<PAGE>
Semiannual Report
High Yield
Fund
- -----------------
November 30, 1997
- -----------------
[LOGO OF T. ROWE PRICE APPEARS HERE]
T. Rowe Price
<PAGE>
Report Highlights
- --------------------------------------------------------------------------------
High Yield Fund
. High-yield bonds continued to perform well during the six months ended
November 30, buoyed by strong economic growth.
. New issuance of high-yield bonds headed for an annual record, but demand
from individuals and institutions remained robust.
. The fund's six-month return compared favorably with the First Boston High
Yield Index and the Lipper average of similar funds.
. We participated in the improving outlook for the telecommunications
industry, which is the fund's largest sector exposure.
. While the overall environment and fundamentals should support further solid
returns for high-yield bonds, we do not expect a repeat of this year's
strong performance.
<PAGE>
Fellow Shareholders
Continuing to take its cue from the robust economy, the high-yield bond market
turned in another strong performance for the six months ended November 30.
October's sharp tumble in global stock markets temporarily interrupted the flow
of positive results, but the high-yield market's quick recovery attested to its
impressive resilience.
Market Environment
High-yield bonds continued to be buoyed by the economy's momentum. With
inflation remaining subdued and prospects of another tightening by the Federal
Reserve diminishing, interest rates retraced their first-half rise. Like high-
quality bonds, high-yield bonds benefited from falling rates. Unlike their
high-quality counterparts, however, high-yield bond returns were further
enhanced by strong economic growth.
The high-yield picture dimmed only in October, when financial market turmoil
spread from Southeast Asia, where it began last July, to virtually all other
stock markets. Since a healthy equity market is always important to high-yield
issuers, high-yield bonds faltered as stocks plunged. As is usually the case in
such circumstances, the lower-quality tiers -- previously the best performers in
1997 -- were hit hardest. Nevertheless, there was a positive side to the
correction, in our view, because the yield differential between high- and low-
quality bonds widened for a while, improving some valuations that had seemed
excessive and providing some buying opportunities.
[BAR GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
NEW HIGH-YIELD BOND ISSUES
Foreign Companies Total Companies
<S> <C> <C>
Nov-90 0.00 1.40
Nov-91 0.02 10.00
Nov-92 0.64 46.00
Nov-93 2.90 69.10
Nov-94 5.29 43.00
Nov-95 7.52 47.30
Nov-96 7.88 73.60
Nov-97 15.88 119.40
</TABLE>
Source: Chase Securities, Inc.
1
<PAGE>
The high-yield market's supply-and-demand fundamentals remained healthy. The
volume of new issues coming to market is likely to set a calendar year record,
despite October's slowdown. A striking aspect of this supply is the rising
participation of foreign corporations, which in recent years has accounted for
12% to 16% of total volume. (The chart on page 1 shows the total number of
annual issues in this decade and the percent represented by foreign companies.)
On the domestic front, telecommunications companies dominated issuance in the
second half. Fortunately, the demand side of the equation was strong, as high-
yield bonds continue to become accepted as a mainstream asset class by
individuals and a wide variety of institutional investors.
PERFORMANCE AND STRATEGY REVIEW
Your fund performed well in both absolute and relative terms during the six and
12 months ended November 30. Returns of 7.67% and 14.21% for the respective
periods exceeded both the First Boston benchmark index and the average return of
competitor funds.
- ----------------------
Performance Comparison
- ----------------------
<TABLE>
<CAPTION>
Periods Ended 11/30/97 6 Months 12 Months
- --------------------------------------------------------
<S> <C> <C>
High Yield Fund 7.67% 14.21%
First Boston High Yield Index 6.87 13.79
Lipper High Yield Funds Average 7.47 13.23
</TABLE>
The fund's performance edge reflected our lighter concentration in lower-quality
credits. In particular, we held a lower percentage of foreign issues than the
overall high-yield marketplace and many competitor funds. This posture
restrained your fund's comparative returns earlier in the year, when lower-
quality issues were the performance leaders, but was beneficial during the
October correction.
Our strategy during recent months was to position the fund somewhat more
aggressively while tightening risk-control measures. Of the two major areas of
opportunity during the period, foreign and telecommunications bonds, we focused
on the latter. As shown in the table following this letter, the fund's exposure
to this sector rose from 7% to 12% of net assets -- still below the sector's
market weighting of almost 14%. After languishing during the first quarter,
telecommunications became the best-performing sector of the market during the
second half of the year. Drawing as always on the rigorous research of our
internal credit analysts, we are more constructive about the prospects for this
sector, particularly the competitive local exchange carriers,
2
<PAGE>
such as Intermedia Communications and NEXTLINK Communications. These companies
are borrowing heavily to lay fiber optic lines across the country to challenge
the Baby Bells in the local telephone markets. As part of our risk-control
strategy, we spread this exposure over approximately two dozen different
companies.
- -----------------------
QUALITY DIVERSIFICATION
- -----------------------
[PIE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
B 74%
Nonrated (Convertibles; Equities) 8%
AAA, AA, A, BBB 6%
CCC 6%
BB 5%
CC and Below 1%
</TABLE>
Apart from increasing our telecommunications exposure, we made no notable sector
shifts during the past six months. The fund's assets remain well diversified
among approximately two dozen industries. Our largest holdings remained equally
well diversified, as you can see in the Twenty-Five Largest Holdings table on
page 6. The largest holding -- U.S. Treasury bonds -- is new to the list. We
purchased these long-term bonds in November, because it seemed a prudent move
until the extent of the uncertainty overseas became apparent. Treasuries also
benefited from their "safe haven" status, providing robust returns during the
period.
OUTLOOK
After weighing the positives and potential negatives, our view of the high-yield
market is fairly positive. Valuations have improved, demand is strong, and
corporate consolidation trends continue to boost the prices of many high-yield
issues. Most important, U.S. economic growth seems likely to remain solid, and
a slightly slower pace should not trigger credit problems. We have some
concerns, however. The overall credit quality of new high-yield bond issues has
gradually deteriorated, and we are becoming ever more selective. The growing
overseas component of our market also makes it potentially more volatile, in our
opinion.
All in all, we expect further good returns on high-yield bonds in the coming
months but would be surprised to see a repeat of the price
3
<PAGE>
appreciation evident through most of 1997. We intend to exercise caution in
selecting new holdings and vigilance over risk. Shareholders should keep in mind
that the market for noninvestment-grade bonds, like the stock market, can
experience sharp changes in psychology that are hard to predict, so high-yield
bonds should be part of a well-diversified portfolio.
Respectfully submitted,
/s/ Mark J. Vaselkiv
Mark J. Vaselkiv
Chairman of the Investment Advisory Committee
December 19, 1997
4
<PAGE>
T. Rowe Price High Yield Fund
- -------------------------------------------------------------------------
- --------------------
Portfolio Highlights
- --------------------
<TABLE>
<CAPTION>
KEY STATISTICS
5/31/97 11/30/97
- -------------------------------------------------------------------------
<S> <C> <C>
Price Per Share $ 8.43 $8.69
.........................................................................
Dividends Per Share
.........................................................................
For 6 months 0.37 0.38
....................................................................
For 12 months 0.75 0.75
....................................................................
Dividend Yield *
.........................................................................
For 6 months 9.16% 8.93%
....................................................................
For 12 months 9.50 9.25
....................................................................
Weighted Average Maturity (years) 8.7 10.0
.........................................................................
Weighted Average Effective Duration (years) 3.9 4.5
.........................................................................
Weighted Average Quality ** B+ B
.........................................................................
</TABLE>
* Dividends earned and reinvested for the periods indicated are annualized
and divided by the average daily net asset values per share for the same
period.
** Based on T. Rowe Price research.
5
<PAGE>
T. Rowe Price High Yield Fund
- -------------------------------------------------------------------------
Portfolio Highlights
<TABLE>
<CAPTION>
TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
11/30/97
- -------------------------------------------------------------------------
<S> <C>
U.S. Treasury Bonds 1.9%
.........................................................................
Cablevision Systems 1.5
.........................................................................
Coinmach 1.5
.........................................................................
Ocwen 1.4
.........................................................................
Keebler 1.4
- -------------------------------------------------------------------------
Allied Waste 1.4
.........................................................................
Nextel Communications 1.2
.........................................................................
Communication & Power Industries 1.2
.........................................................................
DecisionOne 1.1
.........................................................................
Sterling Chemicals 1.1
- -------------------------------------------------------------------------
Doane Products 1.1
.........................................................................
Galaxy Telecom 1.1
.........................................................................
Frontiervision 1.0
.........................................................................
Herff Jones 1.0
.........................................................................
Kelley Oil & Gas 1.0
- -------------------------------------------------------------------------
Courtyard by Marriott II 1.0
.........................................................................
Plastic Containers 1.0
.........................................................................
Protection One Alarm 1.0
.........................................................................
Maxxam Group Holdings 1.0
.........................................................................
American Builders & Contractors Supply 1.0
- -------------------------------------------------------------------------
Celestica International 1.0
.........................................................................
Riverwood International 1.0
.........................................................................
Benedek Broadcasting 1.0
.........................................................................
Metronet Communications 0.9
.........................................................................
Pricellular Wireless 0.9
- -------------------------------------------------------------------------
Total 28.7%
</TABLE>
6
<PAGE>
T. Rowe Price High Yield Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------
Portfolio HIGHLIGHTS
- --------------------------------------------------------------------------------
SECTOR DIVERSIFICATION
Percent of Percent of
Net Assets Net Assets
5/31/97 11/30/97
- --------------------------------------------------------------------------------
<S> <C> <C>
Telecommunications 7% 12%
................................................................................
Service 6 8
................................................................................
Consumer Products 6 8
................................................................................
Cable Operators 7 7
................................................................................
Financial 5 6
................................................................................
Energy 4 5
................................................................................
Food and Tobacco 3 4
................................................................................
Electronic Components 2 4
................................................................................
Broadcasting 4 4
................................................................................
Aerospace and Defense 5 4
................................................................................
Short-Term 3 4
................................................................................
Transportation 2 3
................................................................................
Gaming 3 3
................................................................................
Manufacturing 3 3
................................................................................
Specialty Chemicals 2 3
................................................................................
Building Products 4 3
................................................................................
Entertainment and Leisure 3 2
................................................................................
U.S. Treasury Securities - 2
................................................................................
Textiles and Apparel 3 2
................................................................................
Container 2 2
................................................................................
Supermarkets 2 2
................................................................................
All Other 21 9
................................................................................
Other Assets Less Liabilities 3 -
- --------------------------------------------------------------------------------
Total 100% 100%
</TABLE>
7
<PAGE>
T. Rowe Price High Yield Fund
- --------------------------------------------------------------------------------
- ----------------------
Performance Comparison
- --------------------------------------------------------------------------------
This chart shows the value of a hypothetical $10,000 investment in the fund over
the past 10 fiscal year periods or since inception (for funds lacking 10-year
records). The result is compared with a broad-based average or index. The index
return does not reflect expenses, which have been deducted from the fund's
return.
[LINE GRAPH APPEARS HERE]
HIGH YIELD FUND
- --------------------------------------------------------------------------------
As of 11/30/97
<TABLE>
<CAPTION>
Date High Yield Fund First Boston High Yield Index
- ---- --------------- -----------------------------
<S> <C> <C>
11/30/87 10,000 10,000
11/88 11,838 11,571
11/89 11,887 11,743
11/90 10,406 10,892
11/91 13,575 15,619
11/92 15,454 18,148
11/93 18,847 21,552
11/94 17,571 21,384
11/95 20,150 25,049
11/96 22,520 27,973
11/97 25,719 31,830
</TABLE>
- ------------------------------------
Average Annual Compound Total Return
- --------------------------------------------------------------------------------
This table shows how the fund would have performed each year if its actual (or
cumulative) returns for the periods shown had been earned at a constant rate.
<TABLE>
<CAPTION>
Periods Ended 11/30/97 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
High Yield Fund 14.21% 13.54% 10.72% 9.91%
................................................................................
</TABLE>
Investment return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
8
<PAGE>
T. Rowe Price High Yield Fund
- --------------------------------------------------------------------------------
- --------------------
FINANCIAL HIGHLIGHTS For a share outstanding throughout each period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
6 Months Year 3 Months+++ Year
Ended Ended Ended Ended
11/30/97 5/31/97 5/31/96 5/31/95 5/31/94 2/28/94 2/28/93
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period $ 8.43 $ 8.13 $ 8.16 $ 8.37 $ 9.15 $ 8.58 $ 8.23
...............................................................................
Investment activities
Net investment income 0.38 0.75 0.73 0.75 0.18 0.81 0.82
Net realized and
unrealized gain (loss) 0.26 0.30 (0.02) (0.20) (0.78) 0.57 0.35
...............................................................................
Total from
investment activities 0.64 1.05 0.71 0.55 (0.60) 1.38 1.17
...............................................................................
Distributions
Net investment income (0.38) (0.75) (0.74) (0.76) (0.18) (0.81) (0.82)
...............................................................................
NET ASSET VALUE
End of period $ 8.69 $ 8.43 $ 8.13 $ 8.16 $ 8.37 $ 9.15 $ 8.58
-------------------------------------------------------------------------------
Ratios/Supplemental Data
Total return 7.67% 13.49% 9.06% 7.09% (6.52)% 16.59% 14.96%
.............................................................................................................
Ratio of expenses to
average net assets 0.80%+ 0.84% 0.85% 0.88% 0.85%+ 0.85% 0.89%
.............................................................................................................
Ratio of net investment
income to average
net assets 8.94%+ 9.15% 8.89% 9.27% 8.37%+ 8.99% 9.85%
.............................................................................................................
Portfolio turnover rate 71.3% 111.3% 100.1% 74.2% 62.5%+ 107.0% 104.4%
.............................................................................................................
Net assets, end of period
(in millions) $ 1,528 $ 1,401 $ 1,229 $ 1,208 $ 1,241 $ 1,624 $ 1,404
.............................................................................................................
</TABLE>
+ Annualized.
+++ The fund's fiscal year-end was changed to May 31.
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
T. Rowe Price High Yield Fund
- --------------------------------------------------------------------------------
Unaudited November 30, 1997
- -----------------------
Statement of Net Assets Par/Shares Value
- --------------------------------------------------------------------------------
In thousands
<TABLE>
<CAPTION>
CORPORATE BONDS AND NOTES 84.8%
<S> <C> <C>
Advertising 1.1%
ITT Promedia CVA, Sr. Sub. Notes, (DEM)
9.125%, 9/15/07 $11,000 $ 6,370
................................................................................
ITT Publimedia B.V., Sr. Sub. Notes, 9.375%, 9/15/07 5,000 5,225
................................................................................
Outdoor Communications, Sr. Sub. Notes, 9.25%, 8/15/07 5,000 5,025
................................................................................
16,620
.......
Aerospace and Defense 3.6%
Burke Industries, Sr. Notes, (144a), 10.00%, 8/15/07 5,500 5,692
................................................................................
Communications & Power Industries, Sr. Sub. Notes
12.00%, 8/1/05 15,750 17,601
................................................................................
Dyncorp, Sr. Sub. Notes, 9.50%, 3/1/07 10,625 10,891
................................................................................
L 3 Communications, Sr. Sub. Notes, 10.375%, 5/1/07 9,300 10,044
................................................................................
Stellex Industries, Sr. Sub. Notes, (144a), 9.50%, 11/1/07 8,675 8,664
................................................................................
United Defense Industries, Sr. Sub. Notes, (144a)
8.75%, 11/15/07 2,250 2,222
................................................................................
55,114
.......
Automobiles and Related 1.3%
Chief Auto Parts, Sr. Notes, 10.50%, 5/15/05 6,000 5,880
................................................................................
Venture Holdings Trust
Sr. Sub. Notes, (144A), 9.50%, 7/1/05 10,000 10,000
.............................................................................
Sr. Sub. Notes, 9.75%, 4/1/04 3,650 3,559
................................................................................
19,439
.......
Beverages 0.1%
Dr Pepper Bottling, Sr. Disc. Notes, STEP
Zero Coupon, 2/15/03 1,750 1,807
................................................................................
1,807
.......
Broadcasting 1.9%
Azteca Holdings, Sr. Secured Notes, (144a), 11.00%, 6/15/02 2,800 2,870
................................................................................
Benedek Broadcasting, Sr. Notes, 11.875%, 3/1/05 12,900 14,448
................................................................................
Muzak, Gtd. Sr. Notes, 10.00%, 10/1/03 7,475 7,849
................................................................................
TV Azteca, Gtd. Sr. Notes, 10.50%, 2/15/07 3,750 3,900
................................................................................
29,067
.......
Building Products 2.6%
American Builders & Contractors Supply, Sr. Sub. Notes
10.625%, 5/15/07 14,275 14,846
................................................................................
Falcon Building Products, Sr. Sub. Disc. Notes, STEP
Zero Coupon, 6/15/07 6,500 4,192
................................................................................
</TABLE>
10
<PAGE>
T. Rowe Price High Yield Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par/Shares Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Maxxam Group Holdings
Sr. Notes, 11.25%, 8/1/03 $ 5,500 $ 5,844
............................................................................
Sr. Secured Notes, 12.00%, 8/1/03 8,500 9,180
................................................................................
Werner Holdings, Sr. Sub. Notes, (144a), 10.00%, 11/15/07 4,800 4,872
................................................................................
38,934
.........
Cable Operators 5.0%
Comcast UK Cable, Sr. Sub. Disc. Deb., STEP
Zero Coupon, 11/15/07 12,550 10,008
................................................................................
Frontiervision, Sr. Sub. Notes, 11.00%, 10/15/06 11,400 12,369
................................................................................
Frontiervision Operating Partners
Sr. Disc. Notes, (144a), STEP
Zero Coupon, 9/15/07 5,000 3,469
................................................................................
Fundy Cable, Sr. Secured 2nd Priority Notes
11.00%, 11/15/05 12,000 12,960
................................................................................
Galaxy Telecom, Sr. Sub. Notes, 12.375%, 10/1/05 14,750 15,967
................................................................................
Northland Cable Television, Sr. Sub. Notes, (144a)
10.25%, 11/15/07 12,000 12,315
................................................................................
TeleWest PLC
Sr. Deb., 9.625%, 10/1/06 2,275 2,355
........................................................................
Sr. Disc. Deb., STEP, Zero Coupon, 10/1/07 5,000 3,812
................................................................................
UIH Australia Pacific, Sr. Disc. Notes, STEP
Zero Coupon, 5/15/06 4,940 3,211
................................................................................
76,466
.........
Conglomerates 0.7%
ICF Kaiser International, Sr. Notes, 13.00%, 12/31/03 9,100 10,238
................................................................................
10,238
.........
Consumer Products 7.8%
American Safety Razor, Sr. Notes, 9.875%, 8/1/05 12,000 12,840
................................................................................
Aurora Foods, Sr. Sub. Notes, 9.875%, 2/15/07 6,600 6,930
................................................................................
Chattem, Sr. Sub. Notes, 12.75%, 6/15/04 8,900 10,124
................................................................................
CLN Holdings, Sr. Secured 2nd Priority Disc. Notes
Zero Coupon, 5/15/01 15,125 9,604
................................................................................
Doane Products, Sr. Notes, 10.625%, 3/1/06 15,000 16,050
................................................................................
Hedstrom Holdings
Sr. Disc. Notes, (144a), STEP
Zero Coupon, 6/1/09 4,050 2,430
........................................................................
Sr. Sub. Notes, (144a), 10.00%, 6/1/07 6,600 6,616
................................................................................
Herff Jones, Sr. Sub. Notes, 11.00%, 8/15/05 14,575 15,814
................................................................................
</TABLE>
11
<PAGE>
T. Rowe Price High Yield Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par/Shares Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Holmes Products, Gtd. Notes, (144a), 9.875%, 11/15/07 $ 5,000 $ 5,038
................................................................................
PM Holdings, Sub. Disc. Notes, STEP, Zero Coupon, 9/1/05 14,500 11,691
................................................................................
Revlon Consumer Products, Sr. Sub. Notes
10.50%, 2/15/03 6,250 6,594
................................................................................
Revlon Worldwide, Sr. Secured Disc. Notes
Zero Coupon, 3/15/01 10,000 6,925
................................................................................
Windy Hill Pet Food, Sr. Sub. Notes, 9.75%, 5/15/07 8,275 8,523
................................................................................
119,179
.........
Container 1.5%
Bway, Sr. Sub. Notes, (144a), 10.25%, 4/15/07 7,000 7,647
................................................................................
Plastic Containers, Sr. Secured Notes, 10.00%, 12/15/06 14,795 15,683
................................................................................
23,330
.........
Electronic Components 3.9%
Celestica International, Gtd. Sr. Sub. Notes, 10.50%,
12/31/06 13,825 14,724
................................................................................
Details, Sr. Sub. Notes, (144a), 10.00%, 11/15/05 5,000 5,063
................................................................................
Details Holdings, Sr. Disc. Notes, (144a), STEP
Zero Coupon, 11/15/07 4,750 2,719
................................................................................
DII Group, Sr. Sub. Notes, (144a), 8.50%, 9/15/07 11,800 11,652
................................................................................
Fairchild Semiconductor
Sr. Sub. Notes, 10.125%, 3/15/07 6,000 6,270
............................................................................
Sub. Notes, PIK, (144a), 11.74%, 3/14/08 6,352 6,249
................................................................................
Viasystems, Sr. Sub. Notes, (144a), 9.75%, 6/1/07 12,000 12,420
................................................................................
59,097
.........
Energy 4.6%
Bellwether Exploration, Sr. Sub. Notes, 10.875%, 4/1/07 8,900 9,701
................................................................................
Benton Oil & Gas
................................................................................
Sr. Notes, (144A), 9.375%, 11/1/07 3,000 3,038
............................................................................
Sr. Notes, 11.625%, 5/1/03 2,420 2,668
................................................................................
Energy Corporation of America, Sr. Sub. Notes, 9.50%, 5/15/07 9,075 9,030
................................................................................
Flores & Rucks, Sr. Sub. Notes, 9.75%, 10/1/06 6,850 7,329
................................................................................
Kelley Oil & Gas, Sr. Sub. Notes, 10.375%, 10/15/06 14,975 15,799
................................................................................
Plains Resources, Sr. Sub. Notes, 10.25%, 3/15/06 12,185 13,099
................................................................................
Rutherford Moran Oil, Sr. Sub. Notes, (144a), 10.75%, 10/1/04 9,300 9,532
................................................................................
70,196
.........
Entertainment and Leisure 1.9%
Hollywood Theaters, Sr. Sub. Notes, 10.625%, 8/1/07 5,800 6,162
................................................................................
Six Flags Theme Parks, Sr. Sub. Disc. Notes, STEP
Zero Coupon, 6/15/05 12,100 12,856
................................................................................
</TABLE>
12
<PAGE>
T. Rowe Price High Yield Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par/Shares Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
United Artists Theatre Circuit, PTC, 9.30%, 7/1/15 $ 10,521 $ 10,521
................................................................................
29,539
.........
Financial 4.2%
B.F. Saul, REIT, Sr. Secured Notes, 11.625%, 4/1/02 12,000 12,840
................................................................................
Bank Plus, Sr. Notes, 12.00%, 7/18/07 1,250 1,400
................................................................................
Bank United, Trust Pfd. Securities, 10.25%, 12/31/26 7,500 7,687
................................................................................
First Federal Financial, 11.75%, 10/1/04 2,200 2,481
................................................................................
Mego Mortgage
Sr. Sub. Notes, 12.50%, 12/1/01 2,000 1,970
............................................................................
Sr. Sub. Notes, (144a), 12.50%, 12/1/01 1,000 985
................................................................................
ML Capital Trust, Gtd. Notes, 9.875%, 3/1/27 3,650 4,117
................................................................................
Ocwen Capital Trust I, 10.875%, 8/1/27 6,400 6,848
................................................................................
Ocwen Financial, Sr. Notes, 11.875%, 10/1/03 9,800 10,976
................................................................................
Resource America, Sr. Notes, (144a), 12.00%, 8/1/04 10,000 10,275
................................................................................
Superior National Insurance Group
Gtd. Trust Pfd. Securities, 10.75%, 12/1/17 4,625 4,671
................................................................................
64,250
.........
Food and Tobacco 4.1%
Ameriserve Food, Sr. Sub. Notes, (144a), 10.125%, 7/15/07 12,275 12,766
................................................................................
Archibald Candy, Sr. Secured Notes, 10.25%, 7/1/04 11,725 12,282
................................................................................
Keebler, Sr. Sub. Notes, 10.75%, 7/1/06 19,000 21,375
................................................................................
Mrs. Fields Original, Gtd. Sr. Notes, (144a), 10.125%,
12/1/04 5,000 5,025
................................................................................
Southern Foods Group, Sr. Sub. Notes, (144a), 9.875%, 9/1/07 10,500 10,920
................................................................................
62,368
.........
Gaming 2.8%
Casino America, Sr. Notes, 12.50%, 8/1/03 4,750 5,148
................................................................................
Eldorado Resorts, Sr. Sub. Notes, 10.50%, 8/15/06 6,000 6,480
................................................................................
Grand Casino, 1st Mtg. Notes, 10.125%, 12/1/03 5,100 5,419
................................................................................
Horseshoe Gaming, Sr. Sub. Notes, 9.375%, 6/15/07 4,250 4,388
................................................................................
Majestic Star Casino, Sr. Secured Notes, 12.75%, 5/15/03 10,000 10,700
................................................................................
Rio Hotel & Casino, Sr. Sub. Notes, 10.625%, 7/15/05 9,570 10,383
................................................................................
42,518
.........
Health Care 1.3%
Kinetic Concepts, Sr. Sub. Notes, (144a), 9.625%, 11/1/07 5,850 5,864
................................................................................
Owens & Minor, Sr. Sub. Notes, 10.875%, 6/1/06 7,150 7,901
................................................................................
Paragon Health Network, Sr. Sub. Disc. Notes, (144a), STEP
Zero Coupon, 11/1/07 9,500 5,795
................................................................................
19,560
.........
</TABLE>
13
<PAGE>
T. Rowe Price High Yield Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par/Shares Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Lodging 1.4%
Courtyard by Marriott II, Sr. Secured Notes
10.75%, 2/1/08 $ 14,550 $ 15,768
................................................................................
Red Roof Inns, Sr. Notes, 9.625%, 12/15/03 4,850 5,008
................................................................................
20,776
.........
Manufacturing 2.5%
AMTROL, Sr. Sub. Notes, 10.625%, 12/31/06 6,625 6,758
................................................................................
Axiohm, Sr. Sub. Notes, (144a), 9.75%, 10/1/07 4,125 4,166
................................................................................
Hawk, Sr. Notes, 10.25%, 12/1/03 8,450 8,936
................................................................................
HCC Industries, Sr. Sub. Notes, (144a), 10.75%, 5/15/07 11,000 11,440
................................................................................
International Wire, Sr. Sub. Notes, (144a), 11.75%, 6/1/05 6,725 7,330
................................................................................
38,630
.........
Metals and Mining 1.3%
AEI Holding, Sr. Notes, (144a), 10.00%, 11/15/07 8,675 8,805
................................................................................
Earle M. Jorgensen, Sr. Notes, 10.75%, 3/1/00 2,500 2,581
................................................................................
Haynes International, Sr. Notes, 11.625%, 9/1/04 8,000 9,160
................................................................................
20,546
.........
Paper and Paper Products 1.4%
Repap New Brunswick, Sr. Notes, 10.625%, 4/15/05 6,750 6,547
................................................................................
Riverwood International
Sr. Notes, 10.625%, 8/1/07 4,800 4,968
............................................................................
Sr. Sub. Notes, 10.875%, 4/1/08 9,750 9,555
................................................................................
21,070
.........
Printing and Publishing 1.3%
Sun Media
Sr. Sub. Notes
9.50%, 2/15/07 7,500 7,969
.........................................................................
9.50%, 5/15/07 4,500 4,792
................................................................................
Transwestern Holdings, Sr. Disc. Notes, (144a), STEP
Zero Coupon, 11/15/08 6,450 3,709
................................................................................
Transwestern Publishing, Sr. Sub. Notes, (144a)
9.625%, 11/15/07 3,900 3,959
................................................................................
20,429
.........
Restaurants 0.3%
Krystal, Sr. Notes, (144a), 10.25%, 10/1/07 5,000 5,050
................................................................................
5,050
.........
</TABLE>
14
<PAGE>
T. Rowe Price High Yield Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par/Shares Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Retail 0.7%
Safelite Glass, Sr. Sub. Notes, (144a)
9.875%, 12/15/06 $ 10,000 $ 10,925
................................................................................
10,925
..........
Service 7.9%
Allied Waste, Sr. Sub. Notes, 10.25%, 12/1/06 8,625 9,401
................................................................................
Allied Waste Industries, Sr. Disc. Notes, STEP
Zero Coupon, 6/1/07 17,000 11,688
................................................................................
Ballys Total Fitness, Sr. Sub. Notes, (144a), 9.875%,
10/15/07 8,500 8,415
................................................................................
Coinmach
Sr. Notes, (144a), 11.75%, 11/15/05 3,000 3,293
...........................................................................
Sr. Sub. Notes, 11.75%, 11/15/05 17,775 19,641
................................................................................
DecisionOne, Sr. Sub. Notes, 9.75%, 8/1/07 9,175 9,404
................................................................................
DecisionOne Holdings, Units
(Each Unit consists of a $1,000 par
Sr. Disc. Deb., STEP, Zero Coupon, 8/1/08,
and 1 Warrant) 11,825 7,745
................................................................................
Host Marriott Travel Plazas, Sr. Notes, 9.50%, 5/15/05 9,000 9,495
................................................................................
International Logistics, Sr. Notes, (144a), 9.75%, 10/15/07 4,050 3,979
................................................................................
Intertek Finance, Sr. Sub. Notes, 10.25%, 11/1/06 12,005 12,605
................................................................................
Loomis Fargo & Company, Sr. Sub. Notes, 10.00%, 1/15/04 6,000 6,150
................................................................................
Protection One Alarm, Gtd. Sr. Disc. Notes, STEP
Zero Coupon, 6/30/05 11,900 13,031
................................................................................
Town Sports International, Sr. Notes, (144a), 9.75%, 10/15/04 5,500 5,459
................................................................................
120,306
..........
Specialty Chemicals 2.6%
Huntsman, Sr. Sub. Notes, (144a), VR, 9.094%, 7/1/07 7,000 7,210
................................................................................
Koppers Industry, Sr. Sub. Notes, (144a), 9.875%, 12/1/07 4,300 4,365
................................................................................
Sovereign Specialty Chemicals, Sr. Sub. Notes, (144a)
9.50%, 8/1/07 11,000 11,302
................................................................................
Sterling Chemicals
Sr. Secured Disc. Notes, STEP
Zero Coupon, 8/15/08 14,800 9,842
........................................................................
Sr. Sub. Notes, 11.25%, 4/1/07 6,700 7,102
................................................................................
39,821
..........
</TABLE>
15
<PAGE>
T. Rowe Price High Yield Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par/Shares Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Supermarkets 1.5%
Community Distributors, Sr. Notes, (144a)
10.25%, 10/15/04 $ 3,800 $ 3,876
................................................................................
Pathmark Stores, Sub. Notes, 11.625%, 6/15/02 9,500 9,642
................................................................................
The Pantry, Sr. Sub. Notes, (144a), 10.25%, 10/15/07 9,500 9,405
................................................................................
22,923
..........
Telecommunications 10.5%
American Communications Services, Sr. Disc. Notes, STEP
Zero Coupon, 11/1/05 4,750 3,539
................................................................................
Call-Net Enterprises, Sr. Disc. Notes, STEP
Zero Coupon, 8/15/07 3,000 1,995
................................................................................
Clearnet Communications, Sr. Disc. Notes, STEP
Zero Coupon, 12/15/05 5,250 3,938
................................................................................
Colt Telecom Group
Sr. Notes, (DEM), 8.875%, 11/30/07 7,000 3,969
...........................................................................
Units
(Each Unit consists of a $1,000 par
Sr. Disc. Note, STEP, Zero Coupon, 12/15/06,
and 1 Warrant) 12,300 9,287
................................................................................
Globalstar, Sr. Notes, 11.375%, 2/15/04 6,650 6,700
................................................................................
Hyperion Telecommunications, Sr. Secured Notes
12.25%, 9/1/04 3,850 4,158
................................................................................
Intermedia Communications of Florida
Sr. Disc. Notes, STEP
Zero Coupon, 5/15/06 4,300 3,332
........................................................................
Zero Coupon, 7/15/07 7,750 5,309
................................................................................
Mcleod, Sr. Notes, (144a), 9.25%, 7/15/07 6,650 6,783
................................................................................
Metronet Communications
Sr. Disc. Notes, (144a), STEP
Zero Coupon, 11/1/07 8,500 4,930
........................................................................
Units
(Each Unit consists of a $1,000 par
Sr. Note, (144a), 12.00%, 8/15/07, and 1 Warrant) 8,250 9,323
................................................................................
MGC Communications, Units
(Each Unit consists of a $1,000 par
Secured Note, (144a), 13.00%, 10/1/04,
and 1 Warrant) 7,000 6,965
................................................................................
</TABLE>
16
<PAGE>
T. Rowe Price High Yield Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par/Shares Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Netia Holdings B.V.
Gtd. Sr. Disc. Notes, (144a), STEP
Zero Coupon, 11/1/07 $ 2,900 $ 1,638
........................................................................
Gtd. Sr. Notes, (144a), 10.25%, 11/1/07 4,750 4,501
................................................................................
Nextel Communications
Sr. Disc. Notes, STEP, Zero Coupon, 8/15/04 4,900 4,226
...........................................................................
Sr. Disc. Notes, (144a), STEP
Zero Coupon, 9/15/07 6,500 3,949
........................................................................
Zero Coupon, 10/31/07 11,850 6,843
NEXTLINK Communications
Sr. Notes
9.625%, 10/1/07 4,125 4,166
........................................................................
12.50%, 4/15/06 5,000 5,675
................................................................................
Omnipoint, Sr. Notes, 11.625%, 8/15/06 4,850 5,141
................................................................................
Page America Group, PIK, 15.00%, 6/30/98 + 9,800 8,036
................................................................................
Price Communications Wireless, Sr. Sub. Notes, (144a)
11.75%, 7/15/07 1,950 2,101
................................................................................
Pricellular Wireless, Sr. Notes, 10.75%, 11/1/04 13,000 14,105
................................................................................
Primus Telecommunications Group, Sr. Notes, 11.75%, 8/1/04 4,250 4,526
................................................................................
Qwest Communications International
Sr. Disc. Notes, (144a), STEP
Zero Coupon, 10/15/07 8,075 5,208
................................................................................
RCN
Sr. Disc. Notes, (144a), STEP
Zero Coupon, 10/15/07 6,750 3,966
........................................................................
Sr. Notes, (144a), 10.00%, 10/15/07 3,250 3,258
................................................................................
RSL Communications, Gtd. Sr. Notes, 12.25%, 11/15/06 3,000 3,308
................................................................................
Sprint Spectrum, Sr. Notes, 11.00%, 8/15/06 4,800 5,400
................................................................................
Telegroup, Sr. Disc. Notes, (144a), STEP
Zero Coupon, 11/1/04 3,000 2,220
................................................................................
Vialog, Units
(Each Unit consists of a $1,000 par
Sr. Note, 12.75%, 11/15/01, and 1 Warrant) 2,425 2,480
................................................................................
160,975
..........
Textiles and Apparel 1.6%
Anvil Knitwear, Sr. Notes, 10.875%, 3/15/07 1,650 1,697
................................................................................
Delta Mills, Sr. Notes, (144a), 9.625%, 9/1/07 10,000 10,125
................................................................................
Dyersburg, Sr. Sub. Notes, 9.75%, 9/1/07 6,175 6,391
................................................................................
</TABLE>
17
<PAGE>
T. Rowe Price High Yield Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par/Shares Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Glenoit, Sr. Sub. Notes, (144a), 11.00%, 4/15/07 $ 5,700 $ 6,099
................................................................................
Plaid Clothing Group, Sr. Sub. Notes, 11.00%, 8/1/03 * 8,650 11
................................................................................
24,323
..........
Transportation 3.4%
Chemical Leaman, Sr. Notes, (144a), 10.375%, 6/15/05 5,500 5,720
................................................................................
Clark Materials Handling, Sr. Notes, 10.75%, 11/15/06 4,000 4,220
................................................................................
Global Ocean Carriers, Sr. Notes, (144a), 10.25%, 7/15/07 10,425 9,956
................................................................................
Greyhound Lines, Sr. Notes, 11.50%, 4/15/07 6,750 7,324
................................................................................
Sea Containers Ltd., Sr. Sub. Deb., 12.50%, 12/1/04 6,013 6,794
................................................................................
Stena AB, Sr. Notes, 8.75%, 6/15/07 7,000 7,035
................................................................................
TravelCenters of America, Sr. Sub. Notes, 10.25%, 4/1/07 10,750 11,207
................................................................................
52,256
..........
Total Corporate Bonds and Notes (Cost $1,263,067) 1,295,752
..........
EQUITY AND CONVERTIBLE SECURITIES 8.3%
Automobiles and Related 0.0%
Hayes Wheels International, Warrants, 7/1/03 * 18 204
................................................................................
204
..........
Beverages 0.8%
Dr Pepper Bottling Holdings, Common Stock, (Class A) *+@ 547 12,298
................................................................................
12,298
..........
Broadcasting 1.8%
American Radio Systems, PIK, Exch. Pfd. Stock 76 9,159
................................................................................
Capstar Broadcasting Partners, PIK, Sr. Exch. Pfd. Stock 67 7,538
................................................................................
Chancellor Media, PIK, Exch. Pfd. Stock 50 5,909
................................................................................
Spanish Broadcasting System
PIK, Sr. Exch. Pfd. Stock 3 3,392
...........................................................................
Warrants, 6/30/99 * 3 705
................................................................................
26,703
..........
Building and Real Estate 0.1%
Camden Property Trust, REIT, Common Stock 50 1,634
................................................................................
1,634
..........
Cable Operators 1.5%
Cablevision Systems, PIK, Pfd. Stock
(Series H) 33 3,914
...........................................................................
(Series M) 167 19,049
................................................................................
</TABLE>
18
<PAGE>
T. Rowe Price High Yield Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par/Shares Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Peachtree Cable Associates Ltd., Common Stock *+@ $ 10 $ 170
................................................................................
Wireless One, Warrants, 10/19/00 * 19 5
...............................................................................
23,138
...........
Conglomerates 0.0%
ICF Kaiser International, Warrants, 12/31/99* 64 64
................................................................................
64
............
Consumer Products 0.0%
Hedstrom Holdings, Common Stock* 246 246
................................................................................
246
............
Energy 0.3%
Clark USA, PIK, Cum. Sr. Exch. Pfd. Stock, (144a) * 48 4,987
................................................................................
4,987
............
Financial 1.7%
Bay View Capital Trust, Common Stock 50 1,669
................................................................................
Chevy Chase Preferred Capital, Non-Cum. Exch. Pfd. Stock 124 6,440
................................................................................
Criimi Mae, REIT, Cum. Conv. Pfd. Stock 145 4,921
................................................................................
Imperial Credit Commercial Mortgage Investment
Common Stock * 353 5,537
................................................................................
Leasing Solutions, Conv. Sub. Notes, 6.875%, 10/1/03 3,000 2,946
................................................................................
Ocwen Asset Investment, REIT, Common Stock 200 3,619
................................................................................
25,132
............
Gaming 0.0%
Becker Gaming, Warrants, 11/15/00 *+@ 425 106
................................................................................
Hollywood Casino, Common Stock, (Class A) * 93 228
................................................................................
President Casinos, Warrants, (144a), 9/30/99 *+@ 214 54
................................................................................
388
............
Health Care 0.0%
Wright Medical Technology, Warrants, 6/30/03 *+@ 38 381
................................................................................
381
............
Manufacturing 0.1%
Tokheim, Common Stock * 100 1,881
................................................................................
1,881
............
Retail 0.0%
Lamonts Apparel, Common Stock * 250 --
................................................................................
--
............
Service 0.4%
Efficient Market Services, Conv. Pfd. Stock *++++@ 364 4,000
................................................................................
Protection One, Common Stock 200 2,319
................................................................................
6,319
............
</TABLE>
19
<PAGE>
T. Rowe Price High Yield FundS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par/Shares Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Telecommunications 1.3%
American Communications Services
PIK, Jr. Red. Pfd. Stock * $ 39 $ 3,763
.............................................................................
Warrants, 11/1/05 * 12 1,020
................................................................................
Clearnet Communications, Warrants, 9/15/05 * 57 342
................................................................................
Globalstar, Warrants, (144a), 2/15/04 * 7 798
................................................................................
Hyperion Telecommunications
PIK, Sr. Exch. Red. Pfd. Stock, (144a) * 32 3,079
................................................................................
Intermedia Communications of Florida
PIK,Exch. Pfd. Stock 43 5,067
.............................................................................
Warrants, 6/1/00 * 2 134
................................................................................
Microcell Telecommunications
Conditional Warrants, (144a), 6/15/06 * 33 --
................................................................................
Unconditional Warrants, (144a), 6/15/06 * 33 697
................................................................................
Nextel Communications
Common Stock * 12 308
.............................................................................
PIK, Exch. Pfd. Stock 25 2,786
................................................................................
Page America Group
Common Stock *++++@ 1,109 129
.............................................................................
Conv. Pfd. Stock, (Series I) *++++@ 20 248
.............................................................................
Warrants *++++@ 711 --
................................................................................
Powertel, Warrants, 2/1/06 * 64 480
................................................................................
Primus Telecommunications Group, Warrants, 8/1/04 * 4 42
................................................................................
RSL Commincations, Warrants, (144a), 11/15/06 * 3 261
................................................................................
19,154
............
Textiles and Apparel 0.3%
Anvil Holdings, PIK, Sr. Exch. Pfd. Stock, (Series B) * 156 3,747
................................................................................
3,747
............
Total Equity and Convertible Securities (Cost $110,320) 126,276
............
U.S. GOVERNMENT OBLIGATIONS 1.9%
U.S. Treasury Obligations 1.9%
U.S. Treasury Bonds, 6.00%, 2/15/26 30,000 29,527
................................................................................
Total U.S. Government Obligations (Cost $29,166) 29,527
............
</TABLE>
20
<PAGE>
T. Rowe Price High Yield Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par/Shares Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
ASSET-BACKED SECURITIES 0.9%
Airlines 0.9%
Airplane Pass Through Trust, 10.875%, 3/15/19 $ 11,955 $ 13,449
.............................................................................
Total Asset-Backed Securities (Cost $12,040) 13,449
.............
MONEY MARKET FUNDS 3.7%
Reserve Investment Fund, 5.71% # 55,832 55,832
.............................................................................
Total Money Market Funds (Cost $55,832) 55,832
.............
Total Investments in Securities
99.6% of Net Assets (Cost $1,470,425) $ 1,520,836
Other Assets Less Liabilities 6,706
................................................................................
NET ASSETS $ 1,527,542
-------------
Net Assets Consist of:
Accumulated net investment income - net of distributions $ 2,757
Accumulated net realized gain/loss - net of distributions (198,070)
Net unrealized gain (loss) 50,411
Paid-in-capital applicable to 175,720,826 shares of $0.01 par
value capital stock outstanding; 1,000,000,000 shares authorized 1,672,444
.............
NET ASSETS $ 1,527,542
-------------
NET ASSET VALUE PER SHARE $ 8.69
-------------
</TABLE>
+ Private Placement
* Non-income producing
++ Security valued by the Fund's Board of Directors
@ Securities contain some restrictions as to public resale--total of
such securities at period-end amounts to 1.1% of net assets.
# Seven-day yield
DEM German deutschemark
PIK Payment-in-Kind
PTC Pass-through Certificate
REIT Real Estate Investment Trust
STEP Stepped Coupon Bond for which the interest rate will adjust on
specified future dates.
VR Variable Rate
144a Security was purchased pursuant to Rule 144a under the Securities Act of
1933 and may not be resold subject to that rule except to qualified
institutional buyers -- total of such securities at period-end amounts to
25.1% of net assets.
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
T. Rowe Price High Yield Fund
- --------------------------------------------------------------------------------
Unaudited
- -----------------------
Statement of Operations
- --------------------------------------------------------------------------------
In thousands
<TABLE>
<CAPTION>
<S> <C>
6 Months
Ended
11/30/97
Investment Income
Interest and dividend income $ 72,967
.........
Expenses
Investment management 4,675
Shareholder servicing 1,095
Prospectus and shareholder reports 98
Custody and accounting 92
Registration 20
Legal and audit 18
Directors 9
Miscellaneous 7
.........
Total expenses 6,014
.........
Net investment income 66,953
.........
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 26,115
Foreign currency transactions 12
.........
Net realized gain (loss) 26,127
Change in net unrealized gain or loss on securities 17,575
.........
Net realized and unrealized gain (loss) 43,702
.........
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $110,655
--------
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
T. Rowe Price High Yield Fund
- --------------------------------------------------------------------------------
Unaudited
- ----------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
In thousands
<TABLE>
<CAPTION>
6 Months Year
Ended Ended
11/30/97 5/31/97
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income $ 66,953 $ 119,566
Net realized gain (loss) 26,127 (4,192)
Change in net unrealized gain or loss 17,575 49,415
...........................
Increase (decrease) in net assets from operations 110,655 164,789
...........................
Distributions to shareholders
Net investment income (65,658) (119,015)
...........................
Capital share transactions*
Shares sold 158,658 273,226
Distributions reinvested 53,322 95,950
Shares redeemed (130,800) (242,907)
Redemption fees received 46 152
...........................
Increase (decrease) in net assets from capital
share transactions 81,226 126,421
...........................
Net Assets
Increase (decrease) during period 126,223 172,195
Beginning of period 1,401,319 1,229,124
...........................
End of period $ 1,527,542 $ 1,401,319
---------------------------
*Share information
Shares sold 18,392 33,021
Distributions reinvested 6,157 11,597
Shares redeemed (15,087) (29,450)
...........................
Increase (decrease) in shares outstanding 9,462 15,168
</TABLE>
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
T. Rowe Price High Yield Fund
- --------------------------------------------------------------------------------
Unaudited November 30, 1997
- -----------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price High Yield 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 December 31, 1984.
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 originally issued with maturities of one year or more
are stated at fair value as furnished by dealers who make markets in such
securities or by an independent pricing service, which considers yield or price
of bonds of comparable quality, coupon, maturity, and type, as well as prices
quoted by dealers who make markets in such securities. Securities with original
maturities of less than one year are stated at fair value, which is determined
by using a matrix system that establishes a value for each security based on
money market yields.
Equity securities listed or regularly traded on a securities exchange are valued
at the last quoted sales price on the day the valuations are made. A security
which is listed or traded on more than one exchange is valued at the quotation
on the exchange determined to be the primary market for such security. Listed
securities not traded on a particular day and securities regularly traded in the
over-the-counter market are valued at the mean of the latest bid and asked
prices. Other equity securities are valued at a price within the limits of the
latest bid and asked prices deemed by the Board of Directors, or by persons
delegated by the Board, best to reflect fair value.
For purposes of determining the fund's net asset value per share, the U.S.
dollar value of all assets and liabilities initially expressed in foreign
currencies is determined by using the mean of the bid and offer prices of such
currencies against U.S. dollars quoted by a major bank.
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.
24
<PAGE>
T. Rowe Price High Yield Fund
- --------------------------------------------------------------------------------
Currency Translation Assets and liabilities are translated into U.S. dollars at
the prevailing exchange rate at the end of the reporting period. Purchases and
sales of securities and income and expenses are translated into U.S. dollars at
the prevailing exchange rate on the dates of such transactions. The effect of
changes in foreign exchange rates on realized and unrealized security gains and
losses is reflected as a component of such gains and losses.
Premiums and Discounts Premiums on high-yield debt securities, other than PIK
and STEP bonds, are recognized upon disposition of the security as gain or loss
for both financial reporting and tax purposes. Market discounts are recognized
upon disposition of the security as gain or loss for financial reporting
purposes and as ordinary income for tax purposes. Original issue discounts, and
all premiums and discounts on PIK and STEP bonds, are amortized for both
financial reporting and tax purposes.
Other Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses are
reported on the identified cost basis. Dividend income and distributions to
shareholders are recorded by the fund on the ex-dividend date. Income and
capital gain distributions are determined in accordance with federal income tax
regulations and may differ from those determined in accordance with generally
accepted accounting principles.
NOTE 2 - INVESTMENT TRANSACTIONS
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.
Noninvestment-Grade Debt Securities At November 30, 1997, the fund held
investments in noninvestment-grade debt securities, commonly referred to as
"high-yield" or "junk" bonds. A real or perceived economic downturn or higher
interest rates could adversely affect the liquidity or value, or both, of such
securities because such events could lessen the ability of issuers to make
principal and interest payments.
Other Purchases and sales of portfolio securities, other than short-term and
U.S. government securities, aggregated $1,084,858,000 and $1,013,427,000,
respec-
25
<PAGE>
T. Rowe Price High Yield Fund
- --------------------------------------------------------------------------------
tively, for the six months ended November 30, 1997. Purchases of U.S. government
securities aggregated $29,165,000 for the six months ended November 30, 1997.
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of its
taxable income. The fund has unused realized capital loss carryforwards for
federal income tax purposes of $231,406,000, of which $83,409,000 expires in
1998, $40,436,000 in 1999, and $107,561,000 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, 1997, the aggregate cost of investments for federal income tax
and financial reporting purposes was $1,470,425,000, and net unrealized gain
aggregated $50,411,000, of which $74,439,000 related to appreciated investments
and $24,028,000 to depreciated investments.
NOTE 4 - RELATED PARTY TRANSACTIONS
The investment management agreement between the fund and the manager provides
for an annual investment management fee, of which $784,000 was payable at
November 30, 1997. The fee is computed daily and paid monthly, and consists of
an individual fund fee equal to 0.30% 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 Price Associates (the group). The group fee rate
ranges from 0.48% for the first $1 billion of assets to 0.30% for assets in
excess of $80 billion. At November 30, 1997, 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.
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
26
<PAGE>
T. Rowe Price High Yield Fund
- --------------------------------------------------------------------------------
invested in the fund. The fund incurred expenses pursuant to these related party
agreements totaling approximately $651,000 for the six months ended November 30,
1997, of which $134,000 was payable at period-end.
Additionally, the fund is one of several T. Rowe Price-sponsored mutual funds
(underlying funds) in which the T. Rowe Price Spectrum Funds (Spectrum) may
invest. Spectrum does not invest in the underlying funds for the purpose of
exercising management or control. Expenses associated with the operation of
Spectrum are borne by each underlying fund to the extent of estimated savings to
it and in proportion to the average daily value of its shares owned by Spectrum,
pursuant to special servicing agreements between and among Spectrum, the
underlying funds, T. Rowe Price, and, in the case of T. Rowe Price Spectrum
International, Rowe Price-Fleming International. Spectrum Income Fund held
approximately 23.3% of the outstanding shares of the High Yield Fund at November
30, 1997. For the six months then ended, the fund was allocated $415,000 of
Spectrum expenses, $52,000 of which 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, 1997, totaled
$744,000 and are reflected as interest income in the accompanying Statement of
Operations.
27
<PAGE>
T. Rowe Price Shareholder Services
- --------------------------------------------------------------------------------
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.
Automated 24-Hour Services Including Tele*Access(R) and
T. Rowe Price OnLine.
DISCOUNT BROKERAGE*
Individual Investments Stocks, bonds, options, precious metals,
and other securities at a savings over regular commission rates.
INVESTMENT INFORMATION
Combined Statement Overview of your T. Rowe Price accounts.
Shareholder Reports Fund managers' reviews of their strategies and
results.
T. Rowe Price Report Quarterly investment newsletter discussing
markets and financial strategies.
Performance Update Quarterly review of all T. Rowe Price fund results.
Insights Educational reports on investment strategies and financial
markets.
Investment Guides Asset Mix Worksheet, College Planning Kit,
Diversifying Overseas: A Guide to International Investing, Personal
Strategy Planner, Retirees Financial Guide, and Retirement Planning Kit.
*A division of T. Rowe Price Investment Services, Inc. Member NASD/SIPC.
28
<PAGE>
T. Rowe Price Mutual Funds
- --------------------------------------------------------------------------------
STOCK FUNDS
...............................
Domestic
Blue Chip Growth
Capital Appreciation
Capital Opportunity
Diversified Small-Cap Growth
Dividend Growth
Equity Income
Equity Index
Financial Services
Growth & Income
Growth Stock
Health Sciences
Media & Telecommunications*
Mid-Cap Growth
Mid-Cap Value
New America Growth
New Era
New Horizons**
Real Estate
Science & Technology
Small-Cap Stock***
Small-Cap Value**
Spectrum Growth
Value
International/Global
Emerging Markets Stock
European Stock
Global Stock
International Discovery
International Stock
Japan
Latin America
New Asia
Spectrum International
BOND FUNDS
...............................
Domestic Taxable
Corporate Income
GNMA
High Yield
New Income
Short-Term Bond
Short-Term U.S. Government
Spectrum Income
Summit GNMA
Summit Limited-Term Bond
U.S. Treasury Intermediate
U.S. Treasury Long-Term
Domestic Tax-Free
California Tax-Free Bond
Florida Insured
Intermediate Tax-Free
Georgia Tax-Free Bond
Maryland Short-Term
Tax-free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Summit Municipal Intermediate
Tax-Free High Yield
Tax-Free Income
Tax-Free Insured
Intermediate Bond
Tax-free Short-Intermediate
Virginia Short-Term
Tax-Free Bond
Virginia Tax-Free Bond
...............................
International/Global
Emerging Markets Bond
Global Government Bond
International Bond
MONEY MARKET FUNDS
...............................
Taxable
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
Tax-Free
California Tax-Free Money
New York Tax-Free Money
Summit Municipal
Money Market
Tax-Exempt Money
BLENDED ASSET FUNDS
...............................
Balanced
Personal Strategy Balanced
Personal Strategy Growth
Personal Strategy Income
Tax-Efficient Balanced
T. ROWE PRICE NO-LOAD
VARIABLE ANNUITY
...............................
Equity Income Portfolio
International Stock Portfolio
Limited-Term Bond Portfolio
Mid-Cap Growth Portfolio
New America Growth Portfolio
Personal Strategy Balanced Portfolio
Prime Reserve Portfolio
* Formerly the closed-end New Age Media Fund; converted to open-end status on
7/28/97.
** Closed to new investors.
*** Formerly the OTC Fund.
Please call for a prospectus. Read it carefully before you invest or send money.
The T. Rowe Price No-Load Variable Annuity [#V6021] is issued by Security
Benefit Life Insurance Company. In New York, it [#FSB201(11-96)] is issued by
First Security Benefit Life Insurance Company of New York, White Plains, NY.
T. Rowe Price refers to the underlying portfolios' investment managers and the
distributors, T. Rowe Price Investment Services, Inc.; T. Rowe Price Insurance
Agency, Inc.; and T. Rowe Price Insurance Agency of Texas, Inc. The Security
Benefit Group of Companies and the T. Rowe Price companies are not affiliated.
The variable annuity may not be available in all states. The contract has
limitations. Call a representative for costs and complete details of the
coverage.
29
<PAGE>
For yield, price, last transaction, Investor Centers:
current balance, or to conduct 101 East Lombard St.
transactions, 24 hours, 7 days Baltimore, MD 21202
a week, call Tele*Access(R):
1-800-638-2587 toll free T. Rowe Price
Financial Center
For assistance 10090 Red Run Blvd.
with your existing Owings Mills, MD 21117
fund account, call:
Shareholder Service Center Farragut Square
1-800-225-5132 toll free 900 17th Street, N.W.
410-625-6500 Baltimore area Washington, D.C. 20006
To open a Discount Brokerage ARCO Tower
account or obtain information, 31st Floor
call: 1-800-638-5660 toll free 515 South Flower St.
Los Angeles, CA 90071
Internet address:
www.troweprice.com 4200 West Cypress St.
10th Floor
T. Rowe Price Associates Tampa, FL 33607
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for
distribution only to shareholders
and to others who have received
a copy of the prospectus of the
T. Rowe Price High Yield Fund(R).
[LOGO OF T. ROWE PRICE APPEARS HERE]
T. Rowe Price Investment Services, Inc., Distributor. F57-051 11/30/97
