Annual Report
Short-Term
U.S. Government Fund
May 31, 1997
T. Rowe Price
Report Highlights
o The Federal Reserve tightened in March to slow the surging
economy; the consequent interest rate rise led to
lackluster returns on high-quality bonds for the six-month
period ended May 31.
o Mortgage-backed securities were the performance leaders
among high-quality bonds.
o The fund's 6- and 12-month returns of 1.78% and 6.90%,
respectively, lagged its Lipper peer group slightly for the
shorter period but exceeded it for the longer.
o Mortgage-backed securities remained our major focus; we
pared our holdings of asset-backed issues and reinvested
the proceeds in Treasury notes.
o Additional Fed tightening is possible this year, so we are
maintaining a neutral posture. Longer term, prospects are
good for continued moderate inflation and growth-a
favorable environment for bonds.
Fellow Shareholders
Interest rates rose and prices of high-quality bonds declined on
balance for the six months ended May 31, 1997, the reverse of
the credit market scenario in the first half of the fund's
fiscal year. Bond fund returns for the six-month period were
basically flat, as coupon income tended to offset price drops.
For the 12-month period, returns were solid, driven almost
entirely by income.
Over the past six months, the economy developed considerable
momentum. Consumer sentiment reached unusually high levels, and
household spending on durable goods surged. Jobs were created at
a rapid rate, and the civilian unemployment rate dropped to 4.8%
in May, its lowest level in over two decades. The GDP rose at a
5.8% annual rate in the first quarter, roughly double its trend
rate since the current upturn began in 1991.
Against this background, the Federal Reserve abandoned its
patient wait for the economy to slow on its own and, on March
25, raised the target for the key federal funds rate from 5.25%
to 5.50%-the first tightening since 1995. This sent shock waves
through the stock and bond markets, but they gradually regained
their equilibria in April as interest rates leveled off or
declined slightly, as shown in the chart.
Chart 1 - Interest Rate Levels line chart
Among high-grade bond market sectors, mortgage-backed securities
outstripped both Treasuries and corporates for the six-month
period, as the rise in interest rates dampened the rate at which
homeowners prepaid their mortgages. The strong performance in
recent months enabled mortgage securities to provide the highest
overall returns for the 12-month period as well. Treasury issues
outperformed corporate bonds for the six-month period but not
for the whole 12 months.
Performance and Strategy Review
The fund's return of 1.78% for the six-month period reflected
$0.14 of income per share partially offset by a $0.06 decline in
share price. For the 12-month period, income of $0.28 was
augmented by a small rise in share price ($4.59 to $4.62),
generating a 6.90% return. Performance slightly lagged the
fund's peer group average for the shorter period but surpassed
it for the fiscal year.
Performance Comparison
Periods Ended 5/31/97 6 Months 12 Months
__________________________________________________________
Short-Term U.S.
Government Fund 1.78% 6.90%
Lipper Average of Short-Term
U.S. Government Funds 1.90 6.09
We made the major change to the portfolio in the first half of
the fund's fiscal year when we sharply increased our commitment
to mortgage-backed securities, which offer higher yields than
Treasury issues with virtually no additional credit risk. On May
31, this position composed 59% of net assets, of which almost
half represented balloon mortgages, particularly obligations of
Freddie Mac (Federal Home Loan Mortgage Corporation). We like
balloons because they have short durations-about 1.3 years-and
attractive yields and, therefore, fit well with the fund's
objective of high income consistent with minimal price
fluctuation. (Duration indicates a fund's interest rate
sensitivity. For example, a duration of two years means a fund's
share price would fall about 2% for each one-percentage-point
rise in interest rates, and vice versa.)
In recent months, a rise in credit card delinquencies reported
by major credit card banks prompted us to trim holdings of some
asset-backed securities with exposure to this area. This shows
up in the drop in corporate notes and bonds from 14% to 11% in
the Sector Diversification table following this letter. Proceeds
from these sales as well as principal repayments on mortgage
securities we hold were reinvested in three- to five-year
Treasury notes. We believe the mortgage securities market is a
bit expensive at present after its recent strong performance, so
we prefer to allocate additional assets to Treasuries for the
time being.
Outlook
With the economy strong and labor markets under stress, some
additional tightening of monetary policy is possible this year
as the Fed tries to restrain the economy's powerful pace. Credit
markets may again be roiled by a higher federal funds rate. We
expect yields in the short-term market to remain in a fairly
narrow range, but since further Fed action cannot be ruled out,
we will probably maintain the fund's duration in neutral
territory through the end of this year. Barring a serious
miscalculation by the Fed, we think prospects are good for
moderate growth and a favorable market for debt securities over
the long term.
Respectfully submitted,
Peter Van Dyke
President and Chairman of the Investment Advisory Committee
June 20, 1997
T. Rowe Price Short-Term U.S. Government Fund
Portfolio Highlights
Key statistics
11/30/96 5/31/97
___________________________________________________________
Price Per Share $ 4.68 $ 4.62
Dividends Per Share
For 6 months 0.14 0.14
For 12 months 0.27 0.28
Dividend Yield *
For 6 months 6.04% 6.22%
For 12 months 6.05 6.22
Weighted Average Maturity (years) 2.8 2.8
Weighted Average Effective
Duration (years) 2.2 2.3
Weighted Average Quality ** AAA- AAA
* Dividends earned and reinvested for the periods indicated
are annualized and divided by the average daily net asset
values per share for the same period.
** Based on T. Rowe Price research.
SECTOR Diversification
Percent of Percent of
Net Assets Net Assets
11/30/96 5/31/97
___________________________________________________________
U.S. Government Mortgage-Backed
Securities 61% 59
%
U.S. Treasury Obligations 16 25
Corporate Bonds and Notes 14 11
Federal National Mortgage
Association (Fannie Mae)
Debentures 5 6
All Other 10 4
Other Assets Less Liabilities -6 -5
___________________________________________________________
_
Total 100% 100%
T. Rowe Price Short-Term U.S. Government Fund
Performance Comparison
This chart shows the value of a hypothetical $10,000 investment
in the fund over the past 10 fiscal year periods or since
inception (for funds lacking 10-year records). The result is
compared with a broad-based average or index. The index return
does not reflect expenses, which have been deducted from the
fund's return.
Chart 2 - SEC graph
Average Annual Compound Total Return
This table shows how the fund would have performed each year if
its actual (or cumulative) returns for the periods shown had
been earned at a constant rate.
Periods Ended Since Inception
5/31/97 1 Year 3 Years 5 Years Inception Date
____________________________________________________________
Short-Term
U.S.
Government
Fund 6.90% 5.78% 4.18% 4.47% 9/30/91
Investment return and principal value represent past performance
and will vary. Shares may be worth more or less at redemption
than at original purchase.
T. Rowe Price Short-Term U.S. Government Fund
For a share outstanding throughout each period
Financial Highlights
Year 3 Months# Year
Ended Ended Ended
5/31/97 5/31/96 5/31/95 5/31/94 2/28/94 2/28/93
NET ASSET VALUE
Begin-
ning
of
period $ 4.59 $ 4.67 $ 4.65 $ 4.75 $ 4.83 $ 4.97
Invest-
ment
activi-
ties
Net
invest-
ment
income 0.28* 0.28* 0.26* 0.06 * 0.23 * 0.29*
Net
real-
ized and
unreal-
ized
gain
(loss) 0.03 (0.08) 0.01 (0.11) (0.08) (0.13)
Total
from
invest-
ment
activi-
ties 0.31 0.20 0.27 (0.05) 0.15 0.16
Distri-
butions
Net
invest-
ment
income (0.27) (0.27) (0.24) (0.05) (0.17) (0.28)
Tax
return
of
capital (0.01) (0.01) (0.01 ) - (0.06) (0.02)
Total
distri-
butions (0.28) (0.28) (0.25) (0.05) (0.23) (0.30)
NET ASSET VALUE
End of
period $ 4.62 $ 4.59 $ 4.67 $ 4.65 $ 4.75 $ 4.83
Ratios/Supplemental Data
Total
return 6.90%* 4.31%* 6.14%* (0.97)%* 3.11%* 3.33%*
Ratio
of
expenses
to
average
net
assets 0.70%* 0.70%* 0.59%* 0.50%*! 0.40%* 0.25%*
Ratio of
net
invest-
ment
income
to
average
net
assets 6.05%* 5.93%* 5.48%* 4.69%*! 4.78%* 5.96%*
Port-
folio
turnover
rate 82.9% 152.8% 100.0% 27.6%! 70.4% 110.8%
Net
assets,
end of
period
(in thou-
sands) $ 92,697 $ 98,529 $112,387 $187,517$225,154 $476,448
* The manager agreed to bear all expenses of the fund through June 30,
1992. Excludes expenses in excess of a 0.20% voluntary expense
limitation in effect July 1, 1992 through July 31, 1992, a 0.30%
voluntary expense limitation in effect August 1, 1992 through August 31,
1992, a 0.40% voluntary expense limitation in effect September 1, 1992
through February 28, 1994, a 0.50% voluntary expense limitation in
effect March 1, 1994 through August 31, 1994, a 0.60% voluntary expense
limitation in effect September 1, 1994 through February 28, 1995, and a
0.70% voluntary expense limitation in effect March 1, 1995 through May
31, 1998.
! Annualized.
# The fund's fiscal year-end was changed to May 31.
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Short-Term U.S. Government Fund
May 31, 1997
Statement of Net Assets
Par Value
In thousands
U.S. GOVERNMENT MORTGAGE-BACKED
SECURITIES 58.6%
U.S. Government Agency ARM 4.0%
Federal National Mortgage Assn.
5.974%, 1/1/19 $ 793 $ 778
5.997%, 3/1/20 121 119
6.00%, 2/1 - 7/1/18 292 289
6.009%, 12/1/16 - 7/1/27 694 686
6.03%, 12/1/17 - 11/1/20 559 552
6.071%, 5/1/17 - 5/1/31 831 820
6.075%, 3/1/19 17 17
6.084%, 5/1/24 126 124
6.125%, 8/1 - 11/1/17 107 105
6.817%, 10/1/14 10 10
7.357%, 11/1/21 215 218
7.50%, 5/1/17 45 46
3,764
U.S. Government Agency Asset-Backed 10.5%
Federal National Mortgage Assn.,
8.00%, 4/25/25 9,500 9,702
9,702
U.S. Government Agency Obligations 40.0%
Federal Home Loan Mortgage
5 year balloon
5.00%, 6/1/99 453 445
6.50%, 6/1/99 3,634 3,653
7.00%, 1/1/00 - 9/1/01 6,095 6,125
8.00%, 8/1/97 - 2/1/00 112 113
7 year balloon
6.50%, 12/1/99 - 12/1/03 6,424 6,380
7.00%, 1/1/00 - 8/1/01 3,617 3,643
TBA, 6.50%, 7/1/02 5,000 4,997
REMIC
5.85%, 11/15/17 1,951 1,940
7.50%, 11/15/17 2,000 2,028
Federal National Mortgage Assn.
7 year balloon
7.50%, 3/1/99 - 8/1/01 2,036 2,060
Federal National Mortgage Assn.
REMIC
5.75%, 6/25/06 $ 2,634 $ 2,612
Inverse Floater, 11.494%,
6/25/99 2,856 3,050
37,046
U.S. Government Guaranteed Obligations 4.1%
Government National Mortgage Assn.
I, 11.50%, 3/15/10 - 12/15/15 1,667 1,894
Project Loan, I, 9.125%, 12/15/28 1,800 1,896
3,790
Total U.S. Government
Mortgage-Backed Securities
(Cost $54,282) 54,302
U.S. GOVERNMENT OBLIGATIONS 31.0%
U.S. Government Agency Obligations 6.4%
Federal National Mortgage Assn.
Deb.
5.22%, 7/10/98 5,000 4,925
7.30%, 7/10/02 1,000 994
5,919
U.S. Treasury Obligations 24.6%
U.S. Treasury Notes
5.875%, 2/28/99 5,000 4,979
6.125%, 7/31/00 - 12/31/01 13,000 12,899
6.25%, 5/31/00 2,000 1,994
6.625%, 6/30/01 - 4/30/02 2,900 2,913
22,785
Total U.S. Government Obligations
(Cost $28,841) 28,704
CORPORATE BONDS AND NOTES 10.9%
Finance and Credit 3.3%
Ciesco L.P., MTN, (144a), 7.38%,
4/19/00! 3,000 3,048
3,048
Industrials 5.5%
General Electric, Deb., 7.875%,
9/15/98 3,000 3,064
Rockwell International, 7.625%,
2/17/98 2,000 2,021
5,085
Telephone 2.1%
Southwestern Bell Telephone,
6.375%, 4/1/01 $ 2,000 $ 1,976
1,976
Total Corporate Bonds and Notes
(Cost $10,080) 10,109
NON-GOVERNMENT ASSET-BACKED
SECURITIES 2.4%
Home Equity Loans-Backed 0.6%
HFC Home Equity Loan, 4.75%,
5/20/08 534 532
532
Non-Government Agency ARM 1.8%
Resolution Trust Corp., 7.822%, 12/25/20 439
444
Ryland Mercury Savings Trust, MPC,
6.348%, 10/15/18 575 574
Ryland Mortgage Securities, MPC,
7.677%, 5/25/17 47 44
Salomon Brothers Mortgage
Securities, MPC, 6.625%, 8/25/18 702 672
1,734
Total Non-Government Asset-Backed
Securities (Cost $2,351) 2,266
COMMERCIAL PAPER 1.6%
Investments in Commercial Paper
through a Joint Account
5.60 - 5.69%, 6/2/97 1,458 1,458
Total Commercial Paper
(Cost $1,458) 1,458
Total Investments in Securities
104.5% of Net Assets (Cost $97,012) $ 96,839
Other Assets Less Liabilities (4,142)
NET ASSETS $ 92,697
_________
Net Assets Consist of:
Accumulated net investment income -
net of distributions $ (471)
Accumulated net realized gain/loss -
net of distributions (23,738)
Net unrealized gain (loss) (173)
Paid-in-capital applicable to
20,064,323 shares of $0.01 par
value capital stock outstanding;
1,000,000,000 shares authorized 117,079
NET ASSETS $ 92,697
_________
NET ASSET VALUE PER SHARE $ 4.62
_________
! Private Placement
ARM Adjustable Rate Mortgage
Inverse Floater Inverse floating rate note; interest rate is inversely
tied to a published index-rate shown reflects current
rate at 5/31/97.
MTN Medium Term Note
MPC Mortgage Pass-through Certificate
REMIC Real Estate Mortgage Investment Conduit
TBA To be announced security purchased on a forward
commitment basis; the aggregate liability for
securities purchased under such agreements totaled
$4,935,000 at 5/31/97.
144a Security was purchased pursuant to Rule 144a under the
Securities Act of 1933 and may not be resold subject
to that rule except to qualified institutional buyers-
total of such securities at year-end amounts to 3.3%
of net assets.
T. Rowe Price Short-Term U.S. Government Fund
Statement of Operations
In thousands
Year
Ended
5/31/97
Investment Income
Interest income $ 6,385
Expenses
Investment management 250
Shareholder servicing 171
Custody and accounting 147
Registration 43
Legal and audit 23
Prospectus and shareholder reports 12
Directors 7
Miscellaneous 9
Total expenses 662
Net investment income 5,723
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on securities (530)
Change in net unrealized gain or
loss on securities 1,139
Net realized and unrealized gain (loss) 609
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 6,332
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Short-Term U.S. Government Fund
Statement of Changes in Net Assets
In thousands
Year
Ended
5/31/97 5/31/96
Increase (Decrease) in Net Assets
Operations
Net investment income $ 5,723 $ 6,297
Net realized gain (loss) (530) 415
Change in net unrealized gain
or loss 1,139 (2,154)
Increase (decrease) in net
assets from operations 6,332 4,558
Distributions to shareholders
Net investment income (5,567) (5,995)
Tax return of capital (156) (304)
Decrease in net assets from
distributions (5,723) (6,299)
Capital share transactions*
Shares sold 25,020 19,825
Distributions reinvested 4,695 5,139
Shares redeemed (36,156) (37,081)
Increase (decrease) in net
assets from capital
share transactions (6,441) (12,117)
Net Assets
Increase (decrease) during period (5,832) (13,858)
Beginning of period 98,529 112,387
End of period $ 92,697 $ 98,529
*Share information
Shares sold 5,409 4,245
Distributions reinvested 1,016 1,101
Shares redeemed (7,826) (7,939)
Increase (decrease) in
shares outstanding (1,401) (2,593)
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Short-Term U.S. Government Fund
May 31, 1997
Notes to Financial Statements
Note 1 - Significant Accounting Policies
T. Rowe Price Short-Term U.S. Government Fund, Inc. (the fund) is registered
under the Investment Company Act of 1940 as a diversified, open-end
management investment company and commenced operations on September 30, 1991.
Valuation Debt securities are generally traded in the over-the-counter
market. Investments in securities originally issued with maturities of one
year or more are stated at fair value as furnished by dealers who make
markets in such securities or by an independent pricing service, which
considers yield or price of bonds of comparable quality, coupon, maturity,
and type, as well as prices quoted by dealers who make markets in such
securities. Securities with original maturities of less than one year are
stated at fair value, which is determined by using a matrix system that
establishes a value for each security based on money market yields.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair
value as determined in good faith by or under the supervision of the officers
of the fund, as authorized by the Board of Directors.
Premiums and Discounts Premiums and discounts on debt securities, other than
mortgage-backed securities, are amortized for both financial reporting and
tax purposes.
Premiums and discounts on mortgage-backed securities are recognized upon
principal repayment as gain or loss for financial reporting purposes and as
ordinary income for tax purposes.
Other Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses
are reported on the identified cost basis. Distributions to shareholders are
recorded by the fund on the ex-dividend date. Income and capital gain
distributions are determined in accordance with federal income tax
regulations and may differ from those determined in accordance with generally
accepted accounting principles.
Note 2 - Investment Transactions
Commercial Paper Joint Account
The fund, and other affiliated funds, may transfer uninvested cash into a
commercial paper joint account, the daily aggregate balance of which is
invested in high-grade commercial paper. All securities purchased by the
joint account satisfy the fund's criteria as to quality, yield, and
liquidity.
Other Purchases and sales of portfolio securities, other than short-term and
U.S. government securities, aggregated $1,962,000 and $14,756,000,
respectively, for the year ended May 31, 1997. Purchases and sales of U.S.
government securities aggregated $77,086,000 and $70,011,000, respectively,
for the year ended May 31, 1997.
Note 3 - Federal Income Taxes
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of
its taxable income. The fund has unused realized capital loss carryforwards
for federal income tax purposes of $23,665,000, of which $12,778,000 expires
in 2000, $5,229,000 in 2001, and $5,658,000 thereafter through 2005. The fund
intends to retain gains realized in future periods that may be offset by
available capital loss carryforwards.
In order for the fund's capital accounts and distributions to shareholders
to reflect the tax character of certain transactions, the following
reclassifications were made during the year ended May 31, 1997. The results
of operations and net assets were not affected by the reclassifications.
Undistributed net investment income $(141,000)
Undistributed net realized gain 144,000
Paid-in-capital (3,000)
At May 31, 1997, the aggregate cost of investments for federal income tax and
financial reporting purposes was $97,012,000, and net unrealized loss
aggregated $173,000, of which $317,000 related to appreciated investments and
$490,000 to depreciated investments.
Note 4 - Related Party Transactions
The investment management agreement between the fund and T. Rowe Price
Associates, Inc. (the manager) provides for an annual investment management
fee, of which $21,000 was payable at May 31, 1997. The fee is computed daily
and paid monthly, and consists of an individual fund fee equal to 0.10% of
average daily net assets and a group fee. The group fee is based on the
combined assets of certain mutual funds sponsored by the manager or Rowe
Price-Fleming International, Inc. (the group). The group fee rate ranges from
0.48% for the first $1 billion of assets to 0.30% for assets in excess of $80
billion. At May 31, 1997, and for the year then ended, the effective annual
group fee rate was 0.33%. The fund pays a pro-rata share of the group fee
based on the ratio of its net assets to those of the group.
Under the terms of the investment management agreement, the manager is
required to bear any expenses through May 31, 1998, which would cause the
fund's ratio of expenses to average net assets to exceed 0.70%. Thereafter,
through May 31, 2000, the fund is required to reimburse the manager for these
expenses, provided that average net assets have grown or expenses have
declined sufficiently to allow reimbursement without causing the fund's ratio
of expenses to average net assets to exceed 0.70%. Pursuant to this
agreement, $155,000 of management fees were not accrued by the fund for the
year ended May 31, 1997. Additionally, $779,000 of unaccrued management fees
related to a previous expense limitation are subject to reimbursement through
May 31, 1998.
In addition, the fund has entered into agreements with the manager and two
wholly owned subsidiaries of the manager, pursuant to which the fund receives
certain other services. The manager computes the daily share price and
maintains the financial records of the fund. T. Rowe Price Services, Inc.,
is the fund's transfer and dividend disbursing agent and provides shareholder
and administrative services to the fund. T. Rowe Price Retirement Plan
Services, Inc., provides subaccounting and recordkeeping services for certain
retirement accounts invested in the fund. The fund incurred expenses pursuant
to these related party agreements totaling approximately $231,000 for the
year ended May 31, 1997, of which $26,000 was payable at period-end.
During fiscal year 1996, Price Waterhouse LLP succeeded Coopers & Lybrand
L.L.P. as independent accountants for the Short-Term U.S. Government Fund,
a decision that was approved by the fund's Board of Directors. During the two
fiscal years preceding the change, the fund received unqualified opinions and
had no disagreements with Coopers & Lybrand L.L.P. or reportable events that
caused the change.
T. Rowe Price Short-Term U.S. Government Fund
T. Rowe Price Shareholder Services
Report of Independent Accountants
To the Board of Directors and Shareholders of
T. Rowe Price Short-Term U.S. Government Fund, Inc.
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position
of T. Rowe Price Short-Term U.S. Government Fund, Inc. (the "Fund") at May
31, 1997, the results of its operations for the year then ended, and the
changes in its net assets and the financial highlights for each of the two
years in the period ended May 31, 1997, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of
the Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at May 31, 1997 by
correspondence with the custodian and brokers and, where appropriate, the
application of alternative auditing procedures for unsettled security
transactions, provide a reasonable basis for the opinion expressed above. The
financial statements of the Fund for the fiscal periods presented prior to
the year ended May 31, 1996 were audited by other independent accountants
whose report dated June 19, 1995 expressed an unqualified opinion on these
statements.
PRICE WATERHOUSE LLP
Baltimore, Maryland
June 18, 1997
Investment Services And Information
Knowledgeable Service Representatives
By Phone 1-800-225-5132 Available Monday through Friday from
8 a.m. to 10 p.m. ET and weekends from 8:30 a.m. to 5 p.m. ET.
In Person Available in T. Rowe Price Investor Centers.
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Individual Investments Stocks, bonds, options, precious metals, and other
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Investment Information
Combined Statement Overview of your T. Rowe Price accounts.
Shareholder Reports Fund managers' reviews of their strategies and results.
T. Rowe Price Report Quarterly investment newsletter discussing markets and
financial strategies.
Performance Update Quarterly review of all T. Rowe Price fund results.
Insights Educational reports on investment strategies and financial markets.
Investment Guides Asset Mix Worksheet, College Planning Kit, Diversifying
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Kit.
*A division of T. Rowe Price Investment Services, Inc. Member NASD/SIPC.
For yield, price, last transaction,
current balance, or to conduct
transactions, 24 hours, 7 days
a week, call Tele*Access(registered trademark):
1-800-638-2587 toll free
For assistance
with your existing
fund account, call:
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To open a Discount Brokerage
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Internet address:
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T. Rowe Price Associates
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for
distribution only to shareholders
and to others who have received
a copy of the prospectus of the
T. Rowe Price Short-Term U.S. Government Fund.
Investor Centers:
101 East Lombard St.
Baltimore, MD 21202
T. Rowe Price
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10090 Red Run Blvd.
Owings Mills, MD 21117
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Tampa, FL 33607
T. Rowe Price Investment Services, Inc., Distributor.
F69-050 5/31/97
Chart 1 - Interest Rate Levels - a 3-line chart showing the 5-year Treasury
Note, 2-year Treasury note, and 1-year Treasury Bill yields from 5/31/96 to
5/31/97.]
Chart 2 - SEC line graph showing the cumulative growth of $10,000 invested
in the US Government Fund over the past 10 years (or from inception for funds
lacking 10-year histories) compared with $10,000 invested in a broad-based
index or average over the same period.
