FUJ00151901
FUJ00151901
Company Secret
ICL PLC
International Computers Limited
ICL Global Investments Limited
Minutes of the Investment & Strategy Committee
Held at lpm on Wednesday 25" November 1998
Observatory House,. Windsor Road, Slough Berks, SL1 2EY
Mr M Naruto
Mr T Sekizawa POH-4320D
Mr R Christou (Item 55) :
Mr H Kurokawa
Mr H Sakai
Mr T Yurino
Present Mr T K Todd (Chairman) I I
In attendance Mr S Riesenfeld .
Mr R F Scott (Secretary)
Mr Y Katsuya
Mr Y Sumida
Mr D J Teague (Item 56)
MrRM Hacking (Item 57)
Mr J H Bennett (Item 55)
Mr A King (Item 56)
Mr R Strich (Item 56)
MrNR Hartnell — (Item 57)
Mr Sekizawa was welcomed to the Committee.
Action by: 98/52 Minutes of previous meeting
Minutes of the meeting held on 22™ July 1998 were approved
as a correct record for signature by Mr Todd.
98/53 Matters Arising
Mr Todd said that actions noted from the previous Minutes
had been completed, were being progressed, or were no
longer applicable.
Re-minute 98/50d), Year 2000. - Mr Naruto requested ICL
fully investigate Year 2000. compliance issues in the
businesses ICL had in recent years transferred elsewhere in
isc/mins2511 . 1 of 6
FUJ00151901
FUJ00151901
co cao co ft MH & oO ho
J
co of @& co oO Ome ell
Mr Todd
ise/mins2511
98/54
Company Secret
the Fujitsu Group. These included Fujitsu ICL Computers,
and the businesses in Australia and Asia (including the Indian
businesses including ICIM). Mr Todd mentioned his
continued efforts with customers to make them aware of the
issues. (A Year 2000 issues update report would be made to
the-Board the following day).
Chief Executive’s Report —- November 1998 PLC/98/21
Financial Performance PLC/98/22
1999 Budget PLC/98/24
ICL Strategic Plan 1999 - 2003 PLC/98/29
Mr Todd then Mr Riesenfeld reported. Points noted:
a)
b)
Mr Todd referred to performance of the company, which
Mr Riesenfeld would report in more detail. We had now
made a profit before tax in each of the last four quarters
and although he would wish that our forecasting was
more accurate, the forecasts were usually exceeded.
Considerable effort. was going into exceeding the
minimum commitment of £40m profit before tax from
operations (£57m including profit from existing
disposals).
Mr Todd referred to markets and to the performance of
some of ICL’s competitors. He referred to the Pathway
contract which would be the subject of reports and
discussion later in the meeting.
ICL had had some significant bid successes recently.
These included DTI-ELGAR where Mr Todd thanked
Fujitsu for the support letter. This would be a showcase
for ICL’s technology since it was positioned on the
interface between the DTI and UK businesses. A ten to
fifteen year relationship was expected. The Courts 2000
contract was expected to be signed before the end of the
year. OnDSS Accord, ICL had . apparently been
promised, with our partners Microsoft and Andersen
Consulting, an over-arching service contract, as had the
BT consortium, while EDS was the prime service
provider. It was not clear what this meant for ICL and
Mr Todd said we were being cautious. He would be
reviewing carefully whether it would be appropriate to
take a contract.
This led to a discussion on the risks associated with PFI
contracts where it was becoming increasingly clear that
the balance of risk would sometimes be too far towards
2 of 6
FUJ00151901
FUJ00151901
Company Secret
the contractor. Mr Sekizawa commented that ICL now
had considerable PFI experience, particularly arising from
Pathway and that we should be able to develop useful
Mr Todd approaches and suggestions which could be used with the
Government to position ICL advantageously.
d) Mr Todd referred to the market and to ICL’s competitors,
both of which were being watched carefully.
They included BT which, like EDS, was also a partner
and a customer, or was capable of being so, depending on
circumstances.
e) Arising from the BBC contract, ICL had decided to
withdraw from direct involvement in the internet service
provider marketplace, but would, depending on terms
agreed, run the BBC’s internet service for them. It was
becoming increasingly clear that Globalstore as a
software product would become very successful in the
retail marketplace and ICL needed to ensure there was a
satisfactory commercial model. Some’ of the retail
hardware product, were not market leaders. Mr Popa, the
country manager of Romania, was congratulated for his
Mr Todd efforts to secure the Romanian rail contract.
f) Mr Riesenfeld reported on ICL’s results and forecasts,
Revenue growth had accelerated over the last ‘three
quarters and the referred to the effect of exchange rates on
ICL’s performance. It was agreed ICL would prepare its
results in sterling and the Euro during 1999 and
Mr Naruto added that the ICL should also use the Euro in
internal billing.
g) Mr Riesenfeld referred to the performance of ICL’s
businesses including the continued strength of High
Performance Systems, the cost of provisions and bids in
Central Europe, Retail and Services, where the
applications and technical consultancy division was
showing a significant loss due to transfer pricing.
Here the accepted practige in consultancies was -to set
these manpower costs low to encourage success in the
related projects and it was noted ICL might have to revise
j this stance.
Mr Todd added that he was seeking at least £12m extra
profit to enhance the October forecast of £53.5m
I operating profit for the year. The significance of profit
from continuing operation, to the analysts and market in
I : regard to flotation was noted. ICL would be
concentrating on this figure.
isc/mins2511 3 of 6
FUJ00151901
FUJ00151901
core offerings.
He added his
shareholder.
98/55 ICL Pathway
isc/mins2511
acceleration “to
commitment
management and people.
- The Committee endorsed the budget and strategic plan.
These would be discussed with the Board and
Mr Bennett then Mr Christou presented. There was then a
lengthy discussion. Points noted were:
a) Mr Bennett reported encouraging operational progress
with the live service in 204 Post Offices. Those who saw
demonstrations of the system continued to be impressed.
Company Secret
h) Mr Riesenfeld referred to the budget for the new fiscal
year to 31 March 2000. Profit before tax was planned at
£95m (compared to £51.1m 1998/99) and operating profit
was expected to be £115m (compared to £58.4m
1998/99). Revenue growth was expected to continue its
for the new budget year.
The Committee noted other elements of the budget
including operating expenditure,
continued, and borrowings which were heavily biased
towards major projects.
where reductions
i) Mr Todd referred to ICL’s strategic plan 1999 — 2003,
including our approach to IT portfolio investment
strategies, and the ICL business model, where much work
had recently been done to refine our approach to the
market, through offerings.
concentration of our capabilities through these offerings
to the customers and to managed withdrawal from non-
referred to the
The financial plan focussed on operating profits of £66m
(before rationalisation expenditure) for 1998/99, £124m
1999/2000 and £168m for 2000/01 the expected year of
flotation. Over the period of the plan profit approached
5% to 6% of revenue which was
benchmark/target. Mr Todd referred to the factors which
he believed would lead to this accelerating profit trend,
including cessation of the high levels of infrastructure
spend going on at present, elimination of losses and ICL’s
new focus behind profitable core/strategic offerings.
Outside of the financial plan, he referred to strategic
opportunities to increase business, for example in France
by collaboration and eventually. acquisition, and to
Germany and possibilities within the Fujitsu family.
developing ICL’s
an accepted
PLC/98/25
40f6
FUJ00151901
FUJ00151901
Company Secret
b) Mr Christou reported on the without prejudice
negotiations which had taken place with Government to
resolve the project dispute. The contents of the without
prejudice negotiations are briefly: summarised in the
attached report marked (A). Thisreport’ is to be
submitted to Masons for the purpose of obtaining urgent
legal advice as to the merits/risks of proceeding with
litigation against the background of the commercial
negotiations set out in the report.
98/56 Project Q ISC/98/36
Mr Strich, with Mr King, presented on ICL’s proposals to
seize the opportunity to become the trusted personal
information broker for the individual by collecting available
personal information about an individual, providing him the
information collected in return for the right to be his collective
bargaining agent for personal information, eliminating other
personal information, collection and distribution sources to
increase the value of personal information and rewarding the
individual for allowing this. Q involved‘a plan to establish
a global brand that promised the individual collective power
based on control over collection, storage and distribution of
their personal information.
Mr Todd recommended the proposal and the committee
discussed it. It was noted that there were similarities between
Mr King Q and Project iMi of Fujitsu and it was agreed Mr Strich
would urgently meet with those in Fujitsu who were operating
this project. Mr Sekizawa pointed out that it had taken some
time, at least two'years, for iMi to look successful but with the
speed of developments on the internet and differences
between the US and UK markets, and Japan, he accepted that
Q might take off more quickly.
It was estimated that Q would require $110m of investment
and the options were that Fujitsu/ICL embarked on this by
itself, or that the project was for three to five selected
investment partners, or for a larger number of eight to ten
investment partners. The recommended proposal was that
Fujitsu and/or ICL would be one of three to five partners in
the project, with ultimately a $30m investment and around
23% ownership. $1m had been committed by ICL to-date and
$10m was requested for commitment in the quarter beginning
1" January 1999. Mr Todd was in favour of this and Mr King
and Mr Strich would be able to use this endorsement pending
further discussion by Fujitsu ICL Group. The Committee
decided that the Board would be asked. to discuss the project
and, subject to the Board’s views, Mr Sekizawa, Mr Naruto
ise/mins2511 5 of 6
FUJ00151901
FUJ00151901
Mr Todd
isc/mins2511
98/57
Company Secret
and Mr Todd were delegated by the Committee (and it was
proposed that they also be delegated by the Board) to decide
on the recommended proposal outlined or any alternative.
Other Matters
The committee delegated to Mr Todd and Mr Yurino,
decision power regarding the following papers:
Healthcare in Holland ISC/98/37
ECRC ISC/98/38
ICIM ISC/98/40
Capitalisation of subsidiaries ISC/98/39
and the committee noted the following papers:
Major Bids report ISC/98/35
Year 2000 PLC/98/26
South Africa . . ISC/98/41
Glovia ERP product ISC/98/42
Acquisition of PTI Inc. : ISC/98/43
Chairman and managing directors of trading subsidiaries
_(noted.and approved) ISC/98/44
Pension Policy Committee and .
Audit Committee Minutes for the Board.
Documents Signed and Sealed PLC/98/27a&b
Half Yearly Preference Share Dividend PLC/98/28
Dates of next meetings:
The committee noted the proposed dates of:
3" February and 12" May. The July and November meeting
dates. were still being investigated (subsequently agreed as
20" July and 24" November).
6 of 6