UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File Number: 811-03894
T. Rowe Price Short-Term Bond Fund, Inc.
(Exact name of registrant as specified in charter)
100 East Pratt Street, Baltimore, MD 21202
(Address of principal executive offices)
David Oestreicher
100 East Pratt Street, Baltimore, MD 21202
(Name and address of agent for service)
Registrant’s telephone number, including area code: (410) 345-2000
Date of fiscal year end: May 31
Date of reporting period: May 31, 2024
Item 1. Reports to Shareholders
(a) Report pursuant to Rule 30e-1
![Image](https://capedge.com/proxy/N-CSR/0001193125-24-192759/g868533ssl4bgde9g15t4ff1ifeo.jpg)
Annual Shareholder Report
May 31, 2024
Short Duration Income Fund
I Class (TSIDX)
This annual shareholder report contains important information about Short Duration Income Fund (the "fund") for the period of June 1, 2023 to May 31, 2024. You can find the fund’s prospectus, financial information on Form N-CSR (which includes required tax information for dividends), holdings, proxy voting information, and other information atwww.troweprice.com/prospectus. You can also request this information without charge by contacting T. Rowe Price at 1-800-638-5660 or info@troweprice.com or contacting your intermediary.
What were the fund costs for the last year? (based on a hypothetical $10,000 investment)
Costs of a $10,000 investment | Costs paid as a percentage of a $10,000 investment | |
---|---|---|
Short Duration Income Fund - I Class | $31 | 0.30% |
What drove fund performance during the past 12 months?
The shorter-maturity U.S. investment-grade bond market generated positive returns over the 12-month period ended May 31, 2024, largely lifted by declining interest rates and tighter credit spreads near the end of 2023. Corporate bonds and securitized credit generated positive excess returns during the rally and the broader reporting period.
The fund’s out-of-benchmark allocations to emerging markets debt and securitized sectors—asset-backed securities (ABS), collateralized loan obligations (CLOs), commercial mortgage-backed securities, and residential mortgage-backed securities—aided relative performance versus its style-specific benchmark, the Bloomberg 1–3 Year U.S. Corporate Bond Index. Security selection among investment-grade and high yield corporate bonds further added to relative gains. Additionally, the portfolio’s slightly shorter-than-benchmark average duration position helped relative performance as U.S. Treasury note and bond yields ended the period higher.
Out-of-benchmark holdings of U.S. Treasuries hindered performance relative to the fund’s style-specific benchmark, as corporate credit spreads tightened.
The fund’s allocation to corporate debt decreased but continued to represent the portfolio’s largest absolute position. As corporate bond valuations tightened early in the period, we focused on additions in ABS. We also added CLOs during the period as spreads tightened elsewhere in fixed income markets.
While we are primarily a cash bond manager, we occasionally employ the limited use of derivatives in our strategy for hedging purposes. Derivatives may include futures and options, as well as credit default and interest rate swaps. During the reporting period, our use of derivatives, particularly Treasury futures, detracted modestly from absolute performance.
How has the fund performed?
Cumulative Returns of a Hypothetical $500,000 Investment as of May 31, 2024
![A line chart as described in the following paragraph.](https://capedge.com/proxy/N-CSR/0001193125-24-192759/g868533zkmfn5o3dylqyh0suxiln.jpg)
I Class | Regulatory Benchmark | Strategy Benchmark | |
---|---|---|---|
12/8/20 | 500,000 | 500,000 | 500,000 |
2/28/21 | 504,292 | 491,107 | 501,375 |
5/31/21 | 506,334 | 490,403 | 502,782 |
8/31/21 | 508,512 | 498,419 | 503,129 |
11/30/21 | 505,104 | 495,429 | 500,247 |
2/28/22 | 498,217 | 478,121 | 493,805 |
5/31/22 | 488,450 | 450,082 | 487,789 |
8/31/22 | 482,725 | 441,022 | 483,898 |
11/30/22 | 478,221 | 431,818 | 482,548 |
2/28/23 | 484,094 | 431,639 | 485,408 |
5/31/23 | 489,706 | 440,437 | 491,543 |
8/31/23 | 494,685 | 435,759 | 495,415 |
11/30/23 | 502,230 | 436,913 | 503,510 |
2/29/24 | 512,176 | 446,000 | 511,526 |
5/31/24 | 518,523 | 446,187 | 517,174 |
202405-3565004, 202407-3567307
F1306-052 7/24
Average Annual Total Returns
1 Year | Since Inception 12/8/2020 | |
---|---|---|
Short Duration Income Fund (I Class) | 5.88% | 1.05% |
Bloomberg U.S. Aggregate Bond Index (Regulatory Benchmark) | 1.31 | - 3.22 |
Bloomberg 1-3 Year U.S. Corporate Bond Index (Strategy Benchmark) | 5.21 | 0.98 |
The preceding line graph shows the value of a hypothetical $500,000 investment in the fund over the past 10 fiscal year periods or since inception (for funds lacking 10-year records). The fund’s performance information included in the line graph and table above is compared with a regulatory required index that represents an overall securities market (Regulatory Benchmark). In addition, the line graph and table may also include one or more indexes that more closely aligns to the fund's investment strategy (Strategy Benchmark(s)). Due to new SEC Rules on shareholder reporting the fund adopted a new broad-based securities market index, referred to as the Regulatory Benchmark. Market index returns do not include expenses, which are deducted from fund returns. The fund's total return figures reflect the reinvestment of dividends and capital gains, if any. Neither the fund’s returns nor the index returns reflect the deduction of taxes that a shareholder would pay on fund distributions or redemptions of fund shares. The fund’s past performance is not a good predictor of the fund’s future performance. Updated performance information can be found at www.troweprice.com.
What are some fund statistics?
Fund Statistics
Total Net Assets (000s) | $54,942 |
Number of Portfolio Holdings | 381 |
Investment Advisory Fees Paid (000s) | $(165) |
Portfolio Turnover Rate | 88.7% |
What did the fund invest in?
Credit Quality Allocation* (as a % of Net Assets)
AAA Rated | 18.5% |
AA Rated | 10.2 |
A Rated | 17.9 |
BBB Rated | 23.0 |
BB Rated and Below | 6.9 |
Not Rated | 5.7 |
U.S. Treasury Securities | 14.3 |
U.S. Government Agency Securities | 4.1 |
Reserves | -0.6 |
*Credit ratings for the securities held in the Fund are provided by Moody’s, Standard & Poor’s, and Fitch and are converted to the Standard & Poor’s nomenclature. A rating of AAA represents the highest-rated securities, and a rating of D represents the lowest rated securities. If the ratings agencies differ, the highest rating is applied to the security. If a rating is not available, the security is classified as Not Rated. The rating of the underlying investment vehicle is used to determine the creditworthiness of credit default swaps and sovereign securities. The Fund is not rated by any agency.
Top Ten Holdings (as a % of Net Assets)
U.S. Treasury Notes | 13.3% |
Federal National Mortgage Assn. | 2.0 |
Federal Home Loan Banks | 1.2 |
U.S. Treasury Inflation-Indexed Notes | 1.0 |
Octane Receivables Trust | 1.0 |
UMBS | 1.0 |
Crown Castle | 1.0 |
VF | 0.9 |
Ford Credit Auto Lease Trust | 0.9 |
Verus Securitization Trust | 0.8 |
If you invest directly with T. Rowe Price, you can elect to receive future shareholder reports or other important documents through electronic delivery by enrolling at www.troweprice.com/paperless. If you invest through a financial intermediary such as an investment advisor, a bank, retirement plan sponsor or a brokerage firm, please contact that organization and ask if it can provide electronic delivery.
Bloomberg does not accept any liability for any errors or omissions in the indexes or data, and hereby expressly disclaim all warranties of originality, accuracy, completeness, timeliness, merchantability and fitness for a particular purpose. No party may rely on any indexes or data contained in this communication. Visit www.troweprice.com/en/us/market-data-disclosures for additional legal notices & disclaimers.
Short Duration Income Fund
I Class (TSIDX)
T. Rowe Price Investment Services, Inc.
100 East Pratt Street
Baltimore, MD 21202
![Image](https://capedge.com/proxy/N-CSR/0001193125-24-192759/g868533h4myvslcudgv60qqhbvki.jpg)
![Image](https://capedge.com/proxy/N-CSR/0001193125-24-192759/g868533jpenb0vgufcsb3gwjc46z.jpg)
Annual Shareholder Report
May 31, 2024
Short Duration Income Fund
Investor Class (TSDLX)
This annual shareholder report contains important information about Short Duration Income Fund (the "fund") for the period of June 1, 2023 to May 31, 2024. You can find the fund’s prospectus, financial information on Form N-CSR (which includes required tax information for dividends), holdings, proxy voting information, and other information atwww.troweprice.com/prospectus. You can also request this information without charge by contacting T. Rowe Price at 1-800-638-5660 or info@troweprice.com or contacting your intermediary.
What were the fund costs for the last year? (based on a hypothetical $10,000 investment)
Costs of a $10,000 investment | Costs paid as a percentage of a $10,000 investment | |
---|---|---|
Short Duration Income Fund - Investor Class | $42 | 0.41% |
What drove fund performance during the past 12 months?
The shorter-maturity U.S. investment-grade bond market generated positive returns over the 12-month period ended May 31, 2024, largely lifted by declining interest rates and tighter credit spreads near the end of 2023. Corporate bonds and securitized credit generated positive excess returns during the rally and the broader reporting period.
The fund’s out-of-benchmark allocations to emerging markets debt and securitized sectors—asset-backed securities (ABS), collateralized loan obligations (CLOs), commercial mortgage-backed securities, and residential mortgage-backed securities—aided relative performance versus its style-specific benchmark, the Bloomberg 1–3 Year U.S. Corporate Bond Index. Security selection among investment-grade and high yield corporate bonds further added to relative gains. Additionally, the portfolio’s slightly shorter-than-benchmark average duration position helped relative performance as U.S. Treasury note and bond yields ended the period higher.
Out-of-benchmark holdings of U.S. Treasuries hindered performance relative to the fund’s style-specific benchmark, as corporate credit spreads tightened.
The fund’s allocation to corporate debt decreased but continued to represent the portfolio’s largest absolute position. As corporate bond valuations tightened early in the period, we focused on additions in ABS. We also added CLOs during the period as spreads tightened elsewhere in fixed income markets.
While we are primarily a cash bond manager, we occasionally employ the limited use of derivatives in our strategy for hedging purposes. Derivatives may include futures and options, as well as credit default and interest rate swaps. During the reporting period, our use of derivatives, particularly Treasury futures, detracted modestly from absolute performance.
How has the fund performed?
Cumulative Returns of a Hypothetical $10,000 Investment as of May 31, 2024
![A line chart as described in the following paragraph.](https://capedge.com/proxy/N-CSR/0001193125-24-192759/g868533yzmacsyiovwlixszmkgju.jpg)
Investor Class | Regulatory Benchmark | Strategy Benchmark | |
---|---|---|---|
12/8/20 | 10,000 | 10,000 | 10,000 |
2/28/21 | 10,083 | 9,822 | 10,028 |
5/31/21 | 10,121 | 9,808 | 10,056 |
8/31/21 | 10,162 | 9,968 | 10,063 |
11/30/21 | 10,091 | 9,909 | 10,005 |
2/28/22 | 9,951 | 9,562 | 9,876 |
5/31/22 | 9,753 | 9,002 | 9,756 |
8/31/22 | 9,637 | 8,820 | 9,678 |
11/30/22 | 9,544 | 8,636 | 9,651 |
2/28/23 | 9,659 | 8,633 | 9,708 |
5/31/23 | 9,779 | 8,809 | 9,831 |
8/31/23 | 9,865 | 8,715 | 9,908 |
11/30/23 | 10,013 | 8,738 | 10,070 |
2/29/24 | 10,209 | 8,920 | 10,231 |
5/31/24 | 10,332 | 8,924 | 10,343 |
202405-3565004, 202407-3567307
F1305-052 7/24
Average Annual Total Returns
1 Year | Since Inception 12/8/2020 | |
---|---|---|
Short Duration Income Fund (Investor Class) | 5.66% | 0.95% |
Bloomberg U.S. Aggregate Bond Index (Regulatory Benchmark) | 1.31 | - 3.22 |
Bloomberg 1-3 Year U.S. Corporate Bond Index (Strategy Benchmark) | 5.21 | 0.98 |
The preceding line graph 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 fund’s performance information included in the line graph and table above is compared with a regulatory required index that represents an overall securities market (Regulatory Benchmark). In addition, the line graph and table may also include one or more indexes that more closely aligns to the fund's investment strategy (Strategy Benchmark(s)). Due to new SEC Rules on shareholder reporting the fund adopted a new broad-based securities market index, referred to as the Regulatory Benchmark. Market index returns do not include expenses, which are deducted from fund returns. The fund's total return figures reflect the reinvestment of dividends and capital gains, if any. Neither the fund’s returns nor the index returns reflect the deduction of taxes that a shareholder would pay on fund distributions or redemptions of fund shares. The fund’s past performance is not a good predictor of the fund’s future performance. Updated performance information can be found at www.troweprice.com.
What are some fund statistics?
Fund Statistics
Total Net Assets (000s) | $54,942 |
Number of Portfolio Holdings | 381 |
Investment Advisory Fees Paid (000s) | $(165) |
Portfolio Turnover Rate | 88.7% |
What did the fund invest in?
Credit Quality Allocation* (as a % of Net Assets)
AAA Rated | 18.5% |
AA Rated | 10.2 |
A Rated | 17.9 |
BBB Rated | 23.0 |
BB Rated and Below | 6.9 |
Not Rated | 5.7 |
U.S. Treasury Securities | 14.3 |
U.S. Government Agency Securities | 4.1 |
Reserves | -0.6 |
*Credit ratings for the securities held in the Fund are provided by Moody’s, Standard & Poor’s, and Fitch and are converted to the Standard & Poor’s nomenclature. A rating of AAA represents the highest-rated securities, and a rating of D represents the lowest rated securities. If the ratings agencies differ, the highest rating is applied to the security. If a rating is not available, the security is classified as Not Rated. The rating of the underlying investment vehicle is used to determine the creditworthiness of credit default swaps and sovereign securities. The Fund is not rated by any agency.
Top Ten Holdings (as a % of Net Assets)
U.S. Treasury Notes | 13.3% |
Federal National Mortgage Assn. | 2.0 |
Federal Home Loan Banks | 1.2 |
U.S. Treasury Inflation-Indexed Notes | 1.0 |
Octane Receivables Trust | 1.0 |
UMBS | 1.0 |
Crown Castle | 1.0 |
VF | 0.9 |
Ford Credit Auto Lease Trust | 0.9 |
Verus Securitization Trust | 0.8 |
If you invest directly with T. Rowe Price, you can elect to receive future shareholder reports or other important documents through electronic delivery by enrolling at www.troweprice.com/paperless. If you invest through a financial intermediary such as an investment advisor, a bank, retirement plan sponsor or a brokerage firm, please contact that organization and ask if it can provide electronic delivery.
Bloomberg does not accept any liability for any errors or omissions in the indexes or data, and hereby expressly disclaim all warranties of originality, accuracy, completeness, timeliness, merchantability and fitness for a particular purpose. No party may rely on any indexes or data contained in this communication. Visit www.troweprice.com/en/us/market-data-disclosures for additional legal notices & disclaimers.
Short Duration Income Fund
Investor Class (TSDLX)
T. Rowe Price Investment Services, Inc.
100 East Pratt Street
Baltimore, MD 21202
![Image](https://capedge.com/proxy/N-CSR/0001193125-24-192759/g868533kjqzekkhhjmgg9kjlywwb.jpg)
Item 1. (b) Notice pursuant to Rule 30e-3.
Not applicable.
Item 2. Code of Ethics.
The registrant has adopted a code of ethics, as defined in Item 2 of Form N-CSR, applicable to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of this code of ethics is filed as an exhibit to this Form N-CSR. No substantive amendments were approved or waivers were granted to this code of ethics during the period covered by this report.
Item 3. Audit Committee Financial Expert.
The registrant’s Board of Directors has determined that Mr. Paul F. McBride qualifies as an audit committee financial expert, as defined in Item 3 of Form N-CSR. Mr. McBride is considered independent for purposes of Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
(a) – (d) Aggregate fees billed for the last two fiscal years for professional services rendered to, or on behalf of, the registrant by the registrant’s principal accountant were as follows:
2024 | 2023 | |||||||||
Audit Fees | $33,841 | $33,192 | ||||||||
Audit-Related Fees | - | - | ||||||||
Tax Fees | - | - | ||||||||
All Other Fees | - | - |
Audit fees include amounts related to the audit of the registrant’s annual financial statements and services normally provided by the accountant in connection with statutory and regulatory filings. Audit-related fees include amounts reasonably related to the performance of the audit of the registrant’s financial statements and specifically include the issuance of a report on internal controls and, if applicable, agreed-upon procedures related to fund acquisitions. Tax fees include amounts related to services for tax compliance, tax planning, and tax advice. The nature of these services specifically includes the review of distribution calculations and the preparation of Federal, state, and excise tax returns. All other fees include the registrant’s pro-rata share of amounts for agreed-upon procedures in conjunction with service contract approvals by the registrant’s Board of Directors/Trustees.
(e)(1) The registrant’s audit committee has adopted a policy whereby audit and non-audit services performed by the registrant’s principal accountant for the registrant, its investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant require pre-approval in advance at regularly scheduled audit committee meetings. If such a service is required between regularly scheduled audit committee meetings, pre-approval may be authorized by one audit committee member with ratification at the next scheduled audit committee meeting. Waiver of pre-approval for audit or non-audit services requiring fees of a de minimis amount is not permitted.
(2) No services included in (b) – (d) above were approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Less than 50 percent of the hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most recent fiscal year were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees.
(g) The aggregate fees billed for the most recent fiscal year and the preceding fiscal year by the registrant’s principal accountant for non-audit services rendered to the registrant, its investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant were $1,230,000 and $1,521,000, respectively.
(h) All non-audit services rendered in (g) above were pre-approved by the registrant’s audit committee. Accordingly, these services were considered by the registrant’s audit committee in maintaining the principal accountant’s independence.
(i) Not applicable.
(j) Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Investments.
(a) Not applicable. The complete schedule of investments is included in Item 7 of this Form N-CSR.
(b) Not applicable.
Item 7. Financial Statements and Financial Highlights for Open-End Management Investment Companies.
(a – b) Report pursuant to Regulation S-X.
Item 8. Changes in and Disagreements with Accountants for Open-End Management Investment Companies.
Not applicable.
Item 9. Proxy Disclosures for Open-End Management Investment Companies.
Not applicable.
Item 10. Remuneration Paid to Directors, Officers, and Others of Open-End Management Investment Companies.
Remuneration paid to Directors is included in Item 7 of this Form N-CSR.
Item 11. Statement Regarding Basis for Approval of Investment Advisory Contract.
If applicable, see Item 7.
Item 12. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 13. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 14. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 15. Submission of Matters to a Vote of Security Holders.
There has been no change to the procedures by which shareholders may recommend nominees to the registrant’s board of directors.
Item 16. Controls and Procedures.
(a) The registrant’s principal executive officer and principal financial officer have evaluated the registrant’s disclosure controls and procedures within 90 days of this filing and have concluded that the registrant’s disclosure controls and procedures were effective, as of that date, in ensuring that information required to be disclosed by the registrant in this Form N-CSR was recorded, processed, summarized, and reported timely.
(b) The registrant’s principal executive officer and principal financial officer are aware of no change in the registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 17. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not applicable.
Item 18. Recovery of Erroneously Awarded Compensation.
Not applicable.
Item 19. Exhibits.
(a)(1) | The registrant’s code of ethics pursuant to Item 2 of Form N-CSR is attached. | |
(2) | Listing standards relating to recovery of erroneously awarded compensation: not applicable. | |
(3) | ||
(b) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
T. Rowe Price Short Duration Income Fund | ||||
By | /s/ David Oestreicher | |||
David Oestreicher | ||||
Principal Executive Officer | ||||
Date | July 18, 2024 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By | /s/ David Oestreicher | |||
David Oestreicher | ||||
Principal Executive Officer | ||||
Date | July 18, 2024 |
By | /s/ Alan S. Dupski | |||
Alan S. Dupski | ||||
Principal Financial Officer | ||||
Date | July 18, 2024 |