Annual Report
Summit
Income
Funds
October 31, 1998
T. Rowe Price
Report Highlights
Summit Income Funds
o Interest rates moved in a narrow range until July, then plummeted
when Russia's economic crisis prompted renewed demand for the safety of
U.S. Treasuries.
o The dividend yield for the Summit Cash Reserves Fund declined as
rates fell, but the fund posted better gains than its peer group average.
o Summit Limited-Term Bond Fund relied on corporate holdings with good
yields and a comparatively long duration to outperform its peer group
average.
o A strategy that limited prepayment risk helped the Summit GNMA Fund
outpace its peer group average.
o We expect slower economic growth and lower interest rates in the
coming year.
Fellow Shareholders
The investing background was turbulent for the six and 12 months ended October
31, 1998, and the domestic economy showed wear after absorbing a year's worth of
crises in Southeast Asia and Russia. These trends heightened investors' taste
for relatively low-risk investments, especially short-term instruments and
high-quality bonds, such as Treasuries. The Summit Income Funds' returns were
moderate in this environment, but consistently outperformed their peer group
averages.
MARKET ENVIRONMENT
Over the course of the period, global events overshadowed domestic economic and
financial market developments. The lingering effects of last year's Southeast
Asia collapse were evident in weakening corporate earnings reports and a growing
external trade deficit, while the financial crisis in Russia this past August
heightened investor discomfort with higher-risk investments. Economists, as well
as the Federal Reserve, noted a worrisome trend toward global deflation. These
concerns caused sharp losses in multinational financial services stocks,
impaired worldwide market liquidity, and sparked a global credit crunch. Even
though U.S. gross domestic product (GDP) growth was steady and inflation
remained low, market volatility in the U.S. increased, and investors became
highly risk averse.
Interest Rate Levels
Current 5-Year 90-Day
Coupon GNMA Treasury Note Treasury Bill
10/31/97 6.95 5.78 5.18
6.99 5.82 5.27
6.90 5.71 5.40
1/31 6.63 5.48 5.22
6.87 5.60 5.16
6.62 5.62 5.19
4/30 6.67 5.72 5.05
6.63 5.57 5.09
6.56 5.50 5.06
7/31 6.59 5.51 5.07
6.47 5.07 5.03
5.92 4.24 4.38
10/31/98 6.15 4.22 4.21
The Federal Reserve responded to the troubled atmosphere by reducing short-term
interest rates a total of 50 basis points in September and October, and another
25 basis points in November, after the period ended. The moves were intended to
help ease the worldwide credit crunch while also improving consumer and investor
confidence at home. These cuts, combined with the general investor preference
for lower-risk investments, prompted a strong rally in high-quality bonds.
Preparing For The Year 2000
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The Year 2000 draws closer every day, and it holds special meaning beyond the
arrival of a new millennium. The issue for investors is that many computer
programs throughout the world use two digits instead of four to identify the
year and may assume the next century starts with 1900. If these programs are not
modified, they will not be able to correctly handle the century change when the
year changes from "99" to "00" on January 1, 2000, and they will no longer be
able to perform necessary functions. The Year 2000 issue affects all companies
and organizations. T. Rowe Price has been taking steps to assure that its
computer systems and processes are capable of functioning in the Year 2000.
Detailed plans for remediation efforts have been developed and are currently
being executed.
OUR PLAN OF ACTION
We began to address these issues several years ago by requiring that all new
systems process and store four-digit years. We plan to complete all
reprogramming efforts for the major application systems, including business
applications required to service our customers and processing infrastructure
necessary to ensure the integrity of customer data and investments, by December
31, 1998, leaving a full 12 months for system testing. Because we exchange data
electronically with customers and vendors, we are working with them to assess
the adequacy of their own compliance efforts. Our goal is to ensure the
continuation of the same level of service to all our mutual fund shareholders
and clients after December 31, 1999.
We are asking all vendors and companies we do business with for a Year 2000
compliance status, with the expectation that some organizations will not be able
to modify their interface files prior to December 31, 1999. Our goal is to
identify any noncompliant files so that we can implement alternative solutions.
In addition, we are scheduling tests for critical vendors and companies that
claim Year 2000 compliance to ensure that time-related data and calculations
function properly as we move into the next century.
SMOOTH TRANSITION PLANNED
We believe our programs and initiatives will provide a smooth transition into
the next millennium. We are assessing all systems providing products or services
to our retail mutual fund shareholders, retirement plan sponsors, and
participants, and we are taking steps to modify them where necessary for the
Year 2000. Our plan provides time to develop solutions for all noncompliant
systems and data files from customers or vendors.
The Securities Industry Association (SIA) is coordinating Year 2000 testing to
assure that securities markets, clearing corporations, depositories, and third
party service providers can send, receive, and process files and transactions
accurately. In late July 1998, the SIA completed a beta test of Year 2000
readiness. The test was considered successful in terms of transactions completed
and will serve as the basis for the SIA's industry-wide approach. During October
1998, T. Rowe Price completed its beta test of Year 2000 readiness with the SIA
and is ready for the industry-wide test that is scheduled for March and April
1999.
For a more detailed discussion of our Year 2000 effort, as well as continuing
updates on our progress, please check our Web site (www.troweprice.com).
Treasuries were the chief beneficiaries of the trends toward lower rates and
higher investor demand for safety, with the yield on 30-year Treasuries falling
to a new low in October. Corporate bonds did less well, although shorter-term,
higher-quality issues provided relatively attractive performance. Falling rates
were more problematic for mortgage-backed bonds, which struggle when home
mortgage prepayments increase. Lower yields on cash instruments reflected the
drop in short-term rates.
SUMMIT CASH RESERVES FUND
Performance Comparison
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Periods Ended 10/31/98 6 Months 12 Months
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Cash Reserves Fund 2.66% 5.35%
Lipper Money Market
Funds Average 2.43 4.91
The sharp decline in interest rates toward the end of the period reduced money
market fund returns in general, reflected in your fund by a drop in dividend
yield. Although we were able to keep dividends per share for the six months
ending October 31 unchanged from the previous six-month period, the fund's
seven-day compound dividend yield slipped to 5.16% from 5.38% on April 30 and
5.41% one year ago. Fortunately, a relatively low expense ratio and effective
management decisions helped your fund maintain a significant edge over the
Lipper Money Market Funds Average for both the 6- and 12-month periods.
As rates fell, we sought to slow the pace at which we would have to reinvest
maturing, higher-yielding holdings in issues with lower yields. We maintained a
strategy, developed earlier in the year, of owning sufficient issues with
relatively long maturities to minimize the decline in the fund's yield. The
fund's weighted average maturity throughout the last half-year was in the
neighborhood of 80 days, and ended the period at 81 days, up from 79 six months
ago.
In view of the heightened volatility in global financial markets, we redirected
sector exposure by reducing Eurodollar negotiable CDs (primarily issued by large
international banking concerns) from 12% to 4%. We also cut exposure to other
finance and credit sector instruments (included in the table following this
letter as part of the "all other" category) by six percentage points. We used
the proceeds to increase our holdings in high-quality, collateralized
asset-backed commercial paper. Since money market issuance is often dominated by
the securities of financial institutions, the recent growth in availability of
asset-backed commercial paper has come at an opportune time for portfolio
managers, like us, wishing to diversify. The fund's weighted average credit
quality remained high as it continued to hold only first-tier money market
instruments.
During the period, swap-related products including floating rate notes also
became less expensive relative to other securities. Accordingly, we increased
our floating rate holdings from 8% to 14% when their yields became notably more
attractive than those of fixed rate issues.
SUMMIT LIMITED-TERM BOND FUND
Performance Comparison
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Periods Ended 10/31/98 6 Months 12 Months
- --------------------------------------------------------------------------------
Limited-Term Bond Fund 4.76% 7.97%
Lipper Short Intermediate
Investment-Grade
Debt Funds Average 4.11 6.97
Your fund posted a strong return of 4.76% during the six-month period, well
ahead of the 4.11% gain of the Lipper Short Inter-mediate Investment-Grade Debt
Funds Average. That performance lifted the fund's 12-month results to 7.97%-a
percentage point better than its peer group. A strategy that emphasized
higher-yielding corporate bonds and longer maturities, combined with a
relatively low expense ratio, contributed to the superior performance. As
interest rates fell during the last half-year, the fund's six-month dividends
per share remained steady even though its dividend yield slipped from 6.24% at
last report to 5.88% at period's end as a result of share price appreciation.
The fund posted good results despite a heavy concentration in corporate bonds,
which did not perform as well as Treasuries when interest rates fell and
investors rushed to relatively safe investments. As mentioned in the semiannual
shareholder letter, we trimmed the fund's corporate holdings from roughly 60% of
assets at the end of 1997 to near 55% during the early part of 1998 and
maintained exposure at about this level throughout the past six months. This
positioning helped protect returns from widening yield spreads (between
Treasuries and corporates), as did the fund's solid, AA- average credit quality.
As the period ended, we selectively added some AA and BBB bonds with attractive
yields that we felt had been oversold. A 3.1-year duration-somewhat longer than
the Lipper peer group average-bolstered fund performance as rates fell.
Quality Diversification
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Summit Limited-Term Bond Fund
AAA AA A BBB BB B and Below
34.5 13 26 22 3 1.5
Within the corporate sector, industry allocations remained generally unchanged,
with one important exception. Given the heightened risk in the global financial
markets and their negative effect on financial companies, we reduced the
portfolio's exposure to banking and finance sector securities from 17% six
months ago to 13% at October 31. We shifted the assets to issues in the less
economically sensitive consumer products and services sector.
We also made a change in the noncorporate-bond segment of the portfolio when it
became clear that interest rates were heading lower. As falling rates caused
mortgage-backed securities to underperform, we reduced exposure to the sector
from 18% to 14% in recent months and increased holdings of asset-backed
securities, whose cash flows are more predictable and less sensitive to falling
rates.
We perceive the U.S. economic environment as generally favorable and look for
flat or declining interest rates. Accordingly, we expect to maintain a high
weighting in corporate bonds as well as a slightly long duration compared with
our Lipper peer group. Should the global environment worsen and the likelihood
of a recession increase, we would probably trim corporate holdings further and
increase holdings of asset-backed federal agency and U.S. Treasury securities.
SUMMIT GNMA FUND
Performance Comparison
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Periods Ended 10/31/98 6 Months 12 Months
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GNMA Fund 3.77% 7.10%
Lipper GNMA Funds Average 3.49 6.77
When compared with the strong gains of Treasuries and even some corporate bonds,
mortgage-backed securities had an uninspiring 12 months. The last six months
were particularly difficult. A generally defensive investment strategy, however,
helped your fund post gains of 3.77% and 7.10% for the 6- and 12-month periods,
respectively, handily outperforming the Lipper GNMA Funds Average for both time
frames. Overall, the fund's price per share is up $0.05 over the last six
months, to $9.87. Dividends over the last six months were unchanged at $0.32,
but the overall dividend yield decreased over both periods because the price
rose.
Your fund's returns have been heavily influenced by the continual drop in
interest rates during the last two years. Over the past 12 months, intermediate
and long interest rates fell at least one percentage point, while short rates
fell about 1.5 percentage points, causing the yield curve (which charts the
yields for different maturities) to steepen. In the same period, 30-year
mortgage rates fell from 7.20% to 6.83%, as measured by Freddie Mac's Primary
Mortgage Market Survey, briefly hitting 6.49% in early October-a six-year low.
Rates dropped most sharply in August through October, raising prepayment risk
for mortgage-backed investors. (Prepayments can negatively affect total return
when homeowners refinance their high-rate mortgages, causing premium-priced
mortgage-backed bonds to be cashed out at par. In that case, the premium and the
higher yield are lost.) This growing risk, along with the dislocation in world
financial markets, caused mortgages to underperform Treasuries in the last three
months of the period.
The mortgage-backed market saw a refinancing wave in April of 1998, and another
wave is expected in November. Fortunately, we have been emphasizing mortgage
securities that are less vulnerable to prepayments. These holdings include
project loans, construction loans, and collateralized mortgage obligations
(CMOs), which either structurally or legally are designed to prevent early
prepayments. These securities did their job in April-the increase in prepayments
received by the fund was minimal-and we expect similar results with upcoming
refinancings. As always the average credit quality of the portfolio remained
very high at AAA.
OUTLOOK
While there was some negative news and much concern about the state of the U.S.
economy during the period, there was little strong evidence that a recession is
at hand. Indeed, we expect 1999 to be marked by slower GDP growth-perhaps below
2%-but not a recession. This slowing will place some pressure on corporate
profits, but the overall economic climate should remain generally favorable for
business. The Fed is also likely to remain accommodative given the current low
rate of inflation and the high level of economic uncertainty.
It is unclear, however, if Treasuries can continue to dominate the fixed income
markets as they have through most of 1998. If interest rates trend lower,
investors can expect their money market yields to taper off further.
Mortgage-backed bonds will also continue to be plagued by refinancings. In the
absence of recession, intermediate-term corporate bonds should offer solid
returns at reasonable risk.
Respectfully submitted,
Peter Van Dyke
President
November 21, 1998
Change in Management
Peter Van Dyke, a managing director of T. Rowe Price and director of the taxable
bond department, is planning to retire from T. Rowe Price Associates at the end
of this year. We wish him the very best in his future pursuits. Your directors
have elected Edward A. Wiese to be president of the Summit Income Funds. Mr.
Wiese has been the chairman of the Investment Advisory Committees for the Summit
Cash Reserves and Summit Limited-Term Bond Funds since their inception in 1993.
He joined T. Rowe Price in 1984 and has been managing investments since 1985.
Deborah L. Boyer, a vice president of the taxable bond department, has been
appointed chairman of the Summit GNMA Fund's Investment Advisory Committee.
Prior to joining the firm in 1996, she was an assistant vice president and
government bond trader for First Chicago NBD Corporation. Other members of
Summit GNMA's committee include Connice A. Bavely, Heather R. Landon, James M.
McDonald, Edmund M. Notzon III, and Gwendolyn G. Wagner.
The preceding updates the Summit Income Funds prospectus of March 1, 1998.
T. Rowe Price Summit Income Funds
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Portfolio Highlights
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KEY STATISTICS
4/30/98 10/31/98
Summit Cash Reserves Fund
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Price Per Share $ 1.00 $ 1.00
Dividends Per Share
For 6 months 0.026 0.026
For 12 months 0.053 0.052
Dividend Yield (7-Day Compound) * 5.38% 5.16%
Weighted Average Maturity (days) 79 81
Weighted Average Quality ** First Tier First Tier
Summit Limited-Term Bond Fund
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Price Per Share $ 4.61 $ 4.69
Dividends Per Share
For 6 months 0.14 0.14
For 12 months 0.29 0.28
Dividend Yield *
For 6 months 6.24% 5.88%
For 12 months 6.50 6.15
30-Day Standardized Yield 5.90 5.31
Weighted Average Maturity (years) 4.3 4.0
Weighted Average Effective
Duration (years) 3.1 3.1
Weighted Average Quality *** AA- AA-
(continued on next page)
T. Rowe Price Summit Income Funds
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Portfolio Highlights
- --------------------------------------------------------------------------------
KEY STATISTICS
4/30/98 10/31/98
Summit GNMA Fund
- --------------------------------------------------------------------------------
Price Per Share $ 9.82 $ 9.87
Dividends Per Share
For 6 months 0.32 0.32
For 12 months 0.66 0.64
Dividend Yield *
For 6 months 6.75% 6.40%
For 12 months 6.95 6.68
30-Day Standardized Yield 6.20 5.83
Weighted Average Maturity (years) 10.4 8.0
Weighted Average Effective
Duration (years) 3.9 3.1
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
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Portfolio Highlights
SECTOR DIVERSIFICATION
Percent of Percent of
Net Assets Net Assets
4/30/98 10/31/98
Summit Cash Reserves Fund
- --------------------------------------------------------------------------------
U.S. Negotiable Bank Notes 3% 6%
Certificates of Deposit 39 32
Domestic Negotiable CDs 4 5
Eurodollar Negotiable CDs 12 4
U.S. Dollar Denominated
Foreign Negotiable CDs 23 23
Commercial Paper and Medium-Term Notes 53 62
Asset-Backed 12 24
Banking 8 11
Asset-Backed Structured Notes 8 5
Insurance -- 4
Investment Dealers 3 4
All Other 22 14
Foreign Government and Municipalities 4 1
Other Assets Less Liabilities 1 - 1
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Total 100% 100%
Fixed Rate Obligations 92 86
Floating Rate Instruments 8 14
(continued on next page)
T. Rowe Price Summit Income Funds
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Portfolio Highlights
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SECTOR DIVERSIFICATION
Percent of Percent of
Net Assets Net Assets
4/30/98 10/31/98
Summit Limited-Term Bond Fund
- --------------------------------------------------------------------------------
Corporate Bonds and Notes 54% 56%
Consumer Products and Services 8 10
Banking and Finance 17 13
Industrial 11 12
Utilities 11 11
Transportation 1 3
Media & Communications -- 3
All Other 6 4
Asset-Backed Securities 5 10
Mortgage-Backed Securities 18 14
U.S. Government Obligations 17 15
U.S. Treasuries 9 7
Government Agency Obligations 8 8
Money Market Funds* 4 9
Other Assets Less Liabilities 2 - 4
- --------------------------------------------------------------------------------
Total 100% 100%
Summit GNMA Fund
- --------------------------------------------------------------------------------
GNMA 81% 81%
U.S. Government Agencies 14 14
Asset-Backed Securities -- 4
Agency-Backed STRIPS 3 1
Money Market Funds* 6 4
Other Assets Less Liabilities - 4 - 4
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Total 100% 100%
*See note at end of financial statements.
T. Rowe Price Summit Income Funds
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Performance Comparison
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These charts show the value of a hypothetical $25,000 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 Funds Summit Cash
Average Rserves Fund
10/29/93 25.000 25.000
10/94 25.819 25.901
10/95 27.195 27.372
10/96 28.531 28.803
10/97 29.943 30.337
10/98 31.446 31.961
SUMMIT LIMITED-TERM BOND FUND
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Merrill Lynch Lipper Short Summit
1-5 Year Corporate/ Intermediate Limited-
Government Investment-Grade Term
Index Debt Funds Average Bond Fund
10/29/93 25.000 25.000 25.000
10/94 24.987 24.485 24.822
10/95 27.606 27.121 26.649
10/96 29.240 28.605 28.109
10/97 31.266 30.520 30.002
10/98 33.901 32.635 32.393
T. Rowe Price Summit Income Funds
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Performance Comparison
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SUMMIT GNMA FUND
- --------------------------------------------------------------------------------
Salomon Lipper Summit
GNMA GNMA Funds GNMA
Index Average Fund
10/29/93 25.000 25.000 25.000
10/94 24.648 24.260 24.583
10/95 28.322 27.698 28.375
10/96 30.357 29.308 29.928
10/97 33.103 31.823 32.673
10/98 35.457 34.015 34.991
Average Annual Compound Total Return
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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.
Since Inception
Periods Ended 10/31/98 1 Year 3 Years 5 Years Inception Date
Summit Cash Reserves Fund 5.35% 5.30% 5.04% 5.03% 10/29/93
Summit Limited-Term
Bond Fund 7.97 6.72 5.32 5.31 10/29/93
Summit GNMA Fund 7.10 7.24 6.96 6.95 10/29/93
Investment return and principal value represent 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
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Financial Highlights
For a share outstanding throughout each period
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Year 10/29/93
Ended Through
10/31/98 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 $ 1.000
Investment activities
Net investment income 0.052 0.052 0.051 0.055 0.035
Distributions
Net investment income (0.052) (0.052) (0.051) (0.055) (0.035)
NET ASSET VALUE
End of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------------------------------------------------
Ratios/Supplemental Data
Total return* 5.35% 5.33% 5.23% 5.68% 3.60%
Ratio of expenses to
average net assets 0.45% 0.45% 0.45% 0.45% 0.45%!
Ratio of net investment
income to average
net assets 5.24% 5.18% 5.09% 5.55% 4.03%!
Net assets, end of period
(in millions) $ 1,885 $ 1,303 $ 742 $ 433 $ 187
* 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.
T. Rowe Price Summit Limited-Term Bond Fund
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Financial Highlights
For a share outstanding throughout each period
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Year 10/29/93
Ended Through
10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
NET ASSET VALUE
Beginning of period $ 4.61 $ 4.60 $ 4.65 $ 4.64 $ 5.00
Investment activities
Net investment income 0.28 0.29 0.30 0.32 0.33
Net realized and
unrealized gain (loss) 0.08 0.01 (0.05) 0.01 (0.36)
Total from
investment activities 0.36 0.30 0.25 0.33 (0.03)
Distributions
Net investment income (0.28) (0.28) (0.29) (0.31) (0.33)
Tax return of capital -- (0.01) (0.01) (0.01) --
Total distributions (0.28) (0.29) (0.30) (0.32) (0.33)
NET ASSET VALUE
End of period $ 4.69 $ 4.61 $ 4.60 $ 4.65 $ 4.64
Ratios/Supplemental Data
Total return* 7.97% 6.73% 5.48% 7.36% (0.71)%
Ratio of expenses to
average net assets 0.55% 0.55% 0.55% 0.55% 0.55%!
Ratio of net investment
income to average
net assets 5.96% 6.28% 6.43% 6.85% 6.98%!
Portfolio turnover rate 52.0% 74.5% 116.1% 84.3% 296.0%!
Net assets, end of period
(in thousands) $ 40,904 $ 29,620 $ 25,984 $ 27,004 $ 21,116
* 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.
T. Rowe Price Summit GNMA Fund
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Financial Highlights
For a share outstanding throughout each period
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Year 10/29/93
Ended Through
10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
NET ASSET VALUE
Beginning of period $ 9.83 $ 9.65 $ 9.81 $ 9.15 $ 10.00
Investment activities
Net investment income 0.64 0.67 0.67 0.70 0.69
Net realized and
unrealized gain (loss) 0.04 0.18 (0.16) 0.66 (0.85)
Total from
investment activities 0.68 0.85 0.51 1.36 (0.16)
Distributions
Net investment income (0.64) (0.64) (0.62) (0.67) (0.69)
Tax return of capital -- (0.03) (0.05) (0.03) --
Total distributions (0.64) (0.67) (0.67) (0.70) (0.69)
NET ASSET VALUE
End of period $ 9.87 $ 9.83 $ 9.65 $ 9.81 $ 9.15
Ratios/Supplemental Data
Total return* 7.10% 9.17% 5.47% 15.43% (1.67)%
Ratio of expenses to
average net assets 0.60% 0.60% 0.60% 0.60% 0.60%!
Ratio of net investment
income to average
net assets 6.47% 6.91% 6.99% 7.40% 7.31%!
Portfolio turnover rate 83.8% 111.8% 136.1% 173.8% 61.5%!
Net assets, end of period
(in thousands) $ 46,571 $ 29,530 $ 24,718 $ 22,777 $ 17,184
* 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.
T. Rowe Price Summit Cash Reserves Fund
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October 31, 1998
Statement of Net Assets
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Par Value
In thousands
BANK NOTES 6.9%
Bank of America National
Trust & Savings,
5.65%, 1/7/99 $ 20,000 $ 20,001
Bank of New York
5.70%, 5/26/99 10,000 9,997
5.75%, 5/14/99 25,000 24,991
Bankboston N.A., 5.74%, 4/15/99 10,000 10,020
Bayerische Landesbank,
VR, 5.033%, 1/22/99 10,000 9,990
FCC National Bank
5.13%, 3/12/99 10,000 10,000
5.68%, 6/3/99 10,000 9,996
5.71%, 3/5/99 5,000 4,999
Key Bank N.A., VR,
5.175%, 11/30/98 15,000 14,993
PNC Bank Trust, VR,
5.426%, 11/13/98 15,000 15,000
Total Bank Notes (Cost $129,987) 129,987
CERTIFICATES OF DEPOSIT 29.7%
Banco Santander, (London),
5.15%, 11/30/98 25,000 25,000
Bank of Austria AG
5.70%, 3/30/99 9,250 9,248
5.72%, 4/19/99 20,000 20,025
Barclays Bank PLC
5.70%, 3/30/99 9,000 9,008
VR, 5.235%, 11/5/98 10,000 9,991
Bayerische Hypotheken,
5.70%, 3/30/99 10,000 9,998
Bayerische Landesbank
5.57%, 11/30/98 35,000 35,003
5.65%, 7/23/99 15,000 14,989
5.81%, 12/17/98 2,500 2,500
Branch Banking & Trust,
5.51%, 1/11/99 25,000 25,000
Canadian Imperial Bank of Commerce
5.54%, 12/2/98 40,000 40,001
5.745%, 4/27/99 5,000 4,999
Chase Manhattan Bank
5.03%, 4/6/99 10,000 10,000
5.685%, 8/3/99 10,000 9,995
5.73%, 5/17/99 3,000 3,000
Commerzbank, (London),
5.42%, 2/16/99 $ 16,000 $ 16,001
Credit Agricole Indosuez,
5.75%, 4/26/99 30,000 30,032
Credit Communal de Belgique,
5.63%, 2/11/99 20,000 20,001
Creditanstalt Bankverein,
5.71%, 3/30/99 10,000 9,998
Den Danske Bank,
5.75%, 4/26/99 10,000 9,998
Deutsche Bank AG,
5.70%, 3/5 - 3/30/99 20,000 19,996
Dresdner Bank AG,
5.33%, 3/11/99 25,000 25,002
Harris Trust & Savings Bank,
5.54%, 11/2/98 15,000 15,000
Hessische Landesbank,
5.52%, 11/9/98 25,000 25,000
Kredietbank NV
5.69%, 3/29/99 10,000 9,998
5.75%, 4/28/99 10,000 9,997
Merita Bank PLC,
5.26%, 1/5/99 10,000 10,000
National Bank of Canada,
5.80%, 5/12/99 10,000 9,998
Nordeutsche Landesbank
Girozentrale, (London)
5.57%, 1/29/99 5,000 5,000
Regions Bank,
5.30%, 9/10/99 25,000 24,999
Societe Generale,
5.785%, 5/12/99 5,000 4,998
Svenska Handelsbanken,
5.74%, 6/1/99 10,000 9,996
Swiss Bank
5.65%, 3/9 - 3/24/99 35,000 35,016
5.69%, 6/3/99 10,000 9,997
5.80%, 4/30/99 20,000 19,994
Westdeutsche Landesbank, (London),
5.51%, 1/11/99 10,000 10,000
Total Certificates of Deposit (Cost $559,778) 559,778
COMMERCIAL PAPER 47.5%
Aluminum Company of America,
5.10%, 11/13/98 10,000 9,983
Asset Securitization Cooperative
4(2)
5.27%, 11/10/98 30,000 29,960
5.35%, 11/17/98 15,000 14,964
5.50%, 11/12/98 8,000 7,987
Bex America Finance,
5.23%, 1/12/99 10,000 9,895
BL North America,
5.50%, 11/20/98 20,000 19,942
BT Alex Brown,
5.50%, 1/14/99 10,000 9,887
California Pollution Control
5.60%, 11/2/98 $ 20,000 $ 20,000
4(2), 5.19%, 2/11/99 15,000 15,000
Ciesco
5.05%, 2/11/99 25,420 25,056
5.10%, 11/25/98 25,000 24,915
Commoloco, 5.63%, 11/2/98 8,000 7,999
Commonwealth Bank of Australia,
5.25%, 11/5/98 23,000 22,987
Corporate Asset Funding
4(2)
5.05%, 2/8/99 25,000 24,652
5.10%, 11/5/98 - 1/28/99 38,743 38,483
5.25%, 1/12/99 3,000 2,968
5.35%, 11/9/98 1,565 1,563
Countrywide Home Loans,
5.22%, 1/29/99 20,300 20,038
Cregem North America,
5.50%, 1/8/99 10,000 9,896
CS First Boston Group,
4(2), 5.51%, 11/18/98 6,000 5,984
Delaware Funding
4(2)
5.15%, 11/16/98 24,535 24,482
5.17%, 1/15/99 10,000 9,892
5.20%, 11/18/98 8,000 7,981
5.38%, 11/6/98 8,000 7,994
Den Danske, 5.50%, 1/6/99 1,000 990
Dresdner U.S. Finance
5.00%, 3/15/99 20,000 19,628
5.10%, 12/1/98 15,000 14,936
Du Pont EI de Nemours,
5.07%, 11/24/98 834 831
Falcon Asset Securitization
4(2)
5.16%, 12/10/98 14,000 13,922
5.21%, 11/20/98 10,000 9,972
5.25%, 11/3/98 19,850 19,844
5.27%, 11/6/98 10,000 9,993
FCAR Owner Trust, 5 30%, 1/12/99 5,600 5,541
Finova Capital
5.55%, 11/6/98 9,000 8,993
5.57%, 11/4/98 1,000 1,000
France Telecom, 5.10%, 11/13/98 $ 8,833 $ 8,818
Gap, 4(2), 5.25%, 12/8/98 14,000 13,924
Generale Bank, 5.50%, 11/10/98 17,000 16,977
Golden Funding,
4(2), 5.22%, 12/17/98 28,190 28,002
Island Finance of Puerto Rico,
5.52%, 11/19/98 10,000 9,972
Jefferson Pilot, 4(2),
5.12%, 1/20/99 5,000 4,943
Market Street Funding, 4(2),
5.25%, 11/17/98 17,000 16,960
Morgan Stanley Group,
5.00%, 2/25/99 25,000 24,597
National Australia Funding,
5.16%, 1/7/99 25,000 24,760
National Rural Utilities
Cooperative Finance
5.05%, 2/9/99 20,000 19,719
5.12%, 1/25/99 12,600 12,448
5.52%, 11/12/98 3,000 2,995
New Center Asset Trust,
5.50%, 11/2/98 300 300
Paccar Financial,
5.15%, 11/12/98 300 300
Panasonic Finance,
4(2), 5.50%, 11/9/98 5,000 4,994
Park Avenue Recreation, 4(2),
5.32%, 1/25/99 20,000 19,749
Power Authority, State of New York,
5.13%, 11/23/98 17,000 16,947
Preferred Receivables Funding
5.35%, 11/6/98 18,000 17,987
4(2)
5.18%, 1/20/99 1,650 1,631
5.20%, 1/11/99 29,000 28,702
Repeat Offering Securitization
4(2)
5.25%, 12/2/98 12,000 11,946
5.28%, 1/8/99 14,462 14,318
5.33%, 1/28/99 10,000 9,870
5.35%, 1/11/99 10,000 9,894
Rio Tinto
4(2)
5.10%, 1/29/99 22,000 21,723
5.25%, 12/11/98 25,200 25,053
Safeco Credit
5.28%, 11/23/98 15,000 14,952
5.35%, 1/14/99 10,000 9,890
4(2), 5.53%, 11/9/98 5,000 4,994
Unifunding, 5.20%, 1/14/99 20,000 19,786
Total Commercial Paper (Cost $895,309) 895,309
MEDIUM-TERM NOTES 14.4%
Abbey National Treasury Services PLC,
5.645%, 6/1/99 $ 10,000 $ 9,994
Chrysler Financial,
5.92%, 12/16/98 1,500 1,501
Citicorp, 5.48%, 12/17/98 15,000 14,997
Credit Suisse First Boston, VR,
5.348%, 11/18/98 8,000 7,997
Depfa Bank, VR, 5.273%, 1/7/99 10,000 9,999
Disney, 6.25%, 6/21/99 3,450 3,473
Du Pont EI De Nemours, VR,
7.50%, 6/11/99 3,858 3,910
First Security Auto Grantor Trust,
5.248%, 11/15/99 5,000 5,000
Ford Motor Credit
5.513%, 10/4/99 4,150 4,156
VR, 5.938%, 11/23/98 3,000 3,003
8.00%, 1/15/99 1,800 1,808
8.45%, 12/30/98 2,500 2,510
General Electric Capital
6.125%, 3/4/99 2,495 2,502
8.10%, 1/26/99 5,605 5,633
General Motors Acceptance Corporation
5.625%, 1/25/99 3,610 3,607
5.95%, 12/14/98 1,750 1,750
Goldman Sachs
VR
5.219%, 11/23/98 5,000 5,000
5.408%, 11/17/98 10,000 10,000
5.409%, 11/16/98 5,000 5,000
IBM, VR, 5.219%, 11/2/99 15,000 15,000
International Lease Finance
6.05%, 4/30/99 7,500 7,536
VR, 5.548%, 1/15/99 16,000 16,024
Lincs, VR, 5.408%, 11/18/98 30,000 29,996
Nationsbank, VR, 5.494%, 1/13/99 10,000 10,011
Newcourt Equipment Trust,
5.007%, 11/20/99 10,000 10,000
Quebec Province of Canada,
9.375%, 4/1/99 10,695 10,846
Rabobank, VR, 5.408%, 11/17/98 13,253 13,253
Reed Elsevier, 7.66%, 2/19/99 800 804
Salomon, 6.22%, 11/19/98 1,039 1,039
SMM Trust, VR, 5.375%, 11/5/98 $ 25,000 $ 25,000
STINT Trust, VR, 5.313%, 12/30/98 10,000 10,000
Tiers Trust, VR, (144a),
5.409%, 11/16/98 20,000 20,000
Total Medium-Term Notes (Cost $271,349) 271,349
U.S. GOVERNMENT AGENCY
OBLIGATIONS 0.0%
Federal Home Loan Mortgage,
Disc. Notes, 5.42%, 11/2/98 246 246
Total U.S. Government Agency Obligations (Cost $246) 246
FUNDING AGREEMENTS 2.4%
General American Life Insurance, VR,
5.79%, 11/2/98 ! 10,000 10,000
Peoples Benefit Life Insurance, VR,
5.48%, 11/2/98 ! 20,000 20,000
Transamerica Life Insurance, VR,
5.444%, 1/4/99 ! 15,000 15,000
Total Funding Agreements (Cost $45,000) 45,000
Total Investments in Securities
100.9% of Net Assets (Cost $1,901,669) $1,901,669
Other Assets Less Liabilities (17,122)
NET ASSETS $1,884,547
----------
Net Assets Consist of:
Accumulated net realized gain/loss -
net of distributions $ 40
Paid-in-capital applicable to
1,884,506,868 shares of $0.0001
par value capital stock outstanding;
2,000,000,000 shares of the
Corporation authorized 1,884,507
NET ASSETS $1,884,547
----------
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 period-end amounts to
1.06% of net assets.
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Summit Limited-Term Bond Fund
- --------------------------------------------------------------------------------
October 31, 1998
Statement of Net Assets
Par/Shares Value
- --------------------------------------------------------------------------------
In thousands
CORPORATE BONDS AND NOTES 56.4%
Banking and Finance 12.9%
ABN AMRO Bank (Chicago), N.V.,
Gtd. Sub. Notes
7.25%, 5/31/05 $ 250 $ 266
Aristar, Sr. Notes, 7.875%, 2/15/99 225 227
Banco Generale, Sr. Sub. Notes, (144a),
7.70%, 8/1/02 300 281
Chubb, Deb., 8.75%, 11/15/99 62 63
General Electric Capital, MTN,
6.15%, 11/5/01 350 362
Goldman Sachs Group L.P.,
6.25%, 2/1/03 500 516
Hartford National, Sub. Cap. Notes,
9.85%, 6/1/99 50 51
Heller Financial, 7 875%, 11/1/99 220 224
HSBC Finance Nederland,
Sub. Gtd. Notes, (144a)
7.40%, 4/15/03 270 286
Kansallis Osake Pankki (New York),
Sub. Notes
10.00%, 5/1/02 375 430
Lincoln National, 6 50%, 3/15/08 450 454
MBNA, Sub. Notes, 7 25%, 9/15/02 200 208
Mercantile Safe Deposit & Trust,
6.53%, 7/3/00 300 305
Morgan Guaranty Trust,
Sub. Notes, 7.375%, 2/1/02 250 264
Paine Webber Group, 7.875%, 2/15/03 500 525
Salomon, 7.30%, 5/15/02 300 312
Union Planters, Sub. Notes,
6.25%, 11/1/03 225 229
Westamerica Bank, Sub. Notes,
6.99%, 9/30/03 250 256
5,259
Consumer Products and Services 9.5%
Amvescap, Sr. Notes, 6.375%, 5/15/03 400 409
Beckman Instruments, 7.10%, 3/4/03 500 499
Coca Cola Femsa, 8.95%, 11/1/06 275 269
Hospital Corporation of America,
Zero Coupon, 6/1/01 500 417
Nabisco, 6.125%, 2/1/33 300 296
Pepsico, MTN, 5.75%, 1/2/03 250 256
Philip Morris, 7.25%, 9/15/01 325 341
Sony, 6.125%, 3/4/03 375 385
Tenet Healthcare, Sr. Sub. Notes,
8.625%, 1/15/07 300 310
Time Warner, (144a), 6.10%, 12/30/01 400 407
Watson Pharmaceuticals,
7.125%, 5/15/08 275 288
3,877
Energy 1.1%
PDV America, Sr. Notes, 7.875%, 8/1/03 $ 450 $ 444
444
Finance and Credit 2.0%
Ciesco, MTN, (144a), 7.38%, 4/19/00 250 251
Grand Metropolitan Investment,
Zero Coupon, 1/6/04 750 570
821
Industrials 11.9%
Allied Signal, 5.75%, 3/15/01 350 349
Eaton Offshore, Gtd. Notes,
9.00%, 2/15/01 400 438
General Motors Acceptance Corporation,
MTN 6.625%, 4/24/00 300 306
Hutchison Whampoa Finance, (144a),
6.95%, 8/1/07 600 557
Ingersoll Rand, Sr. Notes,
6.255%, 2/15/01 300 306
Lockheed Martin, 6.75%, 3/15/03 475 500
Parker Hannifin, 5.65%, 9/15/03 500 512
Praxair, 6.15%, 4/15/03 350 356
Service Corporation International,
7.375%, 4/15/04 500 535
Tenneco, 8.20%, 11/15/99 270 277
USA Waste Services, Sr. Notes,
6.50%, 12/15/02 375 383
Waste Management, 6 625%, 7/15/02 350 361
4,880
Media and Communications 3.1%
Cox Communications, 8.875%, 3/1/01 245 264
NWCG Holdings, Sr. Secured Disc. Notes
Zero Coupon, 6/15/99 300 289
Viacom
6.75%, 1/15/03 250 259
Sr. Notes, 7.75%, 6/1/05 100 108
Worldcom, Sr. Notes, 6.25%, 8/15/03 325 336
1,256
Retail 1.3%
Rite Aid, 6.70%, 12/15/01 500 521
521
Transportation 3.4%
Delta Air Lines, ETC,
9.60%, 5/26 - 6/1/00 197 209
ERAC USA Finance, (144a),
6.375%, 5/15/03 375 390
Norfolk Southern, 6 95%, 5/1/02 500 525
Northwest Airlines, 8.375%, 3/15/04 250 267
1,391
Utilities 11.2%
CE Electric UK Funding, Sr. Notes,
(144a), 6.853%, 12/30/04 $ 400 $ 417
Cleveland Electric, 7.19%, 7/1/00 250 254
Entergy Mississippi, 6.45%, 4/1/08 375 396
Midamerican Energy, Sr. Notes,
6.50%, 12/15/01 250 260
National Rural Utilities Cooperative Finance
5.00%, 10/1/02 500 500
Niagara Mohawk Power
7.375%, 8/1/03 275 291
Sr. Notes, 7.25%, 10/1/02 375 385
Orange & Rockland Utilities, Deb.,
6.14%, 3/1/00 250 254
Pacific Gas & Electric,
1st Mtg. Bonds, 8.75%, 1/1/01 250 268
Progress Capital Holdings, MTN, (144a),
6.88%, 8/1/01 250 258
Public Service Electric & Gas,
Mtg. Bonds, 8.875%, 6/1/03 325 370
Texas New Mexico Power
1st Mtg. Bonds, 9.25%, 9/15/00 200 212
Deb., 10.75%, 9/15/03 225 245
United Illuminating, 6.25%, 12/15/02 190 193
Williams Cos, 6.125%, 2/15/02 275 277
4,580
Total Corporate Bonds and Notes (Cost $22,677) 23,029
WARRANTS 0.0%
President Casinos, (144a), 9/30/99 *!+ 1 0
Total Warrants (Cost $3) 0
U.S. GOVERNMENT MORTGAGE-BACKED
SECURITIES 13.8%
U.S. Government Agency Obligations 11.3%
Federal Home Loan Mortgage
10.75%, 12/1/09 $ 103 113
5 year balloon
5.00%, 6/1/99 145 146
6.00%, 4/1/99 187 187
7 year balloon, 6.50%, 12/1/99 329 330
CMO, 6.92%, 1/25/12 240 241
Federal Home Loan Mortgage
REMIC
6.00%, 8/15/06 - 5/15/16 $ 2,274 $ 2,329
6.40%, 1/15/08 500 505
7.50%, 9/15/06 147 148
Federal National Mortgage Assn.
7.00%, 4/1/09 300 306
9.00%, 5/1/05 232 240
REMIC, 7.50%, 8/25/05 86 87
4,632
U.S. Government Guaranteed Obligations 2.5%
Government National Mortgage Assn.
I, 10.00%, 11/15/09 - 10/15/21 431 474
II, 10.00%, 10/20/20 113 124
Midget, I
9.00%, 4/15 - 12/15/01 41 42
10.00%, 1/15/00 - 4/15/01 247 252
10.50%, 1/15/00 - 2/15/01 109 111
1,003
Total U.S. Government Mortgage-Backed
Securities (Cost $5,572) 5,635
U.S. GOVERNMENT OBLIGATIONS 14.9%
U.S. Government Agency Obligations 8.3%
Federal Home Loan Banks,
5.125%, 9/15/03 2,000 2,023
Federal National Mortgage Assn.
7.65%, 10/6/06 500 511
Deb., 6.15%, 12/14/01 300 301
MTN, 7.15%, 4/11/07 275 312
U.S. Department Housing & Urban Development
6.49%, 8/1/07 240 260
3,407
U.S. Treasury Obligations 6.6%
U.S. Treasury Notes
6.375%, 8/15/02 750 801
6.50%, 10/15/06 1,700 1,905
2,706
Total U.S. Government Obligations (Cost $5,825) 6,113
ASSET-BACKED SECURITIES 10.3%
Amresco Residential Securities,
6.925%, 6/25/25 $ 375 $ 381
Banc One Auto Grantor Trust,
6.27%, 11/20/03 162 164
California Infrastructure
6.25%, 6/25/04 175 178
6.38%, 9/25/08 600 611
Fingerhut Master Trust,
6.07%, 2/15/05 375 383
Harley Davidson Eaglemark
5.94%, 2/15/04 125 127
(144a), 6.35%, 10/15/02 120 118
IMC Home Equity Loan Trust, VR,
6.36%, 8/20/22 375 379
Neiman Marcus Credit Master Trust,
7.60%, 6/15/03 500 517
Newcourt Equipment, 5.393%, 5/20/04 500 499
NPF Receivables Trust, 6.22%, 6/1/02 375 375
Sears Credit Account Master Trust,
5.25%, 10/16/08 500 496
Total Asset-Backed Securities (Cost $4,206) 4,228
MUNICIPAL BONDS 0.2%
Taxable Municipal 0.2%
University of Miami, GO, 6.90%, 4/1/04 85 91
Total Municipal Bonds (Cost $85) 91
MONEY MARKET FUNDS 8.8%
Reserve Investment Fund, 5.41% # 3,605 3,605
Total Money Market Funds (Cost $3,605) 3,605
Total Investments in Securities
104.4% of Net Assets (Cost $41,973) $ 42,701
Other Assets Less Liabilities (1,797)
NET ASSETS $ 40,904
----------
Net Assets Consist of:
Accumulated net investment income -
net of distributions $ (193)
Accumulated net realized gain/loss -
net of distributions (1,361)
Net unrealized gain (loss) 728
Paid-in-capital applicable to 8,728,778 shares
of $0.0001 par value capital stock outstanding;
2,000,000,000 shares of the Corporation authorized 41,730
NET ASSETS $ 40,904
----------
NET ASSET VALUE PER SHARE $ 4.69
----------
! Private Placement
* Non-income producing
+ Securities contain some restrictions as to public resale-total of
such securities at period-end amounts to 0.0% of net assets
# Seven-day yield
CMO Collateralized Mortgage Obligation
ETC Equipment Trust Certificate
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 period-end amounts to 7.24% of net
assets.
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Summit GNMA Fund
- --------------------------------------------------------------------------------
October 31, 1998
Statement of Net Assets
Par/Shares Value
- --------------------------------------------------------------------------------
In thousands
U.S. GOVERNMENT MORTGAGE-BACKED
SECURITIES 91.6%
U.S. Government Guaranteed Obligations 84.2%
Government National Mortgage Assn.
6.00%, 4/15 - 6/15/28 $ 1,981 $ 1,963
6.50%, 1/15/24 - 10/15/28 4,041 4,086
7.00%, 4/15/24 - 8/15/28 4,776 4,887
7.50%, 6/15/22 - 3/15/28 2,010 2,072
8.00%, 4/15/17 - 11/15/27 2,214 2,301
8.50%, 6/15/16 - 11/15/27 3,915 4,142
9.00%, 8/15/08 - 8/15/21 539 575
9.50%, 6/15/09 - 7/15/20 428 463
10.00%, 12/15/17 - 3/15/18 450 496
10.50%, 7/15/15 - 12/15/19 663 738
11.00%, 12/15/09 - 12/15/15 104 116
11.50%, 7/15 - 12/15/15 27 31
II
9.00%, 5/20/22 - 3/20/25 296 315
9.50%, 2/20/17 - 12/20/20 162 175
10.00%, 1/20/14 - 3/20/21 142 156
11.00%, 9/20/17 24 27
Construction Loan, I
6.67%, 2/15/01 94 95
7.00%, 4/15/00 431 446
GPM, I
9.25%, 7/15/16 - 7/15/17 12 13
9.50%, 7/15/09 59 64
10.00%, 8/15/13 4 4
Project Loan, I
6.30%, 11/15/33 310 309
7.75%, 3/15/20 297 321
8.00%, 11/15/17 395 430
8.50%, 1/15/27 197 204
REMIC
6.50%, 2/20/21 - 10/16/24 4,000 3,983
7.00%, 5/16/24 3,000 3,067
Government National Mortgage Assn.
REMIC
7.493%, 7/16/24 $ 3,000 $ 3,178
7.50%, 5/16/27 970 1,014
Construction Loan, I
6.67%, 6/15/38 577 586
7.00%, 7/15/38 552 573
TBA, II, 6.50%, 11/20/28 1,000 1,009
U.S. Department of Veteran Affairs, REMIC,
6.75%, 8/15/20 1,354 1,387
39,226
Stripped Mortgage Securities 2.2%
Federal National Mortgage Assn.
CMO, Interest Only, 8.50%, 4/1/22** 432 82
REMIC, Principal Only, Zero Coupon, 10/25/21 970 920
1,002
U.S. Government Agency Obligations 5.2%
Federal Home Loan Mortgage
REMIC
5.00%, 7/15/05 13 13
5.85%, 11/15/17 140 141
6.50%, 8/15/25 1,500 1,501
Federal National Mortgage Assn.
6.50%, 1/1/26 396 399
REMIC
5.00%, 8/25/22 16 16
8.00%, 1/25/21 2 2
Inverse Floater, 12 806%, 6/25/99 330 351
2,423
Total U.S. Government
Mortgage-Backed Securities (Cost $41,549) 42,651
U.S. GOVERNMENT OBLIGATIONS 4.4%
U.S. Government Agency Obligations 4.4%
Tennessee Valley Authority
5.88%, 4/1/36 1,000 1,027
6.235%, 7/15/45 1,000 1,036
Total U.S. Government Obligations (Cost $2,013) 2,063
ASSET-BACKED SECURITIES 4.5%
Home Equity Loans-Backed 4.5%
GE Capital Mortgage Services,
6.75%, 8/25/28 $ 1,997 $ 2,043
Prudential Home Mortgage Securities,
6.00%, 10/25/07 25 25
Total Asset-Backed Securities (Cost $2,018) 2,068
MONEY MARKET FUNDS 3.5%
Reserve Investment Fund, 5.41% # 1,632 1,632
Total Money Market Funds (Cost $1,632) 1,632
Total Investments in Securities
104.0% of Net Assets (Cost $47,212) $ 48,414
Other Assets Less Liabilities (1,843)
NET ASSETS $ 46,571
----------
Net Assets Consist of:
Accumulated net investment income -
net of distributions $ (244)
Accumulated net realized gain/loss -
net of distributions (448)
Net unrealized gain (loss) 1,202
Paid-in-capital applicable to 4,718,267 shares
of $0.0001 par value capital stock outstanding;
2,000,000,000 shares of the Corporation authorized 46,061
NET ASSETS $ 46,571
----------
NET ASSET VALUE PER SHARE $ 9.87
----------
** For Interest Only securities, par 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 10/31/98
REMIC Real Estate Mortgage Investment Conduit
TBA To be announced security was purchased on a forward
commitment basis The accompanying notes are an integral part
of these financial statements.
T. Rowe Price Summit Income Funds
- --------------------------------------------------------------------------------
Statement of Operations
- --------------------------------------------------------------------------------
In thousands
Year Year Year
Ended Ended Ended
10/31/98 10/31/98 10/31/98
Investment Income
Income
Interest income $ 85,953 $ 2,255 $ 2,730
Expenses
Investment management and
administrative 6,801 191 231
Net investment income 79,152 2,064 2,499
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on securities 27 159 (115)
Change in net unrealized gain or loss
on securities -- 485 200
Net realized and unrealized gain (loss) 27 644 85
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 79,179 $ 2,708 $ 2,584
---------------------------------------
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
10/31/98 10/31/97
Increase (Decrease) in Net Assets
Operations
Net investment income $ 79,152 $ 54,228
Net realized gain (loss) 27 2
Increase (decrease) in
net assets from operations 79,179 54,230
Distributions to shareholders
Net investment income (79,152) (54,228)
Capital share transactions*
Shares sold 2,913,215 2,247,386
Distributions reinvested 75,564 52,014
Shares redeemed (2,407,379) (1,737,843)
Increase (decrease) in
net assets from capital
share transactions 581,400 561,557
Net Assets
Increase (decrease) during period 581,427 561,559
Beginning of period 1,303,120 741,561
End of period $ 1,884,547 $ 1,303,120
---------------------------------
*Share information
Shares sold 2,913,215 2,247,386
Distributions reinvested 75,564 52,014
Shares redeemed (2,407,379) (1,737,843)
Increase (decrease) in
shares outstanding 581,400 561,557
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
10/31/98 10/31/97
Increase (Decrease) in Net Assets
Operations
Net investment income $ 2,064 $ 1,704
Net realized gain (loss) 159 (98)
Change in net unrealized gain or loss 485 133
Increase (decrease) in
net assets from operations 2,708 1,739
Distributions to shareholders
Net investment income (2,064) (1,667)
Tax return of capital -- (37)
Decrease in net assets
from distributions (2,064) (1,704)
Capital share transactions*
Shares sold 20,167 12,694
Distributions reinvested 1,635 1,325
Shares redeemed (11,162) (10,418)
Increase (decrease) in
net assets from capital
share transactions 10,640 3,601
Net Assets
Increase (decrease) during period 11,284 3,636
Beginning of period 29,620 25,984
End of period $ 40,904 $ 29,620
---------------------------------
*Share information
Shares sold 4,358 2,771
Distributions reinvested 353 290
Shares redeemed (2,411) (2,283)
Increase (decrease) in shares outstanding 2,300 778
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
10/31/98 10/31/97
Increase (Decrease) in Net Assets
Operations
Net investment income $ 2,499 $ 1,852
Net realized gain (loss) (115) (229)
Change in net unrealized gain or loss 200 789
Increase (decrease) in
net assets from operations 2,584 2,412
Distributions to shareholders
Net investment income (2,499) (1,777)
Tax return of capital -- (75)
Decrease in net assets
from distributions (2,499) (1,852)
Capital share transactions*
Shares sold 28,082 14,057
Distributions reinvested 1,904 1,356
Shares redeemed (13,030) (11,161)
Increase (decrease) in
net assets from capital
share transactions 16,956 4,252
Net Assets
Increase (decrease) during period 17,041 4,812
Beginning of period 29,530 24,718
End of period $ 46,571 $ 29,530
---------------------------------
*Share information
Shares sold 2,838 1,461
Distributions reinvested 193 140
Shares redeemed (1,317) (1,160)
Increase (decrease) in shares outstanding 1,714 441
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Summit Income Funds
- --------------------------------------------------------------------------------
October 31, 1998
Notes to Financial Statements
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Summit Income Funds, 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 Limited-Term Bond and GNMA 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.
Investments in mutual funds are valued at the closing net asset value per share
of the mutual fund on the day of valuation.
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, 1998, were as follows:
Limited-Term
Bond Fund GNMA Fund
U.S. government securities
Purchases $ 8,015,000 $ 46,244,000
Sales 7,032,000 32,780,000
Other securities
Purchases 19,410,000 1,997,000
Sales 9,829,000 31,000
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 $1,367,000, of which $808,000
expires in 2002, $354,000 in 2003, and $205,000 thereafter through 2005. Capital
loss carryforwards utilized by Limited-Term Bond Fund in 1998 amounted to
$209,000. The GNMA Fund has unused realized capital loss carryforwards for
federal income tax purposes of $447,000, of which $173,000 expires in 2003,
$142,000 in 2004, and $132,000 in 2005. Capital loss carryforwards utilized by
GNMA Fund in 1998 amounted to $14,000. 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, 1998. The results
of operations and net assets were not affected by the increases/(decreases) to
these accounts.
Limited-Term
Bond Fund GNMA Fund
Undistributed net investment income $ (59,000) $ (101,000)
Undistributed net realized gain 67,000 151,000
Paid-in-capital (8,000) (50,000)
At October 31, 1998, the aggregate costs of investments for the Cash Reserves,
Limited-Term Bond, and GNMA Funds for federal income tax purposes was
substantially the same as for financial reporting and totaled $1,901,669,000,
$41,973,000, and $47,213,000, respectively. For the Cash Reserves Fund,
amortized cost is equivalent to value. For the Limited-Term Bond and GNMA Funds,
net unrealized gain (loss) on investments was as follows:
Limited-Term
Bond Fund GNMA Fund
Appreciated investments $ 861,000 $ 1,381,000
Depreciated investments (133,000) (179,000)
Net unrealized gain (loss) $ 728,000 $ 1,202,000
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 $875,000, $28,000, and $8,000 were payable at October 31, 1998, by
the the Cash Reserves, Limited-Term Bond, 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.
Additionally, the Cash Reserves Fund is one of several T. Rowe Price-sponsored
mutual funds (underlying funds) in which the T. Rowe Price Spectrum Funds
(Spectrum) may invest. Spectrum does not invest in the underlying funds for the
purpose of exercising management or control. Expenses associated with the
operation of Spectrum are borne by each underlying fund to the extent of
estimated savings to it and in proportion to the average daily value of its
shares owned by Spectrum, pursuant to special servicing agreements between and
among Spectrum, the underlying funds, T. Rowe Price, and, in the case of T. Rowe
Price Spectrum International, Rowe Price-Fleming International. Spectrum Income
Fund held approximately 1.2% of the outstanding shares of the Cash Reserves Fund
at October 31, 1998. For the year then ended, the fund was allocated $88,000 of
Spectrum expenses.
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 and Government 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 and the GNMA Funds for the year ended October 31, 1998,
totaled $125,000 and $68,000, 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 Summit Cash Reserves Fund,
Summit Limited-Term Bond Fund, and Summit GNMA Fund
In our opinion, the accompanying statements of net assets and the
related statements of operations and of changes in net assets and the
financial highlights present fairly, in all material respects, the
financial position of Summit Cash Reserves Fund, Summit Limited-Term Bond
Fund, and Summit GNMA Fund (comprising T. Rowe Price Summit Funds, Inc.,
hereafter referred to as the "Funds") at October 31, 1998, and the results
of each of their operations, the changes in each of their net assets and
the financial highlights for each of the fiscal periods presented, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which
included confirmation of securities at October 31, 1998 by correspondence
with the custodian and brokers, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
November 18, 1998
T. Rowe Price Shareholder Services
- --------------------------------------------------------------------------------
Investment Services And Information
KNOWLEDGEABLE SERVICE REPRESENTATIVES
By Phone Shareholder service representatives are available from 8 a.m.
to 10 p.m. ET Monday through Friday and from 8:30 a.m. to 5 p.m. ET on
weekends. Call 1-800-225-5132 to speak directly with a representative who
will be able to assist you with your accounts.
In Person Visit one of our investor center locations to meet with a
representative who will be able to assist you with your accounts. You can
also drop off applications or obtain prospectuses and other literature at
these centers.
AUTOMATED 24-HOUR SERVICES
Tele*Access(registered trademark) Call 1-800-638-2587 to obtain
information such as account balance, date and amount of your last
transaction, latest dividend payment, fund prices, and yields.
Additionally, you have the ability to request prospectuses, statements, and
account and tax forms; to reorder checks; and to initiate purchase,
redemption, and exchange orders for identically registered accounts.
Internet. T. Rowe Price Web site: www.troweprice.com All the
information and services available on Tele*Access are available on our Web
site, including transactions in your fund and Discount Brokerage accounts
(with preauthorized access).
ACCOUNT SERVICES
Checking Write checks for $500 or more on any money market and most
bond fund accounts (except the High Yield and Emerging Markets Bond Funds).
Automatic Investing Build your account over time by investing directly
from your bank account or paycheck with Automatic Asset Builder.
Additionally, Automatic Exchange enables you to set up systematic
investments from one fund account into another, such as from a money fund
into a stock fund. A $50 minimum makes it easy to get started.
Automatic Withdrawal If you need money from your fund account on a
regular basis, you can establish scheduled, automatic redemptions.
Dividend and Capital Gains Payment Options Reinvest all or some of
your distributions, or take them in cash. We give you maximum flexibility
and convenience.
DISCOUNT BROKERAGE*
Investments Available You can trade stocks, bonds, options, precious
metals, mutual funds, and other securities at a savings over regular
commission rates.
To Open an Account Call a shareholder service representative for more
information.
INVESTMENT INFORMATION
Combined Statement A comprehensive overview of your T. Rowe Price
accounts is provided. The summary page gives you earnings by tax category,
provides total portfolio value, and lists your investments by type. Detail
pages itemize account transactions.
Shareholder Reports Portfolio managers review the performance of the
funds in plain language and discuss T. Rowe Price's economic outlook.
T. Rowe Price Report This is a quarterly newsletter with relevant
articles on market trends, personal financial planning, and T. Rowe Price's
economic perspective.
Performance Update This quarterly report reviews recent market
developments and provides comprehensive performance information for every
T. Rowe Price fund. Insights This library of information includes reports
on mutual fund tax issues, investment strategies, and financial markets.
Detailed Investment Guides Our widely acclaimed Asset Mix Worksheet,
College Planning Kit, Diversifying Overseas: A Guide to International
Investing, Retirees Financial Guide, and Retirement Planning Kit (also
available on disk or CD-ROM for PC use) can help you determine and reach
your investment goals.
*A division of T. Rowe Price Investment Services, Inc. Member NASD/SIPC.
T. Rowe Price Mutual Funds
- --------------------------------------------------------------------------------
STOCK FUNDS
Domestic
Blue Chip Growth
Capital Appreciation
Capital Opportunity
Diversified Small-Cap Growth
Dividend Growth
Equity Income
Equity Index 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
Total Equity Market Index
Value
International/Global
Emerging Markets Stock
European Stock
Global Stock
International Discovery
International Stock
Japan
Latin America
New Asia
Spectrum International
BOND FUNDS
Domestic Taxable
Corporate Income
GNMA
High Yield
New Income
Short-Term Bond
Short-Term U.S. Government
Spectrum Income
Summit GNMA
Summit Limited-Term Bond
U.S. Treasury Intermediate
U.S. Treasury Long-Term
Domestic Tax-Free
California Tax-Free Bond
Florida 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 Short-Term
Tax-Free Bond
Virginia Tax-Free Bond
International/Global
Emerging Markets Bond
Global Bond!!
International Bond
MONEY MARKET FUNDS!!!
Taxable
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
Tax-Free
California Tax-Free Money
New York Tax-Free Money
Summit Municipal
Money Market
Tax-Exempt Money
BLENDED ASSET FUNDS
Balanced
Personal Strategy Balanced
Personal Strategy Growth
Personal Strategy Income
Tax-Efficient Balanced
T. ROWE PRICE NO-LOAD
VARIABLE ANNUITY
Equity Income Portfolio
International Stock Portfolio
Limited-Term Bond Portfolio
Mid-Cap Growth Portfolio
New America Growth Portfolio
Personal Strategy Balanced Portfolio
Prime Reserve Portfolio
* Formerly named Equity Index.
** Closed to new investors.
*** Formerly named Florida Insured Intermediate Tax-Free.
! Formerly named Tax-Free Insured Intermediate Bond.
!! Formerly named Global Government Bond.
!!! Neither the funds nor their share prices are insured or guaranteed
by the U.S. government.
Please call for a prospectus. 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.
T. Rowe Price Summit Income Funds
- --------------------------------------------------------------------------------
Annual Meeting Results
- --------------------------------------------------------------------------------
The Summit Income Funds held an annual meeting on October 15, 1998, to elect
directors of the funds and to ratify the Board of Directors' selection of
PricewaterhouseCoopers LLP as the funds' independent accountants.
The results of voting were as follows (by numbers of shares).
For nominees to the Board
of Directors for the Summit
Income Funds:
Calvin W. Burnett
In favor: 946,750,007.195
Withheld: 17,810,157.418
Anthony W. Deering
In favor: 950,543,058.956
Withheld: 14,017,105.657
F. Pierce Linaweaver
In favor: 946,770,472.182
Withheld: 17,789,692.431
William T. Reynolds
In favor: 951,945,390.016
Withheld: 12,614,774.597
James S. Riepe
In favor: 950,944,695.528
Withheld: 13,615,469.085
John G. Schreiber
In favor: 950,640,755.319
Withheld: 13,919,409.294
M. David Testa
In favor: 951,893,582.105
Withheld: 12,668,582.508
For PricewaterhouseCoopers LLP
as independent accountants:
For Summit Cash Reserves Fund
In favor: 939,353,395.226
Against: 5,016,365.174
Abstained: 12,828,895.530
For Summit GNMA Fund
In favor: 2,389,556.642
Against: 11,584.649
Abstained: 34,501.387
For Summit Limited-Term Bond Fund
In favor: 4,817,289.171
Against: 44,171.031
Abstained: 64,405.803
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
T. Rowe Price Investment Services, Inc., Distributor. C10-050 10/31/98
