BT 2001 Annual Report Download - page 113

29. Financial commitments, contingent liabilities and subsequent events (continued)
On 2 May 2001, BT announced that it had agreed to sell its interests in Japan Telecom and J-Phones for »3.7 billion, and its
interest in Airtel in Spain for »1.1 billion, both to Vodafone. The impact of the combined transaction will be a net reduction in
total group debt of »4.4 billion. Completion of the transactions is conditional upon relevant regulatory and procedural approvals
in Europe and Japan.
On 4 May 2001, BT also announced that it had agreed in principle to sell its interest in Maxis Communications in Malaysia
for »350 million. This transaction is also subject to regulatory and other approvals.
On 10 May 2001, BT announced that it proposed to raise approximately »5.9 billion, net of expenses, by the issue of up to
1,975,580,052 new ordinary shares at a price of 300 pence per share. The issue is being made by way of a rights issue on the basis
of 3 new ordinary shares for every 10 existing ordinary shares held on 9 May 2001. The rights issue is due to close on 15 June
2001.
30. Pension costs
The total pensions cost of the group expensed within sta¡ costs was »326 million (2000 ^ »167 million, 1999 ^ »176 million), of
which »315 million (2000 ^ »159 million, 1999 ^ »167 million) related to the group’s main pension scheme, the BT Pension
Scheme (BTPS). The increase in cost in the year ended 31 March 2001 was mainly attributable to the general trend towards
longer life expectancy and a smaller amortisation of the combined pension fund position and pension provision held in the group
balance sheet.
The pension cost for the year ended 31 March 2001 was based on the valuation of the BTPS at 31 December 1999. The
pension costs for the years ended 31 March 2000 and 1999 were based on the valuation of the BTPS at 31 December 1996. The
valuations, carried out by professionally quali¢ed independent actuaries, used the projected unit method. The valuations were
determined using the following long-term assumptions:
Rates (per annum)
1999
valuation
%
1996
valuation
%
Return on existing assets, relative to market values 5.45 7.95
(after allowing for a real increase in dividends of) 1.00 0.75
Return on future investments 7.12 8.42
Average increase in retail price index 3.00 4.00
Average future increases in wages and salaries 4.80 5.82
Average increase in pensions 3.00 3.75-4.00
At 31 December 1999, the assets of the BTPS had a market value of »29,692 million and, taking account of the special
contribution by the company in March 2000, were su⁄cient to cover 96.8% of the bene¢ts that had accrued to members by that
date, after allowing for expected future increases in wages and salaries but not taking into account the costs of providing
incremental pension bene¢ts for employees taking early retirement under release schemes since that date. This cost, which
amounted to »429 million in the year ended 31 March 2001, will be taken into account in the next actuarial valuation being
undertaken at 31 December 2000. The costs for the previous ¢nancial years (2000 ^ »140 million, 1999 ^ »279 million) were taken
into account in the 31 December 1999 valuation.
For the purpose of determining the group’s pension expenses in the year ended 31 March 2001, the same assumptions were
used as set out above for the December 1999 valuation, with the exception that, over the long term, it has been assumed that the
return on the existing assets of the scheme, relative to market values, would be 5.6% per annum (allowing for real equity
dividend growth of 1.25% per annum).
In the year ended 31 March 2001, the group made regular contributions of »308 million (2000 ^ »253 million,
1999 ^ »239 million) and special contributions of »300 million (2000 ^ »230 million, 1999 ^ »200 million).
BT Annual report and Form 20-F 113