All of Rhode Island's assets in the fund will be returned to the State by January 3rd, 2009

PROVIDENCE 11/21/2008 Rhode Island General Treasurer Frank T. Caprio announced today that The Reserve Government Fund has been accepted into United States Treasury's newly established Temporary Guarantee Program for Money Market Funds.

This means that all of Rhode Island's assets, totaling $62 million which had been frozen for the past two months in The Reserve Fund, will be returned to the State with no financial loss by January 3, 2009.

"Through the hard work of my office and a coalition of investors, we were able to secure Rhode Island's assets in an extremely timely manner," said Treasurer Caprio. " These are difficult economic times, so my office took a very hands-on approach and was actively involved in the process of making sure the State's assets were returned with no loss," said Caprio.

Having received an initial distribution of $26 million on November 13, this latest development means that Rhode Island will receive the remaining $36 million of its $62 million original investment in the beginning of the New Year.

The decision marks the end of two months of intense negotiation, led by Treasurer Caprio, between the Reserve, its investors, the United States Securities and Exchange Commission and the United States Treasury.

" I would like to thank the United States Treasury for their help during the entire process of retrieving the State's funds, especially the Treasury's office of Financial Institutions. They, along Rhode Island Senator Jack Reed and his staff, were also invaluable," said Caprio. "I want to also thank The Reserve Fund's founder and CEO, Bruce R. Bent, who met with me personally in his office in New York City and was very cooperative through this entire process."

On Wednesday, November 19th, The Reserve formally entered into a "letter agreement" specifying that if the Reserve is unable to sell its U.S. Government Agency backed securities by January 3, 2009, Treasury will purchase them, at no loss, from The Reserve.

History

The Reserve Fund had all its assets frozen after asking the SEC to allow it to temporarily renege on its prospectus, requiring it to honor redemption requests after 7 days. This happened after one of its managed funds (not the one RI was invested with) had "broken the buck," or fallen below the money-fund industry's $1-a-share standard.

Rhode Island has $62 million invested in the $7 Billion Reserve Co. U.S. Government Fund (the "Fund"), representing less than 1% of the fund. On September 22, 2008 the SEC granted an order permitting the Fund to postpone payment of shares that had been submitted for redemption.

Under the provisions of the money market investment, investors are entitled to redemption within seven days. The SEC order has temporarily placed that redemption timeline in limbo to permit The Reserve Fund to liquidate that fund in an orderly manner as market conditions allow.

Rhode Island had invested an average of $62 million or more of its short term cash funds with The Reserve's U.S. Government Money market Fund, in accordance with the state's investment policy.

Backed by U.S. Government Agency securities, U.S. money market funds are traditionally considered stable and liquid investments.

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