Update 1st March

Update following a number of questions and progress update for the community of stakeholders

From: David Alexander

Date: 1 March 2010 14:13

Subject: Village Shop update deadline 5th of March plus photo opportunity today at 3pm

To:

I would like to start by saying an immense thank you to all of you who have responded so positively to the idea of buying the village shop as a community. Support has come in the form of offers of funds towards the purchase, loans if need be, to services donated across a range of disciplines right through to people volunteering to work in the shop should we be successful in acquiring it.

The local press have taken an interest in our campaign and are planning to take some photos today at the village shop at 3pm. If any of your are available and wish to support the campaign by being in the photos please come along at just before 3pm.

The key matter currently is one of funds. We have until the 5th of March to make a formal expression of interest to the vendors solicitor. These expression of interest needs to underwritten with the funds required. I am therefore focusing on this area currently.

In terms of amount pledged so far, we are at about 40 families saying yes to an investment. We are at about 40% of our target of £183,000 but there are at least 12 people yet to declare the amount they would be prepared to invest. We also have an offer of a loan for close to the full amount which we could consider if we felt reaching the purchase price was not likely to happen.

I cannot stress that now is the time to act and commit if you believe this is the right course of action. The village shop is unlikely to become available again for such a purchase and it will therefore be outside of our ability to shape its future or develop its services if we do not take this opportunity now. If we set the share price at £25 per share we need to sell 7,320 shares to raise the funds required.

I hope you are able to invest something to get us to goal in cash terms as well other forms of support. Please would be so kind as to pass this on to anyone you have email addresses for or can simply share a printed copy with. We need all the support we can muster as a community to make it happen.

Please do not hesitate to contact me directly on 0771 747 3661 if you have any questions. I have provided some answers to specific questions that have arisen below.

A number of questions have arisen during the last week or so which I have provided answers to to those who raised it. I have selected the most popular and summarised the answers below. I hope this will be of use for those of you yet to confirm precisely how much you would be prepared to invest into the fund to buy the business.

1. How will the shop be run - We will employ a professional manager for the shop with relevant retail experience and the motivation to deliver a well run, community focused yet profitable business. I would envisage them being supported by a mixture of volunteer and paid staff. We have had a lot of offers to volunteer and I do have at least one person in mind to run the shop on behalf of the community with the relevant experience. The shop will have a management board elected by the community shareholders). Their job is to ensure it is correctly managed, has a clear set of social objectives and the right commercial support to allow it to operate professionally. Consultation with the people that use the shop regularly and people who would like to use the shop but feel it does not meet their needs will be sought on an ongoing basis. Lets not forget the business is profitable today and has a very respectable turnover. I would expect us to improve this turnover annually through offering new services that people want and are prepared to pay for.

2. Can we buy the freehold of the building as well? - The answer is yes we can, I have spoken with the owner, who is prepared to sell it if we buy it as a community interest company with a defined social purpose as outlined. They are not in a position to sell the freehold until April 2011 onwards. This means we will ensure we have sufficient shares available within the company to accommodate a further fund raising round later on to top up our funds so we can purchase the freehold. I do not have exact prices for freehold but we need to realistically think of paying something in the order of £250,000 for the building and land. I have spoken to a local commercial agent who provided me with a rule of thumb valuation model for such transactions.

3. Why is a community interest company limited by shares the right format to buy the business in? - These special types of businesses were designed specifically to help with running a business where there is a social purpose. We could adopt an industrial and provident society format or register as a charity but this comes with additional regulation overheads.

My sense from some experience in this area is that if we are asking people to invest their money into a business with social purpose there should be some recognition of that. CIC's allow this by offering to pay dividends to those people who invested. These dividends are limited in scale in order to ensure the sustainability of the business over time but it does mean that it is possible for them to get recognition for providing upfront support.

The value of their shares for dividend purposes will always equate to the amount of money they put in at the point of share purchase. It is entirely possible for a CIC to pay all or some of its dividends to a charity if this was the decision of the shareholders. This can be done by simply changing the memorandum and articles of association.

The other benefits of being a CIC are transparency of governance, the ability to raise additional funds either by issue of shares or through commercial loan, flexibility to secure normal trading advantages as a company.

4. How much is a share in the company - The answer to this questions comes in three parts.

A. How much money do we need to raise to buy the business as a going concern, including stock and what level of working capital is needed to operate with positive cashflow. - current answer is around £183,000

B. How much is needed to buy the freehold when it comes available - The answer is around £250,000. This may be less given profits generated between purchase of the business and point of purchase of the land and the freehold.

C. What types of development would we like to do to the premises or the business going forward that would require investment beyond what could be achieved out of operating profits. - This amount is not clear at this time, but let us say £100,000

This gives us potential a maximum share capital value of £533,000. We could break this up into shares of anything from £1 to through to a £25 each. The price of a share needs to be determined based on the level of interest in buying shares and how much people have to invest. I do not believe we would want to exclude people from investing by making the individual share price too high. We have had offers from £50 upwards so far.

The table shows what different levels of investment at different share prices would mean in terms of number of shares someone would hold. Regardless of volume of shares it is about value of holding that drives dividend payments. Right now the focus is on raising the £183,000 through sale of shares in the CIC. This would leave the balance of shares as unissued share capital in the CIC for future sale to raise further funds for development or purchase of freehold.