Shareholder Exclusive

February 2017

We use the power of communications to make a better world

A message from your Chairman

Direct dividend information

Shareholder prize draws and offers

01

03

07

1

As announced last October, we paid an interim dividend of 4.85p per share on 6 February, an increase of 10%. We remain committed to paying progressive dividends underpinned by long-term growth in our cash flow.

We’re continuing our rollout of fibre broadband. Our network is now available to more than 26 million premises and we’re helping the government reach its target to make superfast broadband available to 95% of the country by the end of 2017. And we plan to go further and make ultrafast broadband available to up to 12 million premises by the end of 2020. We’re making good progress extending our G.fast pilots to another 12 locations meaning our ultrafast network will pass 500,000 premises by April 2017.

The Broadband Delivery UK programme continues to be successful, making superfast broadband available to 4.5 million premises. BT has invested billions of pounds in the UK’s digital infrastructure over the last decade. The pace and breadth of our fibre rollout is a huge success story for the UK and shows exactly what can be achieved through close partnerships between the public and private sector.

Customer experience remains a key priority. We’re adding thousands of UK and Irish customer service roles. I’m delighted that we met our commitment to be answering 100% of EE customer calls in the UK and Ireland by the end of 2016, and we remain committed to answering 90% of customer calls to our Consumer division in the UK and Ireland by the end of Spring 2017.

Our mobile base continues to grow. We added more than half a million postpaid mobile customers in the first six months of the year, almost half of them with EE. In October we launched our BT Mobile Family SIM package to save UK

families money and improve visibility of their mobile spend. This package reflects our customers’ increasing concerns about managing their finances with research showing that 91% of families are focusing more on saving now than they did previously.

Since bringing BT and EE together, we’ve been looking at ways we can offer customers the best of both brands. EE customers have been able to enjoy an introductory period of free BT Sport on their mobile since the summer. And we’re trialling the sale of BT Broadband and TV products in 20 EE stores.

We’re also transforming our TV service over the coming months with the introduction of a new, image-rich user experience with easy access to channels and on demand content, and a new BT TV app. This free upgrade will enable customers to manage their recordings and stream live and on demand programmes on mobile devices, providing a seamless TV experience in and out of the home.

Our aim is to continue to invest to deliver sustainable profitable revenue growth. Together with our cost transformation activities, this will support long-term cash flow growth and value creation for shareholders.

Sir Michael Rake, Chairman 6 February 2017

Chairman’s messageAs we near the end of this landmark financial year, our first full year including EE, we continue to drive cost efficiency and productivity improvements, while making important investments to support the UK’s digital future and improve customer experience.

2BT Sport on BT TV requires minimum line speed check bt.com Free for existing BT TV customers when you re-contract TV and broadband for 12 months. Subject to minimum line speed and availability. 12 UEFA Champions League games shown free to air on BT Sport Showcase 2016/17. Terms apply.

0800 389 18630800 389 1865

bt.com/sport

There’s only one way to see the four big competitions in the same place. 42 Premier League games live and exclusive, the only place to see the UEFA Champions League, UEFA Europa League and exclusive live matches from the Emirates FA Cup too.

All 4 competitions together. Live on BT Sport.

Four Competitions One Venue

3

Why not receive your dividends direct to your bank or building society account and we’ll automatically enter you into our prize draws where you could win one of our great prizes?

Why choose direct dividend payment?

All you need to do is call us with your bank details on 0808 100 4141 – it’s free.

Don’t delay – sign up today – the prize draws close on 31 March 2017. You too could be a winner like Simon Walker from Merseyside or Christina Henry from County Down.

Receive your dividends direct and have a chance to win oneof our great prizes

It’s more secure

One dividend confirmation in May for all dividends in the previous tax year

No trips to the bank

No fees for lost cheques

For more details go to shareview.co.uk

4

* To enter, sign up to receive direct dividends. For all prize draw terms and conditions, go to bt.com/signup All prize draws close on 31 March 2017.

Get superfast, super-reliable Wi-Fi for every room with Whole Home Wi-Fi. It talks to all your gadgets to make sure they’re always automatically connected to the fastest and strongest signal. This is Wi-Fi at its finest.

Choose to receive your dividends direct and you’ll automatically be entered into the prize draw.*

WIN a three night weekend break with Warner Leisure Hotels at any one of their stylish hotels in 2017*. Stay in a standard room and enjoy a range of daytime activities including full use of the leisure and sports facilities. Delicious breakfasts and evenings meals are also included. Be the first to experience all that’s new for 2017. All prize winners must be over 21 years of age. By choosing to receive your dividends direct, you’ll automatically be entered into the prize draw.

At nearly 600ft tall, the BT Tower gives you spectacular panoramic views of the city of London. You can visit as our VIP guest and see the sights for yourself.

Simply choose to receive your dividends direct by 31 March 2017 and we’ll enter you into the draw to win two tickets for a memorable visit to the BT Tower.*

All shareholders who choose direct dividends will be entered into a prize draw to win a 6-bottle case of Moutard Champagne.*

BT Whole Home Wi-Fi

Get away from it all

Naked Wines

BT Tower Trip

5

BT has always believed in the powerful impact of volunteering, and using the power of communications to make a better world. Every day our people use their passion, expertise and skills to make a difference in their local communities, and we encourage our employees and other stakeholders to give their time to release the potential of others.

Living our purpose

Stand Up To Cancer

We were proud to be the lead sponsor of the latest Stand Up To Cancer (SU2C) campaign.

BT’s MyDonate platform provided the technology for call centre donations on the night of the live fundraising show, contributing to our 2020 goal to help raise £1 billion for good causes.

BT employees got behind the campaign. Over 5,000 gave their support by volunteering their time. Activities ranged from bucket collecting across the country, volunteering to take donations over the phone, to organising fundraising events.

EE stores promoted the campaign and sold Stand Up To Cancer merchandise, and we also displayed stickers on Openreach vans.

And to help raise awareness and money for Cancer Research’s work, BT Sport aired a Stand Up To Cancer takeover after the live fundraising show.

Our next big activity will be for Red Nose Day in March, which we’ll support through employee fundraising and volunteering.

Modern Slavery Helpline

BT has partnered with Unseen – a UK charity which tackles modern slavery and human trafficking - to launch a UK-wide helpline and resource centre. The new national helpline will operate around the clock.

In the wake of the Modern Slavery Act 2015, the Home Office predicts there may be as many as 13,000 victims in the UK alone. Modern slavery can hide in takeaways, hotels, car washes, nail bars and private homes. Victims can be men, women or children of all ages, but it is normally more prevalent amongst the most vulnerable, minority or socially excluded groups.

As founding partner of the Modern Slavery Helpline, BT is providing the cloud voice services and freefone calls. We also highlighted the role of technology in combating modern slavery at a launch event at the BT Tower in London on National Anti-Slavery Day on 18 October. In addition, we are committed to educating our employees about the indicators of modern slavery so they know when to call the helpline number - 0800 0121 700.

6

Beyond Sport Global Summit

BT supports the 100% Sport movement looking to inspire sports fans to live, work and play more sustainably.

We played a leading role at the Beyond Sport Global Summit where we showcased our ‘sport for change’ credentials to Non-Governmental organisations, Corporations & Governing Bodies.

At the Summit, in conjunction with the Shippey Campaign, we launched sensory rooms for Premier League football clubs. These are comfortable spaces for fans with sensory difficulties that allow them to enjoy live sport. The Premier League & BT Disability Programme will also create opportunities for disabled people as well as volunteering opportunities for BT employees.

We also hosted a thought leadership round table discussing how sport can be used as a driver for environmental change. In the BT Power Lounge, attendees took on the Land Rover Ben Ainsley Racing ‘Power Challenge’ to experience how sailors taking part in the America’s Cup generate sustainable power for the boat. BT is the Technology in Sustainability Partner to Land Rover BAR, the British team in the America’s Cup. Simon Green, Head of BT Sport, spoke about BT Sport’s ethos - to be clean, credible & responsible. We also gave a glimpse of the future of sport, and how people experience it, with virtual reality sessions.

Our prize draws

7

Win a 2 night cruise to Bruges (tours from Zeebrugge) with P&O Cruises*

We’re offering one lucky shareholder the chance to win a 2 night cruise to Bruges sailing on 2 September 2017 on board P&O Cruises elegant flagship, Britannia.

Combining the excitement of cruising with the sophistication of a five-star hotel, Britannia isn’t just the biggest ship ever built exclusively for the British market – she’s the most glamorous too. Enjoy the on board experiences or spend a day exploring Bruges. The prize is for cruise B725 and includes accommodation in a balcony cabin for two, full-board meals and entertainment.

This prize draw closes on 31 March 2017.

Lenovo ideapad 110 LaptopWe’re offering one lucky shareholder the chance to win a Lenovo laptop. The Lenovo ideapad 110 laptop gives you dependable processing power, good memory, lots of storage, an attractive display, and integrated graphics.*

This prize draw closes on 31 March 2017.

* To enter and/or request prize draw terms and conditions, call 0800 138 5110 or go to bt.com/signup

*To enter call 0800 138 5110 or go to bt.com/signup

8

Shareholder offers

Sail awayWe’ve teamed up with Cunard and P&O Cruises to offer you a 5% saving* when booking a cruise of 2-99 nights. Cruising offers an abundance of possibilities and the chance to explore many different destinations in one of the most relaxing ways imaginable.

*To receive your 5% saving with P&O Cruises call 0843 374 2287 quoting 00BTCOM or visit ourcruisepartners.com

*To receive your 5% saving with Cunard call 0843 374 2253 quoting 00BTCOM or visit ourcruisepartners.com

For more shareholder offers go to bt.com/shareholderoffers

Where will this year take you? With up to 40% off 1,000s of rooms, there are so many great reasons to stay in 2017. Plus, if you book before 26 February 2017, you can save £20 off all rooms, with an extra £10 off all February and March breaks! At Warner we’re confident you’ll find something you’ll like!*

To book call 0333 202 0304 or visit warnerhotels.co.uk/BT quote BTBROCHURE

*book by 31 March 2017. Terms and conditions apply. Go to bt.com/signup

*Terms and conditions apply. Go to bt.com/signup Calls cost 3p per minute plus your telephone company’s network access charge.

BT ShopSave up to £30 on the BT8600 Advanced Call Blocker range that comes with our unique Virtual Assistant, which means you’ll never have to speak to another cold caller again!

To find out what else is available, call 0800 917 0514 or visit bt.com/shop/shareholder Demand is usually very high, so we’re only able to make these offers available for a limited period.

9

Become an e-shareholder

What to do

As an e-shareholder we’ll communicate with you electronically and your dividends will be paid directly into your bank or building society account.

It’s easier and quicker all round.

If you already receive your dividends direct to your bank or building society account, you can become an e-shareholder by signing up to receive your communications electronically.

All you need is your shareholder reference number and your email address.

To register your e-shareholder account, go to bt.com/signup and update your details to ‘email’ rather than ‘paper’.

Alternatively, if you currently receive your communications by post and your dividends by cheque, you can become an e-shareholder by following two easy steps.

It couldn’t be easier!

Step 1 Register online at bt.com/signup give us your email address and add your shareholder reference number (from your dividend confirmation).

Step 2 Look out for your activation code in the post. When you receive it, add your bank or building society details online.

Make sure your contact details are correct check at shareview.co.uk

In 2015/16, we introduced consolidated dividend confirmations giving you all your BT dividend information for the previous year in one statement.

By choosing to receive your dividends direct to your bank or building society, you’ll automatically receive an annual consolidated dividend confirmation with our annual mailing in May.

Fraudsters use persuasive, high pressure tactics to scam investors. They may offer to sell you shares that turn out to be fake or worthless, or to buy your shares at a high price if you pay an upfront fee.

Either way, the promised profits won’t materialise and you’ll probably lose your money. Here’s how to avoid investment scams...

How to avoid share fraud1. Hang up on cold calls

If you’ve been cold called with a high-risk offer to buy or sell shares, chances are it’s a high risk investment or a scam. You should treat the call with extreme caution. The safest thing to do is hang up.

2. Check the firm on the Financial Services Register at fca.org.uk/register The Financial Services Register is a public record of all the firms and individuals in the financial services industry that are regulated by the Financial Conduct Authority (FCA).

3. Get impartial advice Think about getting impartial advice before you hand over any money. Seek advice from someone unconnected to the firm that has approached you.

Report a scamIf you suspect that you’ve been approached by fraudsters please tell the FCA using the share fraud reporting form at fca.org.uk/scams, where you can find out more about investment scams. You can also call the FCA Consumer Helpline on 0800 111 6768.

If you’ve lost money to investment fraud, you should report it to Action Fraud on 0300 123 2040 or online at actionfraud.police.uk

Find out more at fca.org.uk/scamsmart

Remember: if it sounds too good to be true, it probably is!Take simple precautions to protect personal and financial information - for tips on how to protect yourself and find out the latest information go to bt.com/scams

From April 2016, the dividend ‘tax credit’ was replaced by a new tax-free dividend allowance.

The dividend allowance does not reduce your total income for tax purposes, but it means that you won’t have to pay tax on the first £5,000 of your dividend income, no matter what non-dividend income you have. The allowance is available to anyone who has dividend income.

What does this mean for you as shareholders? Tax on any dividends you receive over £5,000 will be charged at 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers.

Dividends within your allowance will still count towards your basic or higher rate bands and may therefore affect the rate of tax that you pay on dividends you receive in excess of the £5,000 allowance.

Dividends received on shares held in an Individual Savings Account (ISA) continue to be tax free.

10

SEPTFEB

MAY

Consolidated dividend confirmation

Fraud warning

Changes to dividend payments

Separate dividend confirmations for each dividend.

One dividend confirmation in May for all dividends paid in the previous tax year.

Shareholder helpline For general enquiries call:

Freefone: 0808 100 4141 (+44 121 415 7178*)

Textphone: 0800 169 6907 (+44 121 415 7028*)

BT Shop: 0800 917 0514

*Calls from outside the UK

Online You can find information on how to manage your shareholdings at help.shareview.co.uk

If your question is not answered by the information provided, you can send your enquiry via secure email from these pages.

Post Equiniti, Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA, United Kingdom

(Please include a daytime telephone number.)

Contact information

BT Group plc Registered office: 81 Newgate Street, London EC1A 7AJ Registered in England and Wales No. 4190816 PHME: 79650 Printed on FSC Pavarotti Silk. Printed in England by Communisis PLC.

www.bt.com