PRICE T ROWE NEW ERA FUND INC, 497, 1994-03-15

PRICE T ROWE NEW ERA FUND INC
497, 1994-03-15

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Prospectus

To Open an Account:
Investor Services
1-800-638-5660
547-2308 in Baltimore

YIELDS & PRICES:
Tele*Access\rs\
24 hours, 7 days a week
1-800-638-2587
625-7676 in Baltimore

EXISTING ACCOUNT:
Shareholder Services
1-800-225-5132
625-6500 in Baltimore

INVESTOR CENTERS:

101 East Lombard Street
First Floor
Baltimore, Maryland

Farragut Square
First Floor
900 17th Street, NW
Washington, DC

T. Rowe Price Financial Center
First Floor
10090 Red Run Boulevard
Owings Mills, Maryland

ARCO Tower
31st Floor
515 South Flower Street
Los Angeles, California

T. ROWE PRICE
Invest With Confidence\rs\

T. ROWE PRICE
NEW ERA FUND\rs\
May 1, 1993
Revised to
February 21, 1994

<PAGE>

NEW ERA
FUND

PROSPECTUS
MAY 1, 1993
REVISED TO
FEBRUARY 21, 1994
T. ROWE PRICE
NEW ERA FUND, INC.

TABLE OF CONTENTS

FUND INFORMATION
Investment Objective........................................................ 2
Investment Program.......................................................... 2
Summary of Fund Fees and Expenses........................................... 3
Per-Share Data and Other
Annualized Ratios......................................................... 4
Investment Policies......................................................... 4
Performance Information..................................................... 6
Capital Stock............................................................... 6
NAV, Pricing, and Effective Date............................................ 7
Receiving Your Proceeds..................................................... 7
Dividends and Distributions................................................. 8
Taxes....................................................................... 8
Management of the Fund...................................................... 8
Expenses and Management Fee................................................. 9

HOW TO INVEST
Shareholder Services........................................................10
Conditions of Your Purchase.................................................10
Completing the New Account Form.............................................12
Opening a New Account.......................................................13
Purchasing Additional Shares................................................13
Exchanging and Redeeming Shares.............................................14

INVESTMENT SUMMARY
The Fund invests primarily in the common stocks of companies which own or
develop natural resources and other basic commodities, and other selected
growth companies. It is designed for investors seeking long-term growth of
capital.

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T. ROWE PRICE
100% No Load. This Fund has no sales charges, no redemption fees, and no 12b-1
fees. 100% of your investment is credited to your account.

Services. T. Rowe Price provides easy access to your money through bank
wires or telephone redemptions and offers easy exchange to other T. Rowe Price
Funds.

T. Rowe Price Associates, Inc. (T. Rowe Price) was founded in 1937 by the late
Thomas Rowe Price, Jr. As of December 31, 1992, the firm and its affiliates
managed approximately $41.4 billion for approximately two and one-half million
individual and institutional investors.

- ------------------------------------------------------------------------------
This prospectus contains information you should know about the Fund before you
invest. PLEASE KEEP IT FOR FUTURE REFERENCE. A Statement of Additional
Information for the Fund (dated May 1, 1993, revised to February 21, 1994) has
been filed with the Securities and Exchange Commission and is incorporated by
reference in this prospectus. It is available at no charge by calling:
1\-800\-638\-5660.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION, OR ANY STATE SECURITIES COMMISSION, PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

<PAGE>

INVESTMENT
OBJECTIVE
The Fund's investment objective is to seek long-term growth of capital through
investment primarily in common stocks of companies which own or develop
natural resources and other basic commodities, and other selected,
non-resource growth companies. Current income is not a factor in the selection
of stocks for investment by the Fund. Total return will consist primarily of
capital appreciation (or depreciation).
The Fund's share price will fluctuate with changing market conditions, and
your investment may be worth more or less when redeemed than when purchased.
The Fund should not be relied upon as a complete investment program, nor used
to play short-term swings in the stock market. The Fund cannot guarantee it
will achieve its investment objective.

INVESTMENT
PROGRAM
Investing in companies whose earnings are expected to exceed inflation.
In the opinion of T. Rowe Price, inflation represents one of the major
economic problems investors will face over the long term. From the early 1970s
through the late 1980s, the inflation rate was considerably above average
historic levels. Although inflation has slowed in recent years, T. Rowe Price
believes the strenuous efforts required on the part of government, business,
labor, and consumers to control inflation are difficult to maintain for
extended periods--particularly during recessions. Political pressure to
counteract these economic slowdowns often leads to governmental policies which
in turn renew inflationary forces. The investment program of the Fund has been
developed in light of these considerations.
The Fund invests in a diversified group of companies whose earnings and/or
value of tangible assets are expected to grow faster than the rate of
inflation over the long term. T. Rowe Price believes the most attractive
opportunities which satisfy the Fund's objective are in companies which own or
develop natural resources and in companies where management has the
flexibility to adjust prices or the ability to control operating costs.
Some of the most important factors evaluated by T. Rowe Price in selecting
natural resource companies are the capability for expanded production,
superior exploration programs and production facilities, and the potential to
accumulate new resources. The Fund expects to invest in those natural resource
companies which own or develop energy sources (such as oil, gas, coal, and
uranium), precious metals, forest products, real estate, nonferrous metals,
diversified resources, and other basic commodities which, in the opinion of T.
Rowe Price, can be produced and marketed profitably during periods of rising
labor costs and prices. However, the percentage of the Fund's assets invested
in natural resource and related businesses versus the percentage invested in
non-resource companies may vary greatly depending upon economic and monetary
conditions and the outlook for inflation. The earnings of natural resource
companies may be expected to follow irregular patterns, because these
companies are particularly influenced by the forces of nature and
international politics. Companies which own or develop real estate might also
be subject to irregular fluctuations of earnings, because these companies are
affected by changes in the availability of money, interest rates, and other
factors.
Ordinarily, the assets of the Fund will be invested primarily in common
stocks, but the Fund may also invest in fixed income securities, convertible
securities, preferred stocks, warrants, asset-based securities, restricted
securities, and up to 25% of its total assets in the securities of foreign
issuers. The Fund's holdings are generally listed on a national securities
exchange. While the Fund may invest in unlisted securities, such securities
will usually have an established over-the-counter market.
Please see INVESTMENT POLICIES for a more complete description of the
Fund's investments.

<PAGE>

SUMMARY OF
FUND FEES
AND EXPENSES
THE FUND IS 100% NO-LOAD . . . you pay no fees to purchase, exchange or redeem
shares, nor any ongoing marketing (12b-1) expenses. Lower expenses benefit you
by increasing your investment return from the Fund.
Shown below are ALL expenses and fees the Fund incurred during its fiscal
year. Where applicable, expenses were restated to reflect current fees.
Expenses are expressed as a percent of average Fund net assets. More
information about these expenses may be found below and under EXPENSES AND
MANAGEMENT FEE and in the Statement of Additional Information under MANAGEMENT
FEE and LIMITATION ON FUND EXPENSES.

SHAREHOLDER TRANSACTION
EXPENSES ANNUAL FUND EXPENSES
Sales load "charge" on
purchases NONE Management fee 0.60%
Sales load "charge" on Total other (Shareholder
reinvested dividends NONE servicing, custodial,
Redemption fees NONE auditing, etc.)\SD\ 0.21%
Exchange fees NONE Distribution fees (12b-1) NONE
-------
TOTAL FUND EXPENSES 0.81%

\SD\The Fund charges a $5.00 fee for wire redemptions under $5,000, subject to
change without notice.

Example of
Fund expenses.
The following example illustrates the expenses you would incur on a $1,000
investment, assuming a 5% annual rate of return and redemption at the end of
each period shown. For example, expenses for the first year in the Fund would
be $8. THIS IS AN ILLUSTRATION ONLY. Actual expenses and performance may be
more or less than shown.

1 Year--$8 3 Years--$26 5 Years--$45 10 Years--$100

MANAGEMENT FEE. The Fund pays T. Rowe Price an investment management fee
consisting of a flat Individual Fund Fee of 0.25% of the Fund's net assets and
a Group Fee, defined on page 9 under EXPENSES AND MANAGEMENT FEE, of 0.35% as
of December 31, 1992. Thus, the total combined management fee for the Fund
would be 0.60% of net assets.

TRANSFER AGENT, SHAREHOLDER SERVICING, AND ADMINISTRATIVE COSTS. The Fund paid
fees to: (i) T. Rowe Price Services, Inc. (TRP Services) for transfer and
dividend disbursing agent functions and shareholder services for all accounts;
(ii) T. Rowe Price Retirement Plan Services, Inc. for subaccounting and
recordkeeping services for certain retirement accounts; and (iii) T. Rowe
Price for calculating the daily share price and maintaining the portfolio and
general accounting records of the Fund. These fees totaled approximately
$500,000, $182,000, and $76,000, respectively.

<PAGE>

PER-SHARE
DATA AND
OTHER
ANNUALIZED
RATIOS
The following table provides information about the Fund's financial
history. It is based on a single share outstanding throughout each fiscal year
(which ends on the last day of December). The most recent five years of the
table are part of the Fund's financial statements which are included in the
Fund's annual report and incorporated by reference into the Statement of
Additional Information, which is available to shareholders. The financial
statements in the annual report have been audited by Price Waterhouse,
independent accountants, whose unqualified report covers the most recent
five-year period.

<TABLE>
<CAPTION>
Investment Activities Distributions
Ratio of
Net Net
Realized Invest-
and Un- TOTAL Ratio of ment
NET realized FROM NET Expenses Income Shares
Year ASSET Net Gain INVEST- Net Net TOTAL ASSET to to Outstanding
Ended, VALUE, Invest- (Loss) MENT Invest- Real- DIS- VALUE, Average Average Portfolio at End of
December BEGINNING Ex- ment on In- ACTIV- ment ized TRIBU- END OF Net Net Turnover Year (in
31 OF YEAR Income penses Income vestments ITIES Income Gain TIONS YEAR Assets Assets Rate thousands)

INVESTMENT
POLICIES
The Fund's investment program and policies are subject to further restrictions
and risks which are described in the Statement of Additional Information. The
Fund will not make a material change in its investment objective or a change
in its fundamental policies without obtaining shareholder approval. The Fund's
investment program, unless otherwise specified, is not a fundamental policy
and may be changed without shareholder approval. Shareholders will be notified
of any material change in the investment program. In addition to the
investments described under Investment Program, the Fund's investments may
include, but are not limited to, those described below.

ASSET-BASED SECURITIES. The Fund may invest in debt securities, preferred
securities or convertible securities, the principal amount, redemption terms
or conversion terms of which are related to the market price of some natural
resource asset such as gold bullion. While the market prices for an
asset-based security and the related natural resource asset generally are
expected to move in the same direction, there may not be perfect correlation
in the two price movements. Asset-based securities may not be secured by a
security interest in or claim on the underlying natural resource asset. The
asset-based securities in which the Fund may invest may bear interest or pay
preferred dividends at below market (or even relatively nominal) rates.
Certain asset-based securities may be payable at maturity in cash at the
stated principal amount or, at the option of the holder, directly in a stated
amount of the asset to which it is related.

CASH RESERVES. While the Fund will remain primarily invested in common stocks,
it may, for temporary defensive purposes, invest in reserves without
limitation. The Fund may also establish and maintain reserves as T. Rowe Price
believes is advisable to facilitate the Fund's cash flow needs (e.g.,
redemptions, expenses, and purchases of portfolio securities). The Fund's
reserves will be invested in domestic and foreign money market instruments
rated within the top two credit categories by a national rating organization
or, if unrated, the T. Rowe Price equivalent.

<PAGE>

FOREIGN SECURITIES. The Fund may invest up to 25% of its total assets in
securities principally traded in markets outside the United States. While
investments in foreign securities are intended to reduce risk by providing
further diversification, such investments involve sovereign risk in addition
to credit and market risks. Sovereign risk includes local political or
economic developments, potential nationalization, withholding taxes on
dividend or interest payments, and currency blockage (which would prevent cash
from being brought back to the United States). Foreign investments may be
affected favorably or unfavorably by changes in currency rates and exchange
control regulations. Foreign companies may have less public or less reliable
information available about them and may be subject to less governmental
regulation than U.S. companies. Securities of foreign companies may be less
liquid or more volatile than securities of U.S. companies. In order to
facilitate the purchase and sale of foreign securities, the Fund may engage in
certain foreign currency transactions.

LENDING OF PORTFOLIO SECURITIES. As a fundamental policy, for the purpose of
realizing additional income, the Fund may lend securities with a value of up
to 30% of its total assets to broker-dealers or institutional investors. Any
such loan will be continuously secured by collateral at least equal to the
value of the security loaned. Such lending could result in delays in receiving
additional collateral or in the recovery of the securities or possible loss of
rights in the collateral should the borrower fail financially.

STOCK INDEX FUTURES CONTRACTS AND OPTIONS. The Fund may enter into futures
contracts (or options thereon) to hedge all or a portion of its portfolio, or
as an efficient means of regulating its exposure to the equity markets. The
Fund will not use futures contracts for speculation. The Fund will limit its
use of futures contracts so that: (1) no more than 5% of the Fund's total
assets would be committed to initial margin deposits or premiums on such
contracts and (2) immediately after entering into such contracts, no more than
30% of the Fund's total assets would be represented by such contracts. The
Fund may also write covered call options and purchase put options on
securities and financial indices. The aggregate market value of the Fund's
portfolio securities covering call options will not exceed 25% of the Fund's
net assets. Futures contracts and options can be highly volatile and could
result in reduction of the Fund's total return, and the Fund's attempt to use
such investments for hedging purposes may not be successful. Successful
futures strategies require the ability to predict future movements in
securities prices, interest rates and other economic factors. The Fund's
potential losses from the use of futures extends beyond its initial investment
in such contracts. Also, losses from options and futures could be significant
if the Fund is unable to close out its position due to disruptions in the
market or lack of liquidity.

PORTFOLIO TURNOVER. The Fund will not generally trade in securities for
short-term profits but, when circumstances warrant, securities may be
purchased and sold without regard to the length of time held. The Fund's
portfolio turnover rates for the years 1992, 1991, and 1990, were 16.9%, 9.0%,
and 9.0%, respectively.

FUNDAMENTAL INVESTMENT POLICIES. As a matter of fundamental policy, the Fund
will not: (1) purchase the securities of any company if, as a result, (a) the
Fund would own more than 10% of the outstanding securities of any class of any
issuer, (b) the Fund's holdings of that company would amount to more than 5%
of the Fund's total assets, or (c) the Fund would have more than 25% of the
value of its total assets concentrated in any one industry; (2) borrow money
except for temporary administrative purposes and then only in amounts not
exceeding 15% of the Fund's total assets valued at market; (3) in any manner
transfer as collateral any securities owned by the Fund except as may be
necessary in connection with permissible borrowings, which in no event will
exceed 15% of its assets valued at cost and, as an operating policy, no more
than 10% of its net assets valued at market; and (4) purchase additional
securities when money borrowed exceeds 5% of the Fund's total assets.

<PAGE>

PERFORMANCE
INFORMATION
The Fund may advertise total return figures on both a cumulative and
compound average annual basis and compare them to various indices (e.g., the
S&P 500), other mutual funds or other performance measures. (The total return
of the Fund consists of the change in its net asset value per share and the
net income it earns.) Cumulative total return compares the amount invested at
the beginning of a period with the amount redeemed at the end of the period,
assuming the reinvestment of all dividends and capital gain distributions. The
compound average annual total return indicates a yearly compound average of
the Fund's performance, derived from the cumulative total return. The annual
compound rate of return for the Fund may vary from any average. Further
information about the Fund's performance is contained in its annual report
which is available free of charge.

CAPITAL STOCK
The Fund is a Maryland corporation organized in 1968 and registered with the
Securities and Exchange Commission under the Investment Company Act of 1940 as
a diversified, open-end investment company, commonly known as a "mutual fund."
A mutual fund, such as the Fund, enables shareholders to: (1) obtain
professional management of investments, including T. Rowe Price's proprietary
research; (2) diversify their portfolio to a greater degree than would be
generally possible if they were investing as individuals and thereby reduce,
but not eliminate risks; and (3) simplify the recordkeeping and reduce
transaction costs associated with investments.

SHAREHOLDER RIGHTS. The Fund issues one class of capital stock, all shares of
which have equal rights with regard to voting, redemptions, dividends,
distributions, and liquidations. Fractional shares have voting rights and
participate in any distributions and dividends. Shareholders have no
preemptive or conversion rights; nor do they have cumulative voting rights.
When the Fund's shares are issued, they are fully paid and nonassessable. The
Fund does not routinely hold annual meetings of shareholders. The total
authorized capital stock of the Fund consists of 200,000,000 shares, each
having a par value of $1.00. As of December 31, 1992, there were 52,905
shareholders in the Fund and a total of 2,443,796 shareholders in the other 43
T. Rowe Price Funds.

<PAGE>

FUND OPERATIONS AND SERVICES
The following sections apply to this Fund and all T. Rowe Price Equity Funds.

NAV,
PRICING, AND
EFFECTIVE
DATE

If your order is received
in good order before 4:00
pm ET, you will receive
that day's NAV.

NET ASSET VALUE PER SHARE (NAV). The NAV per share, or share price, for the
Fund is normally determined as of 4:00 pm Eastern Time (ET) each day the New
York Stock Exchange is open. The Fund's share price is calculated by
subtracting its liabilities from its total assets and dividing the result by
the total number of shares outstanding. Among other things, the Fund's
liabilities include accrued expenses and dividends payable, and its total
assets include portfolio securities valued at market as well as income accrued
but not yet received.

PURCHASED SHARES are priced at that day's NAV if your request is
received before 4:00 pm ET in good order. (See Completing the New Account Form
and Opening a New Account.) If received later than 4:00 pm ET, shares will be
priced at the next business day's NAV.

REDEMPTIONS are priced at that day's NAV if your request is received
before 4:00 pm ET in good order at the transfer agent's offices at T. Rowe
Price Account Services, P.O. Box 89000, Baltimore, MD 21289\-0220. If received
after 4:00 pm ET, shares will be priced at the next business day's NAV.
Also, we cannot accept requests which specify a particular date for
purchase or redemption or which specify any special conditions. If your
redemption request cannot be accepted, you will be notified and given further
instructions.

EXCHANGES are normally priced in the same manner as purchases and
redemptions. However, if you are exchanging into a bond or money fund and the
release of your exchange proceeds is delayed for the allowable five business
days (see Receiving Your Proceeds), you will not begin to earn dividends until
the sixth business day after the exchange.

The Fund reserves the right to change the time at which purchases,
redemptions, and exchanges are priced if the New York Stock Exchange closes at
a time other than 4:00 pm ET or an emergency exists.

RECEIVING
YOUR
PROCEEDS
Redemption proceeds are mailed to the address or sent by wire or ACH
transfer to the bank account designated on your New Account Form. They are
generally sent the next business day after your redemption request is received
in good order. Proceeds sent by wire will be credited to your bank account the
next business day and proceeds sent by ACH transfer will be credited the
second day after the sale. In addition, under unusual conditions, or when
deemed to be in the best interests of the Fund, redemption proceeds may not be
sent for up to five business days after your request is received to allow for
the orderly liquidation of securities. Requests by mail for wire redemptions
(unless previously authorized) must have a signature guarantee.

<PAGE>

DIVIDENDS AND
DISTRIBUTIONS
The Fund distributes all net investment income and capital gains to
shareholders. Dividends from net investment income and distributions from
capital gains, if any, are normally declared in December and paid in January.
However, dividends from net investment income for the Balanced, Growth &
Income, Equity Income, and Dividend Growth Funds will be declared and paid
quarterly. Dividends and distributions declared by the Fund will be reinvested
unless you choose an alternative payment option on the New Account Form.
Dividends not reinvested are paid by check or transmitted to your bank account
via ACH. If the U.S. Postal Service cannot deliver your check, or if your
check remains uncashed for six months, the Fund reserves the right to reinvest
your distribution check in your account at the then current NAV and to
reinvest all subsequent distributions in shares of the Fund.

TAXES
Form 1099-DIV
will be mailed
to you in January.

DIVIDENDS AND DISTRIBUTIONS. In January, the Fund will mail you Form 1099-DIV
indicating the federal tax status of your dividends and capital gain
distributions. Generally, dividends and distributions are taxable in the year
they are paid. However, any dividends and distributions paid in January but
declared during the prior three months are taxable in the year they are
declared. Dividends and distributions are taxable to you regardless of whether
they are taken in cash or reinvested. Dividends and short-term capital gain
distributions are taxable as ordinary income; long-term capital gain
distributions are taxable as long-term capital gains. The capital gain holding
period is determined by the length of time the Fund has held the securities,
not the length of time you have owned Fund shares.

SHARES SOLD. A redemption or exchange of Fund shares is treated as a sale for
tax purposes which will result in a short or long-term capital gain or loss,
depending on how long you have owned the shares. In January, the Fund will
mail you Form 1099-B indicating the trade date and proceeds from all sales and
exchanges.

UNDISTRIBUTED INCOME AND GAINS. At the time of purchase, the share price of
the Fund may reflect undistributed income, capital gains or unrealized
appreciation of securities. Any income or capital gains from these amounts
which are later distributed to you are fully taxable.

FOREIGN TRANSACTIONS (ALL FUNDS OTHER THAN NEW AMERICA GROWTH FUND).
Distributions resulting from the sale of certain foreign currencies and debt
securities, to the extent of foreign exchange gains, are taxed as ordinary
income or loss. If the Fund pays nonrefundable taxes to foreign governments
during the year, the taxes will reduce the Fund's dividends.

CORPORATIONS. All or part of the Fund's dividends will be eligible for the 70%
deduction for dividends received by corporations.

TAX-QUALIFIED RETIREMENT PLANS. Tax-qualified retirement plans generally will
not be subject to federal tax liability on either distributions from the Fund
or redemption of shares of the Fund. Rather, participants in such plans will
be taxed when they begin taking distributions from the plans.

MANAGEMENT
OF THE FUND
INVESTMENT MANAGER. T. Rowe Price is responsible for selection and management
of the Fund's portfolio investments. T. Rowe Price serves as investment
manager to a variety of individual and institutional investors, including
limited and real estate partnerships and other mutual funds.

BOARD OF DIRECTORS/TRUSTEES. The management of the Fund's business and affairs
is the responsibility of the Fund's Board of Directors/Trustees.

<PAGE>

PORTFOLIO TRANSACTIONS. Decisions with respect to the purchase and sale of the
Fund's portfolio securities are made by T. Rowe Price. The Fund's Board of
Directors/Trustees has authorized T. Rowe Price to utilize certain brokers
indirectly related to T. Rowe Price in the capacity of broker in connection
with the execution of the Fund's portfolio transactions.

INVESTMENT SERVICES. T. Rowe Price Investment Services, Inc., a wholly-owned
subsidiary of T. Rowe Price, is the distributor for this Fund as well as all
other T. Rowe Price Funds.

TRANSFER AND DIVIDEND DISBURSING AGENT, SHAREHOLDER SERVICING AND
ADMINISTRATIVE. TRP Services, a wholly-owned subsidiary of T. Rowe Price,
serves the Fund as transfer and dividend disbursing agent. T. Rowe Price
Retirement Plan Services, Inc., a wholly-owned subsidiary of T. Rowe Price,
performs subaccounting and recordkeeping services for shareholder accounts in
certain retirement plans investing in the Price Funds. T. Rowe Price
calculates the daily share price and maintains the portfolio and general
accounting records of the Fund. The address for TRP Services and T. Rowe Price
Retirement Plan Services, Inc. is 100 East Pratt Street, Baltimore, Maryland
21202.

EXPENSES AND
MANAGEMENT
FEE
The Fund bears all expenses of its operations other than those incurred by T.
Rowe Price under its Investment Management Agreement with T. Rowe Price. Fund
expenses include: the management fee; shareholder servicing fees and expenses;
custodian and accounting fees and expenses; legal and auditing fees; expenses
of preparing and printing prospectuses and shareholder reports; registration
fees and expenses; proxy and annual meeting expenses, if any; and
directors'/trustees' fees and expenses.

MANAGEMENT FEE. The Fund pays T. Rowe Price an investment management fee
consisting of an Individual Fund Fee and a Group Fee. See Summary of Fund Fees
and Expenses for the Individual Fund Fee. The Group Fee varies and is based on
the combined net assets of all mutual funds sponsored and managed by T. Rowe
Price and Rowe Price-Fleming International, Inc., excluding T. Rowe Price
Spectrum Fund, Inc., and any institutional or private label mutual funds, and
distributed by T. Rowe Price Investment Services, Inc..

The Fund pays, as its portion of the Group Fee, an amount equal to the
ratio of its daily net assets to the daily net assets of all the Price Funds.
The table below shows the annual Group Fee rate at various asset levels of the
combined Price Funds:
0.480% First $1 billion 0.350% Next $2 billion
0.450% Next $1 billion 0.340% Next $5 billion
0.420% Next $1 billion 0.330% Next $10 billion
0.390% Next $1 billion 0.320% Next $10 billion
0.370% Next $1 billion 0.310% Thereafter
0.360% Next $2 billion

Based on combined Price Funds' assets of approximately $26.2 billion at
December 31, 1992, the Group Fee was 0.35%.

<PAGE>

SHAREHOLDER
SERVICES
The following is a brief summary of services available to shareholders in the
T. Rowe Price Funds, some of which may be restricted or unavailable to
retirement plan accounts. You must authorize most of these services on an
Account Form. Services may be modified or withdrawn at any time without
notice. Please verify all transactions on your confirmation statements
promptly after receiving them. Any discrepancies must be reported to
Shareholder Services immediately.

AUTOMATIC ASSET BUILDER. You can have us move $50 or more on the same day each
month from your bank account or invest $50 or more from your paycheck into any
T. Rowe Price Fund.

Investor Services
1-800-638-5660
1-410-547-2308

DISCOUNT BROKERAGE SERVICE. You can trade stocks, bonds, options, CDs,
Treasury Bills, and precious metals at substantial savings through our
Discount Brokerage Service. Call Investor Services for more information.

EXCHANGE SERVICE. You can move money from one account to an existing
identically registered account or open a new identically registered account.
Remember that, for tax purposes, an exchange is treated as a redemption and a
new purchase. Exchanges into a state tax-free fund are limited to investors
residing in states where those funds are qualified for sale. Some of the T.
Rowe Price Funds may impose a redemption fee of 1\-2%, payable to such Funds,
on shares held for less than one year.

RETIREMENT PLANS. For details on IRAs, please call Investor Services. For
details on all other retirement plans, please call our Trust Company at
1-800-492-7670.

Shareholder Services
1-800-225-5132
1-410-625-6500

TELEPHONE SERVICES. The following services are explained fully in the Services
Guide, which is mailed to new T. Rowe Price investors. If you don't have a
copy, please call Shareholder Services. (All telephone calls to Shareholder
Services and Investor Services are recorded in order to protect you, the Fund,
and its agents.)

24-HOUR ACCOUNT SERVICE. Tele*Access\rs\ provides information on yields,
prices, latest dividends, account balances, and last transaction as well as
the ability to initiate purchase, redemption and exchange orders (if you have
established Telephone Services). Just call 1-800-638-2587 and press the
appropriate codes into your touch-tone phone. PC*Access\rs\ provides the same
information as Tele*Access, but on a personal computer.

ELECTRONIC TRANSFERS. We offer three free methods for purchasing or redeeming
Fund shares in amounts of $100 to $100,000 through ACH transfers between your
bank checking and Fund accounts:
--By calling Shareholder Services during business hours (TELE-CONNECT\rs\);
--By touch-tone phone any day, any time (TELE*ACCESS);
--By personal computer any day, any time (PC*ACCESS).

If your bank checking and fund account are not identically registered, you
will need a signature guarantee to establish this service.

WIRE TRANSFERS. Wire transfers can be processed through bank wires (a $5
charge applies to redemption amounts under $5,000, and your bank may charge
you for receiving wires). While this is usually the quickest transfer method,
the Fund reserves the right to temporarily suspend wires under unusual
circumstances.

CONDITIONS
OF YOUR
PURCHASE
ACCOUNT BALANCE (ALL FUNDS OTHER THAN NEW ERA FUND). If your account drops
below $1,000 for three months or more, the Fund has the right to close your
account, after giving 60 days' notice, unless you make additional investments
to bring your account value to $1,000 or more.

<PAGE>

BROKER-DEALERS. Purchases or redemptions through broker-dealers, banks, and
other institutions may be subject to service fees imposed by those entities.
No such fees are charged by T. Rowe Price Investment Services or the Fund if
shares are purchased or redeemed directly from the Fund.

EXCESSIVE TRADING AND EXCHANGE LIMITATIONS. To protect Fund shareholders
against disruptions in portfolio management which might occur as a result of
too frequent buy and sell activity and to minimize Fund expenses associated
with such transaction activity, the Fund prohibits excessive trading in any
account (or group of accounts managed by the same person). Within any 120
consecutive-day period, investors may not exchange between Price Funds more
than twice or buy and sell the Price Funds more than once, if the transactions
involve substantial assets or a substantial portion of the assets in the
account or accounts. This policy is applied on a multi-fund basis. Any
transactions above and beyond these guidelines will be considered to be
excessive trading, and the investor may be prohibited from making additional
purchases or exercising the exchange privilege.

This policy does not apply to exchanges solely between, or purchases and sales
solely of, the Price Money Funds, nor does it apply to simple redemptions from
any Fund.

NONPAYMENT. If your check, wire or ACH transfer does not clear, or if
payment is not received for any telephone purchase, the transaction will be
cancelled and you will be responsible for any loss the Fund or Investment
Services incurs. If you are already a shareholder, the Fund can redeem shares
from any identically registered account in this Fund or any other T. Rowe
Price Fund as reimbursement for any loss incurred. You may be prohibited or
restricted from making future purchases in any of the T. Rowe Price
Funds.

U.S. DOLLARS. All purchases must be paid for in U.S. dollars, and checks must
be drawn on U.S. banks.

REDEMPTIONS IN EXCESS OF $250,000. Redemption proceeds are normally paid in
cash. However, if you redeem more than $250,000, or 1% of the Fund's net
assets, in any 90-day period, the Fund may in its discretion: (1) pay the
difference between the redemption amount and the lesser of these two figures
with securities of the Fund or (2) delay the transmission of your proceeds for
up to five business days after your request is received.

SIGNATURE GUARANTEES. A signature guarantee is designed to protect you and the
Fund by verifying your signature. You will need one to:
(1) Establish certain services after the account is opened.
(2)Redeem over $50,000 by written request (unless you have authorized
telephone services).
(3)Redeem or exchange shares when proceeds are: (i) being mailed to an
address other than the address of record, (ii) made payable to other than
the registered owner(s), or (iii) being sent to a bank account other than
the bank account listed on your fund account.
(4)Transfer shares to another owner.
(5)Send us written instructions asking us to wire redemption proceeds
(unless previously authorized).
(6)Establish Electronic Transfers when your bank checking and fund account
are not identically registered.

These requirements may be waived or modified in certain instances.

Acceptable guarantors are all eligible guarantor institutions as defined
by the Securities Exchange Act of 1934 such as: commercial banks which are
FDIC members, trust companies, firms which are members of a domestic stock
exchange, and foreign branches of any of the above. We cannot accept
guarantees from institutions or individuals who do not provide reimbursement
in the case of fraud, such as notaries public.

<PAGE>

TELEPHONE EXCHANGE AND REDEMPTION. Telephone exchange and redemption are
established automatically when you sign the New Account Form unless you check
the box which states that you do not want these services. The Fund uses
reasonable procedures (including shareholder identity verification) to confirm
that instructions given by telephone are genuine. If these procedures are not
followed, it is the opinion of certain regulatory agencies that the Fund may
be liable for any losses that may result from acting on the instructions
given. All conversations are recorded, and a confirmation is sent within five
business days after the telephone transaction.

TEN-DAY HOLD. The mailing of proceeds for redemption requests involving any
shares purchased by personal, corporate or government check, or ACH transfer
is generally subject to a 10-day delay to allow the check or transfer to
clear. The 10-day clearing period does not affect the trade date on which your
purchase or redemption order is priced, or any dividends and capital gain
distributions to which you may be entitled through the date of redemption. If
your redemption request was sent by mail or mailgram, proceeds will be mailed
no later than the seventh calendar day following receipt unless the check or
ACH transfer has not cleared. The 10-day hold does not apply to purchases made
by wire, Automatic Asset Builder-Paycheck, or cashier's, treasurer's, or
certified checks.

THE FUND AND ITS AGENTS RESERVE THE RIGHT TO: (1) reject any purchase or
exchange, cancel any purchase due to nonpayment, or reject any exchange or
redemption where the Fund has not received payment; (2) waive or lower the
investment minimums; (3) accept initial purchases by telephone or mailgram;
(4) waive the limit on subsequent purchases by telephone; (5) reject any
purchase or exchange prior to receipt of the confirmation statement; (6)
redeem your account (see Tax Identification Number); (7) modify the conditions
of purchase at any time; and (8) reject any check not made directly payable to
the Fund or T. Rowe Price (call Shareholder Services for more information).

COMPLETING
THE NEW
ACCOUNT FORM
You must provide your
tax ID number and sign
the New Account Form.

TAX IDENTIFICATION NUMBER. We must have your correct social security or
corporate tax identification number and a SIGNED New Account Form or W-9 Form.
Otherwise, federal law requires the Fund to withhold a percentage (currently
31%) of your dividends, capital gain distributions, and redemptions, and may
subject you to a fine. You also will be prohibited from opening another
account by exchange. If this information is not received within 60 days after
your account is established, your account may be redeemed, priced at the NAV
on the date of redemption.

Unless you otherwise request, one shareholder report will be mailed to
multiple account owners with the same tax identification number and same zip
code and to those shareholders who have requested that their accounts be
combined with someone else's for financial reporting.

ACCOUNT REGISTRATION. If you own other T. Rowe Price Funds, make certain the
registration (name and account type) is identical to your other funds for easy
exchange. REMEMBER TO SIGN THE FORM EXACTLY AS THE NAME APPEARS IN THE
REGISTRATION SECTION.

SERVICES. By signing up for services on the New Account Form, rather than
after the account is opened, you will avoid having to complete a separate form
and obtain a signature guarantee (see Conditions of Your Purchase).

<PAGE>

OPENING A NEW
ACCOUNT
Minimum initial investment: $2,500 ($1,000 for retirement plans and UGMA/UTMA
accounts); $50 per month for Automatic Asset Builder accounts--see Shareholder
Services)

Checks payable to
T. Rowe Price Funds.

By Mail Send your New Account Form and check to:

REGULAR MAIL MAILGRAM, EXPRESS, REGISTERED, OR
CERTIFIED MAIL
T. Rowe Price Account Services T. Rowe Price Account Services
P.O. Box 17300 10090 Red Run Boulevard
Baltimore, MD 21298-9353 Owings Mills, MD 21117

Investor Services
1-800-638-5660
1-410-547-2308

By Wire Call Investor Services for an account number and use Wire Address
below. Then, complete the New Account Form and mail it to one of
the addresses above. (Not applicable to retirement plans.)

WIRE ADDRESS Morgan Guaranty Trust Company of New York
(to give to your bank): ABA #021000238
T. Rowe Price (fund name)/AC-00153938
Account name(s) and account number

Shareholder Services
1-800-225-5132
1-410-625-6500

By Exchange Call Shareholder Services. The new account will have the same
registration as the account from which you are exchanging.
Services for the new account may be carried over by telephone
request if preauthorized on the existing account. See Excessive
Trading and Exchange Limitations under Conditions of Your
Purchase.
In Person Drop off your New Account Form and obtain a receipt at a T.
Rowe Price Investor Center:

101 East Lombard Street T. Rowe Price Financial Center
First Floor First Floor
Baltimore, MD 10090 Red Run Boulevard
Owings Mills, MD

Farragut Square ARCO Tower
First Floor 31st Floor
900 17th Street, NW 515 South Flower Street
Washington, DC Los Angeles, CA

PURCHASING
ADDITIONAL
SHARES

By Wire Call Shareholder Services or
use the Wire Address in Opening
a New Account.
By Mail Indicate your account number
and the Fund name on your
check. Mail it to us at the
address below with the stub
from a statement confirming a
prior transaction or a note
stating that you want to
purchase shares in that Fund
and giving us the account
number.

Shareholder Services
1-800-225-5132
1-410-625-6500

Minimum: $100 ($50 for retirement plans)

T. Rowe Price Funds
Account Services
P.O. Box 89000
Baltimore, MD 21289-1500

<PAGE>

By ACH Use Tele*Access, PC*Access or
Transfer call Shareholder Services (if
you have established Telephone
Services) for ACH transfers.

By Automatic Fill out the Automatic Asset
Asset Builder Builder section on the New
Account or Shareholder Services
Form.

Minimum: $5,000

By Phone Call Shareholder Services.

EXCHANGING
AND REDEEMING
SHARES

By Phone Call Shareholder Services.
If you find our phones busy
during unusually volatile
markets, please consider
placing your order by express
mail, mailgram, Tele*Access or
PC*Access if you have
authorized telephone services.
For exchange policy, see
Excessive Trading and Exchange
Limitations under Conditions of
Your Purchase.

Redemption proceeds can be
mailed, sent by Electronic
Transfer, or wired to your
bank. The Fund charges a $5.00
fee for wire redemptions under
$5,000, subject to change
without notice. Your bank may
also charge you for receiving
wires.

Shareholder Services
1-800-225-5132
1-410-625-6500

T. Rowe Price
Trust Company
1-800-492-7670
1-410-625-6585

By Mail Indicate account name(s) and
numbers, fund name(s), and
exchange or redemption amount.
For exchanges, indicate the
accounts you are exchanging
from and to along with the
amount. We require the
signature of all owners exactly
as registered, and possibly a
signature guarantee (see
Signature Guarantees under
Conditions of Your Purchase).

NOTE: Distributions from
retirement accounts, including
IRAs, must be in writing.
Please call Shareholder
Services to obtain an IRA
Distribution Request Form. For
employer-sponsored retirement
accounts, call T. Rowe Price
Trust Company or your plan
administrator for instructions.
Shareholders holding previously
issued certificates must
conduct transactions by mail.
If you lose a stock
certificate, you may incur an
expense to replace it. Call
Shareholder Services for
further information.

MAILING ADDRESSES:
REGULAR MAIL
Non-Retirement
and IRA Accounts
T. Rowe Price Account Services
P.O. Box 89000
Baltimore, MD 21289-0220

Employer-Sponsored
Retirement Accounts
T. Rowe Price Trust Company
P.O. Box 89000
Baltimore, MD 21289-0300

MAILGRAM, EXPRESS, REGISTERED,
OR CERTIFIED MAIL
All Accounts
T. Rowe Price Account Services
10090 Red Run Boulevard
Owings Mills, MD 21117

To Open an Account: Prospectus
Investor Services
1-800-638-5660 T. Rowe Price
547-2308 in Baltimore New Era FundR

Yield & Prices:
Tele*AccessR
24 hours, 7 days a week
1-800-638-2587 May 1, 1993
625-7676 in Baltimore Revised to
February 21, 1994
Existing Account:
Shareholder Services
1-800-225-5132
625-6500 in Baltimore

Investor Centers:

101 East Lombard Street
First Floor
Baltimore, Maryland

Farragut Square
First Floor
900 17 Street, NW
Washington, D.C.

T. Rowe Price Financial Center
First Floor
10090 Red Run Boulevard
Owings Mills, Maryland

ARCO Tower
31st Floor
515 South Flower Street
Los Angeles, California

T. Rowe Price
Invest With ConfidenceR

STATEMENT OF ADDITIONAL INFORMATION

T. Rowe Price New Era Fund, Inc.R

(the "Fund")

This Statement of Additional Information is not a prospectus but should
be read in conjunction with the Fund's prospectus dated May 1, 1993, revised
to February 21, 1994, which may be obtained from T. Rowe Price Investment
Services, Inc., 100 East Pratt Street, Baltimore, Maryland 21202.

The date of this Statement of Additional Information is May 1, 1993,
revised to February 21, 1994.

<PAGE>
<PAGE 2>
TABLE OF CONTENTS

Page Page

Asset-Based Securities . . . . . .13 Investment Program . . . . . . . .3
Call and Put Options . . . . . . . 3 (page 2 in Prospectus)
Custodian. . . . . . . . . . . . .29 Investment Restrictions. . . . . 17
Dealer Options . . . . . . . . . . 7 Legal Counsel. . . . . . . . . . 37
Distributor for Fund . . . . . . .28 Lending of Portfolio Securities. 13
Dividends. . . . . . . . . . . . .35 Management of Fund . . . . . . . 25
Federal and State Registration Net Asset Value Per Share34
of Shares. . . . . . . . . . . .37 Organization of the Fund . . . . 36
Foreign Currency Transactions. . .16 Portfolio Transactions . . . . . 29
Foreign Securities . . . . . . . .15 Pricing of Securities. . . . . . 34
Futures Contracts. . . . . . . . . 8 Principal Holders of Securities. 26
Independent Accountants. . . . . .37 Private Placements (Restricted . 15
Investment Management Services . .26 Securities)
Investment Objective . . . . . . . 2 Tax Status . . . . . . . . . . . 35
(page 2 in Prospectus) (page 8 in Prospectus)
Investment Objective and Policies. 2 Warrants . . . . . . . . . . . . 14
Investment Performance . . . . . .20

INVESTMENT OBJECTIVE AND POLICIES

The following information supplements the discussion of the Fund's
investment objective and policies discussed on pages 2, 4, and 5 of the
prospectus. Unless otherwise specified, the investment program and
restrictions of the Fund are not fundamental policies. The operating policies
of the Fund are subject to change by its Board of Directors without
shareholder approval. However, shareholders will be notified of a material
change in an operating policy. The fundamental policies of the Fund may not
be changed without the approval of at least a majority of the outstanding
shares of the Fund or, if it is less, 67% of the shares represented at a
meeting of shareholders at which the holders of 50% or more of the shares are
represented.

INVESTMENT OBJECTIVE

The Fund's investment objective is to seek long-term growth of capital
through investment primarily in common stocks of companies which own or
develop natural resources and other basic commodities, and other selected
non-resource growth companies. Current income is not a factor in the
selection of stocks for investment by the Fund.

The Fund's share price will fluctuate with changing market conditions,
and your investment may be worth more or less when redeemed than when
purchased. The Fund should not be relied upon as a complete investment
program, nor used to play short-term swings in the stock market. The Fund
cannot guarantee it will achieve its investment objective.

INVESTMENT PROGRAM

In addition to the investments described in the Fund's prospectus, the
Fund may invest in the following:

Writing Covered Call Options

The Fund may write (sell) "covered" call options and purchase options
to close out options previously written by the Fund. In writing covered call
options, the Fund expects to generate additional premium income which should

<PAGE 3>
serve to enhance the Fund's total return and reduce the effect of any price
decline of the security involved in the option. Covered call options will
generally be written on securities which, in the opinion of the Fund's
investment manager, T. Rowe Price Associates, Inc. ("T. Rowe Price"), are not
expected to have any major price increases in the near future but which, over
the long term, are deemed to be attractive investments for the Fund.

A call option gives the holder (buyer) the "right to purchase" a
security at a specified price (the exercise price), at expiration of the
option (European style) or at any time until a certain date (the expiration
date) (American style). So long as the obligation of the writer of a call
option continues, he may be assigned an exercise notice by the broker-dealer
through whom such option was sold, requiring him to deliver the underlying
security against payment of the exercise price. This obligation terminates
upon the expiration of the call option, or such earlier time at which the
writer effects a closing purchase transaction by repurchasing an option
identical to that previously sold. To secure his obligation to deliver the
underlying security in the case of a call option, a writer is required to
deposit in escrow the underlying security or other assets in accordance with
the rules of a clearing corporation. The Fund will write only covered call
options. This means that the Fund will own the security subject to the option
or an option to purchase the same underlying security having an exercise price
equal to or less than the exercise price of the "covered" option, or will
establish and maintain with its custodian for the term of the option, an
account consisting of cash, U.S. government securities or other liquid
high-grade debt obligations having a value equal to the fluctuating market
value of the optioned securities. In order to comply with the requirements of
several states, the Fund will not write a covered call option if, as a result,
the aggregate market value of all portfolio securities covering call or put
options exceeds 25% of the market value of the Fund's net assets. Should
these state laws change or should the Fund obtain a waiver of their
application, the Fund reserves the right to increase this percentage. In
calculating the 25% limit, the Fund will offset, against the value of assets
covering written calls and puts, the value of purchased calls and puts on
identical securities with identical maturity dates.

Portfolio securities on which call options may be written will be
purchased solely on the basis of investment considerations consistent with the
Fund's investment objective. The writing of covered call options is a
conservative investment technique believed to involve relatively little risk
(in contrast to the writing of naked or uncovered options, which the Fund will
not do), but capable of enhancing the Fund's total return. When writing a
covered call option, the Fund, in return for the premium, gives up the
opportunity for profit from a price increase in the underlying security above
the exercise price, but conversely retains the risk of loss should the price
of the security decline. Unlike one who owns securities not subject to an
option, the Fund has no control over when it may be required to sell the
underlying securities, since it may be assigned an exercise notice at any time
prior to the expiration of its obligation as a writer. If a call option which
the Fund has written expires, the Fund will realize a gain in the amount of
the premium; however, such gain may be offset by a decline in the market value
of the underlying security during the option period. If the call option is
exercised, the Fund will realize a gain or loss from the sale of the
underlying security. The Fund does not consider a security covered by a call
to be "pledged" as that term is used in the Fund's policy which limits the
pledging or mortgaging of its assets.

The premium received is the market value of an option. The premium the
Fund will receive from writing a call option will reflect, among other things,
the current market price of the underlying security, the relationship of the
exercise price to such market price, the historical price volatility of the
underlying security, and the length of the option period. Once the decision
to write a call option has been made, T. Rowe Price, in determining whether a

<PAGE 4>
particular call option should be written on a particular security, will
consider the reasonableness of the anticipated premium and the likelihood that
a liquid secondary market will exist for those options. The premium received
by the Fund for writing covered call options will be recorded as a liability
of the Fund. This liability will be adjusted daily to the option's current
market value, which will be the latest sale price at the time at which the net
asset value per share of the Fund is computed (close of the New York Stock
Exchange), or, in the absence of such sale, the latest asked price. The
option will be terminated upon expiration of the option, the purchase of an
identical option in a closing transaction, or delivery of the underlying
security upon the exercise of the option.

Closing transactions will be effected in order to realize a profit on
an outstanding call option, to prevent an underlying security from being
called, or, to permit the sale of the underlying security. Furthermore,
effecting a closing transaction will permit the Fund to write another call
option on the underlying security with either a different exercise price or
expiration date or both. If the Fund desires to sell a particular security
from its portfolio on which it has written a call option, or purchased a put
option, it will seek to effect a closing transaction prior to, or concurrently
with, the sale of the security. There is, of course, no assurance that the
Fund will be able to effect such closing transactions at a favorable price.
If the Fund cannot enter into such a transaction, it may be required to hold a
security that it might otherwise have sold. When the Fund writes a covered
call option, it runs the risk of not being able to participate in the
appreciation of the underlying security above the exercise price, as well as
the risk of being required to hold onto securities that are depreciating in
value. This could result in higher transaction costs. The Fund will pay
transaction costs in connection with the writing of options to close out
previously written options. Such transaction costs are normally higher than
those applicable to purchases and sales of portfolio securities.

Call options written by the Fund will normally have expiration dates
of less than nine months from the date written. The exercise price of the
options may be below, equal to, or above the current market values of the
underlying securities at the time the options are written. From time to time,
the Fund may purchase an underlying security for delivery in accordance with
an exercise notice of a call option assigned to it, rather than delivering
such security from its portfolio. In such cases, additional costs may be
incurred.

The Fund will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from the writing of the option. Because increases in the market
price of a call option will generally reflect increases in the market price of
the underlying security, any loss resulting from the repurchase of a call
option is likely to be offset in whole or in part by appreciation of the
underlying security owned by the Fund.

Writing Covered Put Options

Although the Fund has no current intention, in the foreseeable future,
of writing American or European style covered put options and purchasing put
options to close out options previously written by the Fund, the Fund reserves
the right to do so. A put option gives the purchaser of the option the right
to sell, and the writer (seller) has the obligation to buy, the underlying
security at the exercise price during the option period (American style) or at
the expiration of the option (European style). So long as the obligation of
the writer continues, he may be assigned an exercise notice by the
broker-dealer through whom such option was sold, requiring him to make payment
of the exercise price against delivery of the underlying security. The

<PAGE 5>
operation of put options in other respects, including their related risks and
rewards, is substantially identical to that of call options.

The Fund would write put options only on a covered basis, which means
that the Fund would maintain in a segregated account cash, U.S. government
securities or other liquid high-grade debt obligations in an amount not less
than the exercise price or the Fund will own an option to sell the underlying
security subject to the option having an exercise price equal to or greater
than the exercise price of the "covered" option at all times while the put
option is outstanding. (The rules of a clearing corporation currently require
that such assets be deposited in escrow to secure payment of the exercise
price.) The Fund would generally write covered put options in circumstances
where T. Rowe Price wishes to purchase the underlying security for the Fund's
portfolio at a price lower than the current market price of the security. In
such event the Fund would write a put option at an exercise price which,
reduced by the premium received on the option, reflects the lower price it is
willing to pay. Since the Fund would also receive interest on debt securities
maintained to cover the exercise price of the option, this technique could be
used to enhance current return during periods of market uncertainty. The risk
in such a transaction would be that the market price of the underlying
security would decline below the exercise price less the premiums received.
Such a decline could be substantial and result in a significant loss to the
Fund. In addition, the Fund, because it does not own the specific securities
which it may be required to purchase in exercise of the put, cannot benefit
from appreciation, if any, with respect to such specific securities. In order
to comply with the requirements of several states, the Fund will not write a
covered put option if, as a result, the aggregate market value of all
portfolio securities covering put or call options exceeds 25% of the market
value of the Fund's net assets. Should these state laws change or should the
Fund obtain a waiver of their application, the Fund reserves the right to
increase this percentage. In calculating the 25% limit, the Fund will offset,
against the value of assets covering written puts and calls, the value of
purchased puts and calls on identical securities with identical maturity
dates.

Purchasing Put Options

The Fund may purchase American or European style put options. As the
holder of a put option, the Fund has the right to sell the underlying security
at the exercise price at any time during the option period. The Fund may
enter into closing sale transactions with respect to such options, exercise
them or permit them to expire. The Fund may purchase put options for
defensive purposes in order to protect against an anticipated decline in the
value of its securities. An example of such use of put options is provided
below.

<PAGE>
<PAGE 6>
The Fund may purchase a put option on an underlying security (a
"protective put") owned by the Fund as a defensive technique in order to
protect against an anticipated decline in the value of the security. Such
hedge protection is provided only during the life of the put option when the
Fund, as the holder of the put option, is able to sell the underlying security
at the put exercise price regardless of any decline in the underlying
security's market price. For example, a put option may be purchased in order
to protect unrealized appreciation of a security where T. Rowe Price deems it
desirable to continue to hold the security because of tax considerations. The
premium paid for the put option and any transaction costs would reduce any
capital gain otherwise available for distribution when the security is
eventually sold.

Although the Fund has no current intention, in the foreseeable future,
of purchasing put options at a time when the Fund does not own the underlying
security, it reserves the right to do so. By purchasing put options on a
security it does not own, the Fund seeks to benefit from a decline in the
market price of the underlying security. If the put option is not sold when
it has remaining value, and if the market price of the underlying security
remains equal to or greater than the exercise price during the life of the put
option, the Fund will lose its entire investment in the put option. In order
for the purchase of a put option to be profitable, the market price of the
underlying security must decline sufficiently below the exercise price to
cover the premium and transaction costs, unless the put option is sold in a
closing sale transaction.

To the extent required by the laws of certain states, the Fund may not
be permitted to commit more than 5% of its assets to premiums when purchasing
call and put options. Should these state laws change or should the Fund
obtain a waiver of their application, the Fund may commit more than 5% of its
assets to premiums when purchasing call and put options. The premium paid by
the Fund when purchasing a put option will be recorded as an asset of the
Fund. This asset will be adjusted daily to the option's current market value,
which will be the latest sale price at the time at which the net asset value
per share of the Fund is computed (close of New York Stock Exchange), or, in
the absence of such sale, the latest bid price. This asset will be terminated
upon expiration of the option, the selling (writing) of an identical option in
a closing transaction, or the delivery of the underlying security upon the
exercise of the option.

Purchasing Call Options

Although the Fund has no current intention, in the foreseeable future,
of purchasing American or European style call options, the Fund reserves the
right to do so. As the holder of a call option, the Fund has the right to
purchase the underlying security at the exercise price at any time during the
option period (American style) or at the expiration of the option (European
style). The Fund may enter into closing sale transactions with respect to
such options, exercise them or permit them to expire. The Fund may purchase
call options for the purpose of increasing its current return or avoiding tax
consequences which could reduce its current return. The Fund may also
purchase call options in order to acquire the underlying securities. Examples
of such uses of call options are provided below.

Call options may be purchased by the Fund for the purpose of
acquiring the underlying securities for its portfolio. Utilized in this
fashion, the purchase of call options enables the Fund to acquire the security
at the exercise price of the call option plus the premium paid. At times the
net cost of acquiring securities in this manner may be less than the cost of
acquiring the securities directly. This technique may also be useful to the
Fund in purchasing a large block of securities that would be more difficult to
acquire by direct market purchases. So long as it holds such a call option
rather than the underlying security itself, the Fund is partially protected

<PAGE 7>
from any unexpected decline in the market price of the underlying security and
in such event could allow the call option to expire, incurring a loss only to
the extent of the premium paid for the option.

To the extent required by the laws of certain states, the Fund may not
be permitted to commit more than 5% of its assets to premiums when purchasing
call and put options. Should these state laws change or should the Fund
obtain a waiver of their application, the Fund may commit more than 5% of its
assets to premiums when purchasing call and put options. The Fund may also
purchase call options on underlying securities it owns in order to protect
unrealized gains on call options previously written by it. A call option
would be purchased for this purpose where tax considerations make it
inadvisable to realize such gains through a closing purchase transaction.
Call options may also be purchased at times to avoid realizing losses.

Dealer Options

The Fund may engage in transactions involving dealer options. Certain
risks are specific to dealer options. While the Fund would look to a clearing
corporation to exercise exchange-traded options, if the Fund were to purchase
a dealer option, it would rely on the dealer from whom it purchased the option
to perform if the option were exercised. Failure by the dealer to do so would
result in the loss of the premium paid by the Fund as well as loss of the
expected benefit of the transaction.

Exchange-traded options generally have a continuous liquid market while
dealer options have none. Consequently, the Fund will generally be able to
realize the value of a dealer option it has purchased only by exercising it or
reselling it to the dealer who issued it. Similarly, when the Fund writes a
dealer option, it generally will be able to close out the option prior to its
expiration only by entering into a closing purchase transaction with the
dealer to which the Fund originally wrote the option. While the Fund will
seek to enter into dealer options only with dealers who will agree to and
which are expected to be capable of entering into closing transactions with
the Fund, there can be no assurance that the Fund will be able to liquidate a
dealer option at a favorable price at any time prior to expiration. Until the
Fund, as a covered dealer call option writer, is able to effect a closing
purchase transaction, it will not be able to liquidate securities (or other
assets) used as cover until the option expires or is exercised. In the event
of insolvency of the contra party, the Fund may be unable to liquidate a
dealer option. With respect to options written by the Fund, the inability to
enter into a closing transaction may result in material losses to the Fund.
For example, since the Fund must maintain a secured position with respect to
any call option on a security it writes, the Fund may not sell the assets
which it has segregated to secure the position while it is obligated under the
option. This requirement may impair the Fund's ability to sell portfolio
securities at a time when such sale might be advantageous.

The Staff of the SEC has taken the position that purchased dealer
options and the assets used to secure the written dealer options are illiquid
securities. The Fund may treat the cover used for written OTC options as
liquid if the dealer agrees that the Fund may repurchase the OTC option it has
written for a maximum price to be calculated by a predetermined formula. In
such cases, the OTC option would be considered illiquid only to the extent the
maximum repurchase price under the formula exceeds the intrinsic value of the
option. Accordingly, the Fund will treat dealer options as subject to the
Fund's limitation on unmarketable securities. If the SEC changes its
position on the liquidity of dealer options, the Fund will change its
treatment of such instrument accordingly.

Futures Contracts

<PAGE 8>
Transactions in Futures

The Fund may enter into stock index futures contracts ("futures or
futures contracts").

Stock index futures contracts may be used to provide a hedge for a
portion of the Fund's portfolio, as a cash management tool, or as an efficient
way for T. Rowe Price to implement either an increase or decrease in portfolio
market exposure in response to changing market conditions. Stock index
futures contracts are currently traded with respect to the S&P 500 Index and
other broad stock market indices, such as the New York Stock Exchange
Composite Stock Index and the Value Line Composite Stock Index. The Fund may,
however, purchase or sell futures contracts with respect to any stock index.
Nevertheless, to hedge the Fund's portfolio successfully, the Fund must sell
futures contacts with respect to indices or subindices whose movements will
have a significant correlation with movements in the prices of the Fund's
portfolio securities.

The Fund will enter into futures contracts which are traded on
national futures exchanges and are standardized as to maturity date and
underlying financial instrument. The principal financial futures exchanges in
the United States are the Board of Trade of the City of Chicago, the Chicago
Mercantile Exchange, the New York Futures Exchange, and the Kansas City Board
of Trade. Futures exchanges and trading in the United States are regulated
under the Commodity Exchange Act by the Commodity Futures Trading Commission
("CFTC"). Although techniques other than the sale and purchase of futures
contracts could be used for the above-referenced purposes, futures contracts
offer an effective and relatively low cost means of implementing the Fund's
objectives in these areas.

Regulatory Limitations

The Fund will engage in transactions in futures contracts and options
thereon only for bona fide hedging and risk management purposes, in each case
in accordance with the rules and regulations of the CFTC, and not for
speculation.

The Fund may not enter into a futures contract or options thereon if,
at the time of entering into the contract, and as a result thereof, (i) the
then current aggregate futures market prices of the securities required to be
delivered under open futures contract sales plus the then current aggregate
purchase prices of the securities required to be purchased under open futures
contract purchases would exceed 30% of the Fund's total assets or (ii) more
than 5% of the market value of the Fund's total assets would be committed to
margin deposits or premiums on options on such futures contracts; provided,
however, that in the case of an option which is in-the-money at the time of
purchase, the in-the-money amount may be excluded in calculating the 5%
limitation.

In instances involving the purchase of futures contracts or call
options thereon or the writing of put options thereon by the Fund, an amount
of cash, U.S. government securities or other liquid, high-grade debt
obligations, equal to the market value of the futures contracts and options
thereon (less any related margin deposits), will be deposited in a segregated
account with the Fund's custodian to cover the position, or alternative cover
will be employed thereby insuring that the use of such futures contracts and
options is unleveraged.

In addition, CFTC regulations may impose limitations on the Fund's
ability to engage in certain risk management strategies. If the CFTC or other
regulatory authorities adopt different (including less stringent) or
additional restrictions, the Fund would comply with such new restrictions.

<PAGE 9>
Trading in Futures

A futures contract provides for the future sale by one party and
purchase by another party of a specified amount of a specific financial
instrument (e.g., units of a stock index) for a specified price, date, time
and place designated at the time the contract is made. Brokerage fees are
incurred when a futures contract is bought or sold and margin deposits must be
maintained. Entering into a contract to buy is commonly referred to as buying
or purchasing a contract or holding a long position. Entering into a contract
to sell is commonly referred to as selling a contract or holding a short
position.

Unlike when the Fund purchases or sells a security, no price would be
paid or received by the Fund upon the purchase or sale of a futures contract.
Upon entering into a futures contract, and to maintain the Fund's open
positions in futures contracts, the Fund would be required to deposit with its
custodian in a segregated account in the name of the futures broker an amount
of cash, U.S. government securities, suitable money market instruments, or
liquid, high-grade debt securities, known as "initial margin." The margin
required for a particular futures contract is set by the exchange on which the
contract is traded, and may be significantly modified from time to time by the
exchange during the term of the contract. Futures contracts are customarily
purchased and sold on margins that may range upward from less than 5% of the
value of the contract being traded.

If the price of an open futures contract changes (by increase in the
case of a sale or by decrease in the case of a purchase) so that the loss on
the futures contract reaches a point at which the margin on deposit does not
satisfy margin requirements, the broker will require an increase in the
margin. However, if the value of a position increases because of favorable
price changes in the futures contract so that the margin deposit exceeds the
required margin, the broker will pay the excess to the Fund.

These subsequent payments, called "variation margin," to and from the
futures broker, are made on a daily basis as the price of the underlying
assets fluctuate making the long and short positions in the futures contract
more or less valuable, a process known as "marking to the market." The Fund
expects to earn interest income on its margin deposits.

Although certain futures contracts, by their terms, require actual
future delivery of and payment for the underlying instruments, in practice
most futures contracts are usually closed out before the delivery date.
Closing out an open futures contract purchase or sale is effected by entering
into an offsetting futures contract purchase or sale, respectively, for the
same aggregate amount of the identical securities and the same delivery date.
If the offsetting purchase price is less than the original sale price, the
Fund realizes a gain; if it is more, the Fund realizes a loss. Conversely, if
the offsetting sale price is more than the original purchase price, the Fund
realizes a gain; if it is less, the Fund realizes a loss. The transaction
costs must also be included in these calculations. There can be no assurance,
however, that the Fund will be able to enter into an offsetting transaction
with respect to a particular futures contract at a particular time. If the
Fund is not able to enter into an offsetting transaction, the Fund will
continue to be required to maintain the margin deposits on the futures
contract.

For example, the Standard & Poor's 500 Stock Index is composed of 500
selected common stocks, most of which are listed on the New York Stock
Exchange. The S&P 500 Index assigns relative weightings to the common stocks
included in the Index, and the Index fluctuates with changes in the market
values of those common stocks. In the case of the S&P 500 Index, contracts

<PAGE 10>
are to buy or sell 500 units. Thus, if the value of the S&P 500 Index were
$150, one contract would be worth $75,000 (500 units x $150). The stock index
futures contract specifies that no delivery of the actual stock making up the
index will take place. Instead, settlement in cash occurs. Over the life of
the contract, the gain or loss realized by the Fund will equal the difference
between the purchase (or sale) price of the contract and the price at which
the contract is terminated. For example, if the Fund enters into a futures
contract to buy 500 units of the S&P 500 Index at a specified future date at a
contract price of $150 and the S&P 500 Index is at $154 on that future date,
the Fund will gain $2,000 (500 units x gain of $4). If the Fund enters into a
futures contract to sell 500 units of the stock index at a specified future
date at a contract price of $150 and the S&P 500 Index is at $152 on that
future date, the Fund will lose $1,000 (500 units x loss of $2).

Special Risks of Transactions in Futures Contracts

Volatility and Leverage. The prices of futures contracts are
volatile and are influenced, among other things, by actual and anticipated
changes in the market and interest rates, which in turn are affected by fiscal
and monetary policies and national and international policies and economic
events.

Most United States futures exchanges limit the amount of fluctuation
permitted in futures contract prices during a single trading day. The daily
limit establishes the maximum amount that the price of a futures contract may
vary either up or down from the previous day's settlement price at the end of
a trading session. Once the daily limit has been reached in a particular type
of futures contract, no trades may be made on that day at a price beyond that
limit. The daily limit governs only price movement during a particular trading
day and therefore does not limit potential losses, because the limit may
prevent the liquidation of unfavorable positions. Futures contract prices
have occasionally moved to the daily limit for several consecutive trading
days with little or no trading, thereby preventing prompt liquidation of
futures positions and subjecting some futures traders to substantial losses.

Because of the low margin deposits required, futures trading involves
an extremely high degree of leverage. As a result, a relatively small price
movement in a futures contract may result in immediate and substantial loss,
as well as gain, to the investor. For example, if at the time of purchase,
10% of the value of the futures contract is deposited as margin, a subsequent
10% decrease in the value of the futures contract would result in a total loss
of the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
150% of the original margin deposit, if the contract were closed out. Thus, a
purchase or sale of a futures contract may result in losses in excess of the
amount invested in the futures contract. However, the Fund would presumably
have sustained comparable losses if, instead of the futures contract, it had
invested in the underlying instrument and sold it after the decline.
Furthermore, in the case of a futures contract purchase, in order to be
certain that the Fund has sufficient assets to satisfy its obligations under a
futures contract, the Fund earmarks to the futures contract money market
instruments equal in value to the current value of the underlying instrument
less the margin deposit.

Liquidity. The Fund may elect to close some or all of its futures
positions at any time prior to their expiration. The Fund would do so to
reduce exposure represented by long futures positions or increase exposure
represented by short futures positions. The Fund may close its positions by
taking opposite positions which would operate to terminate the Fund's position
in the futures contracts. Final determinations of variation margin would then
be made, additional cash would be required to be paid by or released to the
Fund, and the Fund would realize a loss or a gain.

<PAGE 11>
Futures contracts may be closed out only on the exchange or board of
trade where the contracts were initially traded. Although the Fund intends to
purchase or sell futures contracts only on exchanges or boards of trade where
there appears to be an active market, there is no assurance that a liquid
market on an exchange or board of trade will exist for any particular contract
at any particular time. In such event, it might not be possible to close a
futures contract, and in the event of adverse price movements, the Fund would
continue to be required to make daily cash payments of variation margin.
However, in the event futures contracts have been used to hedge the underlying
instruments, the Fund would continue to hold the underlying instruments
subject to the hedge until the futures contracts could be terminated. In such
circumstances, an increase in the price of the underlying instruments, if any,
might partially or completely offset losses on the futures contract. However,
as described below, there is no guarantee that the price of the underlying
instruments will, in fact, correlate with the price movements in the futures
contract and thus provide an offset to losses on a futures contract.

Hedging Risk. A decision of whether, when, and how to hedge involves
skill and judgment, and even a well-conceived hedge may be unsuccessful to
some degree because of unexpected market behavior, market or interest rate
trends. There are several risks in connection with the use by the Fund of
futures contracts as a hedging device. One risk arises because of the
imperfect correlation between movements in the prices of the futures contracts
and movements in the prices of the underlying instruments which are the
subject of the hedge. T. Rowe Price will, however, attempt to reduce this
risk by entering into futures contracts whose movements, in its judgment, will
have a significant correlation with movements in the prices of the Fund's
underlying instruments sought to be hedged.

Successful use of futures contracts by the Fund for hedging purposes
is also subject to T. Rowe Price's ability to correctly predict movements in
the direction of the market. It is possible that, when the Fund has sold
futures to hedge its portfolio against a decline in the market, the index,
indices, or underlying instruments on which the futures are written might
advance and the value of the underlying instruments held in the Fund's
portfolio might decline. If this were to occur, the Fund would lose money on
the futures and also would experience a decline in value in its underlying
instruments. However, while this might occur to a certain degree, T. Rowe
Price believes that over time the value of the Fund's portfolio will tend to
move in the same direction as the market indices which are intended to
correlate to the price movements of the underlying instruments sought to be
hedged. It is also possible that if the Fund were to hedge against the
possibility of a decline in the market (adversely affecting the underlying
instruments held in its portfolio) and prices instead increased, the Fund
would lose part or all of the benefit of increased value of those underlying
instruments that it has hedged, because it would have offsetting losses in its
futures positions. In addition, in such situations, if the Fund had
insufficient cash, it might have to sell underlying instruments to meet daily
variation margin requirements. Such sales of underlying instruments might be,
but would not necessarily be, at increased prices (which would reflect the
rising market). The Fund might have to sell underlying instruments at a time
when it would be disadvantageous to do so.

In addition to the possibility that there might be an imperfect
correlation, or no correlation at all, between price movements in the futures
contracts and the portion of the portfolio being hedged, the price movements
of futures contracts might not correlate perfectly with price movements in the
underlying instruments due to certain market distortions. First, all
participants in the futures market are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors might close futures contracts through offsetting
transactions which could distort the normal relationship between the

<PAGE 12>
underlying instruments and futures markets. Second, the margin requirements
in the futures market are less onerous than margin requirements in the
securities markets, and as a result the futures market might attract more
speculators than the securities markets do. Increased participation by
speculators in the futures market might also cause temporary price
distortions. Due to the possibility of price distortion in the futures market
and also because of the imperfect correlation between price movements in the
underlying instruments and movements in the prices of futures contracts, even
a correct forecast of general market trends by T. Rowe Price might not result
in a successful hedging transaction over a very short time period.

Options on Futures Contracts

Options on futures are similar to options on underlying instruments
except that options on futures give the purchaser the right, in return for the
premium paid, to assume a position in a futures contract (a long position if
the option is a call and a short position if the option is a put), rather than
to purchase or sell the futures contract, at a specified exercise price at any
time during the period of the option. Upon exercise of the option, the
delivery of the futures position by the writer of the option to the holder of
the option will be accompanied by the delivery of the accumulated balance in
the writer's futures margin account which represents the amount by which the
market price of the futures contract, at exercise, exceeds (in the case of a
call) or is less than (in the case of a put) the exercise price of the option
on the futures contract. Alternatively, settlement may be made totally in
cash. Purchasers of options who fail to exercise their options prior to the
exercise date suffer a loss of the premium paid.

As an alternative to writing or purchasing call and put options on
stock index futures, the Fund may write or purchase call and put options on
stock indices. Such options would be used in a manner similar to the use of
options on futures contracts. From time to time, a single order to purchase
or sell futures contracts (or options thereon) may be made on behalf of the
Fund and other T. Rowe Price Funds. Such aggregated orders would be allocated
among the Fund and the other T. Rowe Price Funds in a fair and non-
discriminatory manner.

<PAGE>
<PAGE 13>
Special Risks of Transactions in Options on Futures Contracts

The Fund may seek to close out an option position by writing or
buying an offsetting option covering the same index, underlying instruments,
or contract and having the same exercise price and expiration date. The
ability to establish and close out positions on such options will be subject
to the maintenance of a liquid secondary market. Reasons for the absence of a
liquid secondary market on an exchange include the following: (i) there may
be insufficient trading interest in certain options; (ii) restrictions may be
imposed by an exchange on opening transactions or closing transactions or
both; (iii) trading halts, suspensions or other restrictions may be imposed
with respect to particular classes or series of options, or underlying
instruments; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or a clearing
corporation may not at all times be adequate to handle current trading volume;
or (vi) one or more exchanges could, for economic or other reasons, decide or
be compelled at some future date to discontinue the trading of options (or a
particular class or series of options), in which event the secondary market on
that exchange (or in the class or series of options) would cease to exist,
although outstanding options on the exchange that had been issued by a
clearing corporation as a result of trades on that exchange would continue to
be exercisable in accordance with their terms. There is no assurance that
higher than anticipated trading activity or other unforeseen events might not,
at times, render certain of the facilities of any of the clearing corporations
inadequate, and thereby result in the institution by an exchange of special
procedures which may interfere with the timely execution of customers' orders.

Lending of Portfolio Securities

For the purpose of realizing additional income, the Fund may make
secured loans of portfolio securities amounting to not more than 30% of its
total assets. This policy is a fundamental policy. Securities loans are made
to broker-dealers or institutional investors pursuant to agreements requiring
that the loans be continuously secured by collateral at least equal at all
times to the value of the securities lent marked to market on a daily basis.
The collateral received will consist of cash, U.S. government securities,
letters of credit or such other collateral as may be permitted under its
investment program. While the securities are being lent, the Fund will
continue to receive the equivalent of the interest or dividends paid by the
issuer on the securities, as well as interest on the investment of the
collateral or a fee from the borrower. The Fund has a right to call each loan
and obtain the securities on five business days' notice or, in connection with
securities trading on foreign markets, within such longer period of time which
coincides with the normal settlement period for purchases and sales of such
securities in such foreign markets. The Fund will not have the right to vote
securities while they are being lent, but it will call a loan in anticipation
of any important vote. The risks in lending portfolio securities, as with
other extensions of secured credit, consist of possible delay in receiving
additional collateral or in the recovery of the securities or possible loss of
rights in the collateral should the borrower fail financially. Loans will
only be made to persons deemed by T. Rowe Price to be of good standing and
will not be made unless, in the judgment of T. Rowe Price, the consideration
to be earned from such loans would justify the risk.

Asset-Based Securities

The Fund may invest in debt securities, preferred securities or
convertible securities, the principal amount, redemption terms or conversion
terms of which are related to the market price of some natural resource asset
such as gold bullion. For the purposes of the Fund's investment policies,
these securities are referred to as "asset-based securities." While the
market prices for an asset-based security and the related natural resource
asset generally are expected to move in the same direction, there may not be

<PAGE 14>
perfect correlation in the two price movements. Asset-based securities may
not be secured by a security interest in or claim on the underlying natural
resource assets.

The Fund will not acquire asset-based securities for which no
established secondary trading market exists if at the time of acquisition more
than 10% of its total assets are invested in securities which are not readily
marketable. The Fund may invest in asset-based securities without limit when
it has the option to put such securities to the issuer or a stand-by bank or
broker and receive the principal amount or redemption price thereof less
transaction costs on no more than seven days' notice or when the Fund has the
right to convert such securities into a readily marketable security in which
it could otherwise invest upon not less than seven days' notice.

The asset-based securities in which the Fund may invest may bear
interest or pay preferred dividends at below market (or even relatively
nominal) rates. The Fund's holdings of such securities therefore may not
generate appreciable current income, and the return from such securities
primarily will be from any profit on the sale, maturity or conversion thereof
at a time when the price of the related asset is higher than it was when the
Fund purchased such securities. As an example, assume gold is selling at a
market price of $300 per ounce and an issuer sells a $1,000 face amount gold
related note with a seven year maturity, payable at maturity at the greater of
either $1,000 in cash or the then market price of three ounces of gold. If at
maturity, the market price of gold is $400 per ounce, the amount payable on
the note would be $1,200. Certain asset-based securities may be payable at
maturity in cash at the stated principal amount or, at the option of the
holder, directly in a stated amount of the asset to which it is related. In
such instance, because the Fund presently does not intend to invest directly
in natural resource assets, the Fund would sell the asset-based security in
the secondary market, to the extent one exists, prior to maturity if the value
of the stated amount of the asset exceeds the stated principal amount and
thereby realize the appreciation in the underlying asset. Asset-based
securities or hybrid commodity and security instruments may not be subject to
regulation of the Commodities Futures Trading Commission, which generally
regulates the trading of commodity futures, the SEC, which regulates the offer
and sale of securities, or any other governmental agency.

Warrants

The Fund may invest in warrants; however, in order to comply with the
securities law of a certain state, not more than 5% of its assets (at the time
of purchase) will be invested in warrants other than warrants acquired in
units or attached to other securities. Of such 5% not more than 2% of assets
at the time of purchase may be invested in warrants that are not listed on the
New York or American Stock Exchanges. Should the law of this state change or
should the Fund obtain a waiver of its application, the Fund may invest in
warrants to a greater extent than 5% of its assets. Warrants are pure
speculation in that they have no voting rights, pay no dividends and have no
rights with respect to the assets of the corporation issuing them. Warrants
basically are options to purchase equity securities at a specific price valid
for a specific period of time. They do not represent ownership of the
securities, but only the right to buy them. Warrants differ from call options
in that warrants are issued by the issuer of the security which may be
purchased on their exercise, whereas call options may be written or issued by
anyone. The prices of warrants do not necessarily move parallel to the prices
of the underlying securities.

Private Placements (Restricted Securities)

<PAGE 15>
The Fund may invest in restricted securities (privately placed
securities) and other securities that are not readily marketable, but will not
acquire such securities if as a result they would comprise more than 10% of
the value of the Fund's total assets.

Restricted securities may be sold only in privately negotiated
transactions or in a public offering with respect to which a registration
statement is in effect under the Securities Act of 1933 (the "1933 Act").
Where registration is required, the Fund may be obligated to pay all or part
of the registration expenses and a considerable period may elapse between the
time of the decision to sell and the time the Fund may be permitted to sell a
security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the Fund might obtain a less
favorable price than prevailed when it decided to sell. Restricted securities
will be priced at fair value as determined in good faith by the Board of
Directors. If through the appreciation of restricted securities or the
depreciation of unrestricted securities, the Fund should be in a position
where more than 10% of the value of its total assets are invested in illiquid
assets, including restricted securities, the Fund will take appropriate steps
to protect liquidity.

Notwithstanding the above, the Fund may purchase securities which while
privately placed, are eligible for purchase and sale under Rule 144A under the
1933 Act. This rule permits certain qualified institutional buyers, such as
the Fund, to trade in privately placed securities even though such securities
are not registered under the 1933 Act. Securities purchased under Rule 144A
are considered restricted and thus subject to the Fund's prohibition of
investing no more than 10% of its total assets in restricted securities.
However, not all Rule 144A securities are illiquid, and T. Rowe Price, under
the supervision of the Fund's Board of Directors, on a case by case basis,
will make this determination. A determination of whether a Rule 144A security
is liquid or not is a question of fact. In making this determination, T. Rowe
Price will consider the trading markets for the specific security taking into
account the unregistered nature of a Rule 144A security. In addition, T. Rowe
Price could consider the (1) frequency of trades and quotes, (2) number of
dealers and potential purchasers, (3) dealer undertakings to make a market,
(4) and the nature of the security and of market place trades (e.g., the time
needed to dispose of the security, the method of soliciting offers and the
mechanics of transfer). The liquidity of Rule 144A securities would be
monitored and, if as a result of changed conditions, it is determined that a
Rule 144A security is no longer liquid, the Fund's holdings of illiquid
securities would be reviewed to determine what, if any, steps are required to
assure that the Fund does not invest more than 10% of its assets in restricted
securities. Investing in Rule 144A securities could have the effect of
increasing the amount of the Fund's assets invested in illiquid securities if
qualified institutional buyers are unwilling to purchase such securities.

Foreign Securities

The Fund may invest in the securities of foreign issuers. The Fund
currently intends to limit any such investment to not more than 25% of its
assets. Because the Fund may invest in foreign securities, investment in the
Fund involves risks that are different in some respects from an investment in
a fund which invests only in securities of U.S. domestic issuers. Foreign
investments may be affected favorably or unfavorably by changes in currency
rates and exchange control regulations. There may be less publicly available
information about a foreign company than about a U.S. company, and foreign
companies may not be subject to accounting, auditing, and financial reporting
standards and requirements comparable to those applicable to U.S. companies.
There may be less governmental supervision of securities markets, brokers and
issuers of securities. Securities of some foreign companies are less liquid

<PAGE 16>
or more volatile than securities of U.S. companies, and foreign brokerage
commissions and custodian fees are generally higher than in the United States.
Settlement practices may include delays and may differ from those customary in
United States markets. Investments in foreign securities may also be subject
to other risks different from those affecting U.S. investments, including
local political or economic developments, expropriation or nationalization of
assets, restrictions on foreign investment and repatriation of capital,
imposition of withholding taxes on dividend or interest payments, currency
blockage (which would prevent cash from being brought back to the United
States), and difficulty in enforcing legal rights outside the U.S.

Foreign Currency Transactions

Since investments in foreign companies will usually involve currencies
of foreign countries, and since the Fund may temporarily hold funds in bank
deposits in foreign currencies during the completion of investment programs,
the value of the assets of the Fund as measured in United States dollars may
be affected favorably or unfavorably by changes in foreign currency exchange
rates and exchange control regulations, and the Fund may incur costs in
connection with conversions between currencies. The Fund will conduct its
foreign currency exchange transactions on a spot (i.e., cash) basis at the
spot rate prevailing in the foreign currency exchange market.

Federal Tax Treatment of Options, Futures Contracts and Forward Foreign
Exchange Contracts

The discussion herein may refer to transactions in which the Fund
does not engage. The Fund's prospectus sets forth the types of transactions
permissible to the Fund.

The Fund may enter into certain option, futures, and forward foreign
exchange contracts, including options and futures on currencies, which will be
treated as Section 1256 contracts or straddles.

Transactions which are considered Section 1256 contracts will be
considered to have been closed at the end of the Fund's fiscal year and any
gains or losses will be recognized for tax purposes at that time. Such gains
or losses from the normal closing or settlement of such transactions will be
characterized as 60% long-term capital gain or loss and 40% short-term capital
gain or loss regardless of the holding period of the instrument. The Fund
will be required to distribute net gains on such transactions to shareholders
even though it may not have closed the transaction and received cash to pay
such distributions.

Options, futures and forward foreign exchange contracts, including
options and futures on currencies, which offset a foreign dollar denominated
bond or currency position may be considered straddles for tax purposes in
which case a loss on any position in a straddle will be subject to deferral to
the extent of unrealized gain in an offsetting position. The holding period
of the securities or currencies comprising the straddle will be deemed not to
begin until the straddle is terminated. For securities offsetting a purchased
put, this adjustment of the holding period may increase the gain from sales of
securities held less than three months. The holding period of the<PAGE>

<PAGE 17>
security offsetting an "in-the-money qualified covered call" option on an
equity security will not include the period of time the option is outstanding.

Losses on written covered calls and purchased puts on securities,
excluding certain "qualified covered call" options on equity securities, may
be long-term capital loss, if the security covering the option was held for
more than twelve months prior to the writing of the option.

In order for the Fund to continue to qualify for federal income tax
treatment as a regulated investment company, at least 90% of its gross income
for a taxable year must be derived from qualifying income; i.e., dividends,
interest, income derived from loans of securities, and gains from the sale of
securities or currencies. Pending tax regulations could limit the extent that
net gain realized from option, futures or foreign forward exchange contracts
on currencies is qualifying income for purposes of the 90% requirement. In
addition, gains realized on the sale or other disposition of securities,
including options, futures or foreign forward exchange contracts on securities
or securities indexes and, in some cases, currencies, held for less than three
months, must be limited to less than 30% of the Fund's annual gross income.
In order to avoid realizing excessive gains on securities or currencies held
less than three months, the Fund may be required to defer the closing out of
option, futures or foreign forward exchange contracts beyond the time when it
would otherwise be advantageous to do so. It is anticipated that unrealized
gains on Section 1256 option, futures and foreign forward exchange contracts,
which have been open for less than three months as of the end of the Fund's
fiscal year and which are recognized for tax purposes, will not be considered
gains on securities or currencies held less than three months for purposes of
the 30% test.

INVESTMENT RESTRICTIONS

Fundamental policies of the Fund may not be changed without the
approval of the lesser of (1) 67% of the Fund's shares present at a meeting of
shareholders if the holders of more than 50% of the outstanding shares are
present in person or by proxy or (2) more than 50% of the Fund's outstanding
shares. Other restrictions, in the form of operating policies, are subject to
change by the Fund's Board of Directors without shareholder approval. Any
investment restriction which involves a maximum percentage of securities or
assets shall not be considered to be violated unless an excess over the
percentage occurs immediately after, and is caused by, an acquisition of
securities or assets of, or borrowings by, the Fund.

Fundamental Policies

As a matter of fundamental policy, the Fund may not:

(1) Allocation of Principal and Brokerage Business. Deal with any of
its officers or directors, or with any entity with which any of
its officers or directors is affiliated, as principal in the
purchase or sale of portfolio securities, or effect portfolio
transactions through any such officer, director, or entity as
agent or broker, unless the Fund pays no more than customary
brokerage charges for such services;

<PAGE 18>
(2) Borrowing. Borrow money, except the Fund may borrow from banks
as a temporary measure for extraordinary or emergency purposes,
and then only from banks in amounts not exceeding 15% of its
total assets valued at market. The Fund will not borrow in order
to increase income (leveraging), but only to meet redemption
requests which might otherwise require untimely disposition of
portfolio securities (see page 5 of prospectus). Interest paid
on any such borrowings will reduce net investment income. The
Fund may enter into futures contracts as set forth in (4) below;

(3) Commodities. Purchase or sell commodities or commodity
contracts; except that it may enter into futures contracts
subject to (4) below;

(4) Futures Contracts. Enter into a futures contracts or options
thereon if, as a result thereof, (i) the then current aggregate
futures market prices of securities required to be delivered
under open futures contract sales plus the then current aggregate
purchase prices of securities required to be purchased under open
futures contract purchases would exceed 30% of the Fund's total
assets (taken at market at the time of entering into the
contract), or (ii) more than 5% of the Fund's total assets (taken
at market value at the time of entering into the contract) would
be committed to margin on such futures contracts or premiums on
options; provided, however, that in the case of an option which
is in-the-money at the time of purchase, the in-the-money amount
as defined under certain CFTC regulations may be excluded in
computing such 5%;

(5) Industry Concentration. Purchase any securities which would
cause more than 25% of its total assets at the time of such
purchase to be concentrated in the securities of issuers engaged
in any one industry;

(6) Investment Companies. Acquire the securities of any investment
company, except securities purchased in the open market where no
profit to a sponsor or dealer other than customary brokerage
commissions results from such purchase, and securities acquired
pursuant to a plan of merger or consolidation; provided, that as
a matter of operating policy, the Fund will not purchase the
securities of open-end investment companies. Duplicate fees may
result from such purchases;

(7) Joint Transactions. Participate on a joint or a joint and
several basis in any securities trading account;

(8) Loans. Make loans, except that it may (i) acquire publicly
distributed bonds, debentures, notes, and other debt securities,
and (ii) lend portfolio securities provided that no such loan may
be made if as a result the aggregate of such loans would exceed
30% of the value of the Fund's total assets;

(9) Mortgaging. Mortgage, pledge, hypothecate or, in any manner,
transfer as security for indebtedness any security owned by the
Fund, except (i) as may be necessary in connection with
permissible borrowings, in which event such mortgaging, pledging,
or hypothecating may not exceed 15% of the Fund's assets, valued
at cost; provided, however, that as a matter of operating policy,
the Fund will limit any such mortgaging, pledging, or
hypothecating to 10% of its net assets, valued at market,

<PAGE 19>
in order to comply with certain state investment restrictions;
and (ii) it may enter into futures contracts;

(10) Ownership of Portfolio Securities by Officers and Directors.
Purchase or retain the securities of any issuer if those officers
and directors of the Fund, and of its investment manager, who
each owns beneficially more than .5% of the outstanding
securities of such issuer, together own beneficially more than 5%
of such securities;
(11) Percent Limit on Assets Invested in Any One Issuer. Purchase any
securities which would cause more than 5% of its total assets at
the time of such purchase to be invested in the securities of any
issuer, but this limitation does not apply to obligations issued
or guaranteed by the U.S. government, or to bank certificates of
deposit;

(12) Percent Limit on Share Ownership of Any One Issuer. Purchase any
securities which would cause the Fund at the time of such
purchase to own more than 10% of the outstanding securities of
any class of any issuer, but this limitation does not apply to
obligations issued or guaranteed by the U.S. government, or to
bank certificates of deposit;

(13) Real Estate. Purchase or sell real estate, although it may
invest in the securities of companies whose business involves the
purchase or sale of real estate;

(14) Restricted or Not Readily Marketable Securities. Purchase a
security, if, as a result, more than 10% of the value of the
Fund's total assets would be invested in: (a) securities with
legal or contractual restrictions on resale and (b) other
securities that are not readily marketable;

(15) Senior Securities. Issue any class of securities senior to any
other class of securities;
(16) Short Sales and Purchases on Margin. Effect short sales of
securities or purchase securities on margin, except for use of
short-term credit necessary for clearance of purchases of
portfolio securities, and except for margin deposits made in
connection with futures contracts, subject to (4) above;

(17) Underwriting. Act as an underwriter of securities, except
insofar as it might technically be deemed to be an underwriter
for purposes of the Securities Act of 1933 upon the disposition
of certain securities; or

(18) Unseasoned Issuers. Purchase any securities which would cause
more than 5% of its total assets, valued at cost, at the time of
such purchase to be invested in the securities of issuers engaged
in continuous operation for less than three years.

<PAGE>
<PAGE 20>
Operating Policies

As a matter of operating policy, the Fund may not:

(1) Control of Portfolio Companies. Invest in companies for the
purpose of exercising management or control;

(2) Oil and Gas Programs. Purchase participations or other direct
interests or enter into leases with respect to oil, gas, other
mineral exploration or development programs; or

(3) Options, Etc. Invest in puts, calls, straddles, spreads, or any
combination thereof, except that the Fund may invest in or commit
its assets to writing call and put options and purchasing put and
call options to the extent permitted by the prospectus and
Statement of Additional Information.

Under the 1940 Act, the Fund may not invest in any securities of any
issuer which, in its most recent fiscal year, derived more than 15% of its
gross revenues from "securities related activities," as defined by rules of
the 1940 Act, unless certain conditions are met. As a result of these
restrictions, the Fund may not invest in the securities of certain banks,
broker-dealers and other companies in foreign countries. If the Fund finds
that this restriction prevents it from pursuing its investment objective, it
may apply to the Securities and Exchange Commission for an order which would
permit it to acquire such securities, but no assurance can be given that any
such order will be granted. It is also possible the law in this area will
change, in which case the Fund could have greater flexibility in the purchase
of the securities of foreign banks, broker-dealers, and other companies.

INVESTMENT PERFORMANCE

Total Return Performance

The Fund's calculation of total return performance includes the
reinvestment of all capital gain distributions and income dividends for the
period or periods indicated, without regard to tax consequences to a
shareholder in the Fund. Total return is calculated as the percentage change
between the beginning value of a static account in the Fund and the ending
value of that account measured by the then current net asset value, including
all shares acquired through reinvestment of income and capital gains
dividends. The results shown are historical and should not be considered
indicative of the future performance of the Fund. Each average annual
compound rate of return is derived from the cumulative performance of the Fund
over the time period specified. The annual compound rate of return for the
Fund over any other period of time will vary from the average.

<PAGE>
<PAGE 21>
Cumulative Performance Percentage Change

Since
1 Year 5 Years 10 Years Inception
Ended Ended Ended 1/20/69 to
12/31/92+ 12/31/92 12/31/92 12/31/92++
_________ ________ ________ __________

New Era Fund 2.08% 46.53% 220.49% 888.89%
S&P 500 7.61 109.02 347.36 1032.05
Dow Jones Industrial Average 7.37 103.85 367.48938.49
Lipper Natural Resources
Funds Average 1.94 43.92 159.87 N/A
CPI 2.90 22.96 45.39 299.72

Total Return

Capital Dividend Total
Change Income Return
_______ ________ ______

12/31/91 - 12/31/92 - 0.19% 2.27% 2.08%
12/31/87 - 12/31/92 28.14 18.39 46.53
12/31/82 - 12/31/92 129.59 90.90 220.49
1/20/69 - 12/31/92 413.70 475.19 888.89

Average Annual Compound Rates of Return

Since
1 Year 5 Years 10 Years Inception
Ended Ended Ended 1/20/69 to
12/31/92+ 12/31/92 12/31/92 12/31/92++
_________ ________ ________ __________

New Era Fund 2.08% 7.94% 12.35% 10.04%
S&P 500 7.61 15.89 16.16 10.67
Dow Jones Industrial Average 7.37 15.31 16.6710.27
Lipper Natural Resources
Funds Average 1.94 7.23 9.92 N/A
CPI 2.90 4.22 3.81 5.96

+ If you invested $1,000 at the beginning of 1992 the total return on December
31, 1992 would be $1,020.80 ($1,000 x 1.0208).
++Assumes purchase of one share of the New Era Fund at the initial offering
price of $10.00 on January 20, 1969. Over this time, stock prices in general
have risen.

From time to time, in reports and promotional literature: (1) the
Fund's total return performance or P/E ratio will be compared to any one or
combination of the following: (i) the Standard & Poor's 500 Stock Index and
Dow Jones Industrial Average so that you may compare the Fund's results with
those of a group of unmanaged securities widely regarded by investors as
representative of the stock market in general; (ii) other groups of mutual
funds, including T. Rowe Price Funds, tracked by: (A) Lipper Analytical
Services, a widely used independent research firm which ranks mutual funds by
overall performance, investment objectives, and assets; (B) Morningstar, Inc.,
another widely used independent research firm which ranks mutual funds; or (C)
other financial or business publications, such as Business Week, Money
Magazine, Forbes and Barron's, which provide similar information; (iii)
indices of stocks comparable to those in which the Fund invests; and (iv) the
performance of U.S. Government and corporate bonds, notes and bills. (The
purpose of these comparisons would be to illustrate historical trends in
different market sectors so as to allow potential investors to compare

<PAGE 22>
different investment strategies.); (2) the Consumer Price Index (measure for
inflation) may be used to assess the real rate of return from an investment in
the Fund; (3) other government statistics such as GNP, and net import and
export figures derived from governmental publications, e.g. The Survey of
Current Business, may be used to illustrate investment attributes of the Fund
or the general economic, business, investment, or financial environment in
which the Fund operates; (4) the effect of tax-deferred compounding on the
Fund's investment returns, or on returns in general, may be illustrated by
graphs, charts, etc. where such graphs or charts would compare, at various
points in time, the return from an investment in the Fund (or returns in
general) on a tax-deferred basis (assuming reinvestment of capital gains and
dividends and assuming one or more tax rates) with the return on a taxable
basis; and (5) the sectors or industries in which the Fund invests may be
compared to relevant indices or surveys (e.g. S&P Industry Surveys) in order
to evaluate the Fund's historical performance or current or potential value
with respect to the particular industry or sector. In connection with (4)
above, information derived from the following chart may be used:

IRA Versus Taxable Return

Assuming 9% annual rate of return, $2,000 annual contribution and 28% tax
bracket.

Year Taxable Tax Deferred
____ _______ ____________

10 $ 28,700 $ 33,100
15 51,400 64,000
20 82,500 111,500
25 125,100 184,600
30 183,300 297,200

IRAs

An IRA is a long-term investment whose objective is to accumulate
personal savings for retirement. Due to the long-term nature of the
investment, even slight differences in performance will result in
significantly different assets at retirement. Mutual funds, with their
diversity of choice, can be used for IRA investments. Generally, individuals
may need to adjust their underlying IRA investments as their time to
retirement and tolerance for risk changes.

<PAGE>
<PAGE 23>
Other Features and Benefits

The Fund is a member of the T. Rowe Price Family of Funds and may help
investors achieve various long-term investment goals, such as investing money
for retirement, saving for a down payment on a home, or paying college costs.
To explain how the Fund could be used to assist investors in planning for
these goals and to illustrate basic principles of investing, various
worksheets and guides prepared by T. Rowe Price Associates, Inc. and/or T.
Rowe Price Investment Services, Inc. may be made available. These currently
include: the Asset Mix Worksheet which is designed to show shareholders how to
reduce their investment risk by developing a diversified investment plan; the
College Planning Guide which discusses various aspects of financial planning
to meet college expenses and assists parents in projecting the costs of a
college education for their children; the Retirement Planning Kit (also
available in a PC version) which includes a detailed workbook to determine how
much money you may need for retirement and suggests how you might invest to
reach your goal; and the Retirees Financial Guide which includes a detailed
workbook to determine how much money you can afford to spend and still
preserve your purchasing power and suggests how you might invest to reach your
goal. From time to time, other worksheets and guides may be made available as
well. Of course, an investment in the Fund cannot guarantee that such goals
will be met.

To assist investors in understanding the different returns and risk
characteristics of various investments, the aforementioned guides will include
presentation of historical returns of various investments using published
indices. An example of this is shown below.

Historical Returns for Different Investments

Annualized returns for periods ended 12/31/92

50 years 25 years 10 years 5 years

Small-Company Stocks 16.3% 12.4% 11.6% 13.6%

Large-Company Stocks 12.6 10.6 16.2 15.9

Foreign Stocks N/A N/A 17.1 1.6

Long-Term Corporate Bonds 5.4 8.8 13.1 12.5

Intermediate-Term U.S.
Gov't. Bonds 5.6 9.0 11.0 10.3

Treasury Bills 4.6 7.2 6.9 6.3

U.S. Inflation 4.3 5.9 3.8 4.2

Sources: Ibbotson Associates. Foreign stocks reflect performance of The
Morgan Stanley Capital International EAFE Index, which includes some 1,000
companies representing the stock markets of Europe, Australia, New Zealand,
and the Far East. This chart is for illustrative purposes only and should not
be considered as performance for any T. Rowe Price Fund. Past performance
does not guarantee future results.

Also included will be various portfolios demonstrating how these historical
indices would have performed in various combinations over a specified time
period in terms of return. An example of this is shown below.

Performance of Retirement Portfolios*

Asset Mix Annualized Returns Number Value
20 Years Ending of Years of
12/31/92 with $10,000
Negative Investment
Returns After Period
__________________________________________________________
Best Worst
Portfolio Growth Income Safety Average Year Year

I. Low
Risk 15% 35% 50% +9.0% +19.0% -0.2% 1 $ 56,451

II. Moderate
Risk 55% 30% 15% +10.4% +25.7% - 7.5% 2 $ 72,918

III. High
Risk 85% 15% 0% +11.2% +34.5% -16.2% 5 $ 83,382

Source: T. Rowe Price Associates; data supplied by Ibbotson Associates.

* Based on actual performance of stocks (Wilshire 5000), Lehman Brothers
Government/Corporate Bond Index, and Treasury bills from January 1973
through December 1992. Past performance does not guarantee future
results. Figures include changes in principal value and reinvested
dividends. This Exhibit is for illustrative purposes only and is not
representative of the performance of any T. Rowe Price Fund.

Redemptions in Kind

In the unlikely event a shareholder were to receive an in kind
redemption of portfolio securities of the Fund, brokerage fees could be
incurred by the shareholder in a subsequent sale of such securities.

Issuance of Fund Shares for Securities

Transactions involving issuance of a fund's shares for securities or
assets other than cash will be limited to (1) bona fide reorganizations; (2)
statutory mergers; or (3) other acquisitions of portfolio securities that: (a)
meet the investment objective and policies of the Fund; (b) are acquired for
investment and not for resale except in accordance with applicable law; (c)
have a value that is readily ascertainable via listing on or trading in a
recognized United States or international exchange or market; and (d) are not
illiquid.

MANAGEMENT OF FUND

The officers and directors of the Fund are listed below. Unless
otherwise noted, the address of each is 100 East Pratt Street, Baltimore,
Maryland 21202. Except as indicated, each has been an employee of T. Rowe
Price for more than five years. In the list below, the Fund's directors who
are considered "interested persons" of T. Rowe Price or the Fund as defined
under Section 2(a)(19) of the Investment Company Act of 1940 are noted with an
asterisk (*). These directors are referred to as inside directors by virtue
of their officership, directorship, and/or employment with T. Rowe Price.

LEO C. BAILEY, Director - Retired; Address: 3396 South Placita Fabula, Green
Valley, Arizona 85614
*GEORGE J. COLLINS, Director - President, Managing Director, and Chief
Executive Officer, T. Rowe Price; Director, Rowe Price-Fleming International,
Inc., T. Rowe Price Trust Company, and T. Rowe Price Retirement Plan Services,
Inc.; Chartered Investment Counselor

<PAGE 25>
DAVID K. FAGIN, Director - Chairman, Chief Executive Officer and Director,
Golden Star Resources, Ltd.; formerly (1986-7/91) President, Chief Operating
Officer, and Director, Homestake Mining Company; Address: One Norwest Center,
1700 Lincoln Street, Suite 1950, Denver, Colorado 80203
*CARTER O. HOFFMAN, Director - Managing Director, T. Rowe Price; Chartered
Investment Counselor
JOHN K. MAJOR, Director - Chairman of the Board and President, KCMA
Incorporated, Tulsa, Oklahoma; Address: 126 E. 26 Place, Tulsa, Oklahoma
74114-2422
*GEORGE A. ROCHE, President and Director - Managing Director and Chief
Financial Officer, T. Rowe Price; Vice President and Director, Rowe
Price-Fleming International, Inc.
HUBERT D. VOS, Director - President, Stonington Capital Corporation, a private
investment company; Address: 1231 State Street, Suite 210, Santa Barbara,
California 93190-0409
STEPHEN W. BOESEL, Vice President - Vice President, T. Rowe Price
HUGH M. EVANS, III, Vice President - Employee, T. Rowe Price; formerly
(7/1/88-7/1/90) Analyst, Morgan Stanley & Co., Inc., New York, New York
RICHARD P. HOWARD, Vice President - Vice President, T. Rowe Price; Chartered
Financial Analyst
HENRY H. HOPKINS, Vice President - Managing Director, T. Rowe Price; Vice
President and Director, T. Rowe Price Investment Services, Inc., T. Rowe Price
Services, Inc., and T. Rowe Price Trust Company; Vice President, Rowe
Price-Fleming International, Inc. and T. Rowe Price Retirement Plan Services,
Inc.
JAMES A.C. KENNEDY, III, Vice President - Managing Director, T. Rowe Price
CHARLES M. OBER, Vice President - Vice President, T. Rowe Price; Chartered
Financial Analyst
DAVID L. REA, Vice President - Vice President, T. Rowe Price
JAMES S. RIEPE, Vice President - Managing Director, T. Rowe Price; Chairman of
the Board, T. Rowe Price Services, Inc., T. Rowe Price Retirement Plan
Services, Inc., and T. Rowe Price Trust Company; President and Director, T.
Rowe Price Investment Services, Inc.; Director, Rhone-Paulenc Rorer, Inc.
ALAN R. STUART, Vice President - Vice President, T. Rowe Price
DAVID J. WALLACK, Vice President - Vice President, T. Rowe Price; formerly
(9/89-7/90) attended Carnegie Mellon Graduate School and (4/84-9/88) Fund
Raising Project Manager, J. Paul Getty Trust and Harvard University
LENORA V. HORNUNG, Secretary - Vice President, T. Rowe Price
CARMEN F. DEYESU, Treasurer - Vice President, T. Rowe Price, T. Rowe Price
Services, Inc., and T. Rowe Price Trust Company
DAVID S. MIDDLETON, Controller - Vice President, T. Rowe Price, T. Rowe Price
Services, Inc., and T. Rowe Price Trust Company
ROGER L. FIERY, Assistant Vice President - Vice President, Rowe Price-Fleming
International, Inc.
EDWARD T. SCHNEIDER, Assistant Vice President - Vice President, T. Rowe Price
Services, Inc.
INGRID I. VORDEMBERGE, Assistant Vice President - Employee, T. Rowe Price

The Fund's Executive Committee, comprised of Messrs. Collins, Hoffman,
and Roche, has been authorized by the Board of Directors to exercise all of
the powers of the Board to manage the Fund in the intervals between meetings
of the Board, except the powers prohibited by statute from being delegated.

PRINCIPAL HOLDERS OF SECURITIES

As of the date of the prospectus, the officers and directors of the
Fund, as a group, owned less than 1% of the outstanding shares of the Fund.

As of December 31, 1992, the following shareholder beneficially owned
more than 5% of the outstanding shares of the Fund: Pirateline & Co., Attn.:

<PAGE 26>
Mark White, State Street Bank and Trust Company, 1776 Heritage Drive - 4W,
North Quincy, Massachusetts, 02171-2101.

INVESTMENT MANAGEMENT SERVICES

Services

Under the Management Agreement, T. Rowe Price provides the Fund with
discretionary investment services. Specifically, T. Rowe Price is responsible
for supervising and directing the investments of the Fund in accordance with
the Fund's investment objective, program, and restrictions as provided in its
prospectus and this Statement of Additional Information. T. Rowe Price is
also responsible for effecting all security transactions on behalf of the
Fund, including the negotiation of commissions and the allocation of principal
business and portfolio brokerage. In addition to these services, T. Rowe
Price provides the Fund with certain corporate administrative services,
including: maintaining the Fund's corporate existence and corporate records,
registering and qualifying Fund shares under federal and state laws;
monitoring the financial, accounting, and administrative functions of the
Fund; maintaining liaison with the agents employed by the Fund such as the
Fund's custodian and transfer agent; assisting the Fund in the coordination of
such

<PAGE>
<PAGE 27>
agents' activities; and permitting T. Rowe Price's employees to serve as
officers, directors, and committee members of the Fund without cost to the
Fund.

The Management Agreement also provides that T. Rowe Price, its
directors, officers, employees, and certain other persons performing specific
functions for the Fund will only be liable to the Fund for losses resulting
from willful misfeasance, bad faith, gross negligence, or reckless disregard
of duty.

Management Fee

The Fund pays T. Rowe Price a fee ("Fee") which consists of two
components: a Group Management Fee ("Group Fee") and an Individual Fund Fee
("Fund Fee"). The Fee is paid monthly to T. Rowe Price on the first business
day of the next succeeding calendar month and is calculated as described
below.

The monthly Group Fee ("Monthly Group Fee") is the sum of the daily
Group Fee accruals ("Daily Group Fee Accruals") for each month. The Daily
Group Fee Accrual for any particular day is computed by multiplying the Price
Funds' group fee accrual as determined below ("Daily Price Funds' Group Fee
Accrual") by the ratio of the Fund's net assets for that day to the sum of the
aggregate net assets of the Price Funds for that day. The Daily Price Funds'
Group Fee Accrual for any particular day is calculated by multiplying the
fraction of one (1) over the number of calendar days in the year by the
annualized Daily Price Funds' Group Fee Accrual for that day as determined in
accordance with the following schedule:

Price Funds'
Annual Group Base Fee
Rate for Each Level of Assets
_____________________________

0.480% First $1 billion
0.450% Next $1 billion
0.420% Next $1 billion
0.390% Next $1 billion
0.370% Next $1 billion
0.360% Next $2 billion
0.350% Next $2 billion
0.340% Next $5 billion
0.330% Next $10 billion
0.320% Next $10 billion
0.310% Thereafter

For the purpose of calculating the Group Fee, the Price Funds include
all the mutual funds distributed by T. Rowe Price Investment Services, Inc.
(excluding T. Rowe Price Spectrum Fund, Inc. and any institutional or private
label mutual funds). For the purpose of calculating the Daily Price Funds'
Group Fee Accrual for any particular day, the net assets of each Price Fund
are determined in accordance with the Fund's prospectus as of the close of
business on the previous business day on which the Fund was open for business.

The monthly Fund Fee ("Monthly Fund Fee") is the sum of the daily Fund
Fee accruals ("Daily Fund Fee Accruals") for each month. The Daily Fund Fee
Accrual for any particular day is computed by multiplying the fraction of one
(1) over the number of calendar days in the year by the Individual Fund Fee
Rate of 0.25% and multiplying this product by the net assets of the Fund for
that day, as determined in accordance with the Fund's prospectus as of the
close of business on the previous business day on which the Fund was open for
business.

<PAGE 28>
The management fees paid by the Fund for the years 1992, 1991, and
1990, were $4,337,000, $4,660,000, and $4,706,000, respectively.

Limitation on Fund Expenses

The Management Agreement between the Fund and T. Rowe Price provides
that the Fund will bear all expenses of its operations not specifically
assumed by T. Rowe Price. However, in compliance with certain state
regulations, T. Rowe Price will reimburse the Fund for certain expenses which
in any year exceed the limits prescribed by any state in which the Fund's
shares are qualified for sale. Presently, the most restrictive expense ratio
limitation imposed by any state is 2.5% of the first $30 million of the Fund's
average daily net assets, 2% of the next $70 million of the Fund's assets, and
1.5% of net assets in excess of $100 million. For the purpose of determining
whether the Fund is entitled to reimbursement, the expenses of the Fund are
calculated on a monthly basis. If the Fund is entitled to reimbursement, that
month's management fee will be reduced or postponed, with any adjustments made
after the end of the year.

T. Rowe Price Spectrum Fund, Inc.

The Fund is a party to a Special Servicing Agreement ("Agreement")
between and among T. Rowe Price Spectrum Fund, Inc. ("Spectrum Fund"), T. Rowe
Price, T. Rowe Price Services, Inc. and various other T. Rowe Price funds
which, along with the Fund, are funds in which Spectrum Fund invests
(collectively all such funds "Underlying Price Funds").

The Agreement provides that, if the Board of Directors/Trustees of any
Underlying Price Fund determines that such Underlying Fund's share of the
aggregate expenses of Spectrum Fund is less than the estimated savings to the
Underlying Price Fund from the operation of Spectrum Fund, the Underlying
Price Fund will bear those expenses in proportion to the average daily value
of its shares owned by Spectrum Fund, provided further that no Underlying
Price Fund will bear such expenses in excess of the estimated savings to it.
Such savings are expected to result primarily from the elimination of numerous
separate shareholder accounts which are or would have been invested directly
in the Underlying Price Funds and the resulting reduction in shareholder
servicing costs. Although such cost savings are not certain, the estimated
savings to the Underlying Price Funds generated by the operation of Spectrum
Fund are expected to be sufficient to offset most, if not all, of the expenses
incurred by Spectrum Fund.

DISTRIBUTOR FOR FUND

T. Rowe Price Investment Services, Inc. ("Investment Services"), a
Maryland corporation formed in 1980 as a wholly-owned subsidiary of T. Rowe
Price, serves as the Fund's distributor. Investment Services is registered as
a broker-dealer under the Securities Exchange Act of 1934 and is a member of
the National Association of Securities Dealers, Inc. The offering of the
Fund's shares is continuous.

Investment Services is located at the same address as the Fund and T.
Rowe Price -- 100 East Pratt Street, Baltimore, Maryland 21202.

Investment Services serves as distributor to the Fund pursuant to an
Underwriting Agreement ("Underwriting Agreement"), which provides that the
Fund will pay all fees and expenses in connection with: registering and
qualifying its shares under the various state "blue sky" laws; preparing,
setting in type, printing, and mailing its prospectuses and reports to
shareholders; and issuing its shares, including expenses of confirming
purchase orders.

<PAGE 29>
The Underwriting Agreement provides that Investment Services will pay
all fees and expenses in connection with: printing and distributing
prospectuses and reports for use in offering and selling Fund shares;
preparing, setting in type, printing, and mailing all sales literature and
advertising; Investment Services' federal and state registrations as a
broker-dealer; and offering and selling Fund shares, except for those fees and
expenses specifically assumed by the Fund. Investment Services' expenses are
paid by T. Rowe Price.

Investment Services acts as the agent of the Fund in connection with
the sale of its shares in all states in which the shares are qualified and in
which Investment Services is qualified as a broker-dealer. Under the
Underwriting Agreement, Investment Services accepts orders for Fund shares at
net asset value. No sales charges are paid by investors or the Fund.

CUSTODIAN

State Street Bank and Trust Company (the "Bank") is the custodian for
the Fund's securities and cash, but it does not participate in the Fund's
investment decisions. Portfolio securities purchased in the U.S. are
maintained in the custody of the Bank and may be entered into the Federal
Reserve Book Entry System, or the security depository system of the Depository
Trust Corporation. The Bank and Fund have entered into a Sub-Custodian
Agreement with The Chase Manhattan Bank, N.A., London, pursuant to which
portfolio securities which are purchased outside the United States are
maintained in the custody of various foreign branches and affiliates of The
Chase Manhattan Bank and such other custodians, including foreign banks and
foreign securities depositories, in accordance with regulations under the
Investment Company Act of 1940. The Bank's main office is at 225 Franklin
Street, Boston, Massachusetts 02110. The address for The Chase Manhattan
Bank, N.A., London is Woolgate House, Coleman Street, London, EC2P 2HD,
England.

PORTFOLIO TRANSACTIONS

Investment or Brokerage Discretion

Decisions with respect to the purchase and sale of portfolio securities
on behalf of the Fund are made by T. Rowe Price. T. Rowe Price is also
responsible for implementing these decisions,

<PAGE>
<PAGE 30>
including the negotiation of commissions and the allocation of portfolio
brokerage and principal business.

How Brokers and Dealers are Selected

Equity Securities

In purchasing and selling the Fund's portfolio securities, it is T. Rowe
Price's policy to obtain quality execution at the most favorable prices
through responsible brokers and dealers and, in the case of agency
transactions, at competitive commission rates. However, under certain
conditions, the Fund may pay higher brokerage commissions in return for
brokerage and research services. As a general practice, over-the-counter
orders are executed with market-makers. In selecting among market-makers, T.
Rowe Price generally seeks to select those it believes to be actively and
effectively trading the security being purchased or sold. In selecting
broker-dealers to execute the Fund's portfolio transactions, consideration is
given to such factors as the price of the security, the rate of the
commission, the size and difficulty of the order, the reliability, integrity,
financial condition, general execution and operational capabilities of
competing brokers and dealers, and brokerage and research services provided by
them. It is not the policy of T. Rowe Price to seek the lowest available
commission rate where it is believed that a broker or dealer charging a higher
commission rate would offer greater reliability or provide better price or
execution.

Fixed Income Securities

Fixed income securities are generally purchased from the issuer or a
primary market-maker acting as principal for the securities on a net basis,
with no brokerage commission being paid by the client. Transactions placed
through dealers serving as primary market-makers reflect the spread between
the bid and asked prices. Securities may also be purchased from underwriters
at prices which include underwriting fees.

With respect to equity and fixed income securities, T. Rowe Price may
effect principal transactions on behalf of the Fund with a broker or dealer
who furnishes brokerage and/or research services, designate any such broker or
dealer to receive selling concessions, discounts or other allowances, or
otherwise deal with any such broker or dealer in connection with the
acquisition of securities in underwritings.

How Evaluations are Made of the Overall Reasonableness of Brokerage
Commissions Paid

On a continuing basis, T. Rowe Price seeks to determine what levels of
commission rates are reasonable in the marketplace for transactions executed
on behalf of the Fund. In evaluating the reasonableness of commission rates,
T. Rowe Price considers: (a) historical commission rates, both before and
since rates have been fully negotiable; (b) rates which other institutional
investors are paying, based on available public information; (c) rates quoted
by brokers and dealers; (d) the size of a particular transaction, in terms of
the number of shares, dollar amount, and number of clients involved; (e) the
complexity of a particular transaction in terms of both execution and
settlement; (f) the level and type of business done with a particular firm
over a period of time; and (g) the extent to which the broker or dealer has
capital at risk in the transaction.

<PAGE>
<PAGE 31>
Description of Research Services Received from Brokers and Dealers

T. Rowe Price receives a wide range of research services from brokers
and dealers. These services include information on the economy, industries,
groups of securities, individual companies, statistical information,
accounting and tax law interpretations, political developments, legal
developments affecting portfolio securities, technical market action, pricing
and appraisal services, credit analysis, risk measurement analysis,
performance analysis and analysis of corporate responsibility issues. These
services provide both domestic and international perspective. Research
services are received primarily in the form of written reports, computer
generated services, telephone contacts and personal meetings with security
analysts. In addition, such services may be provided in the form of meetings
arranged with corporate and industry spokespersons, economists, academicians
and government representatives. In some cases, research services are
generated by third parties but are provided to T. Rowe Price by or through
broker-dealers.

Research services received from brokers and dealers are supplemental to
T. Rowe Price's own research effort and, when utilized, are subject to
internal analysis before being incorporated by T. Rowe Price into its
investment process. As a practical matter, it would not be possible for T.
Rowe Price's Equity Research Division to generate all of the information
presently provided by brokers and dealers. T. Rowe Price pays cash for
certain research services received from external sources. T. Rowe Price also
allocates brokerage for research services which are available for cash. While
receipt of research services from brokerage firms has not reduced T. Rowe
Price's normal research activities, the expenses of T. Rowe Price could be
materially increased if it attempted to generate such additional information
through its own staff. To the extent that research services of value are
provided by brokers or dealers, T. Rowe Price may be relieved of expenses
which it might otherwise bear.

T. Rowe Price has a policy of not allocating brokerage business in
return for products or services other than brokerage or research services. In
accordance with the provisions of Section 28(e) of the Securities Exchange Act
of 1934, T. Rowe Price may from time to time receive services and products
which serve both research and non-research functions. In such event, T. Rowe
Price makes a good faith determination of the anticipated research and non-
research use of the product or service and allocates brokerage only with
respect to the research component.

Commissions to Brokers who Furnish Research Services

Certain brokers who provide quality execution services also furnish
research services to T. Rowe Price. In order to be assured of continuing to
receive research services considered of value to its clients, T. Rowe Price
has adopted a brokerage allocation policy embodying the concepts of Section
28(e) of the Securities Exchange Act of 1934, which permits an investment
adviser to cause an account to pay commission rates in excess of those another
broker or dealer would have charged for effecting the same transaction, if the
adviser determines in good faith that the commission paid is reasonable in
relation to the value of the brokerage and research services provided. The
determination may be viewed in terms of either the particular transaction
involved or the overall responsibilities of the adviser with respect to the
accounts over which it exercises investment discretion. Accordingly, while T.
Rowe Price cannot readily determine the extent to which commission rates or
net prices charged by broker-dealers reflect the value of their research
services, T. Rowe Price would expect to assess the reasonableness of
commissions in light of the total brokerage and research services provided by
each particular broker.

Internal Allocation Procedures

<PAGE 32>
T. Rowe Price has a policy of not precommitting a specific amount of
business to any broker or dealer over any specific time period. Historically,
the majority of brokerage placement has been determined by the needs of a
specific transaction such as market-making, availability of a buyer or seller
of a particular security, or specialized execution skills. However, T. Rowe
Price does have an internal brokerage allocation procedure for that portion of
its discretionary client brokerage business where special needs do not exist,
or where the business may be allocated among several brokers which are able to
meet the needs of the transaction.

Each year, T. Rowe Price assesses the contribution of the brokerage and
research services provided by brokers, and attempts to allocate a portion of
its brokerage business in response to these assessments. Research analysts,
counselors, various investment committees, and the Trading Department each
seek to evaluate the brokerage and research services they receive from brokers
and make judgments as to the level of business which would recognize such
services. In addition, brokers sometimes suggest a level of business they
would like to receive in return for the various brokerage and research
services they provide. Actual brokerage received by any firm may be less than
the suggested allocations but can, and often does, exceed the suggestions,
because the total brokerage business is allocated on the basis of all the
considerations described above. In no case is a broker excluded from
receiving business from T. Rowe Price because it has not been identified as
providing research services.

Miscellaneous

T. Rowe Price's brokerage allocation policy is consistently applied to
all its fully discretionary accounts, which represent a substantial majority
of all assets under management. Research services furnished by brokers
through which T. Rowe Price effects securities transactions may be used in
servicing all accounts (including non-Fund accounts) managed by T. Rowe Price.
Conversely, research services received from brokers which execute transactions
for the Fund are not necessarily used by T. Rowe Price exclusively in
connection with the management of the Fund.

From time to time, orders for clients may be placed through a
computerized transaction network.

The Fund does not allocate business to any broker-dealer on the basis of
its sales of the Fund's shares. However, this does not mean that broker-
dealers who purchase Fund shares for their clients will not receive business
from the Fund.

Some of T. Rowe Price's other clients have investment objectives and
programs similar to those of the Fund. T. Rowe Price may occasionally make
recommendations to other clients which result in their purchasing or selling
securities simultaneously with the Fund. As a result, the demand for
securities being purchased or the supply of securities being sold may
increase, and this could have an adverse effect on the price of those
securities. It is T. Rowe Price's policy not to favor one client over another
in making recommendations or in placing orders. T. Rowe Price frequently
follows the practice of grouping orders of various clients for execution which
generally results in lower commission rates being attained. In certain cases,
where the aggregate order is executed in a series of transactions at various
prices on a given day, each participating client's proportionate share of such
order reflects the average price paid or received with respect to the total
order. T. Rowe Price has established a general investment policy that it will
ordinarily not make additional purchases of a common stock of a company for
its clients (including the T. Rowe Price Funds) if, as a result of such
purchases, 10% or more of the outstanding common stock of such company would
be held by its clients in the aggregate.

<PAGE 33>
To the extent possible, T. Rowe Price intends to recapture solicitation
fees paid in connection with tender offers through T. Rowe Price Investment
Services, Inc., the Fund's distributor. At the present time, T. Rowe Price
does not recapture commissions or underwriting discounts or selling group
concessions in connection with taxable securities acquired in underwritten
offerings. T. Rowe Price does, however, attempt to negotiate elimination of
all or a portion of the selling-group concession or underwriting discount when
purchasing tax-exempt municipal securities on behalf of its clients in
underwritten offerings.

Transactions with Related Brokers and Dealers

As provided in the Investment Management Agreement between the Fund and
T. Rowe Price, T. Rowe Price is responsible not only for making decisions with
respect to the purchase and sale of the Fund's portfolio securities, but also
for implementing these decisions, including the negotiation of commissions and
the allocation of portfolio brokerage and principal business. It is expected
that T. Rowe Price may place orders for the Fund's portfolio transactions with
broker-dealers through the same trading desks T. Rowe Price uses for portfolio
transactions in domestic securities. The trading desk accesses brokers and
dealers in various markets in which the Fund's foreign securities are located.
These brokers and dealers may include certain affiliates of Robert Fleming
Holdings Limited ("Robert Fleming Holdings") and Jardine Fleming Group Limited
("JFG"), persons indirectly related to T. Rowe Price. Robert Fleming
Holdings, through Copthall Overseas Limited, a wholly-owned subsidiary, owns
25% of the common stock of Rowe Price-Fleming International, Inc. ("RPFI"), an
investment adviser registered under the Investment Advisers Act of 1940.
Fifty percent of the common stock of RPFI is owned by TRP Finance, Inc., a
wholly-owned subsidiary of T. Rowe Price, and the remaining 25% is owned by
Jardine Fleming Holdings Limited, a subsidiary of JFG. JFG is 50% owned by
Robert Fleming Holdings and 50% owned by Jardine Matheson Holdings Limited.
Orders for the Fund's portfolio transactions placed with affiliates of Robert
Fleming Holdings and JFG will result in commissions being received by such
affiliates.

The Board of Directors of the Fund has authorized T. Rowe Price to
utilize certain affiliates of Robert Fleming and JFG in the capacity of broker
in connection with the execution of the Fund's portfolio transactions. These
affiliates include, but are not limited to, Jardine Fleming Securities Limited
("JFS"), a wholly-owned subsidiary of JFG, Robert Fleming & Co. Limited ("
RF&Co."), Jardine Fleming Australia Securities Limited, and Robert Fleming,
Inc. (a New York brokerage firm). Other affiliates of Robert Fleming Holdings
and JFG also may be used. Although it does not believe that the Fund's use of
these brokers would be subject to Section 17(e) of the Investment Company Act
of 1940, the Board of Directors of the Fund has agreed that the procedures set
forth in Rule 17(e)(1) under that Act will be followed when using such
brokers.

<PAGE>
<PAGE 34>
Other

For the years 1992, 1991, and 1990, the total brokerage commissions
paid by the Fund, including the discounts received by securities dealers in
connection with underwritings, were $299,000, $451,000, and $699,000,
respectively. Of these commissions, approximately 95%, 63%, and 39%,
respectively, were paid to firms which provided research, statistical, or
other services to T. Rowe Price in connection with the management of the Fund
or, in some cases, to the Fund.

The portfolio turnover rate of the Fund for each of the last three
years has been as follows: 1992--16.9%, 1991--9.0%, and 1990--9.0%.

PRICING OF SECURITIES

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 that are not traded on a particular day 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. Securities regularly traded in the over-the-counter
market are valued at the latest bid price.

Debt securities are generally traded in the over-the-counter market and
are valued at a price deemed best to reflect fair value as quoted by dealers
who make markets in these securities or by an independent pricing service.
Short-term debt securities are valued at their cost in local currency which,
when combined with accrued interest, approximates fair value.

For purposes of determining the Fund's net asset value per share, all
assets and liabilities initially expressed in foreign currencies are converted
into U.S. dollars at the mean of the bid and offer prices of such currencies
against U.S. dollars quoted by a major bank.

Assets and securities 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.

NET ASSET VALUE PER SHARE

The purchase and redemption price of the Fund's shares is equal to the
Fund's net asset value per share or share price. The Fund determines its net
asset value per share by subtracting its liabilities (including accrued
expenses and dividends payable) from its total assets (the market value of the
securities the Fund holds plus cash and other assets, including income accrued
but not yet received) and dividing the result by the total number of shares
outstanding. The net asset value per share of the Fund is calculated as of
the close of trading on the New York Stock Exchange ("NYSE") every day the
NYSE is open for trading. The NYSE is closed on the following days: New
Year's Day, Washington's Birthday, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day, and Christmas Day.

Determination of net asset value (and the offering, sale, redemption
and repurchase of shares) for the Fund may be suspended at times (a) during
which the NYSE is closed, other than customary weekend and holiday closings,
(b) during which trading on the NYSE is restricted, (c) during which an
emergency exists as a result of which disposal by the Fund of securities owned
<PAGE 35>

by it is not reasonably practicable or it is not reasonably practicable for
the Fund fairly to determine the value of its net assets, or (d) during which
a governmental body having jurisdiction over the Fund may by order permit such
a suspension for the protection of the Fund's shareholders; provided that
applicable rules and regulations of the Securities and Exchange Commission (or
any succeeding governmental authority) shall govern as to whether the
conditions prescribed in (b), (c), or (d) exist.

DIVIDENDS

Unless you elect otherwise, dividends and capital gain distributions
will be reinvested on the reinvestment date using the NAV per share of that
date. The reinvestment date normally precedes the payment date by about 10
days although the exact timing is subject to change.

TAX STATUS

The Fund intends to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended ("Code").

A portion of the dividends paid by the Fund may be eligible for the
dividends-received deduction for corporate shareholders. For tax purposes, it
does not make any difference whether dividends and capital gain distributions
are paid in cash or in additional shares. The Fund must declare dividends
equal to at least 98% of ordinary income (as of December 31) and capital gains
(as of October 31) in order to avoid a federal excise tax and distribute 100%
of ordinary income and capital gains as of December 31 to avoid federal income
tax.

At the time of your purchase, the Fund's net asset value may reflect
undistributed income, capital gains or net unrealized appreciation of
securities held by the Fund. A subsequent distribution to you of such
amounts, although constituting a return of your investment, would be taxable
as either dividends or capital gain distributions. For federal income tax
purposes, the Fund is permitted to carry forward its net realized capital
losses, if any, for eight years, and realize net capital gains up to the
amount of such losses without being required to pay taxes on, or distribute
such gains. On March 31, 1993, the books of the Fund indicated that the
Fund's aggregate net assets included undistributed net income of $3,474,540,
net realized capital gains of $15,966,158, and unrealized appreciation of
$176,906,351.

If, in any taxable year, the Fund should not qualify as a regulated
investment company under the Code: (i) the Fund would be taxable at the
normal corporate rates on the entire amount of its taxable income, if any,
without deduction for dividends or other distributions to shareholders and
(ii) the Fund's distributions to the extent made out of the Fund's current or
accumulated earnings and profits would be taxable to shareholders as ordinary
dividends (regardless of whether they would otherwise have been considered
capital gain dividends).

Taxation of Foreign Shareholders

The Code provides that dividends from net income will be subject to
U.S. tax. For shareholders who are not engaged in a business in the U.S.,
this tax would be imposed at the rate of 30% upon the gross amount of the
dividends in the absence of a Tax Treaty providing for a reduced rate or
exemption from U.S. taxation. Distributions of net long-term capital gains

<PAGE 36>
realized by the Fund are not subject to tax unless the foreign shareholder is
a nonresident alien individual who was physically present in the U.S. during
the tax year for more than 182 days.

To the extent the Fund invests in foreign securities, the following
would apply:

Foreign Currency Gains and Losses

Foreign currency gains and losses, including the portion of gain or
loss on the sale of debt securities attributable to foreign exchange rate
fluctuations, are taxable as ordinary income. If the net effect of these
transactions is a gain, the dividend paid by the Fund will be increased; if
the result is a loss, the income dividend paid by the Fund will be decreased.
Adjustments to reflect these gains and losses will be made at the end of the
Fund's taxable year.

Passive Foreign Investment Companies (PFICs)

The Fund may purchase the securities of certain foreign investment
funds or trusts called passive foreign investment companies. Capital gains on
the sale of such holdings will be deemed to be ordinary income regardless of
how long the Fund holds its investment. In addition to bearing their
proportionate share of the fund's expenses (management fees and operating
expenses), shareholders will also indirectly bear similar expenses of such
funds. In addition, the Fund may be subject to corporate income tax and an
interest charge on certain dividends and capital gains earned from these
investments, regardless of whether such income and gains are distributed to
shareholders.

In accordance with tax regulations, the Fund intends to treat these
securities as sold on the last day of the Fund's fiscal year and recognize any
gains for tax purposes at that time; losses will not be recognized. Such
gains will be considered ordinary income which the Fund will be required to
distribute even though it has not sold the security and received cash to pay
such distributions.

ORGANIZATION OF THE FUND

Shareholders are entitled to one vote for each full share held (and
fractional votes for fractional shares held) and will vote in the election of
or removal of directors (to the extent hereinafter provided) and on other
matters submitted to the vote of shareholders. There will normally be no
meetings of shareholders for the purpose of electing directors unless and
until such time as less than a majority of the directors holding office have
been elected by shareholders, at which time the directors then in office will
call a shareholders' meeting for the election of directors. Except as set
forth above, the directors shall continue to hold office and may appoint
successor directors. Voting rights are not cumulative, so that the holders of
more than 50% of the shares

<PAGE>
<PAGE 37>
voting in the election of directors can, if they choose to do so, elect all
the directors of the Fund, in which event the holders of the remaining shares
will be unable to elect any person as a director.

FEDERAL AND STATE REGISTRATION OF SHARES

The Fund's shares are registered for sale under the Securities Act of
1933, and the Fund or its shares are registered under the laws of all states
which require registration, as well as the District of Columbia and Puerto
Rico.

LEGAL COUNSEL

Shereff, Friedman, Hoffman & Goodman, whose address is 919 Third Avenue,
New York, New York 10022, is legal counsel to the Fund.

INDEPENDENT ACCOUNTANTS

Price Waterhouse, 7 St. Paul Street, Suite 1700, Baltimore, Maryland
21202, are independent accountants to the Fund. The financial statements of
the Fund for the year ended December 31, 1992, and the report of independent
accountants are included in the Fund's Annual Report for the year ended
December 31, 1992 on pages 6 through 13. A copy of the Annual Report
accompanies this Statement of Additional Information. The following financial
statements and the report of independent accountants appearing in the Annual
Report for the year ended December 31, 1992, are incorporated into this
Statement of Additional Information by reference:

Annual Report
Page
_____________

Report of Independent Accountants 13
Statement of Net Assets, December 31, 1992 6-7
Statement of Operations, year ended
December 31, 1992 8
Statement of Changes in Net Assets, years ended
December 31, 1992 and December 31, 1991 9
Notes to Financial Statements,
December 31, 1992 10-11
Per Share and Other Information 12