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July 1, 2000
FUND PROFILE
T. ROWE PRICE
Corporate Income Fund
A bond fund seeking a high level of income and some capital growth.
This profile summarizes key information about the fund that is included in the
fund's prospectus. The fund's prospectus includes additional information about
the fund, including a more detailed description of the risks associated with
investing in the fund that you may want to consider before you invest. You may
obtain the prospectus and other information about the fund at no cost by calling
1-800-638-5660, or by visiting our Web site at www.troweprice.com.
TROWEPRICELOGO
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FUND PROFILE
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What is the fund's objective?
The objective is to provide high income and some capital growth.
What is the fund's principal investment strategy?
We will invest at least 65% of total assets in corporate debt securities
issued by U.S. and foreign companies. Holdings will be a mix of long-term
investment-grade and noninvestment-grade bonds (also called high-yield or
junk bonds). The fund may invest in a variety of other securities in an
effort to enhance income and achieve some capital growth. These include
convertible debt and preferred stock, together limited to no more than 25% of
assets; U.S. Treasury and agency securities; and mortgage- and asset-backed
securities, including some mortgage derivatives. In addition, up to 25% of
assets may be invested in non-U.S. dollar foreign securities, and there is no
limit on the fund's investments in U.S. dollar-denominated foreign
securities. We expect the fund's weighted average maturity to exceed 10
years.
At least 65% of the fund's net assets must, at the time of purchase, have
received an investment-grade rating (AAA, AA, A, BBB) from at least one
rating agency (or, if unrated, must have a T. Rowe Price equivalent), but
could be rated below investment grade (junk) by other agencies. Such bonds
are called "split-rated." Up to one-third of total assets can be in bonds
rated junk by all agencies that assign a rating. However, none of these
ratings can be lower than B, and B- rated issues will not compose more than
10% of total assets.
This investment program gives us considerable flexibility in seeking high
income. Within the limits described, we can seek the most advantageous
combination of securities. For example, when the difference is small between
the yields of various quality levels, we may concentrate investments in
higher-quality issues. When the difference is large, we may move down the
credit scale to seek higher yields. Likewise, we may purchase bonds issued by
foreign companies, including U.S. dollar-denominated Yankee bonds, when they
offer higher yields than U.S. bonds of comparable quality and maturity.
We may also invest in other securities, including futures and options, in
keeping with the fund's objective.
The fund may sell securities for a variety of reasons, such as to secure
gains, limit losses, or redeploy assets into more promising opportunities.
Further information about the fund's investments, including a review of
market conditions and fund strategies and their impact on performance, is
available in the annual and semiannual shareholder reports. To obtain free
copies of any of these documents, call 1-800-638-5660.
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FUND PROFILE
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What are the main risks of investing in the fund?
A major source of risk for the fund is price declines caused by rising
interest rates, but credit risk can be equally important.
. Interest rate risk This is the decline in bond prices that usually
accompanies a rise in interest rates. Longer-maturity bonds typically decline
more than those with shorter maturities.
. Credit risk This is the chance that any fund holding could have its credit
rating downgraded, or that a bond issuer will default (fail to make timely
payments of interest or principal), potentially reducing the fund's income
level and share price. High-yield bonds are speculative since their issuers
are more vulnerable to financial setbacks and recession than more
creditworthy companies, but BBB rated bonds (and, especially, split-rated
ones) may have speculative elements as well. High-yield bond issuers include
small companies lacking the history or capital to merit investment-grade
status, former blue chip companies downgraded because of financial problems,
and firms with heavy debt loads.
. The fund may continue to hold a security that has been downgraded or loses
its investment-grade rating after purchase.
The fund's credit risk is greater than a Treasury fund or one with all
high-quality bonds, but less than a fund focusing entirely on high-yield
(junk) bonds. Higher-quality bond prices are generally affected primarily by
changes in interest rate levels, but high-yield bond prices are affected by
other factors as well: changes in a company's financial situation, economic
forecasts, stock market conditions, and overall market psychology that can
lead to the kind of volatility associated with stocks. High-yield bonds are
generally less liquid than high-quality bonds, meaning that large
transactions can cause substantial price changes.
. Foreign investing risk To the extent the fund holds foreign bonds, it will
be subject to special risks whether the bonds are denominated in U.S. dollars
or foreign currencies. These risks include potentially adverse political and
economic developments overseas, greater volatility, lower liquidity, and the
possibility that foreign currencies will decline against the dollar, lowering
the value of securities denominated in those currencies and possibly the
fund's share price. Currency risk affects the fund primarily to the extent
that it holds nondollar foreign bonds.
In addition, derivative securities held by the fund can be unusually
volatile, and a small position could cause a significant loss.
As with any mutual fund, there can be no guarantee the fund will achieve its
objective.
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FUND PROFILE
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. The fund's share price may decline, so when you sell your shares, you may
lose money. An investment in the fund is not a deposit of a bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency.
How can I tell if the fund is appropriate for me?
Consider your investment goals, your time horizon for achieving them, and
your tolerance for risk. If you can accept the possibility of share price
declines in an effort to achieve high income and some capital growth, the
fund could be an appropriate part of your overall investment strategy. If you
are investing for principal safety and liquidity, you should consider a money
market fund.
The fund can be used in both regular and tax-deferred accounts, such as IRAs.
. The fund should not represent your complete investment program or be used
for short-term trading purposes.
How has the fund performed in the past?
The bar chart and the average annual total return table indicate risk by
illustrating how much returns can differ from one year to the next. The
fund's past performance is no guarantee of its future returns.
The fund can also experience short-term performance swings, as shown by the
best and worst calendar quarter returns during the years depicted in the
chart.
LOGO
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FUND PROFILE
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<TABLE>
<CAPTION>
Calendar Year Total Returns
"96" "97" "98" "99"
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<S> <C> <C> <C>
4.69 12.57 2.28 -0.83
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</TABLE>
Quarter ended Total return
Best quarter 9/30/97 4.89%
Worst quarter 9/30/98 -4.02%
The fund's total return for the six months ended 6/30/99 was -1.07%.
<TABLE>
Table 1 Average Annual Total Returns
<CAPTION>
Periods ended 06/30/2000
Since inception
1 year (10/31/1995)
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<S> <C> <C>
Corporate Income Fund 2.44% 5.20%
Lehman Brothers BAA Corporate
Bond Index 2.62 5.73
Lipper Corporate Debt Funds BBB 2.29 5.15
Rated Average
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</TABLE>
These figures include changes in principal value, reinvested dividends, and
capital gain distributions, if any.
What fees or expenses will I pay?
The fund is 100% no load. There are no fees or charges to buy or sell fund
shares, reinvest dividends, or exchange into other T. Rowe Price funds. There
are no 12b-1 fees. Like all mutual funds, the fund charges the following:
. A management fee The percent of fund assets paid to the fund's investment
manager. The fund's fee comprises a group fee, 0.32% as of June 30, 1999, and
an individual fund fee of 0.15%.
. "Other" administrative expenses Primarily the servicing of shareholder
accounts, such as providing statements and reports, disbursing dividends, and
providing custodial services.
<TABLE>
Table 2 Fees and Expenses of the Fund
<CAPTION>
Annual fund operating expenses
(expenses that are deducted from fund assets)
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<S> <C>
Management fee 0.47%/a/
Other expenses 0.66%
Total annual fund operating
expenses 1.13%/a/
Fee waiver/reimbursement 0.33%
Net expenses 0.80%
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</TABLE>
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/a/
To limit the fund's expenses during its initial period of operations, T. Rowe
Price contractually obligated itself to waive its fees and bear any expenses
through May 31, 1999, that would cause the fund's ratio of expenses to
average net assets to exceed 0.80%. Effective June 1, 1999, T. Rowe Price
agreed to extend the expense limitation of 0.80% for a period of two years
through May 31, 2001. Fees waived or expenses paid or assumed under these
agreements are subject to reimbursement to T. Rowe Price by the fund whenever
the fund's expense ratio is below 0.80%; however, no reimbursement will be
made after May 31, 2001 (for the first agreement), or May 31, 2003 (for the
second agreement), or if it would result in the expense ratio exceeding
0.80%. Any amounts reimbursed will have the effect of increasing fees
otherwise paid by the fund.
Example. The following table gives you a rough idea of how expense ratios
may translate into dollars and helps you to compare the cost of investing in
this fund with that of other funds. Although your actual costs may be higher
or lower, the table shows how much you would pay if operating expenses remain
the same, the expense limitation currently in place is not renewed, you
invest $10,000, you earn a 5% annual return, and you hold the investment for
the following periods:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
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<S> <C> <C> <C>
$82 $292 $557 $1,314
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</TABLE>
Who manages the fund?
The fund is managed by T. Rowe Price Associates, Inc. Founded in 1937, T.
Rowe Price and its affiliates manage investments for individual and
institutional accounts. The company offers a comprehensive array of stock,
bond, and money market funds directly to the investing public.
Robert M. Rubino manages the fund day-to-day and has been chairman of its
Investment Advisory Committee since 1998. He joined T. Rowe Price in 1987 and
has been managing investments since 1993.
Note: The following questions and answers about buying and selling shares and
services do not apply to employer-sponsored retirement plans. If you are a
participant in one of these plans, please call your plan's toll-free number for
additional information.
How can I purchase shares?
Fill out the New Account Form and return it with your check in the postpaid
envelope. The minimum initial purchase is $2,500 ($1,000 for IRAs and gifts
or transfers to minors). The minimum subsequent investment is $100 ($50 for
IRAs, gifts or transfers to minors, or Automatic Asset Builder). You can also
open an account by bank wire, by exchanging from another T. Rowe Price fund,
or by transferring assets from another financial institution.
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FUND PROFILE
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How can I sell shares?
You may redeem or sell any portion of your account on any business day.
Simply write to us or call. You can also access your account at any time via
Tele*Access /(R)/ or our Web site. We offer convenient exchange among our
entire family of domestic and international funds. Restrictions may apply in
special circumstances, and some redemption requests need a signature
guarantee. A $5 fee is charged for wire redemptions under $5,000.
When will I receive income and capital gain distributions?
The fund distributes income monthly and net capital gains, if any, at
year-end. For regular accounts, income and short-term gains are taxable at
ordinary income rates, and long-term gains are taxable at the capital gains
rate. Distributions are reinvested automatically in additional shares unless
you choose another option, such as receiving a check. Distributions paid to
IRAs and employer-sponsored retirement plans are automatically reinvested.
What services are available?
A wide range, including but not limited to:
. retirement plans for individuals and large and small businesses;
. automated information and transaction services by telephone or computer;
. electronic transfers between fund and bank accounts;
. automatic investing and automatic exchange;
. brokerage services; and
. asset manager accounts.
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, MD 21202
www.troweprice.com
LOGO
RPS F03-035
T. Rowe Price Investment Services, Inc., Distributor
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