PAYNE & ASSOCIATES

Corporate Governance Advisors

17 Westbrooke Drive, P O Box 171, Strathavon, 2031

Tel and Fax 011-7844741

7 March 2003

Mr N J Frangos

The Woodlands

Woodmead

Dear Nick

I acknowledge receipt of your letter dated 24 February 2003. You are aware that I stated my reluctance to discuss my assignment and report once it was released. However, after careful consideration, I have decided that the inaccuracies in your letter cannot be left unchallenged.

I am aware that you have rejected my findings. As you and I agreed throughout, it was always your right to do so. What surprises me is that you now also wish to discredit the integrity of the process. At our last meeting, on Monday 10 February, where we discussed your closing argument and the integrity of the process, you expressed yourself satisfied, although retaining the right to disagree with my findings if you so wished.

I confirmed to you that my investigation was unfettered in scope and that I had followed the process which I defined at our first meeting, namely to gather evidence from all parties I believed relevant, ensuring that I understood the evidence from that parties perspective. I explained that this would be an interactive process until I was satisfied that I had obtained all the information and perspectives which each person wished to convey to me. At our wrap-up meetings of 9 and 10 February you confirmed to me that you had given me all relevant evidence available to you. We discussed my understanding of your perspectives thereon until you were satisfied that I understood where you were coming from on both hard and soft issues. I conducted a similar process with all other parties.

Throughout our interaction I explained that after the evidence gathering phase I would analyse each issue in the light of the evidence provided by all parties. Thereafter I would conclude and report. I explained that I would not interact with any party during the analysis, conclusion and reporting phases unless I required clarification in relation to their perspective on an issue. I obtained written closing arguments from you and the directors to assist me in my understanding of your respective perspectives on all of the issues.

I explained, and you accepted, that I would not engage the parties in order for them to explain their perspectives on the evidence provided by the others. Everyone had copies of your letter of resignation and the response thereto, and thus understood the issues to be addressed. My role was to identify the facts and report thereon, not mediate between the parties.

I also explained that, should I be presented with minutes, correspondence or similar documents by one party where the other party appeared to be unaware of such document, in order to establish its authenticity I would discuss that document with the other party. No such documents came to my attention. I made it clear that this would be the only situation where there would be a "right to reply". You and I discussed this on more than one occasion, including 9/10 February, where I informed you that I had not been given any documents central to the issues which documents did not appear to be in the possession or knowledge of the other parties. I reject your claim that I promised you a broad "right of reply".

I explained to all parties that my role was that of an expert in accounting, auditing and corporate governance, and that my process would be similar to a combination of those followed by a judge or an arbitrator. I would thus not discuss my analysis and conclusions with the parties. I explained that the equivalent of a right of appeal would be for anyone who was unhappy to request the convening of a meeting of Corpcapital shareholders.

I am pleased that your letter records some of the concerns discussed at our meeting of 9/10 February. That meeting was to discuss your final summary and closing arguments on all the issues we had discussed in our previous meetings, and was specifically to ensure that I understood your perspectives and evidence on all of the issues. I made it clear that I had not yet concluded on most of the issues and would still require some time to compile my report. You expressed your satisfaction of my understanding of your perspectives on the issues.

We specifically discussed your perspectives on whether there had been "Enron accounting"; whether there was a need for a 417 enquiry or a forensic audit. We also discussed your allegations that Eric Ellerine had a number of conflicts of interest. You raised this issue at our first meeting to discuss the evidence files which you prepared for me. Whilst you referred to these alleged conflicts on a number of occasions this was the one area where you did not provide me with detailed evidence, suggesting instead that I refer to the minutes of directors meetings. I confirmed to you that I had reviewed all of the minute books.

When you told me that a person by the name of Dori had informed you that Eric Ellerine had apparently asked you to meet with him during the course of my investigation I said that I believed no harm would be done thereby, provided that my assignment and mandate were not interfered with. You asked me to comment on the paragraph to this effect in your letter of reply to Eric Ellerine, and asked me to make any amendments thereto which I required. I did so. At the same time I asked you what you meant in other parts of your letter. Your explanations were different to the way your letter was drafted and, as I was reading the letter, you asked me to note the amendments so that your typist could make the corrections. You subsequently told me that the envisaged meeting did not take place.

When you asked me whether anyone would have a preview of my report and the opportunity to change it I stated emphatically that this would not happen. I linked this assurance to my role being similar to a judge/arbitrator, and to the fact that none of the parties would be granted a right to reply - as referred to above. I followed this process.

You requested that you receive a copy of my report in time to prepare yourself for questions from the media. I agreed with you that this would be fair. I subsequently discussed with you the implications of my report being of a price sensitive nature, but confirmed that you would receive a hard copy thereof as soon as it was released on SENS, as is required by law. This was done.

For the record, I gave my report to the non-Executive directors late in the afternoon of Saturday 15 February only hours after I completed it. They made it available to you and the other shareholders on the afternoon of Monday 17 February. I have monitored the release of my report in the press, to SENS and on the Corpcapital’s website, in order to confirm that it was not altered.

I confirm that you made various suggestions of people who you believed I should consult for advice in order to assist me with the conduct of my investigation. I told you that I had the right to do so if I believed it necessary. At our meeting of 10 February I told you that I had not found it necessary at that stage to consult with anyone for advice, though I would do so if necessary. As it transpired, I did not require such assistance.

You stated throughout our interactions that you were satisfied with the integrity of my process, but reserved the right to reject my conclusions if you did not agree with them. I respect this right.

In summary, I believe that my process was thorough, and that it enabled me to establish the facts, and each persons perspectives thereon. My report contains my conclusions and recommendations, as well as a summary, to the extent I believe appropriate, of some of the more important issues.

If you wish to take your concerns surrounding corporate governance at Corpcapital further, I suggest that you request the convening of a meeting of shareholders.

Yours sincerely

Nigel Payne