<PAGE>
Semiannual Report
NEW
INCOME
FUND
-----------------
NOVEMBER 30, 2000
-----------------
[LOGO OF T. ROWE PRICE]
<PAGE>
REPORT HIGHLIGHTS
---------------------------------------------------------------------------
New Income Fund
. The Federal Reserve's success in slowing the economy produced banner
performance for high-quality bonds.
. The New Income Fund posted strong gains that again exceeded the average
competing fund but trailed the Lehman Brothers U.S. Aggregate Index.
. We increased our investments in Treasury inflation-protected securities,
trimmed mortgages, and searched for value in the beaten-down telecom
sector.
. The environment for bonds remains favorable, especially for those with
solid credit outlooks and a yield advantage over Treasuries.
UPDATES AVAILABLE
For updates on T. Rowe Price funds following the end of each calendar quarter,
please see our Web site at www.troweprice.com.
<PAGE>
FELLOW SHAREHOLDERS
High-quality bonds rallied across all sectors over the past six months due to
the perception that the Federal Reserve has finished raising interest rates and
succeeded in slowing the economy. The New Income Fund posted strong returns in
the 6- and 12- month periods ended November 30, 2000, and outperformed the
average competing fund.
MARKET ENVIRONMENT
The Federal Reserve's yearlong tightening program through May 2000 had the
desired effect of cooling off a red-hot economy and reducing inflationary
pressures. As a result, the past six months provided a healthy environment for
fixed-income investors as bond yields fell and prices rose. Barring a surge in
equity prices in late December, bonds will have outperformed stocks in 2000 for
the first time since 1993, and by a strong margin.
--------------------
INTEREST RATE LEVELS
--------------------------------------------------------------------------------
[GRAPH]
[PLOT POINTS TO COME]
In contrast to the first half of this year, the most recent economic data sug-
gest that the economy has decelerated considerably. Third-quarter GDP showed a
2.4% annualized growth rate, down from the 5.2% recorded for the second quarter.
Upward trends in retail sales and industrial production have reversed, and
manufacturing activity is slowing. An anemic savings rate, high energy prices,
and lower equity prices have left consumers with fewer reserves with which to
boost spending.
To be sure, the unemployment rate remains stubbornly low at 4% and suggests that
the U.S. is near full employment. The latest readings also show wages growing at
a 4% annual rate, the highest since January 1999. Driven by higher energy
prices, the consumer price index reached 3.4% during October.
1
<PAGE>
A recent signal from Fed Chairman Alan Greenspan suggested that the Fed's
hawkish stance would soften following its meeting in December, and this, in
fact, occurred. Core inflation, which strips out food and energy prices, is well
behaved at 2.5% and productivity gains remain high. Removal of the tightening
bias confirms the downward move in bond yields that began months ago.
Bond yields peaked in May
The bond market sensed the deceleration in the U.S. economy toward the end of
the second quarter. Helped by an improving budget picture and the continuation
of a bimonthly government buyback initiative, long-term Treasuries initially led
the rally. Yields reached an interim peak in the long end of the market at
around 6.25% during May. Subsequent evidence of an economic slowdown shifted
investor focus toward intermediate Treasuries, such as the five-year note, which
stood to benefit more than long-term Treasuries from an easier Fed policy. Over
the six-month period, five-year note yields fell more than one percentage point.
By contrast, 30-year Treasury yields fell less than half a percentage point, as
shown in the chart on page 1. As a result, the performance of the five-year
note was exceptionally strong, especially considering its moderate interest
rate risk. Because of their greater price gains in response to declining rates,
however, long-term bonds delivered even better returns, albeit with much more
volatility.
-------------------
BOND MARKET RETURNS
--------------------------------------------------------------------------------
[GRAPH]
[PLOT POINTS TO COME]
Developments in the economy and the Treasury market provided mixed signals to
other fixed-income sectors. High-quality bonds with yield advantages, such as
U.S. agency, asset-, and mortgage-backed securities, produced impressive
returns. Agency bonds also benefited from the announcement that
government-sponsored enterprises (such as Fannie Mae and Freddie Mac) would
improve their public disclosure and increase their capital bases.
2
<PAGE>
Corporate bonds, however, responded defensively to reduced economic growth and
generally failed to track the advance of Treasury issues. Talk of further
downgrades and the volatility in the equity markets added to the uncertainty in
many sectors. Nonetheless, high-grade corporate bonds still posted healthy total
returns.
In general, higher-quality issues outperformed lower-quality, as shown in the
bar chart on page 2. Maintaining higher quality, however, did not guarantee
strong relative performance. The telecommunications sector, for example, which
is dominated by A rated companies, continued to underperform the overall
corporate market. A once highly regarded blue chip company, Xerox, (which your
fund did not own) fell to junk status because of its deteriorating finances.
High-quality or not, corporate bonds had to be chosen carefully.
----------------------
PERFORMANCE COMPARISON
--------------------------------------------------------------------------------
Periods Ended 11/30/00 6 Months 12 Months
New Income Fund 7.02% 8.27%
Lehman Brothers
U.S. Aggregate Index 7.58 9.06
Lipper Average of Corporate
Bond Funds A-Rated 6.69 7.10
Fund performance was strong during the 6- and 12-month periods ended November
30, driven by the recent rebound in high-quality bonds. Results again exceeded
the best known average of similar funds, as shown in the table, aided by portfo-
lio management and below-average expenses. However, returns trailed an unmanaged
benchmark of the overall domestic bond market, the Lehman Brothers U.S.
Aggregate Index. As noted in our last letter, nearly a third of the Lehman index
is composed of Treasury bonds, which have been the best performers over the past
year. Your fund has traditionally emphasized higher-yielding sectors, especially
mortgage-backed and corporate bonds, whose strong performance during the periods
under review was eclipsed by that of the Treasury market, 30-year Treasuries in
particular. Fund returns during the past six months were driven by a $0.29 rise
in the share price to $8.36. Dividends per share increased by a penny to $0.27
compared with the previous six months.
STRATEGY
For most of the six-month period, we remained positive about the U.S. economy
but wary of adverse corporate developments, illiquidity, and
3
<PAGE>
declining credit quality within certain sectors of the corporate market. As a
result, most of our efforts during the summer focused on selecting strong
sectors and individual credits rather than on the overall direction of interest
rates. A brief period of price weakness during September, however, provided an
opportunity to increase our interest rate exposure and extend duration to a more
aggressive posture. (Duration is a measure of a bond fund's sensitivity to
interest rates; for example, a duration of five years means the fund's share
price will rise or fall about 5% for each one-percentage-point fall or rise in
interest rates.)
Within the Treasury sector, Treasury inflation protected securities (TIPS),
which benefit from higher inflation, continued their positive contribution. Over
the past six months, allocations to TIPS maturing in '02 and '07 have performed
well relative to comparable short-term Treasuries. We also increased our
exposure to intermediate-term Treasuries in order to raise the quality of the
portfolio and capture their price appreciation as rates declined. Positive
supply fundamentals relating to the federal budget surplus also dictated that we
maintain a healthy allocation to long-term Treasuries.
------------------------
SECURITY DIVERSIFICATION
--------------------------------------------------------------------------------
Cash and Other 4%
Corporate Bonds and Convertibles 35%
Asset-Backed Securities 6%
U.S. Treasuries 16%
U.S. Agency Obligations 5%
Mortgage-Backed Securities 34%
Based on net assets as of 11/30/00.
Agency, mortgage-, and asset-backed securities continued to supply the portfolio
with high-quality yield. We increased our allocation to agencies throughout the
six-month period as the political uncertainty surrounding the privileged status
of Fannie Mae and Freddie Mac dissipated. Within the mortgage sector, we reduced
our GNMA allocation and our exposure to prepayment risk within the sector.
Despite a lower overall allocation to mortgages, we increased holdings of more
stable commercial mortgage-backed securities.
Our corporate credit team has worked diligently to weed out less appealing names
and sectors, build better liquidity, and take advantage of special
opportunities. Exposure to the energy, high-quality bank,
4
<PAGE>
defense, and real estate investment trust sectors has proved beneficial. The
increased allocation to telecom over the past six months reflects our view that
many high-quality operators trading at distressed levels offer value. In
addition, the attractive valuations of several convertible preferreds have led
us to initiate modest positions in these special situations.
OUTLOOK
". . . WE REMAIN OPTIMISTIC ABOUT THE PROSPECTS FOR BONDS GOING FORWARD."
Current yields reflect a high probability that the economy will achieve a much-
desired "soft landing," in which excesses are purged but the economy does not
enter recession. At 5.52%, five-year Treasury notes are trading almost one
percentage point below the overnight federal funds rate. Further appreciation in
bond prices and declines in yields would require a faster deceleration in growth
or a stronger signal from the Fed that interest rate cuts are imminent. Despite
a perception in the market that bond prices have advanced too far, we remain
optimistic about the prospects for bonds going forward. The economy continues to
slow, and certain sectors of the equity market may remain under pressure as
growth and profit expectations ratchet lower. Consumer demand will probably
remain subdued. In this environment, the Fed would likely reduce the federal
funds target rate.
Corporate yields attractive despite risks
Long-term indicators remain positive for Treasuries. Despite concerns about
additional government spending, the supply fundamentals for the Treasury market
support higher prices. We estimate that at least $250 billion in Treasuries
maturing in 2001 will not be reissued, and that the government will buy back at
least $30 billion in longer-term Treasuries next year. Investing within the
corporate bond sector remains a challenge. Negative credit developments have
occurred with alarming frequency and over-leveraging within certain sectors is a
major concern. Nevertheless, we believe that investors are receiving ample
compensation in select issues and sectors, such as telecom, to warrant
additional allocations. The highest-quality and more defensive sectors, which
are approaching fully valued levels, are becoming less compelling than
corporates. However, agencies, mortgages, and asset-backed securities still
provide an attractive yield above Treasuries and shelter to investors awaiting a
more stable environment for corporates.
5
<PAGE>
An economic slowdown, the chronic U.S. trade deficit, and the potential benefits
of diversification also led us to explore opportunities in nondollar bonds. In
consultation with our colleagues at T. Rowe Price International in London, we
have come to view the euro, after its 25% decline, as undervalued. We believe
modest allocations to high-quality nondollar debt can enhance returns while
lowering overall portfolio risk.
Respectfully submitted,
/s/ William T. Reynolds
William T. Reynolds
President, T. Rowe Price New Income Fund Inc.
December 17, 2000
6
<PAGE>
T. ROWE PRICE NEW INCOME FUND
--------------------------------------------------------------------------------
--------------------
PORTFOLIO HIGHLIGHTS
--------------------------------------------------------------------------------
KEY STATISTICS
5/31/00 11/30/00
--------------------------------------------------------------------------------
Price Per Share $ 8.07 $ 8.36
Dividends Per Share
For 6 months 0.26 0.27
For 12 months 0.52 0.53
30-Day Dividend Yield * 6.98% 6.50%
30-Day Standardized Yield to Maturity 7.46 6.82
Weighted Average Maturity (years) 9.9 9.3
Weighted Average Effective Duration (years) 4.9 5.0
Weighted Average Quality ** AA AA
* Dividends earned for the last 30 days of each period indicated are
annualized and divided by the fund's net asset value per share at the end of
the period.
** Based on T. Rowe Price research.
7
<PAGE>
T. ROWE PRICE NEW INCOME FUND
--------------------------------------------------------------------------------
---------------------
PORTFOLIO HIGHLIGHTS
--------------------------------------------------------------------------------
SECTOR DIVERSIFICATION
Percent of Percent of
Net Assets Net Assets
5/31/00 11/30/00
------------------------------------------------------------------------------
Mortgage-Backed Securities 37% 34%
U.S. Treasury Obligations 17 16
Asset-Backed Securities 5 6
Banking 4 5
U.S. Government Agency Obligations 3 5
Telephones 1 4
Electric Utilities 3 2
Energy 2 2
Money Market Funds * 3 3
All Other 24 22
Other Assets Less Liabilities 1 1
--------------------------------------------------------------------------------
Total 100% 100%
* See note at end of financial statements.
8
<PAGE>
T. ROWE PRICE NEW INCOME 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 benchmarks, which may include
a broad-based market index and a peer group average or index. Market
indexes do not include expenses, which are deducted from fund returns as
well as mutual fund averages and indexes.
NEW INCOME FUND
---------------------------------------------------------------------------
As of 11/30/00
[GRAPH]
[PLOT POINTS TO COME]
------------------------------------
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.
Periods Ended 11/30/00 1 Year 3 Years 5 Years 10 Years
---------------------------------------------------------------------------
New Income Fund 8.27% 4.35% 5.02% 6.98%
Investment return and principal value represent past performance and will
vary. Shares may be worth more or less at redemption than at original
purchase.
9
<PAGE>
T. ROWE PRICE NEW INCOME FUND
--------------------------------------------------------------------------------
--------------------
FINANCIAL HIGHLIGHTS For a share outstanding throughout each period
--------------------------------------------------------------------------------
Unaudited
<TABLE>
<CAPTION>
6 Months Year
Ended Ended
11/30/00 5/31/00 5/31/99 5/31/98 5/31/97 5/31/96
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period $ 8.07 $ 8.50 $ 9.09 $ 8.77 $ 8.70 $ 8.97
Investment activities
Net investment
income (loss) 0.27 0.52 0.54 0.57 0.58 0.60
Net realized and
unrealized gain (loss) 0.29 (0.43) (0.45) 0.36 0.07 (0.27)
Total from
investment activities 0.56 0.09 0.09 0.93 0.65 0.33
Distributions
Net investment income (0.27) (0.52) (0.54) (0.57) (0.58) (0.60)
Net realized gain -- -- (0.14) (0.04) -- --
Total distributions (0.27) (0.52) (0.68) (0.61) (0.58) (0.60)
NET ASSET VALUE
End of period $ 8.36 $ 8.07 $ 8.50 $ 9.09 $ 8.77 $ 8.70
-----------------------------------------------------------
Ratios/Supplemental Data
Total return++ 7.02% 1.13% 1.02% 10.84% 7.70% 3.70%
Ratio of total expenses to
average net assets 0.71%+ 0.73% 0.72% 0.71% 0.74% 0.75%
Ratio of net investment
income (loss) to average
net assets 6.54%+ 6.32% 6.16% 6.31% 6.65% 6.66%
Portfolio turnover rate 74.6%+ 83.6% 94.3% 147.3% 87.1% 35.5%
Net assets, end of period
(in millions) $ 1,710 $ 1,633 $ 1,942 $ 2,076 $ 1,711 $ 1,634
</TABLE>
++ Total return reflects the rate that an investor would have earned on an
investment in the fund during each period, assuming reinvestment of all
distributions.
+ Annualized
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
T. ROWE PRICE NEW INCOME FUND
--------------------------------------------------------------------------------
Unaudited November 30, 2000
<TABLE>
<CAPTION>
------------------------
PORTFOLIO OF INVESTMENTS Par/Shares Value
----------------------------------------------------------------------------------------
In thousands
CORPORATE BONDS AND NOTES 33.6%
<S> <C> <C>
Aerospace & Defense 0.4%
Lockheed Martin, Sr. Notes, 8.20%, 12/1/09 $ 7,125 $ 7,618
---------
7,618
---------
Airlines 1.6%
Atlas Air, 7.63%, 1/2/15 9,601 9,315
Continental Airlines, 8.312%, 4/2/11 10,000 10,052
Delta Air Lines, Sr. Notes, 7.70%, 12/15/05 5,000 4,920
Qantas Airways, Sr. Notes, (144a), 7.75%, 6/15/09 3,000 2,943
---------
27,230
---------
Automobiles and Related 0.4%
Ford Motor Credit, Sr. Notes, 6.125%, 4/28/03 6,350 6,232
---------
6,232
---------
Banking 5.4%
Banco Generale, Sr. Notes, (144a), 7.70%, 8/1/02 10,000 9,785
Banco Santiago, Sr. Sub. Notes, 7.00%, 7/18/07 10,800 9,887
Bank United, MTN, 8.00%, 3/15/09 5,000 4,892
Bankboston, Sr. Sub. Notes, 6.50%, 12/19/07 4,100 3,857
Capital One Bank, Sr. Notes, 8.25%, 6/15/05 10,000 9,835
FCB/NC Capital Trust I, Jr. Sub Notes, 8.05%, 3/1/28 5,900 4,897
Imperial Bank, Sr. Sub. Notes, 8.50%, 4/1/09 9,265 9,020
MBNA, Sr. Notes, 7.75%, 9/15/05 8,500 8,362
MBNA, MTN, 6.875%, 11/15/02 2,000 1,959
Riggs National, Sr. Sub. Notes, 9.65%, 6/15/09 10,000 9,325
State Street, Sr. Sub. Notes, 7.65%, 6/15/10 8,975 9,192
Sumitomo Bank International, Sr. Sub. Notes
8.50%, 6/15/09 4,300 4,401
Wells Fargo, Sr. Notes, 7.25%, 8/24/05 7,000 7,135
---------
92,547
---------
Beverages 0.3%
Panamerican Beverages, Sr. Notes, 7.25%, 7/1/09 5,550 4,842
---------
4,842
---------
Broadcasting 0.5%
Hearst-Argyle Television, Sr. Notes, 7.50%, 11/15/27 10,000 8,538
---------
8,538
---------
Building and Real Estate 0.6%
EOP Operating, Sr. Notes, 7.75%, 11/15/07 10,000 10,021
---------
10,021
---------
</TABLE>
11
<PAGE>
T. ROWE PRICE NEW INCOME FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par/Shares Value
------------------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Cable Operators 0.5%
Tele-Communications, Sr. Notes, 7.875%, 8/1/13 $ 8,000 $ 7,981
--------
7,981
--------
Electric Utilities 2.4%
AEP Resources, Sr. Notes, (144a), 6.50%, 12/1/03 15,000 14,761
DTE Capital, Sr. Notes, (144a), 7.11%, 11/15/03 15,000 14,840
Korea Electric Power, Sr. Notes, 7.00%, 10/1/02 5,500 5,427
South Carolina Electric & Gas, 1st Mtg. Bonds
6.125%, 3/1/09 8,000 7,541
--------
42,569
--------
Electronic Components 0.4%
Arrow Electronics, Sr. Notes, (144a), 8.20%, 10/1/03 + 6,200 6,271
--------
6,271
--------
Energy 2.4%
PDVSA Finance, Sr. Notes
6.80%, 11/15/08 8,000 6,892
9.75%, 2/15/10 7,750 7,778
YPF Sociedad Anonima, Sr. Notes
7.25%, 3/15/03 10,000 9,726
10.00%, 11/2/01 16,525 17,490
--------
41,886
--------
Entertainment and Leisure 1.1%
International Speedway, Sr. Notes, 7.875%, 10/15/04 10,000 9,899
Royal Caribbean Cruises, Sr. Notes, 6.75%, 3/15/08 9,560 8,422
--------
18,321
--------
Finance and Credit 1.2%
CIT Group, Sr. Notes, 5.50%, 2/15/04 6,000 5,658
General Electric Capital, Sr. Notes, 7.375%, 1/19/10 14,000 14,681
--------
20,339
--------
Food Processing 0.4%
Flowers Industries, Sr. Notes, 7.15%, 4/15/28 10,000 7,006
--------
7,006
--------
Foreign Government and Municipalities 3.2%
Banco Latinoamericano, Sr. Notes, 6.55%, 4/15/03 7,900 7,697
Canada Government, 6.00%, 9/1/05 (CAN) 22,000 14,721
Federal Republic of Germany, Sr. Notes
5.25%, 7/4/10 (EUR) 19,500 17,237
12
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
T. ROWE PRICE NEW INCOME FUND
------------------------------------------------------------------------------------------
Par/Shares Value
------------------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Petroleos Mexicanos, Sr. Notes, 9.25%, 3/30/18 $ 5,000 $ 4,892
Province of Manitoba, Sr. Notes, 7.50%, 2/22/10 10,000 10,575
--------
55,122
--------
Insurance 1.2%
AIG Sunamerica Global Financing II
Sr. Notes, (144a), 7.60%, 6/15/05 + 7,000 7,228
Jefferson Pilot Capital Trust, Jr. Sub. Notes, (144a)
8.14%, 1/15/46 5,750 5,180
Trenwick Capital Trust I, Jr. Sub. Notes, 8.82%, 2/1/37 10,500 8,434
--------
20,842
--------
Investment Dealers 1.2%
Goldman Sachs Group, Sr. Notes, (144a), 6.625%, 12/1/04 10,000 9,817
Morgan Stanley Dean Witter, Sr. Notes, 7.75%, 6/15/05 10,000 10,254
--------
20,071
--------
Media and Communications 0.9%
Seagrams, Sr. Notes, 6.80%, 12/15/08 10,000 10,321
Time Warner, Sr. Notes, 8.11%, 8/15/06 5,000 5,233
--------
15,554
--------
Metals 0.2%
Alcoa, Sr. Notes, 7.375%, 8/1/10 3,320 3,403
--------
3,403
--------
Paper and Paper Products 0.8%
Celulosa Arauco Y Constitucion, Sr. Notes
8.625%, 8/15/10 7,500 7,460
International Paper, Sr. Notes, (144a), 8.00%, 7/8/03 5,350 5,457
--------
12,917
--------
Petroleum 1.2%
Union Texas Petroleum, Sr. Notes, 7.00%, 4/15/08 20,000 20,028
--------
20,028
--------
Savings and Loan 0.9%
Dime Bancorp, Sr. Notes, 6.375%, 1/30/01 10,000 9,973
Greenpoint Bank, Sr. Sub Notes, 9.25%, 10/1/10 5,550 5,426
--------
15,399
--------
Service 1.1%
Federal Express, ETC, 8.25%, 1/15/19 9,674 9,801
Waste Management, Sr. Notes, 7.70%, 10/1/02 8,579 8,486
--------
18,287
--------
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
T. ROWE PRICE NEW INCOME FUND
----------------------------------------------------------------------------------------
Par/Shares Value
----------------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Telecommunications 0.9%
Sprint, Sr. Notes, 6.125%, 11/15/08 $ 8,420 $ 7,503
Telefonica Europe, Sr. Notes, 7.75%, 9/15/10 8,680 8,647
--------
16,150
--------
Telephones 3.7%
Ameritech Capital Funding, Sr. Notes, 6.25%, 5/18/09 10,000 9,238
AT&T, Sr. Notes, 6.50%, 3/15/29 4,500 3,628
Centurytel, Sr. Notes, 8.375%, 10/15/10 7,000 7,126
Deutsche Telekom, Sr. Notes, 8.00%, 6/15/10 12,000 12,156
KPN, Sr. Notes, (144a), 8.00%, 10/1/10 + 5,550 5,373
Qwest Capital Funding, Sr. Notes, (144a)
7.90%, 8/15/10 + 11,580 11,771
U.S. West Capital Funding, Sr. Notes, 6.875%, 8/15/01 15,000 14,957
--------
64,249
--------
Wireless Communications 0.7%
Vodafone Airtouch, Sr. Notes, (144a), 7.75%, 2/15/10 + 11,000 11,286
--------
11,286
--------
Total Corporate Bonds and Notes (Cost $586,058) 574,709
--------
ASSET-BACKED SECURITIES 5.8%
Auto-Backed 1.8%
DaimlerChrysler Auto Trust, 6.66%, 1/8/05 9,800 9,851
Dealer Auto Receivables Trust, 7.12%, 3/15/05 15,526 15,762
Provident Auto Lease, 7.73%, 10/14/07 5,680 5,767
--------
31,380
--------
Credit Card-Backed 1.6%
First USA Credit Card Master Trust, 7.269%, 12/19/00 8,548 8,548
MBNA Master Credit Card Trust II, 7.42%, 12/15/00 5,250 5,250
World Financial Network Credit Card Master Trust
6.95%, 4/15/06 5,500 5,585
6.981%, 12/15/00 8,500 8,526
--------
27,909
--------
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
T. ROWE PRICE NEW INCOME FUND
----------------------------------------------------------------------------------------
Par/Shares Value
----------------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Stranded Asset 0.5%
California Special Purpose Trust, 6.42%, 9/25/08 $ 8,550 $ 8,518
--------
8,518
--------
Equipment Lease Heavy Duty 0.4%
Case Equipment Loan Trust, 5.77%, 8/15/05 6,000 5,932
--------
5,932
--------
Recreational Vehicles 1.5%
Chase Manhattan Owner Trust, 6.54%, 8/15/17 11,795 11,793
CIT RV Trust, 6.35%, 4/15/11 13,375 13,327
--------
25,120
--------
Total Asset-Backed Securities (Cost $98,041) 98,859
--------
EQUITY AND CONVERTIBLE SECURITIES 1.7%
Automobiles and Related 0.1%
Ford Motor, Common 102 2,309
--------
2,309
--------
Banking 0.1%
Silicon Valley Bancshares, Pfd., 8.25% 30 630
--------
630
--------
Building and Real Estate 0.8%
Equity Residential Properties Trust, REIT,
Cv. Pfd., 7.25% 150 3,623
Reckson Associates Realty, REIT
Cv. Pfd., (Series A), 7.625% 429 9,447
--------
13,070
--------
Media and Communications 0.3%
Media One Group, Cv. Pfd., 7.00% 144 5,121
--------
5,121
--------
Paper and Paper Products 0.1%
International Paper, Cv. Pfd., 5.25% 52 2,136
--------
2,136
--------
Railroads 0.1%
Union Pacific Capital Trust, Cv. Pfd., 6.25% 50 2,210
--------
2,210
--------
Telephones 0.2%
Liberty Media, Cv. Pfd., (Class A), 4.00% 5,000 3,590
--------
3,590
--------
Total Equity and Convertible Securities (Cost $29,503) 29,066
--------
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
T. ROWE PRICE NEW INCOME FUND
-----------------------------------------------------------------------------------
Par/Shares Value
-----------------------------------------------------------------------------------
In thousands
<S> <C> <C>
NON-U.S. GOVERNMENT MORTGAGE-BACKED SECURITIES 11.1%
Home Equity Loans-Backed 2.2%
Chase Funding Mortgage Loan, 6.59%, 5/25/28 $ 5,053 $ 4,800
GE Capital Mortgage Services, REMIC, 6.465%, 6/25/28 14,207 13,914
Money Store Home Equity Trust
6.985%, 10/15/16 6,000 5,981
7.91%, 5/15/24 13,159 13,344
---------
38,039
---------
Whole Loans-Backed 4.5%
BA Mortgage Securities, 7.00%, 7/25/28 20,600 19,937
Countrywide Mortgage Backed Securities
6.75%, 11/25/23 5,673 5,478
GE Capital Mortgage Services, REMIC, 6.75%, 8/25/28 13,962 13,669
Norwest Asset Securities, 6.75%, 10/25/28 11,746 10,691
Residential Accredited Loans
6.75%, 7/25/28 7,500 7,410
7.25%, 11/25/27 10,290 10,242
Securitized Asset Sales, 7.41%, 9/25/24 10,383 10,270
---------
77,697
---------
Commercial Mortgage-Backed 4.4%
COMM 2000
7.416%, 4/15/10 10,000 10,076
7.494%, 4/15/10 8,400 8,609
JP Morgan Commercial Mortgage Finance, 7.68%, 8/15/32 8,500 8,721
LB Commercial Conduit Mortgage Trust, 6.78%, 4/15/09 8,800 8,599
PNC Mortgage Acceptance, 7.33%, 10/10/09 10,000 10,233
Prudential Securities Secured Financing, 6.074%, 1/15/08 12,317 11,978
Salomon Brothers Mortgage Securities VII
7.455%, 4/18/10 8,125 8,374
7.52%, 12/18/09 7,464 7,718
---------
74,308
---------
Total Non-U.S. Government Mortgage-Backed Securities 190,044
(Cost $193,762) ---------
U.S. GOVERNMENT MORTGAGE-BACKED SECURITIES 23.2%
U.S. Government Agency Obligations 11.0%
Federal Home Loan Mortgage
5.50%, 10/15/20 1,245 1,230
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
T. ROWE PRICE NEW INCOME FUND
----------------------------------------------------------------------------------------
Par/Shares Value
----------------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Federal Home Loan Mortgage
6.50%, 11/1/04 - 6/1/24 $ 20,858 $ 20,408
7.00%, 8/15/09 - 11/1/30 47,253 47,093
7.50%, 5/1/24 - 1/1/30 21,007 21,188
8.00%, 6/1/08 28 28
10.50%, 7/1/11 - 8/1/20 278 292
11.00%, 1/1/16 - 7/1/20 160 172
11.50%, 6/1/01 0 0
REMIC, 6.50%, 3/15/23 10,810 10,657
Principal Only, 8/1/28 6,945 4,677
Federal National Mortgage Assn.
6.00%, 1/1/29 1,616 1,536
6.50%, 3/1/29 - 2/1/30 42,925 41,718
7.50%, 5/1/15 - 8/1/30 39,217 39,722
8.75%, 3/1/10 4 4
---------
188,725
---------
U.S. Government Guaranteed Obligations 12.2%
Government National Mortgage Assn.
I
6.00%, 12/15/28 8,896 8,500
6.50%, 8/15/25 - 5/15/29 39,262 38,369
7.00%, 1/15/24 - 5/15/29 62,903 62,745
7.50%, 8/15/16 - 8/15/28 19,700 19,968
8.00%, 7/15/16 - 10/15/27 29,561 30,354
8.50%, 9/15/16 - 7/15/23 6,069 6,292
9.00%, 1/15/09 - 11/15/19 765 806
9.50%, 6/15/09 - 3/15/25 262 272
11.00%, 12/15/09 - 1/15/21 6,162 6,607
11.50%, 3/15/10 - 10/15/15 902 974
II
7.00%, 12/20/23 - 11/20/28 21,204 21,070
7.00%, 4/20/30 4,877 4,837
8.50%, 9/20/26 31 31
9.00%, 6/20/16 - 2/20/18 508 527
GPM, I, 10.25%, 4/15/16 - 11/15/20 890 945
Principal Only, 3/16/28 8,103 5,864
---------
208,161
---------
Total U.S. Government Mortgage-Backed Securities (Cost $390,969) 396,886
---------
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
T. ROWE PRICE NEW INCOME FUND
----------------------------------------------------------------------------------------
Par/Shares Value
----------------------------------------------------------------------------------------
In thousands
U.S. GOVERNMENT OBLIGATIONS/AGENCIES 21.5%
<S> <C> <C>
U.S. Government Agency Obligations 5.1%
Federal Home Loan Mortgage
5.25%, 1/15/06 $ 10,000 $ 8,699
6.875%, 1/15/05 22,750 23,280
6.875%, 3/15/10 38,000 39,416
Tennessee Valley Authority, 6.235%, 7/15/45 14,934 14,954
--------
86,349
--------
U.S. Treasury Obligations 16.4%
U.S. Treasury Bonds
5.50%, 8/15/28 46,000 44,683
6.125%, 8/15/29 4,350 4,639
6.50%, 11/15/26 41,300 45,478
7.50%, 11/15/16 29,000 34,299
U.S. Treasury Inflation-Indexed Notes
3.375%, 1/15/07 33,432 32,781
3.625%, 7/15/02 21,194 21,189
U.S. Treasury Notes
5.50%, 7/31/01 5,000 4,979
6.00%, 9/30/02 15,175 15,266
6.50%, 8/15/05 30,500 31,747
6.875%, 5/15/06 21,500 22,873
7.00%, 7/15/06 22,000 23,558
--------
281,492
--------
Total U.S. Government Obligations/Agencies (Cost $366,587) 367,841
--------
MONEY MARKET FUNDS 2.5%
Reserve Investment Fund, 6.70%#++ 41,881 41,881
--------
Total Money Market Funds (Cost $41,881) 41,881
--------
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
T. ROWE PRICE NEW INCOME FUND
-------------------------------------------------------------------------------------------
Value
-------------------------------------------------------------------------------------------
In thousands
<S> <C> <C> <C> <C>
Total Investments in Securities
99.4% of Net Assets (Cost $1,706,801) $ 1,699,286
Futures Contracts
In thousands
Contract Unrealized
Expiration Value Gain (Loss)
---------- -------- -----------
Long, 300 U.S. Treasury
5-Year Notes contracts,
$282,000 par of U.S. Treasury
Notes pledged as initial margin 3/01 $ 30,633 $ 196
Net payments (receipts) of variation
margin to date (69)
----------
Variation margin receivable
(payable) on open futures contracts 127
Forward Currency Exchange Contracts
In thousands
Unrealized
Counterparty Settlement Receive Deliver Gain (Loss)
------------- ---------- --------------- --------------- -----------
Barclays Bank 4/20/01 USD 14,901 CAD 22,500 $ 202
----------
Net unrealized gain (loss) on open forward
currency exchange contracts 202
Other Assets Less Liabilities 10,062
------------
NET ASSETS $ 1,709,677
============
</TABLE>
+ Private Placement
++ Affiliated company
# Seven-day yield
CAD Canadian dollar
ETC Equipment Trust Certificate
EUR Euro
GPM Graduated Payment Mortgage
MTN Medium Term Note
REIT Real Estate Mortgage Investment Trust
REMIC Real Estate Mortgage Investment Conduit
USD US Dollar
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
6.1% of net assets.
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
T. ROWE PRICE NEW INCOME FUND
--------------------------------------------------------------------------------
Unaudited November 30, 2000
-----------------------------------
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
In thousands
Assets
Investments in securities, at value (cost $1,664,920) $ 1,657,405
Investment in affiliated companies (cost $41,881) 41,881
Securities lending collateral 293,852
Other assets 52,751
------------
Total assets 2,045,889
------------
Liabilities
Obligation to return securities lending collateral 293,852
Other liabilities 42,360
------------
Total liabilities 336,212
------------
NET ASSETS $ 1,709,677
------------
Net Assets Consist of:
Accumulated net investment income - net of distributions $ 2,904
Accumulated net realized gain/loss - net of distributions (101,738)
Net unrealized gain (loss) (7,116)
Paid-in-capital applicable to 204,490,062 shares of
$1.00 par value capital stock outstanding;
300,000,000 shares authorized 1,815,627
------------
NET ASSETS $ 1,709,677
------------
NET ASSET VALUE PER SHARE $ 8.36
------------
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
T. ROWE PRICE NEW INCOME FUND
--------------------------------------------------------------------------------
Unaudited
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
In thousands
6 Months
Ended
11/30/00
Investment Income (Loss)
Income
Interest $ 59,704
Dividend 859
Securities lending 151
------------
Total income 60,714
------------
Expenses
Investment management 3,906
Shareholder servicing 1,831
Custody and accounting 117
Prospectus and shareholder reports 54
Registration 16
Legal and audit 8
Directors 6
Miscellaneous 5
------------
Total expenses 5,943
Expenses paid indirectly (41)
Net expenses 5,902
------------
Net investment income (loss) 54,812
------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities (10,277)
Futures (3,120)
Options 49
Foreign currency transactions 17
------------
Net realized gain (loss) (13,331)
------------
Change in net unrealized gain or loss
Securities 72,152
Futures 768
Other assets and liabilities
denominated in foreign currencies 203
------------
Change in net unrealized gain or loss 73,123
------------
Net realized and unrealized gain (loss) 59,792
------------
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 114,604
-----------
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
T. ROWE PRICE NEW INCOME FUND
--------------------------------------------------------------------------------
Unaudited
----------------------------------
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
In thousands
<TABLE>
<CAPTION>
6 Months Year
Ended Ended
11/30/00 5/31/00
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ 54,812 $ 113,673
Net realized gain (loss) (13,331) (71,654)
Change in net unrealized gain or loss 73,123 (23,998)
Increase (decrease) in net assets from operations 114,604 18,021
Distributions to shareholders
Net investment income (54,699) (113,579)
Capital share transactions *
Shares sold 85,514 192,491
Distributions reinvested 51,094 105,794
Shares redeemed (119,615) (511,721)
Increase (decrease) in net assets from capital
share transactions 16,993 (213,436)
Net Assets
Increase (decrease) during period 76,898 (308,994)
Beginning of period 1,632,779 1,941,773
End of period $ 1,709,677 $ 1,632,779
---------------------------
*Share information
Shares sold 10,393 23,373
Distributions reinvested 6,188 12,863
Shares redeemed (14,530) (62,339)
Increase (decrease) in shares outstanding 2,051 (26,103)
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
T. ROWE PRICE NEW INCOME FUND
--------------------------------------------------------------------------------
Unaudited November 30, 2000
-----------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price New Income 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 October 12, 1973. The fund
seeks the highest level of income consistent with the preservation of
capital over time by investing primarily in marketable debt securities.
The accompanying financial statements were prepared in accordance with
generally accepted accounting principles, which require the use of
estimates made by fund management.
Valuation Debt securities are generally traded in the over-the-counter
market. Investments in securities 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.
Equity securities listed or regularly traded on a securities exchange are
valued at the last quoted sales price at the time the valuations are made.
A security that 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.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation. Financial futures
contracts are valued at closing settlement prices.
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.
Currency Translation Assets and liabilities denominated in foreign
currencies are translated into U.S. dollar values each day at the
prevailing exchange rate, using the mean of the bid and offer prices of
such currencies against U.S. dollars quoted by a major bank. Purchases and
sales of securities and income and
23
<PAGE>
T. ROWE PRICE NEW INCOME FUND
--------------------------------------------------------------------------------
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.
Affiliated Companies As defined by the Investment Company Act of 1940, an
affiliated company is one in which the fund owns at least 5% of the
outstanding voting securities.
Premiums and Discounts Premiums and discounts on debt securities, other
than mortgage-backed securities (MBS), are amortized for both financial
reporting and tax purposes. Premiums and discounts on all MBS are
recognized upon disposition or principal repayment as gain or loss for
financial reporting purposes. For tax purposes, premiums and discounts on
MBS acquired on or before June 8, 1997, are recognized upon disposition or
principal repayment as ordinary income. For MBS acquired after June 8,
1997, premiums are recognized as gain or loss; discounts are recognized as
gain or loss, except to the extent of accrued market discount.
In November, 2000, the American Institute of Certified Public Accountants
issued a revised Audit and Accounting Guide - Audits of Investment
Companies (the guide), which will be adopted by the fund as of June 1,
2001. The guide requires all premiums and discounts on debt securities to
be amortized, and gain/loss on paydowns of MBS to be accounted for as
interest income. Upon adoption, the fund will adjust the cost of its debt
securities, and corresponding unrealized gain/loss thereon, in the amount
of the cumulative amortization that would have been recognized had
amortization been in effect from the purchase date of each holding. This
adjustment will have no effect on the fund's net assets or results of
operations.
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 net investment
income and realized gains determined in accordance with generally accepted
accounting principles. Expenses paid indirectly reflect credits earned on
daily uninvested cash balances at the custodian and are used to reduce the
fund's custody charges. Payments ("variation margin") made or received by
the fund to settle the daily fluctuations in the value of futures contracts
are recorded as unrealized gains or
24
<PAGE>
T. ROWE PRICE NEW INCOME FUND
--------------------------------------------------------------------------------
losses until the contracts are closed. Unrealized gains and losses on
futures contracts are included in Other assets and Other liabilities and in
Change in net unrealized gain or loss in the accompanying financial
statements.
NOTE 2 - INVESTMENT TRANSACTIONS
Consistent with its investment objective, the fund engages in the following
practices to manage exposure to certain risks or enhance performance. The
investment objective, policies, program, and risk factors of the fund are
described more fully in the fund's prospectus and Statement of Additional
Information.
Forward Currency Exchange Contracts During the six months ended November
30, 2000, the fund was a party to forward currency exchange contracts
under which it is obligated to exchange currencies at specified future
dates and exchange rates. Risks arise from the possible inability of
counterparties to meet the terms of their agreements and from movements in
currency values.
Futures Contracts During the six months ended November 30, 2000, the fund
was a party to futures contracts, which provide for the future sale by one
party and purchase by another of a specified amount of a specific financial
instrument at an agreed upon price, date, time, and place. Risks arise from
possible illiquidity of the futures market and from movements in security
values.
Securities Lending The fund lends its securities to approved brokers to
earn additional income. It receives as collateral cash and U.S. government
securities valued at 102%-105% of the value of the securities on loan. Cash
collateral is invested in a money market pooled account by the fund's
lending agent. Collateral is maintained over the life of the loan in an
amount not less than the value of loaned securities, as determined at the
close of fund business each day; any additional collateral required due to
changes in security values is delivered to the fund the next business day.
Although risk is mitigated by the collateral, the fund could experience a
delay in recovering its securities and a possible loss of income or value
if the borrower fails to return the securities. At November 30, 2000, the
value of loaned securities was $287,081,000; aggregate collateral consisted
of $293,852,000 in the securities lending collateral pool.
Other Purchases and sales of portfolio securities, other than short-term
and U.S. government securities, aggregated $388,390,000 and $309,568,000,
respectively, for the six months ended November 30, 2000. Purchases and
sales of
25
<PAGE>
T. ROWE PRICE NEW INCOME FUND
--------------------------------------------------------------------------------
U.S. government securities aggregated $232,484,000 and $293,852,000,
respectively, for the six months ended November 30, 2000.
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. As of May 31, 2000, the fund had $38,446,000 of
capital loss carryforwards, $1,953,000 of which expres in 2007, and
$36,493,000 in 2008. The fund intends to retain gains realized in future
periods that may be offset by available capital loss carryforwards.
At November 30, 2000, the cost of investments for federal income tax
purposes was substantially the same as for financial reporting and totaled
$1,706,801,000. Net unrealized loss aggregated $7,515,000 at period-end, of
which $24,446,000 related to appreciated investments and $31,961,000 to
depreciated investments.
NOTE 4- RELATED PARTY TRANSACTIONS
The fund is managed by T. Rowe Price Associates, Inc. (the manager or Price
Associates). The investment management agreement between the fund and the
manager provides for an annual investment management fee, of which $648,000
was payable at November 30, 2000. 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 T. Rowe Price
International, Inc. (the group). The group fee rate ranges from 0.48% for
the first $1 billion of assets to 0.295% for assets in excess of $120
billion. At November 30, 2000, 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 Price Associates and
two wholly owned subsidiaries of Price Associates, pursuant to which the
fund receives certain other services. Price Associates 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.
26
<PAGE>
T. ROWE PRICE NEW INCOME FUND
--------------------------------------------------------------------------------
provides subaccounting and recordkeeping services for certain retirement
accounts invested in the fund. The fund incurred expenses pursuant to these
related party agreements totaling approximately $1,065,000 for the six
months ended November 30, 2000, of which $195,000 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, Price Associates, and, in
the case of T. Rowe Price Spectrum International, T. Rowe Price
International. Spectrum Income Fund held approximately 36% of the
outstanding shares of the New Income Fund at November 30, 2000. For the six
months then ended, the fund was allocated $672,000 of Spectrum expenses,
$207,000 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 Price Associates. The Reserve Funds are
offered as cash management options only to mutual funds and other accounts
managed by Price Associates or T. Rowe Price International, 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, 2000, totaled $1,857,000 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 the T. Rowe
Price Web site on the Internet. Address: www.troweprice.com.
BROKERAGE SERVICES*
Individual Investments Stocks, bonds, options, precious metals, and
other securities at a savings over full-service commission rates. **
INVESTMENT INFORMATION
Combined Statement Overview of all your accounts with T. Rowe Price.
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.
* T. Rowe Price Brokerage is a division of T. Rowe Price Investment
Services, Inc., Member NASD/SIPC.
** Based on a July 2000 survey for representative-assisted stock
trades. Services vary by firm, and commissions may vary depending
on size of order.
28
<PAGE>
T. ROWE PRICE MUTUAL FUNDS
--------------------------------------------------------------------------------
STOCK FUNDS
Domestic
Blue Chip Growth
Capital Appreciation
Capital Opportunity
Developing Technologies
Diversified Small-Cap Growth
Dividend Growth
Equity Income
Equity Index 500
Extended Equity Market 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
Tax-Efficient Growth
Total Equity Market Index
Value
BLENDED ASSET FUNDS
Balanced
Personal Strategy Balanced
Personal Strategy Growth
Personal Strategy Income
Tax-Efficient Balanced
BOND FUNDS
Domestic Taxable
Corporate Income
GNMA
High Yield
New Income
Short-Term Bond
Spectrum Income
Summit GNMA
U.S. Bond Index
U.S. Treasury Intermediate
U.S. Treasury Long-Term
Domestic Tax-Free
California Tax-Free Bond
Florida 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 Intermediate Bond
Tax-Free Short-Intermediate
Virginia Tax-Free 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
INTERNATIONAL/GLOBAL
FUNDS
Stock
Emerging Europe &
Mediterranean
Emerging Markets Stock
European Stock
Global Stock
Global Technology
International Discovery*
International Equity Index
International Growth & Income
International Stock
Japan
Latin America
New Asia
Spectrum International
Bond
Emerging Markets Bond
International Bond
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
* Closed to new investors.
+ Investments in the funds are not insured or guaranteed by the FDIC or any
other government agency. Although the funds seek to preserve the value of
your investment at $1.00 per share, it is possible to lose money by investing
in the funds.
Please call for a prospectus, which contains complete information, including
fees and expenses. Read it carefully before investing.
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 fund and account information
or to conduct transactions,
24 hours, 7 days a week
By touch-tone telephone
Tele*Access 1-800-638-2587
By Account Access on the Internet
www.troweprice.com/access
For assistance with your existing fund account, call:
Shareholder Service Center
1-800-225-5132
To open a brokerage account or obtain information, call:
1-800-638-5660
For the hearing impaired, call: 1-800-367-0763
Internet address:
www.troweprice.com
Plan Account Lines for retirement plan participants: The appropriate 800 number
appears on your retirement account statement.
T. Rowe Price Associates
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 appropriate to the fund or funds
covered in this report.
Walk-In Investor Centers:
For directions, call 1-800-225-5132
or visit our Web site at
www.troweprice.com/investorcenters
Baltimore Area
Downtown - new address
105 East Lombard Street
Owings Mills
Three Financial Center
4515 Painters Mill Road
Boston Area
386 Washington Street
Wellesley
Colorado Springs
2260 Briargate Parkway
Los Angeles Area
Warner Center
21800 Oxnard Street, Suite 270
Woodland Hills
San Francisco Area
1990 North California Boulevard
Suite 100
Walnut Creek
Tampa
4200 West Cypress Street
10th Floor
Washington, D.C.
900 17th Street N.W.
Farragut Square
[LOGO OF T. ROWE PRICE]
T. Rowe Price Investment Services, Inc., Distributor. F43-051 11/30/00
