SECURITIES
AND EXCHANGE COMMISSION
Washington, DC 20549
_________________
FORM 6-K
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
March 30, 2004
REUTERS
GROUP PLC
(Translation of registrant’s name into English)
85 FLEET STREET, LONDON EC4P 4AJ,
ENGLAND
(Address of principal executive offices)
[Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.]
Form 20-F 
Form
40-F 
[Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.]
Yes No
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| REUTERS GROUP PLC (Registrant) |
|
| Dated: March 30, 2004 | By: /s/ Rosemary Martin |
Exhibit Index |
|
| Exhibit Number | Exhibit List |
| 99.1 | Reuters Annual Review 2003 |
| 99.2 | Reuters Notice of 2004 Annual General Meeting |
Exhibit 99.1
The bigger picture
Reuters Annual Review 2003
Financial highlights
Reuters Group
| 2003 | 2002 | % | |||||
| £m | £m | Change | |||||
| Revenue | 3,197 | 3,575 | (11% | ) | |||
| Operating profit/(loss) | 126 | (144 | ) | – | |||
| Profit/(loss) before tax | 49 | (493 | ) | – | |||
| Profit/(loss) after tax | 27 | (516 | ) | – | |||
| Return on equity | 13.3% | (58.4% | ) | – | |||
| Net debt | (77 | ) | (66 | ) | 17% | ||
| Basic earnings/(loss) per ordinary share | 3.1p | (29.0p | ) | – | |||
| Diluted earnings/(loss) per share | 3.0p | (29.0p | ) | – | |||
| Earnings/(loss) per ADS1,2 | 32.9c | (309.4c | ) | – | |||
| Dividends per ordinary share | 10.0p | 10.0p | – | ||||
| Dividends per ADS2 (see page 28) | 60.0p | 60.0p | – | ||||
| 1 Each American Depositary Share represents six ordinary shares. | |||||||
| 2 A nominal exchange rate of US$1.78= £1 has been used for convenience. |
As used in this annual review, ‘Reuters Group’ and ‘Group’ refer to Reuters Group PLC and its subsidiaries including Instinet Group Incorporated (Instinet Group) and associates and joint ventures. The ‘company’ refers to the parent Reuters Group PLC. ‘Reuters’ refers to Reuters Group excluding Instinet Group.
Five year summary
From the Chairman
This is my 19th and last annual Chairman’s statement. Some perspective is in order.
First, and most important, I am more confident now than I have ever been that Reuters strategy is matched by its ability to implement. The focusing and transforming process which Tom Glocer and his executive team are so ably managing is absolutely necessary to make Reuters properly competitive in its core business. This, in turn, is a prerequisite for expansion in the financial industry or, for that matter, outside of it. I stressed last year the Board’s belief in management’s performance. Since then a great deal more has been accomplished, as this annual review illustrates. Success with Fast Forward (see page 3) cannot be taken for granted. But the omens are good.
Throughout my time as Chairman two related factors have profoundly affected Reuters strategy and its implementation: Reuters long history as a news agency, prior to its explosive growth in the finance industry; and the Reuters Trust Principles.
The management skills and experience required to run a leading news agency can be characterised as deep but narrow. Nevertheless, the native Reuters management rose exceptionally well to the challenge of rapidly expanding the business to meet the demand generated in the financial markets by the
The 1990s were therefore a decade of experiment, learning and adjustment. Forward momentum was maintained but with increasing difficulty in Reuters core business. The Board and executive wrestled with new and large problems in managing the complexity of the business and in responding to competition, to the coming of the internet, and to big changes in the financial industry. Mistakes were made but good things also occurred: Reuters was never seduced by the mirage of ‘the transforming acquisition’; substantial surplus cash was returned to shareholders; and, most important of all, learning from experience continued and led ultimately to the leadership and strategy now in place.
The Reuters Trust Principles, first articulated in 1941 to describe Reuters purpose, stand for objectivity and independence in reporting facts and events. They have remained pervasive in the business ever since, notwithstanding its great expansion in the financial
I warmly welcome my successor, Niall FitzGerald, who brings great international perspective and commercial experience, and I thank all my Board colleagues over the years for their unfailing support, especially John Craven for his valuable assistance in the task of leading the Board. I also gratefully acknowledge on the Board’s behalf the patience, commitment and skill shown by all those working for the continuing health and development of Reuters, in which I have great confidence.
Sir Christopher Hogg
Chairman
Reuters Group PLC Annual Review 2003 1
Reuters at a glance
We provide indispensable information for professionals in the financial services, media and corporate markets.
Our information is trusted and drives decision-making across the globe.
Our reputation is based on speed, accuracy and freedom from bias.
2 Reuters Group PLC Annual Review 2003
Chief Executive’s review
I shall remember 2003 as the year in which our Fast Forward transformation programme was launched and we began to see the first signs of its benefits in our product line, customer service and cost base.
Chris Hogg, in his last Chairman’s statement, has stated his confidence in our future and the importance of the Reuters Trust Principles in shaping our history. Were he a less modest man he would have allowed me to pay him the tribute he deserves in these pages.
My challenge remains how to transform Reuters, not only our cost base and products, but also our culture, without damaging the core values which sustain us: the pursuit of truth, freedom from bias, objectivity and global perspective. In 2003 I began to see the evidence that this was indeed possible.
In terms of financial results, we returned the Group to profit, while exceeding our Fast Forward savings targets and improving the operating margin
(pre-restructuring) of the core Reuters business. The dividend, which at the beginning of the year many feared could not be maintained, was covered by Reuters earnings and operating cash flow.
In the product line, we fulfilled an interim Fast Forward goal of taking the number of information products down from a confusing 1,300 to 550 and we introduced a host of new products to enthusiastic market reception. New versions of 3000 Xtra and BridgeStation convinced customers that we have a strong premium tier offer, and we sold 18,000 new units of 3000 Xtra. In the mid tier, we introduced the easy-to-use Reuters Trader and Reuters Knowledge and integrated the targeted products we obtained in the Multex acquisition. Finally, we made great strides in our Enterprise business by establishing the role of Reuters Market Data System as the market standard in trading room systems and achieving strong growth in our risk management and enterprise information products.
2003 was also the year in which we reversed a trend of recent years and significantly improved Reuters customer service, as borne out by objective client feedback through our customer satisfaction index. This is one facet of culture change at Reuters which I will pursue without apology.
As part of the Fast Forward drive to simplify and streamline Reuters business, we made considerable progress in the portfolio, selling or closing 17 non-strategic units in 2003, 73 since the beginning of 2002, and
concentrating our efforts on our four principal holdings: Factiva, Instinet Group, Radianz and TIBCO Software Inc. (TSI). In February 2004 we completed the sale of the majority of our interest in TSI, realising US$563 million (£311 million) in
net proceeds which we applied to strengthen the Reuters balance sheet. We continue to work closely with the remaining large units to build their value, achieve operating synergies with the rest of the Group and ultimately crystallise value for
Reuters shareholders.
(continued on next page)
| Fast Forward | |
| – | Make our information indispensable |
| – | Move to a new business architecture |
| – | Simplify and segment our product line |
| – | Focus our solutions business |
| – | Reduce and reshape our cost base |
| – | Reinvigorate culture and behaviour |
Reuters Group PLC Annual Review 2003 3
Chief Executive’s review continued
This unfinished business tempers my sense of accomplishment for 2003 and also puts it in perspective.
Tom Glocer
Chief Executive
We have refined our customer
segments so they more
closely match the communities they serve.
| Institutional Sales & Trading The sales and trading community is our largest market. It is the core of our business and covers all financial asset classes. We provide products for customers who deal in the foreign exchange, fixed income, equities, commodities and energy and related markets. We provide news and real-time data, prices, analytics and transaction services which allow users to communicate and trade. Our transaction services are ‘broker-neutral’, enabling buyers and sellers to achieve the best execution prices. Main
products |
Asset
Management & Research In Asset Management & Research we serve all those carrying out company or financial research in banks, asset managers and corporates. Our Reuters Knowledge suite of products is designed for them. We also provide the news, historical data and analytics to help portfolio managers make investment decisions and create portfolios. We have integrated BarraOne™ portfolio risk analysis into 3000 Xtra and BridgeStation to provide additional value to portfolio managers and analysts. Main products |
Enterprise Our Enterprise business targets the complete business organisation as a customer rather than the end-user. We provide systems which allow our customers to pump real-time market data and other information into their proprietary applications and around their organisations. We also provide applications which allow our customers to monitor and manage their risks. Main products |
Media |
4 Reuters Group PLC Annual Review 2003
| More than a theory | |
| We have completed the first year of our three-year Fast Forward transformation programme. We are working hard to become more competitive, more service-driven and more efficient although we still have much to achieve. In everything we do we strive to act with responsibility. |
|
We are developing a range of products better
suited to the needs of our customers. We are
improving content and giving customers the
tools they need to analyse it and the means to
communicate and trade. Our strategy is
to provide
the right products at the right price to meet the
requirements of different users across an enterprise.
This helps our customers lower their information
and technology costs.
Achievements – Launched
new products: Reuters – Introduced
Reuters Market Data – Acquired Multex to add research – Completed exclusive deal with |
Product enhancement |
Iraq news coverage |
“Our
priority is to invest in profitable |
Reuters Group PLC Annual Review 2003 7
| Our customers are at the heart of our business. We are working with them to understand their needs and the way they work and make money. We are investing in better systems, processes and skilled people to improve service and to deliver better value for money. |
Achievements |
|
|
|
 “Customer satisfaction levels improved on a worldwide basis in 2003. We are working hard to make our products easier to use and providing more and better news and information. To ensure that our customers derive maximum value from the products they use, we are very focused on enhancing the service we deliver to each end-user, face-to-face, on the telephone and online.” Christopher Hagman Managing Director, Global Channels |
|||||
| – | Increased customer satisfaction levels | ||||||||
| – | Hired 150 new staff
in customer training and support |
||||||||
| – | Deployed improved
customer relationship management system to provide better service |
||||||||
| – | Created alliances
with MSN, AOL and Lotus, which will enable customers to connect through instant messaging to the broadest possible community |
||||||||
Reuters Group PLC Annual Review 2003 9
We are making good progress in streamlining our operations and simplifying our product line. We remain ahead of our cost savings target. At the same time we are investing in skilled staff and new facilities in growing economies.
| Achievements | |
| – | Decreased Reuters operating cost base in 2003 by 11% |
| – | Removed a quarter of our legacy products from sale |
| – | Transferred our large-scale systems integration and customised development business to Accenture |
London property portfolio
The
majority of our London staff, currently located in 10 properties, will move to
one building at Canary Wharf in 2005. The relocation to
London’s new financial district will generate £5 million in annual
cost savings and a cash benefit of £30
million. This follows the successful move in 2001 of our New York-based staff
to a single building.
Building skills in growing economies
We tripled the number of staff at our development centre in Bangkok in 2003, enabling us to provide product support more cost
effectively. We are establishing a new data production facility in Bangalore, India which is due to become operational in the course of 2004. Recruitment and training are now underway.
“We are developing a single global delivery platform to support Reuters next generation products. This will allow us to lower our operating costs, bring products to market more quickly and reduce the cost of product ownership for our customers. Reuters Knowledge was the first product to be built on the new technology and others will follow in 2004.”
Graham Albutt
President,
Business Programmes
Reuters Group PLC Annual Review 2003 11
We strive always to remain true to the values of integrity, independence and freedom from bias encapsulated in Reuters Trust Principles. We are working at being increasingly efficient, successful and responsible in what we do and how we do it.
| Achievements | |
| – | Launched policy giving employees time for community activities |
| – | Established Reuters Corporate Responsibility Advisory Board as a forum for stakeholders to engage with us on corporate responsibility issues |
| – | Introduced ‘reverse mentoring’ in the US where senior managers partner with employees of diverse ethnic and religious backgrounds to gain insights into the issues they face |
| – | As one of a number of research activities undertaken under the aegis of Reuters Foundation, Reuters AlertNet, the Fritz Institute and Columbia University, New York collaborated on research to find ways of enabling the humanitarian sector to communicate its message |
Global employees’ day
On
11 June 2003 we held an ‘employee day’ with events organised around
the world for our employees to share ideas about the
Fast Forward programme.
“I was greatly impressed by the buzz, the
energy flowing, the goodwill and positive ‘can do’ attitude.” Marc
Duale, Managing Director, Asia.
Providing environmental news
“If we are to achieve true sustainability, then we need access to high quality information about the daily impact that we have on the environment. In our opinion, Reuters is the only organisation covering environmental news on a truly global basis. Over the last eight years Reuters has been the exclusive provider of our World Environment News.” Jon Dee, Founder and Managing Director, Planet Ark.
“We are building on our existing programmes and developing initiatives within Reuters and with partner organisations to find innovative ways to shape our future to benefit our shareholders, our employees, the environment and society.”
Rosemary Martin
General Counsel and Company Secretary
Reuters Group PLC Annual Review 2003 13
| Business review |
Our operations
Reuters
Although we are best known as the largest international multimedia news agency, more than 90% of our revenue derives from our financial services business. Our financial services customers work in the equities, fixed
income, foreign exchange, money, commodities and energy markets.
Our core strengths lie in supplying the content, analytics, trading and messaging capabilities needed to operate in the marketplace.
We also provide financial institutions with specially designed tools to help them reduce risk and distribute and manage the ever-increasing volumes of market data.
We operate our business through customer segments, geographic sales and service channels and shared resources to build, sell and support the products and services our customers need.
Instinet Group
We have a 63% interest in Instinet Group, a publicly listed company. Instinet Group is the largest global electronic agency securities broker. It provides sophisticated electronic trading solutions and execution
services to enable buyers and sellers worldwide to trade securities directly and anonymously with each other.
Review
Reuters
Reuters core revenue falls into three categories: recurring, usage and outright. Recurring revenue, derived primarily from the sale of subscription products, made up 92% of our core revenue in 2003. Usage revenue,
derived principally from trading activities conducted on Reuters Dealing or through Bridge Trading, generated 4% of core revenue. Outright revenue, comprised of once-off sales of information and risk management solutions, represented 4% of core
revenue.
Recurring revenue
Premium products
Our premium products comprise our top international sales and trading desktop applications. They include our flagship Reuters 3000 Xtra product; BridgeStation, a product primarily for the US institutional equities
market; and Dealing 3000, an information and transactions product for the interbank foreign exchange and money markets.
In 2003 our premium product recurring revenue was £730 million, up 10% compared with 2002. The number of users accessing our premium products stood at 103,000 at the end of 2003, reflecting a 10% increase over the course of the year and 6% growth since the end of the third quarter. This increase was driven by installations of 3000 Xtra, which now has 69,000 installed positions.
Mid and lower tier products
Our mid and lower tier products are targeted at users who do not need the sophistication and power of our premium products. They also include domestic and regional products.
The recurring revenue from our mid and lower tier products in 2003 was £272 million, down 16% compared with 2002. Sales of Reuters Knowledge and Reuters Trader, launched in the second half of 2003, are expected to reduce revenue decline in this sector of our business in 2004.
14 Reuters Group PLC Annual Review 2003
2000 and 3000 series products
Our 2000 and 3000 series products are what we term our old or ‘legacy’ products, developed in the 1980s and early 1990s. We intend to withdraw these products over time, migrating customers to new products,
such as Reuters Trader and 3000 Xtra.
In 2003 the recurring revenue from our legacy products was £363 million, down 34% year-on-year. While we lost 28,000 user accesses in this category, a higher proportion of them than expected upgraded to 3000 Xtra, especially towards the end of the year.
Enterprise products
Our enterprise products help our customers manage their risk and distribute market data around their enterprises. We supply datafeeds, information in flexible formats, to power their applications. We also provide
enterprise information products for the back office to help with the valuation of portfolios and other requirements.
The recurring revenue generated from enterprise products was £588 million in 2003, down 3% compared with 2002. Despite the overall decline, we saw revenue growth of more than 50% from our new enterprise information products. Regulatory changes, requiring customers to value their funds more frequently, have increased demand for these products.
Media products
Our media products are designed to serve the needs of the world’s newspapers, television and cable networks, radio stations, websites and consumers. We supply news in text, video, graphics and pictures.
Our media recurring revenues were £142 million in 2003 compared with £148 million in 2002. We saw increased revenues in the first half of 2003 driven by demand for our coverage of the Iraq war and its aftermath but this was offset by lower revenues in the second half as customers balanced their budgets.
The usage revenue from our transaction product, Dealing Matching, and from our US institutional brokerage firm, Bridge Trading, was £103 million. Dealing Matching, which provides the automatic and anonymous matching of bids and offers, saw 9% growth as a result of the continued volatility in the spot and forward foreign exchange markets, product enhancements and a successful campaign to attract euro/dollar liquidity. Bridge Trading revenues declined 46% compared with 2002, reflecting poor market conditions in the first half of 2003 although performance improved in the last quarter.
Outright revenue
Our outright revenue was £105 million, 36% lower than in 2002. The main reasons for this decline were the continuing restrictions on our customers’ IT budgets and our decision to withdraw from the customised
solutions business. We are now focusing on three main areas: risk management, market data systems and treasury solutions. In 2002 we acquired AVT, which helps banks attract liquidity from their customers through automated trading. This contributed
to the 50% growth of our treasury solutions business in 2003. The roll-out of Reuters Market Data System to customers is going well. It is becoming the new market data distribution standard.
Instinet Group
In 2003 Instinet Group’s revenues declined 9% to £540 million compared with a 31% decrease in 2002. This was due primarily to the US dollar weakness and increases in trading volumes being offset by
reductions in pricing.
While trading volume in the US equity markets as a whole has continued to show moderate growth since 2002, Instinet Group’s most significant market, Nasdaq, has experienced a decline since 2001. However, during the last half of 2003, Nasdaq volume increased and remained at a higher level than in 2002. After declining at the end of 2001 and the beginning of 2002, and increasing through the rest of 2002 due to organic growth and especially the acquisition of Island in September, Instinet Group’s market share fluctuated in 2003.
The intense competitive environment within the brokerage business has resulted in price reductions since 2001. In September 2001, Instinet Group reduced average prices by 11% due to a new pricing schedule for US broker-dealer customers. In March 2002 it implemented a new pricing plan for these customers including further reducing prices for trading listed stocks by approximately 60%. In October 2003, it reduced pricing by 37% for routing orders in Nasdaq-listed stocks to other venues through its automated smart order-routing system. Instinet Group continues to monitor future price competition and evaluate its pricing structure as part of its ongoing efforts to maintain and expand its liquidity pool.
Reuters Group PLC Annual Review 2003 15
| Governance and corporate responsibility |
Through sound governance and responsible behaviour we are taking care to protect our heritage of over 150 years of business experience to ensure Reuters thrives for future generations.
Reuters plays a significant role in world affairs as the trusted provider of reliable and insightful news and information in over 150 countries. Our governance structure and our approach to corporate responsibility are designed to ensure we maintain and develop this role.
Board of directors
Sir Christopher Hogg. Chairman of the Board and Nominations Committee. Non-executive Chairman of GlaxoSmithKline plc since May 2002 (non-executive director
since 1993) and a non-executive director of Air Liquide SA since May 2000. Non-executive Chairman of the Royal National Theatre since 1995. Former member of the International Council of JP Morgan from 1988 to 2003. Former Chairman of Courtaulds PLC
from 1980 to 1996 (Chief Executive 1979-1991) and of Allied Domecq PLC (1996-2002). Former non-executive director of the Bank of England (1992-1996). Age 67.
Tom Glocer. Chief Executive. Former Chief Executive of Reuters Information (2000) and President & Senior Company Officer, Reuters America (1998-2000). Appointed Chief Executive Officer, Reuters Latin America in 1997 after serving in Reuters legal department from 1993. Formerly practised law in New York, Paris and Tokyo. Non-executive director of Instinet Group. Member of the International Advisory Panel to the Monetary Authority of Singapore, Corporate Council of the Whitney Museum, The Madison Council of the Library of Congress and of the Leadership Champions Group (Education) of Business in the Community. Age 44.
David Grigson. Finance Director. Joined Reuters in August 2000 from Emap plc where he was Group Finance Director and Chairman of Emap Digital. He is a qualified chartered accountant and a member of the Financial Services Authority Practitioners Panel. Formerly held senior finance roles in the UK and US at Saatchi and Saatchi Plc (1984-1989). Held a number of financial positions at Esso UK from 1980 to 1984. Also a non-executive director of Instinet Group. Age 49.
Devin Wenig. Executive Director since February 2003. Executive Director and President of Customer Segments. President – Investment Banking (2001-2003). Joined Reuters in 1993 as Corporate Counsel, Reuters America and held a number of senior management positions before being appointed President, Reuters Information in January 2001. Also a non-executive director of Instinet Group and Nastech Pharmaceutical Company. Age 37.
Sir John Craven. Senior independent non-executive director and member of the Audit Committee. Non-executive Chairman of Lonmin Plc since 1997. Non-executive Chairman of Fleming Family & Partners. Former member of the Board of Managing Directors of Deutsche Bank AG and former Executive Chairman of Morgan Grenfell Group plc (1989-1997). Former non-executive director of Gleacher & Co LLC, Rothmans International BV, Ducati SpA and Société Générale de Surveillance SA. He is a member of the Canadian and Ontario Institute of Chartered Accountants. Age 63.
Edward Kozel. Non-executive director; member of the Remuneration Committee. Managing Director of Integrated Finance Limited, an investment bank based in New York. Director of Open Range Ventures LLC, of Yahoo! and Narus Inc. Formerly, a non-executive director of Cisco Systems Inc. (2000-2001), where he worked from 1989-2000 in a number of roles, including Chief Technology Officer and Senior Vice President for Business Development. Also a former non-executive director of TIBCO Software Inc. (2000-2001). Prior to 1989 he worked with SRI International in California. Age 48.
Roberto Mendoza. Non-executive director; member of the Remuneration Committee. Chairman of Egg plc and non-executive director of Prudential plc, Vitro SA and The BOC Group PLC. Director of Integrated Finance Limited. Formerly Vice-Chairman and Director of JP Morgan & Co Inc. (1990-2000) and Managing Director of Goldman Sachs & Co (2000). Joined JP Morgan in 1967 with successive assignments in London and New York. Age 58.
Richard (Dick) Olver. Non-executive director; Chairman of the Audit Committee. Deputy Group Chief Executive of BP p.l.c since January 2003. Chief Executive Officer of BP Exploration & Production Division (1998-2002). A member of the Institute of Civil Engineers, he has worked for BP since 1973. A governor of New Hall School. Age 57.
Charles Sinclair. Non-executive director; Chairman of the Remuneration Committee. Group Chief Executive of Daily Mail and General Trust plc since 1988. Joined Associated Newspapers in 1975 and held a number of roles prior to its merger into the Daily Mail Group in 1988. Non-executive director of Euromoney Institutional Investor PLC and Schroders plc. Fellow of the Institute of Chartered Accountants. Age 55.
Ian Strachan. Non-executive director; member of the Audit Committee. Non-executive Chairman of Instinet Group since 1 January 2003 (non-executive director since May 2001). Non-executive director of Transocean Inc., Johnson Matthey plc, Xstrata plc and Rolls-Royce Group Plc. Former non-executive director of Harsco Corporation, Deputy Chairman of Invensys plc (1999-2000) and Chief Executive Officer of BTR plc (1996-1999). Former Deputy Chief Executive Officer (1991-1995) and Chief Financial Officer (1987-1991) of Rio Tinto plc. Also a former non-executive director of Commercial Union plc (1991-1995). Age 60.
Group Management Committee (Reuters senior executive committee) Tom Glocer (Chairman), David Grigson, Devin Wenig, Graham Albutt (President, Business Programmes), Christopher Hagman (Managing Director, Global Channels), Alexander Hungate (Chief Marketing Officer), Geert Linnebank (Editor-in-Chief), Rosemary Martin (General Counsel and Company Secretary), Michael Sayers (Global Head of Operations and Technology), Susan Taylor-Martin (Global Head of Corporate Strategy), Christian Verougstraete (Group Human Resources Director) and Simon Walker (Director of Corporate Communications).
16 Reuters Group PLC Annual Review 2003
Summary directors’ report
The directors present their summary
directors’ report, remuneration report and financial statement for the year
ended 31 December 2003. These are derived from the Group’s full directors’ report,
remuneration report and financial statements and only represent a summary of
the Group’s
full financial statements.
Activities and likely future developments
These are described in the Chief Executive’s review on pages 3 and 4, in
the business review on pages 14 and 15, and in the summary operating and financial
review on pages 20 and 21.
Corporate governance and internal control
Reuters Group PLC is committed to high standards of corporate governance. During
2003 Reuters complied with the Combined Code issued in 1998 save that Tom Glocer
had a service contract which was terminable by the company on, in effect, up
to two years’ notice. The terms of this contract have been varied so that
with effect from 1 January 2004 Tom Glocer’s service contract is terminable
by the company on, in effect, one year’s notice. In light of developments
in corporate governance regulation during 2003, the company made certain alterations
to its governance arrangements so that since 1 January 2004 it has complied with
the Combined Code published in July 2003 (the new Combined Code) save that no
individual member of the Audit Committee has been identified by the Board as
having ‘recent and relevant financial experience’. However, in common
with all the non-executive directors, the members of the Audit Committee are
all experienced and influential individuals, having the skills described in their
biographies on page 16 and the Board considers that, collectively, the members
have the attributes required to discharge properly the committee’s
responsibilities.
Reuters Group PLC also complies with all the US Securities and Exchange Commission (SEC) and (with the exception of two waivers described below) Nasdaq governance requirements, including some as to which compliance is not actually required until 31 July 2005 due to the company’s status as a ‘foreign private issuer’. These include requirements to have a majority of independent directors, and to have audit, remuneration and nominations committees comprised entirely of independent directors. The company has received waivers from Nasdaq from two provisions of its governance rules, regarding quorum requirements and shareholder approval of employee share-based incentive schemes, in both cases on the basis that compliance with the rules would be contrary to standard UK business practice. The company does seek and has received shareholder approval of its employee share-based incentive schemes to the extent required by UK regulation, including the UK Listing Authority (UKLA) Listing Rules.
The quality of the individual directors, the balance of the Board’s composition and the dynamics of the Board as a group, serve to ensure both the Board’s effectiveness and the inability of an individual or a small group to dominate the Board’s decision-making. The Board has determined that each of the non-executive directors is independent in character and judgment by reason of his personal qualities, and that each of the non-executive directors is ‘independent’ as that term is defined in Nasdaq and SEC governance requirements.
The Board is responsible for the success of the company within a framework of controls which enables risk to be assessed and managed. It sets strategic aims, ensures resources are in place to achieve these aims and monitors performance. The articles of association require the directors to pay due regard to the Reuters Trust Principles which are designed to protect Reuters integrity and independence and represent the core values at the heart of Reuters business. We are unusual in having enshrined our principles in our constitution. Reuters Founders Share Company Limited, an independent body, has express powers to safeguard these principles. Each of our employees is also responsible for upholding the principles when they sign up to Reuters Code of Conduct when joining the company, and they reaffirm their undertaking regularly.
The directors acknowledge their responsibility for Reuters system of internal control and confirm they have reviewed its effectiveness.
Full statements on corporate governance and internal controls are contained in the annual report and Form 20-F.
Dividend
An interim dividend of 3.85 pence per ordinary share was paid on 3 September
2003. The directors recommend a final dividend of 6.15 pence per ordinary share,
giving a total of 10.0 pence per ordinary share for the year (2002: 10.0 pence).
Subject to shareholders’ approval at the annual general meeting to be held
on 22 April 2004, the final dividend will be paid on 29 April 2004 to members
on the register at the close of business on 12 March 2004.
Directors
The names and biographical details of current directors are given on page 16.
Philip Green stepped down from the Board in June 2003. On 17 February 2003 Devin Wenig was appointed as an executive director. Sir Christopher Hogg, Tom Glocer, David Grigson and Ian Strachan retire by rotation and are proposed for re-election as directors at the forthcoming annual general meeting. Sir Christopher Hogg will stand down from the Board when his successor, Niall FitzGerald, becomes Chairman in October 2004. Charles Sinclair is also retiring from the Board and is proposed for re-election. He has served as a non-executive director for nine years and is required to retire on an annual basis. Charles Sinclair has stated his intention to stand down from the Board at the 2005 annual general meeting. As non-executive directors, Sir Christopher Hogg, Charles Sinclair and Ian Strachan do not have service contracts but have letters of appointment. Sir John Craven will be retiring from the Board at the annual general meeting on 22 April 2004. On the retirement of Sir John Craven, Richard Olver will become the senior independent non-executive director. Details of the remuneration of the non-executive directors and information on the service contracts and remuneration of the executive directors are set out on pages 17 to 24 of the annual report. A non-executive director is not required to hold ordinary shares in order to qualify as a director.
Reuters Group PLC Annual Review 2003 17
| Governance and corporate responsibility continued |
We continue our long tradition of working with others for commercial and social benefits, striving to be increasingly efficient, successful and responsible in our business.
We are working with other companies in the Media Sector CSR Forum considering the implications of corporate responsibility for our sector. During 2004, the Forum will launch a key issues debate, setting out sectoral CSR topics and inviting stakeholder feedback.
For further information on corporate responsibility at Reuters, please contact Rosemary Martin or visit our website www.reuters.com/csr.
Our community
 |
A global
team of Reuters employees on site at Habitat for Humanity in east London, helping to build simple, low-cost housing. |
During 2003 we introduced the Community Volunteering Policy, which enables employees to spend a day a year in work time on a community project. In 2004 we will launch the Community Events Week to encourage employees to join colleagues on volunteering projects around the world. We will measure the success of the week through the number of employees participating and the number of locations represented.
Under the guidance of its trustees, four of whom are members of the Group Management Committee, Reuters Foundation has continued to develop its partnerships during 2003 to maximise the effectiveness and sustainability of its four programmes.
| • | Reuters AlertNet provides global news, communications and logistical information to international disaster relief organisations and the public. It underwent an overhaul in 2003. The relaunch, on the first day of the war on Iraq, saw a surge in traffic including a new one-day record of more than a quarter of a million page views. AlertNet is at www.alertnet.org. |
| 2003 | 2002 | 2001 | 2000 | 1999 | ||||||
| Members | 230 | 192 | 168 | 135 | 90 | |||||
| Countries | 43 | 38 | 34 | 29 | 22 | |||||
| • | Journalism Training The Foundation’s courses continue to train journalists from developing and transitional countries. A highlight of 2003 training was the HIV-AIDS Reporting course in South Africa at which Archbishop Desmond Tutu and Nobel Peace Prize nominee, Zackie Achmat, were guest speakers. |
| • | Reuters Foundation Fellowship Programme at Green College, Oxford offers a stimulating academic environment to experienced journalists wishing to undertake research projects on a wide variety of subjects. The 2002/03 academic year saw 20 journalists from 15 countries benefit from this programme, which now has more than 300 alumni. |
| • | Reuters Foundation Digital Vision Program, Stanford University is an incubator for innovative applications of computing and communications in the developing world. The Program supports individuals and organisations who seek to use technology solutions to address needs in underserved communities. | |
| Past fellows have won awards for further development of ideas developed on the Program from World Bank, Omidyar Foundation, Philips Electronics and Cisco. | ||
Our workplace
 |
Reuters
European Employee Forum operates as a pan-European works council. Tom Glocer and other executive directors meet with the Forum regularly. |
Our employees face many challenges as we progress though Fast Forward. Their continuing dedication and flexibility in adapting to our changing business is one of our greatest assets.
We use web-based communications tools to communicate strategy, explain plans, and encourage employees to put questions and give feedback to Tom Glocer and other senior executives. Meetings are held regularly between management, employees and union representatives so that the views of employees are taken into account when decisions are made that may affect their interests. We undertake regular employee surveys to evaluate morale and identify any employee issues that need to be addressed. The results are communicated through Reuters.
Reuters Code of Conduct guides employees on how to meet their responsibilities whilst acting with integrity. Our induction and employee programmes emphasise the importance of upholding Reuters principles. Our global compliance helpline offers confidential guidance on ethical work issues and can be used to report anonymously any suspected violations of Reuters policies.
We are committed to the training and development of our people. It is our policy that selection of employees for recruitment, training, development and promotion should be determined solely on their skills, abilities and other requirements that are relevant to the jobs and in accordance with the laws in the country concerned.
We strictly maintain our equal opportunities policy, prohibiting discriminatory practices on the basis of sex, race, religion, disability, age, or any other characteristic protected by applicable law.
As a global organisation, we employ a diverse staff. Following the initiative of our Americas Diversity Advisory Council (DAC) and editorial staff-management diversity committees, we are in the process of establishing a global DAC.
In 2003, the Minority Corporate Counsel Association recognised the Reuters America legal team as ‘Employer-of-Choice’ in the northeast US for its inclusive work environment that eliminates barriers and maintains diversity.
18 Reuters Group PLC Annual Review 2003
Reuters Health and Safety policy aims to safeguard employees and others from accidents, injuries and illnesses and to help ensure that Reuters Group is compliant with legislation. The company, all managers and employees have legal responsibilities related to health and safety. We provide health and safety training for all employees and occupational healthcare in all major locations. We continue to adopt best practice in display screen equipment.
The most significant health and safety risks are faced by our editorial staff operating in war zones. In order to mitigate the risk to the best of our ability, we constantly review our safety provisions to ensure that the hostile environment training and safety equipment provided is of the highest standard. Employees have standing instructions to avoid risks to their, or others’ personal safety wherever possible.
Our marketplace
 |
Geneva was the second
stop for the brightspot travelling suite at which our key products are displayed. |
During 2003 we have focused on improving our marketplace communications, seeking to use innovative ways to gain a better understanding of our stakeholders to improve the way we operate and serve our customers.
Our customer satisfaction surveys, conducted twice a year through telephone interviews in more than 25 countries, have reported a rise in levels of customer satisfaction. We will continue to monitor the customer view of Reuters through our balanced scorecard and aim to build on our improvement throughout 2004.
Reuters brightspot, a travelling concept designed to update existing and potential customers on our latest products, took to the road in 2003. It highlighted the benefits of some of our strategic offerings in sales and trading, risk, private client services and portfolio management. A similar event was held at Reuters offices for market data and IT customer staff.
We continue to streamline our products and have achieved our 2003 target of making 250 products obsolete. By segmenting our product line we aim to offer our customers simpler propositions to fulfil their requirements.
The relationships with our suppliers and business partners are important to our success, and we seek to be fair and honest in our dealings. We are signatories to the Better Payment Practice Code, affirming our commitment to responsible conduct with suppliers, including timely invoice payment in accordance with supplier agreements.
We are in regular dialogue with our investors through an extensive programme of presentations and meetings. Our aim is to build understanding about Reuters and to obtain the views of the investment community so they feature appropriately in our decision-making on key shareholder issues. During the year we introduced ‘teach-ins’, assisting analysts in learning about our business. We conducted a survey of institutional investors at the end of the year to assess the effectiveness of our communications and to ascertain their perceptions of the company.
Our environment
 |
Participants from 11 countries
across five continents visited the Eden Project, southwest England, during a Reuters Foundation Writing Environmental News course. |
Our business activity has a relatively light environmental footprint. We are classified by the Ethical Investment Research Service as a low-impact company. We do not commit resources to emissions reporting or an environmental management system as these are not currently priorities for us. However, we continue to listen to stakeholder advice on the levels of reporting they require and to look into lightweight methods of measuring environmental impact. Members of Reuters Corporate Responsibility Advisory Board provide stakeholder input into our strategy and the issue of environmental reporting was discussed at the September 2003 Advisory Board meeting. In 2002 we tasked ourselves with looking at how we could apply a global environmental policy across the business. We have not yet achieved this objective as our facilities team has been focusing its efforts on a number of large relocation projects, including planning for the move of Reuters global headquarters to Canary Wharf, London in 2005; opening a new data centre in Bangalore, India; and a computer centre in Hazelwood, Missouri.
Of all our facilities, the data and computer centres consume the most energy. We take steps to incorporate environmentally friendly features in buildings we commission:
| • | Most of the power in a data centre is spent in cooling it. When we replace air conditioning systems we review new devices to maximise energy efficiency. |
| • | We utilise ‘free cooling’ where we can. By spending more on the data centre air handlers we eliminate the need to run the external chiller plants for much of the year. |
| • | We only use environmentally friendly fire suppressant systems. |
| • | Our power equipment is selected to ensure we run as near unity power factor as we can (reducing the effective amount of power needed by ensuring we use it in the most efficient manner). |
| Reuters expenditure on water, heat and electricity | 2003 £000 |
2002 £000 |
Cost savings £000 |
|||
| Asia | 2,950 | 2,966 | 16 | |||
| Americas | 5,615 | 7,070 | 1,455 | |||
| Continental Europe, Middle East, Africa | 3,357 | 3,039 | (318 | ) | ||
| UK, Ireland | 2,817 | 2,747 | (70 | ) | ||
| Other Reuters entities | 1,612 | 2,270 | 658 | |||
| Reuters core business | 16,351 | 18,092 | 1,741 | |||
Reuters Foundation trains, promotes and rewards high standards of environmental journalism. Throughout 2003 Reuters Foundation has run environmental journalism training courses in London and Durban. Reuters Foundation continues to sponsor the International Union for Conservation of Nature and Natural Resources media award for excellence in environmental journalism.
Reuters Group PLC Annual Review 2003 19
| Summary operating and financial review |
Review of year end results
Under US law, all statements other than statements
of historical fact included in this review are, or may be deemed to be, forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Certain important factors
that could cause actual results to differ materially from those discussed in
such forward-looking statements are described under ‘Forward-looking statements’ on
page 28 as well as elsewhere in this review. All written and oral forward-looking
statements made on or after the date of this report and attributable to Reuters
are expressly qualified in their entirety by such factors.
1 Financial overview
Introduction
The financial services markets in which the
Reuters Group operates remained cost conscious and competitive in 2003, resulting
in reductions in revenues at both Reuters and the Instinet Group for the second
successive year. The Reuters Group returned to profit in 2003 at both the operating
and pre-tax levels, as the declines in revenues were offset by the impact of
cost containment and restructuring programmes within the Group, which reduced
the cost base. Also, the level of impairment charges and goodwill write-downs
that depressed last
year’s earnings were not repeated in 2003. Earnings and cash flow have enabled
the full year dividend to be maintained at 10.0 pence.
The beginning of a cyclical recovery in financial services towards the end of 2003 resulted in a reduction in the rate of decline in revenue, although the pattern is not uniform. The US recovery is strong, Asia is showing a modest improvement, and Europe is lagging but showing some signs of an upturn. Structural changes remain a factor in the financial markets, with overcapacity still being an issue, particularly in Europe. The competitive outlook is improved by enhancements to the Reuters product line and improvements in customer service which are translating into new business.
| 2 Financial overview | ||||||
| Year to 31 December | ||||||
| 2003 | 2002 | 2001 | ||||
| Summary of results | £m | £m | £m | |||
| Revenue | ||||||
| Reuters | 2,664 | 2,992 | 3,042 | |||
| Instinet Group | 540 | 592 | 854 | |||
| Intra-group | (7 | ) | (9 | ) | (11 | ) |
| Reuters Group revenue | 3,197 | 3,575 | 3,885 | |||
| Operating costs | ||||||
| Reuters | (2,490 | ) | (2,797 | ) | (2,887 | ) |
| Instinet Group | (588 | ) | (931 | ) | (707 | ) |
| Intra-group | 7 | 9 | 11 | |||
| Reuters Group operating costs | (3,071 | ) | (3,719 | ) | (3,583 | ) |
| Operating profit | ||||||
| Reuters | 174 | 195 | 155 | |||
| Instinet Group | (48 | ) | (339 | ) | 147 | |
| Reuters Group operating profit | 126 | (144 | ) | 302 | ||
| Affiliates | (35 | ) | (74 | ) | (85 | ) |
| Impairments and disposals | (13 | ) | (256 | ) | (53 | ) |
| Fixed asset investments | – | 1 | 3 | |||
| Net interest | (29 | ) | (20 | ) | (9 | ) |
| Profit before tax | ||||||
| Reuters | 95 | (123 | ) | 10 | ||
| Instinet Group | (46 | ) | (370 | ) | 148 | |
| Reuters Group profit before tax | 49 | (493 | ) | 158 | ||
2003 results compared with 2002
Reuters Group revenue declined
by 11% to £3,197 million. Reuters revenue was down 11%, to £2,664
million reflecting weak trading conditions in global financial markets. Instinet
Group revenue was down 9%, largely reflecting the adverse impact of the weaker
dollar on Instinet Group revenues.
As a consequence of declining revenues over the past two years, actions have been taken at both Reuters and Instinet Group to reduce the operating cost base. Impairment charges and goodwill write-downs dropped from £314 million to £121 million. The result has been a reduction in Reuters Group operating costs in 2003 of 17%.
A Reuters Group operating loss of £144 million in 2002 was converted to a £126 million profit in 2003. Reuters operating profit decreased by £21 million to £174 million, largely driven by an increase in restructuring charges. Instinet Group’s operating loss decreased from £339 million in 2002 to £48 million in 2003, mainly due to goodwill impairment charges last year of £208 million.
Reuters Group operating margin was 3.9% in 2003. The Reuters operating profit margin remained at 6.5%.
The Reuters Group’s share of affiliates’ losses decreased from £74 million in 2002 to £35 million in 2003. The main driver of this was a £31 million improvement in TIBCO Software Inc. (TSI), due to stronger cost control, minimal restructuring charges compared to 2002 and a £2 million gain on investments compared to a £4 million loss last year, resulting in an £11 million loss in 2003. Due to Reuters reduction of its TSI stake to 8.8% in early 2004, TSI will be treated as a fixed asset investment in future periods. The other key affiliates, Radianz and Factiva, contributed a broadly similar performance in 2003 compared to 2002. Radianz contributed a £27 million loss (£1 million higher than 2002) due to increased revenues being outweighed by impairment charges and restructuring costs. Factiva profit reduced by £1 million to £1 million, due to reduced revenue resulting from depressed market conditions and the shut-down of legacy product offerings, partially mitigated by cost reductions. All other affiliates contributed a net £2 million profit compared to an £8 million loss in 2002. This reflected the Reuters Group’s portfolio rationalisation programme, and lower restructuring and impairment charges within the affiliates, compared to 2002.
The net interest charge increased from £20 million in 2002 to £29 million in 2003. This is partly due to the Multex (renamed Reuters Research) acquisition and also to a £4 million reduction in the interest receivable by affiliates due to the falling value of US dollar interest earnings. Included in the interest charge was a write-off of front-end fees of £4 million attached to Reuters syndicated loan facility.
Impairment charges and net disposal losses have decreased from £256 million in 2002 to £13 million in 2003. Losses in 2003 include a £17 million provision in respect of the disposal of two London-based properties, as part of the Fast Forward programme. In 2002, non-cash impairment charges included a £147 million charge in respect of a write-down in the value of Reuters shares held in the Reuters Employee Share Ownership Trusts due to the fall in Reuters share price over the course of 2002. In addition, in 2002, there were also £81 million of charges taken to reflect a reduction in the carrying value of various investments held by the Group and net losses on disposal of £28 million, including a £19 million loss on the deemed disposal of a portion of the Group’s investment in Instinet Group, following the Island acquisition.
20 Reuters Group PLC Annual Review 2003
The Reuters Group reported a profit before taxation of £49 million in 2003 compared to a loss of £493 million in 2002. The 2003 profit is made up of a £95 million profit in Reuters partly offset by a £46 million loss in Instinet Group.
The tax charge for 2003 was £22 million, £1 million lower than 2002, when a charge arose due to the non-deductible nature of amortisation charges, and certain write-downs, as well as from a dividend paid by Instinet Group.
Earnings/(loss)
per share (EPS)
The Reuters Group recorded
basic earnings per share of 3.1 pence, as compared to a 29.0 pence loss
per share in 2002. The 2003 EPS reflects the Reuters Group’s return
to a net profit. The loss in 2002 primarily reflects the £464 million
non-cash impairment charges in that year.
Cash flow
Net
debt for the Reuters Group as at 31 December 2003 increased by £11
million to £77 million, consisting of net funds in Instinet Group
of £533 million (a significant
portion of which is required to be held for regulatory capital and/or business
purposes), and net debt in Reuters of £610
million.
Reuters net debt position increased by £26 million, due to higher restructuring cash outflows and the acquisition of Multex (renamed Reuters Research) for £155 million. Post year end, Reuters realised cash proceeds of £311 million from the reduction of its stake in TSI, and applied these to reduce debt. Instinet Group’s net cash position improved by £15 million, due to better cash collections and a decrease in capital expenditure from £28 million to £8 million.
Dividend per share
A
final dividend of 6.15 pence has been proposed which, when added to the
interim dividend of 3.85 pence, amounts to 10.0 pence per share, consistent
with both 2002 and 2001.
Non-GAAP measures
In
addition to these UK statutory results, Reuters undertakes further analysis
which results in the creation of certain non-GAAP measures. These measures
are used by management as additional means to assess the performance of
the business and complement the statutory results. Further explanation
of the nature and impact of these measures is included in the annual report
and Form 20-F.
3 Prospects
Reuters
Recurring revenues in Reuters in the last quarter of 2003 were
down 8.6% on an actual basis compared to the last quarter of 2002, ahead
of expectations and Reuters guidance. Market conditions have improved such
that Reuters expects the decline in underlying* recurring revenue in the
first quarter of 2004 to be 9% or slightly better compared to the first
quarter of 2003.Further gradual improvement
in the decline in underlying recurring revenue is expected in the second
quarter.
Reuters expects to incur restructuring costs of approximately £125 million in 2004 and to deliver savings from its Fast Forward programme of approximately £145 million in 2004, in addition to the £75 million of savings from the programme in 2003.
Restructuring expenditure over the course of the Fast Forward programme is still anticipated to be £340 million. Targeted annualised savings by the end of 2005 remain at £440 million.
| * | Underlying revenue excludes acquisitions, disposals and significant once-off items in the period under review and excludes the impact of currency fluctuations. |
Instinet Group
From mid-year 2003, Instinet Group has been
reorganising its businesses to better exploit the worldwide trend towards greater
efficiency and transparency in equities trading. The separation of the sell and
buy side parts of the business, and the consolidation of the order flows of the
Island and Instinet electronic communications networks (ECN), were substantially
completed in February 2004. Associated with these changes is a reduction in headcount
of
approximately 185 employees, most of whom are expected to leave by July 2004.
Reuters Group PLC Annual Review 2003 21
| Summary remuneration report |
The Board has overall responsibility for determining the framework of executive remuneration and its cost, and is required to take account of any recommendations made by the Remuneration Committee. The Board has delegated to the Remuneration Committee, through formal terms of reference, oversight of the specific remuneration packages for the executive directors and consideration of executive remuneration issues generally, including the use of equity incentive plans in particular. The Remuneration Committee consists solely of non-executive directors. All members of the Remuneration Committee have been determined by the Board to be independent as defined by Nasdaq.
Remuneration policy
Executive directors
The Remuneration Committee aims to ensure that
remuneration and incentive arrangements are market-competitive, consistent with
best practice and support the interests of shareholders.
In 2003, excluding pension entitlements, the targeted composition of each executive director’s remuneration was:
| Proportion of fixed versus variable pay | |||||||||
| Base pay (%) |
Fixed long-term bonus (%) |
Variable incentives (%) |
Total (%) |
||||||
| Tom Glocer | 18 | 22 | 60 | 100 | |||||
| David Grigson | 32 | 32 | 36 | 100 | |||||
| Devin Wenig | 32 | 32 | 36 | 100 | |||||
| Philip Green | Not applicable. Please see notes in emoluments table | ||||||||
Variable rewards will continue to be provided through a balanced mix of performance-related elements. The annual cash bonus plan supports operational objectives over the financial year, while the long-term incentive plan will reward superior performance relative to the Group’s competitors over the medium term and share options will support the Group’s growth objectives and reward share price recovery.
The Remuneration Committee also believes that, in addition to participating in equity-based incentive plans, the executive directors should build and maintain a personal equity stake in the company. A personal shareholding policy is operated requiring each executive director to accumulate a personal holding worth twice his basic salary within five years.
Non-executive directors
Non-executive directors are appointed for an
initial period of six years, subject to review after three years. Following the
initial six-year period, non-executive directors may be invited to continue as
a director for a further period, subject always to the requirement to stand for
re-election by shareholders at least every three years. Non-executive directors
who serve more than nine years may offer themselves for re-election by shareholders
annually. Non-executive directors have letters of engagement rather than service
contracts and are not eligible to participate in Reuters executive share plans.
Shareholders determine the basic remuneration paid to the non-executive directors which has been set at £35,000 per annum since 2000. It is proposed that a new fixed annual fee of £50,000 be established in respect of tenure from 1 January 2004. The Chairman’s fees are fixed by the Board. In 2003 the Chairman received a fee of £262,500 and for 2004, the Chairman’s fee will be £290,000. With effect from 1 October 2004, Niall FitzGerald will succeed Sir Christopher Hogg as Chairman of the Group. Niall FitzGerald will be paid £500,000 per annum. The Chairman assumed the chairmanship of the Nominations Committee on 1 January 2004: currently, he has waived the receipt of any fees for this chairmanship. Sir John Craven as Senior Independent Director receives an additional annual fee of £5,000.
Remuneration structure
1 Basic salary and benefits
Reuters policy is to maintain a salary structure
based upon the mid-market of Reuters comparator group of companies. The Remuneration
Committee is also guided by salary levels among other executives and across the
Group as a whole. The executive directors indicated that they did not wish to
receive a salary increase in 2003 and subsequently, for 2004. The Remuneration
Committee has affirmed this position.
Non-cash benefits are provided to executive directors and the Chairman in line with normal market practice.
2 Pensions
Since April 1999 it has been the
Group’s policy that all new UK employees, including executive directors,
are offered participation in a defined contribution pension plan. In the case
of UK executive directors, in lieu of pension provisions above the statutory
earnings cap (where applicable), an additional taxable allowance is granted.
In the US, all employees are offered participation in a defined contribution
(401K) plan. In lieu of a contribution on salary above the tax qualified limit,
an additional contribution is granted to a Supplementary Employee Retirement
Plan (SERP). The SERP is unfunded. £23,000 was paid into defined contribution
schemes for executive directors in 2003. One executive director is in a defined
benefit scheme.
3 Annual performance-related bonus
Bonus arrangements are normally negotiated individually
and included in each executive director’s service contract. The Remuneration
Committee determines performance targets annually. Bonus payments are non-pensionable.
In 2003, the executive directors were eligible for an annual cash bonus, with
a maximum level of 100% of base salary for all but Tom Glocer, whose maximum
level was 125% of salary. Under the terms of his service contract, effective
from 23 July 2001, Tom Glocer’s bonus potential will rise to 150% for 2004.
For 2004, the Remuneration Committee has determined to maintain a strong emphasis on financial performance with 60% of the maximum bonus potential being measured against budgeted Reuters operating profits before restructuring, amortisation of goodwill and other intangibles and impairments (Target Operating Profit). In addition, the Remuneration Committee has introduced a profit threshold, based on Target Operating Profit, below which no bonuses will be paid. For the most senior levels of management a proportion of bonus above a target level will be paid in shares, receipt of which will be deferred for three years. The Remuneration Committee has also determined to maintain focus on achieving Reuters transitional objectives, and to this end, the bonus structure will also incorporate measures relating to customer satisfaction and delivery against specific product development and delivery targets. As Reuters progresses through this transitional phase, it is anticipated that the bonus factors will be re-weighted to provide an even greater emphasis on financial performance with an increased weighting being ascribed to growth and revenue.
22 Reuters Group PLC Annual Review 2003
4 Equity incentive plans
The executive directors also participate in
a discretionary share option plan (DSOP) and a long-term incentive plan (LTIP)
designed to reward
longer-term performance. All executive directors’ future entitlements are
subject to the performance conditions applicable to the relevant plan as disclosed
below. Other than as described below, the company has no present intention of
making any significant change to the executive directors’ existing entitlements
under these plans.
During 2003, the Remuneration Committee reviewed the operation of the existing equity plans and resolved to introduce a number of changes to the way these will operate in the future. These include the removal of a number of re-testing provisions in the plans and, in order to reduce the dilution impact of the share option plans and partly in substitution for the scaling back of DSOP awards to Group Management Committee (GMC) members and executive directors, the Remuneration Committee proposes to introduce a Restricted Share Plan for employees below the GMC level and an Annual Bonus Profit Sharing Plan. Further details of these are provided below.
LTIP: Since 1993, Reuters has operated a long-term incentive plan which seeks to encourage and reward long-term growth in shareholder value. It is Reuters practice to make an annual award of share rights to executive directors and those senior managers most able to influence corporate performance.
Under the terms of his service contract, annual equity awards to Tom Glocer will be based on a fair market value, calibrated by reference to the average of the mid-market position of a comparator group of FTSE 100 companies, with significant international operations (excluding the top and bottom five companies measured by market capitalisation) and the median position of a US comparator group comprising media companies. His 2003 award was 1,731,277. The other executive directors will receive awards with a fair market value of up to 69% of base salary.
To be consistent with the objectives of the plan, and to ensure the Group’s growth is measured relative to other major UK companies, performance is measured over a three-year period by comparing the Group’s relative total shareholder return (TSR) with that of other companies comprising the FTSE 100 at the beginning of the period. The companies are ranked according to their TSR for the measurement period with the company having the highest TSR ranked first. For 2003, the Group’s position on the list determines the extent to which awards will vest. The Group must achieve median TSR performance for a proportion of the award to vest. Between those positions awards vest on a straight line scale starting at 4% for median performance. If awards vest or only partially vest after three years, the plan permits the measurement period to be extended by up to two years. Subject to shareholder approval at the annual general meeting, from 2004, the re-testing provision will be removed and future awards that do not meet at least the median performance condition on completion of the performance period will lapse. Future awards will continue to vest in full for top quartile performance, with one-third of the initial award vesting for median performance, with proportionate vesting for incremental performance between these points.
DSOP: A global discretionary stock option plan aims to reward growth in earnings and in the share price. Under the terms of his service contract, annual equity awards to Tom Glocer will be based on a fair market value using option pricing methodology which currently ascribes to each share a value of 27.5% of the market price. His 2003 award was 2,014,108. The other executive directors will receive awards with a fair market value of approximately 69% of base salary.
Options granted to executive directors can only vest if the percentage growth in the Group’s earnings per share (EPS) exceeds the percentage growth in the retail price index by more than 9% over the three-year performance period. If the target is not met, the performance period may be extended by up to two years with an increase of 3% in the hurdle rate of EPS growth for each year added to the performance period. If the target rate is not met by the end of the fifth year, the options will lapse. From 2004, the re-testing provision will be removed and accordingly, awards will not permit any extension of the measurement period. If awards do not meet the EPS performance condition upon completion of the initial performance period, they will lapse.
Other plans: In common with other employees, the executive directors are entitled to participate in an international savings-related share option plan. There are also several legacy plans under which directors received awards prior to joining the Board. It is not intended that they should receive further awards under these plans.
New plans: The company will seek shareholder approval of two new plans at the 2004 annual general meeting: the Restricted Share Plan and the Annual Bonus Profit Sharing Plan. These plans will be made available to employees but normally the executive directors and members of the GMC will not participate in them. The former plan will enable the Group to provide market competitive remuneration, whilst reducing the dilution impact to shareholders. The latter plan is being introduced to focus all employees on profit growth. Payments under the plan will typically be made in the form of shares which will normally be subject to a 12-month vesting period.
Performance graph
Shown below is the Group’s TSR for the
five years to 31 December 2003 compared with the return achieved by the FTSE
100 index of companies. This index is used as the comparator group for the performance
conditions attached to the LTIP referred to above. The calculations assume the
reinvestment
of dividends.
Reuters Group PLC Annual Review 2003 23
| Summary remuneration report continued |
| Directors’ remuneration for 2003 | ||||||||||||||
| Directors’ emoluments | ||||||||||||||
| 2003 | 2002 | |||||||||||||
| Compensation | ||||||||||||||
| Salary/ | Expense | for loss | ||||||||||||
| fees | Bonus | Benefits7 | allowances7 | of office | Total8 | Total | ||||||||
| £000 | £000 | £000 | £000 | £000 | £000 | £000 | ||||||||
| Chairman: | ||||||||||||||
| Sir Christopher Hogg | 263 | – | 15 | – | – | 278 | 277 | |||||||
| Non-executive directors: | ||||||||||||||
| Sir John Craven | 45 | – | – | – | – | 45 | 45 | |||||||
| Edward Kozel | 35 | – | – | – | – | 35 | 35 | |||||||
| Niall FitzGerald1 | 35 | – | – | – | – | 35 | – | |||||||
| Roberto Mendoza | 35 | – | – | – | – | 35 | 35 | |||||||
| Richard Olver | 50 | – | – | – | – | 50 | 45 | |||||||
| Charles Sinclair | 45 | – | – | – | – | 45 | 45 | |||||||
| Ian Strachan2 | 204 | – | – | – | – | 204 | 110 | |||||||
| Executive directors: | ||||||||||||||
| Tom Glocer3 | 816 | 801 | 281 | – | – | 1,898 | 1,710 | |||||||
| Philip Green4 | 225 | – | 14 | 58 | 834 | 1,131 | 836 | |||||||
| David Grigson3 | 400 | 314 | 2 | 69 | – | 785 | 690 | |||||||
| Devin Wenig3 | 312 | 274 | 12 | 11 | – | 609 | – | |||||||
| Total emoluments of directors | 2,465 | 1,389 | 324 | 138 | 834 | 5,150 | 4,714 | 5 | ||||||
| Other senior managers as a group (10
persons)6 (2002: 8 persons) |
2,712 | 1,551 | 118 | 367 | 1,209 | 5,957 | 3,748 | |||||||
| Notes: | |
| 1. | Niall FitzGerald’s payment of £35,000 is made directly to Unilever PLC. |
| 2. | Ian Strachan’s fees include £168,712 as a non-executive director (Chairman) of Instinet Group and £35,000 as non-executive director of the company. He received from Instinet Group 9,995 restricted stock units (vested May 2003) with a market value of £22,198, and 20,718 restricted stock units (vesting May 2004). |
| 3. | Tom Glocer’s non-cash benefits included accommodation costs of £239,166, travel and relocation-related expenses of £19,878, company car and healthcare of £21,532. David Grigson received healthcare benefits of £1,470, a car allowance of £7,420 and a retirement allowance of £61,000. Devin Wenig was appointed an executive director on 17 February 2003. The amounts shown for Devin Wenig as a director are from that date to 31 December 2003. His emoluments prior to that date are included within the collective numbers for senior managers. He received private healthcare benefits of £12,000 and an £11,000 car allowance. |
| 4. | On resignation from the Board and as an employee on 30 June 2003, Philip Green’s termination payment was £815,000 being equivalent to one year’s salary, average bonus payment and annual employer’s pension contributions. He was also made a gift of his company car, valued at £18,800, in lieu of any entitlement to a bonus for 2003, which would otherwise have been £176,625. He also received a car, private healthcare and life insurance benefits of £14,000 and a retirement allowance of £58,000. In addition, in accordance with the provisions in place for all employees whose position is made redundant, Philip Green was provided with outplacement support. For Philip Green, this was an amount up to a maximum value of £25,000; this does not represent monies received by Philip Green, but is the maximum amount payable to a third party to provide the services. |
| 5. | The total for directors in 2002 includes payments of £27,000 and £859,000 respectively to Dennis Malamatinas and Geoffrey Weetman who retired in 2002. |
| 6. | There were 10 managers in total during 2003: Devin Wenig – 1 January 2003 to 16 February 2003; Stephen Mitchell – up to 31 August 2003, when he left the company; Christian Verougstraete and Simon Walker – 3 March 2003 and 8 January 2003 when each respectively joined the company; Rosemary Martin – 23 June 2003 on appointment to the GMC. |
| 7. | During the year, items included under Benefits are those provided as goods and services, and items included under Expense Allowances, are contractual benefits which are paid in cash other than goods and services. |
| 8. | Total aggregate directors’ emoluments in the year, excluding termination payments, were £4.4 million. In 2002, the equivalent emoluments, excluding directors not serving in 2003 and termination payments of £0.6 million, were £4.1 million. |
The total interests of the current directors in the issued share capital of the company and in shares underlying options and incentive plans are shown below at 31 December 2003.
| Long-term | ||||||
| Shares | Options | incentives | ||||
| Directors: | ||||||
| Sir Christopher Hogg | 63,321 | 1,012 | – | |||
| Tom Glocer | 217,058 | 4,765,516 | 2,853,314 | |||
| David Grigson | 48,430 | 848,305 | 506,078 | |||
| Devin Wenig | 78,354 | 766,934 | 436,212 | |||
| Sir John Craven | 6,846 | – | – | |||
| Niall FitzGerald | 30,000 | – | – | |||
| Edward Kozel | 67,500 | – | – | |||
| Roberto Mendoza | 53,000 | – | – | |||
| Richard Olver | 10,000 | – | – | |||
| Charles Sinclair | 35,000 | – | – | |||
| Ian Strachan | 15,500 | – | – | |||
24 Reuters Group PLC Annual Review 2003
| Summary financial statement |
This summary financial statement, including the summary directors’ report and remuneration report, was approved by the directors on 3 March 2004 and signed on their behalf by Tom Glocer and David Grigson. It does not contain sufficient information to provide as full an understanding of the results and state of affairs of the Group as that contained in the annual report and Form 20-F. If you have not received the full annual report and Form 20-F, but wish to do so, a copy may be obtained free of charge from the Investor Relations department or through the internet at www.about.reuters.com/ar2003. You may also elect to receive the full annual report and Form 20-F for all future years. The auditors have issued an unqualified report on the financial statements containing no statement under sections 237(2) or 237(3) of the Companies Act 1985.
| Summary consolidated profit and loss account | ||||||
| for the year ended 31 December | ||||||
| 2003 | 2002 | 2001 | ||||
| £m | £m | £m | ||||
| Group revenue | 3,197 | 3,575 | 3,885 | |||
| Operating costs | (3,071 | ) | (3,719 | ) | (3,583 | ) |
| Operating profit/(loss) | 126 | (144 | ) | 302 | ||
| Share of operating losses of joint ventures | (27 | ) | (35 | ) | (46 | ) |
| Impairment of investments in joint ventures | (8 | ) | (6 | ) | (16 | ) |
| Share of operating losses of associates | (8 | ) | (39 | ) | (39 | ) |
| Impairment of investment in associate | (1 | ) | – | (26 | ) | |
| Profit/(loss) on disposal of subsidiary undertakings | 3 | (29 | ) | 216 | ||
| Profit/(loss) on disposal of joint ventures and associates | 10 | 3 | (7 | ) | ||
| Loss on disposal of tangible fixed assets | (17 | ) | – | (10 | ) | |
| Profit/(loss) on disposal of other fixed asset investments | 6 | (2 | ) | 35 | ||
| Income from fixed asset investments | – | 1 | 3 | |||
| Amounts written off fixed asset investments | (6 | ) | (222 | ) | (245 | ) |
| Net interest payable | (29 | ) | (20 | ) | (9 | ) |
| Profit/(loss) on ordinary activities before taxation | 49 | (493 | ) | 158 | ||
| Taxation on profit/(loss) on ordinary activities | (22 | ) | (23 | ) | (107 | ) |
| Profit/(loss) on ordinary activities after taxation | 27 | (516 | ) | 51 | ||
| Equity minority interests | 16 | 112 | (5 | ) | ||
| Profit/(loss) attributable to ordinary shareholders | 43 | (404 | ) | 46 | ||
| Dividends | (140 | ) | (139 | ) | (140 | ) |
| Loss for the period | (97 | ) | (543 | ) | (94 | ) |
| Basic earnings/(loss) per ordinary share | 3.1 | p | (29.0 | p) | 3.3 | p |
| Diluted earnings/(loss) per ordinary share | 3.0 | p | (29.0 | p) | 3.2 | p |
Consolidated revenue and operating profit derive from continuing operations in all material respects.
The result for the year has been computed on an unmodified historical cost basis.
| Consolidated statement of total recognised gains and losses | ||||||
| for the year ended 31 December | ||||||
| 2003 | 2002 | 2001 | ||||
| £m | £m | £m | ||||
| Profit/(loss) attributable to ordinary shareholders | 43 | (404 | ) | 46 | ||
| Unrealised gain on deemed partial disposal of subsidiary undertakings | – | 1 | 11 | |||
| Unrealised gain on deemed partial disposal of associate | – | 12 | – | |||
| Unrealised gains on disposal of fixed asset investments | – | 10 | – | |||
| Translation differences taken directly to reserves | (113 | ) | (95 | ) | 23 | |
| Total recognised gains and losses relating to the year | (70 | ) | (476 | ) | 80 | |
Reuters Group PLC Annual Review 2003 25
| Summary financial statement continued |
for the year ended 31 December
2003 |
2002 |
2001 |
||||
£m |
£m |
£m |
||||
| Net cash inflow from operating activities | 429 |
355 |
887 |
|||
| Dividends received from associates | 3 |
2 |
2 |
|||
| Returns on investments and servicing of finance | ||||||
| Interest received | 17 |
20 |
30 |
|||
| Interest paid | (45 |
) |
(58 |
) |
(40 |
) |
| Income from fixed asset investments | – |
1 |
3 |
|||
| Dividends paid to equity minority interests | – |
(27 |
) |
– |
||
| Net cash outflow from returns on investments and servicing of finance | (28 |
) |
(64 |
) |
(7 |
) |
| Taxation paid | (33 |
) |
(73 |
) |
(173 |
) |
| Capital expenditure and financial investment | ||||||
| Purchase of tangible fixed assets | (131 |
) |
(168 |
) |
(276 |
) |
| Sale of tangible fixed assets | 13 |
15 |
6 |
|||
| Purchase of fixed asset investments | (3 |
) |
(80 |
) |
(73 |
) |
| Sale of fixed asset investments | 11 |
22 |
68 |
|||
| Net cash outflow on capital expenditure and financial investment | (110 |
) |
(211 |
) |
(275 |
) |
| Acquisitions and disposals (including joint ventures and associates) | (106 |
) |
(6 |
) |
(89 |
) |
| Equity dividends paid | (140 |
) |
(139 |
) |
(227 |
) |
| Cash inflow/(outflow) before management of liquid resources and financing | 15 |
(136 |
) |
118 |
||
| Management of liquid resources | ||||||
| Net (increase)/decrease in short-term investments | (99 |
) |
378 |
(448 |
) | |
| Financing | ||||||
| Proceeds from the issue of shares | – |
2 |
16 |
|||
| Net (decrease)/increase in borrowings | (13 |
) |
(158 |
) |
350 |
|
| Net cash (outflow)/inflow from financing | (13 |
) |
(156 |
) |
366 |
|
| (Decrease)/increase in cash | (97 |
) |
86 |
36 |
||
Net cash inflow from operating activities
Operating profit is reconciled to net cash inflow from operating activities as follows:
2003 |
2002 |
2001 |
||||
£m |
£m |
£m |
||||
| Operating profit/(loss) | 126 | (144 | ) | 302 | ||
| Depreciation | 193 | 227 | 246 | |||
| Amortisation and impairment of goodwill and other intangible assets | 121 | 315 | 81 | |||
| (Increase)/decrease in stocks | (1 | ) | 2 | 4 | ||
| Decrease/(increase) in debtors | 316 | 241 | (6 | ) | ||
| (Decrease)/increase in creditors | (316 | ) | (314 | ) | 254 | |
| Loss on disposal of tangible fixed assets | – | 1 | 11 | |||
| Amounts written (back)/off interests in own shares | (12 | ) | 3 | 12 | ||
| Other, principally translation differences | 2 | 24 | (17 | ) | ||
| Net cash inflow from operating activities | 429 | 355 | 887 | |||
26 Reuters Group PLC Annual Review 2003
Summary consolidated balance sheet
at 31 December
2003 |
2002 |
2001 |
||||
£m |
£m |
£m |
||||
| Fixed assets | 1,266 | 1,516 | 1,963 | |||
| Current assets | 1,677 | 2,008 | 2,575 | |||
| Creditors: amounts falling due within one year | (1,766 | ) | (2,198 | ) | (2,709 | ) |
| Net current liabilities | (89 | ) | (190 | ) | (134 | ) |
| Total assets less current liabilities | 1,177 | 1,326 | 1,829 | |||
| Creditors: amounts falling due after more than one year | (425 | ) | (354 | ) | (344 | ) |
| Provisions for liabilities and charges | (271 | ) | (245 | ) | (212 | ) |
| Net assets | 481 | 727 | 1,273 | |||
| Capital and reserves | ||||||
| Called-up share capital and share premium | 449 | 449 | 447 | |||
| Other reserve | (1,717 | ) | (1,717 | ) | (1,717 | ) |
| Capital redemption reserve | 1 | 1 | 1 | |||
| Profit and loss account reserve | 1,553 | 1,763 | 2,378 | |||
| Shareholders’ equity | 286 | 496 | 1,109 | |||
| Equity minority interests | 195 | 231 | 164 | |||
| Capital employed | 481 | 727 | 1,273 | |||
Post balance sheet events
On 23 January 2004, Reuters entered into a sale
and leaseback arrangement in respect of its freehold data centre in Hazelwood,
Missouri. The lease term is 20 years. Proceeds from the sale were £23 million.
On 28 January 2004, Reuters sold the freeholds of its current headquarters at 85 Fleet Street and the St. Brides building for approximately £30 million. 85 Fleet Street will be the subject of a short leaseback until Reuters moves to leasehold premises at Canary Wharf in 2005. A charge of £17 million was booked against profits in 2003 in anticipation of losses arising from the disposal of these two properties.
On 3 February 2004, Reuters concluded the sale of 86 million shares in TSI. Total proceeds were approximately £311 million and the net profit on disposal was approximately £155 million. Following the sale, Reuters holding was 17 million shares or 8.8% of TSI’s common stock and as a result Reuters will no longer account for TSI as an associate.
On 19 February 2004, Reuters sold its 98% holding in Tower Group Holding Corp. for a profit of approximately £6 million.
No tax is expected to arise on any of the above transactions.
Independent auditors’ report to the shareholders of Reuters Group PLC
We have examined the summary financial statement,
which includes the summary directors’ report and remuneration report, of
Reuters Group PLC.
Respective responsibilities of directors and auditors
The directors are responsible for preparing the annual
review and summary financial statement in accordance with applicable law. Our
responsibility is to report to you our opinion on the consistency of the summary
financial statement within the annual review with the full annual financial statements,
the directors’ report and the remuneration report and its compliance with
the relevant requirements of Section 251 of the United Kingdom Companies Act
1985 and the regulations made thereunder. We also read the other information
contained in the annual review and consider the implications for our report if
we become aware of any apparent misstatements or material inconsistencies with
the summary
financial statement.
The statement, including the opinion, has been prepared for and only for the company’s shareholders as a body in accordance with Section 251 of the Companies Act 1985 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this statement is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Basis of opinion
We conducted our work in accordance with Bulletin 1999/6 ‘The auditors’ statement on the summary financial statement’ issued
by the Auditing Practices Board.
Audit opinion
In our opinion the summary financial statement is consistent with the annual
financial statements, the directors’ report and the remuneration report
of Reuters Group PLC for the year ended 31 December 2003 and complies with the
applicable requirements of Section 251 of the Companies Act 1985, and the regulations
made thereunder.
PricewaterhouseCoopers LLP
Chartered Accountants and Registered Auditors
London
3
March 2004
Reuters Group PLC Annual Review 2003 27
| Information for shareholders |
Registrar: Lloyds TSB Registrars (see inside back cover) provides a free online service for Reuters Group shareholders which gives direct access to a range of information and practical help. Visit their website www.shareview.co.uk for further information.
Low cost share dealing service: Please contact Cazenove & Co Ltd, Postal Dealing Department, 20 Moorgate, London EC2R 6DA (Tel: (0) 20 7155 5155) for further information.
Dividends
Ordinary shareholders have received the following dividends in respect of each
financial year:
Pence per share |
|||||||
Interim |
Final |
Total |
|||||
1999 |
3.65 |
11.00 |
14.65 |
||||
2000 |
3.65 |
12.35 |
16.00 |
||||
2001 |
3.85 |
6.15 |
10.00 |
||||
2002 |
3.85 |
6.15 |
10.00 |
||||
20031 |
3.85 |
6.15 |
10.00 |
||||
| 1 Proposed. The final dividend
in respect of 2003 is payable on 29 April 2004 to
holders of ordinary shares on the register at 12 March 2004 |
|||||||
American Depositary Shares
Each American Depositary Share (ADS) represents six ordinary shares.
ADS dividends
ADS holders are eligible for all stock dividends or other entitlements accruing
on the underlying Reuters Group PLC shares and receive cash dividends in US dollars.
Dollar amounts paid to ADS holders depend on the sterling/dollar exchange rate
at the time of payment. Dividends are normally paid twice a year. Dividend cheques
are mailed directly to the ADS holder on the payment date if the ADSs are registered
directly with Reuters US depositary. Dividends on ADSs that are registered with
brokers are sent to the brokers, who forward them to ADS holders. Reuters US
depositary is JPMorgan Chase Bank (see inside back cover).
ADS holders should be aware that under recently enacted US federal income tax legislation, dividends may be qualified dividend income eligible for a reduced rate of US federal income tax of 15% if the ADS holder meets certain holding period requirements. In general, dividends paid after 30 April 2003 (or after 30 April 2004 for ADS holders that have elected to extend the period of application of the prior US-UK income tax treaty) should no longer be increased by a UK tax refund amount and should not be subject to UK withholding tax.
| Fiscal year ended | |||||||||||||
| 31 December | Pence per share |
Cents per ADS |
|||||||||||
Interim |
Final |
Total |
Interim |
Final |
Total |
||||||||
| Dividends in accordance with UK GAAP | |||||||||||||
1999 |
3.65 |
11.00 |
14.65 |
35.03 |
104.15 |
139.18 |
|||||||
2000 |
3.65 |
12.35 |
16.00 |
31.56 |
106.44 |
138.00 |
|||||||
2001 |
3.85 |
6.15 |
10.00 |
33.29 |
53.56 |
86.85 |
|||||||
2002 |
3.85 |
6.15 |
10.00 |
36.05 |
58.46 |
94.51 |
|||||||
20031 |
3.85 |
6.15 |
10.00 |
36.08 |
|||||||||
1 Proposed. The final dividend in respect of 2003 is payable on 6 May 2004 to holders of ADSs on the record at 12 March 2004 and will be converted into US dollars from sterling at the rate prevailing on 1 May 2004. |
|||||||||||||
Form 20-F
Reuters Group PLC is subject to the information requirement of the US Securities
laws applicable to foreign companies and in accordance files an annual report
on Form 20-F, which corresponds to the Form 10-K filed by US-based companies,
and other information with the US Securities and Exchange Commission (SEC). Copies
of the annual report and Form 20-F are available from the Investor Relations
department, Reuters Group PLC, 85 Fleet Street, London EC4P 4AJ. Electronic copies
can be accessed through the internet on www.about.reuters.com/ar2003 or from
the SEC’s EDGAR database via the SEC’s home page: www.sec.gov.
Forward-looking statements
Forward-looking statements
This annual review contains certain forward-looking statements within the meaning
of the United States Private Securities Litigation Reform Act of 1995 with
respect to Reuters Group’s financial condition, results of operations
and business, and management’s strategy, plans and objectives for the
Group. In particular, all statements that express forecasts, expectations and
projections with respect to certain matters, including trends in results of
operations, margins, growth rates, overall financial market trends, product
releases, the impact of interest rates or exchange rates, anticipated cost
savings and synergies and the successful completion of strategic transactions
or restructuring programmes are all forward-looking statements. These statements
involve risk and uncertainty because they relate to events and depend on circumstances
that may occur in the future. There are a number of factors that could cause
actual results and developments to differ materially from those expressed or
implied by these forward-looking statements. These factors include, but are
not limited to:
| • | Reuters Group’s ability to realise the anticipated benefits of its Fast Forward transformation programme; |
| • | unfavourable conditions in financial markets; |
| • | the impact of currency and interest rate fluctuations on Reuters Group’s reported revenue and earnings; |
| • | difficulties or delays that Reuters Group may experience in developing or responding to new customer demands or launching new products; |
| • | the dependency of Reuters Group on third parties for the provision of certain network and other services; |
| • | any significant failures or interruptions experienced by the networks or systems of Reuters Group and such networks’ ability to accommodate increased traffic; |
| • | Reuters Group’s exposure to a decline in the valuation of companies in which it has invested and of its lack of management control over all such companies; |
| • | changes in the regulatory or competitive environment; |
| • | adverse governmental action in countries where Reuters conducts reporting activities; and |
| • | the ability of the Group to realise the benefits of acquisitions. |
For additional information, please see ‘Risk factors’ in the Reuters Group PLC annual report and Form 20-F for the year ended 31 December 2003. Copies of the annual report and Form 20-F are available on request from the Investor Relations department, Reuters Group PLC, 85 Fleet Street, London EC4P 4AJ or through the internet at www.about.reuters.com/ar2003. Any forward-looking statements made by or on behalf of Reuters Group speak only as of the date they are made. Reuters Group does not undertake to update any forward-looking statements.
28 Reuters Group PLC Annual Review 2003
| Financial diary for 2004 | Where to find us |
| Thursday 15 January | Recurring revenue guidance statement for first quarter 2004 issued |
| Tuesday 17 February | Results for year 2003 announced |
| Wednesday 10 March | Ordinary shares go ex-dividend ADSs go ex-dividend |
| Tuesday 16 March | Annual report and Form 20-F filed with SEC and UKLA and made available on Reuters website |
| Tuesday 23 March | Annual report/review posted to shareholders |
| Wednesday 21 April | First quarter trading statement issued |
| Thursday 22 April | Annual general meeting Time: 11.30 am Venue: Lewis Media Centre Millbank Tower, Millbank London SW1P 4RS |
| Thursday 29 April | Final dividend for 2003 payable to ordinary shareholders on the register as at 12 March 2004 |
| Thursday 6 May | Final dividend for 2003 payable to ADS holders on the record as at 12 March 2004 |
| Tuesday 27 July | Results for first six months of 2004 announced |
| Wednesday 28 July | Ordinary shares go ex-dividend ADSs go ex-dividend |
| Wednesday 1 September | Interim dividend for 2004 payable to ordinary shareholders on the register as at 30 July 2004 |
| Wednesday 8 September | Interim dividend payable to ADS holders on the record as at 30 July 2004 |
| Tuesday 19 October | Third quarter trading statement issued |
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Pictures on
cover:
Other pictures:
Richard Lewisohn took the photos of the Chairman (page 1), Tom Glocer (page 3), Jane Platt (page 7), Christopher Hagman (page 9), Graham Albutt (page 11) and Rosemary Martin (page 13). Page 7: Correspondent Matthew Green reports from Iraq. Reuters. Page 9: Lisa Odlum, Customer Support. Bill Robinson. Page 11: 30 South Colonnade, Reuters London base from 2005. Canary Wharf Group plc. Bangkok Development Operation. Reuters. Page 13: Employee engagement day. Chip East. Nepalese farmer.Reuters/Gopal Chitrakar. Page 15: Italian industry minister at press conference. Reuters/Max Rossi. ©Reuters (2004). All rights reserved. Reuters, the sphere logo, BridgeStation, DataScope and Kondor+ are the trade marks or registered trade marks of the Reuters Group of Companies around the world. Designed
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Exhibit 99.2
Notice of 2004 Annual General Meeting
| Reuters Group PLC |  |
Notice of annual general meeting
Notice is hereby given that the 2004 annual general meeting of Reuters Group PLC (the company) will be held at The Lewis Media Centre, Millbank Tower, Millbank, London, SW1P 4RS on Thursday 22 April 2004 at 11.30 am. The following business will be considered, of which resolutions 1-10, 19 and 20 constitute ordinary business and resolutions 11-18 constitute special business.
To consider and, if thought fit, to pass the following resolutions of which resolutions 1-16 and 19 will be proposed as ordinary resolutions and resolutions 17, 18 and 20 will be proposed as special resolutions:
| Ordinary resolutions | |
| 1. | To receive the report of the directors and audited financial statements of the company for the year ended 31 December 2003. |
| 2. | To approve the directors’ remuneration report and the company’s remuneration policy for the year ended 31 December 2003. |
| 3. | To declare a dividend. |
| 4. | To re-elect as a director Tom Glocer, who retires by rotation and, being eligible, offers himself for re-election. |
| 5. | To re-elect as a director David Grigson, who retires by rotation and, being eligible, offers himself for re-election. |
| 6. | To re-elect as a director Sir Christopher Hogg, who retires by rotation and, being eligible, offers himself for re-election. |
| 7. | To re-elect as a director Ian Strachan, who retires by rotation and, being eligible, offers himself for re-election. |
| 8. | To re-elect as a director Charles Sinclair who has served for more than nine years as a director of the company and, being eligible, offers himself for re-election. |
| 9. | To re-appoint PricewaterhouseCoopers LLP as auditors of the company to hold office from the conclusion of this meeting until the conclusion of the next general meeting at which accounts are laid before the company. |
| 10. | To authorise the directors to agree the remuneration of the auditors. |
| 11. | That, pursuant to Regulation 86 of the articles of association of the company, the ordinary remuneration of each of the directors not holding executive office be and is hereby increased with effect from1 January 2004 to £50,000 per annum. |
| 12. | That the amendments highlighted in the Rules of the Long Term Incentive Plan produced to this meeting be approved. |
| 13. | That the Restricted Share Plan, the rules of which are produced to the meeting, be approved and the removal of the re-testing provisions for future grants under the Discretionary Share Option Plan be noted. |
| 14. | That, subject to approval of resolution 13 above, the directors be authorised to establish further plans based on the Restricted Share Plan but modified to take account of local tax, exchange control or securities laws in overseas territories, provided that any shares made available under any such laws are treated as counting against any limit on individual or overall participation in the Restricted Share Plan and provided further that such further plans, so far as practicable, contain limitations so as to ensure that participants obtain no greater benefits (before tax) than employees may obtain from participating in the Restricted Share Plan. |
| 15. | That the Annual Bonus Profit Sharing Plan, the rules of which are produced to the meeting, be approved. |
| 16. | That, subject to approval of resolution 15 above, the directors be authorised to establish further plans based on the Annual Bonus Profit Sharing Plan but modified to take account of local tax, exchange control or securities laws in overseas territories, provided that any shares made available under any such laws are treated as counting against any limit on individual or overall participation in the Annual Bonus Profit Sharing Plan and provided further that such further plans, so far as practicable, contain limitations so as to ensure that participants obtain no greater benefits (before tax) than employees may obtain from participating in the Annual Bonus Profit Sharing Plan. |
| Special resolutions | ||
| 17. | That the company be authorised generally and without conditions to make market purchases (as defined in Section 163(3) of the Companies Act 1985) of its own ordinary shares, provided that: | |
| 17.1 | the company may not purchase more than 143,254,000 ordinary shares in the capital of the company; | |
| 17.2 | the minimum price which the company may pay for each ordinary share is the nominal value per share; | |
| 17.3 | the maximum price (excluding expenses) which the company may pay for each ordinary share is 5% above the average of the closing middle market price taken from the London Stock Exchange Daily Official List for each of the five business days before the purchase is made; | |
| 17.4 | such authority shall expire at the conclusion of the next annual general meeting or on 22 July 2005 (whichever is the earlier); and | |
| 17.5 | the company may, pursuant to the authority granted by this resolution, enter into a contract to purchase such shares which would or might be executed wholly or partly after such expiry. | |
| 18. | That the draft regulations produced to the meeting and signed for the purposes of identification by the Chairman be and are hereby adopted as the company’s articles of association in substitution for the company’s existing articles of association. | |
| Ordinary resolution | ||
| 19. | That the authority conferred on the directors by Regulation 11(A) of the company’s articles of association (as in effect immediately prior to the passing of this resolution) be and is hereby granted for the period beginning on the date this resolution is passed and ending at the conclusion of the next annual general meeting or on 22 July 2005 (whichever is earlier), and for such period the section 80 amount shall be £107,400,000. | |
| Special resolution | ||
| 20. | That the power conferred on the directors by Regulation 11(B) of the company’s articles of association (as in effect immediately prior to the passing of this resolution) be and is hereby granted for the period beginning on the date this resolution is passed and ending at the conclusion of the next annual general meeting or 22 July 2005 (whichever is earlier), and for such period the section 89 amount shall be £17,000,000. | |
Any member entitled to attend and vote at this meeting is entitled to appoint a proxy or proxies to attend and, on a poll, vote in his stead. A proxy need not be a member of the company. A form of proxy is enclosed which shareholders are invited to complete and return in accordance with the instructions on it. If the proxy voting form is returned without an indication as to how your proxy should vote on any particular resolution, then the proxy is entitled to exercise his/her discretion as to whether and, if so, how to vote. The lodging of a form of proxy will not prevent the member from attending the meeting and voting in person.
1 Reuters Group PLC Notice of Annual General Meeting
General notes
| 1. | Copies of the directors’ service contracts, new and amended share plan rules proposed to be adopted pursuant to resolutions 12, 13 and 15, together with the draft articles of association proposed to be adopted pursuant to resolution 18 showing the amendments to the existing articles of association, will be available for inspection at the registered office of the company during normal business hours on any weekday (excluding Saturdays and public holidays) from the date of this notice until the close of the annual general meeting and at the place of the meeting for at least 15 minutes before and during the meeting. |
| 2. | The register of directors’ interests will be available for inspection at the place of the meeting throughout the duration of the meeting. |
| 3. | The company, pursuant to the Uncertificated Securities Regulations 2001, specifies that only those shareholders registered in the register of members of the company as at 6.00 pm on 20 April 2004 or, in the event that this meeting is adjourned, in the register of members 48 hours before the time of any adjourned meeting, shall be entitled to attend or to vote at this meeting in respect of the number of shares registered in their names at that time. Changes to entries on the relevant register of members after 6.00 pm on 20 April 2004 or, in the event that this meeting is adjourned, in the register of members 48 hours before the time of any adjourned meeting, shall be disregarded in determining the rights of any person to attend or vote at the meeting. |
| 4. | The Chairmen of the Audit, Remuneration and Nominations Committees will be present at the meeting to answer questions. |
| By order of the Board | |
Rosemary Martin, General Counsel and Company Secretary
3 March 2004
Registered
Office: 85 Fleet Street, London EC4P 4AJ
Explanatory notes
Resolution 1 – Accounts
The directors will present the directors’ report
and the audited financial statements of the company for the year ended 31 December
2003 to the shareholders.
Resolution 2 – Approval of directors’ remuneration report and the
company’s
remuneration policy
The directors will seek approval for
the directors’ remuneration report and for the company’s
remuneration policy for the year ended 31 December 2003 which are set out in
the Annual Report and Form 20-F 2003.
Resolution 3 – Dividend
The directors are recommending a final dividend of 6.15 pence per ordinary share,
payable on 29 April 2004 to shareholders on the register as at 12 March 2004.
Shareholder approval is required before this dividend can
be paid.
Resolutions 4, 5, 6, 7 & 8 – Re-election
of directors
One-third of the directors must retire
each year, though they may offer themselves for re-election. This year Tom Glocer,
David Grigson,
Sir Christopher Hogg, and Ian Strachan are retiring and seeking re-election.
The Board considers that it is in the interests of the company and its shareholders
that the executive directors continue in their respective roles and therefore
recommends that Tom Glocer should be re-elected so that he may continue, as Chief
Executive, to manage the company’s business and David Grigson should be re-elected so that he may continue in his role as Finance Director. The Board considers that Sir Christopher Hogg should be re-elected as a director so that he may continue
as Chairman of the Board until 1 October 2004 when Niall FitzGerald will succeed him as Chairman. The Board recommends the re-election of Ian Strachan as a non-executive director as he continues to bring valuable skills and experience to the Board.
The Chairman confirms that, following the review of the Board’s effectiveness and formal performance evaluation, the performance of Tom Glocer, David Grigson and Ian Strachan continues to be effective and that they demonstrate commitment to
their roles. Sir John Craven, the Board’s senior independent non-executive
director, led the evaluation of the Chairman and after so doing confirms the
same of the Chairman.
The new Combined Code on Corporate Governance published in 2003 recommends that non-executive directors who have served more than nine years on a company’s board should be subject to annual re-election. Charles Sinclair has served more than nine years on the company’s Board and is therefore submitting himself for re-election at the annual general meeting. The Board has undertaken a review of his effectiveness and believes he continues to be a valuable and committed member of the Board and as such recommends his re-election by shareholders. The Board acknowledges that length of service can affect a director’s independence but believes that Charles Sinclair retains his independence. Charles Sinclair has stated his intention to step down from the Board at the 2005 annual general meeting.
Please refer to pages 16 of the company’s 2003 Annual Review or pages 12-13 of the Annual Report and Form 20-F 2003 for biographical details. Tom Glocer and David Grigson are not members of any Board committees, Sir Christopher Hogg is the Chairman of the Nominations Committee, Ian Strachan is a member of the Audit Committee and Charles Sinclair is the Chairman of the Remuneration Committee.
Resolution 9 – Re-appointment of auditors
The company’s auditors must be appointed
each year as required by law at the annual general meeting. The directors have
recommended
retaining PricewaterhouseCoopers LLP.
2 Reuters Group PLC Notice of Annual General Meeting
Resolution 10 – Remuneration of auditors
Resolution 10 authorises the
directors to
agree the auditors’ remuneration.
Resolution 11 – Increase in non-executive directors’ fees
The ordinary remuneration of non-executive
directors is currently £35,000 per year. It was last increased on 1 January 2000 and in view of the increasing time commitment involved and in line with market trends,
the Board believes it is appropriate to recommend an increase to £50,000
per annum.
Resolutions 12-16 – Share plans
Resolutions 12 to 16 seek the approval
of certain amendments to the company’s existing share plans and the introduction of new share plans. The Appendices to this Notice set out, in the case of a change to a
plan’s rules, the changes which are being proposed and, in the case
of the proposed introduction of a new plan, a summary of that plan.
Resolution 17 – Purchase of own shares by
the company
This resolution seeks to renew, for up
to 15 months, authority for the company to buy its own shares in the market,
to limit the
number of shares which could be purchased to 10% of the total issued ordinary
share capital at 31 December 2003 and to set minimum and maximum prices and
the date when the authority runs out. This authority would only be exercised
if market conditions made it advantageous to do so. As a result of recent
changes to the Companies Act
1985 the company is no longer obliged to cancel any ordinary shares which
it repurchases, but may instead hold them as treasury shares. Treasury shares
can only be used by the company for limited purposes; it may cancel those
shares,
transfer them for the purposes of or pursuant to an employees’ share
scheme or sell them for cash. In the event of a sale for cash the statutory
pre-emption
rights under Section 89 of the Companies Act will apply, subject to the limited
disapplication of those pre-emption rights pursuant to resolution 20.
The effect of such purchases could be to reduce the number of shares in issue outside treasury (and, if repurchased shares are cancelled, the total number of shares in issue) and the directors would accordingly only make such purchases after considering the effect on earnings per share and the benefit to shareholders generally. Earnings per share are based on the results attributable to ordinary shareholders and on the weighted average number of those shares in issue during the year.
As at 3 March 2004 (the latest practicable date before publication of this document) the total number of outstanding options to subscribe for new ordinary shares was 98,592,653. This represents 6.9% of the issued share capital on that date and would represent 8.6% of the company’s issued share capital in the event that both the existing authority approved at the 2003 annual general meeting and the proposed new authority to repurchase shares were to be exercised in full.
At no time has the company held any treasury shares, and accordingly treasury shares are irrelevant for the purposes of the various calculations of percentages or proportions of share capital set out in these notes.
Resolution 18 – Adoption of new articles of association
This resolution proposes that the company adopts, in substitution for its existing
articles of association, new articles of association incorporating certain
amendments made to reflect changes in English company law concerning the
ability of the company to hold its own shares in treasury. As the new articles
affect provisions which are part of the entrenched rights of the Founders
Share, the approval of Reuters Founders Share Company Limited is required
in
order for this resolution to be effective. A summary of the principal proposed
amendments is set out below.
Disapplication of statutory pre-emption rights
A sale of treasury shares by the company for cash is subject to the statutory
pre-emption rights set out in section 89 of the Companies Act 1985. Regulation
11 is amended to allow a resolution disapplying the statutory pre-emption
rights on the issue of new equity securities by the company (including resolution
20) to extend to the sale by the company for cash of treasury shares. Further
amendments to Regulation 11 clarify that the company may satisfy its
obligations to issue shares on a rights issue by using treasury shares.
Interests in shares
Regulation F.15 imposes certain notification
obligations
on the company’s shareholders in relation to interests in the company’s
shares, in addition to their statutory obligations. It also imposes restrictions
on the maximum size of shareholdings in the company (15%). Amendments to Regulation
F.15 provided that treasury shares are treated as unissued shares for the purposes
of these provisions (in line with the statutory notification
provisions).
Bonus shares
Regulation 140 allows the company, with the sanction of an ordinary resolution
of shareholders, to issue bonus shares. Amendments have been made to allow
flexibility as to whether, on any bonus issue, bonus shares need be allotted
to the company in relation to shares held as treasury shares.
Minor amendments
Other amendments bring the articles into line with the statutory approach that
treasury shares are treated as unissued shares for most purposes.
Resolution 19 – Authority of directors to allot
shares
Resolution 19 seeks to renew the directors’ authority to issue the authorised but unissued capital of the company up to a maximum of £107,400,000, being one-third of the total ordinary share capital in issue
at 31 December 2003. The proposed amount of this authority is equivalent to 29.98% of the company’s
issued share capital as at 3 March 2004. As at the date of this Notice the company
held no treasury shares.
Resolution 20 – Disapplication of pre-emption
rights
Resolution 20 seeks to grant the directors
authority to issue shares for cash, or to sell treasury shares, without offering
them first
to existing shareholders pursuant to Section 89 of the Companies Act 1985. It
is in
line with a similar authority granted at last year’s annual general meeting save that, as a consequence of the introduction of the new treasury shares regime and assuming resolution 18 is passed, it now extends to the sale of treasury shares
for cash. The directors’ authority (other than in relation to a rights issue) is limited to £17,000,000 of share capital, which represents 5% of the company’s
issued ordinary share capital at 31 December 2003 (and 4.74% at 3 March 2004)
and is line with the recommended guidelines issued by institutional investor
bodies.
The directors consider that it is in the best interests of the company that they should have the flexibility conferred by this authority, although they have no present intention to make any further issue of shares for cash or to transfer treasury shares for cash, other than to issue small numbers of ordinary shares or to transfer treasury shares to US employee share option holders to round up their share entitlements to the multiples of ordinary shares required for the issue of American Depositary Shares. The authority will lapse at the conclusion of the next annual general meeting or on 22 July 2005 (whichever is the earlier).
3 Reuters Group PLC Notice of Annual General Meeting
Appendices – Share plans
Appendix 1
Summary of the amendments
to the company’s
Long Term Incentive Plan (LTIP)
The participants of the LTIP are the executive directors and other selected senior executives of the company.
Since 1993, Reuters has operated the LTIP which seeks to encourage and reward long term growth in shareholder value. To be consistent with the plan’s objective and to ensure the Group’s growth is measured relative to other major UK companies, the vesting of LTIP awards is conditional on achievement of growth, measured over three years, in the Group’s total shareholder return (TSR) relative to that of other companies comprising the FTSE 100 at the date of award.
Three amendments to the LTIP are proposed in order to bring it more closely into line with existing best practice in the design of this type of long term incentive plan. These are:
1. Removal of re-test provision
In the event that the TSR performance condition is not met at the first possible
opportunity, then the LTIP has two performance re-tests. It is proposed,
concurrent with the introduction of the others changes to the LTIP outlined
below, to remove the provision for re-testing performance for awards made
after the date of shareholder approval of the proposed amendments. In the
event that the performance condition is not satisfied at the end of the
performance
period the award shall lapse. In the event that the performance condition
is met, it is proposed that awards shall vest as set out below.
2. Changes to the vesting schedule
The TSR performance condition has, since 2001, provided that the Group must achieve
median TSR performance for a proportion of the awards to vest; full vesting
only occurs for top quartile performance. Between these positions, awards
vest on a straight line scale, starting at 4% for median performance. Following
an analysis of FTSE comparator groups, the 4% median vesting limit was found
to be low by competitive standards. It is proposed to bring the vesting
level for median performance more into line with market practice. It is therefore
proposed to adopt a vesting rate of 331 /3% for TSR performance at
the median of the FTSE 100 comparator group with full vesting for top quartile performance and with proportionate vesting for incremental performance between these points.
3. Amendment to the retention period provisions
The LTIP currently provides that once an award made to an executive director
has vested in accordance with the performance criteria, there is a further
retention period of normally two years before the vested shares can be transferred.
The provision was designed to encourage executive directors to hold the shares
for an extended period post-vesting. The company has subsequently introduced
a Personal Shareholding Policy which requires executive directors (and
other senior executives) to build-up and retain a shareholding in the company
based on a multiple of salary. Following the implementation of this Personal
Shareholding Policy, the requirement for a retention period has been superseded.
Accordingly, it is proposed that the retention period at the end of the LTIP
performance period is removed.
Appendix 2
Summary of the Restricted Share Plan and changes to the DSOP
The company currently operates a Discretionary Share Option Plan (DSOP). Historically, approximately 4,000 employees who are selected based on agreed criteria including individual performance, role, skills and potential have participated in this plan each year.
To reduce the dilutive impact on shareholders’ interests, it is proposed to reduce significantly the number of participants in the DSOP to executive directors and members of the senior management committee, the Group Management Committee (GMC), save on an exceptional basis. It is further proposed to introduce restricted shares as an alternative reward mechanism to employees who would otherwise have participated in the DSOP.
The Restricted Share Plan will enable selected employees to be granted awards entitling them to a fixed number of ordinary shares in the capital of the company at the end of specified periods subject to remaining in employment. Awards may be granted in the form of nil cost options to acquire the shares, a contingent right to receive shares, an allocation of shares subject to forfeiture or an allocation of shares subject to dealing restrictions. The Remuneration Committee may determine at the date an award is granted whether a participant will be entitled to receive dividends and to exercise voting rights in respect of the shares under a restricted award during the restricted period. It is currently intended that awards will vest as to 25% on each of the first, second, third and fourth anniversaries of grant.
Eligibility: The primary intent of the Restricted Share Plan is to enable the company to provide market levels of reward to selected employees who had previously been eligible for DSOP awards and who are not within six months of their normal retirement age. As restricted shares have a higher intrinsic value per underlying share than an option over such shares, it is possible to grant significantly fewer restricted shares to deliver the same economic value to a recipient when compared to a share option award. All employees of the Group (including executive directors) who are not within six months of their normal retirement age will be eligible to participate in the plan at the discretion of the Remuneration Committee. Restricted shares will not normally be granted to executive directors for long term incentive purposes. Other than in the year of introduction, participants will generally not be eligible for grants in both the DSOP and the Restricted Share Plan in the same year.
Individual limits: The maximum number of shares that may be awarded to a participant in any 12 month period will be limited so that the market value of such shares on the date of grant as determined by reference to the closing middle market quotation for a share as derived from the Daily Official List of the London Stock Exchange on the date of grant, will not exceed 100% of basic salary although if the Remuneration Committee considers that circumstances exist that justify a higher amount, shares with a value of up to 200% of basic salary may be awarded.
Grant of share awards: Awards may only be granted during the period of six weeks following the announcement by the company of its results for any period, or on any day on which the Remuneration Committee determines that exceptional circumstances justify a grant. No awards may be made more than ten years after the adoption of the Restricted Share Plan. No payment will be required for the grant of an award.
Share awards may be granted over unissued or existing shares. No award may be granted under the Restricted Share Plan if it would cause the number of shares issued or issuable pursuant to awards and options granted in the preceding 10 years under any share scheme established by the company to exceed 10% of the company’s issued ordinary share capital at the proposed date of grant. If share awards are to be satisfied by a transfer of existing shares, the percentage limit stated above will not apply. Awards may also be satisfied by the transfer of treasury shares in which case the percentage limits stated above will, in accordance with the current Association of British Insurers guidelines, apply.
4 Reuters Group PLC Notice of Annual General Meeting
Release of awards: The release of restricted share awards will usually not be subject to performance conditions but the Remuneration Committee may grant awards on the basis that they will be forfeited if minimum performance conditions are not achieved. Any performance conditions will be specified at the date of grant.
If a participant leaves employment any unvested portion of his restricted share award will normally be forfeited. Where the reason for leaving is death, injury, disability, ill-health, redundancy, retirement, early retirement with the consent of the Remuneration Committee, the sale of the employing business or company or (if the Remuneration Committee so decides) any other reason all or a time pro rated part of his restricted award (as the Remuneration Committee may determine) may be released early.
Restricted share awards may also be released early in the event of a takeover, merger, reconstruction, amalgamation, demerger or voluntary winding up of the company. In these circumstances, all or a time pro rated part of a restricted award (as the Remuneration Committee may determine) may be released early.
Adjustment of share awards: In the event of any rights or capitalisation issue, sub-division, consolidation, reduction or other variation of the company’s ordinary share capital, or the implementation by the company of a demerger or payment of a super dividend which would otherwise materially affect the value of a share award, the Remuneration Committee may adjust the number of shares subject to share awards.
Participant’s rights: Benefits under the Restricted Share Plan will not be pensionable.
Share awards are not transferable and may only be exercised by the persons to whom they were granted or their personal representatives.
Rights attaching to shares: Shares allotted or transferred under the Restricted Share Plan will rank alongside shares of the same class then in issue. The company will apply to the UK Listing Authority for the listing of any newly issued shares.
Amendments: The Remuneration Committee or Board may amend the Restricted Share Plan. However, the provisions governing eligibility requirements, equity dilution, individual participation limits and the adjustments that may be made following a rights issue or any other variation of capital cannot be altered to the advantage of eligible employees or participants without the prior approval of the company’s shareholders in general meeting (except for minor amendments to benefit the administration of the Restricted Share Plan, to take account of a change in legislation or developments in the law affecting the Restricted Share Plan or to obtain or maintain favourable tax, exchange control or regulatory treatment for participants in the Restricted Share Plan or for any member of the Group). In addition, no alteration may be made that would materially affect any subsisting rights of any participants without their prior consent.
The Board may also establish separate but commercially similar plans or appendices to the Restricted Share Plan for the purpose of granting awards to employees who are employed by non-UK companies or who are or may become primarily liable to tax outside the United Kingdom on their remuneration. Any shares made available under such separate but commercially similar plans or appendices shall count towards the new equity and individual award limits described above.
Termination: The Restricted Share Plan will terminate on the tenth anniversary of its approval by the company’s shareholders, or such earlier time as the Remuneration Committee or the Board may determine, but the rights of existing participants will not thereby be affected. In the event of termination no further options or share awards will be granted.
Changes to the DSOP: Under the DSOP options granted to executive directors can only vest if the percentage growth in the Group’s earnings per share (EPS) exceeds the percentage growth in the retail price index by more than 9% over the 3 year performance period. For existing awards, if the target is not met, the performance period may be extended by up to two years with an increase of 3% in the hurdle rate of EPS growth for each year added to the performance period. If the target rate is not met by the end of the fifth year the options will lapse. These conditions were established in 2001 to retain management focus on earnings in a particularly challenging market. The Remuneration Committee believes that it is appropriate to retain the performance conditions for executive directors at this stage in Reuters transition. From 2004, the re-testing provision will be removed and accordingly, from 2004, awards will not permit extension of the measurement period.
Appendix 3
Summary of the Annual Bonus Profit Sharing Plan (the Bonus Plan)
The company intends to introduce a new bonus arrangement linked to Reuters operating profit. Individual bonuses will be delivered in the form of ordinary shares in the capital of the company under the proposed Bonus Plan.
Eligibility: The Bonus Plan will be available to employees of the Group (excluding executive directors and GMC) and will enable the selected employees of the Group to be granted awards entitling them to a fixed number of shares at the end of a one year period subject to remaining in employment during that time. Awards will be granted in the form of a contingent right to receive shares or, in exceptional circumstances, a cash sum equal to the market value of the number of shares comprised in the award.
Individual limits: The maximum number of shares that may be awarded to a participant in any 12-month period will be limited so that the market value of such shares on the date of grant, as determined by reference to the closing middle market quotation for a share as derived from the Daily Official List of the London Stock Exchange on the date of grant, will not exceed 5% of basic salary, although if the Remuneration Committee considers that circumstances exist that justify a higher amount, shares with a value of up to 10% of basic salary may be awarded.
Release of awards: Awards will not normally be released until the end of the one year restricted period. If a participant leaves employment before the end of the restricted period, his award will normally be forfeited unless the reason for leaving is death, injury, disability, ill-health, redundancy, retirement, early retirement with the consent of the Remuneration Committee, the sale of the employing business or company, or (if the Remuneration Committee so decides) any other reason. In these circumstances an award may be released early.
Awards may also be released early in the event of a takeover, merger, reconstruction or amalgamation, demerger or voluntary winding up of the company. In these circumstances, all of an award may be released early.
Other provisions: Provisions dealing with the adjustment of awards, a participant’s rights, rights attaching to shares, grant periods, new equity limits, amending and terminating the Bonus Plan are identical to those in the Restricted Share Plan.
The Board may also establish separate but commercially similar plans or appendices to the Bonus Plan for the purpose of granting awards to employees who are employed by non-UK companies or who are or may become primarily liable to tax outside the United Kingdom on their remuneration. Any shares made available under such separate but commercially similar plans or appendices shall count towards the new equity and individual award limits.
5 Reuters Group PLC Notice of Annual General Meeting