The Federal Reserve did not raise short-term interest rates in the second quarter of 2016, citing concerns about global market volatility. The central bank kept the federal funds target rate in the 0.25% to 0.50% range that it established when it raised rates in December 2015. While longer-maturity municipal money market yields have moved somewhat higher, rates in the short-term end of the yield curve, where the fund must do most of its investing, remain very low.
The Tax-Exempt Money Fund returned 0.00% in the quarter compared with 0.01% for the Lipper Tax-Exempt Money Market Funds Average. For the 12 months ended June 30, 2016, the fund returned 0.02% versus 0.03% for the Lipper Tax-Exempt Money Market Funds Average. The fund's average annual total returns were 0.02%, 0.01%, and 0.69% for the 1-, 5-, and 10-year periods, respectively, as of June 30, 2016. The fund's expense ratio was 0.51% as of its fiscal year ended February 29, 2016. 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 −0.1400%.* 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.
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. Beginning October 14, 2016, the Fund may impose a fee upon the
sale of your shares or may temporarily suspend your ability to sell shares if
the Fund's liquidity falls below required minimums because of market conditions
or other factors. 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.
Yields on municipal obligations have risen more slowly than yields of taxable money market securities. The dominant factor suppressing yields in the municipal money market remains persistently low supply. Historically low interest rates have encouraged many municipal issuers to borrow for longer periods to lock in favorable financing costs, leading to less short-term issuance. Credit quality plays a large role in the management of the fund, and the portfolio's overall credit quality remains quite strong. As a policy, we favor only the most highly rated issuers in sectors such as hospitals and education, as well as some select general obligation issuers.
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.