-----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==
<SEC-DOCUMENT>0000950109-96-000016.txt : 19960104
<SEC-HEADER>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
</SEC-HEADER>
<DOCUMENT>
<TYPE>N-30D
<SEQUENCE>1
<DESCRIPTION>NEW INCOME FUND
<TEXT>
<PAGE>
- --------------------------------------------------------------------------------
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.
<PAGE>
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
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Periods Ended 11/30/95
6 Months 12 Months
----------------------
<S> <C> <C>
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
- --------------------------------------------------------------------------------
</TABLE>
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
<PAGE>
- --------------------------------------------------------------------------------
Portfolio Highlights
T. Rowe Price New Income Fund / November 30, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Key Statistics
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Periods Ended
Dividend Yield* November 30, 1995
- --------------------------------------------------------------------------------
<S> <C>
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
- --------------------------------------------------------------------------------
</TABLE>
* 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
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Percent of Net Assets
TRPA Quality Rating* 5/31/95 11/30/95
- --------------------------------------------------------------------------------
<S> <C> <C>
1 71% 73%
2 9 7
3 12 13
4 7 7
Below 4 1 --
- --------------------------------------------------------------------------------
Weighted Average 1.6 1.6
- --------------------------------------------------------------------------------
</TABLE>
* On a scale of 1 to 10, with Grade 1 representing highest quality.
- --------------------------------------------------------------------------------
Average Annual Compound Total Return
- --------------------------------------------------------------------------------
Periods Ended November 30, 1995
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
------ ------- --------
<S> <C> <C>
17.57% 8.97% 9.04%
</TABLE>
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Percent of Net Assets
Range 5/31/95 11/30/95
- --------------------------------------------------------------------------------
<S> <C> <C>
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.
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Sector Diversification*
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Percent of Net Assets
5/31/95 11/30/95
- --------------------------------------------------------------------------------
<S> <C> <C>
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
- --------------------------------------------------------------------------------
</TABLE>
* Sectors representing at least 2% of net assets on 11/30/95.
3
<PAGE>
- --------------------------------------------------------------------------------
Statement of Net Assets
T. Rowe Price New Income Fund / November 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
(amounts in thousands)
<TABLE>
<CAPTION>
Amount Value
---------- ----------
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
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
</TABLE>
4
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amount Value
---------- ----------
<S> <C> <C>
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
</TABLE>
5
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amount Value
---------- ----------
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
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
</TABLE>
6
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amount Value
---------- ----------
<S> <C> <C>
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
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Value
----------
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES -- 99.4% OF NET ASSETS
(COST $1,551,074) $1,641,192
- ----------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES............................................................. 9,116
----------
<CAPTION>
Value
----------
<S> <C> <C>
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
=====
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
/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
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations
- --------------------------------------------------------------------------------
T. Rowe Price New Income Fund / Six Months Ended November 30, 1995 (Unaudited)
(in thousands)
<TABLE>
<S> <C>
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
=======
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
T. Rowe Price New Income Fund (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended Year Ended
November 30, 1995 May 31,1995
----------------- -----------
<S> <C> <C>
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
========== ==========
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
- --------------------------------------------------------------------------------
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
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
T. Rowe Price New Income Fund (Unaudited)
<TABLE>
<CAPTION>
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
---------- ------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
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
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized
++ The fund's fiscal year-end was changed to May 31.
* Beginning in fiscal 1995, includes expenses paid indirectly.
13
<PAGE>
================================================================================
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.
<PAGE>
================================================================================
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.
<PAGE>
- --------------------------------------------------------------------------------
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
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----