PRICE T ROWE SHORT TERM BOND FUND INC
497K3B, 2000-01-24
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                                                             January 1, 2000
 FUND PROFILE
T. ROWE PRICE
Short-Term Bond Fund

 A bond fund seeking higher than money market income and minimal share price
 fluctuation.
This profile summarizes key information about the fund that is included in the
fund's prospectus. The fund's prospectus includes additional information about
the fund, including a more detailed description of the risks associated with
investing in the fund that you may want to consider before you invest. You may
obtain the prospectus and other information about the fund at no cost by calling
1-800-638-5660, or by visiting our Web site at www.troweprice.com.

T ROWE PRICE LOGO
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                                                                           1

FUND PROFILE
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 What is the fund's objective?

   The fund seeks a high level of income consistent with minimal fluctuation in
   principal value and liquidity.


 What is the fund's principal investment strategy?

   We invest in a diversified portfolio of short- and intermediate-term
   investment-grade corporate, government, and mortgage-backed securities. We
   may also invest in bank obligations, collateralized mortgage obligations,
   foreign securities, and hybrids. Normally, at least 65% of total assets will
   be invested in short-term bonds. The fund's average effective maturity will
   not exceed three years, and no security's effective maturity will exceed
   seven years when purchased. (An issue's effective maturity is based on its
   nearest call date rather than its maturity date.) We will purchase only
   securities that are rated within the four highest credit categories (AAA, AA,
   A, BBB) by at least one national rating agency or, if unrated, that have a T.
   Rowe Price equivalent rating.

   Within this broad structure, investment decisions reflect the manager's
   outlook for interest rates and the economy as well as the prices and yields
   of the various securities. For example, if rates are expected to fall, the
   manager may seek longer-term securities (within the fund's program) that
   would provide higher yields and appreciation potential.

   We may also invest in other securities, including futures and options, in
   keeping with the fund's objective.

   The fund may sell holdings for a variety of reasons, such as to adjust the
   portfolio's average maturity or quality, or to shift assets into
   higher-yielding securities.

   Further information about the fund's investments, including a review of
   market conditions and fund strategies and their impact on performance, is
   available in the annual and semiannual shareholder reports. To obtain free
   copies of any of these documents, call 1-800-638-5660.


 What are the main risks of investing in the fund?

   Unlike money market funds, which are managed to maintain a stable share
   price, the fund's price can decline. The share price, yield, and overall
   return will be affected by the following:

  . Interest rate risk  Investors should be concerned primarily with this risk.
   An increase in interest rates could cause the fund's share price to fall,
   resulting in a loss of principal. That's because the bonds and notes in the
   fund's portfolio become less attractive to other investors when securities
   with higher yields become available. Even GNMAs and other securities whose
   principal and interest payments are guaranteed can decline in price if rates
   rise. The longer a
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                                                                               2


                                                                           2

FUND PROFILE
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   bond's maturity, the greater its potential for price declines if rates rise
   and for price gains if rates fall.

  . Credit risk  This is the chance that any of the fund's holdings will have
   its credit rating downgraded or will default (fail to make scheduled interest
   or principal payments), potentially reducing the fund's income level and
   share price. While the fund's overall credit quality is high, BBB securities
   may be more susceptible to adverse economic conditions and some may have
   speculative characteristics.

  . The fund may continue to hold a security that has been downgraded or loses
   its investment-grade rating after purchase.

  . Prepayment risk and extension risk Because the fund can invest extensively
   in mortgage-backed securities, it has special risks related to changing
   interest rates. A mortgage-backed bond, unlike most other bonds, can be hurt
   when interest rates fall, because homeowners tend to refinance and prepay
   principal. The loss of high-yielding underlying mortgages and the
   reinvestment of proceeds at lower interest rates can reduce the bond's
   potential price gain in response to falling interest rates, reduce the bond's
   yield, or even cause the bond's price to fall below what an investor paid for
   it, resulting in a capital loss. Any of these developments could cause a
   decrease in the fund's income, share price, or total return.

   Extension risk refers to a rise in interest rates that causes a fund's
   average maturity to lengthen unexpectedly due to a drop in mortgage
   prepayments. This would increase the fund's sensitivity to rising rates and
   its potential for price declines.

  . Foreign investing risk  To the extent the fund holds foreign bonds, it will
   be subject to special risks whether the bonds are denominated in U.S. dollars
   or foreign currencies. These risks include potentially adverse political and
   economic developments overseas, greater volatility, lower liquidity, and the
   possibility that foreign currencies will decline against the dollar, lowering
   the value of securities denominated in those currencies and possibly the
   fund's share price. Currency risk affects the fund primarily to the extent
   that it holds nondollar foreign bonds.

   In addition, derivative securities held by the fund can be unusually
   volatile, and a small position could cause a significant loss.

   As with any mutual fund, there can be no guarantee the fund will achieve its
   objective.

  . The fund's share price may decline, so when you sell your shares, you may
   lose money. An investment in the fund is not a deposit of a bank and is not
   insured or guaranteed by the Federal Deposit Insurance Corporation or any
   other government agency.
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FUND PROFILE
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 How can I tell if the fund is appropriate for me?

   Consider your investment goals, your time horizon for achieving them, and
   your tolerance for risk. The fund is designed for individuals seeking a
   higher level of income than money market funds provide and who can accept the
   risk of modest price declines. If you are investing primarily for principal
   safety and liquidity, you should consider a money market fund.

   The fund can be used in both regular and tax-deferred accounts, such as IRAs.

  . The fund should not represent your complete investment program or be used
   for short-term trading purposes.


 How has the fund performed in the past?

   The bar chart and the average annual total return table indicate risk by
   illustrating how much returns can differ from one year to the next. The
   fund's past performance is no guarantee of its future returns.

   The fund can also experience short-term performance swings, as shown by the
   best and worst calendar quarter returns during the years depicted in the
   chart.
LOGO

<TABLE>
<CAPTION>
                      Calendar Year Total Returns
  "90"   "91"   "92"   "93"   "94"   "95"   "96"   "97"   "98"    "99"
 ----------------------------------------------------------------------
 <S>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>
 8.63   11.21  5.02   6.62   -2.92  9.74   3.91   6.29   6.18    2.29
 ----------------------------------------------------------------------
</TABLE>


          Quarter ended              Total return

 Best quarter                            9/30/91 4.19%

 Worst quarter                          12/31/94 -1.46%
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FUND PROFILE
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<TABLE>
 Table 1  Average Annual Total Returns
<CAPTION>
                                        Periods ended December 31, 1999
                                        1 year     5 years      10 years
 --------------------------------------------------------------------------
 <S>                                   <C>        <C>         <C>
  Short-Term Bond Fund                   2.29%      5.65%         5.63%

  Lehman 1-3 Yr Gvm't/Corp Bond Index    3.15       6.55          6.64
  Lipper Short Investment Grade Debt     2.80       5.95          6.36
  Funds Average
 --------------------------------------------------------------------------
</TABLE>



 These figures include changes in principal value, reinvested dividends, and
 capital gain distributions, if any.


 What fees or expenses will I pay?

   The fund is 100% no load. There are no fees or charges to buy or sell fund
   shares, reinvest dividends, or exchange into other T. Rowe Price funds. There
   are no 12b-1 fees. Like all mutual funds, the fund charges the following:

  . A management fee  The percent of fund assets paid to the fund's investment
   manager. The fund's fee comprises a group fee, 0.32% as of June 30, 1999, and
   an individual fund fee of 0.10%.

  . "Other" administrative expenses  Primarily the servicing of shareholder
   accounts, such as providing statements and reports, disbursing dividends, and
   providing custodial services.

<TABLE>
 Table 2  Fees and Expenses of the Fund
<CAPTION>
                                               Annual fund operating expenses
                                        (expenses that are deducted from fund assets)
 -------------------------------------------------------------------------------------
 <S>                                   <C>
  Management fee                                           0.42%/ // /
  Other expenses                                           0.31%
  Total annual fund operating                              0.73%/ // /
  expenses
 -------------------------------------------------------------------------------------
</TABLE>



   Example.  The following table gives you a rough idea of how expense ratios
   may translate into dollars and helps you to compare the cost of investing in
   this fund with that of other funds. Although your actual costs may be higher
   or lower, the table shows how much you would pay if operating expenses remain
   the same, you invest $10,000, you earn a 5% annual return, and you hold the
   investment for the following periods:
<TABLE>
<CAPTION>
   1 year      3 years      5 years       10 years
 ----------------------------------------------------
 <S>         <C>          <C>          <C>
    $75         $233         $406           $906
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</TABLE>


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FUND PROFILE
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 Who manages the fund?

   The fund is managed by T. Rowe Price Associates, Inc. Founded in 1937, T.
   Rowe Price and its affiliates manage investments for individual and
   institutional accounts. The company offers a comprehensive array of stock,
   bond, and money market funds directly to the investing public.

   Edward A. Wiese manages the fund day-to-day and has been chairman of its
   Investment Advisory Committee since 1995. He joined T. Rowe Price in 1984 and
   has been managing investments since 1985.


 Note: The following questions and answers about buying and selling shares and
 services do not apply to employer-sponsored retirement plans. If you are a
 participant in one of these plans, please call your plan's toll-free number for
 additional information.


 How can I purchase shares?

   Fill out the New Account Form and return it with your check in the postpaid
   envelope. The minimum initial purchase is $2,500 ($1,000 for IRAs and gifts
   or transfers to minors). The minimum subsequent investment is $100 ($50 for
   IRAs, gifts or transfers to minors, or Automatic Asset Builder). You can also
   open an account by bank wire, by exchanging from another T. Rowe Price fund,
   or by transferring assets from another financial institution.


 How can I sell shares?

   You may redeem or sell any portion of your account on any business day.
   Simply write to us or call. You can also access your account at any time via
   Tele*Access /(R)/ or our Web site. We offer convenient exchange among our
   entire family of domestic and international funds. Restrictions may apply in
   special circumstances, and some redemption requests need a signature
   guarantee. A $5 fee is charged for wire redemptions under $5,000.


 When will I receive income and capital gain distributions?

   The fund distributes income monthly and net capital gains, if any, at
   year-end. For regular accounts, income and short-term gains are taxable at
   ordinary income rates, and long-term gains are taxable at the capital gains
   rate. Distributions are reinvested automatically in additional shares unless
   you choose another option, such as receiving a check. Distributions paid to
   IRAs and employer-sponsored retirement plans are automatically reinvested.
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FUND PROFILE
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 What services are available?

   A wide range, including but not limited to:

  . retirement plans for individuals and large and small businesses;

  . automated information and transaction services by telephone or computer;

  . electronic transfers between fund and bank accounts;

  . automatic investing and automatic exchange;

  . brokerage services; and

  . asset manager accounts.
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, MD 21202
www.troweprice.com

LOGO
                                                                     RPS F55-035
 T. Rowe Price Investment Services, Inc., Distributor
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