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28. Reconciliation of movement in shareholders' funds


	Share capital Łm		Share premium account Łm		Capital redemption reserve Łm		Other reserves Łm		Profit and loss account Łm		Total Łm



Balances in British Telecommunications plc group at 31 March 1999	1,617		1,206		747		27		11,343		14,940

Adjustment for restatement of deferred tax provision	-		-		-		-		(1,895	)	(1,895	)

Merger accounting adjustments to reflect new company structure^a:

Eliminate BT capital	(1,617	)	(1,206	)	(747	)	-		-		(3,570	)

BT Shares shown at BT Group nominal value	7,438		-		-		(3,868	)	-		3,570



Balances in BT Group plc group at 1 April 1999, restated	7,438		-		-		(3,841	)	9,448		13,045

Goodwill, previously written off to reserves, taken back to the profit and loss account^b	-		-		-		-		6		6

Employee share option schemes - 38 million shares issued (note 34)	47		-		-		337		-		384

Movement relating to BT’s employee share ownership trust^c	-		-		-		-		(257	)	(257	)

Currency movements (including Ł10 million net losses in respect of foreign currency borrowings)^d	-		-		-		-		(66	)	(66	)

Profit for the financial year (as restated)	-		-		-		-		1,995		1,995

Dividends (19.6p per ordinary share restated)	-		-		-		-		(1,426	)	(1,426	)

Unrealised gain on transfer of assets and group undertakings to a joint venture	-		-		-		159		-		159



Balances at 1 April 2000	7,485		-		-		(3,345	)	9,700		13,840

Employee share option schemes - 78 million shares issued (note 34)	88		-		-		546		-		634

Movement relating to BT’s employee share ownership trust^c	-		-		-		-		(359	)	(359	)

Currency movements (including Ł65 million net gain in respect of foreign currency borrowings)^d	-		-		-		-		429		429

Loss for the financial year (as restated)	-		-		-		-		(1,870	)	(1,870	)

Dividend (7.8p per ordinary share restated)	-		-		-		-		(571	)	(571	)

Adjustment to unrealised gain on transfer of assets and group undertakings to a joint venture	-		-		-		(49	)	-		(49	)



Balances at 1 April 2001	7,573		-		-		(2,848	)	7,329		12,054

Rights issue^e	2,272		-		-		3,604		-		5,876

Shares issued to special purpose trust^f	65		-		-		108		-		173

Other allotments of ordinary shares prior to demerger - 52 million shares issued	61		-		-		160		-		221

Distribution relating to demerger of mmO2^g	-		-		-		-		(19,490	)	(19,490	)

Capital reduction on 21 November 2001^h	(9,537	)	-		-		-		9,537		-

Goodwill, previously written off to reserves, taken back to the profit and loss account^b (note 7)	-		-		-		-		68		68

Employee share option schemes - 1 million shares issued (note 34)	-		2		-		-		-		2

Movement relating to BT’s employee share ownership trust^c	-		-		-		-		(70	)	(70	)

Unrealised gain on start up of joint ventures	-		-		-		5		-		5

Realisation of gain made on start up of joint ventures	-		-		-		(2	)	-		(2	)

Movement in other reserves due to demerger	-		-		-		(2	)	-		(2	)

Currency movements (including Ł36 million net gain in respect of foreign currency borrowings)^d	-		-		-		-		(15	)	(15	)

Profit for the financial year	-		-		-		-		995		995

Dividend (2.0p per ordinary share)	-		-		-		-		(173	)	(173	)



Balances at 31 March 2002	434		2		-		1,025		(1,819	)	(358	)



^aOn 19 November 2001, BT Group plc became the parent company of the group. As described in note 1, this transaction has been accounted for using the principles of merger accounting. These require the restatement of the opening capital balances to reflect the new parent company structure. ^bAggregate goodwill at 31 March 2002 in respect of acquisitions completed prior to 1 April 1998 of Ł1,254 million (2001 - Ł1,383 million, 2000 - Ł1,383 million) has been written off against retained earnings in accordance with the group’s accounting policy. The goodwill written off against retained earnings will be charged in the profit and loss account on the subsequent disposal of the business to which it related. ^cDuring the year ended 31 March 2002 the company issued shares at a market value of Ł154 million (2001 - Ł400 million) in respect of the exercise of options awarded under its principal savings-related share option scheme. Employees paid Ł84 million (2001 - Ł145 million) to the group for the issue of these shares and the balance of Ł70 million (2001 - Ł255 million) comprised contributions to the qualifying employee share ownership trust from group undertakings. The movement relating to BT’s Employee Share Ownership Trust in 2001 included the writedown of shares held in trust. ^dThe cumulative foreign currency translation adjustment, which increased retained earnings at 31 March 2002, was Ł217 million (2001 - Ł278 million increase, 2000 - Ł151 million decrease). ^eThe group’s rights issue closed on 15 June 2001, when British Telecommunications plc was the parent company of the group. A total of 1,976 million ordinary shares of 25p each was issued at 300p per share in a 3 for 10 rights issue. Of the total of Ł5,876 million raised, net of Ł52 million expenses, Ł494 million was credited to share capital and Ł5,382 million to the share premium account of British Telecommunications plc. Following the introduction of BT Group plc as the parent company of the group, the increase in consolidated share capital has been restated to reflect the nominal value of BT Group plc shares and the balance has been credited to other reserves. ^fIn connection with outstanding share options at the date of demerger, 57 million British Telecommunications plc ordinary shares were issued on 14 November 2001 to a special purpose trust. Of the consideration of Ł173 million, Ł159 million was credited to the share premium account of British Telecommunications plc. Following the introduction of BT Group plc as the parent company of the group, the increase in consolidated share capital has been restated to reflect the nominal value of BT Group plc shares and the balance has been credited to other reserves. ^gThe demerger distribution of Ł19,490 million represents the net assets of mmO2, including purchased goodwill, as at the date of the demerger. See also the note on the face of the group profit and loss account for the year ended 31 March 2002. ^hFollowing the approval of the Court, the nominal value of BT Group shares was reduced from 115p per share to 5p per share on 21 November 2001 by way of a reduction of capital under section 135 of the Companies Act 1985. The surplus of Ł9,537 million arising from this reduction has been credited to group profit and loss reserve.


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