Purpose of Resolutions

The first item of business is the requirement for shareholders to receive the financial statements for the financial year which ended on 31 March 2007 together with the reports of the directors and the auditors.

 

Under the Articles of Association, all directors are required to retire and submit themselves for re-election every three years. Notwithstanding the provisions of the Articles, in the interests of good corporate governance, the directors have resolved that, each year, they will all retire voluntarily and submit themselves for re-election by the shareholders. In addition, Vittorio Colao, Alan Jebson and Nick Land were appointed to the Board during the year and, together with Simon Murray who has been appointed to the Board with effect from 1 July 2007, submit themselves for election by the shareholders for the first time. Biographical details of the directors, who are all recommended for re-election/election, are set out in the Company’s Annual Report and in the Annual Review & Summary Financial Statement.

 

This Resolution seeks shareholder approval to the final ordinary dividend recommended by the directors. The directors are proposing a final dividend of 4.41 pence per ordinary share. An interim dividend of 2.35 pence per ordinary share was paid on 2 February 2007, making a total dividend for the year of 6.76 pence per ordinary share. If approved, the final dividend will be paid on 3 August 2007 to shareholders on the ordinary register as of 8 June 2007.

 

In accordance with the Directors’ Remuneration Report Regulations 2002, the Board submits the Remuneration Report to a vote of shareholders. In accordance with the Regulations, the approval of the Remuneration Report is proposed as an Ordinary Resolution.

 

As a result of this year’s review, the Remuneration Committee has concluded that the existing Remuneration Policy remains appropriate but intends to make four minor changes. These are as follows:

 

·        The comparator group for the Relative Total Shareholder Return (“TSR”) performance condition on the Group Long Term Incentive Plan (“GLTI”) Shares will be changed from all the companies in the FTSE Global Telecommunications Index to the top 50% of companies in the FTSE Global Telecommunications Index by market capitalisation, this will allow us to calculate the ranking on an unweighted basis;

 

·        The vesting curve on the relative TSR performance condition will be changed to a straight line between threshold and maximum;

 

·        A fifth performance measure will be added to the Group Short Term Incentive Plan (“GSTIP”), which will focus participants on the development of total communication services; and

 

·        The performance condition on the Deferred Share Bonus (“DSB”) has changed from a two year adjusted EPS to a two year cumulative adjusted free cash flow target.

 

The key principles of the Remuneration Policy, which are being maintained, are:

 

·        The expected value of total remuneration will be benchmarked against the relevant market;

 

·        A high proportion of total remuneration will be delivered through performance related payments;

 

·        Performance measures will be balanced between absolute financial measures and sector comparative measures to achieve maximum alignment between executive and shareholder objectives;

 

·        The majority of performance related remuneration will be provided in the form of equity; and

 

·        Share ownership requirements will be applied to executive directors.

 

The Committee continues to monitor how well incentive awards made in previous years align with the Company’s performance. The Committee believes that the Remuneration Policy continues to work well and forecast rewards are commensurate with actual performance.

 

The Company is required to appoint auditors at each general meeting at which accounts are presented, to hold office until the end of the next such meeting. Resolution 18, which is recommended by the Audit Committee, proposes the re-appointment of the Company’s existing auditors, Deloitte & Touche LLP. Resolution 19 follows best practice in corporate governance by separately seeking authority for the Audit Committee to determine their remuneration.

 

Under Section 80 of the Companies Act 1985, directors are, with certain exceptions, unable to allot relevant securities without the authority of the shareholders in a general meeting. Relevant securities as defined in the Companies Act 1985 include the Company’s ordinary shares or securities convertible into the Company’s ordinary shares.

 

This Resolution authorises the directors to allot up to 8,750,001,093 ordinary shares for the period ending on the earlier of 24 October 2008 or the Company’s Annual General Meeting in 2008. The authority represents approximately 16.6% of the share capital in issue at 31 May 2007. This percentage excludes 5,234,562,303 ordinary shares held in treasury at that date, which represented 9.01% of the share capital (excluding treasury shares) in issue at 31 May 2007. This authority complies with guidelines issued by investor bodies. The directors have no immediate plans to make use of this authority, other than to fulfil the Company’s obligations under its executive and employee share plans.

 

Section 89 of the Companies Act 1985 imposes restrictions on the issue of equity securities (as defined in the Companies Act 1985, which include the Company’s ordinary shares) which are, or are to be, paid up wholly in cash and not first offered to existing shareholders. The Company’s Articles of Association allow shareholders to authorise directors, for a period up to five years, to allot (a) relevant securities generally up to an amount fixed by the shareholders and (b) equity securities for cash other than in connection with a rights issue up to an amount specified by the shareholders and free of the restrictions in Section 89. In accordance with institutional investor guidelines, the amount of equity securities to be issued for cash other than in connection with a rights issue is restricted to 5% of the existing issued ordinary share capital. The Company has not issued any of its equity securities for cash in the last three years.

 

Resolution 21 is conditional on Resolution 20 having been passed and will be proposed as a Special Resolution. It authorises the directors to allot up to 2,537,500,317 ordinary shares for cash without first being required to offer them to existing shareholders for the period ending on the earlier of 24 October 2008 or the Company’s Annual General Meeting in 2008. The authority represents approximately 4.8% of the share capital in issue at 31 May 2007, and complies with guidelines issued by investor bodies. The directors have no immediate plans to make use of this authority, other than to fulfil the Company’s obligations under its executive and employee share plans.

 

In certain circumstances it may be advantageous for the Company to purchase its own shares. Resolution 22, which will be proposed as a Special Resolution, approves the purchase by the Company of up to 5,200,000,000 ordinary shares at a price not exceeding the higher of (1) 5% above the average closing price of such shares for the five business days on the London Stock Exchange prior to the date of purchase and (2) the higher of the last independent trade and the highest current independent bid on the London Stock Exchange.

 

Similar resolutions have been approved by shareholders at previous Annual General Meetings of the Company. No shares have been purchased since the date of the 2006 Annual General Meeting.

 

While the Board currently has no plans for further share purchases, it wishes to retain the flexibility provided by Resolution 22. Should any share purchases be made, pursuant to Resolution 22, it is intended that the shares would be held in treasury, subject to the limit imposed by the Companies Act 1985 (or, if the relevant provisions are in force at the time, the Companies Act 2006). In future, to the extent that such limit is exceeded, treasury shares will be cancelled (in the same way that 2,250 million treasury shares were cancelled in the period from 1 April 2005 to 31 March 2006).

 

No dividends are paid on and no voting rights attach to treasury shares. Any treasury shares sold by the Company will count towards the number of shares which, if Resolution 21 is passed, may be issued without first offering them to existing shareholders.

 

As the existing shareholder approval to purchase shares expires at the Annual General Meeting on 24 July 2007, purchases after that date are subject to renewed shareholder approval at the Annual General Meeting. The directors will use this authority only after careful consideration, taking into account market conditions prevailing at the time, other investment opportunities, appropriate gearing levels and the overall position of the Company. The directors will only purchase such shares after taking into account the effects on earnings per share (excluding items not related to underlying business performance) and the benefit for shareholders.

 

Resolution 22 specifies the maximum number of shares which may be acquired and the maximum and minimum prices at which they may be bought.

 

The total number of warrants and options to subscribe for shares issued by the Company outstanding at 31 May 2007 was 469,550,310. This represents 0.89% of the issued share capital at that date (excluding treasury shares). If the Company was to purchase the maximum number of shares permitted pursuant to this Resolution, then the total number of warrants and options to subscribe for shares issued by the Company outstanding at 31 May 2007 would represent 0.99% of the issued share capital (excluding treasury shares).

 

This is a Special Resolution to seek general authority from shareholders for the Company to send or supply documents or information to shareholders in electronic form or by means of a website, so taking advantage of new company legislation regarding electronic communications with shareholders, which became effective on 20 January 2007.

 

Existing company legislation permits the Company to communicate with shareholders electronically (e.g. by fax, email or by means of a website) in respect of certain types of information they receive from the Company. However, the new legislation makes two important changes:

 

·        All Company notices, documents and other information (“shareholder information”) can now be provided to shareholders electronically, provided that they agree to this and provide an appropriate (e.g. email) address; and

 

·        If shareholders are invited to agree that the Company may send or supply shareholder information by means of a website, those who do not respond within 28 days are deemed to have agreed to the Company communicating shareholder information to them by means of a website.

 

Where shareholders agree (or are deemed to have agreed) to communication of shareholder information by means of a website, shareholders must be notified of the availability of the relevant document or information on the website, the address of the website, the place on the website where it may be accessed and how to access the document or information. This information will be provided to shareholders by post or by email (if they have provided the Company with an email address for this purpose).

 

Increased use of electronic communications will deliver significant savings to the Company in terms of administration, printing and postage costs. It will also speed up the communication of information to shareholders in a convenient form, whilst at the same time delivering significant environmental benefits through reduced use of paper and of the energy required for its production and distribution.

 

Electronic communication is not new to the Company. Indeed, a number of our shareholders already prefer to have communications from the Company, including this Notice of Meeting and the Annual Report, made available electronically rather than receiving paper copies. If you prefer to receive an email notification of the availability of documents on the Company’s website, you are encouraged to follow the steps set out as Option A on the Shareholder Communications Form.

 

Accordingly, Resolution 23 is being proposed to confer the necessary authority on the Company.

 

The Company would like to take advantage of the new legislation as early as possible.

 

You will find enclosed with this booklet and accompanying documents a Shareholder Communications Form (“Form”) which is an invitation to you to select the means you prefer the Company to use to send you shareholder information. Please read the information on the Form carefully. Subject to Resolution 23 being passed at the AGM, the options available to you are:

 

A.     To elect to receive communications from the Company via the Company’s website, with notification of the availability of shareholder information to your email address. To choose this option, simply follow the steps described in Option A on the Form;

 

B.     To elect to continue to receive paper copy documents. To choose this option, place a cross in the box under Option B on the Form; or

 

C.     Not to respond to the Company with an election under Options A or B described above by 31 August 2007; in which case, you will be deemed to have agreed to the communication of shareholder information by means of a website and the Company will, at the appropriate time, notify you in writing to your registered address of the availability of shareholder information on the Company’s website. However, if at any time in the future you wish to revert to receiving paper copy shareholder information, you can do so simply by making a request to the Company’s Registrars.

 

This is a Special Resolution to adopt new Articles of Association. The new Articles of Association would allow the Company to take advantage of the electronic communication provisions of the new companies legislation, as set out in more detail in the note to Resolution 23 above.

 

In addition, the new Articles of Association would not contain the requirement in the existing Articles of Association for the age of a director who has reached the age of 70 to be stated in any notice (or accompanying document) of a general meeting at which such director is proposed for election or re-election. Further, the description of the Company’s share capital contained in the Articles of Association would be updated to reflect the Company’s current share capital and the references to provisions of the Companies Act 1985 contained in the Articles of Association would be updated where appropriate to reflect the repeal or re-enactment of those provisions by the Companies Act 2006.

 

 

These resolutions have been requisitioned by a group of shareholders and primarily relate to proposals regarding the Company’s shareholding in Verizon Wireless and the Company’s levels of debt. These resolutions also limit the Company’s ability to make acquisitions and would significantly constrain the directors’ flexibility in managing both the Company’s global business and implementing their successful strategy to deliver value to shareholders. Set out in Appendix I is an explanatory statement relating to Resolutions 25 to 28 submitted by the group of shareholders. Your directors’ response to this statement is set out in Appendix II.