<DOCUMENT>
<TYPE>N-30D
<SEQUENCE>1
<FILENAME>nif40416.txt
<DESCRIPTION>T. ROWE PRICE NEW INCOME FUND
<TEXT>
Annual Report
NEW INCOME FUND
MAY 31, 2001
T. ROWE PRICE
<PAGE>
Report Highlights
New Income Fund
o Aggressive easing by the Federal Reserve buoyed bond prices and the
performance of the New Income Fund.
o Your fund's six- and 12-month returns were in line with the performance of
the Lehman Brothers U.S. Aggregate Index and the Lipper peer group average.
o We added to the corporate bond portion of the portfolio and trimmed the
mortgage sector.
o With the economy likely to be weak for several more months, we expect the
Fed to continue its easy money policy.
UPDATES AVAILABLE
For updates on T. Rowe Price funds following the end of each calendar
quarter, please see our Web site at www.troweprice.com.
<PAGE>
FELLOW SHAREHOLDERS
The past 12 months were favorable for investment-grade bonds and your fund.
The Federal Reserve lowered its target for the key federal funds rate five times
in the first five months of this year. Efforts by many corporate borrowers to
reduce excess debt and strengthen their balance sheets added support to the
already attractive corporate bond markets. This combination helped the New
Income Fund post a double-digit total return in the 12 months ended May 31.
MARKET ENVIRONMENT
A glance in the rear view mirror shows that rising interest rates
characterized the bond market from June 1999 through May 2000.
In response to inflation pressure and an overheating economy, the Federal
Reserve ratcheted the fed funds rate up six times from 4.75% to 6.5%. We adopted
a defensive strategy during this difficult period, trimming interest rate
sensitivity and improving the quality.
The following table was depicted as a line graph in the printed material.
30-Year Treasury Bond 5-Year Treasury Note 1-Year Treasury Bill
--------------------- -------------------- --------------------
5/31/00 6.14 6.65 6.28
5.94 6.25 6.13
5.8 6.16 6.06
8/31/00 5.71 6.02 6.23
5.89 5.9 6.08
5.72 5.73 6.01
11/30/00 5.66 5.52 6
5.44 4.98 5.34
5.5 4.77 4.58
2/28/01 5.31 4.65 4.46
5.44 4.56 4.11
5.79 4.88 3.92
5/31/01 5.75 4.91 3.56
Interest rates peaked in mid-summer, shortly after the Fed's last
tightening on May 16, 2000. By that time, the tech-stock bubble had already
begun to deflate, leading to a severe decline in capital expenditures and
bulging inventories. Spiking fuel and energy prices added to the economic
problems. Real (inflation-adjusted) gross domestic product slowed to 2.2% in the
third quarter of 2000 and to 1% the following quarter. As the bond market sensed
this deceleration, bond prices rallied, yields drifted lower, and fixed-income
investors enjoyed profitable third and fourth quarters. The yield on the 30-year
Treasury bond declined to 5.44% at year-end from 6.14% in May.
<PAGE>
The Fed, which had kept its hands off the policy lever during the second
half of the election year, surprised the markets with a 50 basis points rate cut
(100 basis points equal one percent) on January 3, 2001. It subsequently lowered
rates in four more half-point increments from January to May. Bottom line: In
less than two years, the central bank raised rates 175 basis points (six hikes
in 12 months), then lowered rates 250 basis points.
The following table was depicted as a line graph in the printed material.
6-Month Return 12-Month Return
-------------- ---------------
Treasury 3.36 11.09
Mortgage 5.18 13.38
AAA 5.84 14.15
BBB 8.08 15.21
BBB/BB 12.53 20.22
Most bond market sectors made the most of the recent rally and achieved
impressive results in 2001. However, the most noteworthy turnaround occurred in
corporate bonds. Last year, stock buybacks, the threat of bankruptcy, and
increasingly leveraged balance sheets contributed to push corporate bond yields
up, well above Treasury yields. This "yield spread" stood at recession-like
levels. Despite heavy net issuance so far during 2001, the corporate bond market
has been the best performing investment-grade fixed-income sector. Lower-quality
bonds have performed even better. Foreign buyers seeking conservative
dollar-based investments have also added to renewed interest in U.S. corporate
bonds.
Mortgages, asset-backed securities, and agency bonds also delivered strong
returns. A wave of homeowner refinancing earlier in the year, triggered by a dip
in 30-year mortgage rates, did not dampen the outstanding performance achieved
in mortgages over the last 12 months. Government-sponsored enterprises, such as
Fannie Mae, survived several scares, mainly from regulatory sources. These
agency issuers emerged relatively unscathed, and their debt continues to perform
well. Commercial mortgage-backed securities also generated above-average yields
and performed extremely well as they gained broader market acceptance during the
past year.
<PAGE>
PERFORMANCE REVIEW
PERFORMANCE COMPARISON
Periods Ended 5/31/01 6 Months 12 Months
------------------------------------------------------------------
New Income Fund 5.16% 12.54%
Lehman Brothers U.S.
Aggregate Index 5.14 13.12
Lipper Average of Corporate
Bond Funds A-Rated 5.02 12.09
New Income generated a strong 5.16% six-month gain ($0.17 of per share
appreciation and $0.26 of income), and an outstanding 12.54% 12-month total
return. The six-month gain was in line with the Lehman Brothers U.S. Aggregate
Index and modestly better than the Lipper average of A-rated corporate bond
funds. Your fund's 12-month total return was slightly better than the average
competing fund and a similar amount below the Lehman Brothers index. The banner
performance raises New Income's five-year average annual return to 6.54% and its
10-year average gain to 6.95%.
STRATEGY
The following table was depicted as a pie chart in the printed material.
Corporate Bonds and Convertibles 43
Mortgage-Backed Securities 25
U.S. Treasuries 17
Asset-Backed Securities 9
U.S. Agency Obligations 4
Cash and Other 2
Our investment strategy focuses on fundamental analysis of companies,
sectors, and security structures in which we invest. We analyze government,
mortgage, asset-backed, and corporate bonds, and the credit market trends in the
U.S. and selected foreign markets in search of investment-grade (BBB rated and
higher) securities that offer high yield and sta-ble or improving credit
quality. The themes discussed in the Market Environment section guided our
investment decisions over the last six months.
The most pivotal shift in the period was raising our allocation to
corporate bonds from 35% to 43%. Much of the shift occurred in the last six
months when it became clear that the Fed's actions would aggressively ease
borrowing costs. Our credit analysts were also impressed that many companies
were planning to improve their balance sheets by reducing debt. Our major source
of funding for new corporate bond purchases was from sales of mortgage-backed
securities. While we remain constructive on the mortgage market, we reduced our
position in the sector to 25% of assets from 34% six months ago. Reducing our
mortgage exposure improved the fund's cash flow stability and did not materially
affect its overall credit rating, which remains AA.
<PAGE>
Our strategic focus remained on sector and security selection, rather than
the overall direction of interest rates. However, we elected to extend the
portfolio's duration (sensitivity to interest rate changes) relative to its
benchmark last year. While the decision proved beneficial in 2000 and the first
quarter of 2001, it has hurt performance recently. Nonetheless, we believe it is
the right posture to maintain going forward.
Recognizing that higher energy prices would keep the headline consumer
price index (CPI) somewhat elevated, we supplemented the portfolio with Treasury
Inflation Protected Securities (TIPS). These securities capture the benefit of
higher inflation, as measured by the CPI, and provide an attractive real rate of
return. TIPS performed extremely well during the last 6- and 12-month periods
and at the end of May represented 2% of the portfolio. Our small allocation to
nondollar bonds (those denominated in a foreign currency) provided mixed
results. We initiated several positions because of the attractive relative
valuations of the euro and Canadian dollar. While both currencies added value
during the fourth quarter last year, a stronger U.S. dollar in 2001 caused these
positions to underperform domestic issues.
OUTLOOK
It is too early to be sure, but recent efforts by the Federal Reserve
appear to have slowed the economy's downward momentum. Residential construction
and home sales continue to hold up, auto sales are steady at relatively high
levels, and consumer confidence has rebounded from its lows. A tax cut this year
and the prospect of lower energy prices add to the view that the worst may be
behind us. The recent upturn in long-term rates suggests that the bond market
has embraced this economic optimism. Although short-term rates continued to
fall, longer-term interest rates touched their lowest point in this cycle near
the end of 2001's first quarter. The yield on the 10-year Treasury note and
30-year Treasury bond reached levels of 4.75% and 5.25%, respectively, near the
end of March.
<PAGE>
The reluctance of market participants to push longer-term Treasury yields
much below 5% may reflect a few other concerns. In spite of dramatic economic
weakness, inflation has remained above 3%. While it is unlikely that the U.S.
economy will experience a contraction, in all likelihood it will undergo the
functional equivalent of a recession. Economic data released in late May and
early June suggest that GDP will average less than 1% through this year's third
quarter. Additional concerns include rising unemployment, declining consumer
spending, and persistent weakness in business investment.
The Federal Reserve appears to be providing both timely and adequate
response to the aforementioned concerns, and the potential for further rate cuts
enhances the appeal of bonds on a total return basis. As a result, we will
continue to maintain a long duration in the portfolio. We still view corporate,
mortgage, and asset-backed securities as attractive investments because, even
though their rates have come down, they still offer a yield advantage over
Treasuries.
Adding to corporate bond holdings during a period of economic uncertainty
may be counterintuitive, but we believe the climate for this asset class will
remain positive as long as the Fed remains accommodative, corporations continue
to rebuild their balance sheets, and growth stays positive. We remain confident
in our investment strategy and in the ability of our analysts to identify and
recommend companies and investments with stable and improving prospects.
Respectfully submitted,
/s/
William T. Reynolds
President of the fund and chairman of its Investment Advisory Committee
June 18, 2001
The committee chairman has day-to-day responsibility for managing the
portfolio and works with committee members in developing and executing the
fund's investment program.
<PAGE>
T. ROWE PRICE NEW INCOME FUND
--------------------------------------------------------------------------------
PORTFOLIO HIGHLIGHTS
KEY STATISTICS 11/30/00 5/31/01
Price Per Share $ 8.36 $ 8.53
Dividends Per Share
For 6 months 0.27 0.26
For 12 months 0.53 0.53
30-Day Dividend Yield * 6.50% 5.94%
30-Day Standardized Yield to Maturity 6.82 5.90
Weighted Average Maturity (years) 9.3 8.2
Weighted Average Effective Duration (years) 5.0 5.0
Weighted Average Quality ** AA AA
* Dividends earned for the last 30 days of each period indicated are
annualized and divided by the fund's net asset value per share at the end
of the period.
** Based on T. Rowe Price research.
<PAGE>
T. ROWE PRICE NEW INCOME FUND
--------------------------------------------------------------------------------
PORTFOLIO HIGHLIGHTS
SECTOR DIVERSIFICATION
Percent of Percent of
Net Assets Net Assets
11/30/00 5/31/01
Mortgage-Backed Securities 34% 25%
U.S. Treasury Obligations 16 17
Asset-Backed Securities 6 9
Banking 5 5
Telephones 4 5
U.S. Agency Obligations 5 4
Investment Dealers 1 3
Electric Utilities 2 3
Energy 2 2
Entertainment and Leisure 1 2
Money Market Funds * 3 3
All Other 20 23
Other Assets Less Liabilities 1 -1
Total 100% 100%
* See note at end of the financial statements.
<PAGE>
T. ROWE PRICE NEW 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 benchmarks, which may include a
broad-based market index and a peer group average or index. Market indexes do
not include expenses, which are deducted from fund returns as well as mutual
fund averages and indexes.
AVERAGE ANNUAL COMPOUND TOTAL RETURN
This table shows how the fund would have performed each year if its actual
(or cumulative) returns for the periods shown had been earned at a constant
rate.
Periods Ended 5/31/01 1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
New Income Fund 12.54% 4.76% 6.54% 6.95%
Investment return and principal value represent past performance and will
vary. Shares may be worth more or less at redemption than at original purchase.
Returns do not reflect taxes that the shareholder may pay on fund distributions
or the redemption of fund shares.
<PAGE>
T. ROWE PRICE NEW INCOME FUND
--------------------------------------------------------------------------------
For a share outstanding throughout each period
FINANCIAL HIGHLIGHTS
Year
Ended
5/31/01 5/31/00 5/31/99 5/31/98 5/31/97
NET ASSET VALUE
Beginning of period $ 8.07 $ 8.50 $ 9.09 $ 8.77 $ 8.70
Investment activities
Net investment income (loss) 0.53 0.52 0.54 0.57 0.58
Net realized and
unrealized gain (loss) 0.46 (0.43) (0.45) 0.36 0.07
Total from
investment activities 0.99 0.09 0.09 0.93 0.65
Distributions
Net investment income (0.53) (0.52) (0.54) (0.57) (0.58)
Net realized gain - - (0.14) (0.04) -
Total distributions (0.53) (0.52) (0.68) (0.61) (0.58)
NET ASSET VALUE
End of period $ 8.53 $ 8.07 $ 8.50 $ 9.09 $ 8.77
RATIOS/SUPPLEMENTAL DATA
Total returnu 12.54% 1.13% 1.02% 10.84% 7.70%
Ratio of total expenses to
average net assets 0.73% 0.73% 0.72% 0.71% 0.74%
Ratio of net investment
income (loss) to average
net assets 6.30% 6.32% 6.16% 6.31% 6.65%
Portfolio turnover rate 112.1% 83.6% 94.3% 147.3% 87.1%
Net assets, end of period
(in millions) $ 1,684 $ 1,633 $ 1,942 $ 2,076 $ 1,711
** Total return reflects the rate that an investor would have earned on an
investment in the fund during each period, assuming reinvestment of all
distributions.
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. ROWE PRICE NEW INCOME FUND
--------------------------------------------------------------------------------
May 31, 2001
PORTFOLIO OF INVESTMENTS Par/Shares Value
In thousands
CORPORATE BONDS AND NOTES 40.3%
Aerospace & Defense 0.5%
Raytheon, Sr. Notes, 6.15%, 11/1/08 $ 8,600 $ 8,095
8,095
Automotive 0.6%
Ford Motor, Sr. Notes, 7.375%, 10/28/09 10,000 10,233
10,233
Banking 5.5%
Banco Generale, Sr. Notes, (144a), 7.70%, 8/1/02 + 10,000 10,018
Banco Santiago, Sr. Sub. Notes, 7.00%, 7/18/07 10,800 10,291
Bank of America, Sr. Sub. Notes, 7.40%, 1/15/11ss. 11,350 11,773
BankUnited, MTN, Sr. Sub. Notes, 8.00%, 3/15/09 5,000 5,240
Capital One Financial, Sr. Notes, 8.25%, 6/15/05 10,000 10,366
Citigroup
Sr. Notes, 6.75%, 12/1/05ss. 17,000 17,573
Sr. Sub. Notes, 7.25%, 10/1/10ss. 10,000 10,416
First Union, MTN, Sr. Sub. Notes, 7.55%, 8/18/05ss. 7,500 7,941
MBNA, Sr. Sub. Notes, 7.75%, 9/15/05ss. 8,500 8,754
92,372
Beverages 0.3%
Panamerican Beverages, Sr. Notes, 7.25%, 7/1/09 5,550 5,010
5,010
Broadcasting 0.5%
Hearst-Argyle Television, Sr. Notes, 7.50%, 11/15/27 10,000 9,043
9,043
Cable Operators 0.6%
Comcast, Sr. Notes, 6.75%, 1/30/11 10,500 10,322
10,322
Conglomerates 0.4%
Hutchison Whampoa, Sr. Notes, (144a), 7.00%, 2/16/11 + 6,465 6,436
6,436
Electric Utilities 2.8%
AEP Resources, Sr. Notes, (144a), 6.50%, 12/1/03 + 15,000 15,271
DTE Energy, Sr. Notes, 6.45%, 6/1/06 10,500 10,497
Korea Electric Power, Sr. Notes, 7.00%, 10/1/02ss. 5,500 5,566
PSEG Power, Sr. Notes, (144a), 6.875%, 4/15/06 + 4,550 4,548
Sempra Energy, Sr. Notes, 6.95%, 12/1/05 3,800 3,766
South Carolina Electric & Gas, 1st Mtg. Bonds
6.125%, 3/1/09 8,000 7,631
47,279
<PAGE>
Electronic Components 0.4%
Arrow Electronics, Sr. Notes, 8.20%, 10/1/03 $ 6,200 $ 6,297
6,297
Energy 1.9%
PDVSA Finance
Sr. Notes
6.80%, 11/15/08ss. 8,000 7,055
9.75%, 2/15/10ss. 7,750 7,920
YPF Sociedad Anonima, Sr. Notes
7.25%, 3/15/03ss. 10,000 9,959
10.00%, 11/2/28 6,720 7,027
31,961
Entertainment and Leisure 1.5%
International Speedway, Sr. Notes, 7.875%, 10/15/04 10,000 10,152
Royal Caribbean Cruises, Sr. Notes, 8.75%, 2/2/11 4,740 4,610
Viacom, Sr. Notes, 7.875%, 7/30/30ss. 10,000 10,617
25,379
Finance and Credit 1.4%
CIT Group, Sr. Notes, 5.50%, 2/15/04 6,000 5,945
General Electric Capital, MTN, 7.375%, 1/19/10 10,000 10,711
PHH, Sr. Notes, 8.125%, 2/3/03 7,000 7,135
23,791
Food Processing 0.4%
McCormick, Sr. Notes, 6.40%, 2/1/06 7,300 7,315
7,315
Foreign Government and Municipalities 2.8%
Banco Latinoamericano, Sr. Notes, 6.55%, 4/15/03 7,900 7,918
Canada Government, 6.00%, 9/1/05 (CAD) 23,400 15,408
Federal Republic of Germany, Sr. Notes
6.00%, 2/16/06 (EUR) 20,275 18,027
Petroleos Mexicanos, Sr. Notes, 9.25%, 3/30/18ss. 5,000 5,042
46,395
Gas & Gas Transmission 0.4%
PG&E National Energy Group
Sr. Notes, (144a), 10.375%, 5/16/11 + 7,590 7,543
7,543
Insurance 1.2%
AIG Sunamerica Global Financing, Sr. Notes, (144a)
7.60%, 6/15/05 + 7,000 7,466
Jefferson Pilot Capital Trust,(144a),8.14%, 1/15/46+ 3,000 2,944
<PAGE>
Sun Life Canada U.S. Capital Trust, (144a)
8.526%, 5/29/49 + $ 7,000 $ 6,537
Trenwick Capital Trust I, 8.82%, 2/1/37 5,500 4,115
21,062
Investment Dealers 2.8%
Goldman Sachs Group, Sr. Notes, 6.875%, 1/15/11ss. 15,000 14,939
Lehman Brothers, Sr. Notes, 7.875%, 8/15/10ss. 12,000 12,616
Morgan Stanley Dean Witter
Sr. Notes
6.10%, 4/15/06 10,000 9,993
6.75%, 4/15/11 10,000 9,934
47,482
Long Distance 1.0%
AT&T
Sr. Notes
6.00%, 3/15/09 8,000 7,488
6.50%, 3/15/29 4,000 3,433
Sprint, Sr. Notes, 6.125%, 11/15/08 6,000 5,535
16,456
Manufacturing 0.7%
Mallinckrodt Group, Sr. Notes, 6.75%, 9/15/05 5,000 5,094
Tyco International, Sr. Notes, 6.75%, 2/15/11 6,500 6,453
11,547
Media and Communications 0.5%
AOL Time Warner, Sr. Notes, 7.625%, 4/15/31 8,000 8,035
Metals 0.2%
Alcoa, Sr. Notes, 7.375%, 8/1/10ss. 3,320 3,513
3,513
Metals and Mining 0.5%
Phelps Dodge, Sr. Notes, 8.75%, 6/1/11ss. 8,000 8,062
8,062
Paper and Paper Products 1.1%
Celulosa Arauco Y Constitucion, Sr. Notes
8.625%, 8/15/10 7,500 7,628
Georgia-Pacific, Sr. Notes, 7.50%, 5/15/06ss. 4,710 4,751
International Paper, Sr. Notes, 8.00%, 7/8/03 5,350 5,600
17,979
Petroleum 1.2%
Union Texas Petroleum, Sr. Notes, 7.00%, 4/15/08 20,000 20,531
20,531
<PAGE>
Railroads 0.4%
Union Pacific, Sr. Notes, 6.65%, 1/15/11ss. $ 7,000 $ 6,896
6,896
Real Estate 0.7%
Simon Debartolo Group, Sr. Notes, 6.875%, 11/15/06 4,440 4,363
Simon Property Group, Sr. Notes, (144a)
7.375%, 1/20/06 + 7,190 7,211
11,574
Retail 1.0%
Federated Department Stores
Sr. Notes
6.625%, 4/1/11 4,000 3,864
7.00%, 2/15/28 5,075 4,658
Sears Roebuck Acceptance, Sr. Notes, 7.00%, 2/1/11 8,685 8,539
17,061
Savings and Loan 0.7%
Dime Bancorp, Sr. Notes, 7.00%, 7/25/01 5,750 5,754
Greenpoint Bank, Sr. Sub. Notes, 9.25%, 10/1/10 5,550 5,794
11,548
Service 0.5%
Waste Management, Sr. Notes, 7.70%, 10/1/02 8,579 8,777
8,777
Specialty Chemicals 0.3%
Union Carbide, Sr. Notes, 6.70%, 4/1/09 5,000 5,026
5,026
Supermarkets 0.8%
Delhaize America, Sr. Notes,(144a),8.125%,4/15/11ss.+ 13,750 14,241
14,241
Telephones 4.8%
Ameritech Capital Funding, Sr. Notes, 6.25%, 5/18/09 10,000 9,675
British Telecommunications, Sr. Notes, 8.125%,12/15/10 10,835 11,456
CenturyTel, Sr. Notes, 8.375%, 10/15/10 7,000 7,285
KPN, Sr. Notes, 8.00%, 10/1/10 8,500 8,281
Qwest Communications International Capital Funding
Sr. Notes, 7.90%, 8/15/10 11,580 12,077
U.S. West Capital Funding, Sr. Notes, 6.875%, 8/15/01 15,000 15,045
Verizon Communications Global Funding
Sr. Notes, (144a)
6.75%, 12/1/05 + 8,235 8,438
7.75%, 12/1/30 + 8,000 8,288
80,545
<PAGE>
Transportation Services 0.5%
Erac USA Finance, Sr. Notes, (144a), 8.00%, 1/15/11 + $ 8,145 $ 8,235
8,235
Wireline Communications 1.4%
Worldcom, Sr. Notes, 8.25%, 5/15/31 23,450 23,490
23,490
Total Corporate Bonds and Notes (Cost $676,936) 679,531
ASSET-BACKED SECURITIES 8.9%
Airlines 1.2%
Atlas Air, 7.63%, 1/2/15 9,506 9,222
Continental Airlines, 8.312%, 4/2/11 10,000 10,429
19,651
Auto-Backed 1.5%
DaimlerChrysler Auto Trust, 6.66%, 1/8/05 9,800 10,078
Nissan Auto Receivables, 5.75%, 6/15/06 10,097 10,213
Provident Auto Lease, 7.73%, 10/14/07 5,386 5,525
25,816
Credit Card-Backed 3.8%
Citibank Credit Card Issuance Trust
6.90%, 10/15/07ss. 15,900 16,558
7.45%, 9/15/07 11,075 11,453
MBNA Credit Card Trust, 5.75%, 10/15/08 16,950 16,908
MBNA Master Credit Card Trust II
4.923%, 12/15/06 5,250 5,221
(144a), 7.10%, 9/15/13 + 5,000 4,772
World Financial Network Credit Card Master Trust
6.981%, 7/15/06 8,500 8,505
63,417
Equipment Lease Heavy Duty 0.3%
Case Equipment Loan Trust, 5.77%, 8/15/05 6,000 6,056
6,056
Recreational Vehicles 1.5%
Chase Manhattan Owner Trust, 6.54%, 8/15/17 11,795 11,836
CIT RV Trust, 6.35%, 4/15/11 13,375 13,501
25,337
<PAGE>
Transportation (excluding Railroad) 0.6%
Federal Express, ETC, 8.25%, 1/15/19 $ 9,674 $ 9,792
9,792
Total Asset-Backed Securities (Cost $149,177) 150,069
EQUITY AND CONVERTIBLE SECURITIES 1.6%
Banking 0.0%
Silicon Valley Bancshares, Pfd., 8.25% + 30 683
683
Building and Real Estate 0.6%
Reckson Associates Realty, REIT, Cv. Pfd.
(Series A), 7.625% 429 9,619
9,619
Electronic Components 0.1%
Analog Devices, 4.75%, 10/1/05 2,000 1,826
1,826
Media and Communications 0.2%
Mediaone Group, Cv. Pfd., 7.00% 105 3,071
3,071
Paper and Paper Products 0.1%
International Paper, Cv. Pfd., 5.25%ss. 52 2,325
2,325
Railroads 0.2%
Union Pacific Capital Trust, Cv. Pfd., 6.25% 50 2,466
2,466
Telephones 0.2%
Liberty Media/Sprint PCS, 4.00%, 11/15/29 4,995 3,638
3,638
Telecom Equipment 0.2%
Corning, Zero Coupon, 11/8/15 5,806 3,412
3,412
Total Equity and Convertible Securities (Cost $27,351) 27,040
NON-U.S. GOVERNMENT MORTGAGE-BACKED SECURITIES 10.1%
Commercial Mortgage-Backed 3.5%
COMM 2000, CMO, 7.494%, 4/15/10 8,400 8,805
GE Capital Commercial Mortgage, CMO, 6.531%, 5/15/33 5,225 5,193
<PAGE>
JP Morgan Commercial Mortgage Finance, CMO
7.679%, 8/15/32 $ 8,500 $ 8,912
LB Commercial Conduit Mortgage Trust, CMO,
6.78%, 4/15/09 8,800 8,981
Prudential Securities Secured Financing, CMO
6.074%, 1/15/08 11,792 11,604
Salomon Brothers Mortgage Securities VII, CMO
7.455%, 4/18/10 8,125 8,316
7.52%, 12/18/09 7,464 7,902
59,713
Home Equity Loans-Backed 3.8%
Bankboston Home Equity Loan Trust, 6.35%, 2/25/13 7,125 7,127
Chase Funding Mortgage Loan, 6.59%, 5/25/28 5,053 4,980
GE Capital Mortgage Services, REMIC, 6.465%, 6/25/28 13,879 13,885
Mellon Residential Funding Corp., 5.945%, 2/25/11 17,750 17,750
Money Store Home Equity Trust
6.985%, 10/15/16 6,000 6,084
7.91%, 5/15/24 13,159 13,606
63,432
Whole Loans-Backed 2.8%
Countrywide Mortgage Backed Securities, CMO
6.75%, 11/25/23 5,361 5,293
GE Capital Mortgage Services, REMIC, 6.75%, 8/25/28 13,962 13,862
Norwest Asset Securities, CMO, 6.75%, 10/25/28 11,662 11,138
Residential Accredited Loans, CMO
6.75%, 7/25/28 7,500 7,566
7.25%, 11/25/27 10,226 9,990
47,849
Total Non-U.S. Government Mortgage-
Backed Securities (Cost $171,145) 170,994
U.S. GOVERNMENT MORTGAGE-BACKED SECURITIES 15.1%
U.S. Government Agency Obligations 5.9%
Federal Home Loan Mortgage
6.50%, 11/1/04 - 6/1/24 6,526 6,496
7.00%, 2/1/24 - 6/1/25 2,978 3,023
7.50%, 5/1 - 6/1/24 2,805 2,890
8.00%, 6/1/08 21 21
<PAGE>
10.50%, 7/1/11 - 8/1/20 $ 215 $ 230
11.00%, 1/1/16 - 7/1/20 149 162
CMO
5.50%, 10/15/20 791 795
6.35%, 3/15/31 9,864 9,918
6.50%, 7/15/11 - 3/15/23 34,162 34,134
7.00%, 11/15/22 7,606 7,782
Principal only, 8/1/28 6,524 4,796
Federal National Mortgage Assn.
6.00%, 4/1/14 - 1/1/29 5,053 4,962
8.75%, 3/1/10 4 4
CMO, 5.50%, 9/25/11 6,088 6,137
TBA, 6.50%, 4/1/29 17,400 17,133
98,483
U.S. Government Guaranteed Obligations 9.2%
Government National Mortgage Assn.
I
6.50%, 8/15/25 - 5/15/29 36,960 36,708
7.00%, 1/15/24 - 4/15/28 36,002 36,652
7.50%, 8/15/16 - 8/15/28 8,576 8,870
8.00%, 7/15/16 - 10/15/27 26,095 27,351
8.50%, 9/15/16 - 7/15/23 5,561 5,904
9.00%, 1/15/09 - 11/15/19 674 727
9.50%, 6/15/09 - 3/15/25 235 248
11.00%, 12/15/09 - 1/15/21 5,586 6,189
11.50%, 3/15/10 - 10/15/15 779 872
GPM, I, 10.25%, 4/15/16 - 11/15/20 841 906
II
7.00%, 12/20/23 - 11/20/28 6,324 6,400
8.50%, 9/20/26 25 27
9.00%, 6/20/16 - 2/20/18 415 444
CMO, Principal Only, 3/16/28 7,351 5,567
TBA, II
6.00%, 1/1/31 8,746 8,464
6.50%, 6/20/31 9,946 9,822
155,151
Total U.S. Government Mortgage-Backed
Securities (Cost $247,519) 253,634
<PAGE>
U.S. GOVERNMENT OBLIGATIONS/AGENCIES 21.8%
U.S. Government Agency Obligations 3.4%
Federal Home Loan Mortgage
6.875%, 1/15/05 $ 4,750 $ 5,001
7.00%, 3/15/10 4,350 4,621
Federal National Mortgage Assn.
5.50%, 2/15/06ss. 13,710 13,725
6.00%, 5/15/08ss. 7,500 7,567
7.125%, 1/15/30 10,500 11,232
Tennessee Valley Authority, Sr. Notes, 6.235%, 7/15/45 14,934 14,933
57,079
U.S. Treasury Obligations 18.4%
Federal Home Loan Mortgage
5.25%, 1/15/06 (EUR) 19,500 16,652
U.S. Treasury Bonds
5.50%, 8/15/28ss. 11,500 10,855
6.50%, 11/15/26ss. 41,300 44,296
7.50%, 11/15/16ss. 29,000 33,795
U.S. Treasury Inflation-Indexed Notes
3.375%, 1/15/07ss. 49,263 50,295
U.S. Treasury Notes
4.25%, 3/31/03 850 850
4.25%, 11/15/03ss. 51,800 51,568
5.75%, 11/15/05ss. 40,010 41,262
6.00%, 9/30/02ss. 30,175 30,951
6.50%, 8/15/05ss. 2,500 2,650
6.75%, 5/15/05ss. 25,000 26,671
309,845
Total U.S. Government
Obligations/Agencies (Cost $367,848) 366,924
Options Written (0.0)%
Eurodollar Future Put, 6/8/01 @ $0.885 175 (873)
Total Options (Cost $(223)) (873)
Money Market Funds 3.5%
T. Rowe Price Reserve Investment Fund, 4.61% # 58,624 58,624
Total Money Market Funds (Cost $58,624) 58,624
<PAGE>
Total Investments in Securities
101.3% of Net Assets (Cost $1,698,377) $1,705,943
Forward Currency Exchange Contracts
In thousands
Unrealized
Counterparty Settlement Receive Deliver Gain (Loss)
------------- ---------- ----------- ------------ -----------
Morgan Stanley 6/8/01 USD 15,562 CAD 24,000 $ 35
Net unrealized gain (loss) on open forward
currency exchange contracts 35
FUTURES CONTRACTS In thousands
----------------- ------------
Contract Unrealized
Expiration Value Gain (Loss)
---------- --------- -----------
Long, 35 U.S. Treasury Bond contracts,
$81,000 of U.S. Treasury Bonds pledged
as initial margin 6/01 $ 3,507 $ (16)
Long, 390 U.S. Treasury 5 year contracts
$315,000 of Federal Home Loan Mortgage
pledged as initial margin 6/01 40,572 (668)
Net payments (receipts) of variation
margin to date 930
Variation margin receivable
(payable) on open futures contracts 246
Other Assets Less Liabilities (21,929)
NET ASSETS $1,684,295
# Seven-day yield
+ Private Placement
CAD Canadian Dollar
CMO Collateralized Mortgage Obligation
ETC Equipment Trust Certficate
EUR Euro
GPM Graduated Payment Mortgage
MTN Medium Term Note
REIT Real Estate Investment Trust
REMIC Real Estate Mortgage Investment Conduit
TBA To be announced security was purchased on a forward commitment basis
USD U.S. Dollar
ss. All or a portion of this security is on loan at May 31, 2001 - See
Note 2.
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 period-end amounts
to 6.1% of net assets.
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. ROWE PRICE NEW INCOME FUND
--------------------------------------------------------------------------------
May 31, 2001
STATEMENT OF ASSETS AND LIABILITIES
In thousands
Assets
Investments in securities, at value (cost $1,698,377) $ 1,705,943
Securities lending collateral 341,966
Other assets 48,390
Total assets 2,096,299
Liabilities
Obligation to return securities lending collateral 341,966
Other liabilities 70,038
Total liabilities 412,004
NET ASSETS $ 1,684,295
Net Assets Consist of:
Accumulated net investment income - net of distributions $ 2,863
Accumulated net realized gain/loss - net of distributions (82,108)
Net unrealized gain (loss) 6,878
Paid-in-capital applicable to 197,524,284 shares of
$1.00 par value capital stock outstanding;
300,000,000 shares authorized 1,756,662
NET ASSETS $ 1,684,295
NET ASSET VALUE PER SHARE $ 8.53
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. ROWE PRICE NEW INCOME FUND
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS In thousands
Year
Ended
5/31/01
Investment Income (Loss)
Income
Interest $ 116,235
Dividend 1,654
Securities lending 746
Total Income 118,635
Expenses
Investment management 7,887
Shareholder servicing 4,018
Custody and accounting 236
Prospectus and shareholder reports 106
Registration 24
Legal and audit 17
Directors 14
Miscellaneous 9
Total expenses 12,311
Expenses paid indirectly (54)
Net expenses 12,257
Net investment income (loss) 106,378
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Securities 8,611
Futures (3,238)
Written options 223
Foreign currency transactions 703
Net realized gain (loss) 6,299
Change in net unrealized gain or loss
Securities 87,883
Futures (113)
Written options (650)
Other assets and liabilities
denominated in foreign currencies (3)
Change in net unrealized gain or loss 87,117
Net realized and unrealized gain (loss) 93,416
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 199,794
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. ROWE PRICE NEW INCOME FUND
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS In thousands
Year
Ended
5/31/01 5/31/00
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ 106,378 $ 113,673
Net realized gain (loss) 6,299 (71,654)
Change in net unrealized gain or loss 87,117 (23,998)
Increase (decrease) in net assets from operations 199,794 18,021
Distributions to shareholders
Net investment income (106,306) (113,579)
Capital share transactions *
Shares sold 240,495 192,491
Distributions reinvested 99,203 105,794
Shares redeemed (381,670) (511,721)
Increase (decrease) in net assets from capital
share transactions (41,972) (213,436)
Net Assets
Increase (decrease) during period 51,516 (308,994)
Beginning of period 1,632,779 1,941,773
End of period $1,684,295 $1,632,779
*Share information
Shares sold 28,496 23,373
Distributions reinvested 11,807 12,863
Shares redeemed (45,218) (62,339)
Increase (decrease) in shares outstanding (4,915) (26,103)
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. ROWE PRICE NEW INCOME FUND
--------------------------------------------------------------------------------
May 31, 2001
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price New 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 12, 1973. The fund seeks the highest
level of income consistent with the preservation of capital over time by
investing primarily in marketable debt securities.
The accompanying financial statements were prepared in accordance with
generally accepted accounting principles, which require the use of estimates
made by fund management.
Valuation Debt securities are generally traded in the over-the-counter
market. Investments in domestic securities and foreign securities 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.
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. A
security that is listed or traded on more than one exchange is valued at the
quotation on the exchange determined to be the primary market for such security.
Listed securities not traded on a particular day and securities regularly traded
in the over-the-counter market are valued at the mean of the latest bid and
asked prices. Other equity securities are valued at a price within the limits of
the latest bid and asked prices deemed by the Board of Directors, or by persons
delegated by the Board, best to reflect fair value.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation. In the absence of a last sale
price, written options are valued at the mean of the latest bid and asked
prices. Financial futures contracts are valued at closing settlement 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.
Currency Translation Assets and liabilities denominated in foreign
currencies are translated into U.S. dollar values each day at the prevailing
exchange rate, using the mean of the bid and offer prices of such currencies
against U.S. dollars quoted by a major bank. Purchases and sales of securities
and income and expenses are translated into U.S. dollars at the prevailing
exchange rate on the dates of such transactions. The effect of changes in
foreign exchange rates on realized and unrealized security gains and losses is
reflected as a component of such gains and losses.
<PAGE>
Premiums and Discounts Premiums and discounts on debt securities, other
than mortgage-backed securities (MBS), are amortized for both financial
reporting and tax purposes. Premiums and discounts on all MBS are recognized
upon disposition or principal repayment as gain or loss for financial reporting
purposes. For tax purposes, premiums and discounts on MBS acquired on or before
June 8, 1997, are recognized upon disposition or principal repayment as ordinary
income. For MBS acquired after June 8, 1997, premiums are recognized as gain or
loss; discounts are recognized as gain or loss, except to the extent of accrued
market discount.
In November, 2000, the American Institute of Certified Public Accountants
issued a revised Audit and Accounting Guide - Audits of Investment Companies
(the guide), which will be adopted by the fund as of June 1, 2001. The guide
requires all premiums and discounts on debt securities to be amortized and
gain/loss on paydowns of MBS to be accounted for as interest income. Upon
adoption, the fund will adjust the cost of its MBS, and corresponding unrealized
gain/loss thereon, in the amount of the cumulative amortization that would have
been recognized had amortization been in effect from the purchase date of each
holding. This adjustment will have no effect on the fund's net assets or results
of operations.
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 net investment income and realized gains
determined in accordance with generally accepted accounting principles. Expenses
paid indirectly reflect credits earned on daily uninvested cash balances at the
custodian and are used to reduce the fund's custody charges. Payments
("variation margin") made or received by the fund to settle the daily
fluctuations in the value of futures contracts are recorded as unrealized gains
or losses until the contracts are closed. Unrealized gains and losses on futures
and forward currency exchange contracts are included in Other assets and Other
liabilities, respectively, and in Change in net unrealized gain or loss in the
accompanying financial statements.
<PAGE>
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.
Forward Currency Exchange Contracts During the year ended May 31, 2001, the
fund was a party to forward currency exchange contracts under which it is
obligated to exchange currencies at specified future dates and exchange rates.
Risks arise from the possible inability of counterparties to meet the terms of
their agreements and from movements in currency values.
Futures Contracts During the year ended May 31, 2001, the fund was a party
to futures contracts, which provide for the future sale by one party and
purchase by another of a specified amount of a specific financial instrument at
an agreed upon price, date, time, and place. Risks arise from possible
illiquidity of the futures market and from movements in security values and
interest rates.
Options Call and put options on futures contracts give the holder the right
to purchase or sell, respectively, a particular futures contract at a specified
price until a certain date. Risks arise from possible illiquidity of the options
market and from movements in underlying futures prices. Options are reflected in
the accompanying Statement of Net Assets at market value. Transactions in
options written and related premiums received during the year ended May 31, 2001
were as follows:
Number of
Contracts Premiums
Outstanding at beginning of period - -
Written 175,000 $ 223,000
Exercised - -
Expired - -
Closed - -
------------------------------------------------------------------------------
Outstanding at end of period 175,000 $ 223,000
<PAGE>
Securities Lending The fund lends its securities to approved brokers to
earn additional income. It receives as collateral cash and U.S. government
securities valued at 102%-105% of the value of the securities on loan. Cash
collateral is invested in a money market pooled account by the fund's lending
agent. Collateral is maintained over the life of the loan in an amount not less
than the value of loaned securities, as determined at the close of fund business
each day; any additional collateral required due to changes in security values
is delivered to the fund the next business day. Although risk is mitigated by
the collateral, the fund could experience a delay in recovering its securities
and a possible loss of income or value if the borrower fails to return the
securities. At May 31, 2001, the value of loaned securities was $357,578,000;
aggregate collateral consisted of $363,331,000 in the securities lending
collateral pool.
Other Purchases and sales of portfolio securities, other than short-term
and U.S. government securities, aggregated $973,482,000 and $778,769,000,
respectively, for the year ended May 31, 2001. Purchases and sales of U.S.
government securities aggregated $855,916,000 and $1,077,933,000, respectively,
for the year ended May 31, 2001.
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of its
taxable income. As of May 31, 2001, the fund has $75,984,000 of capital loss
carryforwards, $1,953,000 of which expires in 2007, $36,493,000 in 2008, and
$37,538,000 in 2009. The fund intends to retain gains realized in future periods
that may be offset by available capital loss carryforwards.
At May 31, 2001, the cost of investments for federal income tax purposes
was substantially the same as for financial reporting and totaled
$1,698,377,000. Net unrealized gain aggregated $7,566,000 at period end, of
which $27,317,000 related to appreciated investments and $19,751,000 to
depreciated investments.
NOTE 4- RELATED PARTY TRANSACTIONS
The fund is managed by T. Rowe Price Associates, Inc. (the manager or Price
Associates), a wholly owned subsidiary of T. Rowe Price Group. The investment
management agreement between the fund and the manager provides for an annual
investment management fee, of which $680,000 was payable at May 31, 2001. The
fee is computed daily and paid monthly, and consists 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 Price
Associates (the group). The group fee rate ranges from 0.48% for the first $1
billion of assets to 0.295% for assets in excess of $120 billion. At May 31,
2001, and for the year then ended, the effective annual group fee rate was
0.32%. The fund pays a pro-rata share of the group fee based on the ratio of its
net assets to those of the group.
<PAGE>
In addition, the fund has entered into agreements with Price Associates and
two wholly owned subsidiaries of Price Associates, pursuant to which the fund
receives certain other services. Price Associates 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 $2,372,000 for the year ended
May 31, 2001, of which $211,000 was payable at period-end.
Additionally, the fund is one of several mutual funds sponsored by Price
Associates (underlying funds) in which the T. Rowe Price Spectrum Funds
(Spectrum) may invest. Spectrum does not invest in the underlying funds for the
purpose of exercising management or control. Expenses associated with the
operation of Spectrum are borne by each underlying fund to the extent of
estimated savings to it and in proportion to the average daily value of its
shares owned by Spectrum, pursuant to special servicing agreements between and
among Spectrum, the underlying funds, Price Associates, and, in the case of T.
Rowe Price Spectrum International, T. Rowe Price International. Spectrum Income
Fund held approximately 34% of the outstanding shares of the New Income Fund at
May 31, 2001. For the year then ended, the fund was allocated $1,431,000 of
Spectrum expenses, $167,000 of which was payable at period-end.
The fund may invest in the T. Rowe Price Reserve Investment Fund and the T.
Rowe Price Government Reserve Investment Fund (collectively, the Reserve Funds),
open-end management investment companies managed by Price Associates. The
Reserve Funds are offered as cash management options only to mutual funds and
other accounts sponsored by Price Associates, and are not available to the
public. The Reserve Funds pay no investment management fees. Distributions from
the Reserve Funds to the fund for the year ended May 31, 2001, totaled
$3,263,000 and are reflected as interest income in the accompanying Statement of
Operations.
<PAGE>
T. ROWE PRICE NEW INCOME FUND
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
T. Rowe Price New Income Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, 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 New Income Fund, Inc.
("the Fund") at May 31, 2001, and the results of its operations, the changes in
its net assets and the financial highlights for each of the fiscal periods
presented, in conformity with accounting principles generally accepted in the
United States of America. 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 audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States of America, 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
audits, which included confirmation of securities at May 31, 2001 by
correspondence with custodians and brokers, provide a reasonable basis for our
opinion.
PricewaterhouseCoopers LLP
Baltimore, Maryland
June 19, 2001
<PAGE>
T. ROWE PRICE NEW INCOME FUND
--------------------------------------------------------------------------------
TAX INFORMATION (UNAUDITED) FOR THE TAX YEAR ENDED 5/31/01
We are providing this information as required by the Internal Revenue Code.
The amounts shown may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements.
For corporate shareholders, $656,000 of the fund's distributed income and
short-term capital gains qualified for the dividends-received deduction.
<PAGE>
For fund and account information
or to conduct transactions,
24 hours, 7 days a week
By touch-tone telephone
Tele*Access 1-800-638-2587
By Account Access on the Internet
www.troweprice.com/access
For assistance with your existing
fund account, call:
Shareholder Service Center
1-800-225-5132
To open a brokerage account or
obtain information, call:
1-800-638-5660
For the hearing impaired,
call: 1-800-367-0763
Internet address:
www.troweprice.com
Plan Account Lines for retirement
plan participants:
The appropriate 800 number appears
on your retirement account statement.
T. Rowe Price Associates
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
appropriate to the fund or funds
covered in this report.
<PAGE>
Investor Centers:
For directions, call 1-800-225-5132
or visit our Web site at
www.troweprice.com/investorcenters
Baltimore Area
Downtown
105 East Lombard Street
Owings Mills
Three Financial Center
4515 Painters Mill Road
Boston Area
386 Washington Street
Wellesley
Chicago Area
1900 Spring Road, Suite 104
Oak Brook
Colorado Springs
2260 Briargate Parkway
Los Angeles Area
Warner Center
21800 Oxnard Street, Suite 270
Woodland Hills
New Jersey/New York Area
51 JFK Parkway, 1st Floor
Short Hills, New Jersey
San Francisco Area
1990 North California Boulevard, Suite 100
Walnut Creek
Tampa
4200 West Cypress Street
10th Floor
Washington, D.C. Area
Downtown
900 17th Street N.W.
Farragut Square
Tysons Corner
1600 Tysons Boulevard
Suite 150
Opening July 2001
T. Rowe Price Investment Services, Inc., Distributor. F43-050 5/31/01
</TEXT>
</DOCUMENT>