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October 1, 2000
FUND PROFILE
T. ROWE PRICE
High Yield Fund
A higher-risk bond fund that seeks to earn a high level of income and some
appreciation.
This profile summarizes key information about the fund that is included in the
fund's prospectus. The fund's prospectus includes additional information about
the fund, including a more detailed description of the risks associated with
investing in the fund that you may want to consider before you invest. You may
obtain the prospectus and other information about the fund at no cost by calling
1-800-638-5660, or by visiting our Web site at www.troweprice.com.
TROWEPRICELOGO
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FUND PROFILE
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What is the fund's objective?
The fund seeks high current income and, secondarily, capital appreciation.
What is the fund's principal investment strategy?
We will normally invest at least 80% of total assets in a widely diversified
portfolio of high-yield corporate bonds, often called "junk" bonds,
income-producing convertible securities, and preferred stocks. High-yield
bonds are rated below investment grade (BB and lower). They generally provide
high income in an effort to compensate investors for their higher risk of
default, which is the failure to make required interest or principal
payments. High-yield bond issuers include small or relatively new companies
lacking the history or capital to merit investment-grade status, former blue
chip companies downgraded because of financial problems, companies electing
to borrow heavily to finance or avoid a takeover or buyout, and firms with
heavy debt loads.
The fund's weighted average maturity generally is expected to be in the 8- to
12-year range. In selecting investments, we rely extensively on T. Rowe Price
research analysts. When our outlook for the economy is positive, we may
purchase lower-rated bonds in an effort to secure additional income and
appreciation potential. When it is less positive, we may gravitate toward
higher-rated junk bonds.
We may also invest in other securities, including futures and options, in
keeping with the fund's objective.
The fund may sell holdings for a variety of reasons, such as to adjust the
portfolio's average maturity or quality, or to shift assets into
higher-yielding securities.
Further information about the fund's investments, including a review of
market conditions and fund strategies and their impact on performance, is
available in the annual and semiannual shareholder reports. To obtain free
copies of either of these documents, call 1-800-638-5660.
What are the main risks of investing in the fund?
This fund could have greater price declines than one that invests primarily
in high-quality bonds. Like other bond funds, it is exposed to interest rate
risk, but credit risk and other risks may often be more important.
. Interest rate risk This means that the fund's price is likely to fall when
interest rates rise. Longer-maturity bonds typically decline more than those
with shorter maturities.
. Credit risk This is the potential for price losses caused by credit rating
downgrades and defaults. Companies issuing high-yield bonds are not as strong
financially as those with higher credit ratings, so the bonds are usually
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FUND PROFILE
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considered speculative investments. These companies are more vulnerable to
financial setbacks and recession than more creditworthy companies, which may
impair their ability to make interest and principal payments. Therefore, the
credit risk for the fund's portfolio increases when the U.S. economy slows or
enters a recession.
The fund may be more vulnerable to interest rate risk if it is focusing on BB
rated bonds, since better-quality junk bonds follow the investment-grade
market to some extent. But if its focus is on bonds rated B and below, credit
risk will probably predominate.
. Liquidity risk This is the chance that the fund may not be able to sell
bonds at desired prices and that large purchases or sales of certain
high-yield bond issues may cause substantial price swings.
. Other risks The entire noninvestment-grade bond market can experience
sudden and sharp price swings due to a variety of factors, including changes
in economic forecasts, stock market activity, large sustained sales by major
investors, a high-profile default, or a change in the market's psychology.
This type of volatility is usually associated more with stocks than bonds,
but junk bond investors should be prepared for it.
. Foreign investing risk To the extent the fund holds foreign bonds, it will
be subject to special risks whether the bonds are denominated in U.S. dollars
or foreign currencies. These risks include potentially adverse political and
economic developments overseas, greater volatility, lower liquidity, and the
possibility that foreign currencies will decline against the dollar, lowering
the value of securities denominated in those currencies and possibly the
fund's share price. Currency risk can affect the fund to the extent that it
holds nondollar foreign bonds.
As with any mutual fund, there can be no guarantee the fund will achieve its
objective.
. The fund's share price may decline, so when you sell your shares, you may
lose money. An investment in the fund is not a deposit of a bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency.
How can I tell if the fund is appropriate for me?
Consider your investment goals, your time horizon for achieving them, and
your tolerance for risk. If you are a long-term, risk-oriented investor
seeking a high level of current income and some appreciation potential, the
fund may be appropriate but should not represent a significant portion of
your assets. If you are investing primarily for stability and liquidity, you
should consider a money market fund.
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The fund can be used in both regular and tax-deferred accounts, such as IRAs.
. The fund should not represent your complete investment program or be used
for short-term trading purposes.
How has the fund performed in the past?
The bar chart showing calendar year returns and the average annual total
return table indicate risk by illustrating how much returns can differ from
one year to the next and over time. Fund past performance is no guarantee of
future returns.
The fund can also experience short-term performance swings, as shown by the
best and worst calendar quarter returns during the years depicted in the
chart.
LOGO
<TABLE>
<CAPTION>
Calendar Year Total Returns
"90" "91" "92" "93" "94" "95" "96" "97" "98" "99"
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-10.96 30.90 14.73 21.82 -8.00 15.77 11.58 14.47 4.46 4.18
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</TABLE>
Quarter ended Total return
Best quarter 3/31/91 10.47%
Worst quarter 9/30/90 -6.22%
<TABLE>
Table 1 Average Annual Total Returns
<CAPTION>
Periods ended 09/30/2000
1 year 5 years 10 years
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<S> <C> <C> <C>
High Yield Fund 3.52% 7.47% 10.15%
CS First Boston High Yield Index 1.92 6.20 11.77
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Lipper High Current Yield Funds -0.02 5.49 10.43
Average
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</TABLE>
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These figures include changes in principal value, reinvested dividends, and
capital gain distributions, if any.
What fees or expenses will I pay?
The fund is 100% no load. The fund charges a 1% redemption fee, payable to
the fund, on shares held less than one year. There are no other fees or
charges to buy or sell fund shares, reinvest dividends, or exchange into
other T. Rowe Price funds. There are no 12b-1 fees. Redemption proceeds of
less than $5,000 sent by wire are subject to a $5 fee paid to the fund.
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Table 2 Fees and Expenses of the Fund
<CAPTION>
Shareholder fees (fees paid directly from your investment)
Redemption fee (for shares held less than one year) 1%
Annual fund operating expenses
(expenses that are deducted from fund assets)
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<S> <C> <S>
Management fee 0.62%/ /
Other expenses 0.21%
Total annual fund operating expenses 0.83%/ /
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</TABLE>
Example. The following table gives you a rough idea of how expense ratios
may translate into dollars and helps you to compare the cost of investing in
this fund with that of other mutual funds. Although your actual costs may be
higher or lower, the table shows how much you would pay if operating expenses
remain the same, you invest $10,000, earn a 5% annual return, and hold the
investment for the following periods and then redeem:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
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<S> <C> <C> <C>
$85 $265 $460 $1,025
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</TABLE>
Who manages the fund?
The fund is managed by T. Rowe Price Associates, Inc. Founded in 1937, T.
Rowe Price and its affiliates manage investments for individual and
institutional accounts. The company offers a comprehensive array of stock,
bond, and money market funds directly to the investing public.
Mark J. Vaselkiv manages the fund day-to-day and has been chairman of its
Investment Advisory Committee since 1996. He has been managing investments in
the high-yield bond market since joining T. Rowe Price in 1988.
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Note: The following questions and answers about buying and selling shares and
services do not apply to employer-sponsored retirement plans. If you are a
participant in one of these plans, please call your plan's toll-free number for
additional information.
How can I purchase shares?
Fill out the New Account Form and return it with your check in the postpaid
envelope. The minimum initial purchase is $2,500 ($1,000 for IRAs and gifts
or transfers to minors). The minimum subsequent investment is $100 ($50 for
IRAs, gifts or transfers to minors, or Automatic Asset Builder). You can also
open an account by bank wire, by exchanging from another T. Rowe Price fund,
or by transferring assets from another financial institution.
How can I sell shares?
You may redeem or sell any portion of your account on any business day.
Simply write to us or call. You can also access your account at any time via
Tele*Access /(R)/ or our Web site. We offer convenient exchange among our
entire family of domestic and international funds. Restrictions may apply in
special circumstances, and some redemption requests need a signature
guarantee.
When will I receive income and capital gain distributions?
The fund distributes income monthly and net capital gains, if any, at
year-end. For regular accounts, income and short-term gains are taxable at
ordinary income rates, and long-term gains are taxable at the capital gains
rate. Distributions are reinvested automatically in additional shares unless
you choose another option, such as receiving a check. Distributions paid to
IRAs and employer-sponsored retirement plans are automatically reinvested.
What services are available?
A wide range, including but not limited to:
. retirement plans for individuals and large and small businesses;
. automated information and transaction services by telephone or computer;
. electronic transfers between fund and bank accounts;
. automatic investing and automatic exchange;
. brokerage services; and
. asset manager accounts.
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FUND PROFILE
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T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, MD 21202
www.troweprice.com
LOGO
RPS F57-035
T. Rowe Price Investment Services, Inc., Distributor
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