<PAGE>
FUND PROFILE
July 1, 1999
T. Rowe Price Tax-EfficientBalanced Fund
A fund seeking attractive after-tax total return from a portfolio of stocks and
tax-exempt bonds.
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-XXX-XXX-XXXX, or by visiting our Web site at www.troweprice.com.
1. What is the fund's objective?
The fund seeks to provide attractive long-term total returns on an after-tax
basis with a balanced portfolio of stocks and municipal bonds.
2. What is the fund's principal investment strategy?
We invest a minimum of 50% of total assets in municipal bonds (measured at
the end of each quarter) and the balance in stocks. The stock portion is
invested primarily in large-capitalization stocks selected mainly from the
largest 1,000 U.S. companies. The bond portion will be invested primarily in
long-term municipal bonds, with maturities generally exceeding 10 years and
investment-grade ratings of BBB or higher. A maximum of 10% of the bond
component may be invested in below-investment-grade ("junk") bonds to take
advantage of their relatively high tax-exempt income and potential for price
appreciation.
Stock selection is based on fundamental, bottom-up analysis that seeks to
identify companies with superior long-term appreciation prospects. Generally
we
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use a growth approach to stock selection, looking for companies with a
demonstrated ability to increase revenues, earnings, and cash flow
consistently; capable management; attractive business niches; and a
sustainable competitive advantage. Valuation measures, such as a company's
price/earnings ratio relative to the market and its own growth rate, and its
dividend yield relative to the market are also considered.
Generally, the fund will limit exposure to high-yielding stocks. However, the
payment of dividends - even higher-than-average dividends - does not
disqualify a stock from consideration for the fund's portfolio.
Bond selection reflects the manager's outlook for interest rates and the
economy as well as the prices and yields of various securities. For example,
if we expect rates to fall, the managers may buy longer-term securities to
provide higher yield. Conversely, shorter maturities may be favored if rates
are expected to rise.
To accomplish the fund's goal of minimizing taxable distributions, we will
strive to avoid realizing capital gains. However, gains may be realized when
it is believed that the risk of holding a security outweighs tax
considerations. When gains are taken, we will attempt to offset them with
losses from other securities. This may be accomplished by selling certain
securities at a loss and investing the proceeds in similar securities.
We may also invest in other securities, including foreign securities,
futures, and options, in keeping with the fund's objective.
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-XXX-XXX-XXXX.
3. What are the main risks of investing in the fund?
Of the fund's two main types of assets, stocks will be the most volatile. The
stock 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. The fund's
balance between stocks and bonds may also mean it will not fully participate
in rallies in either individual asset class.
Growth stocks can be volatile for several reasons. Since they usually
reinvest a high proportion of their earnings in their own businesses, they
may lack the dividends often associated with value stocks that could cushion
their decline in a falling market. Also, since investors buy growth stocks
because of their expected
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superior earnings growth, earnings disappointments often result in sharp
price declines.
Investments in stocks that appear undervalued carry the risk that the market
will not recognize a security's intrinsic value for a long time, or that a
stock judged to be undervalued may actually be appropriately priced.
The fund also invests a substantial percentage of assets in municipal bonds,
which have two main sources of risk: interest rate and credit risk. Interest
rate risk is the decline in bond prices that usually accompanies a rise in
interest rates. Longer-maturity bonds typically suffer greater declines than
those with shorter maturities. Credit risk is the chance that any fund
holding could have its credit rating downgraded, or that a bond issuer will
default (fail to make timely payments of interest or principal), potentially
reducing the fund's income level and share price. To the extent that we
invest in junk bonds, credit risk will be higher since their issuers are more
vulnerable to financial setbacks and recession than more creditworthy
companies.
The fund is also exposed to risks specific to municipal bonds, such as the
possibility that tax reform may broadly reduce their value, or that
individual issuers will be unable to meet their obligations due to problems
in that state or locality.
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.
3 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.
4. 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 risk. If you can accept the possibility of share price
decline in an effort to achieve attractive after-tax total return over the
long-term, the fund could be appropriate for you. The higher your tax
bracket, the more likely that this fund will be appropriate. This fund should
not represent your complete investment program or be used for short-term
trading purposes.
The fund is inappropriate for tax-deferred accounts, such as IRAs.
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3 Investors should have a long-term investment horizon and be willing to wait
out bear markets.
5. 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.
<TABLE>
INSERT BAR
CHART HERE
<CAPTION>
Calendar Year Total Returns
-------------------------------
<S> <C>
1998 19.87%
-------------------------------
</TABLE>
The fund can also experience short-term performance swings. The best calendar
quarter return during the years depicted in the chart was 12.56% in the
fourth quarter of 1998, and the worst was -3.30% in the third quarter of
1998.
<TABLE>
Average Annual Total Returns
<CAPTION>
Periods ended December 31, 1998
Since inception
1 year (06/30/97)
<S> <C> <C> <S>
Tax-Efficient Balanced Fund 19.87 19.35
% %
------------------------------------
52% Lehman Brothers Muni. Bond Index/48% S&P 500 Stock Index 17.08 17.10
Lipper Balanced Funds Average 13.48 14.55
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</TABLE>
These figures include changes in principal value, reinvested dividends, and
capital gain distributions, if any.
6. 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 one year. 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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<TABLE>
Fees and Expenses of the Fund
<CAPTION>
Shareholder fees (fees paid directly from your investment)
Redemption fee (for shares held less than one year) 1.00%
Annual fund operating expenses
(expenses that are deducted from fund assets)
----------------------------------------------------------------------------------
<S> <C>
0.52
%
Management fee /a/
0.95
Other expenses %
1.47
%
Total annual fund operating expenses /a/
0.47
Fee waiver/reimbursement %
Net expenses 1.00
%
----------------------------------------------------------------------------------
</TABLE>
To limit the fund's expenses during its initial period of operations, T. Rowe
Price contractually obligated itself to waive its fees and bear any expenses
through February 28, 1999, that would cause the fund's ratio of expenses to
average net assets to exceed 1.00%. Effective March 1, 1999, T. Rowe Price
agreed to extend the expense limitation for an additional two-year period
through February 28, 2001. 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 1.00%; however, no reimbursement
will be made after February 28, 2001 (for the first agreement), or February
28, 2003 (for the second agreement), or if it would result in the expense
ratio exceeding 1.00%. Any amounts reimbursed will 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 show the expenses 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>
<S> <C> <C> <C>
1 year 3 years 5 years 10 years
$102 $ $ $
370 711 1,674
----------------------------------------------------
</TABLE>
7. Who manages the fund?
William F. Snider and Donald J. Peters manage the fund day-to-day and are
co-chairmen of its Investment Advisory Committee. Mr. Snider joined T. Rowe
Price in 1991 and has been managing investments since 1993. Mr. Peters has
been managing investments since joining T. Rowe Price in 1993.
8. How can I purchase shares?
Fill out and return a New Account Form in the postpaid envelope, along with
your check. The minimum initial purchase is $2,500 or $50 if investing
through Automatic Asset Builder. The minimum subsequent investment is $100.
You can
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also open an account by bank wire, by exchanging from another T. Rowe Price
fund, or by transferring assets from another financial institution.
9. 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.
10. When will I receive income and capital gain distributions?
The fund distributes income quarterly 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.
11. 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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To Open a Mutual Fund, Asset Manager, or Brokerage Account
Investor Services
1-XXX-XXX-XXXX
For Information on Existing Accounts
Shareholder Services
1-800-225-5132
For Yields and Prices and Account Transactions
Tele*Access/(R)/
24 hours, 7 days 1-800-638-2587
For Fund Information and Account Transactions on the Internet
www.troweprice.com
Investor Centers
101 East Lombard St. Baltimore, MD 21202
T. Rowe Price Financial Center 10090 Red Run Blvd. Owings Mills, MD 21117
Farragut Square 900 17th Street, N.W. Washington, D.C. 20006
Warner Center, Plaza 5
21800 Oxnard Street
Suite 270
Woodland Hills, CA 91367
4200 West Cypress St. 10th Floor Tampa, FL 33607
4410 Arrows West Drive
Colorado Springs, CO 80907
Headquarters
100 East Pratt St. Baltimore, MD 21202
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NEW ACCOUNT FORM (LOGO)
You may purchase shares of a T. Rowe Price fund after
reviewing the information in the profile or after requesting
and reviewing the fund's prospectus (and other information).
Please note: an IRA will not be established using this form.
If you want to open an IRA, call 1-800-638-5660 to request
an IRA New Account Form.
Mail this form to: T. Rowe Price
P.O. Box 17300, Baltimore, MD 21298-9353
For help with this form, call toll free 1-800-638-5660.
Please do not remove the mailing label from this form.
1 PROVIDE YOUR TAX IDENTIFICATION NUMBER
Owner's or Minor's Social Security or Tax ID Number
(Use Minor's Social Security Number for Custodial Account)
_ _ _ _ _ _ _ _ _
Joint Owner's or Custodian's Social Security or Tax ID Number
_ _ _ _ _ _ _ _ _
2 DESIGNATE TYPE OF ACCOUNT AND OWNER NAME(S)
Please print in CAPITAL LETTERS. Choose one:
__ Individual or Joint Account.*
*Joint tenancy with right of survivorship unless you instruct otherwise.
Owner's Name (First, Middle Initial, Last)
________________________________
Title: Mr. Ms. Mrs. Dr.
Joint Owner's Name (First, Middle Initial, Last)
________________________________
Title: Mr. Ms. Mrs. Dr.
__ Custodial Account.
Uniform Gift or Transfer to Minors Act (UGMA or UTMA)
Custodian's Name (First, Middle Initial, Last)
________________________________
Minor's Name (First, Middle Initial, Last)
________________________________
State of Residence (Minor's or Custodian's)
________________________________
__ Trust, Corporation, Business, or Other Entity Account.*
*Please attach the first and last pages of the trust agreement or a copy
of
the corporate resolution.
Name of Trust, Corporation, or Other Entity
_________________________________________________________
Trustee Names or Type of Entity
________________________________________________________
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Name of Trust Beneficiary (Optional) Date of Trust Agreement
________________ __-__-__
month day year
__ Check this box if your organization is incorporated or tax-exempt under
Section 501(a) of the Internal Revenue Code, a qualified retirement plan
under Section 401(a), or a custodial account under Section 403(b)(7),
and
you DO NOT want us to file information returns on your behalf.
3 PROVIDE YOUR ADDRESS
Street Address or P.O. Box
__________________________________________________
__________________________________________________
City State
____________________ __
ZIP Code
_ _ _ _ _ - _ _ _ _
4 PROVIDE OTHER ACCOUNT DATA
Daytime Phone Ext.
_ _ _ _ _ _ - _ _ _ _ _ _ _ _
Evening Phone Ext.
_ _ _ _ _ _ - _ _ _ _ _ _ _ _
Date of Birth (Owner/Minor)
Date of Birth (Joint Owner/Custodian)
_ _ - _ _ - _ _ _ _ - _ _ - _ _
month day year month day year
__ U.S. Citizen __ Resident Alien
__ Nonresident Alien. My permanent foreign address for tax purposes is:
_____________________________________
_____________________________________
Owner's Occupation / Employer Name (Optional)
_____________________________________
Employer Address (Optional)
__________________________________________________________________________
5 SELECT YOUR FUND(S)
Please print the fund name(s) exactly as listed inside the Investment Kit you
received with this form. Fill in the amount of your investment for each fund.
The minimum initial investment is $2,500 per fund ($1,000 for UGMAs/UTMAs)
but is waived if you use Automatic Asset Builder (see Sections 6 and 7E).
Fund Name Amount
__________________________________ $________
Fund Name Amount
__________________________________ $________
Fund Name Amount
__________________________________ $________
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Fund Name Amount
__________________________________ $________
Total Investment$________
6 CHOOSE YOUR INVESTMENT METHOD
A. __ By check.
Make payable to T. Rowe Price Funds. (Otherwise it may be returned.)
B. __ By Automatic Asset Builder.
See Section 7E for instructions.
C. __ By wire.
Please call 1-800-225-5132 for the following information and wiring
instructions:
Account Number
_ _ _ _ _ _ _ _ _ _ - _
Date of Wire
_ _ - _ _ - _ _
month day year
(over, please)
7 SELECT YOUR ACCOUNT SERVICE OPTIONS
A. TO RECEIVE YOUR DISTRIBUTIONS
Your dividends and capital gains will be reinvested unless you indicate
------
otherwise.
__ Pay dividends and capital gains to me by check.
__ Transfer dividends and capital gains to my bank account.
(Please complete Section 7C if you elect this option.)
__ Pay dividends to me by check and reinvest capital gains.
B. TO EXCHANGE AND REDEEM FUND SHARES
You can use the telephone or your personal computer to check your account
balance, redeem shares, or make exchanges among any identically registered
accounts unless you check the boxes below.
------
__ I do NOT want telephone/computer exchange.
__ I do NOT want telephone/computer redemption.
C. TO MAKE TRANSFERS BETWEEN YOUR BANK AND T. ROWE PRICE
This service makes purchasing or redeeming fund shares even more convenient.
Simply call a T. Rowe Price representative or Tele*Access (R) and your
transaction
will be processed by electronically moving money between your bank
account and your mutual fund accounts.
Transfers occur only when you initiate them ($100 minimum) and are made
through the Automated Clearing House (ACH) network or by wire.* This service
becomes available approximately 20 days after your application is
processed. Since you initiate transfers by phone or computer, be sure that
you did not decline the phone/computer redemption service above.
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__ Check this box to set up this service. YOU MUST ALSO ATTACH A BLANK,
VOIDED CHECK (other than your investment check) from your bank
account to this form.
Any co-owner of your bank account who is not a co-owner of
---
your mutual fund account must sign below.
X___________________________________________
Bank Account Co-owner's Signature
*There is a $5 fee for wire redemptions under $5,000 but no fee for ACH
transactions.
ATTACH VOIDED CHECK HERE
D. TO SET UP CHECKWRITING
You can write checks for $500 or more on all T. Rowe Price money market and
bond fund accounts (except the High Yield and Emerging Markets Bond funds).
Those authorized to write checks should read the checking agreement and sign
below.
By signing this form, I agree to all of State Street Bank's checking account
rules, and to any conditions and limitations on redeeming checks from the
T. Rowe Price Funds. I also agree that:
(1) This form applies to any other identically registered T. Rowe Price
fund checking account I establish later;
(2) If I am subject to IRS backup withholding, I may write checks only on
money fund accounts;
(3) State Street Bank and the Fund reserve the right to change, revoke, or
close any checking account;
(4) The signatures are authentic, and, for organizations, I have submitted
an original or certified resolution authorizing the individuals with legal
capacity to sign and act on behalf of the organization.
(Do not detach this section from the rest of the form.)
_____________________________________________________
Fund Name Fund Name
_____________________________________________________
Print Name of Owner, Custodian, or Trustee
X___________________________________________________
Signature Date
_____________________________________________________
Print Name of Joint Owner, Co-trustee, Corporate Officer, etc.
X___________________________________________________
Signature Date
How many signatures do you require on checks?
__ Only one owner __ All owners
G00-008 6/30/98
<PAGE>
E. TO SET UP AUTOMATIC ASSET BUILDER
This service allows you to automatically invest in your fund account through
your
bank account and/or payroll deduction each month (minimum $50 per fund).
___ Check this box to invest from your bank account.
Be sure to complete Section 7C and fill in the information below.
Fund Name
__________________________________________________________________________
Amount Day of Month You Would Like to Invest
__________________________________ ____
Fund Name
__________________________________________________________________________
Amount Day of Month You Would Like to Invest
_____________________ ___
Fund Name
__________________________________________________________________________
Amount Day of Month You Would Like to Invest
_____________________ ___
Fund Name
__________________________________________________________________________
Amount Day of Month You Would Like to Invest
_____________________ ___
____ Check this box to invest through payroll deduction.
T. Rowe Price will mail you instructions for this service.
8 SIGN YOUR NEW ACCOUNT FORM
By signing this form, I certify that:
- - I agree to be bound by the terms of the prospectus for each fund in which
I am investing. If I am purchasing shares after reviewing a fund profile, I
understand that I will receive the prospectus after I purchase shares in the
fund. I have the authority and legal capacity to purchase mutual fund shares,
am of legal age in my state, and believe each investment is suitable for me.
- - I authorize T. Rowe Price, the Funds, their affiliates and agents to act on
any
instructions believed to be genuine for any service authorized on this form,
including telephone/computer services. The Funds use reasonable procedures
(including shareholder identity verification) to confirm that instructions
given by telephone/computer are genuine, and the Funds are not liable for
acting on these instructions. (If these procedures are not followed, it is the
opinion of certain regulatory agencies that the Funds may be liable for any
loss that may result from acting on instructions given.) I understand that
anyone who can properly identify my account(s) can make phone/computer
transactions on my behalf.
- - The Funds can redeem shares from my account(s) to reimburse a fund for
any loss due to nonpayment or other indebtedness.
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- - By selecting the electronic transfer service in Section 7C, I hereby authorize
T. Rowe Price to initiate credit and debit entries to my (our) account at the
Financial Institution indicated and for the Financial Institution to credit or
debit the same to such account through the Automated Clearing House
(ACH) system, subject to the rules of the Financial Institution, ACH, and the
Fund. T. Rowe Price may correct any transaction error with a debit or credit
to my Financial Institution account and/or Fund account. THIS AUTHORIZATION,
including any credit or debit entries initiated thereunder, is in full
force and effect until I notify T. Rowe Price of its revocation by telephone
or in writing and T. Rowe Price has had sufficient time to act on it.
- - Under penalties of perjury, the tax identification number(s) shown on
this form is correct. If I fail to give the correct number or fail to sign this
form, T. Rowe Price may reject, restrict, or redeem my investment. I may
also be subject to IRS backup withholding (currently 31%) on all
distributions and redemptions, and I may be subject to a $50 IRS penalty.
- - Under penalties of perjury, I am NOT subject to IRS backup withholding
because 1) I have not been notified, or 2) notification has been revoked
(cross out "NOT" if you are currently subject to withholding), or 3) I have
indicated in Section 4 that I am a nonresident alien and certify that for
dividends I am not a U.S. citizen or resident (or I am filing for a foreign
corporation, partnership, estate, or trust).
- - For clarification on any of these certification issues, please contact us for
assistance.
- - The IRS does not require your consent to any provision of this document
other than the certifications required to avoid backup withholding.
PLEASE SIGN HERE
X__________________________________________________
Signature of Owner, Custodian, or Trustee Date
X__________________________________________________
Signature of Joint Owner, Co-trustee, Corporate Officer, etc. Date
Thank you for your investment. You will receive a confirmation shortly.
8
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