PriceSmart, Inc. owns and operates membership-shopping warehouse clubs in Central America, the Caribbean, and Colombia.

The original action charges that Defendants violated federal securities laws by issuing a series of materially false and misleading statements to the market throughout the Class Period, statements which had the effect of artificially inflating the market price of the Company's securities. The Complaint alleges that during the Class Period, Defendants made or approved of false statements about the business and economic future of the Company. The Complaint further alleges that they knew or recklessly disregarded statements that were materially false and misleading.

The Complaint further alleges that PriceSmart has admitted that it inappropriately recorded transactions included in its 2002 to 2003 results, and will have to restate those results to remove millions in improperly reported revenues. Therefore, these accounting/financial statements made were not a fair presentation of PriceSmart's results (hence in violation of Generally Accepted Accounting Principles and SEC rules). On November 10, 2003, the Company issued a press release entitled "PriceSmart to Restate Financial Statements for Fiscal 2002 and the First Three Quarters of Fiscal 2003." The press release declared in part that PriceSmart will restate its financial statements for fiscal year 2002 and the first three quarters of fiscal year 2003, and that regarding the fourth quarter and fiscal year 2003 results, the Company is expecting to report a significant loss in the fourth quarter, which could exceed $20 million. Hence, the stock dropped below $8 per share on this news, an 80% decline from its Class Period high of more than $42.00 per share.

On November 17, 2003, the first in a series of seven federal securities fraud class action lawsuits were filed in the United States District Court for the Southern District of California against the Company and certain of its former and present officers and directors, which were consolidated as In re PriceSmart, Inc. Securities Litigation, Lead Case No. 03cv02260L (LSP). Six of the Complaints asserted claims against (1) the Company, (2) its former President and Chief Executive Officer, and (3) its former Chief Financial Office. On behalf of a proposed class of persons who purchased the Company’s common stock between December 20, 2001 and November 7, 2003, Plaintiffs asserted claims under Section 10(b) and Section 20(a) of the Securities Exchange Act of 1934, and SEC Rule 10b-5 promulgated thereunder, based on the allegation that Defendants made material misstatements and omissions in connection with the financial statements that were the subject of a financial restatement. Plaintiffs sought damages on behalf of the proposed class. The seventh federal securities fraud Complaint, Performance Capital L.P. v. PriceSmart, Inc., Case No. 03cv02561 JAH (S.D. Cal), was filed by investors who purchased the Company’s Series A Preferred Stock in January 2002, as well as on behalf of a class of common stock purchasers, and added a breach of fiduciary duty claim against every then-current member of the Company’s current Board of Directors, as well as a claim under Section 12(a)(2) and Section 15 of the Securities Act of 1933 relating to Plaintiffs’ purchase of Series A Preferred Stock. The Company refers to this litigation as the Performance Capital lawsuit. Plaintiffs sought damages on behalf of the proposed class as well as rescission of their contracts with the Company regarding the Series A Preferred Stock. All of the federal securities actions were consolidated before The Honorable John Houston in an order dated September 9, 2004, which also appointed a lead Plaintiff on behalf of the proposed class of common stock purchasers. The lead Plaintiff filed a consolidated Complaint on November 29, 2004, with an expanded proposed class period of November 1, 2001 to December 16, 2003.

As reported by the Company’s Form 10-K for the fiscal year ended August 31, 2005, Defendants and the Plaintiffs who brought the Performance Capital lawsuit entered into a settlement which was approved by Judge Houston on November 8, 2004 and judgment was entered. Pursuant to the settlement, the Performance Capital lawsuit has been dismissed and the Court entered an order releasing claims that were or could have been brought by certain purchasers and holders of the Company’s Series A Preferred Stock, which the Company refers to as the Series A Preferred Sub-Class, arising out of or relating to the purchase or ownership of the Company’s Series A Preferred Stock. As a term of the settlement, members of the Series A Preferred Sub-Class were offered the opportunity to exchange their Series A Preferred Stock for shares of the Company’s common stock at a conversion price of $10.00 per share, and all members of the Series A Preferred Sub-Class accepted this offer. The Company paid attorney’s fees and costs to Counsel for the Performance Capital Plaintiffs in the amount of $325,000, which was covered by the Company’s insurance carrier.

According to the same SEC filing, Defendants and the parties to the remaining class action lawsuits entered into a settlement which was approved by Judge Houston on August 18, 2005, and judgment was entered. Under the settlement, in exchange for a full release of all claims, Plaintiffs received $2,350,000 (of which the Company’s directors and officers insurance carrier paid 80% and the Company paid 20%, as the Company and the carrier agreed that effective as of March 1, 2005, the Company satisfied the $1,000,000 retention on its insurance policy).