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January 1, 2000
FUND PROFILE
T. ROWE PRICE
Diversified Small-Cap Growth Fund
An aggressive fund seeking long-term appreciation through a widely diversified
portfolio of small-cap growth stocks.
This profile summarizes key information about the fund that is included in the
fund's prospectus. The fund's prospectus includes additional information about
the fund, including a more detailed description of the risks associated with
investing in the fund that you may want to consider before you invest. You may
obtain the prospectus and other information about the fund at no cost by calling
1-800-638-5660, or by visiting our Web site at www.troweprice.com.
T ROWE PRICE LOGO
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FUND PROFILE
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What is the fund's objective?
The fund seeks long-term growth of capital by investing primarily in common
stocks of small growth companies.
What is the fund's principal investment strategy?
We will invest at least 80% of the fund's total assets in small-cap growth
companies defined as companies whose market capitalization is smaller than
80% of those in the Standard & Poor's 500 Stock Index. (A company's market
"capitalization" is found by multiplying its shares outstanding by its stock
price.) The portfolio will be very broadly diversified, and the top 25
holdings will not constitute a large portion of assets. This broad
diversification should minimize the effects of individual security selection
on fund performance.
We use a number of quantitative models designed by T. Rowe Price to identify
key characteristics of small-cap growth stocks. Based on these models, stocks
are selected in a "top down" manner so that the portfolio as a whole reflects
characteristics we consider important, such as valuations (price/earnings or
price/book value ratios, for example) and projected earnings growth. In
building the investment models and adjusting them as needed, we draw on T.
Rowe Price's extensive experience in all aspects of small-cap growth
investing--research, portfolio strategy, and trading.
While most assets will be invested in U.S. common stocks, other securities
may also be purchased, including foreign stocks, futures, and options, in
keeping with fund objectives.
The fund may sell securities for a variety of reasons, such as to secure
gains, limit losses, or redeploy assets into more promising opportunities.
Further information about the fund's investments, including a review of
market conditions and fund strategies and their impact on performance, is
available in the annual and semiannual shareholder reports. To obtain free
copies of any of these documents, call 1-800-638-5660.
What are the main risks of investing in the fund?
As with all equity funds, this fund's share price can fall because of
weakness in the broad market, a particular industry, or specific holdings.
The market as a whole can decline for many reasons, including adverse
political or economic developments here or abroad, changes in investor
psychology, or heavy institutional selling. The prospects for an industry or
company may deteriorate because of a variety of factors, including
disappointing earnings or changes in the competitive environment. In
addition, our assessment of companies held in the fund may prove incorrect,
resulting in losses or poor performance even in a rising market. Finally, the
fund's investment approach could fall out of favor with the investing public,
resulting in lagging performance versus other types of stock funds.
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FUND PROFILE
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Investing in small companies involves greater risk than is customarily
associated with more established companies. Stocks of small companies are
subject to more abrupt or erratic price movements than larger-company stocks.
Small companies often have limited product lines, markets, or financial
resources, and their managements may lack depth and experience. Such
companies usually do not pay significant dividends that could cushion returns
in a falling market.
Growth stocks can have steep price declines if their earnings disappoint
investors. Since the fund will typically be fully invested in this market
sector, investors are fully exposed to its volatility.
To the extent that the fund invests in foreign stocks, it is also subject to
the risk that some holdings may lose value because of declining foreign
currencies or adverse political or economic events overseas. If the fund uses
futures and options, it is exposed to additional volatility and potential
losses.
As with any mutual fund, there can be no guarantee the fund will achieve its
objective.
. The fund's share price may decline, so when you sell your shares, you may
lose money. An investment in the fund is not a deposit of a bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency.
How can I tell if the fund is appropriate for me?
Consider your investment goals, your time horizon for achieving them, and
your tolerance for the inherent risk of common stock investments. If you seek
capital growth over a long period and are comfortable with the fund's risk
profile, it could be appropriate for a portion of your stock investments.
This fund should not represent your complete investment program or be used
for short-term trading purposes.
The fund can be used in both regular and tax-deferred accounts, such as IRAs.
. Equity investors should have a long-term investment horizon and be willing
to wait out bear markets.
How has the fund performed in the past?
The bar chart and the average annual total return table indicate risk by
illustrating how much returns can differ from one year to the next. The
fund's past performance is no guarantee of its future returns.
The fund can also experience short-term performance swings, as shown by the
best and worst calendar quarter returns during the year depicted in the
chart.
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FUND PROFILE
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<TABLE>
<CAPTION>
Calendar Year Total Returns
"98" "99"
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<S> <C> <C> <S>
3.58 27.69
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</TABLE>
Quarter ended Total return
Best quarter 12/31/99 27.00%
Worst quarter 9/30/98 -22.23%
<TABLE>
Table 1 Average Annual Total Returns
<CAPTION>
Periods ended
December 31, 1999
Since inception
1 year 5 years (06/30/1997)
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<S> <C> <C> <C>
Diversified Small-Cap Growth Fund 27.69% ---% 14.93%
Russell 2000 Growth Index 43.09 --- 19.28
Lipper Small-Cap Fund Index 41.93 --- 18.43
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</TABLE>
These figures include changes in principal value, reinvested dividends, and
capital gain distributions, if any.
What fees or expenses will I pay?
The fund is 100% no load. The fund charges a 1% redemption fee, payable to
the fund, on shares held less than six months. There are no other fees or
charges to buy or sell fund shares, reinvest dividends, or exchange into
other T. Rowe Price funds. There are no 12b-1 fees.
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FUND PROFILE
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<TABLE>
Fees and Expenses of the Fund
<CAPTION>
Shareholder fees (fees paid directly from your investment)
Redemption fee (for shares held less than six months) 1%
Annual fund operating expenses
(expenses that are deducted from fund assets)
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<S> <C>
Management fee 0.67%/a/
Other expenses 0.79%
Total annual fund operating expenses 1.46%/a/
Fee waiver/reimbursement
Net expenses
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</TABLE>
/a/
To limit the fund's expenses during its initial period of operations, T. Rowe
Price is contractually obligated to waive its fees and bear any expenses
through December 31, 1998, which would cause the fund's ratio of expenses to
average net assets to exceed 1.25%. Effective January 1, 1999, T. Rowe Price
agreed to extend this expense limitation for a period of two years through
December 31, 2000. Fees waived or expenses paid or assumed under these
agreements are subject to reimbursement to T. Rowe Price by the fund whenever
the fund's expense ratio is below 1.25%; however, no reimbursement will be
made after December 31, 2000 (for the first agreement), or December 31, 2002
(for the second agreement), or if it would result in the expense ratio
exceeding 1.25%. Any amounts reimbursed have the effect of increasing fees
otherwise paid by the fund.
Example. The following table gives you a rough idea of how expense ratios
may translate into dollars and helps you to compare the cost of investing in
this fund with that of other funds. Although your actual costs may be higher
or lower, the table shows how much you would pay if operating expenses remain
the same, the expense limitation currently in place is not renewed, you
invest $10,000, you earn a 5% annual return, and you hold the investment for
the following periods:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
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<S> <C> <C> <C>
$127 $419 $756 $1,709
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</TABLE>
Who manages the fund?
The fund is managed by T. Rowe Price Associates, Inc. Founded in 1937, T.
Rowe Price and its affiliates manage investments for individual and
institutional accounts. The company offers a comprehensive array of stock,
bond, and money market funds directly to the investing public.
Richard T. Whitney manages the fund day-to-day and has been chairman of its
Investment Advisory Committee since 1997. He joined T. Rowe Price in 1985 and
has been managing investments since 1986.
The following questions and answers about buying and selling shares and
services do not apply to employer-sponsored retirement plans. If you are a
participant in one of these plans, please call your plan's toll-free number for
additional information.
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FUND PROFILE
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How can I purchase shares?
Fill out the New Account Form and return it with your check in the postpaid
envelope. The minimum initial purchase is $2,500 ($1,000 for IRAs and gifts
or transfers to minors). The minimum subsequent investment is $100 ($50 for
IRAs, gifts or transfers to minors, or Automatic Asset Builder). You can also
open an account by bank wire, by exchanging from another T. Rowe Price fund,
or by transferring assets from another financial institution.
How can I sell shares?
You may redeem or sell any portion of your account on any business day.
Simply write to us or call. You can also access your account at any time via
Tele*Access /(R)/ or our Web site. We offer convenient exchange among our
entire family of domestic and international funds. Restrictions may apply in
special circumstances, and some redemption requests need a signature
guarantee. A $5 fee is charged for wire redemptions under $5,000.
When will I receive income and capital gain distributions?
The fund distributes income and net capital gains, if any, at year-end. For
regular accounts, income and short-term gains are taxable at ordinary income
rates, and long-term gains are taxable at the capital gains rate.
Distributions are reinvested automatically in additional shares unless you
choose another option, such as receiving a check. Distributions paid to IRAs
and employer-sponsored retirement plans are automatically reinvested.
What services are available?
A wide range, including but not limited to:
. retirement plans for individuals and large and small businesses;
. automated information and transaction services by telephone or computer;
. electronic transfers between fund and bank accounts;
. automatic investing and automatic exchange;
. brokerage services; and
. asset manager accounts.
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FUND PROFILE
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T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, MD 21202
www.troweprice.com
LOGO
F20-035
T. Rowe Price Investment Services, Inc., Distributor
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