Protection that keeps your clients in business Presented by: Your name, position Date (month, year)

Protection that keeps your clients in business April 2007£12.75 Co value£500m October 2007£0.85p (shares suspended) Administrators called in in April 2008 Once a rising star of the stock market, Carter & Carter's fortunes have deteriorated rapidly since the helicopter crash on May 2 in which Phillip Carter died Source: guardian.co.uk Monday 10 March 2008 Share Price The effect of losing a key person 2

Protection that keeps your clients in business Direction & vision Entrepreneurship Boardroom cohesion What went wrong? Creditor Confidence 3

Protection that keeps your clients in business Solicitors Bank Other consequences Solicitors Auditors IFAs Bank Clients Creditors 4

Protection that keeps your clients in business 5 Owner / managed business No ‘substitutes bench’ Limited market for shares.

Protection that keeps your clients in business The owner managed business Four key business functions Leadership Financial control Production Sales. 6

Protection that keeps your clients in business Frank Technical Director R&D Quality control Buying Projects Contracts Team leader Peter Finance Director Cash flow Credit control Cost control Forecasting Profit testing Loans/Capital tax Company Secretary Anne Sales and Marketing Connections Product & market Negotiating Team leader Exports Alan Managing Director Vision Direction Leadership Board cohesion Bank confidence Silos – Custom Control Systems Ltd 7

Protection that keeps your clients in business Peter Finance Director Cash flow Credit control Cost control Forecasting Profit testing Loans/Capital tax Company Secretary Anne Sales and Marketing Connections Product & market Negotiating Team leader Exports Alan Managing Director Vision Direction Leadership Board cohesion Bank confidence Silos – Custom Control Systems Ltd 8

Protection that keeps your clients in business How will they source a replacement? What are the financial consequences? What will happen to the shares? Peter Finance Director Cash flow Credit control Cost control Forecasting Profit testing Loans/Capital tax Company Secretary Anne Sales and Marketing Connections Product & market Negotiating Team leader Exports Alan Managing Director Vision Direction Leadership Board cohesion Bank confidence Silos – Custom Control Systems Ltd 9 Three key questions

Protection that keeps your clients in business How will they source a replacement? Peter Finance Director Cash flow Credit control Cost control Forecasting Profit testing Loans/Capital tax Company Secretary Anne Sales and Marketing Connections Product & market Negotiating Team leader Exports Alan Managing Director Vision Direction Leadership Board cohesion Bank confidence Silos – Custom Control Systems Ltd First key question 10

Protection that keeps your clients in business TimeMonths ? Head hunter costs£ ? Share option buy out£ ? Relocation costs£ ? How will they source the right replacement? Consider the potential time and money involved: 11

Protection that keeps your clients in business How will they source the right replacement? Friends Provident paid £370,000 for Trevor Matthews to move home. Matthews received the ‘relocation allowance’ for his move from Edinburgh to Dorking, Surrey. A spokesman for Friends Provident says: ‘ Relocation costs are a standard part of most employee contracts where people have to move location for their role.’ ‘It was extremely important for us to be able to secure Trevor Matthews’ appointment to us.’ Money Marketing – 15/09/

Protection that keeps your clients in business How will they source a replacement? What are the financial consequences? Peter Finance Director Cash flow Credit control Cost control Forecasting Profit testing Loans/Capital tax Company Secretary Anne Sales and Marketing Connections Product & market Negotiating Team leader Exports Alan Managing Director Vision Direction Leadership Board cohesion Bank confidence The second key question 13

Protection that keeps your clients in business Will they remain loyal? What happens if quality and service levels fall? What will be the effect on turnover and gross profit? How will the company meet its fixed costs? What are the financial consequences? How do the customers feel today? 14

Protection that keeps your clients in business Contacting key customers? Approaching key staff? Talking to suppliers? Possibly looking to a takeover? What are the financial consequences? What will the competition be doing today? 15

Protection that keeps your clients in business Director loan accounts may need repaying? Outstanding salary and bonus may need to be paid? Dividends now paid to the estate? SIPP / SSAS Return of Fund might need to be paid. What are the financial consequences? What will the executors of the estate be doing? 16

Protection that keeps your clients in business Will they reduce or withdraw credit terms? Can they still get creditor insurance? What are the financial consequences? How do the trade creditors feel today? 17

Protection that keeps your clients in business Attitudes changing in the economic climate? Will, or can, the bank fund cash-flow shortfall? Will they call in overdrafts? If they lend, will they require personal security? –In particular second charges –could these charges be retrospective on existing loans? What are the financial consequences? How does the bank manager feel today? 18

Protection that keeps your clients in business The vicious circle of doubt Bank Creditors Customers No cash flow Repay loans Replacement cash flow Be your own banker ££ Cover 19

Protection that keeps your clients in business Summary of needs Replacement costs Director loan account Bank loans & overdraft Contribution to Gross Profit £ 100,000 £ 50,000 £ 150,000 £ 450,000 Need 1 Key Person Cash Flow Costs quoted are estimated for illustration purposes 20

Protection that keeps your clients in business How will they source a replacement? What are the financial consequences? What will happen to the shares? Peter Finance Director Cash flow Credit control Cost control Forecasting Profit testing Loans/Capital tax Company Secretary Anne Sales and Marketing Connections Product & market Negotiating Team leader Exports Alan Managing Director Vision Direction Leadership Board cohesion Bank confidence The third key question 21

Protection that keeps your clients in business What will happen to the shares? Who gets the shares? –What is in the will? Spouse / partner? –How will they generate income? Children? –How old? Majority or minority shares? 22

Protection that keeps your clients in business The minority shareholder No power No market No guarantee of income The estate has the problem! 23

Protection that keeps your clients in business The majority shareholder Run or work in the company? Appoint / remove directors? Strip retained profit out of the business? Sell the shares - To whom? - At what price? - Check articles! 24

Protection that keeps your clients in business Articles of association Pre-emption rights? -Must offer to existing shareholders first? Value clause -- How will the shares be value d? -- Problems of post death valuation But - Where does the money come from? Both the Estate and the company may have the problem 25

Protection that keeps your clients in business Fair value For Estate The business ‘will’ Life / CIC Policy Cross Option Agreement Fair value for EstateControl for the business 26

Protection that keeps your clients in business Summary of needs Possible total Replacement costs Director loan account Bank loans & overdraft Contribution to GP Value of shares £ 100,000 £ 50,000 £ 150,000 £ 450,000 £ 250,000* £700,000 Need 1 Key Person Cash Flow Need 2 Share Protection *Assumes company valued at £1m – one quarter share 27

Protection that keeps your clients in business What creates the profit? "The most essential human tasks: sensing, judging, creating, and building relationships...means a great deal of a company's value lies between the ears of the employees" Thomas A. Stewart - Intellectual Capital: The New Wealth of Organisations,

If you want to find out more, contact: Name Contact telephone number Thank you. Scottish Provident is a division of the Royal London Group, which consists of The Royal London Mutual Insurance Society Limited and its subsidiaries. The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The firm is on the Financial Services Register, registration number It provides life assurance and pensions and is a member of the Association of British Insurers and the Association of Financial Mutuals. Registered in England and Wales number Registered office: 55 Gracechurch Street, London, EC3V 0RL. SCPR5912 JUL15 Important information