The Federal Reserve's
commitment to keeping short-term interest rates
exceptionally low for an extended period
continues to compress all money market rates
near 0%. With no signs of inflation, a
stubbornly high unemployment rate, and the
persistent drag from the housing slowdown, the
Federal Reserve is clearly in no hurry to raise
the fed funds target rate above the current
0.00% to 0.25% range that was set in late 2008.
The Prime Reserve Fund returned
0.00% in the second quarter versus 0.00% for the
Lipper Money Market Funds Average. For the
one-year period ended June 30, 2010 the fund
returned 0.01% versus 0.04% for the Lipper
average. The fund's seven-day simple
annualized dividend yield as of June 30 was
0.01%. Its seven-day simple annualized dividend
yield without waiver was −0.18%.* The
fund's yield more closely reflects its
current earnings than does 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.
Benchmark Definitions
Our strategy has been
based on our assessment that the Fed remains on
hold, placing interest rate risk at a minimum.
Therefore, we felt comfortable investing in
longer-term money market securities.
Nevertheless, we have remained highly selective
in the credit risks we are willing to take. In
the financials sector, for example, we remain
focused on instruments issued by high-quality
banks. A significant portion of the portfolio
remains invested in municipal debt carrying
yields above comparable taxable money market
instruments. The majority of these municipal
investments feature terms of one to seven days
as well as additional liquidity support from
tier 1 banks-those that are financially the
strongest. With consumer credit trends
improving, we continue to add to our investments
backed by consumer debt.
We expect money market
rates to remain near 0% for some time. The
currentfears that a European debt crisis could
grow more prominent make it clear that the
global financial system remains fragile. In
response, we will continue to identify and
invest in only the highest-quality names, while
maintaining a highly liquid portfolio as we
watch for signs of higher rates.*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. 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. A fee waiver has
the effect of increasing the fund's net
yield; without it, the fund's 7-day yield
would have been lower. Please see the prospectus
for more details.
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