New SEC Money Market Fund Reforms
August 24, 2015 – Update
Like others in the industry, we are adapting our money market products to respond to the changing regulatory environment. We recognize that investors may look to money funds for liquidity, convenience and price stability. As a result, we plan to offer only money market funds that seek to maintain a stable $1 net asset value (NAV).
Money market reform: How our funds line up
The changes we are implementing are outcomes of money market regulations the Securities and Exchange Commission (SEC) enacted last year which are designed to make money market funds more resilient for investors. The rules include the potential to suspend redemptions for 10 days and/or apply redemption fees in some funds so they can better withstand market crises.
The chart below outlines our money market funds and the changes we’re making.
|Capital Preservation Fund||Premium Money Market Fund (new name U.S. Government Money Market Fund)2||Prime Money Market Fund3||California Tax-Free Money Market Fund3||Tax-Free Money Market Fund3|
|Investment Objective||Maximum safety and liquidity||Current income while maintaining liquidity and capital||High current income while preserving capital||Safety of principal and current income, and exempt from federal and California income taxes||Safety of principal and current income, exempt from federal income taxes|
|Fund Changes||None||Fund changes effective 12/1/15 (pending proxy)||Institutional accounts will need to exchange to an appropriate money market fund or liquidate4|
|Stable $1 NAV||Yes||Yes||Yes||Yes||Yes|
|Ability to Implement Redemption Fees, Liquidity Gates||No||No||Yes. If needed, the boards will have the ability to impose a liquidity fee or suspend redemptions in times of severe market stress|
What you can expect
- Clients in Premium Money Market Fund – If you were a shareholder of this fund on August 10, 2015, you can expect proxy materials in late August. Please vote no matter how large or small your holdings. Your vote counts.
- Clients in Capital Preservation Fund – No action needed.
- Clients in Prime Money Market, California Tax-Free Money Market and Tax-Free Money Market Funds4 – If you hold the funds in a retail account, no action is needed. If you hold the funds in an institutional account, we will be reaching out to you over the next year to help you understand how to comply.
The SEC rule changes were intended to further enhance the resiliency of money market funds. We believe this peace of mind is important to our clients.
If you want help determining what money market fund strategy may be right for you, please contact us. Thank you for your business.
2 Shareholders as of August 10, 2015 are being asked to vote on two proposals that would convert our Premium Money Market Fund into a government money market fund. If the proxy is approved, the conversion of the fund is expected to be effective December 1, 2015 and the fund’s name would change to U.S. Government Money Market Fund.
3 We anticipate changes to these funds will be effective in the fall of 2016.
4 The SEC defines retail accounts as those where a natural person (e.g., an individual with a social security number) makes decisions about the account. The SEC defines accounts where a non-natural person is the decision maker (e.g., a corporation with an EIN) as institutional accounts.Institutional account holders will need to exchange to an appropriate money market or liquidate as described above.
On or about August 24, 2015, we mailed a proxy statement to shareholders of record as of August 10, 2015, and filed it with the SEC. We urge investors to read the proxy statement because it contains important information. The proxy statement and other relevant documents will be available free of charge on the SEC’s website at www.sec.gov or by calling 1-800-345-2021. The proxy statement will also be available on American Century Investments’ website.
On December 1, 2015, the Premium Money Market Fund changed its name to the U.S. Government Money Market Fund.
The disclosure below applies to the California Tax-Free Money Market Fund, Prime Money Market Fund and the Tax-Free Money Market Fund:
Money Market Fund: You could lose money by investing in the fund. Although the fund seeks to preserve the value of your investment at $1 per share, it cannot guarantee it will do so. The fund may impose a fee upon sale of your shares or may temporarily suspend your ability to sell shares if the fund's liquidity falls below required minimums because of market conditions or other factors. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The fund's sponsor has no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial support to the fund at any time.
The disclosure below applies to the Capital Preservation Fund and the U.S. Government Money Market Fund:
Money Market Fund: You could lose money by investing in the fund. Although the fund seeks to preserve the value of your investment at $1 per share, it cannot guarantee it will do so. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The fund's sponsor has no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial support to the fund at any time.