We learned from Strategic Insight's SimFundFiling product, which tracks the SEC's EDGAR Mutual Fund Filings with a more user-friendly interface, that money market mutual fund families continue to file prospectus supplements to reflect the SEC's recent Money Market Fund Reforms. Dreyfus, Federated, and John Hancock were among those complexes updating their filings recently. (See our previous April 6 News article, "Money Funds Changing Prospectuses to Reflect New SEC MMF Reforms, which mentioned Evergreen's filings.")
The Dreyfus Money Market Fund Supplement says, "The Securities and Exchange Commission has recently amended its regulations with respect to money market funds. Beginning May 28, 2010, all money market funds will be required to comply with SEC requirements with respect to the liquidity of the funds' investments. Specifically, taxable money market funds will be required to hold at least 10% of their total assets in 'daily liquid assets' and all money market funds will be required to hold at least 30% of their total assets in 'weekly liquid assets.' Daily liquid assets include cash (including demand deposits), direct obligations of the U.S. Government and securities (including repurchase agreements) that will mature or are subject to a demand feature that is exercisable and payable within one business day. Weekly liquid assets include cash (including demand deposits), direct obligations of the U.S. Government, agency discount notes with remaining maturities of 60 days or less, and securities (including repurchase agreements) that will mature or are subject to a demand feature that is exercisable and payable within five business days."
The filing adds, "Also beginning May 28, 2010, new limits will be placed on the ability of a money market fund to acquire second-tier securities. Specifically, money market funds will be prohibited from (i) investing more than 3% of total assets in second-tier securities, (ii) investing more than 1 / 2 of 1% of total assets in second-tier securities issued by any single issuer, and (iii) acquiring second-tier securities with a remaining maturity of more than 45 days. In addition, beginning June 30, 2010, a money market fund will be required to limit its dollar-weighted average portfolio maturity to 60 days or less, and its dollar-weighted average life (portfolio maturity measured without reference to any maturity shortening provisions of adjustable rate securities by reference to their interest rate reset dates) to 120 days."
Federated Investors said in its recent prospectus updates, "On February 23, 2010, the Securities and Exchange Commission adopted amendments to Rule 2a-7 under the Investment Company Act of 1940, which governs all money market funds. The changes to the Prospectuses, as set forth in the following supplement, are generally in response to such amendments." Federated's multiple supplement changes include removing all references of 90 day WAMs to 60 days, and adds a, "Risk Associated with Use of Amortized Cost" disclaimer. It says, "In the unlikely event that the Fund's board of trustees were to determine pursuant to Rule 2a-7 that the extent of the deviation between the Fund's amortized cost per share and its market-based NAV per share may result in material dilution or other unfair results to shareholders, the board will cause the Fund to take such action as it deems appropriate to eliminate or reduce to the extent practicable such dilution or unfair results, including, but not limited to, considering suspending redemption of Shares and liquidating the Fund under Rule 22e-3 under the Investment Company Act of 1940."
John Hancock Money Market Fund's Prospectus Supplement says, "The fund maintains an average dollar-weighted maturity of 60 days or less and a dollar-weighted average life of 120 days or less. Unlike the fund's weighted average maturity, the fund's weighted average life is calculated without reference to the re-set dates of variable rate debt obligations held by the fund.... Beginning in October 2010, the following information for the fund will be posted on the Web site by the fifth business day after month end: weighted average maturity; weighted average life; and complete portfolio holdings by investment category and other related information. Beginning in December 2010, the fund will report certain information to the SEC monthly on Form N-MFP, including the fund's portfolio holdings and other pricing information, which will be made public 60 days after the end of the month to which the information pertains."
