U.S. economic data released during the quarter were decidedly mixed. Some signs of inflation began to appear, which alleviated deflation worries, and the unemployment rate continued to decline. However, first-quarter gross domestic product (GDP) shrank at a 2.9% annualized rate, the weakest quarterly GDP reading in five years, which was attributed to severe winter weather. The Federal Reserve continued to wind down its monthly asset purchase program. Money market rates remained very low as the Fed kept the fed funds rate near 0% to boost the economy.
The California Tax-Free Money Fund returned 0.00% in the quarter compared with 0.00% for the Lipper California Tax-Exempt Money Market Funds Average. For the 12 months ended June 30, 2014, the fund returned 0.01% versus 0.01% for the Lipper California Tax-Exempt Money Market Funds Average. The fund's average annual total returns were 0.01%, 0.01%, and 1.00% for the 1-, 5-, and 10-year periods, respectively, as of June 30, 2014. The fund's expense ratio was 0.67% as of its fiscal year ended February 28, 2014. The fund's seven-day simple annualized yield as of June 30, 2014, was 0.01%. Its seven-day simple annualized yield without waiver was −0.46%.* The fund's yield more closely reflects its current earnings than the total return.
For up-to-date standardized total returns, including the most recent month-end performance, please click on the Performance tab, above.
Current performance may be lower or higher than the quoted past performance,
which cannot guarantee future results. Return and yield will vary.
An investment in money market funds 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 the fund.
*In an effort to maintain a zero or positive net yield for the fund, T. Rowe Price has voluntarily waived all or a portion of the management fee it is entitled to receive from the fund. A fee waiver has the effect of increasing the fund's net yield. The 7-day yield without waiver represents what the yield would have been if we were not waiving our management fee. This voluntary waiver is in addition to any contractual expense ratio limitation in effect for the fund and may be amended or terminated at any time without prior notice. Please see the prospectus for more details.
The Fed began tapering its monthly asset purchases starting in January, but the very short-term securities in which the fund invests felt no impact from the policy change. Low rates prevailed over the period. Overwhelming demand for high-quality, liquid investments has led to minimal differences in yields between the shortest-term securities and those with slightly longer maturities in recent years. Credit quality continues to play a major role in managing the fund. We continue to favor prerefunded bonds, which are typically higher quality because they are backed by collateral held in Treasuries.
Money market yields are not expected to change significantly for quite some time despite the start of the Fed's gradual wind-down of its easy monetary policies. We believe that the Fed will not begin actively targeting short-term interest rates until sometime in mid-2015 at the earliest. Given our low rate outlook, we are comfortable operating at the longer end of our permissible weighted average maturity (WAM) range, with a target WAM of 50 to 55 days. We are committed to managing a high-quality, diversified portfolio focused on liquidity and stability of principal.