D F T
Guidelines for Allied Dunbar : July 1987
General
I. The Guidelines for Allied Dunbar rof lact the expectation that the
company should be able to achieve sustained rapid rates of growth in
turnover and profits through building on the strengths inherent In:-
(a) A customer base of I million relatively affluent policyhold*rs
and investors.
(b) A large direct saletforce and a &aod relationship with 3,000
independent life assuranc a and Lavestment brakers.
(c) A management teas experienced and Innovative in lif a, pensions,
retail funds and related fields.
(d) A highly efficient administrative to=, experienced in these
fields and capable of operating sophisticated computer systems
and controls.
Financial Guidelines
2. Uturns : Allied Dunbar should aim for the annual Increase in thst
value of B.A.T Industries' attributable share of the assessed value of
the business together with not dividends paid to B.A.T Industries to
be 25% of the opening value of the attributable assessed value. B.A.T
Industries' attributable share should reflect the not liability to
B.A.T Industries on outstanding shares and share options.
Additionally, Allied Dunbar should seek to L=r"s* the Financial
Surplus from Wm In 1987 to L137z In 1992, which represents a pro-tax
return on B.A.T Industries' estimated book value rising from 19.9z in
1987 to 35.7% in 1992.
3. Gross Initial Candsolons : Allied Dunbar should aim, to achieve
10Z p.a. real growth in gross initial commissions.
4. Dividends : Allied Dunbar should seek to increase the dividend per
share by at least IOZ p.a. in real terms. on this basis and assuming
B.A.T Industries acquires shares promptly after issue, this u4nimum
dividends required from Allied Dunbar are:-
la 1987 1988 1989 1990 1991 1992
Not Dividend 35.0 40.4 46.8 54.1 62.5 72.2 C
Tax Cradir- (ka)12.9 14.9 17.3 20.0 23.1 26.7
47.9 59.3 64.1 74.1 85.6 98.9
(These figures assume average inflation of 4.5% p.a.
and an ACT rate of 27.)
SpecifIc Priorities
5. The first priority La to retain the co=itment and motivation of the
salesfarace and sales management in a period when it may be n*cosssrY 11Q.
to adjust products. selling methods and commission arrangements to C>
meet the requirement of now legislation and rogulacory arrangements.,
if, as part of this, it is intended to redesign at replace the
existing share option scheme, provision should be made for appropriate
consultation.
BAT Industries document for Province of British Columbia 23 April 1999

2
6. Since margins an policies are likely to decline significantly there
will need to be particular emphasis an improving salssforce
productivity through attracting more customers and by providing
existing customers with a wider range of attractive policies.
Specific provision will need to be made for ansuricS the adequacy of
the training and back-up services which Allied Dunbar provide to the
salesforce.
7. Thar* should be continuing emph"Ls an ensuring that the quality and
capacity of the information systems used within Allied Dunbar Ls such
that these can not only support the existing business but can also be
used as a positive factor La promoting new activities and services.
The plans for Allied Dunbar should include adequate provision for the
necessary investments both in the systems and La the management
resource required for their operation and development.
S. Allied Dunbar should continue to consider, with Eagle Star, the extent
to which cross-sallLng of Eagle Star Life and Central Insurance
products can be --A- attractive to the two companies and to iwiividual
salesman.
9. Thera should be continuing emphasis on the need to achieve above
average investment performance. Criteria should be developed for
measuring this performance, which should be monitored an a continuing
basis relative to key comparator companies.
10. There should be further consideration of options for enhancing the
existing business base L=IudLug:-
(a) Strengthening the branding of the names Allied Dunbar and thoe
Financial Planning Service.
(b) Reassessing opportunities in the Broker market.
(c) Developing a segmented salssforce aimed at different custoner
groups.
(d) Developing an International salesforce.
(a) Developing arrangements with other financial service
institutions similar to those already established with Estate
Agents.
(f) Considering the potential for extending the customer base co
compete more strongly in the sectors of the market currently
served by Industrial Life companies.
11. Allied Dunbar should also consider the possibilities for further
extending its activities La financial services through a major
acquisition to be funded by B.A.T Industries. In assessing these
possibilities, key critaria to be not will be that the acquisition
should be in an activity where the *xistin strengths and expertise of
Allied Dunbar can be applied to enhance the value of the company
acquired and that it should enable Allied Dunbar to establish a strong
competitive position within the relevant urket sector.
ISIDJA
21st July 1987
BAT Industries document for Province of British Columbia 23 April 1999