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Exhibit 1.1
 BT




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Certificate of Incorporation on Change of Name and Re-Registration as a public company
    
    
    3Certificate of Incorporation
    
    
    5Contents of the Articles of Association
    
    
    7Articles of Association
    
    
    9Explanation of Terms
    
    
    65Index
    
    
    73Resolutions of BT Group shareholders
    
    
    77
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Newgate Telecommunications Limited
 BT Group plc
   A SHAH
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JENNIFER KING
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Article No(s)
    
    Subject
    
    Page No(s)1
    
    Preliminary Article
    
    
        92-3
    
    General Meetings
    
    
        94-5
    
    Notice of General Meetings
    
    
        96-11
    
    Proceedings at General Meetings
    
    
        1112-16
    
    Voting at General Meetings
    
    
        1417-21
    
    Shareholders Voting Rights
    
    
        1522-26
    
    Proxies
    
    
        1727
    
    Company Representatives
    
    
        1928-29
    
    Directors
    
    
        1930-34
    
    Appointment and Removal of Directors
    
    
        2035-37
    
    Rotation of Directors
    
    
        2138
    
    Disqualification of Directors
    
    
        2239-42
    
    Remuneration of Directors
    
    
        2243-51
    
    Board Meetings
    
    
        2452-53
    
    Board Committees
    
    
        2654-58
    
    Directors Interests
    
    
        2759-67
    
    Directors Management Powers
    
    
        3168-69
    
    Directors Borrowing Powers
    
    
        3470
    
    Liability
    
    
        3671-75
    
    Shares
    
    
        3676-79
    
    Changing Share Capital
    
    
        3880-82
    
    Share Rights
    
    
        3983-84
    
    Share Certificates
    
    
        4185-86
    
    Transferring Shares
    
    
        4287-91
    
    People Automatically Entitled to Shares by Law
    
    
        4392
    
    Shareholders who Cannot be Traced
    
    
        4493-101
    
    Dividends
    
    
        45102
    
    Scrip Dividends
    
    
        48103-111
    
    Communications with shareholders
    
    
        50112-113
    
    Auditor
    
    
        53114
    
    Secretary
    
    
        53115
    
    Seals
    
    
        54116-117
    
    Documents
    
    
        55118-120
    
    Indemnity, Insurance and Defence expenditure
    
    
        56121-123
    
    Reserves
    
    
        58124-126
    
    Accounts
    
    
        59127
    
    Winding Up
    
    
        60128
    
    Interpretation
    
    
        60
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Articles bold  Articles Articles italics
 
 Articles of Association
of BT Group plc   special resolution
 Preliminary Article
 1.
    
    Standard regulations do not applyAny regulations made under the legislationcontaining standard articles of association
do not apply to BT.
 General Meetings
 2.
    
    Annual General MeetingsEvery year BTmust hold an Annual General Meeting, in addition to any other General
Meetingswhich are held in the year. The notice calling the meeting must say that the
meeting is the Annual General Meeting. BTmust hold an Annual General Meetingwithin
six monthsof BTsaccounting reference date. The Boardwill decide when and where to
hold the Annual General Meeting.3.
    
    General MeetingsThe Boardcan decide to call a General Meetingat any time.
 Notice of General Meetings
 4.
    
    Notice of meetings4.1.
    
    At least 21 clear days writtennotice must be given for every Annual General Meeting. For
every other General Meeting, at least 14 clear days writtennotice must be given.4.2.
    
    A notice of meeting must state:
 
    
    where the meeting is to be held;
    
    the date and time of the meeting;
    
    the general nature of any special businessto be dealt with at the meeting;
    
    whether a resolution will be proposed as a special resolution; and
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
    
    that a shareholderwho can attend, speak and vote can appoint one
or more proxies(who need not be shareholders) to attend, speak and vote for
them.
 4.3.
    
    Notices of meetings must be given to the shareholders, unless the Articlesor the rightsof
the shares say they are not entitled to receive them from BT. However, the Boardcan decide
that only peoplewho are entered on the Registerat the close of business on a particular day
are entitled to receive the notice. The Boardcan choose that day so long as it falls not more
than 21 days before the notice is sent. Notice must also be given to the Auditorand the
Board.4.4.
    
    The Boardcan specify in the notice of meeting a time by which a personmust be entered on
the Registerin order to have the right to attend or vote at the meeting. The time specified
must not be more than 48 hours before the time fixed for the meeting.4.5.
    
    If BTcannot call a General Meetingby sending notices by post or by using electronic means,
because the postal system or electronic meansof communication in the United Kingdomare
generally suspended or restricted, notice of the meeting will be treated as being given to
shareholdersaffected by the suspension or restriction by advertisement in at least two United
Kingdomnational newspapers. Notice given in this way will be treated as being given to
affected shareholderswho are entitled to receive it at midday on the day when the last
advertisement appears in the newspapers. In any such case, BTmust:
 
    
    if it is possible, make the notice available on its website from
the date of the advertisement until the end of the General Meetingor any
adjournmentof the meeting; and
    
    if it becomes generally possible to use the postal system or
electronic meansagain more than 14 days before the meeting send confirmation of
the notice by post or electronic means.
 5.
    
    Moving or postponing meetings at short noticeIf the Boardconsider that it is impractical, or undesirable, to hold a General
Meetingon the date or at the time or place stated in the notice of meeting, they can
change the place of, or postpone, the meeting, or do both of these things. Notice of
the business of the meeting does not need to be given again. The Boardmust take
reasonable steps to ensure that a shareholdertrying to attend the meeting at the
original date, time and place is informed of the new arrangements. If a meeting is
rearranged in this way, proxyappointments can be made, in the way required by
Articles 22 to 25, until 48 hours before the rearranged meeting. The Boardcan also
change the place of, or postpone, the rearranged meeting, or do both, under this
Article.
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Proceedings at General Meetings
 6.
    
    Chairman of meetings6.1.
    
    The chairman of the Boardwill be the chairman at every General Meeting.6.2.
    
    If BTdoes not have a chairman, or if the chairman is not present, willing and able to chair
the meeting, the deputy chairman will chair the meeting.6.3.
    
    If BTdoes not have a chairman or a deputy chairman, or if neither the chairman nor the
deputy chairman is present, willing and able to chair the meeting, after waiting 15 minutes
from the time that the meeting is due to start, the directors who are present will choose one
of the directors to act as chairman. If there is only one director present, that director, if
willing, will be chairman. If no director is present and willing, the Secretary, if present
and willing, will be chairman.6.4.
    
    If there is no director or Secretarypresent, willing and able to chair the meeting, after
waiting 15 minutes from the time that the meeting is due to start, the shareholdersand
proxieswho are present and entitled to vote will pass an ordinary resolutionto elect a
shareholderor proxyto act as chairman.6.5.
    
    Nothing in the Articlesis intended to restrict or exclude any of the powers or rights of a
chairman of a meeting which are given by law.6.6.
    
    The decision of the chairman on points of order, matters of procedure or arising incidentally
out of the business of a General Meetingis conclusive, as is the chairmans decision, acting
in good faith, on whether a point or matter is of this nature.7.
    
    Security and other arrangements at meetings7.1.
    
    The chairman of a meeting or the Secretarycan take any action they consider appropriate:
 
    
    for proper and orderly conduct at a General Meeting; or
    
    so that the meeting reflects the wishes of the majority.
 7.2.
    
    The Boardcan ask shareholdersor proxieswanting to attend a General Meetingto submit to
searches or other security arrangements which the Boardthink are appropriate. The Boardcan,
in their discretion, refuse entry to, or remove from, a General Meetinga shareholderor proxy
who does not submit to those searches or comply with those security arrangements.8.
    
    Meeting in different places8.1.
    
    Subject tothe legislationand the rest of the Articles, every shareholdercan attend a
General Meetingin person or by proxy. Where the General Meetingis to be held at more than
one place, a shareholderor proxyprevented from attending at one place can attend and
participate at another place.
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8.2.
    
    The Boardcan make arrangements that they, in their discretion, think appropriate to:
 
    
    regulate the number of peopleattending at a place where a General
Meeting(or adjournment) is to be held;
    
    ensure the safety of peopleattending at that place; or
    
    enable attendance at that meeting (or adjournment);
 and can change those arrangements at any time. The arrangements can include (without
limitation) the issue of tickets or the use of a random method of selection.
 8.3.
    
    In the case of a General Meetingto which these arrangements apply, the Boardcan, when
specifying the place of the meeting:
 
    
    direct that the meeting will be held at a place identified in the
notice at which the chairman of the meeting will attend (the Main Meeting
Place); and
    
    make arrangements for simultaneous attendance and participation at
other places (whether by electronic meansor otherwise) by shareholdersand
proxiesentitled to attend the meeting but excluded from it under this Article or
who want to attend at one of the other places.
 The notice of meeting does not have to give details of any arrangements under this
Article.8.4.
    
    Subject toArticle 8.1, arrangements for simultaneous attendance can include arrangements for
regulating the number of peopleattending at any other places.8.5.
    
    In the Articles(unless the context requires otherwise) the shareholderswill be treated as
meeting in the Main Meeting Place.8.6.
    
    The Boardspowers and discretions under this Article are delegated to the chairman at a
General Meeting.9.
    
    Quorum9.1.
    
    Before a General Meetingstarts any business, there must be a quorumpresent. If not, the
meeting cannot carry out any business but can choose a personto chair the meeting. The quorum
is two peoplewho are entitled to vote. They can be shareholdersor proxiesor a combination
of both.9.2.
    
    This Article applies if a quorumis not present within 20 minutes after the time fixed for a
General Meetingto start or within any longer period which the chairman decides. If the
meeting was called by
shareholders, it is cancelled. Any other meeting is adjournedto any date, time and
place stated in the notice of meeting. If the notice does not provide for this, the
meeting is adjournedto a date, time and place decided by the chairman.
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10.
    
    Adjourning meetings10.1.
    
    The chairman of a meeting can adjournthe meeting, before or after it has started, if the
chairman considers that:
 
    
    there is not enough room for the number of shareholdersand proxies
who want to attend the meeting;
    
    the behaviour of anyone present prevents, or is likely to prevent,
the business of the meeting being carried out in an orderly way; or
    
    an adjournmentis necessary for any other reason, so that the
business of the meeting can be properly carried out.
 The chairman can adjournthe meeting for any of these reasons to a date, time and
place which the chairman decides, or indefinitely. The chairman does not need the
consent of the meeting to do this.10.2.
    
    The chairman of a meeting can adjourna meeting which has a quorumpresent if the meeting
agrees. The chairman may adjournthe meeting if the meeting directs this. The adjournmentcan
be to a date, time and place which the chairman decides, or indefinitely.10.3.
    
    If a meeting is adjournedindefinitely, the Boardwill decide the date, time and place of
the adjournedmeeting. Meetings can be adjournedmore than once.10.4.
    
    If a meeting is adjournedfor 60 days or more, at least seven days notice must be given for
the adjournedmeeting in the same way as was required for the original meeting, including
notice of the business to be considered there. If a meeting is adjournedfor less than 60
days, there is no need to give notice of the adjournedmeeting, or of the business to be
considered there.10.5.
    
    A reconvened meeting can only deal with business that could have been dealt with at the
meeting which was adjourned.11.
    
    Amending resolutions11.1.
    
    The chairman can propose amendments to an ordinaryor special resolutionif they are
amendments to correct an obvious error in the resolution.11.2.
    
    No other amendments can be proposed to a special resolution.11.3.
    
    Amendments to an ordinary resolutionwhich are within the scope of the resolution can be
proposed if writtennotice of the proposed amendment is received at the Registered Office
addressed to the
Secretaryat least three clear business daysbefore the day fixed for the meeting or
adjournedmeeting.11.4.
    
    If the chairman, acting in good faith, rules an amendment out of order, an error in that
ruling will not affect the validity of a vote on the original resolution.
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Voting at General Meetings
 12.
    
    How votes are taken12.1.
    
    If a resolution is put to the vote at a General Meeting, it will be decided by a show of
hands, unless a pollis demanded as soon as, or before, the result of the show of handsis
declared by the chairman. A pollcan be demanded by:
 
    
    the chairman of the meeting;
    
    at least five shareholdersat the meeting who are entitled to vote
(or their proxies); or
    
    one or more shareholdersat the meeting who are entitled to vote
(or their proxies) and who have, between them, at least 10 per cent of the total
votes of all shareholderswho have the right to vote at the meeting.
 The chairman of the meeting can also demand a pollbefore all, some or any of the
resolutions are put to the vote on a show of hands.12.2.
    
    A demand for a pollcan be withdrawn if the chairman agrees to this. If a pollis demanded,
and this demand is then withdrawn, a declaration by the chairman of the result of a vote by a
show of handson that resolution, which was made before the pollwas demanded, will stand.13.
    
    How polls are taken13.1.
    
    The chairman of the meeting can decide where, when and how a pollwill be taken. The result
will be treated as the decision of the meeting where the pollwas demanded, even if the poll
is taken after the meeting.13.2.
    
    The chairman can:
 
    
    decide that a ballot, electronic voting, voting papers or tickets
will be used;
    
    appoint one or more scrutineers (who need not be shareholders);
    
    adjournthe meeting to a date, time and place which the chairman
decides for the result of the pollto be declared; or
    
    declare the result of the pollor decide how it should be declared.
 13.3.
    
    A shareholdercan vote either in person or by proxyon a poll. If a shareholdervotes on a
poll, they do not have to use all of their votes or cast all their votes in the same way.14.
    
    Timing of pollsA pollcan be taken either at the meeting or within three months. No notice is
required for a poll.15.
    
    Meetings continue after poll demandedA demand for a pollon a particular matter does not stop a meeting from continuing and
dealing with other matters. But once all these matters have been dealt with, the
meeting is treated as having ended immediately after the pollhas been taken, even
though the result of the pollis to be worked out and announced later.
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16.
    
    Effect of declaration by chairmanThe following applies when there is a vote on a show of handsand no pollis demanded
or a demand for a pollis withdrawn. Any of the following declarations about a
resolution by the chairman of the meeting is conclusive proof that it has been:
 
    
    passed or not passed; or
    
    passed with a particular majority.
 An entry in respect of this kind of declaration in the minutes of the meeting is also
conclusive evidence of that fact. There is no need to prove the number or proportion
of votes recorded for or against a resolution.
 Shareholders Voting Rights
 17.
    
    Votes of shareholdersWhere there is a vote on a show of hands, a shareholderpresent at a meeting in person
or by proxyhas one vote. Where there is a poll, a shareholderpresent in person or by
proxyhas one vote for every share which they hold or represent. This is subject to
any specialrightsor restrictions which are given to a class of shares and to the
Articles.18.
    
    Failure to comply with notice under section 793 of the Companies Act18.1.
    
    This Article applies if a shareholder, or a personappearing to be interested in shares
(within the meaning of Part 22 of the Companies Act) held by that shareholder, has:
 
    
    been sent a notice under section 793 of the Companies Actrequiring
information about interests in shares; and
    
    failed to supply to BTthe required information within 14 days
after delivery of that notice.
 Then, unless the Boarddecide otherwise, the shareholderis not entitled to:
 
    
    attend or vote either in person or by proxyat a shareholders
meeting; or
    
    exerciseany other right in relation to shareholders meetingsas
holder of any shares in BT.
 These restrictions end seven days after the earlier of the date on which:
 
    
    the shareholdercomplies with the notice to BTssatisfaction; and
    
    BTreceives writtennotice that there has been an approved transfer
of the shares.
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18.2.
    
    A personwho obtains shares subject torestrictions under Article 18.1 is subject tothe
same restrictions, unless the transfer was:
 
    
    an approved transfer; or
    
    made by a shareholderwho was not in default in supplying the
information required by the notice under Article 18.1.
 18.3.
    
    In this Article a personis treated as appearing to be interested in any shares if the
shareholderholding those shares has been sent a notice under section 793 of the Companies Act
and:
 
    
    the shareholderhas named that personas being so interested; or
    
    (after taking into account the response of the shareholderto the
notice and any other relevant information) the Boardknows or reasonably believes
that the personin question is or may be interested in the shares.
 18.4.
    
    In this Article a transfer of shares is an approved transferif:
 
    
    it is a transfer of shares to an offeror under an acceptance of a
takeover offer; or
    
    the Boardare satisfied that the transfer is a genuine sale of the
whole of the beneficial ownershipof the shares to a personwho is not connected
with the shareholderor with a personappearing to be interested in the shares.
This includes such a sale made through the London Stock Exchangeor any other
stock exchange on which BTsshares are normally traded.
 19.
    
    Votes of joint shareholdersIf more than one joint shareholdervotes, the only vote which will count is the vote
of the first shareholderlisted on the Registerfor the share. This also applies if
the shareholdersvote by proxy.20.
    
    Votes of shareholders who are unable to manage their affairsThis Article applies where a:
 
    
    shareholderis unable to manage their affairs; and
    
    court which claims jurisdiction to protect peoplewho are unable to
manage their affairs has made an order about the shareholder.
 The peopleappointed by the court to act for the shareholdercan vote for the
shareholderand exerciseother rightsat General Meetings. This includes appointing a
proxy, voting on a show of handsand voting on a poll. However, it only applies if any
evidence which the Boardrequires of their authority to do these things is delivered
to the Registered Officeor any other place the Boardspecify for delivery of proxy
formsat least 48 hours before the relevant meeting (or adjournedmeeting).21.
    
    Challenging votesAn objection to the right of a personto vote must be made at the meeting (or
adjournedmeeting) at which the vote is cast. If a vote is not disallowed at a
meeting, it is valid for all purposes. An objection must be raised with the chairman
of the meeting. The chairmans decision is conclusive.
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Proxies
 22.
    
    Appointment of proxies22.1.
    
    A shareholderis entitled to appoint a proxyor (subject toArticle 23) proxiesto exercise
all or any of the shareholdersrights to attend, speak and vote at General Meetings.22.2.
    
    A proxyis appointed by using a proxy formor in any other way, and subject toany terms and
conditions, the Boarddecide. For example, the Boardcan decide that a proxycan be appointed
using electronic meansor by means of a website.22.3.
    
    A proxyneed not be a shareholder.23.
    
    Multiple proxiesA shareholdercan appoint more than one proxy. However, each proxy must be appointed
to exerciserightsin respect of a different share or shares held by the shareholder.24.
    
    Form of Proxy24.1.
    
    A proxy form:
 
    
    must be in writing; and
    
    can be in any form which is commonly used or in any other form the
Boardapprove.
 24.2.
    
    A proxy formgiven by:
 
    
    an individual must be signed by the individual or an attorneywho
is authorised to act on behalf of the individual or authenticated in accordance
with Article 104; and
    
    a companymust be sealed with the companys sealor signed by an
officerof the companyor an attorneywho is authorised to act on behalf of the
companyor authenticated in accordance with Article 104.
 Any signature on or authentication of an appointment need not be witnessed.25.
    
    Receipt of proxies25.1.
    
    A proxy formmust be received at the place or addressstated in the notice of meeting or
proxy formor in any invitation contained in an electronic formto appoint a proxyor, if no
place or addressis stated, at the Registered Office. If the Boarddecide that a proxycan be
appointed in any other way, notice of the appointment must be received as the Boardspecify.25.2.
    
    Notices of appointments of proxiesmust be received at least:
 
    
    48 hours before a meeting or adjournedmeeting;
    
    24 hours before a pollis taken, if the pollis taken more than 48
hours after it was demanded; or
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
    
    48 hours before a meeting or adjournedmeeting, if the pollis
taken within 48 hours after the meeting or adjournedmeeting.
 In calculating the periods in this Article, the Boardcan decide to exclude any part
of any day which is not a business day.25.3.
    
    If a proxy formis signed or authenticated in accordance with Article 104, the power of
attorneyor other authority relied on to appoint a proxy, or a copy which has been certified
by a solicitor or notary, must be registered with BT, together with any proxy formor in any
other way that the Boardspecify, unless this has already been done. These documents must be
received by the deadline which applies to notices of appointments of proxiesunder Article
25.2. The Boardmay decide to disapply the requirements in this Article 25.3 in relation to a
proxy formor the appointment of a proxymade under the second sentence of Article 25.1.25.4.
    
    In relation to any shares in uncertificated form, the Boardcan:
 
    
    permit a proxyto be appointed by electronic meansin the form of
an uncertificated proxy instruction;
    
    permit any supplement to, or amendment or withdrawal of this
instruction by a further uncertificated proxy instruction;
    
    decide the method of determining the time when any uncertificated
proxy instructionis to be treated as received by BT; and
    
    treat any instruction of this kind which appears or claims to be
sent on behalf of the shareholderas conclusive evidence that the personsending
the instruction is authorised to send it on behalf of that shareholder.
 25.5.
    
    If this Article is not complied with, the proxywill not be able to act for the personwho
appointed them.25.6.
    
    If a proxyfor several meetings has been properly appointed for a meeting or adjourned
meeting, the proxydoes not need to be appointed again for a later meeting which the
appointment covers. A
proxy formwill be valid for any adjournmentof the meeting or meetings to which it
relates and for any vote on a show of handsor any polldemanded at that meeting or
adjournedmeeting.25.7.
    
    If more than one proxy is appointed in respect of the same share to act at the same meeting,
only the last appointment received will be treated as valid (regardless of when it was signed
or by what means it was submitted). If BT does not know which is the last appointment, BT can
decide which appointment to treat as valid or whether any of them are valid and its decision
will be conclusive.25.8.
    
    A shareholdercan attend, vote and speak at a General Meetingor on a polleven if they have
appointed a proxyto attend, vote and speak at that meeting or on that poll.
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26.
    
    Termination of proxies26.1.
    
    A vote cast by a proxyin the way authorised by their appointment and a demand for a poll
made by a proxywill be valid even though the shareholderwho appointed the proxyhas:
 
    
    died or is unable to manage their affairs;
    
    terminated the appointment; or
    
    terminated the authority of the personwho made the appointment.
 However, this does not apply if writtennotice of any of these events has been
received in any way specified for the appointment of proxies:
 
    
    48 hours before the meeting or adjournedmeeting;
    
    24 hours before the pollis taken, if the pollis taken more than
48 hours after it was demanded; or
    
    48 hours before a meeting or adjournedmeeting, if the pollis
taken within 48 hours after the meeting or adjournedmeeting.
 In calculating the periods in this Article, the Boardcan decide to exclude any part
of any day which is not a business day.26.2.
    
    The appointment of a proxywill cease to be valid 12 monthsafter the date the proxy form
was signed or authenticated or notice of the appointment was received. However, the
appointment is still valid at an adjournedmeeting or on a polldemanded at a meeting or
adjournedmeeting, if the original meeting was first held within the 12 monthperiod.
 Company Representatives
 27.
    
    Appointment of company representativesSubject to the legislation, a companywhich is a shareholdercan, by resolution of its
directors or other governing body, authorise a personor several peopleto act as its
representative or representatives at a General Meeting. Each of those peopleis called
a company representative.
 Directors
 28.
    
    Number of directorsThere must be at least two directors. The shareholderscan vary this minimum and/or
decide or vary a maximum number of directors by passing an ordinary resolution.29.
    
    Directors need not be shareholdersA director need not be a shareholder. A director who is not a shareholderis still
entitled to receive notice of and attend and speak at shareholders meetings.
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Appointment and Removal of Directors
 30.
    
    People who can be directorsOnly the following peoplecan be elected as directors at a General Meeting:
 
    
    a director who is retiring at the meeting;
    
    a personwho is recommended by the Board; and
    
    a personwho has been proposed in the following way. A shareholder
who is entitled to attend and vote at the meeting (other than the proposed
director) must deliver to BTa notice in writing, signed or authenticated in
accordance with Article 104 by the shareholder. The notice must state that they
intend to propose the personfor election and whether the personis proposed as
an additional director or to replace a director who is retiring or being removed.
This notice must be delivered not less than seven nor more than 42 days before
the date of the meeting. The personto be proposed must deliver to BTwith the
notice a confirmation in writing, signed or authenticated in accordance with
Article 104 by the personto be proposed that they are willing to be elected.
 31.
    
    Filling vacancies and appointing or electing additional directors31.1.
    
    The Boardcan appoint a personas an additional director or as a replacement for another
director. A director appointed in this way automatically retires at the first Annual General
Meetingafter their appointment. At this Annual General Meetingthey can be elected by the
shareholders as a director.31.2.
    
    Subject toArticle 30, the shareholderscan elect a personproposed as an additional
director or to replace another director by passing an ordinary resolution.31.3.
    
    Additional directors can only be appointed or elected under this Article within any maximum
number of directors which applies under Article 28 (including any variation of that maximum
approved by an ordinary resolutionof shareholders).32.
    
    Removing and electing directors by ordinary resolution32.1.
    
    The shareholderscan pass an ordinary resolutionto remove a director, even though the
directors time in office has not ended. This applies despite anything else in the Articlesor
in any agreement between BTand the director. Special noticeof the resolution must be given
to BTas required by the legislation. If a director is removed in this way, it
will not affect any claim which the director has for damages for breach of any
contract of service.32.2.
    
    Subject toArticle 30, the shareholderscan elect a personto replace a director who has
been removed in this way by passing an ordinary resolution. A personelected under this
Article to replace a director who has been removed retires by rotationunder Article 35 when
the director replaced would have been due to retire. If no director is elected under this
Article, the vacancy can be filled under Article 31.
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33.
    
    Electing two or more directorsA single resolution for the election of two or more directors is void unless the
shareholdersapprove the putting of the resolution in this form first by a vote taken
at the General Meetingwith no votes cast against.34.
    
    Directors can act if there are vacanciesEven if one or more director(s) has stopped being a director, the remaining
director(s) can continue to act. If the number of director(s) falls below the minimum
which applies under Article 28 (including any variation of that minimum approved by an
ordinary resolutionof shareholders), the remaining director(s) can only:
 
    
    appoint further director(s) to make up the shortfall; or
    
    convene a General Meeting.
 If no director(s) are willing or able to act under this Article, any two shareholders
can call a General Meetingto elect director(s).
 Rotation of Directors
 35.
    
    Retiring by rotationAt every Annual General Meetingany director who was elected or last re-elected a
director at or before the Annual General Meetingheld in the third yearbefore the
current yearmust retire by rotation.36.
    
    Re-electing directors who retire by rotationAt the General Meetingat which a director retires by rotationthe shareholderscan
pass an ordinary resolutionto re-elect the director or, if Article 30 has been
complied with, to elect some other eligible personin the directors place.The retiring director is treated as re-elected unless:
 
    
    the meeting expressly resolves not to elect a director to fill the
vacancy;
    
    the director has told BT in writingthat the director does not want
to be re-elected;
    
    a resolution to re-elect the director is put to the meeting and
lost; or
    
    any maximum number of directors which applies under Article 28
(including any variation of that maximum approved by an ordinary resolutionof
shareholders) would be exceeded.
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37.
    
    When a director retiresA director retiring at a General Meetingretires at the end of that meeting or (if
earlier) when a resolution is passed to elect another personin the directors place
or when a resolution to re-elect the director is put to the meeting and lost. Where a
retiring director is re-elected (or treated as re-elected under Article 36) the
retiring director continues as a director without a break.
 Disqualification of Directors
 38.
    
    When directors are disqualified38.1.
    
    A director automatically ceases to be a director if:
 
    
    the director ceases to be a director under the legislationor is
removed from office under the Articles;
    
    the director is prohibited from being a director under the
legislation;
    
    the director becomes bankrupt;
    
    the director makes an arrangement or composition with the
directors creditors or applies for an interim order under section 253 of the
Insolvency Act 1986 in connection with a voluntary arrangement under that Act;
    
    the director becomes unable to manage their affairs and a court
which claims jurisdiction to protect peoplewho are unable to manage their
affairs has made an order detaining the director or appointing a personto manage
the directors property or affairs;
    
    except where the directors contract prevents the director
resigning, the director:
 
    
    delivers to BTa writtennotice of resignation signed
by or on behalf of the director; or
    
    offers to resign and the Boardpass a resolution
accepting the offer;
 
    
    the director has missed Boardmeetings for a continuous period of
six months, without permission from the Boardand the Boardpass a resolution
removing the director from office; or
    
    the directors contract expires or is terminated for any reason and
is not renewed or replaced within 14 days.
 38.2.
    
    If a director ceases to be a director, the director automatically ceases to be a member of
any Boardcommittee or sub-committee.
 Remuneration of Directors
 39.
    
    Directors feesThe Boardcan decide on the amount, timing and method of payment of directors fees,
but the total fees paidto each director, excluding amounts payable under any other
Article, must not exceed:
 
    
    £65,000 a year(accruing daily), increasing by the percentage
increase in the retail prices index (as defined in Section 833(2)
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Income and
Corporation Taxes Act 1988) for any 12 monthperiod beginning on 1 April 1999 or
an anniversary of that date; or
 
    
    any higher sum decided on by an ordinary resolutionof
shareholders. This resolution can increase the fee paidto all or any directors
either permanently or for a particular period.
 40.
    
    Directors expensesThe Boardcan also repay to a director all expenses properly incurred in:
 
    
    attending and returning from shareholders meetings, Boardmeetings
or Boardcommittee meetings; or
    
    any other way in connection with BTsbusiness.
 41.
    
    Extra fees41.1.
    
    The Boardcan award extra fees to a director who:
 
    
    holds an executive position;
    
    acts as chairman or deputy chairman;
    
    serves on a Boardcommittee or board at the request of the Board;
or
    
    performs any other services which the Boardconsider extends beyond
the ordinary duties of a director.
 41.2.
    
    Extra fees can take the form of salary, commission, profit sharing or other benefits (and
can be paidpartly in one way and partly in another). They can also include any kind of
benefit for the directors dependants. This is all decided by the Board.42.
    
    Pensions and other benefits42.1.
    
    The Boardcan decide whether to provide:
 
    
    pensions;
    
    annual payments; or
    
    other allowances or benefits,
 to any peopleincluding peoplewho are or who were directors of BT. The Boardcan
decide to extend these arrangements to relations or dependants of, or peopleconnected
to, these people. The Boardcan also decide to contribute to a scheme or fund or to
paypremiums to a third party for these purposes.
 42.2.
    
    BTcan only provide pensions and other similar benefits to:
 
    
    peoplewho are or were directors but who have not been employed by,
or held an office or executive position in, BTor its subsidiary undertakings;
and
    
    relations or dependants of, or peopleconnected to, those directors
or former directors,
 if the shareholdersapprove this by passing an ordinary resolution.42.3.
    
    No director or former director is accountable to BTor the shareholdersfor a benefit of any
kind given in accordance with this Article. The receipt
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of a benefit of any kind given in
accordance with this Article does not prevent a personfrom being or becoming a director of
BT.
 Board Meetings
 43.
    
    Board meetingsThe Boardcan decide when and where to have meetings, how they are conducted and the
quorum. They can also adjourntheir meetings.44.
    
    Notice of Board meetings44.1.
    
    A meeting can be called by a director or the Secretary. The Secretarymust also call a
meeting if a director requests this.44.2.
    
    The Boardcan decide how notice of Boardmeetings is to be given and on any terms and
conditions (including oral notice). Subject tothis, Boardmeetings are called by delivering a
writtennotice to each director personally or by sending it to their last known addressor
another addressgiven to BTfor this purpose.44.3.
    
    A director who is out of the United Kingdomis not entitled to be given notice of a Board
meeting unless:
 
    
    notice of a Boardmeeting is given in writing; and
    
    the director has asked the Board in writingto send notices of
Boardmeetings during the directors absence to the directors last known address
or another addressgiven to BTfor this purpose.
 A director can waive notice of a meeting at any time, even if the meeting has already
taken place.45.
    
    Chairman of Board meetings45.1.
    
    The Boardcan appoint a director as chairman or deputy chairman for whichever periods the
Boarddecide. If the chairman is at a meeting, the chairman will chair it. In the chairmans
absence, the chair will be taken by the deputy chairman. If there is no chairman or deputy
chairman present and willing within five minutes after the time when
the meeting is due to start, the chair will be taken by a director nominated by the
chairman in writing. If the chairman has not done this, the directors present can
choose which one of them will be the chairman of the meeting.
 45.2.
    
    References in the Articlesto deputy chairman include, if no one has been appointed with
that specific title, a personappointed to a position with another title which the Board
designate as equivalent to the position of deputy chairman.
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46.
    
    Quorum46.1.
    
    If no other quorumis fixed by the Board, two directors form a quorum. A meeting at which a
quorumis present can exerciseall the powers and discretions of the Board.46.2.
    
    A director who ceases to be a director at a Boardmeeting can continue to be present and act
as a director and be counted in the quorumuntil the end of that Boardmeeting if no other
director objects and a quorumof the Boardwould not otherwise be present.47.
    
    Voting at Board meetingsMatters for decision which arise at a Boardmeeting will be decided by a majority
vote. If the votes are equal, the chairman of the meeting has a second, casting vote.48.
    
    Video conference and telephone meetingsAny of the directors or members of a committee can take part in a Boardmeeting or
Boardcommittee meeting by way of a:
 
    
    video conference or conference telephone or similar equipment
designed to allow everybody to take part in the meeting; or
    
    series of video conferences or telephone calls from the chairman of
the meeting.
 Taking part in this way will be treated as being present at the meeting. A meeting
which takes place by a series of video conferences or telephone calls from the
chairman will be treated as taking place where the chairman is. Otherwise meetings
will be treated as taking place where the largest group of the participants is or, if
there is no such group, where the chairman is, unless the Boarddecide otherwise.
 49.
    
    Minutes of meetings49.1.
    
    The Boardmust cause minutes to be made in minute books of the:
 
    
    names of the directors present at each Boardmeeting and Board
committee meeting;
    
    appointments of officersmade by the Board; and
    
    proceedings and resolutions at Boardmeetings, Boardcommittee
meetings and shareholders meetings.
 49.2.
    
    It is not necessary for the directors present at a Boardmeeting or Boardcommittee meeting
to sign their names in the minute book or other attendance book.50.
    
    Validity of the Boards actionsEverything which is done by a Boardmeeting, a Boardcommittee meeting or a person
acting as a director, will be valid even though it is discovered later that a director
or personacting as a director was not properly appointed or elected. This also
applies if it is discovered later that a personwas disqualified from being a
director, had ceased to be a director or was not entitled to vote.
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51.
    
    Written ResolutionsA directors writtenresolution is adopted when all of the directors entitled to vote
on the resolution at a Boardmeeting have:
 
    
    signed one or more copies of it, or
    
    otherwise indicated their agreement to it in writing.
 These copies can be made using electronic means. This kind of resolution is only
adopted if the number of directors who have signed it or indicated their agreement to
it meet the quorumrequirement for Boardmeetings. Once a directors written
resolution has been adopted, it will be treated as if it had been a resolution which
was passed at a Boardmeeting.
 Board Committees
 52.
    
    Delegating powers to committees52.1.
    
    The Boardcan delegate any of their powers or discretions to committees of one or more
directors or other people. This includes powers or discretions relating to directors payor
giving benefits to directors. If the Boardhave delegated a power or discretion to a
committee, any references in the Articlesto using that power or discretion include its use by
the committee. A committee must comply with any regulations made by the Board. These
regulations can require or allow peoplewho are not directors to be co-opted onto the
committee and can give voting rights to co-opted members.52.2.
    
    Unless the Boardspecifically decide not to allow this, a committee can sub-delegate powers
and discretions to sub-committees or other people.52.3.
    
    References in the Articlesto committees include sub-committees permitted under this
Article.
 53.
    
    Proceedings of committees53.1.
    
    If a committee includes two or more members, the Articleswhich regulate Boardmeetings and
their procedure will also apply to committee meetings (if possible), unless these are
inconsistent with any regulations for the committee which the Boardhas made under Article 52.53.2.
    
    A committee or sub-committee can be called a board or council or any other name the
Boarddecide.
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Directors Interests
 54.
    
    Authorising directors conflicts of interest54.1.
    
    For the purposes of section 175 of the Companies Act, the Boardcan authorise any matter
which:
 
    
    would or could be a breach of a directors duty under that section;
or
    
    could result in a breach of a directors duty under that section.
 This authorisation will avoid a situation arising in which the director has, or could
have, a direct or indirect interest that conflicts, or could conflict, with the
interests of BT.54.2.
    
    For authorisation of a matter under this Article to be effective:
 
    
    the matter in question must have been proposed in writingfor
consideration at a Boardmeeting, in accordance with the Boardsnormal
procedures or in any other way the Boardmay decide;
    
    any quorumrequirement at the Boardmeeting when the matter is
considered must be met without counting any Interested Directors; and
    
    the matter must be agreed without the Interested Directorsvoting,
or would have been agreed if the votes of the Interested Directorshad not been
counted.
 54.3.
    
    Any matter authorised under this Article will include any existing or potential conflict of
interest which it is reasonable to expect will arise out of the authorised matter.54.4.
    
    Any authorisation of a matter under this Article will be subject toany conditions or
limitations decided on by the Board. The Boardcan decide the conditions or limitations at the
time authorisation is given, or later on, and can end them at any time. A director must comply
with any obligations the Boardimpose on the director after a matter has been authorised.54.5.
    
    A director does not have to hand over to BTany benefit which the director receives (or a
personconnected with the director receives) as a result of anything the Boardhas authorised
under this Article. No contract of the type described in this Article can be cancelled because
of any directors interest or benefit.55.
    
    Directors may have certain interests55.1.
    
    Subject tocompliance with Article 55.2, a director can have the following interests:
 (a)
    
    a director (or a personconnected with the director) can be a
director, officeror employee of, or have an interest in (including holding
 shares), any Relevant Company;(b)
    
    a director (or a personconnected with the director) can have an
interest in any Relevant Company BThas an interest in or be a party to a
contract with that company;(c)
    
    a director (or a personconnected with the director, or any firm
the director is a partner, employee or shareholder of) can do
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professional work
for any Relevant Company(other than as an Auditor) whether or not payment is
made for the work;(d)
    
    an interest if it cannot reasonably be regarded as likely to give
rise to a conflict of interest;(e)
    
    an interest if the director is not aware of the interest or of the
transaction or arrangement giving rise to the interest (for these purposes the
director will be treated as being aware of matters if it is reasonable to expect
the director to be aware of them);(f)
    
    an interest in any matter authorised under Article 54.1; or(g)
    
    any other interest authorised by ordinary resolution.
 No authorisation under Article 54 (other than under paragraph (f) of this Article) is
required for any interests under this Article.55.2.
    
    The director must declare the nature and extent of any interest allowed under Article 55.1
and not falling within Article 55.3, at a Board meeting or in the manner set out in section
184 or 185 of the Companies Act.55.3.
    
    A director does not need to declare an interest:
 
    
    if it cannot reasonably be regarded as likely to give rise to a
conflict of interest;
    
    if the director is not aware of the interest or of the transaction
or arrangement giving rise to the interest (for these purposes the director will
be treated as being aware of matters if it is reasonable to expect the director
to be aware of them);
    
    if the interest relates to any matter which has been authorised
under Article 54.1;
    
    if the other directors already know about the interest (and for
this purpose the other directors will be treated as knowing about the interest if
it is reasonable to expect they know about it); or
    
    if the interest concerns the terms of the directors service
contract that have been or are to be considered at a Boardmeeting or at a
committee meeting of directors appointed for the purpose under these Articles.
 55.4.
    
    A director does not have to hand over to BTany benefit which the director (or a person
connected with the director) receives:
 
    
    from any contract or from any office or employment or from any
interest in any Relevant Company; or
    
    for any payment as referred to in Article 55.1. No contract of the
type described in Article 55.1 can be cancelled because of any directors
interest or benefit.
 55.5.
    
    In this Article each of the following is a Relevant Company:
 
    
    BT;
    
    a subsidiary undertakingof BT;
    
    any holdingcompanyof BTor a subsidiary undertakingof any such
holdingcompany;
    
    any companypromoted by BT; or
    
    any companyin which BTis otherwise interested.
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56.
    
    When directors can vote on things in which they are interested56.1.
    
    Unless this Article says otherwise, and regardless of whether the interest is one which is
authorised under Article 54 or allowed under Article 55, a director cannot vote (and if the
director does vote, such vote will not be counted) on a resolution about a contract in which
the director (or a personconnected with the director) is interested.56.2.
    
    A director cannot be counted in the quorumfor a Boardmeeting in relation to any resolution
on which the director is not entitled to vote.56.3.
    
    If the legislationallows, a director can (unless the director has some other interest as
well as an interest allowed by this Article) vote and be counted in the quorumon a resolution
concerning a contract:
 (a)
    
    in which the director has an interest of which the director is not
aware;(b)
    
    in which the director has an interest which cannot reasonably be
regarded as likely to give rise to a conflict of interest;(c)
    
    in which the director has an interest only because the director is
a holder of shares, debenturesor other securitiesof BT, or by reason of any
other interest in or through BT;(d)
    
    which involves the giving of any security, guarantee or indemnity
to the director or any other personfor:
 
    
    money lent or obligations incurred by the director or
by any other personat the request of or for the benefit of BTor the
benefit of any of its subsidiary undertakings; or
    
    a debt or other obligation which is owed by BTor any
of its subsidiary undertakingsto that other personif the director has
taken responsibility for all or any part of that debt or obligation by
giving a guarantee, security or indemnity;
 (e)
    
    where BTor any of its subsidiary undertakingsis offering any
 shares, debenturesor other securitiesfor subscriptionor purchase:
 
    
    to which the director is or may be entitled to
participate as a holder of BTsecurities; or
    
    where the director will be involved in the underwriting
or sub-underwriting;
 (f)
    
    relating to any other companyin which the director has an
interest, directly or indirectly (including holding a position in that company)
or is a shareholder, creditor, employee or otherwise involved in that company.
These rights do not apply if the director owns one per cent or more of that
companyor of the voting rights in that company;(g)
    
    relating to an arrangement for the benefit of BTemployees or
former BTemployees or any of BTssubsidiary undertakingswhich only gives the
directors the same benefits that are generally given to the employees or former
employees to whom the arrangement relates;(h)
    
    relating to BTbuying or renewing insurance for any liabilityfor
the benefit of directors or for the benefit of personswho include directors;(i)
    
    relating to the giving of indemnitiesin favour of directors;
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(j)
    
    relating to the funding of expenditure by any director or
directors:
 
    
    on defending criminal, civil or regulatory proceedings
or actions against the director or the directors;
    
    in connection with an application to the court for
relief; or
    
    on defending the director or the directors in any
regulatory investigations;
 (k)
    
    which enables any director or directors to avoid incurring
expenditure as described in paragraph (j); and(l)
    
    in which the directors interest, or the interest of directors
generally, has been authorised by an ordinary resolution.
 56.4.
    
    This Article applies if the Boardare considering proposals to appoint two or more directors
to positions with BTor any companyin which BThas an interest. It also applies if the Board
are considering fixing or varying the terms of the appointment. These proposals can be split
up to deal with each proposed director separately. If this is done, each proposed director can
vote (unless the proposed director is prevented from voting under Article 56.1) and be counted
in the quorumfor each resolution, except the one concerning that director.56.5.
    
    If a question comes up at a meeting about whether a director (other than the chairman of the
meeting) has a material interest or whether the director can vote or be counted in the quorum,
and the director does not agree to abstain from voting on the question or not be counted in
the quorum, the question must be referred to the chairman of the meeting. The chairmans
ruling about the director is conclusive, unless the nature or extent of the directors
interests have not been fairly disclosed to the Board. If the question comes up about the
chairman of the meeting, the question will be decided by a resolution of the Board. The
chairman cannot vote on the question but can be counted in the quorum. The Boardsresolution
about the chairman is conclusive, unless the nature or extent of the chairmans interests have
not been disclosed to the Board.57.
    
    Confidential information57.1.
    
    Subject toArticle 57.2, if a director receives information for which the director owes a
duty of confidentiality to a personother than BT, and the director did not receive the
information because of their position as a director, the director will not be required to:
 
    
    disclose such confidential information to BTor to the Board, or to
any director, officeror employee of BT; or
    
    use or apply such confidential information in any other way in
connection with the directors duties as a director.
 57.2.
    
    If a duty of confidentiality arises out of a situation in which the director has, or can
have, a direct or indirect interest that conflicts, or possibly may conflict, with the
interests of BT, Article 57.1 will apply only if the conflict arises out of a matter which has
been authorised under Article 54 or falls within Article 55.57.3.
    
    This Article does not affect any equitable principle or rule of law which may excuse or
release the director from disclosing information, in circumstances where disclosure may
otherwise be required under this Article.
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58.
    
    Directors interests  general58.1.
    
    For the purposes of Articles 54 to 58:
 
    
    a reference to a contract includes a reference to an existing or
proposed contract, transaction or arrangement;
    
    a director will be treated as owning one per cent or more of a
companyif the director (together with those personsconnected with the director)
holds an interest in shares representing one per cent or more of:
 
    
    a class of issued equity share capital; or
    
    the voting rights of that company;
 
    
    an interest of a personwho is connected with a director will be
treated as an interest of the director; and
    
    section 252 of the Companies Actwill determine whether a personis
connected with a director.
 58.2.
    
    Where a director has an interest which it is reasonable to expect will result in a conflict
of interest, the director can if asked to do so by the Boardtake such additional steps that
are necessary or desirable to manage the conflict of interest. These steps can include
complying with any procedures laid down by the Boardto manage conflicts of interest
generally, or carrying out any specific procedures approved by the Boardfor managing the
situation or matter in question, including (without limitation) the director:
 
    
    being absent from any Boardmeetings where the relevant situation
or matter is to be considered; and
    
    not being given access to documents or information made available
to the Boardgenerally in relation to such situation, or arranging for the
documents or information to be reviewed by a professional adviser to determine
whether it is appropriate for the director to have access to such documents or
information.
 58.3.
    
    The shareholderscan by passing an ordinary resolutionratify any contract not properly
authorised by reason of breaching any of the provisions in Articles 54 to 58.
 Directors Management Powers
 59.
    
    Management powers59.1.
    
    The Boardwill manage BTsbusiness. They can use all BTspowers, except where the
legislationor the Articlessay that powers can only be used by the shareholdersvoting to do
so at a General Meeting. The general management powers under this Article are not limited in
any way by specific powers given to the Boardby other Articles.59.2.
    
    The Boardsmanagement powers are subject to:
 
    
    the legislation;
    
    the Articles; and
    
    any other requirements which are consistent with the legislation
and the Articlesand are approved by the shareholderspassing an ordinary
resolution.
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59.3.
    
    If a change is made to the Articlesor the shareholdersapprove a requirement relating to
something which the Boardhave already done which was within their powers, that change or
requirement cannot invalidate the Boardsprevious action.60.
    
    Appointing directors to executive positionsThe Boardcan appoint one or more directors to any executive position they decide. As
far as the legislationallows, they can decide how long these appointments will be for
and what their terms will be. They can also vary the terms of or end these
appointments. If a director ceases to be a director, the director automatically ceases
to hold any executive position in BT. If a directors appointment is varied or ends
because of this Article, this does not prejudice any claim against BTfor breach of
contract.61.
    
    Delegation of powersThe Boardcan give a director or the Secretaryany of the powers which they have
jointly as the Board. These powers can be given on any terms and conditions the Board
decide either in parallel with, or in place of, the powers of the Boardacting
together. These powers can include the power to sub-delegate. The Boardcan change
the basis on which these powers are given or withdraw them from the director or
Secretary. No persondealing in good faith who does not know about the change or
withdrawal will be affected by it.62.
    
    Power to establish local boards and agencies62.1.
    
    The Boardcan set up local boardsor agencies to manage, supervise or advise on any of BTs
business in the United Kingdomor elsewhere. The Boardcan also appoint a person(who need not
be a director) to be a:
 
    
    member of a local board; or
    
    manager or agent.
 62.2.
    
    The Boardcan:
 
    
    decide the remuneration and other benefits of peopleappointed
under this Article;
    
    delegate any of the Boardsauthority, powers or discretions to a:
 
    
    local board;
    
    manager or agent; or
    
    subsidiary undertakingof BT(whether wholly-owned or
not);
 
    
    allow local boards, managers or agents, or subsidiary undertakings
to delegate to another person;
    
    allow members of local boardsto fill any vacancies on their boards
and to continue to act even though there are vacancies;
    
    remove any peopleappointed under this Article (including people
appointed by another personunder this Article); and
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
    
    cancel or change an appointment or delegation made under this
Article (including an appointment made by another personunder this Article),
although this will not affect a personwho acts in good faith who has not had
notice of the cancellation or change.
 62.3.
    
    An appointment or delegation by the Boardwhich is referred to in this Article can be on any
terms and conditions the Boarddecide.62.4.
    
    In this Article, local board means a special or local board, committee or council and
includes a regional or area board or a board for a particular part of BTsbusiness.63.
    
    Power to appoint agents63.1.
    
    The Boardcan appoint a person(including the members of a group which changes over time) as
BTsagent. The agent can either be appointed directly by the Board, or the Boardcan give
another personthe power to select an agent. The Boardcan decide the purposes, powers,
authorities and discretions of an agent. But they cannot give an agent a power, authority or
discretion which the Boarddo not have under the Articles.63.2.
    
    The Boardcan decide how long an appointment of an agent will last for and they can apply
any terms and conditions to it. The appointment can include any provisions which the Board
decide for the protection and convenience of a persondealing with the agent. The appointment
can also allow the agent to sub-delegate all or any of their powers, authorities or
discretions to any other person.64.
    
    Positions with titles including the word directorThe Boardcan appoint a personto a position having a title including the word
director or give a title including the word director to an existing position and
can end that appointment or the use of that title. The use of the word director in
the title of a position does not imply that the holder is a director of BTand the
holder does not have the power to act as a director of BTand is not treated as a
director of BTfor the purposes of the Articles.65.
    
    Overseas branch registersBTcan use all the powers that the legislationgives to keep an overseas branch
register. The Boardcan make and change any regulations they decide relating to this
register, as long as the legislationallows this.
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66.
    
    Signatures on cheques etc.All cheques, promissory notes, drafts, bills of exchange and other instruments
(whether negotiableor transferable or not) and all receipts for money paidto BTcan
be signed, drawn, accepted, endorsed or made effectivein any way the Boarddecide.67.
    
    Power to provide for the benefit of employees and former employeesThe Boardcan, by passing a resolution, exerciseany powers given by the legislation
to provide for the benefit of employees and former employees of BTor any of its
subsidiariesin connection with the ending of the business or the transfer to a person
of all or any part of the business and assetsof BTor that subsidiary.
 Directors Borrowing Powers
 68.
    
    Borrowing powersTo the extent that the legislationand the Articlesallow, the Boardcan exerciseall
the powers of BTto:
 
    
    borrow money;
    
    mortgage or charge all or any part of BTsbusiness, property and
assets(present and future);
    
    issue debenturesand other securities; and
    
    give security either outright or as collateral security, for a
debt, liabilityor obligation of BTor another person.
 69.
    
    Borrowing restrictions69.1.
    
    The Boardwill limit the borrowings of BTand exerciseall voting and other rights or powers
of control exercisableby BTin relation to its subsidiary undertakingsso as to ensure that
the aggregate amount of all borrowings by the Groupoutstanding at any time is not more than
£35,000,000,000. This affects subsidiary undertakingsonly to the extent the Boardcan do this
by exercisingthese rights or powers of control. This limit can be exceeded if the consent of
shareholdershas been given in advance by passing an ordinary resolution. The limit does not
include borrowings owing by one member of the Groupto another member of the Group.69.2.
    
    In this Article:
 
    
    Groupmeans BTand its subsidiary undertakings; and
    
    minority proportionmeans the proportion of the issuedequity share
capital of a partly-owned subsidiary undertakingwhich does not belong to the
Group.
 69.3.
    
    In Article 69.1:
 
    
    amounts borrowed by a member of the Groupfor the purpose of
repaying (with or without a premium) all or any part of other borrowings owing by
another member of the Groupwhich are to be used for this purpose within six
monthsof being borrowed are not to be taken into account pending their use for
that purpose;
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
    
    amounts borrowed by a partly-owned subsidiary undertakingwhich are
not owed to another member of the Groupare to be taken into account (except that
a proportion of the borrowings equal to the minority proportionis to be
excluded);
    
    amounts borrowed by a member of the Groupwhich are owed to a
partly-owned subsidiary undertakingare to be taken into account to the extent of
a proportion of the borrowings equal to the minority proportion;
    
    amounts borrowed by a subsidiary undertakingbefore it became a
member of the Groupare not to be taken into account until six monthsafter the
date it became a member of the Group;
    
    amounts secured on an assetof a member of the Groupbefore it was
acquired by a member of the Groupare not to be taken into account until six
monthsafter the date of the acquisition;
    
    amounts beneficiallyowned by a member of the Groupwhich are
deposited with a personwho is not a member of the Groupand are repayable on, or
within three monthsafter, a demand are to be deducted from the borrowings of the
Group(except that where the amounts are owned by a partly-owned subsidiary
undertakinga proportion of the amount owned equal to the minority proportionis
to be excluded from the amount deducted); and
    
    if the amount of the borrowings is being calculated in connection
with a transaction involving a companybecoming or ceasing to be a member of the
Group, the amount is to be calculated as if the transaction had already occurred.
 69.4.
    
    A certificate or report by a personchosen by the Boardas to the amount of the borrowings
at a particular time will be conclusive evidence of that amount. However, the Boardcan rely
on a genuine estimate of the amount of the borrowings at any time and if as a result the limit
stated in Article 69.1 is exceeded, an amount of borrowed money equal to the excess can be
disregarded until six monthsafter the date the Boardbecame aware that this situation had or
may have arisen, whether because of a decision of the personchosen by the Boardor for any
other reason.69.5.
    
    No lender or other persondealing with the Groupneeds to look at or enquire whether the
limit imposed by this Article is being observed. No borrowing incurred or security given in
excess of this limit will be invalid or ineffective unless the lender or the recipient of the
security had express notice at the time when the borrowing was incurred or
security given that the limit had been or would as a result be exceeded.
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Liability
 70.
    
    Liability of membersThe liability of each member is limited to the amount (if any) unpaid on the shares
held by that member.
 Shares
 71.
    
    Boards authority to allot shares and equity securities and to sell treasury shares71.1.
    
    This Article regulates the Boardsauthority to allotshares and their power to allot equity
securitiesfor cash and to sell treasury sharesfor cash.71.2.
    
    For the purposes of section 549 of the Companies Act, the Boardare authorised, generally
and without conditions, under section 551 of the Companies Act, to allotshares and to grant
rights to subscribe for or to convert any security into shares in BT. They are authorised to
allotshares and grant rights for any prescribed period. The maximum amount of shares which
the Boardcan allotand rights which the Boardcan grant in each period is the Section 551
Amount.71.3.
    
    The Boardhave the power to allot equity securitiesunder the general authority in Article
71.2, entirely paidfor in cash, and to sell treasuryshares, entirely paidfor in cash, in
each case free of the restriction in section 561(1) of the Companies Act. They have the power
to allot equity securitiesand to sell treasury sharesfor any prescribed period. There is no
maximum amount of equity securitiesor treasury shareswhich the Boardcan allotor sell where
the allotmentor the sale is in connection with a rights issue. In all other cases, the
maximum amount of equity securitiesand treasury shareswhich the Boardcan allotor sell is
the Section 561 Amount.71.4.
    
    During each prescribed period, the Boardcan make offers, and enter into agreements, which
would, or might, need shares or equity
securitiesto be allottedor sold, or rights to be granted, after those periods.71.5.
    
    In this Article:
 
    
    rights issuemeans an offer of equity securitieswhich is open for
a period decided by the Boardto the peoplewho are registered on a particular
date (chosen by the Board) as holders of:
 
    
    Ordinary Shares, in proportion to their holdings of
Ordinary Shares;
    
    other classes of equity securitieswhich give them the
right to receive the offer or which allow BTto decide whether or not they
should receive the offer (and the Boarddecide that they should receive
it).
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However, the Boardcan do the following things (and the issuewill still be treated as
a rights issuefor the purposes of this Article if they do so):
 
    
    sell any fractions of equity securitiesto which peoplewould be
entitled and keep the net proceeds for BTsbenefit or make other appropriate
arrangements to deal with such fractions;
    
    make the rights issuesubject toany limits or restrictions which
the Boardthink are necessary or appropriate to deal with legal or practical
problems under the laws of any territory, or under the requirements of any
recognised regulatory body, or stock exchange, in any territory or as a result of
 shares being represented by American Depositary Shares or Global Depositary
Shares or other instruments;
    
    treat a shareholdersholdings of certificatedand uncertificated
sharesas separate shareholdings; or
    
    deal in a different way with the rightsof an Ordinary Shareholder,
if that shareholderasks;
    
    prescribed periodmeans any period fixed by the shareholdersby
passing a resolution at a General Meeting. These resolutions can take the form
of:
 
    
    an ordinary resolution fixing a prescribed period under
Article 71.2;
    
    a special resolution fixing a prescribed period under
Article 71.3;
    
    a special resolution fixing identical prescribed
periods under Articles 71.2 and 71.3; or
    
    a special resolution fixing different prescribed
periods under Articles 71.2 and 71.3;
 
    
    the Section 551 Amountfor any prescribed periodis that stated in
a relevant ordinary resolutionpassed by the shareholdersat a General Meeting;
    
    the Section 561 Amountfor any prescribed periodis that stated in
a relevant special resolution; and
    
    in working out any maximum amounts of securities, the face valueof
rights to subscribe for shares, or to convert any securitiesinto shares, will be
taken as the face valueof the shares which would be allottedif the subscription
or conversion takes place.
 72.
    
    Uncertificated shares72.1.
    
    Subject tothe Articlesand to the extent that the legislationallows, the Boardcan decide
that a class of shares can:
 
    
    be held in uncertificated form and that title to those shares can
be transferred using a relevant system; or
    
    no longer be held and transferred in uncertificated form.
 72.2.
    
    The Articlesdo not apply to shares of a class which are held in uncertificated form to the
extent that they are inconsistent with the:
 
    
    holding of shares of that class in uncertificated form;
    
    transfer of title to shares of that class using a relevant system;
or
    
    Regulations.
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73.
    
    Renunciations of allotted but unissued sharesWhere a share has been allottedto a personbut that personhas not yet been entered
on the Register, the Boardcan recognise a transfer (called a renunciation) by that
personof their right to the share in favour of some other person. The ability to
renounce allotmentsonly applies if the terms on which the share is allottedare
consistent with renunciation. The Boardcan impose terms and conditions regulating
renunciationrights and can allow renunciationrights to be securitiesin
uncertificated form in their own right.74.
    
    Power to pay commission and brokerage74.1.
    
    BTcan use all the powers given by the legislationto paycommission or brokerageto a
personwho:
 
    
    applies, or agrees to apply, for any new shares; or
    
    gets any other personto apply, or agree to apply for, any new  shares.
 74.2.
    
    BTcan paythe commission in cash, or by allottingshares, or by a combination of both.75.
    
    No trusts or similar interests recognised75.1.
    
    BTwill only be affected by, or recognise, a current and absolute right to whole shares. The
fact that all or any part of a share may not be owned outright by the registered owner is not
of concern to BT, for example, if a share is held on any kind of trust. This applies even if
BTknows about the ownership of the share.75.2.
    
    The only exceptions are any rights:
 
    
    expressly given by the Articles; or
    
    which BThas a legal duty to recognise.
 Changing Share Capital
 76.
    
    Power to reduce capitalThe shareholderscan pass a special resolutionto reduce in any way:
 
    
    BTsshare capital; or
    
    a capital redemption reserveor share premium account.
 This is subject toany restrictions under the legislation.
 77.
    
    Power to change capitalThe shareholderscan pass ordinary resolutions to do any of the following:
 
    
    divide, all or any part of BTsshare capital into shares with a
smaller face valuethan the existing shares; and
    
    consolidateand divideall or any of BTsshares into shares with a
larger face valuethan the existing shares.
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This is subject toany restrictions under the legislation.
 78.
    
    Fractions of shares78.1.
    
    If any shares are consolidatedor divided, the Boardhave power to deal with any fractions
of shares which result or any other problem that arises. If the Boarddecide to sell any
 shares representing fractions, they must sell for the best price they can reasonably obtain
and distribute the net proceeds of sale among shareholdersin proportion to their fractional
entitlements. The Boardcan sell to a person(including BT, if the legislationallows) and can
authorise a personto transfer those shares to the buyer or in accordance with the buyers
instructions. The buyer does not need to take any action to check how any money paidis used.
The buyers ownership will not be affected if the sale was irregular or invalid in any way.78.2.
    
    When the Boardconsolidateor divideshares, they can treat certificatedand uncertificated
shareswhich a shareholderholds as separate shareholdings, as far as the legislationallows
this. The Boardcan also arrange for any shares which result from a consolidationor division
and which represent rights to fractions of shares to be entered in the Registeras
certificated shareswhere this makes it easier to sell them.79.
    
    Buying back shares79.1.
    
    BTcan use all the powers given by the legislationto buy back any of its own shares
(including redeemableshares).79.2.
    
    BThas the right to:
 
    
    sell any treasury shares;
    
    transfer any treasury sharesfor the purposes of, or to benefit, an
employees share scheme;
    
    receive an allotmentof shares as fully paidbonus shares in
respect of any treasury shares; or
    
    receive any amount payable on redemptionof any redeemable treasury
shares.
 BTcannot exerciseany other right in respect of treasury sharesBTholds, including
any right to attend or vote at meetings, to participate in any offer BTmakes to
shareholdersor to receive any distribution (including in a winding up).
 Share Rights
 80.
    
    Shares and special rights80.1.
    
    The provisions in these Articlesabout allotment, transfer, automatically entitled to a
share by lawand all other matters relating to shares apply to new shares in the same way as
if they were existing shares.
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80.2.
    
    BTcan issuenew shares and attach any rightsand restrictions to them, as long as this
is not restricted by special rightspreviously given to holders of any existing shares.
Subject tothis, the rightsof new shares can take priority over the rightsof existing
shares, or existing sharescan take priority over them, or the new shares and the existing
sharescan rank equally. These rightsand restrictions can apply to sharing in BTsprofits or
assets. Other rightsand restrictions can also apply, for example relating to the right to
vote.80.3.
    
    The shareholderscan decide on the rightsand restrictions to be attached to new shares by
passing an ordinary resolution. The Boardcan also take these decisions if the shareholders
have not passed a resolution which covers the point.80.4.
    
    If the legislationallows this, the new shares can include rightsfor the holder and/or BT
to have them redeemedand the Boardcan decide the terms, conditions and manner of redemption
of the shares.81.
    
    Changing special rights of shares81.1.
    
    If BTsshare capital is split into different classes of share, and if the legislation
allows this, the special rightswhich are attached to any of these classes can be varied or
withdrawn if the shareholdersapprove this by passing a special resolution. This must be
passed at a separate meeting of the holders of the relevant class of shares. This is called a
class meeting. Alternatively, the holders of at least 75 per cent of the existing sharesof
the class (by face value) can give their writtenconsent.81.2.
    
    All the Articlesrelating to General Meetingsapply, with any necessary changes, to a class
meeting, but with the following adjustments:
 
    
    at least two peoplewho hold (or who act as proxiesfor peoplewho
hold) at least one third of the total face valueof the existing sharesof the
class are a quorumat a class meeting. However, if this quorumis not present at
an adjournedmeeting, one personwho holds shares of the class, or their proxy,
is a quorum;
    
    a shareholderwho is present in person or by proxycan demand a
poll; and
    
    on a poll, the holders of shares will have one vote for every share
of the class which they hold.
 This is subject toany special rightsor restrictions which are attached to a class of
shares by the Articles, or any rightsattached to shares in some other way under the
Articles.81.3.
    
    This Article also applies if special rightsof shares forming part of a class are varied or
withdrawn. Each part of the class which is being treated differently is viewed as a separate
class in applying this Article.
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82.
    
    More about special rights of sharesUnless the terms of the existing sharessay something different, the special rightsof
existing sharesare not regarded as varied or withdrawn if:
 
    
    new shares are created, or issued, which rankequally with or after
any existing sharesin payment of dividends or sharing in profits or assetsof
BT; or
    
    BTbuys back or redeemsits own shares.
 Share Certificates
 83.
    
    Certificates83.1.
    
    When a shareholderis first registered as the holder of any class of certificated shares,
that shareholderis entitled, free of charge, to one certificate for all the certificated
sharesof that class which the shareholderholds. If a shareholderholds certificated shares
of more than one class, that shareholderis entitled to a separate share certificate for each
class. This does not apply if the legislationallows BTnot to issue share certificates.83.2.
    
    If a shareholderreceives more certificated sharesof any class, that shareholderis
entitled, free of charge, to a certificate for the extra shares.83.3.
    
    If a shareholdertransfers some of the shares covered by a certificate, that shareholderis
entitled, free of charge, to a new certificate for the balance if the balance is also covered
by a certificate.83.4.
    
    BTdoes not have to issue more than one certificate for a certificated share, even if that
share is held jointly.83.5.
    
    When BTdelivers a certificate to the first named joint holder of certificated shares, this
is treated as delivery to all of the joint shareholders.83.6.
    
    BTcan deliver a certificate to a broker or agent who is acting for a personwho is buying
certificated sharesor who is having certificated sharestransferred to them.83.7.
    
    The Boardcan decide how share certificates are made effective. For example, they can be:
 
    
    signed by two directors or one director and the Secretary;
    
    sealed with the Seal; or
    
    printed, in any way, with a copy or representation of those
signatures or the Seal. The representation can be made or produced mechanically,
electronically or in any other way the Boardapprove.
 83.8.
    
    A share certificate must state the number and class of shares to which it relates and the
amount paid upon those shares. It cannot be for shares of more than one class.
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83.9.
    
    The time limit for BTto provide a share certificate under this Article for certificated
sharesis:
 
    
    two monthsafter the allotmentof a new share (or any longer period
provided by its terms of issue); or
    
    five business daysafter a transfer of shares is presented for
registration or the instruction from the operatorof the relevant systemis
received.
 84.
    
    Replacement certificates84.1.
    
    A shareholdercan ask BTto cancel and replace a single share certificate with two or more
certificates, for the same total number of shares. The Boardcan require the shareholderto
payfor the new certificates.84.2.
    
    A shareholdercan ask BTfor a new certificate if the original is:
 
    
    worn out, damaged or defaced; or
    
    lost, stolen or destroyed.
 The Boardcan require the shareholderto pay BTsexceptional out of pocket expenses
for issuing a new certificate.84.3.
    
    If a certificate has been worn out, damaged or defaced, BTcan require the certificate to be
delivered to it before issuing a replacement. If a certificate is lost, stolen or destroyed,
BTcan require satisfactory evidence, and an indemnity, before issuing a replacement.
 Transferring Shares
 85.
    
    Share transfers85.1.
    
    Unless the Articlessay otherwise, a shareholdercan transfer some or all of their shares to
another person.85.2.
    
    Every transfer of certificated sharesmust be in writing, and either in the usual standard
form, or another form approved by the Board.85.3.
    
    Every transfer of uncertificated sharesmust be carried out using a relevant system.85.4.
    
    The transfer form for certificated sharesmust be delivered to the Registered Officeor any
other place the Boarddecide. The transfer form must have with it:
 
    
    the share certificate for the shares to be transferred;
    
    any other evidence which the Boardask for to prove that the person
wanting to make the transfer is entitled to do this; and
    
    if the transfer form is executedby another personon behalf of the
personmaking the transfer, evidence of the authority of that personto do so.
 85.5.
    
    However, if a transfer is by a recognised clearing houseor its nominee or by a recognised
investment exchange, a share certificate is only needed if a certificate has been issued for
the shares in question.
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85.6.
    
    A transfer form must be signed, or made effectivein some other way, by or on behalf of the
personmaking the transfer.85.7.
    
    The personmaking a transfer will be treated as continuing to be the shareholderuntil the
name of the personto whom a share is being transferred is entered on the Registerfor that
share.86.
    
    More about share transfers86.1.
    
    If BTregisters a transfer, it can keep the transfer form. A transfer form cannot be used to
transfer more than one class of shares. Each class needs a separate form.86.2.
    
    No fee is payable to BTfor transferring shares or registering changes relating to the
ownership of shares.86.3.
    
    Transfers cannot be in favour of more than four joint holders.86.4.
    
    A transfer form must be properly stamped to show payment of any applicable stamp duty.86.5.
    
    The Boardcan refuse to register a transfer of an uncertificated sharein the circumstances
stated in the Regulations.86.6.
    
    If the Boarddecide not to register a transfer of a share, they must notify the personto
whom that share was to be transferred giving reasons for their decision. This must be done as
soon as possible and no later than two monthsafter BTreceives the:
 
    
    transfer (in the case of a certificated share); or
    
    instruction from the operatorof the relevant system(in the case
of an uncertificated share).
 People Automatically Entitled to Shares by Law
 87.
    
    When shareholders die87.1.
    
    If a shareholderwho is a joint shareholderdies, the remaining joint shareholderor
shareholderswill be the only peoplewho BTwill recognise as being entitled to their shares.87.2.
    
    When a sole shareholder(or a shareholderwho is the last survivor of joint shareholders)
dies, their legal personal representativeswill be the only peoplewho BTwill recognise as
being entitled to their shares.88.
    
    Registering personal representativesA personwho becomes automatically entitled to a share by lawcan either be registered
as the shareholderor can select some other personto have the share transferred to.
The automatically entitledpersonmust provide any evidence of their entitlement which
the Boardreasonably require.
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89.
    
    People who want to be registered must give noticeIf a personwho is automatically entitled to a share by lawwants to be registered as
a shareholder, they must deliver a writtennotice to BTsaying that they have made
this decision. The notice must be in the form which the Boardrequire. This notice
will be treated as a transfer form. All the Articlesabout registering transfers of
shares apply to it. The Boardhave the same power to refuse to register the
automatically entitledpersonas they would have had in deciding whether to register a
transfer by the personwho was previously entitled to the shares.90.
    
    Having another person registered90.1.
    
    If a personwho is automatically entitled to a share by lawwants the share to be
transferred to another person, they must do this for:
 
    
    a certificated share, by signing a transfer form to the personthey
have selected; and
    
    an uncertificated share, by using a relevant system.
 90.2.
    
    The Boardhave the same power to refuse to register the personselected as they would have
had in deciding whether to register a transfer by the personwho was previously entitled to
the shares.91.
    
    Rights of people automatically entitled to shares by law91.1.
    
    A personwho is automatically entitled to a share by lawis entitled to any dividends or
other money relating to the share, even though they are not registered as the holder of that
share, on supplying to BTevidence the Boardreasonably require to show their title to the
share. However, the Boardcan send a writtennotice to the personsaying that the personmust
either be registered as the holder of the share or transfer the share to some other person. If
the automatically entitledpersondoes not do this within 90 days of the notice, the Boardcan
withhold all dividends or other money relating to the share until they do.91.2.
    
    Unless registered as the holder of the share, the personautomatically entitled to a share
by lawcannot:
 
    
    receive notices of shareholders meetings, or attend or vote at
these meetings; or
    
    exercise any other right of a shareholderin relation to any of
these meetings; unless the Boarddecide to allow this.
 Shareholders who Cannot be Traced
 92.
    
    Untraced shareholders92.1.
    
    BTcan sell any shares if:
 
    
    during the previous 10 years, the shares have been in issue, BThas
tried to payat least three dividends and no dividend has been cashed;
    
    after this 10 yearperiod, BTgives notice that it intends to sell
the shares by advertisement in a United Kingdomnational newspaper
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and a newspaper appearing in the area which includes the addressheld by BTfor
delivering notices relating to the shares; and
    
    during this 10 yearperiod, and for three monthsafter the last
advertisement appears in the newspapers, BThas not heard from the shareholderor
a personwho is automatically entitled to the shares by law.
 92.2.
    
    To sell any shares in this way, the Boardcan authorise a personto transfer the shares.
This transfer will be just as effective as if it had been made by the registered holder of the
shares, or by a personwho is automatically entitled to the shares by law. The ownership of
the personto whom the shares are transferred will not be affected even if the sale is
irregular or invalid in any way.92.3.
    
    The net sale proceeds belong to BTunless and until claimed under this Article, and it must
paythese proceeds to the shareholderwho could not be traced, or to the personwho is
automatically entitled to the shares by law, if that shareholder, or that other person, asks
for them.92.4.
    
    BTmust record the name of that shareholder, or the personwho was automatically entitled to
the shares by law, as a creditor for this money in its accounts. The money is not held on
trust, and no interest is payable on the money. BTcan keep any money which it has earned on
the net sale proceeds. BTcan use this money for its business or the business of its holding
company(if any), or it can invest the money in any way that the Boarddecide.92.5.
    
    In the case of uncertificated shares, this Article is subject toany restrictions which
apply under the Regulations.
 Dividends
 93.
    
    Final dividendsShareholderscan declaredividends by passing an ordinary resolution, but no dividend
can exceed the amount recommended by the Board.94.
    
    Fixed and interim dividends94.1.
    
    If the Boardconsider that the profits of BTjustify such payments, they can pay:
 
    
    interim dividends on any class of shares of any amounts, on any
dates and for any periods which they decide; and
    
    fixed or other dividends on any class of shares on the dates stated
for the payment of those dividends.
 94.2.
    
    If the Boardact in good faith, they are not liable to any shareholdersfor any loss they
suffer because a lawful dividend has been paidunder this Article on other shares which rank
equally with or behind their shares.
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95.
    
    Distributions in kindIf the Boardrecommend this, shareholderscan pass an ordinary resolutionto direct
all or any part of a dividend to be paidby distributing specific assets(and in
particular paid-upshares or debenturesof any other company). The Boardmust give
effect to that resolution. Where a difficulty arises on the distribution, the Board
can settle it as they decide. In particular, they can:
 
    
    issue fractional certificates;
    
    value the assetsfor distribution purposes;
    
    paycash of a similar value to adjust the rights of shareholders;
and/or
    
    transfer any assetsto trustees.
 96.
    
    No dividends are payable except out of profitsNo dividend can be paidexcept out of profits available for distribution under the
legislation.97.
    
    Payments to shareholders97.1.
    
    A dividend or other money payable in cash relating to a share can be paid:
 
    
    by cheque or warrantpayable to the shareholderor person
automatically entitled to the shares by lawwho is entitled to it or to another
personnamed in a writteninstruction from the shareholder(or all joint
shareholdersor peoplejointly and automatically entitled to the shares by law);
    
    in the case of uncertificated shares, by using a relevant system;
    
    by bank transfer, electronic meansor by means of a website
directly to an account named in a writteninstruction from the shareholder(or
all joint shareholdersor peoplejointly and automatically entitled to the shares
by law); and/or
    
    in any other way agreed between the shareholder(or all joint
shareholdersor peoplejointly and automatically entitled to the shares by law)
and BT.
 97.2.
    
    For joint shareholders, or peoplejointly and automatically entitled to shares by law, BT
can rely on a receipt for a dividend or other money paidon shares from any one of them.97.3.
    
    Cheques and warrantsare sent, and payment in any other way is made, at the risk of the
peoplewho are entitled to the money. BTis treated as having paida dividend if a cheque or
warrantis cleared or if a payment is made using a relevant system, bank transfer, electronic
meansor by means of a website. BTwill not be responsible for a payment which is lost or
delayed.97.4.
    
    BTcan send a cheque or warrantto shareholderswho are employees of BTor any of its
subsidiary undertakingsthrough BTsinternal post system.97.5.
    
    Unless the rightsattached to any shares, the terms of any shares or the Articlessay
otherwise, a dividend and any other money payable in
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respect of a share can be paidin
whatever currency the Boarddecide using an appropriate exchange rate selected by the Board
for any currency conversions required. The Boardcan also decide how any costs relating to the
choice of currency will be met.97.6.
    
    No dividend or other money payable by BTin respect of its shares carries a rightto
interest from BT, unless the rightsof the shares say something different.98.
    
    Deducting amounts owing from dividends and other moneyIf a shareholderowes any money to BTrelating in any way to BTshares, the Boardcan
deduct any of this money from any:
 
    
    dividend on any shares held by the shareholder; or
    
    other money payable by BTin respect of the shares.
 Money deducted in this way can be used to paythe amounts owed to BT.99.
    
    Unclaimed dividends and other money99.1.
    
    Unclaimed dividends and other money payable in respect of a share can be invested or
otherwise used by the Boardfor the benefit of BTuntil they are claimed. The Boardcan decide
to paythe unclaimed dividends and other money into a separate account, but BTwill not be a
trusteeof the money. If a dividend or other money has not been claimed for 10 yearsafter it
was declaredor became due for payment, it will be forfeited and belong to BTagain unless the
Boarddecides otherwise.99.2.
    
    BTcan stop paying dividends if cheques or warrantsfor two dividends in a row are sent back
or not cashed or if payment by any other means has not been able to be made twice in a row
through no fault of BT. BTmust start paying dividends in the same way again if the
shareholderor a personautomatically entitled to the shares by law:
 
    
    claims those dividends in writing(before they go back to BTunder
Article 99.1); and
    
    does not ask BTto start paying dividends in some other way.
 100.
    
    Waiver of dividendsAll or any dividends can be waived by a document which is accepted by BTor on which
BTacts. The document must be signed or authenticated in accordance with Article 104
by the shareholder(or the personautomatically entitled to the shares by law) and
delivered to BT.101.
    
    Record datesA dividend or distribution on, and an allotmentor issueof, any shares can be paidor
made to the holders of shares shown on the Registerat whatever time on whatever day
is stated in the resolution declaring the dividend or providing for the distribution,
allotmentor issue. If no time is stated in the resolution, the close of business
applies. This Article applies whether what is being done is the result of a resolution
of the Boardor a resolution passed at a General Meeting. The date can be before the
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relevant resolution was passed. This Article does not affect the rightsbetween past
and present shareholdersto payments or other benefits.
 Scrip Dividends
 102.
    
    Shareholders can be offered the right to receive new shares instead of cash dividends102.1.
    
    The Boardcan offer Ordinary Shareholdersthe right to choose to receive new Ordinary
Shares, which are credited as fully paid, instead of some or all of their cash dividend.
Before they can do this, the shareholdersmust have passed an ordinary resolutionauthorising
the Boardto make this offer.102.2.
    
    The ordinary resolutioncan apply to some or all of a particular dividend or dividends.
Alternatively, it can apply to some or all of the dividends which are declaredor paidin a
specified period. The specified period must not end later than the end of the Annual General
Meetingwhich is held in the fifth yearafter the ordinary resolutionis passed.102.3.
    
    The Boardcan offer shareholdersthe right to request new shares instead of cash for:
 
    
    the next dividend; or
    
    all future dividends (if a share alternative is made available),
until they tell BTthat they no longer want to receive new shares.
 The Boardcan also allow shareholdersto choose between these alternatives.102.4.
    
    A shareholderchoosing new shares is entitled to Ordinary Shareswhose total relevant value
is as near as possible to the cash dividend the shareholderwould have received (disregarding
any tax credit), but not more than it.The relevant valueof a share is:
 
    
    the average value of BTs Ordinary Sharesfor the five dealing days
starting from, and including, the day when the shares are first quoted
ex-dividend(this average value is worked out from the average middle market
quotations for BTs Ordinary Shareson the London Stock Exchange, as published in
its Daily Official List); or
    
    a value worked out in accordance with the ordinary resolution.
 A certificate or report by the Auditorstating the relevant valuefor a dividend is
conclusive evidence of that value.102.5.
    
    The Boardcan decide how any costs relating to making new shares available in place of a
cash dividend will be met. For example, they can decide that an amount will be deducted from
the entitlement of a shareholderunder Article 102.4.
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102.6.
    
    After the Boardhave decided to apply this Article to a dividend, they must give eligible
shareholders writtennotice of their right to choose new shares. This notice should also say
how, where and when shareholdersmust notify BTif they want to receive new shares. Where
shareholdershave already chosen to receive new shares in place of all future dividends, if
new shares are available, BTwill not need to notify them of a right to choose new shares.102.7.
    
    No shareholderwill receive a fraction of a share. The Boardcan decide how to deal with any
fractions left over. For example, they can decide that the benefit of fractions belongs to BT
or that fractions are ignored or deal with fractions in some other way.102.8.
    
    The Boardcan exclude or restrict the right of shareholdersto choose new shares or make any
other arrangements where they decide that:
 
    
    this is necessary or appropriate to deal with legal or practical
problems:
    
    under the laws of any territory;
    
    under the requirements of any recognised regulatory body, or stock
exchange, in any territory; or
    
    as a result of shares being represented by American Depositary
Shares or Global Depositary Shares or other instruments; or
    
    it would be impractical or unduly onerous to give the right to any
shareholderor that for some other reason the right should not be given.
 102.9.
    
    If a shareholderchooses to receive new shares, no dividend on the corresponding elected
shareswill be declaredor payable. Instead, new Ordinary Shareswill be allottedon the basis
stated earlier in this Article. To do this the Boardwill change into capital a sum equal to the total face
valueof the new Ordinary Sharesto be allotted. They will use this sum to payup in
full the appropriate number of new Ordinary Shares. These will then be allottedand
distributed to the holders of the elected sharesas stated above. The sum to be
changed into capital can be taken from any amount which is part of BTsreserves
(including premiumsreceived when any shares were issued, capital redemption reserves
or other undistributable reserves) or which BTis holding as net profits. Article 122
applies to this process, as far as it is consistent with this Article.102.10.
    
    The new Ordinary Sharesrankequally in all respects with the existing fully paid Ordinary
Sharesat the time the new Ordinary Sharesare allotted. They are not entitled to share in the
dividend from which they arose and do not allow the holder to choose new shares instead of
that dividend.
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102.11.
    
    Unless the Boarddecide otherwise or the Regulationsor the rules of a relevant system
require otherwise, any new Ordinary Shareswhich a shareholderhas chosen to receive instead
of some or all of their cash dividend will be:
 
    
    uncertificated sharesif the corresponding elected shareswere
uncertificated shareson the record date for that dividend; and
    
    certificated sharesif the corresponding elected shareswere
certificated shareson the record date for that dividend.
 102.12.
    
    The Boardcan decide that new shares will not be available in place of any cash dividend.
They can decide this at any time before new shares are allottedin place of a dividend,
whether this is before or after shareholdershave chosen to receive new shares.102.13.
    
    In this Article, elected sharesmeans the shares in respect of which the shareholderhas
chosen to receive new shares.
 Communications with shareholders
 103.
    
    Delivering notices and other documents to shareholders103.1.
    
    BTcan, subject toand in accordance with the Companies Actand these Articles, send or
supply all types of notice, document or information to a shareholder:
 
    
    by delivering it by hand to the addressrecorded for the
shareholderon the Registeror an addressspecified for the purpose by the
intended recipient;
    
    by sending it by post in an envelope (with postage paid) to the
addressrecorded for the shareholderon the Register; or
    
    by electronic means(except for share certificates) and/or by
making such notices, documents or information (except for share certificates)
available on a website.
 103.2.
    
    Subject tothe provisions of Articles 103 to 111, the Company Communications Provisions
govern any provision of the Companies Actor those Articlesthat authorises or requires
notices, documents or information to be sent or supplied by BTto its shareholdersor to BT
from its shareholders.104.
    
    Signature or authentication of documentsWhere these Articlesrequire a notice, document or information, including a proxy
form, to be signed or authenticated by a shareholderor other personthen any notice,
document or information sent or supplied in electronic formis sufficiently
authenticated in any manner authorised by the Company Communications Provisionsor in
any other manner approved by the Board. The Boardcan designate mechanisms for
validating any notice or document of this kind, and any document not validated by the
use of these mechanisms can be treated by the Boardas never having been received by
BTor its agent.
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105.
    
    Joint shareholders105.1.
    
    Anything which needs to be agreed by joint shareholderswill be treated as being agreed by
all the joint shareholderswhere it has been agreed by the joint shareholder who is listed
first on the Register.105.2.
    
    When a notice, document or information is authorised or required to be sent or supplied to
joint shareholdersit must be sent or supplied to the joint shareholderwho is listed first on
the Registerfor the share but, subject tothe legislation, ignoring a joint shareholder
without an addressin the United Kingdomunder Article 106. A notice, document or information
sent in this way is treated as delivered to all the joint shareholders.105.3.
    
    The provisions of this Article relating to joint shareholderswill have effect in place of
the Company Communications Provisions.106.
    
    Shareholders with foreign addresses or on branch registers106.1.
    
    Subject tothe legislation, BTdoes not have to send notices, documents or information to a
shareholderwhose addresson the Registeris outside the United Kingdomif the shareholderhas
not given BTan addressin the United Kingdomwhere notices, documents or information can be
sent.106.2.
    
    For a shareholderregistered on a branch register, notices, documents or information can be
posted or despatched in the United Kingdomor in the country where the branch register is
kept.107.
    
    Notices when shareholders have died or are bankrupt or in liquidation107.1.
    
    This Article applies where a personis registered as a sole or first-named joint shareholder
but another personis automatically entitled to their shares by law. The personwho proves
that they are automatically entitled to the shares by lawto the reasonable satisfaction of
the Boardcan give BTan addresswhere notices, documents and information can be sent or
supplied. If this is done, subject toArticle 91.2, notices, documents and information must be
sent to that address. Otherwise, if a notice, document or information is sent or supplied to
the shareholdernamed on the Registerin accordance with the Articles, this will be valid even
though another personis automatically entitled to their shares by law. This applies even if
BTwas aware of this. If notices, documents or information are sent in accordance with this
Article, there is no need to send them in any other way to any other peopleinvolved.107.2.
    
    The provisions of this Article relating to the death, bankruptcy or liquidation of a
shareholderwill have effect in place of the Company Communications Provisions.
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108.
    
    When notices are delivered108.1.
    
    If a notice, document or information is delivered by hand, it is treated as being delivered
at the time it is handed to or left for the shareholder.108.2.
    
    If a notice, document or information is sent or supplied by BTin hard copy form, or in
electronic form, but not delivered by electronic meansand which is sent by pre-paid post and
properly addressed, it is treated as being received by the intended recipient:
 
    
    24 hours after it was posted, if first class post was used; or
    
    72 hours after it was posted, if first class post was not used.
 It can be proved conclusively that a notice, document or information was received by
post by showing that the notice, document or information was properly addressed,
prepaid and posted.108.3.
    
    If a notice, document or information (other than a share certificate) is sent or supplied by
BTby electronic means, it is treated as being received by the intended recipient at the time
it was sent. It can be proved conclusively that a notice, document or information was received
by electronic means, by showing that the notice, document or information was properly
addressed.108.4.
    
    If a notice, document or information is sent or supplied by BTby means of a website it is
treated as being received by the intended recipient when the material was first made available
on the website or, if later, when the recipient received (or is treated as having received)
notice of the fact that the material was available on the website.108.5.
    
    The provisions of this Article relating to delivery of notices, documents or information
will have effect in place of the Company Communications Provisions.109.
    
    Undelivered noticesThis Article applies where, on two consecutive occasions, notices, documents or
information sent or supplied by post have been returned undelivered. If the
shareholdergives BTa new addresswhere notices, documents or information can be sent
or supplied, the shareholderis entitled to have notices, documents or information
sent or supplied to them at that address. Otherwise, the shareholderis not entitled
to receive any notices, documents or information from BT.110.
    
    If notices are accidentally not sent110.1.
    
    If a notice, proxy form,other document or information relating to a meeting or other
proceeding is accidentally not sent or is not received, the meeting or other proceeding will
not be invalid as a result.110.2.
    
    A shareholderpresent in person or by proxyat a shareholders meetingis treated as having
received proper notice of that meeting and, where necessary, of the purpose of that meeting.
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111.
    
    Delivering notices and other documents to BT111.1.
    
    Shareholderscan subject toand in accordance with the Companies Actand these Articles,
send or supply a notice, document or information to BT:
 
    
    by delivering it by hand to the Registered Office;
    
    by sending it by post in an envelope (with postage paid) to the
Registered Office;
    
    by electronic meansto the addressnotified by BTin its
communications to shareholdersfor this purpose.
 111.2.
    
    If a notice, document or information is delivered by hand, it is treated as being delivered
at the time it is left at the Registered Office.111.3.
    
    If a notice, document or information is sent by post, it is treated as being delivered at
the time it is received at the Registered Office.111.4.
    
    If a notice, document or information is sent by electronic means, it is treated as being
delivered at the time it was received.111.5.
    
    A notice, document or information sent or supplied to BTby electronic meanswill not be
treated as received by BTif it is rejected by computer virus protection arrangements.111.6.
    
    This Article does not affect any provision of the legislationor the Articlesrequiring
notices or documents to be delivered in a particular way.
 Auditor
 112.
    
    Attending General MeetingsThe Auditorcan attend a General Meetingand can speak there on any business which is
relevant to them as Auditor.113.
    
    Validity of the Auditors actionsAs far as the legislationallows, the actions of a personacting as an Auditorare
valid in favour of a persondealing with BTin good faith, even if there was some
defect in that personsappointment or that personwas at any time not qualified to
act as an auditor.
 Secretary
 114.
    
    Secretary, and deputy and temporary Secretaries114.1.
    
    The Secretaryis appointed by the Board. The Boarddecide the terms and period of the
appointment. The Boardcan also remove the Secretary. This does not affect any claim for
damages against BTfor breach of any contract of employment the Secretarymay have. The Board
can appoint two or more peopleto be joint Secretaries.
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114.2.
    
    The Boardcan also appoint one or more peopleto be deputy Secretariesor one personto be a
temporary Secretary. The Boarddecide their terms and period of employment. The Boardcan also
remove a deputy or temporary Secretary. This does not affect any claim for damages against BT
for breach of any contract of employment they may have. Anything which the Articlesrequire or
allow to be done by the Secretarycan also be done by a deputy or temporary Secretary.114.3.
    
    Anything which the legislationor the Articlesrequire or allow to be done by or to a
director and the Secretarycannot be done by or to one personacting as both a director and
the Secretary.
 Seals
 115.
    
    Seal and Securities Seal115.1.
    
    The Boardare responsible for arranging for the Sealand any Securities Sealto be kept
safely. The Sealand any Securities Sealcan only be used with the authority of the Boardor a
committee authorised by the Board. For the purposes of this Article, a committee authorised by
the Boardcan consist solely of peoplewho are not directors.115.2.
    
    Every document which has the Sealstamped on it must be signed autographically by:
 
    
    one director and the Secretary;
    
    two directors;
    
    one director in the presence of a witness who confirms the
signature of the director, or
    
    a personwho is authorised to do so by the Boardeither generally
or in relation to specific documents or documents of specific descriptions.
 However, the Boardcan decide that specific documents or documents of specific
descriptions can be printed, in any way, with a copy or representation of these
signatures. The representation can be made or produced mechanically, electronically or
in any other way the Boardapprove.115.3.
    
    The Securities Sealcan be used only for sealing securities issuedby BTand documents
creating or evidencing securities issuedby BT. Securitiesand documents which have the
Securities Sealstamped on them do not need to be signed.115.4.
    
    The Boardcan use all the powers given by the legislationrelating to official seals for use
abroad.
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Documents
 116.
    
    Certifying copies of documents116.1.
    
    A director or the Secretaryhas power to decide that any of the following are genuine and to
certify copies of or extracts from them as true copies or extracts:
 
    
    documents relating to BTsconstitution;
    
    resolutions passed by the shareholdersor a class of shareholders,
or by the Boardor a Boardcommittee; and
    
    books, documents, records or accounts which relate to BTs
business.
 The Boardcan also give this power to other people.116.2.
    
    A document which appears to be a copy of a resolution or an extract from the minutes of a
meeting and which is certified as a true copy or extract as described in Article 116.1 is
conclusive evidence for a personwho deals with BTon the strength of the document that the:
 
    
    resolution has been properly passed; or
    
    extract is a true and accurate record of the proceedings of a valid
meeting.
 117.
    
    Destroying documents117.1.
    
    BTcan destroy all:
 
    
    transfer forms for shares, documents sent to support a transfer and
any other documents which were the basis for making an entry on the Register, six
yearsafter the date of registration;
    
    dividendpayment instructions and notifications of a change of
addressor name, two yearsafter the date these were recorded; and
    
    cancelled share certificates, one yearafter the date they were
cancelled.
 117.2.
    
    A document destroyed by BTin accordance with Article 117.1 is conclusively treated as
having been valid and effective in accordance with BTsrecords relating to the document. Any
action of BTin dealing with the document in accordance with its terms before it was destroyed
is conclusively treated as having been properly taken.117.3.
    
    Articles 117.1 and 117.2 only apply to documents which are destroyed in good faith and if BT
has not been informed that keeping the documents is relevant to any claim.117.4.
    
    If the documents relate to uncertificated shares, BTmust also comply with any rules (as
defined in the Regulations) which limit its ability to destroy these documents.117.5.
    
    This Article does not make BTliable if it:
 
    
    destroys a document earlier than the time limit stated in Article
117.1;
    
    does not comply with the conditions in Article 117.3; or
    
    would not be liable if this Article did not exist.
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117.6.
    
    This Article applies whether a document is destroyed or disposed of in some other way.
 Indemnity, Insurance and Defence expenditure
 118.
    
    Indemnity118.1.
    
    Subject to, and as far as the legislationand rules made by the UK Listing Authorityallow,
every director, former director and officerof BTand of each of the Associated Companiesof
BTwill be indemnifiedby BTout of its own funds against the following:
 
    
    any liability incurred by or attaching to the directors or officers
in connection with any negligence, default, breach of duty or breach of trust by
the directors or officersin relation to BTor any Associated Companyof BTother
than:
 
    
    any liability to BTor any Associated Company; and
    
    any liability of the kind referred to in section 234(3)
of the Companies Act; and
    
    any other liability incurred by or attaching to the
directors or officers:
 
    
    in actually or seemingly carrying out their duties;
    
    in exercisingor seemingly exercisingtheir powers; and
    
    in any other activity connected to their duties, powers or office.
 118.2.
    
    Subject tothe Companies Actand rules made by the UK Listing Authority, BTmay indemnify a
director and former director of BTand any Associated Companyof BTif the director is the
trustee of an occupational pension scheme (within the meaning of section 235(6) of the
Companies Act).118.3.
    
    Where a director or officeris indemnified against any liability in accordance with this
Article 118, the indemnity will cover all costs, charges, losses, expenses and liabilities
incurred by the directors or officers.118.4.
    
    In this Article a companyis an Associated Companyof BTif:
 
    
    the companyis a subsidiaryof BT;
    
    BTis a subsidiaryof the company;
    
    both BTand the companyare subsidiariesof the same company.
 119.
    
    Insurance119.1.
    
    In this Article each of the following is a Relevant Company:
 
    
    BT;
    
    a holdingcompanyof BT;
    
    a body, whether or not incorporated, in which BTor its holding
company, or a predecessor of BTor its holdingcompany, has or had an interest,
whether direct or indirect; and
    
    a body, whether or not incorporated, which is in any way allied to
or associated with BT, or any subsidiary undertakingof BTor such other body.
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119.2.
    
    As far as the legislationallows and without limiting Article 118 in any way, the Boardcan
arrange for BTto purchase and maintain insurance against any liabilityfor or for the benefit
of:
 
    
    any peoplewho are or were at any time directors or officersof a
Relevant Company; or
    
    any peoplewho are or were at any time a trustee of any pension
fund or employees share scheme in which employees of any Relevant Companyare
interested.
 This includes insurance against any liabilityincurred by or attaching to those people
through any act or omission:
 
    
    in actually or seemingly carrying out their duties;
    
    in exercisingor seemingly exercisingtheir powers; and
    
    in any other activity connected to their duties, powers or office;
 in relation to:
 
    
    any Relevant Company;
    
    any pension fund; or
    
    any employees share scheme;
 and all costs, charges, losses, expenses and liabilitiesincurred by those peoplein
relation to any act or omission.120.
    
    Defence expenditure120.1.
    
    Subject toand as far as the legislationand rules made by the UK Listing Authorityallow,
BTmay:
 
    
    provide a director, former director or officerof BTor any
Associated Companyof BTwith funds to meet expenditure incurred or which a
director or officermay incur in defending any criminal or civil proceedings in
connection with any negligence, default, breach of duty or breach of trust by the
director or officerin relation to BTor an Associated Companyof BTor in
connection with any application for relief under the provisions mentioned in
section 205(5) of the Companies Act; and
    
    do anything to enable any of these directors or officersto avoid
incurring that expenditure.
 120.2.
    
    The terms set out in section 205(2) of the Companies Actwill apply to any provision of
funds or other things done under Article 120.1.120.3.
    
    Subject toand as far as the legislationand rules made by the UK Listing Authorityallow,
BTmay:
 
    
    provide a director, former director or officer of BTor any
Associated Companyof BTwith funds to meet expenditure incurred or which a
director or officermay incur in defending an investigation by a regulatory
authority or against action proposed to be taken by a regulatory authority in
connection with any alleged negligence, default, breach of duty or breach of
trust by the director or officerin relation to BTor any Associated Companyof
BT; and
    
    do anything to enable any of these directors or officersto avoid
incurring that expenditure.
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120.4.
    
    In this Article a companyis an Associated Companyof BTif:
 
    
    the companyis a subsidiaryof BT;
    
    BTis a subsidiaryof the company;
    
    both BTand the companyare subsidiariesof the same company.
 Reserves
 121.
    
    Setting up reservesThe Boardcan set aside any profits of BTand hold them in a reserve. The Boardcan
decide to use these sums for any purpose for which the profits of BTcan lawfully be
used. Pending their use, sums held in a reservecan either be used in the business of
BTor invested in any way the Boarddecide. The Boardcan divide the reserveinto
separate funds for special purposes and change the funds 


into which the reserveis divided. The Boardcan also carry forward any profits
without holding them in a reserve. The Boardmust comply with the restrictions in the
legislationwhich relate to reserve funds.122.
    
    Changing reserves into capital122.1.
    
    If the Boardrecommend this, shareholderscan pass an ordinary resolutionto allow the Board
to change into capital an amount which:
 
    
    is part of BTsreserves(including premiumsreceived when any
shares were issued, capital redemption reservesor other undistributable
reserves); or
    
    BTis holding as net profits.
 122.2.
    
    The Boardwill use the sum which is changed into capital by setting it aside for the
Ordinary Shareholderson the Registerat the stated time on the day the resolution is passed
(or whatever day is stated in the resolution or fixed as stated in the resolution). If no time
is stated in the resolution, the close of business applies. The sum set aside must be used to
payup in full shares of BTand to allotsuch shares and distribute them to shareholdersas
bonus shares in proportion to their holdings of Ordinary Sharesat the time. The shares can be
Ordinary Sharesor, if the rightsof other existing sharesallow this, shares of some other
class.122.3.
    
    If a difficulty arises in operating this Article, the Boardcan resolve it in any way which
they decide. For example, they can decide that the benefit of fractions of shares belongs to
BTor that fractions are ignored or deal with fractions in some other way.122.4.
    
    The Boardcan appoint a personto sign a contract with BTon behalf of those who are
entitled to shares under the resolution. Such a contract is binding on all concerned.
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123.
    
    Assets treated as revenueIf the legislationallows:
 
    
    where an asset, business or property is bought by BTas from a past
date, the Boardcan decide that any of the related profits and losses as from
that date can be added to BTsrevenue account and treated for all purposes as
profits or losses of BT; and
    
    where any securitiesare bought by BTwith any dividend or
interest, the Boardcan decide that the dividend or interest can be treated as
revenue rather than capital.
 Accounts
 124.
    
    Accounting recordsThe Boardmust make sure that accounting records which comply with the legislationare
kept.125.
    
    Location and inspection of records125.1.
    
    The accounting records must be kept at:
 
    
    the Registered Office; or
    
    any other place which the legislationallows and the Boarddecides.
 125.2.
    
    BTs officersalways have the right to inspect the accounting records.125.3.
    
    No other person(including a shareholder) has a right to inspect any accounting records or
other books or papers of BTunless the:
 
    
    legislationor a Court order gives that personthe right;
    
    Boardauthorise that personto do so; or
    
    shareholderspass an ordinary resolutionauthorising that personto
do so.
 126.
    
    Sending copies of accounts and other documents126.1.
    
    This Article applies to BTsannual accounts and report to be put to the shareholdersat a
General Meetingand any other documents which the legislationrequires to be attached to them.126.2.
    
    Copies of these documents must be sent to the shareholdersand debentureholdersand all
other peopleto whom the legislationor the Articlesrequire BTto send them. This must be
done at least 21 days before the relevant General Meeting.126.3.
    
    But BTneed not send these documents to:
 
    
    shareholderswho are sent summary financial statements in
accordance with the legislation;
    
    more than one joint shareholderor debentureholder; or
    
    a personfor whom BTdoes not have a current address.
 Shareholdersand debentureholderswho are not sent copies can receive a copy free of
charge by applying to BTat the Registered Officeor an addressthat the Boardhas
specified for that purpose.
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Winding Up
 127.
    
    Distribution in kind127.1.
    
    If BTis wound up (whether the liquidation is voluntary, under supervision of the Court or
by the Court) the liquidator can, with the authority of a special resolutionpassed by the
shareholders, divide among the shareholdersall or any part of the assetsof BT. This applies
whether the assetsconsist of property of one kind or different kinds. For this purpose, the
liquidator can place whatever value the liquidator considers fair on any property and decide
how the division is carried out between shareholdersor different groups of shareholders. The
liquidator can also, with the same authority, transfer any assetsto trusteesupon any trusts
for the benefit of shareholderswhich the liquidator decides. The liquidation of BTcan then
be finalised and BTdissolved. No past or present shareholdercan be compelled to accept any
 shares or other property under this Article which could give them a liability.
 Interpretation
 128.
    
    Meaning of certain words and phrases used in the Articles128.1.
    
    The following table gives the meaning of certain words and phrases as they are used in the
Articles. However, the meaning given in the table does not apply if that is inconsistent with
the context in which a word or phrase appears.
 Words
    
    MeaningsArticles
    
    BTsarticles of association, including any
changes made to themAuditor
    
    The auditor of BTand, where two or more people
are appointed to act jointly, any one of themBoard
    
    All or any of the directors of BTacting as a boardBT
    
    BT Group plcbusiness day
    
    A day (excluding Saturdays, Sundays and public
holidays) on which banks are open for business in
the City of LondonCompanies Act
    
    The Companies Act 2006company
    
    A corporate body
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Company
    
    The meaning of this term is given in the Companies
Act.Communications 
Provisions
    
    These provisions have effect for the purposes
of anything in the Companies Actor these Articles
that authorises or requires notices, documents or
information to be sent or supplied by or to BTelectronic form
    
    This is a term used in the Companies Act. It
covers a document or information sent or supplied
by electronic meansor by any other means while in
an electronic form(such as by email, text
message, fax or sending a disk by post)existing shares
    
    Shares which are in issueat the relevant timeface value(of a share)
    
    The nominal valueof the shareGeneral Meeting
    
    A meeting of shareholdersheld in accordance with
the Articles. This includes any General Meeting
which is held as BTsAnnual General Meetinghard copy form
    
    This is a term used in the Companies Act. It
covers documents or information sent or supplied
in paper copy or a similar form which can be readInterested Directors
    
    Directorswho have or could have a direct or
indirect interest in a matter which conflicts, or
could conflict, with the interests of BTlegislation
    
    The Companies Act, the Regulationsand all other
laws and regulations applying to BTLondon Stock Exchange
    
    London Stock Exchange plc or the principal stock
exchange in the United Kingdommonth
    
    Calendar monthofficer
    
    Includes a director, manager and company secretary
but does not include an Auditorordinary business
    
    All the following business (if it takes place at
an Annual General Meeting): declaring and approving dividends; considering the accounts, reports of the Board
and Auditorand any other documents which the
legislationrequires to be attached to them; electing directors in place of those retiring
for any reason (whether by rotationor
not); and appointing the Auditor(when special noticeof
the resolution for the appointment is not required
by the legislation) and deciding either the
remuneration that the Auditorwill be paidor the
way in which this remuneration will be decided
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Ordinary Shareholders
    
    Holders of Ordinary SharesOrdinary Shares
    
    BTsordinary shares of 5p eachpaid-up (share or 
other security)
    
    Includes a share or other securitywhich is
treated (credited) as paid-uppay
    
    Includes any kind of reward or payment for servicesperson or people
    
    Includes companiesand unincorporated associationsproxy form
    
    Includes any document (including in an electronic
form) which appoints a proxyrecognised clearing 
house
    
    A clearing house recognised under the Financial
Services and Markets Act 2000recognised investment 
exchange
    
    An investment exchange recognised under the
Financial Services and Markets Act 2000Register
    
    BTsregister of shareholdersRegistered Office
    
    BTsregistered officeRegulations
    
    The Uncertificated Securities Regulations 2001rights (of a share)
    
    The rights attached to the share when it is
issued, or afterwardsSeal
    
    BTscommon seal or Securities SealSecretary
    
    A personappointed by the Boardto do work as the
company secretary, including an assistant (who
does not need to be appointed by the Boardunder
Article 114), deputy or temporary company
secretary. Where two or more peopleare appointed
to act jointly, it includes any one of themSecurities Seal
    
    An official seal kept by BTunder section 50 of
the Companies Actshareholders
    
    Holders of BTssharesshareholders meeting
    
    A General Meetingof BTor a meeting of a class of
holders of BTssharesspecial business
    
    All business at General Meetingsexcept for
ordinary businessUK Listing Authority
    
    The Financial Services Authority acting in its
capacity as the competent authority for the
purposes of the Financial Services and Markets Act
2000
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United Kingdom
    
    Great Britain and Northern Irelandwrittenor in writing
    
    In writing or any way of representing or copying
words legibly so that they are permanent
(including anything in electronic form) or partly
one form and partly anotheryear
    
    Calendar year
 128.2.
    
    The singular includes the plural, and the other way around.128.3.
    
    When an Actis referred to, this includes an amendment to the Act(before or after the
adoption of these Articles) as well as its inclusion in a later Act. This principle of
interpretation also applies to other kinds of legislation, and to any section, paragraph or
similar in any legislation.128.4.
    
    A word which is defined in the legislationmeans the same in the Articles, unless the
Articlesdefine it differently, or the way in which the word is used is inconsistent with the
definition in the legislation.128.5.
    
    Where the legislationor the Articlessay that something can be done by passing an ordinary
resolution, this can also be done by passing a special resolution.128.6.
    
    A personwho is automatically entitled to a share by lawincludes a personwho is entitled
to the share as a result of the death or bankruptcy of a shareholder.128.7.
    
    Where the Articlesrefer to certificated shares, this means that ownership of the shares can
be transferred using a writtentransfer document (rather than in accordance with the
Regulations) and that a share certificate is usually issued to the owner.128.8.
    
    Where the Articlesrefer to clear daysthe number of days does not include the two days
between which the interval is measured. For example, if notice is required to be given a
number of clear daysbefore a meeting, neither the date notice is delivered, or treated as
being delivered, nor the date of the meeting is taken into account.128.9.
    
    A debentureincludes debenture stock and a debentureholder includes a debenture
stockholder.128.10.
    
    Where the Articlesrefer to a document being made effectivethis means being signed, sealed
or executed in some other legally valid way.128.11.
    
    Where the Articlesrefer to a show of hands, a shareholdermay vote in person at a meeting
(including by electronic meansor any other method which the Boardapproves).128.12.
    
    Where the Articlesrefer to uncertificated shares, this means that ownership of the shares
can be transferred in accordance with the Regulationswithout using a writtentransfer
document and that no share certificate is issued to the owner.
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Explanation of Terms
 
 BTs Articles Articles Articles Secretary Shareholders Secretary
 accounting reference date
 BTs
 Act
 Companies Act
 address
 proxy relevant system electronic means
 adjourn
  allot
 person allotted person pay allotted person shareholders person issued
 asset
 attorney
 attorney person person attorney power of attorney
 automatically entitled to a share by law
 person person person shareholder shareholders personal representatives shareholder trustee
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beneficial interest beneficial ownership
 person beneficial person beneficial trustees
 bond
  brokerage
 company
 capitalise
 reserves company
 capital redemption reserve
 reserve company redeemed
 company representative
 company company representative BTs Articles company
 consolidate
  debenture
 company
 declare
 declared
 divide
 face value
 electronic means
 electronic
form Companies Act
 equity securities
 Companies Act
 
    
    ordinary shares of a companyexcept shares which only have a limited right to share in the
companysincome or assets, for example, preference shares; or
    
    securitieswhich can be converted into ordinary shares, or which allow their holder to
subscribefor ordinary shares.
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ex-dividend
 person declared paid
 executed
  exercise
 exercised
 face value
 face value Ordinary Share BT issues premium face value face value face value nominal value par value
 holding company
 company company company company company subsidiary company
 indemnity
 person person indemnity person indemnity person
 in issue  issue
 instrument
 issue
 shareholder shareholders shareholders issued in issue
 liability
 negotiable instrument
 person
 nominal value par value  face value
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operator
 relevant system Regulations
 ordinary resolution
  personal representative
 person
 poll
 poll people poll shareholder Ordinary Shareholder poll show of hands shareholder proxy company representative
 power of attorney
 people person
 premium
 BT issues face value face value face value
 proxy
 proxy shareholder shareholder proxy proxy form Board proxy shareholder proxy poll show of hands BTs Articles proxy General Meeting
 proxy form
 shareholder proxy BTs
Articles electronic means shareholder proxy proxy form BT
 quorum
 shareholders
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rank ranking
 shareholders rank ranking ranks BTs rank rank rank rank BTs rank
 recognised clearing house
  recognised investment exchange
 London Stock Exchange recognised investment exchange
 redeem redemption
 redeemed BT issued redemption redeemed redeemable
 relevant system
 legislation relevant system
 renunciation
 allotted person person renunciation
 remainder
 remainder reversion
 reserve fund reserve
 companys shareholders reserve company
 retire by rotation
 shareholders
 reversion
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rights issue
 companies shareholders shareholders company
 securities
 instruments bonds debentures
 share premium account
 issued BT face value face value face value premium premiums reserve fund dividends share premium
account
 show of hands
 shareholder proxy company representative shareholder proxy company representative
 special notice
 special notice legislation BT
 special resolution
 Shareholders
 special rights
 rights rights special rights assets
 subject to
 subject to
 subscription subscribe for shares
 company
 subsidiary
 company company company company Companies Act
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subsidiary undertaking
 Companies Act subsidiary company company company
 
    
    has a majority of the votes in the company, either alone or acting with others;
    
    is a shareholderwho can appoint or remove a majority of the directors; or
    
    can exercisedominant influence over the companybecause of anything in the companys
articles or because of a certain kind of contract.
 takeover offer
 company person Companies Act
 tenant in common
 people
 treasury shares
 company Companies Act
 trustee
 person people people beneficial
 uncertificated proxy instruction
 relevant system BTs Board
 underwrite underwriter
 person people underwrites
 unincorporated associations
 persons
 warrant dividend warrant
 wind up
 company company assets assets shareholders rank BTs assets rank
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Index
  Subject
    
    Article
    
    PageAccounts
    
    124-126
    
    59Appointment and Removal of Directors
    
    30-34
    
    20Directors can act if there are vacancies
    
    34
    
    21Electing two or more directors
    
    33
    
    21Filling vacancies and appointing or electing directors
    
    31
    
    20People who can be directors
    
    30
    
    20Removing and electing directors by ordinary resolution
    
    32
    
    20Auditor
    
    112-113
    
    53Attending General Meetings
    
    112
    
    53Validity of the Auditors actions
    
    113
    
    53Board Committees
    
    52-53
    
    26Board Meetings
    
    43-51
    
    24Chairman of
    
    45
    
    24Minutes of meetings
    
    49
    
    25Notice of
    
    44
    
    24Quorum
    
    46
    
    25Validity of Boards actions
    
    50
    
    25Video conference and telephone meetings
    
    48
    
    25Voting at
    
    47
    
    25Written Resolutions
    
    51
    
    26Borrowing Powers (of Directors)
    
    68-69
    
    34Changing Share Capital
    
    76-79
    
    38Buying back shares
    
    79
    
    39Fractions of shares
    
    78
    
    39Power to change capital
    
    77
    
    38Power to reduce capital
    
    76
    
    38Communications with shareholders
    
    103-111
    
    50Company Representatives
    
    27
    
    19Directors
    
    28-69
    
    19Appointment and Removal
    
    30-34
    
    20Borrowing powers and restrictions
    
    68-69
    
    34Disqualification
    
    38
    
    22Expenses
    
    40
    
    23Interests
    
    54-58
    
    27Management powers
    
    59-67
    
    31Number of directors
    
    28
    
    19Pensions
    
    42
    
    23Remuneration
    
    39-42
    
    22Rotation
    
    35-37
    
    21as Shareholders (directors need not be)
    
    29
    
    19
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Dividends
    
    93-102
    
    45Deducting amounts owing from dividends and
    
    98
    
    47other moneyDistributions in kind
    
    95
    
    46Final dividends
    
    93
    
    45Fixed and interim dividends
    
    94
    
    45No dividends are payable except out of profits
    
    96
    
    46Payments to shareholders
    
    97
    
    46Record dates
    
    101
    
    47Scrip Dividends
    
    102
    
    48Unclaimed dividends and other money
    
    99
    
    47Waiver of dividends
    
    100
    
    47Documents
    
    116-117
    
    55General Meetings
    
    2-16
    
    9Adjourning meetings
    
    10
    
    13Amending resolutions
    
    11
    
    13Annual
    
    2
    
    9Chairman of meetings
    
    6
    
    11General Meetings
    
    3
    
    9Meeting in different places
    
    8
    
    11Notice of
    
    4-5
    
    9Proceedings at
    
    6-11
    
    11Polls
    
    13-15
    
    14Quorum
    
    9
    
    12Security and other arrangements
    
    7
    
    11Voting at
    
    12-16
    
    14Indemnity, Insurance and Defence expenditure
    
    118-120
    
    56Interpretation
    
    128
    
    60Liability
    
    70
    
    36Management powers (of directors)
    
    59-67
    
    31Appointing directors to executive positions
    
    60
    
    32Delegation of powers
    
    61
    
    32Management powers
    
    59
    
    31Overseas branch registers
    
    65
    
    33Positions with titles including the word director
    
    64
    
    33Power to appoint agents
    
    63
    
    33Power to establish local boards and agencies
    
    62
    
    32Power to provide for the benefit of employees
and former employees
    
    67
    
    34Signatures on cheques etc.
    
    66
    
    34Meetings (see General Meetings)Noticeof General Meetings
    
    4
    
    9Moving or postponing at short notice
    
    5
    
    10People Automatically Entitled to Shares by Law
    
    87-91
    
    43
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Proceedings at General Meetings
    
    6-11
    
    11Proxies
    
    22-26
    
    17Quorum:for General Meetings
    
    9
    
    12for Board Meetings
    
    46
    
    25Record dates
    
    101
    
    47Removal of Directors
    
    32
    
    20Reserves
    
    121-123
    
    58Assets treated as revenue
    
    123
    
    59Changing reserves into capital
    
    122
    
    58Setting up reserves
    
    121
    
    58Remuneration of Directors
    
    39-42
    
    22Directors expenses
    
    40
    
    23Directors fees
    
    39
    
    22Extra fees
    
    41
    
    23Pensions and other benefits
    
    42
    
    23Representatives (see Company Representatives)Rotation of Directors
    
    35-37
    
    21When a director retires
    
    37
    
    22Seals
    
    115
    
    54Secretary
    
    114
    
    53Scrip Dividends
    
    102
    
    48Shares
    
    71-75
    
    36Boards authority to allot shares and
    
    71
    
    36equity securities and to sell treasury sharesBuying back shares
    
    79
    
    39Changing share capital
    
    76-79
    
    38No trusts or similar interests recognised
    
    75
    
    38Power to pay commission and brokerage
    
    74
    
    38Renunciations of allotted but unissued shares
    
    73
    
    38Uncertificated shares
    
    72
    
    37Share Certificates
    
    83-84
    
    41Share Rights
    
    80-82
    
    39Shareholders Voting Rights
    
    17-21
    
    15Shareholders who Cannot be Traced
    
    92
    
    44Signature or authentication of documents
    
    104
    
    50
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Transferring Shares
    
    85-86
    
    42Voting at General Meetings
    
    12-16
    
    14Effect of declaration by Chairman
    
    16
    
    15How votes are taken
    
    12
    
    14Polls
    
    13-15
    
    14Winding up
    
    127
    
    60
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Public Company Limited by Shares
 
 
  Ordinary Resolution
    (a)
    
    up to an amount of £127 million;(b)
    
    comprising equity securities up to a further amount of £127 million in connection with a rights
issue.
  
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Public Company Limited by Shares
 
  Special Resolution
    (a)
    
    under the authority given by paragraph (a) of Resolution 9:
 
    
    in connection with a pre-emptive offer;
    
    except in connection with a pre-emptive offer, up to an aggregate nominal amount of
£20 million; and
 (b)
    
    under the authority given by paragraph (b) of Resolution 9 in connection with a rights issue
  
    
    pre-emptive offer means an offer of equity securities open for a period fixed by the
Board to holders (other than the Company) of ordinary shares in proportion to their
holdings, subject to the limits or restrictions which the directors think are necessary;
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
    
    references to an allotment of equity securities include a sale of treasury shares; and
    
    in working out any maximum amounts of securities, the face value of rights to
subscribe for shares, or to convert any securities into shares, will be taken as the face
value of the shares which would be allotted if the subscription or conversion takes
place.
 
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Public Company Limited by Shares
 
  Special Resolution
    (a)
    
    the maximum number of shares which may be purchased is 774 million shares;(b)
    
    the minimum price (excluding expenses) which may be paid for each share is 5p;(c)
    
    the maximum price (excluding expenses) which the Company may pay for each share cannot be
more than the higher of:
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(d)
    
    this authority will expire at the end of the next AGM of the Company held in 2010, or if
earlier, 14 October 2010, except in relation to the purchase of shares, the contract for which
was concluded before the expiry of this authority and which might be executed wholly or partly
after that expiry.
 
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Public Company Limited by Shares
 
  Special Resolution
    (a)
    
    amends its articles of association (Current Articles) by deleting the provisions of the
Companys memorandum of association (Memorandum) which, due to section 28 Companies Act 2006
(2006 Act), would be treated as provisions of the Current Articles; and(b)
    
    adopts new articles of association (New Articles).
 
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Public Company Limited by Shares
 
  Special Resolution
    
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