PRICE
POINT
February 2016
Money Market Reform:
WHAT YOU NEED TO KNOW.
Timely intelligence and
analysis for our clients.
EXECUTIVE SUMMARY
Joseph Lynagh, CFA
Portfolio Manager,
Fixed Income
In 2014, the Securities and Exchange Commission (SEC) adopted a second round of
money market fund regulations in response to the performance of money market funds
during the 2008 financial crisis. T. Rowe Price is working to ensure that shareholders
in its money market funds face minimal disruption as we implement the new rules by
October 2016. Below is a summary of the changes and what investors can expect from
T. Rowe Price.
WHY MONEY MARKET REFORM
You may recall that certain money market funds came under enormous stress in 2008
because of significant redemption pressure particularly from large institutional
investors. As a result of the issues related to certain money market funds during the
financial crisis, the SEC adopted regulations in 2010 and, more recently, in July 2014
to protect shareholders and reduce the likelihood of future disruptions caused by a
significant amount of redemptions. The revised SEC money market regulations aim to:
 Distinguish between retail and institutional investors and restrict who can invest in
retail money market funds
 Allow for or require liquidity fees and redemption restrictions, or “gates” to be applied
to ensure a fund’s stability in periods of severe money market stress
 Maintain a stable $1.00 share value for government and retail funds while requiring
institutional funds to have floating share values, or net asset values (NAVs).
WHAT IS CHANGING?
Essentially, the SEC is dividing money fund investors into two distinct groups:
 Retail investors, defined by the SEC as ‘natural persons’ (for example, investors who
can be identified by social security number)
 Institutional investors, which include corporations or other similar entities
Investors in money funds will have the option to invest in two distinct
product groups:
 Non-government money funds—these funds, which include prime and
tax-exempt money market funds, may be required to impose liquidity
fees and redemption gates if the fund is experiencing severe redemption
stress.
 Government money funds—these funds, such as U.S. government or
Treasury money funds are not required to implement fees or gates.
IMPACT ON RETAIL INVESTORS
Most retail investors will experience minimal impact to their investments.
Money market funds for retail investors will remain low-risk, highly liquid
investments for cash reserves, and will continue to be managed to
maintain a stable price of $1.00 per share, whether in government or nongovernment funds. However, non-government money market funds for
retail investors must build the capability to impose liquidity fees and
redemption gates. Fees are either discretionary or mandatory if a fund’s
liquidity falls below SEC-defined thresholds but the fund’s Board has
ultimate discretion in either case. The fund’s Board may also elect to
impose redemption gates. Government money market funds are not
required to impose liquidity fees or redemption gates but have the option to
do so with appropriate disclosure.
The T. Rowe Price funds’ Board has decided not to impose liquidity fees or
redemption gates on its government money funds
LIQUIDITY FEES AND
REDEMPTION GATES
Liquidity fees, either
mandatory or discretionary,
may be imposed on
redeeming shareholders if
there is a significant loss of
liquidity in a money market
fund, while redemption
gates may be imposed to
temporarily restrict money
market fund withdrawals.
Fees and gates are unlikely
to be implemented under
normal conditions in the
money market. They are
more likely to be imposed
during periods of significant
money market stress to
prevent significant outflows
that, if left unchecked, could
dramatically impair a money
fund’s liquidity level.
To comply with the new rules, some funds will change names and
investment composition to be better aligned with the fund’s investment strategy.
IMPACT ON INSTITUTIONAL INVESTORS
Institutional investors will be impacted by several new changes outlined in the new SEC rule changes:
 Institutional investors will not be permitted to invest in retail money funds. All Institutional money market fund
products—except for government money funds—must build the capability to impose liquidity fees and
redemption gates that may be imposed if the fund experiences significant redemptions.
 Institutional non-government money market funds must operate with a floating NAV, rounded to the fourth
decimal place (e.g., $1.0001). Today, these funds are managed to maintain a stable NAV of $1.00.
As with retail investors, institutional investors will notice some funds will change names and investment
composition to better align with the fund’s investment strategy.
T. Rowe Price will create a new institutional non-government money fund for institutional investors. As we
implement the changes, we will provide more information to affected clients about how to transfer any assets
invested in retail money market funds to the new institutional fund or other investment vehicles.
IMPACT ON RETIREMENT PLANS
Retirement plans will experience some changes as a result of the new rules. There will be no impact on
retirement plans investing in Government money market funds, and plans may continue to invest in these funds.
Participant-directed retirement plans, including plan-level accounts held to facilitate the administration of a plan,
PRICE PO INT
2
2
2
are also permitted to invest in Retail money market funds, as long as their record-keeper’s platform has the ability
to implement fees and gates during periods of significant redemptions. After careful review of the systems,
operational processes and the client experience changes required for T. Rowe Price Retirement Plan Services
(RPS) to administer fees and gates, RPS has determined that it will offer only Government money market funds
on its record-keeping platform. RPS will work closely with our workplace retirement plan clients over the coming
months to assist with any necessary changes to their plan lineups.
WHAT IS T. ROWE PRICE DOING TO COMPLY?
As of October 2016, T. Rowe Price will offer the following money market funds:
Government Funds (not subject to fees and gates)
MONEY MARKET FUNDS—FOR RETAIL, INSTITUTIONAL, INSURANCE COMPANY AND
RETIREMENT PLAN INVESTORS
Prime Reserve Fund
1
Prime Reserve Portfolio
2
U.S. Treasury Money Fund
1
Effective August 1, 2016. Prime Reserve Fund will change from a Retail to a Government Money Market Fund. It will be renamed
Government Money Fund.
2
Effective May 1, 2016. Prime Reserve Portfolio, which is only available to investors in the T. Rowe Price Variable Annuity, will change from a
Retail to a Government Money Market Fund. It will be renamed Government Money Portfolio.
Non-Government Funds (subject to fees and gates)
MONEY MARKET FUNDS—FOR RETAIL INVESTORS ONLY
Summit Cash Reserves Fund
3
Tax-Exempt Money Fund
Summit Municipal Money Market Fund
California Tax-Free Money Fund
Maryland Tax-Free Money Fund
New York Tax-Free Money Fund
3
Effective August 1, 2016. Summit Cash Reserves Fund will be renamed Cash Reserves Fund.
MONEY MARKET FUNDS—FOR INSTITUTIONAL INVESTORS ONLY
Institutional Cash Reserves Fund
4
4
Inception date to be determined.
As the effective date for money fund reform approaches, we anticipate making additional decisions and changes
regarding our money market fund offerings. We will provide periodic updates to keep our clients and other
interested parties informed.
PRICE PO INT
3
3
3
An investment in a money market fund is not insured or guaranteed by the FDIC or any other government
agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in a money market fund.
Visit troweprice.com/funds to request a prospectus or summary prospectus; each includes investment
objectives, risks, fees, expenses, charges, and other information that you should read and consider carefully
before investing.
T. Rowe Price Investment Services, Inc.
2016- US-18 364
2/16