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SUMMARY DIRECTORS’ REPORT

 

PRINCIPAL ACTIVITIES
BT Group plc is one of the world’s leading providers of communications solutions and services, operating in 170 countries. In the 2006 financial year approximately 87% of revenues were derived from operations in the UK. Details of our businesses and performance are given in the Review of the year.

DIVIDENDS
An interim dividend of 4.3 pence per share (2005: 3.9 pence) was paid on 13 February 2006. The directors recommend a final dividend of 7.6 pence per share (2005: 6.5 pence) to be paid on 11 September 2006 to shareholders on the register at the close of business on 18 August 2006. This makes a total dividend for the year of 11.9 pence per share (2005: 10.4 pence), an increase of 14%.

BT’s total shareholder return (TSR) performance over the five financial years to 31 March 2006  
BT's Total Shareholder Return
 

Source: Datastream 1 April 2001 = 100
The graph shows the relative TSR performance (adjusted for the rights issue and demerger of
our mobile business in the 2002 financial year) of BT and the FTSE 100.

DIRECTORS
Details of the current members of the Board are shown on the following page. All served throughout the financial year, with the exception of Matti Alahuhta and Phil Hodkinson, who were appointed on 1 February 2006. Lou Hughes served as a director until 31 March 2006.
      Sir Anthony Greener, Maarten van den Bergh and Clayton Brendish retire from the Board by rotation at the Annual General Meeting and being eligible, offer themselves for re-election. Matti Alahuhta and Phil Hodkinson, having been appointed by the Board, will retire and will be proposed for election.
     The letters of appointment of Sir Anthony Greener, Maarten van den Bergh and Clay Brendish were extended for a second term of three years and are terminable by either party on three months’ notice.
     The contracts of Matti Alahuhta and Phil Hodkinson are for an initial period of three years from 1 February 2006 and are terminable by either party on three months’ notice.

ANNUAL GENERAL MEETING
The Notice of the Annual General Meeting to be held at 10.30 am at the Barbican Centre, London on 12 July 2006 is contained in the AGM information section.

CORPORATE GOVERNANCE
It is BT’s policy to achieve for all our operations best practice in our standards of business integrity. The directors consider that BT has, throughout the year, complied with the provisions set out in section 1 of the 2003 Combined Code on Corporate Governance.

BOARD, DIRECTORS AND BOARD COMMITTEES
The Board is currently made up of the part-time Chairman, the Chief Executive, four other executive directors and eight independent non-executive directors. It is BT’s policy that the Board will comprise a majority of independent non-executive directors. The roles of the Chairman and the Chief Executive are separate. The non-executive directors provide a strong, independent element on the Board. Sir Anthony Greener, the Deputy Chairman, is the senior independent director. Non-executive directors are appointed initially for three years at the end of which the appointment may be continued by mutual agreement. The Chairman and the non-executive directors meet regularly without the executive directors. The Chairman ensures the views of shareholders are known to and appropriately considered by the Board.
      The Board’s principal focus is the overall strategic direction, development and control of the group. A formal statement of its role is available on the company’s website. The Board meets at least nine times each year.
     During summer 2005 the Board carried out a further evaluation of Board and Board Committee performance and effectiveness. As part of this process, the Chairman has one-to-one sessions with the directors and the Deputy Chairman, Sir Anthony Greener, met all directors individually to review the Chairman’s performance.
     To meet best corporate governance practice, Audit, Remuneration and Nominating Committees have long been an established part of BT’s system of governance. Each committee has written terms of reference, which are available on the company’s website. The Audit and Remuneration Committees are made up entirely of independent non-executive directors. The Board considers that several of the Audit Committee’s members have recent and relevant financial experience. The Audit Committee reviews the company’s published financial results, the Annual Report and Form 20-F and other published information for statutory and regulatory compliance and reports its views to the Board. It recommends the appointment, reappointment and remuneration of the company’s external auditors. The Board has policies determining what non-audit services the company’s external auditors can provide, in order to safeguard their independence and objectivity.
     The Nominating Committee ensures an appropriate balance of experience and abilities on the Board, using this evaluation to review the size and composition of the Board and to recommend any proposed changes to the Board.
     The Equality of Access Board became operational on
1 November 2005 to monitor the company’s compliance with the Undertakings made to Ofcom following Ofcom’s Strategic Review of Telecommunications. Its terms of reference are also available on the company’s website.
     The Chief Executive, Ben Verwaayen, chairs the Operating Committee, which meets weekly. The Board also has a Community Support Committee and a Pension Scheme Performance Review Group.

INTERNAL CONTROL AND RISK MANAGEMENT
The Board is responsible for the group’s systems of internal control and risk management and for reviewing the effectiveness of those systems. Such systems are designed to manage, rather than eliminate, the risk of failure to achieve business objectives; any system can provide only reasonable and not absolute assurance against material misstatement or loss.
      BT has processes for identifying, evaluating and managing the significant risks faced by the group. These processes have been in place for the whole of the 2006 financial year and have continued up to the date on which this document was approved.

 

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