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Corporate Governance

The Company is committed to high standards of corporate governance, for which the Board is responsible to the Company’s shareholders. The Board has fully implemented the provisions of the UK Corporate Governance Code issued in June 2010.

What are the responsibilities of the Board of Directors?

The Board sets the Company’s strategic aims and ensures that necessary resources are in place in order for the Company to meet its objectives. All members of the Board take collective responsibility for the performance of the Company and all decisions are taken objectively and in the interest of the Company.

The Board is responsible for satisfying itself as to the integrity of financial information and the effectiveness of the Company’s system of internal control and risk management processes and is responsible for ensuring that the Company’s obligations to its shareholders are met.

Whilst the Board has delegated the normal operational management of the Company to the Executive Directors and other senior management it has established guidelines requiring specific matters to be subject to decision by the full Board of Directors, including material acquisitions and disposals, investments and capital projects. The Non-executive Directors have a particular responsibility to challenge constructively the strategy proposed by the Executive Directors; to scrutinise and challenge performance; to satisfy themselves on the integrity of financial information and that financial controls are robust and defensible; to ensure appropriate remuneration and that succession planning arrangements are in place in relation to Executive Directors and other senior members of the management team.

How frequently are Board meetings held?

At least eight Board meetings are scheduled during the year and additional meetings are convened to consider matters that are time-critical. The Chairman ensures that, at least annually, the non-executives meet without the executive directors present.

What are the responsibilities of the Chairman and Chief Operating Officer?

As Chairman of the Board, Stephen Billingham is responsible for:

• the leadership of the Board, ensuring its effectiveness and setting its agenda;
• ensuring that adequate time is available for discussion of all agenda items, in particular strategic issues;
• arranging the regular evaluation of the performance of the Board, its Committees and individual Directors; and
• promoting a culture of openness and debate by facilitating the effective contribution of Non-executive Directors and ensuring constructive relations between Executive and Non-executive Directors;
• ensuring that, through the Company Secretary, the members of the Board receive clear, accurate and timely information; and
• ensuring effective communication with shareholders.

Whilst not a director of the company, the Chief Operating Officer, supported by the Finance Director, is responsible for:

• developing strategic operating plans;
• preparing annual budgets and medium term projections for the Group and closely monitoring performance against plans and budgets; and
• overseeing the day-to-day management of the Group.

How is the board structured to ensure that no individual or small group of individuals can dominate the Board’s decision making?

The Board is considered to be of sufficient size such that the balance of skills and experience is appropriate to the size of the business. The Board is balanced by a strong non-executive element and at least half of the Board, excluding the chairman, are considered by the Board to be independent in character and judgement and have no relationships or circumstances that are likely to affect, or could appear to affect, their judgement as Directors of the Company. The Board has reviewed the provisions in the UK Corporate Governance Code and has concluded that, under the definitions used, two of the three current Non-executive Directors are independent.

The Board has appointed Angus Porter as its Senior Independent Non-executive Director and, on appointment, the Chairman was considered by the Board to meet all of the independence criteria set out in the UK Corporate Governance Code.

How are directors appointed to the Board?

The Company has a formal, rigorous and transparent procedure for the appointment of new directors. The Nominations and Governance Committee leads the process for board appointments and for succession planning and makes recommendations to the Board. New directors stand for election at the AGM following their appointment. The company has decided to comply with the UK Corporate Governance Code’s recommendation on annual re-election at the forthcoming AGM and every director will stand for re-election.

None of the full time executive directors has more than one Non-executive directorship in a FTSE 100 company nor the chairmanship of such a company.

The terms and conditions of appointment of Non-executive directors are available for inspection at the Company’s registered office during normal business hours.

What information is provided to the Board?

To enable the Board to discharge its duties, all Directors are given appropriate documentation in advance of each Board meeting. This normally includes a detailed report on current trading and full papers on matters where the Board will be required to make a decision or give its approval.

What is the role of the Company Secretary?

The Company Secretary acts as secretary to the Board and its Committees.

The Directors, each of whom has received appropriate training, have access to the advice and services of the Company Secretary who is responsible for advising the Board, through the Chairman, on all governance matters.

The Company Secretary is also responsible for ensuring that board procedures are followed, that applicable rules and regulations are complied with and that there are good information flows within the Board, its Committees and between the Non-executive Directors and senior management.

The Company Secretary facilitates the induction and professional development of Board members.

How is the performance of the Board evaluated?

During the year the Board undertakes a formal evaluation of its own performance and that of its committees and individual Directors. The Board considers that the best means of effectively undertaking this process is a combination of self and peer assessment. This process is led by the Chairman except in relation to his own performance as Chairman which is led by the Senior Independent Director. The results of the review are discussed by the Board and any appropriate action plan agreed.

Level and make-up of remuneration

The Board believes that a properly constituted and effective remuneration committee is key to ensuring that the Company’s policy on Executive Directors’ remuneration supports the enhancement of shareholder value. The Board has delegated to the Board’s Remuneration Committee the assessment and recommendation of a broad policy on executive remuneration.

The Remuneration Committee considers all material elements of remuneration and incentives of Executive Directors and senior management with reference to independent remuneration research and professional advice in accordance with the Combined Code. The Remuneration Committee judges where to set the main elements of the remuneration package relative to comparative companies. It is the aim of the Remuneration Committee to encourage and reward superior performance. It is the opinion of the Remuneration Committee that shareholders’ interests are best served by focusing a greater proportion of Executive Directors total remuneration on performance-related compensation. The aim of this policy is to provide remuneration packages that will retain talented people in the business, enable the recruitment of appropriately skilled and experienced newcomers and be seen as competitive in the markets in which the Company operates. Executive share options are not offered at a discount save as permitted by the relevant provisions of the Listing Rules.

When setting the levels of remuneration for non-executive directors the Board takes into account the time commitment each Non-executive Director makes to the Company (for example through membership of the Audit and Risk, Remuneration and Nomination and Governance Committees).

There are no special provisions for compensation in the event of loss of office. The Remuneration Committee would consider the circumstances of any individual case of early termination and would determine compensation payments accordingly. A fair but robust principal of mitigation would be applied to the payment of compensation in the context of professional advice received as to contractual entitlement.

All Executive Directors’ service contracts are initially for a fixed period of one year from date of appointment, and will continue thereafter unless terminated by written notice of at least 12 months.

What are the company’s main internal controls?

The Board is responsible for the Company’s system of internal control and risk management and for reviewing the effectiveness of those systems. Such systems are designed to manage rather than eliminate risk of failure to achieve the Company’s strategic objectives. It should be recognised that such systems can only provide reasonable and not absolute assurance against material misstatement or loss. The 2010 UK Corporate Governance Code requires the Directors to review the effectiveness of the Company’s system of internal controls. This relates to all controls, covering financial, operational, compliance and risk management matters.

The Company has processes for identifying, evaluating and managing the significant risks faced by the Group in the form of a Company Risk Register which is reviewed and updated regularly as required.

The key procedures which the Directors have established with a view to providing effective internal control are as follows:

• Regular Board meetings to consider a schedule of matters reserved for Directors’ consideration
• An annual review of corporate strategy, which includes a review of risks facing the business
• A risk management process (Company Risk Register) which identifies the key risks facing the business and how these risks are monitored and managed on an ongoing basis
• An established organisational structure with clearly defined lines of responsibility and delegation of authority.
• Documented and enforced policies and procedures
• Appointment of staff of the necessary calibre to fulfil their allotted responsibilities
• Comprehensive budgets and forecasts, approved by the Board, reviewed and revised on a regular basis, with performance monitored against them and explanations obtained for material variances
• A detailed investment approval process, requiring Board approval for major projects. Post investment appraisals are conducted and are reviewed by the Board
• An Audit and Risk Committee of the Board, comprising Non-executive Directors, which considers significant financial control matters as appropriate
• An internal audit function which performs continuous assessments of the quality and effectiveness of risk management and control
• Documented fraud and whistle blowing policies and procedures and regular review of current whistle blowing regulations
• Reporting of accounting policies and legal developments to the Board
• Review of treasury policies and activities by the Audit and Risk Committee
• An established programme of management development and succession planning.
• The Board conducts a review of the effectiveness of the system of internal control on an annual basis taking account of any material developments which have taken place in the year.

What is the role of the Audit and Risk Committee?

The Audit and Risk Committee (ARC) is made up of John Allkins (Chairman), Angus Porter and Ian Dyson and meets at least three times per annum. Senior management, including the Finance Director and internal and external auditors may attend for part or all of each meeting. The internal and external auditors have unrestricted access to the ARC and its Chairman. Three of the members of the ARC are independent Non-executive Directors.

The ARC considers all matters relating to internal control and reporting, internal and external audits, the scope and results of the audits, the independence and objectivity of the auditors and establishes that an effective system of internal financial control is maintained.

The ARC has primary responsibility for making a recommendation on the appointment or re-appointment of the external auditors. In order to maintain the independence of the external auditors, the Board has determined policies as to what non-audit services can be provided by the Company’s external auditors and the approval processes related to them. Under those policies work of a consultancy nature will not be offered to the external auditors unless there are clear efficiencies and value added benefits to the Company. The ARC monitors the level of non-audit fees paid to the external auditors.

Download the Terms of Reference – Audit and Risk Committee.pdf (in pdf format)

What is the role of the Nominations and Governance Committee?

The Nominations and Governance Committee (NGC) is made up of Stephen Billingham (Chairman), Angus Porter, Ian Dyson and John Allkins and meetings are held as deemed necessary by the Chairman of the Committee. The majority of the NGC members, including the Committee Chairman, are independent Non-executive Directors.

The NGC considers all matters relating to the structure, size and composition of the Board and makes necessary recommendations to the Board with regard to adjustments and new appointments where deemed necessary. The Committee considers the mix of skills and experiences that the Board requires and seeks the appointment of directors to meet its assessment of what is required to ensure that the Board is effective in discharging its responsibilities. The NGC may use the services of external search agencies when recruiting new Directors.

Download the Terms of Reference – Nominations and Governance Committee (in pdf format)

What is the role of the Remuneration Committee?

The Remuneration Committee is made up of Angus Porter (Chairman), Stephen Billingham and John Allkins and meets at least twice a year and at such other times as the Chairman of the Committee deems necessary.

All of the members of the Remuneration Committee are independent Non-executive Directors. The Chief Operating Officer and other directors may be invited to attend meetings as considered appropriate by the Remuneration Committee.

The Remuneration Committee will consider all material elements of the remuneration policy, remuneration and incentives of Executive Directors and senior management to ensure that remuneration is sufficient to attract, retain and motivate directors of the quality required to run the company successfully. This is performed with reference to independent remuneration research and professional advice, which is provided by Aon Consulting, in accordance with the 2010 Corporate Governance Code. The Remuneration Committee will then recommend to the Board the framework for executive remuneration packages of individual Directors. The Board is then responsible for implementing the recommendations although no Director is involved in deciding his own remuneration. The Directors are not permitted, under articles, to vote on their own terms and conditions of remuneration. The Remuneration Committee is responsible for preparation of the Report on Directors Remuneration which forms part of the Annual Report.

Download the Terms of Reference – Remuneration Committee (in pdf format)

How does the Company communicate with shareholders?

Communications with shareholders are given high priority and the Company aims to provide as much information as is commercially sensible to both existing and potential investors, recognising that transparency is the best way to develop understanding of the Company’s strategy, performance and growth potential. The Company encourages two-way communication with both its institutional and private shareholders and responds quickly to all enquiries. There is a regular dialogue with institutional shareholders as well as presentations after the Company’s preliminary announcement of the year end results and at the half year.

The Board uses the Annual General Meeting to communicate with private and institutional investors and welcomes their participation. It is our policy for all Directors to attend the AGM whenever possible. The Chairman aims to ensure that the Chairmen of the Audit, Remuneration and Nomination Committees and the Senior Independent Non-executive Director are available at the AGM and are available to answer relevant questions. The Chairman also writes to the major shareholders on an annual basis inviting them to correspond with the Non-executive Board of Directors if they so wish.

Debt Information

Each quarter, information is provided on a confidential basis to the Rating Agencies (Moody’s, Fitch and Standard & Poors), Security Trustee and parties to all our financing transactions.

This information includes confirmation of compliance with the covenants established under the securitisation structures. The company recognises the importance of keeping its bondholders (both current & potential) informed about the underlying performance of the businesses covered by the two securitisation structures and therefore it makes available these quarterly reports on this website and also via Bloomberg. The information is released into the public domain to coincide with the interim and preliminary results announcement of Punch Taverns plc and therefore quarter 1 and quarter 2 reports are released in April each year and quarter 3 and quarter 4 reports are released in October each year.

If you would like to be alerted to the exact date of our results announcement please subscribe to the e-mail news services elsewhere on this site. Included on this site is a copy of the Offering Circular when the bonds were issued (such documents are directed at persons having professional experience in matters relating to investments), the quarterly reports and spreadsheets showing the financial history of each structure over the past three years. In line with information provided to Rating agencies etc. this information is unaudited and is extracted from the company’s management information.

A pdf file showing the debt and interest profile for all our securitisations is available below.

• Punch Taverns Finance A
• Punch Taverns Finance B

If you have any questions on this information please contact the company via investors@punchtaverns.com

For assistance with respect to the procedures for participating in the noteholder consent process, or to request a copy of the circular, noteholders are advised to contact the Tabulation and Exchange Agent, whose details are set out below.

Deutsche Bank AG,
London Branch
Winchester House
1 Great Winchester Street
London EC2N 2DB
xchange.offer@db.com
Tel: +44 (0)20 7547 5000

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