 16) |  | 1    |   | 1    |   |     |  
|Adjustments in respect of prior periods                  |  | (32  | ) | (19  | ) | (13  | )
|                                                         |  |      |   |      |   |      |  
|                                                         |  | (6   | ) | 50   |   | 30   |  
|Double taxation relief                                   |  | (3   | ) | (4   | ) | (7   | )
|                                                         |  |      |   |      |   |      |  
|                                                         |  | (9   | ) | 46   |   | 23   |  
|                                                         |  |      |   |      |   |      |  
|Foreign
    tax                                          |  |      |   |      |   |      |  
|Current tax on income for the period                     |  | 56   |   | 26   |   | 82   |  
|Share of joint ventures and associates tax (see note 16) |  | 2    |   | 6    |   | 6    |  
|Adjustments in respect of prior periods                  |  | (9   | ) | (36  | ) | (9   | )
|                                                         |  |      |   |      |   |      |  
|                                                         |  | 49   |   | (4   | ) | 79   |  
|                                                         |  |      |   |      |   |      |  
|Current
    tax charge for the period                    |  | 40   |   | 42   |   | 102  |  
|Deferred taxation (see note 24)                          |  | 33   |   | (20  | ) | (79  | )
|                                                         |  |      |   |      |   |      |  
|Taxation
    on profit on ordinary activities            |  | 73   |   | 22   |   | 23   |  
|                                                         |  |      |   |      |   |      |  

A reconciliation of the current tax charge on ordinary activities for the period
  reported in the profit and loss account is set out below.

|                                                                                 |  |      |   | Restated |   | Restated |  
|-------------------------------------------------------------------------------- |  | ---- | - | -------- | - | -------- | -
|                                                                                 |  | 2004 |   | 2003     |   | 2002     |  
|                                                                                 |  | £m   |   | £m       |   | £m       |  
|                                                                                 |  |      |   |          |   |          |  
|Profit/(loss) before tax                                                         |  | 437  |   | 56       |   | (344     | )
|                                                                                 |  |      |   |          |   |          |  
|Corporation tax on pre-tax profit/(loss) at UK nominal rate of 30%               |  | 131  |   | 17       |   | (103     | )
|Non-tax deductible amortisation and impairment of goodwill and other intangibles |  | 21   |   | 30       |   | 88       |  
|Adjustments in respect of prior years                                            |  | (41  | ) | (55      | ) | (22      | )
|Permanent differences                                                            |  | 11   |   | 7        |   | 13       |  
|Non-taxable investment impairments and disposals                                 |  | (66  | ) | 3        |   | 32       |  
|Fixed asset related timing differences                                           |  | (2   | ) | (12      | ) | 1        |  
|Non-fixed asset related timing differences                                       |  | (10  | ) | (15      | ) | 39       |  
|Tax losses (utilised)/not utilised in period                                     |  | (6   | ) | 56       |   | 35       |  
|Tax on dividend received on acquisition of Island                                |  |     |   |         |   | 10       |  
|Other differences                                                                |  | 2    |   | 11       |   | 9        |  
|                                                                                 |  |      |   |          |   |          |  
|Total
    current tax                                                            |  | 40   |   | 42       |   | 102      |  
|                                                                                 |  |      |   |          |   |          |  

The other differences are primarily due to overseas profits taxed at rates
  differing from those in the UK and the geographical mix of profits.

Tax paid in the period on disposals was £9 million (2003: £1 million,
  2002: £nil). No tax is expected to fall due in respect of the proposed
  disposal of Radianz.

£10 million of UK corporation tax in respect of unrealised translation
  differences arising in 2004 is recognised in the Statement of Total Recognised
Gains and Losses (2003 and 2002: £nil).

|48 |  | Reuters Group PLC Annual Report and Form 20-F 2004
|-- |  | --------------------------------------------------

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|05 | DIVIDENDS
|-- | ---------

|                            |  |       |  |       |  |       | 
|--------------------------- |  | ----- |  | ----- |  | ----- | 
|                            |  | 2004  |  | 2003  |  | 2002  | 
|                            |  | £m    |  | £m    |  | £m    | 
|                            |  |       |  |       |  |       | 
|Interim paid                |  | 54    |  | 54    |  | 53    | 
|Final (2004
      proposed) |  | 86    |  | 86    |  | 86    | 
|                            |  |       |  |       |  |       | 
|                            |  | 140   |  | 140   |  | 139   | 
|                            |  |       |  |       |  |       | 
|                            |  |       |  |       |  |       | 
|Per ordinary
      share    |  | Pence |  | Pence |  | Pence | 
|                            |  |       |  |       |  |       | 
|Interim paid                |  | 3.85  |  | 3.85  |  | 3.85  | 
|Final (2004
      proposed) |  | 6.15  |  | 6.15  |  | 6.15  | 
|                            |  |       |  |       |  |       | 
|                            |  | 10.00 |  | 10.00 |  | 10.00 | 
|                            |  |       |  |       |  |       | 

|06 | EARNINGS PER ORDINARY SHARE
|-- | ---------------------------

Basic and diluted
  earnings per ordinary share are based on the results attributable to ordinary
  shareholders and on the weighted average number of those shares in issue during
  the year. The weighted average number of shares in issue may be reconciled to
  the number used in the basic and diluted earnings per ordinary share calculations
  as follows:

|Weighted
      average number in millions                       |  | 2004  |   | 2003  |   | 2002  |  
|--------------------------------------------------------------- |  | ----- | - | ----- | - | ----- | -
|                                                                |  |       |   |       |   |       |  
|Ordinary shares
      in issue                                  |  | 1,434 |   | 1,432 |   | 1,432 |  
|Non-vested
      shares held by employee share ownership trusts |  | (34   | ) | (36   | ) | (37   | )
|                                                                |  |       |   |       |   |       |  
|Basic earnings
      per share denominator                      |  | 1,400 |   | 1,396 |   | 1,395 |  
|Issuable under
      employee share schemes                     |  | 34    |   | 18    |   |      |  
|                                                                |  |       |   |       |   |       |  
|Diluted earnings
      per share denominator                    |  | 1,434 |   | 1,414 |   | 1,395 |  
|                                                                |  |       |   |       |   |       |  

|07 | REMUNERATION OF DIRECTORS
|-- | -------------------------

Section 9 of the
  Remuneration Report on pages 36-40 includes details of directors emoluments,
  pension arrangements, long-term incentive plans and stock option plans, and
  forms part of these financial statements.

|08 | EMPLOYEE
      INFORMATION
|-- | --------------------------

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

|By customer
    segment                   |      |        |      | Restated |      | Restated | 
|----------------------------------------- | ---- | ------ | ---- | -------- | ---- | -------- | 
|                                          | 2004 |        | 2003 |          | 2002 |         
|                                          |      |        |      |          |      |          | 
|Sales &
      Trading                     |      | 334    |      | 285      |      | 143      | 
|Research &
      Asset Management         |      | 765    |      | 1,353    |      | 1,437    | 
|Enterprise                                |      | 324    |      | 343      |      | 439      | 
|Media                                     |      | 70     |      | 93       |      | 140      | 
|                                          |      |        |      |          |      |          | 
|Direct customer
      segment             |      | 1,493  |      | 2,074    |      | 2,159    | 
|Channels                                  |      | 5,074  |      | 5,431    |      | 5,843    | 
|Operations
      & Technology             |      | 3,509  |      | 3,563    |      | 3,633    | 
|Content                                   |      | 3,546  |      | 3,399    |      | 3,348    | 
|Corporate Services                        |      | 1,243  |      | 1,533    |      | 1,619    | 
|                                          |      |        |      |          |      |          | 
|Reuters                                   |      | 14,865 |      | 16,000   |      | 16,602   | 
|Instinet Group                            |      | 1,115  |      | 1,345    |      | 1,731    | 
|                                          |      |        |      |          |      |          | 
|Total                                     |      | 15,980 |      | 17,345   |      | 18,333   | 
|                                          |      |        |      |          |      |          | 
|                                          |      |        |      |          |      |          | 
|By location                               |      |        |      |          |      |          | 
|                                          |      |        |      |          |      |          | 
|Europe, Middle
      East and Africa      |      | 7,781  |      | 8,743    |      | 8,920    | 
|The Americas                              |      | 5,378  |      | 6,065    |      | 6,874    | 
|Asia/Pacific                              |      | 2,821  |      | 2,537    |      | 2,539    | 
|                                          |      |        |      |          |      |          | 
|Total                                     |      | 15,980 |      | 17,345   |      | 18,333   | 
|                                          |      |        |      |          |      |          | 
|                                          |      |        |      |          |      |          | 
|By function                               |      |        |      |          |      |          | 
|                                          |      |        |      |          |      |          | 
|Production
      and communications       |      | 8,868  |      | 9,022    |      | 9,658    | 
|Selling and
      marketing               |      | 4,404  |      | 4,846    |      | 5,146    | 
|Support services
      and administration |      | 2,708  |      | 3,477    |      | 3,529    | 
|                                          |      |        |      |          |      |          | 
|Total                                     |      | 15,980 |      | 17,345   |      | 18,333   | 
|                                          |      |        |      |          |      |          | 
|The above include:                        |      |        |      |          |      |          | 
|Development
      staff                   |      | 2,282  |      | 2,123    |      | 2,109    | 
|                                          |      |        |      |          |      |          | 

The average number
  of employees during 2004 included 181 temporary staff (2003: 211, 2002: 281).
  Staff cost information is included in note 2. Prior periods have been restated
  to reflect changes in the management of the business, as explained in note 1
  on page 44.

|Reuters Group PLC Annual
      Report and Form 20-F 2004 |  | 49
|-------------------------------------------------------- |  | --

---



Back to Contents

CONSOLIDATED
  CASH FLOW STATEMENT for the year ended 31
  December



|                                                                                |  |       |  | 2004 |   | 2003 |   | 2002 |  
|------------------------------------------------------------------------------- |  | ----- |  | ---- | - | ---- | - | ---- | -
|                                                                                |  | Notes |  | £m   |   | £m   |   | £m   |  
|                                                                                |  |       |  |      |   |      |   |      |  
|Net cash
      inflow from operating activities                                 |  | 9     |  | 253  |   | 429  |   | 355  |  
|Dividends
      received from joint ventures and associates                     |  |       |  | 4    |   | 3    |   | 2    |  
|Returns
      on investments and servicing of finance                           |  |       |  |      |   |      |   |      |  
|Interest received                                                               |  |       |  | 19   |   | 17   |   | 20   |  
|Interest paid                                                                   |  |       |  | (30  | ) | (45  | ) | (58  | )
|Income from
      fixed asset investments                                       |  |       |  | 1    |   |     |   | 1    |  
|Dividends paid
      to equity minority interests                               |  |       |  |     |   |     |   | (27  | )
|                                                                                |  |       |  |      |   |      |   |      |  
|Net cash
      outflow from returns on investments and servicing of finance     |  |       |  | (10  | ) | (28  | ) | (64  | )
|Taxation
      paid                                                             |  |       |  | (43  | ) | (33  | ) | (73  | )
|Capital
      expenditure and financial investment                              |  |       |  |      |   |      |   |      |  
|Purchase of
      tangible fixed assets                                         |  |       |  | (109 | ) | (131 | ) | (168 | )
|Sale of tangible
      fixed assets                                             |  |       |  | 66   |   | 13   |   | 15   |  
|Purchase of
      fixed asset investments                                       |  |       |  | (1   | ) | (3   | ) | (80  | )
|Sale of fixed
      asset investments                                           |  |       |  | 25   |   | 11   |   | 22   |  
|                                                                                |  |       |  |      |   |      |   |      |  
|Net cash
      outflow on capital expenditure and financial investment          |  |       |  | (19  | ) | (110 | ) | (211 | )
|Acquisitions
      and disposals (including joint ventures and associates)      |  | 10    |  | 362  |   | (106 | ) | (6   | )
|Equity
      dividends paid                                                     |  |       |  | (140 | ) | (140 | ) | (139 | )
|                                                                                |  |       |  |      |   |      |   |      |  
|Cash inflow/(outflow)
      before management of liquid resources and financing |  |       |  | 407  |   | 15   |   | (136 | )
|Management
      of liquid resources                                            |  |       |  |      |   |      |   |      |  
|Net (increase)/decrease
      in short-term investments                         |  | 10    |  | (164 | ) | (99  | ) | 378  |  
|Financing                                                                       |  |       |  |      |   |      |   |      |  
|Proceeds from
      the issue of shares                                         |  | 26    |  | 6    |   |     |   | 2    |  
|Net decrease
      in borrowings                                                |  | 10    |  | (225 | ) | (13  | ) | (158 | )
|                                                                                |  |       |  |      |   |      |   |      |  
|Net cash
      outflow from financing                                           |  |       |  | (219 | ) | (13  | ) | (156 | )
|                                                                                |  |       |  |      |   |      |   |      |  
|Increase/(decrease)
      in cash                                               |  | 11    |  | 24   |   | (97  | ) | 86   |  
|                                                                                |  |       |  |      |   |      |   |      |  
|                                                                                |  |       |  |      |   |      |   |      |  
|                                                                                |  |       |  |      |   |      |   |      |  
|                                                                                |  |       |  | 2004 |   | 2003 |   | 2002 |  
|                                                                                |  | Notes |  | £m   |   | £m   |   | £m   |  
|                                                                                |  |       |  |      |   |      |   |      |  
|Reconciliation
      of net cash flow to movement in net funds/(debt)           |  |       |  |      |   |      |   |      |  
|Increase/(decrease)
      in cash                                               |  |       |  | 24   |   | (97  | ) | 86   |  
|Cash outflow
      from movement in borrowings                                  |  | 10    |  | 225  |   | 13   |   | 158  |  
|Cash outflow/(inflow)
      from movement in liquid resources                   |  | 10    |  | 164  |   | 99   |   | (378 | )
|                                                                                |  |       |  |      |   |      |   |      |  
|Change in net
      funds/(debt) resulting from cash flows                      |  |       |  | 413  |   | 15   |   | (134 | )
|Net (debt)/funds
      arising on acquisitions/disposals                        |  |       |  | (1   | ) | 3    |   | 1    |  
|Non-cash movements                                                              |  |       |  | 5    |   |     |   |     |  
|Translation
      differences                                                   |  |       |  | (14  | ) | (29  | ) | (71  | )
|                                                                                |  |       |  |      |   |      |   |      |  
|Movement in
      net funds/(debt)                                              |  |       |  | 403  |   | (11  | ) | (204 | )
|Opening net
      (debt)/funds                                                  |  | 11    |  | (77  | ) | (66  | ) | 138  |  
|                                                                                |  |       |  |      |   |      |   |      |  
|Closing
      net funds/(debt)                                                  |  | 11    |  | 326  |   | (77  | ) | (66  | )
|                                                                                |  |       |  |      |   |      |   |      |  



|50 |  | Reuters
      Group PLC Annual Report and Form 20-F 2004
|-- |  | --------------------------------------------------------

---



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NOTES
  ON THE CONSOLIDATED CASH FLOW STATEMENT



|09 | NET
      CASH INFLOW FROM OPERATING ACTIVITIES
|-- | -----------------------------------------------

Operating profit
  is reconciled to net cash inflow from operating activities as follows:

|                                                                    |  |      |   | Restated |   | Restated |  
|------------------------------------------------------------------- |  | ---- | - | -------- | - | -------- | -
|                                                                    |  | 2004 |   | 2003     |   | 2002     |  
|                                                                    |  | £m   |   | £m       |   | £m       |  
|                                                                    |  |      |   |          |   |          |  
|Operating profit/(loss)                                             |  | 197  |   | 130      |   | (142     | )
|Depreciation                                                        |  | 133  |   | 193      |   | 227      |  
|Amortisation
      and impairment of goodwill and other intangibles |  | 76   |   | 121      |   | 315      |  
|(Increase)/decrease
      in stocks                                 |  | (1   | ) | (1       | ) | 2        |  
|Decrease in
      debtors                                           |  | 148  |   | 316      |   | 241      |  
|Decrease in
      creditors                                         |  | (341 | ) | (316     | ) | (314     | )
|Loss on disposal
      of tangible fixed assets                     |  | 3    |   |         |   | 1        |  
|Employee share
      scheme charge/(credit)                         |  | 18   |   | (16      | ) | 1        |  
|Other, principally
      translation differences                    |  | 20   |   | 2        |   | 24       |  
|                                                                    |  |      |   |          |   |          |  
|Net cash
      inflow from operating activities                     |  | 253  |   | 429      |   | 355      |  
|                                                                    |  |      |   |          |   |          |  

|10 | ANALYSIS
      OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT
|-- | ---------------------------------------------------------------------------

|                                                                           |  |        |   |        |  
|-------------------------------------------------------------------------- |  | ------ | - | ------ | -
|                                                                           |  | 2004   |   | 2003   |  
|                                                                           |  | £m     |   | £m     |  
|                                                                           |  |        |   |        |  
|Acquisitions
      and disposals (including joint ventures and associates) |  |        |   |        |  
|Cash consideration:                                                        |  |        |   |        |  
|Subsidiary
      undertakings (see note 31)                                |  | (66    | ) | (155   | )
|Joint
      ventures                                                       |  |       |   |       |  
|Loans
      (repaid to)/from joint ventures and associates (see note 16)   |  | (5     | ) | (3     | )
|Deferred
      payments for acquisitions in prior years                    |  | (8     | ) | (11    | )
|                                                                           |  |        |   |        |  
|                                                                           |  | (79    | ) | (169   | )
|Less cash disposed
      (net of cash acquired)                            |  | (13    | ) | 38     |  
|                                                                           |  |        |   |        |  
|                                                                           |  | (92    | ) | (131   | )
|Cash received
      from disposals (including deemed disposals):           |  |        |   |        |  
|Subsidiary
      undertakings                                              |  | 70     |   | 10     |  
|Joint
      ventures and associates                                        |  | 379    |   | 15     |  
|Instinet
      (deemed disposal)                                           |  | 5      |   |       |  
|                                                                           |  |        |   |        |  
|Net cash inflow/(outflow)
      on acquisitions and disposals              |  | 362    |   | (106   | )
|                                                                           |  |        |   |        |  
|Management
      of liquid resources                                       |  |        |   |        |  
|(Increase)/decrease
      in term deposits                                 |  | (39    | ) | (5     | )
|Sale of certificates
      of deposit                                      |  |       |   |       |  
|Purchase of
      listed/unlisted securities                               |  | (2,083 | ) | (3,582 | )
|Sale of listed/unlisted
      securities                                   |  | 1,958  |   | 3,488  |  
|                                                                           |  |        |   |        |  
|Net cash (outflow)/inflow
      from movement in short-term investments    |  | (164   | ) | (99    | )
|                                                                           |  |        |   |        |  
|Financing                                                                  |  |        |   |        |  
|Decrease in
      short-term borrowings                                    |  | (168   | ) | (78    | )
|(Decrease)/increase
      in long-term borrowings                          |  | (57    | ) | 65     |  
|                                                                           |  |        |   |        |  
|Net cash outflow
      from movement in borrowings                         |  | (225   | ) | (13    | )
|                                                                           |  |        |   |        |  

|11 | ANALYSIS
      OF NET FUNDS
|-- | ---------------------------

|                                          |  |                |  |            |  |                |   |             |  |                             |   |                 |  |       |  
|----------------------------------------- |  | -------------- |  | ---------- |  | -------------- | - | ----------- |  | --------------------------- | - | --------------- |  | ----- | -
|                                          |  |                |  |            |  |                |   |             |  | Bank/other
      borrowings |   |                 | 
|                                          |  |                |  |            |  |                |   |             |  |                             |   |                 |  |       |  
|                                          |  |                |  |            |  |                |   |             |  |                             |   | Falling         |  |       |  
|                                          |  | Cash
      at  |  |            |  | Total          |   |             |  | Falling                     |   | due
      after |  |       |  
|                                          |  | bank
      and |  |            |  | cash
      and |   | Short-term  |  | due
      within            |   | more
      than |  |       |  
|                                          |  | in
      hand  |  | Overdrafts |  | overdrafts     |   | investments |  | one
      year              |   | one
      year  |  | Total |  
|                                          |  | £m             |  | £m         |  | £m             |   | £m          |  | £m                          |   | £m              |  | £m    |  
|                                          |  |                |  |            |  |                |   |             |  |                             |   |                 |  |       |  
|31 December
      2002                    |  | 158            |  | (19)       |  | 139            |   | 570         |  | (422                        | ) | (353)           |  | (66   | )
|Cash flow                                 |  | (86)           |  | (11)       |  | (97            | ) | 99          |  | 78                          |   | (65)            |  | 15    |  
|Exchange movements                        |  |               |  | 1          |  | 1              |   | (50)        |  | 8                           |   | 12              |  | (29   | )
|Arising on
      acquisition              |  |               |  |           |  |               |   | 3           |  |                            |   |                |  | 3     |  
|                                          |  |                |  |            |  |                |   |             |  |                             |   |                 |  |       |  
|31 December
      2003                    |  | 72             |  | (29)       |  | 43             |   | 622         |  | (336                        | ) | (406)           |  | (77   | )
|Cash flow                                 |  | 13             |  | 11         |  | 24             |   | 164         |  | 168                         |   | 57              |  | 413   |  
|Non-cash movements                        |  |               |  |           |  |               |   | 5           |  |                            |   |                |  | 5     |  
|Exchange movements                        |  | (2)            |  | 1          |  | (1             | ) | (36)        |  | 4                           |   | 19              |  | (14   | )
|Arising on
      (disposals)/acquisitions |  |               |  |           |  |               |   | (2)         |  |                            |   | 1               |  | (1    | )
|                                          |  |                |  |            |  |                |   |             |  |                             |   |                 |  |       |  
|31
      December 2004                    |  | 83             |  | (17)       |  | 66             |   | 753         |  | (164                        | ) | (329)           |  | 326   |  
|                                          |  |                |  |            |  |                |   |             |  |                             |   |                 |  |       |  



|Reuters Group PLC Annual
      Report and Form 20-F 2004 |  | 51
|-------------------------------------------------------- |  | --

---



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NOTES
  ON THE CONSOLIDATED CASH FLOW STATEMENTcontinued



|12 | DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS
|-- | -------------------------------------------

Discussion of the
  Groups objectives and policies for the management of financial instruments
  and associated risks together with information relating to hedging activities
  is included under Treasury policies, financing and foreign exchange
  in the Operating and Financial Review on pages 21-22.

A substantial portion
  of Reuters Group revenue is receivable in foreign currencies with terms of payment
  up to three months in advance. As such, Reuters Group is subject to currency
  exposure from committed revenue and, additionally, to interest rate risk from
  borrowing and the investment of cash balances. Reuters 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, Reuters Group would be subject to market risk on these
  financial instruments from fluctuations in currency and interest rates. Reuters
  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.

|                                          |  |          |  |          |   |       |   |          |  |          |  |       |   |          |  |          |   |       |  
|----------------------------------------- |  | -------- |  | -------- | - | ----- | - | -------- |  | -------- |  | ----- | - | -------- |  | -------- | - | ----- | -
|                                          |  |          |  |          |   | 2004  |   |          |  |          |  | 2003  |   |          |  |          |   | 2002  |  
|                                          |  |          |  |          |   |       |   |          |  |          |  |       |   |          |  |          |   |       |  
|                                          |  | Gross    |  |          |   |       |   | Gross    |  |          |  |       |   | Gross    |  |          |   |       |  
|                                          |  | contract |  | Carrying |   | Fair  |   | contract |  | Carrying |  | Fair  |   | contract |  | Carrying |   | Fair  |  
|                                          |  | amounts  |  | value    |   | value |   | amounts  |  | value    |  | value |   | amounts  |  | value    |   | value |  
|                                          |  | £m       |  | £m       |   | £m    |   | £m       |  | £m       |  | £m    |   | £m       |  | £m       |   | £m    |  
|                                          |  |          |  |          |   |       |   |          |  |          |  |       |   |          |  |          |   |       |  
|Foreign exchange
      forward contracts: |  |          |  |          |   |       |   |          |  |          |  |       |   |          |  |          |   |       |  
|Contracts
      in profit                 |  | 124      |  | 1        |   | 1     |   | 102      |  |         |  | 1     |   | 96       |  |         |   | 7     |  
|Contracts
      in loss                   |  | 271      |  | (1       | ) | (1    | ) | 63       |  |         |  | (1    | ) | 154      |  |         |   | (6    | )
|Foreign currency
      options:           |  |          |  |          |   |       |   |          |  |          |  |       |   |          |  |          |   |       |  
|Contracts
      in profit                 |  |         |  |         |   |      |   | 23       |  |         |  | 1     |   | 194      |  | 2        |   | 1     |  
|Contracts
      in loss                   |  |         |  |         |   |      |   | 88       |  |         |  | (1    | ) | 60       |  |         |   | (1    | )
|Currency and
      interest rate swaps:   |  |          |  |          |   |       |   |          |  |          |  |       |   |          |  |          |   |       |  
|Contracts
      in profit                 |  | 373      |  | 54       |   | 64    |   | 614      |  | 26       |  | 27    |   | 361      |  | 12       |   | 16    |  
|Contracts
      in loss                   |  | 5        |  |         |   |      |   | 67       |  |         |  |      |   | 203      |  | (14      | ) | (17   | )
|                                          |  |          |  |          |   |       |   |          |  |          |  |       |   |          |  |          |   |       |  
|Total                                     |  | 773      |  | 54       |   | 64    |   | 957      |  | 26       |  | 27    |   | 1,068    |  |         |   |      |  
|                                          |  |          |  |          |   |       |   |          |  |          |  |       |   |          |  |          |   |       |  

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.

The following table
  provides an analysis by currency of derivative contracts held for currency hedging
  purposes as at 31 December. Comparatives have been restated to reflect the inclusion
  of Swiss franc in the analysis.

|             |  |       |  |          |  |         |  |       |  |          |  | Restated |  |       |  |          |  | Restated | 
|------------ |  | ----- |  | -------- |  | ------- |  | ----- |  | -------- |  | -------- |  | ----- |  | -------- |  | -------- | 
|             |  |       |  |          |  | 2004    |  |       |  |          |  | 2003     |  |       |  |          |  | 2002     | 
|             |  |       |  |          |  |         |  |       |  |          |  |          |  |       |  |          |  |          | 
|             |  | Swaps |  | Forwards |  | Options |  | Swaps |  | Forwards |  | Options  |  | Swaps |  | Forwards |  | Options  | 
|             |  | %     |  | %        |  | %       |  | %     |  | %        |  | %        |  | %     |  | %        |  | %        | 
|             |  |       |  |          |  |         |  |       |  |          |  |          |  |       |  |          |  |          | 
|Euro         |  | 8     |  | 28       |  |        |  | 5     |  | 51       |  | 100      |  |      |  | 54       |  | 100      | 
|Japanese yen |  | 3     |  | 2        |  |        |  | 9     |  | 3        |  |         |  |      |  | 33       |  |         | 
|Swiss franc  |  | 19    |  | 15       |  |        |  | 13    |  | 3        |  |         |  |      |  |         |  |         | 
|US dollar    |  | 70    |  | 37       |  |        |  | 73    |  | 30       |  |         |  |      |  |         |  |         | 
|Other        |  |      |  | 18       |  |        |  |      |  | 13       |  |         |  |      |  | 13       |  |         | 
|             |  |       |  |          |  |         |  |       |  |          |  |          |  |       |  |          |  |          | 
|Total        |  | 100   |  | 100      |  |        |  | 100   |  | 100      |  | 100      |  |      |  | 100      |  | 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.

|52 |  | Reuters
      Group PLC Annual Report and Form 20-F 2004
|-- |  | --------------------------------------------------------

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|12 | DERIVATIVES AND OTHER FINANCIAL INSTRUMENTScontinued
|-- | ----------------------------------------------------

The results of currency
  and interest rate hedging activities for the three years to December 2004 are
  as summarised below:

|                                |  |      |  | Year
      to 31 December |  
|------------------------------- |  | ---- |  | ------------------------- | -
|                                |  |      |  |                           |  
|                                |  | 2004 |  | 2003                      |  
|Recognised
      gains/(losses) |  | £m   |  | £m                        |  
|                                |  |      |  |                           |  
|Currency hedging                |  | 29   |  | 11                        |  
|Interest rate
      hedging     |  | 10   |  | (3                        | )
|                                |  |      |  |                           |  

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.

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:

|                                                 |  | 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 compared to £1 million at 31 December 2003 and £nil at 31 December
  2002.

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% (2003: 3%,
  2002: 4%). 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 Group 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  |   |          |   | 2003  |   |          |   | 2002  |  
|--------------------------------------------- |  | -------- | - | ----- | - | -------- | - | ----- | - | -------- | - | ----- | -
|                                              |  |          |   |       |   |          |   |       |   |          |   |      
|                                              |  | Carrying |   | Fair  |   | Carrying |   | Fair  |   | Carrying |   | Fair  |  
|                                              |  | value    |   | value |   | value    |   | value |   | value    |   | value |  
|                                              |  | £m       |   | £m    |   | £m       |   | £m    |   | £m       |   | £m    |  
|                                              |  |          |   |       |   |          |   |       |   |          |   |       |  
|Derivative
      instruments                  |  | 54       |   | 64    |   | 26       |   | 27    |   |         |   |      |  
|Other financial
      assets:                 |  |          |   |       |   |          |   |       |   |          |   |       |  
|Fixed
      asset investments                 |  | 28       |   | 34    |   | 54       |   | 73    |   | 66       |   | 67    |  
|Long-term
      debtors                       |  | 20       |   | 20    |   | 21       |   | 21    |   | 12       |   | 12    |  
|Investments
      held for sale (see note 16) |  | 108      |   | 194   |   |         |   |      |   |         |   |      |  
|Other
      short-term investments and cash   |  | 836      |   | 836   |   | 694      |   | 694   |   | 728      |   | 728   |  
|Other financial
      liabilities:            |  |          |   |       |   |          |   |       |   |          |   |       |  
|Short-term
      borrowings                   |  | (181     | ) | (181  | ) | (365     | ) | (365  | ) | (441     | ) | (441  | )
|Long-term
      borrowings                    |  | (329     | ) | (329  | ) | (406     | ) | (406  | ) | (353     | ) | (353  | )
|Other
      financial liabilities             |  | (97      | ) | (97   | ) | (113     | ) | (113  | ) | (88      | ) | (88   | )
|                                              |  |          |   |       |   |          |   |       |   |          |   |       |  

The fair value
  of fixed asset investments and investments held for sale is the carrying value
  unless the investment has a readily determinable market value which is higher.

The fair value
  of listed short-term investments was based on quoted market prices for those
  investments. The carrying amount of the other short-term deposits and investments
  approximated to their fair values due to the short maturity of the instruments
  held.

The fair value
  of short-term borrowings approximated to the carrying value due to the short
  maturity of the investments.

Short-term debtors
  and creditors have been excluded from the above analysis and all other disclosures
  in this note, other than the currency risk disclosures.



|Reuters Group PLC Annual
      Report and Form 20-F 2004 |  | 53
|-------------------------------------------------------- |  | --

---



Back to Contents

NOTES
  ON THE CONSOLIDATED CASH FLOW STATEMENTcontinued



|12 | DERIVATIVES AND OTHER FINANCIAL INSTRUMENTScontinued
|-- | ----------------------------------------------------

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:

i) 1% increase
  in the specific rate of interest from the levels effective at 31 December 2004
  with all other variables remaining constant; and

ii) 10% weakening
  in the value of sterling against all other currencies from the levels applicable
  at 31 December 2004 with all other variables remaining constant.

|                                       |                      |                    |  |     |   | Fair value
      changes |  
|-------------------------------------- | -------------------- | ------------------ |  | --- | - | ------------------------ | -
|                                       |                      | arising from      
|                                       |                      | 10% weakening     
|                                       | 1% increase
      in | in £
      against
|                                       | interest
      rates | other currencies  
|Fair value                             | (adverse)            | (adverse)         
|£m                                     | £m                   | £m                
|                                       |                      |                    |  |     |   |                          |  
|Currency and
      interest rate swaps |                      | 64                 |  | (27 | ) | (10                      | )
|Forward contracts                      |                      |                   |  |    |   | (16                      | )
|                                       |                      |                    |  |     |   |                          |  
|Total                                  |                      | 64                 |  | (27 | ) | (26                      | )
|                                       |                      |                    |  |     |   |                          |  

Monetary assets
  and liabilities by currency, after cross-currency swaps, excluding the functional
  currency of each operation at 31 December 2004, were:

|                                        | Net
      foreign currency monetary assets/(liabilities) |     
|--------------------------------------- | -------------------------------------------------------- | ----
|                                        |                                                         
|                                        |                                                          |     
|Sterling                                | US dollar                                                | Euro
|£m                                      | £m                                                       | £m  
|                                        |                                                          |     
|Functional
      currency of operation: |                                                          |     
|Sterling                                |                                                          |    
|US
      dollar                         |                                                          | (15 
|Euro                                    |                                                          |    
|Swiss
      franc                       |                                                          | (23 
|Japanese
      yen                      |                                                          | 1   
|Hong
      Kong dollar                  |                                                          | 1   
|Other                                   |                                                          |    
|                                        |                                                          |     
|Total                                   |                                                          | (36 
|                                        |                                                          |     

Exchange differences
  that arise as a consequence of trading transactions and the translation of monetary
  assets and liabilities are taken to the profit and loss account. In accordance
  with the Groups accounting policy, exchange differences attributable to
  long-term foreign currency borrowings used to finance the Groups foreign
  currency investments are taken directly to reserves. Consequently, long-term
  foreign currency borrowings have been excluded from the above table.

The currency and
  interest rate profile of the Groups financial assets at 31 December 2004
  was:

|                       |                     |             |                        |                      |                        | Cash
      and short-term investments |  | Fixed
      rate investments | 
|---------------------- | ------------------- | ----------- | ---------------------- | -------------------- | ---------------------- | ------------------------------------- |  | ---------------------------- | 
|                       |                    
|                       |                     |             | Weighted
      average |                      | Weighted
      average
|Non-interest           | Floating
      rate | Fixed rate  | interest
      rate at | time for
      which
|Total                  | bearing assets      | investments | investments            | 31 December          | rate is fixed         
|£m                     | £m                  | £m          | £m                     | %                    | Years                 
|                       |                     |             |                        |                      |                        |                                       |  |                              | 
|Sterling               |                     | 416         |                        | 80                   |                        | 336                                   |  |                             | 
|US dollar              |                     | 469         |                        | 58                   |                        | 411                                   |  |                             | 
|Euro                   |                     | 33          |                        | 7                    |                        | 26                                    |  |                             | 
|Other                  |                     | 74          |                        | 11                   |                        | 58                                    |  | 5                            | 
|                       |                     |             |                        |                      |                        |                                       |  |                              | 
|31
      December 2004 |                     | 992         |                        | 156                  |                        | 831                                   |  | 5                            | 
|                       |                     |             |                        |                      |                        |                                       |  |                              | 
|31 December
      2003 |                     | 769         |                        | 75                   |                        | 673                                   |  | 21                           | 
|31 December
      2002 |                     | 806         |                        | 78                   |                        | 717                                   |  | 11                           | 
|                       |                     |             |                        |                      |                        |                                       |  |                              | 

Interest on floating
  rate investments is earned at rates based on local money market rates. Floating
  rate investments include £370 million (2003: £303 million, 2002:
  £135 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.



|54 |  | Reuters Group
      PLC Annual Report and Form 20-F 2004
|-- |  | --------------------------------------------------------

---



Back to Contents

|12 | DERIVATIVES AND OTHER FINANCIAL INSTRUMENTScontinued
|-- | ----------------------------------------------------

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                  |                    
|financial              | Floating
      rate
|Total                  | liabilities         | borrowings
|£m                     | £m                  | £m        
|                       |                     |            |  |     |  |            | 
|Sterling               |                     | 280        |  | 60  |  | 220        | 
|US dollar              |                     | 271        |  | 21  |  | 250        | 
|Euro                   |                     | 25         |  | 13  |  | 12         | 
|Swiss franc            |                     | 27         |  | 2   |  | 25         | 
|Other                  |                     | 4          |  | 1   |  | 3          | 
|                       |                     |            |  |     |  |            | 
|31
      December 2004 |                     | 607        |  | 97  |  | 510        | 
|                       |                     |            |  |     |  |            | 
|31 December
      2003 |                     | 884        |  | 113 |  | 771        | 
|31 December
      2002 |                     | 882        |  | 88  |  | 794        | 
|                       |                     |            |  |     |  |            | 

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 interest rate on borrowings at 31 December 2004 was 4% (2003: 4%, 2002:
  4%). The above analysis excludes creditors falling due within one year which
  are of a non-financial nature.

Total financial
  liabilities are repayable as follows:

|                                 |  | 2004                        |              | 2003 |                             | 2002         | 
|-------------------------------- |  | --------------------------- | ------------ | ---- | --------------------------- | ------------ | 
|                                 |  |                            
|Borrowings£      m               |  | Otherfinancialliabilities£m | Borrowings£m |      | Otherfinancialliabilities£m | Borrowings£m | 
|financial                       
|liabilities                     
|£m                              
|                                 |  |                             |              |      |                             |              | 
|Within one
      year            |  | 181                         |              | 32   |                             | 365          | 
|Between one
      and two years  |  | 19                          |              | 19   |                             | 58           | 
|Between two
      and five years |  | 5                           |              | 18   |                             | 24           | 
|Over five years                  |  | 305                         |              | 28   |                             | 324          | 
|                                 |  |                             |              |      |                             |              | 
|Total                            |  | 510                         |              | 97   |                             | 771          | 
|                                 |  |                             |              |      |                             |              | 

In April 2003,
  Reuters entered into a committed syndicated credit facility for £1.0 billion.
  £520 million of the facility either expired or was voluntarily cancelled
  in 2004. At 31 December 2004, Reuters had £480 million available under
  the facility. The facility was undrawn during 2004. The commitment expires and
  final repayment is due in April 2008.

At the same time
  as the syndicated credit facility was arranged, committed bilateral facilities
  of £90 million were also put in place on similar terms. During 2004, £66
  million of the facilities either expired or were voluntarily cancelled. At 31
  December 2004, Reuters had £24 million available, all of which was undrawn.
  No loans were outstanding under this facility during 2004.

In addition, at
  31 December 2004, the Group had unused, short-term, uncommitted bank borrowing
  facilities denominated in various currencies, the sterling equivalent of which
  was approximately £200 million, at money market rates varying principally
  between 2% and 6%, depending on the currency.



|Reuters
      Group PLC Annual Report and Form 20-F 2004 |  | 55
|-------------------------------------------------------- |  | --

---



Back to Contents

CONSOLIDATED
  BALANCE SHEETat 31
  December



|                                                              |  |       |  |        |   |  | Restated |   |  | Restated |  
|------------------------------------------------------------- |  | ----- |  | ------ | - |  | -------- | - |  | -------- | -
|                                                              |  |       |  | 2004   |   |  | 2003     |   |  | 2002     |  
|                                                              |  | Notes |  | £m     |   |  | £m       |   |  | £m       |  
|                                                              |  |       |  |        |   |  |          |   |  |          |  
|Fixed
      assets                                            |  |       |  |        |   |  |          |   |  |          |  
|Intangible
      assets                                       |  | 14    |  | 268    |   |  | 375      |   |  | 418      |  
|Tangible assets                                               |  | 15    |  | 355    |   |  | 481      |   |  | 601      |  
|Investments                                                   |  | 16    |  |        |   |  |          |   |  |          |  
|Investments
      in joint ventures:                          |  |       |  |        |   |  |          |   |  |          |  
|Share
      of gross assets                                   |  |       |  | 110    |   |  | 108      |   |  | 207      |  
|Share
      of gross liabilities                              |  |       |  | (50    | ) |  | (56      | ) |  | (110     | )
|                                                              |  |       |  | 60     |   |  | 52       |   |  | 97       |  
|Share
      of net assets of associates                       |  |       |  | 23     |   |  | 230      |   |  | 266      |  
|Other
      investments                                       |  |       |  | 28     |   |  | 54       |   |  | 66       |  
|                                                              |  |       |  |        |   |  |          |   |  |          |  
|                                                              |  |       |  | 734    |   |  | 1,192    |   |  | 1,448    |  
|                                                              |  |       |  |        |   |  |          |   |  |          |  
|Current
      assets                                          |  |       |  |        |   |  |          |   |  |          |  
|Stock                                                         |  | 17    |  | 3      |   |  | 2        |   |  | 1        |  
|Debtors                                                       |  | 18    |  | 544    |   |  | 708      |   |  | 1,019    |  
|Deferred taxation                                             |  | 24    |  | 234    |   |  | 273      |   |  | 260      |  
|Investments:                                                  |  |       |  |        |   |  |          |   |  |          |  
|Investments
      held for sale                               |  | 16    |  | 108    |   |  |         |   |  |         |  
|Other
      short-term investments                            |  | 19    |  | 753    |   |  | 622      |   |  | 570      |  
|Cash at bank
      and in hand                                |  |       |  | 83     |   |  | 72       |   |  | 158      |  
|                                                              |  |       |  |        |   |  |          |   |  |          |  
|                                                              |  |       |  | 1,725  |   |  | 1,677    |   |  | 2,008    |  
|Creditors:
      Amounts falling due within one year          |  | 20    |  | (1,257 | ) |  | (1,766   | ) |  | (2,198   | )
|                                                              |  |       |  |        |   |  |          |   |  |          |  
|Net current
      assets/(liabilities)                        |  |       |  | 468    |   |  | (89      | ) |  | (190     | )
|                                                              |  |       |  |        |   |  |          |   |  |          |  
|Total
      assets less current liabilities                   |  |       |  | 1,202  |   |  | 1,103    |   |  | 1,258    |  
|Creditors:
      Amounts falling due after more than one year |  | 21    |  | (348   | ) |  | (425     | ) |  | (354     | )
|Provisions
      for liabilities and charges                  |  |       |  |        |   |  |          |   |  |          |  
|Pensions and
      similar obligations                        |  | 23    |  | (49    | ) |  | (63      | ) |  | (59      | )
|Deferred taxation                                             |  | 24    |  | (29    | ) |  | (33      | ) |  | (27      | )
|Other provisions                                              |  | 25    |  | (164   | ) |  | (175     | ) |  | (159     | )
|                                                              |  |       |  |        |   |  |          |   |  |          |  
|Net assets                                                    |  |       |  | 612    |   |  | 407      |   |  | 659      |  
|                                                              |  |       |  |        |   |  |          |   |  |          |  
|Capital
      and reserves                                    |  | 26    |  |        |   |  |          |   |  |          |  
|Called-up share
      capital                                 |  |       |  | 359    |   |  | 358      |   |  | 358      |  
|Share premium
      account                                   |  |       |  | 96     |   |  | 91       |   |  | 91       |  
|Other reserve                                                 |  |       |  | (1,717 | ) |  | (1,717   | ) |  | (1,717   | )
|Capital redemption
      reserve                              |  |       |  | 1      |   |  | 1        |   |  | 1        |  
|Profit and
      loss account reserve                         |  |       |  | 1,673  |   |  | 1,479    |   |  | 1,695    |  
|                                                              |  |       |  |        |   |  |          |   |  |          |  
|Shareholders
      equity                                    |  |       |  | 412    |   |  | 212      |   |  | 428      |  
|Equity minority
      interests                               |  |       |  | 200    |   |  | 195      |   |  | 231      |  
|                                                              |  |       |  |        |   |  |          |   |  |          |  
|Capital
      employed                                        |  |       |  | 612    |   |  | 407      |   |  | 659      |  
|                                                              |  |       |  |        |   |  |          |   |  |          |  

Restated following
  the adoption of UITF17 and UITF38 (see Accounting Basis on page
  72).

The balance sheet
  of Reuters Group PLC is shown on page 71.

The financial statements
  on pages 43-73 and the Summary of differences between UK and US generally
  accepted accounting principles on pages 74-80 were approved by the directors
  on 7 March 2005.

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



|56 |  | Reuters Group
      PLC Annual Report and Form 20-F 2004
|-- |  | --------------------------------------------------------

---



Back to Contents

RECONCILIATION
  OF MOVEMENTS IN SHAREHOLDERS FUNDSfor
  the year ended 31 December



|                                                                            |  |      |   |  | Restated |   | Restated |  
|--------------------------------------------------------------------------- |  | ---- | - |  | -------- | - | -------- | -
|                                                                            |  | 2004 |   |  | 2003     |   | 2002     |  
|                                                                            |  | £m   |   |  | £m       |   | £m       |  
|                                                                            |  |      |   |  |          |   |          |  
|Retained profit/(loss)
      for the period                                 |  | 211  |   |  | (90      | ) | (394     | )
|Unrealised
      gain on deemed partial disposal of subsidiary undertakings |  |     |   |  |         |   | 1        |  
|Unrealised
      gain on deemed partial disposal of associates              |  |     |   |  |         |   | 12       |  
|Unrealised
      gain on disposal of fixed asset investments                |  |     |   |  |         |   | 10       |  
|Translation
      differences taken directly to reserves                    |  | (25  | ) |  | (113     | ) | (95      | )
|Taxation on
      translation differences taken directly to reserves        |  | (10  | ) |  |         |   |         |  
|Shares issued
      during the year                                         |  | 6    |   |  |         |   | 2        |  
|Amounts credited/(charged)
      in respect of employee share schemes       |  | 18   |   |  | (13      | ) | 1        |  
|Purchase of
      own shares                                                |  |     |   |  |         |   | (65      | )
|                                                                            |  |      |   |  |          |   |          |  
|Net movement
      in shareholders equity                                  |  | 200  |   |  | (216     | ) | (528     | )
|                                                                            |  |      |   |  |          |   |          |  
|Opening shareholders
      equity as previously stated                     |  | 286  |   |  | 496      |   | 1,109    |  
|Prior period
      adjustment (see Accounting Basis on page 72)           |  | (74  | ) |  | (68      | ) | (153     | )
|                                                                            |  |      |   |  |          |   |          |  
|Opening shareholders
      equity as restated                              |  | 212  |   |  | 428      |   | 956      |  
|                                                                            |  |      |   |  |          |   |          |  
|Closing
      shareholders equity                                          |  | 412  |   |  | 212      |   | 428      |  
|                                                                            |  |      |   |  |          |   |          |  
|

NOTES ON
  THE CONSOLIDATED BALANCE SHEET

|13 | SEGMENTAL
      ANALYSIS
|-- | ------------------------

The tables below
  show total assets and non-interest bearing net assets by Customer Segment and
  by location on a basis consistent with the segmental analysis of profit in note
  1. For the reasons discussed in that note, the assets in any location are not
  matched with the revenue earned in that location.

|By
      customer segment                          |      |              |      |          |       |          |       |  |      |          |  | Non-interestbearing
    net assets |  
|-------------------------------------------------- | ---- | ------------ | ---- | -------- | ----- | -------- | ----- |  | ---- | -------- |  | ---------------------------------- | -
|                                                   |      | Total assets |     
|                                                   |     
|                                                   |      |              |      | Restated |       | Restated |       |  |      | Restated |  | Restated                          
|2004                                               | 2003 | 2002         | 2004 | 2003     | 2002 
|£m                                                 | £m   | £m           | £m   | £m       | £m   
|                                                   |      |              |      |          |       |          |       |  |      |          |  |                                    |  
|Sales &
      Trading                              |      | 157          |      |          | 303   |          | 353   |  | 59   |          |  | 173                                |  
|Research &
      Asset Management                  |      | 130          |      |          | 111   |          | 132   |  | 82   |          |  | 29                                 |  
|Enterprise                                         |      | 39           |      |          | 34    |          | 54    |  | 11   |          |  | (8                                 | )
|Media                                              |      | 32           |      |          | 118   |          | 145   |  | 12   |          |  | 47                                 |  
|                                                   |      |              |      |          |       |          |       |  |      |          |  |                                    |  
|Total Customer
      Segment                       |      | 358          |      |          | 566   |          | 684   |  | 164  |          |  | 241                                |  
|Channels                                           |      | 135          |      |          | 355   |          | 395   |  | 21   |          |  | 204                                |  
|Operations
      & Technology                      |      | 317          |      |          | 258   |          | 378   |  | 201  |          |  | 155                                |  
|Content                                            |      | 22           |      |          | 27    |          | 27    |  | (51  | )        |  | (55                                | )
|Corporate Services                                 |      | 57           |      |          | 98    |          | 117   |  | 30   |          |  | 61                                 |  
|Central                                            |      | 652          |      |          | 411   |          | 511   |  | (109 | )        |  | (113                               | )
|Instinet Group                                     |      | 918          |      |          | 1,154 |          | 1,344 |  | 30   |          |  | (9                                 | )
|                                                   |      |              |      |          |       |          |       |  |      |          |  |                                    |  
|Total assets/non-interest
      bearing net assets |      | 2,459        |      |          | 2,869 |          | 3,456 |  | 286  |          |  | 484                                |  
|                                                   |      |              |      |          |       |          |       |  |      |          |  |                                    |  
|Interest bearing
      net assets/(liabilities)    |      |              |      |          |       |          |       |  | 326  |          |  | (77                                | )
|                                                   |      |              |      |          |       |          |       |  |      |          |  |                                    |  
|Total
      net assets                             |      |              |      |          |       |          |       |  | 612  |          |  | 407                                |  
|                                                   |      |              |      |          |       |          |       |  |      |          |  |                                    |  

Central total assets
  by customer segment consist principally of Reuters cash and short-term investments.

|                                                   |      | Total
      assets |      | Non-interestbearing
      net assets |     
|-------------------------------------------------- | ---- | ------------------ | ---- | ------------------------------------ | ----
|                                                   |      |                    |      |                                     
|By
      location                                  |      |                    |      | Restated                             |     
|2004                                               | 2003 | 2002               | 2004 | 2003                                 | 2002
|£m                                                 | £m   | £m                 | £m   | £m                                   | £m  
|                                                   |      |                    |      |                                      |     
|Europe, Middle
      East and Africa               |      | 647                |      | 974                                  |     
|The Americas                                       |      | 1,072              |      | 1,323                                |     
|Asia/Pacific                                       |      | 157                |      | 157                                  |     
|Central                                            |      | 583                |      | 415                                  |     
|                                                   |      |                    |      |                                      |     
|Total assets/non-interest
      bearing net assets |      | 2,459              |      | 2,869                                |     
|                                                   |      |                    |      |                                      |     
|Fixed assets                                       |      | 734                |      | 1,192                                |     
|Current assets                                     |      | 1,725              |      | 1,677                                |     
|                                                   |      |                    |      |                                      |     
|Total
      assets                                 |      | 2,459              |      | 2,869                                |     
|                                                   |      |                    |      |                                      |     

Central total assets
  by location consist principally of those assets held by head office operations
  together with unamortised goodwill and other intangibles.



|Reuters
      Group PLC Annual Report and Form 20-F 2004 |  | 57
|-------------------------------------------------------- |  | --

---



Back to Contents

NOTES
  ON THE CONSOLIDATED BALANCE SHEETcontinued



|14 | INTANGIBLE
      ASSETS
|-- | -----------------------



|                                                  |                       |          |   |           |   |             |   | Technology |   |        |  
|------------------------------------------------- | --------------------- | -------- | - | --------- | - | ----------- | - | ---------- | - | ------ | -
|                                                  |                       |          |   | Goodwill  |   | Trade names |   | know-how   |   | Total  |  
|                                                  |                       |          |   | £m        |   | £m          |   | £m         |   | £m     |  
|                                                  |                       |          |   |           |   |             |   |            |   |        |  
|Cost                                              |                       |          |   |           |   |             |   |            |   |        |  
|31
      December 2003                            |                       |          |   | 1,036     |   | 39          |   | 161        |   | 1,236  |  
|Exchange
      differences                        |                       |          |   | (30       | ) |            |   | (7         | ) | (37    | )
|Additions                                         |                       |          |   | 6         |   |            |   | 1          |   | 7      |  
|Disposals                                         |                       |          |   | (82       | ) |            |   |           |   | (82    | )
|Adjustments
      (see note 31 on page 69)        |                       |          |   | (6        | ) |            |   |           |   | (6     | )
|                                                  |                       |          |   |           |   |             |   |            |   |        |  
|31
      December 2004                            |                       |          |   | 924       |   | 39          |   | 155        |   | 1,118  |  
|                                                  |                       |          |   |           |   |             |   |            |   |        |  
|Amortisation
      and impairment                 |                       |          |   |           |   |             |   |            |   |        |  
|31
      December 2003                            |                       |          |   | (798      | ) | (11         | ) | (52        | ) | (861   | )
|Exchange
      differences                        |                       |          |   | 16        |   |            |   | 3          |   | 19     |  
|Disposals                                         |                       |          |   | 68        |   |            |   |           |   | 68     |  
|Charged
      in the year:                        |                       |          |   |           |   |             |   |            |   |        |  
|Amortisation                                      |                       |          |   | (38       | ) | (3          | ) | (21        | ) | (62    | )
|Impairment                                        |                       |          |   | (14       | ) |            |   |           |   | (14    | )
|                                                  |                       |          |   |           |   |             |   |            |   |        |  
|31
      December 2004                            |                       |          |   | (766      | ) | (14         | ) | (70        | ) | (850   | )
|                                                  |                       |          |   |           |   |             |   |            |   |        |  
|Net
      book amount                             |                       |          |   |           |   |             |   |            |   |        |  
|31
      December 2004                            |                       |          |   | 158       |   | 25          |   | 85         |   | 268    |  
|                                                  |                       |          |   |           |   |             |   |            |   |        |  
|31
      December 2003                            |                       |          |   | 238       |   | 28          |   | 109        |   | 375    |  
|                                                  |                       |          |   |           |   |             |   |            |   |        |  
|                                                  |                       |          |   |           |   |             |   |            |   |        |  
|15                                                | TANGIBLE
      ASSETS
|                                                  |                       |          |   |           |   |             |   |            |   |        |  
|                                                  |                       |          |   |           |   |             |   | Office     |   |        |  
|                                                  |                       |          |   |           |   | Computer    |   | equipment  |   |        |  
|                                                  |                       | Freehold |   | Leasehold |   | systems     |   | and motor  |   |        |  
|                                                  |                       | property |   | property  |   | equipment   |   | vehicles   |   | Total  |  
|                                                  |                       | £m       |   | £m        |   | £m          |   | £m         |   | £m     |  
|                                                  |                       |          |   |           |   |             |   |            |   |        |  
|Cost                                              |                       |          |   |           |   |             |   |            |   |        |  
|31
      December 2003                            |                       | 245      |   | 214       |   | 1,040       |   | 247        |   | 1,746  |  
|Exchange
      differences                        |                       | (6       | ) | (12       | ) | (34         | ) | (10        | ) | (62    | )
|Additions                                         |                       | 1        |   | 32        |   | 69          |   | 9          |   | 111    |  
|Disposals                                         |                       | (83      | ) | (47       | ) | (215        | ) | (53        | ) | (398   | )
|                                                  |                       |          |   |           |   |             |   |            |   |        |  
|31
      December 2004                            |                       | 157      |   | 187       |   | 860         |   | 193        |   | 1,397  |  
|                                                  |                       |          |   |           |   |             |   |            |   |        |  
|Depreciation                                      |                       |          |   |           |   |             |   |            |   |        |  
|31
      December 2003                            |                       | (97      | ) | (112      | ) | (853        | ) | (203       | ) | (1,265 | )
|Exchange
      differences                        |                       | 6        |   | 3         |   | 32          |   | 5          |   | 46     |  
|Charged
      in the year                         |                       | (9       | ) | (11       | ) | (97         | ) | (16        | ) | (133   | )
|Disposals                                         |                       | 27       |   | 27        |   | 208         |   | 48         |   | 310    |  
|                                                  |                       |          |   |           |   |             |   |            |   |        |  
|31
      December 2004                            |                       | (73      | ) | (93       | ) | (710        | ) | (166       | ) | (1,042 | )
|                                                  |                       |          |   |           |   |             |   |            |   |        |  
|Net
      book amount                             |                       |          |   |           |   |             |   |            |   |        |  
|31
      December 2004                            |                       | 84       |   | 94        |   | 150         |   | 27         |   | 355    |  
|                                                  |                       |          |   |           |   |             |   |            |   |        |  
|31
      December 2003                            |                       | 148      |   | 102       |   | 187         |   | 44         |   | 481    |  
|                                                  |                       |          |   |           |   |             |   |            |   |        |  
|                                                  |                       |          |   |           |   |             |   |            |   |        |  
|                                                  |                       |          |   |           |   |             |   |            |   |        |  
|                                                  |                       |          |   |           |   |             |   |            |   |        |  
|                                                  |                       |          |   |           |   |             |   | 2004       |   | 2003   |  
|Net
      book amount of leasehold property       |                       |          |   |           |   |             |   | £m         |   | £m     |  
|                                                  |                       |          |   |           |   |             |   |            |   |        |  
|Long-term
      leaseholds                        |                       |          |   |           |   |             |   | 32         |   | 44     |  
|Short-term
      leaseholds                       |                       |          |   |           |   |             |   | 62         |   | 58     |  
|                                                  |                       |          |   |           |   |             |   |            |   |        |  
|Total
      leasehold property                    |                       |          |   |           |   |             |   | 94         |   | 102    |  
|                                                  |                       |          |   |           |   |             |   |            |   |        |  
|                                                  |                       |          |   |           |   |             |   |            |   |        |  
|Contracted
      capital commitments not provided |                       |          |   |           |   |             |   | 37         |   | 14     |  
|                                                  |                       |          |   |           |   |             |   |            |   |        |  



|58 |  | Reuters Group
      PLC Annual Report and Form 20-F 2004
|-- |  | --------------------------------------------------------

---



Back to Contents



|16 | INVESTMENTS
|-- | -----------

|                                                   |  |                |   |              |   |              |   |             |   |       |  
|-------------------------------------------------- |  | -------------- | - | ------------ | - | ------------ | - | ----------- | - | ----- | -
|                                                   |  | Interests in   |   | Interests in |   | Interests in |   | Other       |   |       |  
|                                                   |  | joint ventures |   | associates   |   | own shares   |   | investments |   | Total |  
|Fixed asset investments                            |  | £m             |   | £m           |   | £m           |   | £m          |   | £m    |  
|                                                   |  |                |   |              |   |              |   |             |   |       |  
|Net assets/cost                                    |  |                |   |              |   |              |   |             |   |       |  
|31 December 2003 as previously stated              |  | 52             |   | 226          |   | 74           |   | 54          |   | 406   |  
|Prior period adjustment                            |  |               |   |             |   | (74          | ) |            |   | (74   | )
|                                                   |  |                |   |              |   |              |   |             |   |       |  
|31 December 2003 as restated                       |  | 52             |   | 226          |   |             |   | 54          |   | 332   |  
|Reclassifications                                  |  |               |   | (31          | ) |             |   |            |   | (31   | )
|Exchange differences                               |  |               |   | (6           | ) |             |   | (1          | ) | (7    | )
|Arising in year  share
    of:                    |  |                |   |              |   |              |   |             |   |       |  
|Operating (losses)/profits                         |  | (2             | ) | 7            |   |             |   |            |   | 5     |  
|Profit on disposal of business                     |  | 9              |   |             |   |             |   |            |   | 9     |  
|Interest receivable                                |  | 1              |   |             |   |             |   |            |   | 1     |  
|Taxation                                           |  | (1             | ) | (2           | ) |             |   |            |   | (3    | )
|Dividends received                                 |  | (2             | ) | (2           | ) |             |   |            |   | (4    | )
|Loans repaid to joint ventures (see note 29)       |  | 5              |   |             |   |             |   |            |   | 5     |  
|Disposals (see note 31)                            |  |               |   | (172         | ) |             |   | (24         | ) | (196  | )
|Impairment                                         |  |               |   |             |   |             |   | (1          | ) | (1    | )
|Shareholder taxes                                  |  | (2             | ) |             |   |             |   |            |   | (2    | )
|                                                   |  |                |   |              |   |              |   |             |   |       |  
|31 December 2004                                   |  | 60             |   | 20           |   |             |   | 28          |   | 108   |  
|                                                   |  |                |   |              |   |              |   |             |   |       |  
|Goodwill                                           |  |                |   |              |   |              |   |             |   |       |  
|31 December 2003                                   |  |               |   | 4            |   |             |   |            |   | 4     |  
|Charged in the year                                |  |               |   | (1           | ) |             |   |            |   | (1    | )
|                                                   |  |                |   |              |   |              |   |             |   |       |  
|31 December 2004                                   |  |               |   | 3            |   |             |   |            |   | 3     |  
|                                                   |  |                |   |              |   |              |   |             |   |       |  
|Net book amount                                    |  |                |   |              |   |              |   |             |   |       |  
|Net assets/cost                                    |  | 60             |   | 20           |   |             |   | 28          |   | 108   |  
|Goodwill                                           |  |               |   | 3            |   |             |   |            |   | 3     |  
|                                                   |  |                |   |              |   |              |   |             |   |       |  
|31 December 2004                                   |  | 60             |   | 23           |   |             |   | 28          |   | 111   |  
|                                                   |  |                |   |              |   |              |   |             |   |       |  
|Net book amount                                    |  |                |   |              |   |              |   |             |   |       |  
|Net assets/cost as previously stated               |  | 52             |   | 226          |   | 74           |   | 54          |   | 406   |  
|Prior period adjustment                            |  |               |   |             |   | (74          | ) |            |   | (74   | )
|                                                   |  |                |   |              |   |              |   |             |   |       |  
|Net assets/cost as restated                        |  | 52             |   | 226          |   |             |   | 54          |   | 332   |  
|Goodwill                                           |  |               |   | 4            |   |             |   |            |   | 4     |  
|                                                   |  |                |   |              |   |              |   |             |   |       |  
|31 December 2003 as restated                       |  | 52             |   | 230          |   |             |   | 54          |   | 336   |  
|                                                   |  |                |   |              |   |              |   |             |   |       |  
|Fixed asset listed investments at 31 December 2004 |  |                |   |              |   |              |   |             |   |       |  
|Carrying value                                     |  |               |   |             |   |             |   | 13          |   | 13    |  
|Market value                                       |  |               |   |             |   |             |   | 19          |   | 19    |  
|                                                   |  |                |   |              |   |              |   |             |   |       |  
|                                                   |  |                |   |              |   |              |   |             |   |       |  

|                                                     |  | Interests in   |  | Interests in |  | Interests in |  | Other       |   |       |  
|---------------------------------------------------- |  | -------------- |  | ------------ |  | ------------ |  | ----------- | - | ----- | -
|                                                     |  | joint ventures |  | associates   |  | own shares   |  | investments |   | Total |  
|Current asset investments                            |  | £m             |  | £m           |  | £m           |  | £m          |   | £m    |  
|                                                     |  |                |  |              |  |              |  |             |   |       |  
|Cost                                                 |  |                |  |              |  |              |  |             |   |       |  
|31 December 2003                                     |  |               |  |             |  |             |  |            |   |      |  
|Reclassifications                                    |  |               |  |             |  |             |  | 31          |   | 31    |  
|Additions                                            |  |               |  |             |  |             |  | 82          |   | 82    |  
|Exchange differences                                 |  |               |  |             |  |             |  | (2          | ) | (2    | )
|Impairment                                           |  |               |  |             |  |             |  | (3          | ) | (3    | )
|                                                     |  |                |  |              |  |              |  |             |   |       |  
|31 December 2004                                     |  |               |  |             |  |             |  | 108         |   | 108   |  
|                                                     |  |                |  |              |  |              |  |             |   |       |  
|Current asset listed investments at 31 December 2004 |  |                |  |              |  |              |  |             |   |       |  
|Carrying value                                       |  |               |  |             |  |             |  | 29          |   | 29    |  
|Market value                                         |  |               |  |             |  |             |  | 115         |   | 115   |  
|                                                     |  |                |  |              |  |              |  |             |   |       |  

Prior to the adoption
  by the Group of UITF38 Accounting for ESOP Trusts, the shares held in Reuters Group PLC by the Reuters ESOTs were held as a fixed asset investment. In
accordance with the requirements of UITF38, these shares have been deducted from shareholders equity.
This change has been accounted for as a prior period adjustment and previously
reported figures have been restated accordingly (see note 26
on page 66).

Fixed asset other investments consist principally of small equity investments.
Impairment write downs have
been made when, based on directors valuations, a permanent diminution in
the
carrying value of the investment has occurred.

The reclassification of investments from interests in associates within fixed
asset investments to other investments within current asset investments arises
from the part-disposal of Reuters interest in TSI (see note 31 on page 69), and
reflects managements intention to
dispose of its remaining shareholding.

|Reuters Group PLC Annual Report and Form 20-F 2004 |  | 59
|-------------------------------------------------- |  | --

---



Back to Contents

NOTES ON THE CONSOLIDATED BALANCE SHEETcontinued



|16 | INVESTMENTScontinued
|-- | --------------------

On 16 November 2004, Reuters purchased the 49% of the voting shares of Radianz
  that it did not already own from Equant, thereby increasing its shareholding
  from 51% to 100% of voting shares. The acquisition of the additional 49% stake
  is included within current asset investments. The 49% was acquired with a view
  to resale, and the stake has not been previously consolidated in the Group
  financial statements. As permitted by the Companies Act, Radianz has not been
  consolidated at 31 December 2004. The original investment has continued to
  be equity accounted in accordance with FRS 9 Associates and Joint Ventures,
  as shown in the table above. The aggregated capital and reserves of Radianz
  as at 31 December 2004 were £96 million and the loss for the year was £7
  million. Balances between Reuters and Radianz as at 31 December 2004 and details
  of the nature and extent of transactions between the two parties during the
  year are given in note 29 Related Party Transactions. During 2004,
  Reuters wrote down the carrying value of its investment in Radianz by £3
  million.

Had all listed investments been disposed of on 31 December 2004, no tax would
  have been payable on the assumption that none of the earnings would be repatriated.
  1.0 million TSI shares subject to in-the-money options held by Reuters employees
  who worked at TIBCO Finance Technology Inc., a former Reuters subsidiary which
  was incorporated into other Reuters businesses in 2001, have been included
  in the market value of current asset investments at the value of the option
proceeds.

|17 | STOCK
|-- | -----

|                          |  |      |  |      |  |      |  
|------------------------- |  | ---- |  | ---- |  | ---- | -
|                          |  | 2004 |  | 2003 |  | 2002 |  
|                          |  | £m   |  | £m   |  | £m   |  
|                          |  |      |  |      |  |      |  
|Contract work in progress |  | 3    |  | 2    |  | 2    |  
|Less progress payments    |  |     |  |     |  | (2   | )
|                          |  |      |  |      |  |      |  
|                          |  | 3    |  | 2    |  |     |  
|Equipment stock           |  |     |  |     |  | 1    |  
|                          |  |      |  |      |  |      |  
|Total
    stock           |  | 3    |  | 2    |  | 1    |  
|                          |  |      |  |      |  |      |  
|                          |  |      |  |      |  |      |  

|18 | DEBTORS
|-- | -------

|                                                 |  |      |   |      |   |       |  
|------------------------------------------------ |  | ---- | - | ---- | - | ----- | -
|                                                 |  | 2004 |   | 2003 |   | 2002  |  
|                                                 |  | £m   |   | £m   |   | £m    |  
|                                                 |  |      |   |      |   |       |  
|Amounts
    falling due within one year          |  |      |   |      |   |       |  
|Trade debtors                                    |  | 162  |   | 211  |   | 249   |  
|Less allowance for doubtful accounts             |  | (31  | ) | (41  | ) | (52   | )
|                                                 |  |      |   |      |   |       |  
|                                                 |  | 131  |   | 170  |   | 197   |  
|Instinet counterparty debtors                    |  | 216  |   | 356  |   | 514   |  
|Amounts owed by joint ventures and associates    |  | 11   |   | 21   |   | 81    |  
|Other debtors                                    |  | 96   |   | 84   |   | 149   |  
|Prepayments and accrued income                   |  | 70   |   | 56   |   | 66    |  
|                                                 |  |      |   |      |   |       |  
|                                                 |  | 524  |   | 687  |   | 1,007 |  
|Amounts
    falling due after more than one year |  |      |   |      |   |       |  
|Other debtors                                    |  | 15   |   | 16   |   | 12    |  
|Prepayments and accrued income                   |  | 5    |   | 5    |   |      |  
|                                                 |  |      |   |      |   |       |  
|Total
    debtors                                |  | 544  |   | 708  |   | 1,019 |  
|                                                 |  |      |   |      |   |       |  
|                                                 |  |      |   |      |   |       |  

|19 | OTHER
    SHORT-TERM INVESTMENTS
|-- | --------------------------------

|                                       |  |      |  |      |  |      | 
|-------------------------------------- |  | ---- |  | ---- |  | ---- | 
|                                       |  | 2004 |  | 2003 |  | 2002 | 
|                                       |  | £m   |  | £m   |  | £m   | 
|                                       |  |      |  |      |  |      | 
|Listed                                 |  |      |  |      |  |      | 
|Government securities:                 |  |      |  |      |  |      | 
|UK                                     |  |     |  | 10   |  | 23   | 
|Overseas                               |  | 13   |  | 18   |  | 29   | 
|Other deposits:                        |  |      |  |      |  |      | 
|Overseas                               |  | 5    |  | 109  |  | 329  | 
|                                       |  |      |  |      |  |      | 
|                                       |  | 18   |  | 137  |  | 381  | 
|                                       |  |      |  |      |  |      | 
|Unlisted                               |  |      |  |      |  |      | 
|Certificates of deposit:               |  |      |  |      |  |      | 
|UK                                     |  |     |  | 1    |  | 2    | 
|Term deposits:                         |  |      |  |      |  |      | 
|UK                                     |  | 84   |  | 47   |  | 47   | 
|Overseas                               |  | 32   |  | 32   |  | 29   | 
|Other deposits:                        |  |      |  |      |  |      | 
|UK                                     |  | 247  |  | 24   |  | 4    | 
|Overseas                               |  | 372  |  | 381  |  | 107  | 
|                                       |  |      |  |      |  |      | 
|                                       |  | 735  |  | 485  |  | 189  | 
|                                       |  |      |  |      |  |      | 
|Total
    other short-term investments |  | 753  |  | 622  |  | 570  | 
|                                       |  |      |  |      |  |      | 



|60 |  | Reuters Group PLC Annual Report and Form 20-F 2004
|-- |  | --------------------------------------------------

---



Back to Contents

|20 | CREDITORS:
    AMOUNTS FALLING DUE WITHIN ONE YEAR
|-- | --------------------------------------------------

|                                                        |  |       |  |       |  |       | 
|------------------------------------------------------- |  | ----- |  | ----- |  | ----- | 
|                                                        |  | 2004  |  | 2003  |  | 2002  | 
|                                                        |  | £m    |  | £m    |  | £m    | 
|                                                        |  |       |  |       |  |       | 
|Trade creditors                                         |  | 71    |  | 95    |  | 103   | 
|Accruals                                                |  | 337   |  | 446   |  | 519   | 
|Instinet counterparty creditors                         |  | 197   |  | 389   |  | 545   | 
|Deferred income                                         |  | 23    |  | 29    |  | 57    | 
|Amounts owed to joint ventures and associates           |  | 45    |  | 29    |  | 86    | 
|Other creditors                                         |  | 27    |  | 33    |  | 37    | 
|Other taxation and social security                      |  | 36    |  | 40    |  | 65    | 
|                                                        |  |       |  |       |  |       | 
|                                                        |  | 736   |  | 1,061 |  | 1,412 | 
|Bank overdrafts                                         |  | 17    |  | 29    |  | 19    | 
|Bank loans                                              |  | 37    |  | 1     |  | 11    | 
|Other borrowings                                        |  | 127   |  | 335   |  | 411   | 
|Current UK corporation and overseas taxation            |  | 254   |  | 254   |  | 259   | 
|Proposed dividend                                       |  | 86    |  | 86    |  | 86    | 
|                                                        |  |       |  |       |  |       | 
|Total creditors falling due within one year             |  | 1,257 |  | 1,766 |  | 2,198 | 
|                                                        |  |       |  |       |  |       | 
|Current UK corporation and overseas taxation comprises: |  |       |  |       |  |       | 
|UK corporation tax                                      |  | 153   |  | 170   |  | 125   | 
|Overseas taxes                                          |  | 101   |  | 84    |  | 134   | 
|                                                        |  |       |  |       |  |       | 
|Total current UK corporation and overseas taxation      |  | 254   |  | 254   |  | 259   | 
|                                                        |  |       |  |       |  |       | 
|                                                        |  |       |  |       |  |       | 

|21 | CREDITORS:
    AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
|-- | -----------------------------------------------------------

|                                                     |  |      |  |      |  |      | 
|---------------------------------------------------- |  | ---- |  | ---- |  | ---- | 
|                                                     |  | 2004 |  | 2003 |  | 2002 | 
|                                                     |  | £m   |  | £m   |  | £m   | 
|                                                     |  |      |  |      |  |      | 
|Term notes                                           |  | 329  |  | 406  |  | 353  | 
|Accruals and deferred income                         |  | 17   |  | 19   |  |     | 
|Other creditors                                      |  | 2    |  |     |  |     | 
|Amounts owed to joint ventures                       |  |     |  |     |  | 1    | 
|                                                     |  |      |  |      |  |      | 
|Total creditors falling due after more than one year |  | 348  |  | 425  |  | 354  | 
|                                                     |  |      |  |      |  |      | 
|

The maturity profile of all bank overdrafts, bank loans and other borrowings is given in note 12.

|22 | CONCENTRATION
    OF CREDIT RISK
|-- | --------------------------------

Reuters Group is exposed to concentrations of credit risk. Reuters Group invests
in UK and US government securities and with high credit quality financial institutions.
Reuters Group limits the amount of credit exposure to any one financial institution.
The Group is also exposed to credit risk from its trade debtors, which are concentrated
in the financial community. Reuters Group estimates that approximately 72% of
its subscribers are financial institutions, 17% are corporations in other sectors
of the business community, 4% are from the news media and 7% are government institutions
and individuals worldwide (2003: 70%, 16%, 6% and 8% respectively, 2002: 68%,
19%, 6% and 7%
respectively).

In addition, Instinet Group is exposed to the possibility of trades between its
counterparties failing to settle. Due to the settlement mechanisms employed,
the maximum exposure is generally limited to the market movement between the
trade date and the settlement date. There are no material unprovided off-balance
sheet exposures or positions in respect of trades undertaken on or prior to 31
December 2004.

|23 | PENSIONS
    AND SIMILAR OBLIGATIONS
|-- | ------------------------------------

Reuters 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 34 defined contribution plans covering approximately 67% of its
employees, of which the largest plans are: the Reuters Pension Fund, the Reuters
Retirement Plan and the Reuters 401K Pension Plans. The percentage of employees
covered and the company contribution to these plans were:

|                           |  |                    |   | Company               |  
|-------------------------- |  | ------------------ | - | --------------------- | -
|                           |  |                    |   | contribution          |  
|                           |  | %
    of employees |   | %
    of basic salary |  
|                           |  |                    |   |                       |  
|Reuters Pension Fund       |  | 10.3               | % | 9.5                   | %
|Reuters Retirement Plan    |  | 16.1               | % | 7.0                   | %
|Reuters 401K Pension Plans |  | 24.8               | % | 6.0                   | %
|                           |  |                    |   |                       |  



|Reuters
        Group PLC Annual Report and Form 20-F 2004 |  | 61
|---------------------------------------------------------- |  | --

---



Back to Contents

NOTES ON THE CONSOLIDATED BALANCE SHEET
continued

|23 | PENSIONS
    AND SIMILAR OBLIGATIONScontinued
|-- | ---------------------------------------------

Defined benefit plansThe Group also operates 33 defined benefit plans covering approximately 24% of employees. Individually, these plans are of a relatively minor nature. The 17 largest plans are valued under
SSAP 24 by independently qualified actuaries using the projected unit credit method. The SSAP 24 provision is reviewed annually based on locally reported information, with the most recent review being at 1 January 2004. The smaller remaining plans
are subject to regular valuations based on accepted actuarial practice and standards within the country in which the plan is established. The largest plans are directly invested and others are invested in insurance contracts. The remainder are
internally funded in accordance with local practice, with provisions in the subsidiary undertakings to recognise the pension obligations.

Funding policy is set in accordance with local requirements.

The largest defined benefit plans are the UK Supplementary Pension Scheme (SPS)
and those in Switzerland, Japan and Hong Kong. The charges in respect of these
plans in 2004 were £2
million, £3 million, £2 million and £1 million respectively
(2003: £2 million, £5 million, £3 million and £2 million
respectively). Details of the SSAP 24 valuation results in respect of these plans
are
given below.

|                                               |  | UK SPS |   | Switzerland |   | Japan |   | Hong Kong |  
|---------------------------------------------- |  | ------ | - | ----------- | - | ----- | - | --------- | -
|                                               |  |        |   |             |   |       |   |           |  
|Percentage of employees covered                |  | 0.2    | % | 4.2         | % | 2.4   | % | 1.0       | %
|Assumptions:                                   |  |        |   |             |   |       |   |           |  
|Investment return: pre-retirement              |  | 6.9    | % | 4.5         | % | 3.0   | % | 7.0       | %
|Investment return: post-retirement             |  | 5.4    | % | 4.5         | % | 3.0   | % | 7.0       | %
|Salary growth                                  |  | 3.9    | % | 3.0         | % | 3.0   | % | 5.0       | %
|Pension increases                              |  | 2.4    | % | 1.5         | % | 2.0   | % |          |  
|Market value of assets (£m)                    |  | 37     |   | 69          |   | 15    |   | 14        |  
|Present value of past service liabilities (£m) |  | 44     |   | 68          |   | 21    |   | 13        |  
|                                               |  |        |   |             |   |       |   |           |  
|                                              
|

Post-retirement medical benefitsIn the US, the Group closed its post-retirement medical plan with effect from 1 July 2002. A total of 190 employees, retirees and covered spouses retain entitlement to post-retirement
medical benefits which remain unfunded. The principal assumptions used in the most recent actuarial valuation undertaken at 1 January 2004 were a discount rate of 8% and that the growth in healthcare costs would decrease from 9% per annum in 2004 to
6% by 2007 and remain at 5% thereafter.

|                                              |  | 2004 |   | 2003 |   | 2002 |  
|--------------------------------------------- |  | ---- | - | ---- | - | ---- | -
|                                              |  | £m   |   | £m   |   | £m   |  
|                                              |  |      |   |      |   |      |  
|Opening balance                               |  | 63   |   | 59   |   | 58   |  
|Profit and
        loss account (see note 2): |  |      |   |      |   |      |  
|Defined
          contribution plans          |  | 28   |   | 35   |   | 47   |  
|Defined
          benefit plans               |  | 9    |   | 18   |   | 18   |  
|Post-retirement
          medical benefits    |  | (3   | ) | (3   | ) |     |  
|                                              |  |      |   |      |   |      |  
|                                              |  | 34   |   | 50   |   | 65   |  
|Utilised in
        the year                  |  | (48  | ) | (46  | ) | (64  | )
|                                              |  |      |   |      |   |      |  
|Closing
          balance                     |  | 49   |   | 63   |   | 59   |  
|                                              |  |      |   |      |   |      |  
|                                             
|

£40 million of the £49 million closing balance relates to schemes valued in accordance with SSAP 24 (2003: £52 million, 2002: £47
  million).

FRS 17: Fourth year transitional disclosuresComposition of the schemesFull actuarial valuations were carried out at various dates between 1 January
2003 and 31 December 2004 and updated to 31 December 2004, where necessary, by
independent qualified actuaries in accordance with FRS 17. The major assumptions
used by the actuary at 31 December 2004 were:

|                                        |  |      |   |      |   | UK plans |   |      |   | Overseas plans |   | Post-retirement medical benefits |  
|--------------------------------------- |  | ---- | - | ---- | - | -------- | - | ---- | - | -------------- | - | -------------------------------- | -
|                                        |  |      |   |      |   |          |   |      |   |                |   |                                  |  
|                                        |  | 2004 |   | 2003 |   | 2002     |   | 2004 |   | 2003           |   | 2002                             |  
|                                        |  |      |   |      |   |          |   |      |   |                |   |                                  |  
|Discount rate                           |  | 5.25 | % | 5.50 | % | 5.50     | % | 3.63 | % | 4.03           | % | 4.10                             | %
|Inflation assumption                    |  | 2.75 | % | 2.50 | % | 2.25     | % | 1.46 | % | 1.44           | % | 1.52                             | %
|Rate of increase in salaries            |  | 4.00 | % | 3.75 | % | 4.00     | % | 2.56 | % | 2.55           | % | 3.06                             | %
|Rate of increase in pensions in payment |  | 2.75 | % | 2.50 | % | 2.25     | % | 1.59 | % | 1.42           | % | 1.69                             | %
|                                        |  |      |   |      |   |          |   |      |   |                |   |                                  |  
|The assets in the scheme and            |  |      |   |      |   |          |   |      |   |                |   |                                  |  
|expected return on assets were:         |  |      |   |      |   |          |   |      |   |                |   |                                  |  
|                                        |  |      |   |      |   |          |   |      |   |                |   |                                  |  
|Expected rate of return on assets       |  |      |   |      |   |          |   |      |   |                |   |                                  |  
|Equities                                |  | 8.25 | % | 8.25 | % | 8.25     | % | 7.12 | % | 7.23           | % | 7.60                             | %
|Bonds                                   |  | 4.50 | % | 5.00 | % | 5.00     | % | 3.04 | % | 3.76           | % | 3.86                             | %
|Property                                |  | 6.50 | % | 6.67 | % | 6.60     | % |     |   |               |   |                                 |  
|Cash                                    |  | 4.00 | % | 3.75 | % | 3.50     | % | 2.18 | % | 2.83           | % | 2.65                             | %
|Other                                   |  |     |   |     |   |         |   | 4.95 | % | 4.77           | % | 5.25                             | %
|                                        |  |      |   |      |   |          |   |      |   |                |   |                                  |  
|Market value (£m)                       |  |      |   |      |   |          |   |      |   |                |   |                                  |  
|Equities                                |  | 35   |   | 23   |   | 19       |   | 61   |   | 60             |   | 50                               |  
|Bonds                                   |  | 79   |   | 11   |   | 7        |   | 47   |   | 43             |   | 40                               |  
|Property                                |  | 9    |   | 1    |   | 1        |   |     |   |               |   |                                 |  
|Cash                                    |  |     |   | 2    |   | 6        |   | 4    |   | 6              |   | 3                                |  
|Other                                   |  |     |   |     |   |         |   | 12   |   | 7              |   | 4                                |  
|                                        |  |      |   |      |   |          |   |      |   |                |   |                                  |  



|62 |  | Reuters
        Group PLC Annual Report and Form 20-F 2004
|-- |  | ----------------------------------------------------------

---



Back to Contents

|23 | PENSIONS
            AND SIMILAR OBLIGATIONScontinued
|-- | -----------------------------------------------------

The following amounts at 31 December were measured in accordance with the requirements of FRS 17:

|                                    |  |      |   |      |   |          |   |      |   |                |   |      |   |      |   | Post-retirementmedical benefits |   |      |       |      |   |      |  
|----------------------------------- |  | ---- | - | ---- | - | -------- | - | ---- | - | -------------- | - | ---- | - | ---- | - | ------------------------------- | - | ---- | ----- | ---- | - | ---- | -
|                                    |  |      |   |      |   | UK plans |   |      |   | Overseas plans |   |      |   |      |   |                                 |   |      | Total |     
|                                    |  |      |   |      |   |          |   |      |   |                |   |      |   |      |   |                                 |   |      |       |      |  
|                                    |  | 2004 |   | 2003 |   | 2002     |   | 2004 |   | 2003           |   | 2002 |   | 2004 |   | 2003                            |   | 2002 |       | 2004 |   | 2003 |  
|                                    |  | £m   |   | £m   |   | £m       |   | £m   |   | £m             |   | £m   |   | £m   |   | £m                              |   | £m   |       | £m   |   | £m   |  
|                                    |  |      |   |      |   |          |   |      |   |                |   |      |   |      |   |                                 |   |      |       |      |   |      |  
|Total market value of assets        |  | 123  |   | 37   |   | 33       |   | 124  |   | 116            |   | 97   |   |     |   |                                |   |     |       | 247  |   | 153  |  
|Present value of scheme liabilities |  | (159 | ) | (57  | ) | (63      | ) | (158 | ) | (140           | ) | (132 | ) | (3   | ) | (5                              | ) | (6   | )     | (320 | ) | (202 | )
|                                    |  |      |   |      |   |          |   |      |   |                |   |      |   |      |   |                                 |   |      |       |      |   |      |  
|Deficit in the scheme               |  | (36  | ) | (20  | ) | (30      | ) | (34  | ) | (24            | ) | (35  | ) | (3   | ) | (5                              | ) | (6   | )     | (73  | ) | (49  | )
|Related deferred tax asset          |  | 11   |   | 6    |   | 9        |   | 10   |   | 8              |   | 10   |   | 1    |   | 2                               |   | 2    |       | 22   |   | 16   |  
|                                    |  |      |   |      |   |          |   |      |   |                |   |      |   |      |   |                                 |   |      |       |      |   |      |  
|Net pension liability               |  | (25  | ) | (14  | ) | (21      | ) | (24  | ) | (16            | ) | (25  | ) | (2   | ) | (3                              | ) | (4   | )     | (51  | ) | (33  | )
|                                    |  |      |   |      |   |          |   |      |   |                |   |      |   |      |   |                                 |   |      |       |      |   |      |  

The assets and liabilities reported under UK plans cover a small UK scheme with 35 active members together with unfunded early retirement and retirement benefit schemes, the liabilities of
which are covered through book reserves. The figures do not include Reuters Pension Fund, as this is a defined contribution plan and its assets and liabilities are not required to be disclosed under FRS 17.

If the above amounts had
been recognised in the financial statements, the Groups net assets and
profit and loss reserve at 31 December would be as follows:

|                                                                            |  |       |   | Restated |   | Restated |  
|--------------------------------------------------------------------------- |  | ----- | - | -------- | - | -------- | -
|                                                                            |  | 2004  |   | 2003     |   | 2002     |  
|                                                                            |  | £m    |   | £m       |   | £m       |  
|                                                                            |  |       |   |          |   |          |  
|Net assets per consolidated balance sheet                                   |  | 612   |   | 407      |   | 659      |  
|Net pension liability already recognised in net assets                      |  | 27    |   | 30       |   | 24       |  
|                                                                            |  |       |   |          |   |          |  
|Net assets before impact of FRS 17                                          |  | 639   |   | 437      |   | 683      |  
|Net pension liability under FRS 17                                          |  | (51   | ) | (33      | ) | (50      | )
|                                                                            |  |       |   |          |   |          |  
|Net assets after impact of FRS 17                                           |  | 588   |   | 404      |   | 633      |  
|                                                                            |  |       |   |          |   |          |  
|Consolidated profit and loss account reserve                                |  | 1,673 |   | 1,479    |   | 1,695    |  
|Net pension liability already recognised in profit and loss account reserve |  | 27    |   | 30       |   | 24       |  
|                                                                            |  |       |   |          |   |          |  
|Profit and loss account reserve before impact of FRS 17                     |  | 1,700 |   | 1,509    |   | 1,719    |  
|Net pension liability under FRS 17                                          |  | (51   | ) | (33      | ) | (50      | )
|                                                                            |  |       |   |          |   |          |  
|Profit and loss account reserve after impact of FRS 17                      |  | 1,649 |   | 1,476    |   | 1,669    |  
|                                                                            |  |       |   |          |   |          |  
|                                                                           
|

Under the requirements of FRS 17, the following amounts would have been recognised in the performance statements in the year to 31 December:

|                                                    |  |          |   |          |   |            |  | 2004  |   |          |   |          |   |            |  | 2003  |  
|--------------------------------------------------- |  | -------- | - | -------- | - | ---------- |  | ----- | - | -------- | - | -------- | - | ---------- |  | ----- | -
|                                                    |  |          |   |          |   |            |  |       |   |          |   |          |   |            |  |       |  
|                                                    |  |          |   |          |   | Post-      |  |       |   |          |   |          |   | Post-      |  |       |  
|                                                    |  |          |   |          |   | retirement |  |       |   |          |   |          |   | retirement |  |       |  
|                                                    |  |          |   | Overseas |   | medical    |  |       |   |          |   | Overseas |   | medical    |  |       |  
|                                                    |  | UK plans |   | plans    |   | benefits   |  | Total |   | UK plans |   | plans    |   | benefits   |  | Total |  
|                                                    |  | £m       |   | £m       |   | £m         |  | £m    |   | £m       |   | £m       |   | £m         |  | £m    |  
|                                                    |  |          |   |          |   |            |  |       |   |          |   |          |   |            |  |       |  
|Analysis of amount charged to operating profit      |  |          |   |          |   |            |  |       |   |          |   |          |   |            |  |       |  
|Current service cost                                |  | 2        |   | 10       |   |           |  | 12    |   | 1        |   | 11       |   |           |  | 12    |  
|Past service cost                                   |  | (1       | ) |         |   |           |  | (1    | ) |         |   | 1        |   |           |  | 1     |  
|                                                    |  |          |   |          |   |            |  |       |   |          |   |          |   |            |  |       |  
|Total operating charge                              |  | 1        |   | 10       |   |           |  | 11    |   | 1        |   | 12       |   |           |  | 13    |  
|                                                    |  |          |   |          |   |            |  |       |   |          |   |          |   |            |  |       |  
|Analysis of amount credited to other finance income |  |          |   |          |   |            |  |       |   |          |   |          |   |            |  |       |  
|Expected return on pension scheme assets            |  | 4        |   | 6        |   |           |  | 10    |   | 2        |   | 6        |   |           |  | 8     |  
|Interest on pension scheme liabilities              |  | (4       | ) | (5       | ) |           |  | (9    | ) | (3       | ) | (5       | ) |           |  | (8    | )
|                                                    |  |          |   |          |   |            |  |       |   |          |   |          |   |            |  |       |  
|Net return                                          |  |         |   | 1        |   |           |  | 1     |   | (1       | ) | 1        |   |           |  |      |  
|                                                    |  |          |   |          |   |            |  |       |   |          |   |          |   |            |  |       |  
|                                                   
|

|Reuters Group PLC Annual Report and Form 20-F 2004 |  | 63
|-------------------------------------------------- |  | --

---



Back to Contents

NOTES
  ON THE CONSOLIDATED BALANCE SHEET continued

|23
      PENSIONS AND SIMILAR OBLIGATIONS continued
|---------------------------------------------------

Amounts that would have been recognised in performance statements under FRS 17 (continued):

|                                                                                        |  |                |   |          |   |            |   | 2004  |   |                |   |          |   |            |   | 2003  |  
|--------------------------------------------------------------------------------------- |  | -------------- | - | -------- | - | ---------- | - | ----- | - | -------------- | - | -------- | - | ---------- | - | ----- | -
|                                                                                        |  |                |   |          |  
|                                                                                        |  |                |   |          |   | Post-      |   |       |   |                |   |          |   | Post-      |   |       |  
|                                                                                        |  |                |   |          |   | retirement |   |       |   |                |   |          |   | retirement |   |       |  
|                                                                                        |  |                |   | Overseas |   | medical    |   |       |   |                |   | Overseas |   | medical    |   |       |  
|                                                                                        |  | UK
      plans |   | plans    |   | benefits   |   | Total |   | UK
      plans |   | plans    |   | benefits   |   | Total |  
|                                                                                        |  | £m             |   | £m       |   | £m         |   | £m    |   | £m             |   | £m       |   | £m         |   | £m    |  
|                                                                                        |  |                |   |          |   |            |   |       |   |                |   |          |   |            |   |       |  
|Analysis
      of amount recognised in statement of total                               |  |                |   |          |   |            |   |       |   |                |   |          |   |            |   |       |  
|recognised
      gains and losses (STRGL)                                               |  |                |   |          |   |            |   |       |   |                |   |          |   |            |   |       |  
|Actual return
      less expected return on pension scheme assets                       |  | (1             | ) | (1       | ) |           |   | (2    | ) | 2              |   | 10       |   |           |   | 12    |  
|Experience
      (losses)/gains arising on the scheme liabilities                       |  | (11            | ) | 5        |   | 1          |   | (5    | ) | 8              |   | (2       | ) | 1          |   | 7     |  
|Changes in
      assumptions underlying the present value of the                        |  |                |   |          |   |            |   |       |   |                |   |          |   |            |   |       |  
|scheme
      liabilities                                                                |  | (8             | ) | (14      | ) |           |   | (22   | ) | (1             | ) | 5        |   |           |   | 4     |  
|                                                                                        |  |                |   |          |   |            |   |       |   |                |   |          |   |            |   |       |  
|Actuarial (loss)/gain
      recognised in the STRGL                                     |  | (20            | ) | (10      | ) | 1          |   | (29   | ) | 9              |   | 13       |   | 1          |   | 23    |  
|                                                                                        |  |                |   |          |   |            |   |       |   |                |   |          |   |            |   |       |  
|                                                                                        |  |                |   |          |   |            |   |       |   |                |   |          |   |            |   |       |  
|Movements
      in deficit during the year                                              |  |                |   |          |   |            |   |       |   |                |   |          |   |            |   |       |  
|Deficit in
      the scheme at beginning of the year                                    |  | (20            | ) | (24      | ) | (5         | ) | (49   | ) | (30            | ) | (35      | ) | (6         | ) | (71   | )
|Movement in
      the year:                                                             |  |                |   |          |   |            |   |       |   |                |   |          |   |            |   |       |  
|Current
      service cost                                                              |  | (2             | ) | (10      | ) |           |   | (12   | ) | (1             | ) | (11      | ) |           |   | (12   | )
|Employer
      contributions                                                            |  | 5              |   | 10       |   | 1          |   | 16    |   | 3              |   | 10       |   |           |   | 13    |  
|Past
      service costs                                                                |  | 1              |   |         |   |           |   | 1     |   |               |   | (1       | ) |           |   | (1    | )
|Other
      finance income                                                              |  |               |   | 1        |   |           |   | 1     |   | (1             | ) | 1        |   |           |   |      |  
|Actuarial
      (loss)/gain recognised in the STRGL                                     |  | (20            | ) | (10      | ) | 1          |   | (29   | ) | 9              |   | 13       |   | 1          |   | 23    |  
|Effect
      of currency translation                                                    |  |               |   | (1       | ) |           |   | (1    | ) |               |   | (1       | ) |           |   | (1    | )
|                                                                                        |  |                |   |          |   |            |   |       |   |                |   |          |   |            |   |       |  
|Deficit in
      scheme at end of year                                                  |  | (36            | ) | (34      | ) | (3         | ) | (73   | ) | (20            | ) | (24      | ) | (5         | ) | (49   | )
|                                                                                        |  |                |   |          |   |            |   |       |   |                |   |          |   |            |   |       |  
|                                                                                        |  |                |   |          |   |            |   |       |   |                |   |          |   |            |   |       |  
|History
      of experience gains and losses                                            |  |                |   |          |   |            |   |       |   |                |   |          |   |            |   |       |  
|                                                                                        |  |                |   |          |   |            |   |       |   |                |   |          |   |            |   |       |  
|Difference
      between the expected and actual return on scheme assets                |  |                |   |          |   |            |   |       |   |                |   |          |   |            |   |       |  
|Amount
      (£m)                                                                       |  | (1             | ) | (1       | ) |           |   | (2    | ) | 2              |   | 10       |   |           |   | 12    |  
|Percentage
      of scheme assets at period end (%)                                     |  | 0.8%           |   | 0.8%     |   |           |   | 0.8%  |   | 5.4%           |   | 8.6%     |   |           |   | 7.8%  |  
|                                                                                        |  |                |   |          |   |            |   |       |   |                |   |          |   |            |   |       |  
|Experience
      gains and losses of scheme liabilities                                 |  |                |   |          |   |            |   |       |   |                |   |          |   |            |   |       |  
|Amount
      (£m)                                                                       |  | (11            | ) | 5        |   | 1          |   | (5    | ) | 8              |   | (2       | ) | 1          |   | 7     |  
|Percentage
      of the present value of the scheme liabilities at period end (%)       |  | 6.9%           |   | 3.2%     |   | 33.3%      |   | 1.6%  |   | 14.1%          |   | 1.4%     |   | 20.0%      |   | 3.4%  |  
|                                                                                        |  |                |   |          |   |            |   |       |   |                |   |          |   |            |   |       |  
|Total amount
      recognised in the STRGL                                              |  |                |   |          |   |            |   |       |   |                |   |          |   |            |   |       |  
|Amount
      (£m)                                                                       |  | (20            | ) | (10      | ) | 1          |   | (29   | ) | 9              |   | 13       |   | 1          |   | 23    |  
|Percentage
      of the present value of the scheme liabilities at period
      end (%) |  | 12.6%          |   | 6.3%     |   | 33.3%      |   | 9.1%  |   | 15.8%          |   | 9.3%     |   | 20.0%      |   | 11.4% |  
|                                                                                        |  |                |   |          |   |            |   |       |   |                |   |          |   |            |   |       |  
|                                                                                        |  |                |   |          |   |            |   |       |   |                |   |          |   |            |   |       |  
|                                                                                        |  |                |   |          |   |            |   |       |   |                |   |          |   |            |   |       |  
|                                                                                        |  |                |   |          |   |            |   |       |   |                |   |          |   |            |   | 2002  |  
|                                                                                        |  |                |   |          |   |            |   |       |   |                |  
|                                                                                        |  |                |   |          |   |            |   |       |   |                |   |          |   | Post-      |   |       |  
|                                                                                        |  |                |   |          |   |            |   |       |   |                |   |          |   | retirement |   |       |  
|                                                                                        |  |                |   |          |   |            |   |       |   |                |   | Overseas |   | medical    |   |       |  
|                                                                                        |  |                |   |          |   |            |   |       |   | UK
      plans |   | plans    |   | benefits   |   | Total |  
|History
      of experience gains and losses (continued)                                |  |                |   |          |   |            |   |       |   | £m             |   | £m       |   | £m         |   | £m    |  
|                                                                                        |  |                |   |          |   |            |   |       |   |                |   |          |   |            |   |       |  
|Difference
      between the expected and actual return on scheme assets                |  |                |   |          |   |            |   |       |   |                |   |          |   |            |   |       |  
|Amount
      (£m)                                                                       |  |                |   |          |   |            |   |       |   | (9             | ) | (17      | ) |           |   | (26   | )
|Percentage
           of scheme assets at period end (%)                                |  |                |   |          |   |            |   |       |   | 27.8%          |   | 17.9%    |   |           |   | 20.4% |  
|                                                                                        |  |                |   |          |   |            |   |       |   |                |   |          |   |            |   |       |  
|Experience
      gains and losses of scheme liabilities                                 |  |                |   |          |   |            |   |       |   |                |   |          |   |            |   |       |  
|Amount
      (£m)                                                                       |  |                |   |          |   |            |   |       |   |               |   | (9       | ) | (3         | ) | (12   | )
|Percentage
           of the present value of the scheme liabilities at period end (%)  |  |                |   |          |   |            |   |       |   |               |   | 5.4%     |   | 46.3%      |   | 5.7%  |  
|                                                                                        |  |                |   |          |   |            |   |       |   |                |   |          |   |            |   |       |  
|Total amount
      recognised in the STRGL                                              |  |                |   |          |   |            |   |       |   |                |   |          |   |            |   |       |  
|Amount
      (£m)                                                                       |  |                |   |          |   |            |   |       |   | (9             | ) | (47      | ) | (1         | ) | (57   | )
|Percentage
           of the present value of the scheme liabilities at period end (%)  |  |                |   |          |   |            |   |       |   | 14.8%          |   | 35.1%    |   | 27.9%      |   | 28.3% |  
|                                                                                        |  |                |   |          |   |            |   |       |   |                |   |          |   |            |   |       |  

Two of the overseas
  plans are closed to new entrants, therefore under the projected unit credit
  method, the current service cost will increase as a percentage of payroll as
  members of the scheme approach retirement. The service cost for these schemes
  totals £2 million in 2004.

Contributions to
  funded plans in 2005 are expected to increase slightly on 2004 levels.

The Group is anticipating
  that a further overseas plan may be closed to new entrants in 2005. Existing
  members will retain accrued benefits in the scheme, but transfer future contributions
  into a new defined contribution scheme.



|64 |  | Reuters Group
      PLC Annual Report and Form 20-F 2004
|-- |  | --------------------------------------------------------

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Back to Contents

|24 DEFERRED TAXATION (ASSETS)/LIABILITIES
|-----------------------------------------

|                                             |  |      |   |      |   |      |  
|-------------------------------------------- |  | ---- | - | ---- | - | ---- | -
|                                             |  | 2004 |   | 2003 |   | 2002 |  
|                                             |  | £m   |   | £m   |   | £m   |  
|                                             |  |      |   |      |   |      |  
|Opening balance                              |  | (240 | ) | (233 | ) | (154 | )
|Exchange differences                         |  | 2    |   | 13   |   |     |  
|Profit and
      loss account                |  | 33   |   | (20  | ) | (79  | )
|                                             |  |      |   |      |   |      |  
|Closing
      balance                        |  | (205 | ) | (240 | ) | (233 | )
|                                             |  |      |   |      |   |      |  
|                                             |  |      |   |      |   |      |  
|The closing
      balance is analysed below: |  |      |   |      |   |      |  
|                                             |  |      |   |      |   |      |  
|Timing differences:                          |  |      |   |      |   |      |  
|Fixed
      asset related                    |  | (45  | ) | (41  | ) | (39  | )
|Tax
      losses                             |  | (45  | ) | (52  | ) | (55  | )
|Other                                        |  | (115 | ) | (147 | ) | (139 | )
|                                             |  |      |   |      |   |      |  
|                                             |  | (205 | ) | (240 | ) | (233 | )
|                                             |  |      |   |      |   |      |  

Reuters Group has provided for deferred tax liabilities in respect of dividends which are either accrued as receivable or where there is a binding agreement to remit the earnings of overseas
subsidiary undertakings, joint ventures and associates. To the extent that earnings of its overseas subsidiary undertakings, joint ventures and associates are not expected to be remitted in the foreseeable future, no tax is expected to be
payable.

|                                                   |  |        |   | Valuation |  |             |  |      |  
|-------------------------------------------------- |  | ------ | - | --------- |  | ----------- |  | ---- | -
|                                                   |  | Assets |   | allowance |  | Liabilities |  | Net 
|                                                   |  | £m     |   | £m        |  | £m          |  | £m  
|                                                   |  |        |   |           |  |             |  |      |  
|Total timing
      differences at 31 December 2004 |  |        |   |           |  |             |  |      |  
|Fixed asset
      related                          |  | (73    | ) | 16        |  | 12          |  | (45  | )
|Tax losses                                         |  | (159   | ) | 114       |  |            |  | (45  | )
|Other                                              |  | (132   | ) |          |  | 17          |  | (115 | )
|                                                   |  |        |   |           |  |             |  |      |  
|                                                   |  | (364   | ) | 130       |  | 29          |  | (205 | )
|                                                   |  |        |   |           |  |             |  |      |  

The valuation allowance
  of £16 million in respect of fixed assets is made against assets in respect
  of which it is uncertain that suitable taxable income will be available when
  the timing differences reverse (2003: £16 million).

Similarly, the
  valuation allowance of £114 million in respect of losses is made where
  it is uncertain that suitable taxable income will arise. It has increased by
  £11 million in 2004.

Other timing differences
  include reorganisation costs, accrued employee costs (including pension costs)
  and other provisions.

Reuters does not
  recognise the potential future tax benefit of capital losses.

The net closing
  deferred tax balance has been analysed as:

|                                                                                  |  | 2004 |   | 2003 |   | 2002 |  
|--------------------------------------------------------------------------------- |  | ---- | - | ---- | - | ---- | -
|                                                                                  |  | £m   |   | £m   |   | £m   |  
|                                                                                  |  |      |   |      |   |      |  
|Deferred tax
      asset:                                                         |  |      |   |      |   |      |  
|Amounts
      falling due within one year                                         |  | (132 | ) | (143 | ) | (113 | )
|Amounts
      falling due after more than one year                                |  | (102 | ) | (130 | ) | (147 | )
|                                                                                  |  |      |   |      |   |      |  
|                                                                                  |  | (234 | ) | (273 | ) | (260 | )
|Deferred tax
      liability (included in provisions for liabilities and charges) |  | 29   |   | 33   |   | 27   |  
|                                                                                  |  |      |   |      |   |      |  
|                                                                                 
|



|Reuters
      Group PLC Annual Report and Form 20-F 2004 |  | 65
|-------------------------------------------------------- |  | --

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NOTES
  ON THE CONSOLIDATED BALANCE SHEET continued

|25
      OTHER PROVISIONS
|-------------------------

The movement in other provisions during 2004 was as follows:

|                              |  |                 |   | Legal/     |   | Other    |   |       |   |       |  
|----------------------------- |  | --------------- | - | ---------- | - | -------- | - | ----- | - | ----- | -
|                              |  | Rationalisation |   | compliance |   | property |   | Other |   | Total |  
|                              |  | £m              |   | £m         |   | £m       |   | £m    |   | £m    |  
|                              |  |                 |   |            |   |          |   |       |   |       |  
|31 December
      2003        |  | 165             |   | 1          |   | 2        |   | 7     |   | 175   |  
|Translation
      differences |  | (4              | ) |           |   |         |   |      |   | (4    | )
|Charged against
      profit  |  | 131             |   | 3          |   | 1        |   | 6     |   | 141   |  
|Utilised in
      the year    |  | (131            | ) | (1         | ) | (1       | ) | (1    | ) | (134  | )
|Released                      |  | (10             | ) |           |   |         |   | (4    | ) | (14   | )
|Reclassification              |  |                |   | 1          |   |         |   | (1    | ) |      |  
|                              |  |                 |   |            |   |          |   |       |   |       |  
|31
      December 2004        |  | 151             |   | 4          |   | 2        |   | 7     |   | 164   |  
|                              |  |                 |   |            |   |          |   |       |   |       |  

Included within
  the rationalisation provision at the end of 2004 are obligations related to
  the Reuters Fast Forward and Instinet Group restructuring programmes, which
  were first announced in 2003 and include headcount reduction and property rationalisation.
  Severance-related provisions are expected to be utilised during 2005 and property-related
  provisions will be utilised over the remaining lease periods.

The legal/compliance
  provision represents the expected cost of settling disputes arising from contractual
  arrangements with third-party suppliers and individuals.

Other property
  provisions reflect Reuters contractual liability at the balance sheet date to
  make good dilapidations under ongoing rental agreements outside the rationalisation
  programmes.

|26
      CAPITAL AND RESERVES
|-----------------------------

|                                                                           |  |                     |  |            |  |         |  |         |   |                       |   |          |  
|-------------------------------------------------------------------------- |  | ------------------- |  | ---------- |  | ------- |  | ------- | - | --------------------- | - | -------- | -
|                                                                           |  |                     |  | Capital    |  | Share   |  |         |   | Profit
      and loss |   | Share-   |  
|                                                                           |  | Called-up           |  | redemption |  | premium |  | Other   |   | account               |   | holders |  
|                                                                           |  | share
      capital |  | reserve    |  | account |  | reserve |   | reserve               |   | equity   |  
|                                                                           |  | £m                  |  | £m         |  | £m      |  | £m      |   | £m                    |   | £m       |  
|                                                                           |  |                     |  |            |  |         |  |         |   |                       |   |          |  
|31 December
      2001 as previously stated                                |  | 358                 |  | 1          |  | 89      |  | (1,717  | ) | 2,378                 |   | 1,109    |  
|Prior period
      adjustment (see Accounting Basis on page 72)          |  |                    |  |           |  |        |  |        |   | (153                  | ) | (153     | )
|                                                                           |  |                     |  |            |  |         |  |         |   |                       |   |          |  
|31 December
      2001 as restated                                         |  | 358                 |  | 1          |  | 89      |  | (1,717  | ) | 2,225                 |   | 956      |  
|Shares issued
      during the year                                        |  |                    |  |           |  | 2       |  |        |   |                      |   | 2        |  
|Unrealised
      gains on disposal of fixed asset investment               |  |                    |  |           |  |        |  |        |   | 10                    |   | 10       |  
|Unrealised
      gain on deemed partial disposal of subsidiary undertaking |  |                    |  |           |  |        |  |        |   | 1                     |   | 1        |  
|Unrealised
      gain on deemed partial disposal of associates             |  |                    |  |           |  |        |  |        |   | 12                    |   | 12       |  
|Purchase of
      own shares                                               |  |                    |  |           |  |        |  |        |   | (65                   | ) | (65      | )
|Amounts credited
      in respect of employee share schemes                |  |                    |  |           |  |        |  |        |   | 1                     |   | 1        |  
|Translation
      differences                                              |  |                    |  |           |  |        |  |        |   | (95                   | ) | (95      | )
|Loss for the
      year as restated                                        |  |                    |  |           |  |        |  |        |   | (394                  | ) | (394     | )
|                                                                           |  |                     |  |            |  |         |  |         |   |                       |   |          |  
|31 December
      2002 as restated                                         |  | 358                 |  | 1          |  | 91      |  | (1,717  | ) | 1,695                 |   | 428      |  
|Amounts charged
      in respect of employee share schemes                 |  |                    |  |           |  |        |  |        |   | (13                   | ) | (13      | )
|Translation
      differences                                              |  |                    |  |           |  |        |  |        |   | (113                  | ) | (113     | )
|Loss for the
      year as restated                                        |  |                    |  |           |  |        |  |        |   | (90                   | ) | (90      | )
|                                                                           |  |                     |  |            |  |         |  |         |   |                       |   |          |  
|31 December
      2003 as restated                                         |  | 358                 |  | 1          |  | 91      |  | (1,717  | ) | 1,479                 |   | 212      |  
|Shares issued
      during the year                                        |  | 1                   |  |           |  | 5       |  |        |   |                      |   | 6        |  
|Amounts credited
      in respect of employee share schemes                |  |                    |  |           |  |        |  |        |   | 18                    |   | 18       |  
|Translation
      differences                                              |  |                    |  |           |  |        |  |        |   | (25                   | ) | (25      | )
|Taxation on
      translation differences                                  |  |                    |  |           |  |        |  |        |   | (10                   | ) | (10      | )
|Retained profit
      for the year                                         |  |                    |  |           |  |        |  |        |   | 211                   |   | 211      |  
|                                                                           |  |                     |  |            |  |         |  |         |   |                       |   |          |  
|31
      December 2004                                                     |  | 359                 |  | 1          |  | 96      |  | (1,717  | ) | 1,673                 |   | 412      |  
|                                                                           |  |                     |  |            |  |         |  |         |   |                       |   |          |  

During 2004, £6
  million (2003: £nil, 2002: £2 million) was received by Reuters Group
  PLC on the issue of shares in respect of the exercise of options awarded under
  various share option plans.

Cumulative translation
  losses at 31 December 2004 totalled £188 million (2003: £163 million,
  2002: £50 million).

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 the profit and loss reserve, represents the merger difference
  which has since been reflected in the Other reserve.

As at 31 December
  2004, the deduction from shareholders equity in respect of treasury stock
  held by the ESOTs was £209 million (2003: £225 million, 2002: £235
  million). The number of unvested shares held by the ESOTs as at 31 December
  2004 was 32.0 million (2003: 34.4 million, 2002: 35.9 million). These shares
  had a market value of £121 million as at 31 December 2004 (2003: £81
  million, 2002: £64 million).

|66 |  | Reuters Group
      PLC Annual Report and Form 20-F 2004
|-- |  | --------------------------------------------------------

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|27
      SHARE CAPITAL
|----------------------

|                                                                                |  |         |  |         |  |         | 
|------------------------------------------------------------------------------- |  | ------- |  | ------- |  | ------- | 
|                                                                                |  | 2004    |  | 2003    |  | 2002    | 
|                                                                                |  | £m      |  | £m      |  | £m      | 
|                                                                                |  |         |  |         |  |         | 
|Authorised                                                                      |  |         |  |         |  |         | 
|One Founders
      Share of £1                                                  |  |        |  |        |  |        | 
|2,100 million
      ordinary shares of 25 pence each                            |  | 525     |  | 525     |  | 525     | 
|                                                                                |  |         |  |         |  |         | 
|                                                                                |  | 525     |  | 525     |  | 525     | 
|                                                                                |  |         |  |         |  |         | 
|Allotted,
      called-up and fully paid                                        |  |         |  |         |  |         | 
|One Founders
      Share of £1                                                  |  |        |  |        |  |        | 
|Ordinary shares
      of 25 pence each                                          |  | 359     |  | 358     |  | 358     | 
|                                                                                |  |         |  |         |  |         | 
|                                                                                |  | 359     |  | 358     |  | 358     | 
|                                                                                |  |         |  |         |  |         | 
|Number of ordinary
      shares of 25 pence each (millions)                     |  | 1,435.5 |  | 1,432.5 |  | 1,432.5 | 
|                                                                                |  |         |  |         |  |         | 
|                                                                                |  |         |  |         |  |         | 
|Shares
      allotted during the year (millions)                                |  | 2004    |  | 2003    |  | 2002    | 
|                                                                                |  |         |  |         |  |         | 
|2,951,607 shares
      in Reuters Group PLC were issued for cash                |  |         |  |         |  |         | 
|under employee
      share schemes at prices ranging from 90p to 397p per share |  | 3.0     |  |        |  | 0.4     | 
|                                                                                |  |         |  |         |  |         | 

The rights attaching
  to the Founders Share are set out on page 83. The consideration for shares allotted
  during the period was £6 million (2003: £nil, 2002: £2 million).

|28
      EMPLOYEE SHARE OPTION PLANS
|------------------------------------

Reuters Group PLC
  operates share plans for the benefit of employees as explained in the Remuneration
  Report. Since the flotation of Reuters Holdings PLC in 1984, 107 million shares
  have been issued under these plans.

Activity relating
  to share options to subscribe for new shares for the three years ended 31 December
  2004 was as follows:

|                                                                 |  |                |   | Discretionary      |   |       |   |       |   | Weighted             | 
|---------------------------------------------------------------- |  | -------------- | - | ------------------ | - | ----- | - | ----- | - | -------------------- | 
|                                                                 |  | Save
      as- |   | employee
      and |   |       |   |       |   | average              | 
|                                                                 |  | you-earn       |   | executive          |   | Plan  |   |       |   | exercise
      price | 
|                                                                 |  | plans          |   | plans              |   | 2000  |   | Total |   | £                    | 
|                                                                 |  |                |   |                    |   |       |   |       |   |                      | 
|Ordinary
      shares under option in millions (including ADSs): |  |                |   |                    |   |       |   |       |   |                      | 
|31 December
      2001                                           |  | 10.4           |   | 7.7                |   | 20.0  |   | 38.1  |   | 6.55                 | 
|Granted                                                          |  | 7.2            |   | 31.8               |   |      |   | 39.0  |   | 4.04                 | 
|Exercised                                                        |  | (0.2           | ) |                   |   | (0.2  | ) | (0.4  | ) | 5.39                 | 
|Expired, cancelled
      or lapsed                               |  | (6.7           | ) | (0.9               | ) | (3.1  | ) | (10.7 | ) | 6.76                 | 
|                                                                 |  |                |   |                    |   |       |   |       |   |                      | 
|31 December
      2002                                           |  | 10.7           |   | 38.6               |   | 16.7  |   | 66.0  |   | 5.10                 | 
|Granted                                                          |  | 28.0           |   | 25.8               |   |      |   | 53.8  |   | 1.53                 | 
|Exercised                                                        |  |               |   |                   |   |      |   |      |   |                     | 
|Expired, cancelled
      or lapsed                               |  | (8.5           | ) | (8.0               | ) | (2.6  | ) | (19.1 | ) | 4.77                 | 
|                                                                 |  |                |   |                    |   |       |   |       |   |                      | 
|31 December
      2003                                           |  | 30.2           |   | 56.4               |   | 14.1  |   | 100.7 |   | 3.24                 | 
|Granted                                                          |  | 4.6            |   | 10.3               |   |      |   | 14.9  |   | 2.87                 | 
|Exercised                                                        |  | (0.5           | ) | (2.5               | ) |      |   | (3.0  | ) | 2.09                 | 
|Expired, cancelled
      or lapsed                               |  | (4.4           | ) | (5.0               | ) | (2.7  | ) | (12.1 | ) | 4.15                 | 
|                                                                 |  |                |   |                    |   |       |   |       |   |                      | 
|31
      December 2004                                           |  | 29.9           |   | 59.2               |   | 11.4  |   | 100.5 |   | 3.11                 | 
|                                                                 |  |                |   |                    |   |       |   |       |   |                      | 
|Number
      of participants at 31 December 2004                 |  | 7,939          |   | 7,238              |   | 5,690 |   |       |   |                      | 
|                                                                 |  |                |   |                    |   |       |   |       |   |                      | 

The following table summarises information relating to the number of shares under option and those which were exercisable at 31 December 2004:

|                               |  |                    |  | Weighted             |  |             |  | Options              |  | Exercisable | 
|------------------------------ |  | ------------------ |  | -------------------- |  | ----------- |  | -------------------- |  | ----------- | 
|                               |  |                    |  | average
      period |  | Weighted    |  | exercisable
      at |  | weighted    | 
|                               |  | Total
      shares |  | remaining
      to   |  | average     |  | 31
      December    |  | average     | 
|                               |  | under
      option |  | full
      vesting   |  | exercisable |  | 2004                 |  | exercise    | 
|                               |  | (million)          |  | (months)             |  | price       |  | (million)            |  | price       | 
|                               |  |                    |  |                      |  |             |  |                      |  |             | 
|Range of
      exercise prices |  |                    |  |                      |  |             |  |                      |  |             | 
|Ordinary shares
      (£)      |  |                    |  |                      |  |             |  |                      |  |             | 
|0.25-2.00                      |  | 32.8               |  | 17                   |  | £0.95       |  | 1.9                  |  | £1.33       | 
|2.01-5.00                      |  | 38.0               |  | 18                   |  | £2.96       |  | 9.2                  |  | £2.63       | 
|5.01-7.00                      |  | 18.9               |  | 8                    |  | £5.53       |  | 14.2                 |  | £5.56       | 
|7.01-9.00                      |  | 6.3                |  | 6                    |  | £8.56       |  | 3.8                  |  | £8.51       | 
|9.01-11.00                     |  | 0.5                |  | 4                    |  | £9.74       |  | 0.2                  |  | £9.75       | 
|                               |  |                    |  |                      |  |             |  |                      |  |             | 
|ADSs (US$)                     |  |                    |  |                      |  |             |  |                      |  |             | 
|10.01-30.00                    |  | 3.4                |  | 17                   |  | US$10.66    |  |                     |  |            | 
|30.01-50.00                    |  | 0.6                |  | 26                   |  | US$44.58    |  |                     |  |            | 
|                               |  |                    |  |                      |  |             |  |                      |  |             | 
|                               |  | 100.5              |  |                      |  |             |  | 29.3                 |  |             | 
|                               |  |                    |  |                      |  |             |  |                      |  |             | 



|Reuters
      Group PLC Annual Report and Form 20-F 2004 |  | 67
|-------------------------------------------------------- |  | --

---



Back to Contents

NOTES
  ON THE CONSOLIDATED BALANCE SHEET continued

|28
      EMPLOYEE SHARE OPTION PLANS continued
|----------------------------------------------

In August 1990,
  January 1994 and August 2004, Reuters established ESOTs with the power to acquire
  shares in the open market. The trustee of these trusts is an offshore independent
  professional trustee. Shares purchased by the trusts, which are included within
  reserves on the consolidated balance sheet, will be used either to meet obligations
  under the companys restricted share plans described in the Remuneration
  Report on pages 32-40 or to satisfy the exercise of options granted, or to be
  granted, under other employee share option plans. Alternatively, new shares
  may be issued to satisfy these option obligations.

SAYE options are
  issued at a 20% discount to the market price at the time of granting the options.
  This does not give rise to a charge against profit as Reuters has taken advantage
  of the exemption allowed under UITF17 Employee Share Schemes.

|29
      RELATED PARTY TRANSACTIONS
|-----------------------------------

During the year, Reuters Group carried out a number of transactions with related parties in the normal course of business and on an arms length basis. Details of these transactions are
shown below:

|                         |  | 31       |   | Services   |   | Amounts      |   | 31       |  
|------------------------ |  | -------- | - | ---------- | - | ------------ | - | -------- | -
|                         |  | December |   | provided/  |   | (collected)/ |   | December |  
|                         |  | 2003     |   | (received) |   | paid         |   | 2004     |  
|                         |  | £m       |   | £m         |   | £m           |   | £m       |  
|                         |  |          |   |            |   |              |   |          |  
|Amounts receivable:      |  |          |   |            |   |              |   |          |  
|Radianz                  |  | 15       |   | 66         |   | (73          | ) | 8        |  
|Factiva                  |  | 4        |   | 23         |   | (24          | ) | 3        |  
|Other                    |  | 2        |   | 5          |   | (7           | ) |         |  
|                         |  |          |   |            |   |              |   |          |  
|Amounts
      receivable |  | 21       |   | 94         |   | (104         | ) | 11       |  
|                         |  |          |   |            |   |              |   |          |  
|Amounts payable:         |  |          |   |            |   |              |   |          |  
|Radianz                  |  | (22      | ) | (277       | ) | 288          |   | (11      | )
|Factiva                  |  |         |   | (9         | ) | 8            |   | (1       | )
|Other                    |  | (6       | ) | (32        | ) | 38           |   |         |  
|                         |  |          |   |            |   |              |   |          |  
|Amounts
      payable    |  | (28      | ) | (318       | ) | 334          |   | (12      | )
|                         |  |          |   |            |   |              |   |          |  
|                        
|

|                                                                                                                                                                                                                                                        
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|The
      above amounts relate to the rendering or receiving of services between both
      parties, including agency arrangements and licence agreements. The other
      amounts principally relate to TSI and the Reuters building at 3 Times Square.
|                                                                                                                                                                                                                                                        
|In
      addition to the above amounts, Reuters also has the following related party
      transactions:                                                                                                                                                
|                                                                                                                                                                                                                                                        
|1.                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                        
|2.                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                        
|3.                                                                                                                                                                                                                                                      

|30
      OPERATING LEASE COMMITMENTS
|------------------------------------

Minimum payments for non-cancellable operating leases for terms in excess of one year from 31 December are as follows:

|                                   |  | 2004 |  | 2003 |  | 2002 | 
|---------------------------------- |  | ---- |  | ---- |  | ---- | 
|                                   |  | £m   |  | £m   |  | £m   | 
|                                   |  |      |  |      |  |      | 
|Year ended
      31 December       |  |      |  |      |  |      | 
|2003                               |  |     |  |     |  | 91   | 
|2004                               |  |     |  | 97   |  | 81   | 
|2005                               |  | 94   |  | 83   |  | 68   | 
|2006                               |  | 81   |  | 73   |  | 62   | 
|2007                               |  | 74   |  | 63   |  | 57   | 
|2008                               |  | 67   |  | 54   |  | 47   | 
|2009                               |  | 61   |  | 45   |  | 40   | 
|Thereafter                         |  | 379  |  | 282  |  | 289  | 
|                                   |  |      |  |      |  |      | 
|Total minimum
      lease payments |  | 756  |  | 697  |  | 735  | 
|                                   |  |      |  |      |  |      | 

At 31 December, the Group had commitments to make payments during the following year under non-cancellable operating leases as follows:

|                                     |  |      |  | Land
      and buildings |  |      |  |      |  | Other | 
|------------------------------------ |  | ---- |  | ------------------------ |  | ---- |  | ---- |  | ----- | 
|                                     |  |      |  |                          | 
|                                     |  | 2004 |  | 2003                     |  | 2002 |  | 2004 |  | 2003  | 
|                                     |  | £m   |  | £m                       |  | £m   |  | £m   |  | £m    | 
|                                     |  |      |  |                          |  |      |  |      |  |       | 
|Operating leases
      which expire: |  |      |  |                          |  |      |  |      |  |       | 
|Within
      one year                |  | 8    |  | 7                        |  | 11   |  | 1    |  | 2     | 
|In
      the second to fifth years   |  | 34   |  | 43                       |  | 37   |  | 6    |  | 6     | 
|Over
      five years                |  | 54   |  | 48                       |  | 50   |  |     |  |      | 
|                                     |  |      |  |                          |  |      |  |      |  |       | 



|68 |  | Reuters Group
      PLC Annual Report and Form 20-F 2004
|-- |  | --------------------------------------------------------



Back to Contents

|31 | ACQUISITIONS
    AND DISPOSALS
|-- | ------------------------------

AcquisitionsOn 11 March 2004,
Reuters acquired the 50% shareholding in Icor Brokerage Ltd that it did not already
own and, on 22 October 2004, acquired Fitzrovia International plc.

|                                       |  |            |   | Fair value  |  |       |  
|-------------------------------------- |  | ---------- | - | ----------- |  | ----- | -
|                                       |  | Book value |   | adjustments |  | Total |  
|                                       |  | £m         |   | £m          |  | £m    |  
|                                       |  |            |   |             |  |       |  
|Intangible fixed assets                |  |           |   | 1           |  | 1     |  
|Current assets                         |  | 1          |   |            |  | 1     |  
|Current liabilities                    |  | (1         | ) |            |  | (1    | )
|Provisions for liabilities and charges |  | (1         | ) |            |  | (1    | )
|                                       |  |            |   |             |  |       |  
|Net assets acquired                    |  | (1         | ) | 1           |  |      |  
|Cash consideration                     |  |            |   |             |  | (6    | )
|                                       |  |            |   |             |  |       |  
|Goodwill                               |  |            |   |             |  | 6     |  
|                                       |  |            |   |             |  |       |  

The fair value adjustment
  relates to trademarks held by Fitzrovia International plc, which were not recognised
  on that companys balance sheet. The aggregate post-acquisition
contribution of the acquired entities to turnover and operating profit was immaterial.

In addition, on 16 November
2004, Reuters Group acquired Equants entire stake in Radianz for £60
million in cash, together with the release of future funding obligations of £22
million. The accounting treatment of Radianz is described in note 16.

DisposalsDuring 2004, Reuters
disposed of a number of subsidiary undertakings, including: TowerGroup; Yankee;
ORT; Reuters Investment (Bermuda) Ltd; Reuters Funds Investments Ltd; Reuters
(UGS Property) Ltd; plus a number of small wholly-owned subsidiaries. These disposals
resulted
in a net profit of £10 million.

Losses on deemed partial disposal of Reuters interest in Instinet Group, arising
on the exercise of Instinet share awards by Instinet Group employees during the
year, amounted to £1
million.

During the year, Reuters made disposals of certain equity investments. In February
2004, Reuters reduced its stake in TSI from 48.4% to 8.8% (6.2% fully diluted)
through a combination of public offering and a sale of shares back to TSI, for
aggregate net proceeds
of £310 million, realising a profit of £151 million. Reuters disposed
of its 34.2% stake in GL TRADE, realising a gain of £48 million. Other
disposals of
joint ventures and associates realised net profits of £7 million.

In June 2004, Radianz disposed of its voice service business; the Reuters share
of the gain arising on the disposal
was £9 million.

In 2004, Reuters disposed of a number of small fixed asset investments, realising
a net loss on disposal
of £1 million. Instinet Group made disposals of certain fixed asset investments
during 2004, including: the disposal of its stake in Euronext; a further part-disposal
of its stake in Archipelago; the disposal of its stake in the London Stock Exchange;
and other disposals of small fixed asset investments. The net gain arising from
these disposals was £20 million.

Realised net gains, all of which were recorded in the 2004 profit and loss account,
were:

|                                                     |  | £m  |  
|---------------------------------------------------- |  | --- | -
|                                                     |  |     |  
|On disposal of subsidiary undertakings               |  | 10  |  
|On deemed partial disposal of subsidiary undertaking |  | (1  | )
|On disposal of joint ventures and associates         |  | 206 |  
|On disposal of business by joint venture             |  | 9   |  
|On disposal of other fixed asset investments         |  | 19  |  
|                                                     |  |     |  
|Recorded in the profit and loss account              |  | 243 |  
|                                                     |  |     |  

Adjustments to goodwillAdjustments
of £6 million have been made to goodwill during the year (see note 14 on
page 58). These relate to the re-negotiation of earn out agreements in relation
to the acquisitions 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. The fair value adjustments are based on an independent
valuation performed by
professionally-qualified valuers.

|Reuters Group PLC Annual Report and Form 20-F 2004 |  | 69
|-------------------------------------------------- |  | --

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NOTES ON THE CONSOLIDATED BALANCE SHEETcontinued

|32 | SUBSIDIARY
    UNDERTAKINGS, JOINT VENTURES AND ASSOCIATES
|-- | ----------------------------------------------------------

The principal subsidiary undertakings, joint ventures and associates at 31 December 2004, all of which are included in the consolidated financial statements, are shown below. Radianz became
a subsidiary on 16 November 2004, when Reuters acquired the 49% voting stake owned by Equant. The accounting treatment of Radianz is described in note 16 on pages 59-60.

|                                     |  |               |                | Percentage  | 
|------------------------------------ |  | ------------- | -------------- | ----------- | 
|                                     |  | Country of    | Principal area | of equity   | 
|Subsidiary undertakings              |  | incorporation | of operation   | shares held | 
|                                     |  |               |                |             | 
|Bridge Trading Company               |  | USA           | USA            | 100         | 
|Instinet Group Incorporated          |  | USA           | USA            | 62          | 
|Radianz Limited2                     |  | UK            | Worldwide      | 100         | 
|Reuters AG                           |  | Germany       | Germany        | 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 Finance PLC1                 |  | UK            | UK             | 100         | 
|Reuters Holdings Limited1            |  | UK            | UK             | 100         | 
|Reuters Hong Kong Limited            |  | Cook Islands  | Hong Kong      | 100         | 
|Reuters Italia SpA                   |  | Italy         | Italy          | 100         | 
|Reuters Japan Kabushiki Kaisha       |  | Japan         | Japan          | 100         | 
|Reuters Limited                      |  | UK            | Worldwide      | 100         | 
|Reuters Middle East Limited          |  | Cook Islands  | Middle East    | 100         | 
|Reuters Nederland BV1                |  | Netherlands   | Netherlands    | 100         | 
|Reuters SA                           |  | Switzerland   | Worldwide      | 100         | 
|Reuters Services SA                  |  | France        | France         | 100         | 
|Reuters Singapore Limited            |  | Singapore     | Singapore      | 100         | 
|Reuters Transaction Services Limited |  | UK            | Worldwide      | 100         | 
|                                     |  |               |                |             | 

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

|                               |  |               |                |             | 
|------------------------------ |  | ------------- | -------------- | ----------- | 
|                               |  |               |                | Percentage  | 
|                               |  | Country of    | Principal area | of equity   | 
|Joint ventures and associates  |  | incorporation | of operation   | shares held | 
|                               |  |               |                |             | 
|Factiva LLC                    |  | USA           | Worldwide      | 50          | 
|3 Times Square Associates, LLC |  | USA           | USA            | 50          | 
|                               |  |               |                |             | 

The financial years for all the above undertakings end on 31 December.

Factiva is a 50% joint venture with Dow Jones, providing a broad range of global
news and a deep historical archive of business information which client organisations
can integrate into
their business applications and intranet portals.

3 Times Square Associates is a venture with Rudins Times Square Associates LLC,
formed to acquire, develop and operate the 3 Times Square property and building.

|33 | POST
    BALANCE SHEET EVENTS
|-- | -----------------------------

On 28 February 2005, Reuters and Instinet Group entered into an agreement for
Instinet Group to acquire Bridge Trading Company for US$21.5 million in Instinet
Group stock. The transaction is subject to NASD approval and other customary
conditions, and is expected to close by the end of April 2005. The transaction
will be accounted for as a transfer of net assets between Group companies at
fair value, with consequent impact on the minority interest in Instinet Group.
There is no tax on the transaction.

Since the year end, Reuters has reduced its holding in TSI to 7.4%, generating
total net proceeds of £9 million. No tax is expected to be payable as a
result of this transaction.

|70 |  | Reuters Group PLC Annual Report and Form 20-F 2004
|-- |  | --------------------------------------------------

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BALANCE SHEET OF REUTERS GROUP PLCat 31 December

|                                                    |  |       |   | 2004   |   | 2003   |   | 2002   |  
|--------------------------------------------------- |  | ----- | - | ------ | - | ------ | - | ------ | -
|                                                    |  | Notes |   | £m     |   | £m     |   | £m     |  
|                                                    |  |       |   |        |   |        |   |        |  
|Fixed asset investment                              |  | 34    | a | 5,246  |   | 5,246  |   | 2,672  |  
|Current assets                                      |  |       |   |        |   |        |   |        |  
|Debtors falling due within one year:                |  |       |   |        |   |        |   |        |  
|Prepayments and accrued income                      |  |       |   | 1      |   |       |   |       |  
|Amounts owed by Group undertakings                  |  |       |   | 716    |   |       |   | 1,861  |  
|Debtors falling due after more than one year:       |  |       |   |        |   |        |   |        |  
|Prepayments and accrued income                      |  |       |   | 2      |   |       |   |       |  
|Deferred taxation                                   |  |       |   | 3      |   |       |   |       |  
|Other debtors                                       |  |       |   | 48     |   |       |   |       |  
|Current liabilities                                 |  |       |   |        |   |        |   |        |  
|Creditors: amounts falling due within one year:     |  |       |   |        |   |        |   |        |  
|Amounts owed to Group undertakings                  |  |       |   | (3,736 | ) | (2,499 | ) | (1,227 | )
|Other borrowings                                    |  | 34    | b | (127   | ) | (139   | ) | (411   | )
|Proposed dividends                                  |  | 5     |   | (86    | ) | (86    | ) | (86    | )
|                                                    |  |       |   |        |   |        |   |        |  
|Net current (liabilities)/assets                    |  |       |   | (3,179 | ) | (2,724 | ) | 137    |  
|                                                    |  |       |   |        |   |        |   |        |  
|Total assets less current liabilities               |  |       |   | 2,067  |   | 2,522  |   | 2,809  |  
|Other borrowings due after more than one year       |  | 34    | b | (25    | ) | (228   | ) | (352   | )
|                                                    |  |       |   |        |   |        |   |        |  
|Net assets                                          |  |       |   | 2,042  |   | 2,294  |   | 2,457  |  
|                                                    |  |       |   |        |   |        |   |        |  
|Capital and reserves                                |  | 34    | c |        |   |        |   |        |  
|Called-up share capital                             |  | 27    |   | 359    |   | 358    |   | 358    |  
|Capital redemption reserve                          |  |       |   | 1      |   | 1      |   | 1      |  
|Share premium account                               |  |       |   | 96     |   | 91     |   | 91     |  
|Other reserve                                       |  |       |   | 706    |   | 699    |   | 699    |  
|Profit and loss account reserve                     |  |       |   | 880    |   | 1,145  |   | 1,308  |  
|                                                    |  |       |   |        |   |        |   |        |  
|Capital employed                                    |  |       |   | 2,042  |   | 2,294  |   | 2,457  |  
|                                                    |  |       |   |        |   |        |   |        |  
|(Loss)/profit attributable to ordinary shareholders |  |       |   | (125   | ) | (23    | ) | 27     |  
|                                                    |  |       |   |        |   |        |   |        |  

This balance sheet was approved by the directors on 7 March 2005.

|                        |                            | 
|----------------------- | -------------------------- | 
|                        |                            | 
|Tom
          GlocerCEO | David
          GrigsonCFO | 

Advantage has been taken of the provisions of Section 230(3) of the Companies
Act 1985 not to present a separate profit and loss account for Reuters Group
PLC.

|34 | NOTES
    ON THE BALANCE SHEET OF REUTERS GROUP PLC
|-- | ---------------------------------------------------

a. Fixed asset investmentThe majority of
the investment represents the shareholding of Reuters Group PLC in Reuters Holdings
Limited.

b. BorrowingsOther borrowings
falling
due within one year relate to issues of £70 million of Euro Commercial
Paper, which was repaid in January 2005, and £57 million of Euro Medium
Term Notes, repayable at various dates between April 2005 and May 2005. Other
borrowings falling due after more than one year relate to Euro Medium Term Notes
issued, which are repayable at various dates between 2006 and 2008. These borrowings
have a weighted average interest rate payable of 5%, after allowing for interest
rate
and cross currency swaps.

c.
Capital and reserves

|                                                        |            | Called-up |         | Capital          |       | Share |  |     |  | Profit
    and |   |       |  
|------------------------------------------------------- | ---------- | --------- | ------- | ---------------- | ----- | ----- |  | --- |  | -------------- | - | ----- | -
|share                                                   | redemption | premium   | Other   | loss
    account |      
|capital                                                 | reserve    | account   | reserve | reserve          | Total
|£m                                                      | £m         | £m        | £m      | £m               | £m   
|                                                        |            |           |         |                  |       |       |  |     |  |                |   |       |  
|31 December 2003                                        |            | 358       |         | 1                |       | 91    |  | 699 |  | 1,145          |   | 2,294 |  
|Amounts
    receivable in respect ofunissued
    shares |            |          |         |                 |       |      |  | 7   |  |               |   | 7     |  
|Shares allotted during the year                         |            | 1         |         |                 |       | 5     |  |    |  |               |   | 6     |  
|Loss for the year                                       |            |          |         |                 |       |      |  |    |  | (265           | ) | (265  | )
|                                                        |            |           |         |                  |       |       |  |     |  |                |   |       |  
|31
    December 2004                                    |            | 359       |         | 1                |       | 96    |  | 706 |  | 880            |   | 2,042 |  
|                                                        |            |           |         |                  |       |       |  |     |  |                |   |       |  

Following the approval of a High Court Scheme of Arrangement, the majority of
the issued share capital of Reuters Holdings PLC was acquired by Reuters Group
PLC in February 1998.

The loss for the year mainly represents interest and revaluation on intercompany
borrowings, and dividends paid to shareholders.

During the year, Reuters Group PLC granted an option to the Reuters Group PLC
2004 Employee Trust. The Trust will use the option in order to satisfy awards
granted to Reuters employees outside of the UK under the Restricted Share Plan,
once the scheme vests (see page 34). The movement in the Other reserve represents
the option proceeds received.

|Reuters Group PLC Annual Report and Form 20-F 2004 |  | 71
|-------------------------------------------------- |  | --

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ACCOUNTING POLICIES



Accounting
      basisThe financial
  statements are prepared under the historical cost convention and in accordance
  with the Companies Act 1985 and applicable accounting standards. UITF38 Accounting for ESOP Trusts has been adopted for the first
time in the 2004 financial statements. As a result, shares in Reuters Group PLC
held by ESOTs have been reclassified from fixed asset investments and are now
treated as a deduction from Shareholders Equity. No new shares have been
acquired by the ESOTs during the year. In addition, revisions to UITF17 Employee
Share Schemes have changed the basis on which the costs of employee share
schemes are charged to
the profit and loss account. The impact of both these changes in accounting treatment has resulted in prior
period adjustments and previously reported figures have been restated accordingly.
The reclassification of shares acquired by the Reuters ESOTs from fixed asset
investments to Shareholders Equity has reduced net assets by £74
million as at 31 December 2003, by £68 million as at 31 December 2002 and
by £153 million as at 31 December 2001. The impact of adopting the amendment
to UITF17 was to decrease profit before tax by £2 million for the year
to 31 December 2004, and to increase profit before tax by £7 million for
the year to 31 December 2003 and £149 million for the year to 31 December
2002. The prior period adjustment in the Statement of Total Recognised Gains
and Losses of £151 million reflects the change in the basis on which charges
to the profit and loss account are determined, and the reversal of previous impairment
charges. Following recently issued SEC guidance, Reuters Group has determined that transaction-related
regulatory fees in Instinet Group are more appropriately reclassified and shown
gross within revenue, rather than offset within brokerage, clearing and exchange
fees. For the years ended 31 December 2004, 31 December 2003 and 31 December
2002, the
regulatory fee expenses were £30 million, £38 million and £18
million
respectively. This adjustment has no impact on profit before tax. The acquisition of the remaining equity interests in Multex Investor Europe and
Multex Investor Japan in 2003
was accounted for in accordance with FRS 2 Accounting for Subsidiary
Undertakings, which represented a departure from the requirements of the
Companies Act 1985. Basis of consolidationThe consolidated
financial statements include: 
   the
       financial statements of Reuters Group PLC and its subsidiaries to 31 December.
       The results of subsidiaries are included for the period during which they
    are a member of the Group;
   Reuters
       Groups share of the post-acquisition results of joint ventures and associates. Investments in joint ventures and associates are included at the Groups
share of the net assets and unamortised goodwill at the dates of acquisition plus the Groups
share of post-acquisition reserves. Foreign currency translationOn consolidation,
the profit and loss accounts and cash flow statements of entities with non-sterling
functional currencies are translated into sterling at the average rates for the
year. Exchange differences arising on consolidation as a result of the translation
of the profit and loss account from the average rate to the year-end rate are
accounted for through reserves. Exchange differences that arise as a consequence of trading transactions and
the translation of monetary assets and liabilities are taken to the profit and
loss account. Foreign currency investments (including subsidiary undertakings,
joint ventures and associates) are translated at the 31 December rate, and the
associated exchange differences are taken directly to reserves. Exchange differences
attributable to foreign
currency
borrowings used to finance the Groups foreign currency investments are
taken directly to reserves. TreasuryReuters 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. Reuters uses financial instruments to hedge a portion of its interest exposure.
Profits and losses on financial instruments are reported as part of profit for
the period to which they
relate. Financial instruments hedging the risk on foreign currency assets are revalued
at the balance sheet date and the resulting gain or loss offset against that
arising from the translation of
the underlying asset into sterling. The Group does not hold or issue derivative financial instruments for speculative
purposes. RevenueRevenue represents
the turnover, net of discounts, derived from services provided to subscribers
and sales of products applicable to the year. Revenue from sales of subscription-based real-time and historical information
services are 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. Short-term contracts are accounted for on a completed
contract basis. 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 Reuters 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. Securities transactionsSecurities transactions
between Instinet Group counterparties which pass through Instinet Group and in
its role as agency brokers, are recorded on a settlement date basis and, therefore,
are only reflected in the balance sheet if there is a failure to settle. Revenues
and related expenses arising from such securities transactions are accrued from
the date of the transaction. DevelopmentDevelopment expenditure
is charged against profit in the year in which it is incurred. Pensions and similar obligationsThe expected costs
of defined benefit pensions and post-retirement medical benefits are charged
against profit so as to spread the cost over the service lives of the employees
affected. For defined contribution schemes the charge to the profit and loss account represents
contributions payable by Reuters Group during the period. Restricted share and Instinet long-term incentive plansCosts of the restricted
share and Instinet long-term incentive plans are charged to profit over the vesting
period of the awards. Tangible fixed assetsDepreciation is
calculated on a straight line basis so as to write down the assets to their residual
values over their expected useful lives: Freehold land
   Not depreciatedFreehold buildings
   Normally 50 yearsLeasehold property
   Over the term of the leaseComputer systems equipment,office equipment and motor vehicles
   2 to 5 years


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Stock and contract work in progressStock and contract
work in progress are valued at the lower of cost and net realisable value less
progress payments received and receivable from clients. Progress payments in
excess of the
value of work carried out are included within creditors. Cost is calculated on a first in first out basis by reference to the invoiced
value of supplies and attributable costs of bringing stocks to their present
location and condition. Net realisable value is the estimated market value less selling costs. Short-term 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. Movements in short-term investments are reported under the heading of management
of liquid resources in the cash flow statement. 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 premia 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. LeasingOperating lease
rentals are charged against profit on a straight line basis over the period of
the lease. Operating lease incentives received are initially deferred and subsequently recognised
over the minimum contract period. Deferred taxationTax deferred or
accelerated by the effect of timing differences is accounted for to the extent
that a transaction or an event that has occurred at the balance sheet date gives
rise to an obligation to pay more tax in the future or a right to pay less tax
in the future. Deferred taxation is recognised on an undiscounted basis. However, deferred tax assets are only recognised to the extent that, based on
all available evidence, it is more likely than not that suitable taxable profits
will arise from which the
reversal of the asset can be deducted. Goodwill and other intangible assetsGoodwill is calculated
as the difference between the fair value of the consideration paid and the fair
value of the Groups share of the net assets at the date of acquisition.
No value
is attributed to internally generated intangible assets. Purchased goodwill and other intangibles are capitalised and amortised through
the profit and loss account on a straight line basis over their estimated useful
economic lives, which are up to 20 years depending on the nature of the business
acquired. Impairment reviews are carried out at the end of the first financial
year after acquisition and where there is any indication of impairment. Impairment is measured by comparing the carrying value of the asset with the
higher of the net realisable value and the value in use. Any impairment charges
are recognised in the profit and
loss account for the period in which they arise.


Interest in shares of Reuters Group PLCShares held by the
employee share ownership trusts are recorded in the balance sheet as a deduction
from
Shareholders Equity at cost less shares unconditionally vested. Fixed and current asset investmentsFixed asset investments
are held at cost net of permanent diminution in values as assessed by the directors.
Where it is Reuters Groups intention to dispose of an investment in the
short-term, the investment is treated as a current asset, and valued at the lower
of cost and net realisable value.




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SUMMARY OF DIFFERENCES BETWEEN UK AND US Generally Accepted Accounting Principles (GAAP)

01 ACCOUNTING PRINCIPLESThese consolidated
financial statements have been prepared in accordance with UK GAAP, which differ
in certain significant respects from US GAAP. Prior
    period restatements
In
November 2003, the Group entered into cross currency interest rate swaps to hedge
fixed rate Euro debt into floating rate other currencies, principally US dollars.
These instruments have a maturity date of November 2010. Under UK GAAP, the resulting
US dollar foreign currency debt has been designated as a net investment hedge
and, foreign currency translation gains and losses arising on the instrument
are recorded directly to equity and included in the statement of total recognised
gains and losses. During the year, as part of an overall review of complex derivative
instruments, the Group concluded that under US GAAP the gains or losses on these
instruments are required to be included in the income statement. The amounts
for 2003 have been restated to remove the amount recorded directly to equity
and include the amount within
the income statement under US GAAP. Under UK GAAP, computer software licences acquired and other direct internal
costs incurred for internal use software are expensed as incurred. The Group
has reviewed its accounting for such items during the year and has concluded
that the same treatment should not be applied under US GAAP, which requires capitalisation
of certain internal use software costs. The Group has restated prior years to
properly reflect the capitalisation and related amortisation of these costs under
US GAAP. The impact on the net loss,
basic and diluted earnings per ADS, and Shareholders Equity in accordance
with US GAAP of these restatements is as follows: Net
      loss in accordance with US GAAP
   
   2003
   
   2002£m
   £mNet loss in accordance with US GAAP as reported
   
   (38
   )
   (127
   )Foreign exchange gain on derivative
   
   18
   
   Capitalisation of internal use software costs
   
   4
   
   22Tax effect of adjustments
   
   (7
   )
   (6
   )Net loss in accordance with US GAAP as restated
   
   (23
   )
   (111
   )Basic/diluted
      earnings per ADS before
   
   2003
   
   2002accounting
      change
   
   pence
   
   penceBasic/diluted earnings per ADS beforeaccounting change as reported
   
   (16.3
   )
   (49.5
   )Basic/diluted earnings per ADS beforeaccounting change as restated
   
   (9.5
   )
   (42.8
   )Basic/diluted
      earnings per ADS afteraccounting
      changeBasic/diluted earnings per ADS afteraccounting change as reported
   
   (16.3
   )
   (54.3
   )Basic/diluted earnings per ADS afteraccounting change, as restated
   
   (9.5
   )
   (47.6
   )2003
   
   2002Shareholders equity
      in accordance with US GAAP
   
   £m
   
   £mShareholders equity
    in accordance with US GAAPas reported
   
   245
   
   528Foreign exchange gain on derivative
   
   
   
   Capitalisation of internal use software costs
   
   31
   
   32Tax effect of adjustments
   
   (10
   )
   (9
   )Shareholders equity
    in accordance with US GAAP as restated
   
   266
   
   551 Revised
    accounting for ESOTs and employee share schemes in 2004Under UK GAAP, the Group
adopted Urgent Issues Task Force (UITF) Abstract 38 Accounting for ESOP
Trusts for the 2004 financial statements as explained in the accounting
policies note on pages 72-73. As a result, shares in Reuters Group PLC held by
employee share ownership trusts (ESOTs) have been reclassified from fixed asset
investments and are now treated as a deduction from Shareholders Equity.
In addition,
revisions to UITF Abstract 17 Employee Share Schemes have changed
the basis on which the costs of employee share schemes are charged to the profit
and loss account. The impact of these changes in accounting treatment has resulted
in
prior period adjustments and


previously reported UK GAAP figures for 2003 and 2002 have been restated accordingly.
The summary of adjustments between UK and US GAAP has therefore been restated
to reflect the restated UK GAAP figures, and also changes to the differences
between UK and US GAAP, as explained below: Shares
      held by employee share ownership trusts (ESOTs)Under UK
         GAAP, shares in Reuters Group PLC held by ESOTs are now shown as a deduction
         from Shareholders Equity until such time as share options vest
         un-conditionally in employees, whereas previously they were shown as
         a fixed asset investment. Under US GAAP, shares held by ESOTs are shown
         as a deduction from Shareholders Equity until share options are
      exercised by employees.Employee
      Share SchemesUnder UK
         GAAP, compensation charges relating to employee share schemes are based
         on the intrinsic value of the awards at the date of grant, calculated
         as the market value of the shares, less any option price to employees.
         Previously, awards satisfied by the issuance of shares from ESOTs, primarily
         certain stock-based long-term incentive plans, were expensed to the
         profit and loss account based on the original cost of shares held by
         the ESOTs less impairment. Under US GAAP, the compensation charge of
         long-term incentive plans is based on the value of the awards at the
         balance sheet date. Under both UK and US GAAP, the total compensation
         charge is adjusted to take account of performance conditions and the
         compensation charge is spread over the service period. The adjustment
         arising from this difference
is classified within Employee costs. A description of the relevant accounting principles which differ materially is
given below. a.
    Revenue recognitionUnder
UK GAAP, 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. Under US GAAP, specific rules establish the
criteria that must be met for revenue recognition. Under these rules, certain
contracts with multiple elements require an amount of revenue to be deferred
until all criteria are met for
revenue to be recognised. The UK to US GAAP adjustments in 2003 and 2002 arise from the release of revenue
deferred in prior years. No revenue has been deferred for the purposes of US
GAAP in 2004. Under UK GAAP, soft dollar revenues are netted against operating costs in the
profit and loss account. Under US GAAP, soft dollar revenues are presented gross
in revenues and operating costs
(2004: £148 million, 2003: £169 million, 2002: £192 million).
There is no difference in net income as a result of the classification. Under UK and US GAAP, interest income arising on cash provided as security on
stock-borrowing transactions related
to Instinet Groups clearing business is recorded in revenue. Under UK GAAP,
interest on fixed income securities and on cash balances is recorded below operating
activities in the profit and loss account. Under US GAAP, this interest is recorded
in revenue. b.
    SoftwareUnder
UK GAAP, costs of developing computer software products and websites are usually
expensed in the year in which they are incurred. Under US GAAP, the costs of
developing computer software products subsequent to establishing technical feasibility
are capitalised. Additionally, certain costs relating to website development
incurred subsequent to the planning stage are also capitalised. The amortisation
of the capitalised costs is based on the estimated future revenues or remaining
estimated useful economic lives of the products involved. Under UK GAAP, computer software licences acquired for internal use are expensed
the year they are incurred. Under US GAAP, certain costs relating to computer
software licences acquired for internal use are capitalised. Computer software
costs that are incurred in the preliminary project stage are expensed as incurred.
Once the capitalisation criteria have been met, external direct costs of licences
and services consumed and internal employee costs incurred in developing or obtaining
internal use software are capitalised. Costs capitalised are amortised over the
life of the licence. c. Joint ventures and associatesUnder UK
GAAP, the difference between the book value and fair value of




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        Group PLC Annual Report and Form 20-F 2004
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the assets
contributed to joint ventures and associates is recognised in the statement of
total recognised gains and losses. Under US GAAP, the difference is released
to the income statement over the anticipated life of the assets contributed to
the venture. Under UK GAAP, stock compensation expenses are not required to be recorded in
respect of certain joint ventures and associates stock option plans.
Under US GAAP, the Groups share of the results of joint ventures and associates
has been adjusted to reflect
stock compensation charges where appropriate. Under 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. d. Gains on deemed disposal of subsidiary undertakings and associatesUnder
UK GAAP, gains on the deemed partial disposal of subsidiary undertakings and
associates involving non-qualifying consideration are recorded in the statement
of total recognised gains and losses. Under US GAAP, these gains are recorded
in the income statement and are calculated using asset and consideration values
as determined under US GAAP. e. Gain/loss on disposal of subsidiary undertakingsUnder
UK GAAP, goodwill is amortised on a systematic basis whereas under US GAAP goodwill
is not amortised but tested for impairment on an annual basis. Under US GAAP,
therefore, the carrying value of goodwill can be higher, and result in a different
gain or loss on disposal of subsidiary undertakings. Under UK GAAP, the gain
or loss on disposal of an overseas subsidiary is calculated with reference to
assets translated to sterling at the foreign currency exchange rate prevailing
at the date of disposal. Under US GAAP on disposal of a foreign currency subsidiary,
the amount attributable to that entity and accumulated in the translation adjustment
component of equity is removed from the separate component of equity and is reported
as part of the gain or loss on sale of the subsidiary. f. Gain on disposal of associatesUnder UK
GAAP, equity accounting for associates is based on results prepared in accordance
with UK GAAP. Under
US GAAP, the Groups share of results of associates is adjusted to be based
on results prepared in accordance with US GAAP. Under UK GAAP, goodwill is amortised
on a systematic basis, whereas under US GAAP, goodwill is not amortised but written
down when an impairment arises. These differences result in the carrying value
of associates being different under US GAAP, and therefore different gains and
losses arise on disposal. Under UK GAAP, the gain or loss on disposal of an investment in an associate
held in a foreign currency is calculated with reference to the investment translated
to sterling at the foreign currency exchange rate prevailing at the date of disposal.
Under US GAAP on disposal of a foreign currency associate, the amount attributable
to that entity and accumulated in the translation adjustment component of equity
is removed from the separate component of equity and is reported as part of the
gain or loss on sale of the associate. g. Fixed asset investmentsUnder UK
GAAP, fixed asset investments are held in the balance sheet at cost net of permanent
diminution in value as assessed by the directors. Under US GAAP, fixed asset
investments which are available for sale are stated at fair value with unrealised
gains or losses included in the statement of other comprehensive income. Under
US GAAP, traded fixed asset investments are stated at fair value with movements
in fair value included in
the income statement. h. Goodwill and other intangiblesUnder UK
GAAP, goodwill and other intangible assets are amortised. Under US GAAP, prior
to 1 July 2001, goodwill was amortised over its estimated useful life consistent
with UK GAAP. In 2002, Reuters adopted the provisions of Financial Accounting
Standard No. 142 (FAS
142) Goodwill and Other Intangible Assets and as a result goodwill
is no longer subject to amortisation under US GAAP. In addition, the non-amortisation
of goodwill provisions of FAS 142 were effective immediately for goodwill arising
on all acquisitions completed after 30 June 2001. Under UK GAAP, goodwill impairment reviews are carried out at the end of the
first financial year after acquisition and where there is any indication of impairment.
Impairment is measured by comparing
the carrying value of the business with thehigher of the net realisable value and the value in use.


Under US GAAP, the Group performed a transitional impairment test effective 1 January 2002, as required by FAS 142. Goodwill impairment reviews are also conducted whenever the Group
considers there to be an indication of impairment. Beginning in 2002, the Group also completes an annual goodwill impairment test, as required by FAS 142. Under US GAAP, where the carrying value of a reporting unit exceeds its fair
value then a goodwill impairment is recorded based on the excess of the carrying
value of goodwill in a reporting
unit over the implied fair value of that goodwill. Under UK GAAP, the fair value of quoted securities issued to effect a business
combination is measured at the market price at the date of closing the acquisition.
Under US GAAP, the fair value of the securities issued is determined using the
market price for a reasonable period before and after the date that the terms
of the acquisition are agreed to and announced. Under UK GAAP, contingent consideration arising as part of a business combination
is included within goodwill and recorded as a liability at the time of the acquisition.
Under US GAAP, contingent consideration is recorded as an adjustment to goodwill
at the time it is realised. Under UK GAAP, liabilities recorded in respect of
contingent consideration are discounted to net present value and included within
goodwill at the time of the business combination. Under US GAAP, as the liability
is recorded when the contingency is resolved, the value taken to goodwill can
be different. Both UK GAAP and US GAAP require purchase consideration in respect of subsidiaries
acquired to be allocated on the basis of fair values to the various net assets
of the acquiree at the date of acquisition. The excess of purchase consideration
over the fair value assigned to the net assets is treated as goodwill. Both UK
GAAP and US GAAP require separately identifiable intangible assets to be held
separately from goodwill. Under US GAAP a different definition of intangible
assets applies, therefore additional intangible assets may be identified under
US GAAP. i. Current asset investmentsUnder
UK GAAP, current asset investments are held in the balance sheet at the lower
of historical cost and net realisable value. Under US GAAP, available for sale
current asset investments are stated at fair value, with unrealised gains and
losses included in the statement of other comprehensive income. j. Employee costsReuters
grants options under save-as-you-earn (SAYE) plans at a 20% discount. Under UK
GAAP, the share issues are recorded at their discounted price when the options
are exercised. Under US GAAP, the discount is regarded as employee compensation
and is accrued over the vesting period of the grants. Under US GAAP, if a SAYE scheme is offered at a lower price than those offered
previously and participants are able to transfer out of an existing scheme into
the new scheme, variable accounting rules apply. Under these rules, a compensation
charge is recorded on issue of the option for the intrinsic value of the award
at the grant date, and any subsequent movement in the share value results in
a re-measuring of the compensation charge, which continues until the option is
exercised. Variable plan accounting applies to all options in existing higher
priced schemes and also to options in lower priced schemes to the extent that
those options have been transferred from a higher
priced scheme. Under UK GAAP, no compensation charge is recorded when the vesting terms of an option award are accelerated, or when an option plan is amended with substantially similar terms as the old
plan. Under US GAAP, additional compensation cost is recognised when the vesting of an option has been accelerated and those options would otherwise have been forfeited unvested. Additional compensation cost is also recognised where a new
measurement date is established following the amendment of a stock option plan where the exercise price is less than the market value of the underlying shares on the new measurement date. Under UK GAAP, the liability for national insurance on stock options is accrued
based on the intrinsic value of the options on the date of grant and adjusted
for subsequent changes in the market value of the underlying shares. Under US
GAAP, this expense is recorded when the liability crystalises upon exercise of
the stock options.


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SUMMARY OF DIFFERENCES BETWEEN UK AND USGenerally Accepted
Accounting Principles (GAAP) continued

Under UK GAAP, compensation charges relating to employee share schemes are based on the intrinsic value of the awards at the date of grant, calculated as the market value of the shares, less
any option price to employees. Under US GAAP, the cost of long-term incentive plans is remeasured to the value of the awards at the balance sheet date until the final measurement date. Under both UK and US GAAP, the total compensation charge is
adjusted to take account of the performance conditions and the compensation charge is spread over the service period. Under UK GAAP, costs relating to employee share schemes dependent on company
performance in a particular period are recognised in full in that year, regardless
of when the options vest. Under US GAAP, the cost of such schemes is spread over
the period from the date of grant to the vesting date of the options. Under UK GAAP, the expected costs under defined benefit pension and post-retirement
arrangements are spread over the service lives of employees entitled to those
benefits. Variations from regular cost are spread on a straight line basis over
the expected average remaining service lives of relevant current employees. Under
US GAAP, the annual pension cost comprises the estimated cost of benefits accruing
in the period adjusted
for the
amortisation of the surplus arising when FAS 87 Employers Accounting
for Pensions was adopted. The valuation assumptions used to determine the
annual pension cost under US GAAP are the same as those used to determine the
FRS 17 cost as set
out in note 23 on pages 61-64. Under UK GAAP, the transfer of employees that held unvested stock option awards
to a joint venture does not give rise to a charge against profit. Under US GAAP,
the stock awards are considered to be held by non-employees and accordingly a
stock option expense relating to the fair value of the unvested awards is included
in share of operating profit/loss in joint ventures over the remaining
vesting period. k. RestructuringIn 2003,
under US GAAP, Reuters adopted the provisions of Financial Accounting Standard
No. 146 (FAS 146) Accounting for Costs Associated with Exit or Disposal
Activities. FAS 146 has been applied in respect of employee severance provisions
and property cost provisions. US GAAP requires that employee severance costs
that are not one-time termination charges be recognised when it is probable that
these costs will be incurred and the amount is capable of being estimated. Under
UK GAAP, Reuters recognises provisions for employee severance charges once the
Group has a constructive obligation to incur the costs. 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. Under UK GAAP, Reuters recognises provisions for costs associated with the exit
of a property once the intention to exit has been announced. Under US GAAP, charges
for costs associated with the exit of properties are recognised upon vacation
of the property or legal termination of the lease contract. l. Derivative instrumentsUnder 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 company 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 current earnings
under US GAAP. Under current UK GAAP, the company has continued to apply hedge accounting and
is not required to record its derivative instruments or any of its embedded derivative
instruments on the
balance sheet at fair value. Under UK GAAP, compound derivative instuments that have multiple underlyings
can be designated as a net investment hedge and, where this treatment is applied,
foreign currency translation gains and losses arising on the instrument are recorded
in the statement of total recognised gains and losses. Under US GAAP, such instruments
cannot in all cases be designated


as a net investment hedge and therefore foreign currency translation gains and
losses arising on the instrument may in some cases be recorded in the income
statement. m. Consolidation of subsidiary undertakingsUnder UK
GAAP, investments in certain subsidiaries are treated as financing arrangements
in substance and the net investment reflected within short-term investments.
Under US GAAP, such subsidiaries are consolidated under the voting interest model
and assets are reflected within the appropriate accounts. This has resulted in
a reclassification between asset categories within current assets in the current
year. On 16 November 2004, Reuters purchased the 49% voting stake of Radianz that it
did not already own from Equant, thereby increasing its shareholding from 51%
to 100% of the voting shares. Under UK GAAP, the acquisition of the additional
49% stake is included within current asset investments at the lower of cost and
net realisable value. As this 49% was acquired with a view to resale, and the
stake has never been treated as a long-term investment, in the opinion of the
directors it does not represent a continuing investment in Radianz and is therefore
included within current asset investments. The original investment has continued
to be accounted for using equity
accounting. Under US GAAP, Radianz is treated as a joint venture of Reuters Group for the
period 1 January 2004 to 16 November 2004 and for the years ended 31 December
2003 and 2002. The acquisition of the additional 49% stake in Radianz has been
accounted for as a step acquisition and Radianz has therefore been fully consolidated
as a subsidiary from the date of acquisition. Under US GAAP such subsidiaries
are consolidated under the voting interest model and the assets and liabilities
are recorded within the appropriate balance sheet categories. This has resulted
in a reclassification from current assets to other balance sheet line items in
the current year. It is the opinion of the directors that Radianz meets the criteria
set forth in FAS 144 as a disposal group and is therefore classified as an asset
held for sale. The summarised results of Radianz under UK GAAP for the period 1 January 2004
to 16 November 2004 and for the years ended 31 December 2003 and 2002 are set
out below: 1
      Jan-16
      Nov2004
   
   2003
   
   2002Summary
      income statement
   
   £m
   
   £m
   
   £mRevenue
   
   257
   
   327
   
   331Operating costs
   
   (275
   )
   (381
   )
   (446
   )Loss from continuing operations
   
   (20
   )
   (58
   )
   (121
   )Profit from discontinuing operations
   
   2
   
   5
   
   5Net loss
   
   (5
   )
   (59
   )
   (165
   )The
       summarised balance sheet information for Radianz under UK GAAP as at 31
       December 2003 is set out below:2003Summary
      balance sheet
   
   
   
   £mCurrent assets
   
   
   
   90Non-current assets
   
   
   
   84Current liabilities
   
   
   
   (68
   )Non-current liabilities
   
   
   
   (3
   )Net assets
   
   
   
   103 n.
Sale and leasebackUnder
UK GAAP, property sale and leaseback transactions where the leaseback meets the
criteria of an operating lease are accounted for as an operating sale and leaseback,
regardless of any
sub-lease of the leased property. Under US GAAP, where a portion of the leased property is sub-let and that sub-lease
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 made, the difference between the initial
proceeds received and the rental payments is recorded as financing cost over
the term of the lease. o. InterestUnder UK
GAAP, liabilities recorded in respect of contingent consideration


|76 |  | Reuters Group
       PLC Annual Report and Form 20-F 2004
|-- |  | ---------------------------------------------------------

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NOTES ON SUMMARY OF DIFFERENCES BETWEEN UK AND USGenerally
Accepted Accounting Principles (GAAP)

arising as part of business combinations are discounted to net present value. The discount is unwound through the profit and loss account over the life of the liability. Under US GAAP, no
  liability is recorded in respect of contingent consideration, therefore the interest charge is adjusted as appropriate. p. TaxationUnder UK
GAAP, FRS 19 Deferred Taxation requires deferred taxes to be accounted
for on all timing differences. Deferred tax assets are to be recognised to the
extent that, on the basis of all available evidence, it can be regarded as more
likely than not that there will be suitable taxable profits from which the future
reversal of the underlying timing differences can be deducted. Assets not recognised
are shown by way of a valuation allowance in the balance sheet. Under US GAAP,
deferred taxes are accounted for in accordance with FAS 109 Accounting
for Income Taxes on all timing differences and a valuation allowance is
established in respect of those deferred tax assets where it is more likely than
not that some portion
will remain unrealised. This has not given rise to a significant adjustment in the UK to US GAAP reconciliation.
The adjustment is primarily the result of the deferred tax impact of the other
US GAAP adjustments
made in the reconciliation. q. DividendsUnder
UK GAAP, dividends are provided for in the year in respect of which they are
declared or proposed. Under US GAAP, dividends are recognised only in the period
in which they are formally
declared. The effects of these differing accounting principles are shown in notes 36-39. 02 CASH FLOW STATEMENTThe cash
flow statement set out on pages 50-55 has been prepared in conformity with UK
FRS 1 (Revised) Cash Flow Statements. Set out below is a summary consolidated cash flow statement under US GAAP: Restated
   
   Restated2004
   
   2003
   
   2002Notes
   
   £m
   
   £m
   
   £mNet cash inflow fromoperating activities
   1
   
   218
   
   385
   
   276Net cash inflow/(outflow)from investing activities
   2
   
   230
   
   (366
   )
   (37
   )Net cash outflow fromfinancing activities
   3
   
   (370
   )
   (142
   )
   (450
   )Net increase/(decrease) in cashand
       cash equivalents under
          US GAAP
   
   
   78
   
   (123
   )
   (211
   )Net increase/(decrease) incash under UK GAAP
   
   
   24
   
   (97
   )
   86 The principal differences between the UK GAAP cash flow statement and the cash flow statement presented in accordance with FAS 95 are as follows:Notes:1
   Under
       UK GAAP, net cash inflow from operating activities is determined before
       considering (a) net cash outflow from returns on investments and servicing
       of
finance (2004: £10 million, 2003: £28 million, 2002: £64 million),(b)dividends
       received from associates (2004: £4 million, 2003: £3 million,
       2002: £2 million) and (c) taxes paid (2004: £43 million, 2003: £33
       million, 2002: £73 million). Under US GAAP, net cash inflow from
       operating activities is determined after these items. Net cash inflow
       from operating activites under US GAAP also includes £10 million
      cash inflow in respect of Radianz Limited.2
   Under
       UK GAAP, net cash flow from capital expenditure, financial investments
       and acquisitions and disposals (2004: £343 million inflow, 2003: £216
million outflow, 2002: £217 million outflow) are classified separately
while under US GAAP they are classified as investing activities.Under
       UK GAAP, movements in short-term investments (2004: £164 million
       increase, 2003: £99 million increase, 2002: £378 million decrease)
       are not included in cash but classified as management of liquid resources.
       Under US GAAP, short-term investments with maturity of three months or
       less at the date of acquisition (2004: £57 million increase, 2003: £37
       million decrease,
2002: £234 million decrease) are included in cash and cash


equivalents.
       Only short-term investments with a maturity of over three months (2004: £107
       million increase, 2003: £136 million increase, 2002: £144
       million decrease) are classified as investing activity. Net cash inflow/(outflow)
       from investing activities under US GAAP also includes £2 million
    cash outflow in respect of Radianz Limited.Under
       UK GAAP, cash outflow from the acquisition of computer software licences
       and other direct internal costs incurred for internal use software (2004: £4
       million, 2003: £14 million, 2002: £29 million) have been included
       in net cash inflow from operating activities. Under US GAAP, this expenditure
       has been capitalised and therefore the cash outflow has been included
    in the net cash inflow/(outflow) from investing activities.3
   Under
       UK GAAP, dividends paid (2004: £140 million, 2003: £140 million, 2002: £139 million) are classified separately while under US GAAP dividends paid
are classified as financing activities. Under UK GAAP, the purchase of Reuters shares by the ESOTs (2004: £nil, 2003: £nil, 2002: £65
million) is classified as investing activities whereas under US GAAP this is
classified as
financing activities.Under
       UK GAAP, cash flows relating to the movement in bank overdrafts (2004: £11
       million inflow, 2003: £11 million outflow, 2002: £63 million
       outflow) are classified as movements in cash while under US GAAP they
    are classified as a financing activity.


|                                                   |  |   
|-------------------------------------------------- |  | --
|Reuters Group PLC Annual Report and Form 20-F 2004 |  | 77

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NOTES
  ON SUMMARY OF DIFFERENCES BETWEEN UK AND US
  Generally Accepted Accounting Principles (GAAP) continued

|36                                                                                              | ADJUSTMENTS
    TO NET INCOME                                      |       |       |       |          |       |          |  
|----------------------------------------------------------------------------------------------- | ------------------------------------------------------------------ | ----- | ----- | ----- | -------- | ----- | -------- | -
|                                                                                                |                                                                    |       |       |       |          |       |          |  
|                                                                                                |                                                                    |       |       |       | Restated |       | Restated |  
|                                                                                                |                                                                    |       | 2004  |       | 2003     |       | 2002     |  
|                                                                                                |                                                                    |       | £m    |       | £m       |       | £m       |  
|                                                                                                |                                                                    |       |      
|Profit/(loss)
    attributable to ordinary shareholders in accordance with UK GAAP              |                                                                    | 351   |       | 50    |          | (255  | )       
|US GAAP adjustments:                                                                            |                                                                    |       |       |       |          |       |         
|a.                                                                                              | Revenue recognition                                                |       |      |       | 11       |       | 3        |  
|b.                                                                                              | Software                                                           |       | (7    | )     | 4        |       | 21       |  
|c.                                                                                              | Joint ventures and associates                                      |       | (5    | )     | 24       |       | 18       |  
|d.                                                                                              | Gains on deemed disposal of subsidiary undertakings and associates |       |      |       |         |       | 104      |  
|e.                                                                                              | Gain/loss on disposal of subsidiary undertakings                   |       | (24   | )     | (2       | )     |         |  
|f.                                                                                              | Gain on disposal of associates                                     |       | (25   | )     | (1       | )     |         |  
|g.                                                                                              | Fixed asset investments                                            |       | (19   | )     |         |       |         |  
|h.                                                                                              | Goodwill and other intangibles                                     |       | 45    |       | 52       |       | (34      | )
|j.                                                                                              | Employee costs                                                     |       | 8     |       | (32      | )     | (3       | )
|k.                                                                                              | Restructuring                                                      |       | 105   |       | (150     | )     |         |  
|l.                                                                                              | Derivative instruments                                             |       | 58    |       | (15      | )     | (28      | )
|m.                                                                                              | Consolidation
    of subsidiary undertaking                        |       | (8    | )     |         |       |         |  
|n.                                                                                              | Sale and leaseback                                                 |       | (1    | )     |         |       |         |  
|o.                                                                                              | Interest                                                           |       | 1     |       | 1        |       |         |  
|p.                                                                                              | Taxation                                                           |       | (52   | )     | 32       |       | 36       |  
|Minority interest in US GAAP adjustments                                                        |                                                                    | 9     |       | 3     |          | 38    |         
|                                                                                                |                                                                    |       |       |       |          |       |         
|Income/(loss) before cumulative effect of change in accounting principle                        |                                                                    | 436   |       | (23   | )        | (100  | )       
|Cumulative effect of change in accounting principle for FAS 142                                 |                                                                    |      |       |      |          | (13   | )       
|Minority interest effect of change in accounting principle                                      |                                                                    |      |       |      |          | 2     |         
|                                                                                                |                                                                    |       |       |       |          |       |         
|Net
         income/(loss) attributable to ordinary shareholders in accordance with
    US GAAP |                                                                    | 436   |       | (23   | )        | (111  | )       
|                                                                                                |                                                                    |       |       |       |          |       |         
|                                                                                                |                                                                    |       |       |       |          |       |          |  
|                                                                                                |                                                                    |       |       |       |          |       |          |  
|                                                                                                |                                                                    |       |       |       | Restated |       | Restated |  
|                                                                                                |                                                                    |       | 2004  |       | 2003     |       | 2002     |  
|                                                                                                |                                                                    |       | pence |       | pence    |       | pence    |  
|                                                                                                |                                                                    |       |       |       |          |       |          |  
|Earnings
    and dividends                                                                      |                                                                    |       |       |       |          |       |         
|Before
    accounting change                                                                    |                                                                    |       |       |       |          |       |         
|Basic earnings per ADS in accordance with US GAAP                                               |                                                                    | 186.9 |       | (9.5  | )        | (42.8 | )       
|Diluted earnings per ADS in accordance with US GAAP                                             |                                                                    | 182.4 |       | (9.5  | )        | (42.8 | )       
|After
    accounting change                                                                     |                                                                    |       |       |       |          |       |         
|Basic earnings per ADS in accordance with US GAAP                                               |                                                                    | 186.9 |       | (9.5  | )        | (47.6 | )       
|Diluted earnings per ADS in accordance with US GAAP                                             |                                                                    | 182.4 |       | (9.5  | )        | (47.6 | )       
|                                                                                                |                                                                    |       |       |       |          |       |         
|Dividend paid per ADS (including UK tax credit for 2002)                                        |                                                                    | 60.0  |       | 60.0  |          | 66.7  |         
|                                                                                                |                                                                    |       |       |       |          |       |         
|Weighted average number of shares used in basic EPS calculation (millions)                      |                                                                    | 1,400 |       | 1,396 |          | 1,395 |         
|Dilutive shares                                                                                 |                                                                    | 34    |       | 18    |          |      |         
|Used in diluted EPS calculation                                                                 |                                                                    | 1,434 |       | 1,414 |          | 1,395 |         
|                                                                                                |                                                                    |       |       |       |          |       |         

|78 |  | Reuters Group PLC Annual Report and Form 20-F 2004
|-- |  | --------------------------------------------------

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|37 | ADJUSTMENTS
      TO SHAREHOLDERS EQUITY
|-- | -----------------------------------------

|
|

|                                                                           |                                                |      |     |     | Restated |     | Restated |  
|-------------------------------------------------------------------------- | ---------------------------------------------- | ---- | --- | --- | -------- | --- | -------- | -
|2004                                                                       | 2003                                           | 2002
|£m                                                                         | £m                                             | £m  
|                                                                           |                                                |      |     |     |          |     |          |  
|Capital
      employed before minority interest in accordance with UK GAAP |                                                | 412  |     | 212 |          | 428 |         
|US
      GAAP adjustments:                                                 |                                                |      |     |     |          |     |         
|a.                                                                         | Revenue recognition                            |      |    |     |         |     | (11      | )
|b.                                                                         | Software                                       |      | 22  |     | 31       |     | 32       |  
|c.                                                                         | Joint ventures
      and associates            |      | (23 | )   | (13      | )   | (37      | )
|g.                                                                         | Fixed asset
      investments                  |      | 5   |     | 20       |     | 19       |  
|h.                                                                         | Goodwill and
      other intangibles           |      | 145 |     | 120      |     | 71       |  
|h.                                                                         | Contingent
      consideration                 |      |    |     | 24       |     | 29       |  
|i.                                                                         | Current asset
      investments                |      | 84  |     |         |     |         |  
|j.                                                                         | Employee costs                                 |      | (38 | )   | (44      | )   | (39      | )
|k.                                                                         | Restructuring                                  |      | (45 | )   | (150     | )   |         |  
|l.                                                                         | Derivative
      instruments                   |      | (8  | )   | (47      | )   | (14      | )
|m.                                                                         | Consolidation
      of subsidiary undertakings |      | (10 | )   |         |     |         |  
|n.                                                                         | Sale and leaseback                             |      | (1  | )   |         |     |         |  
|p.                                                                         | Taxation                                       |      | (12 | )   | 34       |     | (3       | )
|q.                                                                         | Dividends                                      |      | 86  |     | 86       |     | 86       |  
|Minority interest
    in US GAAP adjustments                               |                                                | 2    |     | (7  | )        | (10 | )       
|                                                                           |                                                |      |     |     |          |     |          |  
|Shareholders
      equity in accordance with US GAAP                      |                                                | 619  |     | 266 |          | 551 |         
|                                                                           |                                                |      |     |     |          |     |          |  
|                                                                           |                                                |      |     |     |          |     |          |  

|38 | STATEMENT
      OF OTHER COMPREHENSIVE INCOME
|-- | ---------------------------------------------

|                                                               |      |      |   |          |   |          |  
|-------------------------------------------------------------- | ---- | ---- | - | -------- | - | -------- | -
|                                                               |      |      |   | Restated |   | Restated |  
|2004                                                           | 2003 | 2002
|£m                                                             | £m   | £m  
|                                                               |      |      |   |          |   |          |  
|Net income/(loss)
        in accordance with US GAAP           |      | 436  |   | (23      | ) | (111     | )
|Other comprehensive
        income/(loss), net of tax:         |      |      |   |          |   |          |  
|Unrealised
      gains on certain fixed asset investments:     |      |      |   |          |   |          |  
|arising
      during year                                      |      | 91   |   | 2        |   | (21      | )
|less
      amounts taken to net income, net of losses          |      | (4   | ) |         |   | 3        |  
|Foreign
      currency translation differences                 |      | (52  | ) | (136     | ) | (94      | )
|Adjustments
        to reflect minimum pension liability       |      | (2   | ) | 4        |   | (4       | )
|                                                               |      |      |   |          |   |          |  
|Comprehensive
        income/(loss) in accordance with US GAAP |      | 469  |   | (153     | ) | (227     | )
|                                                               |      |      |   |          |   |          |  
|                                                               |      |      |   |          |   |          |  

|Reuters
      Group PLC Annual Report and Form 20-F 2004 |  | 79
|-------------------------------------------------------- |  | --

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NOTES
    ON SUMMARY OF DIFFERENCES BETWEEN UK AND US Generally
    Accepted Accounting Principles (GAAP) continued

|39 | SUMMARISED
        BALANCE SHEET (US GAAP BASIS)
|-- | ------------------------------------------------

|
|

|                                                       |  |       |      | Restated |   | Restated |  
|------------------------------------------------------ |  | ----- | ---- | -------- | - | -------- | -
|                                                       |  | 2004  | 2003 | 2002     |  
|                                                       |  | £m    | £m   | £m       |  
|                                                       |  |       |      |          |   |          |  
|Assets                                                 |  |       |      |          |   |          |  
|Fixed tangible
        assets                          |  | 479   |      | 823      |   | 1,012    |  
|Current assets                                         |  | 1,645 |      | 1,531    |   | 1,850    |  
|Other assets                                           |  | 121   |      | 151      |   | 159      |  
|Goodwill
        and other intangibles                 |  | 480   |      | 526      |   | 521      |  
|                                                       |  |       |      |          |   |          |  
|Total
        assets                                   |  | 2,725 |      | 3,031    |   | 3,542    |  
|                                                       |  |       |      |          |   |          |  
|Liabilities
        and shareholders equity           |  |       |      |          |   |          |  
|Current liabilities                                    |  | 1,339 |      | 1,985    |   | 2,167    |  
|Long-term
        liabilities                          |  | 528   |      | 568      |   | 552      |  
|Deferred
        taxes                                 |  | 41    |      | 10       |   | 30       |  
|Minority
        interest                              |  | 198   |      | 202      |   | 242      |  
|Shareholders
        equity before deductions         |  | 830   |      | 511      |   | 804      |  
|Shares held
        by employee share ownership trusts |  | (211  | )    | (245     | ) | (253     | )
|                                                       |  |       |      |          |   |          |  
|Total
        shareholders equity                     |  | 619   |      | 266      |   | 551      |  
|                                                       |  |       |      |          |   |          |  
|Total
        liabilities and shareholders equity     |  | 2,725 |      | 3,031    |   | 3,542    |  
|                                                       |  |       |      |          |   |          |  

Radianz Limited,
    a subsidiary of Reuters Group, has been treated as a disposal group held for
    sale. At 31 December 2004, assets of £142 million and liabilities of
    £55 million were held within the balance sheet in respect of Radianz.

Goodwill and
    other intangibles are net of accumulated amortisation of £658 million
    (2003: £620 million, 2002: £578 million).

03
      ADDITIONAL DISCLOSURES REQUIRED BY US GAAPDerivative
      instrumentsThe current year
      gain on derivative instruments is £58 million (2003: £15 million
      loss, 2002: £28 million loss). At 31 December 2004, the balance sheet
      includes a derivative asset of £45 million. The current year gain
      includes a gain of £21 million (2003: £26 million loss, 2002:
      £19 million loss) relating to currency forward contracts embedded
      within long-term customer contracts. Recent
      Accounting PronouncementsFAS
      123(R) In December 2004,
      the FASB issued FASB Statement No. 123 (revised 2004) Share Based
      Payment (FAS 123 (R)). The statement is a revision of FASB Statement
      No. 123 Accounting for Stock-Based Compensation and supersedes
      APB Opinion No. 25 Accounting for Stock Issued to Employees
      and its related implementation guidance. FAS 123 (R) establishes standards
      for accounting for transactions in which an entity exchanges its equity
      instruments for goods and services, primarily employee services. The statement
      requires a public entity to measure the cost of employee services received
      in exchange for an award of equity instruments to be based on the grant
      date fair value of the award, as determined using an option pricing model
      which considers the unique characteristics of those instruments. The cost
      should be recognised over the period during which an employee is required
      to provide service in exchange for the award. FAS 123 (R) is applicable
      to the Group from the start of the first interim and annual reporting period
      beginning after 15 June 2005. The implementation of FAS 123 (R) will require
      the Group to establish the grant date fair value for all its employee share
      option plans. The Group is in the process of assessing these fair values
      and the resulting impact on the Groups financial position.


FAS
      153 In December 2004,
      the FASB issued FASB Statement No. 153 Exchanges of Non-monetary Assets
      (FAS 153) as an amendment to APB Opinion No. 29 Accounting for Non-monetary
      Transactions. The guidance
      in APB Opinion No. 29 is based on the principle that exchanges on non-monetary
      assets should be measured based on the fair value of the assets exchanged,
      with certain exceptions to that principle. FAS 153 amends APB Opinion No.
      29 to eliminate the exception for non-monetary exchanges of similar productive
      assets and replaces it with a general exception for exchanges on non-monetary
      assets that do not have commercial substance. A non-monetary exchange has
      commercial substance if future cash flows of the entity are expected to
      change significantly as a result of the exchange. FAS 153 is
      effective for non-monetary exchanges occurring in fiscal periods beginning
      after 15 June 2005. This accounting pronouncement is not expected to have
      a significant impact on the Groups financial position or the results
      of its operations. EITF
      03-01 In June 2004,
      the Emerging Issues Task Force (EITF) issued EITF 03-01 The Meaning
      of Other-Than-Temporary Impairment and Its Application to Certain Investments.
      The issue includes determining the meaning of other than temporary impairment
      and its application to debt and equity securities within the scope of FAS
      115, Accounting for Certain Investments in Debt and Equity securities and
      equity securities that are not subject to the scope of FAS 115 and not accounted
      for under the equity method of accounting. The Group is in the process of
      assessing the impact of this pronouncement on the Groups financial
      position.


|   |  |                                                           
|-- |  | ----------------------------------------------------------
|80 |  | Reuters
        Group PLC Annual Report and Form 20-F 2004

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INFORMATION
    FOR SHAREHOLDERS

01
    ORDINARY SHARES As of 2 March 2005,
    there were 1,403,957,850 ordinary shares outstanding, excluding 32,550,175
    ordinary shares owned by certain employee share ownership trusts (see note
    28 on the consolidated balance sheet on pages 67-68). 02
      MAJOR SHAREHOLDERSThe company had
    received notice under section 198 of the UK Companies Act 1985, as at 2 March
    2005 that the following parties held notifiable interests in its shares: PercentageNumber
        
        Number
        
        of
          issuedof
          shares
        
        of
          shares
        
        share
          capital(March
          2005)
        
        (March
          2004)
        
        (March
          2005)Fidelity
          Investments
        130,364,252
        
        94,238,074
        
        9.08Legal &
          General InvestmentManagement
        58,006,887
        
        43,076,669
        
        4.04Barclays
          PLC
        53,902,608
        
        46,046,872
        
        3.75Merrill
          Lynch Investment Managers
        48,978,642
        
        48,978,642
        
        3.48 The companys
    major shareholders do not have any different voting rights from the other
    ordinary shareholders. Brandes Investment Partners and Franklin Templeton
    Investments decreased their holdings during the first half of 2004 and no
    longer hold a notifiable interest. Barclays PLC acquired a notifiable holding
    during 2004 and its holding has fluctuated around the 4% mark throughout 2004.
    As shown above, Fidelity Investments has increased its shareholding during
    2004 by around 36 million shares. There were relatively few other movements
    in the major shareholders. The
      Founders ShareIndependence, integrity
    and freedom from bias in the gathering and dissemination of news and information
    are fundamental to Reuters Group. 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 page 82-83). The Founders
    Share Companys directors are nominated by a Nomination Committee which
    includes certain serving directors of the Founders Share Company, one person
    nominated by each of four news associations, two people appointed by the Chairman
    of Reuters Group PLC and two people appointed after consultation with the
    European Court of Human Rights. A director of the Founders Share Company may
    not be a director or employee of Reuters Group. The current directors
    of the Founders Share Company are as follows: Trustee
          sinceLeonard Berkowitz
        1998The Honourable
        Mrs Anson, GBM, CBE, JP
        2002Sir Michael
        Checkland
        1994Bertrand
        Collomb
        2004Uffe Ellemann-Jensen,
        MP
        2001Dr Frene
        Ginwala
        2004Pehr Gyllenhammar
        (Chairman)
        1997Toyoo Gyohten
        2000Joseph Lelyveld
        2004John McArthur
        2001Sir Christopher
        Mallaby, GCMG, GCVO
        1998Mammen Matthew
        2002The Right
        Hon The Baroness Noakes, DBE
        1998Sir William
        Purves, CBE, DSO
        1998Jaakko Rauramo
        1999Dr Mark Wössner
        2001 Jacques de Larosière
    de Champfeu, KBE, and Robert Erburu retired as trustees in October 2004. Each Founders
    Share Company director is normally required to retire at the annual general
    meeting of the Founders Share Company following the fifth


anniversary of
    his or her nomination or last renomination and will be eligible for renomination
    (unless he or she has reached the age of 75). Except as described
    above, to the best of Reuters Groups knowledge, the company is not directly
    or indirectly owned or controlled by another corporation, by any foreign government
    or by any other natural or legal person, severally or jointly, and currently
    there are no arrangements that may, at a subsequent date, result in a change
    in control of the company. 03
      CORPORATE STRUCTUREThe Reuters 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 32 on the consolidated
    balance sheet, on page 70. 04
      TRADING MARKETSThe companys
    ordinary shares are traded on the London Stock Exchange. American Depositary
    Shares (ADSs), each representing six ordinary shares, are traded on the NASDAQ
    Stock Market. The ADSs are evidenced by American Depositary Receipts (ADRs)
    issued by JPMorgan Chase Bank, as Depositary under a Deposit Agreement, dated
    18 February 1998 (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 prices:2000
        16.20
        
        7.59
        
        153.63
        
        74.252001
        11.58
        
        5.26
        
        103.44
        
        46.002002
        7.47
        
        1.61
        
        64.36
        
        15.122003
        2.68
        
        0.96
        
        27.09
        
        9.592004
        4.29
        
        2.41
        
        49.15
        
        25.72Quarterly
          market prices:2003First quarter
        2.04
        
        0.96
        
        19.65
        
        9.59Second
          quarter
        2.00
        
        1.04
        
        20.27
        
        9.92Third quarter
        2.67
        
        1.70
        
        25.06
        
        17.52Fourth
          quarter
        2.68
        
        2.19
        
        27.09
        
        22.47Quarterly
          market prices:2004First quarter
        4.29
        
        2.41
        
        49.15
        
        25.72Second
          quarter
        4.15
        
        3.33
        
        45.01
        
        35.38Third quarter
        3.56
        
        2.89
        
        39.40
        
        31.75Fourth
          quarter
        4.09
        
        3.23
        
        45.30
        
        34.92Monthly
          market prices:2004August
        3.28
        
        2.89
        
        35.41
        
        31.75September
        3.49
        
        3.12
        
        37.31
        
        33.92October
        3.75
        
        3.23
        
        41.46
        
        34.92November
        4.09
        
        3.66
        
        45.30
        
        40.78December
        3.89
        
        3.60
        
        45.14
        
        41.35Monthly
          market prices:2005January
        3.99
        
        3.64
        
        44.93
        
        40.83February
        4.22
        
        3.98
        
        48.40
        
        44.82March (to
          2 March)
        4.22
        
        4.17
        
        48.67
        
        47.60 Analysis
    of shareholders As of 2 March 2005,
    there were 1,403,957,850 Reuters ordinary shares in issue, including the shares
    referred to below but excluding ordinary shares held by employee share ownership
    trusts. There were 28,180 shareholders on the ordinary share register analysed
    in the chart below. As of the same
      date, 815,268 ordinary shares and 22,321,434 ADSs (representing 133,928,604 ordinary shares) were held on the record in the
      US. These ordinary shares and ADSs were held by 243 record holders and 2,119
      record holders, respectively and represented 0.058% or evidenced ADSs


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        Group PLC Annual Report and Form 20-F 2004 |  | 81

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INFORMATION
    FOR SHAREHOLDERScontinued

respectively,
    representing 9.54% 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.  Dividends
      The table below
      sets forth the amounts of interim, final and total dividends (excluding
      any associated UK tax credit discussed on pages 85-86) paid in respect of
      each fiscal year indicated. Pound sterling amounts per share have been translated
      into US cents per ADS (each representing six ordinary shares) at the actual
      rates of exchange used for each of the respective payments of interim and
      final dividends. Pence
        per share
      
      Cents
        per ADSInterim
      
      Final
      
      Total
      
      Interim
      
      Final
      
      TotalDividends
        inaccordance
        withUK GAAP2000
      
        3.65
      
        12.35
      
        16.00
      
        31.56
      
        106.44
      
        138.002001
      
      3.85
      
      6.15
      
      10.00
      
      33.29
      
      53.56
      
      86.852002
      
      3.85
      
      6.15
      
      10.00
      
      36.05
      
      58.46
      
      94.512003
      
      3.85
      
      6.15
      
      10.00
      
      36.08
      
      64.88
      
      100.9620041
        
      3.85
      
      6.15
      
      10.00
      
      40.94
      
      
      
      Notes: 1
      The
        final dividend in respect of 2004 is payable on 28 April 2005 to holders
        of ordinary shares on the register at 11 March 2005 and on 5 May 2005
        to holders of ADSs on the record at 11March
        2005 and will be converted into US dollars from sterling at the rate prevailing
        on5May
        2005.See
        page 11 for a discussion of the Groups dividend policy. 05
    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 London in
    1851. Reuters Group PLCs registered office and corporate headquarters
    are located at 85 Fleet Street, London EC4P 4AJ, UK (telephone: +44 (0)20
    7250 1122), and will be moving in 2005 to 30 South Colonnade, Canary Wharf,
    London E14 5EP, UK. 06
      MEMORANDUM AND ARTICLES OF ASSOCIATIONThe following description
    summarises certain material rights of holders of the companys ordinary
    shares of 25 pence each and material provisions of the companys Memorandum
    and Articles of Association (the Articles), the Memorandum and Articles of
    Association of Reuters Founders Share Company Limited (the Founders Share
    Company) and English law. The following description is a summary only and
    is qualified in its entirety by reference to the Articles (which have been
    filed with the SEC and Companies House) and the Companies Act. All of the outstanding
    ordinary shares are fully paid. Accordingly, no further contribution of capital
    may be required from the holders of such shares by Reuters.


In this description,
    the term holder refers to the person registered in the register
    of members as the holder of the relevant share and the term beneficial
    owner refers to a person other than the holder who has a beneficial
    interest in the relevant share. JPMorgan Chase Bank, which acts as Depositary
    under the Deposit Agreement relating to the American Depositary Shares, or
    ADSs, is the holder of the ordinary shares represented by the outstanding
    ADSs. GeneralReuters Group PLC
    is incorporated under that name and is registered in England and Wales with
    registered number 3296375. Its objects are set out in the fourth clause of
    its Memorandum of Association and cover a wide range of activities, including
    the following: 
      collecting
        information and supplying news and information services and products;
      acquiring
        and operating wireless installations, satellites and other means of communication;
      utilising
        the Groups communications capabilities to provide various financial
        and securities markets services; and
      carrying
        on any other business supplemental to the foregoing or capable of enhancing
        the Groups profitability or capitalising on the Groups expertise. The Memorandum
    of Association provides a broad range of corporate powers to effect these
    objectives. The
      Reuters Trust Principles and the Founders Share CompanyThe Articles contain
    two sets of restrictions relating to the ownership of Reuters shares. These
    restrictions are intended to ensure continued compliance with the following
    principles (the Reuters Trust Principles) set out in the Article F.114: 
      that
        Reuters shall at no time pass into the hands of any one interest, group
        or faction;
      that
        the integrity, independence and freedom from bias of Reuters shall at
        all times be fully preserved;
      that
        Reuters shall supply unbiased and reliable news services to newspapers,
        news agencies, broadcasters and other media subscribers and to businesses,
        governments, institutions, individuals and others with whom Reuters has
        or may have contracts;
      that
        Reuters shall pay due regard to the many interests which it serves in
        addition to those of the media; and
      that
        no effort shall be spared to expand, develop and adapt the news and other
        services and products of Reuters so as to maintain its leading position
        in the international news and information business. For the purposes
    of the Reuters Trust Principles, the Articles define the term Reuters to mean
    Reuters Group PLC and every subsidiary of it from time to time supplying news
    services. The first set
    of restrictions contained in the Articles applies to persons that become interested
    in 15% or more of the ordinary shares outstanding at any time (excluding any
    shares held by Reuters Group as treasury shares). The term interested
    is defined in the Articles by reference to provisions of the Companies Act
    which require persons to disclose to public companies interests in voting
    shares in excess of a prescribed percentage. Subject to certain exceptions,
    all shares held by a person who reaches the 15% limit will be disenfranchised
    and the shares exceeding the 15% limit must be disposed of. This set of restrictions
    is more fully described below under Rights and restrictions attaching
    to shares  Restrictions on ownership  Disenfranchisement and disposals
    of excess interests. Second, the companys
    share capital includes the Founders Share, which is held by the Founders Share
    Company, a company limited by guarantee consisting of individuals, referred
    to as the Reuters Trustees, who constitute both its members and directors.
    The Founders Share empowers the Founders Share Company to cast such number
    of votes as will pass any resolution supported by and defeat any resolution
    opposed by, the Founders Share Company if it believes that any person or persons
    have obtained, or are seeking to obtain, control of Reuters Group. Control
    for these purposes is




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        Group PLC Annual Report and Form 20-F 2004
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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 to 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 Reuters Group.
    Tender offers or other non-market acquisitions of shares are usually made
    at prices above the prevailing market price of a companys shares. Acquisitions
    of shares by persons attempting to acquire control through market purchases
    may support the price of shares at market levels higher than otherwise would
    be the case. The restrictions and extraordinary voting rights summarised in
    this section may be expected to preclude such offers. DirectorsThe companys
      Articles provide for a board of directors consisting of not fewer than five
      nor more than 15 directors. The Articles require that, in performing their
      duties, the directors have due regard for the Reuters Trust Principles insofar
      as, by the proper exercise of their powers and in accordance with their
      other duties as directors, the directors may do so. The Articles
    contain provisions that require the board of directors to include at least
    five non-executive directors before a new executive director can be appointed. Under the Articles,
    a director may not vote in respect of any contract, arrangement or proposal
    in which the director, or any person connected with the director, has any
    material interest other than by virtue of the directors interests in
    securities of, or otherwise in or through, the company. This is subject to
    certain exceptions relating to proposals (a) giving the director any guarantee,
    security or indemnity in respect of obligations incurred at the request of
    or for the benefit of Reuters Group, (b) giving any guarantee, security or
    indemnity to a third party in respect of obligations of Reuters Group for
    which the director has assumed responsibility under an indemnity or guarantee,
    (c) relating to an offer of securities of Reuters 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 Reuters Group. The directors
    are empowered to exercise all the powers of Reuters Group to borrow money,
    subject to the limitation that the aggregate principal amount outstanding
    in respect of monies borrowed by the Reuters Group shall not exceed a sum
    equal to the higher of 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 annual
    general meeting 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 annual general meeting include any director who
    is due to retire at the meeting by reason of age. A retiring director shall
    be eligible for re-election subject to the requirements of the Combined Code.
    Starting at this years annual general meeting the Board will ask all
    directors to stand for re-election on an annual basis. For additional information
    see the Directors Report and Corporate Governance which appear on pages
    26 and 29-31. Directors are
    not required to hold shares in order to qualify as a director. A director
    not holding any shares may nevertheless attend and speak at general meetings
    of the company.


Rights
      and restrictions attaching to shares DividendsHolders of ordinary
      shares are entitled to participate in the payment of dividends pro rata
      to their holdings. The Founders Share is not entitled to participate in
      the payment of dividends nor will any dividend be paid on any shares held
      by Reuters in treasury. The Board may propose and pay interim dividends
      and recommend a final dividend, in respect of any accounting period out
      of the profits available for distribution under English law. A final dividend
    may be declared by the shareholders in general meeting by ordinary resolution,
    but no dividend may be declared in excess of the amount recommended by the
    Board. The company may
    allot ordinary shares in lieu of cash dividends, subject to shareholder approval
    at the time the relevant dividend is declared. In addition, the company may
    declare and pay equivalent dividends to shareholders outside the United Kingdom
    in local currencies and pay such dividends to the Depositary for value on
    the payment date. Voting
      rightsRights
      conferred by ordinary sharesVoting
      at a general meeting of shareholders is by show of hands unless, before
      or on making known the result, a poll is demanded in accordance with the
      Articles. If voting is by show of hands, each holder of ordinary shares
      who is present in person has one vote. On a poll, every holder of ordinary
      shares who is present in person or by proxy has one vote for every ordinary
      share held. This year the Board has decided that voting on all resolutions
      will be carried out by way of a poll. This approach is consistent with the
      recommendations of the recently published Myners Report to the Shareholder
      Voting Working Group. Holders of a
    substantial number of ordinary shares may be disenfranchised under the circumstances
    described under Restrictions on ownership below. Rights
    conferred by 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 Reuters
    Group voluntarily, by the Court, or any reconstruction of Reuters Group, or
    any resolution which would attach to any share voting rights not identical
    in all respects with those of the ordinary shares, is deemed to be a variation
    of the rights of the Founders Share. Additionally,
    if there are, in the opinion of the Founders Share Company, reasonable grounds
    for believing that any person and his associates have obtained or are attempting
    to obtain, directly or indirectly, control of Reuters Group, the Founders
    Share Company is entitled in its absolute discretion to serve Reuters with
    a written notice (a Founders Share Control Notice) to that effect. Control
    is defined for these purposes as the ability to control the exercise of 30%
    or more of the votes which may be cast on a poll at a general meeting. At
    all times after the service of a Founders Share Control Notice and pending
    its rescission, the Founders Share confers upon the Founders Share Company
    the right to cast on a poll such number of votes as are necessary to ensure
    the effective passing of any resolution in favour of which it votes and to
    ensure the defeat of any resolution against which it votes. The Articles provide
    that the opinion of the Founders Share Company in respect of the service or
    rescission of a Founders Share Control Notice shall be final and binding and
    may not be challenged on any grounds whatsoever. The Founders
    Share Company is entitled at any time to serve Reuters with a written request
    for an extraordinary general meeting and the directors are obliged to comply
    with such request. If they do not comply, the Founders Share Company is entitled
    to convene an extraordinary general meeting. If a Founders Share Control Notice
    has been served, however, the Founders Share Company can convene an extraordinary
    general meeting without first requesting that the directors do so. Four Reuters
    Trustees present at the relevant Trustees meeting can bind all the Founders
    Share Company directors to exercise the voting rights attaching to the Founders
    Share so as to defeat a resolution that would be deemed to




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        Group PLC Annual Report and Form 20-F 2004 |  | 83
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INFORMATION
  FOR SHAREHOLDERScontinued



be a variation
  of the rights attached to the Founders Share. However, the vote of a majority
  of the Reuters Trustees (the chairman of the Founders Share Company having a
  casting vote in the event of equality of votes) is required to determine whether
  a Founders Share Control Notice should be served and, if so, the manner in which
  the voting rights attaching to the Founders Share shall be exercised (excluding
  the vote of any Reuters Trustee who is associated with or materially financially
  interested in the person attempting to obtain control of Reuters). Restrictions
    on ownershipOrdinary
  sharesUnder
  the Articles, a person is interested in shares if, among other things,
  he is interested directly, or through his family or one or more companies, or
  through an interest in association with others pursuant to an agreement or understanding,
  or through a trust or if he controls the voting rights of others. The definition
  of interest in shares in the Articles is made by reference, with
  specified variations, to certain provisions of the Companies Act. Disclosure
  of interests in ordinary sharesThe
  Articles provide for the disclosure of interests in Reuters ordinary shares
  by reference to the Companies Act provisions mentioned above, with specified
  variations. Under these provisions as currently in force, if a person acquires
  an interest in voting shares of a public company amounting to 10%
  or more of the voting shares of any class, or if he increases or reduces such
  holding by at least 1% or if he ceases to have such holding, he is obliged to
  notify the company within two days of the day on which he acquired 10% or any
  such change in his interest took place. Further, if his interest is a material
  interest the 10% referred to above is reduced to 3%. The Articles provide
  for disenfranchisement of shares which are the subject of a notice under Section
  212 of the Companies Act (which allows a company to require disclosure of certain
  details concerning ownership of its shares) if the person served with the notice
  is in default in answering it. The Articles also provide for the imposition
  of restrictions on transferability of the shares concerned and on the right
  to receive dividends if such shares represent at least 0.25% of the class concerned.
  Such restrictions cannot, however, be imposed until the expiry of 14 days after
  the date of the Section 212 notice. Any such restrictions cease if the shares
  concerned are sold pursuant to a takeover offer or to an unconnected third party
  or through the London Stock Exchange. The restrictions on transferability only
  apply to certificated shares. Where a holder of uncertificated shares is in
  default in answering a Section 212 notice, the Articles provide that the Founders
  Share Company may require the Groups directors to apply to the Court for
  such order as may be appropriate. Disenfranchisement
  and disposals of excess interestsSubject
  to certain exceptions described below, certain restrictions apply to persons
  that become interested (as defined in the Articles) in 15% or more
  of the ordinary shares. If any person becomes interested in 15% or more of the
  outstanding shares (excluding any shares held by Reuters as treasury shares)
  (the Relevant Shares), the directors are required to serve a Restriction
  Notice on that person, on any other person known to the directors to have an
  interest in the Relevant Shares and, if different, on the registered holder
  of the Relevant Shares. While a Restriction Notice in respect of Relevant Shares
  is in force, a registered holder of the Relevant Shares is not entitled to attend
  or vote, either in person or by proxy, at any general meeting or at any meeting
  of the holders of any class of Reuters shares. In addition, a Restriction Notice
  will require such person to dispose of any Relevant Shares exceeding the 15%
  limit and supply evidence to the company that such disposal has occurred within
  21 days or such longer period as the directors consider reasonable. If such
  disposition is not made within the specified period, the directors must, as
  far as they are able, dispose of any shares exceeding the 15% limit. Under the
  Articles, any belief, resolution, decision or action of the directors held,
  made or taken pursuant to any of the provisions concerning restrictions on ownership
  shall be conclusive, final and binding on all persons concerned and may not
  be challenged on any grounds whatsoever. The restrictions
  are subject to certain modifications where a person becomes interested in 15%
  or more of the issued shares of any class by reason of a rights issue or an
  underwriting in the ordinary course of its business.


The
  Founders ShareOwnership
  of the Founders Share is restricted to the Founders Share Company. Under its
  Memorandum of Association, the Founders Share Company is not permitted, directly
  or indirectly, to dispose of the Founders Share or of any interest therein,
  or to grant any rights in respect of the Founders Share or any interest therein. Treasury
  SharesReuters
  may acquire and thereafter hold up to 10% of its issued listed share capital
  in treasury. Any such acquisition must be financed from the distributable profits
  of Reuters. Subject to certain limited exceptions, the rights attaching to shares
  while held in treasury will be suspended. Treasury shares may only be subsequently
  disposed of by Reuters by way of cash sale, transfer for the purposes of or
  pursuant to an employees share scheme or cancellation. Pre-emptive
    rights, new issues of shares, sale of treasury shares and repurchase of sharesHolders of ordinary
  shares have no pre-emptive rights under the Articles. However, the ability of
  the directors to cause the company to issue shares, securities convertible into
  shares or rights to shares, or to sell treasury shares, otherwise than pursuant
  to an employee share scheme, is restricted. Under the Companies
  Act, the directors are, with certain exceptions, unable to allot any equity
  securities without express authorisation, which may be contained in the Articles
  or given by its shareholders in general meeting, but which in either event cannot
  last for more than five years. The Companies Act imposes further restrictions
  on the issue of equity securities for cash or sale of treasury shares for cash
  other than by offering them first to existing shareholders unless the statutory
  requirement is displaced or modified by the shareholders in general meeting
  or under the companys Articles. At Reuters annual
     general meeting to be held on 21 April 2005, a resolution will be proposed
    to
  authorise the directors to allot relevant securities, as defined in the Companies
     Act, including any equity securities, up to an aggregate nominal amount
    of £108,000,000
  until the earlier to occur of the annual general meeting in 2006 or 21 July
   2006. A resolution will also be proposed to authorise equity securities as
  defined
  in the Companies Act to be issued within this limit by way of a rights offer,
   or otherwise pro rata to existing shareholders, but other issues of equity
  securities,
  except for shares issued pursuant to employee share schemes, will be limited
   to an aggregate of £17,000,000 in nominal value. Subject to applicable
  provisions of English law, the company may purchase its ordinary shares. Currently,
  it has general authority to repurchase up to 143,254,000 ordinary shares at
  prices ranging from 25 pence and not more than 5% above the average of the middle
  market quotations taken from the Daily Official List of the London Stock Exchange
  for the five business days before the purchase is made. At the Reuters annual
  general meeting on 21 April 2005, a resolution will be proposed to increase
  this authority to 143,540,000 ordinary shares. The directors would only make
  such purchases after considering the effects on earnings per share and the benefits
  for shareholders generally. Rights
    in a winding upIf Reuters Group
  PLC is wound up, the liquidator may, with the authority of an extraordinary
  resolution, divide among the holders of ordinary shares and the Founders Share,
  pro rata to their holdings, Reuters assets (after satisfaction of liabilities
  to creditors), provided, however, that the Founders Share Company may receive
  up to £1 and no more. Variation
    of rights and alteration of share capitalIf, at any time,
  the companys share capital is divided into different classes of shares,
  the rights attached to any class may be varied, subject to the provisions of
  the Companies Act, with the consent in writing of holders of three-quarters
  in value of the shares of that class or upon the adoption of an extraordinary
  resolution passed at a separate meeting of the holders of the shares of the
  class. At every such separate meeting, all of the provisions of the Articles
  relating to proceedings at a general meeting apply, except that the quorum is
  to be the number of persons (which must be two or more) who hold or represent
  by proxy not less than one-third in nominal value of the issued shares of the
  class.




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      PLC Annual Report and Form 20-F 2004
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The company can
     increase its share capital by ordinary resolution in conformity with the
    provisions
  of the Companies Act. However, new shares cannot have voting rights, which
    are  not identical to those of ordinary shares without the prior written
    consent
  of the Founders Share Company. Furthermore, the company may issue shares with
     preferred and other special rights or restrictions, provided that the prior

  written consent of the Founders Share Company has been sought for issuing any
     shares with rights not identical to those of ordinary shares. The company
    can
  consolidate, divide and cancel any of its shares (other than the Founders Share)
     by extraordinary resolution and can reduce its share capital (other than
    the
  Founders Share). Annual
           general meetings and extraordinary general meetingsAnnual
    general  meetings 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. 07
         EXCHANGE CONTROLUnder English law
   and the Articles, persons who are neither residents nor nationals of the UK

  may freely hold, vote and transfer their ordinary shares in the same manner
   as UK residents or nationals. There are currently
     no UK foreign exchange control restrictions on remittances of dividends
    to non-resident
  holders of ordinary shares or on the conduct of Reuters operations. 08
         EXCHANGE RATESThe following table
   sets forth, 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
      Average1
      Month
      High
      Low2000
    1.52
      August
           2004
    1.85
    1.792001
    1.44
    September
         2004
    1.81
    1.772002
    1.51
    October
         2004
    1.84
    1.782003
    1.64
    November
         2004
    1.91
    1.832004
    1.84
    December
         2004
    1.95
    1.912005 (to 4
         March)
    1.91
    January
         2005
    1.91
    1.86February
         2005
    1.92
    1.86Notes: 1
    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 4 March 2005
     the Noon Buying Rate was US$1.92 per £1. Fluctuations in
     the exchange rate between the pound sterling and the US dollar will affect
    the
  US dollar amounts received by holders of the ADSs upon conversion by the depositary
     of cash dividends paid in pounds sterling on the ordinary shares and represented

  by the ADSs. Also, fluctuations in the exchange rate may affect the relative
     market prices of the ADSs in the US and the ordinary shares in the UK. For the effect
     on the Groups results of operations of fluctuations in the exchange
     rates  between the pound sterling and the other major currencies (including
     the US
  dollar) in which revenues are received and expenditures are made by us, see
      the Operating and financial review on pages 11-25.


09
         TAXATION INFORMATION FOR US SHAREHOLDERSThe following 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 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. Nor does it 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 US Internal Revenue Code of
   1986, as amended, its legislative history, existing and proposed regulations,

  published rulings and court decisions, current tax laws, current UK Inland
  Revenue  published practice and the terms of the UK/US double tax treaty which
  came into
  effect on 31 March 2003 (the Treaty), as appropriate, all of which are subject
   to change at any time, possibly with retrospective effect. For the purposes
     of this discussion, a US holder is any beneficial owner of ordinary
      shares or ADSs that is (i) a citizen or resident for tax purposes of the
     US,
  (ii) a corporation organised under the laws of the US or any US State, (iii)
      an estate the income of which is subject to US federal income tax without
     regard
  to its source, or (iv) a trust if a court within the US is able to exercise
      primary supervision over the administration of the trust and one or more
     US
  persons have the authority to control all substantial decisions of the trust. Taxation
         of dividendsUK
   taxation Under 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 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

  will not be entitled to any tax credit from the UK Inland Revenue in respect
    of a dividend although there will be no further UK tax to pay in respect
   of
  that dividend. US
     federal income taxation The gross amount
   of any dividend paid 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 income An individual US
   holders qualified dividend income is subject to tax at a
   reduced  rate of tax of 15% provided that the ordinary 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 company were
    to be treated for the tax year in which dividends are paid (or for the prior

  year), as a foreign investment company, a foreign personal
   holding company, or a passive foreign investment company (a
    PFIC) for US federal income tax purposes. Recently enacted legislation repealed

  the foreign investment company and foreign personal holding company provisions
    for tax years beginning after 31 December 2004. Reuters Group does not believe

  that it would be treated as a foreign investment company or a foreign personal
    holding company for 2004, or that it is a PFIC or was a PFIC for 2004.


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INFORMATION
         FOR SHAREHOLDERScontinued



Accordingly, Reuters
     Group considers that dividends paid with respect to the ordinary 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. Reuters Groups dividends
   generally will be foreign source passive income for US foreign tax credit
  purposes. Taxation
         of capital gainsUK
   taxation Upon 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 ordinary shares or ADSs. The Treaty provides that,

  in such circumstances, capital gains arising from the disposal may be subject
    to tax not only in the jurisdiction of which the holder is resident at the
   time
  of the disposal, but also in that other jurisdiction. US
     federal income taxation Upon a sale or other
   disposal by a US holder of ordinary shares or ADSs, a gain or loss may be
  recognised
  for US federal income tax purposes equal broadly to the difference between
  the  US dollar value of the disposal proceeds and the US holders tax
  basis  (determined in US dollars) in the relevant ordinary shares or ADSs.
  Generally,
  such gain or loss will be regarded as a capital gain or loss and, as a long-term
   capital gain or loss, if the US holders holding period for such ordinary
    shares or ADSs exceeds one year. Long-term capital gains of a non-corporate

  US holder are generally subject to a maximum tax rate of 15%. Any such gain
    or  loss will generally be income or loss from sources within the US for
    foreign
  tax credit limitation purposes. The deductibility of a capital loss is subject
     to limitations since the ADSs and ordinary shares are publicly traded, their

  disposal will be considered to occur on the trade date, regardless
   of the US holders method of accounting. In addition, a US holder that
    receives foreign currency upon the sale or exchange of ordinary shares or
   ADSs
  and subsequently converts the foreign currency into US dollars, will have a
    foreign exchange gain or loss based on any appreciation or depreciation in
   the
  value of the foreign currency against the US dollar. Foreign exchange gain
   or  loss will generally be US source ordinary income or loss. Deposits and
   withdrawals
  of ordinary shares by US holders in exchange for ADSs will not result in the
    realisation of a gain or loss for US federal income tax purposes. Additional
         tax considerationsUK
   inheritance tax An 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 tax No 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. An agreement to
     transfer ordinary shares will normally give rise to a charge to SDRT at
    the
  rate of 0.5% of the amount or value of the consideration for the ordinary shares.
     However, if a duly stamped instrument of transfer of the ordinary shares
    is
  executed in pursuance of the agreement and duly stamped within six years of
     the date on which the agreement is made (or, in a case where the agreement
    is
  conditional, the date that the condition is satisfied) any SDRT paid will be
     repaid. To the extent the SDRT has not already been paid, the charge to
    SDRT
  will be cancelled. SDRT is in general
     payable by the purchaser of ordinary shares. However, there are regulations

  which provide for collection from other persons in certain circumstances. US
     PFIC status If a foreign company
   is a PFIC, then certain distributions and gains can be allocated rateably
  over
  a US holder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 stated above under the heading Taxation of capital
   gains  US federal income taxation, the company reasonably believes
    that it was not a PFIC in 2004 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, Reuters Group cannot assure US holders
   that  the IRS would agree with its 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 Reuters Groups ordinary shares and ADSs in the
   event that it qualifies as a PFIC.




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US
  information reporting and backup withholding A US holder is generally
  subject to information reporting requirements with respect to dividends paid
  in the US on ordinary shares or ADSs and disposal proceeds realised from the
  sale, exchange, redemption or other disposal of ordinary shares or ADSs. In
  addition, a US holder is subject to backup withholding (currently at a rate
  of 28%) on dividends paid in the US on ordinary shares or ADSs and disposal
  proceeds realised from the sale, exchange, redemption or other disposal of ordinary
  shares or ADSs unless the US holder is a corporation, provides an IRS Form W-9
  or otherwise establishes a basis for exemption. Backup withholding is not an
  additional tax. The amount of any backup withholding will be allowed as a credit
  against a US holders US federal income tax liability and may be refunded,
  provided that certain information is furnished to the IRS. 10
    RELATED PARTY TRANSACTIONS AND MATERIAL CONTRACTSRelated
    party transactions  GeneralRelated party transactions
  are principally with Radianz, Factiva, TSI and Instinet Group, each as described
  below. Reuters Group has entered into arrangements with many of its subsidiary
  undertakings, joint ventures and associates, and has in addition provided financial
  information services to, and purchased services from, many of the companies
  with which it shares a common director. Except as otherwise indicated, all of
  these transactions are in the normal course of business on commercial terms.
  Excluding transactions with Radianz, Factiva, TSI and Instinet Group, services
  provided to related parties totalled £5 million and services purchased
  totalled £19 million. Only in the case
  of the transactions with Radianz, Factiva, 3 Times Square Associates LLC (3XSQ
  Associates), TSI and Instinet Group were any of the amounts involved material
  to either party. These services are ongoing and continued at historical levels
  to the date of this report. RadianzDuring 2004 and in
  accordance with inter-company agreements including those described below, Radianz
  provided the Group with network services totalling £277 million (2003:
  £304 million, 2002: £284 million). In 2004, Reuters Group provided
  Radianz with certain technical, field engineering, IT systems, property and
  human resource services for a total cost of £66 million (2003: £82
  million, 2002: £126 million). Network
  Services AgreementTo
  secure the long-term availability of the Radianz network for the Reuters Group,
  Reuters entered into a Network Services Agreement (the NSA) with Radianz in
  May 2000 in connection with the formation of Radianz. The NSA had an initial
  term ending on 1 July 2005 and thereafter would remain in full force and effect
  for successive one-year periods unless either party gave six months notice
  prior to the expiration. Radianz agreed to provide reasonable assistance to
  Reuters in the event of termination of the NSA, to ensure that Reuters could
  migrate the services from Radianz to a third-party company. The NSA remains
  in effect following Reuters purchase of the Equant Groups entire stake
  in Radianz. However, in connection with Reuters exclusive discussions with BT
  to secure a long-term network services agreement, Reuters has served formal
  notification of its intention to terminate the NSA at the 1 July 2005 expiry
  of the initial term. The standards for
  performance of services provided in the NSA have been agreed between Reuters
  and Radianz. In addition, the NSA sets out the processes and procedures for
  managing the contract going forward. In particular, the NSA sets out details
  for monthly performance reviews to review capacity service levels, operational
  changes and orders, introduction of new services and ongoing requirements by
  Reuters. There is also provision for quarterly meetings to discuss the contract
  and its operation and technical matters relating to the business continuity
  plans. Reuters generally
  agreed to continue to use Radianz for its network services in support of global
  and strategic products during the term of the agreement. Detailed provisions
  in respect of rates and charges were agreed between Radianz and Reuters. Radianz
  agreed that it shall provide the network services to Reuters on terms which
  are no less favourable than reasonably comparable services offered to any other
  customer of Radianz, and Reuters agreed to spend an agreed amount with Radianz
  annually.


Purchase
  of Equant StakeOn
  21 October 2004, Reuters entered into an agreement to purchase Equants
  entire stake in Radianz for £60 million (US$110 million) in cash together
  with the release of future funding obligations. The transaction completed on
  16 November 2004. The purchase agreement included standard corporate representations
  and warranties by each of Equant and Reuters as to itself, and was otherwise
  generally on customary terms and conditions for a transaction of this nature.
  At the same time as Reuters announced its agreement to purchase Equants
  stake, Reuters also announced that it was in exclusive discussions with BT to
  secure a long-term agreement for the provision of network services, which is
  expected to involve the sale of Radianz to BT. For more information, see Our
  markets drive our organisational structure  Communications networks
  on page 7. FactivaFactiva and Reuters
  each provide a variety of services to the other. Factiva hosts and maintains
  Reuters pictures archiving service under a rolling one-year contract. Under
  a three-year agreement commencing on 1 January 2003, Factiva permits Reuters
  to incorporate Factiva content in certain Reuters products. Under a separate
  licence, Factiva also permits Reuters staff to access Factiva content. The total
  cost of the services provided by Factiva to Reuters in 2004 was £9 million
  (2003: £7 million, 2002: £19 million). Reuters provides
  Factiva with technical and administrative support services, including use of
  Reuters premises, facilities, finance and payroll services, subject to termination
  by Factiva on six months written notice or Reuters on twelve months
  written notice. Reuters also provides content, including its newswires, to Factiva
  for incorporation in Factiva services for a royalty payment. This agreement
  is currently being renegotiated. In 2004, Reuters granted Factiva an additional
  trademark licence permitting Factiva to use Reuters name for an annual fee based
  on a percentage, increasing in the next calendar year, of Factivas gross
  revenues. The licence continues until breach, insolvency, dissolution of the
  joint venture or Reuters owning less than 50% of Factiva. The total cost of
  the services provided by Reuters to Factiva in 2004 was £23 million (2003:
  £47 million, 2002: £61 million). Under the terms
  of the agreement with Dow Jones & Co. relating to the formation of the Factiva
  joint venture, Reuters has agreed that it will only supply its content in accordance
  with its written policy regarding distribution of content to third parties and
  that in the event that it makes its proprietary content available to any service
  that competes or would reasonably be deemed to compete with Factiva then any
  revenue from such sale shall be paid to Factiva. Such terms also apply to Dow
  Jones. In connection with
  the formation of the Factiva joint venture, Reuters agreed to invest US$20 million
  in cash in the venture over a period of five years by means of an interest-free
  promissory note. At the beginning of 2004, this stood at £1 million. It
  was repaid during the year. At 31 December
  2003, Reuters held a loan of £5 million (2002: £7 million) repayable
  to Factiva, for the settlement of trading balances between Reuters and Factiva.
  This bore interest at LIBOR and was repaid during the year. A further loan of
  £11 million repayable to Factiva, on which interest is payable at LIBOR,
  was taken out by Reuters during the year and remained payable at 31 December
  2004. This is a short-term deposit of surplus cash. TSIOn 3 February 2004,
  Reuters Group reduced its stake in TSI from 48.4% to 8.8%. During 2004, Reuters
  Group purchased £13 million of services from TSI (2003: £16 million,
  2002: £5 million). LicencesReuters owns
  the underlying intellectual property and technology that was in existence at
  31 December 1996 and that is incorporated into many of TSIs products.
  Reuters licenses this technology to TSI. TSI owns all technology and related
  intellectual property rights independently developed by TSI since 1 January
  1997, including enhancements and improvements to the licensed technology, which
  TSI itself licenses to Reuters. Through the third
  quarter of 2003, Reuters had a licence, distribution and maintenance agreement
  with TSI pursuant to which Reuters was required to pay TSI certain minimum distribution
  fees related to sales of TSIs products to




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      Group PLC Annual Report and Form 20-F 2004 |  | 87
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INFORMATION
  FOR SHAREHOLDERScontinued



financial services
  market customers. Under this agreement, Reuters obligations with respect to
  the minimum distribution fees were to expire at the end of 2003, and TSI was
  restricted until May 2004 from selling its products and providing consulting
  services directly to companies in the financial services market, except in limited
  circumstances, if Reuters continued to pay the minimum distribution fees until
  that date. In October 2003, Reuters entered into a revised commercial agreement
  with TSI. Pursuant to the revised agreement, TSI has the right to market and
  sell its products to customers in the financial services market, except that
  TSI will not be able to market or sell risk management applications or market
  data systems for financial services companies or to sell to financial services
  customers through four specified resellers until May 2008. Reuters will continue
  to have the right to use TSI technology internally and embedded within its products,
  and TSI will provide certain fee-based support services to Reuters. The agreement
  provided that Reuters and TSI would work together to migrate Reuters existing
  customers maintenance contracts to TSI, and that Reuters rights to re-sell
  ended in October 2003, subject to completion of a limited number of then in
  progress opportunities. From October 2003 until March 2005, Reuters made quarterly
  payments of US$5 million to TSI, subject to reduction based on TSIs direct
  revenues from products and support sold to financial services customers. On 27 February
  2005, Reuters and TSI entered into an amendment to the commercial agreement
  under which TSI granted Reuters new rights to resell a defined set of TSI software
  products solely in conjunction with the sale by Reuters of its market data delivery
  solutions in return for Reuters paying TSI licence fees in minimum annual amount
  of US$11 million. The reseller rights have an initial term of one year which
  Reuters may elect to extend for two further one-year terms. The amendment also
  extended the time during which Reuters has the right to use TSI technology internally
  and embedded within its products by one year, to 31 December 2012. Repurchase
  by TSIAt
  the same time as the licence agreement revision in October 2003, Reuters and
  TSI entered into an agreement pursuant to which TSI agreed to register sales
  by Reuters of its TSI shares under US securities laws, and to repurchase up
  to US$115 million of its shares from Reuters upon Reuters completing a single
  public offering of at least US$100 million of TSI shares. In February 2004,
  Reuters completed a registered public offering of 69 million TSI shares for
  US$473 million (£261 million), and TSI repurchased an additional 17 million
  shares for US$115 million, resulting in aggregate net proceeds to Reuters, after
  underwriting and transaction fees, of approximately US$563 million (£310
  million). 3XSQ
    AssociatesReuters is party
  to a lease entered into in 1998 with 3XSQ Associates, an entity owned by Reuters
  and Rudin Times Square Associates, LLC formed to acquire, develop and operate
  the 3 Times Square property and building. Pursuant to the lease, which has been
  amended from time to time, Reuters leases approximately 692,000 square feet
  for a term of approximately 20 years expiring in 2021, with an option to terminate
  10 years early as to 77,000 square feet and three successive ten-year renewal
  options as to the entirety of the space. During 2002, 2003 and 2004, Reuters
  made payments to 3XSQ Associates in respect of rent, operating expenses, taxes,
  insurance and other obligations in the amounts of US$32.7 million, US$33.3 million
  and US$32.9 million, respectively. The lease is supported by a US$120 million
  letter of credit provided by Reuters. Instinet
    GroupReuters and Instinet
  Group are party to numerous agreements and arrangements, including those described
  below, under which they provide each other with various products, services,
  licences and other transactions. Sale
  of Bridge TradingOn
  28 February 2005, Reuters entered into an agreement to sell Bridge Trading to
  Instinet Group for US$21.5 million in Instinet Group stock, subject to adjustment
  for working capital and net capital. The transaction is anticipated to complete
  by the end of April 2005, subject to approval from the NASD and other customary
  conditions. Pursuant to the agreement, until 31 December 2005 Bridge Trading
  will continue to have exclusive rights to allow its existing clients to pay
  for Reuters Station through


soft dollar
  credits generated by trading activity. In addition, Reuters has agreed for a
  period of one year not to operate a US broker dealer which allows its customers
  to pay for Reuters Station on a soft dollar basis, and not to solicit Bridge
  Trading employees, in each case subject to certain exceptions. The agreement
  otherwise includes representations and warranties, covenants and other terms
  customary for a transaction of this nature. Following the sale, Reuters will
  continue to provide certain transitional services to Bridge Trading for a period
  through to 31 December 2005, including a lease arrangement for space currently
  occupied by Bridge Trading, various administrative, technology and other support
  services, and a royalty-free licence to the Bridge Trading trademark. Other
  than the licence, such arrangements include fees generally based on allocated
  or attributable costs. RGRSUnder agreements
  between Reuters and Instinet Group, Instinet Group customers gain the ability
  to submit orders to Instinet Group and to receive indications of interest from
  Instinet Group over the RGRS network. Instinet Group is not required to pay
  for orders it receives through RGRS. The US agreement (covering global orders
  submitted via a US connection) term is to 17 December 2005 subject to annual
  renewal thereafter, and is subject to termination rights if Reuters ceases to
  own a majority of Instinet Groups voting stock. The UK agreement (covering
  global orders submitted via a UK connection) will continue until terminated
  by either party on six months notice. In addition, under
  a development agreement Reuters develops enhancements to the RGRS interface
  so that customers can better access Instinet Groups proprietary trading
  functionality. The current term runs through to 19 September 2005 subject to
  annual renewal thereafter and terminable by either party on a change of control
  of Instinet Group, including if Reuters ceases to own a majority of Instinet
  Groups voting stock. NewportSMUnder an agreement
  with Instinet Group, Reuters has the exclusive right to provide the real-time
  market data for Instinet Groups NewportSM(patent pending)
  program trading application. The current agreement term is to 19 September 2005
  subject to annual renewal thereafter and is terminable by either party on a
  change of control of Instinet Group, including if Reuters ceases to own a majority
  of Instinet Groups voting stock. Market
  dataReuters
  had been entitled to redistribute certain proprietary equity securities data
  from Instinet Group under two data distribution agreements. Under a data distribution
  agreement entered into at the time of the Instinet IPO in May 2001, Reuters
  had the limited right to be the exclusive data vendor distributing some of Instinet
  Groups proprietary equity securities data; however, this agreement terminated
  on 17 May 2004. Under a separate agreement originally entered into with Island
  ECN (which was acquired by Instinet Group in September 2002), Reuters has the
  right to redistribute a broader set of proprietary equity securities data from
  Instinet Group. This agreement, which continued in effect notwithstanding the
  termination of the exclusive arrangement described above, has a term until 28
  June 2005 subject to annual renewal thereafter. Reuters is not required to make
  payments in connection with any such redistribution. Customer
  agreementInstinet
  Group has entered into an agreement for certain Reuters information services
  and related hardware, software and support on terms to Reuters independent third-party
  customers, as well as an addendum under which Reuters has granted Instinet Group
  the right to redistribute certain information both internally and to its customers
  subject to termination upon 180 days notice by either party. Preferred
  soft-dollar arrangementThis
  agreement establishes a preferred commercial and soft-dollar arrangement for
  Instinet Group customers that purchase Reuters products and services. This is
  available to certain customers who are increasing their level of business with
  Instinet Group, Reuters or both. Reuters compensates Instinet Groups sales
  personnel for new sales of Reuters products and services, and Instinet Group
  will pay Reuters an annual fee for various administrative and marketing services
  related to training of Instinet Groups personnel. The current agreement
  term is to 19 September 2005 subject to annual renewal thereafter and is terminable
  by either party on a change of control of Instinet Group, including if Reuters
  ceases to own a majority of Instinet Groups voting stock.




|88 |  | Reuters Group
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Commission
  sharing agreementInstinet
  Group has agreed to open accounts for some institutional clients that Bridge
  Trading introduces to Instinet Group, and to rebate Bridge Trading portions
  of the commissions these customers pay at a commercially reasonable rate. This
  agreement is terminable at will by either party. TriadUnder an agreement
  with Bridge Trading, Instinet Group has the ability to deliver indications of
  interest and advertised trades to its customers and potential customers through
  Reuters Triad network. Instinet Group pays standard commercial rates for indications
  of interest and advertised trades it delivers through Triad. The current term
  of the agreement is to 22 July 2005, subject to annual renewal thereafter. Patent
  licensing agreementReuters
  has granted Instinet Group a patent licence permitting Instinet Group to make,
  use and sell products that include a system with functionality that identifies
  counterparties to a transaction and enables communication between the counterparties
  to negotiate the terms of the transaction. This licence is for the life of the
  patent, although it may be terminated under customary conditions. In addition,
  Reuters has the right to terminate in the event that Instinet uses the patent
  to create products that compete with any of Reuters products. Reuters also has
  the right to terminate the licence generally if it ceases to own a majority
  of Instinet Groups voting stock, subject to Instinet retaining some rights
  to the patent for products existing on or before the date of such termination.
  Instinet has also agreed that if it obtains a patent for a system with substantially
  similar functionality, it would grant Reuters a licence to that patent on terms
  no worse than the terms of this licence. Global
  Solutions AgreementThis
  agreement enables Instinet Group to license software from Reuters, usually on
  a one-time fee basis, on a worldwide basis. Reuters has also agreed to provide
  software support for the licensed products. Fixed
  income technology licenceInstinet
  Group has granted Reuters a royalty free, non-exclusive, non-assignable worldwide
  right and licence to use some technology that is owned by or licensed to Instinet
  Group related to its fixed income securities platform. This agreement will automatically
  terminate, subject to Reuters retention of some rights with respect to specified
  products and enhancements, once Reuters ceases to own more than 50% of Instinet
  Groups common stock. Research
  & AnalyticsIn
  September 2001, Reuters purchased Instinet Groups Research and Analytics
  (R&A) product, an analytic software application that incorporates quotes,
  news and access to an INET trading application. Following the R&A purchase,
  Instinet Group was permitted to continue to make available soft-dollar payment
  options to its customers in connection with their use of the R&A product
  and any replacement product, and Reuters agreed until 18 June 2003 not to provide
  any soft dollar payment options to certain R&A customers, directly or through
  a third party, other than through Instinet Group. Reuters and Instinet Group
  each agreed to provide various transitional services relating to the R&A
  product to the other until 30 April 2003 although Instinet Group continued to
  provide transitional services until 31 July 2004. In addition, Instinet Group
  agreed to provide Reuters assistance in migrating R&A customers to a Reuters
  desktop product under an incentive arrangement scheme. The migration was completed
  in July 2004, with all migrating customers bering transferred to the Reuters
  Station product. 3
  Times Square subleaseInstinet
  Group is subject to an agreement with Reuters to sublease 368,000 square feet
  of office space at 3 Times Square in New York City. The sublease term is until
  2021, with a one-time right of termination in 2011 as to approximately half
  the space. Corporate
  agreementReuters
  and Instinet Group are parties to a corporate agreement providing for, among
  other things: (i) Reuters rights to nominate directors to the Instinet Group
  board; (ii) consent rights by Reuters with respect to specified significant
  transactions so long as Reuters beneficially owns at least 35% but less than
  a majority of Instinet Groups voting stock; (iii) consent rights with
  respect to Instinet Group incurring more than US$400 million net indebtedness,
  other than in the ordinary course of its brokerage or similar


businesses, so
  long as Reuters holds a majority of Instinet Groups outstanding voting
  stock; (iv) restrictions on Instinet Group voluntarily taking any action reducing
  Reuters ownership to less than 51%; and (v) restrictions on Instinet Group becoming
  registered as a national securities exchange, without Reuters prior consent,
  if such registration would materially affect Reuters ability to exercise its
  voting and other rights related to its ownership of Instinet common shares,
  so long as Reuters beneficially owns more than 30% of Instinet Groups
  voting stock. Stockholder
  agreementIn
  connection with Instinet Groups acquisition of Island in 2002, Reuters
  entered into various agreements with Instinet Group and certain stockholders
  of Island providing for, among other things, director nomination rights and
  voting, restrictions on purchases, sales and issuances of Instinet Group shares,
  approval rights regarding certain transactions, and registration rights. Reuters
  is limited from acquiring additional shares of Instinet Group without the consent
  of Instinet Groups Board until September 2005, with certain exceptions
  and subject to earlier termination in some circumstances. Other
    material contractsSavvis
    Network Services AgreementIn
    connection with the Bridge acquisition in 2001, Reuters entered into a binding
    term sheet with Savvis, Bridges network service provider, under which
    Savvis agreed to provide internet protocol network services, internet access
    and co-location services necessary to continue network services for the Bridge
    business and customers Reuters was acquiring. The term sheet was formalised
    by an agreement entered into by the parties in September 2001, which has subsequently
    been amended at various times. The agreement, which has a five-year term,
    contained minimum spend commitments for each year. As a result of various
    set-offs and other reductions under the agreement, for the nine-month period
    ending 30 September 2005, Reuters will be required to spend a minimum of US$32.1
    million, subject to adjustment and reduction under certain circumstances;
    thereafter, Reuters will have no further minimum spend commitments to Savvis.
    If Savvis does not meet certain required quality of service levels, Reuters
    is entitled to credits and, in the event of a material breach of such quality
    of service levels, Reuters is entitled to terminate the agreement. In addition,
    upon successful completion of its acquisition of Telerate, Reuters would acquire
    Telerates network services agreement with Savvis, relating to Telerate
    services. Telerate
  Acquisition AgreementOn
  20 December 2004, Reuters entered into an agreement to acquire substantially
  all of the business of Telerate for base consideration of US$100 million and
  Reuters 40,870 shares of Series A Convertible Preferred Stock in Savvis. The
  purchase price is subject to adjustment for working capital and an increase
  by an amount currently estimated to be US$28 million (£15 million) to
  the extent certain actions Telerate may independently take prior to closing
  result in corresponding reduction of Reuters anticipated post-closing restructuring
  costs. Under the agreement, Reuters has provided US$34 million (£18 million)
  in funding to Telerate, which, together with interest, will be applied against
  the purchase price upon the closing or repaid through a draw on a letter of
  credit in the event the deal acquisition does not proceed. The agreement generally
  is on customary terms including representations, warranties, covenants, conditions
  (including regulatory approvals) and indemnities by each of the parties. A portion
  of the purchase price, consisting of US$30 million cash (subject to increase
  in connection with an estimate of closing working capital) and US$15 million
  worth of Savvis stock valued at the closing, will be put into escrow for two
  years to serve, in general, as the sole source of funding for any post-closing
  claims by Reuters. The agreement may be terminated in certain circumstances,
  including: upon mutual agreement; if the closing has not occurred by 20 December
  2005 so long as the failure to close was not the result of the terminating partys
  material breach; upon material breach by either party; if any condition shall
  become impossible to satisfy; if completion is prohibited by final court order;
  or if any of Telerates US subsidiaries shall enter bankruptcy proceedings.
  For more information on the pending Telerate acquisition, see pages 7 and 20,
  as well as the discussion below.




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      Group PLC Annual Report and Form 20-F 2004 |  | 89
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INFORMATION
  FOR SHAREHOLDERScontinued



Telerate
  Transitional Services AgreementReuters
  is party to a Transitional Services
  Agreement (TSA) with Telerate and certain of its subsidiaries dated as of 2
  June 2003.
  The TSA arises from Reuters and Telerates respective acquisitions of certain
  assets out of bankruptcy from Bridge in late 2001 and formalises a term sheet
  the parties had been operating under since that time. Because the businesses
  Telerate acquired  the global Telerate business and certain businesses
  of Bridge in Europe and Asia  were dependent on the software, systems
  and support capabilities acquired by Reuters and because some of the operations
  acquired by Reuters in Europe and Asia were to a lesser extent dependent on
  the assets and operations acquired by Telerate, the parties entered into the
  TSA pursuant to which each agreed to provide the other with certain software
  and/or services for a transitional period. Under the TSA,
  Telerate has a limited right to sublicence to its own clients certain proprietary
  software acquired by Reuters from Bridge. Reuters also provides Telerate with
  a variety of services  including data management, central system software
  development, technical operations and back office support  associated
  with management of the Bridge Data Network acquired by Reuters. Telerate had
  provided Reuters with facilities and maintenance for equipment supporting the
  data collection function of the Bridge Data Network in Europe and Asia, among
  other services, although these have largely been terminated over time as Reuters
  now provides these functions for itself. For the term of
  the TSA, Telerate is restricted in its ability to sell equities information
  products in North America where Reuters acquired the business of Bridge. The
  term of the TSA originally commenced on 18 October 2001 and ran to 18 October
  2005, but has been extended as described below. Each party has a right to terminate
  services it is receiving under the TSA prior to the TSAs expiration. In
  addition, there is an obligation for each party to cancel services it is receiving
  if it is able to provide those services for itself or to contract for the services
  with a third party. Each party has a right to terminate the TSA in the event
  of a material breach by the other party. In connection with
  discussions relating to and the execution of the definitive agreement for Reuters
  acquisition of Telerate, the parties agreed to extend the expiration date of
  the TSA while the acquisition is pending, and, in the event the acquisition
  is terminated without completion, to extend the expiration date further to approximately
  27 months from the date of termination of the acquisition. The parties have
  agreed that upon the successful completion of the acquisition, any outstanding
  invoicing and payment disputes under the TSA will be settled for a payment to
  Reuters of approximately $22 million, including the release to Reuters of approximately
  $12 million escrowed under the TSA from payments of disputed amounts made by
  each of Reuters and Telerate during the term of the TSA. Financing
  arrangement.For
  a discussion of other material contracts, see Treasury Policies, Financing
  and Foreign Exchange on pages 21-22. 11
        CAPITAL INVESTMENTS, EXPENDITURE AND DIVESTMENTSSince
    the beginning of 2002, Reuters Group has made a number of acquisitions and
    has invested in several new and existing businesses. In keeping with its Fast
    Forward goal to simplify business operations, Reuters has also disposed of
    or closed over 80 units during the period. The principal acquisitions, investments
    and disposals (none of which exceeded a cost or proceeds of £50 million,
    save where otherwise stated) were: Acquisitions2004
      Fitzrovia
        International plc, a leading investment fund research company, was acquired
        in October 2004 by Lipper Ltd  a wholly owned subsidiary of Reuters.
      Radianz
        Ltd, in which Reuters acquired the 49% voting interest it did not already
        own from Equant in November 2004, for £60 million ($110 million). Total capital expenditure
  for acquisitions, investments in joint ventures and associates and other investments
  during 2004 was £78 million (2003: £161 million, 2002: £317
  million).


On 20 December
  2004, Reuters entered into agreements to acquire substantially all of the business
  of Telerate as well as a subsidiary of Quick that serves as the exclusive distributor
  of Telerate products in Japan. Both transactions are anticipated to complete
  mid-2005, subject to regulatory approvals for the Telerate acquisition and other
  customary conditions. For more information, see Pending acquisition of
  Telerate on page 7. 2003
    Multex.com,
      Inc., a leading provider of investment research, was acquired in March 2003
      for £158 million. 2002
    Island
      Holding Company Inc., was acquired by Instinet Group in September 2002 for
      stock consideration, having a value at the closing of £194 million.
    Capital
      Access International LLC, a provider of fixed income holdings information,
      was acquired in November 2002.
    AVT
      Technologies Limited, a specialist in automated dealing technology for foreign
      exchange transactions, was acquired in December 2002. Divestments2004
    Reuters disposed
    of or closed a total of 12 units in 2004 for consideration totalling £474
    million. The principal disposals or closures in 2004 were: 
    TSI,
      in which Reuters Group reduced its stake from 48.4% to 8.8% in February
      2004 through completion of a public offering of 69 million TSI shares and
      sale of an additional 17 million shares back to TSI for aggregate net proceeds
      of approximately £310 million.
    GL
      TRADE, a financial software company in which Reuters held a 34.2% shareholding,
      was divested in June 2004 for a consideration of £59 million.
    ORT
      SAS, a wholly-owned credit rating subsidiary of Reuters, was sold in June
      2004 for a total consideration of £29 million.
    TowerGroup,
      a financial services research company in which Reuters held a 98% holding,
      was sold in February 2004.
    Yankee,
      a wholly-owned telecommunications research company, was sold in May 2004.
    Riskmetrics,
      a company specialising in portfolio credit risk evaluation, in which Reuters
      held a 24% stake, was divested in January and June 2004.
    Reuters
      remaining Greenhouse Fund investment portfolio was sold in June 2004 to
      a company established by RVC, the independent fund management company created
      by former Reuters employees in 2001 to manage the Greenhouse Fund. On 28 February
  2005, Reuters entered into an agreement to sell Bridge Trading to Instinet Group
  for US$21.5 million in Instinet Group shares, subject to adjustment for working
  capital and net capital. The transaction is anticipated to complete by the end
  of April 2005, subject to customary conditions.




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2003
  Reuters disposed
  of or closed a total of 17 units in 2003 for consideration totalling £41
  million. The principal disposals in 2003 were: 
    Synetix
      Solutions Limited, a joint venture focusing on data management solutions,
      sold in January 2003;
    Wall
      Street on Demand, a wholly-owned subsidiary providing research, acquired
      as part of the acquisition of Bridge, sold in March 2003;
    Informa
      SA, a provider of on-line credit and financial information, in which Reuters
      held a 40% shareholding, sold in September 2003;
    Datamonitor
      plc, a research company specialising in industry analysis in which Reuters
      held a 20.5% ordinary shareholding, sold on a piecemeal basis between July
      2003 and November 2003;
    The
      Thai Apex services business, a domestic equities information service in
      Thailand, sold into a new joint venture formed by Reuters and Systex Corporation
      in December 2003; and
    Agence
      de Presse Médicale International SAS, a health information provider
      in France, a wholly-owned subsidiary, sold in December 2003. In addition, Multex
  Investor Europe Limited was liquidated in July 2003. The company had surplus
  assets of approximately £10 million which have been absorbed into the
  Group. 2002
  Reuters disposed
  of or closed a total of 56 units in 2002 for consideration totalling £29
  million. The principal disposals or closures in 2002 were: 
    London
      News Radio, in which Reuters held a 20% shareholding, sold in September
      2002;
    Diagram
      Asset Management and Diagram EDI, two non-core units providing software
      solutions for the financial markets that were acquired as part of the acquisition
      of Diagram fip SA in 2001, were sold in September 2002 and November 2002
      respectively;
    Sila
      Communications, a wireless information provider in which Reuters held a
      40% shareholding, was sold in December 2002; and
    Atriax,
      an electronic, internet-based foreign exchange market place, which ceased
      operations during 2002 is currently in the process of being liquidated. Further information
  relating to investments, acquisitions, joint ventures and disposals in 2004
  is provided in notes 16 and 31 on the consolidated balance sheet on pages 59-60
  and 69. 13
      PROPERTY, PLANT AND EQUIPMENTThe computer equipment
  that Reuters uses to create, manage and deliver its products to customers across
  the world forms the bulk of its tangible fixed assets. This equipment is distributed
  across global sites with greater concentration at the major global and regional
  technical centres. As Reuters extends its use of hosting services and browser
  delivery for its products, the quantity of equipment located at customer sites
  is being reduced. The Groups
  principal facilities are: 
    the
      corporate headquarters (100,000 sq. ft.) in Fleet Street, London;In
        September 2003, Reuters announced arrangements to consolidate its London-based
        operations into a new building at Canary Wharf during 2005. Under the
        agreement, Reuters has taken a lease on a 281,000 sq. ft. office building
        and transferred approximately 340,000 sq. ft. of redundant offices, including
        85 Fleet Street, to Canary Wharf Group for cash consideration of approximately £30
        million, leasing back 85 Fleet Street on a temporary basis pending the
        move to Canary Wharf, which is expected to be completed by the end of
      2005.
    the
      US headquarters at 3 Times Square in New York City (692,000 sq. ft.)



      the
        technical centres in London (324,000 sq. ft.), Hazelwood, Missouri (109,000
        sq. ft.), Geneva (144,000 sq.ft.), which also includes the regional office
        for EMEA, Singapore (180,000 sq. ft.), which also includes the regional
        office for Asia, and Hauppauge, New York (50,000 sq. ft.); and
      the
        four corporate office buildings located in St. Louis County, Missouri
        (aggregate of 211,000 sq. ft.). Reuters owns the
  land on which its London and Hauppauge technical centres are situated, whereas
  its buildings in Geneva and Singapore were built on leased land. The leases,
  including periods covered by options to extend, expire in 2095 and 2050, respectively. The Reuters Building
  at 3 Times Square is owned, and was developed, by 3XSQ Associates, which is
  owned by Reuters and Rudins Times Square Associates LLC. In May 2001 Reuters
  commenced its lease of 692,000 sq. ft. from the venture, of which 368,000 sq.
  ft. is subleased to Instinet Group, which in turn has subleased 180,000 sq.
  ft. to third parties. The principal part of Reuters lease will expire in 2021.
  See 3XSQ Associates sublease on page 88 for further information. In 2003, the major
  technical centre building in Hazelwood, Missouri was acquired from Savvis for
  a total consideration of £24 million. Reuters subsequently entered into
  a sale and leaseback for the facility, receiving £23 million under a 20
  year arrangement. During 2004, Reuters
  extended its facilities in Bangkok to 100,000 sq. ft. In Bangalore, a second
  facility adjacent to the companys existing offices was secured, providing
  approximately 150,000 sq. ft. of office accommodation. 14
      LEGAL PROCEEDINGSExcept as described
  below, Reuters Group is not subject to any legal or arbitration proceedings
  which may have, or have had in the recent past, significant effects on the companys
  financial performance or profitability. Instinet Group is a party to certain
  legal proceedings including the following: The
    Island ECN Inc. v. Archipelago LLC and REDIBook ECN LLC;
    Archipelago Securities
    LLC v. Instinet Group Incorporated On 20 September
    2002, Island ECN commenced an arbitration proceeding against respondents Archipelago
    LLC (Archipelago) and REDIBook ECN LLC (REDIBook) before the NASD. Island
    alleged that each respondent entered into a subscriber agreement with Island
    which prescribed certain fees and, despite Islands demand that each
    respondent abide by the terms of its contract, each respondent refused to
    pay such fees. Island is seeking damages of US$5.2 million from Archipelago
    and US$4 million from REDIBook. Archipelago and REDIBook have answered and
    counterclaimed against Island by denying the substantive allegations of Islands
    statement of claim, asserting certain affirmative defences and counterclaims
    against Island, alleging that Island engaged in unfair, discriminatory pricing
    practices against these respondents and asserting claims involving breach
    of contract, breach of obligations of good faith, and attempted monopolisation
    and conspiracy to restrain trade under the US Sherman Act. The counterclaims
    allege damages of no less than US$30 million before trebling, for a total
    of no less than US$90 million treble damages pursuant to the federal antitrust
    laws. Archipelago is also seeking attorneys fees. Additionally, on
  19 February 2003, Archipelago commenced a separate action against Instinet Group
  before the NASD, in which it alleged that Instinet Group also engaged in unfair,
  discriminatory pricing practices against it and asserted claims involving breach
  of contract, breach of obligation of good faith, and attempted monopolisation
  and conspiracy to restrain trade under the US Sherman Act. Archipelago seeks
  no less than US$41 million before trebling for a total of no less than US$123
  million trebled damages. Instinet Group has answered and intends to defend the
  proceeding vigorously. These two actions
  have been consolidated by agreement of the parties and are in the discovery
  phase.




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      Group PLC Annual Report and Form 20-F 2004 |  | 91
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INFORMATION
  FOR SHAREHOLDERScontinued



NexTrade
  Holdings, Inc. v. ProTrader Group, LP, ProTrader Securities Corp., ProTrader
  Technologies LP, ProTrader Trading LLC, ProTrader Services LP and ProTrader.com
  LP. and Instinet Group Incorporated. On 4 February, 2003,
  NexTrade Holdings, Inc. commenced an action against certain subsidiaries of
  ProTrader Group LP, a business acquired by Instinet Group in 2001, in the United
  States District Court, Middle District of Florida, Tampa Division. The complaint
  alleges that these subsidiaries adopted and used the mark ProTrader
  in violation of § 32(1) of the US Lanham Act. The complaint further alleges
  that these subsidiaries use of the ProTrader mark is likely to cause confusion,
  mistake or deception among purchasers of software, services and goods bearing
  the name ProTrader, which allegedly constitutes false designation
  of origin and unfair competition in violation of § 43(a) of the US Lanham
  Act. The complaint also alleges that these subsidiaries use constitutes
  trademark infringement in violation of Florida state statutes and its common
  law, and unfair competition based on trademark infringement in violation of
  the common law of Florida. Finally, the complaint alleges fraud in the inducement
  based on defendants alleged deceitful negotiations to resolve the dispute.
  Plaintiff seeks to recover all of these subsidiaries profits, gains and
  advantages resulting from the unauthorised use of the ProTrader
  mark, damages sustained by the plaintiff of no less than US$15 million before
  trebling and that such damages be trebled, and exemplary and punitive damages
  of not less than US$90 million. Defendants have answered the complaint by denying
  the substantive allegations, asserting certain affirmative defences and by counterclaiming
  against NexTrade, seeking a cancellation of the Pro-Trade trademark
  on the ground that it is descriptive and Plaintiff committed fraud on the Patent
  and Trademark Office during the prosecution of its application. In June 2004,
  the Court ordered that Instinet Group as well as certain former officers of
  the ProTrader entities be named as additional defendants in the action. Instinet
  Group and NexTrade all filed motions for summary judgment on 15 June, 2004 and
  then filed renewed motions for summary judgment on 31 August, 2004. On 15 October
  2004, the Court granted ProTrader and Instinet Groups motion with respect
  to their claim that NexTrade failed to demonstrate that it had sustained damages
  as a result of any alleged infringement and further decided that any profits
  of ProTrader and Instinet to which NexTrade may be entitled, if any, are to
  be offset by their losses which may be aggregated over the years of alleged
  infringement. The Court also granted Plaintiffs motion for summary judgment
  dismissing Defendants counterclaims, but decided that Defendants
  counterclaims are a valid defence to Plaintiffs trademark infringement
  claims. On 21 January 2005, the Court ruled that neither party will be permitted
  to introduce evidence regarding Instinet Groups profits. On 16 February
  2005, the parties reached a settlement in the action and on 17 February 2005
  the Court issued an order dismissing the action with prejudice subject to the
  right by any party to re-open the action within sixty days of the date of the
  order.






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ELEVEN
  YEAR CONSOLIDATED FINANCIAL SUMMARYfor
  the year ended 31 December

|                                                                   |  | 2004    |   |     | 2003    |      | 2002    |      | 2001    |      | 2000    |      | 1999    |      | 1998    |      | 1997    |      | 1996    |   | 1995    |   | 1994    |  
|------------------------------------------------------------------ |  | ------- | - | --- | ------- | ---- | ------- | ---- | ------- | ---- | ------- | ---- | ------- | ---- | ------- | ---- | ------- | ---- | ------- | - | ------- | - | ------- | -
|                                                                   |  | £m      |   |     | £m      |      | £m      |      | £m      |      | £m      |      | £m      |      | £m      |      | £m      |      | £m      |   | £m      |   | £m      |  
|                                                                   |  |         |   |     |         |      |         |      |         |      |         |      |         |      |         |      |         |      |         |   |         |   |         |  
|Results                                                            |  |         |   |     |         |      |         |      |         |      |         |      |         |      |         |      |         |      |         |   |         |   |         |  
|Revenue                                                            |  | 2,885   |   |     | 3,235   |      | 3,593   |      | 3,885   |      | 3,592   |      | 3,125   |      | 3,032   |      | 2,882   |      | 2,914   |   | 2,703   |   | 2,309   |  
|Net interest
      (payable)/receivable                            |  | (4      | ) |     | (29     | )    | (20     | )    | (9      | )    | 3       |      | (4      | )    | 2       |      | 80      |      | 61      |   | 60      |   | 51      |  
|Profit/(loss)
      before tax                                     |  | 437     |   |     | 56      |      | (344    | )    | 158     |      | 657     |      | 632     |      | 580     |      | 626     |      | 652     |   | 558     |   | 510     |  
|Taxation                                                           |  | 73      |   |     | 22      |      | 23      |      | 107     |      | 136     |      | 196     |      | 196     |      | 236     |      | 210     |   | 185     |   | 162     |  
|Profit/(loss)
      attributable to                                |  |         |   |     |         |      |         |      |         |      |         |      |         |      |         |      |         |      |         |   |         |   |         |  
|ordinary shareholders                                              |  | 351     |   |     | 50      |      | (255    | )    | 46      |      | 521     |      | 436     |      | 384     |      | 390     |      | 442     |   | 373     |   | 347     |  
|                                                                   |  |         |   |     |         |      |         |      |         |      |         |      |         |      |         |      |         |      |         |   |         |   |         |  
|Net assets                                                         |  |         |   |     |         |      |         |      |         |      |         |      |         |      |         |      |         |      |         |   |         |   |         |  
|Fixed assets                                                       |  | 734     |   |     | 1,192   |      | 1,448   |      | 1,963   |      | 1,868   |      | 1,205   |      | 1,098   |      | 1,046   |      | 1,026   |   | 999     |   | 687     |  
|Net current
      assets/(liabilities)                             |  | 468     |   |     | (89     | )    | (190    | )    | (134    | )    | (293    | )    | (170    | )    | (577    | )    | 790     |      | 525     |   | 387     |   | 176     |  
|Long-term creditors                                                |  | (348    | ) |     | (425    | )    | (354    | )    | (344    | )    | (310    | )    | (284    | )    | (16     | )    | (37     | )    | (41     | ) | (135    | ) | (87     | )
|Provisions                                                         |  | (242    | ) |     | (271    | )    | (245    | )    | (212    | )    | (112    | )    | (88     | )    | (116    | )    | (120    | )    | (51     | ) | (39     | ) | (36     | )
|                                                                   |  |         |   |     |         |      |         |      |         |      |         |      |         |      |         |      |         |      |         |   |         |   |         |  
|                                                                   |  | 612     |   |     | 407     |      | 659     |      | 1,273   |      | 1,153   |      | 663     |      | 389     |      | 1,679   |      | 1,459   |   | 1,212   |   | 740     |  
|                                                                   |  |         |   |     |         |      |         |      |         |      |         |      |         |      |         |      |         |      |         |   |         |   |         |  
|Tangible
      fixed assets                                        |  |         |   |     |         |      |         |      |         |      |         |      |         |      |         |      |         |      |         |   |         |   |         |  
|Additions                                                          |  | 111     |   |     | 130     |      | 154     |      | 276     |      | 282     |      | 244     |      | 296     |      | 361     |      | 372     |   | 304     |   | 319     |  
|Depreciation                                                       |  | 133     |   |     | 193     |      | 227     |      | 246     |      | 276     |      | 310     |      | 331     |      | 312     |      | 283     |   | 250     |   | 221     |  
|Development
      expenditure                                      |  | 128     |   |     | 171     |      | 200     |      | 294     |      | 323     |      | 197     |      | 200     |      | 235     |      | 202     |   | 191     |   | 159     |  
|                                                                   |  |         |   |     |         |      |         |      |         |      |         |      |         |      |         |      |         |      |         |   |         |   |         |  
|                                                                   |  |         |   |     |         |      |         |      |         |      |         |      |         |      |         |      |         |      |         |   |         |   |         |  
|                                                                   |  |         |   |     |         |      |         |      |         |      |         |      |         |      |         |      |         |      |         |   |         |   |         |  
|                                                                   |  | 2004    |   |     | 2003    |      | 2002    |      | 2001    |      | 2000    |      | 1999    |      | 1998    |      | 1997    |      | 1996    |   | 1995    |   | 1994    |  
|                                                                   |  |         |   |     |         |      |         |      |         |      |         |      |         |      |         |      |         |      |         |   |         |   |         |  
|Ratios                                                             |  |         |   |     |         |      |         |      |         |      |         |      |         |      |         |      |         |      |         |   |         |   |         |  
|Earnings/(loss)
      per ordinary share                           |  | 25.1    | p |     | 3.6     | p    | (18.3   | p)   | 3.3     | p    | 37.1    | p    | 30.9    | p    | 26.7    | p    | 24.0    | p    | 27.3    | p | 23.2    | p | 21.7    | p
|Dividends per
      ordinary share                                 |  | 10.0    | p |     | 10.0    | p    | 10.0    | p    | 10.0    | p    | 16.0    | p    | 14.65   | p    | 14.4    | p    | 13.0    | p    | 11.75   | p | 9.8     | p | 8.0     | p
|Book value
      per ordinary share1                               |  | 29.4    | p |     | 15.2    | p    | 30.7    | p    | 68.2    | p    | 73.7    | p    | 40.5    | p    | 23.3    | p    | 99.9    | p    | 88.3    | p | 73.7    | p | 44.7    | p
|Profit/(loss)
      before tax as a percentageof revenue
      (%) |  | 15.2    |   |     |         |      |         |      |         |      |         |      |         |      |         |      |         |      |         |   |         |   |         |  
|1.7                                                                |  | (9.6    | ) | 4.1 |         | 18.3 |         | 20.2 |         | 19.1 |         | 21.7 |         | 22.4 |         | 20.6 |         | 22.1 |        
|Return on tangible
      fixed assets2(%)                          |  | 87.3    |   |     | 6.3     |      | (56.8   | )    | 7.8     |      | 78.3    |      | 59.1    |      | 48.2    |      | 49.0    |      | 60.0    |   | 55.2    |   | 57.6    |  
|Return on equity3(%)                                               |  | 112.5   |   |     | 15.7    |      | (36.8   | )    | 4.6     |      | 65.0    |      | 92.2    |      | 78.5    |      | 25.6    |      | 33.7    |   | 34.8    |   | 50.8    |  
|                                                                   |  |         |   |     |         |      |         |      |         |      |         |      |         |      |         |      |         |      |         |   |         |   |         |  
|UK corporation
      tax rate                                      |  | 30      |   |     | 30      |      | 30      |      | 30      |      | 30      |      | 30      |      | 31      |      | 32      |      | 33      |   | 33      |   | 33      |  
|                                                                   |  |         |   |     |         |      |         |      |         |      |         |      |         |      |         |      |         |      |         |   |         |   |         |  
|Infrastructure                                                     |  |         |   |     |         |      |         |      |         |      |         |      |         |      |         |      |         |      |         |   |         |   |         |  
|Shares issued
      (millions)                                     |  | 1,436   |   |     | 1,433   |      | 1,433   |      | 1,431   |      | 1,429   |      | 1,423   |      | 1,422   |      | 1,694   |      | 1,689   |   | 1,677   |   | 1,668   |  
|Employees                                                          |  | 14,500  |   |     | 16,744  |      | 17,414  |      | 19,429  |      | 18,082  |      | 16,546  |      | 16,938  |      | 16,119  |      | 15,478  |   | 14,348  |   | 13,548  |  
|User accesses                                                      |  | 328,000 |   |     | 338,000 |      | 388,000 |      | 592,000 |      | 558,000 |      | 520,858 |      | 482,380 |      | 429,000 |      | 362,000 |   | 327,100 |   | 296,700 |  
|                                                                   |  |         |   |     |         |      |         |      |         |      |         |      |         |      |         |      |         |      |         |   |         |   |         |  

Notes: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 (see Accounting Basis on page 72).2003
  and 2002 user accesses have been restated, 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.1994
  fixed assets have been restated to reflect the effect of UITF abstract 13 issued
   in 1995.

|Ratios:
|-------
|       
|1      
|       
|2      
|       
|3      



|Reuters
      Group PLC Annual Report and Form 20-F 2004 |  | 93
|-------------------------------------------------------- |  | --

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CROSS-REFERENCE GUIDE TO FORM 20-F

The information
  in this document that is referenced in the following table, constitutes Reuters
  annual report on Form 20-F for the year 2004 and shall be deemed to be filed
  with the Securities and Exchange Commission for all purposes. No other information
  is included in the 2004 Form 20-F.

|Item |                                                             |  | Page               | 
|---- | ----------------------------------------------------------- |  | ------------------ | 
|     |                                                             |  |                    | 
|1    | Identity
      of directors, senior management and advisers |  | n/a                | 
|     |                                                             |  |                    | 
|2    | Offer
      statistics and expected timetable               |  | n/a                | 
|     |                                                             |  |                    | 
|3    | Key information                                             |  |                    | 
|     | Selected financial
      data                               |  | 5                  | 
|     | Exchange rates                                              |  | 85                 | 
|     | Capitalisation
      and indebtedness                       |  | n/a                | 
|     | Reasons for
      offer and use of proceeds                 |  | n/a                | 
|     | Risk Factors                                                |  | 23-25              | 
|     |                                                             |  |                    | 
|4    | Information
      on the company                            |  |                    | 
|     | History and
      development of the company                |  | 6-10,
      82     | 
|     | Business overview                                           |  | 6-10               | 
|     | Organisational
      structure                              |  | 7,
      70        | 
|     | Property, plant
      and equipment                         |  | 91                 | 
|     |                                                             |  |                    | 
|5    | Operating and
      financial review and prospects          |  |                    | 
|     | Operating results                                           |  | 11-25              | 
|     | Liquidity and
      capital resources                       |  | 21-22              | 
|     | Research and
      development, patents and licences etc    |  | 19                 | 
|     | Trend information                                           |  | 4,
      12-21     | 
|     | Off-balance
      sheet arrangements                        |  | 22                 | 
|     | Tabular disclosure
      of contracted obligations          |  | 21                 | 
|     |                                                             |  |                    | 
|6    | Directors,
      senior management and employees            |  |                    | 
|     | Directors and
      senior management                       |  | 27-28              | 
|     | Compensation                                                |  | 32-40              | 
|     | Board practices                                             |  | 26,
      29-31    | 
|     | Employees                                                   |  | 26,
      49       | 
|     | Share ownership                                             |  | 33-34,
      38-40 | 
|     |                                                             |  |                    | 
|7    | Major shareholders
      and related party transactions     |  |                    | 
|     | Major shareholders                                          |  | 81-82              | 
|     | Related party
      transactions                            |  | 87-90              | 
|     | Interests of
      experts and counsel                      |  | n/a                | 
|     |                                                             |  |                    | 
|8    | Financial information                                       |  |                    | 
|     | Consolidated
      accounts and other financial information |  | See
      Item 17  | 
|     | Litigation                                                  |  | 91-92              | 
|     | Dividend policy                                             |  | 11,
      82       | 
|     | Significant
      changes                                   |  | 70                 | 
|     |                                                             |  |                    | 
|9    | The offer and
      listing                                 |  |                    | 
|     | Offer and listing
      details  price history of shares   |  | 81                 | 
|     | Plan of distribution                                        |  | n/a                | 
|     | Markets                                                     |  | 81                 | 
|     | Selling shareholders                                        |  | n/a                | 
|     | Dilution                                                    |  | n/a                | 
|     | Expenses of
      the issue                                 |  | n/a                | 
|     |                                                             |  |                    | 
|10   | Additional
      information                                |  |                    | 
|     | Share capital                                               |  | n/a                | 
|     | Memorandum
      and Articles of Association                |  | 82-85              | 
|     | Material contracts                                          |  | 20-21,
      87-90 | 
|     | Exchange controls                                           |  | 85                 | 
|     | Taxation                                                    |  | 85-87              | 
|     | Dividends and
      paying agents                           |  | n/a                | 
|     | Statement by
      experts                                  |  | n/a                | 
|     | Documents on
      display                                  |  | 96                 | 
|     | Subsidiary
      information                                |  | n/a                | 
|     |                                                             |  |                    | 

|   |  |                                                         
|-- |  | --------------------------------------------------------
|94 |  | Reuters Group
      PLC Annual Report and Form 20-F 2004

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|Item |                                                                                                                                     |  | Page            | 
|---- | ----------------------------------------------------------------------------------------------------------------------------------- |  | --------------- | 
|     |                                                                                                                                     |  |                 | 
|11   | Quantitative
      and qualitative disclosures about market risk                                                                    |  | 22,
      52-55 | 
|     |                                                                                                                                     |  |                 | 
|12   | Description
      of securities other than equity securities                                                                        |  | n/a             | 
|     |                                                                                                                                     |  |                 | 
|13   | Defaults,
      dividend arrearages and delinquencies                                                                               |  | n/a             | 
|     |                                                                                                                                     |  |                 | 
|14   | Material
      modifications to the rights of security holders and use of proceeds                                                  |  | n/a             | 
|     |                                                                                                                                     |  |                 | 
|15   | Controls
      and procedures                                                                                                       |  | 41              | 
|     |                                                                                                                                     |  |                 | 
|16A  | Audit
      committee financial expert                                                                                              |  | 30              | 
|     |                                                                                                                                     |  |                 | 
|16B  | Code
      of ethics                                                                                                                |  | 31              | 
|     |                                                                                                                                     |  |                 | 
|16C  | Principal
      accountant fees and services                                                                                        |  | 47              | 
|     |                                                                                                                                     |  |                 | 
|17   | Financial
      statements                                                                                                          |  |                 | 
|     | Report
      of the auditors                                                                                                        |  | 42              | 
|     | Consolidated
      profit and loss account for each of the three years in the period ended
      31 December 2003 and related notes |  | 43-49           | 
|     | Consolidated
      cash flow statement for each of the three years in the period ended 31 December
      2003 and related notes     |  | 50-55           | 
|     | Consolidated
      balance sheet as of 31 December 2003, 2002 and 2001 and related notes                                            |  | 56-71           | 
|     | Accounting
      policies                                                                                                           |  | 72-73           | 
|     | Summary
      of differences between UK and US GAAP and related notes                                                               |  | 74-80           | 
|     | Report
      on remuneration and related matters                                                                                    |  | 32-40           | 
|     |                                                                                                                                     |  |                 | 
|18   | Financial
      statements                                                                                                          |  | n/a             | 
|     |                                                                                                                                     |  |                 | 
|     |                                                                                                                                     |  |                 | 
|     |                                                                                                                                     |  |                 | 
|     |                                                                                                                                     |  |                 | 

|GLOSSARY                                                             |                                                                                       
|-------------------------------------------------------------------- | --------------------------------------------------------------------------------------
|                                                                     |                                                                                       
|                                                                     |                                                                                       
|Term used
      in annual report                                     | US equivalent
      or brief description                                              
|                                                                    
|Allotted                                                             | Issued                                                                                
|                                                                    
|Associates                                                           | Affiliates
      accounted for under the equity method                                
|                                                                    
|Called-up share
      capital                                        | Ordinary shares,
      issued and fully paid                                          
|                                                                    
|Capital allowances                                                   | Tax term equivalent
      to US tax depreciation allowances                           
|                                                                    
|Cash at bank
      and in hand                                       | Cash                                                                                  
|                                                                    
|Class of business                                                    | Industry segment                                                                      
|                                                                    
|Combined Code                                                        | A set of corporate
      governance principles and detailed codes of practice         
|                                                                    
|Creditors                                                            | Accounts payable                                                                      
|                                                                    
|Creditors:
      Amounts falling due after more than one year        | Long-term debt                                                                        
|                                                                    
|Creditors:
      Amounts falling due within one year                 | Current liabilities                                                                   
|                                                                    
|Debtors                                                              | Accounts receivable                                                                   
|                                                                    
|Destination
      (of revenue)                                       | The geographical
      area from which goods or services are supplied                 
|                                                                    
|Freehold                                                             | Ownership with
      absolute rights in perpetuity                                    
|                                                                    
|Interest receivable                                                  | Interest income                                                                       
|                                                                    
|Origin (of
      revenue)                                            | The geographical
      area from which goods or services are supplied to a third party
|                                                                     | or another
      geographical area                                                    
|                                                                    
|Profit                                                               | Income                                                                                
|                                                                    
|Profit and
      loss account (statemtent)                           | Income statement                                                                      
|                                                                    
|Profit and
      loss account reserve (under capital and reserves) | Retained earnings                                                                     
|                                                                    
|Profit attributable
      to ordinary shareholders                   | Net income                                                                            
|                                                                    
|Proposed dividend                                                    | Dividend declared
      by directors but not yet approved by shareholders             
|                                                                    
|Share capital                                                        | Ordinary shares,
      capital stock or common stock issued and fully paid            
|                                                                    
|Share premium
      account                                          | Additional
      paid-in capital or paid-in surplus (not distributable)               
|                                                                    
|Shares in issue                                                      | Shares outstanding                                                                    
|                                                                    
|Stocks                                                               | Inventories                                                                           
|                                                                    
|Tangible fixed
      assets                                          | Property and
      equipment                                                          
|                                                                    
|                                                                    
|

|Reuters
      Group PLC Annual Report and Form 20-F 2004 |  | 95
|-------------------------------------------------------- |  | --



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FINANCIAL
  DIARY FOR 2005 Wednesday
  20 April First quarter trading
  statement issued Thursday
  21 AprilAnnual General
  Meeting
  Time: 11:30 am Venue: Cabot Hall,
  Canary Wharf, London E14 5AB Thursday
  28 April Final dividend for
  2004 payable to ordinary shareholders on the register as at 11 March 2005 Thursday
  5 May Final dividend payable
  to ADS holders on the record as at 11 March 2005 Tuesday
  26 July Results for first
  six months of 2005 announced Wednesday
  3 August Ordinary shares go
  ex-dividend Wednesday
  3 AugustADSs go ex-dividend Wednesday
  31 August Interim dividend
  for 2005 payable to ordinary shareholders on the register as at 5 August 2005 Wednesday
  7 September Interim dividend
  payable to ADS holders on the record as at 3 August 2005 Thursday
  27 October Third quarter trading
  statement issued          Documents
        on displayDocuments referred
  to in this report are filed in the US with the SEC and can be read and copied
  at the SECs public reference room located at 450 Fifth Street, NW Washington,
  DC 20549. Information on the operation of the public reference room can be obtained
  in the US by calling the SEC at 1-800-SEC-0330. Reuters Group public filings
  with the SEC are also available on the website maintained by the SEC at www.sec.gov
  or through various Reuters products.




WHERE
  TO FIND US Corporate
  headquarters85 Fleet Street
  London EC4P 4AJ
  Tel: 44 (0)20 7250 1122
  www.about.reuters.com In June 2005 we
  shall be moving to our new corporate headquarters: 30 South Colonnade
  Canary Wharf
  London E14 5EP
  Tel: 44 (0)20 7250 1122 Registered in England
  No: 3296375 Investor
  queriesMiriam McKay
  London
  Tel: 44 (0)20 7542 7057
  Fax: 44 (0)20 7353 3002Email: miriam.mckay@reuters.com Media
  queriesSimon Walker
  London
  Tel: 44 (0)20 7542 7800
  Fax: 44 (0)20 7353 5428
  Email: simon.walker@reuters.com
  Stephen Naru
  New York
  Tel: 1 646 223 7728
  Fax: 1 646 223 5238
  Email: stephen.naru@reuters.com Registrar/DepositaryFor dividend
  queries, duplicate mailings and changes of address Ordinary
  sharesLloyds TSB
  Registrars
  The Causeway
  Worthing
  West Sussex BN99 6DA
  UKTel: 44 (0)870
  600 3970
  (for callers within the UK)
  Tel: 44 (0)121 415 7047
  (for callers outside the UK)
  Fax: 44 (0)1903 833482 American
  Depositary SharesJPMorgan Chase
  Bank, N.A.
  P.O. Box 43013Providence,
  RI 02940-3013
  USA Toll free for callers
  within the US:
  (800) 990-1135
  For callers outside the US: 1 (781) 575-4328
  Fax: 1 (781) 575 4082
  Website: www.adr.com/shareholder
  Email: adr@jpmorgan.com




Electronic
  copiesThe Annual
  Report and Form 20-F and the annual review are available on the internet at
  www.about.reuters.com/ar2004 Listings
  London Stock Exchange
  (RTR.L) and NASDAQ (RTRSY.O) Options on ordinary
  shares are traded on the 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.
  Options on American Depositary Shares are traded on the Pacific Exchange. Corporate
  brokers JPMorgan Cazenove
  Limited Citigroup Financial
  PR Brunswick Group Limited Picture
  on cover March 8 2004. A Palestinian
  refugee woman wearing a prayer dress looks out from her home in a refugee camp.
  Reuters photographer: Ali Jarekji ©Reuters (2005).
  All rights reserved. Reuters, the sphere
  logo, Lipper and Bridge Trading are the trade marks or registered trade marks
  of the Reuters Group of Companies around the world.         Designed and produced
  by salterbaxter
  Printed by CTD


|   |  |                                                         
|-- |  | --------------------------------------------------------
|96 |  | Reuters Group
      PLC Annual Report and Form 20-F 2004

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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, 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)                                                                                                                                                                                                                                                                                                
|      |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.1.1 |  |  | Second Amended and Restated
        License, Maintenance and Distribution Agreement, dated October 1, 2003,
        between Reuters Limited and TIBCO Software Inc. (incorporated by reference
        to Exhibit 99.1 to the Registration Statement on Form S-3 File No. 333-110304,
        filed by TIBCO on November 6, 2003, as amended)                                                                                                                                                                                                                                                                                                                                                                          
|      |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.1.2 |  |  | Amendment
          No. 1, dated February 27, 2005, to Second Amended and Restated License,
          Maintenance and Distribution Agreement, dated October 1, 2003, between
          Reuters Limited and TIBCO Software Inc. (portions of this exhibit have
          been omitted pursuant to a request for confidential treatment)                                                                                                                                                                                                                                                                                                                                                                                 
|      |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.1.3 |  |  | Registration and Repurchase
        Agreement dated 7 October 2003, between Reuters Limited and TIBCO Software
        Inc. (incorporated by reference to Exhibit 4.3 to the Registration Statement
        on Form S-3 File No. 333-110304, filed by TIBCO on November 6, 2003,
        as amended)                                                                                                                                                                                                                                                                                                                                                                                                                   
|      |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.2   |  |  | Network Services Agreement,
        dated 22 May 2000, between Reuters Limited and Proholdco Limited (subsequently
        renamed Radianz Limited) (incorporated by reference to Exhibit 4.4 to
        Amendment No. 1 to the Annual Report on Form 20-F filed by Reuters Group
        PLC with respect to the fiscal year ended 31 December 2000)                                                                                                                                                                                                                                                                                                                                                                  
|      |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.3   |  |  | Network Services Agreement,
        dated 28 September 2001, between Reuters Limited and SAVVIS Communications
        Corporation, as amended (incorporated by reference to Exhibit 10.4 to
        the Quarterly Report on Form 10-Q filed by SAVVIS on 29 November 2001,
        Exhibit 10.57 to the Annual Report on Form 10-K filed by SAVVIS on 28
        February 2003, Exhibits 10.1 and 10.2 to the Quarterly Report on Form
        10-Q filed by SAVVIS on 12 August 2003, Exhibits 10.2 through 10.5 to
        the Quarterly Report on Form 10-Q filed by SAVVIS on 30 October 2003,
        and Exhibits 10.28 and 10.29 to the Annual Report on Form 10-K filed
        by SAVVIS on 24 February 2004)
|      |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.3.1 |  |  | Letter
          Agreement between Reuters Limited and SAVVIS Communications Corporation,
          dated 22 October 2004, regarding settlement of certain credits and
          offsets under the Network Services Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|      |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.4*  |  |  | Transitional Services Agreement
        (“TSA”) dated 2 June 2003 between Reuters Limited and Moneyline
        Telerate Holdings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|      |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.4.1 |  |  | Amendment
          No. 1 dated 8 June 2004 to TSA (portions of this exhibit have been
          omitted pursuant to a request for confidential treatment)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|      |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.4.2 |  |  | Amendment
          No. 2 dated 20 December 2004 to TSA (portions of this exhibit have
          been omitted pursuant to a request for confidential treatment)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|      |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.5*  |  |  | Deed of Covenant
        dated 11 October 2002 made by Reuters Group PLC relating to the £1,500,000,000
        Euro-commercial Paper Programme                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

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|4.5.1*  |  |  | Amended and Restated
        Note Agency Agreement dated 11 October 2002 among Reuters Group PLC (as
        Issuer), Citibank, N.A. (as Issue Agent and Principal Paying Agent) and
        Dexia Banque Internationale a Luxembourg S.A. (as Paying Agent)                                                              
|------- |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |  |  |                                                                                                                                                                                                                                                                                                                           
|4.5.2*  |  |  | Dealer Agreement dated 11 October
        2002 among Reuters Group PLC (as Issuer), Citibank International plc
        (as Arranger) and the various Dealers named therein                                                                                                                                                
|        |  |  |                                                                                                                                                                                                                                                                                                                           
|4.6*    |  |  | Amended and Restated Programme
        Agreement dated 7 November 2003 among Reuters Group PLC (as Issuer and
        Guarantor), Reuters Finance PLC (as Issuer) and the various Initial Dealers
        named therein relating to the November 2003 update of the £1,000,000,000
        Euro Medium Term Note Programme
|        |  |  |                                                                                                                                                                                                                                                                                                                           
|4.6.1*  |  |  | Amended and Restated Trust Deed
        dated 7 November 2003 between Reuters Group PLC (as Issuer and Guarantor),
        Reuters Finance PLC (as Issuer) and Citicorp Trustee Company Limited
        (as Trustee)                                                                                                      
|        |  |  |                                                                                                                                                                                                                                                                                                                           
|4.6.2*  |  |  | Amended and Restated Agency
        Agreement dated 7 November 2003 between Reuters Group PLC (as Issuer
        and Guarantor), Reuters Finance PLC (as Issuer), Citibank NA (as Agent),
        Citibank AG and BNP Paribas Luxembourg (as Paying Agents) and Citicorp
        Trustee Company Limited (as Trustee)     
|        |  |  |                                                                                                                                                                                                                                                                                                                           
|4.6.3*  |  |  | Pricing Supplement dated 17
        November 2003 relating to the issue by Reuters Finance PLC of €500,000,000
        4.625% Guaranteed Notes due 19 November 2010 under the £1,000,000,000
        Euro Medium Term Note Programme                                                                                      
|        |  |  |                                                                                                                                                                                                                                                                                                                           
|4.6.4*  |  |  | Form of Permanent Global Note
        in respect of the issue by Reuters Finance PLC of €500,000,000 4.625%
        Guaranteed Notes due 19 November 2010 under the £1,000,000,000
        Euro Medium Term Note Programme                                                                                                
|        |  |  |                                                                                                                                                                                                                                                                                                                           
|4.6.5*  |  |  | Pricing Supplement dated 24
        March 1999 relating to the issue by Reuters Group PLC of £200,000,000
        5.375% Notes due 26 November 2004 under the £1,000,000,000 Euro
        Medium Term Note Programme                                                                                                      
|        |  |  |                                                                                                                                                                                                                                                                                                                           
|4.6.6*  |  |  | Permanent Global Note dated
        24 March 1999 relating to the issue by Reuters Group PLC of £200,000,000
        5.375% Notes due 26 November 2004 under the £1,000,000,000 Euro
        Medium Term Note Programme                                                                                                   
|        |  |  |                                                                                                                                                                                                                                                                                                                           
|4.7*    |  |  | Syndicated Credit Facility Agreement,
        dated 25 April 2003, among Reuters Group PLC, HSBC Bank plc and J.P.
        Morgan plc, as arrangers, the financial institutions listed therein and
        HSBC Investment Bank Plc, as agent                                                                             
|        |  |  |                                                                                                                                                                                                                                                                                                                           
|4.8     |  |  | Acquisition
          Agreement dated 21 October 2004 among Equant Proton Holdings Limited,
          Equant N.V., Equant Inc., and Reuters Limited                                                                                                                                                                       
|        |  |  |                                                                                                                                                                                                                                                                                                                           
|4.9     |  |  | Amended and Restated Agreement
        and Plan of Merger dated 24 February 2003 by and among Reuters Group
        PLC, Proton Acquisition Corporation and Multex.com, Inc. (incorporated
        by reference to the Tender Offer Statement on Schedule TO-T filed by
        Reuters Group PLC on 26 February 2003)    
|        |  |  |                                                                                                                                                                                                                                                                                                                           
|4.10.1* |  |  | Service Agreement of Thomas
        H. Glocer with Reuters Group PLC dated 10 February 2004                                                                                                                                                                                                                               
|        |  |  |                                                                                                                                                                                                                                                                                                                           
|4.10.2* |  |  | Service Agreement of David Grigson
        with Reuters Group PLC dated 21 June 2001, as amended 3 March 2004                                                                                                                                                                                                             
|        |  |  |                                                                                                                                                                                                                                                                                                                           
|4.10.3* |  |  | Service Agreement of Devin Wenig
        with Reuters Group PLC dated 3 March 2004                                                                                                                                                                                                                                        
|        |  |  |                                                                                                                                                                                                                                                                                                                           

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|4.10.4*                                                                                                                                                                                                                       |  |  | Service Agreement
        of Devin Wenig with Reuters America LLC dated 3 March 2004                                                                                                                                                                                                                                                                                                  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                              |  |  |                                                                                                                                                                                                                                                                                                                                                                                       
|4.10.5*                                                                                                                                                                                                                       |  |  | Engagement Letter of Niall FitzGerald
        with Reuters Group PLC dated 2 March 2004                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                              |  |  |                                                                                                                                                                                                                                                                                                                                                                                       
|4.10.6                                                                                                                                                                                                                        |  |  | Non-Executive Chairman Compensation
        Letter between Instinet Group Incorporated and Ian Strachan, dated January
        1, 2003 (incorporated by reference to Exhibit 10.6 to the Annual Report
        on Form 10-K filed by Instinet Group on 28 March 2002)                                                                                                                 
|                                                                                                                                                                                                                              |  |  |                                                                                                                                                                                                                                                                                                                                                                                       
|4.11                                                                                                                                                                                                                          |  |  | Rules
          of The Reuters Group PLC Long-Term Incentive Plan 1997                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                              |  |  |                                                                                                                                                                                                                                                                                                                                                                                       
|4.12*                                                                                                                                                                                                                         |  |  | Rules of the Reuters Group PLC
        Discretionary Stock Option Plan, as amended                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                              |  |  |                                                                                                                                                                                                                                                                                                                                                                                       
|4.13                                                                                                                                                                                                                          |  |  | Stock
          and Asset Purchase Agreement dated as of 20 December 2004 by and among
          Reuters Limited, Reuters S.A, Moneyline Telerate Holdings, Inc., the
          subsidaries of Moneyline Telerate Holdings named therein and One Equity
          Partners LLC (portions of this exhibit have been omitted pursuant to
          a request for confidential treatment)
|                                                                                                                                                                                                                              |  |  |                                                                                                                                                                                                                                                                                                                                                                                       
|8.1                                                                                                                                                                                                                           |  |  | See Note 32 of the Notes to
        the Consolidated Financial Statements of Reuters Group PLC contained
        in the Annual Report.                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                              |  |  |                                                                                                                                                                                                                                                                                                                                                                                       
|10.1                                                                                                                                                                                                                          |  |  | Consent of PricewaterhouseCoopers
        for incorporation by reference in the Registration Statements on Form
        S-8 of Reuters Group PLC of their report dated 7 March 2005                                                                                                                                                                                                   
|                                                                                                                                                                                                                              |  |  |                                                                                                                                                                                                                                                                                                                                                                                       
|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                                                                                                                                                                                                                            |  |  | Consolidated
          Financial Statements and notes thereto for Radianz Limited for the
          fiscal year ended December 31, 2003                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                              |  |  |                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                             
|* 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.

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SIGNATURES

The registrant hereby certifies that
    it meets all of the requirements for filing on Form 20-F and that it has
    duly caused and authorized the undersigned to sign the annual report on its
    behalf.

REUTERS GROUP PLC(Registrant)

Date: 9 March 2005

| | By: /s/ David Grigson  
| | -----------------------
| | David Grigson,         
| | Chief Financial Officer

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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, 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)                                                                                                                                                                                                                                                                                                
|      |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.1.1 |  |  | Second Amended and Restated
        License, Maintenance and Distribution Agreement, dated October 1, 2003,
        between Reuters Limited and TIBCO Software Inc. (incorporated by reference
        to Exhibit 99.1 to the Registration Statement on Form S-3 File No. 333-110304,
        filed by TIBCO on November 6, 2003, as amended)                                                                                                                                                                                                                                                                                                                                                                          
|      |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.1.2 |  |  | Amendment
          No. 1, dated February 27, 2005, to Second Amended and Restated License,
          Maintenance and Distribution Agreement, dated October 1, 2003, between
          Reuters Limited and TIBCO Software Inc. (portions of this exhibit have
          been omitted pursuant to a request for confidential treatment)                                                                                                                                                                                                                                                                                                                                                                                 
|      |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.1.3 |  |  | Registration and Repurchase
        Agreement dated 7 October 2003, between Reuters Limited and TIBCO Software
        Inc. (incorporated by reference to Exhibit 4.3 to the Registration Statement
        on Form S-3 File No. 333-110304, filed by TIBCO on November 6, 2003,
        as amended)                                                                                                                                                                                                                                                                                                                                                                                                                   
|      |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.2   |  |  | Network Services Agreement,
        dated 22 May 2000, between Reuters Limited and Proholdco Limited (subsequently
        renamed Radianz Limited) (incorporated by reference to Exhibit 4.4 to
        Amendment No. 1 to the Annual Report on Form 20-F filed by Reuters Group
        PLC with respect to the fiscal year ended 31 December 2000)                                                                                                                                                                                                                                                                                                                                                                  
|      |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.3   |  |  | Network Services Agreement,
        dated 28 September 2001, between Reuters Limited and SAVVIS Communications
        Corporation, as amended (incorporated by reference to Exhibit 10.4 to
        the Quarterly Report on Form 10-Q filed by SAVVIS on 29 November 2001,
        Exhibit 10.57 to the Annual Report on Form 10-K filed by SAVVIS on 28
        February 2003, Exhibits 10.1 and 10.2 to the Quarterly Report on Form
        10-Q filed by SAVVIS on 12 August 2003, Exhibits 10.2 through 10.5 to
        the Quarterly Report on Form 10-Q filed by SAVVIS on 30 October 2003,
        and Exhibits 10.28 and 10.29 to the Annual Report on Form 10-K filed
        by SAVVIS on 24 February 2004)
|      |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.3.1 |  |  | Letter
          Agreement between Reuters Limited and SAVVIS Communications Corporation,
          dated 22 October 2004, regarding settlement of certain credits and
          offsets under the Network Services Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|      |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.4*  |  |  | Transitional Services Agreement
        (“TSA”) dated 2 June 2003 between Reuters Limited and Moneyline
        Telerate Holdings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|      |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.4.1 |  |  | Amendment
          No. 1 dated 8 June 2004 to TSA (portions of this exhibit have been
          omitted pursuant to a request for confidential treatment)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|      |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.4.2 |  |  | Amendment
          No. 2 dated 20 December 2004 to TSA (portions of this exhibit have
          been omitted pursuant to a request for confidential treatment)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|      |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.5*  |  |  | Deed of Covenant
        dated 11 October 2002 made by Reuters Group PLC relating to the £1,500,000,000
        Euro-commercial Paper Programme                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

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|4.5.1*  |  |  | Amended and Restated
        Note Agency Agreement dated 11 October 2002 among Reuters Group PLC (as
        Issuer), Citibank, N.A. (as Issue Agent and Principal Paying Agent) and
        Dexia Banque Internationale a Luxembourg S.A. (as Paying Agent)                                                              
|------- |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |  |  |                                                                                                                                                                                                                                                                                                                           
|4.5.2*  |  |  | Dealer Agreement dated 11 October
        2002 among Reuters Group PLC (as Issuer), Citibank International plc
        (as Arranger) and the various Dealers named therein                                                                                                                                                
|        |  |  |                                                                                                                                                                                                                                                                                                                           
|4.6*    |  |  | Amended and Restated Programme
        Agreement dated 7 November 2003 among Reuters Group PLC (as Issuer and
        Guarantor), Reuters Finance PLC (as Issuer) and the various Initial Dealers
        named therein relating to the November 2003 update of the £1,000,000,000
        Euro Medium Term Note Programme
|        |  |  |                                                                                                                                                                                                                                                                                                                           
|4.6.1*  |  |  | Amended and Restated Trust Deed
        dated 7 November 2003 between Reuters Group PLC (as Issuer and Guarantor),
        Reuters Finance PLC (as Issuer) and Citicorp Trustee Company Limited
        (as Trustee)                                                                                                      
|        |  |  |                                                                                                                                                                                                                                                                                                                           
|4.6.2*  |  |  | Amended and Restated Agency
        Agreement dated 7 November 2003 between Reuters Group PLC (as Issuer
        and Guarantor), Reuters Finance PLC (as Issuer), Citibank NA (as Agent),
        Citibank AG and BNP Paribas Luxembourg (as Paying Agents) and Citicorp
        Trustee Company Limited (as Trustee)     
|        |  |  |                                                                                                                                                                                                                                                                                                                           
|4.6.3*  |  |  | Pricing Supplement dated 17
        November 2003 relating to the issue by Reuters Finance PLC of €500,000,000
        4.625% Guaranteed Notes due 19 November 2010 under the £1,000,000,000
        Euro Medium Term Note Programme                                                                                      
|        |  |  |                                                                                                                                                                                                                                                                                                                           
|4.6.4*  |  |  | Form of Permanent Global Note
        in respect of the issue by Reuters Finance PLC of €500,000,000 4.625%
        Guaranteed Notes due 19 November 2010 under the £1,000,000,000
        Euro Medium Term Note Programme                                                                                                
|        |  |  |                                                                                                                                                                                                                                                                                                                           
|4.6.5*  |  |  | Pricing Supplement dated 24
        March 1999 relating to the issue by Reuters Group PLC of £200,000,000
        5.375% Notes due 26 November 2004 under the £1,000,000,000 Euro
        Medium Term Note Programme                                                                                                      
|        |  |  |                                                                                                                                                                                                                                                                                                                           
|4.6.6*  |  |  | Permanent Global Note dated
        24 March 1999 relating to the issue by Reuters Group PLC of £200,000,000
        5.375% Notes due 26 November 2004 under the £1,000,000,000 Euro
        Medium Term Note Programme                                                                                                   
|        |  |  |                                                                                                                                                                                                                                                                                                                           
|4.7*    |  |  | Syndicated Credit Facility Agreement,
        dated 25 April 2003, among Reuters Group PLC, HSBC Bank plc and J.P.
        Morgan plc, as arrangers, the financial institutions listed therein and
        HSBC Investment Bank Plc, as agent                                                                             
|        |  |  |                                                                                                                                                                                                                                                                                                                           
|4.8     |  |  | Acquisition
          Agreement dated 21 October 2004 among Equant Proton Holdings Limited,
          Equant N.V., Equant Inc., and Reuters Limited                                                                                                                                                                       
|        |  |  |                                                                                                                                                                                                                                                                                                                           
|4.9     |  |  | Amended and Restated Agreement
        and Plan of Merger dated 24 February 2003 by and among Reuters Group
        PLC, Proton Acquisition Corporation and Multex.com, Inc. (incorporated
        by reference to the Tender Offer Statement on Schedule TO-T filed by
        Reuters Group PLC on 26 February 2003)    
|        |  |  |                                                                                                                                                                                                                                                                                                                           
|4.10.1* |  |  | Service Agreement of Thomas
        H. Glocer with Reuters Group PLC dated 10 February 2004                                                                                                                                                                                                                               
|        |  |  |                                                                                                                                                                                                                                                                                                                           
|4.10.2* |  |  | Service Agreement of David Grigson
        with Reuters Group PLC dated 21 June 2001, as amended 3 March 2004                                                                                                                                                                                                             
|        |  |  |                                                                                                                                                                                                                                                                                                                           
|4.10.3* |  |  | Service Agreement of Devin Wenig
        with Reuters Group PLC dated 3 March 2004                                                                                                                                                                                                                                        
|        |  |  |                                                                                                                                                                                                                                                                                                                           

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|4.10.4*                                                                                                                                                                                                                       |  |  | Service Agreement
        of Devin Wenig with Reuters America LLC dated 3 March 2004                                                                                                                                                                                                                                                                                                  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                              |  |  |                                                                                                                                                                                                                                                                                                                                                                                       
|4.10.5*                                                                                                                                                                                                                       |  |  | Engagement Letter of Niall FitzGerald
        with Reuters Group PLC dated 2 March 2004                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                              |  |  |                                                                                                                                                                                                                                                                                                                                                                                       
|4.10.6                                                                                                                                                                                                                        |  |  | Non-Executive Chairman Compensation
        Letter between Instinet Group Incorporated and Ian Strachan, dated January
        1, 2003 (incorporated by reference to Exhibit 10.6 to the Annual Report
        on Form 10-K filed by Instinet Group on 28 March 2002)                                                                                                                 
|                                                                                                                                                                                                                              |  |  |                                                                                                                                                                                                                                                                                                                                                                                       
|4.11                                                                                                                                                                                                                          |  |  | Rules
          of The Reuters Group PLC Long-Term Incentive Plan 1997                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                              |  |  |                                                                                                                                                                                                                                                                                                                                                                                       
|4.12*                                                                                                                                                                                                                         |  |  | Rules of the Reuters Group PLC
        Discretionary Stock Option Plan, as amended                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                              |  |  |                                                                                                                                                                                                                                                                                                                                                                                       
|4.13                                                                                                                                                                                                                          |  |  | Stock
          and Asset Purchase Agreement dated as of 20 December 2004 by and among
          Reuters Limited, Reuters S.A, Moneyline Telerate Holdings, Inc., the
          subsidaries of Moneyline Telerate Holdings named therein and One Equity
          Partners LLC (portions of this exhibit have been omitted pursuant to
          a request for confidential treatment)
|                                                                                                                                                                                                                              |  |  |                                                                                                                                                                                                                                                                                                                                                                                       
|8.1                                                                                                                                                                                                                           |  |  | See Note 32 of the Notes to
        the Consolidated Financial Statements of Reuters Group PLC contained
        in the Annual Report.                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                              |  |  |                                                                                                                                                                                                                                                                                                                                                                                       
|10.1                                                                                                                                                                                                                          |  |  | Consent of PricewaterhouseCoopers
        for incorporation by reference in the Registration Statements on Form
        S-8 of Reuters Group PLC of their report dated 7 March 2005                                                                                                                                                                                                   
|                                                                                                                                                                                                                              |  |  |                                                                                                                                                                                                                                                                                                                                                                                       
|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                                                                                                                                                                                                                            |  |  | Consolidated
          Financial Statements and notes thereto for Radianz Limited for the
          fiscal year ended December 31, 2003                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                              |  |  |                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                             
|* 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.

---