Seed International Limited
174 South Church Street
PO Box 1778GT
Grand Cayman
Cayman Islands

Mr Jim Budd
London

20th December 2002

Dear Mr Budd

Mr Paul Freeman of Seed International Limited has informed me that he has invited you to a meeting early in the New Year in order to discuss and clarify details of the information which seems to appear on a regular basis on your website.

I thought I would write to say how much I welcome this decision and the opportunity to enlighten you on what we as a business have been doing in particular over the last year or so, following the systematic departure of virtually all the senior management who were responsible for Seed's business activities prior to this time.

Your article posted 2nd December 2002 entitled "Seed and AoW" highlights my recent involvement as Vice President of Seed, following an earlier involvement at The Wine Corporation.

Initially, both Seed (as a minority shareholder) and Worldwide Wines Limited (as the largest single shareholder) had become increasing concerned over the losses being generated at The Wine Corporation and sought to recruit an experienced board level executive on an interim contract basis to 'parachute' in to the company to stem these losses. I accepted a one-year contract and was appointed Chief Executive of The Wine Corporation on March 1st 2001.

The incumbent Managing Director and the Operations Director left the same day, and Giles Cadman resigned as a director on 3rd April 2001. I then set about a major reengineering programme for The Wine Corporation which included a substantial downsizing of the business.

In November 2001 I was approached by Seed International Limited and asked if I would consider assisting in the management of the new wine program agreement that Seed had signed with Paradigm Wine Services Limited ("Paradigm") and which the vast majority of Seed's clients agreed to adopt in place of their former contracts in Bordeaux and other wines. I was happy to accept this assignment. I know that you have met with the senior management of Paradigm ("Paradigm Holdings and Seed International", posted 4th November 2002) and seem to have satisfied yourself, as did we, of their integrity and veracity.

In the light of all of this, I'm afraid that your continued website references to Bordeaux wines and Champagnes seem a little 'dog eared' in the context of where Seed International Limited finds itself today.

I know of no client of Seed with a live wine contract that is not in the Italian Wine Programme. All clients in contract with Seed have the assurance that the full value of their money is intact. When the original heads of agreement and subsequent definitive agreement was signed with Paradigm, 100% of Seeds client's cash paid positions were honoured by Paradigm, and going forward 100% of these positions are again being honoured under any new proposal from Architects of Wine.

You mention that thirteen customers are currently taking action against Seed in Guernsey ("Thirteen investors pursue legal action in Guernsey", posted 16th December 2002). You of course fail to mention that these thirteen include the original eight who started a similar action in Holland. You also fail to mention that these 13 people represent roughly 0.6% of Seeds active customer base. Gratifyingly, the other 99.4% of Seeds customers appear to be delighted to be receiving exciting and interesting offers from Architects Of Wine, which Seed specifically spent eight long and arduous months of this year negotiating with its wine supplier.

Seed will continue to defend its current position vis-à-vis these thirteen clients, and any others who attempt similar action, because regrettably it has no choice. Each of these clients is now in material breach of contract having not met the terms and conditions of the agreement which they have freely entered into. Whilst Seed have refrained from taking any direct action against these individuals thus far, each of them has entered into a wine purchase agreement that is both valid and substantive. "I've Changed My Mind Give Me My Money Back" is not an option that is reflected in this or any such purchase agreement of a similar nature.

My involvement with Seed International thus far has been short but very interesting, and has moved from a brief footnote in my planned autobiography to possibly even a chapter or two! I cannot answer for its past but I can assure you that its future will be subject to the most rigorous scrutiny to ensure that the kind of allegations that you seem to relish writing are simply unsupportable.

I understand from various people that you are regularly fed uncorroborated snippets of information from various disgruntled former 'employees'. I also understand that you're quite partial to passing these snippets on to other people too. Reminds me a bit of the old "send three and four pence we're going to a dance" school of messaging. Anyway, please don't forget, that most of these people were removed from, or asked to leave the business, because they weren't very good at their jobs. This is hardly a dispassionate source of information, or rather misinformation is it? I know that you 'investigative journalists' like to leave no stone unturned in your quest for the truth, but this is scraping the bottom of the barrel a bit isn't it? (Please forgive the avalanche of mixed metaphors).

I suppose that one of the best pieces of news in 2002 for people or organisations at the sharp end of websites like yours is the recent legal ruling made in Canberra by the High Court of Australia that clears the way for worldwide libel litigation over internet material and in effect allows litigants to mount libel cases anywhere in the world not just in the website's country of origin. About time too eh Jim?

Anyway, I sincerely look forward to the opportunity of meeting with you in 2003 and offer you and yours the heartiest of best wishes for Christmas and the New Year.

Yours very sincerely

DAVID WILCOCK
Vice President - Seed International Limited

David Wilcock 6th January 2003

Dear Mr Wilcock (sent 6.1.03)

Thank you for your letter of 20th December.

Like you I welcome Paul Freeman's invitation to a meeting. I have been seeking answers to questions posed to Seed International and Ocean International Marketing for some three years now, so it will be interesting to meet Seed International's chief executive. I was disappointed that you did not respond to the questions in my letter of 29th November 2001 that I sent to you at the Wine Corporation, which was also copied to John Starr of Claireville Consultancy Ltd, your PR company at the time.

I welcome your promise that Seed International's future 'will be subject to the most rigorous scrutiny'. I assume that as an experienced company director that before you took on the post of vice-president of Seed International you gave the Bordeaux wine program your most rigorous scrutiny and were presumably satisfied that the various positions and trades carried out under this program were both backed by proper contracts and were credible. I would be interested to know what you make of the en primeur trade of October and November 1999. The copies of these certificates have been sent to Marcus Rutherford.

I have to disagree that the Champagne and, in particular, the Bordeaux programs are now a little 'dog eared'. The Seed investors' cash paid positions were built on these trades rather than the Italian program and it is obviously crucial that these positions were properly backed up. Unfortunately Seed's response (29th November 2002) raises considerable doubts. Bordeaux Index has stated categorically that there was no agreement to supply Seed International with wine as required as Seed's reply to my question d states. The sources mentioned by Seed appear to account for only a small fraction of the around $160 million of Seed's clients deposits and profits that was transferred from the Bordeaux program to the Italian. It may be that there were other sources of supply not covered by response d and I look forward to discussing this in detail when I meet Paul Freeman. As the fully paid up Italian program contracts come to between _800 million - _850 million, this is especially important.

Thank you for the detail that eight of the 13 respondents in the Guernsey action started proceedings in Holland. I was aware that the action had started in Holland and thought that investdrinks reported that. I will, of course, review these postings and make sure that the origins of the legal action are clear. However, I would be grateful if you would confirm that your figure of eight is correct as this does not tally with information I have received from Holland.

It may be that 99.4% of Seed's customers will be delighted by the AoW offer as you suggest. As far as I know not all of the AoW offers have been sent out, so your figure appears for the moment to be more of a prediction than factual. I understand that Harmen Hoek of Kerkamp Advocaten is no longer taking on any new clients from Seed International and that prospective clients are now being referred to other Dutch lawyers, so there may be more 13 investors who decide to take legal action against Seed International and its associated companies. Should Seed decide to take legal action I will naturally post details of any action on investdrinks.

The ruling by the High Court in Canberra is interesting and I have no doubt that case history and the legal rulings concerning the internet will continue. I have always assumed that I could face legal action in the UK. My decision to use a Canadian ISP (Tera-Byte) was solely because Canadian law treats ISPs more as a telephone company rather than UK law that views them as publishers. When I launched investdrinks in April 2000, I informed Churchill Ltd of the site's launch. (I enclose a copy of the letter.) Subsequently Fairmays contacted Tera-Byte and demanded that the site be removed forthwith. Tera-Byte immediately asked me for evidence to support material on investdrinks. This was provided to their satisfaction. Fairmays was asked to provide evidence to support their request for investdrinks to be removed. To the best of my knowledge this evidence was never provided to Tera-Byte. I assume that Tera-Byte's invitation to furnish evidence remains open to Seed and its legal advisors. Furthermore I have always undertaken to change or delete material on investdrinks that is shown to be inaccurate.

I note that your account of the agreements with Paradigm and AoW broadly reflects what was I told by Bob Middlemiss when I met him on 17th October 2002. Middlemiss told me that an agreement had been signed between Paradigm Holdings and Seed International Ltd on 15th October 2001 but that by January 2002 Seed International were in breach of the contract because not all of the instalments had been paid. I understand that it was because of this breach that a new agreement (signed on 10th October 2002) was negotiated with AoW. If Middlemiss is correct that Seed were breach of the agreement, I have to wonder whether Seed's Italian wine program contracts remain valid and on what basis Seed collected the March 2002 instalments and continued to demand payment for the September instalments.

In contrast, Seed's response of 29th November 2002 claims that there was no further agreement after the Heads of Agreement was signed between Paradigm Holdings and Seed International in September 2002 and the agreement with AoW on October 10th 2002. As the October 10th agreement with AoW allows them to contact Seed's clients directly and you were offered the opportunity to assist in the management of the new wine program in November 2001, it seems to me more probable that you and Middlemiss are correct that a full agreement was signed in October 2001.

There are several points that I would like clarified and I will be happy to publish these unedited on investdrinks with the normal proviso that they are not libellous or over-long. Some of these I have covered already.

… Are you satisfied that all of the Bordeaux trades are 'valid and substantive'?
… Was a full agreement signed by Seed with Paradigm Holdings?
… If as you suggest 99.4% of Seed's clients are sufficiently delighted with their offers from AoW to accept them, what is the future for Seed International?

I look forward to hearing from you.

Yours sincerely,

Jim Budd

Seed International Limited
174 South Church Street
PO Box 1778GT
Grand Cayman
Cayman Islands

Mr Jim Budd
London

8th January 2003

Dear Jim

Thank you for your letter of January 6th in response to mine. I do hope that we are not going to get into a literary 'tennis match' however I'm sure you would not expect the comments that you make in your letter to go without retort? I shall try to address the points you raise in the same sequence in which you have made them.

As I stated in my previous letter my responsibilities to both Seed International Limited and its clients are concerned with the future not the past. When I first got involved with Seed in November 2001 it was after offers had been made to transfer clients into the new Italian wine model. As the vast majority of clients had already committed to this transfer I did not give the previous Bordeaux wine programme any particular regard at all since it had clearly been superceded by the Italian program with no loss of any financial benefit to those clients who had moved over. I did however satisfy myself that sufficient in-house wine stocks, option cover with third parties such as Bordeaux Index and even open market availability through people like Farr Vintners and Wilkinson was sufficient to cover the position of any individual client that had declined the Italian offer, and who was prepared to pay the unpaid balance on his subsisting Bordeaux contract and take physical delivery of the wine. In the event this was academic, since no client chose to do so, and, as I stated in my previous letter, to my knowledge no client now has a live position with Seed related to anything other than Italian wines. I cannot comment on your request related to the en primeur trade of October and November 1999 since I know nothing of these.

I do not understand your comment related to Bordeaux Index or where you got such information. I think that perhaps there is some semantics going on here concerning the way such things have been described. Seed paid Bordeaux Index substantial amounts of money to secure cover for wines that were related to previous Bordeaux contracts, in case these wines were required to 'go physical'. Seed have all the invoices related to this 'cover' and of course proof of payment to Bordeaux Index. Again, this information is quite irrelevant to the current position anyway.

Your comment that the Seed investors cash position was built on Bordeaux trades rather than the Italian wine program is only partially accurate and completely misses the point, that regardless of whatever trades were done or not done, the financial contract position agreed with the client at the time of his or her transfer into Italian wine, was honoured 100% by Paradigm and is again being honoured 100% under the current offers being made by Architects Of Wine.

Regarding the current Dutch and Guernsey situation (one and the same really), I'm afraid that I shall have to 'keep my powder dry' on this one. I shall probably get a wrap on the knuckles anyway from our corporate lawyers for even writing this response to you (you know what lawyers are like Jim). Suffice it say that we shall continue to defend our position for the reasons mentioned in my previous letter.

Turning to Paradigm and your meeting with Bob Middlemiss. I of course wasn't in attendance, and Bob and I haven't discussed it in any detail at all, however you seem to have a couple of misconceptions emanating from that meeting. We did indeed stop paying Paradigm for a short period in December 2001 but that was because Paradigm had failed to provide us with copies of the contracts that they claimed to have with growers in Italy, which we had requested as part of a due diligence process. I suppose technically we were in breach of contract but as far as we were concerned they were too. Suffice it to say that there was a bit of 'handbags at dawn' between us, but it was quickly resolved and we agreed interim terms in the form of an aside to the original Heads of Agreement which was regularly renewed by both parties lawyers and which effectively continued in force throughout the subsequent negotiation period culminating in the agreements of October 10th 2002. Believe me, there never was and certainly isn't any question as to the validity of the Italian wine contracts entered into by Seed clients.

Please do not underestimate the intensity of the negotiations that took place between the two parties. I personally spent 2/3 days each week for the best part of ten months of last year negotiating acceptable terms and conditions for both Seed and, most importantly its clients. Both sides expended a huge amount of man hours and legal costs in reaching these agreements, which is why it is extremely important to Seed that none of our clients are given any kind of sense that some kind of fudge has happened here. We have negotiated an exceptional deal for each of them, and Architects Of Wine are putting together some really interesting opportunities which we hope our clients will give favourable consideration to.

Finally to the specific points you raise at the end of your letter -

Q. Are you satisfied that all of the Bordeaux trades are 'valid and substantive'?

A. I think I have covered this point in the body of my letter above. There were presumably hundreds of such trades over the years and I certainly haven't felt it necessary to investigate these for the reasons stated. The real point for me is, have any existing Seed clients been disadvantaged by such trades? And the answer has to be no.

Q. Was a full agreement signed by Seed with Paradigm Holdings?

A. A Heads of Agreement covering general terms was signed in October 2001 which finally culminated in two separate agreements (a licence agreement and a supply agreement) being signed in October 2002. During the intervening 12 months a series of interim terms were agreed between the parties that were effectively 'addendums' to the original Heads Of Agreement.

Q. If as I suggest 99.4% of Seed's clients are sufficiently delighted with their offers from AoW to accept them, what is the future for Seed International?

A. If I may so say, your best question so far Jim. I did a socio-economics exam at school many years ago where the question was "What is the future for the British coal industry?" my answer was "Smoke". I thought I should have got an A+ for that but ended up with a C-. The answer to your question is I honestly don't know. Clearly there will be some of our 99.4% of clients who decide not to accept the offer from AoW and will therefore remain in contract for Italian wines with Seed. That is precisely why we needed a separate supply agreement with Paradigm. We shall have to administer those contracts to their conclusion. Also don't forget that all we have agreed with AoW is a licence agreement. The clients remain open for us to seek other suitable opportunities should we desire. Doubtless you will keep yourself informed?

Kind regards

Yours sincerely

David Wilcock
Dear David

Thank you for your swift response. I will publish your letter (20.12.02) and responses to my questions of 6.1.03 on investdrinks when it is updated on Monday subject to the conditions already outlined.

Although I am grateful for your response to my letter of 29.11.01 and note the points you make, I will not be publishing it as events have moved on very considerably since then, especially now that The Wine Corporation has changed hands.

That all of the clients remaining with Seed have moved from the Bordeaux program to the Italian is not in dispute. What is still not is clear is whether all of the Bordeaux trades were 'valid and substantive'. This remains a crucial issue because clients of Seed committed more money to the Bordeaux program because they saw their positions making a 'profit' and the size of the Italian contract corresponds to the deposit paid - monies sent plus profits accrued. Of course all of this is fine if these profits were real because the Bordeaux trades were 'valid and substantive'. If they were not, then clearly Seed's clients have been 'disadvantaged' and possibly defrauded.

At the beginning of December 2002 I faxed copies of the en primeur certificates to Marcus Rutherford as requested and on 11.12.02 received the following acknowledgement relating to the matter of the certificates:

'I have received your email of 1 December 2002 and your fax enclosing hard copies of the certificates to which you refer. My client is presently preparing its reply which I hope shortly to receive and send on to you.' I continue to look forward to response from Seed International.

Whether clients of Seed were clear about the long-term nature of the Italian programme with its regular instalments is another matter. Certainly the investors who have contacted me are consistent: they were not aware of the long-term nature of the Italian program nor its regular instalments. At the very least there has clearly been a serious breakdown in communication between Seed and some of its clients.

To turn to the Wine Corporation, I would like to know how much Bob Middlemiss paid for the company. To what extent was the company still selling wine at the time of the change of ownership as the website had been out of operation for some time awaiting a relaunch

I look forward to hearing from you.

Jim

Hello Jim (sent 10.1.03)

This is getting to be a bit of a habit. Many thanks for your response to my response etc etc. When are we going to get together to discuss all these things face to face? Our previous offer remains open.

I am being very lazy by cutting and pasting your points and answering them, rather than composing yet another long diatribe, which I know we both abhor doing, hope that's OK with you.

JB: That all of the clients remaining with Seed have moved from the Bordeaux program to the Italian is not in dispute. What is still not is clear is whether all of the Bordeaux trades were 'valid and substantive'. This remains a crucial issue because clients of Seed committed more money to the Bordeaux program because they saw their positions making a 'profit' and the size of the Italian contract corresponds to the deposit paid - monies sent plus profits accrued. Of course all of this is fine if these profits were real because the Bordeaux trades were 'valid and substantive'. If they were not, then clearly Seed's clients have been 'disadvantaged' and possibly defrauded.

DW: I think you and I are probably going to have to agree to disagree on this issue Jim. Whatever happened during the 'Bordeaux era', and as you know I wasn't there at the time, I continue to maintain that no current Seed client has been disadvantaged by anything. I bet if you called a customer and verified with him that his current balance was $5000 and that 100% of this value was being honoured under new and greatly improved terms and conditions he wouldn't feel disadvantaged and certainly not defrauded now would he?

Whatever a client has accumulated in 'his pot' through whatever transactions is still there in the form of a valid and substantive purchase contract only now for Italian rather than French wine.

JB: At the beginning of December 2002 I faxed copies of the en primeur certificates to Marcus Rutherford as requested and on 11.12.02 received the following acknowledgement relating to the matter of the certificates:

'I have received your email of 1 December 2002 and your fax enclosing hard copies of the certificates to which you refer. My client is presently preparing its reply which I hope shortly to receive and send on to you.' I continue to look forward to response from Seed International.

DW: I understand that a response is likely to be with you sometime next week.

JB: Whether clients of Seed were clear about the long-term nature of the Italian programme with its regular instalments is another matter. Certainly the investors who have contacted me are consistent: they were not aware of the long-term nature of the Italian program nor its regular instalments. At the very least there has clearly been a serious breakdown in communication between Seed and some of its clients.

DW: As you know, Ocean International Marketing BV do the marketing on behalf of Seed and we've already discussed this issue with them since we picked up a couple of similar comments ourselves. Certainly Ocean had all the information related to the Italian programme from both Seed and more importantly Paradigm as the supplier. Ocean has confirmed to us that it communicated this information to our clients at the time and of course the contract notes that were subsequently issued clearly show this detail too. Before you say it, we know that these contract notes were issued later than they should have been but gremlins with a new IT system in Holland unfortunately delayed the process. What we got was the distinct impression that a small number of clients had had 'second thoughts' and wanted to get out of their purchase contracts. Maybe they had been hit on the US markets or with their investments and were simply looking to get some cash back from wherever they could. Sadly life isn't like that is it Jim? As I said before, "I've changed my mind give me my money back" simply isn't a tenable position in respect of a contract to purchase a physical item.

JB: To turn to the Wine Corporation, I would like to know how much Bob Middlemiss paid for the company. To what extent was the company still selling wine at the time of the change of ownership as the website had been out of operation for some time awaiting a relaunch

DW: Please Jim, stop personalising everything. Architects of Wine Limited bought the shareholding of Worldwide Wine Limited and ipso facto gained a controlling interest in The Wine Corporation. Clearly whatever price was paid is commercially confidential so if I told you I'd have to shoot you. The Wine Corporation has been continuously trading using its premium brand WineFinders as the flagship. You will find the appropriate web site www.winefinders.co.uk is in operation and is of course well known and frequented by WineFinders customers.

Have a good weekend

Kind regards

David Wilcock

David (sent 13.1.03)

'Whatever happened during the 'Bordeaux era', and as you know I wasn't there at the time, I continue to maintain that no current Seed client has been disadvantaged by anything. I bet if you called a customer and verified with him that his current balance was $5000 and that 100% of this value was being honoured under new and greatly improved terms and conditions he wouldn't feel disadvantaged and certainly not defrauded now would he?'

This is revealing nonsense. You might have a case if the investor could get their $5,000 back without further expenditure but as you know the deposit is only 20% of the full balance due. The investor now has to pay $20,000 to get back the $5,000 deposit. They are also reliant on AoW remaining in business for the term of the contract. Should the Bordeaux trades prove not to be 'valid and substantive' or even fraudulent, then the investor has been very clearly disadvantaged. Soon someone will be advancing the bizarre argument that the American doctors by claiming their money and profits back are accepting that the trades were legitimate.

You complain that I am personalising everything by my reference to Bob Middlemiss. This is purely silly. When I asked you on Tuesday (7th) about the Wine Corporation you told me that Bob Middlemiss had bought the company. I forgot to ask you which company had actually bought TWC, so I tried contacting Bob and Mike King to find out as well as emailing the question to you. In any case as I understand it, AoW is a subsidiary of Paradigm Holding which is one of Bob's companies.

I look forward to receiving the explanation about the en primeur trade this week.

Jim

16th January 2003

Dear Jim

'DW: Whatever happened during the 'Bordeaux era', and as you know I wasn't there at the time, I continue to maintain that no current Seed client has been disadvantaged by anything. I bet if you called a customer and verified with him that his current balance was $5000 and that 100% of this value was being honoured under new and greatly improved terms and conditions he wouldn't feel disadvantaged and certainly not defrauded now would he?'

JB: This is revealing nonsense. You might have a case if the investor could get their $5,000 back without further expenditure but as you know the deposit is only 20% of the full balance due.

DW: The client knows this full well when he enters into the agreement to purchase the wine. He only pays a deposit on the full value of the lot and this deposit is non refundable should the client fail to meet his instalment schedule. The deposit system is used so that the client does not have to pay the entire cost of the full parcel of wine upfront. This is particularly advantageous where multi-vintage parcels are concerned, and enables the client to utilise any accrued benefits from the regular release of the wines as contribution to future instalments. Seed insist of Ocean that there are three things that need to be made clear to all clients:-

1) That the deposit is non refundable
2) That there is a schedule of payments, known as the unpaid balance tied to the release dates of the vintages and may span over several years.
3) The wine parcels are priced in the local currency of the wine producer e.g. Euros and instalments may vary based on the currency exchange rate at the time payment is made.

Seed has satisfied itself that this is systematically done.

JB: Should the Bordeaux trades prove not to be 'valid and substantive' or even fraudulent, then the investor has been very clearly disadvantaged. Soon someone will be advancing the bizarre argument that the American doctors by claiming their money and profits back are accepting that the trades were legitimate.

DW: Prove to whom? Yet again you are clinging on to a history that has long since been superseded. You do like to keep harping on about the past Jim don't you? You'll be telling me that Mafeking has been relieved next !!

Best Regards

David

Dear David

Thank you for your response (16.1.03).

En primeur trade

I look forward to receiving the explanation about the en primeur trade this week.

DW: Coming soon, be patient.

Fortunately I am patient but I have to wonder why it is taking so long to furnish an explanation.

Bordeaux trades

I am sorry that you still do not appreciate the importance of these trades and the Champagne ones that preceded them. It is no use pointing out how splendid the roof looks if the foundations are laid on sand. Seed have satisfied itself that Ocean International Marketing systematically explained the consequences of moving from the Bordeaux program to the Italian. It is very clear that for a number of investors, well in excess of those currently taking legal action, that the Italian contracts when they finally arrived in the summer of 2002. Doubtless these are matters that will be tested in the Guernsey court and in Holland, if and when, a substantive writ is served. I also have to wonder why Ocean International Marketing's contract with Seed International was terminated on 10th January 2003 if they had done such a good job of explaining the Italian wine program to investors.

How many investors declined to move to the Italian contract? There must have been some, for whom, a ten year contract was not suitable. There must also have been some who preferred to remain with Bordeaux because of the greater liquidity it offers. After all the Italian multi-vintage en primeur system may work splendidly but it is untried whereas, of course, the Bordeaux market is well established with easy ways of providing an independent valuation.

Worldwide Wines

It is clear from the accounts that Worldwide Wines bankrolled The Wine Corporation to the tune of £9.3 million. What was the source of Worldwide Wines capital?

I look forward to hearing from you.

Jim

Response from David Wilcock (17.1.03)

Dear David

Thank you for your response (16.1.03).

En primeur trade

I look forward to receiving the explanation about the en primeur trade this week.

DW: Coming soon, be patient.

Fortunately I am patient but I have to wonder why it is taking so long to furnish an explanation.

DW: I understand that it was sent today via Marcus Rutherford whom you originally addressed the question to. Let me know if it doesn't arrive soon.

Bordeaux trades

I am sorry that you still do not appreciate the importance of these trades and the Champagne ones that preceded them. It is no use pointing out how splendid the roof looks if the foundations are laid on sand.

DW: The foundations are just fine thanks. We excavated the property got rid of any substandard foundation material and put in some bedrock instead. Why aren't you raving about our show house like most other people are?

Seed have satisfied itself that Ocean International Marketing systematically explained the consequences of moving from the Bordeaux program to the Italian. It is very clear that for a number of investors, well in excess of those currently taking legal action, that the Italian contracts when they finally arrived in the summer of 2002. Doubtless these are matters that will be tested in the Guernsey court and in Holland, if and when, a substantive writ is served.

DW: Happy to test it in court if necessary Jim.

I also have to wonder why Ocean International Marketing's contract with Seed International was terminated on 10th January 2003 if they had done such a good job of explaining the Italian wine program to investors.

DW: AoW wanted to use their own marketing company. I think its called New Fine Wines or something like that. Regrettably in those circumstances we had no reason to retain Ocean hence the contract resignation. It's a shame because there are quite a number of people who worked very hard for Ocean over several years, who have recently lost their jobs.

How many investors declined to move to the Italian contract? There must have been some, for whom, a ten year contract was not suitable.

DW: A largish handful. Honestly Jim very few.

There must also have been some who preferred to remain with Bordeaux because of the greater liquidity it offers. After all the Italian multi-vintage en primeur system may work splendidly but it is untried whereas, of course, the Bordeaux market is well established with easy ways of providing an independent valuation.

DW: There's nowt as strange as folk now is there? I think that the last Bordeaux contract lapsed in September 2002.

Worldwide Wines

It is clear from the accounts that Worldwide Wines bankrolled The Wine Corporation to the tune of £9.3 million. What was the source of Worldwide Wines capital?

DW: Seed International Limited in the form of loan capital.

David

19th January 2003

Dear David

Thank you for your latest response.

Worldwide Wines

Has Worldwide Wines repaid the loan capital to Seed International or is the loan still outstanding? Who are the directors of Worldwide Wines?

From Bordeaux to Italy

How many investors declined to move to the Italian contract? There must have been some, for whom, a ten year contract was not suitable.
DW: A largish handful. Honestly Jim very few.

There must also have been some who preferred to remain with Bordeaux because of the greater liquidity it offers. After all the Italian multi-vintage en primeur system may work splendidly but it is untried whereas, of course, the Bordeaux market is well established with easy ways of providing an independent valuation.

DW: There's nowt as strange as folk now is there? I think that the last Bordeaux contract lapsed in September 2002.

I can well believe that there were very few of Seed's clients who were not systematically persuaded to move from the Bordeaux to the Italian contract. I know two of them who declined and had to fight long and hard to get just their principal back, choosing to write off the profits they were said to have made. Curiously Ocean International Marketing declined to reveal where their wine was stored and the rotational numbers for the cases.

'I did however satisfy myself that sufficient in-house wine stocks, option cover with third parties such as Bordeaux Index and even open market availability through people like Farr Vintners and Wilkinson was sufficient to cover the position of any individual client that had declined the Italian offer, and who was prepared to pay the unpaid balance on his subsisting Bordeaux contract and take physical delivery of the wine.' (DW. 8.1.03)

Your answers appear to confirm that Seed International only bought a small fraction of the $600 million worth of Bordeaux that was traded on behalf of its clients. It was, of course, the apparent success of the trades that persuaded Seed's clients to invest more money in the Bordeaux trades. How do you trade legitimately on 'open market availability'?

Apart from a flippant remark - 'There's nowt as strange as folk now is there?' - what you fail deal with is that the move from Bordeaux to the Italian contracts was not in the best interest of some of Seed's clients. Some of these clients now see their retirement prospects permanently blighted because they cannot hope to pay out the total value of the Italian contracts no matter how they are rescheduled by AOW.

En primeur trades

I look forward to receiving Seed's response but as of 5pm on Friday 17th Marcus Rutherford had not received it.

Jim