Now you don't have to choose between a comfortable income and a comfortable investment
Introducing T. Rowe Price Adjustable Rate U.S. Government Income Fund
Top quality government securities give you higher income than most short-term investments ... and limit your risk
Low-volatity, and interest rates that adjust to keep pace with the economy
With CD and bank rates at their lowest levels in over four years, many individuals are
weighing their options: continue with safety and low income,
or take on some investment risk to get higher yields.
The T. Rowe Price Adjustable Rate U.S. Government Fund
offers a new way to limit risk while seeking higher income.
It invests mainly in adjustable rate mortgage (ARM) securities
issued by the U.S. Government and its agencies -- GNMAs ("Ginnie Maes"), FNMAs
("Fannie Maes"), and FHLMCs ("Freddie Macs"). These securities offer
high-quality credit protection and some protection from interest rate risk.
Until recently, you had to pay sales charges to invest in ARM securities.
Now T. Rowe Price introduces this Fund with no sales charges of any kind.
Higher income and high credit quality
Yields in this Fund should appeal to income investors,
because ARM rates are set above short-term rates--usually 1.5-2% higher
than a specific short-term index. This extra margin means the Fund can offer
higher income than most short-term investments.
The ARM securities in which the Fund invests are among those with the
highest credit ratings. Securities issued by GNMA are backed by the full
faith and credit of the U.S. Government for the timely payment of principal
and interest.* Fannie Maes and Freddie Macs do not have the same full
guarantee, but their close relationship with the U.S. Government means
they carry only minimal credit risks.
Benefits and risks you should understand
This new approach offers both attractive benefits, and special risks. Like
all bond funds, the Fund is subject to some interest rate risk. When interest
rates rise, the share price may fall. However, unlike fixed rate
mortgages, ARMs adjust to changing rates every six months to a year. This
keeps the principal value of the mortgage securities relatively stable, and
helps lessen the Fund’s share price changes.
Of course, this Fund is not a money fund, it is not guaranteed like
bank products, and its yield and share price will vary. Our information kit
fully explains its risks, and the effects of the "caps" and "floors" built
into the reset feature. We encourage you to read everything carefully before
To help reduce risks as much as possible, our Fund managers actively
manage the Fund portfolio and diversify by investing across different geographic
regions, reset dates, and types of ARMS. As a result, the Fund’s yields
should be higher than money markets
and short-term Treasury investments, while fluctuation should be less than
with bond funds and long-term Treasuries.
Free planning information
Since this is a new type of fund for many investors, we’ve written an
informative guide, Investing In Mortgage Securities, to give you a
better understanding of the risks and rewards of investing in ARM securities.
It can help you decide what place this new Fund could have in your portfolio.
Call for your free copy, or return this entire brochure.
As with all our funds, this Fund is 100% no load--no fees to purchase,
exchange, or redeem shares, and no 12b-1 charges. That benefits you
by increasing the Fund’s investment return. $2,500 minimum investment
($1,000 for IRAs).
Call 24 hours
for a free guide
Send me a free guide, Investing In Mortgage Securities, and
a prospectus with more complete information, including management
fees and other charges and expenses. I will read the prospectus carefully
before I invest or send money.
How investing in
adjustable rate mortgage
securities can benefit you
How ARM securities work
Direct benefits to you
Interest rate marginARM rates are set above
a specific short term index, usually 1.5-2% higher.
Higher income You
should enjoy higher rates
than short-term Treasuries
or money markets pay.
Adjustable rate Unlike
fixed rate mortgages, ARM rates are reset automatically, every 6 to 12 months, to
reflect current interest rates.
Low volatility The reset feature reduces your interest rate risk, so ARM securities generally provide greater
stability of principal than fixed-rate mortgagesecurities.
U.S. Government or agency backing Each
security is backed by the
U.S. Government or one of
its agencies for the timely
payment of principal and interest on the individual securities owned by the
Fund. The Fund itself is
High credit safety The credit quality of the
Fund’s holdings is among the