Annual Report
Corporate Income Fund
May 31, 1996
T. Rowe Price
REPORT HIGHLIGHTS
o Bonds have produced disappointing results since your fund commenced
operations on October 31, 1995, due in part to a breakdown in balanced
budget discussions in Washington.
o The conditions that contributed to strong bond returns in 1995 changed
direction early in 1996. Yields on high-quality securities rose sharply
from their year-end levels. In contrast, the high-yield sector did much
better.
o Your fund produced a positive return during the seven months since
inception, outperforming its benchmark primarily because of the fund's
greater exposure to high-yield bonds.
o Our credit allocation strategy so far has been to maximize the use of
lower-quality bonds in both the investment-grade and
below-investment-grade portions of the portfolio.
o We anticipate a period of relative interest rate stability compared with
what we have seen in recent months, which should be favorable for fixed
income investors.
Fellow Shareholders
We would like to welcome new shareholders to the Corporate Income Fund. This
is our first annual report and it covers the period from the fund's inception
on October 31, 1995, through May 31, 1996. Although we are excited about the
prospects for this fund, bond funds in general produced disappointing results
so far in 1996.
MARKET ENVIRONMENT
Last year, indications of a slowing economy, mild inflation, and easier
monetary policy by the Federal Reserve all contributed to strong returns for
bonds. These trends changed direction early in 1996, and so did the direction
of the bond market. The initial impetus behind the sagging bond market was the
failure of Congress and the President to reach agreement on balancing the
federal budget. This was followed by a stronger-than-expected rebound in the
economy, which triggered inflation fears, driving up yields and depressing
bond prices.
Chart 1 - Yield Comparison
Ten-year Treasury yields rose more than one percentage point from the end of
January to 6.8% at fiscal year-end. The accompanying chart compares the yields
of BBB-rated corporate bonds with those of 10-year Treasuries over the past 12
months.
The economy grew at an annualized rate of 2.3% in the first quarter, compared
with 0.5% in the fourth quarter of 1995. This rate of growth, combined with a
spike in oil and other commodity prices, kindled fears of resurgent inflation.
Against this backdrop, the rate increases of the past five months had a
negative impact on the high-quality sectors of the fixed income market.
However, lower-quality high-yield bonds, a major component of your fund's
portfolio, did much better. These bonds tend to act more like stocks at
certain points in the economic cycle, and they benefited from the fairly
robust economic activity so far this year.
Chart 2 - Total Return by Credit Quality
The performances of various quality sectors of the fixed income market during
the six months ended May 31, 1996, are shown in the chart.
PERFORMANCE REVIEW
Your fund's return was negative during the six months ended May 31 but
positive though modest over the seven months since inception, as income more
than offset declining bond prices.
PERFORMANCE COMPARISON
Since
Inception
Periods Ended 5/31/96 6 Months 10/31/95
Corporate Income Fund - 1.51% 0.09%%
Lipper Corporate Debt BBB
Funds Average - 1.86 - 0.26
Returns exceeded those of the Lipper benchmark for both the six- and
seven-month periods, largely because of the portfolio's greater exposure to
high-yield bonds. Your fund's flexible investment guidelines allow it to
invest in a broad variety of securities in an effort to enhance income and
achieve some capital appreciation. Our weightings among various sectors of the
market reflect our in-house credit research, as well as our outlook for the
economy and the markets.
STRATEGY
During the past seven months, we maximized the use of lower-quality bonds in
both the investment-grade and below-investment-grade portions of the
portfolio. At fiscal year-end, investment-grade securities (BBB-rated and
higher) composed 69% of fund assets, slightly above the minimum requirement of
65%. B-rated bonds, the lowest level of high-yield bonds the fund can
purchase, accounted for 10% of assets, the maximum allowable limit. The
remainder of the portfolio was allocated mostly among BB-rated bonds, with
minimal percentages given to miscellaneous sectors.
Chart 3 - Quality Diversification
We expect to maintain this credit allocation strategy as long as the economy
maintains its relatively strong growth rate. If signs of a slowdown appear
during the second half of the year, we would respond with an upgrading of
credit qualities, primarily by moving to BB-rated bonds in the
noninvestment-grade portion and into A-rated and higher-quality bonds in the
investment-grade category. In a slowing economy, higher-quality bonds
generally do better because of their greater sensitivity to interest rates.
Our investment decisions continue to emphasize protection of principal and
level of income, while using our in-house credit research in an effort to find
improving credit situations.
OUTLOOK
The economy seems to have solid momentum, and the pace of first quarter growth
suggests that the economy is likely to grow at substantially above its trend
rate in the second quarter. The expansion is now five years old. Eventually
some imbalance could develop or an external shock could jolt the economy into
a recession. At the moment, however, a contraction appears to be a distant
prospect.
Against this backdrop, there is no immediate urgency for the Fed to move
toward a restrictive mode (although it could tighten later), since the fixed
income markets have already responded with higher rates. Higher bond yields
during the past five months may reflect much of the news about growth and
inflation.
Currently, we anticipate a period of relative interest rate stability compared
with what we have seen during the past few months, which should benefit
investors in fixed income markets. Your fund's ability to invest across
various quality sectors could help cushion it against interest rate volatility
under certain conditions, while providing relatively high income.
Again, we welcome you as shareholders and thank you for investing with T. Rowe
Price.
Respectfully submitted,
Peter Van Dyke
President and
Chairman of the Investment Advisory Committee
June 21, 1996
T. Rowe Price Corporate Income Fund
PORTFOLIO HIGHLIGHTS
KEY STATISTICS
5/31/96
_____________________________________________________________________________
Price Per Share $ 9.58
Dividends Per Share
For 6 months 0.37
Since Inception (10/31/95) 0.44
Dividend Yield *
For 6 months 7.53%
Since Inception (10/31/95) 7.58
Weighted Average Maturity (years) 14.5
Weighted Average Effective Duration (years) 6.3
Weighted Average Quality ** BBB
* 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.
** Based on T. Rowe Price research.
SECTOR DIVERSIFICATION
Percent of
Net Assets
5/31/96
_____________________________________________________________________________
Investment-Grade Corporate Bonds 60%
Noninvestment-Grade Corporate Bonds 29
Asset-Backed Securities 4
Commercial Paper 3
Mortgage-Backed Securities 1
Convertible Preferred Stock 1
Other Assets Less Liabilities 2
Total 100%
T. Rowe Price Corporate Income Fund
PERFORMANCE COMPARISON
This chart shows the value of a hypothetical $10,000 investment in the fund
over the past 10 fiscal year periods or since inception (for funds lacking
10-year records). The result is compared with a broad-based average or index.
The index return does not reflect expenses, which have been deducted from the
fund's return.
Chart 4 - Corporate Income Fund
TOTAL RETURN
10/31/95
to
Period Ended 5/31/96 5/31/96
_____________________________________________________________________________
Corporate Income Fund 0.09%
Investment return and principal value represent past performance and will
vary. Shares may be worth more or less at redemption than at original
purchase.
T. Rowe Price Corporate Income Fund
FINANCIAL HIGHLIGHTS
For a share outstanding throughout the period
10/31/95
to
5/31/96
_____________________________________________________________________________
NET ASSET VALUE
Beginning of period $ 10.00
Investment activities
Net investment income 0.44*
Net realized and
unrealized gain (loss) (0.42)
Total from
investment activities 0.02
Distributions
Net investment income (0.44)
NET ASSET VALUE
End of period $ 9.58
Ratios/Supplemental Data
Total return 0.09%*
Ratio of expenses to
average net assets 0.80%*!
Ratio of net investment
income to average net assets 7.56%*!
Portfolio turnover rate 70.5%!
Net assets, end of period
(in thousands) $ 12,461
* Excludes expenses in excess of a 0.80% expense limitation in effect
through 5/31/97.
! Annualized.
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Corporate Income Fund
May 31, 1996
Statement of Net Assets Par/Shares Value
In thousands
CORPORATE BONDS AND NOTES 88.6%
Aerospace and Defense 1.2%
BE Aerospace, Sr. Sub. Notes, 9.875%, 2/1/06 $ 100 $ 98
K & F Industries, Sr. Sub. Deb.,
13.75%, 8/1/01 50 52
_____________________________________________________________________________
150
Banking 1.8%
Banca Commerciale Italiana, Sr. Sub. Notes,
8.25%, 7/15/07 230 231
_____________________________________________________________________________
231
Beverages 0.2%
Texas Bottling Group, Sr. Sub. Notes,
9.00%, 11/15/03 25 25
_____________________________________________________________________________
25
Building Products 0.9%
Schuller International Group, Sr. Notes,
10.875%, 12/15/04 100 108
_____________________________________________________________________________
108
Cable Operators 3.1%
Rogers Cablesystems, Sub. Deb., 11.00%, 12/1/15 150 156
Tele-Communications, Sr. Notes, 8.75%, 2/15/23 240 225
_____________________________________________________________________________
381
Consumer Nondurables 1.2%
American Safety Razor, Sr. Notes, 9.875%, 8/1/05 100 101
Doane Products, Sr. Notes, 10.625%, 3/1/06 50 51
_____________________________________________________________________________
152
Container 5.4%
Crown Cork & Seal, Deb., 8.00%, 4/15/23 400 383
Owens-Illinois, Sr. Deb., 11.00%, 12/1/03 150 163
Riverwood International, Sr. Notes, 10.25%, 4/1/06 125 125
_____________________________________________________________________________
671
Electric Utilities 12.8%
Commonwealth Edison, 1st Mtg. Bonds, 8.00%, 4/15/23 400 376
El Paso Electric, 1st Mtg. Notes, 8.90%, 2/1/06 150 149
Long Island Lighting, Gen. and Ref. Bonds,
9.75%, 5/1/21 519 519
Texas Utilities Electric, 1st Mtg. Bonds,
7.375%, 10/1/25 600 546
_____________________________________________________________________________
1,590
Electronic Components 0.9%
Exide Electronics Group, Units,
(Each unit consists of a $1,000 par Sr. Sub. Note,
(144a), 11.50%, 3/15/06, and 1 warrant) 100 107
_____________________________________________________________________________
107
Energy 3.7%
Coda Energy, Sr. Sub. Notes, (144a), 10.50%, 4/1/06 $ 50 $ 50
Gulf Canada Resources Ltd., Sr. Sub. Deb.,
9.625%, 7/1/05 100 100
Petroleum Heat and Power, Sub. Deb., 12.25%, 2/1/05 50 55
Plains Resources, Sr. Sub. Notes, (144a),
10.25%, 3/15/06 40 41
Rowan Companies, Sr. Notes, 11.875%, 12/1/01 150 162
Tuboscope Vetco International, Sr. Sub. Notes,
10.75%, 4/15/03 50 52
_____________________________________________________________________________
460
Entertainment and Leisure 6.1%
Time Warner, Notes, 7.75%, 6/15/05 700 677
United Artists Theatre Circuit, PTC, (144a),
9.30%, 7/1/15 100 90
_____________________________________________________________________________
767
Food and Tobacco 1.7%
Consolidated Cigar, Sr. Sub. Notes, 10.50%, 3/1/03 150 157
MAFCO, Sr. Sub. Notes, 11.875%, 11/15/02 50 53
_____________________________________________________________________________
210
Gaming 3.7%
GNF, 1st Mtg. Notes, 10.625%, 4/1/03 100 102
Grand Casinos, 1st Mtg. Notes, 10.125%, 12/1/03 100 102
Showboat, 1st Mtg. Bonds, 9.25%, 5/1/08 100 101
Trump Atlantic City Associates, 1st Mtg. Notes,
11.25%, 5/1/06 150 151
_____________________________________________________________________________
456
Gas and Gas Transmission 3.8%
Columbia Gas Systems, Notes, 7.32%, 11/28/10 500 472
_____________________________________________________________________________
472
Health Care 1.9%
Columbia Healthcare, Deb., 7.50%, 12/15/23 90 87
Dade International, Sr. Sub. Notes, (144a),
11.125%, 5/1/06 50 52
Tenet Healthcare, Sr. Notes, 8.625%, 12/1/03 100 101
_____________________________________________________________________________
240
Insurance 7.2%
Nationwide Mutual Life, Surplus Notes, (144a),
7.50%, 2/15/24 400 360
Pacific Mutual Life, Surplus Notes, (144a),
7.90%, 12/30/23 305 297
Principal Mutual Financial, Surplus Notes, (144a),
7.875%, 3/1/24 250 236
_____________________________________________________________________________
893
Investment Dealers 6.6%
Lehman Brothers Holdings, Sr. Notes,
6.625%, 11/15/00 $ 400 $ 390
PaineWebber Group, Sr. Notes, 7.625%, 2/15/14 250 234
Salomon, MTN, 7.59%, 1/28/00 200 201
_____________________________________________________________________________
825
Lodging 4.2%
Courtyard By Marriott II, Sr. Secured Notes,
10.75%, 2/1/08 50 49
La Quinta Inns, Sr. Notes, 7.25%, 3/15/04 500 475
_____________________________________________________________________________
524
Manufacturing 1.2%
Coltec Industries, Sr. Sub. Notes, 10.25%, 4/1/02 150 155
_____________________________________________________________________________
155
Media and Communications 3.7%
News America Holdings, Sr. Deb., 7.75%, 1/20/24 500 458
_____________________________________________________________________________
458
Paper and Paper Products 1.4%
Boise Cascade, Deb., 7.35%, 2/1/16 200 181
_____________________________________________________________________________
181
Savings and Loan 0.8%
B.F. Saul REIT, Sr. Secured Notes, 11.625%, 4/1/02 100 103
_____________________________________________________________________________
103
Service 1.6%
Coinmach, Sr. Notes, 11.75%, 11/15/05 100 104
Host Marriott Travel Plazas, Sr. Notes,
9.50%, 5/15/05 100 97
_____________________________________________________________________________
201
Specialty Chemicals 9.3%
Agricultural Minerals and Chemicals, Sr. Notes,
10.75%, 9/30/03 150 161
Freeport-McMoRan Resource Partners, Sr. Notes,
7.00%, 2/15/08 500 455
IMC Global
Sr. Deb., 9.45%, 12/15/11 50 51
Sr. Notes, 10.125%, 6/15/01 50 53
Methanex, Notes, 7.75%, 8/15/05 450 438
_____________________________________________________________________________
1,158
Supermarkets 1.3%
Vons Companies, Sr. Sub. Notes, 9.625%, 4/1/02 $ 150 $ 158
_____________________________________________________________________________
158
Textiles and Apparel 0.4%
Synthetic Industries, Sr. Sub. Deb., 12.75%, 12/1/02 50 53
_____________________________________________________________________________
53
Transportation 2.5%
Delta Air Lines, ETC, 10.00%, 5/17/10 146 170
Sea Containers Ltd., Sr. Sub. Deb., 12.50%, 12/1/04 125 137
_____________________________________________________________________________
307
_____________________________________________________________________________
Total Corporate Bonds and Notes (Cost $11,549) 11,036
EQUITY AND CONVERTIBLE SECURITIES 0.9%
Savings and Loan 0.9%
First Nationwide Bank Federal Savings,
Conv. Pfd. Stock 1 110
Total Equity and Convertible Securities
_____________________________________________________________________________
(Cost $117) 110
ASSET-BACKED SECURITIES 4.4%
Airlines 4.4%
Airplane Pass Through Trust, 10.875%, 3/15/19 100 104
Continental Airlines
PTC, (144a)
6.94%, 10/15/13 250 223
7.82%, 10/15/13 250 225
_____________________________________________________________________________
Total Asset-Backed Securities (Cost $601) 552
U.S. GOVERNMENT MORTGAGE-BACKED
SECURITIES 0.9%
U.S. Government Guaranteed Obligations 0.9%
Government National Mortgage Assn.
I, 9.50%, 8/15/16 80 87
II, 10.50%, 2/20/19 24 27
Total U.S. Government Mortgage-Backed Securities
_____________________________________________________________________________
(Cost $112) 114
COMMERCIAL PAPER 3.4%
Investments in Commercial Paper through a joint account,
5.41%, 6/3/96 $ 419 $ 419
_____________________________________________________________________________
Total Commercial Paper (Cost $419) 419
Total Investments in Securities
98.2% of Net Assets (Cost $12,798) $ 12,231
Other Assets Less Liabilities 230
NET ASSETS $ 12,461
Net Assets Consist of:
Accumulated net investment income - net of distributions $ 8
Accumulated net realized gain/loss - net of distributions (27)
Net unrealized gain (loss) (567)
Paid-in-capital applicable to 1,300,661 shares of $0.0001 par
value capital stock outstanding; 1,000,000,000 shares authorized 13,047
NET ASSETS $ 12,461
NET ASSET VALUE PER SHARE $ 9.58
ETC Equipment Trust Certificate
MTN Medium Term Note
PTC Pass-through Certificate
REIT Real Estate Investment Trust
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 13.5% of net assets.
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Corporate Income Fund
STATEMENT OF OPERATIONS
In thousands
10/31/95
to
5/31/96
_____________________________________________________________________________
Investment Income
Interest and dividend income $ 342
Expenses
Custody and accounting 57
Shareholder servicing 16
Legal and audit 8
Organization 6
Directors 3
Prospectus and shareholder reports 1
Registration 1
Reimbursed by manager (59)
Total expenses 33
Net investment income 309
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on securities (27)
Change in net unrealized gain or loss on securities (567)
Net realized and unrealized gain (loss) (594)
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ (285)
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Corporate Income Fund
STATEMENT OF CHANGES IN NET ASSETS
In thousands
10/31/95
to
5/31/96
_____________________________________________________________________________
Increase (Decrease) in Net Assets
Operations
Net investment income $ 309
Net realized gain (loss) (27)
Change in net unrealized gain or loss (567)
Increase (decrease) in net assets from operations (285)
Distributions to shareholders
Net investment income (307)
Capital share transactions*
Shares sold 14,825
Distributions reinvested 257
Shares redeemed (2,129)
Increase (decrease) in net assets from capital
share transactions 12,953
Net Assets
Increase (decrease) during period 12,361
Beginning of period 100
End of period $ 12,461
*Share information
Shares sold 1,483
Distributions reinvested 26
Shares redeemed (218)
Increase (decrease) in shares outstanding 1,291
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Corporate Income Fund
May 31, 1996
Notes to Financial Statements
Note 1 - Significant Accounting Policies
T. Rowe Price Corporate Income Fund, Inc., (the fund) is registered under the
Investment Company Act of 1940 as a diversified, open-end management
investment company and commenced operations on October 31, 1995.
Valuation Debt securities are generally traded in the over-the-counter
market. 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
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. Equity securities listed or regularly
traded on a securities exchange are valued at the last quoted sales price at
the time the valuations are made. Listed securities that are not traded on a
particular day are valued at the mean of the latest bid and asked prices.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by or under the supervision of the officers of the
fund, as authorized by the Board of Directors.
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. Dividend income and distributions
to shareholders are recorded by the fund on the ex-dividend date. Income and
capital gain distributions are determined in accordance with federal income
tax regulations and may differ from those determined in accordance with
generally accepted accounting principles.
Note 2 - Investment Transactions
Consistent with its investment objective, the fund engages in the following
practices to manage exposure to certain risks or enhance performance. The
investment objective, policies, program, and risk factors of the fund are
described more fully in the fund's prospectus and Statement of Additional
Information.
Noninvestment-Grade Debt Securities At May 31, 1996, the fund held
investments in noninvestment-grade debt securities, commonly referred to as
"high-yield" or "junk" bonds. A real or perceived economic downturn or higher
interest rates could adversely affect the liquidity or value, or both, of such
securities because such events could lessen the ability of issuers to make
principal and interest payments.
Commercial Paper Joint Account The fund, and other affiliated funds, may
transfer uninvested cash into a commercial paper joint account, the daily
aggregate balance of which is invested in high-grade commercial paper. All
securities purchased by the joint account satisfy the fund's criteria as to
quality, yield, and liquidity.
Other Purchases and sales of portfolio securities, other than short-term and
U.S. government securities, aggregated $15,154,000 and $2,853,000,
respectively, for the year ended May 31, 1996.
Note 3 - Federal Income Taxes
No provision for federal income taxes is required since the fund intends to
qualify as a regulated investment company and distribute all of its taxable
income.
In order for the 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 May 31, 1996. The results
of operations and net assets were not affected by the reclassifications.
Undistributed net investment income $ 6,000
Paid-in-capital (6,000)
At May 31, 1996, the aggregate cost of investments for federal income tax and
financial reporting purposes was $12,798,000, and net unrealized loss
aggregated $567,000, of which $26,000 related to appreciated investments and
$593,000 to depreciated investments.
Note 4 - Related Party Transactions
The investment management agreement between the fund and T. Rowe Price
Associates, Inc. (the manager) provides for an annual investment management
fee. The fee is computed daily and paid monthly, consisting of an individual
fund fee equal to 0.15% of average daily net assets and a group fee. The
group fee is based on the combined assets of certain mutual funds sponsored by
the manager or Rowe Price-Fleming International, Inc. (the group). The group
fee rate ranges from 0.48% for the first $1 billion of assets to 0.305% for
assets in excess of $50 billion. At May 31, 1996, and for the year then
ended, the effective annual group fee rate was 0.33% and 0.34%, respectively.
The fund pays a pro rata share of the group fee based on the ratio of its net
assets to those of the group.
Under the terms of the investment management agreement, the manager is
required to bear any expenses through May 31, 1997, which would cause the
fund's ratio of expenses to average net assets to exceed 0.80%. Thereafter,
through May 31, 1999, the fund is required to reimburse the manager for these
expenses, provided that average net assets have grown or expenses have
declined sufficiently to allow reimbursement without causing the fund's ratio
of expenses to average net assets to exceed 0.80%. Pursuant to this
agreement, $20,000 of management fees were not accrued by the fund for the
year ended May 31, 1996, and $59,000 of other expenses were borne by the
manager.
In addition, the fund has entered into agreements with the manager and two
wholly owned subsidiaries of the manager, pursuant to which the fund receives
certain other services. The manager computes the daily share price and
maintains the financial records of the fund. T. Rowe Price Services, Inc., is
the fund's transfer and dividend disbursing agent and provides shareholder and
administrative services to the fund. T. Rowe Price Retirement Plan Services,
Inc., provides subaccounting and recordkeeping services for certain retirement
accounts invested in the fund. The fund incurred expenses pursuant to these
related party agreements totaling approximately $51,000 for the year ended May
31, 1996, of which $6,000 was payable at period-end.
T. Rowe Price Corporate Income Fund
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
T. Rowe Price Corporate Income Fund, Inc.
In our opinion, the accompanying statement 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
T. Rowe Price Corporate Income Fund, Inc. (the "Fund") at May 31, 1996, and
the results of its operations, the changes in its net assets, and the
financial highlights for the period October 31, 1995 (commencement of
operations) through May 31, 1996, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of
the Fund's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit 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 audit, which included confirmation of securities at May 31, 1996 by
correspondence with the custodian and, where appropriate, the application of
alternative auditing procedures for unsettled security transactions, provides
a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Baltimore, Maryland
June 19, 1996
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Retirement Planning Kit (also available on disk for PC use) help you determine
and reach your investment goals.
T. Rowe Price Mutual Funds
Stock Funds
Domestic
Balanced
Blue Chip Growth
Capital Appreciation
Capital Opportunity
Dividend Growth
Equity Income
Equity Index
Growth & Income
Growth Stock
Health Sciences
Mid-Cap Growth
Mid-Cap Value
New America Growth
New Era
New Horizons*
OTC
Science & Technology
Small-Cap Value*
Spectrum Growth
Value
International/Global
Emerging Markets Stock
European Stock
Global Stock
International Discovery
International Stock
Japan
Latin America
New Asia
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 Insured 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 Insured
Intermediate Bond
Tax-Free Short-Intermediate
Virginia Short-Term Tax-Free Bond
Virginia Tax-Free Bond
International/Global
Emerging Markets Bond
Global Government Bond
International Bond
Short-Term Global Income
Money Market
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
Personal Strategy Balanced
Personal Strategy Growth
Personal Strategy Income
T. Rowe Price No-Load Variable Annuity
Equity Income Portfolio
International Stock Portfolio
Limited-Term Bond Portfolio
New America Growth Portfolio
Personal Strategy Balanced Portfolio
*Closed to new investors.
For yield, price, last transaction, and current balance, 24 hours, 7 days a
week, call:
1-800-638-2587 toll free
For assistance with your existing fund account, call:
Shareholder Service Center
1-800-225-5132 toll free
625-6500 Baltimore area
T. Rowe Price
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for distribution only to shareholders and to others
who have received a copy of the prospectus of the T. Rowe Price Corporate
Income Fund.
Invest With Confidence(registered trademark)
T. Rowe Price
T. Rowe Price Investment Services, Inc., Distributor RPRTCIF 5/31/96
Chart 1 - Yield Comparison - Yield Comparison chart showing yields of
BBB-rated corporate bonds and 10-year Treasuries from 5/31/95 through 5/31/96.
Chart 2 - Total Return by Credit Quality - A bar chart showing total returns
for 6 months ended May 31, 1996 by the following credit quality sectors:
AAA/AA/A-Rated Corporate Bonds, BBB-Rated Corporate Bonds, BBB/BB-Rated
Corporate Bonds, BB-Rated Corporate Bonds,B-Rated Corporate Bonds.
Chart 3 - Quality Diversification - Quality diversification pie chart showing
A-rated and above 18%, BBB 47%, BB 19%, B 10%, Convertible Preferred Stock 1%,
and Mortgage and Asset-Backed 5%
Chart 4 - SEC Chart - Corporate Income Fund - A line chart showing the
cumulative growth of $10,000 invested in the Corporate Income Fund from
inception compared with $10,000 invested in a broad-based index and broad
based average over the same period.
