BT 2003 Annual Report Download - page 121

34. Employee share schemes continued
The fourth five-year performance cycle of the ESP ended on 31 July 2002 and on the basis of the corporate
performance measure, the company’s Total Shareholder Return (TSR) target relative to the other companies in
the FTSE 100, 32.5% (2002 – 85%) of the shares vested on 1 August 2002 in 65 participants (1 August 2001:
62 participants) and 1.0 million shares (1 August 2001 – 1.2 million shares) were transferred to those participants.
The BT Deferred Bonus Plan (DBP) was established in 1998 and awards were granted to employees of the
group in July 1998, 1999, 2000, 2001 and June 2002. Under this plan, shares in the company are acquired by
an employee share ownership trust and transferred to participants at the end of three years if he or she has
continued to be employed by the group throughout that period. On 1 August 2002, 657,592 shares (1 August
2001 – 303,326) were transferred to 223 participants (1 August 2001 – 154) at the end of the three-year
deferred period.
At 31 March 2003, 31.7 million shares (2002 – 24.6 million shares) in the company were held in trust for
employee share schemes, of which 15.5 million shares (2002 – 16.5 million shares) were held for the ISP, 2.9 million
shares (2002 – 1.1 million shares) were held for the RSP, 2.3 million shares (2002 – 4.4 million shares) were held
for the ESP and 4.2 million shares (2002 – 2.7 million shares) were held for the DBP. Dividends or dividend
equivalents earned on the shares during the conditional periods are reinvested in company shares for the potential
benefit of the participants.
Additional information relating to the plans is as follows:
Year ended 31 March 2003
ISP
£m
RSP
£m
ESP
£m
DBP
£m
Total
£m
Value of range of possible future transfers: nil to 24.3 4.6 3.6 6.7 39.2
Provision for the costs of the plans charged (credited) to the profit
and loss account in year – (0.2) (0.2) 5.8 5.4
Nominal value of shares held in trust 0.8 0.1 0.1 0.2 1.2
Market value of shares held in trust 24.3 4.6 3.6 6.7 39.2
Year ended 31 March 2002
ISP
£m
RSP
£m
ESP
£m
DBP
£m
Total
£m
Value of range of possible future transfers: nil to 46.0 3.0 12.3 7.5 68.8
Provision for the costs of the plans charged (credited) to the profit
and loss account in year – 5.4 (9.2) 2.1 (1.7)
Nominal value of shares held in trust 0.8 0.1 0.2 0.1 1.2
Market value of shares held in trust 46.0 3.0 12.3 7.5 68.8
Of the total BT Group plc shares held, 6.8 million shares were held at 31 March 2003 in trust for future awards
under employee share schemes. These shares had a nominal value of £0.3 million and a market value of
£10.7 million at 31 March 2003.
The values of possible future transfers of shares under the plans were based on the BT Group plc share price
at 31 March 2003 of 157p (2002 – 280p). The provisions for the costs of the ISP, RSP and ESP were based on
best estimates of the company’s performance over the plans’ conditional periods, relating to those portions of
the plan conditional periods from commencement up to the financial year end.
Employee Share Investment Plan
From December 2001 the BT Group Employee Share Investment Plan (ESIP) was in operation. The ESIP,
which has been approved by the Inland Revenue, gives UK employees an opportunity to purchase shares
(partnership shares) monthly out of pre-tax salary up to a maximum value of £125 per month. During the 2003
financial year, 5.3 million shares (2002 – 0.7 million shares) were purchased by the Trustee of the ESIP on behalf
of 12,092 employees at a total cost of £10.6 million (2002 – £1.8 million). 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. A phantom plan,
which delivers cash awards equivalent to the value of the free shares, operates for employees outside the UK.
In 2003, 2% of pre-tax profits, amounting to £36 million, was set aside for the ESIP and the phantom plan for
employees outside the UK (2002 – £25 million). The allocation of this sum was subject to two performance
targets, one of increasing earnings per share by 25% and the other of reducing customer dissatisfaction by 25%,
both of which were achieved. 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
ADSs quarterly at a price (the Base Option Price) which is 85% of the market price of an ADS at the start of the
offer (and in the case of employees who have joined the ESPP after the start of the offer, 85% of the market price
on the date of joining, whichever is higher). At 15 May 2003, 69,164 shares have been issued under the BT Group
ESPP. As the ADS price has been less than the Base Option Price since the date of the quarterly purchase in July
2002 the ESPP has been suspended until the ADS price rises above the Base Option Price.
Notes to the financial statements
120 BT Annual Report and Form 20-F 2003