MutualFundWire.com: Did Another Reserve Fund Break the Buck in September?
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MutualFundWire.com
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Tuesday, December 16, 2008
Did Another Reserve Fund Break the Buck in September?
The Primary Fund may not be the only Reserve offering that broke the buck in September. The Wall Street Journal's Daisy Maxey reports that the New York-based money manager's Yield Plus Fund may have dipped to a $0.99 NAV on September 15 at 5pm (the Monday after Lehman Brothers declared bankruptcy, and the day before Primary broke the buck [see MFWire, September 17, 2008]).
For the full story on the the death of the Reserve and its Primary Fund, see MFWire's timeline.
According to the WSJ, Reserve hired a forensic accounting firm to investigate the issue, which stems around "the posting of a $1.7 million receivable that was later rescinded," which accounted for about 15 bps of its NAV.
Company Press Release
New York, December 15, 2008 – The Reserve Yield Plus Fund is announcing today that its net asset
value per share as of 5:00 p.m. on September 15, 2008 may have been $0.99 per share, instead of $1.00 per share as previously disclosed for that date.
The adjustment arises from the fact that a receivable from Reserve Management Company, Inc. (RMCI) in the amount of $1,706,000 was recorded by the Fund as an asset on September 15, 2008. At the
present time, it is not clear that the receivable from RMCI should have been recorded as an asset of the Fund. The receivable increased the value of each share by approximately $0.0015. Without the
receivable, the Fund’s net asset value on September 15, 2008 would have rounded to $0.99 per share,
rather than the $1.00 as previously disclosed.
RMCI never paid the $1,706,000 to the Fund, which stopped including the receivable in its net asset
value on October 3, 2008. Outside fund counsel learned of the receivable on November 26, 2008 and
after an initial review informed the Board of Trustees on December 1, 2008. The Trustees immediately directed outside fund counsel to inform regulators and conduct a comprehensive review to determine the circumstances surrounding the authorization and posting of the receivable, and its subsequent reversal. The Fund retained a forensic accounting firm to help examine its books and records. Fund counsel will report the conclusions of the review to the Trustees upon its completion.
It must be emphasized that this restatement doesn’t relate to the value of any underlying holding of the Fund. Approximately $9.7 million of redemption orders were received on September 15, 2008 and paid at $1.00 per share on that date.
The Fund intends to postpone the publication and distribution of its semi-annual report to shareholders for the period ended September 30, 2008 until this matter is resolved.
We deeply regret the uncertainty created by the present circumstances and we will work diligently to resolve this matter as expeditiously as possible.
An investment in the funds is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the funds. Money market yields may vary.
Printed from: MFWire.com/story.asp?s=20159
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