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TAX NEWS - January 2010

Reserve Primary Fund Distributes Assets to Investors

Washington, D.C., Jan. 29, 2010 — The Reserve Primary Fund today completed distribution of $3.4 billion in assets to investors who held shares of the fund when its net asset value fell below $1 per share in September 2008. This distribution, which follows earlier distributions, represents the bulk of the fund's remaining assets.

U.S. District Court Judge Paul Gardephe in Manhattan ordered the pro rata distribution last November at the request of the Securities and Exchange Commission.

"Today's distribution is the product of significant efforts by the SEC to get money back to investors as quickly and fairly as possible," said SEC Chairman Mary Schapiro.

With today's distribution, investors will have recovered more than 98 cents on the dollar.

"The SEC will continue to seek the return of even more assets for investors in the coming months," added Schapiro.

On Sept. 15, 2008, the Reserve Primary Fund, which held $785 million in Lehman-issued securities, became illiquid when the fund was unable to meet investor requests for redemptions. The following day, the Reserve Fund declared it had "broken the buck" because its net asset value had fallen below $1 per share.

On May 5, 2009, the SEC filed fraud charges against entities and individuals who operate the Reserve Fund for failing to provide key material facts to, and affirmatively misleading, investors and trustees about the impact on the fund of the bankruptcy of Lehman Brothers Holdings, Inc. More significantly, in bringing the enforcement action, the SEC sought to expedite the distribution of the fund's remaining assets to investors by proposing a plan of liquidation. The SEC is continuing to pursue those claims and will seek to designate any further financial recovery for distribution.

In its complaint, the agency asked the court to enter an order compelling a pro rata distribution of remaining fund assets, $3.5 billion of which the fund had withheld from investors pending the outcome of approximately 30 lawsuits against the Reserve Fund, the trustees and other officers and directors of the Reserve entities.

In November, the court adopted the SEC's proposed distribution plan.

Investors can find additional information relating to the Commission's action and the Court's orders on the Commission's website.
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