0000080249-01-500011.txt : 20011019
0000080249-01-500011.hdr.sgml : 20011019
ACCESSION NUMBER: 0000080249-01-500011
CONFORMED SUBMISSION TYPE: 497K3B
PUBLIC DOCUMENT COUNT: 1
FILED AS OF DATE: 20011015
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: PRICE T ROWE NEW INCOME FUND INC
CENTRAL INDEX KEY: 0000080249
STANDARD INDUSTRIAL CLASSIFICATION: []
IRS NUMBER: 520980581
FISCAL YEAR END: 0531
FILING VALUES:
FORM TYPE: 497K3B
SEC ACT: 1933 Act
SEC FILE NUMBER: 002-48848
FILM NUMBER: 1758752
BUSINESS ADDRESS:
STREET 1: 100 EAST PRATT ST
CITY: BALTIMORE
STATE: MD
ZIP: 21202
BUSINESS PHONE: 4105472000
497K3B
1
nif-fundprofile.txt
NEW INCOME FUND, 10/1/01
October 1, 2001
FUND PROFILE
T. ROWE PRICE
New Income Fund
A bond fund investing primarily in investment-grade bonds to achieve an
attractive level of income.
TROWEPRICELOGO
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 debt 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 or the outlook warrants, we may
concentrate investments in higher-rated issues.
We may also invest in other securities, including futures, options, and
swaps, in keeping with the fund's objective.
The fund may sell holdings for a variety of reasons, such as to adjust the
portfolio's average maturity or quality, or to shift assets into
higher-yielding securities or different sectors.
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 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 will likely 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. Generally speaking, the
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FUND PROFILE
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longer a 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
bond 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, it can own BBB
securities, which are more susceptible to adverse economic conditions and 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.
. 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. Receiving increasing prepayments in a falling
interest rate environment causes the average maturity of the portfolio to
shorten, reducing its potential for price gains. It also requires the fund to
reinvest proceeds at lower interest rates, which reduces the portfolio's
total return, reduces its yield, and may even cause certain bonds' prices to
fall below what the fund paid for them, 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 swaps and futures, other derivatives that may be 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. Some of these
instruments can be highly volatile, and their value can fall dramatically in
response to rapid or unexpected changes in the mortgage, interest rate, or
economic 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 share price and income level of the fund will fluctuate with changing
market conditions and interest rate levels. 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 showing calendar year returns and the average annual total
return table indicate risk by illustrating how much returns can differ from
one year to the next and over time. Fund past performance is no guarantee of
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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Calendar Year Total Returns
"91" "92" "93" "94" "95" "96" "97" "98" "99" "00"
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15.51 4.96 9.58 -2.22 18.36 2.38 9.32 5.04 -1.58 11.13
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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 09/30/2001
1 year 5 years 10 years
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New Income Fund 12.98% 7.02% 6.94%
Lehman Brothers U.S. Aggregate Index 12.95 8.06 7.76
Lipper Corporate Debt Funds A Rated 11.56 6.91 7.27
Average
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These figures include changes in principal value, reinvested dividends, and
capital gain distributions, if any.
Lehman indices do not reflect the deduction of any fees or expenses.
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.
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 0.26%
Total annual fund operating expenses 0.73%/ // /
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* Redemption proceeds of less than $5,000 sent by wire are subject to a $5 fee
paid to the fund. Accounts with less than a $2,000 balance (with certain
exceptions) are subject to a $10 fee.
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 mutual 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, earn a 5% annual return, and hold the
investment for the following periods and then redeem:
1 year 3 years 5 years 10 years
----------------------------------------------------
$75 $233 $406 $906
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FUND PROFILE
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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.
To participants in employer-sponsored retirement plans: The following questions
and answers about buying and selling shares and services do not apply to your
plan. Please call your plan's toll-free number for additional information. Also
note that this profile may include funds not available through your plan.
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.
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;
FUND PROFILE
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. brokerage services; and
. asset manager accounts.
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, MD 21202
www.troweprice.com
LOGO
RPS F43-035
T. Rowe Price Investment Services, Inc., Distributor