Item 1. Report to Shareholders
T. Rowe Price Short-Term Bond Fund
- --------------------------------------------------------------------------------
Certified Shareholder Report and Financials
T. Rowe Price Short-Term Bond Fund
- --------------------------------------------------------------------------------
Certified Shareholder Report and Financials
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 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 Bond Fund
- --------------------------------------------------------------------------------
Lehman Brothers 1-3 Year
U.S. Government/Credit Index Short-Term Bond Fund
05/31/93 10 10
05/94 10.209 10.136
05/95 10.972 10.481
05/96 11.558 10.961
05/97 12.328 11.65
05/98 13.192 12.45
05/99 13.9 12.976
05/00 14.459 13.417
05/01 15.95 14.841
05/02 16.981 15.767
05/03 18.071 16.83
Average Annual Compound Total Return
- --------------------------------------------------------------------------------
Periods Ended 5/31/03 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Short-Term
Bond Fund 6.74% 7.85% 6.21% 5.34%
Lipper Short
Investment-Grade
Debt Funds Average 5.11 6.52 5.53 5.48
Lehman Brothers
1-3 Year U.S.
Government/Credit
Index 6.42 7.72 6.50 6.10
Returns do not reflect taxes that the shareholder may pay on fund distributions
or the redemption of fund shares. Past performance cannot guarantee future
results.
T. Rowe Price Short-Term Bond Fund
Certified Shareholder Report and Financials
Dear Shareholder,
We are pleased that your fund had a positive return of 6.74% during the 12
months ended May 31, 2003. It outperformed both the Lipper Short
Investment-Grade Debt Funds Average of similarly managed funds and the unmanaged
Lehman Brothers 1-3 Year U.S. Government/Credit Index during the period, as
shown in the table on the preceding page, due primarily to sector allocation.
As you know, the fund seeks a high level of income consistent with minimal
fluctuation in principal value and liquidity by investing in a diversified
portfolio of short- and intermediate-term investment-grade corporate,
government, and mortgage-backed securities. The fund's weighted average maturity
will not exceed three years.
The Major Index Returns table shows how various quality bonds performed over the
fund's fiscal year. High-quality corporate bonds did better than both Treasuries
and their lower-rated counterparts, such as high-yield securities, over the
12-month period, although high-yield rallied in recent months. Fifty percent of
portfolio assets were rated AAA, and the balance was diversified among AA, A,
and BBB securities, as shown in the Quality Diversification chart.
Major Index Returns
12-Month
1 Year Ended 5/31/03 Return
- --------------------------------------------------------------------------------
Lehman Brothers U.S. Treasury Index 14.22%
Lehman Brothers U.S. Aggregate Index 11.58
Lehman Brothers U.S. Credit Index 16.06
Lehman Brothers Mortgage-Backed
Securities Index 6.42
CS First Boston High Yield Index 13.25
Source: Lehman Brothers and CS First Boston.
Quality Diversification
- --------------------------------------------------------------------------------
AAA 50%
A 19
AA 16
BBB 15
Based on T. Rowe Price research.
The Interest Rate Levels chart reflects the pattern of bond yields during the
same period. Yields declined in general as the economy remained sluggish until
recent weeks, an environment that favored fixed-income securities throughout the
entire period.
Interest Rate Levels
5-Year 2-Year Federal Funds
Treasury Note Treasury Note Target Rate
5/31/02 4.35 3.19 1.75
6/30/02 4.03 2.81 1.75
7/31/02 3.45 2.23 1.75
8/31/02 3.22 2.13 1.75
9/30/02 2.56 1.68 1.75
10/31/02 2.73 1.67 1.75
11/30/02 3.27 2.06 1.25
12/31/02 2.73 1.6 1.25
1/31/03 1.69 2.93 1.25
2/28/03 2.66 1.51 1.25
3/31/03 2.71 1.48 1.25
4/30/03 2.75 1.48 1.25
5/31/03 2.29 1.32 1.25
The Portfolio Characteristics table shows various portfolio details as of May
31, 2003, compared with one year earlier. The weighted average maturity of the
portfolio remained stable at 2.1 years, and the duration rose a notch to 1.9
years, close to the peer group average. The quality of the portfolio's holdings
rose a bit from AA to AA+. Holdings in non-U.S. dollar-denominated securities
enhanced performance relative to competing funds.
Portfolio Characteristics
Periods Ended 5/31/02 5/31/03
Price Per Share $ 4.75 $ 4.87
30-Day Standardized
Yield to Maturity 4.47% 2.42%
Weighted Average
Maturity (years) 2.1 2.1
Weighted Average
Effective Duration
(years) 1.8 1.9
Weighted Average Quality* AA AA+
* Based on T. Rowe Price research.
We thank you for your continued support.
Respectfully,
James S. Riepe
Chairman
June 20, 2003
T. Rowe Price Short-Term Bond Fund
- --------------------------------------------------------------------------------
Certified Shareholder Report and Financials
Financial Highlights For a share outstanding throughout each period
- --------------------------------------------------------------------------------
Year
Ended
5/31/03 5/31/02 5/31/01 5/31/00 5/31/99
NET ASSET VALUE
Beginning of
period $ 4.75 $ 4.71 $ 4.52 $ 4.63 $ 4.69
Investment activities
Net investment
income (loss) 0.19* 0.25* 0.28* 0.26 0.26
Net realized
and unrealized
gain (loss) 0.12 0.04 0.19 (0.11) (0.06)
Total from
investment
activities 0.31 0.29 0.47 0.15 0.20
Distributions
Net investment
income (0.19) (0.25) (0.28) (0.26) (0.26)
NET ASSET VALUE
End of period $ 4.87 $ 4.75 $ 4.71 $ 4.52 $ 4.63
--------- --------- --------- --------- ---------
Ratios/Supplemental
Data
Total return^ 6.74%* 6.24%* 10.61%* 3.39% 4.23%
Ratio of total
expenses to
average net assets 0.55%* 0.55%* 0.59%* 0.72% 0.73%
Ratio of net
investment income
(loss) to average
net assets 3.85%* 5.11%* 5.99%* 5.74% 5.44%
Portfolio
turnover
rate 110.1% 49.9% 77.6%(ckmrk) 50.7% 51.6%
Net assets,
end of period
(in millions) $ 1,052 $ 696 $ 469 $ 287 $ 324
* Excludes expenses in excess of a 0.55% contractual expense limitation in
effect through 9/30/04.
^ 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.
(ckmrk) Excludes the effect of the acquisition of Summit Limited-Term Bond
Fund's and Short-Term U.S. Government's Fund's assets.
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Short-Term Bond Fund
- --------------------------------------------------------------------------------
Certified Shareholder Report and Financials May 31, 2003
Portfolio of Investments Par/Shares Value
- --------------------------------------------------------------------------------
In thousands
CORPORATE BONDS AND NOTES 38.3%
Banking and Finance 10.7%
ABN AMRO Bank (Chicago), 7.25%, 5/31/05 $ 3,620 $ 4,003
AIG Sunamerica Global Financing
XII, 144A, 5.30%, 5/30/07 3,450 3,794
Allstate Financial Global Funding,
144A, 5.25%, 2/1/07 4,500 4,917
AT&T Capital Corporation, 6.60%, 5/15/05 1,110 1,188
Bank of America, 5.25%, 2/1/07 4,000 4,392
Bank of New York, 2.20%, 5/12/06 6,000 6,017
Bank One Corporation, 6.50%, 2/1/06 3,000 3,344
Bear Stearns, 3.00%, 3/30/06 5,000 5,130
CIT Group
5.50%, 11/30/07 3,000 3,251
7.50%, 11/14/03 2,390 2,451
Citigroup
4.125%, 6/30/05 3,000 3,146
5.75%, 5/10/06 2,500 2,758
Wachovia, 7.55%, 8/18/05 4,750 5,326
General Electric Capital, 5.00%, 6/15/07 6,000 6,556
Goldman Sachs Group, 144A, 6.75%, 2/15/06 + 5,900 6,549
Household Finance, 5.75%, 1/30/07 4,330 4,786
International Lease Finance, 5.50%, 6/7/04 5,500 5,698
Keycorp New, 6.75%, 3/15/06 1,850 2,047
Lehman Brothers, 7.375%, 5/15/04 4,675 4,937
Marsh & McLennan, 3.625%, 2/15/08 4,810 5,004
Marshall & Ilsley Bank, 4.125%, 9/4/07 2,160 2,291
Merrill Lynch, 7.00%, 3/15/06 225 252
Midland Bank, 7.625%, 6/15/06 4,300 4,989
Morgan Stanley Dean Witter, 6.10%, 4/15/06 1,700 1,881
St. Paul Companies, 5.75%, 3/15/07 2,475 2,685
Travelers Property Casualty, 3.75%, 3/15/08 1,770 1,823
Union Planters, 6.25%, 11/1/03 160 163
United States Bancorp, 3.125%, 3/15/08 4,600 4,655
Wachovia Corporation, 7.45%, 7/15/05 2,000 2,229
Washington Mutual, 5.625%, 1/15/07 5,850 6,462
112,724
Consumer Products and Services 8.2%
Abbott Laboratories, 5.625%, 7/1/06 4,225 4,693
Brown Forman Corporation, 144A,
2.125%, 3/15/06 3,640 3,661
Clear Channel Communications, 7.875%,
6/15/05 $ 2,740 $ 3,039
Comcast Cable, 8.375%, 5/1/07 3,750 4,413
Cox Communications
6.15%, 8/1/03 4,036 4,076
6.875%, 6/15/05 2,350 2,560
Dayton Hudson Corporation, 7.50%,
7/15/06 2,500 2,882
Diageo Capital, 6.625%, 6/24/04 2,000 2,108
Eastman Kodak, 9.75%, 10/1/04 350 385
Fred Meyer, 7.375%, 3/1/05 4,700 5,101
General Mills, 3.875%, 11/30/07 5,000 5,230
Gillette, 3.50%, 10/15/07 6,250 6,474
Grand Metropolitan Investment,
Zero Coupon, 1/6/04 3,925 3,895
Kellogg Company, 2.875%, 6/1/08 5,950 5,941
Kraft Foods, 4.625%, 11/1/06 4,850 5,132
Lenfest Communications, 8.375%, 11/1/05 5,802 6,490
McCormick, 6.40%, 2/1/06 3,000 3,286
Newell Rubbermaid, 2.00%, 5/1/05 1,515 1,520
Ralcorp Holdings, 8.75%, 9/15/04 5,500 5,989
Viacom, 6.40%, 1/30/06 4,440 4,958
Wal-Mart, 6.55%, 8/10/04 4,425 4,693
86,526
Energy 1.4%
BP Canada Finance, 3.375%, 10/31/07 5,700 5,896
Coastal, 7.50%, 8/15/06 950 879
ConocoPhillips, 3.625%, 10/15/07 6,350 6,604
PDV America, 7.875%, 8/1/03 1,605 1,591
14,970
Industrial 7.1%
Agrium, 7.00%, 2/1/04 1,000 1,021
Alcoa, 4.25%, 8/15/07 2,475 2,636
American Honda Finance, 144A, 2.875%,
4/3/06 4,400 4,483
Boeing Capital, 7.10%, 9/27/05 4,500 4,950
Caterpillar Financial Services, 6.875%,
8/1/04 3,500 3,708
Daimler Chrysler North America, 6.90%,
9/1/04 5,000 5,300
Dow Chemical, 7.00%, 8/15/05 6,000 6,614
Ford Motor Credit, 6.50%, 1/25/07 3,750 3,906
General Dynamics Corporation, 2.125%,
5/15/06 4,615 4,641
GMAC, 7.50%, 7/15/05 5,000 5,377
Hutchison Whampoa Finance, 144A, 6.95%,
8/1/07 $ 4,500 $ 5,136
John Deere Capital, 3.90%, 1/15/08 4,000 4,162
Northrop Grumman, 8.625%, 10/15/04 5,550 6,051
Parker Hannifin, 5.65%, 9/15/03 250 253
Praxair Incorporated, VR, 4.75%, 7/15/03 4,000 4,297
Toyota Motor Credit, 5.625%, 11/13/03 3,250 3,313
United Technologies, 6.625%, 11/15/04 3,250 3,481
Weyerhaeuser, 5.50%, 3/15/05 5,000 5,287
74,616
Media and Communications 3.0%
AOL Time Warner, 5.625%, 5/1/05 3,500 3,702
Bellsouth, 5.00%, 10/15/06 5,200 5,671
British Telecommunications, STEP, 7.875%,
12/15/05 5,000 5,669
SBC Communications, 5.75%, 5/2/06 3,200 3,531
Telefonica Europe, 7.35%, 9/15/05 3,000 3,361
U.S. West Communications, 7.20%, 11/1/04 3,500 3,544
Verizon Global Funding, 6.125%, 6/15/07 5,200 5,881
31,359
Transportation 1.3%
ERAC USA Finance, 144A, 6.625%, 2/15/05 + 5,665 6,013
Norfolk Southern, 7.875%, 2/15/04 125 130
Southwest Airlines, 8.75%, 10/15/03 2,100 2,150
Union Pacific, 5.84%, 5/25/04 4,500 4,666
12,959
Utilities 6.6%
Alabama Power, 5.49%, 11/1/05 4,250 4,614
American Electric Power, 6.125%, 5/15/06 2,055 2,231
Arizona Public Service, 5.875%, 2/15/04 2,750 2,829
CE Electric UK Funding, 144A, 6.853%,
12/30/04 2,370 2,459
Cinergy, 6.25%, 9/1/04 3,900 4,040
Consumers Energy Group, 6.00%, 3/15/05 2,150 2,284
DTE Energy, 6.00%, 6/1/04 4,500 4,673
Dynegy, 8.125%, 3/15/05 1,340 1,273
Energy East, 5.75%, 11/15/06 5,000 5,417
Entergy Gulf States, 144A, 5.20%, 12/3/07 5,310 5,557
FirstEnegy, 5.50%, 11/15/06 3,650 3,977
Mirant Americas, 7.625%, 5/1/06 1,675 1,281
National Rural Utilities, 5.25%, 7/15/04 4,050 4,219
Niagara Mohawk Power, 5.375%, 10/1/04 $ 5,250 $ 5,430
Pinnacle West Capital, 6.40%, 4/1/06 3,300 3,558
Potomac Electric Power, 3.75%, 2/15/06 3,800 3,928
PSEG Power, 6.875%, 4/15/06 3,345 3,731
Sempra Energy, VR, 6.925%, 7/1/04 4,550 4,780
TXU, 144A, 6.125%, 3/15/08 2,900 3,117
69,398
Total Corporate Bonds and Notes (Cost $383,606) 402,552
ASSET-BACKED SECURITIES 10.4%
BMW Vehicle Owner Trust,
Series 2003-A, Class A3
1.94%, 2/25/07 8,750 8,821
Capital Auto Receivables Asset Trust,
Series 2002-2
Class A4, 4.50%, 10/15/07 3,000 3,165
Class CERT, 4.18%, 10/15/07 2,380 2,441
Chase Manhattan Auto Owner Trust,
Series 2001-B, Class CTFS
3.75%, 5/15/08 1,281 1,306
CIT RV Trust
Series 1997-A, Class A6, 6.35%, 4/15/11 762 789
Series 1998-A, Class A4, 6.09%, 2/15/12 2,719 2,775
Citibank Credit Card Issuance Trust
Series 2000-A1, 6.90%, 10/15/07 11,100 12,379
Series 2000-A3, Class A3, 6.875%,
11/16/09 3,700 4,319
Series 2001-A6, Class A6, 5.65%,
6/16/08 7,000 7,698
Comed Transitional Funding Trust,
Series 1998-1, Class A5
5.44%, 3/25/07 4,530 4,721
CPL Transition Funding,
Series 2002-1, Class A1
3.54%, 1/15/07 4,331 4,405
Dayton Hudson Credit Card Master Trust,
Series 1998-1A
5.90%, 5/25/06 3,200 3,220
Harley-Davidson Motorcycle Trust
Series 2001-1B, Class CTFS,
5.29%, 1/15/09 1,649 1,707
Series 2003-1, Class B,
2.39%, 11/15/10 2,891 2,919
Honda Auto Receivables Owner Trust,
Series 2002-1, Class A4
4.22%, 4/16/07 6,000 6,270
John Deere Owner Trust,
Series 2001-A, Class A4
3.78%, 9/15/08 5,175 5,337
MBNA Credit Card Trust
Series 1999-M, Class A,
6.60%, 4/16/07 $ 6,150 $ 6,589
Series 2000-A, Class C, 144A,
7.90%, 7/16/07 250 269
Series 2000-I, Class A,
6.90%, 1/15/08 7,000 7,734
MBNA Master Credit Card Trust II,
Series 2000-D, Class C, 144A
8.40%, 9/15/0 3,850 4,442
Nissan Auto Receivables Owner Trust
Series 2000-C, Class A3,
6.72%, 8/16/04 374 375
Series 2002-A, Class A4,
4.28%, 10/16/06 1,000 1,046
Peco Energy Transition Trust,
Series 1999-A, Class A3
1.464%, 9/1/03 139 139
Regions Auto Receivables Trust,
2.63%, 1/15/07 5,000 5,095
Reliant Energy Transition Bond Trust,
Series 2001-1, Class A1
3.84%, 9/15/07 4,984 5,147
SSB Auto Loan Trust,
Series 2002-1, Class C,
4.13%, 2/15/09 2,687 2,700
WFS Financial Owner Trust,
Series 2000-4, Class A-4
7.41%, 9/20/07 3,934 4,053
Total Asset-Backed Securities (Cost $106,187) 109,861
U.S. GOVERNMENT MORTGAGE-
BACKED SECURITIES 15.9%
U.S. Government Agency Obligations 14.3%
Federal Home Loan Mortgage
4.50%, 10/1/07 16,556 17,094
6.50%, 10/1 - 12/1/03 159 160
10.00%, 7/1/03 - 10/1/05 14 14
10.75%, 12/1/09 29 31
CMO
4.105%, 10/27/31 5,000 5,182
5.50%, 4/15/10 - 7/15/21 8,000 8,081
6.00%, 1/15/08 2,649 2,724
6.50%, 4/15/21 - 6/15/26 4,834 4,999
Federal National Mortgage Assn.
5.00%, 2/1/18 207 215
5.50%, 4/1/18 - 3/25/30 43,360 44,873
6.00%, 7/1/13 - 6/25/16 1,921 1,987
7.00%, 6/1 - 9/1/03 102 102
9.00%, 5/1/05 - 1/25/08 2,352 2,533
ARM
3.43%, 11/1/21 $ 113 $ 115
3.46%, 12/1/17 - 11/1/20 155 158
3.463%, 5/1/17 104 106
3.49%, 3/1/20 32 33
3.507%, 10/1/17 32 33
3.515%, 3/1/19 4 4
3.542%, 7/1/27 220 226
3.558%, 12/1/16 5 5
3.561%, 3/1/18 10 10
3.75%, 11/1/17 27 27
4.387%, 12/1/32 14,671 15,095
4.75%, 6/1/18 - 7/1/18 37 40
4.98%, 5/1/24 46 50
5.00%, 1/1/09 3,452 3,561
5.534%, 1/1/19 221 244
6.817%, 10/1/14 8 9
CMO, Principal Only, 10/25/03 380 377
TBA, 5.00%, 1/1/18 40,665 41,974
150,062
U.S. Government Guaranteed Obligations 1.6%
Government National Mortgage Assn.
6.00%, 7/15/17 5,915 6,204
7.00%, 9/15/12 - 12/15/13 6,235 6,688
8.00%, 5/15/07 158 170
8.50%, 2/15/05 - 3/15/06 69 72
9.00%, 1/15/05 - 2/15/06 63 66
9.50%, 8/15/03 - 10/15/09 7 8
10.00%, 8/15/04 - 10/15/21 159 175
10.50%, 11/15/15 69 78
11.00%, 4/20/14 2 2
11.25%, 7/15 - 8/15/13 78 88
11.50%, 3/15/10 - 12/15/15 608 686
11.75%, 8/15 - 9/15/13 162 184
TBA, 6.00%, 1/1/33 2,625 2,731
17,152
Total U.S. Government Mortgage-Backed Securities (Cost $165,172) 167,214
NON-U.S. GOVERNMENT MORTGAGE-
BACKED SECURITIES 3.0%
Banc of America Commercial Mortgage,
Series 2003-1, Class A1
CMO, 3.878%, 9/11/36 $ 4,789 $ 4,955
DLJ Commercial Mortgage,
Series 1999-CG2, Class A1B
CMO, 7.30%, 6/10/32 4,200 5,093
GMAC Commercial Mortgage Securities,
CMO, 6.15%, 11/15/07 2,340 2,501
JP Morgan Commercial Mortgage
Financial Corp.
Series 1999-C7,Class A2, CMO, 6.507%,
10/15/35 4,000 4,637
Mellon Residential Funding,
Series 2001-HEIL, Class A3
5.945%, 2/25/11 439 443
Money Store Home Equity Trust,
Series 197-C, Class AF8
6.575%, 1/15/39 3,223 3,302
Morgan Stanley Dean Witter Capital,
CMO, 5.38%, 1/15/39 5,772 6,314
Prudential Securities Secured Financing,
Series 1999, Class A1
CMO, 6.074%, 1/15/08 754 818
Residential Funding Mortgage Securities,
Series 1999-S3, Class A1
CMO, 6.50%, 1/25/29 171 172
Ryland Mercury Savings Trust,
Series 1998-MS2, Class A
4.253%, 6/1/03 30 30
Sovereign Bank Home Equity Loan Trust,
Series 2000-1, Class A6
7.25%, 2/25/15 635 704
Summit Mortgage Trust,
CMO, 144A, 1.00%, 6/28/16 2,390 2,393
Total Non-U.S. Government
Mortgage-Backed Securities (Cost $30,257) 31,362
U.S. GOVERNMENT OBLIGATIONS/AGENCIES 19.9%
U.S. Government Agency Obligations 7.4%
Federal Home Loan Banks, 3.25%, 8/15/05 10,000 10,373
Federal Home Loan Mortgage
2.875%, 9/15/05 20,000 20,597
5.75%, 7/15/03 17,000 17,092
Federal National Mortgage Assn.
2.50%, 6/15/08 14,500 14,501
4.00%, 8/15/03 11,000 11,062
6.375%, 8/15/07 (AUD) 7,150 4,931
78,556
U.S. Treasury Obligations 12.5%
U.S. Treasury Notes
1.625%, 1/31 - 4/30/05 $ 95,000 $ 95,620
2.00%, 5/15/06 35,000 35,437
131,057
Total U.S. Government Obligations/Agencies (Cost $208,122) 209,613
OTHER 3.6%
Canada Government
3.50%, 6/1/05 (CAD) 17,540 12,881
5.75%, 9/1/06 (CAD) 32,640 25,493
University of Miami, 6.90%, 4/1/04 (MBIA Insured) 50 52
Total Other (Cost $37,921) 38,426
MONEY MARKET FUNDS 12.8%
T. Rowe Price Reserve Investment Fund,
1.28%, 6/2/03 # 134,202 134,202
Total Money Market Funds (Cost $ 134,202) 134,202
T. Rowe Price Short-Term Bond Fund
- --------------------------------------------------------------------------------
Certified Shareholder Report and Financials
Value
- --------------------------------------------------------------------------------
In thousands
Total Investments in Securities
103.9% of Net Assets (Cost $1,065,467) $1,093,230
Forward Currency Exchange Contracts
(In thousands)
Unrealized
Counterparty Settlement Receive Deliver Gain (Loss)
- ------------ ---------- ------- ------- -----------
Morgan Stanley 6/9/03 USD 10,032 CAD 14,000 $(177)
Net unrealized gain (loss) on open forward
currency exchange contracts (177)
Other Assets Less Liabilities (40,786)
NET ASSETS $1,052,267
----------
# Seven-day yield
+ Security contains restrictions as to public resale pursuant to the
Securities Act of 1933 and related rules-total of such securities at
period-end amounts to $12,562,000 and represents 1.2% of net assets
144A Security was purchased pursuant to Rule 144A under the Securities Act
of 1933 and may be resold in transactions exempt from registration
only to qualified institutional buyers-total of such securities at
period-end amounts to $52,790,000 and represents 5.0% of net assets
ARM Adjustable Rate Mortgage
AUD Australian dollar
CAD Canadian dollar
CMO Collateralized Mortgage Obligation
MBIA MBIA Insurance Corp.
STEP Stepped coupon bond for which the coupon rate of interest will adjust
on specified future date(s)
TBA To Be Announced security was purchased on a forward commitment basis
VR Variable Rate
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Short-Term Bond Fund
- --------------------------------------------------------------------------------
Certified Shareholder Report and Financials May 31, 2003
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
In thousands
Assets
Investments in securities, at value (cost $1,065,467) $1,093,230
Receivable from securities sold 53,422
Other assets 11,383
Total assets 1,158,035
Liabilities
Payable for investment securities purchased 103,315
Other liabilities 2,453
Total liabilities 105,768
NET ASSETS $1,052,267
----------
Net Assets Consist of:
Undistributed net investment income (loss) $ (3,010)
Undistributed net realized gain (loss) (17,533)
Net unrealized gain (loss) 27,622
Paid-in-capital applicable to 216,040,124 shares of
$0.01 par value capital stock outstanding;
1,000,000,000 shares authorized 1,045,188
NET ASSETS $1,052,267
----------
NET ASSET VALUE PER SHARE $ 4.87
----------
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Short-Term Bond Fund
- --------------------------------------------------------------------------------
Certified Shareholder Report and Financials
Statement of Operations
- --------------------------------------------------------------------------------
In thousands
Year
Ended
5/31/03
Investment Income (Loss)
Income
Interest $ 37,207
Income distributions from mutual funds 1,454
Securities lending 10
Total income 38,671
Expenses
Investment management 3,014
Shareholder servicing 1,494
Custody and accounting 173
Prospectus and shareholder reports 75
Registration 50
Legal and audit 15
Directors 9
Miscellaneous 5
Total expenses 4,835
Expenses paid indirectly (3)
Net expenses 4,832
Net investment income (loss) 33,839
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 5,153
Foreign currency transactions (375)
Net realized gain (loss) 4,778
Change in net unrealized gain (loss)
Securities 19,816
Other assets and liabilities
denominated in foreign currencies (141)
Change in net unrealized gain (loss) 19,675
Net realized and unrealized gain (loss) 24,453
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 58,292
----------
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Short-Term Bond Fund
- --------------------------------------------------------------------------------
Certified Shareholder Report and Financials
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
In thousands
Year
Ended
5/31/03 5/31/02
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ 33,839 $ 29,461
Net realized gain (loss) 4,778 3,545
Change in net unrealized gain (loss) 19,675 (186)
Increase (decrease) in net assets
from operations 58,292 32,820
Distributions to shareholders
Net investment income (35,336) (29,750)
Capital share transactions *
Shares sold 595,171 401,342
Distributions reinvested 31,620 26,827
Shares redeemed (293,855) (203,497)
Increase (decrease) in net assets
from capital share transactions 332,936 224,672
Net Assets
Increase (decrease) during period 355,892 227,742
Beginning of period 696,375 468,633
End of period $ 1,052,267 $ 696,375
--------------- ---------------
*Share information
Shares sold 124,265 84,201
Distributions reinvested 6,594 5,629
Shares redeemed (61,320) (42,759)
Increase (decrease) in
shares outstanding 69,539 47,071
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Short-Term Bond Fund
- --------------------------------------------------------------------------------
Certified Shareholder Report and Financials May 31, 2003
Notes to Financial Statements
- --------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Short-Term Bond Fund, Inc. (the fund) is registered under the
Investment Company Act of 1940 (the 1940 Act) as a diversified, open-end
management investment company and commenced operations on March 2, 1984. The
fund seeks a high level of income consistent with minimal fluctuation in
principal value and liquidity.
The accompanying financial statements were prepared in accordance with
accounting principles generally accepted in the United States of America, which
require the use of estimates made by fund management.
Valuation
Investments are valued at the close of the New York Stock Exchange (NYSE),
normally 4 p.m. ET, each day that the NYSE is open for business. Debt securities
are generally traded in the over-the-counter market. Securities with original
maturities of one year or more are valued at prices 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 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 bid-side 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.
Other investments and those 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.
Most foreign markets close before the NYSE. Developments that could affect the
values of securities that occur between the close of a foreign market and the
close of the NYSE normally will not be reflected in security valuations.
However, if such developments are so significant that they will, in the judgment
of the officers of the fund, clearly and materially affect the value of
securities, the previous closing prices may be adjusted to reflect the fair
value of the securities as of the close of the NYSE, as determined in good faith
by or under the supervision of the officers of the fund, as authorized by the
Board of Directors.
Currency Translation
Assets, including investments, and liabilities denominated in foreign currencies
are translated into U.S. dollar values each day at the prevailing exchange rate,
using the mean of the bid and ask prices of such currencies against U.S. dollars
as quoted by a major bank. Purchases and sales of securities, income, and
expenses are translated into U.S. dollars at the prevailing exchange rate on the
date of the transaction. The effect of changes in foreign currency exchange
rates on realized and unrealized security gains and losses is reflected as a
component of such gains and losses.
Premiums and Discounts
Premiums and discounts on debt securities are amortized for financial reporting
purposes.
Expenses Paid Indirectly
Credits earned on temporarily uninvested cash balances at the custodian are used
to reduce the fund's custody charges. Custody expense in the accompanying
statement of operations is presented before reduction for credits, which totaled
$3,000 for the year ended May 31, 2003.
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. Unrealized gains and losses on forward currency
exchange contracts are included in Other assets and Other liabilities,
respectively, and in Change in net unrealized gain or loss in the accompanying
financial statements.
NOTE 2 - INVESTMENT TRANSACTIONS
Consistent with its investment objective, the fund engages in the following
practices to manage exposure to certain risks or enhance performance. The
investment objective, policies, program, and risk factors of the fund are
described more fully in the fund's prospectus and Statement of Additional
Information.
Forward Currency Exchange Contracts
During the year ended May 31, 2003, the fund was a party to forward currency
exchange contracts under which it is obligated to exchange currencies at
specified future dates and exchange rates. Risks arise from the possible
inability of counterparties to meet the terms of their agreements and from
movements in currency values.
Securities Lending
The fund lends its securities to approved brokers to earn additional income. It
receives as collateral cash and U.S. government securities valued at 102% to
105% of the value of the securities on loan. Cash collateral is invested in a
money market pooled account managed by the fund's lending agent in accordance
with investment guidelines approved by fund management. Collateral is maintained
over the life of the loan in an amount not less than the value of loaned
securities, as determined at the close of fund business each day; any additional
collateral required due to changes in security values is delivered to the fund
the next business day. Although risk is mitigated by the collateral, the fund
could experience a delay in recovering its securities and a possible loss of
income or value if the borrower fails to return the securities. Securities
lending revenue recognized by the fund consists of earnings on invested
collateral and borrowing fees, net of any rebates to the borrower and
compensation to the lending agent. At May 31, 2003, there were no securities on
loan.
Other
Purchases and sales of portfolio securities, other than short-term and U.S.
government securities, aggregated $356,205,000 and $255,086,000, respectively,
for the year ended May 31, 2003. Purchases and sales of U.S. government
securities aggregated $830,495,000 and $648,659,000, respectively, for the year
ended May 31, 2003.
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 to
shareholders all of its taxable income and gains. Federal income tax regulations
differ from generally accepted accounting principles; therefore, distributions
determined in accordance with tax regulations may differ significantly in amount
or character from net investment income and realized gains for financial
reporting purposes. Financial reporting records are adjusted for permanent
book/tax differences to reflect tax character. Temporary differences are not
adjusted.
Distributions during the year ended May 31, 2003 totaled $35,336,000 and were
characterized as ordinary income for tax purposes. At May 31, 2003, the
tax-basis components of net assets were as follows:
Unrealized appreciation $28,821,000
Unrealized depreciation (1,022,000)
Net unrealized
appreciation (depreciation) 27,799,000
Undistributed ordinary income (1,210,000)
Capital loss carryforwards (19,510,000)
Paid-in capital 1,045,188,000
Net assets $1,052,267,000
--------------
Federal income tax regulations require the fund to treat the gain/loss on
certain open forward currency exchange contracts as realized on the last day of
the tax year; accordingly, $177,000 of unrealized losses reflected in the
accompanying financial statements were realized for tax purposes as of May 31,
2003. The fund intends to retain realized gains to the extent of available
capital loss carryforwards for federal income tax purposes. In 2003, the fund
utilized $1,703,000 of capital loss carryforwards. As of May 31, 2003, the fund
had $10,744,000 of capital loss carryforwards that expire in 2004, $2,405,000
that expire in 2005, and $6,361,000 that expire thereafter through 2009.
For the year ended May 31, 2003, the fund recorded the following permanent
reclassifications to reflect tax character. Reclassifications to paid-in capital
relate primarily to expiring capital loss carryforwards. Results of operations
and net assets were not affected by these reclassifications.
Undistributed net investment income $ 286,000
Undistributed net realized gain 18,102,000
Paid-in capital (18,388,000)
At May 31, 2003, the cost of investments for federal income tax purposes was
$1,065,290,000.
NOTE 4 - RELATED PARTY TRANSACTIONS
The fund is managed by T. Rowe Price Associates, Inc. (the manager or Price
Associates), a wholly owned subsidiary of T. Rowe Price Group, Inc. The
investment management agreement between the fund and the manager provides for an
annual investment management fee, which is computed daily and paid monthly. The
fee consists of an individual fund fee, equal to 0.10% of the fund's average
daily net assets, and the fund's pro-rata share of a group fee. The group fee is
calculated based on the combined net assets of certain mutual funds sponsored by
Price Associates (the group) applied to a graduated fee schedule, with rates
ranging from 0.48% for the first $1 billion of assets to 0.295% for assets in
excess of $120 billion. The fund's portion of the group fee is determined by the
ratio of its net assets to those of the group. At May 31, 2003, the effective
annual group fee rate was 0.32%, and investment management fee payable totaled
$324,000.
Under the terms of the investment management agreement, the manager is
required to bear any expenses, excluding interest, taxes, brokerage commissions,
and extraordinary expenses, through September 30, 2004, which would cause the
fund's ratio of total expenses to average net assets (expense ratio) to exceed
0.55%. Thereafter, through September 30, 2006, 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 expense ratio to exceed 0.55%. Pursuant to this agreement, $688,000 of
management fees were not accrued by the fund for the year ended May 31, 2003. At
May 31, 2003, unaccrued management fees in the amount of $961,000 remain subject
to reimbursement by the fund through May 31, 2004, and $688,000 through
September 30, 2006.
In addition, the fund has entered into service agreements with Price Associates
and two wholly owned subsidiaries of Price Associates (collectively, Price).
Price Associates computes the daily share price and maintains the financial
records of the fund. T. Rowe Price Services, Inc. provides shareholder and
administrative services in its capacity as the fund's transfer and dividend
disbursing agent. T. Rowe Price Retirement Plan Services, Inc. provides
subaccounting and recordkeeping services for certain retirement accounts
invested in the fund. Expenses incurred pursuant to these service agreements
totaled $1,069,000 for the year ended May 31, 2003, of which $97,000 was payable
at year-end.
Additionally, the fund is one of several mutual funds in which certain college
savings plans managed by Price Associates may invest. As approved by the fund's
Board of Directors, shareholder servicing costs associated with each college
savings plan are borne by the fund in proportion to the average daily value of
its shares owned by the college savings plan. For the year ended May 31, 2003,
the fund was charged $92,000 for shareholder servicing costs related to the
college savings plans, of which $79,000 was for services provided by Price and
$9,000 was payable at year-end. At May 31, 2003, approximately 2.9% of the
outstanding shares of the fund were held by college savings plans.
The fund is also one of several mutual funds sponsored by Price Associates
(underlying Price funds) in which the T. Rowe Price Spectrum Funds (Spectrum
Funds) and T. Rowe Price Retirement Funds (Retirement Funds) may invest. Neither
the Spectrum Funds nor the Retirement Funds invest in the underlying Price funds
for the purpose of exercising management or control. Pursuant to separate,
special servicing agreements, expenses associated with the operation of the
Spectrum and Retirement Funds are borne by each underlying Price fund to the
extent of estimated savings to it and in proportion to the average daily value
of its shares owned by the Spectrum and Retirement Funds, respectively. Expenses
allocated under these agreements are reflected as shareholder servicing expense
in the accompanying financial statements. For the year ended May 31, 2003, the
fund was allocated no Spectrum Funds' expenses and $29,000 of Retirement Funds'
expenses under these agreements. Of these amounts, $9,000 related to services
provided by Price and $3,000 was payable at year-end. At May 31, 2003,
approximately 0.3% of the fund's outstanding shares were held by the Spectrum
Funds and 0.7% were held by the Retirement Funds.
The fund may invest in the T. Rowe Price Reserve Investment Fund and T. Rowe
Price Government Reserve Investment Fund (collectively, the Reserve Funds),
open-end management investment companies managed by Price Associates. The
Reserve Funds are offered as cash management options only to mutual funds,
trusts, and other accounts managed by Price Associates and/or 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 year
ended May 31, 2003, totaled $1,454,000.
T. Rowe Price Short-Term Bond Fund
- --------------------------------------------------------------------------------
Certified Shareholder Report and Financials
Report of Independent Auditors
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of T. Rowe Price Short-Term Bond
Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, 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 Bond Fund,
Inc. (the "Fund") at May 31, 2003, the results of its operations, the changes in
its net assets and the financial highlights for each of the fiscal periods
presented, in conformity with accounting principles generally accepted in the
United States of America. 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 auditing standards generally accepted in
the United States of America, 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, 2003 by
correspondence with the custodians and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Baltimore, Maryland
June 18, 2003
T. Rowe Price Short-Term Bond Fund
- --------------------------------------------------------------------------------
Certified Shareholder Report and Financials
Tax Information (Unaudited) for the Tax Year Ended 5/31/03
- --------------------------------------------------------------------------------
We are providing this information as required by the Internal Revenue Code. The
amounts shown may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements.
The fund's distributions to shareholders included $644,000 from short-term
capital gains.
T. Rowe Price Short-Term Bond Fund
- --------------------------------------------------------------------------------
Certified Shareholder Report and Financials
About the Fund's Directors and Officers
- --------------------------------------------------------------------------------
Your fund is governed by a Board of Directors that meets regularly to review
investments, performance, expenses, and other business matters, and is
responsible for protecting the interests of shareholders. The majority of the
fund's directors are independent of T. Rowe Price Associates, Inc. (T. Rowe
Price); "inside" directors are officers of T. Rowe Price. The Board of
Directors elects the fund's officers, who are listed in the final table. The
business address of each director and officer is 100 East Pratt Street,
Baltimore, MD 21202.
The Statement of Additional Information includes additional information about
the fund directors and is available without charge by calling a T. Rowe Price
representative at 1-800-225-5132.
Independent Directors
Name
(Date of Birth) Principal Occupation(s) During Past 5 Years and
Year Elected* Directorships of Other Public Companies
- --------------------------------------------------------------------------------
Anthony W. Deering Director, Chairman of the Board, President, and
(1/28/45) Chief Executive Officer, The Rouse Company, real
1983 estate developers; Director, Mercantile Bank
(4/03 to present)
Donald W. Dick, Jr. Principal, EuroCapital Advisors, LLC, an acquisition
(1/27/43) and management advisory firm
2001
David K. Fagin Director, Golden Star Resources Ltd., Canyon
(4/9/38) Resources Corp. (5/00 to present), and Pacific Rim
2001 Mining Corp. (2/02 to present); Chairman and
President, Nye Corp.
F. Pierce Linaweaver President, F. Pierce Linaweaver & Associates, Inc.,
(8/22/34) consulting environmental and civil engineers
1983
Hanne M. Merriman Retail Business Consultant; Director, Ann Taylor
(11/16/41) Stores Corp., Ameren Corp., Finlay Enterprises,
2001 Inc., The Rouse Company, and US Airways Group, Inc.
John G. Schreiber Owner/President, Centaur Capital Partners, Inc.,
(10/21/46) a real estate investment company; Senior Advisor
1992 and Partner, Blackstone Real Estate Advisors, L.P.;
Director, AMLI Residential Properties Trust, Host
Marriott Corp., and The Rouse Company
Hubert D. Vos Owner/President, Stonington Capital Corp., a private
(8/2/33) investment company
2001
Paul M. Wythes Founding Partner, Sutter Hill Ventures, a venture
(6/23/33) capital limited partnership, providing equity
2001 capital to young high-technology companies
throughout the United States; Director, Teltone
Corp.
*Each independent director oversees 105 T. Rowe Price portfolios and serves
until retirement, resignation, or election of a successor.
T. Rowe Price Short-Term Bond Fund
- --------------------------------------------------------------------------------
Certified Shareholder Report and Financials
Inside Directors
Name
(Date of Birth)
Year Elected*
[Number of T. Rowe Price Principal Occupation(s) During Past 5 Years and
Portfolios Overseen] Directorships of Other Public Companies
- --------------------------------------------------------------------------------
William T. Reynolds Director and Vice President, T. Rowe Price and
(5/26/48) T. Rowe Price Group, Inc.; Director, T. Rowe Price
1997 Global Asset Management Limited
[37]
James S. Riepe Director and Vice President, T. Rowe Price; Vice
(6/25/43) Chairman of the Board, Director, and Vice President,
1983 T. Rowe Price Group, Inc.; Chairman of the Board
[105] and Director, T. Rowe Price Global Asset Management
Limited, T. Rowe Price Global Investment Services
Limited, T. Rowe Price Investment Services, Inc.,
T. Rowe Price Retirement Plan Services, Inc., and
T. Rowe Price Services, Inc.; Chairman of the Board,
Director, President, and Trust Officer, T. Rowe
Price Trust Company; Director, T. Rowe Price
International, Inc.; Chairman of the Board,
Short-Term Bond Fund
M. David Testa Chief Investment Officer, Director, and Vice
(4/22/44) President, T. Rowe Price; Vice Chairman of the
1997 Board, Chief Investment Officer, Director, and
[105] Vice President, T. Rowe Price Group, Inc.; Director,
T. Rowe Price Global Asset Management Limited and
T. Rowe Price Global Investment Services Limited;
Chairman of the Board and Director, T. Rowe Price
International Inc.; Director and Vice President,
T. Rowe Price Trust Company
*Each inside director serves until retirement, resignation, or election of a
successor.
T. Rowe Price Short-Term Bond Fund
- --------------------------------------------------------------------------------
Certified Shareholder Report and Financials
Officers
Name (Date of Birth)
Title and Fund(s) Served Principal Occupation(s)
- --------------------------------------------------------------------------------
Connice A. Bavely (3/5/51) Vice President, T. Rowe Price and
Vice President, Short-Term Bond Fund T. Rowe Price Group, Inc.
Stephen V. Booth (6/21/61) Vice President, T. Rowe Price,
Vice President, Short-Term Bond Fund T. Rowe Price Group, Inc., and
T. Rowe Price Trust Company
Steven G. Brooks, CFA (8/5/54) Vice President, T. Rowe Price and
Vice President, Short-Term Bond Fund T. Rowe Price Group, Inc.
Jennifer A. Callaghan (5/6/69) Assistant Vice President, T. Rowe
Assistant Vice President, Short-Term Price
Bond Fund
Joseph A. Carrier (12/30/60) Vice President, T. Rowe Price,
Treasurer, Short-Term Bond Fund T. Rowe Price Group, Inc., and
T. Rowe Price Investment Services,
Inc.
Patrick S. Cassidy (8/27/64) Vice President, T. Rowe Price
Vice President, Short-Term Bond Fund and T. Rowe Price Group, Inc.
Roger L. Fiery III (2/10/59) Vice President, T. Rowe Price,
Vice President, Short-Term Bond Fund T. Rowe Price Group, Inc., T. Rowe
Price International Inc., and T. Rowe
Price Trust Company
Gregory S. Golczewski (1/15/66) Vice President, T. Rowe Price and
Vice President, Short-Term Bond Fund T. Rowe Price Trust Company
Charles B. Hill (9/22/61) Vice President, T. Rowe Price and
Vice President, Short-Term Bond Fund T. Rowe Price Group, Inc.
Henry H. Hopkins (12/23/42) Director and Vice President, T. Rowe
Vice President, Short-Term Bond Fund Price Group, Inc., T. Rowe Price
Investment Services, Inc., T. Rowe
Price Services, Inc., and T. Rowe
Price Trust Company; Vice President,
T. Rowe Price, T. Rowe Price
International, Inc., and T. Rowe
Price Retirement Plan Services, Inc.
Patricia B. Lippert (1/12/53) Assistant Vice President, T. Rowe
Secretary, Short-Term Bond Fund Price and T. Rowe Price Investment
Services, Inc.
Cheryl A. Mickel (1/11/67) Vice President, T. Rowe Price and
Vice President, Short-Term Bond Fund T. Rowe Price Group, Inc.
Robert M. Rubino (8/2/53) Vice President, T. Rowe Price and
Vice President, Short-Term Bond Fund T. Rowe Price Group, Inc.
Edward A. Wiese, CFA (4/12/59) Vice President, T. Rowe Price,
President, Short-Term Bond Fund T. Rowe Price Group, Inc., and
T. Rowe Price Trust Company; Chief
Investment Officer, Director, and
Vice President, T. Rowe Price Savings
Bank
Unless otherwise noted, officers have been employees of T. Rowe Price or T. Rowe
Price International for at least five years.
Item 2. Code of Ethics.
Not required at this time.
Item 3. Audit Committee Financial Expert.
Not required at this time.
Item 4. Principal Accountant Fees and Services.
Not required at this time.
Item 5. Audit Committee of Listed Registrants.
Not required at this time.
Item 6. [Reserved]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. [Reserved]
Item 9. 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) At the date of filing this Form N-CSR, the registrant's Principal Executive
Officer and Principal Financial Officer are aware of no significant changes in
the registrant's internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Item 10. Exhibits.
(a) Not required at this time.
(b) Separate certifications by the registrant's principal executive officer and
principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002 and required by Rule 30a-2 under the Investment Company Act of 1940, are
attached.
A certification by the registrant's principal executive officer and principal
financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, is
attached.
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-Term Bond Fund, Inc.
By /s/ James S. Riepe
James S. Riepe
Principal Executive Officer
Date July 14, 2003
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/ James S. Riepe
James S. Riepe
Principal Executive Officer
Date July 14, 2003
By /s/ Joseph A. Carrier
Joseph A. Carrier
Principal Financial Officer
Date July 09, 2003