April 1, 2000
 FUND PROFILE
T. ROWE PRICE
New Income Fund

 A bond fund willing to assume principal risk to achieve an attractive level of
 income.
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.

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FUND PROFILE
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 What is the fund's objective?

   The fund seeks the highest level of income consistent with the preservation
   of capital over time by investing primarily in marketable debt securities.


 What is the fund's principal investment strategy?

   We will invest at least 80% of the fund's total assets in income-producing
   securities, which may include U.S. government and agency obligations,
   mortgage- and asset-backed securities, corporate bonds, foreign securities,
   collateralized mortgage obligations (CMOs), and others, including, on
   occasion, equities.

   All securities purchased by the fund must be rated investment grade (AAA, AA,
   A, or BBB) by at least one major credit rating agency or, if unrated, must
   have a T. Rowe Price equivalent rating. Up to 15% of total assets may be
   invested in "split-rated securities," or those rated investment grade by at
   least one rating agency, but below investment grade by others. However, none
   of the fund's remaining assets can be invested in bonds rated below
   investment grade by Standard & Poor's, Moody's, or Fitch IBCA, Inc.

   We have considerable flexibility in seeking high yield for the fund. There
   are no maturity restrictions, so we can purchase longer-term bonds which tend
   to have higher yields than shorter-term issues. However, the portfolio's
   weighted average maturity is expected to be between four and 15 years. In
   addition, when there is a large yield difference between the various quality
   levels, we may move down the credit scale and purchase lower-rated bonds with
   higher yields. When the difference is small, we may concentrate investments
   in the higher-rated issues.

   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 adjust the
   portfolio's average maturity, or to shift assets into higher-yielding
   securities.

   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.


 What are the main risks of investing in the fund?

  . Interest rate risk  Investors should be concerned primarily with this risk.
   An increase in interest rates could cause the fund's share price to fall,
   resulting in a loss of principal. That's because the bonds and notes in the
   fund's portfolio become less attractive to other investors when securities
   with higher yields become available. Even GNMAs and other securities whose
   principal and interest payments are guaranteed can decline in price if rates
   rise. The longer a




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FUND PROFILE
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   bond's maturity, the greater its potential for price declines if rates rise
   and for price gains if rates fall. Because the fund may invest in bonds of
   any maturity, it carries more interest rate risk than short-term corporate
   funds.

  . Credit risk  This is the chance that any of a fund's holdings will have its
   credit rating downgraded or will default (fail to make scheduled interest or
   principal payments), potentially reducing the fund's income level and share
   price. While the fund's overall credit quality is high, BBB securities are
   more susceptible to adverse economic conditions and some may have speculative
   characteristics.

  . The fund may continue to hold a security that has been downgraded or loses
   its investment-grade rating after purchase.

  . 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.

  . Prepayment risk and extension risk A mortgage-backed bond, unlike most other
   bonds, can be hurt when interest rates fall, because homeowners tend to
   refinance and prepay principal. The loss of high-yielding underlying
   mortgages and the reinvestment of proceeds at lower interest rates can reduce
   the bond's potential price gain in response to falling interest rates, reduce
   the bond's yield, or even cause the bond's price to fall below what an
   investor paid for it, resulting in a capital loss. Any of these developments
   could cause a decrease in the fund's income, share price, or total return.

   Extension risk refers to a rise in interest rates that causes a fund's
   average maturity to lengthen unexpectedly due to a drop in mortgage
   prepayments. This would increase the fund's sensitivity to rising rates and
   its potential for price declines.

  . Derivatives risk  Shareholders are also exposed to derivatives risk, the
   potential that our investments in these complex and volatile instruments
   could affect the fund's share price. In addition to CMOs and better-known
   instruments such as futures, other derivatives used in limited fashion by the
   fund include interest-only (IO) and principal-only (PO) securities known as
   "strips." The value of these instruments is derived from an underlying pool
   of mortgage-backed securities or a CMO. All these instruments can be highly
   volatile, and their value can fall dramatically in response to rapid or
   unexpected changes in the mortgage or interest rate environment.




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FUND PROFILE
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   As with any mutual fund, there can be no guarantee the fund will achieve its
   objective.

  . 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. The fund may be appropriate for you if you seek an
   attractive level of income and are willing to accept the risk of a declining
   share price when interest rates rise. Steadily reinvesting the fund's income
   is a conservative strategy for building capital over time. If you are
   investing primarily for 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
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FUND PROFILE
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                      Calendar Year Total Returns
  "90"   "91"   "92"   "93"   "94"   "95"   "96"   "97"   "98"   "99"
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 8.77   15.51  4.96   9.58   -2.22  18.36  2.38   9.32   5.04    -1.58
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          Quarter ended              Total return

 Best quarter                            6/30/95 5.83%

 Worst quarter                           3/31/96 -2.53%




 Table 1  Average Annual Total Returns

                                             Periods ended 3/31/00
                                         1 year    5 years     10 years
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  New Income Fund                        1.46%      5.99%       7.20%

  Lehman Aggregate Bond Index            1.87       7.14        8.02
  Lipper Corporate Debt Funds A-Rated    0.36       6.29        7.65
  Average
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 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 2  Fees and Expenses of the Fund

                                               Annual fund operating expenses
                                        (expenses that are deducted from fund assets)
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  Management fee                                           0.47%/ // /
  Other expenses                                           0.25%
  Total annual fund operating                              0.72%/ // /
  expenses
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   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, you invest $10,000, you earn a 5% annual return, and you hold the
   investment for the following periods:




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FUND PROFILE
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   1 year      3 years      5 years       10 years
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    $74         $230         $401           $894
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 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.

   William T. Reynolds manages the fund day-to-day and has been chairman of its
   Investment Advisory Committee since 1998. He joined T. Rowe Price in 1981 and
   has been managing investments since 1978.


 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.


 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.


FUND PROFILE
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 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

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                                                                         F43-035
 T. Rowe Price Investment Services, Inc., Distributor