https://www.sec.gov/Archives/edgar/data/853437/000174177320002231/c497.htm97 1 c497.htm
T. Rowe Price U.S. Treasury Long-Term Fund
Supplement to Prospectus Dated March 1, 2020
The fund’s Board of Directors has approved changes to the fund’s name, investment objective, fee structure, and overall investment program, which includes changing to an index strategy that tracks the returns of its current benchmark index. These changes are expected to become effective on October 1, 2020, subject approval by the fund’s shareholders of change to the investment objective.
Effective October 1, 2020, the fund will change its name from the T. Rowe Price U.S. Treasury Long-Term Fund to the T. Rowe Price U.S. Treasury Long-Term Index Fund. In connection with the name change and to align with the shift to an index strategy, the fund’s investment objective is proposed to be changed to seek to provide high income consistent with maximum credit protection.
The fund’s management fee currently consists of a group fee component that declines at certain asset levels and is calculated daily based on the combined net assets of all T. Rowe Price Funds (except the funds-of-funds, TRP Reserve Funds, Multi-Sector Account Portfolios, and any index or private label mutual funds) and an individual fund fee component. However, the individual fund fee is 0.00% so the fund’s management fee equals the group fee rate. On May 31, 2020, the annual group fee rate was 0.29%. In addition, through at least September 30, 2020, T. Rowe Price has contractually agreed to waive a portion of the management fee it is entitled to receive from the fund in order to limit the fund’s overall management fee rate to 0.15% of the fund’s average daily net assets. Effective October 1, 2020, the arrangement limiting the overall management fee to 0.15% will be terminated and the group fee component of the management fee will be eliminated, and the fund will begin paying T. Rowe Price an annual investment management fee of 0.06% based on the fund’s average daily net assets.
Effective October 1, 2020, subject to approval by the fund’s shareholders of the change to the fund’s investment objective, the following changes will be made to the prospectus:
The investment objective on page 1 will be revised as follows:
The fund seeks to provide high income consistent with maximum credit protection.
The fee table and expense example on pages 1—2 will be revised as follows...
Comments
That’s four of the most confusing sentences I’ve ever read. - “Who’s on first?“
Actually that was fairly easy to follow after the second reading.
BTW TRP seems to be very active these days. Rolling out semitransparent ETFs, switching from active to indexing on some funds, etc. Wonder what's up with them? They tend to move fairly slowly on this kind of stuff, I think.
It's hard to see active management adding much value to long term Treasuries. They are essentially commodities with no credit risk. So for this fund at least, it makes sense to give up the active management ghost.
With its active ETFs, it looks like TRP is trying to preserve (actually increase) its management fees, while adding a distribution channel and benefiting from offering "cheaper" ETFs. Cheaper for the investor (lower total ER), but more profitable for the management company.
Unlike OEFs, ETFs have very little in the way of "other expenses" (administration, distribution, etc.) 100% of the ERs of TRP's ETFs go to management. Here are their prospectuses:
https://www.troweprice.com/personal-investing/funds/etfs/prospectuses-reports.html
Total expense ratios:
TCHP, 0.57% vs. TRBCX, 0.69%
TDGV, 0.50% vs. PRDGX, 0.62%
TEQI, 0.54% vs. PRFDX, 0.64%
TGRW, 0.52% vs. PRGFX, 0.65%