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An Open Letter To Valeri Belokon and Kaspars Varpins

29 July 2014

Message From Chairman Karl Oyston

Blackpool FC Chairman Karl Oyston has asked the official website to publish an open letter sent to Valeri Belokon and Kaspars Varpins.

The contents of this letter can be found below:

Dear Valeri and Kaspars,

Thank you for your open letter.

Twelve months ago in a letter from your company, VB Football Assets, you asked us to buy you out. This has been your main objective for the last three years.

As recently as last week, you sent your representative, Mr Normunds Malnacs to Blackpool to press the football club to buy you out. You proposed to the directors of Blackpool Football Club that we buy
your shares and terminate your loan agreements. I quote what you wrote:

Proposed Value

“Taking into account calculations for both share value and agreement value we would like to propose you to acquire VBFA 20 per cent shares in BFC and BFC Segesta agreement for a total of £24 million, with £14
million paid at the transaction date [transfer of shares and agreement] and remaining £10 million to be repaid as a seven year fixed interest [to be agreed] loan secured with the mortgage of the stadium.”

This, Valeri, if had we agreed to pay £24 million, would have given you a massive profit of virtually three times the original combined cost of your shares, which cost you £1.8 million, with a further £6.6
million loan from you to contribute towards the construction and fit-out of the South and South West stands.

You have already taken £1.86 million from the football club.

Yet you say, in your recent open letter: Now it is time to pay back what you have taken and finally, ‘Put Football First'.

How could your £24 million extraction proposal amount to Putting Football First? If you take £24 million out of the club to Latvia, how does that put football first?

The loan agreement specifies that you receive a share of the club’s ongoing ticket, catering, commercial and season ticket income from the South and South West stands paid to your Latvian company. This would significantly reduce the amount of money available to the football club for the players’ wage budget - please tell me how this is putting football first?

May I remind you that you have resisted my repeated proposal to separate all football and non-football income. The non-football income could then be shared according to our agreement. I would further
remind you that I was opposed to structuring the deal to build the South and South West stand based on the sacrifice in perpetuity of football income.

Through your representative Kaspar Varpins, you have asked, as recorded in the Blackpool FC board minutes, for dividend payments on your shares. How can this be putting football first?

For 27 years my father has never taken a penny in dividends or any salary or any consultancy fees, even when, before my time, he was serving as chairman and chief executive. I have therefore resisted any
such dividends.

You say in the first paragraph of your open letter that my father has failed to meet you to discuss your concerns. This is simply not true. As you well know, my father has offered to meet you many times in
London or Blackpool. You would also have met him, had you attended more than one of the board meetings during the last four years. We cannot understand why you do not come to the board meetings to help
Blackpool Football Club and put football first.

My father remains ready to meet you at any time in London or Blackpool. You and I both know why he is not prepared to travel to Riga.

As you know well, my father and our family have funded the club since the day he got involved 27 years ago.

In 1987 the directors of Blackpool Football Club approached my father and told him that the club was bankrupt and that the assets would be sold to pay off the debts. Developers were ready to pick up Bloomfield
Road for development.

My father is a genuine fan, which accounts for the irrationality of his conduct in supporting a loss-making operation for a quarter of a century.

He has ploughed large sums of money into BFC, both in personal money and in large interest-free loans from various Oyston group companies.

At one point, my father converted over £4 million of personal loans to Blackpool Football Club into a Blackpool Football Club shareholding, adding to additional share capital, which then totalled £5.5 million.

In the 2000-2001 season, the club required substantial sums to re-develop the ground, which was by far the most dilapidated in the Football League. No bank would touch Blackpool Football Club.

As a consequence of our discussions, my father then sold his company which owned Lancashire Life, Yorkshire Life and Cheshire Life magazines in the UK, a company making large sums of money and a real
cash cow, to support Blackpool Football Club, a company historically losing large sums of money.

This was the money that I used to build the North, the North West and the West stand, at a time when the club had just been promoted from what now is League Two.

He gave an interest-free loan of £6.5 million to attract a further £2.5 million grant from the Football Foundation. This £9 million enabled me to build and fit-out most of the North, North West and West
stands as you see them today. At that moment there was no realistic prospect of ever getting this money back.

This financial support from my father puts your £1.8 million shareholding into perspective. So, I don’t think my father needs any advice about putting both football and BFC first.

I attach a picture of what the stadium looked like before we started the re-development, only twelve years ago.

You also say in your letter that my father and I have “channeled away more than £24 million”. It is strange that this is the very sum that you would have “channeled” away to Latvia, if your 2013 proposal had
been accepted.

Up until May 31, 2013, BFC had made loans to Segesta Limited, BFC's parent company, of £24 million.

The £24 million was in part used to pay off loans to Protoplan Ltd., Zabaxe Ltd., which was a considerable benefit to Blackpool Football Club because they were loans that had been used to build and modernise
the BFC stadium and to provide BFC with income streams. Please note that Protoplan and Zabaxe, both Oyston group companies, did not take profit or interest on those loans.

Capital expenditure was required to complete the stadium, particularly the South East Corner and the new East Stand and for the fit-out of the South Stand hotel, the income stream from which would eventually
benefit you.

The completed Travelodge hotel, with an income of over £500,000 per annum, was purchased as a long-term investment and enhances the assets of the group and the revenue of the football club and its parent

No-one has ever explained that it was my father who used his personal money to build the Travelodge and indeed it was he who bought the Travelodge land in the first place with his personal money, when he
bailed out Blackpool Football Club 27 years ago. In effect, he paid for the land twice, when he bought it for a second time for £650,000 following an independent valuation. That was because Blackpool
Football Club needed cash and he stepped in and put football first.

This accounts for most of the £24 million that you say we “channeled away”.

You say that my father and I took £11.5 million in salaries. The board approved the payment of £11 million to Zabaxe Ltd., a company owned by my father. The money did not go to him personally and it was paid in consideration to Zabaxe for its financial help and the help of other group companies for having supported the football club over a period of 24 years and building much of the stadium you see today. This
involved large interest-free loans, without which support BFC would not have survived.

I remind you that when you purchased your 20 per cent shareholding in the football club for £1.8 million, my father never took a single penny of it and made sure that all your £1.8 million went into the
football club.

That was putting football first.

I invite you to consider how you would respond if Blackpool Football Club were to buy a minority shareholding of twenty per cent of your bank, the Baltic International Bank of Riga, Latvia, and then proceed
to tell you how to run your bank insisting that you open escrow accounts to frustrate the bank’s ability to trade.

How would you feel if we then complained in an open letter to a Latvian newspaper about the bank’s activities in Kyrgyzstan, where your Manas bank and your gold mine were confiscated after the fall of
the Bakyiev government?

For the avoidance of doubt, I would never have treated you in such a manner and will not agree to your proposal of an escrow account.

We are surprised that you have so easily persuaded SISA/BST to support your extraction of £24 million from the club or alternatively that SISA/BST were unaware of your 2013 proposal, subsequent discussion or
the follow-up visit by Mr Malnacs as recently as last week. It appears that SISA/BST singularly failed to carry out any proper, or any, due diligence, unless of course they support the extraction of £24 million
to Latvia, which is certainly not putting football first.

We are hopeful that the members of SISA/BST will examine the conduct of their leadership in this matter, as I do not see any circumstances where the football club would be able to take their current leadership

We have a position that is virtually unique in football. We are a debt-free, cash rich club, unlike many of our competitors that will suffer the ravages of transfer embargo as early as January 2015, when
they fall foul of the Financial Fair Play regulations.

This strong position does not come easily, or without cost, in the way in which we sometimes have to operate. Please be assured that the club is in the best possible hands as we are in this for the long term.


Karl Oyston.

Dated this 28th day of July 2014.

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