Will Davis

3-Year Plan Executive Summary This business plan provides a review of our companies’ recent status as well as a review of the industries we operate in. The focus of this plan is to highlight where we are doing well and where there is room for improvement. The market for information products is constantly evolving as competitors create new, more efficient ways to distribute information to customers. The challenge is not the information and advice we offer, but how we can best provide it to our customers. Demand for information products remains strong in most industry segments. The Financial & Risk business segment is an exception with the financial realm undergoing major changes after a major recession. Contrary to other news organizations, Thomson Reuters is growing, which gives us an appeal to investors and hope for the future.     Review of Recent History     The financial year of 2011 was a rocky period for Thomson Reuters. There were major changes in leadership and an overhaul of the corporate structure. In 2011 was announced that you, James C. Smith, would become President and CEO and Stephane Bello would become Executive Vice President and CFO effective January 1, 2012. This change in leadership can be considered a positive, as new

leadership may mark a new direction and new ideas to bring the company through a constantly changing business climate. The most significant occurrence was the reorganization our corporate structure in the later half of 2011. We collapsed our divisional structure and now the company is organized into a group of strategic business units with a corporate center, which now functions as a home base and support center. Earnings for the year were less than anticipated at $12.9 billion, which indicates growth of 5%. Free cash flow was below anticipated at $1.6 billion. The Legal, Tax & Accounting sector proved to be the highest performing business unit at 9% growth for the fiscal year. The stock price finished the calendar year at $26.67 with an earnings loss of $1.67 per share. The 2011fiscal year market cap was $22,174.73 million, down from $31,213.59 for the fiscal year of 2010. Overall, the company remains profitable but not as profitable as desired. Current Market and Competitive Overview Thomson Reuters is a multi-industry corporation, specializing in intelligent information services and products. Intelligent information is the synthesis of human intelligence, industry expertise and innovative technology. The purpose of intelligent information is to provide professionals in a variety of fields with knowledge they need to act and make better decisions faster (Thomson Reuters Annual Report). The intelligence sector is facing ongoing challenges. More and more free sources of information are emerging as more government and private entities share information free of charge. New legislation threatens to alter the landscape of the information

industry, as lawmakers demand stronger privacy laws, which would restrict access to gathering and sharing certain types of information. The market for intelligent information varies in terms of competitors by the category of business. Thomson Reuters provides information services to professionals in the following markets: Financial & Risk, Legal, Tax & Accounting, and Intellectual Property & Science. The Financial & Risk business unit provides critical news, information and analytics (Bloomberg). Four categories fall under this business unit: Trading, Investing, Marketplaces, and Governance, Risk & Compliance. Competitors with Trading’s information products are Bloomberg, SunGard, Telekurs, IDC, and other smaller local and niche competitors. In vesting’s competitors include. Bloomberg, FactSet, S&P/Capital IQ, Morningstar, SunGard Data Systems, Boadridge Financial Solutions, IDC, and Telekurs. Marketplaces competes with large inter-dealer brokers, like ICAP’s EBS platform and Bloomberg. In the sector of Governance & Risk competes with business entities at the global, regional, and local niche level. Governance & Risk’s compliance audit and risk products compete with Wolters Kluwer Compliance Resource Network, CCH Team Mate, Protiviti, BWise and MetricStream. Governance & Risk’s products in the financial crime and reputational risk market compete with Dow Jones, LexisNexis and Actimize. Governance, transaction and legal risk products compete with LexisNexis, Bloomberg and Practical Law Company. Our Legal business unit provides critical information, decision support tools, software and services to legal, investigation, business and government professionals around the world. Our products in this sector range from online databases to software.

Competitors for the Legal sector include Reed Elsevier (LexisNexis) ,Wolters Kluwer and Bloomberg. The Intellectual Property & Science business products consist of comprehensive intellectual property (IP) and scientific information, decision support tools and services for governments, academia, publishers, corporations and law firms to utilize. Main competitors include Coresearch, CPA Global, LexisNexis, Minesoft, patent office sites, Reed Elsevier, Wolters Kluwer, Informa, Chemical Abstracts Services, ProQuest, EBSCO, Aries and Google Scholar. Thomson Reuters still holds a highly competitive position in all of the categories in which it operates; we are an industry leader holding the number 1 or number 2 positions in most of the markets we serve. It’s imperative that we do not let this position slip. As the industry services landscape changes, our position is being challenged. In light of the variety of industries we operate in, one competitor stands out and competes with us in almost all of our categories: Bloomberg. Bloomberg passed us in market share in 2011 with 30.44 percent market share, with us close behind with 30.05 percent of the market share (talkingbiznews.com). Thomson Reuters and Bloomberg are neck-in-neck, being called the “Pepsi and Coke” of journalism (Brown). We are both still growing in a time when most news outlets are shrinking or dying off; while this may seem scary, it is a testament to our business model. We are doing something right. We should observe our key competitor and try and learn from them, as well. In a more focused view, we compete against a variety of smaller, regional information providers in niche markets for our individual industries. They do not threaten our market share on an individual basis, but collectively there is potential competition.

The challenge with smaller companies is that that it’s much easier and quicker to change the course of a tugboat (them) as opposed to a tanker (us). Smaller companies are able to test and try out newer innovations quicker and more efficiently due to their smaller scale operations. Our two largest stakeholders are our shareholders and Woodbridge. Woodbridge came to control 55% of our common shares on March 1, 2012, which makes the private company the majority and controlling shareholder of Thomson Reuters. Our shareholders are concerned due to the decline in share value in the past year of $1.67 per share. We must appease minority shareholders in order to court their continued investment in us; if the stock continues to decline we will lose investor confidence. The most important shareholder, Woodbridge, must be appeased. With their controlling share of stock, the company has the ability to make major changes in our company unless we please them with our performance.

Overview of Strategic and Financial Options Thomson Reuters is currently facing a multitude of potential threats to our future vitality. The threats are factors that are subject to change could directly and adversely affect our business model. A top threat is our ability to adapt to an ever-changing business climate, which refers to a variety of issues: our ability to innovate and expand, inexpensive and free alternative information sources on the rise, and our subscription model.

As noted in the previous section, we compete with a variety of information product providers of all shapes and sizes. A key threat from this is the potential that our competitors will out-innovate us and capture new markets before we are able to or anticipate them. Our larger competitors, like Bloomberg, have the financial resources, manpower, and scope to invest in research and development for market innovation. The span of these larger competitors also enables them to expand into new geographic markets at a similar or faster pace than we are able. Smaller, niche market providers are just as big of a threat to our ability to innovate and expand as our larger competitors are. Smaller companies are able to quickly test out new technologies on a smaller scale without the high risk and potential for loss that we face with our large-scale operations. Smaller companies can also open up shop in unexplored markets and fill a void before we are able to successfully expand into that market. A direct threat to our business model is the emergence of new inexpensive information businesses, some even being free. A lot of these alternate information sources are sprouting up as the Federal and local governments become more open with sharing information. Customers may choose to use these public information sources to cut cost instead of using our subscription-accessed products. The next threat is the possibility is the risk of a decline in subscriptions to our product. In 2011, 86% of our profits came from recurring subscriptions or similar contract-based agreements. Most of these agreements are renewed annually, but many can be cancelled in a fraction of a year if we are given appropriate notice. If our

customers chose to end their subscriptions in favor of saving costs or find cheaper alternatives, it could easily harm our bottom line. Our competition is a major threat but one that can be faced by addressing the problems I just listed. Bloomberg has beat us in market share, for the time being, and smaller companies are innovating and exploring new markets, scoping these ideas and customers out from under us. We must take a proactive approach to shore-up the current assets we have and turn our risks into opportunities. One option is to devote more financial resources to research and development. This could be done by not only funding product research but also by recruiting fresh, creative talent. Perhaps scope out high performing employees at other companies and make them strong offers to work for us. Another option is to determine which of our smaller; niche competitors are thriving at innovation and acquire them in order to incorporate their ideas into our business model. I’m you can’t beat ‘em, buy ‘em. Let the smaller companies take on the burden of trial and error and once they have a product or idea with potential, absorb them and utilize it. This all depends on how acquirable any of these companies are, obviously. But the main point is that in the information industry, innovation is key. We can’t simply thrive off of being large; we must also have fresh ideas. As free and inexpensive information is becoming more available via the Internet we must adapt and differentiate our product. It has been indicated that customers are turning away from some of our print-only information sources in favor of quicker, more efficient online sources. We should be investing money in adapting these information products to an online format wherever possible. There should be no situation where a

competitor’s product is easier to access than ours. Also, it must be made clear to current and future consumers the superiority of our information products to that of free or cheap sources. Our product is developed from in-depth analysis and expert input on the information out there. A possible tactic would be to launch a public relations campaign targeted at our current customers to remind them what a quality product they have access too, so that they are reminded the money they give us is well spent. In this period of fast, free information popping up all over the Internet it’s easy for customers to lust for a cheaper, readily available alternative without considering the quality of that information. Another solution may be to modify our subscription model if subscriptions begin to decline heavily. It may be best to do this in advance, rather than wait for a decline – to be proactive rather than reactive. We should consider modifying subscriptions based on the customer base that purchases them. In all of the industries we serve, we have small clients and large clients with a varying degree of financial resources. A tiered model could be developed in which our customers only pay for certain levels of information. Smaller companies could pay less money to just access the bits of information they need, rather than pay the current sum for an excess of information that may be only valuable to larger companies. One example falls under our Legal business unit in which we serve small law firms and large law firms, which both have a variance in needs. However, I would caution that this is the last option we should try out. Our subscription model hasn’t suffered major hits yet and we don’t want to fix something that isn’t broken.

Recommendations for Investment/Divestment

My recommendation is that we invest on two fronts: product development, and acquisitions. There are no portions of our business model that are clearly dying, thus divestment is unnecessary. We are also large enough that a merger is out of the question. Investment in research and development is key to fuel organic growth. Resources should be devoted to continuously updating and improving our current programs, software, and other information products so that they do not become antiquated. But we must also develop new, industry-changing products. Investment in this sector would come in two forms: (1) providing adequate resources to our development teams and (2) talent acquisition. We are a large corporation with much cash and credit at our disposal. We have the money necessary to develop new products. We must not be afraid to invest in order to remain relevant in the ever-changing information industry. Also, in order to keep our teams and ideas fresh, we must actively pursue promising talent with fresh ideas. This could come in the form of researching employees at our competitors and sending them offers and it could come in the form of offering well-paying jobs to those who have solid ideas for new products. The next recommendation for investment is expansion through acquisition. By acquiring existing competitors we automatically strengthen the current markets we are in or expand into new markets. The ideal acquisitions would be competitors with promising products that would strengthen our offerings. Let them come up with the ideas and

purchase them once the ideas are ripe. The purpose of these acquisitions would not be to grow in size, as we are already a large company, but to expand our market coverage and bring new talent and ideas into Thomson Reuters. Acquisitions would also help us gain market share, which could put us back ahead of Bloomberg, if he right acquisitions are made. Growth is the most important strategy. Anything to spur growth is positive. As pointed out earlier, us and Bloomberg are bucking the news trend and still growing. Growth through acquisitions and expansion is encouraging to shareholders. Most important is that we fight to gain lost ground on Bloomberg and make sure that we are the “Coke” of our industry and not the “Pepsi”.

Conclusion Our core business still remains strong. We are an industry leader holding first and second place positions in the industries we serve. We have a diversified business structure with our largest customer accounting for 1 percent of our current revenues, fortifying us to extreme harm from a single customer. Subscription renewals remain high and profitable. The electronic frontier is proving to be profitable for us with 90 percent of our 2011 revenues coming from delivery of information via online, software or other tech. One of our biggest assets is that we are attractive based on our sound, stable financial practices with a high cash flow ($422 million cash flow for 2011) and dividends being a strong feature of our shareholder returns. The reorganization of our corporate structure shows promise for a more efficient way of doing business, making the development and execution of new plans and ideas more efficient and more likely to succeed.

Our product category is still relevant and by serving a variety of industries we have not pigeonholed ourselves, but innovation is key in this period of change. The type of information we provide has much value, the way we provide it must constantly evolve with the changing demands of the industry. Technological innovation is our best bet, which can only be achieved through research funding and fresh ideas. If we evolve with the industry we will thrive, we must not stagnate and become a dinosaur.

Sources Bloomberg  Terminal.  Bloomberg.  New  York,  NY.  22 Apr. 2012

Brown,  Joshua  M.  The  Christian  Science  Monitor.  The  Christian  Science  Monitor,  3   Apr.  2012.  Web.  20  Apr.  2012  <http://www.csmonitor.com/Business/The-­‐ Reformed-­‐Broker/2012/0403/Bloomberg-­‐and-­‐Reuters-­‐The-­‐Coke-­‐and-­‐Pepsi-­‐of-­‐ journalism>.  

NYConvergence.  6  Apr.  2012.  22  Apr.  2012     <http://nyconvergence.com/2012/04/bloomberg-­‐lp-­‐and-­‐reuters-­‐soon-­‐to-­‐take-­‐ over-­‐news-­‐industry.html>.  

Talking  Biz  News.  UNC-­‐Chapel  Hill,  24  Feb.  2012.  Web.  22  Apr.  2012   <http://www.talkingbiznews.com/?p=30991&utm_source=twitterfeed&utm_mediu m=twitter>.     Thomson  Reuters  Annual  Report.  Thomson  Reuters,  1  Mar.  2012.  Web.  22  Apr.  2012   <http://ar.thomsonreuters.com/home.html>.