Public Statement No. 1 of 2009 (13 January 2009) - Reserve Internatonal Liquidity Fund Ltd.

The British Virgin Islands Financial Services Commission (the "Commission") issues this public statement to inform the public that it has amended its previous enforcement directive against Reserve International Liquidity Fund Ltd. (the "Fund"). The Commission issues this public statement in order to inform and protect the public interest and the interests of the customers, creditors or investors of the Fund.

The Commission issues this public statement pursuant to Section 37A (4) of the Financial Services Commission Act, 2001

Relevant Chronology:

On 17 October, 2008, the Commission issued a directive to the Fund under Section 40(1)(b) of the Financial Services Commission Act, 2001. The Commission directed and required that the Fund take the following action:

Suspend, until further notice by the Commission:

the subscription of shares by new or existing investors;
the redemption of shares by investors; and
the payment of the proceeds of the redemption

Submit weekly reports to the Commission setting out:

details of its cash balance, including the institution(s) at which the cash is held;
details of its investments, including the jurisdiction of issuer, type/category of investments and the current value of the investments at cost and current market value; and
an update on all ongoing litigation involving the Fund.

On 12 November, 2008, the Fund submitted a draft Plan of Liquidation and Distribution of Assets to the Commission. The Commission conducted a detailed review of the proposals and reverted to the Fund with its requirements on 5 December, 2008.
On 8 December, 2008, the Fund responded to, and addressed some of the Commission's requirements. In this communication, the Fund failed to address the fundamental issue of whether it had the legal capacity within its constitution to make the then proposed distribution.
On 31 December, 2008, the Fund submitted an amended proposal for the payment of the proceeds of the redemption of shares. Among other things, the Fund proposed to amend its Articles of Association to permit the Fund to make interim payments to Members in partial payment of redemption requests.
On 6 January, 2009 the Fund indicated that it expected to make the first payment of approximately $1.6 billion. The Fund also proposed to make a second distribution of interim payments on a pro rata basis, upon the accumulation of further cash of $300 million dollars, as well as other distributions in due course.

The Commission's Amended Directive:

In response to the actions taken and correspondence submitted to the Commission by the Fund, the Commission has now amended its previous directive to remove the suspension on the redemption of shares by investors and the payment of redemption proceeds. This effectively allows the Fund to make an interim payment of the proceeds of redemption of shares in accordance with the proposal submitted by way of its letter dated 31 December 2008.

The amendment of the Commission's directive is made subject to the Commission's receipt of the duly executed resolution of the directors amending the Fund's Articles of Association and the duly filed amended Articles of Association.

The Commission has further directed that following the first interim payment of the proceeds of the redemption of shares in accordance with the proposal submitted by way of letter dated 31 December 2008, no further payments of redemptions proceeds must be made without the Commission's prior written consent.

The Commission will provide additional updates on developments as matters progress.

Robert A. Mathavious
Managing Director /CEO
British Virgin Islands Financial Services Commission
Pasea Estate, Tortola, British Virgin Islands
Telephone: (284) 494-4190
Facsimile: (284) 494-5016
E-mail: [email protected]
Website: www.bvifsc.vg
Hours: Monday - Friday 8:30 am - 4:30 pm