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January 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.
T. ROWE PRICE LOGO
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FUND PROFILE
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What is theeach fund's objective?
The objective is to provide high income and some capital growth.
What is theeach 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.
TheEach 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 theeach 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 fundfunds?
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 (see Table ). 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. Please see High-Yield,
High-Risk Investing in Section 3 for additional information about these
investments.
. Foreign investing risk To the extent theeach 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 theeach 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
objectivefunds will achieve their objectives.
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. TheEach 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 iswhich fund is most 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.
TheEach fund can be used in both regular and tax-deferred accounts, such as
IRAs.
. The fund or funds you select should not represent your complete investment
program or be used for short-term trading purposes.
How has theeach fund performed in the past?
The bar charts and the average annual total return table indicate risk by
illustrating how much returns can differ from one year to the next. TheEach
fund's past performance is no guarantee of its future returns, and the
performance of Prime Reserve PLUS would have differed because of its
different expense ratio.
The fundfunds can also experience short-term performance swings, as shown by
the best and worst calendar quarter returns during the years depicted in the
charts. the year depicted in the chart.
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LOGO
<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
12/31/1999
Since inception
1 year (10/31/1995)
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<S> <C> <C>
Corporate Income Fund -0.83% 5.29%
Lehman Aggregate Bond Index -0.82 5.72
Lipper Corporate Debt Funds -1.68 5.27
BBB-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 isThe funds are 100% no load. However, the funds charge a redemption
fee of 0.50%, payable to the funds, for shares held less than six months, and
a quarterly maintenance fee of $2.50 for accounts of less than $10,000.
However, the fund charges a redemption fee of 0.50%, payable to the fund, for
shares held less than six months, and a quarterly maintenance fee of $2.50
for accounts of less than $10,000. The fund charges a % redemption
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fee, payable to the fund, on shares held less than . The fee applies to
exchanges as well. There are no other 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: The
fund has a single, all-inclusive fee covering investment management and
operating expenses. This will not fluctuate. The Extended Equity Market Index
and Total Equity Market Index Funds each have a single, all-inclusive fee
covering investment management and operating expenses. This will not
fluctuate. While the funds themselves impose no fees or charges, they will
indirectly bear their pro-rata share of the expenses of the underlying funds.
The following table provides a range of average weighted expense ratios for
each fund. A range is given instead of a single number because the pro-rata
share of expenses fluctuates along with changes in the average assets in each
of the underlying funds. While the fund itself imposes no fees or charges, it
will indirectly bear its pro-rata share of the expenses of the underlying
funds. The following table provides a range for the fund's average weighted
expense ratio. A range is given instead of a single number because the
pro-rata share of expenses fluctuates along with changes in the average
assets in each of the underlying funds.
. A management fee The percent of fund assets paid to theeach fund's
investment manager. EachThe fund's fee comprises a group fee, 0.32% as of
June 30, 1999, and an individual fund fee of 0.15%. The individual fund fees
were as follows: Equity Index 500 Fund, 0.20%; and Extended Equity Market
Index and Total Equity Market Index Funds, 0.40%. The individual fund fees
are as follows: Prime Reserve Fund, 0.05%; New Income Fund, 0.15%; Equity
Income Fund, 0.25%; and International Stock Fund, 0.35%.
. "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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/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
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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 fundthese funds with that of other funds. Although your actual costs may
be higher or lower, the table belowshows how much uses the midpoint of the
range to show the expenses you would pay if operating expenses remain the
same, the expense limitation currently in place is not renewed (if
applicable), 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>
* Does not include account maintenance fee for accounts of less than $10,000.
Who manages the fundfunds?
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 theeach fund day-to-day and hashave been chairman of
itstheir Investment Advisory Committee since 1998. He joined T. Rowe Price in
1987 and has been managing investments since 1993. He has been managing
investments since joining T. Rowe Price in 1993. He joined T. Rowe Price in
1987 as a research analyst and has been managing investments since 1993. He
joined in 1987 and has been a portfolio manager since 1993. He has been
managing investments in the high-yield bond market since joining T. Rowe
Price in 1988. From 1992 to 1997, she was a trader on the corporate
high-grade trading desk.
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
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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.
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?
TheEach 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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