January 28, 2010

The Securities and Exchange Commission has approved new risk-limiting rules that are designed to further stabilize money market funds and to increase the safety and liquidity for money market fund shareholders. The rule changes tighten existing requirements regarding the maturity, quality, liquidity and disclosure of money market fund portfolios.

Here's a quick summary of some of the key SEC rule changes.

Improved Portfolio Liquidity
To facilitate redemptions, under the new SEC rules, all taxable money market funds will be required to maintain at least 10 percent of assets liquid within one day. And at least 30 percent of all money market funds' assets will have to be convertible to cash within one week. No such liquidity requirements exist today.

Higher Credit Quality
To reduce risk, money market funds will be restricted to investing up to 3 percent of portfolio assets in lower quality securities, with a half a percent limit per issuer. Currently, that limit is set at up to 5 percent of portfolio assets, with a 1 percent limit per issuer.

Shorter Portfolio Maturity
To reduce the exposure of funds to specific risks, such as sudden interest rate movements, the maximum weighted average maturity of securities in money market funds will be limited to 60 days from the current 90 days.

Increased Disclosure
To enhance disclosure, money market funds will be required to post their portfolio holdings monthly on their Web sites, as well as disclose the fund's "shadow" floating share price, monthly with a 60-day lag.

To get complete details on the rule changes, view the SEC press release.

The SEC hasn't determined an effective date or an implementation period. It's anticipated that a transition period will be provided for money market funds to become compliant. In addition, the SEC is considering subsequent rule changes.

Given that Northern Trust already adheres to, in large part, the new SEC requirements, we don't expect the rule changes to materially impact the investment strategy of our money market funds. Northern Trust employs a conservative investment process along with a variety of risk management measures. We remain committed to our investment methodology, which has helped us deliver competitive returns in a risk-managed framework for more than 25 years.

If you have any questions about the SEC rule changes, please contact your Investment Relationship Manager, or call us at 800-637-1380 weekdays from 7:00 a.m. to 7:00 p.m. Central time.

An investment in the Money Market Funds is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Money Market Funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Money Market Funds.

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