BCSC

Exemption Orders (Discretionary)

BRITISH TELECOMMUNICATIONS PLC

2001 BCSECCOM 1043

Headnote:

Mutual Reliance Review System for Exemptive Relief Applications – Transaction involving a "demerger" - Relief granted to one of the resulting companies from certain continuous disclosure and insider reporting requirements subject to certain conditions.

Applicable British Columbia Provisions

Securities Act, R.S.B.C. 1996, c. 418, ss. 85, 87, 91(1)b), 119(2)(b)
Securities Rules, B.C. Reg. 194/97, ss. 144, 145, 149 and 184(2)

IN THE MATTER OF THE SECURITIES LEGISLATION OF BRITISH COLUMBIA, NOVA SCOTIA AND QUÉBEC

AND

IN THE MATTER OF THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF BRITISH TELECOMMUNICATIONS PLC AND BT GROUP PLC

MRRS DECISION DOCUMENT

[para 1]
WHEREAS the local securities regulatory authority or regulator (the “Decision Maker”) in each of British Columbia, Québec and Nova Scotia (the “Jurisdictions”) have received an application from BT Group plc (“BT Group”) for a decision under the securities legislation of the Jurisdictions (the “Legislation”) that:

(a) the requirements contained in the Legislation to issue a press release and file a report upon the occurrence of a material change, to file and deliver audited annual financial statements and annual reports, where applicable, and unaudited interim financial statements and annual information forms, where applicable, and provide management’s discussion and analysis thereon, and to comply with the proxy and proxy solicitation requirements, including filing an information circular or report in lieu thereof (collectively, the "Continuous Disclosure Requirements") shall not apply to BT Group; and

(b) the requirement contained in the Legislation for an insider of a reporting issuer to file reports disclosing the insider’s direct or indirect beneficial ownership of, or control or direction over, securities of the reporting issuer or the equivalent (the “Insider Reporting Requirements”) shall not apply to insiders of BT Group;

[para 2]
AND WHEREAS under the Mutual Reliance Review System for Exemptive Relief Applications (the “System”), the British Columbia Securities Commission is the principal regulator for this application;

[para 3]
AND WHEREAS BT Group has represented to the Decision Makers that:

1. BT is a company which was incorporated and registered in England and Wales on April 1, 1984 under the Companies Acts 1948 to 1981; BT is currently listed on the London Stock Exchange (the “LSE”) under the symbol “BT”;

2. BT Group was incorporated and registered in England and Wales under the Companies Act, 1985 (the “Act”) on March 30, 2001 as Newgate Telecommunications Limited and reregistered as a public company on September 11, 2001;

3. BT is currently a reporting issuer under the securities legislation of the Provinces of Ontario, Québec, British Columbia and Nova Scotia; pursuant to orders granted in 1996 BT was granted relief from the Continuous Disclosure Requirements on terms substantially similar to the relief sought in this application by orders of the Decision Makers, and insiders of BT were granted relief from the Insider Reporting Requirements pursuant to certain orders or blanket orders of the Decision Makers;

4. BT Group is not currently a reporting issuer under the Legislation;

5. based on the market price of BT on August 31, 2001, BT’s market capitalization is approximately £36.3 billion;

6. as of August 31, 2001, BT had 8,596,818,408 ordinary shares issued and outstanding (the “BT Shares”); certain of BT’s Shares are held as American Depositary Shares; each American Depositary Share represents 10 BT Shares and is evidenced by an American Depositary Receipt (the “BT ADRs”); the BT ADRs are currently listed on the New York Stock Exchange (the “NYSE”); each holder of BT Shares and BT ADRs is a BT Shareholder;

7. as of September 4, 2001, there were 1,140 BT Shareholders resident in Canada; the BT Shareholders resident in Canada hold 606,222 shares representing approximately 0.01% of the BT Shares;

8. as of September 4, 2001, of the BT Shareholders resident in Canada, there are approximately 261 resident in British Columbia, 66 resident in Québec and 22 resident in Nova Scotia;

9. BT is proposing to “demerge” or spin-out its wireless business by incorporating two new publicly-listed holding companies; one of the new holding companies, mm02 plc (“mm02”) will acquire all of the issued and outstanding shares of BT by way of plan of arrangement (the “Plan of Arrangement”); after the Plan of Arrangement has been completed the BT business without the wireless business will be transferred to the other newly-incorporated holding company, BT Group (the “Demerger”);

10. upon the implementation of the Plan of Arrangement, BT Shareholder’s BT Shares and BT ADR's will be exchanged, on a one-for-one basis, for an ordinary share in mm02 or an American Depositary Receipt of mm02, as applicable; upon the implementation of the Demerger, BT Group will issue to each mm02 shareholder and mm02 American Depositary Receipt holder, on a one-for-one basis, an ordinary share in BT Group (“BT Group Share”) or an American Depositary Receipt of BT Group (“BT Group ADR”), as applicable;

11. an application has been filed under the Mutual Reliance Review System for Exemptive Relief in the Jurisdictions, as well as in certain other provinces, requesting relief from the prospectus and registration requirements for the newly-issued mm02 and BT Group shares and ADRs, as well as first trade relief and relief from the Continuous Disclosure Requirements and Insider Reporting Requirements for mm02; Ontario was designated as the principal regulator for that application; this application is being made in the Jurisdictions, as the relief requested herein was not required in Ontario;

12. an application will be made for admission to the Official List of the UK Listing Authority and admission to trading on the London Stock Exchange of the BT Group Shares; a supplemental listing application will be made to list the BT Group ADRs on the New York Stock Exchange (the “NYSE”);

13. BT Group will be subject to the reporting requirements of the United States Securities Exchange Act of 1934 (the “1934 Act”);

14. every BT Shareholder resident in Canada holding BT Group Shares and BT Group ADRs after the Plan of Arrangement and Demerger will receive all continuous disclosure documents (including proxy solicitation materials) required to be sent to holders resident in England and Wales in the case of BT Group Shares and resident in the United States in the case of BT Group ADRs pursuant to the laws, rules and regulations of England and Wales or the United States, as applicable, and applicable stock exchange rules;

15. there is a de minimis number of BT Shareholders in Canada and therefore there will be, upon implementation of the Plan of Arrangement and Demerger, a de minimis number of BT Group shareholders in Canada;

16. upon implementation of the Plan of Arrangement and Demerger, BT Group will, as a result of the definition of “reporting issuer” under the Legislation and as a result of a section 80(2) order in Nova Scotia, be deemed to be a reporting issuer in British Columbia, Québec and Nova Scotia;

[para 4]
AND WHEREAS under the System, this MRRS Decision Document evidences the decision of each Decision Maker (collectively, the “Decision”);

[para 5]
AND WHEREAS each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the Decision has been met;

[para 6]
THE DECISION of the Decision Makers under the Legislation is that:

1. the Continuous Disclosure Requirements of the Legislation shall not apply to BT Group provided that:

(a) BT Group complies with paragraph 14 of this Decision;

(b) BT Group files with the relevant Decision Makers in the Jurisdictions copies of all documents filed by BT Group with the United States Securities and Exchange Commission (the “SEC”) under the 1934 Act;

(c) BT Group complies with the requirements of the LSE or NYSE in respect of making public disclosure of material information on a timely basis and forthwith issues in the Jurisdictions and files with the relevant Decision Makers in the Jurisdictions any such press release that discloses a material change in the affairs of BT Group; and

(d) BT Group files with the Decision Makers in the relevant Jurisdictions copies of any proxy solicitation materials delivered to holders of BT Group Shares or BT Group ADR's; and

2. the Insider Reporting Requirements in the relevant Jurisdictions shall not apply to insiders of BT Group provided that such insiders file with the SEC on a timely basis the reports, if any, required to be filed with the SEC pursuant to s.16 of the 1934 Act and rules and regulations thereunder.

[para 7]
DATED November 2 , 2001

Brenda Leong
Director