Annual Report
Summit
Income
Funds
October 31, 1997
T. Rowe Price
Report Highlights
Summit Income Funds
o Bond yields declined on balance, while money market rates
were essentially flat.
o The Summit Cash Reserves Fund's 2.71% and 5.33% returns for
the 6- and 12-month periods were well ahead of its Lipper
peer group's average gains, largely due to successful
management of the fund's maturity structure.
o With a 6-month return of 4.83% and a 12-month gain of
6.73%, the Summit Limited-Term Bond Fund also outperformed
its Lipper index by focusing on better-yielding corporate
and mortgage-backed bonds.
o After a difficult first half, the Summit GNMA Fund turned
in a strong 7.22% gain over the past six months. Its 6- and
12-month returns were ahead of its Lipper group's average.
o We believe the outlook for bonds is favorable if inflation
remains subdued.
Fellow Shareholders
Over the 12 months ended October 31, 1997, bond prices
appreciated as interest rates fell on balance. Much of the gain
occurred during the last six months as inflation remained
subdued despite strong economic growth. The domestic bond market
also benefited from currency turmoil in the emerging markets as
global investors found a safe haven in U.S. Treasury bonds. In
this environment, the Summit Income Funds were able to
consistently outperform their peers for both the 6- and 12-month
periods.
Market Environment
Inflationary fears troubled the bond market for much of the
year, as the economy showed signs of consistent, robust growth.
Gross domestic product, a key measure of economic health,
registered four consecutive quarters of more than 3% annualized
growth through September 30. The Federal Reserve raised interest
rates in March to slow the expansion; in the ensuing months,
however, growth picked up while inflation seemed, unexpectedly,
to decelerate. The Fed opted not to raise short-term interest
rates again, but it remains somewhat skeptical that the factors
restraining inflation are long-lasting.
Interest Rate Levels
5-Year
Current Treasury 90-Day
Coupon GNMA Note Treasury Bill
10/31/96 7.48 6.15 5.04
7.18 5.9 5.03
7.6 6.22 5.08
1/31 7.56 6.36 5.04
7.56 6.31 5.01
7.91 6.66 5.26
4/30 7.66 6.62 5.22
7.68 6.6 5.03
7.49 6.33 4.94
7/31 7 6 5.12
7.38 6.22 5.12
6.98 5.94 4.93
10/31/97 6.95 5.78 4.97
Treasury bonds were volatile throughout the fund's year. The
Fed's March interest rate hike hurt returns, and various
economic reports caused wide price swings. Finally, in late
October, the collapse of several Southeast Asian currencies and
subsequent decline in global financial markets increased demand
for (and lowered the yields on) Treasuries. This flight to
quality helped interest rates trend lower overall for the year.
The 30-year Treasury bond yield, which began the fiscal year at
6.70%, peaked at 7.17% in April before ending at 6.15%. As a
result, Treasuries outperformed mortgage-backed bonds (which
suffer from increased prepayments when rates fall sharply) and
lower-quality issues in October, after underperforming for most
of the year.
Nonetheless, yield spreads between higher- and lower-quality
bonds narrowed for the period as a whole. Investors have been
willing to buy lower-quality, higher-yielding bonds in the
belief that the strong economy would lead to credit quality
upgrades. According to Moody's and Standard & Poor's, bond
rating upgrades exceeded downgrades by a margin of more than
three to one.
Only money market rates failed to make a significant move during
the year, fluctuating within a narrow range.
Summit Cash Reserves Fund
Despite the interest rate hike in March and the sharp bond rally
late in the period, 90-day Treasury bill rates varied only
modestly throughout the year. Since May 31, 1997, rates on the
90-day Treasury bill changed by only six basis points (100 basis
points equal one percent). This stability is reflected in the
small change in the Summit Cash Reserves Fund's seven-day
compound dividend yield, from 5.35% on April 30 to 5.41% at
period's end.
Performance Comparison
Periods Ended 10/31/97 6 Months 12 Months
_________________________________________________________
Cash Reserves Fund 2.71% 5.33%
Lipper Money Market
Funds Average 2.46 4.87
We are pleased that during this generally flat market we were
able to both elevate the fund's yield and outperform our peer
group. Over the past 12 months, your fund's 5.33% return was
substantially ahead of the 4.87% gain notched by the Lipper
Money Market Funds Average.
The fund's performance was assisted by a comparatively low
expense ratio, and we were also able to add value by managing
the portfolio's maturity structure. After taking a generally
cautious stance in the spring, when interest rates were rising,
we used the past six months to extend the average maturity of
the fund's holdings from 54 to 67 days. We accomplished this by
owning several one-year instruments, which typically have higher
yields than other money market instruments.
To counter the added interest rate risk of the one-year
maturities, we maintained a significant stake in more defensive
one-month instruments. This "barbell" portfolio allowed us to
increase fund yield over the past six months, while rates
overall were flat to slightly lower.
We shifted allocations among different types of investments
during the period, but our overall strategy was basically
unchanged. The fund remains heavily weighted toward bank
certificates of deposit (CDs) and commercial paper, with a
continued emphasis on banking and asset-backed securities.
Summit Limited-Term Bond Fund
The Summit Limited-Term Bond Fund posted a strong six-month
performance, gaining 4.83% compared with a 4.69% return for the
Lipper Short Intermediate Investment-Grade Debt Funds Average.
That showing helped the fund to a 6.73% 12-month gain, which
also exceeded the Lipper Average.
Performance Comparison
Periods Ended 10/31/97 6 Months 12 Months
_________________________________________________________
Limited-Term Bond Fund4.83% 6.73%
Lipper Short Intermediate
Investment-Grade
Debt Funds Average 4.69 6.52
The fund's outperformance was largely due to a yield advantage over many of
its competitors. Indeed, its yield increased modestly, despite the fact that
intermediate-term interest rates trended down over the past six months. We
were able to enhance yield by overweighting corporate and mortgage
securities, which have higher yields than comparable government obligations.
The fund's mortgage-backed allocation was close to its level of six months
ago. However, we significantly increased the fund's corporate allocation, to
58% on October 31 from 46% on April 30. This increase reflected our
confidence in the corporate bond market in an environment where the U.S.
economy is growing, inflation is low, and corporate profitability is high.
Most of the fund's corporate holdings are high quality, with 73% rated single
A or better. However, the fund continues to apply T. Rowe Price's careful
credit research to selective purchases of issues rated BBB and below. The
fund carried a 20% stake in BBB issues, which are at the low end of
investment grade. Seven percent of fund assets was in below-investment-grade
issues that we believe have the potential to be upgraded.
Quality Diversification
AAA AA A BBB BB B and below
42 7 24 20 6 1
The stock market correction of October 27 touched off a scramble for
high-quality issues, causing BBB and BB holdings to underperform. Although
we did not escape losses in these areas, our holdings in sectors such as
utilities and banking held up relatively well. In addition, the higher income
these issues provided helped compensate the fund for their weak October
showing.
Weighted average duration was maintained in a fairly neutral band between 2.6
years and 2.8 years throughout the 12-month period. (Duration measures
sensitivity of bond prices to changes in interest rates. For example, a fund
with a duration of 3.0 years will rise or fall in price by 3% for every one
percentage point decline or rise, respectively, in interest rates.) Our
duration strategy was little changed for the year as it took a back seat to
our efforts to enhance yield.
Summit GNMA Fund
Your fund's returns reflected the up-then-down pattern of interest rates for
the year (and corresponding pattern of weak-then-strong total returns). In
the first six months of the period, when interest rates were rising, gains
were somewhat scarce. Since then, the market has been fertile, providing both
relatively high yields and a beneficial decline in interest rates. For both
the 6- and 12-month periods, results were strong, especially compared with
the Lipper GNMA Funds Average. For the six months, the 7.22% return reflected
an increase in the fund's share price from $9.49 to $9.83, plus income of
$0.33 per share. Although we were able to take advantage of the market rally,
declining rates again increased prepayment fears. Prepayments on mortgages
come from two sources: mortgages being paid off as homeowners move into new
homes, and refinancing of existing mortgages on the same residence. Of the
two, prepayments from refinancings have fluctuated most widely; as rates fell
over the past six months, refinancings picked up. New mortgage applications
so far this year are behind last year's levels, meaning that supply in our
market is becoming tighter.
Performance Comparison
Periods Ended 10/31/976 Months 12 Months
_________________________________________________________
GNMA Fund 7.22% 9.17%
Lipper GNMA Funds Average 6.19 8.39
We attempted to work within the framework of lower interest rates and higher
prepayment potential.
Throughout the past six months, we attempted to work within the framework of
lower interest rates and higher prepayment potential. We held a diversified
selection of GNMA securities-now at 90% of assets-which in aggregate offered
a good balance between relatively high income and protection against
prepayments. As noted in our last report, we have also been buying some less
traditional mortgage and bond products that offer incrementally higher yield
as well as prepayment protection. These include project loans, putable
Tennessee Valley Authority issues, and mortgage-backed collateralized
mortgage obligations (CMOs). Project loans are mortgages on commercial
properties with clauses that prevent prepayments for up to 10 years. This
feature means we can rely on a steadier flow of income and principal payments
from the bonds. The TVA issues offer potential price appreciation if interest
rates drop, and if rates rise our downside risk is limited because we can
sell (put) them back to TVA at par value. Our CMOs have generally more
predictable durations and offer a somewhat higher yield than conventional
mortgage-backed issues.
Outlook
The seemingly contradictory environment of above-trend economic growth and
declining inflation poses a dilemma for fixed income investors. Classic
economic theory suggests that inflation must follow extended periods of
strong growth. However, there is an equally compelling case for lower bond
yields, given deflationary trends not seen since the 1950s. This argument
holds that excess labor in the global economy will keep a lid on inflationary
wage pressures; productivity will continue to increase due to enhancements
in technology; and the demographics of an aging population will spur
investments in fixed income. These trends, combined with a nearly balanced
budget and global demand for U.S. Treasuries, could presage even lower
interest rates down the road.
We believe that the outlook for the fixed income market is favorable as long
as inflation remains subdued.
Respectfully submitted,
Peter Van Dyke
President
Summit Income Funds
November 19, 1997
Portfolio Highlights
Key statistics
4/30/97 10/31/97
Summit Cash Reserves Fund
___________________________________________________________
Price Per Share $ 1.00 $ 1.00
Dividends Per Share
For 6 months .025 .027
For 12 months .050 .052
Dividend Yield (7-Day Compound) * 5.35% 5.41%
Weighted Average Maturity (days) 54 67
Weighted Average Quality ** First Tier First Tier
(continued on next page)
T. Rowe Price Summit Income Funds
Portfolio Highlights
Key statistics
4/30/97 10/31/97
Summit Limited-Term Bond Fund
___________________________________________________________
Price Per Share $ 4.54 $ 4.61
Dividends Per Share
For 6 months 0.14 0.15
For 12 months 0.29 0.29
Dividend Yield *
For 6 months 6.37% 6.55%
For 12 months 6.51 6.56
Weighted Average Maturity (years) 3.4 3.9
Weighted Average Effective
Duration (years) 2.6 2.7
Weighted Average Quality *** AA AA-
Summit GNMA Fund
____________________________________________________________
Price Per Share $ 9.49 $ 9.83
Dividends Per Share
For 6 months 0.33 0.33
For 12 months 0.67 0.67
Dividend Yield *
For 6 months 7.14% 6.90%
For 12 months 7.25 7.14
Weighted Average Maturity (years) 9.6 10.1
Weighted Average Effective
Duration (years) 5.3 3.9
Weighted Average Quality *** AAA AAA
* 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.
** All securities purchased in the money fund are rated in the two highest
categories (tiers) as established by national rating agencies or, if
unrated, are deemed of comparable quality by T. Rowe Price.
*** Based on T. Rowe Price research.
T. Rowe Price Summit Income Funds
Portfolio Highlights
Sector Diversification
Percent of Percent of
Net Assets Net Assets
4/30/97 10/31/97
Summit Cash Reserves Fund
____________________________________________________________
U.S. Negotiable Bank Notes 6% 2%
Certificates of Deposit
Domestic Negotiable CDs 4 5
Eurodollar Negotiable CDs 13 15
U.S. Dollar Denominated Foreign
Negotiable CDs 13 19
Commercial Paper and Medium-Term
Notes
Banking 9 15
Asset-Backed 18 10
Asset-Backed Structured Notes 5 8
Finance and Credit 8 7
Broker-Dealers 5 5
All Other 16 11
Foreign Government and Municipalities3 4
Other Assets Less Liabilities - - 1
____________________________________________________________
Total 100% 100%
Fixed Rate Obligations 89 90
Floating Rate Instruments 11 10
(continued on next page)
T. Rowe Price Summit Income Funds
Portfolio Highlights
Sector Diversification
Percent of Percent of
Net Assets Net Assets
4/30/97 10/31/97
Summit Limited-Term Bond Fund
____________________________________________________________
Corporate Bonds and Notes
Banking 9% 10%
Utilities 5 10
Finance and Credit 7 8
Media and Communications 2 7
Industrial 7 5
All Other 16 18
Asset-Backed Securities 4 2
Mortgage-Backed Securities 25 24
U.S. Government Obligations
U.S. Treasuries 12 9
Government Agency Obligations 3 4
Cash Equivalents
Money Market Funds 4 3
Commercial Paper 4 -
Other Assets Less Liabilities 2 -
____________________________________________________________
Total 100% 100%
Summit GNMA Fund
____________________________________________________________
GNMA 87% 90%
U.S. Government Agencies 20 15
Short-Term Obligations 3 3
Agency-Backed STRIPS 1 1
Other Assets Less Liabilities - 11 - 9
____________________________________________________________
Total 100% 100%
T. Rowe Price Summit Income Funds
Performance Comparison
These charts show the value of a hypothetical $10,000 investment in each fund
over the past 10 fiscal year periods or since inception (for funds lacking
10-year records). The result is compared with a broad-based average or index.
The index return does not reflect expenses, which have been deducted from the
fund's return.
Summit Cash Reserves Fund
Lipper Money Market Summit Cash
Funds Average Reserves Fund
10/29/93 $ 10,000 $ 10,000
10/94 10,327 10,360
10/95 10,876 10,949
10/96 11,404 11,521
10/97 11,959 12,135
Summit Limited-Term Bond Fund
Merrill Lynch Lipper Short
1-5 Year Intermediate
Corporate/ Investment- Summit
Government Grade Debt Limited-Term
Index Funds Average Bond Fund
10/29/93 $ 10,000 $ 10,000 $ 10,000
10/94 9,995 9,815 9,929
10/95 11,043 10,849 10,659
10/96 11,696 11,444 11,244
10/97 12,506 12,190 12,001
Performance Comparison
Summit GMNA Fund
Summit GNMA Lipper GNMA Salomon GNMA
Fund Funds Average Index
10/29/93 $ 10,000 $ 10,000 $ 10,000
10/94 9,833 9,687 9,859
10/95 11,350 11,075 11,329
10/96 11,971 11,717 12,143
10/97 13,069 12,727 13,241
Average Annual Compound Total Return
This table shows how each 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 Since Inception
10/31/97 1 Year 3 Years Inception Date
Summit Cash
Reserves Fund 5.33%5.41% 4.95% 10/29/93
Summit
Limited-Term
Bond Fund 6.73 6.52 4.66 10/29/93
Summit GNMA Fund 9.17 9.95 6.91 10/29/93
Investment return represents past performance and will vary. Shares of the
bond funds may be worth more or less at redemption than at original purchase.
The money fund's $1.00 share price is not guaranteed, nor is the fund insured
by the U.S. government.
T. Rowe Price Summit Cash Reserves Fund
For a share outstanding throughout each period
Financial Highlights
Year 10/29/93
Ended to
10/31/97 10/31/96 10/31/95 10/31/94
NET ASSET VALUE
Beginning of
period $ 1.000 $ 1.000 $ 1.000 $ 1.000
Investment
activities
Net invest-
ment income 0.052 0.051 0.055 0.035
Distributions
Net invest-
ment income (0.052) (0.051) (0.055) (0.035)
NET ASSET VALUE
End of period $ 1.000 $ 1.000 $ 1.000 $ 1.000
_________________________________________
Ratios/Supplemental Data
Total return 5.33% 5.23% 5.68% 3.60%
Ratio of expenses
to average net
assets 0.45%0.45% 0.45% 0.45%!
Ratio of net
investment income
to average
net assets 5.18% 5.09% 5.55% 4.03%!
Net assets, end
of period (in
thousands) $1,303,120 $ 741,561 $433,464 $ 186,523
! Annualized.
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Summit Limited-Term Bond Fund
Financial Highlights
For a share outstanding throughout each period
Year 10/29/93
Ended through
10/31/97 10/31/96 10/31/95 10/31/94
NET ASSET VALUE
Beginning of
period$ 4.60 $ 4.65 $ 4.64 $ 5.00
Investment
activities
Net invest-
ment income 0.29 0.30 0.32 0.33
Net realized
and unrealized
gain (loss) 0.01 (0.05) 0.01 (0.36)
Total from
investment
activities 0.30 0.25 0.33 (0.03)
Distributions
Net invest-
ment income (0.28) (0.29) (0.31) (0.33)
Tax return of
capital (0.01) (0.01) (0.01) -
Total distri-
butions (0.29) (0.30) (0.32) (0.33)
NET ASSET VALUE
End of period $ 4.61 $ 4.60 $ 4.65 $ 4.64
Ratios/Supplemental Data
Total return 6.73% 5.48% 7.36% (0.71)%
Ratio of expenses
to average net
assets 0.55% 0.55% 0.55% 0.55%!
Ratio of net
investment
income to average
net assets 6.28% 6.43% 6.85% 6.98%!
Portfolio
turnover rate 74.5% 116.1% 84.3% 296.0%!
Net assets, end
of period (in
thousands) $ 29,620 $ 25,984 $ 27,004 $ 21,116
! Annualized.
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Summit GNMA Fund
For a share outstanding throughout each period
Financial Highlights
Year 10/29/93
Ended through
10/31/97 10/31/96 10/31/95 10/31/94
NET ASSET VALUE
Beginning of
period$ 9.65 $ 9.81 $ 9.15 $ 10.00
Investment
activities
Net invest-
ment income 0.67 0.67 0.70 0.69
Net realized
and unreal-
ized gain
(loss) 0.18 (0.16) 0.66 (0.85)
Total from
investment
activities 0.85 0.51 1.36 (0.16)
Distributions
Net invest-
ment income (0.64) (0.62) (0.67) (0.69)
Tax return of
capital (0.03) (0.05) (0.03) -
Total distri-
butions (0.67) (0.67) (0.70) (0.69)
NET ASSET VALUE
End of period $ 9.83 $ 9.65 $ 9.81 $ 9.15
Ratios/Supplemental Data
Total return 9.17% 5.47% 15.43% (1.67)%
Ratio of expenses
to average net
assets 0.60% 0.60% 0.60% 0.60%!
Ratio of net
investment
income to
average
net assets 6.91% 6.99% 7.40% 7.31%!
Portfolio
turnover rate 111.8% 136.1% 173.8% 61.5%!
Net assets,
end of period
(in thousands) $ 29,530 $ 24,718 $ 22,777 $ 17,184
! Annualized.
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Summit Cash Reserves Fund
October 31, 1997
Statement of Net Assets
Par Value
In thousands
BANK NOTES 3.1%
FCC National Bank, 5.59%,
11/7/97 $ 6,000 $ 6,000
First America Bank of
Michigan, 6.15%, 3/27/98 4,900 4,898
First Tennessee Bank,
6.08%, 6/5/98 5,000 4,999
Key Bank NA, 5.50%, 11/20/97 10,000 9,998
National Bank of Commerce, VR,
5.746%, 11/24/97 5,250 5,254
Westpac Banking, 6.07%, 5/27/98 9,800 9,798
Total Bank Notes (Cost $40,947) 40,947
BANKERS' ACCEPTANCES 0.1%
Regions Bank
5.58%, 2/5/98 1,000 985
5.60%, 2/18/98 1,000 983
Total Bankers' Acceptances (Cost
$1,968) 1,968
CERTIFICATES OF DEPOSIT 38.2%
Abbey National, (London), 5.59%,
12/31/97 36,000 36,002
ABN AMRO Bank, VR, 5.85%, 8/7/98 19,750 19,743
Bank of Montreal, 5.55%, 11/24/97 10,000 10,000
Bank of Nova Scotia
5.60%, 11/13/97 4,000 4,000
(London), 5.55%, 11/3/97 10,000 10,000
Bank of Scotland, (London),
5.63%, 12/29/97 10,000 10,000
Banque Nationale de Paris
6.11%, 6/3/98 5,000 4,999
(London), 5.60%, 12/18/97 10,000 9,998
Barclays Bank PLC, (London),
5.63%, 1/20/98 10,000 10,000
Bayerische Hypotheken, (London),
5.60%, 12/2/97 14,000 14,000
Bayerische Vereinsbank
5.50%, 12/4/97 5,000 4,998
(London), 5.76%, 5/29/98 15,000 15,001
Branch Banking & Trust, 5.54%,
11/24/97 10,000 10,000
Canadian Imperial Bank of Commerce
5.60%, 12/30/97 24,000 24,001
5.915%, 8/12/98 10,000 9,997
Chase Manhattan Bank, 5.65%,
4/6/98 $ 7,000 $ 7,000
Commerzbank, 5.93%, 6/26/98 4,900 4,898
Credit Agricole Indosuez,
5.70%, 2/2/98 10,000 10,001
Credit Suisse, 6.25%, 4/10/98 10,000 10,000
First National Bank of Maryland,
5.95%, 10/22/98 10,000 9,995
Generale Bank, 5.96%, 6/18/98 14,000 13,997
Hessische Landesbank
6.13%, 4/1/98 - 4/7/98 14,900 14,906
(London), 5.57%, 11/28/97 5,000 5,000
MBNA America Bank N.A.,
5.62%, 11/3/97 25,000 25,000
National Bank of Canada,
6.15%, 5/15/98 5,000 4,999
National Westminster Bank PLC,
5.66%, 2/11/98 23,900 23,887
Nordeutsche Landesbank, (London),
5.688%, 12/8/97 3,000 3,000
Rabobank Nederland
5.56%, 12/3/97 10,000 10,000
(London), 5.86%, 8/21/98 25,000 24,990
Royal Bank of Canada
5.91%, 6/17/98 9,900 9,894
5.95%, 3/24/98 5,000 4,998
Societe Generale
5.56%, 12/3/97 8,000 8,000
5.61%, 11/3/97 6,950 6,950
5.65%, 1/15/98 15,000 15,000
5.80%, 2/3/98 5,000 5,000
Sudwest Deutsche Landesbank,
(London), 5.60%, 12/29/97 23,000 23,001
Svenska Handelsbank (London),
5.63%, 11/17/97 15,000 15,000
Toronto Dominion Bank
(London)
5.595%, 1/20/98 10,000 9,999
5.63%, 11/17/97 10,000 10,000
6.14%, 6/3/98 5,000 5,000
Union Bank of California,
5.80%, 10/6/98 10,000 10,000
Westdeutsche Landesbank, 5.64%,
12/19/97 15,000 15,000
Total Certificates of Deposit
(Cost $498,254) 498,254
COMMERCIAL PAPER 47.0%
Asset Securitization Cooperative
4(2)
5.50%, 12/4/97 $ 15,600 $ 15,521
5.53%, 12/4/97 7,000 6,965
Associates Finance Services of
Puerto Rico
5.53%, 11/17 - 12/16/97 6,655 6,619
Banque Nationale de Paris,
5.52%, 11/14/97 10,000 9,980
Caisse des Depots et Consignations
4(2)
5.51%, 11/7/97 19,000 18,982
5.54%, 11/18/97 5,000 4,987
California Pollution Control,
5.60%, 12/18/97 15,000 15,000
Commonwealth Bank of Australia,
5.50%, 12/4/97 5,000 4,975
Corporate Asset Funding
4(2)
5.49%, 11/12/97 10,000 9,983
5.52%, 11/6/97 7,000 6,995
Countrywide Home Loans
5.52%, 11/10/97 14,000 13,981
5.53%, 11/13/97 3,000 2,994
Creditanstalt Finance, 5.52%, 11/5/97 18,859 18,847
Cregem North America
5.52%, 11/26/97 13,000 12,950
5.56%, 2/23/98 24,700 24,265
Daimler-Benz North America,
5.50%, 2/10/98 5,000 4,923
Delaware Funding, 4(2),
5.52%, 12/2/97 15,000 14,929
Dover Funding
4(2)
5.51%, 11/4/97 6,338 6,335
5.52%, 11/4 - 11/18/97 15,250 15,234
Electronic Data Systems,
5.52%, 11/18/97 1,085 1,082
Falcon Asset Securitization,
4(2), 5.52%, 12/17/97 6,250 6,206
Finova Capital, 5.53%,
11/12 - 11/21/97 11,400 11,373
France Telecom, 5.50%, 11/4/97 5,000 4,998
General Electric Capital,
5.53%, 11/12/97 708 707
General Motors Acceptance
Corporation, 5.55%, 11/5/97 6,000 5,996
Golden Managers Acceptance,
5.52%, 11/18/97 $ 24,800 $ 24,735
Halifax, 5.52%, 12/23/97 1,115 1,106
Island Finance of Puerto Rico
5.52%, 11/17 - 11/25/97 14,000 13,961
5.53%, 11/14/97 10,000 9,980
John Hancock Capital, 4(2),
5.53%, 11/17/97 4,120 4,110
Koch Industries, 5.75%, 11/3/97 10,000 9,997
Lloyds Bank PLC, 5.55%, 3/3/98 20,000 19,624
Market Street Funding, 5.54%,
11/18 - 11/28/97 21,850 21,784
Merrill Lynch
5.50%, 12/10/97 4,300 4,274
5.52%, 11/13 - 11/17/97 10,180 10,159
5.53%, 2/26/98 10,950 10,753
Metropolitan Life Funding,
5.52%, 11/18/97 4,000 3,990
Morgan Stanley Group, 5.57%,
1/22/98 23,900 23,597
Novartis Finance, 5.53%,
11/18 - 11/20/97 13,750 13,713
Preferred Receivables Funding
5.51%, 11/12/97 3,700 3,694
5.52%, 12/1/97 - 2/11/98 14,100 13,958
5.53%, 11/17/97 10,000 9,975
Progress Capital Holdings,
5.51%, 11/14/97 10,000 9,980
Province of Quebec, 5.50%, 3/9/98 10,000 9,804
Prudential Funding, 5.55%, 1/20/98 4,220 4,168
Queensland Treasury, 5.75%, 11/3/97 3,283 3,282
Repeat Offering Securitization
4(2)
5.54%, 11/24/97 3,000 2,990
5.55%, 11/28/97 10,000 9,958
5.58%, 11/28/97 5,000 4,979
RTZ America, 4(2), 5.50%, 11/17/97 10,000 9,976
Safeco Credit, 5.61%, 12/12/97 5,000 4,968
Santander Finance (Delaware),
5.53%, 12/3/97 25,000 24,877
Statoil (Den Norske Stats
Oljeselskap), 5.55%, 11/20/97 2,000 1,994
Svenska Handelsbanken
5.52%, 11/14/97 1,000 998
5.75%, 11/13 - 11/14/97 3,950 3,942
Unifunding, 5.57%, 12/15/97 8,000 7,946
Westdeutsche Landesbank, 5.51%,
11/13/97 $ 40,000 $ 39,926
Woolwich Building Society,
5.50%, 1/20/98 15,000 14,817
Yale University, 5.51%, 11/6 -
11/19/97 13,200 13,170
Total Commercial Paper (Cost
$612,012) 612,012
MEDIUM-TERM NOTES 11.3%
American General Finance, 9.87%,
11/10/97 1,750 1,752
Chrysler Financial, 7.26%, 7/1/98 2,750 2,771
Ford Motor Credit
6.05%, 3/31/98 1,000 1,000
7.125%, 12/1/97 6,850 6,857
8.00%, 12/1/97 1,500 1,503
VR, 5.907%, 11/3/97 1,000 1,000
General Motors Acceptance
Corporation, 7.85%, 11/17/97 1,050 1,051
Goldman Sachs Group
5.625%, 11/18 - 11/20/97 15,000 15,000
5.656%, 11/3/97 5,000 5,000
Hydro Quebec, 7.12%, 12/19/97 1,000 1,001
International Lease Finance,
8.05%, 2/3/98 7,500 7,540
Mellon Financial, 6.50%, 12/1/97 2,600 2,601
Nationsbank, 6.625%, 1/15/98 1,500 1,503
Norwest Financial
6.50%, 11/15/97 4,000 4,001
7.70%, 11/15/97 1,270 1,271
PHH, 5.625%, 11/10/97 9,850 9,850
Rabobank, 5.625%, 11/19/97 24,222 24,222
Short Term Card Account
Trust, VR, (144a)
5.645%, 11/17/97 17,900 17,900
SMM Trust, VR, (144a), 5.656%,
11/26/97 24,000 24,000
Tiers Trust, VR, (144a),
5.625%, 11/17/97 16,900 16,900
Total Medium-Term Notes (Cost
$146,723) 146,723
FUNDING AGREEMENTS 0.8%
General American Life Insurance,
5.86%, 11/1/97! 10,000 10,000
Total Funding Agreements (Cost
$10,000) 10,000
Total Investments in Securities
100.5% of Net Assets (Cost $1,309,904) $1,309,904
Other Assets Less Liabilities (6,784)
NET ASSETS $ 1,303,120
_____________
Net Assets Consist of:
Accumulated net realized gain/loss -
net of distributions 13
Paid-in-capital applicable to
1,303,106,399 shares of $0.0001
par value capital stock outstanding;
1,000,000,000 shares of the
Corporation authorized 1,303,107
NET ASSETS $ 1,303,120
_____________
NET ASSET VALUE PER SHARE $ 1.00
_____________
! Private Placement
VR Variable Rate
4(2) Commercial Paper sold within terms of a private placement
memorandum, exempt from registration under section 4.2 of the
Securities Act of 1933, as amended, and may be sold only to
dealers in that program or other "accredited investors".
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
year-end amounts to 4.5% of net assets.
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Summit Limited-Term Bond Fund
October 31, 1997
Statement of Net Assets
Par/Shares Value
In thousands
CORPORATE BONDS AND NOTES 56.6%
Banking 10.3%
ABN AMRO Bank (Chicago), N.V.,
Gtd. Sub. Notes
7.25%, 5/31/05 $ 250 $ 262
Banco Generale, Sr. Sub. Notes,
7.70%, 8/1/02 300 287
First National Bank Commerce
(New Orleans), Sr. Notes
6.50%, 1/14/00 300 302
Greenpoint Bank, 6.70%, 7/15/02 250 251
Hartford National, Sub. Cap.
Notes, 9.85%, 6/1/99 50 53
Kansallis Osake Pankki (New York),
Sub. Notes
10.00%, 5/1/02 250 285
Keycorp Institutional Capital,
6.625%, 6/15/29 325 328
Mercantile Safe Deposit & Trust,
6.53%, 7/3/00 300 303
Morgan Guaranty Trust, Sub. Notes,
7.375%, 2/1/02 250 261
National City Capital Trust I,
6.75%, 6/1/99 250 252
Union Planters, Sub. Notes,
6.25%, 11/1/03 225 222
Westamerica Banc, Sub. Notes,
6.99%, 9/30/03 250 254
3,060
Consumer Products 2.8%
Coca-Cola Femsa, 8.95%, 11/1/06 275 276
Grand Metropolitan Investment,
Gtd. Notes, 6.50%, 9/15/99 250 252
Philip Morris, 7.25%, 9/15/01 300 309
837
Consumer Services 1.0%
Tenet Healthcare, Sr. Sub. Notes,
8.625%, 1/15/07 275 282
282
Finance and Credit 8.1%
American Annuity Group Capital Trust,
7.25%, 9/25/01 240 245
Aristar, Sr. Notes, 7.875%, 2/15/99 225 231
Ciesco, MTN, 7.38%, 4/19/00 250 255
Contifinancial, Sr. Notes, 7.50%,
3/15/02 250 252
General Electric Capital, MTN,
6.15%, 11/5/01 350 350
Heller Financial, 7.875%, 11/1/99 220 227
HSBC Finance Nederland, Sub. Gtd.
Notes, (144a)
7.40%, 4/15/03 270 282
Hutchison Whampoa Finance, (144a),
6.95%, 8/1/07 600 555
2,397
Industrials 4.7%
Eaton, 6.375%, 4/1/99 $ 500 $ 503
General Motors Acceptance
Corporation, MTN
6.625%, 4/24/00 300 303
Lockheed, Deb., 9.375%, 10/15/99 85 90
Lockheed Martin, Gtd. Notes,
6.55%, 5/15/99 215 217
Tenneco, 8.20%, 11/15/99 270 280
1,393
Insurance 2.5%
Chubb, Deb., 8.75%, 11/15/99 125 129
Liberty Mutual Insurance, (144a),
8.20%, 5/4/07 300 325
USF&G, 7.00%, 5/15/98 275 276
730
Investment Dealers 0.9%
Lehman Brothers, 6.75%, 5/24/99 250 253
253
Media and Communications 6.8%
Comcast Cable Communications, (144a),
8.125%, 5/1/04 300 321
Cox Communications, 8.875%, 3/1/01 245 262
Lucent Technologies, 6.90%, 7/15/01 250 256
NWCG Holdings, Sr. Secured Disc. Notes
Zero Coupon, 6/15/99 300 272
TCI Communications, 8.65%, 9/15/04 600 662
Viacom, 6.75%, 1/15/03 250 245
2,018
Petroleum 3.5%
Maxus Energy, MTN, 10.83%, 9/1/04 300 367
MCN Financing, 6.305%, 6/1/37 300 300
PDV America
Sr. Notes
7.25%, 8/1/98 225 226
7.875%, 8/1/03 150 156
1,049
Retail 3.1%
Dayton Hudson, 9.40%, 2/15/01 275 299
Federated Department Stores,
Sr. Notes, 8.50%, 6/15/03 300 328
Sears Roebuck & Co., MTN, 8.23%,
5/4/99 275 284
911
Transportation 3.3%
Delta Air Lines, Deb., 9.60%, 5/26 -
6/1/00 $ 197 $ 212
Federal Express, 6.25%, 4/15/98 250 251
Northwest Airlines, 8.375%, 3/15/04 250 260
Union Pacific, 7.00%, 6/15/00 250 255
978
Utilities 9.6%
Cleveland Electric, 7.19%, 7/1/00 250 254
Consumers Energy, 1st Ref. Mtg.
Bonds, 6.875%, 5/1/98 152 152
Long Island Lighting, Gen. Ref.
Bonds, 9.75%, 5/1/21 250 262
Midamerican Energy, Sr. Notes,
6.50%, 12/15/01 250 253
Orange & Rockland Utilities, Deb.,
6.14%, 3/1/00 250 250
Pacific Gas & Electric, 1st Mtg.
Bonds, 8.75%, 1/1/01 250 268
Potomac Capital, 6.80%, 9/12/01 300 302
Progress Capital Holdings, MTN,
(144a), 6.88%, 8/1/01 250 254
Public Service Electric & Gas,
Mtg. Bonds, 8.875%, 6/1/03 325 363
System Energy Resources, 1st Mtg.
Notes, 7.625%, 4/1/99 275 280
Texas New Mexico Power, 1st Mtg.
Bonds, 9.25%, 9/15/00 200 213
2,851
Total Corporate Bonds and Notes
(Cost $16,647) 16,759
WARRANTS 0.0%
President Casinos, (144a), 9/30/99 *!> 1 0
Total Warrants (Cost $4) 0
U.S. GOVERNMENT MORTGAGE-BACKED
SECURITIES 24.4%
U.S. Government Agency Obligations 18.9%
Federal Home Loan Mortgage
6.50%, 12/1/99 275 277
6.80%, 4/15/18 300 302
6.92%, 1/25/12 240 242
7.45%, 10/15/15 20 20
7.50%, 9/15/06 375 382
10.75%, 12/1/09 144 158
Federal Home Loan Mortgage
5 year balloon
5.00%, 6/1/99 $ 237 $ 237
6.00%, 4/1/99 321 321
7 year balloon
6.50%, 12/1/99 498 502
7.00%, 5/1/99 404 407
REMIC
6.00%, 8/15/06 1,000 998
6.75%, 10/15/03 500 505
7.00%, 3/15/08 311 315
Federal National Mortgage Assn.
7.00%, 4/1/09 372 379
9.00%, 5/1/05 355 364
REMIC, 7.50%, 8/25/05 174 177
5,586
U.S. Government Guaranteed Obligations 5.5%
Government National Mortgage Assn.
I, 10.00%, 11/15/09 - 10/15/21 666 738
II, 10.00%, 10/20/20 160 175
Midget, I
9.00%, 4/15 - 12/15/01 59 61
9.50%, 3/15/98 3 3
10.00%, 8/15/98 - 4/15/01 409 426
10.50%, 2/15/98 - 2/15/01 239 244
1,647
Total U.S. Government Mortgage-Backed
Securities (Cost $7,191) 7,233
U.S. GOVERNMENT OBLIGATIONS 12.7%
U.S. Government Agency Obligations 3.5%
Federal National Mortgage Assn.
7.65%, 10/6/06 500 512
Deb., 6.15%, 12/14/01 300 298
U.S. Department Housing & Urban
Development Government
6.49%, 8/1/07 240 245
1,055
U.S. Treasury Obligations 9.2%
U.S. Treasury Notes
6.375%, 4/30/99 - 8/15/02 $ 1,090 $ 1,113
6.50%, 8/31/01 - 10/15/06 1,550 1,607
2,720
Total U.S. Government Obligations
(Cost $3,687) 3,775
ASSET-BACKED SECURITIES 2.2%
Auto-Backed 0.9%
Banc One Auto Grantor Trust, 6.27%,
11/20/03 264 265
USAA Auto Loan Grantor Trust, 5.00%,
11/15/99 11 11
276
Home Equity Loans-Backed 0.9%
Access Financial Mortgage Loan
Trust, 6.90%, 5/18/11 250 252
252
Receivables-Backed 0.4%
Harley Davidson Eaglemark, (144a),
6.35%, 10/15/02 125 125
125
Total Asset-Backed Securities
(Cost $650) 653
MUNICIPAL BONDS 0.3%
Taxable Municipal 0.3%
University of Miami, GO, 6.90%,
4/1/04 85 87
Total Municipal Bonds (Cost $85) 87
MONEY MARKET FUNDS 3.4%
Reserve Investment Fund, 5.65%# 1,006 1,006
Total Money Market Funds (Cost $1,006) 1,006
Total Investments in Securities
99.6% of Net Assets (Cost $29,270) $ 29,513
Other Assets Less Liabilities 107
NET ASSETS $ 29,620
__________
Net Assets Consist of:
Accumulated net investment income -
net of distributions $ (134)
Accumulated net realized gain/loss -
net of distributions (1,587)
Net unrealized gain (loss) 243
Paid-in-capital applicable to
6,429,037 shares of $0.0001 par
value capital stock outstanding;
1,000,000,000 shares of the
Corporation authorized 31,098
NET ASSETS $ 29,620
_________
NET ASSET VALUE PER SHARE $ 4.61
_________
! Private Placement
* Non-income producing
> Securities contain some restrictions as to public resale.
# Seven-day yield
GO General Obligation
MTN Medium Term Note
REMIC Real Estate Mortgage Investment Conduit
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
year-end amounts to 5.9% of net assets.
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Summit GNMA Fund
October 31, 1997
Statement of Net Assets
Par Value
In thousands
U.S. GOVERNMENT MORTGAGE-BACKED
SECURITIES 100.4%
U.S. Government Guaranteed
Obligations 95.0%
Government National Mortgage Assn.
I
6.50%, 3/15 - 5/15/26 $ 2,229 $ 2,206
7.00%, 9/15/12 - 12/15/25 1,493 1,511
7.50%, 6/15/22 - 5/15/24 1,708 1,758
8.00%, 4/15/17 - 3/15/25 2,095 2,196
8.50%, 6/15/16 - 3/15/27 3,917 4,136
9.00%, 8/15/08 - 8/15/21 713 771
9.50%, 6/15/09 - 7/15/20 631 690
10.00%, 3/15/18 75 83
10.50%, 9/15/13 - 12/15/19 892 1,002
11.00%, 12/15/09 - 7/15/19 165 188
11.50%, 6/15 - 12/15/15 44 50
II
9.00%, 5/20/22 - 3/20/25 505 539
9.50%, 2/20/17 - 12/20/20 242 262
10.00%, 1/20/14 - 3/20/21 190 208
11.00%, 9/20/17 39 43
GPM, I
9.25%, 7/15/16 - 7/15/17 23 25
9.50%, 7/15/09 63 68
10.00%, 8/15/13 4 5
Project Loan
6.85%, 8/15/32 404 409
7.35%, 7/15/32 169 177
7.75%, 3/15/20 302 322
7.875%, 6/15/27 459 491
8.00%, 11/15/17 404 436
8.50%, 1/15/27 199 209
REMIC
6.50%, 10/16/24 3,000 2,834
7.00%, 5/16/24 3,000 3,022
7.50%, 5/16/27 970 1,018
Government National Mortgage Assn.
TBA, I
7.50%, 7/15/20 $ 1,000 $ 1,023
8.00%, 7/15/20 1,000 1,038
U.S. Department of Veteran Affairs,
REMIC, 6.75%, 8/15/20 1,354 1,345
28,065
U.S. Government Agency Obligations 4.8%
Federal Home Loan Mortgage
5.00%, 7/15/05 37 37
5.85%, 11/15/17 232 232
Federal National Mortgage Assn.
5.00%, 8/25/22 16 15
6.50%, 1/1/26 454 448
REMIC
8.00%, 1/25/21 18 18
Inverse Floater, 11.681%,
6/25/99 606 661
1,411
Stripped Mortgage Securities 0.6%
Federal National Mortgage Assn.
CMO, Interest Only, 8.50%,
4/1/22 ** 619 154
REMIC, Principal Only, Zero
Coupon, 9/25/98 16 15
169
Total U.S. Government Mortgage-Backed
Securities (Cost $28,679) 29,645
U.S. GOVERNMENT OBLIGATIONS 5.2%
U.S. Government Agency Obligations 5.2%
Tennessee Valley Authority
5.88%, 4/1/36 500 520
6.235%, 7/15/45 1,000 1,020
Total U.S. Government Obligations
(Cost $1,504) 1,540
ASSET-BACKED SECURITIES 0.2%
Home Equity Loans-Backed 0.2%
Prudential Home Mortgage Securities,
6.00%, 10/25/07 53 53
Total Asset-Backed Securities
(Cost $53) 53
MONEY MARKET FUNDS 2.8%
Reserve Investment Fund, 5.65%# $ 820 $ 820
Total Money Market Securities
(Cost $820) 820
Total Investments in Securities
108.6% of Net Assets (Cost $31,056) $ 32,058
Other Assets Less Liabilities (2,528)
NET ASSETS $ 29,530
_________
Net Assets Consist of:
Accumulated net investment income -
net of distributions $ (143)
Accumulated net realized gain/loss -
net of distributions (484)
Net unrealized gain (loss) 1,002
Paid-in-capital applicable to
3,003,720 shares of $0.0001 par
value capital stock outstanding;
1,000,000,000 shares of the
Corporation authorized 29,155
NET ASSETS $ 29,530
_________
NET ASSET VALUE PER SHARE $ 9.83
_________
** For Interest Only securities, amount represents notional
principal, on which the fund receives interest
# Seven-day yield
CMO Collateralized Mortgage Obligation
GPM Graduated Payment Mortgage
Inverse
Floater Inverse Floating rate note; interest rate is inversely tied to a
published index - rate shown reflects current rate at 10/31/97
REMIC Real Estate Mortgage Investment Conduit
TBA To be announced security was purchased on a forward commitment
basis; the aggregate liability for securities purchased under such
agreements totaled $2,061,000 at 10/31/97
VR Variable Rate
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Summit Income Funds
Statement of Operations
Cash Reserves Fund
Limited-Term
Bond Fund
GNMA
Fund
In thousands
Limited-
Term Bond
Cash Reserves Fund GNMA Fund
Year Year Year
Ended Ended Ended
10/31/97 10/31/97 10/31/97
Investment Income
Income
Interest income $ 58,935 $ 1,853 $ 2,013
Expenses
Investment management and
administrative 4,707 149 161
Net investment income 54,228 1,704 1,852
Realized and Unrealized
Gain (Loss)
Net realized gain (loss)
on securities 2 (98) (229)
Change in net unrealized
gain or loss on
securities - 133 789
Net realized and unrealized
gain (loss) 2 35 560
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 54,230 $ 1,739 $ 2,412
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Summit Cash Reserves Fund
Statement of Changes in Net Assets
In thousands
Year
Ended
10/31/97 10/31/96
Increase (Decrease) in Net Assets
Operations
Net investment income $ 54,228 $ 30,193
Net realized gain (loss) 2 6
Change in net unrealized
gain or loss - 61
Increase (decrease) in net
assets from operations 54,230 30,260
Distributions to shareholders
Net investment income (54,228) (30,193)
Capital share transactions*
Shares sold 2,247,386 1,150,499
Distributions reinvested 52,014 28,318
Shares redeemed (1,737,843) (870,787)
Increase (decrease) in net
assets from capital
share transactions 561,557 308,030
Net Assets
Increase (decrease) during period 561,559 308,097
Beginning of period 741,561 433,464
End of period $ 1,303,120 $ 741,561
________________________
*Share information
Shares sold 2,247,386 1,150,499
Distributions reinvested 52,014 28,318
Shares redeemed (1,737,843) (870,787)
Increase (decrease) in
shares outstanding 561,557 308,030
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Summit Limited-Term Bond Fund
Statement of Changes in Net Assets
In thousands
Year
Ended
10/31/97 10/31/96
Increase (Decrease) in Net Assets
Operations
Net investment income $ 1,704 $ 1,685
Net realized gain (loss) (98) (235)
Change in net unrealized
gain or loss 133 (88)
Increase (decrease) in net
assets from operations 1,739 1,362
Distributions to shareholders
Net investment income (1,667) (1,601)
Tax return of capital (37) (84)
Decrease in net assets from
distributions (1,704) (1,685)
Capital share transactions*
Shares sold 12,694 14,004
Distributions reinvested 1,325 1,266
Shares redeemed (10,418) (15,967)
Increase (decrease) in net
assets from capital
share transactions 3,601 (697)
Net Assets
Increase (decrease) during period 3,636 (1,020)
Beginning of period 25,984 27,004
End of period $ 29,620 $ 25,984
____________________
*Share information
Shares sold 2,771 3,032
Distributions reinvested 290 275
Shares redeemed (2,283) (3,458)
Increase (decrease) in shares
outstanding 778 (151)
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Summit GNMA Fund
Statement of Changes in Net Assets
In thousands
Year
Ended
10/31/97 10/31/96
Increase (Decrease) in Net Assets
Operations
Net investment income $ 1,852 $ 1,611
Net realized gain (loss) (229) (274)
Change in net unrealized
gain or loss 789 (68)
Increase (decrease) in net
assets from operations 2,412 1,269
Distributions to shareholders
Net investment income (1,777) (1,495)
Tax return of capital (75) (116)
Decrease in net assets from
distributions (1,852) (1,611)
Capital share transactions*
Shares sold 14,057 11,792
Distributions reinvested 1,356 1,130
Shares redeemed (11,161) (10,639)
Increase (decrease) in net
assets from capital
share transactions 4,252 2,283
Net Assets
Increase (decrease) during period 4,812 1,941
Beginning of period 24,718 22,777
End of period $ 29,530 $ 24,718
____________________
*Share information
Shares sold 1,461 1,218
Distributions reinvested 140 117
Shares redeemed (1,160) (1,094)
Increase (decrease) in
shares outstanding 441 241
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Summit Income Funds
October 31, 1997
Notes to Financial Statements
Note 1 - Significant Accounting Policies
T. Rowe Price Summit Income Fund, Inc. (the corporation) is registered under
the Investment Company Act of 1940. The Summit Cash Reserves Fund (the Cash
Reserves Fund), the Summit Limited-Term Bond Fund (the Limited-Term Bond
Fund), and the Summit GNMA Fund (the GNMA Fund), diversified, open-end
management investment companies, are the three portfolios established by the
corporation and commenced operations on October 29, 1993.
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles for the investment company industry;
these principles may require the use of estimates by fund management.
Valuation Debt securities are generally traded in the over-the-counter
market. Except for securities held by the Cash Reserves Fund, investments in
securities originally issued with maturities of one year or more are stated
at fair value as furnished by dealers who make markets in such securities or
by an independent pricing service, which considers yield or price of bonds
of comparable quality, coupon, maturity, and type, as well as prices quoted
by dealers who make markets in such securities. Securities held by the bond
funds with original maturities of less than one year are stated at fair
value, which is determined by using a matrix system that establishes a value
for each security based on money market yields. Securities held by the Cash
Reserves Fund are valued at amortized cost.
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 that fund, as authorized by the Board of Directors.
Premiums and Discounts Premiums and discounts on debt securities, other than
mortgage-backed securities, are amortized for both financial reporting and
tax purposes.
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.
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. Distributions to shareholders are
recorded by each fund on the ex-dividend date. Income and capital gain
distributions are determined in accordance with federal income tax
regulations and may differ from those determined in accordance with generally
accepted accounting principles.
Note 2 - Investment Transactions
Purchases and sales of portfolio securities, other than short-term
securities, for the year ended October 31, 1997, were as follows:
Limited-Term GNMA
Bond Fund Fund
U.S. government securities
Purchases $ 8,097,000 $ 35,466,000
Sales 9,984,000 31,463,000
Other securities
Purchases 14,638,000 496,000
Sales 9,344,000 16,000
Note 3 - Federal Income Taxes
No provision for federal income taxes is required since each fund intends to
continue to qualify as a regulated investment company and distribute all of
its taxable income. The Limited-Term Bond Fund has unused realized capital
loss carryforwards for federal income tax purposes of $1,575,000, of which
$1,016,000 expires in 2002, $354,000 in 2003, and $205,000 thereafter through
2005. The GNMA Fund has unused realized capital loss carryforwards for
federal income tax purposes of $461,000, of which $187,000 expires in 2003,
$142,000 in 2004, and $132,000 in 2005. Each fund intends to retain gains
realized in future periods that may be offset by available capital loss
carryforwards.
In order for each fund's capital accounts and distributions to shareholders
to reflect the tax character of certain transactions, the following
reclassifications were made during the year ended October 31, 1997. The
results of operations and net assets were not affected by the
increases/(decreases) to these accounts.
Limited-Term GNMA
Bond Fund Fund
Undistributed net
realized gain 37,000 75,000
Paid-in-capital (37,000) (75,000)
At October 31, 1997, the aggregate costs of investments for the Cash
Reserves, Limited-Term Bond, and GNMA Funds for federal income tax and
financial reporting purposes were $1,309,904,000, $29,270,000, and
$31,056,000, respectively. For the Cash Reserves Fund, amortized cost is
equivalent to value; and for the Limited-Term Bond and GNMA Funds, net
unrealized gain (loss) on investments was as follows:
Limited-Term GNMA
Bond Fund Fund
Appreciated investments $ 333,000 $ 1,040,000
Depreciated investments (90,000) (38,000
)
Net unrealized gain (loss) $ 243,000 $ 1,002,000
____________________________
Note 4 - Related Party Transactions
The investment management and administrative agreement between each fund and
T. Rowe Price Associates, Inc. (the manager) provides for an all-inclusive
annual fee, of which $380,000 and $1,000 were payable at October 31, 1997,
by the Cash Reserves and GNMA Funds, respectively. The fee, computed daily
and paid monthly, is equal to 0.45% of average daily net assets for the Cash
Reserves Fund, 0.55% of average daily net assets for the Limited-Term Bond
Fund, and 0.60% of average daily net assets for the GNMA Fund. Pursuant to
the agreement, investment management, shareholder servicing, transfer agency,
accounting, and custody services are provided to each fund, and interest,
taxes, brokerage commissions, and extraordinary expenses are paid directly
by each fund.
The Limited-Term Bond and GNMA Funds may invest in the Reserve Investment
Fund and Government Reserve Investment Fund (collectively, the Reserve
Funds), open-end management investment companies managed by T. Rowe Price
Associates, Inc. The Reserve Funds are offered as cash management options
only to mutual funds and other accounts managed by T. Rowe Price and its
affiliates and are not available to the public. The Reserve Funds pay no
investment management fees. Distributions from the Reserve Funds to the
Limited-Term Bond Fund and the GNMA Fund for the year ended October 31, 1997,
totaled $11,000 and $8,000, respectively, and are reflected as interest
income in the accompanying Statement of Operations.
T. Rowe Price Summit Income Funds
Report of Independent Accountants
To the Board of Directors of T. Rowe Price Summit Funds, Inc.
and Shareholders of T. Rowe Price Summit Cash Reserves Fund,
T. Rowe Price Summit Limited-Term Bond Fund and
T. Rowe Price Summit GNMA Fund
We have audited the accompanying statements of net assets of T. Rowe Price
Summit Funds, Inc. (which includes T. Rowe Price Summit Cash Reserves Fund,
T. Rowe Price Summit Limited-Term Bond Fund and T. Rowe Price Summit GNMA
Fund) as of October 31, 1997, and the related statements of operations for
the year then ended, the statements of changes in net assets for each of the
two years in the period then ended and the financial highlights for each of
the three years in the period then ended and the period October 29, 1993
(commencement of operations) to October 31, 1994. These financial statements
and financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
investments owned as of October 31, 1997, by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights, referred
to above, present fairly in all material respects, the financial position of
T. Rowe Price Summit Funds, Inc. as of October 31, 1997, the results of their
operations, the changes in their net assets, and their financial highlights
for the respective periods stated in the first paragraph, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
November 21, 1997
For yield, price, last transaction,
current balance, or to conduct
transactions, 24 hours, 7 days
a week, call Tele*Access(registered trademark):
1-800-638-2587 toll free
For assistance
with your existing
fund account, call:
Shareholder Service Center
1-800-225-5132 toll free
410-625-6500 Baltimore area
To open a Discount Brokerage
account or obtain information,
call: 1-800-638-5660 toll free
Internet address:
www.troweprice.com
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 of the
T. Rowe Price Summit Income Funds.
Investor Centers:
101 East Lombard St.
Baltimore, MD 21202
T. Rowe Price
Financial Center
10090 Red Run Blvd.
Owings Mills, MD 21117
Farragut Square
900 17th Street, N.W.
Washington, D.C. 20006
ARCO Tower
31st Floor
515 South Flower St.
Los Angeles, CA 90071
4200 West Cypress St.
10th Floor
Tampa, FL 33607
Invest With Confidence(registered trademark)
T. Rowe Price Investment Services, Inc., Distributor.
C10-050 10/31/97
