T. Rowe Price Summit GNMA Fund reorganization

TheShadow

http://www.sec.gov/Archives/edgar/data/912028/000091202813000006/summitgnmaptasticker12-20133.htm

497 1 summitgnmaptasticker12-20133.htm
T. Rowe Price Summit GNMA Fund

Supplement to Prospectus Dated March 1, 2013
On October 21, 2013, the Board of Directors of the T. Rowe Price Summit GNMA Fund (“Fund”) approved a proposed merger under which the assets of the Fund would be transferred to the T. Rowe Price GNMA Fund in exchange for shares of that fund.

The merger is subject to the approval of a majority of the Fund’s shareholders. All Fund shareholders at the close of business on January 30, 2014, the “record date,” will be eligible to vote on a plan of reorganization in connection with the proposed merger. It is anticipated that proxy materials and voting instructions will be mailed to shareholders of record in early February, and a special shareholder meeting will be held on or around April 30, 2014. The rationale for the proposal and detailed information regarding the proposed merger and the T. Rowe Price GNMA Fund will be provided in the proxy materials. If the proposal is approved by a majority of the Fund’s shareholders, the merger is expected to take place on or around May 16, 2014, at which point Fund shareholders will receive shares of the T. Rowe Price GNMA Fund representing the same total value as their shares of the Fund on that date. The merger will be structured as a tax-free exchange for shareholders of the Fund, although it is possible that the Fund could declare a taxable distribution to its shareholders shortly before the merger is consummated.

In anticipation of the merger, the Fund will close to new accounts and additional purchases. On page 11, the language under “Purchase and Sale of Fund Shares” is replaced with the following:

The fund will not accept any new accounts and will stop accepting purchases of additional shares from existing shareholders, other than shares purchased through the reinvestment of dividends, after the close of the New York Stock Exchange (normally 4 p.m. ET) on Monday, January 27, 2014. Closing the fund to new accounts and additional purchases does not restrict shareholders from redeeming shares of the fund. You may redeem or exchange shares of the fund on any day the New York Stock Exchange is open for business by accessing your account online at troweprice.com, by calling 1-800-225-5132, or by written request. If you hold shares through a financial intermediary, you must redeem and exchange shares through your intermediary. The fund reserves the right, in its sole discretion and without prior notice, to impose further restrictions or permit additional investments.

The date of this supplement is December 10, 2013.

hank

Interesting. I'm not presently in any of their "Summit" funds. Two that I know of were this one and Summit Prime Reserve. Essentially, for an initial purchase of at least $25,000 you were entitled to a slightly lower ER (due to a lower management fee - and probably lower operating costs) with a correspondingly higher return. Once you met the minimum purchase amount, they permitted you to draw down the balance without problem - as I did once. I'm guessing that - in a nutshell - returns have become so paltry on the GNMA funds that the resulting difference in yield is pretty inconsequential. It's likely, too, that there've been big outflows from these funds making the merger more attractive. In addition, Price has been "nudging" investors to maintain higher balances in other ways - especially through changes in maintenance fees (sometimes waived in return for maintaining higher balances.)

msf

The Summit GNMA fund (PRSUX) has an ER of 0.61%, and the retail GNMA fund (PRGMX) has an ER of just 0.59%.

It is curious that TRP won't tell anyone why they want to merge the funds until weeks after the record date, and will in fact close the Summit fund before the record date, let alone the voting date which is three months later. Perhaps they don't want to advertise that their "cheaper" Summit fund is really more expensive?