Money market yields rose in the fourth quarter of 2015. Although inflation is likely to remain low in the near term due to declining oil and other commodity prices, Federal Reserve officials finally decided to raise short-term interest rates on December 16 because of labor market improvement and their confidence that inflation will return to 2% over the medium term. The new fed funds target rate range is 0.25% to 0.50%; the range had been 0.00% to 0.25% since December 2008.
The Summit Cash Reserves Fund returned 0.00% in the quarter compared with 0.00% for the Lipper Money Market Funds Average. For the 12 months ended December 31, 2015, the fund returned 0.01% versus 0.01% for the Lipper Money Market Funds Average. The fund's average annual total returns were 0.01%, 0.01%, and 1.25% for the 1-, 5-, and 10-year periods, respectively, as of December 31, 2015. The fund's expense ratio was 0.45% as of its fiscal year ended October 31, 2014. The fund's seven-day simple annualized yield as of December 31, 2015, was 0.01%. Its seven-day simple annualized yield without waiver was −0.05%.* 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.
Many investors had believed that the Fed would act in mid-September. However, the Fed cited "global economic and financial developments" as reasons to delay. As global markets settled down in the fourth quarter and as the central bank's mid-December policy meeting approached, most market participants believed that the Fed was very likely to hike rates, and rate capitulation followed. As such, investments for terms that extended past that meeting began to more aggressively price in the likelihood of a Fed hike. At the end of December, our largest allocation was commercial paper and medium-term notes. Municipal obligations also represented a meaningful portion of the portfolio's assets. The remainder was invested primarily in U.S. Treasuries, other U.S. government and agency securities, and certificates of deposit.
Now that the first Fed rate hike is out of the way, Fed officials are likely to take some time assessing its impact on financial markets and economic conditions. Subsequent increases are likely to occur gradually, so the Fed may wait a few months before acting again. Nevertheless, a rising fed funds rate should eventually translate into higher income for money market investors who have endured near-zero interest rates for the last seven years. In any event, principal stability and liquidity remain our highest priorities, so we will remain diligent in monitoring the price pressures that higher rates may bring.