Why are we having this share issue?

At the end of the Eighties, the owners and operators of the line, the Dart Valley Railway, announced their intention to cease running the railway which, they said, was loss making. At that time, the South Devon Railway Trust was formed to take over operations (from Dumbleton Hall Locomotive Ltd., a registered charity, and a number of Association volunteers were appointed to the board) and a lease on the line was negotiated. We have now reached the end of that lease, which leaves three options:
* we renegotiate another lease - this gives us no long term security and the landlord is not enthusiastic
* we pull out and the line is closed
* we buy it which gives us security and, importantly, enables us to apply for grant funding for all sorts of projects from various sources, such as the lottery, Europe and English Heritage, which are not available to us with a short lease.

What exactly is the procedure?

It is quite complicated for legal reasons, but also for tax efficiency. We have, throughout the whole process, taken advice from solicitors, accountants and other specialists in the field of share flotations.

* The Trust has signed an option agreement with the DVR company for the purchase of a 199 lease on the railway, including the associated land, fixtures and fittings for £1.13m, a sum arrived at after in-depth valuations and lengthy negotiations between both sides.

* Included in the option agreement is an option to then buy the freehold for just £1. This is part of a legal nicety involved in the transfer of the Light Railway Order - or Transport and Works Order (TWO) as it will be - which is held by the DVR and takes some time to transfer. The £1 is paid as soon as the TWO is ready.

* The Trust formed the South Devon Railway Plc to raise funds to assist with the purchase of the railway from the DVR as well as fund a number of projects on the railway and, importantly, to purchase from the Trust a 199 year sub-lease on what is termed the "Associated Property", i.e. the non operational land.

* This leaves the Trust to carry out its charitable aims of operating a steam railway and living museum and the new Plc to run the non railway activities like the café, bookshop and so on.

* Remember, up until now we have paid a rental to the DVR for the retail activities, as well as for the railway, with the DVR's contractors running them up until 1999.

Why have we formed a Plc and why isn't the Trust issuing the shares?

There are a number of benefits to the Trust in being a charity - principally in the area of taxation. However, there are certain restrictions on the operation and constitution of a charity which, amongst other things, effectively precludes it from raising funds through a share issue. A share issue such as ours is the only means of raising the kind of sums we need so we were advised that we had to form a public limited company (Plc).

I'm not happy with the idea of a Plc - what is it?

Plc stands for public limited company, in other words a company in which any member of the public can buy shares, as opposed to a private limited company (generally written as Ltd.) in which the shares cannot be traded.

Plcs pay dividends. Will we?

It was interesting to read Ian Allan, writing in a recent edition of Railway World and wishing us good luck, that he looked forward to the day when the SDR would be paying the shareholders a dividend like the DVR does. A Plc can pay dividend to its shareholders at the discretion of the directors. However, the board's intention is to reinvest all the profits of the Plc into the railway. The final decision, though, rests with the shareholders who can vote the directors off the board at an AGM if they disagree with their actions.

So what happens to the profits?

We want to make as much profit as we can so that it can all be ploughed back into a whole range of projects from locomotive and rolling stock preservation to major improvements at Buckfastleigh - the ultimate aim throughout is the creation and maintenance of the perfect GWR branch line and everything that contributes to that.

Why should I buy shares in the SDR?

It will help ensure the future survival of the line. The more shares we sell the less money we have to borrow from the bank to buy it, and the more money can go into improvements and restoration and other projects.

Will I make any money from buying these shares?

Broadly speaking, no! We do not intend paying a dividend preferring to invest the proceeds back into the railway. However, the shares will have a value if you should choose to sell them at a later date. But we do offer shareholder incentives like annual free rides and a discount in the shop and café.

Why don't I loan you money rather than buy shares?

Loans need to be repaid. Having shares in the company means that you own a part of the railway in exchange for your payment.

Why is the minimum subscription £100?

The Plc is legally bound to communicate with its shareholders. This has an expense of course which is the same for every shareholder, however big the holding. Therefore administration costs will outweigh the benefits to the Plc of very small holdings.

What are the shares - do I have any influence over the decision making?

Definitely. There is an annual general meeting and any shareholder has a right to speak and express a view. Remember, a shareholder is one of the owners of the company and the directors are legally bound to act in the best interests of the shareholders.

If the full £2m is raised, having paid the DVR £1.13m, what will happen to the balance of the money?

It will be spent on projects such as major improvements to Buckfastleigh, significant changes to our museum and its exhibits, the restoration of locomotives and rolling stock, PW, S&T, you name it.

What does the Plc do and what does the Trust do?

The Trust runs the railway, the Plc runs the non railway side including catering, cleaning, retailing etc.  Having the Plc provides a tax efficient way of dealing with the profits by donating them to the Trust. The Charity Commission would not permit the Trust to carry out the level of trading that the Plc is expected to achieve and could not then donate the profits it makes on these commercial activities to itself. Sounds silly but its true!

Who are the directors, what are their responsibilities and how much are they paid?

The Plc directors are Alan Taylor chairman, Mike Webb vice chairman, Chris Stokes financial director, Richard Elliott director and company secretary and Peter Treglown marketing director. All except Richard and Peter are also Trust directors. Every director of both the Trust and the Plc is a volunteer and an Association member (several of many years standing) and none of them receives any payment whatsoever. Richard Elliott receives a salary in his position of general manager of the Trust.

Your Memorandum & Articles of Association says you can run a caravan park, chalets and so on. Surely this is not what you are all about?

No, it certainly isn't! The Memorandum and Articles of a public company tend to be very wide ranging. The most important things to do with running and developing the railway are all there and are our raison d'être. But as the Plc will own a fair amount of non railway land it was felt that this paragraph from a pretty standard company M&AA should stay in. The SDR Plc can see absolutely no reason in the foreseeable future for doing anything along the lines of a caravan park or hotels and so on. But, the final very important thing to remember is that the SDR Trust can outvote the Plc under the terms of its golden share style arrangement and stop any inappropriate business being entered into.