BT 2009 Annual Report Download - page 131

ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS BUSINESS AND FINANCIAL REVIEWS OVERVIEW
FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS – NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
129BT GROUP PLC ANNUAL REPORT & FORM 20-F
FINANCIAL STATEMENTS
31. Share based payments continued
Fair value
The following table summarises the fair values and key assumptions used for grants made under the Employee Sharesave plans and ISP in
2009, 2008 and 2007.
2009 2008 2007
Employee Employee Employee
Sharesave ISP Sharesave ISP Sharesave ISP
Weighted average fair value 27p 47p 71p 182p 43p 127p
Weighted average share price 152p 199p 329p 306p 229p 230p
Weighted average exercise price 135p – 269p – 185p –
Expected dividend yield 4.6%-6.4% 4.9% 5.5% 5.5% 5.5% 5.5%
Risk free rates 2.1%-5.5% 5.2% 5.8% 5.8% 5.0% 5.0%
Expected volatility 20.7%-28.4% 23.3% 22.0% 18.0% 17.0% 17.0%
Employee Sharesave grants, under the BT Group Employee Sharesave and the BT Group International Employee Sharesave option plans,
are valued using a binomial option pricing model. Awards under the ISP are valued using Monte Carlo simulations. TSRs were generated
for BT and the comparator group at the end of the three year performance period, using each company’s volatility and dividend yield, as
well as the cross correlation between pairs of stocks.
Volatility has been determined by reference to BT’s historical volatility which is expected to reflect the BT share price in the future. An
expected life of three months after vesting date is assumed for Employee Sharesave options and for all other awards the expected life is
equal to the vesting period. The risk free interest rate is based on the UK gilt curve in effect at the time of the grant, for the expected life
of the option or award.
The fair values for the RSP and DBP were determined using the middle market share price three days prior to the date of grant. The
weighted average share price for RSP awards granted in 2009 was 151p (2008: 310p, 2007: 267p). The weighted average share price for
DBP awards granted in 2009 was 203p (2008: 319p, 2007: 232p).
32. Audit and non-audit services
The following fees for audit and non-audit services were paid or are payable to the company’s auditors, PricewaterhouseCoopers LLP, for
the three years ended 31 March 2009.
2009 2008 2007
£000 £000 £000
Audit services
Fees payable to the company’s auditor and its associates for the audit of parent company
and consolidated accounts 2,831 2,990 3,100
Non-audit services
Fees payable to the company’s auditor and its associates for other services:
– The audit of the company’s subsidiaries pursuant to legislation 4,675 3,848 3,518
– Other services pursuant to legislation 1,211 1,590 1,212
– Tax services 1,247 727 763
– Services relating to corporate finance transactions 32 549 748
– All other services 887 527 23
10,883 10,231 9,364
‘ Audit Services ’ represents fees payable for services in relation to the audit of the parent company and the consolidated accounts and also
includes fees for reports under section 404 of the US Public Company Accounting Reform and Investor Protection Act of 2002 (Sarbanes-
Oxley).
‘
The audit of the company’s subsidiaries pursuant to legislation ’ represents fees payable for services in relation to the audit of the
financial statements of subsidiary companies. The increase in 2009 includes the adverse impact of foreign exchange movements and an
increase in relation to newly-acquired subsidiaries.
‘
Other services pursuant to legislation ’ represents fees payable for services in relation to other statutory filings or engagements that are
required to be carried out by the appointed auditor. In particular, this includes fees for audit reports issued on the group’s regulatory
financial statements.
‘
Tax Services ’ represents fees payable for tax compliance and advisory services.
‘
Services relating to corporate finance transactions ’ represent fees payable in relation to due diligence work completed on acquisitions
and disposals.
‘
All other services ’ represents fees payable for non-regulatory reporting on internal controls and other advice on accounting or financial
matters.
The audit fee of the company was £41,000 (2008: £40,000, 2007: £38,600).
In order to maintain the independence of the external auditors, the Board has determined policies as to what non-audit services can be
provided by the company’s external auditors and the approval processes related to them. Under those policies, work of a consultancy
nature will not be offered to the external auditors unless there are clear efficiencies and value-added benefits to the company.