6-K

Exhibit 99.1

FORM 51-102F4
BUSINESS ACQUISITION REPORT

Item 1		Identity of Company

1.1		Name and Address of Company

		Thomson Reuters Corporation Suite 2706, Toronto Dominion Bank Tower Toronto-Dominion Centre Toronto, Ontario M5K 1A1 Canada

1.2		Executive Officer

		Deirdre Stanley, Executive Vice President and General Counsel (646) 223-8756

Item 2		Details of Acquisition

2.1		Nature of Business Acquired

		On April 17, 2008, The Thomson Corporation (“Thomson”) acquired Reuters Group PLC (“Reuters”), a global information company serving professionals in the financial services, media and corporate markets, by implementing a dual listed company (“DLC”) structure (the “Transaction”).

		Thomson Reuters is the world’s leading source of intelligent information for businesses and professionals. By combining Thomson’s strength in North America with Reuters strength in Europe, the Middle East and Asia, Thomson Reuters created a business with a global brand and presence that will allow it to grow faster than either Thomson or Reuters could have on its own. Thomson Reuters expects to achieve this by:

•		capitalizing on a global brand and presence to drive international growth;

•		delivering greater value to customers through a broader range of electronically delivered critical information and decision support tools;

•		integrating Thomson and Reuters businesses to accelerate growth and capture synergies; and

•		leveraging increased revenue diversity and scale, financial strength and capital deployment to maximize shareholder return.


Thomson Reuters is organized in two divisions:

•		*Markets*, which consists of the financial businesses, which are a combination of those operated by Reuters and Thomson Financial prior to the closing; and

•		*Professional*, which consists of the Legal, Tax & Accounting, Scientific and Healthcare segments.

		Under the DLC structure, Thomson Reuters has two parent companies, both of which are publicly listed — Thomson Reuters Corporation, an Ontario corporation, which was previously named The Thomson Corporation, and Thomson Reuters PLC, a new English company in which Reuters shareholders received shares as part of their consideration in the Transaction. Thomson Reuters Corporation and Thomson Reuters PLC operate as a unified group pursuant to contractual arrangements as well as provisions in their organizational documents. Under the DLC structure, shareholders of Thomson Reuters Corporation and Thomson Reuters PLC both have a stake in Thomson Reuters, with cash dividend, capital distribution and voting rights that are comparable to the rights they would have if they were holding shares in one company carrying on the Thomson Reuters business.

		Key features of the DLC structure include the following:

	•		Thomson Reuters Corporation and Thomson Reuters PLC remain separate publicly listed companies;

	•		the boards of directors of the two companies comprise the same individuals, as do the companies’ executive management;

	•		shareholders of the two companies ordinarily vote together as a single decision-making body, including in the election of directors;

	•		shareholders of the two companies receive equivalent cash dividends and capital distributions;

	•		each company has guaranteed all contractual obligations of the other company, and those of other parties to the extent they are guaranteed by the other company, and will guarantee other obligations as agreed; and

	•		a take-over bid or similar transaction is required to be made for shares of both companies on an equivalent basis.

		In connection with the Transaction, Thomson Reuters adopted the Reuters Trust Principles, which include the preservation of integrity, reliability of news, development of the news business and related principles.

		Thomson Reuters corporate headquarters is located in New York, New York, with key staff also located in Stamford, Connecticut and London, United Kingdom. Thomson Reuters employs more than 50,000 people in 93 countries. Thomson Reuters shares are listed on the New York Stock Exchange (NYSE: TRI); Toronto Stock Exchange (TSX: TRI); London Stock Exchange (LSE: TRIL); and Nasdaq (NASDAQ: TRIN).

2.2		Date of Acquisition

		April 17, 2008

2.3		Consideration

		Under the terms of the Transaction, all of the issued and outstanding Reuters ordinary shares were cancelled and Reuters shareholders were entitled to receive, for each Reuters ordinary share held, 352.5 pence in cash and 0.16 Thomson Reuters PLC ordinary shares. As of the closing of the Transaction, one Thomson Reuters PLC ordinary share was equivalent to one Thomson Reuters Corporation common share under the DLC structure. Thomson shareholders continued to hold their shares of Thomson, renamed Thomson Reuters Corporation.


		Subject to certain exceptions, all options and awards outstanding under Reuters share-based employee compensation plans vested and became fully exercisable prior to the closing of the Transaction. Assuming all outstanding Reuters in-the-money share options and other share-based awards were exercised, Reuters shareholders were entitled to receive aggregate cash consideration of approximately $8.7 billion (based on the $/£ exchange rate of $1.9756/£1 per the noon buying rate of the Federal Reserve Bank of New York on April 16, 2008) on May 1, 2008. Thomson Reuters funded cash consideration using proceeds from the sale of its Thomson Learning businesses as well as borrowings under a £2.5 billion acquisition credit facility. As of April 30, 2008, Thomson Reuters Corporation had borrowed US$3 billion under this facility to finance the Transaction.

		194,107,278 Thomson Reuters PLC ordinary shares were issued to Reuters shareholders on completion of the Transaction.

		The final amount of consideration is subject to change based on certain equity awards of Reuters employees which have an exercise period of up to six months from the completion of the Transaction.

2.4		Effect on Financial Position

		Thomson Reuters believes its future results will reflect savings as a result of the previously announced Thomson and Reuters efficiency initiatives, THOMSONplus and Core Plus, as well as the combination of the two businesses. Thomson Reuters estimates that it will achieve run rate savings of US$1.0 billion by December 31, 2010, earlier than originally anticipated, and US$1.2 billion by December 31, 2011. The aggregate savings through 2011 includes the benefits from THOMSONplus (US$160 million), Core Plus (US$300 million) and Thomson Reuters integration-related savings (US$750 million).

		At March 31, 2008, the THOMSONplus and Core Plus programs had achieved combined run rate savings of US$300 million, leaving an additional US$900 million to be realized by December 31, 2011. The cost to achieve the savings to date has been approximately US$570 million. The estimated cash cost to achieve the remaining US$900 million of savings is US$1.2 billion through 2011.

		In order to obtain antitrust clearance for the Transaction, Thomson Reuters agreed to sell a copy of the Thomson Fundamentals (Worldscope), Reuters Estimates, Reuters Aftermarket Research and Reuters Economics (EcoWin) databases. The sales include copies of the databases, source data and training materials, as well as certain contracts and, potentially, employees connected to the databases. Thomson Reuters is in discussions with several potential buyers, and expects to complete the sales within the next few months.

2.5		Prior Valuations

		None.

2.6		Parties to Transaction

		Not applicable.

2.7		Date of Report

		May 15, 2008

Item 3		Financial Statements

		The unaudited pro forma consolidated financial statements of Thomson Reuters Corporation for the year ended December 31, 2007, included in the section entitled “Unaudited Canadian GAAP Pro Forma Consolidated Financial Statements of Thomson Reuters Corporation” on pages 12 through 38 of Thomson Reuters PLC’s annual report on Form 20-F for the year ended December 31, 2007 (the “Thomson Reuters PLC Annual Report”) which was filed with the securities regulatory authorities in Canada and furnished to the SEC on Form 6-K on April 17, 2008, are specifically incorporated by reference in this business acquisition report.

		A copy of the Thomson Reuters PLC Annual Report is available at the Canadian securities regulatory authorities’ website at www.sedar.com, at the SEC’s website at www.sec.gov and at Thomson Reuters website at www.thomsonreuters.com.

		The consolidated financial statements of Reuters as at and for the years ended December 31, 2007, 2006 and 2005 and the accompanying auditors’ report thereon attached as Annex A hereto are included in this business acquisition report.

CAUTIONARY NOTE CONCERNING FACTORS THAT MAY AFFECT FUTURE RESULTS

This business acquisition report includes forward-looking statements that are based on certain assumptions and reflect Thomson Reuters current expectations. Forward-looking statements are those that are not historical facts and also include Thomson Reuters expectations about future prospects and share repurchase plans. Forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations. Some of the factors that could cause actual results to differ materially from current expectations include risks related to Thomson Reuters ability to achieve the anticipated benefits from the Transaction and other cost savings initiatives (including within the time periods currently expected); changes in the general economy; actions of competitors; changes to legislation and regulations; increased accessibility to free or relatively inexpensive information sources; failure to derive fully anticipated benefits from future or existing acquisitions, joint ventures, investments or dispositions; failure to develop new products, services, applications and functionalities to meet customers’ needs, attract new customers or expand into new geographic markets; failure of electronic delivery systems, network systems or the Internet; detrimental reliance on third parties for information; failure to meet the challenges involved in the expansion of international operations; failure to protect Thomson Reuters reputation; impairment of goodwill and identifiable intangible assets; failure of significant investments in technology to increase revenues or decrease operating costs; increased self-sufficiency of customers; inadequate protection of intellectual property rights; downgrading of credit ratings; threat of legal actions and claims; changes in foreign currency exchange and interest rates; failure to recruit and retain high quality management and key employees; funding obligations in respect of pension and post-retirement benefit arrangements; and actions or potential actions that could be taken by The Woodbridge Company Limited. Additional factors are discussed in Thomson Reuters materials filed with the securities regulatory authorities in Canada and the United States from time to time, including Thomson Reuters Corporation’s annual information form on Form 40-F for the year ended December 31, 2007 and the Thomson Reuters PLC Annual Report. Thomson Reuters disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, other than as required by law, rule or regulation.

Report of Independent Registered Public Accounting Firm to the Shareholder of Reuters Group Limited (formerly Reuters Group PLC)

In our opinion, the accompanying consolidated balance sheet and the related statement of income, of cash flows and statement of recognised income and expense present fairly, in all material respects, the financial position of Reuters Group PLC and its subsidiaries at 31 December 2007, 2006 and 2005, and the results of their operations and cash flows for each of the three years in the period ended 31 December 2007, in conformity with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board and IFRS as adopted by the European Union. The company’s management are responsible for these financial statements; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States), which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Our audits of the financial statements included 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.

IFRS issued by the International Accounting Standards Board and IFRS as adopted by the European Union vary in certain significant respects from accounting principles generally accepted in Canada. Information relating to the nature and effect of such differences is presented in Note 40 to the consolidated financial statements.

/s/ PricewaterhouseCoopers LLP
London

19 March 2008, except for Note 40, as to which the date is 15 May 2008

A-2

Consolidated income statement

For the year ended 31 December


			2007			2006			2005
	Notes		£m			£m			£m

Revenue		01,02		2,605			2,566			2,409
Operating costs		03		(2,355	)		(2,351	)		(2,251	)
Other operating income		04		42			41			49

Operating profit				292			256			207
Finance income		05		117			72			41
Finance costs		05		(151	)		(87	)		(53	)
Profit on disposal of associates, joint ventures and available-for-sale financial assets				21			76			38
Share of post-tax (losses)/profits from associates and joint ventures*		15		(6	)		(4	)		5

Profit before tax				273			313			238
Taxation		06		(60	)		(20	)		(9	)

Profit for the year from continuing operations				213			293			229
Profit for the year from discontinued operations		07		14			12			253

Profit for the year				227			305			482

Attributable to:
Equity holders of the parent		11		227			305			456
Minority interest		11		—			—			26
Earnings per share

From continuing and discontinued operations
Basic earnings per ordinary share		08		18.4p			23.6p			32.6p
Diluted earnings per ordinary share		08		18.0p			23.1p			31.7p

From continuing operations
Basic earnings per ordinary share		08		17.3p			22.6p			16.3p
Diluted earnings per ordinary share		08		16.9p			22.2p			15.9p


*		Share of post-tax (losses)/profits from associates and joint ventures includes a tax charge of £1 million (2006: £2 million, 2005: £1 million).

Dividends paid and proposed during the year were £147 million (2006: £134 million, 2005: £140 million). Please refer to note 32.

A-3

Consolidated statement of recognised income and expense

For the year ended 31 December


			2007			2006			2005
	Notes		£m			£m			£m

Profit for the year				227			305			482
Actuarial gains/(losses) on defined benefit plans		11,25		98			6			(48	)
Exchange differences taken directly to reserves		11,28		20			(95	)		118
Exchange differences taken to the income statement on disposal of assets		11,28		—			—			(2	)
Fair value gains/(losses) on available-for-sale financial assets		11,28		11			6			(15	)
Fair value gains on available-for-sale financial assets taken to the income statement on disposal of assets		11		(18	)		—			(73	)
Fair value gains/(losses) on net investment hedges		11,28		4			34			(39	)
Fair value gains taken to the income statement on disposal of net investment hedges		11,28		—			—			(14	)
Taxation on the items taken directly to or transferred from equity		11		(20	)		(4	)		14

Net gains/(losses) not recognised in income statement		11		95			(53	)		(59	)

Total recognised income for the year				322			252			423

Attributable to:
Equity holders of the parent				322			252			374
Minority interest				—			—			49

Fair value gains and losses arise as a result of application of IAS 39 by the Group, with effect from 1 January 2005. The adoption of IAS 39 resulted in an increase in equity at 1 January 2005 of £129 million, of which £2 million was attributable to the minority interest.

The consolidated reconciliation of changes in equity is set out in note 11.

A-4

Consolidated balance sheet

At 31 December


			2007			2006			2005
	Notes		£m			£m			£m

Assets
Non-current assets:
Intangible assets		13		614			559			487
Property, plant and equipment		14		404			371			358
Investments accounted for using the equity method:
Investments in joint ventures		15		21			19			32
Investments in associates		15		6			19			4
Deferred tax assets		26		286			281			276
Other financial assets and derivatives		16		62			47			22
Retirement benefit assets		25		39			18			—

				1,432			1,314			1,179

Current assets:
Inventories		18		—			1			1
Trade and other receivables		19		255			258			270
Other financial assets and derivatives		16		29			210			18
Current tax debtors				12			8			6
Cash and cash equivalents		20		251			129			662

				547			606			957

Non-current assets classified as held for sale		21		14			—			1

Total assets				1,993			1,920			2,137

Liabilities
Current liabilities:
Trade and other payables		22		(692	)		(491	)		(456	)
Current tax liabilities		23		(247	)		(196	)		(228	)
Provisions for liabilities and charges		24		(37	)		(60	)		(64	)
Other financial liabilities and derivatives		16		(292	)		(166	)		(49	)

				(1,268	)		(913	)		(797	)

Non-current liabilities:
Provisions for liabilities and charges		24		(102	)		(204	)		(392	)
Other financial liabilities and derivatives		16		(370	)		(521	)		(371	)
Deferred tax liabilities		26		(115	)		(110	)		(66	)

				(587	)		(835	)		(829	)

Total liabilities				(1,855	)		(1,748	)		(1,626	)

Net assets				138			172			511

Shareholders’ equity
Share capital		27		539			496			467
Other reserves		28		(1,710	)		(1,738	)		(1,692	)
Retained earnings		11		1,309			1,414			1,736

Total parent shareholders’ equity				138			172			511
Minority interest in equity				—			—			—

Total equity				138			172			511


Tom Glocer		David Grigson
CEO		CFO

A-5

Consolidated cash flow statement

For the year ended 31 December


			2007			2006			2005
	Notes		£m			£m			£m

Cash flows from operating activities
Cash generated from operations		29		534			311			271
Interest received				67			42			55
Interest paid				(99	)		(61	)		(49	)
Tax paid				(26	)		(34	)		(24	)

Net cash flow from operating activities				476			258			253

Cash flows from investing activities
Acquisitions, net of cash acquired		30		(39	)		(67	)		(124	)
Disposals, net of cash disposed		30		23			65			246
Purchases of property, plant and equipment				(116	)		(122	)		(145	)
Proceeds from sale of property, plant and equipment				19			5			3
Purchases of intangible assets				(109	)		(106	)		(40	)
Purchases of available-for-sale financial assets				(1	)		—			(1	)
Proceeds from sale of available-for-sale financial assets				23			—			85
Proceeds from closing of derivative contract				2			—			—
Dividends received				3			3			5

Net cash used in investing activities				(195	)		(222	)		29

Cash flows from financing activities
Proceeds from issue of shares				47			32			10
Share buyback				(174	)		(527	)		(223	)
Decrease/(increase) in short-term investments				194			(196	)		248
(Decrease)/increase in borrowings				(66	)		270			(144	)
Equity dividends paid to shareholders				(147	)		(134	)		(140	)
Equity dividends paid to minority interests				—			—			(23	)

Net cash used in financing activities				(146	)		(555	)		(272	)

Exchange gains/(losses) on cash and cash equivalents				2			(13	)		66

Net increase/(decrease) in cash and cash equivalents				137			(532	)		76

Cash and cash equivalents at the beginning of the year				105			637			561

Cash and cash equivalents at the end of the year		31		242			105			637

A-6

Group Accounting Policies

The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to 2007, 2006 and 2005, unless otherwise stated.

Basis of accounting

The financial statements have been prepared under the historical cost convention, unless otherwise stated below, and in accordance with the Companies Act 1985, International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretation Committee (IFRIC) interpretations as adopted by the European Union (EU) and issued by the IASB. All IFRS issued by the IASB, effective at the time of preparing these financial statements, have been adopted by the EU through the endorsement procedure established by the European Commission, with the exception of the International Accounting Standard IAS39 ‘Financial Instruments: Recognition and measurement’ related to the hedging portfolio.

Since the company is not affected by the provisions regarding portfolio hedging that are not required by the EU-endorsed version of IAS39, the accompanying financial statements comply with both IFRS as adopted by the EU and IFRS issued by the IASB.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain judgements, estimates and assumptions that affect the reported amounts of revenue and expenses during the reported period, the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet dates. Although these estimates are based on management’s best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates.

Further details regarding areas requiring significant assumptions and estimates are provided in the relevant notes to the financial statements.

The areas which require a higher degree of judgement include impairments, intangible assets, defined benefit pension plans, share-based payments, provisions, leases, segment reporting and taxation.

Standards, amendments and interpretations effective in 2007

IFRS7, ‘Financial instruments: Disclosures’ and the complementary amendment to IAS1, ‘Presentation of financial statements — Capital Disclosures’, were adopted during the year introducing new disclosures relating to financial instruments. Adoption of the standards has not had any impact on the classification or valuation of the Group’s financial instruments.

Basis of consolidation

The consolidated financial statements include the financial statements of Reuters Group PLC and its subsidiaries and the Group’s share of the post-acquisition results of associates and joint ventures.

Subsidiaries

Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than 50% of the voting rights. Subsidiaries are consolidated from the date on which control is transferred to the Group and de-consolidated from the date on which control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The excess of the cost of an acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement.

A-7.1

All intra-group transactions are eliminated as part of the consolidation process. In preparing the Group financial statements, accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.

Associates and joint ventures

Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Joint ventures are all entities over which the Group has joint control with one or more other entities outside the Group. Investments in associates and joint ventures are accounted for by the equity method of accounting and are initially recognised at cost. The Group’s investment in associates and joint ventures includes goodwill and intangibles identified on acquisition, plus the Group’s share of post-acquisition reserves.

The Group’s share of post-acquisition profits or losses is recognised in the income statement and its share of post-acquisition movements in reserves is recognised in reserves. When the Group’s share of losses of an associate or joint venture equals or exceeds its interest in the associate or joint venture, the Group does not recognise further losses unless it has incurred obligations or made payments on behalf of the associate or joint venture.

Gains on transactions between the Group and its associates and joint ventures are eliminated to the extent of the Group’s interest. For Group reporting purposes, the results of associates and joint ventures have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.

Foreign currency translation

Amounts included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in pounds sterling, the company’s functional and presentation currency.

Transactions in foreign currencies are translated into the functional currency using the exchange rate prevailing at the date of the transaction. Foreign exchange gains and losses resulting from settlement of such transactions, and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies, are recognised in the income statement except when deferred in equity as qualifying cash flow and net investment hedges.

Exchange differences on non-monetary items, such as available-for-sale financial assets, are included in the fair value reserve in equity.

The results and financial position of all Group companies that have a functional currency other than sterling are translated as follows:

•

income and expenses are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rate prevailing on the transaction date, in which case income and expenses are translated at the date of the transaction);

•

assets and liabilities are translated at the closing exchange rate at the date of the balance sheet; and

•

all resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and from borrowings and other currency instruments designated as hedges of such investments, are taken to equity. When a foreign operation is sold, such exchange differences are recognised in the income statement as part of the gain or loss on sale.

Goodwill and fair value adjustments on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing exchange rate.

A-7.2

Revenue recognition

Revenue represents the turnover, net of discounts, derived from services provided to subscribers and sales of products applicable to the year.

Revenue from sales of subscription-based real-time and historical information services is recognised rateably over the term of the subscription.

Revenue from contracts for the outright sale of systems-based product solutions, which include the sale of fully developed software licences, is recognised at the time of client acceptance, at which time the Group has no further obligation. Long-term contracts are accounted for in accordance with the contractual terms either on a percentage of completion basis or on a time and materials as incurred basis.

Revenue from associated maintenance and support services is recognised rateably over the term of the maintenance contract. Where contracts allow the Group to recharge costs from communications suppliers and exchanges onwards to subscribers, this income is recognised as revenue.

Transaction products usage revenue is accounted for on a trade date basis.

Interest income is accrued on a time basis by reference to the amount outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying value.

Dividend revenue is recognised when the Group’s right to receive payment is established.

Pensions and similar obligations

The Group operates defined contribution and defined benefit pension plans and provides post-retirement medical benefits.

Payments to defined contribution pension plans are charged as an expense to the income statement, as incurred, when the related employee service is rendered. The Group has no further legal or constructive payment obligations once the contributions have been made. A defined benefit plan is a pension plan that is not a defined contribution plan.

For defined benefit pension plans, the cost of providing benefits is determined using the Projected Unit Credit Method and is charged to the income statement so as to spread the service cost over the service lives of the employees. An interest cost representing the unwinding of the discount rate on the scheme liabilities, net of the expected return on scheme assets, is charged to the income statement. The asset or liability recognised in the balance sheet, in respect of defined benefit plans, is the fair value of the defined benefit obligation at the balance sheet date. Pension scheme surpluses are recognised only to the extent that the surplus is considered recoverable. Recoverability is primarily based on the extent to which the Group can unilaterally reduce future contributions to the plan. The defined benefit obligation is calculated annually by independent actuaries. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in a currency in which the benefits will be paid and that have terms of maturity approximating to the terms of the relevant pension liability.

All actuarial gains and losses which arise in calculating the present value of the defined benefit obligation, and the fair value of plan assets, are recognised immediately in the statement of recognised income and expense.

Post-retirement medical benefits are provided to employees of some Group companies. The expected costs are determined using an accounting methodology similar to that for defined benefit pension plans.

A-7.3

Share-based payments

The Group makes equity-settled and cash-settled share-based payments to its employees. Equity-settled share-based awards granted after 7 November 2002 but not vested by 1 January 2005 are measured at fair value at the date of grant using an options pricing methodology and expensed over the vesting period of the award. At each balance sheet date, the Group reviews its estimate of the number of options that are expected to vest.

Cash-settled share-based payments are accrued over the vesting period of the award, based on the current fair market value at each balance sheet date.

When share options are exercised, the proceeds received, net of any transaction costs, are credited to share capital (nominal value) and share premium.

Intangible assets

Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the identifiable net assets (including intangible assets) of the acquired subsidiary, associate or joint venture at the date of acquisition. Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill and intangibles on acquisition of associates and joint ventures is included in the carrying value of the investment. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on disposal of an entity include the carrying amount of goodwill relating to the entity or investment sold.

Internally generated intangible assets

Expenditure related to the development of new products or capabilities that is incurred between establishing technical feasibility and the asset becoming ready for use is capitalised as an intangible asset and amortised over the useful economic life. Capitalisation commences from the point at which the technical feasibility and commercial viability of the product or capability can be demonstrated and the Group is satisfied that it is probable that future economic benefits will result from the product or capability once completed. Capitalisation ceases when the product or capability is ready for use.

Expenditure on research activities, and on development activities that do not meet the above criteria, is charged to the income statement as incurred.

Internally developed intangible assets are systematically amortised, on a straight line basis, over their useful economic lives which range from three to five years.

Other intangibles

Software which forms an integral part of the related hardware is capitalised with that hardware and included within property, plant and equipment.

Costs which are directly associated with the production of software for internal use in the business are capitalised as an intangible asset. Software assets are amortised on a straight line basis over their expected useful economic lives which range from three to five years.

Acquired intangible assets include software licences, customer relationships, trade names and trademarks. These assets are capitalised on acquisition and amortised over their expected useful economic lives which range from five to fifteen years.

A-7.4

Impairment of non-financial assets

Goodwill is not subject to amortisation and is tested annually for impairment.

All other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. In addition, intangible assets under development and not yet ready for use are reviewed for impairment annually. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less cost to sell and value in use.

For the purposes of assessing impairment, assets are grouped at the lowest level for which separately identifiable cash flows exist (cash generating units, ‘CGUs’). Where assets do not generate independent cash flows and their carrying value cannot be attributed to a particular CGU, CGUs are grouped together at the level at which these assets reside, and the carrying amount of this group of CGUs is compared to the recoverable amount of that particular group.

Property, plant and equipment

All items of property, plant and equipment are stated at historical cost less depreciation including expenditure directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefit will flow to the Group and the cost of the item can be measured reliably.

Depreciation is calculated on a straight line basis so as to write down the assets to their residual values over their expected useful lives which are as follows:


Freehold land		Not depreciated
Freehold buildings		Normally 50 years
Leasehold property		Over the term of the lease
Computer systems equipment, office equipment and motor vehicles		2 to 5 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

Non-current assets held for sale

Non-current assets and disposal groups are classified as held for sale if their carrying amount is expected to be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition.

Non-current assets and disposal groups classified as held for sale are measured at the lower of carrying amount and fair value less selling costs.

A-7.5

Financial Assets

Classification

The Group classifies its financial assets in the following categories:

•

financial assets at fair value through profit and loss;

•

loans and receivables;

•

available-for-sale financial assets.

The classification depends on the purpose for which the assets were acquired. Management determines the classification of its investments at initial recognition and re-evaluates this designation at every reporting date.

Financial assets at fair value through profit and loss

This category includes financial assets held for trading and those designated at fair value through profit and loss at inception. A financial asset is classified in this category if acquired principally for the purpose of selling in the short-term or if so designated by management. Derivatives are also classified as held for trading unless they are designated as hedges. Assets in this category are classified as current assets and initially recognised at fair value on the trade date and subsequently remeasured at each reporting date. Transaction costs directly attributable to the acquisition of the asset are recognised immediately in the income statement. Interest or dividend income is recognised separately from the net gain or loss on the asset. Realised and unrealised gains and losses are included in the income statement in the period in which they arise.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Assets in this category are initially recognised on the trade date at fair value plus transaction costs and subsequently measured at amortised cost, using the effective interest method. They are included in current assets, except for maturities greater than 12 months after the balance sheet date, which are classified as non-current assets.

Available-for-sale financial assets

The Group has classified all of its marketable securities as available-for-sale. Assets in this category are initially recognised on the trade date at fair value plus transaction costs and subsequently remeasured at each reporting date. Unrealised gains and losses arising from changes in fair value are recognised in the statement of recognised income and expense.

Impairment and derecognition

The Group assesses at each balance sheet date whether there is objective evidence that a financial asset, or group of financial assets, is impaired. On impairment, the cumulative loss recognised in equity is removed from equity and recognised in the income statement. On disposal of the asset, gains or losses recognised in equity are removed from equity and recognised in the income statement.

Cash and cash equivalents

Cash and cash equivalents include cash in hand, bank deposits repayable on demand, other highly liquid investments with original maturities of three months or less, and bank overdrafts.

Inventories and contract work in progress

Inventories and contract work in progress are valued at the lower of cost and net realisable value less progress payments received.

A-7.6

Trade receivables

Trade receivables do not carry interest and are initially measured at their fair value, as reduced by appropriate allowances for estimated irrecoverable amounts, and subsequently measured at amortised cost. A provision for impairment of trade receivables is established when there is evidence that the Group will not be able to collect all amounts due according to the original terms of these receivables. The amount of the provision is the difference between the carrying value and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the income statement. When a trade receivable is uncollectible it is written off against the provision.

Trade payables

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

Provisions

Provisions, other than in respect of pension and post-retirement benefits, are recognised when the Group has a present legal or constructive obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle the obligation; and the amount can be reliably estimated. Restructuring provisions comprise lease termination liabilities, employee termination payments and other liabilities incurred as part of restructuring programmes.

Leasing

Assets under leasing contracts are classified as finance or operating leases at the inception of the lease or when changes are made to existing contracts.

Assets classified as finance leases are recognised as assets of the Group at the present value of the minimum lease payments determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability.

Operating lease rentals are recognised in the income statement on a straight line basis over the period of the lease. Operating lease incentives received are initially deferred and then recognised over the full period of the lease.

Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred and are subsequently stated at amortised cost, adjusted for fair value movements in respect of related fair value hedges. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the balance sheet date.

Borrowing costs on qualifying assets are expensed as incurred and not capitalised as part of the cost of the asset.

Purchases and sales of financial assets

Purchases and sales of financial assets are recognised on the settlement date, which is the date that the asset is delivered to or by the Group.

A-7.7

Derivative financial instruments and hedging

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument and, if so, the nature of the item being hedged. The Group designates certain derivatives as either:

•

hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedges);

•

hedges of highly probable forecast transactions (cash flow hedges); or

•

hedges of net investments in foreign operations (net investment hedges).

Fair value hedges

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.

Cash flow hedges

The effective portion of changes in the fair value of derivatives that are designated and qualify as a cash flow hedge is recognised in equity. The gain or loss relating to the ineffective portion is recognised immediately in the income statement.

Amounts accumulated in equity are recycled to the income statement in the period when the hedged item will affect profit and loss (for instance, when the forecast sale that is hedged takes place). However, when the forecast transaction that is hedged results in the recognition of a non-financial asset (for example, project costs or a major business investment) or a liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately recognised in the income statement.

Net investment hedges

Derivatives and foreign currency borrowings are used as hedges for net investments in foreign operations. Any gain or loss on a derivative hedging instrument relating to the effective portion of the hedge is recognised in equity; the gain or loss relating to the ineffective portion of the hedge is recognised immediately in the income statement within operating costs. Any gain or loss on foreign currency borrowings used as a hedge is recognised in equity, subject to effectiveness.

Gains and losses accumulated in equity are recognised in the income statement on disposal or impairment of the foreign operation.

Embedded derivatives

Embedded derivatives arise in certain revenue and purchase contracts where the currency of the contract is different from the functional currencies of the parties involved. Such derivatives are separated from the host contracts when their economic characteristics and risks are not closely related to those of the host contract. The derivatives are measured at fair value at each balance sheet date using forward exchange market rates. Changes in the fair value are recognised in the income statement.

Derivatives that do not qualify for hedge accounting

Certain derivative instruments, while providing effective economic hedges under the Group’s policies, are not designated as hedges. Changes in the fair value of any derivative instruments that do not qualify for hedge accounting are recognised immediately in the income statement.

A-7.8

Financial guarantees

Financial guarantees are non-derivative financial liabilities which are recognised initially at fair value plus transaction costs and subsequently measured at the higher of the amount determined in accordance with IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’, and the amount initially recognised.

Fair value estimation

The fair value of financial instruments traded in active markets (such as available-for-sale securities) is based on quoted market prices at the balance sheet date. The fair value of foreign exchange contracts is determined using forward exchange market rates at the balance sheet date. Other financial instruments are valued using standard pricing models based on quoted forward market rates, interpolated between dates where appropriate, and discounted cash flow techniques.

Embedded derivatives arise in revenue and supplier contracts where the currency of the contract is different from the functional currencies of the parties involved. The derivatives are separated from the host contracts and valued using quoted forward market rates.

Interest in shares of Reuters Group PLC

Shares held by the Reuters Employee Share Ownership Trusts and repurchased shares are recorded in the balance sheet at cost and reported as a deduction from shareholders’ equity.

Irrevocable commitments to repurchase shares during close periods entered into before the balance sheet date are recorded in the balance sheet at estimated cost and reported as a current liability with a corresponding deduction from shareholders’ equity.

Dividend distribution

Dividend distributions are recognised as a liability in the period in which the dividends are approved by the company’s shareholders. Interim dividends are recognised when they are paid; final dividends when authorised in general meeting by shareholders.

Taxation

The tax expense for the year comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

The current tax expense is based on the results for the year as adjusted for items that are not taxable or not deductible. Current tax is calculated using tax rates and laws that have been enacted or substantively enacted at the balance sheet date.

Deferred tax is accounted for using the balance sheet liability method, and is the tax expected to be payable or recoverable on temporary differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax is calculated based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates that are expected to apply to the year of realisation or settlement based on tax rates and laws enacted or substantively enacted at the balance sheet date.

Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, associates and joint ventures except where the reversal of the temporary difference can be controlled and it is probable that the difference will not reverse in the foreseeable future.

A-7.9

Deferred tax assets are recognised to the extent it is probable that taxable profits will be available against which the deductible temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are not recognised if the temporary differences arise from goodwill not deductible for tax purposes, or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Segment reporting

Business segmentation is the primary reporting dimension for the Group, with geographical segmentation being the secondary reporting dimension. Accordingly, the four business divisions (Sales & Trading, Research & Asset Management, Enterprise, and Media), are the primary reporting segments for the Group.

Note 1 outlines in detail the allocation approach in respect of divisional results, costs, assets and liabilities.

Standards, interpretations and amendments to issued standards that are not yet effective

Certain new standards, amendments and interpretations to existing standards have been issued by the IASB or IFRIC that are mandatory for accounting periods beginning on or after 1 January 2008 or later periods but which have not yet been adopted by the EU or which the Group has chosen not to adopt early. The new standards which are expected to be relevant to the Group’s operations are as follows:

Standards, interpretations and amendments to issued standards adopted by the EU

IFRS 8 ‘Operating Segments’ (effective from 1 January 2009)

IFRS 8 replaces IAS 14 ‘Segment Reporting’ and aligns segment reporting with the requirements of US accounting standards FAS 131 ‘Disclosures about Segments of an Enterprise and Related Information’. The new standard uses a ‘management approach’, under which segment information is presented on the same basis as that used for internal reporting purposes. The Group has assessed the impact of IFRS 8 and concluded that segment reporting will continue to be focused on the business divisions with the distinction between primary and secondary segments being removed.

IAS 1 (revised) ‘Presentation of Financial Statements’ (effective from 1 January 2009)

IAS 1 (revised) constitutes Phase A of the IASB’s project on performance reporting. Where previously companies were required to present only one of either a Statement of Recognised Income and Expense (SORIE) or a Statement of Recognised Changes in Equity (SOCIE), the amendments require companies to present both a SOCIE and either a statement of comprehensive income or an income statement accompanied by a statement of other comprehensive income as financial statements (formerly referred to as “primary statements”). Other changes include the requirement to present a statement of financial position (balance sheet) as at the beginning of the comparative period when an entity restates the comparatives following a change in accounting policy, the correction of an error, or the reclassification of items in the financial statements; and clarification of disclosure requirements relating to income tax on items recognised in other comprehensive income, dividends, and recycling to the income statement/comprehensive income of gains previously recognised in other comprehensive income. The Group has assessed the impact of the revision and concluded that it is not likely to have a significant effect on the Group’s financial statements.

IFRIC 11 ‘IFRS 2 — Group and Treasury Share Transactions’ (effective from 1 January 2008)

IFRIC 11 addresses share-based payment arrangements in which (a) an entity grants its employees a right to equity instruments of the entity, and either chooses or is required to buy those equity instruments from another party or the shareholder provides the equity instruments needed to settle the share-based payment arrangement; and (b) a subsidiary entity’s employees are granted rights to equity instruments of the parent

A-7.10

entity (or another entity in the same group), in particular, arrangements in which the parent entity or the subsidiary entity grants those rights direct to the subsidiary entity’s employees. The Group has assessed the impact of the interpretation and concluded that it is not likely to have a significant effect on the Group’s financial statements.

Standards, interpretations and amendments to issued standards not yet adopted by the EU

IAS 23 (revised) ‘Borrowing Costs’ (effective from 1 January 2009)

The amendments to IAS 23 remove the option of expensing borrowing costs relating to qualifying assets. Although the amendments are intended to clarify definitions of qualifying assets and eligible borrowing costs (especially in the case of land under development) the amendments are not intended to change the definitions fundamentally. The Group has assessed the impact of IAS 23 (revised) and the current policy will need to be amended from 1 January 2009 onwards to capitalise borrowing costs.

IFRIC 12 ‘Service Concession Arrangements’ (effective from 1 January 2008)

IFRIC 12 provides guidance on certain recognition and measurement issues that arise in accounting for public and private service concession arrangements. It amends IFRIC 4 to exclude from the scope of IFRIC 4 any service concession arrangements that fall within the scope of IFRIC 12. The Group has assessed the impact of the interpretation and concluded that it is not likely to have a significant effect on the Group’s financial statements.

IFRIC 13 ‘Customer Loyalty Programmes’ (effective from 1 July 2008)

Where a customer loyalty programme operates, IFRIC 13 requires an entity to separate sales revenue into revenue for sale of the goods or services and revenue for sale of the loyalty points (based on the fair value of the loyalty points); with the latter being deferred until the loyalty points are redeemed. The IFRIC explains how to determine the fair value of the consideration for the loyalty points and how to account for redemption. It also addresses whether agency relationships arise where a third party provides the loyalty reward, and when a loyalty scheme might be considered to be onerous. The Group has assessed the impact of the interpretation and concluded that it is not likely to have a significant effect on the Group’s financial statements.

IFRIC 14 ‘IAS 19 The limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction’(effective from 1 January 2008)

IFRIC 14 clarifies the requirements of IAS 19, which limits the measurement of a defined benefit asset to the “present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan” plus unrecognised gains and losses; this is known as the “asset ceiling”. The IFRIC addresses when refunds or reductions in future contributions should be regarded as available; how a minimum funding requirement might affect the availability of reductions in future contributions; and when a minimum funding requirement might give rise to an additional liability.

A-7.11

Notes to the financial statements

01 Segmental analysis — income statement

Primary reportable segments — business divisions

The Group operates through four business divisions: Sales & Trading, Research & Asset Management, Enterprise, and Media. Therefore, the Group’s primary segmental reporting is by business division. In order to report segmental results, it is necessary to determine a methodology to allocate revenue, operating costs, other operating income, assets and liabilities to these segments.

Each division is responsible for specific product revenues, with the exception of Reuters 3000 Xtra and the 2000/3000 range of products. Revenues for these shared products are attributed to either the Sales & Trading division or the Research & Asset Management division by reference to the nature of the customer purchasing the product. This is determined on a customer-by-customer basis.

Where operating costs relate to a specific division, they are mapped directly to that division. Where operating costs are shared, an activity based costing (ABC) technique is used to split these costs between divisions. The Reuters ABC model (known as Profitability Insight) allocates shared costs to business activities, which in turn are attributed to products, and therefore divisions, using cost drivers. These cost drivers (such as the number of helpdesk calls received or the number of installed accesses) are derived from a variety of underlying source systems. Judgement has been applied in determining these cost drivers and the resulting allocation of operating costs.

Other operating income is allocated to divisions using a similar methodology to operating costs.

Divisional results could alter with the application of other allocation approaches and as continuous improvements are made to the Profitability Insight model.

When changes are made to the allocation methodology, prior year comparatives are restated to ensure that divisional results are allocated on a consistent basis year-on-year.

From 1 January 2007, Reuters made changes to the allocation of revenue and operating costs among business divisions to reflect changes in the management of Communications revenues and Reuters Messaging products, and to reflect improvements to the allocation methodology.

Communications revenues are no longer allocated as Recoveries to Sales & Trading, but are allocated among business Divisions in line with the products with which they are associated. Reuters Messaging costs are no longer allocated to Sales & Trading, but are allocated to Enterprise to reflect the management of the Messaging product within the Enterprise Division. A proportion of Messaging costs are then charged to the other Divisions based on desktop accesses, to reflect the value of the embedded Messaging capability in desktop products.

2006 comparatives have therefore been restated to decrease recoveries revenues by £80 million, increase other product revenues by £51 million and decrease operating costs by £37 million in Sales & Trading, to increase other product revenue by £6 million and increase operating costs by £9 million in Research & Asset Management, to increase other product revenue by £23 million and increase operating costs by £27 million in Enterprise and to increase operating costs by £1 million in Media.

2005 comparatives have been restated to decrease recoveries revenues by £44 million, increase other product revenues by £27 million and decrease operating costs by £13 million in Sales & Trading, to increase other product revenue by £5 million and increase operating costs by £5 million in Research & Asset Management, to increase other product revenue by £12 million and increase operating costs by £6 million in Enterprise and to increase operating costs by £2 million in Media.

A-8.1

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


	2007
				Research
				& Asset
	Sales &			Manage-
	Trading			ment			Enterprise			Media			Total
	£m			£m			£m			£m			£m

Revenue		1,619			363			451			172			2,605
Operating costs		(1,440	)		(339	)		(371	)		(160	)		(2,310	)
Other operating income		27			5			7			3			42
Divisional operating profit*		206			29			87			15			337
Thomson deal related costs														(45	)
Operating profit														292
Finance income														117
Finance costs														(151	)
Profit on disposal of associates, joint ventures and available-for-sale financial assets														21
Share of post-taxation losses from associates and joint ventures														(6	)
Profit before taxation														273
Taxation														(60	)
Profit for the year from continuing operations														213


*		Divisional operating profit is operating profit less Thomson deal-related costs

A-8.2


	Restated
	2005
				Research
				& Asset
	Sales &			Manage-
	Trading			ment			Enterprise			Media			Total
	£m			£m			£m			£m			£m

Revenue		1,596			263			397			153			2,409
Operating costs		(1,482	)		(298	)		(323	)		(148	)		(2,251	)
Other operating income		37			—			8			4			49
Operating profit		151			(35	)		82			9			207
Finance income														41
Finance costs														(53	)
Profit on disposal of associates, joint ventures and available-for-sale financial assets														38
Share of post-taxation profits from associates and joint ventures														5
Profit before tax														238
Taxation														(9	)
Profit for the year from continuing operations														229

Divisional revenue comprises sales to external customers only. Divisional revenue from transactions with other segments is £nil (2006: £nil, 2005: £nil)

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


	2007			2006			2005
	£m			£m			£m

Sales & Trading		(5	)		(4	)		2
Research & Asset Management		1			—			—
Enterprise		—			—			—
Media		(2	)		—			3
Share of post-taxation (losses)/profits from associates and joint ventures		(6	)		(4	)		5

A-8.4

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


					2007						2006						2005

	Depreciation				Other		Depreciation				Other		Depreciation				Other
	and				non-cash		and				non-cash		and				non-cash
	amortisation		Impairments		expenses		amortisation		Impairments		expenses		amortisation		Impairments		expenses
	£m		£m		£m		£m		£m		£m		£m		£m		£m

Sales & Trading		99		20		27		95		—		36		89		1		39
Research & Asset Management		19		—		6		19		—		7		19		—		4
Enterprise		32		1		6		22		—		8		20		1		2
Media		7		—		2		5		—		3		4		1		1
Total		157		21		41		141		—		54		132		3		46

Please refer to note 13 for more information relating to impairments.

Secondary reportable segments — geographical

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

The following table represents revenue from external customers by geographical area based on the geographical location of the customers:


	2007		2006		2005
Revenue	£m		£m		£m

Europe, Middle East & Africa*		1,441		1,396		1,330
Americas		701		709		651
Asia		463		461		428
Total revenue		2,605		2,566		2,409


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

A-8.5

02 Revenue by type

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


	2007		2006		2005
	£m		£m		£m

Recurring		2,394		2,363		2,235
Usage		139		132		104
Outright		72		71		70
Total revenue		2,605		2,566		2,409

Customers generally pay for Reuters products and services in three ways. Recurring revenue is generated through subscription fees to cover access of terminals and maintenance fees for software. Usage revenue is principally derived from matching and trading transactions, and advertising revenues. Outright revenue comprises once-off sales including information and risk management solutions.

03 Operating costs


	2007		2006		2005
Costs by nature	£m		£m		£m

Salaries, commission and allowances		756		763		761
Social security costs		78		64		67
Share-based payments (see note 33)		36		30		30
Pension costs (see note 25)		40		61		55
Total staff costs		910		918		913
Services*		529		512		455
Depreciation		96		95		99
Data		319		323		281
Communications		249		279		289
Space		156		151		162
Amortisation of intangibles		61		46		33
Impairments		21		—		3
Losses on derivative financial instruments		14		25		—
Losses on ineffective portion of net investment hedges		—		—		1
Losses on financial assets designated at fair value through profit and loss		—		—		15
Foreign exchange losses		—		2		—
Total operating costs		2,355		2,351		2,251
Operating costs include:
Research and development expenditure		100		83		92
Operating lease expenditure:
Hire of equipment		9		6		6
Other, principally property		76		74		67
Advertising		15		19		17


*		Services include equipment hire and bought-in services, including consultancy and contractors, advertising and publicity, professional fees and staff-related expenses.

A-8.6

An analysis of fees payable by the Group to the company’s auditors is set out below:


	2007		2006		2005
	£m		£m		£m

Fees payable to the company’s auditor for the audit of the company’s annual accounts		2.5		2.2		2.9
Fees payable to the company’s auditor and its associates for other services:
The audit of the company’s subsidiaries, pursuant to legislation		1.9		1.3		1.3
Other services pursuant to legislation		3.4		0.6		0.4
Tax services		0.7		1.0		2.6
Services relating to corporate finance transactions		—		0.2		0.4
All other services		0.3		0.2		0.3
Total fees payable		8.8		5.5		7.9
United Kingdom		7.3		3.9		3.8
Overseas		1.5		1.6		4.1

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

In 2007 other services pursuant to legislation include fees relating to the proposed acquisition of Reuters by Thomson.

Fees paid to PricewaterhouseCoopers for the audit of Reuters pension schemes total £0.2 million.

A-8.7

04 Other operating income


	2007		2006		2005
	£m		£m		£m

Profit on disposal of subsidiaries		3		4		4
Gains on derivative financial instruments		1		5		18
Gains on ineffective portion of net investment hedges		1		1		—
Investment income		1		—		1
Foreign exchange gains		4		—		3
Profit on disposal of property, plant and equipment		10		2		—
Other income		22		29		23
Total other operating income		42		41		49

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

05 Finance income and finance costs


	2007			2006			2005
	£m			£m			£m

Interest receivable from:
Available-for-sale assets — listed investments		—			—			1
Loans and receivables — unlisted investments		18			16			18
Derivative financial instruments — hedging instruments		49			33			18
Fair value gains on financial instruments:
Derivative financial instruments: fair value hedges		46			3			1
Fair value adjustment to borrowings relating to interest rate risk		4			13			—
Foreign exchange gain on retranslation of borrowings		—			7			3
Total finance income		117			72			41
Interest payable on:
Financial liabilities measured at amortised cost — bank loans and overdrafts		(2	)		(6	)		(4	)
Financial liabilities measured at amortised cost — other borrowings		(38	)		(23	)		(23	)
Derivative financial instruments — hedging instruments		(54	)		(35	)		(17	)
Fair value losses on financial instruments:
Derivative financial instruments: fair value hedges		—			(19	)		(1	)
Fair value adjustment to borrowings relating to interest rate risk		—			—			(1	)
Foreign exchange retranslation of borrowings		(50	)		—			—
Derivative financial instruments at fair value — held for trading:
Interest payable		(6	)		(3	)		(5	)
Unwinding of discounts		(1	)		(1	)		(2	)
Total finance costs		(151	)		(87	)		(53	)

A-8.8

Factors affecting tax charge for the year

The tax assessed for the year is lower than the standard rate of corporation tax in the UK (30%). The differences are explained below:


	2007			2006			2005
	£m			£m			£m

Profit before tax		273			313			238
Profit before tax multiplied by standard rate of corporation tax in the UK of 30% (2006: 30%, 2005: 30%)		82			94			71
Effects of:
Non-tax deductible amortisation and impairment of intangibles		5			5			4
Expenses not deductible for tax purposes		12			2			4
Non-taxable investment disposals and impairments		(6	)		(15	)		(13	)
Adjustments in respect of prior years		(11	)		(56	)		(23	)
Recognition of tax losses that arose in prior years		—			(4	)		(33	)
Effects of changes in tax rates on deferred taxes		8			—			—
Other differences		(30	)		(6	)		(1	)
Total taxation for continuing operations		60			20			9

Other differences are primarily due to overseas profits taxed at rates different to those in the UK, and the geographical mix of profits in the Group.

On 12 March 2007, the UK Government announced that the standard rate of corporation tax will be reduced to 28% for profits arising after 31 March 2008. As a result of this change of rate, the UK deferred tax assets and liabilities of the group have been remeasured to reflect the expected realisable value of those assets and liabilities at the reduced rate of tax.

The tax charge for the year includes a charge of £20 million in respect of UK tax (2006: credit of £34 million; 2005: charge of £16 million), of which £6 million relates to the effect on deferred taxes of the announced reduction in UK tax rate.

A-8.10

07 Discontinued operations

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

The Group has no activities which are required to be classified as discontinued operations during 2007. However, additional gains totalling £14 million (2006: £12 million) have been recognised in 2007. £10 million (2006: £12 million) relates to the disposal of Instinet Group, which was classified as a discontinued operation during 2005 and a further £4 million relating to associated costs of the disposal of Radianz. The gains relate to tax settlements and the release of tax provisions no longer required.


	2007		2006		2005
	£m		£m		£m

Profits after tax of subsidiaries (net of tax £nil, 2006: £nil, 2005: £20 million)		—		—		69
Profit on disposal of subsidiaries (net of tax, £nil 2006: £nil, 2005: £43 million)		14		12		184
Profit for the year from discontinued operations		14		12		253
Basic earnings per ordinary share for discontinued operations		1.1p		1.0p		16.3p
Diluted earnings per ordinary share for discontinued operations		1.1p		0.9p		15.8p

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

Discontinued operations in 2005

Subsidiaries acquired with a view to resale: Radianz

On 21 October 2004, Reuters entered into exclusive discussions with BT to secure a long-term agreement for the provision of network services, including the sale of Radianz to BT. As a prerequisite to this agreement, Reuters acquired Equant’s 49% voting interest in Radianz, with a view to selling the 100% interest to BT.

On 29 April 2005, Reuters completed the sale of its 100% voting interest in Radianz to BT for gross proceeds of £115 million.

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

Disposal of subsidiaries: Instinet Group (including BTC)

Reuters held approximately 62% of the shares in Instinet Group, a US based company, which was previously accounted for as a subsidiary of Reuters Group PLC on a 100% consolidated basis with offsetting minority interest.

On 31 March 2005, Reuters sold BTC, a soft dollar execution broker, to Instinet Group, for approximately 3.8 million shares of Instinet Group stock, valued at approximately £12 million. In 2004, an impairment loss of £17 million was recognised for BTC within ‘profit for the year from discontinued operations’. The sale to Instinet Group has been accounted for as a partial disposal of the Group’s interest in BTC, which resulted in a loss of £3 million. BTC made profits after tax of £1 million in the period prior to sale.

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

A-8.11

The results of Instinet Group and BTC are as follows:


	2007		2006		2005
	£m		£m		£m

Results of Instinet and BTC
Revenue		—		—		466
Operating costs		—		—		(402	)
Operating profit		—		—		64
Finance income		—		—		13
Profit on disposal of available-for-sale financial assets		—		—		12
Profit before taxation		—		—		89
Taxation		—		—		(20	)
Profit for the period		—		—		69

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


	2007		2006		2005
	£m		£m		£m

Cash generated from discontinued operations (see note 29)		—		—		3
Tax paid		—		—		(13	)
Interest received		—		—		13
Interest paid		—		—		—
Net cash flow from operating activities		—		—		3
Net cash flow from investing activities*		—		—		(474	)
Net cash flow from financing activities		—		—		(85	)
Exchange gains on cash and cash equivalents		—		—		57
Decrease in cash and cash equivalents from discontinued operations		—		—		(499	)


*		Net cash flow from investing activities in 2005 includes £582 million relating to cash held by subsidiaries at the date of disposal.

08 Earnings per ordinary share

Basic earnings per ordinary share is based on the results attributable to equity shareholders and on the weighted average number of ordinary shares in issue during the year, excluding ordinary shares purchased by Reuters Employee Share Ownership Trusts and shares purchased as part of the ongoing buyback programme and held as treasury shares.

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares used in the basic earnings per share calculation to assume conversion of all dilutive potential ordinary shares resulting from outstanding share options.

A-8.12

09 Remuneration of directors

Details of senior management remuneration are given in note 34. Directors’ emoluments, pension arrangements, long-term incentive plans and share option plans are as follows:

Directors’ remuneration for 2007


	Salary/								Compensation		2007		2006
	Fees		Bonus		Benefits¹		Allowance^2&5		for Loss of Office		Total		Total
	£000		£000		£000		£000		£000		£000		£000

Niall FitzGerald, KBE ^3&4		525		—		3		—		—		528		503
Lawton Fitt ⁶		69		—		—		30		—		99		88
Penny Hughes ⁷		54		—		—		10		—		64		50
Ed Kozel ¹⁶		17		—		—		10		—		27		85
Sir Deryck Maughan ⁷		54		—		—		25		—		79		70
Nandan Nilekani ⁸		55		—		—		25		—		80		—
Ken Olisa ⁸		55		—		—		10		—		65		50
Dick Olver ⁹		67		—		—		10		—		77		68
Ian Strachan ¹⁰		64		—		—		10		—		74		60
Tom Glocer ^11&15		888		1,267		451		—		—		2,606		2,265
David Grigson ¹²		482		579		13		80		—		1,154		1,087
Devin Wenig ¹³		448		532		43		10		—		1,033		1,001

Total emoluments of directors ¹⁴		2,778		2,378		510		220		—		5,886		5,327

Notes:

All amounts have been rounded up to the nearest thousand.

The following conversion rates were used: US$2: £1, Swiss Franc 2.4: £1, Hong Kong $15.59: £1. These were the average rates in effect during 2007.


1		Items included under Benefits are those provided as goods and services received during the year.

2		Items included under Allowances are contractual benefits, which are paid in cash rather than as goods and services during the year.

3		Non-cash benefits received by Niall FitzGerald consist of chauffeur benefits of £2,661.

4		Niall FitzGerald has waived his £10,000 Nominations Committee chairman fee.

5		Allowances paid to Lawton Fitt, Penny Hughes, Ed Kozel, Deryck Maughan, Nandan Nilekani, Ken Olisa, Dick Olver and Ian Strachan represent travel allowances to attend overseas board meetings.

A-8.14


6		Fees paid to Lawton Fitt include £18,333 in respect of her position as Chairman of the Audit Committee.

7		Fees paid to Penny Hughes and Deryck Maughan include £3,333 each as members of the Remuneration Committee.

8		Fees paid to Nandan Nilekani and Ken Olisa include £5,000 each as members of the Audit Committee.

9		Fees paid to Dick Olver include £5,000 in respect of his position as member of the Audit Committee, and £11,667 in respect of his position as the Senior Independent Director. Dick Olver was over-paid in error by the company in 2007 by £8,351 and the amount was repaid after year end.

10		Fees paid to Ian Strachan include £13,333 in respect of his position as Chairman of the Remuneration Committee.

11		Non-cash benefits received by Tom Glocer included accommodation costs of £268,143, tax services of £109,681 (including those related to the Thomson transaction), company car and healthcare benefits totalling £36,210, long-term disability insurance of £2,100, and family travel of £34,473.

12		Non-cash benefits received by David Grigson included healthcare benefits of £1,311 and long-term disability insurance of £1,300, tax services of £3,231 and a car benefit of £6,425. Cash allowances consisted of an annual car allowance of £7,420, of which £3,188 was repaid after year end in lieu of his car benefit and a retirement allowance of £74,930.

13		Non-cash benefits received by Devin Wenig consisted of healthcare benefits of £36,323 and tax services of £6,081. Cash allowances consisted of a car allowance of £9,600. Devin Wenig’s salary is paid in US dollars and the total amount reflected in the table is contractually split between his role as executive director and Chief Operating Officer.

14		The total aggregate emoluments for the directors for the period 1 January 2007 to 31 December 2007 were £5.9m. The total emoluments for 2006 were £5.3m.

15		During the year a group company paid certain personal expenses on behalf of Tom Glocer. The amount due from Tom Glocer at 31 December 2007, which was the maximum outstanding during the year, was £1,435. No interest was charged. Tom Glocer repaid the amount as soon as he was informed that any personal expenses had been borne by the company.

16		Ed Kozel resigned as a director on 27 April 2007.

Other senior managers’ remuneration


									Compensation
	Salary/								for Loss		2007		2006
	Fees		Bonus ¹		Benefits		Allowance		of Office		Total		Total
	£000		£000		£000		£000		£000		£000		£000

Other senior managers as a group (16 persons) (2006:
17 persons)		4,197		5,047		202		228		—		9,674		7,019


Notes:

All amounts have been rounded up to the nearest thousand.

The following conversion rates were used: US$2: £1, Swiss Franc 2.4: £1, Hong Kong $15.59: £1. These were the average rates in effect during 2007.

1		In 2007, in addition to the annual bonus scheme, the Remuneration Committee approved an additional one-off bonus to selected employees (excluding executive directors) on profits over and above a target trading profit.

A-8.15

Directors’ pensions

Tom Glocer, David Grigson and Devin Wenig participate in defined contribution pension arrangements. Tom Glocer participates in Reuters US pension arrangements and is entitled to a pension allowance of 25% of his base salary during 2007 and in 2008. He is entitled to a lump sum death-in-service benefit of four times basic salary.

David Grigson is a member of the Reuters Retirement Plan in the UK and is entitled to a contribution in respect of pension benefits equal to 24% of salary up to a salary cap of £112,800. He is entitled to a lump sum death-in-service benefit of four times basic salary.

Devin Wenig participates in Reuters US pension arrangements and is entitled to a pension allowance of 6% of his base salary. He is entitled to a lump sum death-in-service benefit of $1 million.

Contributions and allocations (including the cost of life cover) in respect of these directors in 2007 were:


			Company
			contribution
			in respect
			of period
	Age		£000

Tom Glocer		48		226
David Grigson		53		28
Devin Wenig		41		28

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

The total amount of contributions or accruals made in 2007 to provide pension and similar benefits for the directors was £369,981 (2006: £395,854) and for the executive directors and the other senior managers as a group was £1,312,580 (2006: £1,178,386).

These aggregate figures also include an accrual of £88,000 and £107,000 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.

A-8.16

Directors’ interests in long-term plans


											Market
							Market				price								Number
							price				per								at 31 Dec
			Number at 1		Number		per		Number		share		Number			Number			2007 (or
		Date	Jan 2007 (or		granted		share		vested		at		(released)			(lapsed)			earlier		End of
		of	later date of		during		at		during		vesting		during			during			date of		qualifying	Expiry
	Plan	award	appointment)		period		grant		period		date		period			period			departure)		period	date

Thomas Glocer	LTIP^1&2	20-Feb-02		234,974		—		—		—		—		—			(234,974	)		—	31-Dec-06	01-Jan-07
		24-Feb-03		1,731,277		—		—		—		—		—			—			1,731,277	31-Dec-07	01-Jan-08
		23-Feb-04		544,094		—		—		544,094	£	4.35		(544,094	)		—			—	31-Dec-06	01-Jan-07
		11-Mar-05		417,228		—		—		—		—		—			—			417,228	31-Dec-07	01-Jan-08
		15-Mar-06		500,000		—		—		—		—		—			—			500,000	31-Dec-08	01-Jan-09
		13-Mar-07³		—		500,000	£	4.42		—		—		—			—			500,000	31-Dec-09	01-Jan-10
Total				3,427,573		500,000				544,094				(544,094	)		(234,974	)		3,148,505
Devin Wenig	LTIP^1&2	20-Feb-02		22,047		—		—		—		—		—			(22,047	)		—	31-Dec-06	01-Jan-07
		24-Feb-03		200,000		—		—		—		—		—			—			200,000	31-Dec-07	01-Jan-08
		23-Feb-04		200,000		—		—		200,000	£	4.35		(200,000	)		—			—	31-Dec-06	01-Jan-07
		11-Mar-05		163,468		—		—		—		—		—			—			163,468	31-Dec-07	01-Jan-08
		15-Mar-06		250,000		—		—		—		—		—			—			250,000	31-Dec-08	01-Jan-09
		13-Mar-07³		—		300,000	£	4.42		—		—		—			—			300,000	31-Dec-09	01-Jan-10
Total				835,515		300,000				200,000				(200,000	)		(22,047	)		913,468
David Grigson	LTIP^1&2	20-Feb-02		37,205		—		—		—		—		—			(37,205	)		—	31-Dec-06	01-Jan-07
		24-Feb-03		200,000		—		—		—		—		—			—			200,000	31-Dec-07	01-Jan-08
		23-Feb-04		200,000		—		—		200,000	£	4.35		(200,000	)		—			—	31-Dec-06	01-Jan-07
		11-Mar-05		163,468		—		—		—		—		—			—			163,468	31-Dec-07	01-Jan-08
		15-Mar-06		200,000		—		—		—		—		—			—			200,000	31-Dec-08	01-Jan-09
		13-Mar-07³		—		200,000	£	4.42		—		—		—			—			200,000	31-Dec-09	01-Jan-10
Total				800,673		200,000				200,000				(200,000	)		(37,205	)		763,468


Notes:

1		The LTIP awards are subject to certain performance conditions.

2		LTIP awards to executive directors prior to 2004 are subject to a retention period of two years from vesting, save that this is reduced to one year where the performance period has been extended to five years. For awards made in or prior to 2003, the plan permits the measurement period to be extended by up to two years under a re-testing provision. For LTIP awards made from 2004 onwards no re-testing is permitted.

		LTIP 2002 did not meet performance conditions and therefore lapsed. Had the awards vested, they would have been released in March 2007.

		LTIP 2003 and 2005 did not meet performance conditions and subsequently lapsed in February 2008.

3		2007 awards.

4		Subject to performance conditions being met, share awards are due for release as soon as possible after vesting (subject to any restricted period).

A-8.17

Senior managers’ interests in long-term plans


											Market
							Market				price								Number
							price				per								at 31 Dec
			Number at 1		Number		per		Number		share		Number			Number			2007 (or
		Date	Jan 2007 (or		granted		share		vested		at		(released)			(lapsed)			earlier		End of
		of	later date of		during		at		during		vesting		during			during			date of		qualifying	Expiry
	Plan	award	appointment)		period		grant		period⁴		date		period⁴			period			departure)		period	date

Other senior managers as a group (16 persons) (2006:
17 persons) ⁵	LTIP^1&2	20-Feb-02		96,017		—		—		—		—		—			(96,017	)		—	31-Dec-06	01-Jan-07
		24-Feb-03		650,145		—		—		—		—		—			—			650,145	31-Dec-07	01-Jan-08
		23-Feb-04		290,022		—		—		290,022	£	4.35		(290,022	)		—			—	31-Dec-06	01-Jan-07
		03-Dec-04		92,368		—		—		92,368	£	4.35		(92,368	)		—			—	31-Dec-06	01-Jan-07
		11-Mar-05		336,602		—		—		—		—		—			—			336,602	31-Dec-07	01-Jan-08
		15-Mar-06		479,937		—		—		—		—		—			—			479,937	31-Dec-08	01-Jan-09
		02-Aug-06		64,000		—		—		—		—		—			—			64,000	31-Dec-08	01-Jan-09
		13-Mar-07		—		884,556	£	4.42		—		—		—			—			884,556	31-Dec-09	01-Jan-10
	RSP³	27-Aug-04		52,450		—	£	3.21		26,225	£	6.32		(26,225	)		—			26,225	27-Aug-06	27-Aug-08
		03-Dec-04		17,238		—	£	3.89		8,619	£	6.32		(8,619	)		—			8,619	03-Dec-06	03-Dec-08
		11-Mar-05		158,235		—	£	4.19		52,745	£	4.42		(52,745	)		—			105,490	11-Mar-06	11-Mar-09
		02-Aug-05		14,724		—	£	3.89		4,908	£	6.09		(4,908	)		—			9,816	02-Aug-06	02-Aug-09
		15-Mar-06		292,867		—	£	3.93		168,637	£	4.28		(168,637	)		—			124,230	15-Mar-07	15-Mar-10
		13-Mar-07		—		293,124		—		—		—		—			—			293,124	13-Mar-08	13-Mar-11
		07-Aug-07		—		131,252		—		—		—		—			—			131,252	07-Aug-08	07-Aug-11
Total				2,544,605		1,308,932				643,524				(643,524	)		(96,017	)		3,113,996


Notes:

1		The LTIP awards are subject to certain performance conditions.

2		For awards made in or prior to 2004, the plan permits the measurement period to be extended by up to two years under a re-testing provision. For LTIP awards made from 2004 onwards no re-testing is permitted.

		LTIP 2002 did not meet performance conditions and therefore lapsed. Had the awards vested, they would have been released in March 2007.

		LTIP 2003 and 2005 did not meet performance conditions and subsequently lapsed in February 2008.

3		The restricted share plan was introduced in 2004. Restricted shares will not normally be granted for long-term incentive purposes to executive directors or members of the GLT. The indicated awards were made prior to the appointment of the relevant individuals as GLT members. RSP awards were also made to GLT members in lieu of the DSOP awards due to them in August 2007. Awards are normally granted with a four year vesting period, vesting 25% each year. Therefore, 25% vested in 2007 on the anniversary of the date of grant. If this date fell on a non-trading date, the shares vested at the next available trading date.

4		Subject to performance conditions being met, share awards are due for release as soon as possible after vesting (subject to any restricted period).

5		Other senior managers as a group were 15 persons at 1 January 2007 and were 15 persons at 31 December 2007. Lee Ann Daly and David Craig were appointed to GLT on 1 January 2007 and 1 March 2007 respectively. Alex Hungate resigned on 30 September 2007.

A-8.18

Share options granted to directors


					Number at												Number at
					1 Jan 2007		Number		Number		Number			Number			31 Dec 2007
					(or later		granted		vested		(exercised)			(lapsed)			(or earlier		Earliest
		Date of	Exercise		date of		during		during		during			during			date of		exercise	Expiry
Name	Plan	grant	price		appointment)		period		period		period			period			departure)		date	date

Thomas Glocer ⁶	DSOP³	20-Feb-02	£	5.28		461,295		—		—		—			(461,295	)		—	20-Feb-07	20-Feb-12
		02-Aug-02	£	2.66		915,654		—		—		—			(915,654	)		—	02-Aug-07	02-Aug-12
		24-Feb-03	£	1.35		1,307,514		—		—		(1,307,514	)		—			—	24-Feb-06	24-Feb-13
		04-Aug-03	£	2.45		706,594		—		—		(706,594	)		—			—	04-Aug-06	04-Aug-13
		23-Feb-04	£	4.07		789,430		—		789,430		(789,430	)		—			—	23-Feb-07	23-Feb-14
		27-Aug-04	£	3.21		1,000,928		—		1,000,928		(1,000,928	)		—			—	27-Aug-07	27-Aug-14
		11-Mar-05	£	4.19		719,473		—		—		—			—			719,473	11-Mar-08	11-Mar-15
		02-Aug-05	£	3.89		774,959		—		—		—			—			774,959	02-Aug-08	02-Aug-15
		15-Mar-06	£	3.93		625,000		—		—		—			—			625,000	15-Mar-09	15-Mar-16
		02-Aug-06	£	3.93		625,000		—		—		—			—			625,000	02-Aug-09	02-Aug-16
		13-Mar-07 ⁵	£	4.42		—		625,000		—		—			—			625,000	13-Mar-10	13-Mar-17
		07-Aug-07 ⁵	£	6.19		—		625,000		—		—			—			625,000	07-Aug-10	07-Aug-17
	SAYE ⁴	07-Apr-04	£	3.14		1,200		—		1,200		(1,200	)		—			—	01-Jun-07	01-Dec-07
		14-Apr-05	£	3.33		569		—		—		—			—			569	01-Jun-08	01-Dec-08
		10-Apr-06	£	3.14		1,191		—		—		—			—			1,191	01-Jun-09	01-Dec-09
		03-Apr-07 ⁵	£	3.53		—		1,070		—		—			—			1,070	01-Jun-10	01-Dec-10
Total						7,928,807		1,251,070		1,791,558		(3,805,666	)		(1,376,949	)		3,997,262

A-8.19


					Number at												Number at
					1 Jan 2007		Number		Number		Number			Number			31 Dec 2007
					(or later		granted		vested		(exercised)			(lapsed)			(or earlier		Earliest
		Date of	Exercise		date of		during		during		during			during			date of		exercise	Expiry
Name	Plan	grant	price		appointment)		period		period		period			period			departure)		date	date

Devin Wenig⁶	DSOP³	27-Dec-00^2&3	£	11.39		6,913		—		—		—			(6,913	)		—	27-Dec-01	27-Dec-07
		25-Jun-01^2&3	£	8.62		9,135		—		—		—			—			9,135	25-Jun-02	25-Jun-11
		20-Feb-02^2&3	£	5.28		25,936		—		—		—			—			25,936	20-Feb-03	20-Feb-12
		02-Aug-02^2&3	£	2.66		200,000		—		—		—			—			200,000	02-Aug-03	02-Aug-12
		24-Feb-03	£	1.35		200,000		—		—		—			—			200,000	24-Feb-06	24-Feb-13
		04-Aug-03	£	2.45		200,000		—		—		—			—			200,000	04-Aug-06	04-Aug-13
		23-Feb-04	£	4.07		122,950		—		122,950		—			—			122,950	23-Feb-07	23-Feb-14
		27-Aug-04	£	3.21		155,892		—		155,892		—			—			155,892	27-Aug-07	27-Aug-14
		11-Mar-05	£	4.19		281,886		—		—		—			—			281,886	11-Mar-08	11-Mar-15
		02-Aug-05	£	3.89		303,625		—		—		—			—			303,625	02-Aug-08	02-Aug-15
		15-Mar-06	£	3.93		325,000		—		—		—			—			325,000	15-Mar-09	15-Mar-16
		02-Aug-06	£	3.93		325,000		—		—		—			—			325,000	02-Aug-09	02-Aug-16
		13-Mar-07⁵	£	4.42		—		375,000		—		—			—			375,000	13-Mar-10	13-Mar-17
		07-Aug-07⁵	£	6.19		—		375,000		—		—			—			375,000	07-Aug-10	07-Aug-17
	SAYE⁴	07-Apr-04¹	$	7.27		1,200		—		1,200		(1,200	)		—			—	01-Jun-07	01-Dec-07
		14-Apr-05¹	$	7.93		1,134		—		—		—			—			1,134	01-Jun-08	01-Dec-08
Total						2,158,671		750,000		280,042		(1,200	)		(6,913	)		2,900,558

A-8.20


					Number at												Number at
					1 Jan 2007		Number		Number		Number			Number			31 Dec 2007
					(or later		granted		vested		(exercised)			(lapsed)			(or earlier		Earliest
		Date of	Exercise		date of		during		during		during			during			date of		exercise	Expiry
Name	Plan	grant	price		appointment)		period		period		period			period			departure)		date	date

David Grigson ⁶	DSOP³	20-Feb-02	£	5.28		75,757		—		—		—			(75,757	)		—	20-Feb-07	20-Feb-12
		02-Aug-02	£	2.66		150,375		—		—		—			(150,375	)		—	02-Aug-07	02-Aug-12
		24-Feb-03	£	1.35		200,000		—		—		—			—			200,000	24-Feb-06	24-Feb-13
		04-Aug-03	£	2.45		200,000		—		—		—			—			200,000	04-Aug-06	04-Aug-13
		23-Feb-04	£	4.07		122,950		—		122,950		—			—			122,950	23-Feb-07	23-Feb-14
		27-Aug-04	£	3.21		155,892		—		155,892		—			—			155,892	27-Aug-07	27-Aug-14
		11-Mar-05	£	4.19		281,886		—		—		—			—			281,886	11-Mar-08	11-Mar-15
		02-Aug-05	£	3.89		303,625		—		—		—			—			303,625	02-Aug-08	02-Aug-15
		15-Mar-06	£	3.93		250,000		—		—		—			—			250,000	15-Mar-09	15-Mar-16
		02-Aug-06	£	3.93		250,000		—		—		—			—			250,000	02-Aug-09	02-Aug-16
		13-Mar-07⁵	£	4.42		—		250,000		—		—			—			250,000	13-Mar-10	13-Mar-17
		07-Aug-07⁵	£	6.19		—		250,000		—		—			—			250,000	07-Aug-10	07-Aug-17
	SAYE⁴	07-Apr-04	£	3.14		1,200		—		1,200		(1,200	)		—			—	01-Jun-07	01-Dec-07
		14-Apr-05	£	3.33		569		—		—		—			—			569	01-Jun-08	01-Dec-08
		03-Apr-07⁵	£	3.53		—		1,070		—		—			—			1,070	01-Jun-10	01-Dec-10
Total						1,992,254		501,070		280,042		(1,200	)		(226,132	)		2,265,992


Notes:

1		The options indicated are over American Depositary Shares (ADSs). Each ADS represents six ordinary shares, is denominated in US dollars and trades on The NASDAQ Global Select Market. For the purposes of this disclosure, ADSs have been converted into the equivalent number of ordinary shares and an equivalent option price.

2		The indicated awards were made prior to the appointment of the relevant individual as an executive director. The DSOP options granted prior to the appointment as an executive director have no performance condition.

3		Save as disclosed in note 2 above, exercise of each DSOP award is conditional on performance criteria. Performance conditions were varied during 2006.

4		Options granted under the SAYE Plan have no performance conditions.

5		2007 award.

6		There were total gains of £14,904,955.09 on the exercise of share options in 2007 (2006: £27,384).



		At 31 December 2007, the market close price of our shares was 637.00 pence per share and $76.09 per ADS. The highest prices during the year were 668.50 pence per share and $83.70 per ADS and the lowest were 418.89 pence per share and $48.18 per ADS.

A-8.21

Share options granted to senior managers


					Number at												Number at
					1 Jan 2007		Number		Number		Number			Number			31 Dec 2007
					(or later		granted		vested		(exercised)			(lapsed)			(or earlier		Earliest
		Date of	Exercise		date of		during		during		during			during			date of		exercise	Expiry
Name	Plan	grant	price		appointment)		period		period		period			period			departure)		date	date

Other senior managers as a group (16 persons) (2006:
17 persons) ⁴	DSOP³	27-Dec-00	£	11.39		25,414		—		—		—			(19,883	)		5,531	27-Dec-01	27-Dec-07
		25-Jun-01	£	8.62		54,347		—		—		—			—			54,347	25-Jun-02	25-Jun-11
		21-Dec-01	£	6.92		15,425		—		—		—			—			15,425	21-Dec-02	21-Dec-11
		20-Feb-02	£	5.28		5,697		—		—		—			(5,697	)		—	20-Feb-03	20-Feb-07
		20-Feb-02	£	5.28		107,260		—		—		(23,148	)		—			84,112	20-Feb-03	20-Feb-12
		02-Aug-02	£	2.66		641,708		—		—		(200,000	)		—			441,708	02-Aug-03	02-Aug-12
		24-Feb-03	£	1.35		277,775		—		105,893		(103,575	)		—			174,200	24-Feb-04	24-Feb-13
		01-Apr-03	£	1.08		18,750		—		18,750		—			—			18,750	01-Apr-04	01-Apr-13
		04-Aug-03	£	2.45		501,250		—		170,625		(142,500	)		—			358,750	04-Aug-04	04-Aug-13
		23-Feb-04	£	4.07		277,375		—		69,344		(63,750	)		—			213,625	23-Feb-05	23-Feb-14
		27-Aug-04	£	3.21		199,064		—		49,766		(61,812	)		—			137,252	27-Aug-05	27-Aug-14
		11-Mar-05	£	4.19		113,308		—		28,327		(36,162	)		—			77,146	11-Mar-06	11-Mar-15
		02-Aug-05	£	3.89		122,044		—		30,511		(38,950	)		—			83,094	02-Aug-06	02-Aug-15
		15-Mar-06	£	3.93		148,000		—		37,000		(17,750	)		—			130,250	15-Mar-07	15-Mar-16
		02-Aug-06	£	3.93		233,000		—		58,250		(17,750	)		—			215,250	02-Aug-07	02-Aug-16
		13-Mar-07	£	4.42		—		731,032		—		—			—			731,032	13-Mar-08	13-Mar-17
	SAYE ¹	11-Apr-02	£	4.48		2,216		—		2,216		(2,216	)		—			—	01-Jun-07	01-Dec-07
		11-Apr-02²	$	8.05		1,806		—		1,806		(1,806	)		—			—	01-Jun-07	01-Dec-07
		07-Apr-04	£	3.14		7,200		—		7,200		(7,200	)		—			—	01-Jun-07	01-Dec-07
		07-Apr-04²	$	7.27		1,200		—		1,200		(1,200	)		—			—	01-Jun-07	01-Dec-07
		14-Apr-05	£	3.33		3,072		—		—		—			—			3,072	01-Jun-08	01-Dec-08
		10-Apr-06	£	3.14		3,554		—		—		—			—			3,554	01-Jun-09	01-Dec-09
		10-Apr-06²	$	6.77		1,188		—		—		—			(1,188	)		—	01-Jun-09	01-Dec-09
		03-Apr-07	£	3.53		—		7,215		—		—			—			7,215	01-Jun-10	01-Dec-10
Total						2,760,653		738,247		580,888		(717,819	)		(26,768	)		2,754,313


Notes:

1		Options granted under the SAYE Plan have no performance conditions.

2		The options indicated are over American Depositary Shares (ADSs). Each ADS represents six ordinary shares, is denominated in US dollars and trades on NASDAQ. For the purposes of this disclosure, ADSs have been converted into the equivalent number of ordinary shares and an equivalent option price.

3		The DSOP was approved by the shareholders in April 2001. Awards are normally granted with a four year vesting period, vesting 25% each year. Therefore, 25% vested in 2007 on the anniversary of the date of grant. If this date fell on a non-trading date, the shares vested at the next available trading date.

4		Other senior managers as a group were 15 persons at 1 January 2007 and were 15 persons at 31 December 2007. Lee Ann Daly and David Craig were appointed to GLT on 1 January 2007 and 1 March 2007 respectively. Alex Hungate resigned on 30 September 2007.

		At 31 December 2007, the market close price of our shares was 637.00 pence per share and $76.09 per ADS. The highest prices during the year were 668.50 pence per share and $83.70 per ADS and the lowest were 418.89 pence per share and $48.18 per ADS.

A-8.22

10 Employee information

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


			Restated		Restated
	2007		2006		2005

Business division:
Sales & Trading*		1,430		1,301		987
Research & Asset Management		895		800		658
Enterprise		1,491		1,241		925
Media		220		189		109
Shared divisional resources		3,706		3,182		3,504
Total divisions		7,472		6,713		6,183
Global Sales & Service Organisation		5,843		5,717		4,988
Editorial		2,351		2,321		2,210
Corporate Services*		1,526		1,551		1,637
Total continuing operations		17,462		16,302		15,018
Discontinued operations		—		—		846
Total average number of employees		17,462		16,302		15,864
By location:
Europe, Middle East and Africa		7,359		7,174		6,962
Americas		4,219		4,252		4,292
Asia		5,884		4,876		3,764
Total continuing operations		17,462		16,302		15,018
Discontinued operations		—		—		846
Total average number of employees		17,462		16,302		15,864
By function:
Production and communications		10,335		9,438		8,498
Selling and marketing		4,609		4,572		4,179
Support services and administration		2,518		2,292		2,341
Total continuing operations		17,462		16,302		15,018
Discontinued operations		—		—		846
Total average number of employees		17,462		16,302		15,864
The above include:
Development staff		3,120		2,670		2,332


*		2006 and 2005 have been restated to reflect the way that Reuters was managed in 2007, Transaction Sales and Hosted are now shown within Sales & Trading rather than in Shared divisional resources and Global Sales & Service Organisation, respectively. Chief Technology Office is now included in Corporate Services rather than in Shared Divisional resources.

The average number of employees during 2007 included 167 temporary staff (2006:168, 2005:181).

A-8.23

11 Consolidated reconciliation of changes in equity


					Attributable to equity						Minority			Total
	holders of the parent										interest			equity
			Share		Other			Retained
			capital		reserves			earnings
	Note		£m		£m			£m			£m			£m

1 January 2005				455		(1,647	)		1,690			201			699
Actuarial losses on defined benefit plans		25		—		—			(48	)		—			(48	)
Exchange differences taken directly to reserves				—		97			—			21			118
Exchange differences taken to the income statement on disposal of assets				—		(2	)		—			—			(2	)
Fair value losses on available-for-sale financial assets		16		—		(22	)		—			7			(15	)
Fair value gains on available-for-sale financial assets taken to the income statement on disposal of assets		16		—		(68	)		—			(5	)		(73	)
Fair value losses on net investment hedges		16		—		(39	)		—			—			(39	)
Fair value gains taken to the income statement on disposal of net investments				—		(14	)		—			—			(14	)
Taxation on the items taken directly to or transferred from equity				—		4			10			—			14
Net expense recognised directly in equity				—		(44	)		(38	)		23			(59	)
Profit for the year				—		—			456			26			482
Total recognised (expense)/income for 2005				—		(44	)		418			49			423
Employee share schemes				—		—			42			7			49
Taxation on employee share schemes				—		—			11			—			11
Repurchase of own shares				—		—			(224	)		—			(224	)
Shares to be repurchased				—		—			(59	)		—			(59	)
Proceeds from shares issued to ordinary shareholders		27		12		—			(2	)		—			10
Proceeds of shares issued to minority shareholders of Instinet				—		—			—			3			3
Dividends:		32
Final dividend for 2004				—		—			(86	)		—			(86	)
Interim dividend for 2005				—		—			(54	)		—			(54	)
Share of Instinet’s dividend paid to minority shareholders				—		—			—			(23	)		(23	)
Other movements in equity				—		(1	)		—			—			(1	)
Minority interest in subsidiary disposed in the year				—		—			—			(237	)		(237	)
31 December 2005				467		(1,692	)		1,736			—			511

A-8.24


						Attributable to equity						Minority		Total
	holders of the parent											interest		equity
			Share			Other			Retained
			capital			reserves			earnings
	Note		£m			£m			£m			£m		£m

1 January 2006				467			(1,692	)		1,736			—		511
Actuarial gains on defined benefit plans		25		—			—			6			—		6
Exchange differences taken directly to reserves				—			(95	)		—			—		(95	)
Fair value gains on available-for-sale financial assets		16		—			6			—			—		6
Fair value gains on net investment hedges		16		—			34			—			—		34
Tax on items taken directly to or transferred from equity				—			(3	)		(1	)		—		(4	)
Net expense recognised directly in equity				—			(58	)		5			—		(53	)
Profit for the year				—			—			305			—		305
Total recognised (expense)/income for 2006				—			(58	)		310			—		252
Employee share schemes				—			—			30			—		30
Tax on employee share schemes				—			—			1			—		1
Repurchase of own shares				—			—			(467	)		—		(467	)
Shares to be repurchased				—			—			(53	)		—		(53	)
Shares allotted during the year		27		41			—			(9	)		—		32
Shares cancelled during the year		27		(12	)		12			—			—		—
Dividends:		32
Final dividend for 2005				—			—			(81	)		—		(81	)
Interim dividend for 2006				—			—			(53	)		—		(53	)
31 December 2006				496			(1,738	)		1,414			—		172

A-8.25


			Attributable to equity									Minority		Total
	holders of the parent											interest		equity
			Share			Other			Retained
			capital			reserves			earnings
	Note		£m			£m			£m			£m		£m

1 January 2007				496			(1,738	)		1,414			—		172
Actuarial gains on defined benefit plans		25		—			—			98			—		98
Exchange differences taken directly to reserves				—			20			—			—		20
Fair value gains on available-for-sale financial assets		16		—			11			—			—		11
Fair value gains on available-for-sale financial assets taken to the income statement on disposal of assets		16		—			(18	)		—			—		(18	)
Fair value gains on net investment hedges		16		—			4			—			—		4
Tax on items taken directly to or transferred from equity				—			1			(21	)		—		(20	)
Net income recognised directly in equity				—			18			77			—		95
Profit for the year				—			—			227			—		227
Total recognised income for 2007				—			18			304			—		322
Employee share schemes				—			—			30			—		30
Tax on employee share schemes				—			—			4			—		4
Repurchase of own shares				—			—			(121	)		—		(121	)
Shares to be repurchased				—			—			(169	)		—		(169	)
Shares allotted during the year		27		53			—			(6	)		—		47
Shares cancelled during the year		27		(10	)		10			—			—		—
Dividends:		32
Final dividend for 2006				—			—			(86	)		—		(86	)
Interim dividend for 2007				—			—			(61	)		—		(61	)
31 December 2007				539			(1,710	)		1,309			—		138

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

Retained earnings is stated after deducting £1,272 million (2006: £1,002 million, 2005: £489 million) in respect of treasury shares. This is composed of a cumulative £924 million (2006: £750 million, 2005: £224 million) which represents the cost of 223 million shares in Reuters Group PLC (2006: 187 million, 2005: 57 million) repurchased in the market as part of the ongoing share buyback programme (see note 27), £169 million (2006: £53 million, 2005: £59 million) which represents the cost of 28 million shares in Reuters Group PLC (2006: 12.0 million, 2005: 13.5 million) that Reuters had an irrevocable commitment to repurchase during the year end close period and £179 million (2006: £199 million, 2005: £206 million) which represents the cost of 27 million shares in Reuters Group PLC (2006: 30 million, 2005: 32 million) purchased in the market and held by Reuters Employee Share Ownership Trusts (ESOTs) to satisfy certain options/awards under the Group’s share incentive plans (see note 33).

A-8.26

During 2007, Reuters cancelled 39 million shares, 37 million of which were repurchased as part of the ongoing share buyback programme. An amount equal to the nominal value of these shares has been transferred from share capital to the capital redemption reserve.

12 Segmental analysis — balance sheet

Primary reportable segments

The tables below show assets, liabilities and other information by business division. The assets and liabilities are attributed to business divisions using methodologies consistent with those used to allocate divisional results (see note 1).

31 December 2007

Research

`Sales &

Asset Man-

Trading

agement

Enterprise

Media

Shared

Total

£m

Assets (excluding investment in associates and joint ventures)

764

271

227

621

1,966

Investment in associates and joint ventures

—

Total assets

782

275

228

621

1,993

Total liabilities

(386

)

(122

)

(112

)

(50

)

(1,185

)

(1,855

)

Capital expenditure

160

—

272


	Restated
	31 December 2006
				Research
				&
	`Sales &			Asset Man-
	Trading			agement			Enterprise			Media			Shared			Total
	£m			£m			£m			£m			£m			£m

Assets (excluding investment in associates and joint ventures)		745			243			182			56			656			1,882
Investment in associates and joint ventures		15			4			1			18			—			38
Total assets		760			247			183			74			656			1,920
Total liabilities		(430	)		(116	)		(115	)		(57	)		(1,030	)		(1,748	)
Capital expenditure		172			32			76			10			—			290

A-8.27


	Restated
	31 December 2005
				Research
				&
	`Sales &			Asset Man-
	Trading			agement			Enterprise			Media			Shared			Total
	£m			£m			£m			£m			£m			£m

Assets (excluding investment in associates and joint ventures)		667			246			178			49			961			2,101
Investment in associates and joint ventures		11			5			3			17			—			36
Total assets		678			251			181			66			961			2,137
Total liabilities		(542	)		(141	)		(150	)		(76	)		(717	)		(1,626	)
Capital expenditure*		241			53			38			14			—			346


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

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

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

Secondary reportable segments


	31 December 2007				31 December 2006				31 December 2005
	Total		Capital		Total		Capital		Total		Capital
	assets		expenditure		assets		expenditure		assets		expenditure
By geographical location	£m		£m		£m		£m		£m		£m

Europe, Middle East & Africa		710		144		616		124		589		191
Americas		531		89		522		108		520		99
Asia		228		39		194		58		143		56
Central		524		—		588		—		885		—
Total		1,993		272		1,920		290		2,137		346

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

A-8.28

13 Intangible assets


													Internally
				Trade			Customer			Technology			generated			Purchased
	Goodwill			names			relationships			know-how			software			software			Total
	£m			£m			£m			£m			£m			£m			£m

Cost:
1 January 2005		209			29			1			144			44			54			481
Exchange differences		24			3			4			6			1			2			40
Additions:
Acquisition of subsidiaries		103			4			59			4			—			—			170
Other additions		—			—			—			—			29			11			40
Reclassifications**		(9	)		(3	)		—			(65	)		—			(3	)		(80	)
31 December 2005		327			33			64			89			74			64			651
Exchange differences		(32	)		(4	)		(7	)		(7	)		(1	)		(2	)		(53	)
Additions:
Acquisition of subsidiaries		18			1			11			16			—			—			46
Other additions		—			—			—			—			93			21			114
Adjustments*		2			—			—			—			—			—			2
31 December 2006		315			30			68			98			166			83			760
Exchange differences		(1	)		(1	)		1			(1	)		3			—			1
Additions:
Acquisition of subsidiaries		13			4			1			10			—			—			28
Other additions		—			—			—			—			90			19			109
31 December 2007		327			33			70			107			259			102			898
Amortisation and impairment:
1 January 2005		(18	)		(11	)		—			(66	)		(38	)		(32	)		(165	)
Exchange differences		—			(2	)		—			(3	)		—			(2	)		(7	)
Charged in the year:
Amortisation		—			(3	)		(4	)		(15	)		(3	)		(10	)		(35	)
Impairment		—			—			—			—			(1	)		—			(1	)
Reclassifications**		—			3			—			38			—			3			44
31 December 2005		(18	)		(13	)		(4	)		(46	)		(42	)		(41	)		(164	)
Exchange differences		—			2			1			4			—			2			9
Charged in the year:
Amortisation		—			(4	)		(7	)		(13	)		(10	)		(12	)		(46	)
31 December 2006		(18	)		(15	)		(10	)		(55	)		(52	)		(51	)		(201	)
Exchange differences		—			—			—			—			(1	)		—			(1	)
Charged in the year:
Amortisation		—			(3	)		(7	)		(12	)		(28	)		(11	)		(61	)
Impairment		—			(9	)		—			(9	)		(2	)		(1	)		(21	)
31 December 2007		(18	)		(27	)		(17	)		(76	)		(83	)		(63	)		(284	)
Carrying amount:
31 December 2005		309			20			60			43			32			23			487
31 December 2006		297			15			58			43			114			32			559
31 December 2007		309			6			53			31			176			39			614


*		Adjustments of £2 million to goodwill in 2006 relate to the finalisation of fair value adjustments in respect of the acquisition of Telerate. Fair value adjustments are based on an independent valuation performed by professionally-qualified valuers.

**		Reclassifications in 2005 relate to Instinet Group, which was classified as a discontinued operation prior to its disposal.

A-8.29

Expenditure related to the development of new products or capabilities that is incurred between establishing technical feasibility and the asset becoming ready for use is capitalised when it meets the criteria outlined in IAS38 ‘Intangible assets.’ Such assets are then systematically amortised over their useful economic life. Additionally, the costs of acquiring software licences and costs incurred in bringing software into use are capitalised, and amortised over the expected life of the licence. There is judgement involved in determining an appropriate framework to consider which expenditure requires capitalisation and which should be expensed.

The carrying amount of intangibles, other than goodwill, internally-generated software and purchased software, at 31 December includes the following balances which are considered to be material to the Group’s financial statements:


	Nature (included in	Date of	Carrying amount		Remaining amortisation
Arising on acquisition of	category)	acquisition	£m		period

Telerate	Customer relationships	June 2005		35	7 years, 5 months
Application Networks	Technology know-how	June 2006		10	3 years, 5 months

Impairment tests of goodwill

No impairment losses in respect of goodwill have been recognised in 2007, 2006 and 2005.

For the purpose of performing impairment reviews, Reuters has identified seven cash generating units (CGUs). In prior years, Reuters identified eight CGUs, but disposed of Bridge Trading Company (BTC) in 2005. Annual impairment reviews are performed as at 1 July for all CGUs, which include goodwill. These reviews compare the carrying value of each CGU with the present value of future cash flows arising from the use of the assets of the unit (value in use). If the value in use is less than the carrying value of the CGU, an impairment loss is recognised immediately in the income statement.

A-8.30


		Carrying amount of goodwill at
		31 December 2007		31 December 2006		31 December 2005
Business division	Cash Generating Unit	£m		£m		£m

Sales & Trading	Sales & Trading		149		146		157
Research & Asset Management	Investment Banking & Investment Management		93		93		103
	Wealth Management		—		—		—
	Lipper		33		28		31
Enterprise	Enterprise (excluding Risk)		7		3		4
	Risk		22		22		9
Media	Media		5		5		5
Total			309		297		309

Key assumptions used in the value in use calculations are as follows:

Cash flow projections are derived from financial plans approved by the Board and cover a three year period (2006 and 2005: five year period). They reflect management’s expectations of revenue growth, operating cost and margin for each CGU based on past experience. Projections exclude the expected revenue and cost synergy benefits arising from the various Core Plus growth strategies not yet underway. Cash flows beyond the three year period have been extrapolated using estimated terminal growth rates.

A pre-tax discount rate of 9% (2006: 9% to 11%, 2005: 9%) has been applied to cash flow projections reflecting management’s view that similar risk profiles exist for each CGU. For accounting purposes, impairment testing has been performed using perpetuity growth rate of 3% (2006: 2% to 3%, 2005: 0% to 3%). The rate used has been determined with regard to projected growth for the specific markets in which the CGUs participate. This rate is below the long-term average growth rate for the businesses in which Reuters operates.

The forecasts are most sensitive to changes in projected revenue growth rates in the first three years of the forecast period. However, there is significant headroom and forecast revenues would have to be more than 11% lower than currently projected, before a possible impairment charge would be indicated.

Impairment tests of other intangible assets

Intangible asset impairment losses in the year of £21 million include £18 million in respect of Bridge trade names and technology know-how and £3 million in respect of internally generated and purchased software.

Declining use of the Bridge name in Reuters marketing and Reuters investment in new infrastructure have led management to consider that cash flows generated by the continuing use of these assets no longer support the carrying values of Bridge trade names and technology know-how. The assets were held in Sales & Trading.

£3 million of internally generated and purchased software assets have been impaired following management review. Cash inflows forecast to be generated from these assets are not expected to be sufficient to support their carrying values. These assets were held in Sales & Trading and Enterprise.

A-8.31

14 Property, plant and equipment


										Office
							Computer			equipment
	Freehold			Leasehold			systems			and motor
	property			property			equipment			vehicles			Total
	£m			£m			£m			£m			£m

Cost:
1 January 2005		153			187			858			193			1,391
Exchange differences		1			8			36			4			49
Additions		5			41			80			11			137
Acquisitions		—			—			1			1			2
Disposals		—			(8	)		(91	)		(15	)		(114	)
Reclassifications*		(1	)		(62	)		(41	)		(36	)		(140	)
31 December 2005		158			166			843			158			1,325
Exchange differences		(5	)		(10	)		(57	)		(10	)		(82	)
Additions		9			37			75			9			130
Disposals		—			(4	)		(193	)		(24	)		(221	)
31 December 2006		162			189			668			133			1,152
Exchange differences		2			4			16			5			27
Additions		1			44			83			6			134
Acquisitions		—			—			1			—			1
Disposals		(1	)		(3	)		(53	)		(30	)		(87	)
31 December 2007		164			234			715			114			1,227
Depreciation:
1 January 2005		(70	)		(93	)		(708	)		(166	)		(1,037	)
Exchange differences		(1	)		(3	)		(29	)		(3	)		(36	)
Charged in the year		(4	)		(13	)		(73	)		(13	)		(103	)
Disposals		—			8			89			14			111
Reclassifications*		—			31			33			34			98
31 December 2005		(75	)		(70	)		(688	)		(134	)		(967	)
Exchange differences		2			4			47			9			62
Charged in the year		(4	)		(15	)		(67	)		(9	)		(95	)
Disposals		—			3			192			24			219
31 December 2006		(77	)		(78	)		(516	)		(110	)		(781	)
Exchange differences		(1	)		(2	)		(14	)		(5	)		(22	)
Charged in the year		(4	)		(15	)		(69	)		(8	)		(96	)
Acquisitions		—			—			(1	)		—			(1	)
Disposals		—			2			47			28			77
31 December 2007		(82	)		(93	)		(553	)		(95	)		(823	)
Carrying amount:
31 December 2005		83			96			155			24			358
31 December 2006		85			111			152			23			371
31 December 2007		82			141			162			19			404


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

A-8.32

The carrying amount of computer systems equipment includes an amount of £7 million (2006: £4 million, 2005: £2 million) in respect of subscriber equipment being sourced and managed by IBM on behalf of Reuters. This equipment has been classified as an asset held under finance lease. The agreement for provision of equipment and services by IBM includes a renewal clause and an option to purchase the equipment at fair market value.

The carrying amount of office equipment includes an amount of £3 million (2006: £nil, 2005: £nil) in respect of telephone equipment held under finance lease.

The carrying amount of property, plant and equipment includes £3 million (2006: £16 million, 2005: £nil) in respect of assets in the course of construction.

The carrying amount of leasehold property is analysed as follows:


	2007		2006		2005
Carrying amount of leasehold property	£m		£m		£m

Long-term leaseholds		96		66		33
Short-term leaseholds		45		45		63
Total leasehold property		141		111		96

A-8.33

15 Investments accounted for using the equity method


	Interests			Interests
	in joint			in
	ventures			associates			Total
	£m			£m			£m

Net assets/cost:
1 January 2005		29			5			34
Exchange differences		2			—			2
Arising in year – share of:
Operating profits		5			—			5
Interest receivable		1			—			1
Taxation		(1	)		—			(1	)
Additions		1			—			1
Dividends received		(4	)		—			(4	)
Disposals		(1	)		—			(1	)
Impairments		—			(2	)		(2	)
31 December 2005		32			3			35
Reclassifications*		(14	)		—			(14	)
Exchange differences		(3	)		(1	)		(4	)
Arising in year – share of:
Operating profits		—			1			1
Interest receivable		1			—			1
Taxation		(2	)		—			(2	)
Additions		8			—			8
Dividends received		(3	)		—			(3	)
31 December 2006		19			3			22
Reclassifications**		—			2			2
Exchange differences		—			1			1
Arising in year – share of:
Operating losses		(5	)		(1	)		(6	)
Additions		9			—			9
Dividends received		(2	)		—			(2	)
31 December 2007		21			5			26


*		Reclassifications in 2006 relate to Reuters’ investment in Factiva, which was classified as a non-current asset held for sale and sold during the year.

**		Reclassifications in 2007 relate to Reuters’ investment in TIMES NOW, which was classified as a non-current asset held for sale, and Pluck which was classified as an available-for-sale asset.

A-8.34


	Interests		Interests
	in joint		in
	ventures		associates			Total
	£m		£m			£m

Goodwill:
1 January 2005		—		1			1
31 December 2005		—		1			1
Additions		—		15			15
31 December 2006		—		16			16
Additions		—		5			5
Reclassifications**		—		(20	)		(20	)
31 December 2007		—		1			1
Carrying amount:
31 December 2005		32		4			36
31 December 2006		19		19			38
31 December 2007		21		6			27


*		Reclassifications in 2006 relate to Reuters’ investment in Factiva, which was classified as a non-current asset held for sale and sold during the year.

**		Reclassifications in 2007 relate to Reuters’ investment in TIMES NOW, which was classified as a non-current asset held for sale, and Pluck which was classified as an available-for-sale asset.

The Group holds a 51% interest in AFE Solutions Limited, a 35% holding in 3 Times Square Associates LLC and a 40% holding in Independent Research Network LLC, being other jointly controlled entities accounted for under the equity method of accounting.

In July 2006, Reuters and the Chicago Mercantile Exchange announced the formation of a new joint venture, FXMarketSpace Limited, to create a centrally-cleared, global foreign exchange trading system. Reuters invested £8 million in the joint venture during 2006 and a further £10 million in 2007. The Group holds a 50% interest in this jointly controlled entity.

In October 2006, Reuters acquired a 26% interest in Times Global Broadcasting Company Limited for £11 million relating to the launch of a new Indian TV News Channel, TIMES NOW, in association with the Times of India. Reuters invested £5 million in the associate during 2007. In November 2007 the TIMES NOW investment was classified as a non-current asset held for sale.

In November 2006, Reuters acquired a 17% interest in Pluck Corporation for £4 million. This was classified as an associate and accounted for under the equity method of accounting because Reuters had an option to acquire 100% of the equity and therefore had significant influence over Pluck Corporation. On 31 March 2007 this investment was transferred to available-for-sale assets following expiry of the option to purchase and was sold on 4 March 2008.

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

A-8.35

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


	2007			2006			2005
	£m			£m			£m

Operating profits		(5	)		1			5
Interest receivable		—			1			1
Taxation		(1	)		(2	)		(1	)
Set-up costs of FXMarketSpace		—			(4	)		—
Share of post-taxation (losses)/profits from associates and joint ventures		(6	)		(4	)		5

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


	2007			2006			2005
	£m			£m			£m

Income		7			63			83
Expenses		(12	)		(64	)		(78	)
(Losses)/profit		(5	)		(1	)		5
Non-current assets		54			61			76
Current assets		16			18			37
Current liabilities		(41	)		(49	)		(20	)
Non-current liabilities		(8	)		(11	)		(61	)
Carrying value		21			19			32

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


	2007			2006			2005
	£m			£m			£m

Revenues		5			10			21
(Loss)/Profit		(1	)		1			—
Assets		10			48			19
Liabilities		(4	)		(29	)		(15	)
Carrying value		6			19			4

A-8.36

16 Other financial assets and liabilities

Other financial assets and liabilities, including derivative financial instruments, are stated at fair value.

Other financial assets include the following:


	2007			2006			2005
	£m			£m			£m

Available-for-sale financial assets:
Equity securities		14			17			13
Other available-for-sale financial assets		4			9			5
Short-term deposits		3			198			1
Derivative financial instruments (see note 17):
Cross-currency interest rate swaps – fair value hedges < 1 year		14			—			—
Cross-currency interest rate swaps – fair value hedges > 1 year		20			—			14
Cross-currency interest rate swaps – net investment hedges		34			30			—
Forward foreign exchange contracts – held for trading		1			—			—
Embedded derivatives in revenue contracts		—			—			7
Embedded derivatives in supplier contracts		1			3			—
Total		91			257			40
Less: Non-current portion		(62	)		(47	)		(22	)
Current portion		29			210			18

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

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


	2007			2006			2005
	£m			£m			£m

1 January		26			18			158
Additions		1			—			1
Fair value adjustments transferred to equity		11			6			(50	)
Reclassifications*		4			4			(23	)
Disposals		(24	)		(2	)		(68	)
31 December		18			26			18


*		The reclassification in 2007 relates to the 17% interest in Pluck Corporation reclassified following the expiry of an option to acquire 100% of the equity interest. Reclassifications in 2006 relate to a minority preference share interest in a Factiva entity that Reuters retained following the disposal of the majority of Reuters’ investment in Factiva. Reclassifications in 2005 include balances transferred to assets held for sale and liabilities associated with assets held for sale.

A-8.37

Other financial liabilities include the following:


	2007			2006			2005
	£m			£m			£m

Borrowings:
Bank overdrafts		9			24			25
Term notes and commercial paper		610			632			383
Finance lease payables		12			4			2
Total borrowings		631			660			410
Derivative financial instruments (see note 17)
Cross-currency interest rate swaps – fair value hedges < 1 year		1			2			—
Cross-currency interest rate swaps – fair value hedges > 1 year		—			7			—
Cross-currency interest rate swaps – net investment hedges		—			—			9
Forward foreign exchange contracts – held for trading		1			—			—
Embedded derivatives in revenue contracts		28			18			—
Embedded derivatives in supplier contracts		1			—			1
Total		662			687			420
Less: Non–current portion		(370	)		(521	)		(371	)
Current portion		292			166			49

The term notes principally relate to a public bond of £364 million which is repayable in November 2010 and incurs interest at a fixed rate of 4.6% and a floating rate note of £184 million repayable in November 2008 and at 31 December 2007 incurs interest at 4.8% . Commercial paper of £58 million incurs interest at 5.8% . All borrowings are unsecured.

The maturity profile of finance lease payables is as follows:


	Minimum						Present value of
	lease payments						minimum lease payments
	2007		2006		2005		2007		2006		2005
	£m		£m		£m		£m		£m		£m

Within one year		6		2		1		5		2		1
One to five years		7		2		1		7		2		1
Total		13		4		2		12		4		2

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

A-8.38

Fair value movements on other financial assets and liabilities recognised during 2007, 2006 and 2005 (see note 17) include the following:


				2007					2006					2005
	Fair value					Fair value					Fair value
	gain/(loss)			Fair value		gain/(loss)			Fair value		gain/(loss)			Fair value
	in income			gain/(loss)		in income			gain/(loss)		in income			gain/(loss)
	statement			in equity		statement			equity		statement			in equity
	£m			£m		£m			£m		£m			£m

Available-for-sale financial assets		—			11		—			6		—			(50	)
Embedded derivatives in revenue contracts		(10	)		—		(24	)		—		21			—
Embedded derivatives in supplier contracts		(3	)		—		4			—		(2	)		—
Hedging instruments:
Cross-currency interest rate swaps — fair value hedges		50			—		(3	)		—		(1	)		—
Cross-currency interest rate swaps — net investment hedges		1			4		1			34		(1	)		(39	)
Other derivatives:
Gains		—			—		1			—		—			—
Losses		(1	)		—		(1	)		—		—			—
Other financial assets		—			—		—			—		(16	)		—
Total		37			15		(22	)		40		1			(89	)

17 Derivatives and other financial instruments

Management of financial risk

The Group’s activities expose it to a variety of financial risks. The main risks managed by the Group, under policies approved by the Board, are foreign currency risk, interest rate risk, liquidity risk, counterparty credit risk and price risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. The Board periodically reviews Reuters treasury activities, policies and procedures. All treasury activity takes place within a formal control framework.

Details of values of financial assets and liabilities, including derivative financial instruments are shown on pages A-8.48 and A-8.49.

Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through adequate committed credit facilities, the spreading of debt maturities over a number of years and the ability to close out market positions. Reuters manages its net debt position and interest costs to support its continued access to the full range of debt capital markets. On a regular basis a medium-term forecast of liquidity is reviewed and recommendations made if a safety margin agreed with the Board is not in place over the next 18 months. At 31 December 2007, the Group estimates that, based on forecast cash flows over the following two years the estimated maximum headroom was consistent with maintaining a Baa1/BBB+ credit rating.

A-8.39

In October 2006, Reuters entered into a committed multicurrency syndicated credit facility for £680 million. This replaced an existing committed syndicated credit facility of £480 million and a bilateral loan facility of £24 million. At 31 December 2007, Reuters had available £623 million under the facility, following utilisation of £57 million in the form of a standby letter of credit relating to an operating lease. A further £100 million was drawn on the facility in September 2007 and repaid in November 2007. The commitment expires, and any final repayment is due in October 2011 unless a one-year extension option is exercised in October 2008 (at the banks’ discretion). In this instance, the latest expiry date would be 2012.

In March 1998, Reuters established a Euro commercial paper programme. This provides access to £1.5 billion of uncommitted short-term finance of which £1.4 billion was unused at 31 December 2007 (£1.4 billion was unused at 31 December 2006; £1.5 billion was unused at 31 December 2005). In December 1998, Reuters established a £1 billion Euro medium-term note programme of which £445 million was unused at 31 December 2007 (£490 million was unused at 31 December 2006; £631 million was unused at 31 December 2005).

In addition, at 31 December 2007, the Group had unused, short-term, uncommitted bank borrowing facilities denominated in various currencies, the sterling equivalent of which was approximately £118 million, at money market rates.

The analysis below summarises the maturity profile of the Group’s financial assets and liabilities, based on:

•

the undiscounted contractual maturities of the financial assets; and

•

the undiscounted contractual maturities of the financial liabilities, including interest that will accrue to those liabilities, except where Reuters is entitled and intends to repay the liability before its maturity.

A-8.40

Contractual Maturity Analysis for Financial Assets & Liabilities


	2007
	Contractual maturity
	Within			One to			Two to			Three to			Four to			More than
	one year			two years			three years			four years			five years			five years		Total
	£m			£m			£m			£m			£m			£m		£m

Available-for-sale financial assets		18			—			—			—			—			—		18
Short-term investments		3			—			—			—			—			—		3
Cash and cash equivalents		251			—			—			—			—			—		251
Other financial assets		203			—			—			2			—			4		209
Derivative receivable leg, settled gross		661			41			693			—			—			—		1,395
Derivative payable leg, settled gross		(632	)		(40	)		(637	)		—			—			—		(1,309	)
Financial liabilities
Borrowings		(284	)		(21	)		(388	)		—			—			—		(693	)
Other financial liabilities		(680	)		(20	)		(12	)		(4	)		(2	)		(2	)	(720	)
Total		(460	)		(40	)		(344	)		(2	)		(2	)		2		(846	)

	2006
	Contractual maturity
	Within			One to			Two to			Three to			Four to			More than
	one year			two years			three years			four years			five years			five years		Total
	£m			£m			£m			£m			£m			£m		£m
Available-for-sale financial assets		26			—			—			—			—			—		26
Short-term investments		198			—			—			—			—			—		198
Cash and cash equivalents		129			—			—			—			—			—		129
Other financial assets		224			2			1			—			—			7		234
Derivative receivable leg, settled gross		319			331			36			682			—			—		1,368
Derivative payable leg, settled gross		(321	)		(334	)		(38	)		(671	)		—			—		(1,364	)
Financial liabilities
Borrowings		(171	)		(197	)		(16	)		(353	)		—			—		(737	)
Other financial liabilities		(507	)		(19	)		(7	)		(5	)		(3	)		(5	)	(546	)
Total		(103	)		(217	)		(24	)		(347	)		(3	)		2		(692	)

A-8.41


	2005
	Contractual maturity
	Within			One to			Two to			Three to			Four to			More than
	one year			two years			three years			four years			five years			five years		Total
	£m			£m			£m			£m			£m			£m		£m

Available-for-sale financial assets		18			—			—			—			—			—		18
Short-term investments		1			—			—			—			—			—		1
Cash and cash equivalents		662			—			—			—			—			—		662
Other financial assets		218			1			3			1			—			7		230
Derivative receivable leg, settled gross		186			34			34			34			687			—		975
Derivative payable leg, settled gross		(183	)		(33	)		(33	)		(33	)		(693	)		—		(975	)
Financial liabilities
Borrowings		(63	)		(16	)		(20	)		(16	)		(360	)		—		(475	)
Other financial liabilities		(473	)		(30	)		(8	)		(8	)		(4	)		(7	)	(530	)
Total		366			(44	)		(24	)		(22	)		(370	)		—		(94	)

Capital structure

The Group considers capital to be equity as disclosed in note 11 and net debt, which is total borrowings less short-term deposits and cash and cash equivalents. The Group is committed to managing its capital structure with the objective of maintaining the right balance between funding investment opportunities, managing the risk profile of the business and returning surplus cash to shareholders. On 1 March 2007 Reuters communicated that it will actively manage its capital structure to maintain a strong investment grade rating of BBB+/Baa1. Prior to that Reuters had maintained a credit rating of A-/A3 or better. Reuters monitors the capital structure of the company on the basis of the primary debt capacity ratios as defined by our credit rating agencies. The ratios are calculated using an adjusted cash flow measure as a percentage of adjusted net debt. The adjustments take into account items such as pensions and operating leases. The final credit rating is determined as a combination of financial and non-financial criteria, the ratio being just one of those financial criteria.



	Moodys (RCF/Net Debt**)									Standard & Poors (FFO/Net Debt***)
Rating Agency	2007			2006			2005			2007			2006			2005

Target Credit Rating	Baa1				A3			A3		BBB+				A -			A -
Target % set by Agency		17	%*		20	%		20	%		30	%*		35	%		35	%
Reuters Actual %		39	%*		28	%		31	%		62	%		39	%		67	%


*		Percentages based on Reuters estimates

**		RCF (Retained Cashflow)

***		FFO (Funds from Operations)

A-8.42

Certain group companies are subject to minimum capital requirements imposed by regulatory bodies. At 31 December 2007 minimum regulatory capital for those companies amounted to £1m and during the year they complied with externally imposed capital requirements to which they were subject.

Foreign Currency Risk

Foreign exchange risk arises from cash flows relating to commercial transactions, recognised assets and liabilities and net investments in foreign operations. A substantial portion of Reuters revenue is receivable in foreign currencies with terms of payments up to three months in advance. Reuters is exposed to currency risk from committed revenue for periods of up to two years.

Transaction exposure occurs when, as a result of trading activities, an entity receives or pays cash in a currency different to its functional currency. Exposures principally arise in US dollars and Euros. Risk is managed, where opportunities arise, by denominating commercial contracts in currencies which will reduce net currency exposure. Residual exposure may be managed with the use of forward foreign exchange contracts, currency options and foreign exchange swaps.

The conversion of net investments in foreign operations into the Group’s reporting currency of sterling creates balance sheet translation exposure. The main currency to which the Group is exposed is the US dollar. To mitigate this effect, to the extent that the Group has core debt, it is held in currencies which approximately match to the currency profile of the Group’s net assets. The currency of the debt may be altered by the use of currency swaps. At the end of each quarter the currency profile of net assets and core debt, after the impact of derivatives, are reviewed and adjustments made if appropriate. Issuance of debt in foreign currency also creates translation exposure. This is managed in the form of a fair value hedge which may combine the management of foreign exchange and interest rate risk in one swap transaction.

Hedges of net investment in foreign entity

The Group’s €500 million fixed rate bond and the €250 million floating rate note issued respectively in November 2003 and November 2006 were partially swapped into US dollars and Swiss francs by transacting cross-currency interest rate swaps and designated as a hedge of the net investment in the Group’s foreign subsidiaries. The resulting debt of $694 million (2006: $694 million; 2005: $498 million) was designated against the foreign investment in US subsidiaries, goodwill arising on acquisitions, and certain intangible assets. The resulting Swiss franc debt which was terminated in January 2007 (2006: 79 million Swiss francs; 2005: 55 million Swiss francs) was designated as a hedge of the foreign investment in Reuters SA. Also a debt of €15 million (2006: €15m, 2005: €nil) was designated against the foreign investment in European subsidiaries.

Ineffectiveness of net investment hedges is recognised in operating profit.

A-8.43

Financial Instrument Sensitivity Analysis

The table below shows how the fair values of Reuters’ financial instruments would be impacted by hypothetical changes in foreign currency exchange rates.


							10%			Total
	10%			7%			weakening			weakening
	weakening			weakening			in other			in all
	in US dollar			in Euro			currencies			currencies
	against £			against £			against £			against £

2007		£ m			£ m			£ m			£ m

Total change in fair value		38			(12	)		(8	)		18
Impact recognised in income statement		6			(11	)		(8	)		(13	)
Impact recognised in equity		32			(1	)		—			31
2006
Total change in fair value		36			—			7			43
Impact recognised in income statement		3			1			4			8
Impact recognised in equity		33			(1	)		3			35
2005
Total change in fair value		18			(6	)		(6	)		6
Impact recognised in income statement		(9	)		(4	)		(8	)		(21	)
Impact recognised in equity		27			(2	)		2			27

Interest Rate Risk

The Group’s interest rate risk arises from interest-bearing assets and from borrowings.

Investments and borrowings subject to variable rates expose the Group to cash flow interest rate risk, which is the risk that future cash flows will fluctuate because of changes in market interest rates. Investments and borrowings subject to fixed rates expose the Group to fair value interest rate risk, as the fair value of the financial instrument fluctuates because of changes in market interest rates.

The Group has no specific requirements on the exact proportion of interest that should be fixed or floating. The position is reviewed periodically on a currency by currency basis. Various factors are considered in the review including forecast core debt levels and prevailing market conditions. Based on this review, the Group manages its cash flow and fair value foreign exchange and interest rate risk by using interest rate swaps. Under interest rate swaps, the Group agrees with other parties to exchange, at specified intervals (mainly quarterly), the difference between fixed contract rates and floating-rate interest amounts calculated by reference to the agreed notional principal amounts.

An analysis by currency of interest rate swaps held for risk management purposes is shown on pages A-8.46 and A-8.47.

A-8.44

Hedges of fair values

Currently all long-term debt is held on a floating rate basis after the impact of derivatives. The foreign exchange risk arising from the retranslation of the €500 million fixed rate bond issued by Reuters Finance PLC, the €250 million floating rate note and ¥1 billion fixed rate note issued by Reuters Group PLC was hedged by being swapped into sterling floating rate. The above hedges were executed in the form of cross-currency interest rate swaps.

The weighted average variable rate payable on all interest rate swaps used to alter the currency and interest rate profile of debt issued at 31 December 2007 was 6% (2006: 6%, 2005: 5%). The weighted average variable rate is based on the rate implied in the yield curve at the balance sheet date.

Fair value gains and losses on fair value hedges of foreign exchange and interest rates and their underlying hedged items are recognised in finance costs. The group held no cash flow hedges during the period ended 31 December 2007 (2006: nil, 2005: nil).

The analysis below summarises the sensitivity of the fair value of the Group’s net debt to parallel shifts in the currency yield curves. The changes in rates used are deemed by management to be reasonable and are sufficient in size to demonstrate a material impact. Fair values are the present value of future cash flows based on market rates at the valuation date.

The estimated changes in the fair value of financial instruments before tax are based on a reasonably possible increase of 100 basis points in the Euro, US Dollar and Sterling market yield curves from the levels effective at 31 December 2007 with all other variables remaining constant;


	2007			2006			2005
	£m			£m			£m

100 basis points increase in US Dollar Interest Rate		(3	)		(3	)		(3	)
100 basis points increase in Sterling Interest Rate		—			—			5
100 basis points increase in Euro Interest Rate		—			—			—
Total		(3	)		(3	)		2
Impact recognised in income statement		(3	)		(3	)		2
Impact recognised in equity		—			—			—

A-8.45

Gross

Contract

Period

Amount

Received

Paid

Hedged Risk

(Years)

£m

2007 Fair value hedges:

Japanese yen fixed

Sterling floating

Interest rate and foreign

exchange

2008

Euro fixed

Sterling floating

Interest rate

2010

332

Euro fixed

Sterling floating

Interest rate

2010

Euro floating

Sterling floating

Foreign exchange

2008

169

2006 Fair value hedges:

Japanese yen fixed

Sterling floating

Interest rate and foreign

exchange

2008

Euro fixed

Sterling floating

Interest rate

2010

332

Euro fixed

Sterling floating

Interest rate

2010

Euro floating

Sterling floating

Foreign exchange

2008

169

2005 Fair value hedges:

Japanese yen fixed

Sterling floating

Interest rate and foreign

exchange

2008

Euro fixed

Sterling floating

Interest rate

2008

351

Euro fixed

Sterling floating

Interest rate

2010

Forward foreign exchange contracts held for trading at 31 December 2007 had a gross contract amount £283 million (2006: £242 million, 2005: £131 million) of which the principal currencies were Euros £112 million (2006: £40 million; 2005: £14 million), US dollars £75 million (2006: £60 million; 2005: £22 million) and Swiss francs £20 million (2006: £87 million, 2005: £9 million)

In addition foreign exchange contracts designated as fair value hedges of commercial paper issued in Euros amounted to £23 million (2006: £27 million, 2005: £nil). Foreign exchange contracts held at 31 December 2007 matured in January 2008.

Embedded derivatives

Forward exchange contracts implicitly contained in subscription-based revenue commitments priced in currencies different from both the functional currency of the Reuters entity and that of the customer are separated from their host contracts and held on the balance sheet at fair value. These revenue commitments extend up to two years from the balance sheet date. The majority of embedded derivatives in sales contracts arise through US dollar pricing.

Forward exchange contracts implicitly contained in purchase commitments priced in currencies different from both the functional currency of the Reuters entity and that of the supplier are also separated from their host contracts and held on the balance sheet at fair value. These purchase commitments expire at various times between 2008 and 2012. The majority of embedded derivatives in supplier contracts are US dollar-priced commitments.

A-8.47

Price risk

Movements in equity security prices change the carrying value of available-for-sale financial assets, with changes being recorded in equity. On adoption of IAS 39 on 1 January 2005, Reuters designated its investment in Savvis convertible preference shares as being held at fair value through profit or loss, with movements in the fair value being recognised within the income statement. The shares were pledged as part of the consideration for the Telerate acquisition in June 2005 and no further fair value movements were recorded in the income statement after this point.

The Group does not have a material exposure to commodity price risk.

The accounting policies for financial instruments have been applied to the line items below:


			Assets a		Liabilities at
			fair value		fair value
			through		through			Derivatives					Other
	Loans and		the profit		the profit			used for			Available		financial
	Receivables		and loss		and loss			hedging			for sale		liabilities			Total
	£m		£m		£m			£m			£m		£m			£m

2007
Financial assets as per balance sheet
Other financial assets and derivatives		3		2		—			68			18		—			91
Trade and other receivables		255		—		—			—			—		—			255
Cash and cash equivalents (see note 20)		251		—		—			—			—		—			251
Financial liabilities as per balance sheet
Other financial liabilities and derivatives		—		—		(30	)		(1	)		—		(631	)		(662	)
31 December 2007		509		2		(30	)		67			18		(631	)		(65	)

2006
Financial assets as per balance sheet
Other financial assets and derivatives		198		3		—			30			26		—			257
Trade and other receivables		258		—		—			—			—		—			258
Cash and cash equivalents (see note 20)		129		—		—			—			—		—			129
Financial liabilities as per balance sheet
Other financial liabilities and derivatives		—		—		(18	)		(9	)		—		(660)			(687	)
Total		585		3		(18	)		21			26		(660	)		(43	)

A-8.48


			Assets a		Liabilities at
			fair value		fair value
			through		through			Derivatives					Other
	Loans and		the profit		the profit			used for			Available		financial
	Receivables		and loss		and loss			hedging			for sale		liabilities			Total
	£m		£m		£m			£m			£m		£m			£m

2005

Financial assets as per balance sheet
Other financial assets and derivatives		1		7		—			14			18		—			40
Trade and other receivables		270		—		—			—			—		—			270
Cash and cash equivalents (see note 20)		662		—		—			—			—		—			662
Financial liabilities as per balance sheet
Other financial liabilities and derivatives		—		—		(1	)		(9	)		—		(410	)		(420	)
Total		933		7		(1	)		5			18		(410	)		552

There are no material differences between the fair value and carrying value of financial instruments.

Counterparty credit risk

The Group is exposed to concentrations of credit risk, which are managed on a Group basis. Credit risk arises from cash and cash equivalents, derivative financial instruments, available-for-sale assets, and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions.

The carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the Group’s maximum exposure to credit risk.

Short-term deposits of £3 million at 31 December 2007 relate to deposits in Brazil with a high quality financial institution, and hence the credit risk is perceived to be low. Short-term deposits of £198 million at 31 December 2006 included £197 million in relation to a single counterparty in respect of which credit protection was arranged in the form of credit default swaps and letters of credit. This investment matured on 7 November 2007. No collateral was held as security in respect of these amounts.

Cash and cash equivalents total £251 million at 31 December 2007 (2006: £129 million; 2005: £662 million). The Group invests and conducts its cash management activities with high credit quality financial institutions. The Group has policies that limit the amount of credit exposure to any one financial institution.

A-8.49

Derivative financial instruments with a fair value of £68 million at 31 December 2007 (2006: £30 million; 2005: £14 million) are unsecured. The credit risk attributed to a derivative financial instrument is generally restricted to its fair value and not the principal amount hedged. However, Reuters does not anticipate non-performance by the counterparties which are all banks with recognised long-term credit ratings of ‘A3/A-’ or higher. Ongoing credit evaluation is performed on the financial condition of accounts receivable and credit terms adjusted if appropriate. For treasury activity, approved counterparty credit limits and their utilisation are monitored and transactions arranged only within agreed limits. Credit risk may be managed by the use of credit default swaps and standby letters of credit.

Available-for-sale financial assets totalled £18 million at 31 December 2007, of which £17 million is held in US dollars and the remainder in Swiss francs. The majority of these assets are in the form of equity holdings, and the carrying value of the assets is considered fully recoverable.

Trade receivables net of impairment of £107 million (2006: £110 million; 2005: £120 million) are concentrated in the financial community, and are managed as one class of receivables. Because of the high proportion of Reuters customers that are banks and other regulated financial institutions, the low historic incidence of customer defaults, and the short-term, recurring nature of Reuters billing and collection arrangements, management assess the credit quality of Reuters customer base as high. A small proportion of new customers are referred to external credit rating agencies before acceptance.

The Group estimates that its subscribers are approximately split as follows:


	2007		2006		2005
	%		%		%

Financial institutions		62		65		72
Corporations in other sectors		21		21		14
Newspapers, broadcast news media & news agencies		14		11		9
Governments, central banks & other organisations		3		3		5
Total		100		100		100

A-8.50

18 Inventories


	2007		2006		2005
	£m		£m		£m

Work in progress on contracts		—		1		1

19 Trade and other receivables


	2007			2006			2005
	£m			£m			£m

Trade receivables		118			123			138
Less: Provision for impairment		(11	)		(13	)		(18	)
		107			110			120
Amounts owed by associates and joint ventures		1			6			4
Other receivables		57			80			68
Prepayments and accrued income		90			62			78
Total trade and other receivables		255			258			270

The carrying value of trade and other receivables approximates to their fair value based on discounted cash flows using the Group’s weighted average cost of capital.

Concentration of credit risk faced by the Group and other relevant risk factors are detailed in note 17.

Provision for doubtful debts

The allowance for doubtful debts is comprised entirely of impairments raised against specific trade receivables balances, which are mainly those greater than 365 days old. Impairments represent the differences between the carrying amount of the specific trade receivable and the present value of the expected recoverable amount. No individual impairment is considered material.

The recognition of provisions, both in terms of timing and quantum, requires the exercise of judgement based on the relevant circumstances, which can be subject to change over time. All debts greater than three months past their due date are reviewed monthly, and impairments raised where appropriate. Examples of events which could give rise to impairment are: news about a customer’s financial condition, an account manager’s doubt that a customer is able to pay, delinquency in payment (more than 365 days overdue) and known trading or liquidity problems in a particular market sector.

If the final outcome (on the judgement areas) were to differ by 10% from management’s estimates, the Group would need to book an adjustment of £1 million to operating costs and to trade receivables.

A-8.51

Movement in the allowance for doubtful debts:


	2007			2006			2005
	£m			£m			£m

Balance at 1 January		(13	)		(18	)		(31	)
Utilisation of provision		3			4			5
Unused provision released to profit		3			3			4
Increase in provision		(4	)		(3	)		(5	)
Disposals*		—			—			10
Foreign exchange differences		—			1			(1	)
Balance at 31 December		(11	)		(13	)		(18	)


*		The disposal of £10 million in 2005 relates to Instinet.

Included within trade receivables are amounts past due at the reporting date but not impaired of £64 million. Management believes that these amounts are recoverable as there has been no significant change in the debtors’ credit quality, and accordingly has not provided for them. The Group has no collateral over these balances.

The ageing of net trade receivables at the reporting date was:


	2007		2006		2005
	£m		£m		£m

Not overdue		43		52		58
Past due 0-30 days		22		11		18
Past due 31-60 days		22		20		18
Past due 61-90 days		10		16		13
Past due 91-180 days		7		8		8
Past due 181-365 days		3		3		5
		107		110		120

See note 17 for information on credit risk and impairment associated with trade and other receivables.

A-8.52

Trade and other receivables include amounts denominated in the following major currencies:


	2007		2006		2005
	£m		£m		£m

Canadian Dollar		6		6		3
Swiss Franc		2		3		4
Euro		37		34		36
United Kingdom Pounds Sterling		48		53		65
Japanese Yen		11		13		11
Singapore Dollar		2		3		2
US Dollar		73		95		90
Other		30		26		19
		209		233		230

Prepayments and accrued income include £46 million of prepayments which are non-financial assets (2006: £25 million; 2005: £40million) and which have been excluded from the table above.

20 Cash and cash equivalents


	2007		2006		2005
	£m		£m		£m

Cash:
Cash in hand and at bank		106		79		98
Unlisted cash equivalents:
Term deposits — UK		26		2		12
Term deposits — overseas		2		5		3
Other investments — UK		117		37		546
Other investments — overseas		—		6		3
Cash and cash equivalents		251		129		662

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


	2007		2006		2005
	£m		£m		£m

Brazil		2		1		2
China		—		—		1
Venezuela		4		3		2
Total restricted cash		6		4		5

A-8.53

21 Non-current assets and liabilities held for sale

The following are assets and liabilities classified as held for sale at 31 December:


	2007		2006		2005
	£m		£m		£m

Non-current assets classified as held for sale:
Property, plant and equipment		—		—		1
Assets of associate held exclusively for resale		14		—		—
Total assets classified as held for sale		14		—		1
Liabilities directly associated with non-current assets classified as held for sale:
Liabilities of associate held exclusively for resale		—		—		—
Total net assets classified as held for sale		14		—		1

On 29 November 2007, the Group classified its investment in TIMES NOW as a non-current asset held for sale.

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

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

22 Trade and other payables


	2007		2006		2005
	£m		£m		£m

Trade payables		62		56		14
Accruals		336		276		264
Deferred income		33		31		25
Amounts owed to associates and joint ventures		1		1		11
Other payables		215		94		107
Other taxation and social security		45		33		35
Total trade and other payables		692		491		456

The carrying value of trade and other payables approximates to their fair value based on discounted cash flows using the Group’s weighted average cost of capital.

A-8.54

23 Current tax liabilities


	2007		2006		2005
	£m		£m		£m

Current tax liabilities		247		196		228

The Group is subject to taxation in numerous jurisdictions. Significant judgement is required in determining the worldwide provision for taxation. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will affect the tax provisions in the period in which such determination is made.

24 Provisions for liabilities and charges


	2007			2006			2005
	£m			£m			£m

Provisions for post-employment benefits (see note 25)		43			145			317
Other provisions for liabilities and charges		96			119			139
Total provisions		139			264			456
Less: Non-current portion		(102	)		(204	)		(392	)
Current portion		37			60			64

The movement in other provisions for liabilities and charges during 2007 was as follows:


							Other
	Rationalisation			Legal/compliance			property			Other			Total
	£m			£m			£m			£m			£m

1 January 2007		95			7			2			15			119
Exchange differences		1			—			—			—			1
Charged in the year		14			3			3			14			34
Utilised in the year		(32	)		(2	)		(1	)		(7	)		(42	)
Released		(10	)		—			—			(7	)		(17	)
Unwinding of discounts		1			—			—			—			1
31 December 2007		69			8			4			15			96

The recognition of provisions, both in terms of timing and quantum, requires the exercise of judgement based on the relevant circumstances, which can be subject to change over time.

The largest provisions relate to restructuring programmes, which cover primarily leasehold properties and severances. A number of leasehold properties have been identified as surplus to requirements. Although efforts are being made to sub-let this vacant space, management recognises that this may not be possible immediately. Estimates have been made to cover the cost of vacant possession, together with any shortfall arising from sub-leased rental income being lower than lease costs being borne by the Group. A judgement has also been made in

A-8.55

respect of the discount factor, based on a risk-free rate (4% to 5%), which is applied to the rent shortfalls. For severance provisions, the provision is only recognised where employees have a valid expectation or have already been told of their redundancy. Other provisions are held where the recoverability of amounts is uncertain where the actual outcome may differ from the resulting estimates.

Additionally, the Group is subject to certain legal claims and actions (see note 35). Provision for specific claims or actions are only made when the outcome is considered ‘probable’ that there will be a future outflow of funds, including any associated legal costs. The level of any provision is inevitably an area of management judgement given the outcome of litigation is difficult to predict. There can be no assurance that there will not be an increase in the scope of these legal matters or that any future lawsuits, claims, proceedings or investigations will not be material.

The rationalisation provisions include the Core Plus programme which was announced in July 2005 and includes headcount reduction, data centre rationalisation and development transformation. These provisions will be primarily utilised over the next three years.

Also included within the rationalisation provision at the end of 2007 are obligations related to the Fast Forward programme which was first announced in 2003 and the Telerate integration programme which began in June 2005. Both programmes included headcount reduction and property rationalisation. Severance related provisions have been substantially utilised by the end of 2007, property-related provisions will be substantially utilised over the remaining lease periods.

Legal/compliance provisions represents the expected cost of settling disputes arising from contractual arrangements with third-party suppliers and individuals and the expected cost of fulfilling indemnities given on the disposal of subsidiaries.

Other property provisions reflect Reuters contractual liability at the balance sheet date to make good dilapidations under ongoing rental agreements outside the rationalisation programmes and will be utilised over the remaining lease periods that extend up to 2010.

A-8.56

25 Retirement benefits

The Group has established various pension arrangements covering the majority of its employees. In all plans, except those which are internally funded, the assets are held separately from those of the Group and are independently administered.

Defined contribution plans

Reuters Group operates 34 defined contribution plans covering approximately 52% of its employees, of which the largest plans are the Reuters Retirement Plan and the Reuters 401(k) Plans. The percentage of total employees covered and the company contribution to these plans were:


	Company
	contribution
	% of employees		% of basic salary

Reuters Retirement Plan		16.1		11.0	*
Reuters 401(k) Pension Plans		20.0		6.0


*		7.0% plus 4% through salary sacrifice arrangements.

The Group contributed £31 million to defined contribution plans in 2007 (2006: £29 million; 2005: £25 million) and expects to contribute £32 million in 2008.

Defined benefit plans

The Group also operates 29 defined benefit plans and post retirement medical plans covering approximately 16% of employees. All significant plans are valued under IAS 19 ‘Employee Benefits’ by independently qualified actuaries using the Projected Unit Credit Method.

The largest defined benefit plans are the Reuters Pension Fund (RPF) and the Reuters Supplementary Pension Scheme (SPS). The total defined benefit obligation for all significant plans at 31 December 2007 was £1,228 million (2006: £1,417 million, 2005: £1,346 million), of which £907 million (2006: £1,075 million, 2005: £985 million) related to the RPF and £160 million (2006: £158 million, 2005: £162 million) related to the SPS. The RPF is a complex, hybrid pension fund, with both defined company and employee contributions, and defined employee benefits. The SPS is a smaller defined benefit plan with benefits related to final salary and length of service.

Both the RPF and the SPS are set up under trust, and as such are independent of the Company. Both trusts have a single corporate trustee, with the directors of the corporate trustee operating as the managing committee of the pension plan. The RPF and the SPS trustee companies both have directors appointed by the members, and directors, plus the chairman, appointed by the Company. No senior Company officers are directors of the corporate trustees. Both schemes are prohibited from investing directly in the shares or debt of the Company except to the extent that these form part of pooled fund investments.

A-8.57

Movement on pension provisions and similar obligations


	2007			2006			2005
	£m			£m			£m

1 January		(131	)		(317	)		(263	)
Income statement (see note 3):
Defined benefit plans*		(8	)		(30	)		(27	)
Post-retirement medical benefits		(1	)		—			(3	)
Actuarial gains and losses taken directly to reserves:
Defined benefit plans*		97			8			(46	)
Post-retirement medical benefits		1			(2	)		(2	)
Exchange differences
Defined benefit plans*		—			1			—
Post-retirement medical benefits		—			1			—
		(42	)		(339	)		(341	)
Contributions paid		31			208			24
Net scheme surpluses/provisions		(11	)		(131	)		(317	)
Schemes in surplus recognised within non-current assets		(32	)		(14	)		—
31 December		(43	)		(145	)		(317	)
Composed of:
Defined benefit plans*		(28	)		(129	)		(302	)
Post-retirement medical benefits		(8	)		(9	)		(8	)
Other		(7	)		(7	)		(7	)
31 December		(43	)		(145	)		(317	)


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

Retirement benefit assets


	2007		2006		2005
	£m		£m		£m

Schemes in surplus		32		14		—
Reimbursement rights		7		4		—
Total retirement benefit assets		39		18		—

A-8.58

Amounts recognised in respect of material defined benefit plans

The following disclosures only refer to the Group’s material defined benefit plans:

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


																			Post
																			retirement
										Overseas									medical
	UK Plans									Plans									benefits															Total
	2007			2006			2005			2007			2006			2005			2007			2006			2005			2007			2006			2005
	£m			£m			£m			£m			£m			£m			£m			£m			£m			£m			£m			£m

Present value of funded obligations		(1,067	)		(1,233	)		(1,148	)		(133	)		(157	)		(167	)		—			—			—			(1,200	)		(1,390	)		(1,315	)
Fair value of plan assets		1,202			1,158			902			143			140			139			—			—			—			1,345			1,298			1,041
		135			(75	)		(246	)		10			(17	)		(28	)		—			—			—			145			(92	)		(274	)
Present value of unfunded obligations		(16	)		(15	)		(19	)		(4	)		(3	)		(4	)		(8	)		(9	)		(8	)		(28	)		(27	)		(31	)
		119			(90	)		(265	)		6			(20	)		(32	)		(8	)		(9	)		(8	)		117			(119	)		(305	)
Plan asset not recognised in the balance sheet		(111	)		—			—			(8	)		(3	)		(3	)		—			—			—			(119	)		(3	)		(3	)
IAS 19 deficit recognised in the balance sheet		(16	)		(102	)		(265	)		(10	)		(25	)		(35	)		(8	)		(9	)		(8	)		(34	)		(136	)		(308	)
IAS 19 surplus recognised in the balance sheet		24			12			—			8			2			—			—			—			—			32			14			—
Fair value of reimbursement rights not recognised as pension plan assets		1			—			—			4			4			4			—			—			—			5			4			4

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

Plan assets not recognised in the balance sheet represent the scheme surplus deemed irrecoverable as the Group cannot unilaterally reduce future contributions.

A-8.59

The reimbursement rights reported relate to insurance policies held by Reuters in respect of plans in the UK and Germany which do not meet the definition of plan assets under IAS19. These are recognised in non-current assets.

Amounts recognised in the income statement


																			Post
																			retirement
										Overseas									medical
	UK Plans									Plans									benefits												Total
	2007			2006			2005			2007			2006			2005			2007		2006		2005		2007			2006			2005
	£m			£m			£m			£m			£m			£m			£m		£m		£m		£m			£m			£m

Current service cost		20			23			19			8			10			11			—		—		—		28			33			30
Interest cost		61			55			52			5			5			5			1		—		—		67			60			57
Expected gain on plan assets		(72	)		(61	)		(51	)		(6	)		(6	)		(7	)		—		—		—		(78	)		(67	)		(58	)
Past service cost		—			6			1			—			—			—			—		—		2		—			6			3
Gains on curtailments		(1	)		(3	)		(2	)		(7	)		—			(3	)		—		—		—		(8	)		(3	)		(5	)
Gains on settlements		—			—			(1	)		—			—			—			—		—		—		—			—			(1	)
Total recognised in the income statement		8			20			18			—			9			6			1		—		2		9			29			26
Included within:
Operating profit		8			22			20			—			9			6			1		—		2		9			31			28
Profit on disposal of associates, joint ventures and available-for-sale financial assets		—			(2	)		—			—			—			—			—		—		—		—			(2	)		—
Profit for the year from discontinued operations		—			—			(2	)		—			—			—			—		—		—		—			—			(2	)
Total recognised in the income statement		8			20			18			—			9			6			1		—		2		9			29			26
Actual return on plan assets		50			92			146			5			10			18			—		—		—		55			102			164

A-8.60

Further amounts recognised in the statement of recognised income and expense


																			Post
																			retirement
										Overseas									medical
	UK Plans									Plans									benefits														Total
	2007			2006			2005			2007			2006			2005			2007			2006			2005		2007			2006			2005
	£m			£m			£m			£m			£m			£m			£m			£m			£m		£m			£m			£m

Actuarial losses/(gains)		(192	)		5			46			(20	)		(13	)		(3	)		(2	)		2			2		(214	)		(6	)		45
Effect of asset ceiling		111			—			—			5			—			3			—			—			—		116			—			3
		(81	)		5			46			(15	)		(13	)		—			(2	)		2			2		(98	)		(6	)		48
Deferred taxation impact of actuarial gains and losses recognised in the statement of recognised income and expense		18			(1	)		(10	)		3			3			—			—			(1	)		—		21			1			(10	)
Total recognised in the statement of recognised income and expense		(63	)		4			36			(12	)		(10	)		—			(2	)		1			2		(77	)		(5	)		38

Cumulative amounts recognised in the statement of recognised income and expense


																	Post
																	retirement
								Overseas									medical
	UK Plans							Plans									benefits													Total
	2007			2006		2005		2007			2006			2005			2007			2006		2005		2007			2006			2005
	£m			£m		£m		£m			£m			£m			£m			£m		£m		£m			£m			£m

Balance of actuarial losses at 1 January		246			241		195		(6	)		7			10			4			2		—		244			250			205
Net actuarial losses/(gains) recognised in year		(192	)		5		46		(20	)		(13	)		(3	)		(2	)		2		2		(214	)		(6	)		45
Balance of actuarial losses/(gains) at 31 December		54			246		241		(26	)		(6	)		7			2			4		2		30			244			250
Balance of asset limit effects at 1 January		—			—		—		3			3			—			—			—		—		3			3			—
Effects of the asset ceiling in the year		111			—		—		5			—			3			—			—		—		116			—			3
Balance of asset limit effects at 31 December		111			—		—		8			3			3			—			—		—		119			3			3

A-8.61

Changes in the present value of the defined benefit obligation


																			Post
																			retirement
										Overseas									medical
	UK Plans									Plans									benefits															Total
	2007			2006			2005			2007			2006			2005			2007			2006			2005			2007			2006			2005
	£m			£m			£m			£m			£m			£m			£m			£m			£m			£m			£m			£m

Opening defined benefit obligation		(1,248	)		(1,167	)		(995	)		(160	)		(171	)		(160	)		(9	)		(8	)		(3	)		(1,417	)		(1,346	)		(1,158	)
Current service cost		(20	)		(23	)		(19	)		(8	)		(10	)		(11	)		—			—			—			(28	)		(33	)		(30	)
Past service cost		—			(6	)		(1	)		—			—			—			—			—			(2	)		—			(6	)		(3	)
Interest cost		(61	)		(55	)		(52	)		(5	)		(5	)		(5	)		(1	)		—			—			(67	)		(60	)		(57	)
Gains on curtailments		1			3			2			7			—			3			—			—			—			8			3			5
Liabilities extinguished on settlements		2			—			8			3			1			—			—			—			—			5			1			8
Actuarial gains/ (losses)		214			(36	)		(141	)		21			9			(8	)		2			(2	)		(2	)		237			(29	)		(151	)
Contributions by employees		—			(1	)		(3	)		(3	)		(4	)		(4	)		—			—			—			(3	)		(5	)		(7	)
Benefits paid		29			37			34			14			8			14			—			—			—			43			45			48
Exchange differences on overseas plans		—			—			—			(6	)		12			—			—			1			(1	)		(6	)		13			(1	)
Closing defined benefit obligation		(1,083	)		(1,248	)		(1,167	)		(137	)		(160	)		(171	)		(8	)		(9	)		(8	)		(1,228	)		(1,417	)		(1,346	)

A-8.62

Changes in the fair value of plan assets


																			Post
																			retirement
										Overseas									medical
	UK Plans									Plans									benefits												Total
	2007			2006			2005			2007			2006			2005			2007		2006		2005		2007			2006			2005
	£m			£m			£m			£m			£m			£m			£m		£m		£m		£m			£m			£m

Opening fair value of plan assets		1,158			902			781			140			139			124			—		—		—		1,298			1,041			905
Expected return		72			61			51			6			6			7			—		—		—		78			67			58
Assets transferred on settlements		(2	)		—			(7	)		(3	)		(1	)		—			—		—		—		(5	)		(1	)		(7	)
Actuarial gains/(losses)		(22	)		31			95			(1	)		4			11			—		—		—		(23	)		35			106
Contributions by employer		25			200			13			6			7			6			—		—		—		31			207			19
Contributions by employees		—			1			3			3			4			4			—		—		—		3			5			7
Benefits paid		(29	)		(37	)		(34	)		(14	)		(8	)		(14	)		—		—		—		(43	)		(45	)		(48	)
Exchange differences on overseas plans		—			—			—			6			(11	)		1			—		—		—		6			(11	)		1
Closing fair value of plan assets		1,202			1,158			902			143			140			139			—		—		—		1,345			1,298			1,041

The weighted average duration of the scheme obligations were 25 years and 14 years for the RPF and the SPS respectively.

Following discussions with Trustees of the RPF and SPS, a special contribution of £3.5 million was made to the SPS in 2007, with £36.2 million due to the RPF in 2008. In addition, payments of £1.5 million per year are due to the SPS in each of the years from 2008 until 2010. In addition to these special contributions, employer’s contribution rates have been agreed at between 19.0% and 25.8% of pensionable salary (including 6% and 9% respectively through salary sacrifice arrangements) from 1 April 2007 for RPF members and 34.2% for SPS members (including 6% through salary sacrifice arrangements).

The Group expects to contribute £66 million to its defined benefit schemes in 2008, including the special contributions referred to above.

A-8.63

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


													Post
													retirement
							Overseas						medical
	UK Plans						Plans						benefits										Total
	2007		2006		2005		2007		2006		2005		2007		2006		2005		2007		2006		2005
	%		%		%		%		%		%		%		%		%		%		%		%

Equities		43		44		55		44		45		46		—		—		—		43		44		54
Bonds		44		45		36		48		47		45		—		—		—		44		45		37
Property		6		7		7		—		—		—		—		—		—		5		6		6
Cash		—		1		2		3		4		5		—		—		—		1		2		2
Other		7		3		—		5		4		4		—		—		—		7		3		1

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

The Strategic asset allocation of the fund is driven by the financial characteristics of the fund, in particular the fund’s liabilities and the risk tolerance of the trustees. In setting the Investment policy, the trustees of the RPF and SPS sought the views of the Company.

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


							Overseas						Post retirement
	UK Plans						Plans						medical benefits
	2007		2006		2005		2007		2006		2005		2007		2006		2005
	%		%		%		%		%		%		%		%		%

Discount rate		5.80		4.93		4.75		4.11		3.49		3.29		6.50		6.00		5.50
Inflation assumption		3.30		3.00		2.75		1.77		1.57		1.47		—		—		—
Rate of increase in salaries		4.55		4.25		4.00		2.82		2.61		2.39		—		—		—
Rate of increase in pensions in payment		3.00		3.00		2.75		1.54		1.38		1.38		—		—		—
Medical cost trend		—		—		—		—		—		—		5.00		5.00		5.50
Expected rate of return on reimbursement rights		—		5.10		—		—		4.75		4.25		—		—		—
Expected rate of return on assets:
Equities		8.20		8.10		8.00		6.18		6.42		7.10		—		—		—
Bonds		5.80		4.49		4.00		3.53		3.14		2.92		—		—		—
Property		6.40		6.20		6.00		—		—		—		—		—		—
Cash		4.50		4.25		4.00		2.68		2.28		2.44		—		—		—
Other		4.50		4.25		—		2.10		6.05		5.47		—		—		—

A-8.64

For the RPF and SPS, the two largest schemes, a 0.25% increase in the discount rate would result in a £49 million decrease in the defined benefit obligation at the balance sheet date. A 0.25% decrease in the discount rate would result in a £53 million increase in the defined benefit obligation at the balance sheet date. The effects of such a change are partially hedged by the schemes’ asset portfolio.

The expected return on plan assets reflects the investments currently held to provide for the pension benefit obligations as at the balance sheet date. Plan assets primarily consist of equity instruments and fixed income investments. The expected rate of return on equities was based on expected market conditions in each of the territories in which plans operate. The expected return on assets is stated net of investment expenses. The expected return on assets for the UK plans at 31 December 2007, 31 December 2006 and 31 December 2005 is stated gross of the expected levy to the UK Pension Protection Fund.

UK mortality assumptions

The mortality assumptions used to assess the defined benefit obligation for the RPF and the SPS, the largest plans, at 31 December 2007 are based on the 00 series tables issued by the Continuous Mortality Investigation Bureau with allowance for projected longevity improvements and adjustment for the medium cohort effect. At 31 December 2006 and 31 December 2005 the 92 series short cohort tables were used, also with allowance for projected longevity improvements to calendar year 2025 and adjustment for the short cohort effect.

The following table illustrates the expectation of life of an average member reaching age 65 at the balance sheet date and member reaching 65 at the same date plus 25 years under the assumptions used at 31 December 2007, and under those used at 31 December 2006 and 31 December 2005.


	Life expectation in years
	Male		Female

31 December 2007
Retiring at reporting date at age 65		22		24
Retiring at reporting date + 25 years at age 65		23		25


	Life expectation in years
	Male		Female

31 December 2006
Retiring at reporting date at age 65		21		24
Retiring at reporting date + 25 years at age 65		22		24

For the RPF and the SPS, an increase in life expectancy of 1 year across all age groups would result in a £20 million increase in the defined benefit obligation.

A-8.65

History of experience gains and losses


	2007												2006												2005
							Post												Post												Post
							retirement												retirement												retirement
	UK			Overseas			medical						UK			Overseas			medical						UK			Overseas			medical
	Plans			Plans			benefits			Total			Plans			Plans			benefits			Total			Plans			Plans			benefits			Total
	£m			£m			£m			£m			£m			£m			£m			£m			£m			£m			£m			£m

Defined benefit obligation		(1,083	)		(137	)		(8	)		(1,228	)		(1,248	)		(160	)		(9	)		(1,417	)		(1,167	)		(171	)		(8	)		(1,346	)
Plan assets		1,202			143			—			1,345			1,158			140			—			1,298			902			139			—			1,041
Deficit		119			6			(8	)		117			(90	)		(20	)		(9	)		(119	)		(265	)		(32	)		(8	)		(305	)
Experience adjustments on plan liabilities		(81	)		(11	)		(1	)		(93	)		14			(3	)		3			14			(16	)		6			(1	)		(11	)
Experience adjustments on plan assets		22			1			—			23			31			4			—			35			95			11			—			106

26 Deferred tax

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


	2007			2006			2005
	£m			£m			£m

1 January 2007		171			210			247
Acquisitions/disposals		(4	)		(11	)		(46	)
Income statement (credit)/charge)		21			(18	)		(19	)
Equity (charge)/credit		(21	)		(1	)		10
Exchange differences		—			(10	)		8
Stock options deferred tax in equity		4			1			10
31 December 2007		171			171			210

Deferred tax assets have been recognised in respect of tax losses and other temporary differences giving rise to deferred tax assets only to the extent that it is probable that sufficient taxable profits will be available to allow the asset to be recovered. Accordingly, no deferred tax asset has been recognised in respect of unused tax losses of £121 million carried forward at the balance sheet date. The deferred tax asset not recognised in respect of these losses is £45 million.

A-8.66

Deferred tax assets of £185 million have been recognised in respect of tax losses and other deductible temporary differences arising in certain jurisdictions where losses were incurred in the current or preceding period. Recognition of these assets is based on all relevant factors including their expected recovery measured using Group profit forecasts.

No deferred tax is recognised on the unremitted earnings of overseas subsidiaries and joint ventures as the Group is able to control the timing of the reversal of the temporary differences, and it is probable that the temporary differences will not reverse in the foreseeable future. If the earnings were remitted, tax of £978 million would be payable.

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

Deferred tax liabilities


	Fixed
	Assets			Other			Total
	£m			£m			£m

1 January 2007		(12	)		(98	)		(110	)
Acquisitions/Disposals		—			(4	)		(4	)
Exchange differences		—			—			—
Charged to income statement		(1	)		—			(1	)
31 December 2007		(13	)		(102	)		(115	)

Deferred tax assets


	Fixed					Stock
	Assets		Losses			options			Other			Total
	£m		£m			£m			£m			£m

1 January 2007		62		111			17			91			281
Credited/ (charged) to income statement		13		(15	)		5			19			22
Credited/(charged) in equity		—		15			4			(36	)		(17	)
Realisation of stock option deductions		—		8			(8	)		—			—
Exchange differences		—		—			—			—			—
31 December 2007		75		119			18			74			286
Net Deferred Tax Asset
31 December 2006													171
31 December 2007													171

The deferred tax asset expected to be recovered after more than one year is £219 million (2006: £183 million, 2005: £135 million).

A-8.67

27 Share capital

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


	Called up
	share			Share		Share
	capital			premium		capital
	£m			£m		£m

1 January 2005		359			96		455
Shares allotted during the year		1			11		12
31 December 2005		360			107		467
Shares allotted during the year		7			34		41
Shares cancelled during the year		(12	)		—		(12	)
31 December 2006		355			141		496
Shares allotted during the year		5			48		53
Shares cancelled during the year		(10	)		—		(10	)
31 December 2007		350			189		539

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


	2007		2006		2005
	£m		£m		£m

Authorised:
One Founders Share of £1		—		—		—
2,100 million ordinary shares of 25p each		525		525		525
		525		525		525
Allotted, called up and fully paid:
One Founders Share of £1		—		—		—
Ordinary shares of 25p each		350		355		360
		350		355		360
Number of ordinary shares of 25p each (millions)		1,401		1,422		1,441
Shares allotted during the year in millions
18,557,662 shares in Reuters Group PLC were issued under employee share schemes at prices ranging from £nil to 630p per share. Transaction costs incurred on issue of shares amounted to £nil (2006: £nil, 2005: £nil)		19		29		6

Proceeds from the issue of shares for the year ended 31 December 2007 totalled £47 million (2006: £32 million, 2005: £10 million).

A-8.68

During 2007, Reuters cancelled 39 million shares, 37 million of which were repurchased as part of the ongoing share buyback programme.

Called up share capital includes £1 million for shares granted to employees on exercise of share option/awards in respect of which no cash had been received at the balance sheet date (2006: £1 million, 2005, £1 million).

The following table provides a summary of the shares bought under the buyback programme, from its announcement in July 2005 until May 2007, and then December 2007.


	Total number
	of shares				Approximate
	purchased as				value of shares
	part of				that may
	publicly		Average price		be purchased
	announced		paid per		under the
Month	programme		share (£)		programme (£m)

2005 :
July		1,500,000		3.89		994
August		8,500,000		3.70		962
September		7,150,000		3.73		936
October		2,800,000		3.53		926
November		22,800,000		3.89		836
December		14,650,000		4.08		776
2006 :
January		10,500,000		4.32		731
February		18,450,000		4.06		655
March		13,725,000		3.89		601
April		6,000,000		3.98		577
May		9,435,000		3.86		541
June		17,750,000		3.67		475
July		6,770,000		3.75		450
August		13,000,000		3.89		399
September		9,750,000		4.11		358
October		8,725,000		4.43		319
November		9,500,000		4.57		276
December		5,594,000		4.55		250
2007 :
January		5,700,000		4.43		225
February		6,300,000		4.32		197
March		11,850,000		4.41		145
April		7,675,000		4.85		107

A-8.69

The share buyback programme to return £1 billion to shareholders was announced on 26 July 2005 and was due to run for two years to July 2007. Reuters determined to terminate the above £1 billion buyback programme in May 2007 prior to its expiration. No other programme has expired during the period covered by the table.

The following table provides a summary of the shares bought under the buyback programme, from its announcement on 13 December 2007 until 31 December 2007.

Total number

of shares

purchased as

Total

part of publicly

Average price

cost of shares

announced

paid per

purchased

Month

programme

share (£)

(£m)

2007 :

December

5,050,000

6.14

The current share buyback programme was announced on 13 December 2007 with the intention of repurchasing up to 50 million shares. Regulatory approval was granted for the Thomson-Reuters transaction, subject to certain conditions, on 19 February 2008, at which date the current share buyback programme was suspended. The share buyback programme resumed on 10 March 2008.

A-8.70

28 Other reserves

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


	Capital					Available									Total
	redemption		Other			for-sale			Hedging			Translation			other
	reserve		reserve			reserve			reserve			reserve			reserves
	£m		£m			£m			£m			£m			£m

1 January 2005		1		(1,718	)		94			30			(54	)		(1,647	)
Exchange differences taken directly to reserves		—		—			—			—			97			97
Exchange differences taken to the income statement on disposal of assets		—		—			—			—			(2	)		(2	)
Fair value losses on available-for-sale financial assets		—		—			(22	)		—			—			(22	)
Fair value gains on available-for-sale financial assets taken to the income statement on disposal of assets		—		—			(68	)		—			—			(68	)
Fair value losses on net investment hedges		—		—			—			(39	)		—			(39	)
Fair value gains taken to the income statement on disposal of net investments		—		—			—			(14	)		—			(14	)
Other movements		—		(1	)		—			—			—			(1	)
Tax on items taken directly to or transferred from reserves		—		—			—			16			(12	)		4
31 December 2005		1		(1,719	)		4			(7	)		29			(1,692	)
Exchange differences taken directly to reserves		—		—			—			—			(95	)		(95	)
Fair value gains on available-for-sale financial assets		—		—			6			—			—			6
Fair value gains on net investment hedges		—		—			—			34			—			34
Redemption of share capital		12		—			—			—			—			12
Tax on items taken directly to or transferred from reserves		—		—			—			(10	)		7			(3	)
31 December 2006		13		(1,719	)		10			17			(59	)		(1,738	)
Exchange differences taken directly to reserves		—		—			—			—			20			20
Fair value gains on available-for-sale financial assets		—		—			11			—			—			11
Fair value gains on available-for-sale financial assets taken to the income statement on disposal of assets		—		—			(18	)		—			—			(18	)
Fair value gains on net investment hedges		—		—			—			4			—			4
Redemption of share capital		10		—			—			—			—			10
Tax on items taken directly to or transferred from reserves		—		—			—			(1	)		2			1
31 December 2007		23		(1,719	)		3			20			(37	)		(1,710	)

In 1998, a court approved capital reorganisation took place. In exchange for every 15 ordinary shares in Reuters Holdings PLC, shareholders received pro-rata 13 ordinary shares in Reuters Group PLC plus £13.60 in cash. The difference between the proforma nominal value of shares in issue of Reuters Group PLC immediately prior to the reorganisation and the previously reported capital and reserves of Reuters Holdings PLC, excluding retained earnings, represents the merger difference which has since been recorded in the other reserve.

The capital redemption reserve is used to record an amount equal to the nominal value of treasury shares that have been cancelled.

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

The hedging reserve is used to record the cumulative gains and losses on hedges of the Group’s net investment in foreign operations, providing that the hedges were effective. The cumulative gain or loss is recognised in the income statement on disposal of the foreign operation.

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

A-8.71

29 Net cash flow from operating activities

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


	2007			2006			2005
	£m			£m			£m

Profit for the year from continuing operations		213			293			229
Adjustments for:
Depreciation		96			95			99
Impairment of associates and joint ventures		—			—			2
Impairment of intangibles		21			—			1
Amortisation of intangibles		61			46			33
Profit on disposal of property, plant and equipment		(10	)		(2	)		—
Employee share scheme charges		34			30			30
Foreign exchange losses/(gains)		18			(14	)		(8	)
Fair value movements on derivatives		13			19			(18	)
Fair value movements on other financial assets		—			—			16
Profits on disposals		(24	)		(80	)		(42	)
Income from investments		(1	)		—			(1	)
Share of post-taxation losses/(profits) of associates and joint ventures		6			4			(5	)
Finance income		(117	)		(72	)		(41	)
Finance costs		151			87			53
Taxation		60			20			9
Movements in working capital:
Decrease in inventories		1			—			2
(Increase)/decrease in trade and other receivables		(12	)		23			3
Increase/(decrease) in trade and other payables		75			51			(52	)
(Decrease)/increase in pensions deficit		(26	)		(176	)		9
Decrease in provisions		(25	)		(13	)		(27	)
Decrease in amounts payable to discontinued operations		—			—			(24	)
Cash generated from continuing operations		534			311			268
Profit for the year from discontinued operations		14			12			253
Adjustments for:
Depreciation		—			—			4
Amortisation of intangibles		—			—			2
Loss on disposal of property, plant and equipment		—			—			4
Employee share scheme charges		—			—			18
Profits on disposals		(14	)		(12	)		(278	)
Finance income		—			—			(13	)
Taxation		—			—			20
Movements in working capital:
Increase in trade and other receivables		—			—			(28	)
Decrease in trade and other payables		—			—			(17	)
Increase in provisions		—			—			14
Decrease in amounts receivable from continuing operations		—			—			24
Cash generated from discontinued operations		—			—			3
Cash generated from operations		534			311			271

A-8.72

30 Cash flow from acquisitions and disposals


	2007			2006			2005
	£m			£m			£m

Acquisitions (including joint ventures and associates):
Subsidiary undertakings (see note 36)		(23	)		(32	)		(135	)
Joint ventures and associates		(14	)		(27	)		(1	)
Deferred payments for acquisitions in prior years		(4	)		(9	)		(8	)
		(41	)		(68	)		(144	)
Less: cash acquired		2			1			20
Acquisitions, net of cash acquired		(39	)		(67	)		(124	)
Disposals (including joint ventures and associates):
Subsidiary undertakings*		24			(15	)		824
Joint ventures and associates		(1	)		80			1
Instinet (deemed disposal)		—			—			3
		23			65			828
Add: cash disposed		—			—			(582	)
Disposals, net of cash disposed		23			65			246


*		The cash inflow of £24 million for subsidiary undertakings principally consists of a tax settlement on disposal of Instinet Group which was completed in December 2005. (2006 outflow of £15 million for subsidiary undertakings represents transaction fees on the disposal of Instinet Group).

31 Reconciliation of cash and cash equivalents

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


	2007			2006			2005
	£m			£m			£m

Cash and cash equivalents (see note 20)		251			129			662
Bank overdrafts		(9	)		(24	)		(25	)
Total cash and cash equivalents		242			105			637

A-8.73

32 Dividends


	2007		2006		2005
	£m		£m		£m

Prior year final paid		86		81		86
Current year interim paid		61		53		54
		147		134		140
Per ordinary share	Pence		Pence		Pence
Prior year final paid		6.90		6.15		6.15
Current year interim paid		5.00		4.10		3.85

A further interim dividend in respect of 2007 of 7p per ordinary share will amount to an approximate total dividend of £87million. These financial statements do not reflect this proposed dividend payable.

At 31 December 2007, 27 million shares representing 2% of Reuters Group PLC’s shares, were held by Reuters Employee Share Ownership Trusts in respect of which dividend rights have been waived until Reuters receives written confirmation of cancellation from Computershare Trustees (CI) Limited.

33 Employee share plans

The Group operates a number of share incentive plans for the benefit of employees. The scheme rules of each of these plans contain change of control clauses, which, under certain circumstances, allow for the early vesting of the plans in the event that Reuters is acquired by a third party. The nature of each plan including general terms and conditions and the methods of settlement is set out below:

Long-Term Incentive Plan (LTIP): Since 1993, Reuters has operated an LTIP that seeks to encourage and reward long-term growth in shareholder value. It is Reuters practice to make an annual award of contingent share rights to executive directors and to those senior managers most able to influence corporate performance.

For awards prior to 2006, performance is assessed by reference to the company’s relative total shareholder return (TSR) measured against the FTSE 100 over the performance period and awards vest and are released after 3 years subject to the performance conditions attached. For awards made prior to 2004 that do not vest or only partially vest after three years, the plan permits the measurement period to be extended by up to two years under a re-testing provision. For awards made from 2004 onwards, the re-testing provision does not apply.

50% of the 2006 and 2007 awards had TSR performance conditions attached. However, the remaining 50% have performance conditions based on PBT targets.

From 2003, charges for these awards have been based on the fair market value per share using option pricing methodology. The fair market value ascribed to each TSR LTIP award in 2007 was 43.6% (2006: 55.9%) of the market value at the date of grant. The fair market value ascribed to each PBT LTIP award in 2007 was 92.9% (2006: 93.9%).

All of the LTIP awards are settled in equity.

Discretionary Share Option Plan (DSOP): The global DSOP was adopted by the Remuneration Committee in October 2000 and approved by shareholders in April 2001. It aims to reward growth in earnings and in the share price. The options were normally granted with a four year vesting period, shares vesting 25% each year.

A-8.74

With effect from 2004, to reduce the dilutive impact DSOPs have on shareholders’ interests and to allow the introduction of a plan better targeted at the general employee population, the number of participants was reduced significantly. Participation will normally be confined to executive directors and members of the GLT (prior to 2006, the GMC). Other employees may be eligible to participate in the Restricted Share Plan (see below).

For awards granted from 2005 onwards, full vesting is achieved if adjusted EPS growth exceeds the percentage growth in the retail price index (RPI) by an average of 9% each year over the three year performance period. For awards granted in 2006 and 2007, 50% of the awards vest if adjusted EPS growth exceeds RPI growth by an average of 6% each year over three years, with 9% average growth per year required for full vesting, and awards vesting proportionally for average growth of between 6% and 9%. Of those options which vest under the 2006 and 2007 plans, only 50% can be exercised immediately. A further 25% can be exercised after one year, and another 25% can be exercised after two years.

All options are subject to a maximum 10 year life and are typically settled in equity.

Save-as-you-Earn (SAYE) Plan: An all-employee international savings-related share option plan is offered in which the executive directors are also eligible to participate. Participants save a fixed monthly amount of up to £250 (subject to a maximum, established annually for each offer) for three years and are then able to use their savings to buy shares at a price set at a 20% discount to the market value at the start of the savings period. In line with market practice, no performance conditions are attached to options granted under this plan.

Options are subject to a maximum life of three years and six months and are settled in equity.

Annual Bonus Profit Sharing Plan (ABPSP): In December 2003, Reuters announced its intention to introduce a new profit-sharing plan across the all-employee population. This plan was introduced to focus employees on reward for profit growth. In 2006, this plan was operated as a cash-only plan and no shares will be issued to employees. Executive directors and members of the GLT have not participated in this plan. A decision is taken on an annual basis to operate the plan for the year.

Restricted Share Plan (RSP): In April 2004, at the AGM, the shareholders approved the introduction of the RSP. Currently restricted shares will not normally be granted for long-term incentive purposes to executive directors or members of the GLT* (prior to 2006, the GMC). It is intended that, other than for executive directors and GLT* members, employees will be eligible to participate in this plan instead of the DSOP. Other than in 2004, the year of introduction, employees would generally not be eligible to participate in the DSOP and the RSP in the same year. The RSP is normally granted with a four year vesting period, shares vesting 25% each year.

Awards are typically settled in equity.

The following plans are legacy plans which are no longer operated by the Group:

Performance related share plan (PRSP): This plan operated from 1995 to 2001 and targeted senior executives not participating in the LTIP. All outstanding awards have now lapsed. The performance condition was the same as for the LTIP, although vested shares could be released three years after grant.

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

A-8.75

Activity relating to share options for the year ended 31 December 2005, 31 December 2006 and 31 December 2007 was as follows:


																			Weighted
																			average
																			exercise
																			price for
	SAYE			Plan			DSOP						LTIP &						option
	Plan			2000			& RSP			ABSP			PRSP			Total			plans £

Ordinary shares under option in millions (including ADSs):
At 31 January 2005		29.9			11.4			59.2			—			14.6			115.1			2.71
Granted		3.4			—			7.5			2.3			2.2			15.4			2.07
Forfeited		(2.5	)		(0.4	)		(2.5	)		(0.1	)		(0.4	)		(5.9	)		4.60
Exercised		(1.2	)		—			(4.8	)		(0.1	)		(0.7	)		(6.8	)		1.66
Expired or lapsed		(1.4	)		(10.3	)		(4.0	)		—			(4.4	)		(20.1	)		3.88
31 December 2005		28.2			0.7			55.4			2.1			11.3			97.7			2.70
Granted		5.3			—			9.0			—			2.8			17.1			1.68
Forfeited		(0.9	)		—			(1.6	)		(0.1	)		(0.2	)		(2.8	)		1.64
Exercised		(20.7	)		—			(7.7	)		(2.0	)		—			(30.4	)		1.08
Expired or lapsed		(0.6	)		(0.7	)		(4.1	)		—			(0.6	)		(6.0	)		4.12
31 December 2006		11.3			—			51.0			—			13.3			75.6			2.56
Granted		4.4			—			8.3			—			3.1			15.8			2.14
Forfeited		(1.2	)		—			(3.5	)		—			(0.5	)		(5.2	)		3.18
Exercised		(3.6	)		—			(15.5	)		—			(2.4	)		(21.5	)		2.29
Expired or lapsed		—			—			—			—			(8.5	)		(8.5	)		—
31 December 2007		10.9			—			40.3			—			5.0			56.2			2.84
Of which exercisable		0.2						19.6						—			19.8
Number of participants at 31 December 2007		6,558						5,102						135


Expense included in the
income statement for year
ended	£m		£m		£m		£m		£m		£m

31 December 2005		5		—		18		2		5		30
31 December 2006		6		—		16		1		7		30
31 December 2007		5		—		25		—		6		36

A-8.76

The expense included in the income statement in respect of DSOP and RSP was £25 million (2006: £16 million, 2005: £18 million), of which £4 million (2006: £nil, 2005: £nil) related to cash-settled share options.

Options were exercised on a regular basis throughout the year at the average share price of £5.74 (2006: £3.96, 2005: £3.92) .

The following table summarises information relating to the number of shares under option and those which were exercisable at 31 December 2007:


											Exercisable
											weighted
											average
			Weighted								exercise
			average		Options		Options		Options		price for
			remaining		exercisable at		exercisable at		exercisable at		options
	Total shares		contractual		31 December		31 December		31 December		exercisable at
	under option		life		2007		2006		2005		31 December
Range of exercise prices	(million)		(months)		(million)		(million)		(million)		2007

Ordinary shares
£0.00 — £2.00		18.5		31		2.6		6.8		2.5	£	1.32
£2.01 — £5.00		29.0		59		10.6		17.1		12.0	£	2.89
£5.01 — £7.00		4.8		67		3.6		5.7		5.1	£	5.69
£7.01 — £9.00		3.0		42		3.0		3.6		4.6	£	8.62
£9.01 — £11.00		—		—		—		—		0.4	£	0.00
ADSs*
$10.01 — $30.00		—		—		—		—		0.1	$	0.00
$30.01 — $50.00		0.6		19		—		—		—	$	42.86
$50 +		0.3		35		—		—		—	$	51.09
		56.2		—		19.8		33.2		24.7


*		One ADS is equivalent to six ordinary shares.

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

A-8.77

The following tables summarise the models and key assumptions used for grants made during 2007, 2006 and 2005:


							2007

	SAYE Plan		DSOP		RSP		LTIP

Weighted average fair value (£)		1.67		1.14		4.25		2.95
							Monte Carlo
	Black Scholes		Black Scholes		Black Scholes		simulation based
	options		options		options		customised options
Options pricing model used	pricing model		pricing model		pricing model		pricing model

Key assumptions used:
Weighted average share price (£)		4.82		5.04		4.50		4.33
Range of exercise prices (£)		3.53		4.42-6.19	Nil		Nil
Range of expected volatility (%)		27%		22%-46%		22%-34%		26%
Range of risk-free rates (%)		6%		5%-6%		5%-6%		6%
Range of expected option term (life)	3 years			0.5 to 7 years		0.5 to 4 years	3 years
Range of expected dividend yields		2.5%		2.1%-2.5%		2.1%-2.5%		2.5%

2006

SAYE Plan

DSOP

RSP

LTIP

Weighted average fair value (£)

1.17

1.73

3.65

3.39

Monte Carlo

Black Scholes

simulation based

options

customised options

Options pricing model used

pricing model

Key assumptions used:

Weighted average share price (£)

3.77

4.20

3.88

4.53

Range of exercise prices (£)

3.14

3.93

Nil

Range of expected volatility (%)

35%

23%-48%

25%-41%

36%

Range of risk-free rates (%)

4%-5%

Range of expected option term (life)

3 years

4 to 7 years

1 to 4 years

3 years

Expected dividends (per year)

10p

10p-10.65p

10p

A-8.78

2005

SAYE Plan

DSOP

ABPSP

RSP

LTIP

Weighted average fair value (£)

1.61

1.30

3.95

3.81

2.49

Monte Carlo

Black Scholes

simulation based

options

customised options

Options pricing model used

pricing model

Key assumptions used:

Weighted average share price (£)

4.12

3.97

4.05

4.04

4.05

Range of exercise prices (£)

3.33

3.89-4.05

Nil

Range of expected volatility (%)

47%

28%-54%

37%

28%-54%

48%

Range of risk-free rates (%)

4%-5%

Range of expected option term (life)

3 years

4 to 7 years

2 years

1 to 4 years

3 years

Expected dividends (per year)

10p

Assumptions on expected volatility and expected option term have been made on the basis of historical data, wherever available, for the period corresponding with the vesting period of the option. Volatility is based on daily observations. Best estimates have been used where historical data is not available in this respect.

Market-related performance conditions, which are used to determine the vesting pattern on the LTIP options, are built into the Monte Carlo simulation based options pricing model used to determine fair value of these options.

The Group reported a provision for National Insurance and other social security taxes of £10 million (2006: £7 million, 2005: £11 million) in respect of share-based payment transactions.

The Group recorded a liability for cash settled share options of £5 million (2006: £nil, 2005: £nil), based on current fair values. The intrinsic value of the liability has been measured at £4 million.

34 Related party transactions

The parent company of the Group is Reuters Group PLC (incorporated in the United Kingdom). Reuters Group PLC owns 9.7% of its own shares, relating to the ongoing share buyback programme (see note 27). In addition, 2.0% of Reuters Group PLC is owned by Reuters Employee Share Ownership Trusts (ESOTs).

The ESOTs were established by Reuters in August 1990, January 1994 and August 2004. The ESOTs established in August 1990 and January 1994 are funded by Reuters Group PLC. The ESOT established in August 2004 is funded by Reuters SA. The trustee of the ESOTs is an offshore independent professional trustee. Shares purchased by the ESOTs, which are deducted from shareholders’ equity on the consolidated balance sheet, are used to satisfy certain options/awards under the Group’s share incentive plans.

A-8.79

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


	2007		2006		2005
	£m		£m		£m

Salaries and short-term employee benefits		16		12		8
Post-employment benefits		1		1		1
Termination benefits		—		—		1
Share-based payments		9		8		6
Total		26		21		16

More details of directors’ remuneration and senior management compensation are given in the ‘Directors’ remuneration for 2007’ section of the Remuneration report, details of which form part of these financial statements.

During the year, the Group carried out a number of transactions with related parties, mainly being relationships where the Group holds investments in associates and joint ventures. These transactions involved supply of services and were entered into in the normal course of business and on an arm’s length basis.

Details of these transactions are shown below:


	31							31							31
	December		Amounts		Amounts			December		Amounts		Amounts			December
	2005		invoiced		collected			2006		invoiced		collected			2007
	£m		£m		£m			£m		£m		£m			£m

Amounts receivable:
Joint ventures:
Factiva*		4		30		(33	)		1		—		(1	)		—
FXMarketSpace		—		6		—			6		10		(15	)		1
Other		—		1		(1	)		—		1		(1	)		—
Associates		—		—		—			—		1		(1	)		—
Total amounts receivable		4		37		(34	)		7		12		(18	)		1
Amounts payable:
Joint ventures:
Factiva		1		4		(5	)		—		—		—			—
3 Times Square Associates		—		19		(19	)		—		16		(16	)		—
Associates		—		2		(2	)		—		5		(4	)		1
Total amounts payable		1		25		(26	)		—		21		(20	)		1


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

No amounts were provided for or written off in the income statement in respect of amounts receivable from related parties.

A-8.80

The above amounts relate to the rendering or receiving of services between both parties, including agency agreements and licence agreements. Detailed summaries of key transactions in respect of the Group’s related parties are set out below.

During 2007, Reuters paid £64 million (2006: £237 million, 2005: £47 million) to the Group’s pension funds, including £4 million (2006: £187 million) towards funding the deficit in the Reuters Supplementary Pension Scheme (2006: Reuters Pension Fund and the Reuters Supplementary Pension Scheme).

FXMarketSpace

On 4 May 2006, Reuters and the Chicago Mercantile Exchange (CME) entered into an agreement to form FXMarketSpace, a 50/50 joint venture to create a centrally-cleared, global foreign exchange trading system. Following shareholder approval, the joint venture was formed on 20 July 2006. Reuters has entered into agreements to provide trading access to and trade notification services for, and distribute market data from, FXMarketSpace, among various other services and arrangements. The total cost of these services provided by Reuters to FXMarketSpace in 2007 was £10 million (2006: £6 million).

3 Times Square Associates LLC (‘3XSQ Associates’)

Reuters is party to a lease entered into in 1998 with 3XSQ Associates, an entity owned by Reuters and Rudin Times Square Associates LLC formed to acquire, develop and operate the 3 Times Square property and building. Pursuant to the lease, which has been amended from time to time, Reuters leases approximately 692,000 square feet for a remaining term of approximately 15 years expiring in 2021, with an option to terminate 10 years early as to 77,000 square feet and three successive ten-year renewal options as to the entirety of the space. Reuters made payments to 3XSQ Associates of £16 million during 2007 (2006: £19 million, 2005: £18 million) in respect of rent, operating expenses, taxes, insurance and other obligations.

Factiva

On 15 December 2006, Reuters disposed of the majority of its investment in Factiva. Prior to this disposal, Factiva and Reuters each provided a variety of services to the other through a number of commercial arrangements. Factiva hosted and maintained Reuters pictures archiving service, permitted Reuters to incorporate Factiva content in certain Reuters products, and permitted Reuters staff to access Factiva content. The total cost of the services provided by Factiva to Reuters in 2007 was £nil (2006: £4 million, 2005: £4 million).

Reuters provided Factiva with technical and administrative support services, including use of Reuters premises, facilities, finance and payroll services, provided content, primarily its newswires, to Factiva for incorporation in certain Factiva services, and granted Factiva a trademark licence permitting Factiva to use Reuters name. The total value of the services provided by Reuters to Factiva in 2007 was £nil (2006: £30 million, 2005: £39 million).

Following the disposal of the majority of the investment in Factiva, Reuters will continue to supply content to Factiva under an agreement as a paid supplier and has entered into or continued a number of commercial arrangements with Factiva and Dow Jones, including some of those described above.

In addition to the above amounts, Reuters held a loan payable to Factiva of £10 million at the start of 2006, on which interest was payable at LIBOR. This loan was increased to £12 million during the year and it was all repaid prior to the disposal of the majority of Reuters investment in Factiva.

A-8.81

35 Contingencies and commitments

Contingent liabilities and contingent assets

Except as described below, neither the Group, nor any of its directors, members of senior management or affiliates, is subject to any legal or arbitration proceedings which may have, or have had in the recent past, significant effects on the Group’s financial performance or profitability.

The Group has no contingent assets.

Douglas Gilstrap and Myron Tataryn v. Radianz Ltd., Radianz Americas, Inc., Reuters Limited, Blaxmill (Six) Limited, Reuters C LLC, Reuters America LLC, and British Telecommunications PLC

On 12 September 2005, Radianz’s former CEO Douglas Gilstrap filed a class action lawsuit purportedly on behalf of Radianz option holders against Radianz, Radianz Americas, Inc., Reuters Limited, Blaxmill (Six) Limited, Reuters C LLC, Reuters America LLC and BT in the United States District Court, Southern District of New York, relating to the cash cancellation of Radianz options, in conjunction with Reuters’ sale of Radianz to BT. The complaint does not specify the amount of damages sought. Under the claims and indemnification provision of the Radianz Sale Agreement between BT and Reuters, Reuters elected to take control of the defence of this litigation as to all defendants. On 15 December 2005, a First Amended Complaint was filed which, among other things, added Myron Tataryn, a former Radianz employee based in the UK, as an additional named plaintiff and purported class representative. On 30 January 2006, the defendants filed a motion to dismiss the case in its entirety on forum non conveniens grounds. On 27 July 2006, the United States District Court dismissed the complaint as England is the proper forum for this matter. On 25 August 2006, plaintiffs filed an appeal of the dismissal with the US Court of Appeals for the Second Circuit. Separately, on 7 December 2006 Douglas Gilstrap, along with former Radianz executives Brian Dillon and John Madigan, filed a new lawsuit in the US District Court, Southern District of New York in their individual capacities against Radianz Limited and Radianz Americas for essentially the same claims asserted in the dismissed class action complaint. On 25 May 2007, plaintiffs’ appeal of the dismissal of the class action lawsuit was denied. Then on 10 August 2007 Gilstrap, Dillon and Madigan lawsuit voluntarily dismissed their lawsuit in the Southern District of New York. On 11 August 2007, Gilstrap filed a new lawsuit in an individual capacity with former Radianz employees Thomas McCabe and Myron Tataryn, against Radianz Limited and Radianz Americas, Inc. in Texas state court in Dallas, Texas for essentially the same claims asserted in the federal court. On 22 October 2007, Radianz Limited filed a special appearance in order to preserve its objections to personal jurisdiction and Radianz Americas filed a motion to dismiss the complaint on the basis of forum non conveniens on behalf of Radianz Americas. On 14 January 2008, the Texas state court granted the motion to, pending a decision on whether to make such dismissal conditional upon Radianz Americas waiving a right to recover legal fees against plaintiffs in any action brought in England upon these claims. Subsequently the parties agreed to make the waiver of the right to recover legal fees and costs reciprocal and Radianz Limited agreed to waive its objections to jurisdiction so it could be included within the scope of any dismissal order. Subsequently, on 5 February 2008, the Texas state court entered a judgment dismissing the action as to Radianz Americas and Radianz Limited. Gilstrap, McCabe and Tataryn served Radianz Limited and Radianz Americas with a notice of appeal on 3 March 2008. The Group believes this appeal is without merit and will defend against it vigorously.

Ariel (UK) Limited v. Reuters Group PLC, Reuters C LLC, Reuters Transactions Services Limited, Instinet Group, Incorporated, the NASDAQ Stock Market Inc. and Silver Lake Partners LP

On 16 November 2005, Ariel (UK) Limited brought an action in the United States District Court, Southern District of New York against Reuters Group PLC, Reuters C LLC, Reuters Transactions Services Limited, Instinet Group, NASDAQ and Silver Lake Partners LP, seeking a declaration that a 1975 Agreement between Ariel and Instinet permits Ariel to licence Reuters current patent portfolio to others. The complaint, as amended on 28 February 2006, also claims breach of contract, copyright infringement and requests for declaratory relief. Ariel seeks $50 million compensatory damages from Reuters and Instinet. Reuters answered the complaint and filed a motion to dismiss the case, which was granted on 31 October 2006, dismissing the copyright claims with prejudice and the state law contract claims for lack of jurisdiction. Ariel has filed a notice of appeal to the US Court of Appeals for the Second Circuit. The Group believes the claims are without merit and intends to defend them vigorously.

A-8.82

Capital commitments

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


	2007		2006		2005
	£m		£m		£m

Property, plant and equipment		14		10		16
Intangible assets		26		9		13
Total capital commitments		40		19		29

Group’s share of contingent liabilities and commitments in respect of associates and joint ventures

The Group’s share in contingent liabilities and commitments in relation to its interest in associates and joint ventures was £nil (2006: £nil, 2005: £nil).

Warranties and indemnities

During 2005, the Group has disposed of a number of its investments and provided standard warranties and indemnities as part of the sale and purchase agreements. The likelihood of the Group incurring any liability in relation to these is considered remote, therefore no provisions have been recorded and no disclosure is presented in the financial statements.

Operating lease payables

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


	2007		2006		2005
	£m		£m		£m

Year ended 31 December
2006		—		—		79
2007		—		88		74
2008		94		79		63
2009		85		70		54
2010		73		60		51
2011		62		55		47
2012 (and thereafter for 2005 comparatives)		56		51		305
2013 and thereafter		280		249		—
Total operating lease payables		650		652		673

At the inception of each arrangement involving use of an asset, an assessment is made to establish whether the arrangement contains a lease. Once established, the lease is assessed to classify as either an operating lease or finance lease. This involves making an assessment concerning whether the arrangement substantially transfers the risks and rewards of asset ownership to the Group, in which case it would be treated as a finance lease (refer note 14). Where the arrangement does not result in the transfer of substantially all of the risks and rewards, the arrangement is classified as an operating lease.

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At 31 December 2007, future minimum sublease payments expected to be received under non-cancellable subleases were £2 million (2006: £96 million, 2005: £114 million).

The Group leases various facilities under non-cancellable operating lease agreements. The leases have various terms, escalation clauses and renewal rights. The Group also leases equipment under non-cancellable operating lease agreements.

During the year, Reuters entered into an outsourcing arrangement with Fujitsu Services Limited for the provision of IT services over 10 years for approximately £530 million. Over the life of the contract, it is expected that £72 million will be paid in respect of leasing arrangements, of which £14 million is committed to as at 31 December 2007.

36 Acquisitions

Acquisition of Feri Fund Market Information Limited

On 31 July 2007, a Group company acquired Feri Fund Market Information Limited and its wholly owned subsidiary FI Datenservice GmbH. In accordance with IFRS 3 ‘Business Combinations’, this transaction has been accounted for as an acquisition.


	Book			Fair value			Provisional
	value			adjustments			fair value
	£m			£m			£m

Non-current assets:
Intangible assets		—			8			8
Current assets:
Cash and cash equivalents		2			—			2
Current liabilities		(2	)		—			(2	)
Non-current liabilities
Deferred tax		—			(2	)		(2	)
Net (liabilities)/assets acquired		—			6			6
Goodwill								6
Total consideration								12
Consideration satisfied by:
Cash								12

Goodwill represents the value of synergies arising from the acquisition.

The net assets of the company have been incorporated into the Research & Asset Management division.

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


	£m

Cash consideration		12
Cash acquired		(2	)
Total outflow of cash and cash equivalents		10

A-8.84

Acquisition of ClearForest Limited

On 6 June 2007, a Group company acquired ClearForest Limited and its wholly owned subsidiary ClearForest Corp. In accordance with IFRS 3 ‘Business Combinations’, this transaction has been accounted for as an acquisition.


	Book			Fair value			Provisional
	value			adjustments			fair value
	£m			£m			£m

Non-current assets:
Intangible assets		—			6			6
Current assets:
Other current assets		1			—			1
Current liabilities		(2	)		—			(2	)
Non-current liabilities
Deferred tax		—			(2	)		(2	)
Net liabilities acquired		(1			4			3
Goodwill								7
Total consideration								10
Consideration satisfied by:
Cash								10

Goodwill represents the value of synergies arising from the acquisition. Net assets of the company have been incorporated into the Sales & Trading and Enterprise divisions.

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


	£m

Cash consideration		10
Total outflow of cash and cash equivalents		10

A-8.85

Other acquisitions

Reuters acquired certain trade and assets from Thomas Weisel Partners LLC and Anián LLC on 28 February 2007, and Stylianou LLC in May 2007. The Group also purchased the share capital of EnergyBankLink Pty on 21 September 2007.

Book

Fair value

Provisional

value

adjustments

fair value

£m

Non-current assets:

Intangible assets

—

Net assets acquired

—

Goodwill

—

Total consideration

The fair value adjustments in respect of intangible assets are due to the recognition of £1 million in respect of intellectual property of the Anián product.

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


	£m

Cash consideration		1
Total outflow of cash and cash equivalents		1

From the date of acquisition to 31 December 2007, the acquisitions contributed £2.2 million to revenue, £1.4 million profit before interest and amortisation of intangibles and incurred a £1.3 million profit before amortisation, but after interest.

If the acquisitions had been made at the beginning of the financial year, they would have contributed £5 million to revenue and £1.7 million to profit. This information takes into account the amortisation of acquired intangible assets and the effect of taxation.

37 Disposals

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


	2007		2006		2005
	£m		£m		£m

On disposal of subsidiary undertakings		3		4		4
On disposal of associates, joint ventures and available-for-sale financial assets		21		76		38
Recorded in the income statement		24		80		42

A-8.86

In 2007, gains on disposal of associates, joint ventures and available-for-sale financial assets relate to the Group’s disposal of its investment in Intralinks Inc (£18 million) and further gains relating to the sale of Factiva (£3 million) in 2006. Gains on disposal of subsidiary undertakings relate to a number of small disposals and include £2 million deferred proceeds on the disposal of RVC in 2004.

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

In 2005, gains on disposal of associates, joint ventures and available-for-sale financial assets include £4 million arising from the Group’s disposal of its holding in Quick Corporation and £33 million in respect of the part-disposal of shares in TSI. Gains on disposal of subsidiary undertakings mainly comprise an £8 million gain on disposal of a number of UK entities partly offset by a £6 million loss on disposal of the Reuters Portfolio Management System (RPMS) business. In 2005, Reuters also disposed of its holdings in Radianz and Instinet Group. These subsidiaries were treated as discontinued operations in accordance with IFRS 5 and are therefore disclosed separately in note 7.

38 Post balance sheet events

During the period 1 January 2008 to 14 March 2008, Reuters purchased 31 million shares for total consideration of £188 million, as part of the share buy-back programme announced in December 2007.

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

Total number

of shares

purchased as

part of

Total cost of

publicly

Average price

announced

paid per

purchased

Month

programme

share (£)

(£m)

January

20,975,000

5.99

127

February

6,965,000

6.03

March

3,100,000

6.00

Included above are 28 million shares which the Group has irrevocable commitments to purchase at 31 December 2007. In accordance with the Group’s accounting policy, the cost of these shares (£169 million) has been recorded in the balance sheet at 31 December 2007 and reported as a current liability with a corresponding deduction from shareholders’ equity.

On 19 February 2008, regulatory approval was granted for the Thomson-Reuters transaction, subject to certain conditions, at which date the current share buyback programme was suspended. On 10 March 2008, the resumption of the share buyback programme was announced with the intention of repurchasing up to 17 million shares, representing the balance of the 50 million programme, between 10 March 2008 and the closing of the transaction.

On 31 January 2008, Reuters acquired 100% of the share capital of Starmine Corporation, a provider of proprietary web-based products to assist financial analysts and portfolio managers manage research and value stocks, for consideration of $97 million payable in cash. The purchase price allocation has yet to be finalised.

A-8.87

On 15 May 2007, Reuters and Thomson entered into a definitive agreement (the “Implementation Agreement”) under which Reuters agreed to be acquired by Thomson by implementing a dual listed company (“DLC”) structure (the “Transaction”). Under the DLC structure, Thomson Reuters will have two parent companies, both of which will be publicly listed: Thomson Reuters PLC, a new English company in which existing Reuters Shareholders will receive shares as part of their consideration in the Transaction (together with £3.525 in cash per Reuters ordinary share), and The Thomson Corporation, a Canadian company which will be renamed Thomson Reuters Corporation. Those companies will operate as a unified group pursuant to contractual arrangements as well as provisions in their organisational documents. Under the DLC structure, shareholders of Thomson Reuters Corporation and Thomson Reuters PLC will both have a stake in Thomson Reuters, with cash dividend, capital distribution and voting rights that are comparable to the rights they would have if they were holding shares in one company carrying on the Thomson Reuters business. The transaction is expected to complete on 17 April 2008, subject to shareholder consent, court approvals and other customary closing conditions.

A-8.88

39 Significant subsidiary undertakings, joint ventures and associates

The principal subsidiary undertakings, joint ventures and associates at 31 December 2007, all of which are included in the consolidated financial statements, are shown below:

Principal area of

Percentage of equity

Subsidiary undertakings

Country of incorporation

operation

shares held

Reuters AG

Germany

100

Reuters America Holdings Inc*

USA

Worldwide

100

Reuters America LLC

USA

100

Reuters Australia Pty Limited

Australia

100

Reuters BV

Netherlands

100

Reuters Canada Limited

Canada

Canada/USA

100

Reuters Europe SA

Switzerland

Spain/Portugal

100

Reuters France SAS

France

100

Reuters Finance PLC*

100

Reuters Group Overseas Holdings (UK) Ltd*

Worldwide

100

Reuters Holdings Limited*

100

Reuters Hong Kong Limited

Cook Islands

Hong Kong

100

Reuters International Holdings SARL*

Switzerland

Worldwide

100

Reuters Investments Limited*

100

Reuters Italia SpA

Italy

100

Reuters Japan Kabushiki Kaisha

Japan

100

Reuters Limited

Worldwide

100

Reuters Middle East Limited

Cook Islands

Middle East

100

Reuters Nederland BV*

Netherlands

100

Reuters Research Inc

USA

100

Reuters SA

Switzerland

Worldwide

100

Reuters Singapore Pte Limited

Singapore

100

Reuters Svenska AB

Sweden

100

Reuters Transaction Services Limited

Worldwide

100

Principal area of

Percentage of equity

Joint ventures

Country of incorporation

operation

shares held

3 Times Square Associates LLC

USA

FXMarketSpace Limited

Worldwide


*		Denotes investment companies. All other entities are operating companies.

**		The Group has an equity shareholding of 50% in 3 Times Square Associates LLC. However, Reuters has an effective economic interest of 35% at 31 December 2007.

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

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

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

Reuters has a 26% holding in Times Global Broadcasting Company Limited. This was reclassified as held for sale in 2007.

A-8.89

40 Reconciliation to Canadian GAAP as applied by The Thomson Corporation

Summary of differences between IFRS (as adopted by the EU) and Canadian GAAP

Reuters consolidated financial statements for the year ended 31 December 2007 have been prepared on the basis of IFRS, which differs in certain respects from Canadian GAAP as applied by Thomson in its audited financial statements for the year ended 31 December 2007.

The following reconciliation presents the effect of material differences between Reuters IFRS accounting policies and Thomson Canadian GAAP accounting policies on the profit and shareholders’ equity of Reuters for the year ended 31 December 2007.

Reconciliation of net earnings for the year ended 31 December 2007


		For the year ended
		31 December 2007
		£m

Profit as previously reported by Reuters under IFRS			227
Differences in GAAP increasing / (decreasing) reported profit:
Business combinations	1		(4	)
Other intangibles	2		(2	)
Employee benefits — pensions	3		(161	)
Stock-based compensation	4		3
Derivative instruments and hedging activities	5		(12	)
Sale and leaseback transactions	7		—
Property, plant and equipment	8		(16	)
Joint ventures and associates	9		—
Restructuring	10		7
Taxation	12		46
Net earnings under Thomson Canadian GAAP accounting policies			88

Reconciliation of shareholders’ equity as at 31 December 2007


		As at
		31 December 2007
		£m

Shareholders’ equity as previously reported by Reuters under IFRS			138
Differences increasing / (decreasing) reported shareholders’ equity:
Business combinations	1		105
Other intangibles	2		(6	)
Employee benefits — pensions	3		251
Stock-based compensation	4		10
Derivative instruments and hedging activities	5		(28	)
Investments	6		(2	)
Sale and leaseback transactions	7		(2	)
Property, plant and equipment	8		—
Joint ventures and associates	9		2
Restructuring	10		(5	)
Shares to be repurchased	11		169
Taxation	12		(65	)
Shareholders’ equity under Thomson Canadian GAAP accounting policies			567

A-8.90

The following is a description of the nature of the differences presented in the above reconciliations.

1. Business combinations

Goodwill amortisation

Prior to the adoption of IFRS by Reuters on 1 January 2004, goodwill arising on acquisitions before 1998 and accounted for under the purchase method was eliminated against equity. Goodwill arising on acquisitions from 1998 to 31 December 2003 was capitalised and amortised over its useful life.

Under IFRS, from 1 January 2004, goodwill arising on acquisitions made by Reuters is no longer amortised and is allocated to cash-generating units and assessed for impairment at least annually. Reuters has elected not to apply IFRS 3 ’Business combinations’ retrospectively to business combinations that took place prior to the group’s 1 January 2004 transition date to IFRS, and amortisation arising prior to transition has not been reversed. Goodwill arising on acquisitions before 1 January 2004 remains at its previous carrying value at the date of transition to IFRS.

Under Canadian GAAP, prior to the adoption of Handbook Section 3062 —‘Goodwill and other intangible assets’, Thomson amortised goodwill over its estimated useful life. Following adoption of Handbook Section 3062 from 1 January 2002, goodwill was no longer subject to amortisation under Thomson Canadian GAAP accounting policies, but assessed for impairment at least annually. A GAAP difference therefore arises in respect of the carrying amount of goodwill at each balance sheet date.

Contingent purchase consideration

Under IFRS, contingent purchase consideration is recognised by Reuters when it is probable that the contingency will be met and the amount can be reliably measured, whereas under Thomson Canadian GAAP accounting policies, contingent purchase consideration is recognised when the amount can be reliably measured, and the outcome of the contingency is determined beyond reasonable doubt. This reconciling item shows the impact of adjusting the goodwill and related liability recorded by Reuters in respect of this difference.

Other intangibles

Prior to the adoption of IFRS on 1 January 2004, identifiable intangible assets were recognised separately providing they had a ‘readily ascertainable market’ and were amortised over their useful lives. This definition precluded the recognition of certain customer lists. These lists would meet the recognition criteria under IFRS; however Reuters elected not to apply IFRS 3 — ‘Business combinations’ retrospectively in accordance with an exemption outlined in IFRS 1 —‘First-time Adoption of International Financial Reporting Standards’, and as such these assets were not recognised on adoption of IFRS.

Under Thomson Canadian GAAP, these customer lists met the recognition criteria of Handbook Section 1581 —‘Business Combinations’ and have resulted in a historic difference in carrying value that will be amortised over the estimated useful life of these assets.

2. Other Intangibles

Under Thomson Canadian GAAP accounting policies costs incurred in the development of computer software to be sold externally are capitalised within “other non-current assets” and amortised through cost of sales. Development costs in respect of software generated for internal use are capitalised within “computer software” and amortised through depreciation expense. Under IFRS, Reuters capitalises all such costs within intangible assets and recognises amortisation expense within the amortisation expense line, therefore relevant amounts have been reclassified as part of the reconciliation.

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Furthermore, under IFRS Reuters capitalises certain intangible assets that would not be capitalised under Thomson Canadian GAAP accounting policies. Reuters then systematically amortises these assets over their useful economic lives (normally between three and five years). This adjustment shows the impact of writing off the net book value of such intangible assets.

3. Employee benefits— Pensions

Under both IFRS and Canadian GAAP, the defined benefit pension obligation is determined using the Projected Unit Credit Method. Plan assets are measured at fair value.

Under IFRS, Reuters recognises actuarial gains and losses immediately on the balance sheet with a corresponding charge or credit recorded in the statement of recognised income and expense. The balance sheet asset or liability recognised therefore equates to the actual surplus or deficit in each plan. Under Thomson Canadian GAAP accounting policies, actuarial gains and losses are not recognised immediately, but rather are deferred and recognised in the income statement over the average remaining service life of the active members. Furthermore, cumulative gains and losses are not recognised at all to the extent that they fall inside a “corridor” calculated as 10% of the greater of the defined benefit pension obligation and the fair value of plan assets at the beginning of the year. As a result, the balance sheet asset or liability under Canadian GAAP does not equal the actual surplus or deficit in each plan and the shareholders’ equity reconciliation therefore recognises a significant asset representing actuarial losses yet to be amortised through the income statement under Canadian GAAP.

Under IFRS, a pension scheme surplus can only be recognised as an asset on the balance sheet to the extent that it is recoverable through a reduction in future contributions or return of scheme assets. Changes in the asset restriction from year to year are recognised through the statement of recognised income and expense. Under Thomson Canadian GAAP accounting policies, an adjustment (“valuation allowance”) must be made to the balance sheet asset or liability for any surplus that is not recoverable at the reporting date. The calculation of the recoverable surplus is similar to that under IFRS. A change in the valuation allowance is recognised in earnings for the period in which the change occurs. The reconciliation of net income for the year ended 31 December 2007 recognises a significant expense representing the valuation allowance resulting from unrecoverable surplus taken to the income statement under Canadian GAAP. Under IFRS, the equivalent charge is recognised in the statement of recognised income and expense.

Under IFRS, Reuters recognises past service costs as an expense on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits are already vested immediately following the introduction of, or changes to, a defined benefit plan, past service costs are recognised immediately. Under Thomson Canadian GAAP accounting policies, past service costs arising from plan amendments are amortised on a straight-line basis over the average remaining service period of active employees expected to benefit under the plan at the date of the amendment.

Reuters recognises gains or losses on the curtailment of a defined benefit plan when the curtailment occurs. Under Thomson Canadian GAAP accounting policies, a curtailment loss is recognised in earnings when it is probable that a curtailment will occur and the net effects are reasonably estimable, and a curtailment gain is recognised in earnings when an event giving rise to a curtailment has occurred.

4. Stock-based compensation

Differences in adoption dates

Under IFRS, compensation charges are recorded for equity-settled employee share options or awards made after 7 November 2002 but not vested at 1 January 2005. Under Canadian GAAP, CICA 3870— ‘Stock Based Compensation’ is applied to equity options or awards not vested from 1 January 2004, although early adoption was permitted. Thomson applied CICA 3870 retrospectively from 1 January 2003.

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Therefore under IFRS, fewer options or awards are within scope than under Canadian GAAP. This adjustment reflects the additional charge under Thomson Canadian GAAP accounting in respect of options or awards granted by Reuters before 7 November 2002 but not vested at 1 January 2004. Prior period retrospective adjustments would offset in reserves therefore there is no opening adjustment in 2004.

Cash-settled stock options and awards

Under IFRS, options or awards that will be cash-settled are classified as liabilities by Reuters and valued on a fair value basis, with changes in fair value taken to the income statement at each reporting period. Under Thomson Canadian GAAP accounting policies, such options or awards are also classified as liabilities, but are valued on an intrinsic value basis with the movement being reflected in the income statement. This adjustment reflects this difference between the measurement of such options or awards on a fair value basis by Reuters and on an intrinsic value basis under Thomson accounting policies.

National Insurance (social security costs) on stock options and awards

Under IFRS, the liability for National Insurance (social security costs) on stock options/awards is accrued by Reuters based on the fair value of the options/awards on the date of grant and adjusted for subsequent changes in the market value of the underlying shares. Under Canadian GAAP, this expense is recorded by Thomson upon exercise of the stock options/awards. This adjustment reverses the liability recognised by Reuters and the impact of this difference on the charge in the income statement.

Forfeitures

Under IFRS, Reuters is required to estimate the number of awards expected to vest and to revise the estimate, if necessary, if subsequent information indicates that actual forfeitures are likely to differ from previous estimates. Under Canadian GAAP, Thomson recognises forfeitures of awards as they occur. The adjustment results in a higher expenditure under Thomson Canadian GAAP accounting policies in the years prior to forfeiture as compared to that of IFRS.

5. Derivative instruments and hedging activities

Hedge accounting

Under IFRS, Reuters has designated certain derivatives as hedges of foreign net investments and fair value hedges of borrowings. For net investment hedges, fair value movements arising from these derivatives are recognised in a hedging reserve, until transferred to the income statement on disposal or impairment of the underlying item. For fair value hedges, fair value movements are adjusted in the carrying value of borrowings; movements in the fair value of fair value hedges are recognised in the income statement, together with movements in the fair value of the item being hedged. To the extent that hedges are ineffective, gains and losses are recognised in the income statement.

Reuters has not designated any of its derivative instruments as qualifying hedge instruments under Thomson Canadian GAAP accounting policies. Accordingly, under Thomson accounting policies changes in the fair value of all of Reuters derivative and embedded derivative instruments have been included within the income statement.

Embedded derivatives

Under IFRS, IAS 39 grants an exemption from the requirement to recognise embedded foreign currency derivatives where the currency is commonly used in the economic environment of the host contract. Under Thomson Canadian GAAP accounting policies such an exemption has not been adopted. Therefore Reuters identifies and separately accounts for more embedded derivatives under Thomson accounting policies than it does under IFRS.

A-8.93

In addition the fair value of certain embedded derivatives differs under Thomson accounting policies in that, under Canadian GAAP, only the minimum contractual portion of a contract that has a determinable notional amount is separated from the host contract and accounted for as a derivative instrument, whereas, under IFRS, the amount separated can be the expected cash flows.

6. Investments

Under IFRS, prior to the adoption of IAS 32— ‘Financial Instruments: Disclosure and Presentation’ and IAS 39 —‘Financial Instruments: Recognition and Measurement’ on 1 January 2005, Reuters held fixed asset investments in the balance sheet at cost, net of permanent diminution in value as assessed by the directors.

Following the adoption of IAS 32 and IAS 39, Reuters initially recognises available-for-sale financial assets and financial assets held for trading at fair value and subsequently remeasures at fair value. Reuters has classified all of its marketable securities as available-for-sale, with the exception of its investment in Savvis, which was classified as a financial asset at fair value through profit or loss, before being disposed of in 2005.

Under Thomson Canadian GAAP accounting policies, investments in available-for-sale assets are measured at fair value and those which do not have a readily determinable fair value (i.e. a quoted market price in an active market) are carried at historical cost.

7. Sale and leaseback transactions

Under IFRS, where gains and losses arise from transactions qualifying as sale and operating leasebacks, such gains and losses on the sale of the properties and rental expenses associated with subsequent leasebacks are recognised by Reuters in the income statement.

Under Canadian 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, while lease rental payments are offset against the liability as they are made. The differences between the initial proceeds received and subsequent rental payments are recorded as financing costs over the term of the lease. This reconciling item shows the net effect of these adjustments on Reuters profit and shareholders’ equity.

8. Property, plant and equipment

Under Thomson Canadian GAAP policies, the capitalisation thresholds and assessments of Useful Economic Lives (UELs) differ for certain asset categories. This reconciling item capitalises certain items that have been expensed under Reuters IFRS accounting policies and also adjusts UELs to align the policies adopted.

Under IFRS, gains resulting from the sale and operating leaseback of property, plant and equipment are recognised at the point of sale where the transactions occur at fair value. Under Canadian GAAP gains are deferred in proportion to the rental payments over the lease period.

9. Joint ventures and associates

As described in item 1 above, the carrying value of goodwill under Thomson Canadian GAAP accounting policies will differ due to different adoption dates of relevant accounting standards.

Deferred gain on assets contributed to joint ventures

Prior to the adoption of IFRS on 1 January 2004, where the fair value of assets contributed by Reuters to joint ventures and associates was greater than the book value, the difference was recognised in reserves. This reconciling item recognises the release of this gain to the income

statement over the anticipated life of the long-lived assets contributed to the venture in accordance with Thomson Canadian GAAP accounting policies.

Proportionate consolidation

Reuters adopts equity accounting for its joint ventures. Under Canadian GAAP, interests in joint ventures should be recognised in the financial statements of the venturer using the proportionate consolidation method. This difference is a presentation difference only, and does not impact net profit or shareholders’ equity.

10. Restructuring

Under IFRS, Reuters recognises provisions for restructuring charges other than termination benefits; once it has a present obligation (legal or constructive) to incur the costs as a result of a past event, it is probable that an economic outflow will be required, and a reliable estimate can be made. A constructive obligation is considered to exist when a detailed formal plan is in place and a valid expectation has been raised in those affected. Reuters recognises termination benefits when it is demonstrably committed to a plan of termination when, and only when, it has a detailed formal plan (with specified minimum contents) for the termination, and there is no realistic possibility of withdrawal. Provisions for costs associated with the exit of a property are recognised once the intention to exit has been announced.

Under Thomson Canadian GAAP accounting policies, employee severance costs that are not one-time termination charges are recognised when it is probable that these costs will be incurred and the amount is capable of being estimated. Charges for costs associated with the exit of properties are recognised upon vacating the property or legal termination of the lease contract.

Under IFRS, liabilities for terminating or reducing the activities of an acquired company are only
recognised as part of allocating the cost of a combination if they exist at the date of acquisition and meet certain recognition criteria. Provisions for future losses or other costs expected to be incurred as a result of a business combination are not recognised.

Under Thomson Canadian GAAP accounting policies, certain costs incurred in respect of exit activities and integration are recognised as part of purchase accounting if specified conditions are met.

11. Shares to be repurchased

Under IFRS, Reuters recognises a liability in respect of irrevocable commitments made to purchase Reuters Group PLC shares as part of its publicly-announced buy-back programme during the post balance sheet close period. A corresponding reduction in shareholders’ equity is also recorded.

Under Thomson Canadian GAAP accounting policies, this commitment is not recorded as a liability and reduction to shareholders’ equity as there is no fixed price or fixed number of shares and the counterparty has not purchased any shares as at the balance sheet date.

12. Taxation

Deferred tax adjustments in the IFRS to Canadian GAAP reconciliation are primarily the result of the deferred tax impact of the other GAAP adjustments made in the reconciliation.

Stock-based compensation

Reuters recognises a deferred tax asset for the stock based compensation charge based on the intrinsic value of the related share awards and adjusts the deferred tax asset at each balance sheet date for subsequent changes in the market value of the underlying shares. Under Thomson Canadian GAAP accounting policies deferred tax assets are recognised over the service period based on the compensation charge. Any realised tax deductions in excess of the related compensation charge are recognised in Additional Paid In Capital (APIC). These windfall tax benefits are pooled and can be used to offset shortfalls in deductions related to other share awards. Windfall tax benefits can only enter the APIC pool to the extent they are realised.

Intercompany transactions

Under Thomson Canadian GAAP accounting policies, tax paid as a result of the transfer of an asset which does not leave the group is recorded as an asset in the financial statements until the asset leaves the group or is otherwise utilised. Under IFRS, Reuters recognises such tax in the income statement.

Accounting for uncertainty in income taxes

With effect from 1 January 2007, Thomson has adopted a new accounting policy under Canadian GAAP for accounting for uncertainty in income taxes. The policy requires that an entity evaluates uncertain tax positions using a two-step process:

First, Thomson determines whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. In evaluating whether a tax position has met the more-likely-than-not recognition threshold, Thomson presumes that the position will be examined by the appropriate taxing authority that has full knowledge of all relevant information.

Second, a tax position that meets the more-likely-than-not recognition threshold is measured to determine the amount of benefit to recognise in the financial statements. The tax position is measured at the largest amount of benefit with greater than a 50 per cent. likelihood of being realised upon ultimate settlement. If the tax position does not meet the more-likely-than-not recognition threshold, no benefit from the tax position is recorded.

Thomson was not able to retroactively apply this new policy as the data to determine the amounts and probabilities of the possible outcomes of the various tax positions that could be realised upon ultimate settlement was not collected in prior periods. Further, significant judgments are involved in assessing these tax positions and Thomson concluded that it is not possible to estimate the effects of adopting the policy at an earlier date.

Under Reuters IFRS accounting policies no such prescription exists, and the measurement of uncertain tax positions is assessed by management based on their best estimate of the likely outcome.

For periods prior to 1 January 2007, Thomson’s Canadian GAAP accounting policy for uncertain tax positions was consistent with IFRS. Therefore, the related reconciling item impacts 2007 only. On adoption of the new Thomson Canadian GAAP accounting policy for accounting for uncertainty in income taxes, Reuters booked a credit of £23 million to retained earnings to reflect the cumulative effect of adoption of the standard.

Thomson recognises interest and penalties on underpayment of income taxes as an income tax expense.

13. Additional disclosures required by Canadian GAAP

Goodwill

Movements in the goodwill balance for the year ended 31 December 2007 by segment are set out below:


							Research & Asset
	Goodwill			Sales & Trading			Management			Enterprise		Media
	£m			£m			£m			£m		£m

Cost:
01 January 2007		315			164			121			25		5
Exchange differences		(1	)		(1	)		(1	)		1		—
Additions:
Acquisition of subsidiaries		13			4			6			3		—
Other additions		—			—			—			—		—
Reclassifications		—			—			—			—		—
31 December 2007		327			167			126			29		5

Amortisation and impairment:
01 January 2007		(18	)		(18	)		—			—		—
Exchange differences		—			—			—			—		—
Charged in the year:
Amortisation		—			—			—			—		—
Impairment		—			—			—			—		—
Reclassifications		—			—			—			—		—
31 December 2007		(18	)		(18	)		—			—		—
Carrying amount:
31 December 2006		297			146			121			25		5
31 December 2007		309			149			126			29		5


By geographical location:
Europe, Middle East & Africa			89
Americas			193
Asia			27

			309

The total amount of goodwill deductible for tax purpose is £nil.

Interest

The interest charge of £151 million for the year ended 31 December 2007 includes £126 million in respect of debt incurred for a term of more than one year.

Provisions

The table below sets out an analysis of the rationalisation provision by segment:


	Rationalisation						Research & Asset
	provisions			Sales & Trading			Management			Enterprise			Media
	£m			£m			£m			£m			£m

1 January 2007		95			58			15			17			5
Exchange differences		1			1			—			—			—
Charged in the year		14			9			2			2			1
Utilised in the year		(32	)		(23	)		(2	)		(7	)		—
Released		(10	)		(7	)		(2	)		(1	)		—
Provisions acquired through business combinations		—			—			—			—			—
Reclassifications		—			—			—			—			—
Unwinding of discount		1			1			—			—			—
31 December 2007		69			39			13			11			6

The recognition of provisions, both in terms of timing and quantum, requires the exercise of judgement based on the relevant circumstances, which can be subject to change over time.

Also included within the rationalisation provision at the end of 2007 are obligations related to the Fast Forward programme which was first announced in 2003 and the Telerate integration programme which began in June 2005. Both programmes included headcount reduction and property rationalisation. Severance related provisions have been substantially utilised by the end of 2007. Property related provisions will be utilised over the remaining lease periods.

Tax

At 31 December 2007, Reuters had UK tax losses carried forward of £351 million and tax losses carried forward in other jurisdictions of £334 million. If not utilised, the UK tax losses can generally be carried forward indefinitely. Swiss losses of £207 million will expire if not used by 2011, and US tax losses of £88 million will expire over the period 2016 to 2022. The majority of other tax losses can be carried forward indefinitely.

The ability to recognise the tax benefits of losses is dependent upon a number of factors, including the future profitability of operations in jurisdictions in which the tax losses arose.

Additionally, Reuters has approximately £1.9 billion of UK capital losses carried forward that may only be recognised when used in offsetting future UK capital gains.

No deferred tax has been recognised in respect of £131m of these losses, represented by the £88 million of losses in the US, which will expire over the period 2016 to 2022, together with £21 million in the UK and £22 million in other territories, the majority of which losses can be carried forward indefinitely.

Share options

For options granted during the year the market price of the stock on grant date, the weighted average exercise prices and the weighted average fair value of options are disclosed below:


			Market price of	Weighted average	Weighted average
	Date	Number granted	Reuters share	exercise price	fair value

SAYE 25	3^rd April 07	4,470,556	£4.82	£3.52	£1.67
DSOP March 2007	13^th March 07	2,023,720	£4.38	£4.42	£1.53
DSOP August 2007	7^th Aug 07	1,250,000	£6.20	£6.19	£0.44
RSP March 2007	13^th March 07	4,654,928	£4.38	£0.00	£4.13
RSP August 2007	7^th Aug 07	275,736	£6.20	£0.00	£6.14
LTIP March 2007	13^th March 07	3,031,936	£4.38	£0.00	£2.95
LTIP August 2006	7^th Aug 07	44,288	£6.20	£0.00	£6.75

Earnings per share

The following table provides the securities that could potentially dilute basic earnings per share in the future but that were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive:


Number of shares:
Share options	Nil

A-8.99


Commission File Number: 1-31349		Commission File Number: 333-08354
THOMSON REUTERS CORPORATION		THOMSON REUTERS PLC
(Translation of registrant’s name into English)		(Translation of registrant’s name into English)


THOMSON REUTERS CORPORATION (Registrant)
By:	/s/ Marc E. Gold
	Name:	Marc E. Gold
	Title:	Assistant Secretary

THOMSON REUTERS PLC (Registrant)
By:	/s/ Marc E. Gold
	Name:	Marc E. Gold
	Title:	Assistant Secretary


Exhibit Number		Description

99.1		Business Acquisition Report of Thomson Reuters Corporation dated May 15, 2008

Table of Contents

Table of Contents

Table of Contents


SIGNATURES
EXHIBIT INDEX
EX-99.1: BUSINESS ACQUISITION REPORT OF THOMSON REUTERS CORPORATION


		Page

Report of Independent Registered Public Accounting Firm to the Shareholder of Reuters Group Limited (formerly Reuters Group PLC)		A-2

Consolidated income statement for the years ended 31 December 2007, 2006 and 2005		A-3

Consolidated statement of recognised income and expense for the year ended 31 December 2007, 2006, and 2005		A-4

Consolidated balance sheet as of 31 December 2007, 2006 and 2005		A-5

Consolidated cash flow statement for the years ended 31 December 2007, 2006 and 2005		A-6

Group Accounting Policies		A-7.1

Notes to the financial statements		A-8.1