The Reserve Primary Fund
Ticker Symbol: RPRXX
Market: NASDAQ
Class Period: 9/16/2008 – 9/16/2008
Court: S.D. New York
Date of filing: 9/17/2008
Plaintiff Firm: Wolf Popper, LLP
SIC Code: Sector Classification: Financial
Industry Classification: Other (Mutual Fund)

Summary: According to a press release dated September 19, 2008, a class action was filed against the financial adviser, the underwriter, and the trustees of the Reserve Fund (“Reserve Fund” or the “Trust”). The action was brought on behalf of investors who owned shares in any class of the Primary Fund (or the “Fund”), a series of the Reserve Fund, who had not requested redemption of their shares by 3 p.m. E.S.T. on Tuesday, September 16, 2008.The Reserve Fund is an investment trust organized under Massachusetts law, headquartered in New York City. The Trust consists of Mutual Funds, of which the Primary Fund is a series.

The Primary Fund is a money market mutual fund that is required, by law, to invest in only the highest quality securities and debt obligations.

The complaint alleges that in violation of its legal obligations, as imposed by the Investment Company Act and the SEC’s Rule 2A-7 thereunder, the Primary Fund had invested in, and continued to invest in, approximately $785 million in commercial paper and other debt obligations issued by Lehman Brothers Holdings, Inc. (“Lehman”) (Pink Sheets:LEHMQ).

As Lehman’s financial difficulties mounted in recent months, its debt obligations became high-risk securities that were inappropriate for money market funds to hold. The Complaint further alleges that by Friday, September 12, 2008, Lehman’s financial situation had become desperate; yet defendants continued to hold the debt obligations. On September 15, 2008, when Lehman filed for bankruptcy, defendants were still holding onto $785 million of the Company’s debt obligations, which were now worthless. By the afternoon of September 16, defendants had allowed about a dozen institutional investors to withdraw a total of over $40 billion from the fund, at the “net asset value” price of $1.00 per share. That is the per share value that the Reserve Fund, like virtually all money market funds, strives to maintain.

However, the shares were actually worth less than that when they were redeemed. It was not until the markets closed on September 16 that defendants issued a press release announcing that the net asset value of the fund had belatedly been reduced to 97 cents per share, a shocking and extremely rare development known in the industry as “breaking the buck.”

The press release announced that investors who had sought redemption up to 3 P.M. that day would receive $1 per share, but that subsequent requests for redemption would be at the 97 cents price, and that payments for those shares would be withheld for up to 7 days.

As spelled out in the complaint, defendants violated Section 8 of the Investment Act of 1940 by deviating from the Fund’s fundamental investment objectives without approval by the shareholders of the Fund and by allowing massive redemptions by a favored few investors at an inflated price of $1.00 per share. These actions gave an unfair advantage to certain fund investors at the expense of others, and in a manner which violated the Fund’s stated procedure as well as defendants’ fiduciary obligations to investors.

Sept. 22, 2008