20 OCTOBER 2008

Since the previous update, my primary focus has continued to be on trying to take control of and safeguard the assets of the company. I have also been involved in a number of discussions with parties who have expressed an interest in parts of the business.

Communication

The telephone system at the bank has been up and running since Monday 13 October and a team of bank staff are answering calls between 9am and 5pm. If you are unable to get through, please bear with us and try again later. Staff are also continuing to work through the backlog of emails, faxes and letters which have been received by the bank, PwC and the FSC. I apologise to those of you who have sent me emails directly and not yet had a response, but due to the volume it is taking time to work through them.

Going forward, the best way to make contact is to write to the bank or to email branch@singers.co.im. If you need to telephone the bank, please use the main switchboard number +44 1624 699222.

Assets

On Friday 17 October 2008, I went to London and held meetings with:

• The team in PwC London who are working for me

• The UK lawyers I have appointed to act on my behalf to protect the company's assets

• Ernst & Young, the Administrators of KSF in the UK

 The meeting with the Administrators was very useful as we now have an agreed point of contact with them. They agreed to help us to reconcile the asset positions which we believe are held with them and to help determine the contractual arrangements. However, it was very clear that their sole priority, as per the Court Order appointing them, is the transfer of the UK bank's retail deposits to ING, and anything else is currently of secondary importance. I will post a copy of their Court Order on the website when I receive a certified copy. Meanwhile, it is interesting to note that the Court papers relating to their appointment are sealed, which means we cannot examine them to determine the reasons for their appointment or any other related matters.

Potential purchasers of assets

I have continued to receive enquiries from parties interested in parts of the business, and have met with some of them. Finding a buyer for the company's assets is a priority and a lot of time has been spent in the last few days examining the company's records and preparing analyses for potential purchasers. This will continue to be a key focus over the next week.

Transfers in transit

The matter of transfers in transit was also discussed with Ernst & Young on Friday. It now appears that banks were told to cease processing transactions for Icelandic owned banks on 6 October, but did not tell KSF that this was happening. We do not know why this happened, but it would be consistent with the anti tipping-off provisions which are contained in anti terrorist legislation. Ernst & Young have agreed to assist us in identifying and locating transfers in transit.

I have had contact from a number of you who are concerned about my motives for trying to unfreeze the clearing system to enable these transfers to move. Firstly, let me make it clear that I have absolutely no interest in trying to claw back transfers which should legally continue to their intended destinations. If I did, I am sure that the Court would not permit me to do so. However if, for whatever reason, any transfers did not successfully leave the control of KSF IOM, then I would be legally obliged to seek to recover them. This is not a straightforward area of the law, and I am taking legal advice to make sure that transfers are treated appropriately. Some of you have forwarded copies of relevant legal cases which I have made my lawyers aware of.

Court Hearing

The winding up petition is due to be considered in Court on Friday 24 October. If this goes ahead and the petition is approved by the Deemster, a winding up order will be issued appointing me as Provisional Liquidator and Deemed Official Receiver. Directions will also be made, either at that hearing or shortly thereafter, regarding the timing of the creditors meeting. Following this, notices will be issued as required to depositors and other creditors and proof of debt forms will also be issued.

A significant number of depositors have emailed me in the last few days suggesting that the issuance of the winding up order should be delayed in the hope that the high level political negotiations which are taking place may, along with international financial aid for Iceland, result in the parental guarantee being fully honoured with the financial support of the Icelandic Government.

Whilst I also very much hope that the current negotiations lead to a speedy resolution of the company's financial problems and full backing for your deposits, I must point out that the winding up petition and order are matters for the Isle of Man High Court, and as I am not a petitioner, I have no influence over the outcome of the Court Hearing. Those of you who have views regarding the timing of the winding up order should contact the Isle of Man Financial Supervision Commission, who are a petitioner and may therefore be in a position to influence the timing.

Finally, I want to mention that, once the winding up order is issued, I will be applying to Court for the appointment of a Joint Liquidator. The speed with which the winding up petition was required meant that there was not enough time to identify a candidate at that stage. However it will be beneficial to have a joint liquidator who will be well placed to recover assets in the UK.

 

Mike Simpson

Liquidator Provisionally