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Here’s the letter sent by stricken SIV, Cheyne Finance, to its market counterparties last night. A liquidation of the fund’s assets seemingly began on Wednesday, with an estimate on likely proceeds expected on Thursday.

NOTICE

CHEYNE FINANCE PLC

CHEYNE FINANCE LLC

CHEYNE FINANCE CAPITAL NOTES LLC

CHEYNE CAPITAL MANAGEMENT (UK) LLP

28 August 2007

To:  Moody’s Investors Service Limited, Standard & Poor’s Ratings Services, Morgan Stanley & Co. International plc, Morgan Stanley & Co. Incorporated, AIB/BNY Fund Management (Ireland) LTD, Danske Bank A/S, Merrill Lynch Capital Corporation, The Bank of New York, The Bank of New York, London Branch, Barclays Bank PLC, Barclays Capital Inc., Lehman Brothers International (Europe), Lehman Brothers Inc., Merrill Lynch International, Merrill Lynch Money Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated

We refer to the Investment and Funding Management Agreement (the “Management Agreement”) dated 3 August 2005 among Cheyne Finance PLC, Cheyne Finance LLC, Cheyne Finance Capital Notes LLC (collectively, the “Investment Vehicle”), Cheyne Capital Management Limited (now Cheyne Capital Management (UK) LLP, the “Manager”), Cheyne Capital International Limited and The Bank of New York as Custodian, Security Trustee and U.S. Security Agent.  Unless otherwise specified, capitalized terms not otherwise defined shall have the meanings ascribed to them in the Management Agreement.

Due primarily to mark-to-market losses experienced in its Investment Portfolio, today, 28  August 2007, the Investment Vehicle experienced a breach of the Major Capital Loss Test, as described in Section 2.1(b) of Schedule 8 to the Management Agreement.

In accordance with our responsibilities as Manager under Section 16.1(a) of the Management Agreement, this notice is to inform you that due to the breach of the Major Capital Loss Test, an Enforcement Event has now occurred.

As a result of this Enforcement Event, in accordance with the terms of the Investment Vehicle’s Operating Manual (the “Operating Manual”), today is also a Defeasance Date on which the Investment Vehicle will enter into the Defeasance Process.

As required by the Operating Manual, among other actions, the Manager has now on behalf of the Investment Vehicle drawn down on all Committed Liquidity Facilities and expects to receive the proceeds from such facilities today, and is also prepared to draw on its Money Market Funds and Breakable Deposits as they become needed.

Beginning tomorrow, 29 August, the Manager will commence a gradual orderly sale of the Investment Portfolio as described under the General Preferred Order of Sale (as defined in the Operating Manual).  By Thursday, 30 August, the Manager will estimate the total potential proceeds from the sale of the Investment Portfolio over time, and determine the Defeasance Strategy (as defined in the Operating Manual).

The Investment Vehicle currently has sufficient cash, proceeds from Liquidity Facilities, Money Market Funds and Breakable Deposits to cover its scheduled maturing liabilities into November 2007.  We will continue to work on re-capitalization alternatives or other funding solutions.

Finally, we also note that the Investment Vehicle has undergone a Restricted Investments Event today, the consequence of which is that additional investments may not be made.

By:  Cheyne Capital Management (UK) LLP, the Manager