Semiannual Report
Financial
Services
Fund
June 30, 2000
T. Rowe Price
Report Highlights
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Financial Services Fund
o Financial stocks declined with the broad market during the spring
correction, but the fund managed to post an impressive gain for the first
half of 2000.
o Fund results far surpassed the S&P 500 and the peer group average during
the period due to our exposure to asset managers, trust banks, and other
strong financial groups.
o We continued to focus on maintaining core holdings with solid fundamentals
and reasonable stock valuations, and diversifying our holdings across the
various financial sectors.
o We remain optimistic about the prospects for our portfolio companies, which
usually perform best in the moderate-growth, low-inflation environment we
envision through the rest of the year.
UPDATES AVAILABLE
For updates on T. Rowe Price funds following the end of each calendar quarter,
please see our Web site at www.troweprice.com.
Fellow Shareholders
U.S. stocks weakened overall in the first half of the year as many indices,
particularly the Nasdaq Composite, suffered a reversal of some of the stellar
gains they reaped in late 1999 and early 2000. However, by the end of June, most
of the broader indices recovered somewhat from their earlier lows. Financial
stocks in general reflected the downturn in equities, although your fund posted
an impressive gain in this challenging environment.
Performance Comparison
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Periods Ended 6/30/00 6 Months 12 Months
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Financial Services Fund 7.13% 0.09%
S&P 500 -0.43 7.24
Lipper Financial Services
Funds Average -1.93 -10.14
Many financial stocks continued to decline during the past six months,
particularly those of banking, some life insurance, and Internet finance
companies. Despite the selling, however, good performance from various financial
subsectors, including trust banks and asset managers, helped your fund post
solid first-half results compared with its peer group and the unmanaged Standard
& Poor's 500 Stock Index. While we still trailed the S&P 500 over the 12-month
period, the gap narrowed by more than 50% since our last report, and your fund's
return was significantly ahead of the Lipper average.
MARKET ENVIRONMENT
In previous reports, we highlighted a few of the issues facing the financial
services industry. While the picture has improved in some areas, challenges
remain in others. Perhaps the most positive event of the past few months was the
modestly favorable pricing trend in some commercial insurance sectors-the first
price increases in well over a decade. While the industry has seen many false
starts over the years, this year may be different because of the extreme losses
that depleted the reserves of many companies. By the end of the year we should
have a better sense of whether these pricing trends will be sustainable over the
next few years.
We remain concerned about rising interest rates that continue to pressure net
interest margins at some banks, causing revenue growth to slow. While some of
this slowdown should be only temporary, it will take time for the process to
reverse itself. Moreover, there is a secondary cost from higher rates.
Borrowers, particularly commercial customers, are having more difficulty
repaying their obligations. Consequently, rising credit costs are also likely to
slow bank earnings as some companies will have to add to their reserves at a
faster pace than in 1999. Fortunately, for some more diversified banks, strong
fee growth should offset these negative trends.
While the Internet is still a threat for many banks and brokerage companies, the
reduction in capital being thrown indiscriminately at any newcomer, at least for
the time being, should bring relief to many of our companies' management teams.
Several Internet financial services companies had been causing intense pricing
pressure on certain commodity items. Traditional lenders are not yet declaring
victory over the Internet companies, but they now have more time to develop
their own strategies or acquire Internet companies cheaply. One final note, the
pace of consolidation among financial services companies continues to be light
in the aftermath of new legislation that was expected to accelerate it. While
there have been a few acquisitions this year in the insurance sector, the more
significant activity involved companies taken over by their supermajority
shareholders, such as Citigroup/ Travelers and Hartford Financial
Services/Hartford Life. Recently, however, there has been an unusually high
amount of activity in the asset management area, at near-record valuations in
many instances.
PORTFOLIO REVIEW
A major exception to generally poor performance among financial stocks was the
rebound in several multiline insurance companies and in certain property
casualty stocks-an area where your fund had exposure. In fact, two of the fund's
best contributors year-to-date were Hartford Financial Services Group and ACE
Limited. Meanwhile, brokerage stocks posted another relatively strong quarter.
However, volatility in that segment was exceptionally high as a consequence of
general stock market weakness. We used the weakness to add to brokerage
positions, while paring some holdings in the sector as valuations rebounded.
Citigroup was once again a top contributor to the fund, although its superior
performance this year was a bit more subdued.
Asset managers as a group did exceptionally well in the first half compared with
other financial shares. Three of our top 10 contributors to performance included
Waddell & Reed Financial, Federated Investors, and Kansas City Southern
Industries. They benefited from positive earnings momentum and several
acquisitions at full prices leading to a scarcity value premium on those that
remain. Our final group of strong performers came from several trust banks and
other companies that provide custodial and administrative support: U.S. Trust
(now owned by Charles Schwab), State Street, Bank of New York, and Investor's
Financial Services. While U.S. Trust's strong performance was due in part to its
acquisition by Schwab, the group in general outperformed other banks. Their
predominately fee-based business models appear to be holding up better than more
traditional banks that have much more interest rate and credit risk.
Sector Diversification
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Specialty Financial Svcs. 39
Insurance 18
Bank and Trust 26
Railroad 4
Computer Service and Software 2
Electrical Equipment 2
Other 3
Reserves 6
Based on net assets as of 6/30/00.
Our major disappointments through June came from the insurance sector and were
relatively modest but, nonetheless, remind us how carefully we must select our
holdings. In all but one case (American General), the stock's poor performance
resulted from company-specific problems. UNUMProvident, which we eliminated
during the period, was our worst contributor as the company struggled to
integrate a major acquisition from last year. American General, a large life
insurance and consumer finance company, was also a disappointment, but the stock
recovered somewhat from its earlier lows along with other life insurance and
consumer finance companies. Another life insurer, Protective Life, experienced a
few bumps as problems resurfaced in the dental insurance business-an area
management thought it had fixed in 1999. We eliminated that position shortly
after first-quarter earnings were reported. Finally, we eliminated E.W. Branch,
a small insurance broker that reported lower-than-expected revenues and lost a
key employee to a competitor.
Other portfolio laggards were scattered. Bank of America, Freddie Mac, and
Fannie Mae modestly hurt fund returns, but we believe in the long-term prospects
of the companies. In the case of Bank of America, investors seem to be focusing
on the company's exposure to certain commercial credits and a declining net
interest margin. However, we think the valuation of the shares sufficiently
discounts much of this potentially negative news, and the company is an active
buyer of its stock. As for Fannie Mae and Freddie Mac, certain political risks
appear to be weighing on their stock prices, and current margins on new business
remain under pressure. Nevertheless, we think these stocks are attractively
priced given their growth characteristics, and we believe any changes to the
company's charters will likely be minimal and acceptable to both firms.
Furthermore, credit risks at these companies are low, a desirable characteristic
should we enter a more difficult operating environment.
STRATEGY
While the operating fundamentals in many financial services areas have become
more challenging, we believe your fund's holdings represent companies with the
management, brand recognition, and cost structure to capitalize on
opportunities. We continue to focus on those banks and companies with an
established position in capital markets, processing, trust, or asset management
businesses. For the most part, we avoid the smaller regional banks unless they
present a compelling opportunity based on a deep discount valuation or possess
trends like good management and brand recognition. In specialty finance we are
highly selective, investing only with managements we like and businesses we
understand and think have real value. Specifically, we feel a company's balance
sheet must be pristine and that securitization gains must be kept to a minimum.
Our investment strategy remains essentially the same: we maintain our core
holdings as long as the fundamentals are strong and the valuations reasonable.
We tend to eliminate many positions whenever there is any indication that our
rationale for investing is no longer valid. However, if a stock we like sells
off for no apparent reason, in many cases we will add to the position.
Simultaneously, we selectively sell or trim our winners when valuations exceed
our price targets with no sustainable catalysts. Finally, we try to invest in
stocks that are reasonably liquid so that, in the event we change our minds
about a company, it is not too difficult to sell the stock.
We made one major new addition to the fund, Merrill Lynch, although we did trim
some of our position later in the period. At the time of our initial purchase,
Merrill was trading at a valuation below its peers, yet it appeared to be
gaining momentum in terms of its asset gathering capabilities, due in part to
the rollout of a new service. Our other major purchases in the quarter were a
result of increasing confidence in companies that we already owned. For example,
Marsh & McLennan, a large insurance broker and money manager (Putnam), should
benefit from the previously mentioned trend in commercial insurance prices. We
also increased our holdings of Providian Financial, a credit card company, when
its relative valuation to other credit card companies became attractive.
Recently, the company settled its outstanding business practices issues with the
Office of the Comptroller of the Currency, the San Francisco District Attorney,
the California Attorney General, and the Connecticut Attorney General. With this
cloud lifted, we think the stock can regain a price/earnings multiple that is
average for its group. Additionally, we increased our positions in Kansas City
Southern, Chase Manhattan, Mellon Financial, and Goldman Sachs Group.
Among our major sales, three positions were eliminated: Protective Life,
UNUMProvident, and SunGard Data Systems. As mentioned earlier, our confidence in
Protective Life and UNUMProvident dissipated when each company announced
disappointing news. In the case of SunGard, we felt more optimistic about other
companies in the industry. We also sold some shares of U.S. Trust when they
greatly exceeded our price target. We sold shares of Capital One Financial, a
top-10 credit card lender, in part to finance our purchase of Providian. We are
reluctant to invest too heavily in the credit card sector at this time because
of loss trends in the industry.
OUTLOOK
Stocks remain expensive by many conventional measures, although after the
technology correction in the spring, more rational behavior seems to have
returned. Companies with no earnings are no longer leading the pack. Instead,
investors have begun to focus on earnings, cash flow, balance sheets, and
experienced management teams. While the Fed does not appear to be finished with
its string of interest rate hikes, many economists believe the end is near,
which is good news for the market in general and for financial stocks in
particular. Fortunately, modest rate increases in themselves are not too harmful
to financial companies unless their balance sheets are mismanaged or the cost of
debt becomes so burdensome that borrowers have trouble repaying their loans.
We believe in looking beyond current Fed policy and focusing instead on
investing in the best companies in the various financial services sectors. While
our outlook remains cautious, the prospects for many financial stocks and your
fund are still favorable for several reasons:
o Despite concerns about strong growth and rising interest rates, recent
economic data reveal that inflation remains contained and that business
activity appears to be slowing. We are hopeful that the Fed's tightening
actions over the past year will leave the economy growing moderately with
low inflation, which will be an ideal environment for our stocks.
o Earnings growth is still strong at many high-quality financial companies
and their share price valuations remain attractive on an absolute and
relative basis.
o Demographic trends indicate that financial services will continue to be a
growing and vibrant sector of the global economy, particularly in the
retirement area.
o Many holdings generate significant free cash flow, which management is
likely to use to repurchase stock or make acquisitions that can enhance
performance over time.
We are confident that we can continue to enhance returns and reduce risk over
time by investing in strong well-managed financial services companies with
attractive share prices. Looking ahead to the second half of the year, we remain
cautiously optimistic about the prospects of many of our key holdings.
Valuations for many financial stocks remain quite reasonable relative to the
broader market, allowing us to find new investments or add to our favorites.
Typically, financial shares perform best in a moderate-growth, low-inflation
environment. Furthermore, the eventual return to a more neutral posture on
monetary policy is likely be greeted favorably by investors.
We appreciate your continued confidence and support.
Respectfully submitted,
Larry J. Puglia
President and Chairman of the Investment Advisory Committee
Anna M. Dopkin
Executive Vice President
July 21, 2000
T. Rowe Price Financial Services Fund
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Portfolio Highlights
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TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
6/30/00
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Citigroup 7.4%
Bank of New York 5.6
Marsh & McLennan 4.4
Kansas City Southern Industries 4.0
Mellon Financial 4.0
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Freddie Mac 4.0
State Street 3.8
Chase Manhattan 3.5
Hartford Financial Services Group 3.5
Morgan Stanley Dean Witter 3.4
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Waddell & Reed Financial 3.3
ACE Limited 2.9
Wells Fargo 2.9
FirStar 2.8
Federated Investors 2.7
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American International Group 2.6
Charles Schwab 2.6
Bank of America 2.3
Providian Financial 2.3
Fannie Mae 2.2
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Goldman Sachs Group 2.2
XL Capital 1.9
GE 1.7
Heller Financial 1.7
American Express 1.6
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Total 79.3%
Note: Table excludes reserves.
T. Rowe Price Financial Services Fund
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Portfolio Highlights
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CONTRIBUTIONS TO THE CHANGE IN NET ASSET VALUE PER SHARE
6 Months Ended 6/30/00
Ten Best Contributors
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U.S. Trust*** 28(cents)
Waddell & Reed Financial 25
State Street 22
ACE Limited 22
Bank of New York 16
Federated Investors 15
Investor's Financial Services 13
Hartford Financial Services Group 10
Citigroup 10
Kansas City Southern Industries 10
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Total 171(cents)
Ten Worst Contributors
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UNUMProvident** -15(cents)
American General 12
Freddie Mac 11
First Tennessee National** 10
Bank of America 8
E.W. Branch** 8
Fannie Mae 8
E*Trade Group 7
Protective Life** 6
NextCard 6
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Total -91(cents)
12 Months Ended 6/30/00
Ten Best Contributors
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Citigroup 31(cents)
U.S. Trust*** 27
Waddell & Reed Financial 25
Bank of New York 24
Morgan Stanley Dean Witter 21
Kansas City Southern Industries* 19
Federated Investors* 17
Investor's Financial Services* 16
State Street 16
Marsh & McLennan 13
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Total 209(cents)
Ten Worst Contributors
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Bank of America -42(cents)
UNUMProvident** 37
Associates First Capital 32
Freddie Mac 28
Fannie Mae 13
American General 12
First Tennessee National** 11
The CIT Group** 11
Chase Manhattan 10
U.S. Bancorp** 10
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Total -206(cents)
* Position added
** Position eliminated
*** Acquired by another company
T. Rowe Price Financial Services Fund
Performance Comparison
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This chart shows the value of a hypothetical $10,000 investment in the fund
over the past 10 fiscal year periods or since inception (for funds lacking
10-year records). The result is compared with benchmarks, which may include
a broad-based market index and a peer group average or index. Market
indexes do not include expenses, which are deducted from fund returns as
well as mutual fund averages and indexes.
Financial Services Fund
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S&P 500 Financial
Index Services Fund
9/30/96 10,000 10,000
6/30/97 13,066 13,666
6/98 17,007 18,492
6/99 20,877 19,475
6/00 22,389 19,494
Average Annual Compound Total Return
--------------------------------------------------------------------------------
This table shows how the fund would have performed each year if its actual
(or cumulative) returns for the periods shown had been earned at a constant
rate.
Since Inception
Periods Ended 6/30/00 1 Year 3 Years Inception Date
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Financial Services Fund 0.09% 12.57% 19.49% 9/30/96
Investment return and principal value represent past performance and will
vary. Shares may be worth more or less at redemption than at original
purchase.
T. Rowe Price Financial Services Fund
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Unaudited
Financial Highlights For a share outstanding throughout each period
--------------------------------------------------------------------------------
6 Months Year 9/30/96
Ended Ended Through
6/30/00 12/31/99 12/31/98 12/31/97 12/31/96
NET ASSET VALUE
Beginning of period $ 16.12 $ 16.82 $ 15.56 $ 11.31 $ 10.00
Investment activities
Net investment
income(loss) 0.05 0.10 0.16 0.10* 0.04*
Net realized and
unrealized gain (loss) 1.10 0.15 1.60 4.58 1.30
Total from
investment activities 1.15 0.25 1.76 4.68 1.34
Distributions
Net investment income -- (0.10) (0.16) (0.10) (0.03)
Net realized gain -- (0.85) (0.34) (0.33) --
Total distributions -- (0.95) (0.50) (0.43) (0.03)
NET ASSET VALUE
End of period $ 17.27 $ 16.12 $ 16.82 $ 15.56 $ 11.31
----------------------------------------------------
Ratios/Supplemental Data
Total return (diamond) 7.13% 1.70% 11.55% 41.44%* 13.40%*
Ratio of total expenses
to average net assets 1.12%! 1.14% 1.19% 1.25%* 1.25%*!
Ratio of net investment
income (loss) to average
net assets 0.58%! 0.50% 0.94% 1.15%* 1.71%*!
Portfolio turnover rate 59.0%! 37.1% 46.8% 46.0% 5.6%!
Net assets,
end of period
(in thousands) $172,320 $159,031 $224,277 $177,335 $ 30,047
(diamond) Total return reflects the rate that an investor would have earned on
an investment in the fund during each period, assuming reinvestment
of all distributions.
* Excludes expenses in excess of a 1.25% voluntary expense limitation
in effect through 12/31/98.
! Annualized
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Financial Services Fund
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Unaudited June 30, 2000
Statement of Net Assets Shares Value
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In thousands
Common Stocks 93.7%
FINANCIAL 81.9%
Bank and Trust 25.2%
Bank of America 91,900 $ 3,952
Bank of New York 208,900 9,714
Chase Manhattan 132,500 6,103
Firstar 225,200 4,743
Mellon Financial 189,700 6,912
State Street 62,000 6,576
Wells Fargo 127,000 4,921
Wilmington Trust 10,000 428
43,349
Insurance 18.3%
ACE Limited 180,000 5,040
American General 14,000 854
American International Group 38,000 4,465
Hartford Financial Services Group 106,300 5,946
Marsh & McLennan 72,000 7,519
PMI Group 46,000 2,185
Radian Group 41,500 2,148
XL Capital (Class A) 62,000 3,356
31,513
Financial Services 38.4%
American Express 51,900 2,705
Associates First Capital (Class A) 67,000 1,495
Capital One Financial 38,000 1,696
Charles Schwab 131,082 4,408
Citigroup 210,500 12,683
eSpeed (Class A) * 10,000 435
Fannie Mae 74,000 3,862
Federated Investors (Class B) 131,900 4,625
Financial Federal * 50,000 869
Freddie Mac 169,000 6,844
Goldman Sachs Group 40,000 3,795
Heller Financial 139,000 2,849
Investors Financial Services 50,000 1,986
MBNA 44,000 $ 1,193
Merrill Lynch 10,000 1,150
Morgan Stanley Dean Witter 69,700 5,803
NextCard * 38,000 322
Providian Financial 43,400 3,906
Waddell & Reed Financial (Class A) 108,114 3,547
Waddell & Reed Financial (Class B) 71,094 2,066
66,239
Total Financial 141,101
CAPITAL EQUIPMENT 1.7%
Electrical Equipment 1.7%
GE 55,000 2,915
Total Capital Equipment 2,915
BUSINESS SERVICES AND
TRANSPORTATION 4.7%
Computer Service and Software 0.7%
E*TRADE * 69,100 1,138
1,138
Railroads 4.0%
Kansas City Southern Industries 78,500 6,962
6,962
Total Business Services and Transportation 8,100
MISCELLANEOUS 5.4%
Berkshire Hathaway (Class A) * 37 1,991
Other Miscellaneous Common Stocks 7,298
Total Miscellaneous 9,289
Total Common Stocks (Cost $123,821) 161,405
Short-Term Investments 6.6%
Money Market Funds 6.6%
Reserve Investment Fund, 6.68% # 11,369,977 11,370
Total Short-Term Investments (Cost $11,370) 11,370
Total Investments in Securities
100.3% of Net Assets (Cost $135,191) $ 172,775
Other Assets Less Liabilities (455)
NET ASSETS $ 172,320
----------
Net Assets Consist of:
Accumulated net investment income -
net of distributions $ 450
Accumulated net realized gain/loss -
net of distributions 2,723
Net unrealized gain (loss) 37,584
Paid-in-capital applicable to 9,978,655
shares of $0.0001 par value capital stock
outstanding; 1,000,000,000 shares authorized 131,563
NET ASSETS $ 172,320
----------
NET ASSET VALUE PER SHARE $ 17.27
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# Seven-day yield
* Non-income producing
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Financial Services Fund
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Unaudited
Statement of Operations
--------------------------------------------------------------------------------
In thousands
6 Months
Ended
6/30/00
Investment Income (Loss)
Income
Dividend $ 1,103
Interest 260
Total income 1,363
Expenses
Investment management 534
Shareholder servicing 264
Custody and accounting 49
Prospectus and shareholder reports 21
Registration 14
Legal and audit 7
Directors 4
Miscellaneous 2
Total expenses 895
Net investment income (loss) 468
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on securities (987)
Change in net unrealized gain or loss on securities 10,522
Net realized and unrealized gain (loss) 9,535
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $10,003
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The accompanying notes are an integral part of these financial statements.
T. Rowe Price Financial Services Fund
--------------------------------------------------------------------------------
Unaudited
Statement of Changes in Net Assets
--------------------------------------------------------------------------------
In thousands
6 Months Year
Ended Ended
6/30/00 12/31/99
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ 468 $ 942
Net realized gain (loss) (987) 12,937
Change in net unrealized
gain or loss 10,522 (11,122)
Increase (decrease) in net
assets from operations 10,003 2,757
Distributions to shareholders
Net investment income -- (960)
Net realized gain -- (8,164)
Decrease in net assets
from distributions -- (9,124)
Capital share transactions *
Shares sold 82,002 69,449
Distributions reinvested -- 8,796
Shares redeemed (78,716) (137,124)
Increase (decrease) in net
assets from capital
share transactions 3,286 (58,879)
Net Assets
Increase (decrease)
during period 13, 289 (65,246)
Beginning of period 159,031 224,277
End of period $ 172,320 $ 159,031
-----------------------
*Share information
Shares sold 5,040 4,049
Distributions reinvested -- 567
Shares redeemed (4,929) (8,082)
Increase (decrease) in
shares outstanding 111 (3,466)
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Financial Services Fund
--------------------------------------------------------------------------------
Unaudited June 30, 2000
Notes to Financial Statements
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Financial Services Fund, Inc. (the fund) is registered under
the Investment Company Act of 1940 as a diversified, open-end management
investment company and commenced operations on September 30, 1996. The fund
seeks long-term growth of capital and a modest level of income by investing
primarily in the common stocks of companies in the financial services
industry.
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles for the investment company
industry; these principles may require the use of estimates by fund
management.
Valuation Equity securities listed or regularly traded on a securities
exchange are valued at the last quoted sales price on the day the
valuations are made. A security which is listed or traded on more than one
exchange is valued at the quotation on the exchange determined to be the
primary market for such security. Listed securities not traded on a
particular day and securities regularly traded in the over-the-counter
market are valued at the mean of the latest bid and asked prices. Other
equity securities are valued at a price within the limits of the latest bid
and asked prices deemed by the Board of Directors, or by persons delegated
by the Board, best to reflect fair value.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation.
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.
Other Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses
are reported on the identified cost basis. Dividend income and
distributions to shareholders are recorded by the fund on the ex-dividend
date. Income and capital gain distributions are determined in accordance
with federal income tax regulations and may differ from those determined in
accordance with generally accepted accounting principles. Credits earned on
daily uninvested cash balances at the custodian are used to reduce the
fund's custody charges.
NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term
securities, aggregated $45,559,000 and $47,668,000, respectively, for the
six months ended June 30, 2000.
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.
At June 30, 2000, the cost of investments for federal income tax purposes
was substantially the same as for financial reporting and totaled
$135,191,000. Net unrealized gain aggregated $37,584,000 at period-end, of
which $43,905,000 related to appreciated investments and $6,321,000 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 $97,000 was payable at June 30, 2000. The fee is computed
daily and paid monthly, and consists of an individual fund fee equal to
0.35% 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 0.295% for assets
in excess of $120 billion. At June 30, 2000, and for the six months then
ended, the effective annual group fee rate was 0.32%. The fund pays a
pro-rata share of the group fee based on the ratio of its net assets to
those of the group.
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. is the fund's transfer and dividend disbursing agent and provides
shareholder and administrative services to the fund. T. Rowe Price
Retirement Plan Services, Inc. provides subaccounting and recordkeeping
services for certain retirement accounts invested in the fund. The fund
incurred expenses pursuant to these related party agreements totaling
approximately $236,000 for the six months ended June 30, 2000, of which
$57,000 was payable at period-end.
The fund may invest in the Reserve Investment Fund and Government Reserve
Investment Fund (collectively, the Reserve Funds), open-end management
investment companies managed by T. Rowe Price Associates, Inc. The Reserve
Funds are offered as cash management options only to mutual funds and other
accounts managed by T. Rowe Price and its affiliates and are not available
to the public. The Reserve Funds pay no investment management fees.
Distributions from the Reserve Funds to the fund for the six months ended
June 30, 2000, totaled $260,000 and are reflected as interest income in the
accompanying Statement of Operations.
T. Rowe Price Shareholder Services
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Investment Services and Information
KNOWLEDGEABLE SERVICE REPRESENTATIVES
By Phone 1-800-225-5132 Available Monday through Friday from 8 a.m. to 10
p.m. ET and weekends from 8:30 a.m. to 5 p.m. ET.
In Person Available in T. Rowe Price Investor Centers.
ACCOUNT SERVICES
Checking Available on most fixed-income funds ($500 minimum).
Automatic Investing From your bank account or paycheck.
Automatic Withdrawal Scheduled, automatic redemptions.
Distribution Options Reinvest all, some, or none of your distributions.
Automated 24-Hour Services Including Tele*Access (registered trademark) and
the T. Rowe Price Web site on the Internet. Address: www.troweprice.com
BROKERAGE SERVICES*
Individual Investments Stocks, bonds, options, precious metals, and other
securities at a savings over full-service commission rates. **
INVESTMENT INFORMATION
Combined Statement Overview of all your accounts with T. Rowe Price.
Shareholder Reports Fund managers' reviews of their strategies and results.
T. Rowe Price Report Quarterly investment newsletter discussing markets and
financial strategies.
Performance Update Quarterly review of all T. Rowe Price fund results.
Insights Educational reports on investment strategies and financial
markets.
Investment Guides Asset Mix Worksheet, College Planning Kit, Diversifying
Overseas: A Guide to International Investing, Personal Strategy Planner,
Retirees Financial Guide, and Retirement Planning Kit.
* T. Rowe Price Brokerage is a division of T. Rowe Price Investment
Services, Inc., Member NASD/SIPC.
** Based on a July 2000 survey for representative-assisted stock trades.
Services vary by firm, and commissions may vary depending on size of
order.
T. Rowe Price Mutual Funds
--------------------------------------------------------------------------------
Stock Funds
Domestic
Blue Chip Growth
Capital Appreciation
Capital Opportunity
Diversified Small-Cap Growth
Dividend Growth
Equity Income
Equity Index 500
Extended Equity Market Index
Financial Services
Growth & Income
Growth Stock
Health Sciences
Media & Telecommunications
Mid-Cap Growth
Mid-Cap Value
New America Growth
New Era
New Horizons*
Real Estate
Science & Technology
Small-Cap Stock
Small-Cap Value
Spectrum Growth
Tax-Efficient Growth
Total Equity Market Index
Value
International/Global
Emerging Markets Stock
European Stock
Global Stock
International Discovery*
International Growth & Income
International Stock
Japan
Latin America
New Asia
Spectrum International
Bond Funds
Domestic Taxable
Corporate Income
GNMA
High Yield
New Income
Short-Term Bond
Short-Term U.S. Government
Spectrum Income
Summit GNMA
Summit Limited-Term Bond
U.S. Treasury Intermediate
U.S. Treasury Long-Term
Domestic Tax-Free
California Tax-Free Bond
Florida Intermediate Tax-Free
Georgia Tax-Free Bond
Maryland Short-Term
Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Summit Municipal Intermediate
Tax-Free High Yield
Tax-Free Income
Tax-Free Intermediate Bond
Tax-Free Short-Intermediate
Virginia Short-Term
Tax-Free Bond
Virginia Tax-Free Bond
International/Global
Emerging Markets Bond
Global Bond
International Bond
MONEY MARKET FUNDS!
Taxable
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
Tax-Free
California Tax-Free Money
New York Tax-Free Money
Summit Municipal
Money Market
Tax-Exempt Money
BLENDED ASSET FUNDS
Balanced
Personal Strategy Balanced
Personal Strategy Growth
Personal Strategy Income
Tax-Efficient Balanced
T. ROWE PRICE NO-LOAD
VARIABLE ANNUITY
Equity Income Portfolio
International Stock Portfolio
Limited-Term Bond Portfolio
Mid-Cap Growth Portfolio
New America Growth Portfolio
Personal Strategy Balanced Portfolio
Prime Reserve Portfolio
* Closed to new investors.
! Investments in the funds are not insured or guaranteed by the FDIC or any
other government agency. Although the funds seek to preserve the value of
your investment at $1.00 per share, it is possible to lose money by
investing in the funds.
Please call for a prospectus, which contains complete information, including
fees and expenses. Read it carefully before investing.
The T. Rowe Price No-Load Variable Annuity [#V6021] is issued by Security
Benefit Life Insurance Company. In New York, it [#FSB201(11-96)] is issued by
First Security Benefit Life Insurance Company of New York, White Plains, NY.
T. Rowe Price refers to the underlying portfolios' investment managers and the
distributors, T. Rowe Price Investment Services, Inc.; T. Rowe Price Insurance
Agency, Inc.; and T. Rowe Price Insurance Agency of Texas, Inc. The Security
Benefit Group of Companies and the T. Rowe Price companies are not affiliated.
The variable annuity may not be available in all states. The contract has
limitations. Call a representative for costs and complete details of the
coverage.
For fund and account information
or to conduct transactions,
24 hours, 7 days a week
By touch-tone telephone
Tele*Access 1-800-638-2587
By Account Access on the Internet
www.troweprice.com/access
For assistance
with your existing
fund account, call:
Shareholder Service Center
1-800-225-5132
To open a brokerage account
or obtain information, call:
1-800-638-5660
Internet address:
www.troweprice.com
Plan Account Lines for retirement
plan participants:
The appropriate 800 number appears
on your retirement account statement.
T. Rowe Price Associates
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for
distribution only to shareholders
and to others who have received
a copy of the prospectus appropriate
to the fund or funds covered in this
report.
Walk-In Investor Centers:
For directions, call 1-800-225-5132
or visit our Web site.
Baltimore Area
Downtown
101 East Lombard Street
Owings Mills
Three Financial Center
4515 Painters Mill Road
Boston Area
386 Washington Street
Wellesley
Colorado Springs
4410 ArrowsWest Drive
Los Angeles Area
Warner Center
21800 Oxnard Street, Suite 270
Woodland Hills
Tampa
4200 West Cypress Street
10th Floor
Washington, D.C.
900 17th Street N.W.
Farragut Square
T. Rowe Price Invest with Confidence (registered trademark)
T. Rowe Price Investment Services, Inc., Distributor. F17-051 6/30/00
