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POST OFFICE LIMITED BOARD MEETING
Strictly Confidential and Subject to Legal Privilege - DO NOT FORWARD
MINUTES OF A MEETING OF THE BOARD OF DIRECTORS OF POST OFFICE LIMITED HELD ON TUESDAY 30
JULY 2019 AT HARTWELL HOUSE, OXFORD ROAD, STONE, AYLESBURY, HP17 8NR
Present: Tim Parker Chairman (TP)
Alisdair Cameron Interim Group Chief Executive Officer (AC)
Ken McCall Senior Independent Director (KM)
Tom Cooper Non-Executive Director (TC)
Tim Franklin Non-Executive Director (TF)
Carla Stent Non-Executive Director (CS)
In attendance: Veronica Branton Company Secretary (VB)
Ben Foat General Counsel (BF) (items 6. — 8.)
Amanda Jones Retail Sales Director (AJ) (item 6.)
Julie Thomas Operations Director (JT) (item 6.) I
Laurence O'Neill Senior Legal Counsel (LON) (item 7.)
Owen Woodley CEO — FST&I (OW) (item 9.)
Chrysanthy Pispinis Director, PO Money (CP) (item 9.)
Debbie Smith CEO — Retail (DS) (item 10.)
Andrew Goddard MD — Payzone Bills Payments Ltd (AG) (item 10.)
Action
1. Welcome and Conflicts of Interest
A quorum being present, the Chairman opened the meeting. The Directors declared that they had
no conflicts of interest in the matters to be considered at the meeting in accordance with the
requirements of section 177 of the Companies Act 2006 and the Company’s Articles of Association.
2. Minutes of Previous Board meetings including Status Report
The Board APPROVED the minutes of the Board meeting held on 28 May 2019.
Progress with completion of the actions as shown on the action log was NOTED.
3. CEO Report
Al Cameron introduced the report and highlighted a number of points:
* the financial trend for the year was of concern but we were working to get back to plan and put
in place a £25m buffer
* we were looking at what our plan would be if a major partner were to go into administration, To do:
Tom Cooper would put us in touch with Hannah Gray who leads the UKGI/ BEIS insolvency team TC
Exec
that Supply Chain was running at capacity and might need to make extra pick-ups. It wasnoted 9 do; I
that control risks such as this were not always getting reported to the ARC. ACand CS would ey cs,
discuss how to ensure this flow of information.
A number of points were raised, including: I
© whether announcing redundancies in stages would be more unsettling than a single
announcement? It was reported that people were used to there being changes in the business
and that we would adhere to the consultation processes involving the trades unions, where this
was required. The roles at risk were predominantly management roles but would not impinge
on the new CEO being able to choose his Group Executive
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POST OFFICE LIMITED BOARD MEETING
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* we had been advised that Duncan Tate (a key partner) was leaving Fujitsu. It was suggested
that we raise with Fujitsu our requirement for the standard of service and expertise to be Exec
maintained notwithstanding the change in partner
Irrelevant
Exec
Finance
Financial Performance Report
Financial Performance in P3 was discussed and NOTED.
Quarterly Delivery Report and Funding Request
The Board APPROVED the submission of a request to the Shareholder for a payment of £7m for Q2
against qualifying spend of £46m.
Annual Report and Accounts 2018/19 (ARA 2018/19)
The ARC had met on 29 July 2019 and had discussed the ARA 2018/19, including the draft
statements on the group litigation and on the workers’ rights case (Starling).
The Board:
© APPROVED the statements on the group litigation and workers’ rights cases (Starling) for
inclusion in the ARA 2018/19
© APPROVED and DELEGATED to the Chairman and Interim CEO the signing of the Annual Report
and Accounts for the year ended 31 March 2019.
1 The main policy fully insured members’ pension benefit accruals from 1 April 2012 to 31 March 2017, the date
of the plan closure.
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POST OFFICE LIMITED BOARD MEETING
Strictly Confidential and Subject to Legal Privilege - DO NOT FORWARD
Group Litigation Update
Ben Foat updated the Board on the group litigation:
the Court of Appeal’s decision on leave to appeal the Common Issues Trial Judgment and the
publication of the Horizon Issues Trial Judgment were anticipated in mid-September 2019
work was taking place to prepare for mediation and settlement which could commence in the
middle of October or the beginning of November 2019
Weare analysing the categories of claimants that could be covered by the settlement. It was
noted that settlement for those with a criminal conviction could not be pursued and Lord
Justice Fraser’s view on how this category should be treated would be required. Around 60
claimants were in this category.
A number of points were raised:
whether we would be able to make an umbrella figure as an offer? It was reported that one
option was to provide a global figure for settlement, the distribution of which could be
determined by the claimants’ solicitor, another option was to make individual settlements
whether claimants were required to sign off on the settlement individually? It was reported that
the funder would have first sign off. There was likely to be a committee of claimants who would
consider offers. Claimants were not required to accept a settlement offer but if the funder was
recommending acceptance the claimant risked losing their funding and could incur previous
costs. In such a case, the Judge would have to continue hearing the case for those claimants
who would not agree to settle
the permissions that would be required to fund any settlement agreement. It was noted that
Shareholder permission was required for funding above £50m. A recommendation would need
to be made to HM Treasury and BEIS for a) a settlement which was within POL funding but with
Shareholder approval required because it was above £50 m b) where POL needed to borrow
money to secure a settlement and a mechanism was required for repayment c) where a one off
capital injection was required
that if a settlement pot were approved the spend from this would need to be monitored very
carefully
what sum could be afforded from working capital? It was reported that £170m would take us to
headroom but we needed to keep driving cash efficiencies. We needed to be flexible to
manage the requirements of the case and have a reasonable starting point for our negotiations,
recognising that we might need to talk with our Shareholder. A significant amount of
settlement analysis was required before we would be in a position to consider a potential
settlement figure. That work would be taking place over the next month and the Board would
need to take a decision on the starting point and range for the mediation discussions. That
figure and the range would also have to be discussed with BEIS/ HM Treasury and we would
need to write to BEIS outlining the Board’s recommendations
* that we still needed to understand more about the claimants and their funders. Had there been
a past history of settlements? What was the mediator’s background? How strong was our
team?
* that the Board would need to understand all the constituent parts for the negotiations and
what could and could not be negotiated.
Julie Thomas updated the Board on the operational work streams:
* current procedures and processes were being amended where improvements could be made
and these could be processed quickly*. We were working through a table of all the relevant
artefacts but were also thinking about where we should do things completely differently. That
included support for branches and the Horizon system itself. 150 people were based in
Chesterfield who answered between 30,000 — 40,000 calls a month. These volumes showed
that we were not addressing problems in the right way. We were considering introducing a self-
audit tool for branches to help them see where there were issues that needed to be resolved;
by doing this we might be able to avoid some suspensions and target support to the right
branches
2 For example, if we could see that a screen on Horizon was potentially confusing and resulted in more errors
than average.
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POST OFFICE LIMITED BOARD MEETING I
Strictly Confidential and Subject to Legal Privilege - DO NOT FORWARD
e the leadership team had changed, the loss management systems had been improved and we
were seeing a consistency in responses. The work was at an early stage and represented a
mind-set change as much as a change in processes and procedures
* the greatest costs were associated with changing the Horizon system and bringing in Branch }
Hub. Ultimately we thought these changes would lead to cost savings.
Anumber of points were raised:
how long did it take on average to fix an issue raised by a Postmaster? Questions could usually
be answered immediately but culturally we were trying to address problems differently so that
we could identify the issue within the system and resolve this for the Postmaster. The more
fundamental fix could take three days but resolving problems in this way helped to build trust
and encourage reporting
* Cash balances. The figure of 4,500 not balancing their cash every day seemed high. What were
the reasons for this? It was reported that the complexity of the systems and insufficient
training, in some instances, were drivers. An example was stamps for which there was a manual
process which tended to cause balancing issues. It was noted that it would be helpful to
understand the reason code and the source of the problem to ensure we were targeting
resource at the right issues given that the number of calls was unsustainable. The quid quo pro
of resolving problems and providing support would be that branches would not be permitted to I
trade if they had not done their cash balances properly. I
Amanda Jones updated the Board on changes to the field management system and support for I
Postmasters:
lack of field management had been one of the weakest links in our chain and we were already
seeing benefits from having field team support. It meant that we could move away from a “one
size fits all” approach. Attracting the right people as Postmasters and supporting them with
training and refresher training was central to our success
* previously Postmasters had received training on new products but no refresher training on
operations. This was being introduced together with face to face support. We were piloting
new ways of working through the field teams in around 200 branches. We had a diagnostic that
helped Post Office understand the business and helped the Postmaster to run their business.
We had developed toolkits in various areas like marketing and would seek Postmasters’ views
on training and support periodically.
Anumber of points were raised:
whether we would be relaunching our network support approach through regional roadshows?
© we needed to understand the environment in which Sub postmasters operated, to align our
interests with Postmasters’ and to assess whether we had the balance right between fixed pay
and variable pay
« where Post Offices failed the reasons were varied and there were many different scenarios. The
toolkit needed to include how to be a better retailer
* we needed to have a tariff that made us attractive, a much lower central cost structure and
strong field support for Postmasters. There would be costs involved in changing our approach,
systems and processes
* we had sub-optimal retail products. We still needed a complete picture of Postmaster revenue
from POL and from other parts of their business. The whole concept needed to be profitable
and with a profitable franchise we would need to consider how much we should be investing in
the profit opportunities.
The Board ENDORSED the approach set out in the paper in relation to the mediation and
operational activities to address the requirements flowing from the Common Issues Trial Judgment,
prepare for the Horizon Issues Trial Judgment and achieve the delivery of better support to agents.
The Board AGREED that a paper should be included on the September Board agenda setting out Bl wt
proposals for a starting figure for mediation and an upper limit. The legal team would then be
delegated authority to settle the matter in accordance with the Board's instructions. It was noted I
that BEIS approval would be required for a settlement figure above £50m and the Board would also I
need to approve writing to BEIS to seek approval of the range proposed for the settlement and any
borrowing requirements. The BEIS approvals we likely to take some time and they would need to
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POST OFFICE LIMITED BOARD MEETING
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understand in detail how much POL could afford for the settlement and where additional borrowing
or a capital injection would be required and on what terms.
The Board AGREED:
© that a paper should be prepared for the September Board meeting setting out the reasons for BF I
the changed approach on corporate restructuring and the ramifications of moving from the I
current position to the new position
© to DELEGATE AUTHORITY to the CEO or CFO and General Counsel to agree the final versions of I
the draft Articles of Association and Framework Agreement, subject to there being no further
material change.
3 There was nothing to prevent POL from changing its corporate structure in the future, for example, to set up a i
Holdco should there be an imperative to do so. I
—
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POST OFFICE LIMITED BOARD MEETING
Strictly Confidential and Subject to Legal Privilege - DO NOT FORWARD
The Board:
© CONSIDERED and AGREED the final construct of our refreshed relationship with Bol
¢ DELEGATED AUTHORITY to the Interim CEO and Chief Executive FST&I to proceed to signature
on the basis presented once the contractual legal drafting is concluded.
* APPROVED the total spend of £5.6m related to these negotiations.
The Board congratulated Owen Woodley, Chrysanthy Pispinis and the team on the successful
outcome of their dedication and resilience through a lengthy and complex negotiation process.
10. Parent Company Guarantee for Payzone Bills Payments Limited
Debbie Smith and Andrew Goddard introduced the paper, noting that we wanted to sign the
contract with British Gas at the end of August 2019.
Irrelevant
The Board APPROVED the delegation of authority to the CEO and the General Counsel to finalise
and approve the terms of the parent guarantee in relation to the British Gas contract as set out in
the paper. Should any material variances to this be proposed we would revert to the Board for
approval.
il. Governance items
The Board RATIFIED the appointment of Nick Read as Chief Executive Officer of Post Office Limited.
Nick Read would start in post on 16 September 2019.
The Board NOTED the resignation of Shirine Khoury-Haq as a Non-Executive Director of Post Office
Limited on 18 July 2019.
The Board NOTED that a Credit Card contract had been signed with Capital One on 25 June 2019, I
following the approval of the Sub-group, to which the Board had delegated authority for that I
decision.
The Board APPROVED the revised Remuneration Committee terms of reference on the
recommendation of the Remuneration Committee.
12. Items for Noting
12.1 Sealings
The Board APPROVED the affixing of the Common Seal of the Company to the documents set out
against items numbered 1782 to 1801 inclusive in the seal register.
12.2 Health and Safety Report
The Board NOTED the Health and Safety Report.
12.3 Future Meeting Dates
The Board NOTED the future meeting dates.
12.4 Forward Agenda
The Board NOTED the forward agenda.
13. Date of next meeting
23 September 2019.
I I
i GRO ' 2a\a\iq
Chairman Date
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