-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QBi9j9oFOIYNjkocMsrBVqvVI+Vh1VAIxXmP6azlWZ4OoLSjR+jjh9/etd1P/fDz hEZgX1iod1Q2t7LSiG/bYA== 0000950109-96-000016.txt : 19960104 0000950109-96-000016.hdr.sgml : 19960104 ACCESSION NUMBER: 0000950109-96-000016 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19951130 FILED AS OF DATE: 19960103 SROS: NONE 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: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-02396 FILM NUMBER: 96500402 BUSINESS ADDRESS: STREET 1: 100 EAST PRATT ST CITY: BALTIMORE STATE: MD ZIP: 21202 BUSINESS PHONE: 4105472000 FORMER COMPANY: FORMER CONFORMED NAME: PRICE T ROWE NEW INCOME FUND INC ET AL DATE OF NAME CHANGE: 19920703 N-30D 1 NEW INCOME FUND - -------------------------------------------------------------------------------- Fellow Shareholders - -------------------------------------------------------------------------------- The bond market rally that began about one year ago continued through the most recent six-month period ended November 30, 1995, resulting in handsome returns for your fund. This 12-month rally, one of the strongest on record, came right behind one of the sharpest market sell-offs in history in 1994. The rise in bond prices and decline in yields was underpinned by moderate economic growth, low inflation, and good prospects for meaningful budget reform. MARKET ENVIRONMENT Long rates as measured by 30-year Treasury bonds fell by almost 200 basis points over the 12 months from 8% to 6.2%, with about one-third of the drop occurring since May 31. The decline in money market rates was less significant. For example, one-year Treasury bills fell some 50 to 60 basis points in each of the past six-month periods. (A basis point is one-hundredth of one percent.) The two charts below show interest rate trends from two perspectives. The left-hand chart shows how yields on securities of various maturities declined over the past 12 months except for an uptick last August. Note - -------------------------------------------------------------------------------- Interest Rate Levels - -------------------------------------------------------------------------------- [GRAPH APPEARS HERE] A 4-line chart showing the 30-yr. Treasury bond, 5-yr. Treasury note, 1-yr. Treasury bill, and fed funds rate from 11/30/94 to 11/20/95 that as of November 30, virtually all rates were below the federal funds rate, which was lowered to 5.75% in early July by the Federal Reserve. The right-hand yield curve chart shows the relationship among rates on the shortest maturities out to the longest on three different dates. As you can see, the steeper drop in long-term rates than short-term resulted in a marked flattening of the curve. Since May 31, the rates have dropped across the curve, but the shape of the curve changed little. Corporate securities were the top performing sector for both the most recent 6- and 12-month periods. Treasury securities outperformed mortgage-backed securities primarily because investors feared a significant upsurge in mortgage prepayments as interest rates fell. Although this failed to materialize, prepayment concerns dampened enthusiasm for securities such as GNMAs. (Because mortgages are paid off at par value, prepayments cause a loss to investors who may have purchased them at a price above par.) PERFORMANCE AND STRATEGY REVIEW For the six-month period ending November 30, your fund posted a solid total return of 5.94%, - -------------------------------------------------------------------------------- Treasury Yield Curves - -------------------------------------------------------------------------------- [GRAPH APPEARS HERE] A 3-line chart showing yields on 11/30/94, 5/31/95 and 11/30/95. which exceeded the Lehman Aggregate Bond Index and the average return of our Lipper peer group, shown below. The fund's strong 12-month return of 17.57% slightly lagged these benchmarks due in part to our allocations among mortgage securities, Treasuries, and corporates. - -------------------------------------------------------------------------------- Performance Comparison - --------------------------------------------------------------------------------
Periods Ended 11/30/95 6 Months 12 Months ---------------------- New Income Fund 5.94% 17.57% Lehman Aggregate Bond Index 5.60 17.64 Lipper Average of Corporate Bond Funds A-Rated 5.54 17.73 - --------------------------------------------------------------------------------
We had expected interest rates to decline over the past months and, accordingly, gradually lengthened the fund's duration and maturity. (Duration measures a fund's price sensitivity to interest rate changes. For example, the fund's 5.4-year duration on November 30 suggests that its price would rise or fall about 5% with each one percentage point fall or rise in rates.) The portfolio's weighted average maturity was extended from 10.1 to 10.6 years between May and November and the weighted average effective duration from 5.1 to 5.4 years. While this strategy helped the fund's performance, our underweighting in corporate securities on a duration-weighted basis restrained results versus our benchmarks, particularly over the 12-month period. Sector allocation did not change very much during the past six months, as shown in the chart. Despite a falling rate environment, we maintained a full market weighting in mortgage-backed securities since we believed, and continue to believe, that mortgage prepayments will be below market expectations, enabling these securities to perform well versus others with similar durations. - -------------------------------------------------------------------------------- Portfolio Diversification - -------------------------------------------------------------------------------- [TWO PIE CHARTS APPEAR HERE] Two pie charts showing percentage asset allocation among U.S. Gov't and agencies, mortgage-backed securities, corporate bonds, other for 5/31/95 and 11/30/95. OUTLOOK Your fund benefited from the optimistic tenor of the bond market in recent months--an optimism fueled by widespread expectations of federal deficit reduction. A consensus has emerged that if government spending is indeed curtailed, the Federal Reserve will loosen monetary policy to encourage the greater private-sector spending needed to maintain acceptable economic growth. (Indeed, the Fed did ease a notch after the close of this reporting period, citing lower than expected inflation.) However, if it becomes apparent that Washington is reverting to "business as usual," the Fed is unlikely to ease further, and interest rates could rise. Whether today's optimism in the credit markets is warranted will be a key issue in 1996. Your fund is positioned to do well if rates edge a bit lower as we anticipate, but we believe some caution is warranted until the direction of fiscal policy becomes more apparent. Respectfully submitted, /s/ Charles P. Smith Charles P. Smith President and Chairman of the Investment Advisory Committee December 15, 1995 2 - -------------------------------------------------------------------------------- Portfolio Highlights T. Rowe Price New Income Fund / November 30, 1995 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Key Statistics - --------------------------------------------------------------------------------
Periods Ended Dividend Yield* November 30, 1995 - -------------------------------------------------------------------------------- 6 Months 6.81% 12 Months 7.11 Dividend Per Share - ---------------------------------------- 6 Months $0.30 12 Months 0.61 Change in Price Per Share - ---------------------------------------- 6 Months (From $8.97 to $9.19) $0.22 12 Months (From $8.37 to $9.19) 0.82 - --------------------------------------------------------------------------------
* Dividends earned and reinvested for the periods indicated are annualized and divided by the average daily net asset values per share for the same period. - -------------------------------------------------------------------------------- Quality Diversification - --------------------------------------------------------------------------------
Percent of Net Assets TRPA Quality Rating* 5/31/95 11/30/95 - -------------------------------------------------------------------------------- 1 71% 73% 2 9 7 3 12 13 4 7 7 Below 4 1 -- - -------------------------------------------------------------------------------- Weighted Average 1.6 1.6 - --------------------------------------------------------------------------------
* On a scale of 1 to 10, with Grade 1 representing highest quality. - -------------------------------------------------------------------------------- Average Annual Compound Total Return - -------------------------------------------------------------------------------- Periods Ended November 30, 1995
1 Year 5 Years 10 Years ------ ------- -------- 17.57% 8.97% 9.04%
- -------------------------------------------------------------------------------- Note: For the above periods ended 9/30/95, the fund's returns were 13.82%, 9.11%, and 9.15%, respectively. Investment return and principal value represent past performance and will vary. Shares may be worth more or less at redemption than at original purchase. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Maturity Diversification - --------------------------------------------------------------------------------
Percent of Net Assets Range 5/31/95 11/30/95 - -------------------------------------------------------------------------------- Short-Term (0 to 1 Year) 6% 2% Short Intermediate-Term (1+ to 5 Years) 18 23 Long Intermediate-Term (5+ to 10 Years) 47 54 Long-Term (Over 10 Years) 29 21 - -------------------------------------------------------------------------------- Weighted Average Maturity 10.1 yrs. 10.6 yrs. - -------------------------------------------------------------------------------- Weighted Average Effective Duration 5.1 yrs. 5.4 yrs. - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- Sector Diversification* - --------------------------------------------------------------------------------
Percent of Net Assets 5/31/95 11/30/95 - -------------------------------------------------------------------------------- U.S. Governments, Agencies, and Agency-Backed 68% 72% Banking 6 7 Industrial 4 4 Electric Utilities 4 3 Telephone 2 2 U.S. Dollar-Denominated Foreign Securities 2 2 - --------------------------------------------------------------------------------
* Sectors representing at least 2% of net assets on 11/30/95. 3 - -------------------------------------------------------------------------------- Statement of Net Assets T. Rowe Price New Income Fund / November 30, 1995 (Unaudited) - -------------------------------------------------------------------------------- (amounts in thousands)
Amount Value ---------- ---------- - ---------------------------------------------------------------------------------------------------------------------------- Corporate Bonds and Notes -- 24.7% - ---------------------------------------------------------------------------------------------------------------------------- BANKING -- 7.1% Abbey National, MTN, 6.69%, 10/17/05...................................................... $ 5,000 $ 5,125 ABN AMRO Bank (Chicago), N.V., Sub. Notes, 7.25%, 5/31/05................................. 5,000 5,160 Banca Commerziale Italiana, Sr. Sub. Notes, 8.25%, 7/15/07................................ 3,970 4,325 Banco Central Hispano-Americano, C.I., Gtd. Notes, 7.50%, 6/15/05......................... 6,000 6,235 Banesto Delaware, Gtd. Notes, 8.25%, 7/28/02.............................................. 5,700 6,178 Bank of Scotland International, (144a), 8.80%, 1/27/04.................................... 10,000 11,362 Bankers Trust, 8.25%, 5/1/05.............................................................. 5,000 5,519 Chemical Banking, 7.125%, 3/1/05.......................................................... 5,000 5,214 Den Danske Bank, 7.25%, 6/15/05........................................................... 4,500 4,675 Fifth Third Bank, 6.75%, 7/15/05.......................................................... 4,000 4,105 First Chicago, MTN, 8.20%, 11/14/96....................................................... 5,000 5,116 First National Bank of Boston, 8.375%, 12/15/02........................................... 8,000 8,825 Mercantile Bankshares, Sr. Notes, 6.13%, 7/15/98 (Private Placement)...................... 5,000 5,019 NationsBank N.A., 6.75%, 8/15/00.......................................................... 10,000 10,297 Norwest, MTN, 6.375%, 9/15/02............................................................. 5,000 5,073 PNC Bank N.A., Sub. Notes, 7.875%, 4/15/05................................................ 12,000 13,081 Santander Financial Issuances, 6.80%, 7/15/05............................................. 2,000 2,021 Gtd. Sub. Notes, 7.875%, 4/15/05..................................................... 4,000 4,336 Union Planters, Sub. Notes, 6.75%, 11/1/05................................................ 5,000 5,021 116,687 BEVERAGES -- 0.2% Joseph E. Seagram & Sons, Notes, 7.00%, 4/15/08........................................... 3,000 3,077 ELECTRIC UTILITIES -- 3.2% Alabama Power, 1st Mtg. Bonds, 7.75%, 2/1/23.............................................. 3,650 3,856 Commonwealth Edison, 1st Mtg. Bonds, 9.375%, 2/15/00...................................... 5,000 5,580 Consumers Power, 1st Mtg. Bonds, 6.375%, 9/15/03.......................................... 5,000 4,870 Cooperative Utility Trust, Equip. Trust Cert., 10.70%, 9/15/17............................ 2,500 2,816 Georgia Power, 1st Mtg. Bonds, 7.625%, 3/1/23............................................. 5,750 6,011 7.95%, 2/1/23........................................................................ 3,300 3,492 Gulf States Utilities, 1st Mtg. Bonds, 5.375%, 2/1/97..................................... 4,000 3,873 Monongahela Power, 8.625%, 11/1/21........................................................ 4,720 5,038 Northern Indiana Public Service, MTN, 6.90%, 6/1/00....................................... 5,000 5,125 Pacificorp, MTN, 7.12%, 8/15/02........................................................... 3,900 4,064 Potomac Capital Investment, MTN, 6.19%, 4/28/97........................................... 5,000 4,999 Texas Utilities Electric, 1st Mtg. Bonds, 7.875%, 3/1/23.................................. 3,450 3,615 53,339 FINANCE AND CREDIT -- 1.7% Advanta, Notes, 5.125%, 11/15/96.......................................................... 10,000 9,921 GPA Leasing USA Sub I, Equip. Trust Cert., (144a), 9.125%, 12/2/96........................ 9,375 9,172 Lehman Brothers, 7.625%, 8/1/98........................................................... 8,000 8,239 27,332
4 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Amount Value ---------- ---------- INDUSTRIALS -- 3.6% Burlington, 7.25%, 9/15/05................................................................ $ 5,500 $ 5,650 Clorox, Notes, 8.80%, 7/15/01............................................................. 5,000 5,654 Ford Holdings, Gtd. Notes, 9.25%, 3/1/00.................................................. 5,000 5,575 Lockheed, 7.875%, 3/15/23................................................................. 5,000 5,296 Monsanto, Deb., 8.20%, 4/15/25............................................................ 11,500 12,544 Quantas Airways, Sr. Notes, (144a), 6.625%, 6/30/98....................................... 7,000 7,069 United Technologies, Deb., 8.875%, 11/15/19............................................... 4,340 5,299 Weyerhaeuser, Notes, 9.05%, 2/1/03........................................................ 10,600 12,152 59,239 INVESTMENT DEALERS -- 1.8% Bear Stearns, 7.625%, 4/15/00............................................................. 5,000 5,262 Morgan Stanley Group, 6.75%, 3/4/03....................................................... 5,000 5,068 PaineWebber Group, 8.875%, 3/15/05........................................................ 5,000 5,627 Salomon, MTN, 6.63%, 1/19/96.............................................................. 6,000 5,999 5.47%, 8/29/97....................................................................... 8,500 8,371 30,327 MISCELLANEOUS -- 1.6% Capital Cities/ABC, Notes, 8.75%, 8/15/21................................................. 7,900 9,636 Kaiser Foundation Health Plan, Notes, 9.00%, 11/1/01...................................... 10,325 11,794 Waste Management, Deb., 7.875%, 8/15/96................................................... 5,000 5,069 26,499 PETROLEUM -- 1.3% BP America, Gtd. Notes, 8.50%, 4/15/01.................................................... 5,000 5,573 Mobil, Deb., 7.625%, 2/23/33.............................................................. 9,250 9,802 Texaco Capital, Deb., 8.65%, 1/30/98...................................................... 6,000 6,352 21,727 RAILROADS -- 0.4% Consolidated Rail, Deb., 9.75%, 6/15/20................................................... 5,000 6,616 SAVINGS AND LOAN -- 1.4% CENFED Financial, Sr. Deb., (144a), 11.17%, 12/15/01...................................... 5,000 5,594 Great Western Financial, 6.125%, 6/15/98.................................................. 5,900 5,912 6.375%, 7/1/00....................................................................... 6,000 6,045 Washington Mutual, 7.25%, 8/15/05......................................................... 5,000 5,237 22,788 TELEPHONE -- 2.4% AT&T, 8.35%, 1/15/25...................................................................... 5,000 5,588 BellSouth Telecom, 7.875%, 8/1/32......................................................... 6,400 6,816 GTE, Deb., 9.375%, 12/1/00................................................................ 10,000 11,331 GTE Hawaiian Telephone, Deb., 7.00%, 2/1/06............................................... 5,000 5,161 Pacific Bell, 6.625%, 10/15/34............................................................ 11,200 10,512 39,408 - ---------------------------------------------------------------------------------------------------------------------------- TOTAL CORPORATE BONDS AND NOTES (COST $385,358) 407,039
5 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Amount Value ---------- ---------- - ---------------------------------------------------------------------------------------------------------------------------- U.S. Government Mortgage-Backed Securities -- 30.8% - ---------------------------------------------------------------------------------------------------------------------------- U.S. GOVERNMENT AGENCY OBLIGATIONS -- 2.8% Federal Home Loan Mortgage, 6.50%, 11/1/04 - 6/1/24....................................... $ 12,081 $ 11,836 7.00%, 2/1/24........................................................................ 4,906 4,910 7.50%, 3/1 - 6/1/24.................................................................. 10,399 10,587 8.00%, 6/1/08........................................................................ 156 161 9.00%, 3/1/21 - 5/1/22............................................................... 8,754 9,176 9.75%, 12/1/17....................................................................... 3,077 3,290 10.50%, 2/1/01 - 8/1/20.............................................................. 1,490 1,624 11.00%, 5/1/11 - 7/1/20.............................................................. 709 786 11.50%, 6/1/01....................................................................... 15 16 Federal National Mortgage Assn., 8.75%, 3/1/10............................................ 20 20 10.50%, 7/1/09 - 4/1/22.............................................................. 3,247 3,581 45,987 U.S. GOVERNMENT GUARANTEED OBLIGATIONS -- 28.0% Government National Mortgage Assn., I, 6.00%, 12/15/23 - 4/15/24.......................... 3,579 3,435 6.50%, 9/15/23 - 10/15/25............................................................ 13,011 12,782 7.00%, 4/15/22 - 10/15/25............................................................ 52,289 52,482 7.50%, 8/15/16 - 7/15/25............................................................. 75,947 77,783 8.00%, 7/15/16 - 9/15/25............................................................. 61,982 64,727 8.50%, 9/15/16 - 8/15/25............................................................. 58,018 60,806 9.00%, 1/15/09 - 4/15/25............................................................. 35,446 37,619 9.50%, 6/15/09 - 3/15/25............................................................. 91,739 99,126 11.00%, 12/15/09 -1/15/21............................................................ 27,248 30,679 11.50%, 3/15/10 -10/15/15............................................................ 3,627 4,134 II, 7.00%, 12/20/23.................................................................. 1,582 1,578 9.00%, 6/20/16 - 5/20/22............................................................. 10,668 11,174 GPM, I, 10.25%, 2/15/16 - 11/15/20................................................... 5,591 6,138 462,463 - ---------------------------------------------------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT MORTGAGE-BACKED SECURITIES (COST $498,213) 508,450 - ---------------------------------------------------------------------------------------------------------------------------- U.S. Government Obligations -- 40.7% - ---------------------------------------------------------------------------------------------------------------------------- U.S. Treasury Bonds, 6.25%, 8/15/23....................................................... 29,145 29,154 6.875%, 8/15/25...................................................................... 33,000 36,300 7.50%, 11/15/24...................................................................... 4,100 4,794 7.625%, 2/15/25...................................................................... 1,000 1,189 7.875%, 2/15/21...................................................................... 35,000 42,055 8.00%, 11/15/21...................................................................... 42,160 51,468 8.125%, 5/15/21...................................................................... 32,140 39,658 U.S. Treasury Notes, 5.75%, 9/30/97....................................................... 10,000 10,063 5.875%, 2/15/04...................................................................... 125 126 5.875%, 11/15/05..................................................................... 16,300 16,443 6.125%, 9/30/00...................................................................... 10,000 10,234 6.375%, 8/15/02...................................................................... 5,000 5,196
6 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Amount Value ---------- ---------- U.S. Treasury Notes, 6.50%, 8/15/97....................................................... $ 2,700 $ 2,749 6.50%, 5/15/05....................................................................... 69,700 73,326 6.50%, 8/15/05....................................................................... 26,000 27,361 6.875%, 8/31/99...................................................................... 13,180 13,779 7.125%, 9/30/99...................................................................... 6,375 6,725 7.25%, 5/15/04....................................................................... 109,225 119,892 7.25%, 8/15/04....................................................................... 14,300 15,716 7.50%, 11/15/01...................................................................... 30,000 32,822 7.50%, 5/15/02....................................................................... 6,000 6,596 7.50%, 2/15/05....................................................................... 11,750 13,160 7.75%, 11/30/99...................................................................... 76,250 82,231 7.875%, 11/15/04..................................................................... 27,215 31,127 - ---------------------------------------------------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT OBLIGATIONS (COST $612,804) 672,164 - ---------------------------------------------------------------------------------------------------------------------------- Asset-Backed Securities -- 0.9% - ---------------------------------------------------------------------------------------------------------------------------- AUTO-BACKED -- 0.9% Daimler-Benz Auto Grantor Trust, 3.90%, 10/15/98.......................................... 2,245 2,219 Ford Credit Grantor Trust, 4.30%, 7/15/98................................................. 2,035 2,012 GMAC Grantor Trust, 4.15%, 3/15/98........................................................ 1,101 1,093 Olympic Automobile Receivable, 4.95%, 10/15/99............................................ 1,573 1,537 Premier Auto Trust, 4.22%, 3/2/99......................................................... 4,573 4,498 Toyota Auto Receivables, 3.90%, 8/17/98................................................... 1,984 1,960 Zions Auto Trust, 4.65%, 6/15/99.......................................................... 1,142 1,136 14,455 HOME EQUITY LOAN-BACKED -- 0.0% Home Equity Loan, REMIC, 5.65%, 11/15/14.................................................. 817 798 - ---------------------------------------------------------------------------------------------------------------------------- TOTAL ASSET-BACKED SECURITIES (COST $15,453) 15,253 - ---------------------------------------------------------------------------------------------------------------------------- U.S. $ Denominated Foreign Securities/1/ -- 2.1% - ---------------------------------------------------------------------------------------------------------------------------- British Columbia Hydro & Power, Notes, 15.50%, 11/15/11................................... 14,150 16,284 Inter-American Development Bank, Notes, 9.50%, 10/15/97................................... 2,600 2,773 Province of Ontario, Deb., 15.75%, 3/15/12................................................ 9,000 10,552 17.00%, 11/5/11...................................................................... 5,000 5,800 - ---------------------------------------------------------------------------------------------------------------------------- TOTAL U.S. $ DENOMINATED FOREIGN SECURITIES (COST $36,369) 35,409 - ---------------------------------------------------------------------------------------------------------------------------- Commercial Paper -- 0.2% - ---------------------------------------------------------------------------------------------------------------------------- Investments in Commercial Paper through a joint account, 5.90-5.93%, 12/1/95 (Cost $2,877).................................................... 2,877 2,877
7
Value ---------- - ---------------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES -- 99.4% OF NET ASSETS (COST $1,551,074) $1,641,192 - ---------------------------------------------------------------------------------------------------------------------------- OTHER ASSETS LESS LIABILITIES............................................................. 9,116 ---------- Value ---------- NET ASSETS CONSIST OF: Accumulated net investment income - net of distributions.................................. $ 2,679 Accumulated net realized gain/loss - net of distributions................................. (10,430) Net unrealized gain (loss)................................................................ 90,118 Paid-in-capital applicable to 179,554,080 shares of $1.00 par value capital stock outstanding; 300,000,000 shares authorized....................................... 1,567,941 ---------- NET ASSETS................................................................................ $1,650,308 ========== NET ASSET VALUE PER SHARE................................................................. $9.19 ===== - ----------------------------------------------------------------------------------------------------------------------------
/1/ Marketable securities (payable in U.S. dollars) issued or guaranteed by a foreign government or community. GPM Graduated Payment Mortgage MTN Medium Term Note REMIC Real Estate Mortgage Investment Conduit 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 2% of net assets. The accompanying notes are an integral part of these financial statements. 8 - -------------------------------------------------------------------------------- Statement of Operations - -------------------------------------------------------------------------------- T. Rowe Price New Income Fund / Six Months Ended November 30, 1995 (Unaudited) (in thousands) INVESTMENT INCOME Interest income................................................ $59,151 ------- Expenses Investment management........................................ 3,858 Shareholder servicing........................................ 1,837 Custody and accounting....................................... 221 Prospectus and shareholder reports........................... 55 Registration................................................. 21 Legal and audit.............................................. 14 Directors.................................................... 9 Miscellaneous................................................ 15 ------- Total expenses............................................... 6,030 Expenses paid indirectly..................................... (5) ------- Net expenses................................................. 6,025 ------- Net investment income.......................................... 53,126 ------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on securities......................... 2,445 Change in net unrealized gain or loss on securities............ 36,583 ------- Net realized and unrealized gain (loss)........................ 39,028 ------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS.............. $92,154 ======= - -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. 9 - -------------------------------------------------------------------------------- Statement of Changes in Net Assets - -------------------------------------------------------------------------------- T. Rowe Price New Income Fund (Unaudited) (in thousands)
Six Months Ended Year Ended November 30, 1995 May 31,1995 ----------------- ----------- INCREASE (DECREASE) IN NET ASSETS FROM Operations Net investment income........................................................... $ 53,126 $ 98,482 Net realized gain (loss)........................................................ 2,445 (11,115) Change in net unrealized gain or loss........................................... 36,583 68,296 ---------- ---------- Increase (decrease) in net assets from operations............................... 92,154 155,663 ---------- ---------- Distributions to shareholders Net investment income........................................................... (53,113) (95,838) Net realized gain............................................................... -- (2,632) ---------- ---------- Decrease in net assets from distributions to shareholders....................... (53,113) (98,470) ---------- ---------- Capital share transactions* Shares sold..................................................................... 166,103 355,522 Distributions reinvested........................................................ 39,419 85,120 Shares redeemed................................................................. (160,158) (306,988) ---------- ---------- Increase (decrease) in net assets from capital share transactions............... 45,364 133,654 ---------- ---------- Increase (decrease) in net assets................................................. 84,405 190,847 NET ASSETS Beginning of period............................................................... 1,565,903 1,375,056 ---------- ---------- End of period..................................................................... $1,650,308 $1,565,903 ========== ========== - --------------------------------------------------------------------------------------------------------------------------- *Share information Shares sold..................................................................... 18,380 41,628 Distributions reinvested........................................................ 4,366 9,921 Shares redeemed................................................................. (17,792) (35,940) ---------- ---------- Increase (decrease) in shares outstanding....................................... 4,954 15,609 ========== ========== - ---------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. 10 - -------------------------------------------------------------------------------- Notes to Financial Statements - -------------------------------------------------------------------------------- T. Rowe Price New Income Fund / November 30, 1995 (Unaudited) 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. A) Valuation - Debt securities are generally traded in the over-the-counter market. Investments in securities with remaining maturities of one year or more 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. Securities with remaining maturities of less than one year are stated at fair value, which is determined by using a matrix system that establishes a value for each security based on money market yields. 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. B) Premiums and Discounts - Premiums and discounts on debt securities, other than mortgage-backed securities, are amortized for both financial reporting and tax purposes. Premiums and discounts on mortgage-backed securities are recognized upon principal repayment as gain or loss for financial reporting purposes and as ordinary income for tax purposes. C) Other - Income and expenses are recorded on the accrual basis. Expenses paid indirectly are custody fees paid by float credits earned on daily residual cash balances at the custodian. Investment transactions are accounted for on the trade date. Realized gains and losses are reported on the identified cost basis. 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 those determined in accordance with generally accepted accounting principles. NOTE 2 - INVESTMENT TRANSACTIONS Consistent with its investment objective, the fund engages in the following practices to manage exposure to certain risks and 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. A) Commercial Paper Joint Account - The fund, and other affiliated funds, may transfer uninvested cash into a commercial paper joint account, the daily aggregate balance of which is invested in high-grade commercial paper. All securities purchased by the joint account satisfy the fund's criteria as to quality, yield, and liquidity. B) Securities Lending - To earn additional income, the fund lends its securities to approved brokers. At November 30, 1995, the market value of securities on loan was $364,919,000, which was fully collateralized with cash and U.S. Treasury securities. Although the 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 them. C) Other - Purchases and sales of portfolio securities, other than short-term and U.S. government securities, aggregated $100,622,000 and $115,556,000, respectively, for the six months ended November 30, 1995. Purchases and sales of U.S. government securities aggregated $223,443,000 and $125,448,000, respectively, for the six months ended November 30, 1995. 11 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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. The fund has an unused realized capital loss carryforward for federal income tax purposes of $1,115,000, which expires in 2003. The fund intends to retain gains realized in future periods that may be offset by available capital loss carryforwards. At November 30, 1995, the aggregate cost of investments for federal income tax and financial reporting purposes was $1,551,074,000 and net unrealized gain aggregated $90,118,000, of which $96,060,000 related to appreciated investments and $5,942,000 to depreciated investments. NOTE 4 - RELATED PARTY TRANSACTIONS The investment management agreement between the fund and T. Rowe Price Associates, Inc. (the Manager) provides for an annual investment management fee, of which $654,000 was payable at November 30, 1995. 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 the Manager or Rowe Price-Fleming International, Inc. (the Group). The Group Fee rate ranges from 0.48% for the first $1 billion of assets to 0.31% for assets in excess of $34 billion. At November 30, 1995, and for the six months then ended, the effective annual Group Fee rate was 0.34%. The fund pays a pro rata share of the Group Fee based on the ratio of its net assets to those of the Group. In addition, the fund has entered into agreements with the Manager and two wholly owned subsidiaries of the Manager, pursuant to which the fund receives certain other services. The Manager computes the daily share price and maintains the financial records of the fund. T. Rowe Price Services, Inc. (TRPS), 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. Additionally, the fund is one of several T. Rowe Price mutual funds (the Underlying Funds) in which the T. Rowe Price Spectrum Income Fund (Spectrum) invests. In accordance with an Agreement among Spectrum, the Underlying Funds, the Manager, and TRPS, expenses from the operation of Spectrum are borne by the Underlying Funds based on each Underlying Fund's proportionate share of assets owned by Spectrum. The fund incurred expenses pursuant to these related party agreements totaling approximately $1,740,000 for the six months ended November 30, 1995, of which $349,000 was payable at period- end. 12 - -------------------------------------------------------------------------------- Financial Highlights - -------------------------------------------------------------------------------- T. Rowe Price New Income Fund (Unaudited)
For a share outstanding throughout each period ---------------------------------------------------------------------------------- Three Six Months Year Months Year Ended Ended Ended Ended -------------------------------------------- Nov. 30, May 31, May 31, Feb. 28, Feb. 28, Feb. 29, Feb. 28, 1995 1995 1994++ 1994 1993 1992 1991 ---------- ------- ------- -------- -------- -------- -------- NET ASSET VALUE, BEGINNING OF PERIOD....... $ 8.97 $ 8.65 $ 9.12 $ 9.24 $ 8.94 $ 8.60 $ 8.37 ------ ------ ------ ------ ------ ------ ------ Investment Activities Net investment income................... 0.30 0.58 0.14 0.54 0.57 0.67 0.70 Net realized and unrealized gain (loss).......................... 0.22 0.34 (0.40) (0.05) 0.30 0.36 0.24 ------ ------ ------ ------ ------ ------ ------ Total from investment activities........ 0.52 0.92 (0.26) 0.49 0.87 1.03 0.94 ------ ------ ------ ------ ------ ------ ------ Distributions Net investment income................... (0.30) (0.58) (0.14) (0.54) (0.57) (0.67) (0.70) Net realized gain....................... -- (0.02) (0.07) (0.07) -- (0.02) (0.01) ------ ------ ------ ------ ------ ------ ------ Total distributions..................... (0.30) (0.60) (0.21) (0.61) (0.57) (0.69) (0.71) ------ ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF PERIOD............. $ 9.19 $ 8.97 $ 8.65 $ 9.12 $ 9.24 $ 8.94 $ 8.60 ====== ====== ====== ====== ====== ====== ====== - --------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Total return............................... 5.94% 11.13% (2.84)% 5.36% 10.12% 12.40% 11.77% Ratio of expenses to average net assets.... 0.76%+* 0.78% 0.80%+ 0.82% 0.84% 0.87% 0.88% Ratio of net investment income to average net assets...................... 6.71%+ 6.95% 6.43%+ 5.77% 6.36% 7.64% 8.33% Portfolio turnover rate.................... 31.0%+ 54.1% 91.5%+ 58.3% 85.8% 49.7% 20.7% Net assets, end of period (in millions)........................... $1,650 $1,566 $1,375 $1,458 $1,527 $1,307 $1,131 - ---------------------------------------------------------------------------------------------------------------------------------
+ Annualized ++ The fund's fiscal year-end was changed to May 31. * Beginning in fiscal 1995, includes expenses paid indirectly. 13 ================================================================================ Shareholder Services ================================================================================ To help shareholders monitor their current investments and make decisions that accurately reflect their financial goals, T.Rowe Price offers a wide variety of information and services -- at no extra cost. KNOWLEDGEABLE SERVICE REPRESENTATIVES BY PHONE -- Shareholder service representatives are available from 8 a.m. to 10 p.m. Monday - Friday, and weekends from 8.30 a.m. to 5 p.m. E.T. Call 1-800-225-5132 to speak directly with a representative who will be able to assist you with your accounts. IN PERSON -- Visit one of our investor center locations to meet with a representative who will be able to assist you with your accounts. While there, you can drop off applications or obtain prospectuses and other literature. AUTOMATED 24-HOUR SERVICES Tele*Access(R) (1-800-638-2587) provides information such as account balance, date and amount of your last transaction, latest dividend payment, and fund prices and yields. Additionally, you have the ability to request prospectuses, statements, account and tax forms; reorder checks, and initiate purchase, redemption, and exchange orders for identically registered accounts. PC*Access(R) provides the same information as Tele*Access, but on a personal computer via dial-up modem. ACCOUNT SERVICES Checking -- Write checks for $500 or more on any money market and most bond fund accounts (except the High Yield Fund and Emerging Markets Bond Fund). Automatic Investing -- Build your account over time by investing directly from your bank account or paycheck with Automatic Asset Builder. Additionally, Automatic Exchange enables you to set up systematic investments from one fund account into another, such as from a money fund into a stock fund. A low, $50 minimum makes it easy to get started. Automatic Withdrawal -- If you need money from your fund account on a regular basis, you can establish scheduled, automatic redemptions. Dividend and Capital Gains Payment Options -- Reinvest all or some of your distributions, or take them in cash. We give you maximum flexibility and convenience. INVESTMENT INFORMATION Combined Statement -- A comprehensive overview of your T. Rowe Price accounts. The summary page gives your earnings by tax category provides total portfolio value, and lists your investments by type -- stock, bond, and money market. Detail pages itemize account transactions by fund. Shareholder Reports -- Portfolio managers review the performance of the funds in plain language and discuss T. Rowe Price's economic outlook. The T. Rowe Price Report -- A quarterly newsletter with relevant articles on market trends, personal financial planning and T. Rowe price's economic perspective. Performance Update -- A quarterly report reviewing recent market developments and providing comprehensive performance information for every T. Rowe Price fund. Insights -- A library of information that includes reports on mutual fund tax issues, investment strategies, and financial markets. Detailed Investment Guides -- Our widely acclaimed Asset Mix Worksheet, College Planning Kit, Retirees Financial Guide, Retirement Planning Kit (also available on disk for PC use), and Guide to Risk-Adjusted Performance can help you determine and reach your investment goals. DISCOUNT BROKERAGE You can trade stocks, bonds, options, precious metals, and other securities at a substantial savings over regular commission rates. Call a shareholder service representative for more information. ================================================================================ T. Rowe Price No-Load Mutual Funds ================================================================================ STABILITY Prime Reserve Summit Cash Reserves U.S. Treasury Money California Tax-Free Money New York Tax-Free Money Summit Municipal Money Market Tax-Exempt Money CONSERVATIVE INCOME Short-Term Bond Short-Term Global Income Short-Term U.S. Government Summit Limited-Term Bond U.S. Treasury Intermediate Florida Insured Intermediate Tax-Free Maryland Short-Term Tax-Free Bond Summit Municipal Intermediate Tax-Free Insured Intermediate Bond Tax-Free Short-Intermediate Virginia Short-Term Tax-Free Bond INCOME Global Government Bond GNMA New Income Spectrum Income Summit GNMA U.S. Treasury Long-Term California Tax-Free Bond Georgia Tax-Free Bond Maryland Tax-Free Bond New Jersey Tax-Free Bond New York Tax-Free Bond Summit Municipal Income Tax-Free Income Virginia Tax-Free Bond AGGRESSIVE INCOME Corporate Income Emerging Markets Bond High Yield International Bond Tax-Free High Yield CONSERVATIVE GROWTH Balanced Capital Appreciation Dividend Growth Equity Income Equity Index Growth & Income Spectrum Growth Value GROWTH Blue Chip Growth European Stock Global Stock Growth Stock International Stock Japan Mid-Cap Growth New Era OTC Small-Cap Value AGGRESSIVE GROWTH Capital Opportunity Health Sciences Emerging Markets Stock International Discovery Latin America New America Growth New Asia New Horizons Science & Technology PERSONAL STRATEGY FUNDS Personal Strategy Income Personal Strategy Balanced Personal Strategy Growth Call if you want to know about any T. Rowe Price fund. We'll send you a prospectus with more complete information, including management fees and other expenses. Read it carefully before you invest or send money. T. Rowe Price Investment Services, Inc. Distributor. - -------------------------------------------------------------------------------- SEMIANNUAL REPORT - -------------------------------------------------------------------------------- T.Rowe Price - ------------ NEW INCOME FUND NOVEMBER 30, 1995 FOR YIELD, PRICE, LAST TRANSACTION, AND CURRENT BALANCE, 24 HOURS, 7 DAYS A WEEK, CALL: 1-800-638-2587 toll free 625-7676 Baltimore area FOR ASSISTANCE WITH YOUR EXISTING FUND ACCOUNT, CALL: Shareholder Service Center 1-800-225-5132 toll free 625-6500 Baltimore area T. ROWE PRICE 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 of the T. Rowe Price New Income Fund(R). Invest With Confidence [LOGO APPEARS HERE] T. Rowe Price NIF -----END PRIVACY-ENHANCED MESSAGE-----