FOH Updated Q&A

June 14, 2014

I may be picking up your meaning incorrectly but I've been well aware of the "working capital" requirement since discussions around what sum would be needed to buy the club from UKIO / UBIG. ?5.5 million or therabouts was widely discussed but it was also said incl I understand by BDO that there was a need for any new owner to spend money as part of the bid for the club so we ended up with "only" having to offer ?2.5 million.

I'm very relaxed about the "working capital" but I agree with the need to be open about what that it is being spent on and well as being transparent about everything about the club and its running.

Part of the CVA was in fact take on and make the club a going concern this may have had to be included in the cost projections for the coming years. It could well have failed the Court of Session scrutiny and been knocked back. It's also why the others failed to get pasted the first base. I also think as has been mentioned before this is an evolving process and I have asked FoH myself for more transparent info to explain the reasoning behind it.

I am despite all this still willing to continue with the DD over and above other things as there was no alternative and viable option on the table. If there was where was it? It's like selling a car two weeks after you sold it some says I could have got you more if I'd known, aye ok.

June 14, 2014

OK so things may not be perfect but how many of us would have settled for today's position 6 months ago?

Some people never seem to be happy unless they are moaning.

June 14, 2014

The club had a negative bank balance, estimated at ?99K once all the forecast bills from the administration period had come in and been paid. That ?99K did not include donations of (IIRC) ?58K. The estimated ?99K also included provision for a ?15K win bonus in either of the last two league games that never materialised, so the opening negative balance may be as low as ?26K.

The club's finances are in the best state they have been in decades. Rebuilding the credit rating will need time, and that is the same whether it is Bidco or Fanco that owns the club.

There has been no indication that substantial sums needed to be spent on the ground. If it needs ?100K spent on getting a safety certificate for the main stand, then that will be in the budget. However if it needed ?1M spent, then the decision may well have been to close it. Replacing the main stand is something that needs addressed going forward, but I suspect that it will only be looked at once the CVA loan is paid off, which is in five years time and not two as might have been the case if the deal and the funding had been structured differently.

As an example, it may cost ?100K a year in maintenance for the next five years. Had FoH been in a position in two years to have paid off the Bidco loan, they could have asked the pledgers to help fund a new stand at that point, thus saving ?300K in maintenance costs.

i believe the negative cash balance was also before the onitial foh injection of ?1m. Foh can clear this up very easily. Well they could if ann has told them and if ann allows them to tell us what our money is to be used for.

June 14, 2014

i believe the negative cash balance was also before the onitial foh injection of ?1m. Foh can clear this up very easily. Well they could if ann has told them and if ann allows them to tell us what our money is to be used for.

Without giving us a ? for ? account this is what it was used for

"The position that Bidco has inherited is one of a club that has been left with no money in the bank (or indeed a negative sum as the process of administration concludes). The contribution from FoH has provided essential working capital at this difficult time. The ?1 million contributed so far has not only helped to keep the show on the road, but has also covered the costs of the transaction of the takeover."

I hope at some point in the not to distant future they will produce a copy of the accounts and publish them in line with there transparently claim.

June 14, 2014

No-one tells me what to do or think about my own experience.

And if you are a contributor to FoH, no-one asks you either. Or maybe they will when they get around to the minor stakeholders.

June 14, 2014

Am intrigued to know what the plans are for dissemination of information on the business plan for HoM.

Notes above suggest there might be different levels of disclosure for the FoH member of HoM Board, the FoH Board itself and the FoH membership. But there will also have to be disclosure to the outside shareholders of HoM - assuming that not all have sold to Bidco. Very complicated to control these different information flows.

June 14, 2014

Without giving us a ? for ? account this is what it was used for

"The position that Bidco has inherited is one of a club that has been left with no money in the bank (or indeed a negative sum as the process of administration concludes). The contribution from FoH has provided essential working capital at this difficult time. The ?1 million contributed so far has not only helped to keep the show on the road, but has also covered the costs of the transaction of the takeover."

I hope at some point in the not to distant future they will produce a copy of the accounts and publish them in line with there transparently claim.

To expect a ? for ? account would be ridiculous. but (say) a half million per half million pound account would not seem even at this stage an unreasonable imposition. The club does now have probably a few hundred thousand in the

bank. It can't borrow, but then I didn't think the idea was to get back into debt (except to Ann). But the ST income and other "normal revenue" is intact and it has a minimum of ?300,000 per quarter coming in from FoH on wildly attractive terms (you wouldn't get a bank to give the club money on the terms FoH are giving it!) I am willing to be convinced that this "difficult time" is as difficult as we are told, but it'd need more than the empty words you quote to convince. About all they say is that Ann won't abscond with the money - but we all knew that already.

June 14, 2014

Am intrigued to know what the plans are for dissemination of information on the business plan for HoM.

Notes above suggest there might be different levels of disclosure for the FoH member of HoM Board, the FoH Board itself and the FoH membership. But there will also have to be disclosure to the outside shareholders of HoM - assuming that not all have sold to Bidco. Very complicated to control these different information flows.

The FoH club board member (Ian Murray) is explicitly restricted by normal board confidentiality - so he can only tell the FoH Board and they can only tell FoH members what the majority of the club board (in practice I imagine that pretty much means Ann) want to be disclosed. The agreement commits Ann/the club board to give periodic presentations to the FoH board. The content of these are at Ann/the club board's discretion and can (and I am sure will) themselves be

confidential to the extent Ann doesn't want anything in them disclosed. The agreement gives in effect the FoH board and certainly FoH members no entitlement to information that Ann/the club board doesn't want to disclose.

June 14, 2014

To expect a ? for ? account would be ridiculous. but (say) a half million per half million pound account would not seem even at this stage an unreasonable imposition. The club does now have probably a few hundred thousand in the

bank. It can't borrow, but then I didn't think the idea was to get back into debt (except to Ann). But the ST income and other "normal revenue" is intact and it has a minimum of ?300,000 per quarter coming in from FoH on wildly attractive terms (you wouldn't get a bank to give the club money on the terms FoH are giving it!) I am willing to be convinced that this "difficult time" is as difficult as we are told, but it'd need more than the empty words you quote to convince. About all they say is that Ann won't abscond with the money - but we all knew that already.

I think we both want this to succeed and I'm convinced it will. This new Hearts is something we will need to get used to, it's new territory for the supporters particularly after the Romanov years. At the last cry for help, the share issue, we were promised it would be invested in youth and football schooling and that wasn't the case ( unless you count last seasons blooding of U20s). This time round despite the FoH board voting promise being watered down we will get clarity without breaching confidences.

June 14, 2014

I think we both want this to succeed and I'm convinced it will. This new Hearts is something we will need to get used to, it's new territory for the supporters particularly after the Romanov years. At the last cry for help, the share issue, we were promised it would be invested in youth and football schooling and that wasn't the case ( unless you count last seasons blooding of U20s). This time round despite the FoH board voting promise being watered down we will get clarity without breaching confidences.

By "watered down" do you mean drowned? Maybe we will get clarity. Nothing I've seen so far gives me much confidence. And for me that threatens the success of the "greatest fan movement in Scottish football history".

June 14, 2014

I have no problem in delegating responsibility. I just want to be empowered to do so. At the moment the FANCO board are accountable to Ann Budge and not the membership. That is wrong.

You make a good point here, in many ways Ann Budge/Bidco has stolen a march on FOH/Fanco. In the short term to medium term this will allow Ann to lead Hearts in the same manner as any other CEO and/or majority shareholder. Personally I do not have a concern over this but there is no way that this is the 'spirit' of fan ownership. More simply this is an enhanced model of fan funded.

Where I do have a concern is over the long term fan ownership structure (i.e. post Bidco). I suspect that many contributing to FOH are going to be disappointed at the actual level of control that is made available to general FOH members.

I believe that a very practical model, and one that fairly rewards our average input of ?16 per month would be as follows.

- The full FOH membership (8k approx.) 'meets' once per year to elect the (unpaid) FOH board from the membership pool.

- The FOH board elects a Chairman, who also holds the title Honorary Chairman of the football club and sits on the football club board as a voting member.

- The FOH board are only responsible for one appointment within the football club, the Chief Executive. The only position that the FOH board can dismiss is the Chief Executive.

- The FOH board can veto director appointments, made by the chief executive, but not directly appoint.

- The FOH board can advise and recommend to the football club board, as well as benefit from full disclosure of football club accounts, strategy and business plan.

- the full FOH membership can call for an extra ordinary motion to dismiss the FOH board and/or Chief Executive but this should require an extremely high voting majority and turn out to be carried.

- The football club board should be required to hold regular (quarterly) Q&A sessions with the full FOH membership, the FOH board should also be required to do this.

June 14, 2014

You make a good point here, in many ways Ann Budge/Bidco has stolen a march on FOH/Fanco. In the short term to medium term this will allow Ann to lead Hearts in the same manner as any other CEO and/or majority shareholder. Personally I do not have a concern over this but there is no way that this is the 'spirit' of fan ownership. More simply this is an enhanced model of fan funded.

Where I do have a concern is over the long term fan ownership structure (i.e. post Bidco). I suspect that many contributing to FOH are going to be disappointed at the actual level of control that is made available to general FOH members.

I believe that a very practical model, and one that fairly rewards our average input of ?16 per month would be as follows.

- The full FOH membership (8k approx.) 'meets' once per year to elect the (unpaid) FOH board from the membership pool.

- The FOH board elects a Chairman, who also holds the title Honorary Chairman of the football club and sits on the football club board as a voting member.

- The FOH board are only responsible for one appointment within the football club, the Chief Executive. The only position that the FOH board can dismiss is the Chief Executive.

- The FOH board can veto director appointments, made by the chief executive, but not directly appoint.

- The FOH board can advise and recommend to the football club board, as well as benefit from full disclosure of football club accounts, strategy and business plan.

- the full FOH membership can call for an extra ordinary motion to dismiss the FOH board and/or Chief Executive but this should require an extremely high voting majority and turn out to be carried.

- The football club board should be required to hold regular (quarterly) Q&A sessions with the full FOH membership, the FOH board should also be required to do this.

While I'd go along with much of your model as a goal, I'd argue with the assertion that in the interim period Ann simply has the benefits that would normally accrue to a CEO. The business of which she is CEO has the commitment of a free gift of ?3.8m from the people she may eventually sell the business to. What is more, if those potential buyers fail to deliver ?6.3m over 5 years (plus interest on Ann's ?2.4m loan??)she can terminate the agreement and the potential buyers (FoH) don't get a single share. FoH could deliver 80% to 90% of their commitment (more than twice Ann's investment) and get not a single share. One of my concerns is that the terms of this agreement (which seem to me

extraordinarily one sided and give FoH lots of obligations and few rights) will make meeting FoH's obligations very difficult. Things are very rosy for FoH and its pledges now. I'd be surprised if the feel good factor can be maintained

over 5 years, if FoH members continue to be treated as they are now. One telling line is that the Q&As refer to the need to ensure information flow to FoH members to ensure their financial input is maintained. The concept that the members might actually have rights to information seems to be missing.

to 90% of what they've committed to (more than twice Ann's investment) and end up with nothing.

June 15, 2014

I have no problem with the way the deal has been structured, of course it could have been done in a different way. But the CVA cash was needed immediately as well as other working capital to fund football debts and revitalising the club after administration. Let's not forget that a lot of the structure of the club was hollowed out when we went into administration. And we are not in any position to raise cash on the commercial markets.

I have no issue with Bidco or Fanco having immediate control, for me they are different entities only in name, working towards a common purpose of establishing ownership and stabilisation of HMFC. In addition we are getting a very experienced professional in to run the club post admin in preparation for fan ownership. I think this is a very important transitional process, as in my opinion it would be a huge step to go from VR to Admin then straight to a fan run club post admin, we need this period to adjust and rebuild.

Sure there are other ways, but I am just happy that we have a club to support and I am very happy with what has been done so far and with the method used, my 51 quid is certainly the only direct debit that I'm happy to see leave my account, it's a small price to pay to help HMFC.

June 15, 2014

Geoff - we are where we are for a reason - i.e. we spent significantly more than we earned from income since Chris Robinson and Leslie Deans started speculating in the mid to late 90s, something that continued through the noughties and the early years of the current decade That overspending means that we are in the second tier next season. I interpret from what you are saying that we should overspend again to gain promotion.

Let's say all clubs in the championship adopted the same approach and overspent in order to get a promotion. There is only one guaranteed place, so that means that nine clubs got it wrong and will suffer the consequences.

I'm sure that my aspirations for the club match yours, but I disagree with the premise of spending more than we can afford to get back to the top tier. You could use the same argument about TRFC's overspending and you see where it has taken them (albeit on a different scale). Should Dunfermline be spending more than they can generate from their income in order to get out of the third tier? We will have the second biggest income and budget in the division next season. If we can't get back to the top tier using that alone, it says more about the lack of quality of the players, coaching and recruitment, than it does about the club's income.

I agree with Uly that pledges going into working capital are simply a top-up on ticket prices. Football at the top level in Scotland is way overpriced already without adding to it.

Give it a rest with the "top up" chat.

It was nonsense when first claimed, it is nonsense now.

Sent from my GT-I9300 using Tapatalk

June 15, 2014

Give it a rest with the "top up" chat.

It was nonsense when first claimed, it is nonsense now.

Sent from my GT-I9300 using Tapatalk

Why is it nonsense? The club is being provided with a top up to its revenue (already the second biggest in the league we are in next season, and the third or fourth highest in the country) of ?1.4m per year. To put that in

perspective the top up is bigger than the total revenue of most of the clubs we will be competing with next season.

If we are not even given a meaningful explanation of what the top up is for, I can guatrantee that there will be a lot of anger and frustration when we lose to clubs whose total revenue is less than the top up we are

giving.

June 15, 2014

I have no problem with the way the deal has been structured, of course it could have been done in a different way. But the CVA cash was needed immediately as well as other working capital to fund football debts and revitalising the club after administration. Let's not forget that a lot of the structure of the club was hollowed out when we went into administration. And we are not in any position to raise cash on the commercial markets.

I have no issue with Bidco or Fanco having immediate control, for me they are different entities only in name, working towards a common purpose of establishing ownership and stabilisation of HMFC. In addition we are getting a very experienced professional in to run the club post admin in preparation for fan ownership. I think this is a very important transitional process, as in my opinion it would be a huge step to go from VR to Admin then straight to a fan run club post admin, we need this period to adjust and rebuild.

Sure there are other ways, but I am just happy that we have a club to support and I am very happy with what has been done so far and with the method used, my 51 quid is certainly the only direct debit that I'm happy to see leave my account, it's a small price to pay to help HMFC.

How is the structure of the club "hollowed out"? Why would we need to borrow in the commercial markets? How many of our competitors next season have the facility to borrow in the commercial markets to any significant extent?

If Bidco and Fanco (FoH seems to be the actual counterparty) are the same entities with different names why does the agreement contain so many belts and braces to protect one party's interests? And no-one on this thread has

suggested that the club should go straight to being a "fan run club", have they?

June 15, 2014

How is the structure of the club "hollowed out"? The squad, the coaching staff, the back room staff, maintenance projects, youth development.

Why would we need to borrow in the commercial markets? We needed to fund the CVA, 2.5m upfront, where else would we have gotten it?

How many of our competitors next season have the facility to borrow in the commercial markets to any significant extent? None of them are involved in a CVA, irrelevant.

If Bidco and Fanco (FoH seems to be the actual counterparty) are the same entities with different names why does the agreement contain so many belts and braces to protect one party's interests?

She who pays the piper etc. The club clearly need the working capital, AB is not making a fortune out of this, yet she risks 2.5m oh her kids inheritance, fair deal and as risk rewards go this is not unreasonable.

And no-one on this thread has

suggested that the club should go straight to being a "fan run club", have they?

Not exactly no, but as I said I think we need the experience during the transition.

Sorry for having a view that differs from your own. Tried to answer above, but hey just my opinion. Of course it could have been done in a different way, given time, money, other investors, a different FOH board etc etc, then again, if your aunty had b...

June 16, 2014

The document mentions comms being restricted until the share offer period has come to an end - anyone know when that is?

June 16, 2014

The document mentions comms being restricted until the share offer period has come to an end - anyone know when that is?

I also don't see how that affects FANCO unless FANCO are regarded as a concert party of BIDCO.

June 16, 2014

I also don't see how that affects FANCO unless FANCO are regarded as a concert party of BIDCO.

I don't really understand the criteria and terms of the information restriction here but I'd assume that it's because the two are clearly very much linked. I've really no idea though.

June 16, 2014

Sorry for having a view that differs from your own. Tried to answer above, but hey just my opinion. Of course it could have been done in a different way, given time, money, other investors, a different FOH board etc etc, then again, if your aunty had b...

Thanks for your response and it would not be much of a message board if we all had the same opinions. On your points

- there is clearly a need and intention to strengthen the squad, but without paying much if anything in transfer fees and presumably at wages we can afford. I've always felt the backroom staff could be slimmed down a bit. The Academy no doubt needs some work but the sort of things alluded to so far needn'tt cost a lot.

- the ?2.4 comes from Ann and does not require any commercial borrowing facility

- their are two pipers, one paying upfront and another paying almost 3 times as much over a few years (and will have matched the upfront sum by this time next year). The tune IMO should (in terms of the agreement) have

looked more like a duet than a solo piece.

-No-one argues that Ann shouldn't run the club during a transition period. I do wonder if it is appropriate for her also in effect to run FoH.

June 17, 2014

I recently sent an email to FoH asking about elections and Ian Murray kindly took he time to respond and I have copied the email and posted it here. I feel it gives a bit more insight into the reasoning behind the current Bidco FoH relationship.

Dear Mr

Many thanks for taking the time to write to the Foundation and apologies for the delay in responding to you. This is for two reasons. Firstly, we are a merry band of four volunteers at the moment and the volume has been significant for a number of reasons and secondly, as we have repeatedly stated, we are in a closed period at the moment due to the legal process around the General Offer. We are a connected party to the Club and therefore are covered by the Takeover Panel laws and restrictions on what can be said and what can't be said in public over this period.

Let me answer each of your questions in turn.

1. We will hold an AGM as quickly as possible. This will have to be dictated by the legal process of bringing every "pledger" on as an official "member". At the moment we have 8,000 pledgers but each has to give FoH permission to be a member of the FoH and be processed as such. When everyone is a member we can then run AGMs/EGMs and such like. We should be able to start this process by the end of June as soon as the General Offer is out of the way. Whilst we did say that we would do it "3 months after the CVA is agreed", this was prior to the understanding that a General Offer would be required. At this stage I think we are heading for an October date for the first AGM which isn't too far away.

2. The documents that were published by FoH were in draft and were always subject to change. The purchase of Hearts has fundamentally altered since these documents were produced. The main driver for this, of course, is the capital that has been used to deliver the CVA. This has come from BIDCO without which we would not be in a position to have the club safe. There were no other funding options open to us that would have satisfied the Lithuanian administrators that a deal could be deliverable. It was a combination of BIDCOs capital of ?2.5m and FoHs revenue that convinced them that a deal could be done and concluded.

The original intention of FoH was to have all Directors resign and a full democratic election to take place. However, this was designed when we were of the view that there would be full supporter ownership from day one. This is now not the case as the Club requires total re-organisation and rebuilding. The revenue that FoH generates each month will pay back BIDCO in time (as would be the case with any capital loan) but there is also a significant funding gap at the club for a few years. We always said that FoH funds would be used for both the purposes of the purchase of the club and the working capital requirement. This is where the situation alters. The club requires a working capital requirement of ?1.4m over the next two years and, as a result, BIDCO has made the generous decision to postpone any repayments of the capital for those two years in order to allow every penny to go into stabilising the club. Only when the club has a proper financial foundation will the BIDCO capital loan be repaid. During this transitional phase BIDCO has specified the FoH should have a stable Board to enable a smooth transition over this difficult phase and prepare for full supporter ownership. The contract with BIDCO specifies that the FoH Board should be no larger than 6 of which 4 should be Directors who have been involved previously. The 5th Director should be a new appointment with expertise in finance and the 6th will be an appointee from all the constituted supporters groups that will be replaced by a democratic election at the first AGM. Subsequent AGMs will elect more people on to the Board until there is a fully elected Board by the time there is an official transfer to full supporter ownership.

The exact process for doing this has yet to be worked up but I suspect we will produce a number of options and then allow the membership to decide at the first AGM on the best approach. After all, this is your organisation and is run by the members so probably best for the members to decide the way forward rather than the current Board. As long as it fits in with the legal contract with BIDCO we can have flexibility around this.

It will always be up to the membership to decide who is elected both in the transition phase and for the future. The basic principle at this stage is that BIDCO requires continuity so that the FoH Board doesn't fundamentally change in this transition phase. This is to both protect their investment but also allow them to get on with the job of rebuilding the club.

I hope that explains the situation.

Best wishes,

--

Ian Murray MP

Chair

Foundation of Hearts

-----Original Message-----

From: Dannie

Sent: 25 May 2014 16:39

To: [email protected]

Subject: FoH elections

Dear Sir.

I would be grateful if you could confirm if there will be elections as laid out in statement in line with the following It is the intention to hold an AGM within three months of a Creditors Voluntary Agreement (CVA) being agreed to acquire the football club on behalf of FoH from the majority shareholders. At that point, a democratic election will take place and a new board will be appointed from within the extended FoH membership. With this in mind, all of the existing directors have submitted resignation letters to the chairman, which will take effect at the AGM. There is no need to worry about a mass exodus because some of the current board are planning to stand for election to ensure that a smooth

transition takes place. It will, of course, be for the membership to

decide who is elected.

Thank you

Kind regards Dannie

Sent from my iPhone

Dannie

I've redacted some of the personal details.

June 17, 2014

I recently sent an email to FoH asking about elections and Ian Murray kindly took he time to respond and I have copied the email and posted it here. I feel it gives a bit more insight into the reasoning behind the current Bidco FoH relationship.

Dear Mr

Many thanks for taking the time to write to the Foundation and apologies for the delay in responding to you. This is for two reasons. Firstly, we are a merry band of four volunteers at the moment and the volume has been significant for a number of reasons and secondly, as we have repeatedly stated, we are in a closed period at the moment due to the legal process around the General Offer. We are a connected party to the Club and therefore are covered by the Takeover Panel laws and restrictions on what can be said and what can't be said in public over this period.

Let me answer each of your questions in turn.

1. We will hold an AGM as quickly as possible. This will have to be dictated by the legal process of bringing every "pledger" on as an official "member". At the moment we have 8,000 pledgers but each has to give FoH permission to be a member of the FoH and be processed as such. When everyone is a member we can then run AGMs/EGMs and such like. We should be able to start this process by the end of June as soon as the General Offer is out of the way. Whilst we did say that we would do it "3 months after the CVA is agreed", this was prior to the understanding that a General Offer would be required. At this stage I think we are heading for an October date for the first AGM which isn't too far away.

2. The documents that were published by FoH were in draft and were always subject to change. The purchase of Hearts has fundamentally altered since these documents were produced. The main driver for this, of course, is the capital that has been used to deliver the CVA. This has come from BIDCO without which we would not be in a position to have the club safe. There were no other funding options open to us that would have satisfied the Lithuanian administrators that a deal could be deliverable. It was a combination of BIDCOs capital of ?2.5m and FoHs revenue that convinced them that a deal could be done and concluded.

The original intention of FoH was to have all Directors resign and a full democratic election to take place. However, this was designed when we were of the view that there would be full supporter ownership from day one. This is now not the case as the Club requires total re-organisation and rebuilding. The revenue that FoH generates each month will pay back BIDCO in time (as would be the case with any capital loan) but there is also a significant funding gap at the club for a few years. We always said that FoH funds would be used for both the purposes of the purchase of the club and the working capital requirement. This is where the situation alters. The club requires a working capital requirement of ?1.4m over the next two years and, as a result, BIDCO has made the generous decision to postpone any repayments of the capital for those two years in order to allow every penny to go into stabilising the club. Only when the club has a proper financial foundation will the BIDCO capital loan be repaid. During this transitional phase BIDCO has specified the FoH should have a stable Board to enable a smooth transition over this difficult phase and prepare for full supporter ownership. The contract with BIDCO specifies that the FoH Board should be no larger than 6 of which 4 should be Directors who have been involved previously. The 5th Director should be a new appointment with expertise in finance and the 6th will be an appointee from all the constituted supporters groups that will be replaced by a democratic election at the first AGM. Subsequent AGMs will elect more people on to the Board until there is a fully elected Board by the time there is an official transfer to full supporter ownership.

The exact process for doing this has yet to be worked up but I suspect we will produce a number of options and then allow the membership to decide at the first AGM on the best approach. After all, this is your organisation and is run by the members so probably best for the members to decide the way forward rather than the current Board. As long as it fits in with the legal contract with BIDCO we can have flexibility around this.

It will always be up to the membership to decide who is elected both in the transition phase and for the future. The basic principle at this stage is that BIDCO requires continuity so that the FoH Board doesn't fundamentally change in this transition phase. This is to both protect their investment but also allow them to get on with the job of rebuilding the club.

I hope that explains the situation.

Best wishes,

--

Ian Murray MP

Chair

Foundation of Hearts

-----Original Message-----

From: Dannie

Sent: 25 May 2014 16:39

To: [email protected]

Subject: FoH elections

Dear Sir.

I would be grateful if you could confirm if there will be elections as laid out in statement in line with the following It is the intention to hold an AGM within three months of a Creditors Voluntary Agreement (CVA) being agreed to acquire the football club on behalf of FoH from the majority shareholders. At that point, a democratic election will take place and a new board will be appointed from within the extended FoH membership. With this in mind, all of the existing directors have submitted resignation letters to the chairman, which will take effect at the AGM. There is no need to worry about a mass exodus because some of the current board are planning to stand for election to ensure that a smooth

transition takes place. It will, of course, be for the membership to

decide who is elected.

Thank you

Kind regards Dannie

Sent from my iPhone

Dannie

I've redacted some of the personal details.

Indeed it does give a bit more insight - to the mindset of Ann Budge. Why the "continuity" aspect is so important to her is not clear but given that two places over the next three years on the HMFC board will come from FANCO I would infer that she wants people who she is comfortable with on it.

The 4 permamembers of the FANCO board, to coin a phrase, will allow a permanent majority on it and ensure that two of the four join the board. What isn't clear is what happens if one of the four has to resign. Take Ian Murray. Let's say there is a No vote in the referendum, Labour win the 2015 election and he is asked to join the Cabinet. What happens in this circumstance? Is a Budge acolyte co-opted on to FANCO? Is an election held but Budge uses her power of veto? In short, while Ann Budge is taking every safeguard she can she is storing up trouble and creating unintended consequences.

June 17, 2014

Dannie - You have a PM.

June 17, 2014

Dannie - You have a PM.

Yeah got it thanks.

June 17, 2014

Thanks for your efforts Dannie .

Hopefully some people will chill out now that someone has had answers from Ian Murray.

June 17, 2014

Dannie - I don't know if I'm just becoming an old cynic, but I view it as being a politician's answer of telling you what he wants your to hear, but not necessarily addressing the basic questions that you have asked. It's either that or the original FoH has shown an incredible naivety for a group that has reportedly been working on this for three years. As ever with these sort of things, the answers given generate further questions.

Many thanks for taking the time to write to the Foundation and apologies for the delay in responding to you. This is for two reasons. Firstly, we are a merry band of four volunteers at the moment and the volume has been significant for a number of reasons and secondly, as we have repeatedly stated, we are in a closed period at the moment due to the legal process around the General Offer. We are a connected party to the Club and therefore are covered by the Takeover Panel laws and restrictions on what can be said and what can't be said in public over this period.

Let me answer each of your questions in turn.

1. We will hold an AGM as quickly as possible. This will have to be dictated by the legal process of bringing every "pledger" on as an official "member". At the moment we have 8,000 pledgers but each has to give FoH permission to be a member of the FoH and be processed as such. When everyone is a member we can then run AGMs/EGMs and such like.

I can't believe that the question of the status of pledgers only arose within the last few weeks. If it did, then that is evidence of naivety and a failure to recognise their obligations when accepting ?1M in pledges. If it didn't, then why did they not start the process of converting pledgers to members from the off and making it clear in their communications, e.g. the website, where they have always regarded the pledgers as members.

We should be able to start this process by the end of June as soon as the General Offer is out of the way. Whilst we did say that we would do it "3 months after the CVA is agreed", this was prior to the understanding that a General Offer would be required. At this stage I think we are heading for an October date for the first AGM which isn't too far away.

Naivety once again if FoH didn't understand that a General Offer would be required. It should be common knowledge among business people that anyone obtaining a 30% shareholding in a company is obliged to make a similar offer to all other shareholders. If they weren't aware of it, I'm sure that Bryan Jackson would have let them know at an early stage. FoH's intention was always to obtain a majority shareholding. It is naive in the extreme to believe that you could obtain a majority without making a general offer. I'm afraid that I see it only as an excuse for delaying the AGM. However, if October is to be the date, then that is at least more welcome that not having one at all.

I have also received some information relating to the Quantum shares (which I agreed to keep confidential for the moment). That information gave me a timeline that suggests that FoH and Ann Budge knew all along about the necessity for a wider share offer.

2. The documents that were published by FoH were in draft and were always subject to change. The purchase of Hearts has fundamentally altered since these documents were produced. The main driver for this, of course, is the capital that has been used to deliver the CVA. This has come from BIDCO without which we would not be in a position to have the club safe. There were no other funding options open to us that would have satisfied the Lithuanian administrators that a deal could be deliverable. It was a combination of BIDCOs capital of ?2.5m and FoHs revenue that convinced them that a deal could be done and concluded.

So the use of a capital sum to fund the CVA changes the FoH approach. It comes as a surpise to me that an Option of using a capital sum would change anything significantly. FoH may have had an "Option 1" to fund the CVA either fully or partly by pledges, with or without a lumpsum up front. However, they certainly had an "Option 2" to capitalise the pledges, i.e. to raise a lumpsum as a loan and pay it back from pledges. That was mentioned by Ian Murray at an early FoH presentation in the Gorgie Suite (a couple of weeks before the club went into administration)

I'm disappointed that Ian has also sought to deflect some responsibility onto the Lithuanian administrators for the FoH documents (which ones?) being changed. Once the UBIG/Ukio administrators got the cash for the security and shares that was them divorced from the club. They have no need, nor would I expect them, to have a say in how the purchaser and funder go about their businesses. Their only future involvement is to protect themselves from having been conned as to the value of the club or the assets, by including a windfall clause into the CVA agreement that would allow them a sell on fee should the business or the assets be sold on at a significant profit in the short term.

I'm certain that the real driver for change (in FoH governance) has come from Ann Budge. - more below

The original intention of FoH was to have all Directors resign and a full democratic election to take place. However, this was designed when we were of the view that there would be full supporter ownership from day one.

At least Ian agrees that the original intention was to deliver supporter ownership from day one.

This is now not the case as the Club requires total re-organisation and rebuilding.

Ok, this is where my concern about the deal and the transparency and honesty of the "major stakeholders" is suspect. Why was supporter ownership not deliverable on day one? What is it that needs total re-organisation and rebuilding? Why does that mean a five year delay in delivering fan ownership? Bryan Jackson carried out a total re-organisation and rebuilding of the club to operate on a break even basis within a month of his appointment.

The revenue that FoH generates each month will pay back BIDCO in time (as would be the case with any capital loan) but there is also a significant funding gap at the club for a few years. We always said that FoH funds would be used for both the purposes of the purchase of the club and the working capital requirement. This is where the situation alters. The club requires a working capital requirement of ?1.4m over the next two years and, as a result, BIDCO has made the generous decision to postpone any repayments of the capital for those two years in order to allow every penny to go into stabilising the club. Only when the club has a proper financial foundation will the BIDCO capital loan be repaid.

So Ian accepts that the situation has indeed altered. Why has the situation altered? Has Ann Budge insited on all these alterations for her 1) to provide the up front cash and 2) for her to run the club for up to five years. Were these two elements always integral to Ann's offer or could 1) have been provided without 2)

"The club requires" (I read that as Ann Budge requires).

Why is there a funding gap for a few years? What is it that needs to be funded? BDO ran the club for 11 months from a base point of having ?7K in the bank. We know about the initial ?1M required to keep the club going through the summer and to pay off the football creditors, but what else needs additional funds. Is Ann Budge incapable of running the club on a break even basis for years without an injection of ?2.8M.

I'm realistic enough to recognise and understand that a cash injection of ?1.4M in each of the next two years will greatly enhance the club's prospects of getting back to the top tier within that period. That is its primary purpose, no matter how often it is dressed up as "stabilisation". However, the main players have, thus far, avoided saying that in as many words. Is the reason that they, like me, actually see a distinction between saving the club and funding it's restoration to the top tier. I know that some people see these two elements as one and the same, but I most definitely see them as separate aspirations and in Hearts case the cart is being put before the horse. There are risks involved in putting the return to the premiership as the first priority. If it works out, then great, everyone will be happy. If it doesn't then there are risks that the pledges will diminish over time as results fail to meet expectations and the delivery of fan ownership is either exended or abandoned. It is in essence speculating to accumulate, which is exactly how so many clubs get themselves into financial difficulties in the first place.

During this transitional phase BIDCO has specified the FoH should have a stable Board to enable a smooth transition over this difficult phase and prepare for full supporter ownership. The contract with BIDCO specifies that the FoH Board should be no larger than 6 of which 4 should be Directors who have been involved previously. The 5th Director should be a new appointment with expertise in finance and the 6th will be an appointee from all the constituted supporters groups that will be replaced by a democratic election at the first AGM. Subsequent AGMs will elect more people on to the Board until there is a fully elected Board by the time there is an official transfer to full supporter ownership.

This can only be down to Ann Budge dictating the terms of the arrangement, but I believe it demonstrates a total lack of trust or confidence in FoH and/or the concept of fan ownership.

The exact process for doing this has yet to be worked up but I suspect we will produce a number of options and then allow the membership to decide at the first AGM on the best approach. After all, this is your organisation and is run by the members so probably best for the members to decide the way forward rather than the current Board. As long as it fits in with the legal contract with BIDCO we can have flexibility around this.

This "legal contrtact" is the crux of why we find ourselves still with a lot of questions. We have in effect two deals. The first covers the next five years of the club being owned privately by Ann Budge, but funded by FoH pledges of around ?6.5M. The second provides for fan ownership sometime in 2019 at an additional cost of ?100k. The first deal, to my mind, shows a desparation by FoH to get a deal done. Financially it could and should have been achievable at half the cost. Time wise it could and should have been ended in half the time. You might argue that it was the only deal on the table so FoH felt obliged to accept all and every condition put to them. That might be the case, but it is probably in FoH's interests to keep repeating that line. I happen to believe that other offers may have materialised had FoH or Ann Budge not been in a position to take the bid forward. There were at least two groups who I believe stepped aside or hrld back once it was known the FoH was a viable runner. (the Scandinavians and the London based groups).

It will always be up to the membership to decide who is elected both in the transition phase and for the future. The basic principle at this stage is that BIDCO requires continuity so that the FoH Board doesn't fundamentally change in this transition phase. This is to both protect their investment but also allow them to get on with the job of rebuilding the club.

Again Ann Budge is dictating, rather than collaborating.

I hope that explains the situation.

Don't get me wrong about what is going on. I want what is best for Hearts and the fans, and above all I am as delighted as anyone else that the club has a future at all. However, as more details of the deal have emerged, I would now have preferred that we had ended up being owned privately by a single person or a group of indiviuals.

The deal is being dressed up as fan ownership, but in reality FoH would be as well delaying their AGM and appointment of directors for five years, so minimal is their apparent involvement or influence on how the club is run, despite the level of the fans contribution.

That said I have every faith that Ann Budge will prove to be a good leader for the club, but with the level of financial support she is getting it should be made easier for her.

I'm sorry if it has come over as a bit of a rant, but it is how I feel about the various elements and consequences of the deal.

June 17, 2014

Dannie - I don't know if I'm just becoming an old cynic, but I view it as being a politician's answer of telling you what he wants your to hear, but not necessarily addressing the basic questions that you have asked. It's either that or the original FoH has shown an incredible naivety for a group that has reportedly been working on this for three years. As ever with these sort of things, the answers given generate further questions.

Don't get me wrong about what is going on. I want what is best for Hearts and the fans, and above all I am as delighted as anyone else that the club has a future at all. However, as more details of the deal have emerged, I would now have preferred that we had ended up being owned privately by a single person or a group of indiviuals.

The deal is being dressed up as fan ownership, but in reality FoH would be as well delaying their AGM and appointment of directors for five years, so minimal is their apparent involvement or influence on how the club is run, despite the level of the fans contribution.

That said I have every faith that Ann Budge will prove to be a good leader for the club, but with the level of financial support she is getting it should be made easier for her.

I'm sorry if it has come over as a bit of a rant, but it is how I feel about the various elements and consequences of the deal.

I'd love to see a response to some of those questions from someone at FOH.

June 17, 2014

However, as more details of the deal have emerged, I would now have preferred that we had ended up being owned privately by a single person or a group of individuals.

I suppose the obvious question must be though, did that individual or group exist? Is it a case that without the pledges we would never have secured Ann Budge (or another like her).

I think your views on being naive are probably spot on, I think it was naive and grew out of fear. Never a great basis for a business.

You may be correct in the postponing elections, etc for five years as the power of the fan element is negligible until then. However, having come this far under a "fan owner" banner it would be hard for the FOH board to give up that aspect now.

I suppose,the question that we all need to satisfy ourselves with is, If FOH had initially come to the support with the deal that we now have, i.e. Supporter funded, not supporter owned, would we all have bought in to the same level?

My view is that we would have.

July 1, 2014

Seems to have gone all quiet now that the "Share Offer" period has expired. This was mooted as a reason for Ann Budge/Bidco and FoH being unable to disclosing some information.

The outcome of the share offer has been posted on the website under the "offer" news item, but that is it.

July 1, 2014

Seems to have gone all quiet now that the "Share Offer" period has expired. This was mooted as a reason for Ann Budge/Bidco and FoH being unable to disclosing some information.

The outcome of the share offer has been posted on the website under the "offer" news item, but that is it.

You expected more?

We have been suitably fobbed off. Time to move on.

July 1, 2014

It's about time we had another "proper Q&A" - you know the sort where FoH's "major stakeholders" don't get to define the questions as well as the answers.

July 1, 2014

It's about time we had another "proper Q&A" - you know the sort where FoH's "major stakeholders" don't get to define the questions as well as the answers.

I only posted my comment this morning after being prompted by seeing that Ian Murray was online and browsing the board.

Seems to have gone offline again now. :whistling:

July 1, 2014

Just to add to the questions already raised on this thread, we now know that Bidco/Anne has approved the draft constitution of FoH and any changes to it must be approved by Anne. Is there any chance of the members (sorry funders) having a

chance to read and comment on the draft constitution. The only real info we have seen so far on FoH governance has been copious stuff about board elections, which for the next 5 years or so can in effect be replaced by the simple "The FoH Board shall be determined by Anne/Bidco".

July 7, 2014

Any sign of the updated Q&A?

Ian Murray's reply to Danny Boy suggested the share offer was preventing info being given.

What is the excuse now?

If it is "we are just a band of four" have all the other big business brains jumped ship?

July 11, 2014

Foundation e-mail from Ian Murray

MESSAGE FROM IAN MURRAY MP, CHAIR, FOUNDATION OF HEARTS

Dear Hearts Supporter,

It has been an exciting summer for us all so far. Hearts is out of Administration, season ticket sales have been exceptional, the playing squad is being strengthened and we all look forward to the season ahead.

We wanted to write to you to update on the contract with BIDCO, outline the next steps, give information on our first Annual General Meeting (AGM) and the election process to the FoH Board.

We appreciate that since the club coming out of Administration we have been quieter than we would have liked. This was purely down to legal restrictions placed on FoH due to the General Offer that BIDCO legally had to make for the remainder of Hearts shares. This period has now elapsed.

BIDCO DEAL

We have placed a Q&A on the FOH website (http://www.foundationofhearts.org/foundation-of-hearts-qa/) looking at the technicalities of the deal. It is important to state that the previous draft documents promoted by the Foundation were developed with the backdrop of FoH taking full control of Hearts following the Administration process. The situation has altered significantly since then with the welcome involvement of BIDCO.

The full contract between BIDCO and FoH is available to read in detail here (http://www.heartsfc.co.uk/staticFiles/1d/c2/0,,10289~180765,00.pdf). You will see that there is no FANCO as it was decided that this was an additional administrative layer that was unnecessary. Whatever way the CVA was concluded it would have required a capital sum of ?2.5m to deliver this. BIDCO provided that funding and the contract basically is to ensure two major outcomes. Firstly, to stabilise the club over the first three years with Ann Budge and the BIDCO team in executive roles at Hearts and, secondly, to provide a transition to full FoH ownership when BIDCO has been fully repaid.

The description I used of this relationship back in January was similar to Dragons Den. We get the capital required to deliver the CVA whilst getting the business experience of Ann Budge and her team to turn the fortunes of Hearts around. The previous owners and the Administration process has left the club hollowed out in a number of areas and the financial foundations will take some time to rebuild.

At the outset there is a FoH representative of the HMFC Board and that will increase to two in the second year. There will then be a transition to full FoH supporter ownership from year three onwards to when BIDCO is fully repaid.

The deal gives a contractual obligation to FoH to deliver a minimum of ?1m at completion of the CVA, ?1.4m in year one and ?1.4m in year two to be used for working capital to keep the club on a break even basis. After this point it has been projected that Hearts will no longer require additional working capital and the FoH funds can then be used to repay BIDCO. That is ?3.8m in working capital and ?2.5m in loan capital from BIDCO for the CVA.

The ?1m at the completion of the CVA was transferred to BIDCOs legal team. This was required for a number of immediate uses. Firstly, to provide the club with immediate working capital. Secondly, to provide funds to pay the legal and financial advisor fees to conclude the deal (not BDO as these were settled out of the CVA). Thirdly, to settle the legal and financial advisor fees on the FoH side of the deal. There is also the issue of footballing debt of over ?500,000 that has to be settled or agreements reached with the parties as soon as possible after the CVA.

The contract has a long stop date of five years but this has flexibility in both directions should it be possible to conclude the contract earlier or marginally later.

A full and professionally audited set of accounts will be produced for Members in accordance with the issuing of FoH accounts at the AGM as is normal practice for any company. We do understand that individual pledgers want more and more information now on the finer detail but we can?t respond to these individual requests. All information will be produced in an open and transparent fashion for all Members at the appropriate points in the cycle for AGMs etc.

FUNDING

Whatever way any deal to deliver Hearts out of Administration was done it would have required a capital sum of ?2.5m (?2.4m to UKIO for the CVA and ?100,000 to UBIG for their 50% shareholding). This funding was kindly provided by Ann Budge through BIDCO. Ann has been involved with the Foundation for a number of years and is fully signed up to delivering the ultimate goal of supporter ownership. She is also fully committed to ensuring that the transition phase to supporter ownership is used to rebuild the club from top to bottom so it is in the best possible position when the supporters take over. Ann and her team have hit the ground running and are starting to rebuild Hearts. I?m sure you will agree that the last few weeks have been exceptionally positive and we can see the fruits of this partnership through the level of season ticket sales, club shop sales and the general positive feeling on the club.

Prior to BIDCO committing to fund the CVA FoH left no stone unturned in trying to gain the necessary capital funding. We spoke with every potential financial institution from the high street banks and London financial experts to net-worthy individuals and investment houses. There was little appetite for investment in either Hearts or the wider football industry. The other potential investors that were constantly speculated about were mere speculation and no offer or otherwise was ever made or available.

The bottom line is that without the explicit involvement of Ann Budge and BIDCO it would not have been possible to deliver the CVA and save the club. It was this critical partnership that persuaded the Lithuanian authorities that the deal was credible, fully funded and provided Hearts with a strong future.

It is also the case that whoever funded the CVA there would still have been the requirement of ?3.8m in working capital from FoH over the same period. This is because the legal costs would still have had to be funded, the club would still have had few resources remaining following the long administration process, the club would still have had Premiership overheads and would still have required to be rebuilt.

Every single penny of supporter contributions is going to make sure that Hearts gets back to the top of Scottish Football with a firm financial foundation that means its very existence will never again be threatened. This is important to restate as the work is not over in the long term rescue of Hearts. The successful conclusion of the CVA was merely the start of the long process to recovery.

It is also the case that the ?3.8m of working capital would not be sought from FoH if it wasn?t required. The figures have been meticulously developed over many, many months and that is the projected shortfall from the date of leaving Administration to financial stability. There is no magic wand and that is why we have always been honest with pledgers as to the scale of the challenge and have had these figures in the public domain for a considerable period of time.

The overall working capital figures do not change it is merely where the capital has come from to deliver the CVA. It is a significant benefit to Hearts and the rebuilding process that BIDCO has deferred the repayment of the capital sum until after the club has been stabilised and that is also reflected in the overall figures.

It is also worth emphasising that the pledges were collected for two reasons and these broad principles have not changed:

1. To purchase the club

2. To provide the club with working capital until such time as the club finances were in a position to support the operations of Hearts in full.

The conclusion of the BIDCO contract will deliver both of these objectives.

It is important to re-emphasise that FoH do not run Hearts at this stage but do have a powerful voice on the Hearts Board.

WHAT HAPPENS NEXT

At the moment we have 8,000 contributors but each has to give FoH permission to be a member. This is a legal process whereby every "pledger" will have to be brought on as an official "member?. You will receive an official email from FoH in the next week or so. It will contain a simple legal mechanism for you becoming a full member of FoH and the obligations that this bestows.

As an example, we are a company limited by guarantee. That means that all members have the liability of ?1 should it be dissolved. It will also indicate that by allowing the August Direct Debit, Standing Order or PayPal payment to be made to the Foundation you agree to become a full member. This will entitle you to full voting rights and all that is involved in the Foundation of Hearts. You can choose to continue to contribute to FoH without being a member and this will be explained in that communication.

Many have asked why this is taking so long but there was little point in going through this complicated and expensive legal process until the CVA was concluded as we promised to return all funds if the Administration deal had not been successful.

We continue to have over 8,000 pledgers and a monthly payment rate of over 99%. It is exceptional and we are incredibly grateful to everyone who continues to support the journey to the supporters full owning the club.

AGM

We initially indicated that the first FoH AGM would be held 3 months after the conclusion of the CVA. This was always our intention but it has not proved practically possible given the need for the General Offer for the clubs remaining shares and the closed period to conclude this.

We have received many communications asking why we were not aware of the General Offer requirements. This was not at all clear due to the fact that we were in administration in a different foreign jurisdiction and both the FoH and BIDCO legal advisors spent a significant amount of time clarifying the exact position with the Takeover Panel. This was not an easy process at all and was, for a period of time, the sticking point in getting the deal concluded.

We will bring all pledgers on as full members in August and hold the first AGM for FoH in October/November. We plan to hold the AGM of FoH in every subsequent October.

DEMOCRACY

The original intention of FoH was to have all Directors resign and a full democratic election to take place for all Directors. Indeed, as Chair, I held all the signed resignation letters of all Directors to deliver this. However, this was designed when there would be full supporter ownership from day one. This is now not the case with the involvement of BIDCO so the landscape changed.

This was a complicated deal that no-one could envisage what the process would look like last year. We have tried to produce documents and information on the best case that we knew at that time. We all drove towards saving the club and that is still the intention but we always knew there would have to be flexibility in order to get this done.

The contract with BIDCO stipulates that the FoH will be represented on the HMFC Board by one FoH Director in the first year and two FoH Directors in the second year. It also stipulates that FoH should have a much smaller Board.

The contract with BIDCO specifies that the FoH Board should be no larger than 6 of which 4 should be Directors who have been involved previously. The 5th Director should be a new appointment with expertise in finance (we will be making an appointment shortly) and the 6th was to be an appointee from all the constituted supporters groups that would have been replaced by a democratic election at the first AGM. Due to the first AGM being imminent the supporters groups have decided not to nominate for that short period but to support FoH from the outside. We will, therefore, have an election from the members at the first AGM for the 6^th FoH Director.

One of the main reasons for BIDCO stipulating that 4 original directors are maintained at the moment is for continuity. Prior to the CVA being concluded FOH engaged with legal advisers and corporate financial consultants. These advisers are still assisting us with a host of issues which will take several months to conclude. It should also be noted that all current and future FOH directors take no remuneration and are working in their own time. BIDCO also wanted continuity to enable them to concentrate fully on the task of rebuilding the club.

Subsequent AGMs will elect more people on to the Board until there is a fully elected Board by the time there is an official transfer to full supporter ownership. The exact details will be required to be approved by BIDCO but each year there will be a number of elections to the FoH Board to replace resignations and Directors whose period of office has expired and to prepare for a transitional approach to a fully elected Board. The number of democratically elected positions will increase each year.

It is important to remember that this is your organisation and is run by the members so you will decide the way forward rather than the current Board. As long as it fits in with the legal contract with BIDCO during the transition stage we can have flexibility.

It will always be up to the membership to decide who is elected both in the transition phase and for the future. The basic principle at this stage is that BIDCO requires continuity so that the FoH Board doesn't fundamentally change in this transition phase. This is to both protect the BIDCO investment but also allow them to get on with the job of rebuilding the club.

We will be communicating with you all in due course on the membership issue in order to have everyone on officially as members in August. We will then prepare for the inaugural AGM and election of a FoH member to the Board of FoH.

Foundation Directors

Finally, can I take this opportunity to thank all Directors who served on the FoH Board. Their contribution in helping Hearts survive cannot be underestimated. We were also assisted by a large number of advisors who all gave their time for free for the love of the club. We are grateful to them all and wish them well for an exciting season ahead. Thank you.

As always, please do not hesitate to contact us if you require any further information.

Best wishes,

Ian Murray

Chair, Foundation of Hearts

July 11, 2014

After reading that email it gave me the confidence to double my DD.

July 11, 2014

Great email. One small bugbear I have..

'Hearts is'

Please please please can it be Heart of Midlothian again!!! (also should be are not is i think?)

July 13, 2014

"Hearts is" is correct grammatically because the club is singular.

July 15, 2014

Can anyone say how much is required to be spent on the Stadium in the current season or financial year. Have FOH or the club given a figure? Ive heard that it is well in excess of a million quid.

July 15, 2014

Can anyone say how much is required to be spent on the Stadium in the current season or financial year. Have FOH or the club given a figure? Ive heard that it is well in excess of a million quid.

Source? Neither FoH nor the club have mentioned anything about major expenditure on the stadium.

July 15, 2014

Source? Neither FoH nor the club have mentioned anything about major expenditure on the stadium.

my source may be wrong. I dont see anthing wrong with me asking a straight question on this thread to find out if its rubbish. I thought the point of this thread was to ask questions to get the official view.

July 16, 2014

my source may be wrong. I dont see anthing wrong with me asking a straight question on this thread to find out if its rubbish. I thought the point of this thread was to ask questions to get the official view.

I didn't say anything was wrong with your post, I was just replying to it. This is not an official (or even unofficial) FoH Q&A thread - someone just posted something from the FoH site and it was stickied by the mods.

July 17, 2014

Now I've returned from holiday I've had an opportunity to look at Ian Murray's recent email in a bit more detail. The email has answered some of the questions I had raised on the thread previously, in full or in part although some have not been answered. I have copied some extracts from Ian's email with my comments and further questions below.

BIDCO DEAL

The deal gives a contractual obligation to FoH to deliver a minimum of ?1m at completion of the CVA, ?1.4m in year one and ?1.4m in year two to be used for working capital to keep the club on a break even basis. After this point it has been projected that Hearts will no longer require additional working capital and the FoH funds can then be used to repay BIDCO. That is ?3.8m in working capital and ?2.5m in loan capital from BIDCO for the CVA.

So we now have confirmation that the club will only seek to break even with the ?2.8M extra cash in years one and two. That is disappointing as it confirms my fears that we are gambling fans cash in search of a promotion in the next two years, rather than operating the business in a sustainable way using the windfall of extra ST money, merchandising and other income streams to boost promotion prospects.

It will be great if it comes off, but the danger of this approach is if it fails to deliver promotion in the planned period. Ian states that no additional working capital is required for year three onwards. There are significant risks to the long term stability of the club and fan ownership if we have to endure a third season in the Championship. There would be calls for the heads of Neilson, Levein, Budge and the FoH Board, no ?1.4M boost to income, falling ST sales, a real possibility of diminished pledge income, parachute payments ended etc. In essence the club itself would be at risk without a severe dose of austerity. Fan ownership may no longer be deliverable

Ian?s comments re ?break even? are at odds with a statement he made in February following the announcement of the Bidco deal. He is quoted in the Scotsman the following day ?In the first two years, all of that money will go into the club, and none to repay Budge. A modest budget will be ensured, and for the first time in recent history Hearts will also build up a cash reserve.?

So which one is it? A speculate to accumulate gamble, stabilising the club to live within its means, building cash reserves for a rainy day, or something else?

A full and professionally audited set of accounts will be produced for Members in accordance with the issuing of FoH accounts at the AGM as is normal practice for any company. We do understand that individual pledgers want more and more information now on the finer detail but we can?t respond to these individual requests. All information will be produced in an open and transparent fashion for all Members at the appropriate points in the cycle for AGMs etc.

According to Companies House FoH is due to produce its annual accounts by the end of this month. I don?t know if they will be produced before the end date, but fans shouldn't expect masses of new information. The accounts will only cover the period up to the end of October 2013, i.e. nine months ago. However it should at least provide details of the income from the first couple of months pledges and reflect on the various loan and agreements as ?post balance sheet events?.

Going forward, this is an area where I would like to see much more transparency from FoH. Producing accounts for a year ending nine months previous is of little value in assessing the state of any company?s current financial status. I?d like to see the board commit to producing accounts within three months of the period end date, i.e. produce accounts for the current year up to 31/10/14 by the end of December this year, with an AGM to follow a couple of months later, early in 2015.

FUNDING

It is also the case that whoever funded the CVA there would still have been the requirement of ?3.8m in working capital from FoH over the same period. This is because the legal costs would still have had to be funded, the club would still have had few resources remaining following the long administration process, the club would still have had Premiership overheads and would still have required to be rebuilt.

What are these Premiership overheads?

All last season we ran on a diminished player budget and since the end of the season we have dispensed with Premiership wages for MacDonald, Hamill, Stevenson, Ridgers, McGowan, Tapping and Combe and hopefully used the savings wisely with lower cost contracts for the new recruits.

If the overheads relate to stewarding, ground maintenance or the Academy, then the first two are covered by Premiership level attendances and much of the Academy's running costs are met from SFA grants and HYDC donations.

AGM

We have received many communications asking why we were not aware of the General Offer requirements. This was not at all clear due to the fact that we were in administration in a different foreign jurisdiction and both the FoH and BIDCO legal advisors spent a significant amount of time clarifying the exact position with the Takeover Panel. This was not an easy process at all and was, for a period of time, the sticking point in getting the deal concluded.

We will bring all pledgers on as full members in August and hold the first AGM for FoH in October/November. We plan to hold the AGM of FoH in every subsequent October.

I don?t buy that explanation. Heart of Midlothian PLC is registered in Scotland, has its shares registered in the UK, had administrators appointed by the Court of Session. The club was most definitely not in administration in a different foreign jusrisdiction.

See my point above about production of the accounts and date of the AGM.

DEMOCRACY

The original intention of FoH was to have all Directors resign and a full democratic election to take place for all Directors. Indeed, as Chair, I held all the signed resignation letters of all Directors to deliver this. However, this was designed when there would be full supporter ownership from day one. This is now not the case with the involvement of BIDCO so the landscape changed.

I still haven?t seen any explanation why it was not possible to deliver supporter ownership from day one. The club has borrowed ?2.4M from BIDCO/Ann to pay the CVA itself and will have to pay it back over time. If I borrow money to buy a house, then the lender will at least allow me to assume ownership and take responsibility for its maintenance while the lender retains a security over it. Oh wait! We do have responsibility for its maintenance, but we don?t get any ownership rights for 5 years, until the mortgage is paid off in full.

Was it Ann Budge's insistance that the deal should be structured this way and was FoH so desparate to get a deal agreed without losing face that they bought into it, onerous conditions et al.?

I have a few more questions, but they relate more to HMFC itself and need to be directed to Ann and Bidco. e.g.

the timetable for issuing HMFC accounts

- will any accounts for 2012/13 be produced?

- when will accounts for 2013/14 be produced?

timetable for new shares to be allotted/issued to the 2012 offer subscribers

Ann/Bidco's longer term intentions to retain a personal shareholding in the club beyond the 75.1% to be transferred to FoH.

What club information will shared with FoH and subsequently be allowed to be shared with its members

July 18, 2014

FF good points and I admire your persistence. But as I said on the separate thread on the latest statement I am reconciled now to the fact that we will get very little if any meaningful information over and above what is published in the

FoH and HMFC accounts. The Bidco/FoH agreement makes it clear that the FoH board will only get such information as Ann chooses to provide, and be allowed to pass on to FoH members only what Ann permits. And an earlier Ian Murray statement says information will be provided to "ensure continued financial

support", indicating to me that information flow will increase only if DDs drop off, and that it is not seen that members/funders have any absolute right to information. And Ian now makes it clear that individual questioning is not welcome or at least won't be answered (ironic given the frequent "why not write to FoH" response to any questioning or discussion of FoH).

On the residual Ann shares the latest statement says the voting rights will in due course be transferred to FoH but seemingly not the shares themselves.

I was also on the other thread optimistic about the "democracy" stuff because it seemed to suggest there was no obstacle to elections of any board members who resigned or were voted out. The wording about subject to details being agreed

with Bidco however begs a few questions.

July 25, 2014

Ian Murray's last statement consisted largely of a string of excuses (some rather feeble) for previous FoH promises not being fulfilled. By now you'd have thought FoH would have learned not to make promises they can't deliver. Yet two weeks after formal communication on conversion to member status was to come "in a week or so" , no word or apology/explanation for the delay.

Just as well our DDs are more reliable.

July 27, 2014

Ian Murray's last statement consisted largely of a string of excuses (some rather feeble) for previous FoH promises not being fulfilled. By now you'd have thought FoH would have learned not to make promises they can't deliver. Yet two weeks after formal communication on conversion to member status was to come "in a week or so" , no word or apology/explanation for the delay.

Just as well our DDs are more reliable.

Foundation of Hearts ?@The_FOH 1m

FoH pledgers will receive an email this week confirming your official legal membership of the company. Another #createhistory milestone.

Maybe this week then.

July 30, 2014

Foundation of Hearts ?@The_FOH 1m

FoH pledgers will receive an email this week confirming your official legal membership of the company. Another #createhistory milestone.

Lets hope so.

Lets hope so.

Been a pledger from the start and do not begrudge the money departing my account every month especially considering what the alternative was at the time. Will continue to pledge but having said that it doesn't really look like what I thought it would now the deal is done.

The $1M to get the thing off the ground and cover the costs of the transaction etc. I have no real issue with but I do think there should be a lot more clarity around the $2.8M over the next 2 years and what specifically this is being used?

However you look at that $2.8M it is coming from the fans and is not being used to purchase the shares. There needs to be more clarity around that.

If there is a 2 year window for promotion do we really need to be spending that extra $1.4M a year to achieve given that those we are competing with will have much smaller wage budgets and/or are burdened by cashflow issues/debt. We have just beaten last years ST sales and should be able to achieve promotion without spending this extra cash. Would it not be better to use the $2.8M to purchase the shares and speed up the process of fan ownership.

History has shown us that spending cash does not guarantee success.

FoH should be providing more detail rather than hiding behind "Working Capital".

July 30, 2014

Lets hope so.

Been a pledger from the start and do not begrudge the money departing my account every month especially considering what the alternative was at the time. Will continue to pledge but having said that it doesn't really look like what I thought it would now the deal is done.

The $1M to get the thing off the ground and cover the costs of the transaction etc. I have no real issue with but I do think there should be a lot more clarity around the $2.8M over the next 2 years and what specifically this is being used?

However you look at that $2.8M it is coming from the fans and is not being used to purchase the shares. There needs to be more clarity around that.

If there is a 2 year window for promotion do we really need to be spending that extra $1.4M a year to achieve given that those we are competing with will have much smaller wage budgets and/or are burdened by cashflow issues/debt. We have just beaten last years ST sales and should be able to achieve promotion without spending this extra cash. Would it not be better to use the $2.8M to purchase the shares and speed up the process of fan ownership.

History has shown us that spending cash does not guarantee success.

FoH should be providing more detail rather than hiding behind "Working Capital".

I just can't get excited about the precise use of my money. When I pledged, I was content that it would be for the rest of my life - not 3 years not 5 years. As a result I accept that Hearts will adapt to changing circumstances by altering priorities from time to time. So I don't care if my money is used to help fix a leak in the roof of the old stand, buy bog roll for the ladies loo or help fund a players wages. It's all outgo that must happen if the club is to remain viable.

July 30, 2014

I just can't get excited about the precise use of my money. When I pledged, I was content that it would be for the rest of my life - not 3 years not 5 years. As a result I accept that Hearts will adapt to changing circumstances by altering priorities from time to time. So I don't care if my money is used to help fix a leak in the roof of the old stand, buy bog roll for the ladies loo or help fund a players wages. It's all outgo that must happen if the club is to remain viable.

I don't think anyone is wanting a management account breakdown. Rather, it is why we need to run a ?1.4m loss over the next two years, funded by FoH pledges. Personally I have no issue with it since the most important objective is promotion but others like FF do.

FOH Updated Q&A

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