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Post Office Limited — Strictly Confidential
POLB (12)11"
POLB 12/115-125
POST OFFICE LIMITED
(Company no. 2154540)
Minutes of a Board meeting held on 21st November 2012
at 148 Old Street, London EC1V SHQ
Present:
Alice Perkins Chairman
Neil McCausland Senior Independent Director
Tim Franklin Non-Executive Director
Virginia Holmes Non-Executive Director
Alasdair Marnoch Non-Executive Director
Susannah Storey Non-Executive Director
Paula Vennells Chief Executive
Chris Day Chief Financial Officer
In attendance:
Alwen Lyons Company Secretary
Hugh Flemington Head of Legal (item 12/117 only)
Kevin Gilliland Network and Sales Director (item 12/118 only)
Tim Giles AON Hewitt (item 12/1 only)
Zoe Taylor AON Hewitt (item 12/1 only)
POLB 12/115 INTRODUCTION
(a) I A quorum being present, the Chairman opened the meeting. She
welcomed Fay Healey, Chief HR Officer, who was deputising for
Susan Crichton, HR & Corporate Services Director.
POLB 12/116 PEOPLE UPDATE
(a) I Fay Healey gave an overview of the performance measurement
exercise which had been undertaken for the SLT and the results of the
half year reviews for managers across the directorates within the
organisation.
(b) I The performance review results were aligned with commercial
performance, in terms of reflecting the scale of the challenge of
Network Transformation but also recent successes in the Commercial
area and growing strength in Financial Services.
(c) I The revised performance matrix was discussed. The process of
assessment would mean an increase in the level of turnover at senior
level but it was agreed that the future of the business would require a
high calibre team who could carry through initiatives and respond to
challenges to enable the business to achieve stretching targets.
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(d) I The Board noted the measures being taken to recruit additional staff,
including the proposals for a fast track graduate entry scheme and the
steps being taken to promote and build talent within the organisation.
ACTION: FH (e) I [Discussion here]. The HR team was requested to provide/circulate
(f) I The Chairman commented on the recent Nominations Committee
meeting, at which it had been agreed that talent and diversity should
receive particular attention. The talent pool needed to be strengthened
as there was still a considerable gap in succession planning at senior
levels.
(g) I The Nominations Committee would concentrate on appointments to
the Board and the direct reports to the Chief Executive. The
Remuneration Committee would similarly deal with remuneration policy
and packages at these most senior levels.
ACTION: (h) I Revised terms of reference for all committees [in industry standard
Company form], including the Nominations and Remuneration Committees,
Secretary would be brought back to the Board for final approval in January.
POLB 12/117 PROJECT RAINBOW
(a) I The Chief Executive gave an update on the current situation. She had
invited HF to join the meeting to provide further guidance on the legal
discussions which had taken place and which were continuing.
(b) I It was confirmed that Post Office was in close contact with X and Y to
ensure that the communications plan could be adjusted if disclosures
needed to be made quickly.
(c) I There was a significant reputation risk to Post Office arising from
events such as this. The ARC had discussed high risk contracts at its
recent meeting and had agreed to undertake a more detailed review at
the next ARC meeting in February.
(d) I The Board discussed the likely approach of the Information
Commissioner.
(e) I [Anything else raised here]
(f) I The Board supported the approach taken to date and asked to be kept
informed.
(g) I X asked for sight of the revised emergency response plan which had
been drawn up to deal with any future incidents. It was also suggested
that the business should carry out a review of indemnity insurance
ACTION:Company protections which might be available to the Company in similar
Secretary/HF circumstances.
POLB12/118 NETWORK TRANSFORMATION REPORT AND CROWN UPDATE
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(a) I Kevin Gilliland joined the meeting to provide the latest update on the
conversion rate and progress within the transformation programme for
the wider network and in particular the plans for turning around
financial performance within the Crown offices.
(b) I Network Transformation Programme
He explained that
(c) I The Board urged the executive team to push hard for conversions and
asked for a further report at the January meeting on progress up to the
ACTION: KG end of the calendar year.
(d) I Crown Transformation Update
KG explained the assessment of risk of not reaching the target to
achieve profit within the Crown office network by April 2015.
(e) I The programme for engagement with the unions was outlined and it
was agreed that
(f) I It was noted that the new operating model was just being rolled out in 2
further locations and 3 subsequent pilots would begin in February
2013.
(g) I KG was asked to return with an update on Crown office progress in
ACTION: KG [February].
(h) I [NM reiterated his request for a 5 year P&L for the Crown offices.]
POLB12/119 CHIEF EXECUTIVE’S REPORT
(a) I The Board noted the CEO’s report and discussed the following specific
items:
(b) I DVLA/DWP contract wins: The Board congratulated the team on this
achievement. The value of business to the Post Office was likely to be
in the region of £ over X years.
(c) I Royal Mail interaction:
(d) I Stakeholder Forum:
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o
The Health and Safety report appended to the Report was noted.
POLB 12/120 MINUTES OF PREVIOUS MEETING AND MATTERS ARISING
(a) I The minutes of the Board meeting held on 23 October 2012 were
approved for signature by the Chairman
(b) I The Status Report, showing matters outstanding from previous Board
meetings, was noted.
(c) I The Board noted the minutes of the Pensions Committee meeting held
on 11 October 2012. The Chairman had already summarised the
matters discussed at the Nominations Committee meeting held on 7
November; the minutes of that meeting would be included in a future
pack.
(d) I Alasdair Marnoch provided an overview of the matters discussed by
the Audit, Risk and Compliance Committee meeting (ARC) held on 13
November. The minutes would, similarly, be included in a future Board
pack.
(e) I Chris Day reported that, after taking into account the comments of the
ARC, the half year trading statement for the six months ended 23
September 2012 had been approved by a sub-committee of the Board
on 20 November. Copies of the press release had been circulated to
all Board members. The statement would be released to the press on
22 November for publication on 23 November.
POLB12/121 FINANCIAL PERFORMANCE UPDATE
(a) I CD presented the review of financial performance for October 2012,
including the Crown P&L statement, the business scorecards, a review
of progress against funding plan commitments and a cost management
report.
(b) I It was noted that ExCo membership of the Transformation Board had
been strengthened to provide closer oversight and push forward on
key targets.
(c) I In terms of other key metrics within the business scorecard, the DVLA
and DWP contract wins would now be able to be shown and progress
on network transformation had been discussed earlier in the meeting.
(d) I [Other financial performance issues here]
(e) I The Board asked that
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ACTION: CD
POLB 12/122 PENSIONS: INVESTMENT BELIEFS AND ASSET ALLOCATION
(a) I VH explained that, in order to confirm to the Trustees of the RMPP a
preferred asset allocation, it was important for the Pensions Committee
to establish the Board’s views on appropriate investment objectives
and asset types for the Post Office sections of RMPP. RMPP had its
own statement of investment beliefs but this document was under
review.
(b) I Board members had been invited to complete an online survey issued
by AON Hewitt and this had given some indication of beliefs about
certain categories of investment. Representatives of AON Hewitt had
been invited to join the meeting to discuss those indicators and make
proposals on strategic asset allocation in more detail.
(c) I Tim Giles and Zoe Taylor joined the meeting.
(d) I TG explained that the purpose of the discussion was to refine the
decisions taken at the last Board meeting to invest the Post Office
sections 50% in growth assets and 50% in index linked gilts and to use
extended hedging to limit the risk of an increase in liabilities arising
from inflation or changes in interest rates.
(e) I The definition of growth assets was discussed. One initial finding from
survey responses had been uncertainty about the inclusion of high
yield credit in the asset allocation model. The range of possibilities
within the term “absolute return funds” had also raised some questions.
The proposed alternative asset allocation for the Post Office sections
(f) I was discussed further. It would be possible to increase returns slightly
without increasing volatility by adopting this investment strategy. It was
finally agreed that the current restriction on investing in property should
be removed and consideration should be given to
The Board then discussed the Pension Committee’ s recommendation
(g) I to adopt a trigger mechanism to manage the Post Office sections’
exposure to index linked gilts. Detailed information had been provided
by AON Hewitt to support this recommendation and, after discussion,
the recommendation was approved by the Board.
Directors reiterated that the investment strategy proposed depended
on the implementation of Project Robin. If the buffer to be produced by
Project Robin was not forthcoming, the rate of contributions would
need to be very different and the investment strategy would be
rethought completely because of the different circumstances.
(h
A draft term sheet had been provided for information setting out the
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(i) I current basis under which negotiations were progressing on Project
Robin.
The Board asked for Susan Crichton to provide a paper to the January
(j) I Board meeting on the status of the negotiations to date, the
Shareholder’s views and any implications for State Aid discussions and
confirming the timetable for delivering Project Robin.
ACTION: Susan
Crichton
POLB12/123 ANY OTHER BUSINESS
(a) I [Anything exciting here].
(b) I Alwen Lyons confirmed that the dates for Board meetings in 2013
would now be as set out in the document presented to the meeting. It
was noted that Alasdair Marnoch would not be able to attend the
November meeting.
ACTION: (c) I Some Committee dates (notably those for ARC) would be changed
Company following further discussions with the respective Committee Chairmen.
Secretary
POLB 12/124 ITEMS FOR NOTING
(a) I The Significant Litigation report was noted. Alwen Lyons gave a brief
update on Second Sight’s progress with the Horizon work.
(b) I The Board noted the Report on Sealings and resolved that the
affixing of the Common Seal of the Company to the documents set
out against items numbered 823 to 833 inclusive in the seal
register is hereby confirmed.
(c) I The proposal to update and increase the limits of delegated
authority was approved.
(d) I CD noted that the ARC had discussed the proposal set out at the last
Board meeting to set up two uncommitted loan facilities of up to £50
million each for short term funding flexibility, such that no more than
£50 million would be able to be drawn down at any time.
The proposal had been approved by the ARC but would require a
formal resolution by the Board to satisfy the counterparties’
requirements. It was agreed that the following approved wording
should be included in the minutes of the meeting:
After due and careful consideration of all the circumstances, the Board
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Post Office Limited — Strictly Confidential
expressed the opinion that it was satisfied that it would be most likely to
promote the success of the Company for the benefit of its members as
a whole to enter into:
(i) aletter in the form produced from The Royal Bank of
Scotland pic (the “Bank”) in respect of the uncommitted
revolving credit facility of £50,000,000 made or to be
made available to the Company by the Bank; and
(ii) a similar letter to be issued by Citibank in respect of a
further uncommitted revolving credit facility of
£50,000,000 to be made available to the Company by
Citibank”.
It was resolved that, in addition to and without amending, prejudicing or
revoking any Bank Mandate / Company Excerpt Minute or any other
instruction/s provided or to be provided by the Company to the Bank,
the CFO (Chris Day) and the Head of Corporate Finance (Charles
Colquhoun) be and are hereby authorised to enter into facilities and to
sign and deliver any documents required in connection with loan
facilities up to a maximum of £100 million, on behalf of the Company.
POLB12/125 CLOSE
There being no further business, the meeting was then closed.