----------------------
SEMIANNUAL REPORT
----------------------
GNMA
----------------------
FOR YIELD, PRICE, LAST TRANSACTION,
AND CURRENT BALANCE, 24 HOURS,
7 DAYS A WEEK, CALL:
1-800-638-2587 toll free
625-7676 Baltimore area
----------------------
FOR ASSISTANCE WITH YOUR EXISTING
FUND ACCOUNT, CALL:
Shareholder Service Center
1-800-225-5132 toll free
625-6500 Baltimore area
----------------------
T. ROWE PRICE
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
U.S. Treasury Funds.
<PAGE>
- -------------------------------------------------------------------------------
Fellow Shareholders
- -------------------------------------------------------------------------------
Bond funds, including the GNMA Fund, performed well during the six months
ended November 30, despite a brief rise in interest rates in August. The 30-year
Treasury bond yield fell from 6.81% at the end of May to 6.19% at the end of
November, the low for the six-month period. The yield peaked at 6.96% in
mid-August. Short-term rates also declined, but not to the same extent.
The Federal Reserve lowered the key fed funds rate a quarter-point in July
to 5.75%, following a series of seven tightening moves that ended last February.
The long Treasury bond yield was only about four-tenths of one percentage point
higher than the fed funds rate at the end of November, an indication that the
market anticipated the further Fed easing to 5.5% that took place after the
close of our reporting period.
MARKET ENVIRONMENT
The economic expansion is now more than four and a half years old with few
if any signs of recession on the horizon. During the past six months, consumer
spending was firm and the civilian unemployment rate remained in a healthy zone,
centered around 5.5%. The inventory correction last spring took the steam out of
inflationary pressures that appeared to be developing early in the year, and we
expect consumer inflation to be just below 3% at year-end, roughly where it was
during the past two years.
The Fed's easing in July was based on optimism that progress is being made
on reducing the federal budget deficit over the next seven years or so. Even
though the debate in Washington has been rancorous, a consensus seems to be
emerging that the deficit must be reduced and that entitlement programs cannot
be allowed to expand without ongoing Congressional oversight.
Tighter fiscal policy would give the Fed room to lower interest rates
further to encourage more private spending, which will be needed to keep the
economy at full employment. This view triggered the bond market rally of the
past six months, despite the economy's strength in the third quarter. The
accompanying chart shows that the 10-year Treasury yield fell further than the
current coupon GNMA yield between August and November.
[Edgar description: insert Yield Comparison chart showing current coupon GNMA
and 10-year Treasury note yields from 5/31/95 through 11/30/95]
Falling interest rates prompted fears of prepayment increases on
mortgage-backed bonds, since homeowners can either refinance existing mortgages
or trade up to better homes with the lower rates. As 30-year fixed rate
mortgages fell back toward 7.25%, there was indeed a pickup in prepayments and
also in the level of mortgage applications, providing some indication of future
activity.
<PAGE>
However, prepayments were nowhere near the magnitude of two years earlier,
when mortgage rates were the lowest in 20 years. Many homeowners seized the
opportunity to refinance at that time, so the latest round of rate decreases
does not automatically signal a return of 1993's prepayment levels.
Despite signs of more subdued prepayment activity, mortgage-backed bonds
underperformed both corporate and Treasury issues because of the prepayment
threat. Even seasoned mortgage pools, where prepayments are normally lower than
in newer pools of two to five years' duration, did not appreciate in price with
falling interest rates.
We believe that mortgage bonds will once again attract investor interest if
rates stabilize or trend somewhat lower and visible progress is made on a
bipartisan plan to reduce the federal budget deficit. Until such time, however,
the prepayment issue will continue to cast a pall over the mortgage market.
- --------------------------------------------------------------------------------
PERFORMANCE REVIEW
================================================================================
Notwithstanding the negative impact of prepayment fears, your fund's
returns were impressive for both the 6 and 12 months ended November 30. As you
can see in the table below, fund performance surpassed the averages for our peer
group in both periods.
- --------------------------------------------------------------------------------
Performance Comparison
================================================================================
Periods Ended 11/30/95
6 Months 12 Months
---------------------
GNMAFund 5.14% 17.48%
Lipper GNMA Fund Average 4.73 15.83
================================================================================
Price appreciation accounted for about one-third and dividend income the
balance of the return during the last six months. Our low turnover policy
regarding core GNMA holdings tended to stabilize income, although new purchases
of lower-coupon mortgage pools led to a general decline in the fund's dividend
income.
STRATEGY
With prepayment fears growing, our emphasis was on lower-coupon mortgages
and long-term Treasury bonds. Both types of securities helped the fund benefit
from price appreciation with declining interest rates.
<PAGE>
While our focus continued to be on preservation of principal and high
income, the fall in rates dictated a strategy that kept opportunities for
appreciation in mind as well. Treasury bonds, which are unaffected by
prepayments, appreciate directly with a decline in interest rates. Lower-coupon
mortgages, with their slow principal payments, also appreciate more than
mortgages with high coupons when interest rates fall.
This environment led us to concentrate new purchases in lower-coupon
mortgages, mainly 6.5%, 7%, and 7.5% pools, because of their sensitivity to
interest rate swings. Simultaneously, we held onto many older, higher-coupon
mortgages to stabilize the dividend return. Our new purchases were made in the
forward market in anticipation of coupon and principal payments in coming
months, which accounts for the 97% GNMA position in the portfolio. If the income
level is not sufficient for us to take delivery, the forward contracts can be
rolled ahead without affecting income, since lower prices make up for any lost
coupon income.
OUTLOOK
Whether continued optimism about a federal budget agreement is justified
will become more evident as we move into 1996. If Congress and the
administration agree on a plan to reduce the deficit over seven years, the
recent rate declines are more than justified .
However, progress in this area may prove as ephemeral as it was after
previous budget negotiations. We are reasonably optimistic that rates will edge
lower next year, unless Washington reverts to business as usual.
A relatively stable interest rate environment should be favorable for
mortgage securities. Fears of a new prepayment surge are exaggerated, in our
opinion, and we expect that the higher yield advantages of GNMA securities over
Treasuries will continue to make them popular choices for fixed income
investors.
Respectfully submitted,
[signature]
Peter Van Dyke
President
December 15, 1995
<PAGE>
- --------------------------------------------------------------------------------
Portfolio Highlights
T. Rowe Price GNMA Fund / November 30, 1995
- --------------------------------------------------------------------------------
Key Statistics
================================================================================
Periods Ended
Dividend Yield* November 30,1995
- -----------------------------------------------------------
6 Months 7.22%
12 Months 7.52
Dividend Per Share
- ---------------------------
6 Months $0.34
12 Months 0.68
Change in Price Per Share
- ---------------------------
6 Months (From $9.51 to $9.65) $0.14
12 Months (From $8.83 to $9.65) 0.82
================================================================================
* 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.
Note: Reflecting mortgage prepayments, 9.07% of the fund's income distribution
for January through April 1995 was classified as a "return of capital" and is
reported on Form 1099-DIV, which we send to you in January 1996. This percentage
of the dividend is not subject to federal income tax and should be subtracted
from the cost basis of your investment.
- --------------------------------------------------------------------------------
================================================================================
Quality Diversification
================================================================================
Percent of Net Assets
TRPA Quality Rating* 5/31/95 11/30/95
- -------------------------------------------------------------
1 100% 100%
2 -- --
3 -- --
4 -- --
Weighted Average 1.0 1.0
* On a scale of 1 to 10, with Grade 1 representing highest quality.
================================================================================
- --------------------------------------------------------------------------------
<PAGE>
Maturity Diversification*
================================================================================
Percent of Net Assets
Range 5/31/95 11/30/95
- --------------------------------------------------------------
Short-Term
(0 to 1 Year) -14% -10%
Short Intermediate-
Term (1+ to 5 Years) 7 17
Long Intermediate-
Term (5+ to 10 Years) 66 78
Long-Term
(Over 10 Years) 41 15
Weighted Average Maturity 8.9 yrs. 9.4 yrs.
Weighted Average
Effective Duration 4.9 yrs. 4.8 yrs.
================================================================================
* Based on prepayment-adjusted life of GNMA securities.
================================================================================
- --------------------------------------------------------------------------------
Average Annual Compound Total Return
================================================================================
Periods Ended November 30, 1995
1 Year 5 Years 10 Years
------- ------- -------
17.48% 8.55% 8.37%
Note: For the periods ended 9/30/95, the fund's returns were 14.43% for one
year, 8.83% for five years, and 8.33% since inception (11/26/85). Investment
return and principal value represent past performance and will vary. Shares may
be worth more or less at redemption than at original purchase.
================================================================================
- --------------------------------------------------------------------------------
<PAGE>
Sector Diversification
Percent of Net Assets
5/31/95 11/30/95
- --------------------------------------------------------------
GNMASecurities 111% 97%
U.S. Treasury Securities 4 12
Other Government
Agency Securities 1 1
Other Assets Less Liabilities -16 -10
Total 100 100
- --------------------------------------------------------------------------------
================================================================================
<PAGE>
- --------------------------------------------------------------------------------
Statement of Net Assets
T. Rowe Price GNMA Fund / November 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
(AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
Amount Value
-------- -------
- --------------------------------------------------------------------------------
U.S. Government Guaranteed Obligations -- 97.9%
- --------------------------------------------------------------------------------
Federal Housing Authority, 9.95%, 10/1/32 ................ $ 4,979 $ 5,202
Government National Mortgage Assn., I, 6.50%,
6/15/23 - 6/15/24 .............................. 46,899 46,072
7.00%, 4/15/17 - 9/15/25 ............................ 120,350 120,917
7.50%, 3/15/07 - 9/15/24 ............................ 94,161 96,859
8.00%, 11/15/12 - 7/15/25 ........................... 113,862 119,264
8.50%, 12/15/04 - 1/15/27 ........................... 56,212 59,145
9.00%, 4/15/16 - 9/15/24 ............................ 76,742 81,904
9.50%, 6/15/09 - 5/15/25 ............................ 39,461 42,339
10.00%, 10/15/15 - 7/15/24 .......................... 12,237 13,428
10.50%, 1/15/13 - 11/15/21 .......................... 6,515 7,227
11.00%, 2/15/10 - 6/15/19 ........................... 1,402 1,578
11.50%, 4/15/10 - 7/15/20 ........................... 5,930 6,760
12.00%, 5/15/11 - 10/15/15 .......................... 7,959 9,210
12.50%, 4/15/10 - 7/15/15 ........................... 2,955 3,467
13.00%, 1/15/11 - 8/15/15 ........................... 1,388 1,640
13.50%, 5/15/10 - 2/15/15 ........................... 2,077 2,488
II, 8.00%, 10/20/24 .................................... 3,773 3,666
8.50%, 4/20/16 - 2/20/23 ............................ 30,032 28,915
10.00%, 9/20/16 - 5/20/25 .......................... 4,322 4,678
11.00%, 2/20/14 - 9/20/20 .......................... 3,078 3,438
11.50%, 12/20/13 - 7/20/20 ......................... 2,015 2,276
12.50%, 10/20/13 - 1/20/16 ......................... 251 290
13.00%, 10/20/13 - 9/20/15 ......................... 1,042 1,218
GPM, I, 8.75%, 6/15/17 - 6/15/22 ....................... 1,544 1,627
9.00%, 5/15/09 - 3/15/14 ........................... 775 819
9.25%, 5/15/16 - 8/15/21 ........................... 8,217 8,684
9.50%, 6/15 - 11/15/09 ............................. 2,990 3,212
9.75%, 4/15/16 - 9/15/21 ........................... 10,197 10,956
10.75%, 2/15/16 - 6/15/19 .......................... 2,359 2,628
11.00%, 8/15 - 9/15/10 ............................. 451 496
12.00%, 10/15/10 - 2/15/13 ......................... 613 696
12.25%, 9/15/13 - 3/15/15 .......................... 426 484
12.50%, 4/15/10 - 10/15/12 ......................... 766 873
12.75%, 10/15/13 - 5/15/15 ......................... 467 536
II, 9.75%, 12/20/20 - 7/20/21 .......................... 552 589
10.25%, 3/20 - 9/20/16 ............................. 46 50
11.00%, 9/20/13 - 1/20/14 .......................... 154 169
12.25%, 1/20/14 - 12/20/15 ......................... 430 485
12.75%, 10/20/13 - 7/20/15 ......................... 368 421
<PAGE>
Amount Value
-------- -------
Project Loan, I, 9.25%, 2/15/97 - 10/15/23 ............... $ 12,718 $ 13,339
10.00%, 2/15/30 .................................... 10,890 11,814
10.75%, 3/15/26 .................................... 6,151 6,797
REMIC, 6.50%, 10/16/24 ................................. 33,000 30,390
8.00%, Interest Only, 6/16/23**..................... 16,193 2,915
TBA, I, 6.50%, 1/1/25 .................................. 30,000 29,471
Government National Mortgage Assn.,
TBA, I, 7.00%, 1/1/25 ............................... 20,000 20,056
7.50%, 1/1/25 ...................................... 23,000 23,493
8.00%, 1/1/25 ...................................... 22,000 22,781
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT GUARANTEED OBLIGATIONS (COST $825,957) 856,986
U.S. Government Obligations -- 12.4%
U.S. Treasury Bonds, 6.875%, 8/15/25 ..................... 5,700 105,270
U.S. Treasury Notes, 6.50%, 9/30/96 ...................... 3,370 3,398
-------
TOTAL U.S. GOVERNMENT OBLIGATIONS (COST $105,967) 108,668
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES -- 110.3% OF NET ASSETS
(COST $931,924) 965,654
- --------------------------------------------------------------------------------
PAYABLE FOR INVESTMENTS PURCHASED ........................ (109,869)
OTHER ASSETS LESS LIABILITIES ............................ 19,585
----------
NET ASSETS CONSIST OF: Value
---------
Accumulated net investment income -
net of distributions ..................................... $(4,763)
Accumulated net realized gain/loss -
net of distributions...................................... (29,194)
Net unrealized gain (loss)................................ 33,730
Paid-in-capital applicable to 90,708,700
no par value shares of beneficial
interest outstanding; unlimited
number of shares authorized .............................. 875,597
---------
NET ASSETS. . . . . . . . . . . . . $875,370
========
NET ASSET VALUE PER SHARE. . . . . . . . . $9.65
=====
** For Interest Only securities, amount represents notional principal, on
which the fund receives interest.
GPM Graduated Payment Mortgage
REMIC Real Estate Mortgage Investment Conduit
TBA To be announced security was purchased on a forward commitment basis.
The accompanying notes are an integral part of these financial statements.
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations
T. Rowe Price GNMA Fund / Six Months Ended November 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
(IN THOUSANDS)
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Interest income .......................................... $32,542
--------
Expenses
Investment management .................................. 2,017
Shareholder servicing .................................. 757
Custody and accounting ................................. 260
Prospectus and shareholder reports ..................... 31
Legal and audit ........................................ 17
Registration ........................................... 8
Trustees ............................................... 6
Miscellaneous .......................................... 9
--------
Total expenses ......................................... 3,105
Expenses paid indirectly ............................... (13)
--------
Net expenses ........................................... 3,092
--------
Net investment income .................................... 29,450
--------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on securities ................... 4,310
Change in net unrealized gain or loss on securities ...... 8,493
--------
Net realized and unrealized gain (loss) .................. 12,803
--------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ........ $42,253
========
The accompanying notes are an integral part of these financial statements.
<PAGE>
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
T. Rowe Price GNMA Fund (Unaudited)
- --------------------------------------------------------------------------------
(IN THOUSANDS)
- --------------------------------------------------------------------------------
Six Months Ended Year Ended
November 30, 1995 May 31, 1995
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income ............... $29,450 $ 58,421
Net realized gain (loss) ............ 4,310 (6,992)
Change in net unrealized
gain or loss....................... 8,493 37,254
--------- ---------
Increase (decrease) in net assets
from operations .................. 42,253 88,683
--------- ---------
Distributions to shareholders
Net investment income................ (29,439) (56,700)
Tax return of capital ............... -- (1,712)
--------- ---------
Decrease in net assets
from distributions ............... (29,439) (58,412)
--------- ---------
Capital share transactions*
Shares sold ......................... 94,930 125,225
Distributions reinvested ............ 20,018 45,242
Shares redeemed ..................... (62,859) (192,575)
--------- ---------
Increase (decrease) in net assets
from capital share transactions ... 52,089 (22,108)
--------- ---------
Increase (decrease) in net assets ..... 64,903 8,163
NET ASSETS
Beginning of period ................... 810,467 802,304
--------- ---------
End of period ......................... $875,370 $810,467
========= =========
*Share information
Shares sold ......................... 9,950 13,818
Distributions reinvested ............ 2,099 4,981
Shares redeemed ..................... (6,602) (21,307)
--------- ---------
Increase (decrease) in shares
outstanding ...................... 5,447 (2,508)
========= =========
The accompanying notes are an integral part of these financial statements.
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
T. Rowe Price GNMA Fund / November 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price GNMA Fund (the fund) is registered under the Investment
Company Act of 1940 as a diversified, open-end management investment company.
A) Valuation - Debt securities are generally traded in the over-the-counter
market. Investments in securities with remaining 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 remaining
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.
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 Trustees.
B) Premiums and Discounts - Premiums and discounts on mortgage-backed
securities are recognized upon principal repayment as gain or loss for financial
reporting purposes and as ordinary income for tax purposes. Premiums and
discounts on debt securities, other than mortgage-backed securities, are
amortized for both financial reporting and tax purposes.
C) Other - Income and expenses are recorded on the accrual basis. Expenses
paid indirectly are custody fees paid by float credits earned on daily residual
cash balances at the custodian. Investment transactions are accounted for on the
trade date. Realized gains and losses are reported on the identified cost basis.
Distributions to shareholders are recorded by the fund on the ex-dividend date.
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.
<PAGE>
NOTE 2 - INVESTMENT TRANSACTIONS
Consistent with its investment objective, the fund engages in the following
practices to manage exposure to certain risks and 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.
A) Securities Lending - To earn additional income, the fund lends its
securities to approved brokers. At November 30, 1995, the market value of
securities on loan was $103,070,000, which was fully collateralized with cash.
Although the risk is mitigated by the collateral, the fund could experience a
delay in recovering its securities and a possible loss of income or value if the
borrower fails to return them.
B) Other - Purchases and sales of U.S. government securities aggregated
$513,968,000 and $488,453,000, respectively, for the six months ended November
30, 1995.
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 $31,439,000, of which $12,897,000 expires in
1996, $1,432,000 in 1997, and $17,110,000 thereafter through 2003. The fund
intends to retain gains realized in future periods that may be offset by
available capital loss carryforwards.
At November 30, 1995, the aggregate cost of investments for federal income
tax and financial reporting purposes was $931,924,000 and net unrealized gain
aggregated $33,730,000, of which $35,987,000 related to appreciated investments
and $2,257,000 to depreciated investments.
NOTE 4 - RELATED PARTY TRANSACTIONS
The investment management agreement between the fund and T. Rowe Price
Associates, Inc. (the Manager) provides for an annual investment management fee,
of which $345,000 was payable at November 30, 1995. The fee is computed daily
and paid monthly, and consists of an Individual Fund Fee equal to 0.15% 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 Rowe Price-Fleming
International, Inc. (the Group). The Group Fee rate ranges from 0.48% for the
first $1 billion of assets to 0.31% for assets in excess of $34 billion. At
November 30, 1995, and for the six months then ended, the effective annual Group
Fee rate was 0.34%. The fund pays a pro rata share of the Group Fee based on the
ratio of its net assets to those of the Group.
<PAGE>
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.
(TRPS), 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 invested in the fund. Additionally, the fund is one
of several T. Rowe Price mutual funds (the Underlying Funds) in which the T.
Rowe Price Spectrum Income Fund (Spectrum) invests. In accordance with an
Agreement among Spectrum, the Underlying Funds, the Manager, and TRPS, expenses
from the operation of Spectrum are borne by the Underlying Funds based on each
Underlying Fund's proportionate share of assets owned by Spectrum. The fund
incurred expenses pursuant to these related party agreements totaling
approximately $723,000 for the six months ended November 30, 1995, of which
$142,000 was payable at period-end.
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------
Financial Highlights
T. Rowe Price GNMA Fund (Unaudited)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
For a share outstanding throughout each period
--------------------------------------------------------------------------------------
Three
Six Months Year Months
Ended Ended Ended Year Ended
------------------------------------------------
Nov. 30, May 31, May 31, Feb. 28, Feb. 28, Feb. 29, Feb. 28,
1995 1995 1994^ 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD ............................... $9.51 $9.14 $9.60 $9.92 $9.79 $9.47 $9.16
------ ------ ------ ------ ------ ------ ------
Investment activities
Net investment income ................... 0.34 0.68 0.17 0.68 0.75 0.80 0.83
Net realized and unrealized gain (loss).. 0.14 0.37 (0.46) (0.32) 0.13 0.32 0.31
------ ------ ------ ------ ------ ------ ------
Total from investment activities ........ 0.48 1.05 (0.29) 0.36 0.88 1.12 1.14
------ ------ ------ ------ ------ ------ ------
Distributions
Net investment income ................... (0.34) (0.66) (0.17) (0.68) (0.75) (0.80) (0.83)
Net realized gain ....................... -- (0.02) -- -- -- -- --
------ ------ ------ ------ ------ ------ ------
Total distributions ..................... (0.34) (0.68) (0.17) (0.68) (0.75) (0.80) (0.83)
------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD ............ $9.65 $9.51 $9.14 $9.60 $9.92 $9.79 $9.47
====== ====== ====== ====== ====== ====== ======
--------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Total return .............................. 5.14% 12.11% (3.03)% 3.71% 9.36% 12.28% 13.02%
Ratio of expenses to average net assets ... 0.75%*^ 0.76% 0.76%* 0.77% 0.79% 0.86% 0.85%
Ratio of net investment income
to average net assets ................... 7.12%* 7.50% 7.24%* 6.93% 7.65% 8.25% 8.94%
Portfolio turnover rate ................... 104.5%* 121.3% 151.8%* 92.5% 94.2% 66.0% 91.8%
Net assets, end of period (in thousands) .. $875,370 $810,467 $802,304 $883,391 $913,722 $715,249 $468,969
--------------------------------------------------------------------------------------
<FN>
*Annualized.
^The fund's fiscal year-end was changed to May 31.
**Beginning in fiscal 1995,includes expenses paid indirectly.
</FN>
</TABLE>
<PAGE>
================================================================================
[Shareholders Services page]
================================================================================
