FROM THE CHIEF EXECUTIVE

"Photographs from our own news service
on the pages of our Annual Report ...
illustrate the drive to break new ground
through the use of advanced technology."

For many years now we have been using photographs from our own news pictures service on the pages of our Annual Report. This year we have used them to represent some of our main challenges (Performance, Balance and Opportunity).

They illustrate the drive to break new ground through the use of advanced technology, and to draw competitive advantage from the rapid rate of change it brings about. Then there is the pressure for performance, as we girdle the globe with instant electronic consciousness of all that makes politics and markets hum. Nor can we ever forget the requirement to handle information in a balanced manner, so that those originating news events, who so often complain about distortion by journalists, can readily recognise their face in the mirror we hold up to them. In the torrent of change, this remains the company's ethical distinction, as it has since 1851.

"These images match the reality only if we are prepared to sustain a
substantial programme of investment
and innovation on behalf of
our customers."

These images match the reality only if we are prepared to sustain a substantial programme of investment and innovation on behalf of our customers. The picture will soon become blurred if we dissipate our concentration. The rationale of returning cash to investors is that we invest money as fast as possible in our business and shed the rest to improve the return on a smaller equity base.

Where are the investment flows going? One major destination is our new 3000 series of products, adding new dimensions of background and analysis to our markets coverage. These products are selling well. They are gathering critical mass. We shall go on extending their capacity and features in order to meet anticipated good growth in demand. We shall allow other older products and technology to become obsolete. We shall concentrate our strengths around the 3000 range - for example transaction and brokerage facilities, or our emerging new concept in television, which uses the screen only for coverage of market-moving events and analysis. Unlike competing products which have opted for the consumer market, Reuters Financial Television is gaining a name for itself as the video service for professionals. There can be no more fast or direct approach to getting at the facts than to see them uttered by the newsmaker.

The 3000 series is further reinforced by access to a very large text database, including news from Reuters and several thousand publications worldwide, searchable in seconds. No other financial services vendor has such a facility. The Reuters Business Briefing, as it is known, is developing strong appeal to finance professionals and corporate managers alike.

In short, we aim to persuade our clients to search no further than the "Reuters 3000" to find out all that they can conceivably want to know, and to take action on this knowledge. But we do not seek to impose our technology on them. We interface conveniently to the client's own system, bought from us or from another supplier, so that data can readily be transferred, within the customer organisation, to the place where it is needed - for example in risk management models where we have made a large and successful investment.

Our open systems approach should stand us in good stead for some years to come. Customers tell us that, despite ever-increasing internal technology budgets, they have more and more problems producing useful developments on time. Reuters ability to deliver standard systems products cheaply compares more and more favourably with in-house developments which are expensive to maintain and do not for long remain a unique source of advantage.

Another rich source of standard technologies is the Internet, which has enabled us, for the first time, to invest in a promising new range of products which we are supplying to clients and to the clients of our clients.

Electronic banking and brokerage are no longer stymied by the cost of the "last mile" link into the home. The private investor needs no special lines or equipment since an Internet link to the home already exists. The air is naturally thick with predictions that conventional financial service providers will be disintermediated by this development. At Reuters we do not think this is what is likely to happen. We see our banking and brokerage customers speedily adapting themselves, in some countries, to home delivery of their services, needing only a package of information and related technology to enliven their products for the consumer.

We are opening new markets by providing just such a branded package for our customers to use in their offerings. We believe there will be performance limitations on the Internet for some time to come, although we are investing constantly in smaller companies working on technologies which will improve its efficiency. But the Internet already offers a cheap means to penetrate lower-tier markets which were hitherto ruled out by high delivery cost. The technological future is usually less dramatic than the pundits proclaim, but, over the long haul, it works and it is working for us.

Peter Job Chief Executive