BT 2006 Annual Report Download - page 106

31. SHARE BASED PAYMENT PLANS continued
Historical dividend yields of 4.8% and 4.1% and volatility of 18% and 24% were used in the one-year and three-year models
respectively.
Under the RSP, the length of retention period before awards vest is flexible. Awards may vest in annual tranches. The shares are
transferred at the end of a specified period, only if the participant is still employed by the group. During the 2006 financial year
1,107,330 shares vested in 16 participants in the RSP (2005: 1,340,256 shares vested in 11 participants).
The BT Deferred Bonus Plan (DBP) was established in 1998 and awards are granted annually to selected employees of the
group. Under this plan, shares in the company are transferred to participants at the end of three years if they continued to be
employed by the group throughout that period. On 1 August 2005, 1,966,496 shares (2 August 2004: 1,280,934 shares) were
transferred to 193 participants (2 August 2004: 219 participants) at the end of the three-year deferred period. At 31 March 2006,
24.7 million shares (2005: 27.8 million shares) in the company were held in trust for employee share plans, of which 12.4 million
shares (2005: 12.7 million shares) were held for the ISP, 2.9 million shares (2005: 2.8 million shares) were held for the RSP and
5.9 million shares (2005: 7.9 million shares) were held for the DBP. In accordance with the terms of the plans, dividends or
dividend equivalents earned on the shares during the conditional periods are reinvested in company shares for the potential benefit
of the participants.
Awards under the DBP and RSP were valued by reference to the weighted average market price of the shares on the date of
grant of 223p and 216p respectively.
Employee Share Investment Plan
The BT Group Employee Share Investment Plan (ESIP) has been in operation since December 2001. The ESIP, which has been
approved by HM Revenue & Customs, comprises ‘directshare’ and ‘allshare’. Under directshare, UK employees are given an
opportunity to purchase shares (partnership shares) out of pre-tax salary up to a maximum value of £1,500 per year. During the
2006 financial year, 6.4 million shares (2005: 6.1 million shares), including 0.8 million shares (2005: 0.2 million shares) purchased
by dividend reinvestment, were purchased by the Trustee of the ESIP on behalf of 14,443 (2005: 13,017) employees at a total cost
of £13.7 million (2005: £11.7 million). Allshare, the free shares element of the ESIP allows BT to provide free shares to UK
employees which are held in trust for at least three years. Employees outside the UK receive cash awards equivalent to the value of
the free shares. In 2006, 1% (2005: 0.5%) of pre-tax profits, amounting to £22 million, was allocated to allshare (2005: £11
million). Up to 2% of pre-tax profits would have been available subject to meeting two corporate performance targets; one of these
to maintain earnings per share at the same level as in the 2005 financial year, and the other to have five percent more customers
very or extremely satisfied with BT (provided the percentage of customers who are dissatisfied did not increase compared with the
2005 financial year). The earnings per share target was met but not the one for customer satisfaction. The ESIP replaced the BT
Employee Share Ownership Scheme which operated for employee profit sharing until 2001.
Employee Stock Purchase Plan
The BT Group Employee Stock Purchase Plan (ESPP), for employees in the US, enables participants to purchase American
Depositary Shares (ADS) quarterly at a price (the Initial Base Option Price) which is 85% of the fair market price of an ADS at the
start of the Initial Enrolment Period (or, in the case of employees who enrol in the ESPP after the Initial Enrolment Period, 85% of
the fair market price of an ADS on the last business day of the calendar quarter immediately following enrolment). From 15 May
2005 to 15 May 2006, 1,750,560 shares (175,056 ADSs) have been transferred to participants out of treasury under the ESPP
(from 15 May 2004 to 15 May 2005, 934,782 shares (93,478 ADSs)). The third offer, with an Initial Base Option Price of
US$31.52 ended in December 2005. A fourth offer was launched in December 2005 with an Initial Base Option Price of US$32.53
and will expire in December 2006.
32. AUDIT SERVICES
The auditors’ remuneration for the year ended 31 March 2006 for the group was £5,593,000 (2005: £4,396,000). The audit fees
payable to the company’s auditors, PricewaterhouseCoopers LLP, for the company and UK subsidiary undertakings’ statutory
accounts were £3,351,000 (2005: £2,454,000). The audit fee of the company was £37,700 (2005: £35,000). The following fees
for audit and non-audit services were paid or are payable to the company’s auditors, PricewaterhouseCoopers LLP, for the years
ended 31 March 2006 and 31 March 2005.
2006 2005
£’000 £’000
Audit services
Statutory audit 5,538 4,148
Regulatory audit 1,065 1,423
6,603 5,571
Further assurance services
Corporate finance advice 317 989
Other 311 110
628 1,099
Tax services 1,775 2,912
Other services 216 434
Total 9,222 10,016
BT Group plc Annual Report and Form 20-F 2006 Notes to the consolidated financial statements104