The Reserve announced yesterday that it was distributing $26 billion from its Primary Fund as the initial liquidation distribution to shareholders. This distribution represents approximately 50% of the assets in the Primary Fund as of the close of business on September 15, 2008, the day before the Primary Fund’s net asset value dropped to $0.97 per share due to losses related to Lehman debt holdings. The Primary Fund, one of the nation’s largest and oldest money market funds, was the first in this financial crisis to “break the buck” and inspired the creation of Treasury’s money market fund temporary guarantee program. Unfortunately, because the temporary guarantee program only covers funds in a money market account as of September 19, 2008, the losses incurred by the Primary Fund prior to that date were not covered, and on September 29, the fund announced its intent to liquidate.
Each shareholder, which includes those with outstanding and unfunded redemption requests, will receive its pro rata share of the distribution pool, calculated as each shareholder’s ownership percentage of the fund in relation to the remaining assets in the fund. A shareholder’s ownership percentage consists of its account balance as of September 14, plus accrued dividends and subscriptions, minus any funded redemption requests. In addition, processed service transactions and interest earned from September 1 through September 14 are also taken into account.
The Reserve stated that approximately $25 billion in total assets remain in the Primary Fund. The Reserve has not disclosed any plan or timing as to distribution of these amounts; however, Bruce R. Bent, President of the Primary Fund’s adviser Reserve Management Company, Inc., stated in a press release that the Primary Fund “is committed to making future distributions when more cash becomes available.”