Semiannual Report
Short-Term
U.S. Government
Fund
November 30, 1999
T. Rowe Price
Report Highlights
Short-Term U.S. Government Fund
o Interest rates rose and bond prices fell during the six months ended
November 30, limiting the returns of short-term bond funds.
o Your fund outperformed its benchmarks during the period, though market
returns were modest.
o We focused on mortgage- and asset-backed securities that offer stable
cash flows, high liquidity, and reduced interest rate sensitivity.
o High yields and the Federal Reserve's proactive moves against inflation
provide a strong fundamental backdrop for the bond market.
UPDATES AVAILABLE
For updates on T. Rowe Price funds following the end of each calendar quarter,
please see our Web site at www.troweprice.com.
Fellow Shareholders
Robust U.S. economic strength combined with a gathering recovery overseas pushed
interest rates higher and bond prices lower over the past six months. The
Federal Reserve, acting to preempt inflationary pressures, raised key short-term
interest rates three times, rescinding its three rate cuts of fall 1998. For the
6- and 12-month periods ended November 30, short-term bond funds underperformed
money market funds (which benefit from rising rates) but held up better than
intermediate-term bond funds.
MARKET ENVIRONMENT
The extraordinary strength and endurance of the U.S. economy has produced
virtually unprecedented prosperity for workers and investors alike-but the
past six months were unkind to fixed income investors. In all, 1999 was one
of the most difficult years in recent memory for the bond market. Third
quarter GDP growth was revised upward to 5.5%, and the unemployment rate
remained at a 30-year low of 4.1%. International economies also continued
to improve, as reflected in stronger U.S. exports and firmer commodity and
import prices. While there are some signs of higher costs, the extent to
which inflation has been held in check is remarkable. Both the closely
watched employment cost index and the wage component of the GDP report have
shown only modest increases. Clearly technology and increased globalization
have played significant roles in containing costs, reducing pricing power,
and improving productivity and efficiency. These trends, combined with the
Fed's sound monetary policy, are very positive for bonds in the long term.
Interest Rate Levels
5-Year Treasury Note 2-Year Treasury Note 1-Year Treasury Note
11/30/98 4.62 4.64 4.59
4.59 4.61 4.59
4.56 4.59 4.51
2/99 5.11 5.05 4.82
5.12 4.99 4.72
5.15 5.03 4.73
5/99 5.51 5.35 4.93
5.76 5.61 5.11
5.75 5.59 5.07
8/99 5.71 5.61 5.19
5.81 5.66 5.24
6.09 5.92 5.51
11/30/99 6.03 5.96 5.65
As shown in the chart, one-year Treasury note yields rose 70 basis points
in the six months ended November 30 and more than a full percentage point
over the past year (100 basis points equal one percentage point). Five-year
Treasury note yields rose 52 basis points for the six months and 141 basis
points for the longer period.
Mortgage securities held up better than Treasuries because rising rates
caused a reduction in mortgage prepayments (which occur when homeowners
refinance). This helped to stabilize cash flows and moderate volatility for
mortgage-backed securities. Early in the period, increasing volatility and
a lack of liquidity hampered the mortgage market and drove the yield
advantage of mortgage securities over Treasuries to an extreme level. From
September on, this yield advantage, or risk premium, diminished, and
mortgages were among the top-performing segments of the fixed income
markets. Asset-backed securities also did well.
PERFORMANCE AND STRATEGY REVIEW
The fund's 1.86% return for the six months ended November 30 was modest in
absolute terms but ahead of its Lipper peer group average and the Salomon
Smith Barney 2-Year Treasury Note Index. The strong relative performance of
mortgage- and asset-backed sectors over the past three months aided
results. One-year performance was mixed, falling behind the Lipper category
but matching the two-year index. We were unable to make up the ground we
lost to the Lipper average in the six months ended May 31, when our longer
duration strategy had hurt results. (Duration is a measure of a bond fund's
sensitivity to interest rates; for example, a duration of two years means
the fund's share price will rise or fall about 2% for each
one-percentage-point fall or rise in interest rates.) Duration stood at 2.2
years at the end of the period, a level we consider short to neutral versus
our benchmarks. Please note that in the since-inception Performance
Comparison chart on page 6 of this report, we have eliminated one of the
two unmanaged benchmarks we used to gauge fund performance. We will no
longer use the Salomon Smith Barney 6-Month Treasury Bill Index, since over
time the fund has evolved a consistently longer duration strategy. The
Salomon Smith Barney 2-Year Treasury Note Index will remain, as it
corresponds more closely with our normal duration. The fund's return was
generated entirely by income over the past six and 12 months, as the share
price fell to $4.56 on November 30 from $4.71 a year ago and $4.60 on May
31. Income remained steady at $0.12 per share for the past six months, as
shown in the table on page 5. The fund's six-month dividend yield rose to
5.51% from 5.47% on May 31.
Performance Comparison
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Periods Ended 11/30/99 6 Months 12 Months
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Short-Term
U.S. Government Fund 1.86% 2.16%
Salomon Smith Barney
2-Year Treasury Note Index 1.61 2.16
Lipper Average of Short
U.S. Government Funds 1.51 2.83
During the period, we shifted our mortgage holdings toward more liquid,
more conservative collateralized mortgage obligations (CMOs) that have
stable cash flows and are less interest rate sensitive. Mortgage market
fundamentals remain excellent, with refinancing decreasing, supply falling,
and mortgage rates close to their two-year high. CMO issuance increased
late in the period and liquidity remained good. We expect banks and
agencies, which have been sidelined recently, to step up their purchases of
mortgage-backed securities after the New Year.
We also increased holdings of asset-backed securities, both because of
their stable cash flows and reduced interest rate sensitivity and because
we believe well- selected securities offering a yield advantage over
Treasuries represent good value under current conditions. Other recent
purchases have been focused on high-quality, highly liquid corporate bonds,
which should be somewhat less interest rate sensitive than Treasuries and
also offer attractive yields. Given the likelihood of another Fed rate
hike, duration strategy will remain short to neutral. We also added a
position in Treasury inflation protected securities, anticipating that the
consumer price index would rise from historically low levels. These
securities have performed well. The fund's cash position was increased as a
precaution against potential shareholder redemptions due to Y2K concerns.
OUTLOOK
We expect the year 2000 to be more favorable for bond investors. Neither
inflation nor long-term interest rates are likely to rise significantly
from current levels, though another Fed rate hike is probable in the first
quarter of 2000. Economic growth should moderate eventually to an annual
rate of 3.5% or slightly lower. U.S. consumer demand will likely slow,
since mortgage refinancing (a source of spendable cash) has dried up and
because the recent rise in oil prices will act like a tax increase on
consumers. Given the Fed's proactive stance and the positive influence of
technological advancements, including the Internet, we expect inflation to
remain below 3%. In that environment, the higher yields available on
mortgage- and asset-backed securities remain very attractive. We believe
the Short-Term U.S. Government Fund is well positioned to deliver results
more in line with its long-term average in the years ahead.
Thank you for investing with T. Rowe Price.
Respectfully submitted,
Connice A. Bavely
President and Chairman of the Investment Advisory Committee
December 17, 1999
T. Rowe Price Short-Term U.S. Government Fund
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Portfolio Highlights
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KEY STATISTICS
5/31/99 11/30/99
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Price Per Share $4.60 $4.56
Dividends Per Share
For 6 months 0.12 0.12
For 12 months 0.25 0.25
Dividend Yield *
For 6 months 5.47% 5.51%
For 12 months 5.62 5.59
30-Day Standardized Yield 4.69 5.69
Weighted Average Maturity (years) 3.0 2.6
Weighted Average Effective Duration (years) 2.2 2.2
Weighted Average Quality ** AAA AAA
* Dividends earned and reinvested for the periods indicated are annualized
and divided by the fund's net asset value per share at the end of the
period.
** Based on T. Rowe Price research.
SECTOR DIVERSIFICATION
Percent of Percent of
Net Assets Net Assets
5/31/99 11/30/99
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Mortgage-Backed Securities 57% 50%
U.S. Government Obligations 27 25
Asset-Backed Securities 8 11
Corporate Bonds and Notes 5 7
Money Market Funds 2 7
Other Assets Less Liabilities 1 -
Total 100% 100%
T. Rowe Price Short-Term U.S. Government Fund
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Performance Comparison
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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 benchmarks, which may include
a broad-based market index and a peer group average or index. Market
indexes do not include expenses, which are deducted from fund returns as
well as mutual fund averages and indexes.
Short-term U.S. Government Fund
---------------------------------------------------------------------------
Salomon Smith Barney Short-Term
2-Year Treasury U.S. Government
Note Index Fund
9/30/91 10,000 10,000
11/91 10,200 10,153
11/92 10,930 10,545
11/93 11,599 10,846
11/94 11,675 10,841
11/95 12,889 11,940
11/96 13,604 12,586
11/97 14,402 13,280
11/98 15,409 14,228
11/99 15,742 14,535
Average Annual Compound Total Return
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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.
Since Inception
Periods Ended 11/30/99 1 Year 3 Years 5 Years Inception Date
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Short-Term
U.S. Government Fund 2.16% 4.92% 6.04% 4.69% 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
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Unaudited
Financial Highlights For a share outstanding throughout each period
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6 Months Year
Ended Ended
11/30/99 5/31/99 5/31/98 5/31/97 5/31/96 5/31/95
NET ASSET VALUE
Beginning of
period $4.60 $4.65 $4.62 $4.59 $4.67 $4.65
Investment activities
Net investment income 0.12* 0.25* 0.27* 0.28 0.28* 0.26*
Net realized and
unrealized gain
(loss) (0.04) (0.05) 0.03 0.03 (0.08) 0.01
Total from
investment
activities 0.08 0.20 0.30 0.31 0.20 0.27
Distributions
Net investment
income (0.12) (0.25) (0.27) (0.27) (0.27) (0.24)
Tax return of capital - - - (0.01) (0.01) (0.01)
Total distributions (0.12) (0.25) (0.27) (0.28) (0.28) (0.25)
NET ASSET VALUE
End of period $4.56 $4.60 $4.65 $4.62 $4.59 $4.67
--------------------------------------------------------
Ratios/Supplemental Data
Total return (diamond) 1.86%* 4.39%* 6.71%* 6.90%* 4.31%* 6.14%*
Ratio of total
expenses to average
net assets 0.70%*! 0.70%* 0.70%* 0.70%* 0.70%* 0.59%*
Ratio of net
investment income
to average
net assets 5.43%*! 5.42%* 5.88%* 6.05%* 5.93%* 5.48%*
Portfolio turnover
rate 72.8%! 145.3% 107.5% 82.9% 152.8% 100.0%
Net assets,
end of period
(in thousands) $131,337 $134,227 $109,863 $ 92,697 $98,529 $112,387
(diamond) Total return reflects the rate that an investor would have earned
on an investment in the fund during each period, assuming
reinvestment of all distributions.
* Excludes expenses in excess of a 0.70% voluntary expense limitation
in effect through 5/31/00, and a 0.60% voluntary expense limitation
in effect through 2/28/95.
! Annualized
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Short-Term U.S. Government Fund
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Unaudited November 30, 1999
Statement of Net Assets Par Value
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In thousands
U.S. GOVERNMENT MORTGAGE-BACKED
SECURITIES 48.1%
U.S. Government Agency ARM 1.8%
Federal National Mortgage Assn.
5.745%, 3/1/20 $ 64 $ 63
5.75%, 2/1/16 - 7/1/27 691 677
5.754%, 5/1/31 209 206
5.765%, 3/1/19 8 8
5.771%, 5/1/24 91 89
5.783%, 11/1/19 667 653
5.812%, 5/1/17 - 11/1/20 490 481
5.875%, 11/1/17 56 55
6.68%, 11/1/21 122 123
6.817%, 10/1/14 10 9
2,364
U.S. Government Agency Obligations 39.2%
Federal Home Loan Banks, 6.25%, 10/15/20 5,880 5,727
Federal Home Loan Mortgage
7.75%, 8/15/21 2,052 2,065
5 year balloon
6.50%, 4/20/01 2,522 2,514
7.00%, 1/1/00 - 9/1/01 1,669 1,673
8.00%, 2/1/00 7 7
7 year balloon
6.50%, 12/1/99 - 6/10/01 1,749 1,745
7.00%, 1/1/00 - 8/1/01 878 881
REMIC
5.75%, 6/15/10 2,000 1,985
5.85%, 11/15/17 323 322
Federal National Mortgage Assn.
6.00%, 7/1/13 - 11/18/17 7,305 7,116
7 year balloon
7.00%, 6/1 - 9/1/03 3,478 3,491
7.50%, 8/1/01 126 127
REMIC
5.75%, 6/25/06 549 545
6.00%, 10/18/14 - 5/18/17 6,000 5,909
6.10%, 8/25/21 1,408 1,388
Federal National Mortgage Assn.
REMIC
6.50%, 6/18/11 $ 5,000 $ 4,923
7.00%, 4/18/22 4,000 3,997
Principal Only, 9/25/00 - 10/25/21 7,796 7,093
51,508
U.S. Government Guaranteed Obligations 7.1%
Government National Mortgage Assn.
I, 11.50%, 3/15/10 - 12/15/15 1,432 1,614
REMIC
6.00%, 10/16/25 5,000 4,851
9.00%, 7/20/23 2,852 2,896
9,361
Total U.S. Government Mortgage-Backed
Securities (Cost $64,443) 63,233
U.S. GOVERNMENT OBLIGATIONS 22.6%
U.S. Treasury Obligations 22.6%
U.S. Treasury Inflation-Indexed Notes, 3.625%, 7/15/02 5,241 5,204
U.S. Treasury Notes
5.25%, 8/15/03 1,300 1,263
5.50%, 5/31/03 8,200 8,043
5.75%, 11/30/02 1,350 1,339
6.25%, 8/31/02 1,000 1,004
6.25%, 2/15/03 5,000 5,021
6.625%, 4/30/02 7,750 7,853
Total U.S. Government Obligations (Cost $30,010) 29,727
NON-GOVERNMENT ASSET-BACKED
SECURITIES 12.7%
Auto-Backed 7.1%
BMW Vehicle Owner Trust, VR, 6.54%, 4/25/04 1,250 1,242
CIT RV Trust, 6.35%, 4/15/11 1,500 1,493
Ford Credit Auto Owner Trust, VR, 6.40%, 10/15/02 1,300 1,305
GMAC Commercial Mortgage Securities, 6.15%, 5/15/35 1,864 1,789
MMCA Automobile Owner Trust, VR, 6.80%, 8/15/03 1,500 1,499
Onyx Acceptance Grantor Trust, 6.76%, 5/15/04 2,000 1,990
9,318
Credit Card-Backed 2.7%
Prime Credit Card Master Trust, 6.75%, 11/15/05 $2,000 $2,003
World Financial Network Credit Master Trust, VR
5.711%, 7/15/06 1,500 1,497
3,500
Non-Government Agency ARM 1.8%
Puget Sound Energy Conservation, 6.23%, 7/11/02 2,164 2,155
Ryland Mercury Savings Trust, VR, 6.179%, 10/15/18 211 211
2,366
Receivables-Backed 1.1%
Case Equipment Loan Trust, VR, 5.77%, 8/15/05 1,500 1,466
1,466
Total Non-Government Asset-Backed Securities (Cost $16,742) 16,650
CORPORATE BONDS AND NOTES 9.0%
Finance and Credit 2.8%
Associates Corp. N.A., MTN, 6.90%, 7/29/02 3,600 3,607
3,607
Investment Dealers 1.0%
Merrill Lynch, 8.00%, 2/1/02 1,220 1,249
1,249
Retail 1.5%
Wal-Mart Stores, Sr. Notes, 6.15%, 8/10/01 2,000 1,987
Telephone 1.5%
Southwestern Bell Telephone, 6.375%, 4/1/01 2,000 2,000
2,000
U.S. Government Guaranteed Obligations 2.2%
Federal Home Loan Mortgage, Deb., 5.50%, 5/15/02 3,000 2,940
2,940
Total Corporate Bonds and Notes (Cost $11,907) 11,783
MONEY MARKET FUNDS 7.0%
Reserve Investment Fund, 5.65% # 9,188 9,188
Total Money Market Funds (Cost $9,188) 9,188
Total Investments in Securities
99.4% of Net Assets (Cost $132,290) $130,581
Other Assets Less Liabilities 756
NET ASSETS $131,337
----------
Net Assets Consist of:
Accumulated net investment income - net of distributions $(562)
Accumulated net realized gain/loss - net of distributions (24,172)
Net unrealized gain (loss) (1,709)
Paid-in-capital applicable to 28,801,370 shares of $0.01 par
value capital stock outstanding; 1,000,000,000 shares authorized 157,780
NET ASSETS $131,337
----------
NET ASSET VALUE PER SHARE $4.56
----------
# Seven-day yield
ARM Adjustable Rate Mortgage
MTN Medium Term Note
REMIC Real Estate Mortgage Investment Conduit
VR Variable rate
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Short-Term U.S. Government Fund
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Unaudited
Statement of Operations
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In thousands
6 Months
Ended
11/30/99
Investment Income
Interest income $4,051
Expenses
Investment management 237
Shareholder servicing 102
Custody and accounting 71
Prospectus and shareholder reports 27
Registration 10
Legal and audit 9
Directors 3
Miscellaneous 2
Total expenses 461
Expenses paid indirectly (1)
Net expenses 460
Net investment income 3,591
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on securities (971)
Change in net unrealized gain or loss on securities (302)
Net realized and unrealized gain (loss) (1,273)
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $2,318
----------
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Short-Term U.S. Government Fund
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Unaudited
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
In thousands
6 Months Year
Ended Ended
11/30/99 5/31/99
Increase (Decrease) in Net Assets
Operations
Net investment income $ 3,591 $ 7,073
Net realized gain (loss) (971) (280)
Change in net unrealized gain or loss (302) (1,543)
Increase (decrease) in net
assets from operations 2,318 5,250
Distributions to shareholders
Net investment income (3,591) (7,016)
Capital share transactions *
Shares sold 21,081 84,077
Distributions reinvested 3,170 6,135
Shares redeemed (25,868) (64,082)
Increase (decrease) in net
assets from capital
share transactions (1,617) 26,130
Net Assets
Increase (decrease) during period (2,890) 24,364
Beginning of period 134,227 109,863
End of period $ 131,337 $ 134,227
-----------------------------
*Share information
Shares sold 4,608 17,920
Distributions reinvested 693 1,311
Shares redeemed (5,654) (13,684)
Increase (decrease) in shares outstanding (353) 5,547
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Short-Term U.S. Government Fund
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Unaudited November 30, 1999
Notes to Financial Statements
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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.
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles for the investment company
industry; these principles may require the use of estimates by fund
management.
Valuation Debt securities are generally traded in the over-the-counter
market. Investments in securities with original 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.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation.
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 (MBS), are amortized for both financial
reporting and tax purposes. Premiums and discounts on all MBS are
recognized upon disposition or principal repayment as gain or loss for
financial reporting purposes. For tax purposes, premiums and discounts on
MBS acquired on or before June 8, 1997, are recognized upon disposition or
principal repayment as ordinary income. For MBS acquired after June 8,
1997, premiums are recognized as gain or loss; discounts are recognized as
gain or loss, except to the extent of accrued market discount.
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. Expenses paid indirectly reflect
credits earned on daily uninvested cash balances at the custodian, which
are used to reduce the fund's custody charges.
NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term and U.S.
government securities, aggregated $14,374,000 and $8,203,000, respectively,
for the six months ended November 30, 1999. Purchases and sales of U.S.
government securities aggregated $28,742,000 and $43,011,000, respectively,
for the six months ended November 30, 1999.
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 capital loss carryforwards for federal
income tax purposes of $22,972,000, of which $12,085,000 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.
At November 30, 1999, the cost of investments for federal income tax
purposes was substantially the same as for financial reporting and totaled
$132,290,000. Net unrealized loss aggregated $1,709,000 at period-end, of
which $148,000 related to appreciated investments and $1,857,000 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 $37,000 was payable at November 30, 1999. 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 0.295% for assets
in excess of $120 billion. At November 30, 1999, and for the six months
then ended, the effective annual group fee rate was 0.32%. 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, 2000, which would cause the
fund's ratio of total expenses to average net assets to exceed 0.70%.
Thereafter, through May 31, 2002, 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 total expenses to average net assets to exceed 0.70%.
Pursuant to this agreement, $40,000 of management fees were not accrued by
the fund for the six months ended November 30, 1999, and $92,000 of
management fees remain unaccrued from a prior period. Additionally,
$266,000 of unaccrued management fees related to a previous expense
limitation are subject to reimbursement through May 31, 2000.
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 $135,000 for the six months ended November 30, 1999, of which
$28,000 was payable at period-end.
The fund may invest in the Reserve Investment Fund and Government Reserve
Investment Fund (collectively, the Reserve Funds), open-end management
investment companies managed by T. Rowe Price Associates, Inc. The Reserve
Funds are offered as cash management options only to mutual funds and other
accounts managed by T. Rowe Price and its affiliates and are not available
to the public. The Reserve Funds pay no investment management fees.
Distributions from the Reserve Funds to the fund for the six months ended
November 30, 1999, totaled $364,000 and are reflected as interest income in
the accompanying Statement of Operations.
T. Rowe Price Shareholder Services
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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.
ACCOUNT SERVICES
Checking Available on most fixed income funds ($500 minimum).
Automatic Investing From your bank account or paycheck.
Automatic Withdrawal Scheduled, automatic redemptions.
Distribution Options Reinvest all, some, or none of your
distributions.
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Price Web site on the Internet. Address: www.troweprice.com
BROKERAGE SERVICES*
Individual Investments Stocks, bonds, options, precious metals,
and other securities at a savings over full-service commission
rates.**
INVESTMENT INFORMATION
Combined Statement Overview of all your accounts with T. Rowe
Price.
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 Overseas: A Guide to International Investing, Personal
Strategy Planner, Retirees Financial Guide, and Retirement Planning
Kit.
* T. Rowe Price Brokerage is a division of T. Rowe Price Investment
Services, Inc., Member NASD/SIPC.
** Based on a September 1999 survey for representative-assisted stock
trades. Services vary by firm, and commissions may vary depending
on size of order.
For fund and account information
or to conduct transactions,
24 hours, 7 days a week
By touch-tone telephone
Tele*Access 1-800-638-2587
By Account Access on the Internet
www.troweprice.com/access
For assistance
with your existing
fund account, call:
Shareholder Service Center
1-800-225-5132
To open a brokerage account
or obtain information, call:
1-800-638-5660
Internet address:
www.troweprice.com
Plan Account Lines for retirement
plan participants:
The appropriate 800 number appears
on your retirement account statement.
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 appropriate
to the fund or funds covered
in this report.
Walk-In Investor Centers:
For directions, call 1-800-225-5132
or visit our Web site
Baltimore Area
Downtown
101 East Lombard Street
Owings Mills
Three Financial Center
4515 Painters Mill Road
Boston Area
386 Washington Street
Wellesley
Colorado Springs
4410 ArrowsWest Drive
Los Angeles Area
Warner Center
21800 Oxnard Street, Suite 270
Woodland Hills
Tampa
4200 West Cypress Street
10th Floor
Washington, D.C.
900 17th Street N.W.
Farragut Square
T. Rowe Price, Invest With Confidence, registered trademark
T. Rowe Price Investment Services, Inc., Distributor. F69-051 11/30/99
