Directors’ remuneration
Directors’ remuneration for the 2004 financial year was as follows:

	Basic salary and fees		Pension allowance net of pension contributions		Total salary and fees		Annual bonus		Expenses allowance		Other benefits excluding pension
													Total 2004		Total 2003
				a								d
	£000		£000		£000		£000		£000		£000		£000		£000
Sir Christopher Bland	500		–		500		–		–		32		532		512
B Verwaayence	700		110		810		859		250		49		1,968		2,174
P Danonbe	450		–		450		259		19		22		750		829
A Greene	425		–		425		336		–		30		791		761
I Livingstonbef	450		115		565		325		19		4		913		1,116
Dr P Reynoldsbe	400		–		400		295		19		23		737		732
Sir Anthony Greener	96		–		96		–		–		–		96		90
M van den Bergh	44		–		44		–		–		–		44		40
C Brendishg	39		–		39		–		–		–		39		20
L R Hughes	40		–		40		–		–		–		40		37
Baroness Jay	39		–		39		–		–		–		39		35
J Nelson	39		–		39		–		–		–		39		35
C G Symon	40		–		40		–		–		–		40		37
	3,262		225		3,487		2,074		307		160		6,028		6,418

a	Balance or part of the pension allowance for the 2004 financial year – see ‘‘Pensions’’ below.
b	Pierre Danon, Ian Livingston and Paul Reynolds each received a monthly cash allowance in lieu of a company car totalling £18,500 per annum.
c	Ben Verwaayen is entitled to a housing allowance of £250,000 per annum until 13 January 2005. In the 2004 financial year, £250,000 was paid in respect of that year (2003 – £250,000). These amounts are included in the table above under Expenses allowance.
d	Includes some or all of the following: company car, fuel and driver, personal telecommunications facilities and home security, medical and dental cover for the director and immediate family, professional subscriptions and personal tax and financial counselling.
e	Deferred bonuses payable in shares in three years’ time, were awarded to Ben Verwaayen £429,500 (2003 – £849,000), Pierre Danon £129,500 (2003 – £169,000), Andy Green £168,000 (2003 – £153,000), Ian Livingston £162,500 (2003 – £169,000) and Paul Reynolds £147,500 (2003 – £144,000). When added to the amounts paid or payable for the 2004 financial year, in the table above, the total remuneration of Ben Verwaayen was £2,397,500 (2003 – £3,023,000); Pierre Danon £879,500 (2003 – £998,000), Andy Green £959,000 (2003 – £914,000); Ian Livingston £1,075,500 (2003 – £1,285,000) and Paul Reynolds £884,500 (2003 – £876,000).
f	Ian Livingston joined the Board on 8 April 2002.
g	Clayton Brendish joined the Board on 1 September 2002.
h	Retirement benefits are accruing to three directors (2003 – three) under defined contribution arrangements and to three directors (2003 – three) under a defined benefit scheme.

The salaries of the Chairman and executive directors remained unchanged during the 2003 and 2004 financial years and, following this year’s salary review, the Committee decided there should be no increase from 1 June 2004 in basic salaries.
     Sir Christopher Bland was appointed as part-time Chairman on 1 May 2001. His annual salary on appointment was £500,000.
     Ben Verwaayen joined the company on 14 January 2002 on an annual salary of £700,000. He became Chief Executive on 1 February 2002.
     Pierre Danon, Andy Green and Paul Reynolds joined the Board on 19 November 2001 on salaries of £450,000, £425,000 and £400,000, respectively.
     Ian Livingston joined the Board on 8 April 2002 on a salary of £450,000.
     Annual bonus awards to executive directors ranged from 58% to 123% of salary in the 2004 financial year (2003: 72% to 121%). These payments are not pensionable.

Former directors
Yve Newbold remains a member of the Community Support Committee for which she received fees of £5,000 in the 2004 financial year. She also received fees of £4,000 as a member of BT’s Social Policy Leadership Panel.
Dr Iain Anderson received fees of £12,000 in the 2004 financial year as chairman of the BT Scotland Board. He will retire in June 2004.
     Sir Peter Bonfield received, under pre-existing arrangements, a pension of £331,000 payable by the company in the 2004 financial year (2003 – £322,000).

Loans
Prior to the date of their appointment to the Board on 19 November 2001, Pierre Danon and Paul Reynolds each had interest-free loans from the company to assist with relocation of £375,000 and £300,000, respectively. At 31 March 2004, Pierre Danon owed £243,750 (2003 – £281,250) and Paul Reynolds owed £260,000 (2003 – £290,000). During the 2004 financial year, the maximum amount outstanding was £571,250. There are no outstanding loans granted by any member of the BT group to any other of the directors or guarantees provided by any member of the BT group for their benefit.

Pensions
Sir Christopher Bland is not a member of any of the company pension schemes, but the company matches his contributions, up to 10% of the earnings cap, to a personal pension plan. Company contributions of £9,900 were payable in respect of the 2004 financial year. The earnings cap is a restriction on the amount of pay which can be used to calculate contributions and benefits due to a tax approved pension scheme.
    Ben Verwaayen is not a member of any of the company pension schemes, but the company has agreed to pay an annual amount equal to 20% of his salary towards pension provision. The company paid £29,700 into his personal pension plan plus a cash payment of £110,300 representing the balance of the pension allowance for the 2004 financial year. BT also provides him with a lump sum death in service benefit of four times his salary.
    Ian Livingston is not a member of any of the company pension schemes, but the company has agreed to pay an annual amount equal to 30% of his salary towards pension provision. The company paid £19,800 into his personal pension plan plus a cash payment of £115,200 representing the balance of the pension allowance for the 2004 financial year. BT also provides him with a lump sum death in service benefit of four times his salary.
    Pierre Danon’s pension accrues at the rate of one-thirtieth of his final salary for each year of service. In addition, a two-thirds widow’s pension would be payable on his death. He is a member of the BT Pension Scheme, but as he is subject to the earnings cap the company has agreed to increase his benefits to the target level by means of a non-approved, unfunded arrangement.
    Andy Green is a member of the BT Pension Scheme. From 31 December 1997 the company has been purchasing an additional 203 days of pensionable service each year to bring his pensionable service at age 60 up to 40 years. A two-thirds widow’s pension would be payable on his death.
    Paul Reynolds is a member of the BT Pension Scheme. From 1 July 1996 the company has been purchasing an additional 109 days of pensionable service each year to bring his pensionable service at age 60 up to 40 years. A two-thirds widow’s pension would be payable on his death.

The table below shows the increase in the accrued benefits, including those referred to above, to which each director has become entitled during the year and the transfer value of the increase in accrued benefit:

													Transfer value of increase in accrued benefits less directors’ contributions
									Change intransfer value c-d less directors’ contributions		Additional accrued benefits earned in the year
					Transfer value of accrued benefits
		Accrued pension
	2004		2003		2004		2003		2004		2004		2004
	£000	a	£000	b	£000	c	£000	d	£000		£000	e	£000	f
P Danon	52		37		519		286		218		14		125
A Green	117		109		1,553		1,103		424		6		48
P Reynolds	116		110		1,405		1,014		367		4		21

a-d	As required by the Companies Act 1985 Schedule 7A.
a-b	These amounts represent the deferred pension to which the directors would have been entitled had they left the company on 31 March 2003 and 2004, respectively.
c	Transfer value of the deferred pension in column (a) as at 31 March 2004 calculated on the basis of actuarial advice in accordance with Actuarial Guidance Note GN11 and excludes directors’ contributions. The transfer value represents a liability of the company rather than any remuneration due to the individual and cannot be meaningfully aggregated with annual remuneration, as it is not money the individual is entitled to receive.
d	The equivalent transfer value but calculated as at 31 March 2003 on the assumption that the director left service at that date.
e	The increase in pension built up during the year, net of inflation.
f	The transfer value of the pension in column (e), less directors’ contributions.
g	Directors’ contributions in the 2004 financial year were as follows: Pierre Danon, £14,850 (2003 – £14,580); Andy Green, £25,500 (2003 – £25,500); and Paul Reynolds, £24,000 (2003 – £24,000).

Share options held at 31 March 2004

	Number of shares under option										Usual date from which exercisable
									Option exercise price per share				Usual expiry date
	1 April 2003		Granted		Lapsed		31 March 2004
Sir Christopher Bland	314,244	a					314,244		318p		01/05/04		01/05/11
B Verwaayen	1,121,121	b	–		–		1,121,121		250p		11/02/05		11/02/12
	935,830	c	–		–		935,830		187p		29/07/05		29/07/12
	561,500	d	–		–		561,500		187p		29/07/05		29/07/12
			1,052,632	e	–		1,052,632		199.5p		24/06/06		24/06/13
	2,618,451		1,052,632				3,671,083
P Danon	601,610	c	–		–		601,610		187p		29/07/05		29/07/12
	360,970	d	–		–		360,970		187p		29/07/05		29/07/12
	–		676,692	e	–		676,692		199.5p		24/06/06		24/06/13
	962,580		676,692				1,639,272
A Green	2,905	f	–		–		2,905		255p		14/08/05		13/02/06
	568,190	c	–		–		568,190		187p		29/07/05		29/07/12
	340,910	d	–		–		340,910		187p		29/07/05		29/07/12
			639,098	e	–		639,098		199.5p		24/06/06		24/06/13
	912,005		639,098				1,551,103
I Livingston	7,290	f	–		–		7,290		227p		14/08/07		13/02/08
	601,610	c	–		–		601,610		187p		29/07/05		29/07/12
	360,970	d	–		–		360,970		187p		29/07/05		29/07/12
	–		676,692	e	–		676,692		199.5p		24/06/06		24/06/13
	969,870		676,692		–		1,646,562
Dr P Reynolds	4,555	g	–		–		4,555		218p		14/02/07		13/08/07
	534,760	c	–		–		534,760		187p		29/07/05		29/07/12
	320,860	d	–		–		320,860		187p		29/07/05		29/07/12
	–		601,504	e	–		601,504		199.5p		24/06/06		24/06/13
	860,175		601,504		–		1,461,679
Total	6,637,325		3,646,618		–		10,283,943

	All of the above options were granted for nil consideration. No options were exercised during the year.
a	Options granted under the GSOP on 22 June 2001. The option is not subject to a performance measure. It was a term of Sir Christopher Bland’s initial service contract that (i) he purchased BT shares to the value of at least £1 million; and (ii) as soon as practicable after the purchase of the shares (‘invested shares’), the company would grant a share option over shares to the value of at least £1 million. Sir Christopher Bland was the legal and beneficial owner of the invested shares on 1 May 2004, so the option became exercisable on that date.
b	Options granted under the GSOP on 11 February 2002. The exercise of options is subject to a performance measure being met. The performance measure is relative TSR compared with the FTSE 100. BT’s TSR must be in the upper quartile for all of the options to become exercisable. At median, 40% of the options will be exercisable. Below that point, none of the options may be exercised.
c	Options granted under the GSOP on 29 July 2002. The exercise of options is subject to a performance measure being met. The performance measure is relative TSR compared with the FTSE 100. Details are set out under packages.
d	Options granted under the GSOP on 29 July 2002. The exercise of options is subject to a performance measure being met. The performance measure is earnings per share. Details are set out under packages.
e	Options granted under the GSOP on 24 June 2003. The exercise of options is subject to a performance measure being met. The performance measure is relative TSR compared with the FTSE 100. Details are set out under packages.
f	Options granted on 24 June 2002 under the Employee Sharesave Scheme, in which all employees of the company are eligible to participate.
g	Options granted on 21 December 2001 under the Employee Sharesave Scheme, in which all employees of the company are eligible to participate.
h	Details of the GSOP and performance conditions are set out under packages.
The market price of the shares at 31 March 2004 was 177p (2003 – 157p) and the range during the 2004 financial year was 162p – 206.75p.
There were no unrealised gains on the above share options at 31 March 2004 (2003 – nil), based on the share price of the shares at that date.

Share awards under long-term incentive schemes held at 31 March 2004
Details of the company’s ordinary shares provisionally awarded to directors, as participants under the ESP, ISP and RSP are as follows:

Monetary value of vested award £000

Total number of award shares 31 March 2004

Market Price at vesting

Dividends re-invested

Expected vesting date

Market Price at grant

1 April 2003

Awarded

Vested

Lapsed

h

Sir Christopher Bland

ISP 2001

318,308

–

–

331,488

d

13,180

–

–

267.912p

–

–

RSP 2003

–

274,725

a

–

–

11,375

286,100

–

a

182p

–

–

B Verwaayen

RSP 2001

799,754

–

–

–

33,115

832,869

10/01/05

257.814p

–

–

P Danon

RSP 2000

53,253

–

54,474

b

–

1,221

–

–

267.912p

185p

101

ISP 2000

99,850

–

–

99,850

c

–

–

–

267.912p

–

–

ISP 2001

179,047

–

–

186,460

d

7,413

–

–

267.912p

–

–

A Green

ESP 1998

38,095

–

–

38,095

e

–

–

–

267.912p

–

–

ESP 1999

38,710

–

–

40,032

f

1,322

–

–

267.912p

–

–

ISP 2000

85,292

–

–

85,292

c

–

–

–

267.912p

–

–

ISP 2001

179,047

–

–

186,460

d

7,413

–

–

267.912p

–

–

I Livingston

RSP 2002

505,081

–

168,360

g

–

13,943

350,664

05/04/05

273.5p

185p

311

RSP 2002

113,012

–

–

–

4,679

117,691

20/05/05

202.0p

–

–

Dr P Reynolds

ESP 1998

11,626

–

–

11,626

e

–

–

–

267.912p

–

–

ESP 1999

11,605

–

–

11,999

f

394

–

–

267.912p

–

–

ISP 2000

48,111

–

–

48,111

c

–

–

–

267.912p

–

–

ISP 2001

148,012

–

–

154,140

d

6,128

–

–

267.912p

–

–

Former directors

Sir Peter Bonfieldi

ESP 1998

112,579

–

–

112,579

e

–

–

–

267.912p

–

–

ESP 1999

100,239

–

–

103,666

f

3,427

–

–

267.912p

–

–

ISP 2000

272,947

–

–

272,947

c

–

–

–

267.912p

–

–

ISP 2001

522,025

–

–

543,641

d

21,616

–

–

267.912p

–

–

R Bracej

ESP 1998

57,149

–

–

57,149

e

–

–

–

267.912p

–

–

B Cockburnj

ESP 1998

77,935

–

–

77,935

e

–

–

–

267.912p

–

–

ESP 1999

68,432

–

–

70,771

f

2,339

–

–

267.912p

–

–

a	An award under the RSP was made to Sir Christopher Bland on 1 September 2003 with an initial value of £500,000.The award will vest, subject to continued employment, at the conclusion of the 2007 AGM.
b	The final tranche of the RSP award granted on 4 October 2000, vested on 6 October 2003.
c	The ISP 2000 performance measurement period ended on 31 March 2003. At that time, BT’s position was at 85th position. As a consequence, all awards lapsed.
d	The ISP 2001 performance measurement period ended on 31 March 2004. At that time, BT’s position was at 83rd position. As a consequence, all awards lapsed.
e	The ESP 1998 performance measurement period ended on 31 March 2003. At that time, BT’s position was at 83rd position. As a consequence, all awards have lapsed.
f	The ESP 1999 performance measurement period ended on 31 March 2004. At that time, BT’s position was at 90th position. As a consequence, all awards have lapsed.
g	The first tranche of the RSP award granted on 30 May 2002 vested on 27 May 2003. The second and third tranches will vest on the second and third anniversaries of Ian Livingston joining BT.
h	Adjusted for the demerger of BT’s wireless business in November 2001.
i	Under the terms of his agreement, the awards granted to Sir Peter Bonfield were preserved on his leaving the company until the normal vesting date.
j	The awards granted to Bill Cockburn and Robert Brace were preserved at the discretion of the Remuneration Committee on their leaving until their normal vesting date.
k	Details of the ISP, ESP and RSP and any relevant performance conditions are set out under annual package.

Vesting of outstanding share awards and options
Details of options granted under the GSOP and awards of shares under the ESP and ISP which would have vested based on BT Group’s TSR compared with the other companies in the FTSE 100 for the relevant performance period up to 31 March 2004 are as follows:

			31 March 2004				31 March 2003
	Expected vesting date				Percentage of shares vesting				Percentage of shares vesting
			TSR position				TSR position
ESP 1999a	31/03/04		90		–		87		–
ISP 2001b	31/03/04		83		–		73		–
GSOP 2002	29/07/05		77		–		61		–
GSOP 2003	24/06/06		93		–		–		–

a	The ESP 1999 performance measurement period ended on 31 March 2004. At that time, BT’s position was at 90th position. As a consequence, all awards have lapsed.
b	The ISP 2001 performance measurement period ended on 31 March 2004. At that time, BT’s position was at 83rd position. As a consequence, all awards lapsed.

Options granted to executive directors under the GSOP during the 2003 financial year as an additional incentive, whose exercise is subject to a 35% compound annual growth in earnings per share, before goodwill amortisation and exceptional items, being achieved over three years (equivalent to 22p per share at the end of the 2005 financial year), are not included in the above table, but are included in this table. Earnings per share, before goodwill amortisation and exceptional items, for the 2004 financial year are 16.9p per share (2003 – 14.2p). The compound annual growth in earnings per share over the 2003 and 2004 financial years was 38.6%.

Deferred Bonus Plan awards at 31 March 2004
The following deferred bonuses have been awarded to the directors under the DBP. These shares will normally be transferred to participants at the end of the three-year deferred period if those participants are still employed by BT Group.

Total number of award shares 31 March 2004

Monetary value of vested award £000

Dividends re-invested

Expected vesting date

Market Price at grant

Market Price at vesting

1 April 2003

Awarded

Vested

B Verwaayen

76,996

–

–

3,187

80,183

01/08/05

202.0p

–

–

–

425,614

c

–

17,624

443,238

01/08/06

199.5p

–

–

P Danon

22,292

–

–

762

23,054

01/08/04

267.912p

–

–

75,983

–

–

3,146

79,129

01/08/05

202.0p

–

–

–

84,586

c

–

3,502

88,088

01/08/06

199.5p

–

–

A Green

10,924

–

10,924

ad

–

–

–

267.912p

197.215p

22

45,179

–

–

1,544

46,723

01/08/04

267.912p

–

–

50,654

–

–

2,097

52,751

01/08/05

202.0p

–

–

–

76,803

c

–

3,180

79,983

01/08/06

199.5p

–

–

I Livingston

–

84,586

c

–

3,502

88,088

01/08/06

199.5p

–

–

Dr P Reynolds

4,419

–

4,419

ad

–

–

–

267.912p

197.215p

9

32,813

–

–

1,121

33,934

01/08/04

267.912p

–

–

45,590

–

–

1,886

47,476

01/08/05

202.0p

–

–

–

72,285

c

–

2,992

75,277

01/08/06

199.5p

–

–

Former directorb

Sir Peter Bonfield

86,725

–

86,725

ad

–

–

–

267.912p

197.215p

171

152,502

–

–

5,216

157,718

01/08/04

267.912p

–

–

a	Andy Green, Paul Reynolds and Sir Peter Bonfield received 70p per share on their awards vesting as compensation for the difference between the price of a BT share at the date of vesting and the demerger when the awards should have vested. The Remuneration Committee determined that the awards should continue until their normal vesting date and that participants should be compensated if there was a subsequent fall in the share price.
b	Under the terms of his service agreement, the awards granted to Sir Peter Bonfield were preserved on his leaving until the normal vesting date.
c	Awards granted on 24 June 2003.
d	Awards granted on 2 August 2000, vested on 4 August 2003.
e	Details of the DBP are set out here.

Share awards under all-employee share ownership plans at 31 March 2004

							Total number of award shares 31 March 2004
									Expected vesting date
	1 April 2003		Awarded		Vested
Sir Christopher Bland
ESIP 2003	–		186	a	–		186		05/08/08
P Danon
ESIP 2002	130		–		–		130		14/08/07
ESIP 2003	–		186	a	–		186		05/08/08
	130		186		–		316
A Green
ESOS 2000	85		–		85	b	–		17/08/03
ESOS 2001	66		–		–		66		30/07/04
ESIP 2002	130		–		–		130		14/08/07
ESIP 2003	–		186	a	–		186		05/08/08
	281		186		85		382
P Reynolds
ESOS 2000	85		–		85	b	–		17/08/03
ESOS 2001	66		–		–		66		30/07/04
ESIP 2002	130		–		–		130		14/08/07
ESIP 2003	–		186	a	–		186		05/08/08
	281		186		85		382

a	Awards granted under the BT Group Employee Share Investment Plan on 14 August 2003. On that date the market price of a BT Group share was 194p.
b	Awards granted under the BT Employee Share Ownership Scheme on 17 August 2000 vested on 17 August 2003. On 18 August 2003, the first dealing day after that date, the market price of a BT Group share was 191p. The market price on the date of award was 812p.