The action alleges the defendants represented that Lancer’s revenue was derived from legitimate business transactions, even though substantial revenues were derived as a result of an illegitimate scheme to artificially hike the sales prices of Lancer’s products. In addition, Lancers’ public statements allegedly failed to fully reveal that it had major manufacturing problems, which caused a high defect rate in its products. Lancer also allegedly conspired in a fraudulent scheme with its largest customer, Coca-Cola Company, to artificially create demand for a new line of soda machine dispensers that Lancer was manufacturing for Coca-Cola to sell to its commercial customers.

On January 14, 2004, Lancer announced that the SEC had launched a formal investigation into Lancer’s reporting of its financial statements, revenue and cost recognition, and internal financial and accounting controls. On February 2, 2004, Lancer announced that its longstanding auditor KPMG, LLP, had resigned. Lancer also disclosed that KPMG indicated that the reason for its resignation was that Lancer had not taken timely and appropriate remedial actions with respect to "likely illegal acts." KPMG’s comments contradicted Lancer’s statements on January 30, 2004, that its audit committee had not found sufficient evidence of "intentional misconduct" or "accounting irregularities.” Trading in Lancer shares resumed on May 20, 2004, after nearly four months of being halted due to a government investigation into the fraud allegations involving Coca-Cola Company. Lancer common stock is currently trading well below the $7.50 trading price at which it was halted.

If you purchased securities issued by Lancer Corporation during the applicable period, you may request appointment by the court as a lead plaintiff if you do so by July 14, 2004. A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the court must determine that your claim is typical of the claims of other class members, and that you will adequately represent the class. Under certain circumstances, one or more class members may together serve as lead plaintiffs. Your ability to share in any recovery is not affected by the decision whether or not to serve as a lead plaintiff. You may retain any counsel of your choice to serve as you in this action, or you may choose to do nothing, and remain in the class as a silent member.