The official website for the Glitnir bank

Glitnir Bank files US$2bn legal claim against Jón Ásgeir Jóhannesson and former Directors and Shareholders, alleging fraud; also sues PwC for malpractice and negligence

On 12 May 2010 Glitnir Banki announced that it has commenced legal action in Supreme Court of the State of New York against Jón Ásgeir Jóhannesson, formerly its principal shareholder, Lárus Welding, previously Glitnir´s Chief Executive, Þorsteinn Jónsson, its former Chairman, and other former directors, shareholders and third parties associated with Jón Ásgeir Jóhannesson, for fraudulently and unlawfully draining more than $2 billion out of the Bank.

ICC meeting held in Reykjavík
On 17 May 2010 Glitnir ICC meeting was held in Reykjavík.  The agenda of the meeting included the following:
•    Update from the Winding-Up Board
•    Kroll update
•    Insurance update
•    Update from the Resolution Committee
•    Business Plan update
•    Glitnir strategy and process going forward

At the meeting the Resolution Committee of Glitnir introduced financial information for the three months ended 31 March 2010.  The information included cash flow for the three months ended 31 March 2010, a summary balance sheet as at 31 March 2010 and a breakdown of the liabilities as at 31 March 2010.

Open creditors meeting held in Reykjavík
On 19 May 2010 an open creditors meeting was held at the Hilton Nordica Hotel.  The agenda for the meeting was:
1.    Claims registration update
2.    Kroll update
3.    Financial position as at 31 March 2010
4.    Operational update since 17 December 2009
5.    Composition/ restructuring update
6.    Objections to decisions taken by the Winding-Up Board
7.    Q&A

Reasons for the meeting
According to Point 5 of Paragraph 1 of Art. 85 of Act No. 21/1991, a creditors' meeting is to be held within one month of the expiry of the deadline for lodging claims to discuss the list of claims lodged.  That meeting was held on 17 December 2009.
Due to the number of claims received, that meeting was adjourned until 19 May 2010. The next creditor meeting to discuss registered claims will be held on 2 December 2010.

The principal objectives of the meeting were to:
•    provide important general information to creditors;
•    provide a summary of the financial position of the Bank;
•    present the list of decisions on claims made by the Winding-Up Board since 17 December 2009;
•    provide explanations for decisions taken regarding the above claims;
•    present and account for objections received to the above decisions prior to the meeting;
•    invite participants to submit objections to decisions made on the above claims;
•    provide participants with an opportunity to express their views and explain their objections; and
•    explain the next steps.

A list of claims received was published and made available at the first claims registration creditors’ meeting on 17 December 2009. The list indicated the nature of each claim, its amount and the priority requested for each claim. An updated list has been published on the restricted area of the Bank’s website and is available at the Bank’s offices.

A total of 8,694 claims were received within the time limit for lodging claims, i.e. from 26 May to 26 November 2009.

The total amount of claims lodged is ISK3,430bn.

The total amount of claims lodged is unlikely to reflect Glitnir's actual situation, since this is the maximum amount conceivably claimed by creditors.

The total amount of claims is based on the exchange rate quoted by the Central Bank of Iceland on 22 April 2009. All claims in foreign currencies have been converted using the Central Bank's ISK exchange rate on that date.

In total, decisions have been taken on 4,294 of claims received, split as follows:
•    in advance of the17 December 2009 meeting – 2,395; and
•    between the 17 December 2009 and 19 May 2010 meetings – 1,899.

Business Plan
In April 2010, the Resolution Committee commenced the preparation of a Business Plan.
The objective of the Business Plan is to summarise Glitnir’s current objectives and strategy for realising its assets, supported by asset portfolio and operating expenses cash flow projections. In addition, the Business Plan will include supporting narrative regarding sources of information, key assumptions and methodologies, inherent limitations, risks and sensitivities.

Information meetings
In March the Resolution Committee and the Winding-up Board of Glitnir bank held a series of meetings to present the bank´s affairs. 

Meetings were held with representatives of the ministries, the Central Bank, the FSA and various media. Representatives of Glitnir also appeared for the Trade Committee of the Icelandic parliament, Althingi.

The purpose of the meetings was to clarify the bank’s current situation, review the progress of events from the collapse of the Icelandic banking system in the autumn of 2008 until the present day and to provide information about the main tasks that lay ahead.

Statement of Assets and Liabilities as at 31 December 2009
At the end of March 2010 the Statement of Assets and Liabilities of Glitnir as at 31 December 2009 where presented on Glitnir website.

Summary of Glitnir’s operating expenses
In response to a media query in Iceland, Glitnir’s Resolution Committee and Winding-Up Board provided the following summary of aggregate operating expenses for 2009.

ICC meeting in Reykjavik on 23 February 2010
On 23 February 2010 a further meeting of Glitnir’s Informal Creditors’ Committee (“ICC”) was held in Reykjavik. This was the first meeting of the ICC since it was refreshed during January 2010.
The following topics were discussed during the meeting:

• a review of the refresh of the ICC and a summary of the proposed ICC process going forward;
• a summary of progress in relation to the claims registration process;
• detailed financial information relating to Glitnir; and
• an update from Kroll in relation to their work.

As a result of the finalisation of the claims submission process and changes in size of certain creditors of Glitnir, the Resolution Committee wished to refresh the composition of the ICC. This was undertaken to ensure the ICC best represented the creditor base of Glitnir and comprised a significant proportion of the creditor base. The Resolution Committee engaged external consultants to assist in the refresh of the ICC.

In order to identify potential new ICC members, a notice was placed on Glitnir’s website, asking for notification from creditors that were interested in becoming ICC members. As part of the process to refresh the ICC, the following considerations were taken into account: creditor size, creditor type and creditor geography. In addition, the Resolution Committee wished to limit the size of the ICC to approximately 8 – 12 institutions to ensure that the ICC process remained as efficient and workable as possible.

The refresh of the ICC resulted in a number of new ICC members. All ICC members have been required to enter into strict confidentiality agreements.

The revised composition of the ICC is shown below. This composition is not fixed, and the Resolution Committee may add to or alter the composition going forward.

• Bingham McCutchen LLP, representing certain bondholders
• Houlihan Lokey, representing certain bondholders
• DekaBank
• The Royal Bank of Scotland
• Raiffeisen Zentralbank
• Sumitomo Mitsui Banking Corporation Europe
• Saga Capital
• The Association of Icelandic Pension Schemes
• The Local Government Association
• Aresbank

In addition, there are a small number of further ICC member institutions which are not disclosed above at the request of the ICC member in question.

The Resolution Committee and Winding-Up Board look forward to working closely with the ICC going forward.

• FME authorises ISB Holding ehf.’s qualifying holding in Íslandsbanki
• Ownership of Glitnir’s subsidiaries is transferred to GLB Holding
• New Board of Directors appointed for Íslandsbanki

FME authorises ISB Holding ehf.’s qualifying holding in Íslandsbanki
At the end of December 2009, the Icelandic Financial Supervisory Authority (the “FME”) authorised ISB Holding ehf.’s qualifying holding in Íslandsbanki hf. The permission is granted following the agreement between Glitnir and the Icelandic Ministry of Finance dated 13 September 2009, relating to Glitnir’s acquisition of a 95% holding in Íslandsbanki upon fulfilment of certain conditions.

Glitnir’s ownership will be through a separate wholly-owned subsidiary of Glitnir, ISB Holding, which is directed by a board of directors with the majority of its members independent of Glitnir, Glitnir’s significant creditors and Íslandsbanki itself. Glitnir’s Resolution Committee is allowed to appoint one member of the board of ISB Holding, with the remaining two required to be independent. The nomination of all three members of ISB Holding’s board is subject to the approval of the FME. Members must meet the FME’s requirements, including those pertaining to knowledge and experience of financial operations.

Ownership of Glitnir’s subsidiaries is transferred to GLB Holding
Ownership of Glitnir’s subsidiaries in finance and insurance has now been moved to the holding company GLB Holding.  The company is wholly owned by Glitnir. This new organisational structure is in line with the requirements of the FME.

GLB Holding has a strong financial position, with equity of approximately ISK96.5bn and an equity ratio of 100%. This financial strength enables GLB Holding to provide robust support to its subsidiaries in the financial services and insurance sectors. The Board of Directors of GLB Holding is comprised of Heimir V. Haraldsson (Chairman), Þórdís Bjarnadóttir and Kristján Óskarsson. Heimir and Þórdís are members of Glitnir’s Resolution Committee whilst Kristján is Glitnir’s CEO. Ingólfur Hauksson, Glitnir’s CFO, is managing director of GLB Holding.

Furthermore, a Board of Directors has been appointed for ISB Holding, one of the subsidiaries of GLB Holding. In accordance with the conditions set by FME, the majority of the Board are independent of Glitnir, Glitnir’s most significant creditors and Íslandsbanki itself. The Board of Directors of ISB Holding is comprised of Ólafur Ísleifsson, assistant professor at Reykjavík University, Ásta Þórarinsdóttir, economist, and María B. Ágústsdóttir, managing director of ISB Holding and employee of Glitnir’s Resolution Committee. Reynir Kristinsson, business consultant, is an alternate director.

New Board of Directors appointed for Íslandsbanki
At a shareholders’ meeting held on 25 January 2010 Mr. Fridrik Sophusson, former Minister of Finance and former CEO of Landsvirkjun hf., was elected chairman. The company’s articles of association stipulate that a shareholders’ meeting elects the chairman directly.

The following six people have been appointed on behalf of ISB Holding ehf., a wholly-owned subsidiary of Glitnir:

Mr. Neil Graeme Brown
Neil Graeme Brown, a British national, has extensive experience of finance and restructuring of international businesses. Among positions held by Mr. Brown are head of buyouts and financial services at Apax Partners and partner at Coopers & Lybrand (now PwC). Mr. Brown has 20 years of experience in international private equity and is an expert in US and European M&A markets. Furthermore, he has listed companies on the London, AIM and Nasdaq markets. Mr. Brown has served and serves as a board member for a number of international companies.

Mr. Brown holds a M.A. degree in business from Emmanuel College Cambridge and is an associate of the Institute of Chartered Accountants (ACA).

Mr. John E. Mack
John E. Mack, a US national, has many years’ experience in international banking and M&A. Moreover he has thorough knowledge of the development of best-practice corporate governance.  He was Corporate Executive Officer and CFO of Shinsei Bank in Tokyo from 2002 – 2005 where he managed the Bank's Global IPO. Prior to that, he spent 27 years working for Bank of America (BoA) and its affiliates, most recently as a funding executive for the Parent Company. John Mack has specific experience in corporate work-outs and problem loans through his former role as director of Strategic Solutions, Inc., a majority-owned subsidiary of BoA.

Mr. Mack holds an MBA from the University of Virginia, Darden School of Business and an undergraduate degree in Economics from Davidson College.

Mr. Raymond J. Quinlan
Raymond J. Quinlan, a US national, has a wide ranging career in financial markets. Mr. Quinlan worked for Citigroup, Inc. and its subsidiaries for over three decades where he variously served as manager, chairman and CEO at among others their retail financial services business in North America, M&A execution for all Citigroup businesses, the International Cards Division, the Global Transaction Service Group as well as Analytics for the Global Corporate Bank.

Ray Quinlan holds M.Phil. and  Ph.D.  degrees in Economics from the Graduate School and University Center of the City University of New York, as well as MBA degrees from both the Columbia University Graduate School of Business and the New York University, Stern School of Business.

Mr. Fridrik Sophusson
Fridrik Sophusson has nearly forty years’ wide-ranging experience in fiscal policy making, management and public service in Iceland. He was Managing Director of the Icelandic Management Association from 1972 – 1978 when he was elected to Parliament where he served as an MP for a period of twenty years from 1978 to 1998.  During his stretch as an MP he moreover held the position of Minister of Industry and Energy 1987 – 1988 and Minister of Finance from 1991 – 1998. Mr. Sophusson was appointed the CEO of Landsvirkjun ltd., The National Power Company, in 1999 and held that position for almost 11 years, resigning in 2009. Among companies he has served as board member is Landsbanki from 1990 – 1992, Pharmaco (later Actavis), Enex - a renewable energy solution company, Samorka - the Icelandic Energy and Utilities Assciation, Nordel -Nordic Transmission System Operators, Eurelectric - Union of the  European Electricity Industry, and the Icelandic Chamber of Commerce.
Mr. Sophusson holds a Cand. Jur. degree in Law from the University of Iceland.

Ms. Marianne Økland
Marianne Økland, a Norwegian national, currently holds the position of Managing Director of Avista Partners, a London based consulting firm specialising in advisory and capital raising. Ms. Økland has spent most of her career in banking dealing with debt financing in various positions at JP Morgan and Union Bank of Switzerland (UBS). She worked for their Capital Market division focusing on Nordic Debt Origination and Structuring. Ms. Økland is also familiar with the consulting business from her work at Marsoft Limited, a Boston, Oslo and London based consulting firm specialising in shipping investments.
Ms. Økland holds a M.Sc. degree in Finance and Economics from the Norwegian School of Economics and Business Administration where she worked as a researcher and taught mathematics and statistics.

Mr. Árni Tómasson
Árni Tómasson began his work in accounting in 1979 and has worked in bank and financial institution auditing since 1985. He was partner and later chairman of Deloitte ltd. In Iceland until 2001. He has served as president of the Institute of State Authorized Public Accountants in Iceland (FLE) and held the same post for the Nordic Association of Accountants (NFR). Mr. Tómasson has a combined over 20 years of experience in teaching at Reykjavik University and the University of Iceland and has been chairman of the examination committee for the FLE for the past 6 years.  Mr. Tómasson was CEO of Bunadarbankinn (later merged with Kaupthing) from 2001 – 2003 and has since worked as an independent consultant. Mr. Tómasson was appointed chairman of Glitnir‘s Resolution Committee in October 2008 and has led the committee‘s work and the creditors‘ negotiations with the Icelandic government since that time.

Árni Tómasson has a Cand. oecon. degree in Business Administration from the University of Iceland and is a state authorized public accountant.

Member appointed by the Icelandic State Banking Agency:

Ms. Martha Eiríksdóttir
Martha Eiríksdóttir is an independent project manager. She worked as executive director of relationship management and marketing for Landsnet ltd. from 2003 – 2009. In 2001 – 2003 Ms. Eiríksdottir was executive director of sales and marketing for Islandssimi ltd. During 1994 – 2000 she was dept. manager at Europay Int‘l in Belgium and had prior to that worked as marketing director for Kreditkort ltd (Icelandic Europay) Ms. Eiríksdottir was executive director of marketing for the Icelandic Fisheries Bank from 1988 – 1990. She was appointed to the Board of Directors of Íslandsbanki in February 2009 and is the current vice-chairman of the Board. She was chairman of the board of Kreditkort 2008-2009 and has been a member of the board of Icelandair Group since 2006.

Martha Eiríksdottir has a Cand.oceon. degree in Business Administration from the University of Iceland and a B.Ed. degree from the Icelandic College of Education.

8.685 Claims Lodged in Glitnir´s Winding-up
The time limit for lodging claims in Glitnir’s winding-up proceedings expired on 26 November and at a creditors’ meeting on 17 December, the Winding-up Board did go over the list of claims and explain the decisions which have already been taken.  Creditors also had an opportunity to object to decisions taken by the Winding-up Board on individual claims.

A total of 8,685 claims were lodged in Glitnir’s winding-up proceedings amounting to ISK 3,463 billion. This is a maximum figure, which may decrease as the Winding-up Board reviews the individual claims. In addition, in some instances the same claim has been lodged more than once. Among the largest creditors are foreign financial and banking institutions, on the one hand, and other bond holders, on the other hand.

Claims for wages are relatively few in Glitnir’s winding-up proceedings, as most of the bank’s general employees have already received payment. The Winding-up Board has decided to refuse priority to wage claims by the bank's managing directors and to claims arising from so-called wholesale and money market deposits. The claims for bonuses have also been rejected. In addition, the Winding-up Board has rejected claims that subordinated bonds have the status of general claims. These number some 2300 claims, totalling close to ISK 180 billion.

Creditors meeting on 17 December 2009
According to Point 5 of Paragraph 1 of Art. 85 of Act No. 21/1991, a creditors' meeting is to be held within one month after the expiry of the deadline for lodging claims to discuss the list of claims lodged. The principal objectives of the meeting were:

• •    to provide important general information to creditors;
• •    to provide a summary of the financial position of the Bank and an assessment as to whether the Bank has sufficient assets to meet its obligations;
• •    to present the list of claims received by the Bank;
• •    to provide explanations for decisions taken regarding certain claims;
• •    to present and account for objections received prior to the meeting;
• •    to invite participants to submit objections to decisions made on individual claims;
• •    to provide participants with an opportunity to express their views and explain their objections; and
• •    to explain the next steps.

The list of claims was introduced by the Winding-up Board. The list indicates the nature of each claim, its amount and the priority requested for each claim.  The Winding-Up Board provided creditors with a report providing a summary of how decisions on claims have been taken. 

A number of claims were received after the expiry of the time limit. These are subject to the provisions of Articles 118 and 121 of the Bankruptcy Act and so have not been included in the list of claims. The total amount of claims lodged is ISK3,463bn.The total amount of claims lodged is unlikely to reflect Glitnir's actual situation, since this is the maximum amount conceivably claimed by creditors.  The total amount of claims is based on the exchange rate quoted by the Central Bank of Iceland on 22 April 2009. All claims in foreign currencies have been converted using the Central Bank's ISK exchange rate on that date. Decisions have been taken on 2,481 of the 8,685 claims received.

The Winding-Up Board takes decisions in accordance with the basic principle of Icelandic insolvency law that if special priority is not requested in a satisfactory manner, a claim is considered a general claim under Article 113 of the Bankruptcy Act.

In assessing the priority of claims, the Winding-Up Board follows the main principle of the Bankruptcy Act that all exceptions from the main principles of creditor equality should be reviewed thoroughly.

Upon the expiry of the time limit for lodging claims, the main emphasis was placed on concluding the registration of all claims which had been lodged and assessing those claims where (i) priority was claimed or (ii) the claim concerned the issuance of a debt instrument, the terms and conditions of which make it contractually subordinate to other debts of Glitnir.

Once this was done, decisions were taken on the claims in each individual category and every effort made to conclude the treatment of all claims within the same category.

According to paragraph 5 of Article 102, cf. Temporary Provision VI of the Act on Financial Undertakings, once the time limit for submission of claims has expired, the Winding-Up Board shall assess whether it appears that a financial undertaking’s assets are sufficient to cover its obligations. 

A summary of Glitnir’s assets and obligations is contained within the Statement of Assets and Liabilities as at 30 June 2009 and has been presented at the creditor meeting on 5 November 2009. It is also available on the public area of the Bank’s website, www.glitnirbank.com.

At the meeting creditors had opportunity to raise objections to decisions by the Winding-Up Board on recognising claims.

The next creditors’ meeting where decisions on additional claims will be discussed will be held on Wednesday 19 May 2010 at 10:00 am.

The Winding-Up Board aims at presenting at that meeting its decisions on recognising other claims lodged with priority in accordance with Articles 109-113 of the Bankruptcy Act.

Those creditors on whose claims decisions will be presented at that meeting will be sent a special notification of the decision no later than one week prior to the meeting.

At the creditors' meeting on 19 May 2010 it will be announced when the third meeting on decisions on claims will be held.

Agreement with former CEO of Glitnir Bank
Glitnir banki hf. and Bjarni Ármannsson, former CEO of Glitnir banki reached an agreement on the repayment of the premium paid in share transactions between companies owned by Bjarni Ármannsson with Glitnir banki upon his termination of employment in April 2007.

Glitnir banki recently requested that Bjarni Ármannsson and companies owned by him repay the premium in question plus contractual interest. This request was agreed to. The payment made amounts to over ISK 650 million.

This represents a final settlement between the parties, including as well the cancellation of bond claims by companies owned by Bjarni Ármannsson against the bank amounting to approximately ISK 273 million. No other claims exist from Bjarni Ármannsson or companies owned by him against the bank.

ICC meeting held in Reykjavík
On 4 November 2009, the seventh Glitnir ICC meeting was held in Reykjavík. The agenda of the meeting included:

• •    an update on the process for board member appointments at Islandsbanki;
• •    an update on Glitnir’s cost base; and
• •    an update on Glitnir’s liquidity status.

Open creditors meeting in Reykjavík
A meeting with creditors of Glitnir was held on 5 November 2009 at Hilton Nordica hotel in Reykjavík.   In accordance with Aritcle 13 of Act No. 21/1991, the Moratorium Appointee is obliged to convene a meeting of creditors in advance of the hearing at District Court on 13 November 2009.

The main purposes of the meeting were to:

• •    provide creditors with an update on key events since the creditor´s meeting in February 2009;
• •    present a Statement of Assets and Liabilities and operational overview of Glitnir;
• •    provide creditors with key nest steps including the Moratorium Appointee´s recommendation to the District Court as regards a potential extension of the Moratorium; and
• •    provide creditors with an opportunity to provide feedback and raise questions. 

Increase in liabilities announced at the 5 November 2009 creditor meeting
On 5 November 2009, Glitnir banki hf. (“Glitnir’) announced the potential increase in its liabilities of EUR 752 million, relating to certain transactions identified as a result of Glitnir’s ongoing claims registration process. Following the creditor meeting on 5 November 2009, the Resolution Committee engaged Deloitte hf. (“Deloitte Iceland’) to review these transactions in order to provide further information in relation to their nature and potential quantum.

As part of Deloitte Iceland’s work, all open repo/securities lending transactions involving Glitnir´s bonds were reviewed. The conclusion of Deloitte Iceland´s review was that the potential liabilities regarding these transactions at the time of Glitnir’s collapse totalled approximately EUR 793 million (being EUR 41 million higher than the EUR 752 million announced to creditors on 5 November 2009). The total adjustment of EUR 793 million represents approximately 5.5% of the total liabilities as at 30 June 2009, as originally published on 31 August 2009. The Resolution Committee’s current view is that these liabilities will be treated in line with the other issued bonds included within “Debt issued and other borrowed funds” in the Statement of Assets and Liabilities as at 30 June 2009.

Given the time available to conduct the review, the eventual total liability may be greater or less than EUR 793 million. A final determination of the liability relating to these transactions will be known following completion of the ongoing claims registration. The last day creditors are able to submit claims against Glitnir is 26 November 2009.

District Court of Reykjavik ruled in favour of Glitnir´s request for an extension to the Moratorium order
On 19 November 2009 The District Court of Reykjavík ruled in favour of Glitnir´s request for an extension to the Moratorium order originally granted on 24 November 2008.  The current extension period is due to end of 13 August 2010.

The deadline to file a claim passed on 26 November 2009.

ICC meeting held in London
On 10 September 2009, the sixth Glitnir ICC meeting was held in London. Central to the discussion of the meeting was the recapitalisation of Islandsbanki. The two potential options available to the Resolution Committee were presented and extensively discussed:

a)    The option of acquiring 95% of share capital in Islandsbanki
b)    The option of accepting payment in the form of a debt instrument issued by Islandsbanki, plus call option to a maximum of 90% of Islandsbanki´s shares over the next five years.

The advisors to the Resolution Committee introduced the due diligence process and their major findings to date.

Settlement on Bank Assets to Islandsbanki
Glitnir's Resolution Committee and the Icelandic government signed on 13 September 2009 an agreement on settlement for assets transferred from Glitnir to Íslandsbanki after the Icelandic banking collapse in October 2008. This settlement has been concluded following a preliminary agreement announced on 20 July 2009, pursuant to which the Treasury decided to provide Íslandsbanki with ISK 65 billion in additional equity on 14 August 2009.

Open creditors meeting in Reykjavík
A meeting with creditors of Glitnir was held on 22 September 2009 at Hilton Nordica hotel in Reykjavík.   At the meeting, the Resolution Committee, Moratorium Appointee and other presenters updated creditors in respect of the recapitalisation of Islandsbanki, together with other updates for creditors.  Presentations, minutes of the meeting, question and answers from the meeting have been published on the homepage of Glitnir www.glitnirbank.com.

Glitnir granted an extension to 15 October 2009 to decide whether to aquire 95% share in Íslandsbanki.
On 30 September 2009 The Ministry of Finance accepted a request from the Resolution Committee of Glitnir, on behalf of the creditors, for an extension until 15 October 2009 to arrive at a final decision whether to acquire control of Islandsbanki.

ICC meeting held in Reykjavík
On 13 August 2009, the fifth Glitnir ICC meeting was held in Reykjavík, Iceland. Central to the discussion of the meeting was the process in relation to the Instrument/Ownership structure of Islandsbanki. The terms of the agreement provided 2 alternatives for Glitnir

a) Up to 100% share ownership of Islandsbanki, and
b) A two tier bond structure (Bond A and Bond B) and an equity purchase option.

The Resolution Committee of Glitnir will determine by 30 September, 2009 which of the compensation alternatives to compensation.

The management of Islandsbanki gave a presentation on the business plan for Islandsbanki.

The Statement of Assets and Liabilities as at 30 June 2009 were presented to ICC. The Statement will subsequently be published on the Glitnir website (www.glitnirbank.com).

Agreement between the Government and the Resolution Committee of Glitnir
On 20 July 2009 the Resolution Committee of Glitnir reached an agreement with the Government of Iceland regarding the initial capitalisation of Islandsbanki and compensation alternatives to be made available to Glitnir - broadly comprising either up to 100% share capital ownership in Islandsbanki or a set of bonds plus an option for the purchase of share capital.

The Government of Iceland intends to capitalize Islandsbanki via an ordinary share subscription on August 14, 2009.

Subsequently, the Resolution Committee of Glitnir will determine by 30 September, 2009 which of the two compensation alternatives to compensation:

1. Up to 100% equity ownership of the share capital of Islandsbanki. In this event, the Government will provide incremental capital support in the form of Tier I/II capital securities in the amount of ISK 25 billion and additional liquidity support of ISK 25 billion.
2. Receipt of a combination of instruments composed of the following:

• - Bond A: ISK 52 billion (equivalent value as of October 15, 2008) 7-year Euro-denominated bond
• - Bond B: Euro-denominated bond with a maximum principal balance of ISK 63 billion (equivalent). Principal balance to reflect 90% of Islandabanki net profit in excess of a hurdle rate of return to government capital, accrued in financial periods prior to December 2011
• - Option for the purchase of 90% of the Government´s Islandsbanki share capital; subject to a hurdle rate of return on government capital

Sjóvá
Sjóvá's financial restructuring was completed in the beginning of July 2009. A new company with the name Sjóvá will be established to take over the insurance activities only of the former company. This means that investment activities involving real estate have been separated from Sjóvá's traditional insurance activities. Glitnir represents 91% and Íslandsbanki 9% of the shareholding in Sjóvá.

Glitnir and Íslandsbanki have provided Sjóvá with capital of ISK 16 billion to boost its equity position and ensure its future operation. The Treasury has provided Glitnir with credit in the form of loans granted against a mortgage in Glitnir's holding in Sjóvá. With its participation, the government intends to protect the state's claims against Sjóvá, as well as the interests of a large number of insurance customers. Preparation of the formal sales process for Sjóvá will begin in coming months.

Following the restructuring, Sjóvá fulfils all of the FME's conditions for insurance activities; the company has sufficient assets to cover its technical provisions and its equity position is considered solid.

Further information on submission of claims and handling of claims

Announcement of creditors' meeting
A ruling by the Reykjavík District Court, pronounced on 19 February 2009, authorised the extension of the moratorium granted to Glitnir banki hf., Reg. No. 550500-3530, Kirkjusandur, 105 Reykjavík, which was originally granted on 24 November 2008, to 1:00 pm on Friday, 13 November 2009.

Steinunn Guðbjartsdóttir, Supreme Court Attorney, has served as Administrator during the moratorium.

As a result, and with reference to Art. 13 of Act No. 21/1991, the bank's creditors are invited to a meeting, to be held on Thursday, 5 November 2009, at 10:00 am at the Hilton Reykjavík Nordica, Suðurlandsbraut 2, Reykjavík.

Furthermore, notice is hereby given that the District Court will convene in Courtroom 102 of the courthouse on Lækjartorg square in Reykjavík to review the moratorium of Glitnir banki hf. on Friday, 13 November 2009, at 1:00 pm, as the moratorium granted to the bank by the ruling of the Reykjavík District Court expires at that time.

ICC meeting
On 13 May 2009, the fifth ICC meeting was held in Reykjavik. The agenda for discussion included:

• An overview of the recently appointed Winding Up Board, including details on their role and composition;
• An update from the Ministry of Finance and its advisers in relation to progress on the instrument to be issued by Islandsbanki;
• An update from UBS on its work as financial adviser to the resolution Committee;
• An update on the operations of Glitnir, including a cash flow and operating expenses analysis and an update on key assets; and
• An overview of a typical Composition of Creditors under Icelandic law.

Financial investigations firm appointed 
Glitnir bank has appointed the London office of Kroll to assist the Resolution Committee in investigating potential irregularities in transactions undertaken prior to the bank's collapse. The goal of the investigation is to pursue and recover any assets from those who may have benefited from, or were responsible for, such irregularities. Kroll is a global independent forensic investigation firm and a leader in its field.

The team appointed to this case has a proven track record in investigating alleged wrongdoings prior to corporate collapses as well as conducting large scale, asset recovery actions. This appointment reflects the Resolution Committee's determination to identify any deliberate wrongdoing and maximise recoveries for the benefit of the creditors.

Sjova close to finalising restructuring plan 
Over the past few months, Glitnir's Resolution Committee, the Sjóvá Board of Directors, and Íslandsbanki's Corporate Finance have been working on the restructuring of Sjóvá. The goal of the restructuring is to ensure the best interests of Sjóvá's customers, and to maximise the company's value.

Sjóvá's investment operations are expected to be separated from its insurance arm. This means that a new company will be founded to handle the insurance operations under the name of Sjóvá. An application for a licence to operate has already been sent to the Financial Supervisory Authority in Iceland.

Sjóvá's insurance business is believed to be sound and well run. Following the restructuring, the company's balance sheet will be strong and the insurance operations solid. The restructuring will not affect the company's daily operations which will continue to provide its customers with quality service.

Dr. Hörður Arnarson, former CEO of Marel Food Systems, has been recruited as the company's new CEO. The current CEO, Mr. Þór Sigfússon, has asked to be released from his duties, but will remain in an advisory capacity at first.

The Winding Up Board of Glitnir
The Icelandic parliament has passed a Bill of Legislation to amend the act of Financial Undertakings No 161/2002. The Bill has new rules about the winding-up proceedings of financial institutions.

According to those new rules the Banks' Resolution Committees will continue to operate and to perform certain tasks and in so doing handle the administrative aspects of the winding-up proceedings which would otherwise be entrusted to the Winding Up Boards. The Resolution Committees will continue to act under the direction of the Financial Supervisory Authority (FME). On 12 May 2009 the District Court of Reykjavik appointed a Winding Up Board which will handle those aspects of the winding-up not dealt with by the Resolution Committee.

The members of the Winding Up Board are:

• Steinunn Guðbjartsdóttir, Supreme Court Attorney
• Einar Gautur Steingrímsson, Supreme Court Attorney
• Páll Eiríksson, District Court Attorney

• An update on the new Financial Institutions legislation in Iceland;
• A summary of monthly operating costs incurred since the split in October 2008;
• An update on various of Glitnir's key assets; and
• An operational overview of Glitnir, including key employees, working groups and committees.

Impoundment of Glitnir's assets in Norway ends
During April 2009 Glitnir's assets in Norway, which have been impounded since the bank's collapse last October, were released. The action gave the bank's Resolution Committee unrestricted control over its assets in Norway, which are valued at around ISK 100 billion. According to the chairman of Glitnir's Resolution Committee, Árni Tómasson, this was an important outcome, since it made it clear that the bank would be able to fulfil all of its commitments in Norway and thereby maximise the value of assets for creditors. Furthermore, it ensured equal treatment of creditors, as those who demanded the impoundment in Norway must now, like all creditors, direct their claims to the bank's estate in Iceland, where any disputes arising will be resolved by the Icelandic courts.

Three parties originally demanded the impoundment of Glitnir's assets in Norway, and Norwegian courts agreed to their demand. Glitnir's Resolution Committee requested that the demand be submitted to a court for review in a case brought before a court of first instance in Trondheim in January this year. After the court rejected the demand for impoundment, the German bank KfW appealed the decision. Other creditors withdrew their demands for impoundment and when the time came for the case to be heard by the appellate court last week, KfW also withdrew its demand for impoundment. Subsequently all impoundment of Glitnir's assets in Norway were removed.

Appointment of a new Chief Financial Officer
On April 15 2009, Ingólfur Hauksson was appointed as Chief Financial Officer for Glitnir. Ingólfur Hauksson is a Chartered Accountant and for the last three years worked in the Financial department of Hf. Eimskipafélag Íslands. Previously he was Auditor and Partner at KPMG in Iceland for 15 years.

Milestone's foreign assets disposed of and domestic assets transferred to Iceland
Moderna Finance AB, a subsidiary of Milestone ehf. in Sweden, concluded agreements for the sale of its insurance company Moderna Försäkringar and asset management company Aktie Ansvar. The company also intends to sell the life insurance company Moderna Liv and the bank Banque Invik. Furthermore, the company's Icelandic assets, which include Sjóvá, Askar Capital and Avant, will be sold to Milestone and thereby will once more become owned by Icelandic parties. These changes will not affect the operations of the Icelandic companies.

The disposal of Moderna Finance's assets was concluded in consultation with the Resolution Committee of Glitnir hf., which is Milestone's largest creditor. The disposal of Moderna Finance's assets put an end to plans for financial restructuring of the Swedish Moderna Group, on which the company's owners and Glitnir's Resolution Committee had been working in recent weeks. The restructuring, which was aimed at safeguarding creditors' interests, required in part that Glitnir provide the companies with new capital to refinance their loans. Due to steadily deteriorating market circumstances, however, and a considerable lack of confidence on the part of Swedish parties towards Icelandic ownership, these plans could not be realised and as a result Glitnir would not provide the Swedish companies with new capital.

Both the Resolution Committee and Milestone's management agrees in the assessment that, under the current circumstances, Icelandic interests were best served by disposing of the foreign assets of the Moderna Group and transferring its domestic assets back to the parent company in Iceland.

The estimated sales value of the Moderna Group's foreign assets was considerably lower than it was hoped could be obtained through financial restructuring and the sale of assets at a later date. Milestone's leaders would, in weeks following, work on the company's financial restructuring in co-operation with its principal creditors.

Glitnir's Resolution Committee worked diligently with Milestone's management in the recent months to ensure the best result for creditors. It was therefore somewhat disappointing that the plans, to which considerable effort has been devoted, will not achieve the desired results.

Agreement on a settlement for the Bank's Luxembourg subsidiary
Glitnir's Resolution Committee and the Central Bank of Luxembourg (BCL) signed an agreement providing for settlement of debts for Glitnir's subsidiary, Glitnir Bank Luxembourg S.A. BCL is part of the network of European central banks in member countries of the Eurosystem. Negotiations had been underway since Glitnir Bank Luxembourg S.A. was placed under a suspension of payments mode in early October. This agreement will facilitate Glitnir's Luxembourg subsidiary to be placed into a voluntary and solvent liquidation.

The agreement meant that important interests of Glitnir and its customers would be safeguarded; the Luxembourg subsidiary would have a period of up to five years within which to maximise the value of its assets and repay all debts owed to BCL. The agreement also foresaw that securitised loan portfolios, pledged to BCL, and which include, for instance, loans to Glitnir's Icelandic customers, would continue to be administered by Glitnir's Resolution Committee. According to the agreement, proceeds from the corporate loan portfolio of Glitnir Bank Luxembourg were furthermore to be used to repay debts to BCL. The portfolio principally includes mortgages on commercial and residential real estate in the Nordic countries, the UK and Germany.

A proposal for a settlement with creditors had been presented to all creditors for voting on 16 March 2009. According to this proposal, creditors other than BCL will receive payment of their claims of principal; the agreement was therefore a basic prerequisite enabling a favourable resolution of outstanding issues at Glitnir Bank Luxembourg. The proposal also foresaw that all customer deposits would be repaid in the near future. This move also eliminated uncertainty for the Bank's employees in Luxembourg, as it would ensure them their legal and contractual rights concerning termination of employment, which would not have been the case had the bank gone into receivership.

Árni Tómasson, chairman of Glitnir's Resolution Committee commented: "I am very pleased that the situation at Glitnir Bank Luxembourg has now been settled to the satisfaction of both parties, and giving us leeway to work on resolving these complicated issues in a manner which will safeguard the interests of all parties optimally."

Glitnir's Resolution Committee takes over share capital of Moderna Finance AB
Glitnir's Resolution Committee reached agreement with Milestone ehf., enforcing its charge on the entire share capital of Moderna Finance AB, a subsidiary of Milestone ehf. in Sweden. In so doing, the Resolution Committee acquired control of Moderna's Icelandic subsidiaries Sjóvá, Askar Capital and Avant. Work continued on restructuring these companies and the agreement reached with the Resolution Committee was part of efforts to ensure their long-term operation. The actions would not affect the Icelandic companies' day-to-day operations.
The agreement would not affect the sales process which had previously been initiated for the foreign assets of Moderna Finance AB. Árni Tómasson, chairman of Glitnir's Resolution Committee stated that the takeover of share capital of Moderna Finance AB was part of the normal continuation of the Committee's work, after plans to restructure the Moderna group proved to be to no avail.

Glitnir and its Resolution Committee move to new premises in Reykjavik
During late March, all Glitnir staff in Iceland and the Resolution Committee relocated to new premises in Soltun 26, 105 Reykjavik, Iceland. Prior to this, Glitnir had been using space within the premises of Islandsbanki. The new offices provide additional space and facilities

• Detailed financial analysis of Glitnir;
• Updates on key assets of Glitnir; and
• Update from UBS on its work as financial advisor to the Resolution Committee.

District Court of Reykjavik ruled in favour of Old Glitnir's request for an extension to the Moratorium order
On 19 February 2009 the District Court of Reykjavik ruled in favour of Old Glitnir's request for an extension to the Moratorium order originally granted on 24 November 2008. The current extension period is due to end on 13 November 2009.