The Federal Reserve did not raise short-term interest rates in the second quarter of 2016, citing concerns with global market volatility. The central bank kept the fed funds target rate in the 0.25% to 0.50% range that it established when it raised rates in December 2015. Yields for money market investors remain low.
The Government Money Fund returned 0.00% in the quarter compared with 0.02% for the Lipper Money Market Funds Average. For the 12 months ended June 30, 2016, the fund returned 0.01% versus 0.04% for the Lipper 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, 2016. The fund's expense ratio was 0.53% as of its fiscal year ended May 31, 2015. The fund's seven-day simple annualized yield as of June 30, 2016, was 0.0100%. Its seven-day simple annualized yield without waiver was −0.0800%.* 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.
Effective August 1, 2016, Prime Reserve Fund, changed to a government mandate and was
renamed Government Money Fund. The performance for the periods prior to August 1, 2016
reflects the performance of the fund when it operated as a prime money market fund and
invested in certain types of securities that it is no longer permitted to hold.
Performance prior to this conversion may have been different if the current investment
limitations had been in effect.
Current performance may be lower or higher than the quoted past performance,
which cannot guarantee future results. Return and yield will vary.
You could lose money by investing in the Fund.
Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee
it will do so. An investment in the Fund is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. The Fund's
sponsor has no legal obligation to provide financial support to the Fund, and
you should not expect that the sponsor will provide financial support to the
Fund at any time.
* 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.
Due to Fed inaction, money market rates that depend on the fed funds target rate have been fairly stable. As debt positions have been maturing, we have been moving the fund away from its "prime" mandate and toward a "government" mandate, which becomes effective August 1, 2016. This mandate change, made in response to SEC rule changes, allows the fund to retain the attractive features our investors have enjoyed, including a net asset value managed to stay at $1.00 per share and a focus on liquidity and stability of principal. Our hope is that this mandate change will not disrupt existing shareholders.
While the timing of the Fed's next move is still unclear, we continue to believe that Fed rate hikes will be gradual. The Fed, by its own admission, is cognizant of the global markets' ability to impact the U.S. economy, so Fed officials are keeping a watchful eye on global forces as they make their decisions. We are ready to take advantage of higher rates when they come, but principal stability and liquidity remain our highest priorities.