
[Federal Register: October 31, 2008 (Volume 73, Number 212)]
[Notices]               
[Page 64993-64994]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr31oc08-112]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-28466; 812-13585]

 
Reserve Municipal Money-Market Trust, et al.; Notice of 
Application and Temporary Order

October 24, 2008.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application and a temporary order under Section 
22(e)(3) of the Investment Company Act of 1940 (the ``Act'').

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    Summary of Application: Applicants request a temporary order to 
permit certain of their series to suspend the right of redemption of 
their outstanding redeemable securities and to postpone payment for 
shares which have been submitted for redemption for which payment has 
not been made.
    Applicants: Reserve Municipal Money-Market Trust on behalf of two 
of its series, Arizona Municipal Money-Market Fund and Minnesota 
Municipal Money-Market Fund; Reserve Municipal Money-Market Trust II, 
on behalf of nine of its series, Interstate Tax-Exempt Fund, California 
Municipal Money-Market Fund, Connecticut Municipal Money-Market Fund, 
Florida Municipal Money-Market Fund, Michigan Municipal Money-Market 
Fund, New Jersey Municipal Money-Market Fund, Ohio Municipal Money-
Market Fund, Pennsylvania Municipal Money-Market Fund and Virginia 
Municipal Money-Market Fund; Reserve New York Municipal Money-Market 
Trust on behalf of its single series, New York Municipal Money-Market 
Fund; and Reserve Short-Term Investment Trust on behalf of one of its 
series, Reserve Yield Plus Fund (Reserve Municipal Money-Market Trust, 
Reserve Municipal Money-Market Trust II, Reserve New York Municipal 
Money-Market Trust, and Reserve Short-Term Investment Trust, 
collectively, the ``Applicants'' or the ``Trusts,'' and each such 
series of Reserve Municipal Money-Market Trust, Reserve Municipal 
Money-Market Trust II and Reserve New York Municipal Money-Market 
Trust, a ``Money Market Fund'').
    Filing Date: The application was filed on October 14, 2008 and 
amended on October 24, 2008.
    Hearing or Notification of Hearing: Interested persons may request 
a hearing by writing to the Commission's Secretary and serving 
Applicants with a copy of the request, personally or by mail. Hearing 
requests should be received by the Commission by 5:30 p.m. on November 
17, 2008, and should be accompanied by proof of service on Applicants, 
in the form of an affidavit or, for lawyers, a certificate of service. 
Hearing requests should state the nature of the writer's interest, the 
reason for the request, and the issues contested. Persons who wish to 
be notified of a hearing may request notification by writing to the 
Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street, NE., Washington, DC 20549-1090. Applicants, 1250 Broadway, New 
York, NY 10001-3701.

FOR FURTHER INFORMATION CONTACT: Brian P. Murphy, Senior Counsel, at 
(202) 551-6825 (Division of Investment Management, Office of Chief 
Counsel).

SUPPLEMENTARY INFORMATION: The complete application may be obtained for 
a fee at the Commission's Public Reference Room, 100 F Street, NE., 
Washington, DC 20549-1520 (tel. 202-551-5850).

Applicants' Representations

    1. Each of the Money Market Funds and the Reserve Yield Plus Fund 
(collectively, the ``Funds'') is an open-end management investment 
company registered with the Commission under the Act. Each Money Market 
Fund is a money market fund that operates in a manner consistent with 
Rule 2a-7 under the Act and that seeks a high level of short-term 
interest income exempt from certain taxes as is consistent with the 
preservation of capital and liquidity. The Reserve Yield Plus Fund 
seeks as high a level of current income as is consistent with the 
preservation of capital and liquidity.
    2. The Funds have been subject to a heavy level of redemption 
requests. For example, from September 12, 2008 to October 8, 2008, the 
total net assets of some of the Funds have declined as follows: (1) The 
Interstate Tax-Exempt Fund's total net assets declined from $1.78 
billion to $154.6 million; (2) the Michigan Municipal Money-Market

[[Page 64994]]

Fund's total net assets declined from $29.1 million to $5.3 million; 
(3) the New Jersey Municipal Money-Market Fund's total net assets 
declined from $72.2 million to $20.9 million; (4) the Ohio Municipal 
Money-Market Fund's total net assets declined from $30.9 million to 
$5.6 million; (5) the Pennsylvania Municipal Money-Market Fund's total 
net assets declined from $74.4 million to $2.6 million; and (6) the New 
York Municipal Money-Market Fund's total net assets declined from 
$180.7 million to $91.8 million. The decline of each Fund's total net 
assets was largely caused by heavy redemption requests and not 
declining values associated with portfolio holdings. There has been no 
abatement of the redemptions, and there is no reasonable basis for 
believing that redemptions will abate.
    3. The Funds' have made efforts to raise cash to satisfy 
redemptions from the Funds through the sale of certain short-term 
portfolio securities or maturation of other portfolio securities. The 
Funds are or soon will be limited in the amount of portfolio securities 
that can be sold at or above amortized cost or that will mature in 
seven days or less. The Funds' other portfolio securities can only be 
sold at below amortized cost (possibly at fire-sale prices) due to the 
extreme illiquidity and limited bids in the markets. In the view of the 
boards of trustees of each Trust, including a majority of the trustees 
who are not interested persons of such Trust within the meaning of 
Section 2(a)(19) of the Act, (the ``Boards''), and the investment 
adviser (the ``Adviser''), such sales would be inconsistent with the 
Funds' investment objectives of preservation of capital and harmful to 
non-redeeming shareholders.
    4. In response to these developments, on October 8, 2008, the 
Boards, taking into account the recommendations of the Adviser, 
determined to liquidate the Funds.
    5. On October 8, 2008, the Boards also determined that it would be 
in the best interest of each Fund's shareholders to suspend the right 
of redemption and postpone the date of payment or satisfaction upon 
redemption for more than seven days to allow Applicants the ability to 
liquidate the portfolio securities of the Funds in an orderly manner 
and allow the additional securities held by each Fund to mature. In 
addition, the Boards determined to request an order under Section 
22(e)(3) of the Act.

Applicants' Legal Analysis

    1. Section 22(e)(1) of the Act generally provides that a registered 
investment company may not suspend the right of redemption or postpone 
the date of payment or satisfaction upon redemption of any redeemable 
security in accordance with its terms for more than seven days after 
the tender of such security to the company or its designated agent 
except for any period during which the New York Stock Exchange 
(``NYSE'') is closed other than customary week-end and holiday 
closings, or during which trading on the NYSE is restricted.
    2. Section 22(e)(2) of the Act provides that the seven-day 
redemption period does not apply for any period during which an 
emergency exists, as determined by Commission rules and regulations, as 
a result of which the disposal by a registered investment company of 
portfolio securities is not reasonably practicable or it is not 
reasonably practicable for the registered investment company fairly to 
determine the value of its net assets.
    3. Section 22(e)(3) of the Act provides that redemptions may be 
suspended by a registered investment company for such other periods as 
the Commission may by order permit for the protection of security 
holders of the registered investment company.
    4. Applicants submit that granting the requested relief is for the 
protection of each Fund's shareholders, as provided in Section 22(e)(3) 
of the Act. Applicants assert that, in requesting an order by the 
Commission, the Boards' goal is to ensure that each of the Funds' 
shareholders will be treated appropriately in view of the otherwise 
detrimental effect on each Fund of the recent unprecedented illiquidity 
of the markets and extraordinary levels of redemptions that the Funds 
have experienced. Current market conditions continue to be 
extraordinary, and the requested relief is intended to cause an orderly 
liquidation of each of the Funds' portfolio securities and ensure that 
all of their respective shareholders are protected in the process.
    5. Applicants further submit that the relief is appropriate 
because: (1) The Boards: (a) Taking into account the recommendations of 
the Adviser, determined on October 8, 2008 to liquidate the Funds, (b) 
determined, on October 8, 2008, that a suspension of redemption is in 
the best interest of each Fund's shareholders, (c) determined, on 
October 8, 2008, that a postponement of payment for shares which have 
been submitted for redemption for which payment has not been made is in 
the best interest of each Fund's shareholders, and (d) promptly will 
create plans for the orderly liquidation of each Fund's assets and for 
the appropriate payments to each Fund's shareholders, including those 
whose redemption orders have been received but not yet paid, which 
plans will be subject to Commission supervision and which plans will 
include a planned schedule of possible payments to Fund shareholders 
that is based on the maturities of the portfolio securities held by 
each Fund; (2) each Fund has previously suspended sales as of September 
18, 2008; (3) each Fund will make and keep appropriate records 
surrounding these events; and (4) each Fund continuously will provide 
timely and appropriate information, including initial and ongoing 
disclosure about the plan and its implementation, to its shareholders, 
via Web site or otherwise.

Commission Finding

    Based on the representations in the application, including those 
relating to the current extraordinary market conditions and the Boards' 
October 8, 2008 determinations, the Commission permits the temporary 
suspension of the right of redemption and postponement of payment for 
shares which have been submitted for redemption for which payment has 
not been made by the Funds for the protection of the Funds' security 
holders. Under the circumstances described in the application, which 
require immediate action to protect the Funds' security holders, the 
Commission concludes that it is not practicable to give notice or an 
opportunity to request a hearing before issuing the order. In addition, 
under the circumstances described in the application, the Commission 
concludes that the order should be effective as of the date of the 
actions of the Boards.
    It is ordered, pursuant to Section 22(e)(3) of the Act, that the 
requested relief from Section 22(e) of the Act is granted with respect 
to each Fund until that Fund has liquidated, or until the Commission 
rescinds the order granted herein. This order shall be in effect as of 
October 8, 2008.

    By the Commission.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-25862 Filed 10-30-08; 8:45 am]

BILLING CODE 8011-01-P
