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First Milk has been progressing and evolving in recent years thanks to the commitment and investment of our members.

As members’ capital in the business grows, your Board has recognised that there is a need to review how that capital is treated. This includes consideration of the payment of interest, trading and repayment of capital.

We have undertaken extensive research into the potential structures that First Milk might adopt in dealing with members’ capital and we have looked at avenues undertaken by other worldwide farming co-operatives.

Our current Capital Structure includes two capital accounts:

Membership Account
• Minimum of £1500
• Attracts interest at base rate +2%
• Repayable over five years.

Members’ Investment Account
• Accumulated by 0.5ppl retentions
• Repayable over five years.

The new capital structure proposal recognises member capital contributions to date through interest and dividends (thus rewarding past loyalty and milk volume). An option to trade investments should unlock the underlying value of business once a dividend stream is established and a market develops.

The key elements of the proposal are:-
• 10% of the balance of the Members’ Investment Account will be converted to new Preference Shares;
• The Membership Account balance will be added to the remaining balance in the Members’ Investment Account to create a new Member Capital Account.

Members will receive a return on their capital as follows:-
• Interest payments on the Member Capital Account
• Holders of new Preference Shares will be entitled to a dividend based on the performance of the business.
• Both the new Members’ Capital Account and the new Preference Shares will be repayable in the same way as the current capital accounts when a member leaves First Milk. Former members will also be paid interest on any remaining balances held in their capital accounts.
• The Board may also issue new Preference Shares to existing members to reflect capital retentions since the initial allocation.

Members will be entitled to trade Preference Shares with each other at set times during the year. Leavers would only be able to sell their shares within a year of membership terminating. Meanwhile, Investment Accounts will be tradeable, provided that members retain a minimum investment level (to be a ppl amount based on annual volumes supplied).

New members will be required to commit to investing a minimum capital requirement (to be a ppl amount based on annual volumes to be supplied) and may also be allocated new Preference Shares, at the discretion of the Board.