BTPLC Annual Report 2005 - Report on directors’ remuneration

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Remuneration Review

This part of the Report on directors’ remuneration is subject to audit.

Directors’ emoluments

Directors’ emoluments for the financial year 2004/05 were as follows:

	Basic salary and fees	Pension allowance net of pension contributions	Total salary and fees	Annual cash bonus	Expenses allowance	Other benefits excluding pension	Total 2005	Total 2004

	£000	£000	£000	£000	£000	£000	£000	£000

Sir Christopher Bland^{^d}	500	–	500	–	–	32	532	532
B Verwaayen^{^cdf}	700	127	827	448	196	41	1,512	1,968
A Green^{^df}	444	–	444	204	–	36	684	791
H Lalani^{^def}	64	–	64	136	–	7	207	–
I Livingston^{^bdf}	469	120	589	198	19	10	816	913
Dr P Reynolds^{^bdf}	400	–	400	213	19	21	653	737
Sir Anthony Greener	115	–	115	–	–	–	115	96
M van den Bergh	55	–	55	–	–	–	55	44
C Brendish	50	–	50	–	–	–	50	39
L R Hughes	21	–	21	–	–	–	21	40
Baroness Jay	50	–	50	–	–	–	50	39
J Nelson	50	–	50	–	–	–	50	39
C G Symon	50	–	50	–	–	–	50	40
P Danon^{^bdfh}	413	–	413	250	17	21	701	750

	3,381	247	3,628	1,449	251	168	5,496	6,028

^{^a}

Balance or part of the pension allowance for the financial year 2004/05 – see ‘Pensions’ below.

^{^b}

Ian Livingston, Paul Reynolds and Pierre Danon each received a monthly cash allowance in lieu of a company car equivalent to £18,500 per annum.

^{^c}

Ben Verwaayen was entitled to a housing allowance of £250,000 per annum until 13 January 2005. In the financial year 2004/05, £196,000 was paid in respect of that year (2004 – £250,000). These amounts are included in the table above under Expenses allowance.

^{^d}

Other benefits includes some or all of the following: company car, fuel or driver, personal telecommunications facilities and home security, medical and dental cover for the director and immediate family, special life cover, professional subscriptions and personal tax planning and financial counselling. In addition, Paul Reynolds and Pierre Danon had interest free loans – see ‘Loans’ below.

^e	Hanif Lalani joined the Board on 7 February 2005.

^{^f}

Deferred annual bonuses payable in shares in three years’ time, were awarded to Ben Verwaayen £224,000 (2004 – £429,500), Andy Green £102,000 (2004 – £168,000), Hanif Lalani £68,000 (2004 – £nil), Ian Livingston £99,000 (2004 – £162,500), Paul Reynolds £106,500 (2004 – £147,500) and Pierre Danon £nil (2004 – £129,500).
When added to the amounts paid or payable for the 2004/05 financial year, in the table above, the total emoluments of Ben Verwaayen were £1,736,000 (2004 - £2,397,500), Andy Green £786,000 (2004 – £959,000), Hanif Lalani £275,000 (2004 – £nil), Ian Livingston £915,000 (2004 – £1,075,500), Paul Reynolds £759,500 (2004 – £884,500) and Pierre Danon £701,000 (2004 – £879,500).

^{^{^g}}

Retirement benefits are accruing to three directors (2004 – three) under defined contribution arrangements and to three directors (2004 – three) and one former director under a defined benefit scheme.

^{^h}

Pierre Danon resigned from the Board on 28 February 2005.

The annual salaries of the Chairman, Ben Verwaayen, Pierre Danon and Paul Reynolds remained unchanged during the financial years 2003/04 and 2004/05. On 1 January 2005, the annual salaries of Andy Green and Ian Livingston increased from £425,000 to £500,000 and £450,000 to £525,000, respectively. Hanif Lalani joined the Board on 7 February 2005 on an annual salary of £400,000. Following this year’s salary review, the Committee decided that there should be no general increase from 1 June 2005 in basic salaries.
     A special retention arrangement was established for Hanif Lalani on 1 July 2004, when he was CFO, BT Wholesale, under which he will receive a lump sum cash payment of £150,000 on 30 June 2006, provided he is still an employee of the company on that date. The award will be forfeited without compensation if Mr Lalani resigns or his employment is terminated by the company with cause before that date.
     Pierre Danon’s pro rata bonus in respect of the financial year 2004/05 until he resigned from the Board on 28 February 2005 was based on the achievement of corporate and line of business objectives and on the Committee’s view on his outstanding contribution to BT. All his executive share awards and options lapsed on his resignation. The annual bonus of Hanif Lalani relates to the whole year and is based solely on line of business objectives. Ian Livingston’s annual bonus was based solely on the achievement of corporate objectives.
     Annual cash bonus awards in respect of the financial year 2004/05, which are not pensionable, to executive directors ranged from 38% to 64% of current salary (2004 – 58% to 123%).

Former directors

Yve Newbold retired on 31 August 2004 as a member of the Community Support Committee for which she received fees in the financial year 2004/05 of £2,708. She also received fees of £2,000 as a member of BT’s Social Policy Leadership Panel, which she left on 16 November 2004. Dr Iain Anderson retired in June 2004 as chairman BT Scotland, for which he received fees in the financial year 2004/05 of £3,000.
Sir Peter Bonfield received, under pre-existing arrangements, a pension of £340,000 payable in the financial year 2004/05 (2004 – £331,000).

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 2005, Pierre Danon owed £209,374 (2003 – £243,750), which is repayable by 1 June 2005, and Paul Reynolds owed £230,000 (2003 – £260,000). During the financial year 2004/05, the maximum amount outstanding was £503,750. 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 £10,200 were payable in respect of the financial year 2004/05. 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 30% of his salary towards pension provision, increased from 20% and effective on 1 January 2005. The company paid £30,600 into his personal pension plan plus a cash payment of £126,900 representing the balance of the pension allowance for the financial year 2004/05. 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 £20,400 into his personal pension plan plus a cash payment of £120,225 representing the balance of the pension allowance for the financial year 2004/05. BT also provides him with a lump sum death in service benefit of four times his salary.
     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.
     Hanif Lalani is a member of the BT Pension Scheme. From 7 February 2005, the company has been purchasing an additional 23 days of pensionable service each year to bring his pensionable service at age 60 up to 40 years.
     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.
     Pierre Danon resigned as a director on 28 February 2005. His pension accrued at the rate of one-thirtieth of his final salary for each year of service. In addition, a two-thirds widow’s pension would have been payable on his death. He was a member of the BT Pension Scheme, but as he was subject to the earnings cap the company agreed to increase his benefits to the target level by means of a non-approved, unfunded arrangement.

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 benefits:

									Change in transfer value c-d less directors’ contributions	Additional accrued benefits earned in the year		Transfer value of increase in accrued benefits less directors’ contributions

	2005		2004		2005		2004		2005	2005		2005
	£000	^{^a}	£000	^{^b}	£000	^{^c}	£000	^{^d}	£000	£000	^{^e}	£000	^{^f}

P Danon^{^h}	66		52		696		519		163	12		113
A Green	131		117		1,848		1,553		268	10		115
H Lalani^ⁱ	73		57		668		494		158	14		109
P Reynolds	123		116		1,578		1,405		149	3		12

^{^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 2004 and 2005, respectively.

^{^c}

Transfer value of the deferred pension in column (a) as at 31 March 2005 calculated on the basis of actuarial advice in accordance with Actuarial Guidance Note GN11. 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 2004 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 financial year 2004/05 were as follows: Pierre Danon, £14,025 (2004 – £14,580); Andy Green, £26,625 (2004 – £25,500); Hanif Lalani £16,300 (2004 – £13,350) and Paul Reynolds, £24,000 (2004 – £24,000).

^{^h}

Pierre Danon resigned as a director on 28 February 2005.

^ⁱ	Hanif Lalani joined the Board on 7 February 2005.

Share options held during the year ended 31 March 2005



	1 April 2004 (or date of appointment)		Granted		Lapsed	31 March 2005	Option price per share		Usual date from which exercisable	Usual expiry date

Sir Christopher Bland	314,244	^{^a}	–		–	314,244	318	p	01/05/2004	01/05/2011

B Verwaayen	1,121,121	^{^b}	–		–	1,121,121	250	p	11/02/2005	11/02/2012
	935,830	^{^c}	–		–	935,830	187	p	29/07/2005	29/07/2012
	561,500	^{^d}	–		561,500	–	187	p	29/07/2005	29/07/2012
	1,052,632	^{^e}	–		–	1,052,632	199.5	p	24/06/2006	24/06/2013
	–		546,875	^{^f}	–	546,875	192	p	24/06/2007	24/06/2014

	3,671,083		546,875		561,500	3,656,458

A Green	2,905	^{^g}	–		2,905	–	255	p	14/08/2005	13/02/2006
	568,190	^{^c}	–		–	568,190	187	p	29/07/2005	29/07/2012
	340,910	^{^d}	–		340,910	–	187	p	29/07/2005	29/07/2012
	639,098	^{^e}	–		–	639,098	199.5	p	24/06/2006	24/06/2013
	–		332,032	^{^f}	–	332,032	192	p	24/06/2007	24/06/2014
	–		5,712	^{^h}	–	5,712	165	p	14/08/2007	13/02/2008

	1,551,103		337,744		343,815	1,545,032

H Lalani^{^l}	5,346	^ⁱ	–		–	5,346	173	p	14/08/2006	13/02/2007
	177,810	^{^c}	–		–	177,810	187	p	29/07/2005	29/07/2012
	210,527	^{^e}	–		–	210,527	199.5	p	24/06/2006	24/06/2013
	105,264	^{^j}	–		–	105,264	199.5	p	24/06/2004	24/06/2013
	156,250	^{^f}	–		–	156,250	192	p	24/06/2007	24/06/2014

	655,197		–		–	655,197

I Livingston	7,290	^{^g}	–		–	7,290	227	p	14/08/2007	13/02/2008
	601,610	^{^c}	–		–	601,610	187	p	29/07/2005	29/07/2012
	360,970	^{^d}	–		360,970	–	187	p	29/07/2005	29/07/2012
	676,692	^{^e}	–		–	676,692	199.5	p	24/06/2006	24/06/2013
	–		351,563	^{^f}	–	351,563	192	p	24/06/2007	24/06/2014

	1,646,562		351,563		360,970	1,637,155

Dr P Reynolds	4,555	^{^k}	–		–	4,555	218	p	14/02/2007	13/08/2007
	534,760	^{^c}	–		–	534,760	187	p	29/07/2005	29/07/2012
	320,860	^{^d}	–		320,860	–	187	p	29/07/2005	29/07/2012
	601,504	^{^e}	–		–	601,504	199.5	p	24/06/2006	24/06/2013
	–		312,500	^{^f}	–	312,500	192	p	24/06/2007	24/06/2014

	1,461,679		312,500		320,860	1,453,319

Former director
P Danon	601,610	^{^c}	–		601,610	–	187	p	29/07/2005	29/07/2012
	360,970	^{^d}	–		360,970	–	187	p	29/07/2005	29/07/2012
	676,692	^{^e}	–		676,692	–	199.5	p	24/06/2006	24/06/2013
	–		351,563	^{^f}	351,563	–	192	p	24/06/2007	24/06/2014

	1,639,272		351,563		1,990,835	–

Total	10,939,140		1,900,245		3,577,980	9,261,405

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. BT’s TSR must be in the upper quartile for all of the options to become exercisable. At median, 30% of the options will be exercisable. Below that point, none of the options may be exercised.

^{^d}

Options granted under the GSOP on 29 July 2002. The vesting of the options was subject to a performance measure being met. The performance measure was earnings per share. The performance measure was not met and as a result, the options have lapsed.

^{^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 – see note c above.

^{^f}

Options granted under the GSOP on 24 June 2004. The exercise of options is subject to a performance measure being met. The performance measure is relative TSR compared with a group of companies from the European Telecom Sector. BT’s TSR must be in the upper quartile for all of the options to become exercisable. At median, 30% of the options will be exercisable. Below that point, none of the options may be exercised.

^{^g}

Options granted on 24 June 2002 under the Employee Sharesave Scheme, in which all employees of the company are eligible to participate.

^{^h}

Options granted on 25 June 2004 under the Employee Sharesave Scheme, in which all employees of the company are eligible to participate.

^ⁱ	Options granted on 27 June 2003 under the Employee Sharesave Scheme, in which all employees of the company are eligible to participate.

^{^j}

Options granted under the GSOP (Special Incentive Award) on 24 June 2003, prior to Mr Lalani’s appointment as a director. These options are not subject to a performance measure, as the grant was linked to performance.

^{^k}

Options granted on 21 December 2001 under the Employee Sharesave Scheme, in which all employees of the company are eligible to participate.

^{^l}

Date of appointment – 7 February 2005.

The market price of the shares at 31 March 2005 was 205.5p (2004 – 177p) and the range during the financial year 2004/05 was 169.25p – 216.25p.
As at 31 March 2005, one third of Hanif Lalani’s GSOP 2003 option (granted under the Special Incentive Award) was exercisable giving an unrealised gain of £2,105. There were no further unrealised gains on the above share options at 31 March 2005 (2004 – nil), based on the share price of the shares at that date.
All of Mr Danon’s options lapsed on his last day of service, 28 February 2005.

Share awards under long-term incentive schemes held during the year ended 31 March 2005

Details of the company’s ordinary shares provisionally awarded to directors, as participants under the ISP and RSP are as follows:

1 April
2004

Awarded^{^a}

Dividends
re-invested

Vested^{^f}

Lapsed

Total number of award shares 31 March 2005

Expected vesting date

Price on
grant

Market Price at vesting

Monetary value of vested award £000

Sir Christopher Bland

RSP 2003

286,100

–

13,653

–

299,753

2007

182p

–

B Verwaayen

ISP 2004

–

241,284

11,514

–

252,798

31/03/07

193.42p

–

RSP 2001^{^b}

832,869

–

39,746

872,615

–

257.814p

207.75p

1,813

A Green

ISP 2004

–

146,494

6,990

–

153,484

31/03/07

193.42p

–

H Lalani^{^d}

ISP 2004

70,912

–

1,312

–

72,224

31/03/07

193.42p

–

I Livingston

ISP 2004

–

155,111

7,401

–

162,512

31/03/07

193.42p

–

RSP 2002^{^c}

350,664

–

8,366

175,332

–

183,698

05/04/05

273.5p

181.75p

319

RSP 2002

117,691

–

5,616

–

123,307

20/05/05

202.0p

–

Dr P Reynolds

ISP 2004

–

137,877

6,579

–

144,456

31/03/07

193.42p

–

Former director

Pierre Danon^{^e}

ISP 2004

–

155,111

7,401

–

162,512

–

193.42p

–

The size of awards granted during the financial year 2004/05 was calculated using the average middle market price of a BT share for the three days prior to the grant.

^{^a}

Awards under the ISP were made on 24 June 2004. The awards will vest subject to a performance condition being met. The performance measure is relative TSR compared with a group of companies from the European Telecom Sector. BT’s TSR must be in the upper quartile for all of the awards to vest. At median, 25% of the awards will vest. Below that point, none of the awards will vest.

^{^b}

The RSP awards granted on 11 Februray 2002, vested on 11 February 2005.

^{^c}

The second tranche of the RSP award granted on 30 May 2002 vested on 21 May 2004.

^{^d}

Date of appointment, 7 February 2005.

^{^e}

The award granted under the ISP on 24 June 2004 and the subsequent dividends re-invested, lapsed on 28 February 2005 when Pierre Danon resigned as a director.

^{^f}

Vesting of RSP awards is not subject to a performance condition being met.

Vesting of outstanding share awards and options

Details of options granted under the GSOP in the financial years 2002/03 and 2003/04 which would vest based on BT Group’s TSR compared with the other companies in the FTSE 100 for the relevant performance period up to 31 March 2005 and details of options granted under the GSOP in the financial year 2004/05 and awards of shares under the ISP in the financial year 2004/05 which would vest based on BT Group’s TSR compared with a group of companies from the European Telecom Sector for the relevant performance period up to 31 March 2005 are as follows:



	Expected vesting date	TSR position	Percentage of shares vesting	TSR position	Percentage of shares vesting

ISP 2004	31/03/07	11	–	–	–
GSOP 2002	29/07/05	74	–	77	–
GSOP 2003	24/06/06	84	–	93	–
GSOP 2004	24/06/07	11	–	–	–

None of these outstanding options, or awards of shares under the ISP, which are subject to the TSR performance conditions, would vest.
Options granted to executive directors under the GSOP during the financial year 2002/03 as an additional incentive, whose exercise was 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 financial year 2004/05), are not included in the above table, but are included in the Share Options table. Earnings per share, before goodwill amortisation and exceptional items for the financial year 2004/05 are 18.1p per share (2004 – 16.9p). The compound annual growth in earnings per share over the three years did not meet the target and as a result all of the options have lapsed.

Deferred Bonus Plan awards held during the year ended 31 March 2005

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.

	1 April 2004 (or at date of appointment)	Awarded^{^a}	Vested^{^b}	Dividends re-invested	Lapsed	Total number of award shares 31 March 2005	Expected vesting date	Price at grant		Market Price at vesting		Monetary value of vested award £000

B Verwaayen	80,183	–	–	3,826	–	84,009	01/08/05	202.0	p	–		–
	443,238	–	–	21,152	–	464,390	01/08/06	199.5	p	–		–
	–	222,030	–	10,595	–	232,625	01/08/07	193.42	p	–		–

A Green	46,723	–	46,723	–	–	–	–	267.912	p	187.7897	p	88
	52,751	–	–	2,517	–	55,268	01/08/05	202.0	p	–		–
	79,983	–	–	3,816	–	83,799	01/08/06	199.5	p	–		–
	–	86,939	–	4,148	–	91,087	01/08/07	193.42	p	–		–

H Lalani^{^c}	12,750	–	–	235	–	12,985	01/08/05	202.0	p	–		–
	25,917	–	–	479	–	26,396	01/08/06	199.5	p	–		–
	26,843	–	–	496	–	27,339	01/08/07	193.42	p	–		–

I Livingston	88,088	–	–	4,203	–	92,291	01/08/06	199.5	p	–		–
	–	83,961	–	4,006	–	87,967	01/08/07	193.42	p	–		–

Dr P Reynolds	33,934	–	33,934	–	–	–	–	267.912	p	187.7897	p	64
	47,476	–	–	2,264	–	49,740	01/08/05	202.0	p	–		–
	75,277	–	–	3,591	–	78,868	01/08/06	199.5	p	–		–
	–	76,342	–	3,643	–	79,985	01/08/07	193.42	p	–		–

Former directors
P Danon^{^d}	23,054	–	23,054	–	–	–	–	267.912	p	187.7897	p	43
	79,129	–	–	3,776	82,905	–	01/08/05	202.0	p	–		–
	88,088	–	–	4,203	92,291	–	01/08/06	199.5	p	–		–
	–	66,970	–	3,195	70,165	–	01/08/07	193.42	p	–		–

Sir Peter Bonfield^{^e}	157,718	–	157,718	–	–	–	01/08/04	267.912	p	187.7897	p	296

The size of the awards granted during the financial year 2004/05 was calculated using the average middle market price of a BT share for the three days prior to the grant.

^{^a}

Awards granted on 24 June 2004.

^{^b}

Awards granted on 22 June 2001 vested on 2 August 2004.

^{^c}

Date of appointment – 7 February 2005.

^{^d}

All outstanding awards made under the DBP to P Danon lapsed on 28 February 2005 when he resigned as a director.

^{^e}

Under the terms of his service agreement, awards granted to Sir Peter Bonfield were preserved on his leaving until the normal vesting date.

Share awards under all-employee share ownership plans held during the year ended 31 March 2005

	1 April 2004 (or at date of appointment)		Awarded		Vested		Total number of award shares 31 March 2005	Expected vesting date

Sir Christopher Bland
ESIP 2003	186		–		–		186	05/08/08
ESIP 2004	–		116	^{^a}	–		116	04/08/09

	186		116		–		302

A Green
ESOS 2001	66		–		66	^{^b}	–	–
ESIP 2002	130		–		–		130	14/08/07
ESIP 2003	186		–		–		186	05/08/08
ESIP 2004	–		116	^{^a}	–		116	04/08/09

	382		116		66		432

H Lalani^{^c}
ESIP 2002	130		–		–		130	14/08/07
ESIP 2003	186		–		–		186	05/08/08
ESIP 2004	116	^{^a}	–		–		116	04/08/09

	432		–		–		432

I Livingston
ESIP 2004	–		116	^{^a}	–		116	04/08/09

	–		116		–		116

P Reynolds
ESOS 2001	66		–		66	^{^b}	–	–
ESIP 2002	130		–		–		130	14/08/07
ESIP 2003	186		–		–		186	05/08/08
ESIP 2004	–		116	^{^a}	–		116	04/08/09

	382		116		66		432

Former director
P Danon
ESIP 2002	130		–		–		130	14/08/07
ESIP 2003	186		–		–		186	05/08/08
ESIP 2004	–		116	^{^a}	–		116	04/08/09

	316		116		–		432

^{^a}

Awards granted under the BT Group Employee Share Investment Plan on 4 August 2004. On that date the market price of a BT Group share was 181p.

^{^b}

Awards granted under the BT Employee Share Ownership Scheme on 30 July 2001 vested on 30 July 2004. On 2 August 2004, the first dealing day after that date, the market price of a BT Group share was 190p. The market price on the date of award was 482p.

^{^c}

Date of appointment, 7 February 2005.

Operating Committee
The aggregate remuneration of members of the Operating Committee (OC), other than directors, for services in all capacities during the financial year 2004/05 was as follows:

	2005 £000	2004 £000

Salaries and benefits	296	296
Annual bonuses	104	198
Provision for long-term incentive awards	346	268
Company pension fund contributions	34	34

Total	780	796

Of the six members of the OC, five are members of the Board.
No options were granted under the BT Group Employee Sharesave Scheme to OC members, other than to directors, during the financial year 2004/05 (2004 – Nil).
The members of the OC beneficially own less than 1% of the company’s outstanding ordinary shares.

By order of the Board

Sir Anthony Greener
Deputy Chairman and Chairman of Remuneration Committee

18 May 2005

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