Semiannual Report
New Era Fund
June 30, 1998
T. Rowe Price
Report Highlights
New Era Fund
o Turmoil in Asia hurt natural resource stocks in particular, impeding their
progress during the past six months.
o Your fund's returns far surpassed those of its peer group average during
the past six and 12 months but significantly lagged the S&P 500 in an
environment of generally low inflation.
o Fund results relative to its peers were helped by less exposure to the
weaker energy sectors and also by relatively broad diversification.
o Many fund holdings were involved in merger and acquisition activity,
including energy and forest products shares.
o Our emphasis on companies with strong balance sheets, low production costs,
and strong management should benefit performance when global demand growth
resumes.
Fellow Shareholders
The stock market continued its ascent early this year before stumbling in May,
as concerns about slower corporate earnings growth and the severity of the
problems in Asia increased. Asian travails affected natural resource stocks and
the New Era Fund even more than the broad market, since Asia had been the engine
of growth in demand for most commodities. As a result, the progress for natural
resource companies has been slower and more painful than previously expected.
Performance Comparison
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Periods Ended 6/30/98 6 Months 12 Months
New Era Fund 2.81% 3.70%
S&P 500 17.71 30.16
Lipper Natural Resources
Funds Average -7.29 -10.98
Your fund significantly outpaced the Lipper Natural Resources Funds Average
during the 6- and 12-month periods ended June 30, 1998, due to the fund's
broader diversification and its relatively low exposure to the energy service
and independent producer industries. However, the fund trailed well behind the
unmanaged Standard & Poor's 500 Stock Index during both periods, since virtually
every natural resource sector in which we invest lagged the broad market--not
unusual in an environment of generally low inflation.
ECONOMIC REVIEW
The Federal Reserve has held the line on short-term interest rates since its
hike in March 1997, largely because of concerns that the impact of higher rates
on Asia would overshadow the need to inhibit domestic inflation. Some evidence
of inflationary pressure can be seen in health care costs, which have been
rising rapidly once again, and also in the renewed confidence of labor unions as
a result of low unemployment. However, weighing against these incipient
inflationary trends are indications that the Asian currency and economic
downturn could slow domestic growth due to lower exports and a ballooning trade
deficit.
Commodity markets have been very weak in general during the past year. The CRB
Commodity Price Index fell in June to its lowest point since 1993, an unusual
phenomenon at this advanced stage of an economic expansion. The price of oil was
particularly hard hit as the exceptionally mild El Nino winter, combined with a
drop in Asian demand, put downward pressure on oil prices. Increased exports
from Iraq and higher quotas engineered by OPEC last fall also contributed. These
factors drove the price of oil to its lowest level since 1986 in nominal terms.
Copper and nickel prices also retreated to 11- and 5-year lows, respectively,
causing producers to defer new capacity projects. Pulp, the raw material for
paper, dropped to its lowest price level since 1994 as Indonesian production,
now in excess of regional demand, weighed on global markets. All in all, an
atmosphere of sagging worldwide commodity prices throughout the past six and 12
months hurt natural resource stocks pretty much across the board.
PORTFOLIO MANAGEMENT
Largely in response to the adverse environment for natural resource companies,
merger and acquisition activity in these industries has been accelerating,
benefiting fund performance. During the first six months, three of our oil
services holdings received takeover bids: Weatherford Enterra, Western Atlas,
and Camco International. Union Texas Petroleum, an exploration and production
company, was another acquisition target. Other portfolio companies that have
either merged or are proposing to do so include Ocean Energy with United
Meridian in the exploration and production sector, Jefferson Smurfit with Stone
Container in the forest products area, and Halliburton with Dresser Industries
in energy services. The purpose of these mergers is to strengthen the companies
financially, reduce overhead, and increase and concentrate market share within
their respective industries. Other fund holdings subject to takeover offers
during the first half of the year include Security Capital Atlantic, a real
estate investment trust, Prime Resources Group, a precious metals firm, Energy
Group, a foreign diversified resources company, and Waste Management in the
waste disposal field. In addition, more than half of our portfolio companies,
measured by their share weighting, have either implemented or announced
significant share repurchase programs, an indication that they view their own
stocks as attractively valued.
At the end of June, your fund had 15% of its assets in international integrated
petroleum stocks, 12% in energy services, and 9% in precious metals. The
portfolio's broad diversification compared with its peers helped relative
results. During the most recent six-month period, we added several new paper
industry holdings, including Champion International, a large domestic paper and
forest products company, Macmillan Bloedel, a Canadian producer of wood products
and paper, and Asia Pulp & Paper, an Indonesian company. We purchased shares of
Burlington Resources, a global independent oil and natural gas producer, and
Getchell Gold, a Nevada gold development and production company. In the
diversified metals category, we added WMC, an Australian diversified mining
company, and Rio Tinto, a leading international mining company.
OUTLOOK
World markets have been focused largely on Asia--particularly on Japan, whose
economy slipped from stagnation to recession, and on China, which is making a
bid for Asian leadership by promoting the stability of its currency and
privatizing state-owned industries. However, Japan's political leadership has
yet to undertake the strong actions required to boost economic growth. Should
Japan slide into a deeper recession and China devalue its currency, a period of
global deflation could develop, which would further impair earnings growth in
the natural resource sectors. However, we are optimistic that necessary economic
reforms will be made, and that global growth will resume at a more normal pace.
Once the global economy emerges from this slowdown, these industries should be
better able to benefit from an increase in demand growth.
Natural resource industries have been reducing their cost structure to enhance
profitability during this extended period of weak commodity prices. Slowing
demand because of the situation in Asia has led to a more cautious and
disciplined approach to investments in new capacity and to the closing of
high-cost facilities. Once the global economy emerges from this slowdown, these
industries should be better able to benefit from an increase in demand growth.
We anticipate that there could actually be better pricing leverage for most
commodities, with a tighter balance between supply and demand, and greater
concentration on production following the current period of industry
consolidation and retrenchment.
In response to the low price of oil, OPEC concluded its second agreement this
year to reduce crude oil exports to a world brimming with inventory. We believe
these latest agreements will be adhered to for the most part, which should
result in both inventory reductions and improving oil prices during the rest of
the year.
Your fund emphasizes companies with strong balance sheets, low production costs,
and good management. These types of companies should benefit from the
consolidation taking place during this period of commodity price weakness, and
from a better operating environment when more normal growth resumes.
Respectfully submitted,
Charles M. Ober
President and Chairman of the Investment Advisory Committee
July 24, 1998
T. Rowe Price New Era Fund
Portfolio Highlights
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TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
6/30/98
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Wal-Mart 5.3%
Mobil 5.2
Royal Dutch Petroleum 3.1
Atlantic Richfield 3.0
Camco International 2.9
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Newmont Mining 2.8
British Petroleum 2.4
DuPont 2.2
Fort James 2.1
Burlington Northern Santa Fe 2.1
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USX-Marathon 2.1
Reynolds Metals 2.0
McDermott International 1.8
Ocean Energy 1.7
Halliburton 1.6
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Coflexip 1.5
TOTAL 1.4
Schlumberger 1.4
Rouse 1.3
Inco 1.3
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Western Atlas 1.1
Burlington Resources 1.1
Chevron 1.1
Cooper Cameron 1.1
Placer Dome 1.1
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Total 52.7%
T. Rowe Price New Era Fund
Portfolio Highlights
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CONTRIBUTIONS TO THE CHANGE IN NET ASSET VALUE PER SHARE
6 Months Ended 6/30/98
Ten Best Contributors
- --------------------------------------------------------
Wal-Mart 53(cents)
Camco International 15
DuPont 13
Mobil 8
British Petroleum 8
Union Texas Petroleum 8
Fort James 7
Bristol-Myers Squibb 6
TOTAL 6
Waste Management* 6
- --------------------------------------------------------
Total 130(cents)
Ten Worst Contributors
- --------------------------------------------------------
Newmont Mining -18(cents)
Ocean Energy 9
Schlumberger 8
Inco 7
Cooper Cameron 7
Union Pacific 6
Halliburton 6
PETROBRAS 6
WMC* 4
Reynolds Metals 4
- --------------------------------------------------------
Total -75(cents)
12 Months Ended 6/30/98
Ten Best Contributors
- --------------------------------------------------------
Wal-Mart 68(cents)
Coflexip 30
Camco International 23
Cooper Cameron 16
Mobil 12
British Petroleum 12
Bristol-Myers Squibb 11
DuPont 11
Lyondell Petrochemical 10
McDermott International 9
- --------------------------------------------------------
Total 202(cents)
Ten Worst Contributors
- --------------------------------------------------------
Newmont Mining -44(cents)
Inco* 18
Cambior 14
Reynolds Metals 14
Union Pacific 13
Lonrho 13
TVX Gold 12
Corning 12
Ocean Energy 9
Freeport-McMoRan Copper & Gold** 8
- --------------------------------------------------------
Total -157(cents)
*Position added
**Position eliminated
T. Rowe Price New Era Fund
Portfolio Highlights
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PERFORMANCE CONTRIBUTIONS
6 Months Ended 6/30/98
Cents-Per-Share Percent of
Sector Contribution Net Assets
- --------------------------------------------------------------------------------
Natural Resource-Related
Building and Real Estate -8(cents) 7%
Forest Products 12 8
Integrated Petroleum - Domestic -4 7
Integrated Petroleum - International 28 15
Petroleum Exploration and Production 11 8
Miscellaneous Energy 3 1
Energy Services -8 12
Precious Metals -31 10
Diversified Metals -16 6
Non-Ferrous Metals -14 2
Chemicals 16 5
Diversified Resources -3 6
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Total -14(cents) 87%
Consumer and Services
Merchandising 60(cents) 5%
Miscellaneous 10 2
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Total 70(cents) 7%
Miscellaneous -- 2
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Subtotal 56 96
Reserves and Income 17 4
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Total Portfolio 73(cents) 100%
T. Rowe Price New Era Fund
Performance Comparison
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This chart shows the value of a hypothetical $10,000 investment in the fund over
the past 10 fiscal year periods or since inception (for funds lacking 10-year
records). The result is compared with a broad-based average or index. The index
return does not reflect expenses, which have been deducted from the fund's
return.
For SEC Chart as follows (New Era Fund)
Lipper Natural
S&P 500 Resources Fund
Index Average New Era Fund
6/88 10,000 10,000 10,000
6/89 12,055 10,966 10,876
6/90 14,042 12,616 11,930
6/91 15,081 12,081 12,186
6/92 17,104 12,188 12,618
6/93 19,435 15,043 14,066
6/94 19,707 15,083 15,103
6/95 24,846 16,519 17,704
6/96 31,306 20,764 21,033
6/97 42,170 24,827 26,079
6/98 54,889 23,913 27,044
Average Annual Compound Total Return
- --------------------------------------------------------------------------------
This table shows how the fund would have performed each year if its actual (or
cumulative) returns for the periods shown had been earned at a constant rate.
Periods Ended 6/30/98 1 Year 3 Years 5 Years 10 Years
New Era Fund 3.70% 15.17% 13.97% 10.46%
Investment return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
T. Rowe Price New Era Fund
Unaudited
Financial Highlights
- --------------------------------------------------------------------------------
For a share outstanding throughout each period
6 Months Year
Ended Ended
6/30/98 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
NET ASSET VALUE
Beginning
of period $ 25.95 $ 26.06 $ 22.65 $ 20.15 $ 20.35 $ 18.88
Investment
activities
Net investment
income 0.1 0.40 0.38 0.47 0.36 0.40
Net realized
and unrealized
gain (loss) 0.5 2.40 5.12 3.71 0.69 2.48
Total from
investment
activities 0.7 2.80 5.50 4.18 1.05 2.88
Distributions
Net investment
income -- (0.37 (0.38) (0.48) (0.38) (0.38)
Net realized gain -- (2.54 (1.71) (1.20) (0.87) (1.03)
Total
distributions -- (2.91 (2.09) (1.68) (1.25) (1.41)
NET ASSET VALUE
End of period $ 26.68 $ 25.95 $ 26.06 $ 22.65 $ 20.15 $ 20.35
------------------------------------------------------------
Ratios/Supplemental Data
Total return* 2.81% 10.96% 24.25% 20.76% 5.17% 15.33%
Ratio of
expenses to
average
net assets 0.74%! 0.74% 0.76% 0.79% 0.80% 0.80%
Ratio of
net investment
income to
average
net assets 1.23%! 1.33% 1.53% 2.00% 1.87% 1.92%
Portfolio
turnover rate 12.8% 27.5% 28.6% 22.7% 24.7% 24.7%
Net assets,
end of period
(in millions) $ 1,344 $ 1,493 $ 1,468 $ 1,090 $ 979 $ 753
*Total return reflects the rate that an investor would have earned on an
investment in the fund during each period, assuming reinvestment of all
distributions.
!Annualized.
The accompanying notes are an integral part of these financial statements.
T. Rowe Price New Era Fund
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Unaudited June 30, 1998
Statement of Net Assets
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
Common Stocks 94.9%
NATURAL RESOURCE-RELATED 85.4%
Building and Real Estate 6.1%
AMB Property 200,073 $ 4,902
Boston Properties, REIT 70,000 2,415
Camden Property Trust, REIT 178,100 5,298
Catellus Development * 357,000 6,314
Equity Office Properties, REIT 98,441 2,793
Federal Realty Investment Trust, REIT 230,000 5,534
Patriot American Hospitality, REIT 60,000 1,436
Reckson Associates Realty, REIT 340,000 8,033
Reckson Service Industries * 136,000 463
Rouse 560,000 17,605
Security Capital Atlantic, REIT 259,000 5,779
Security Capital U.S. Realty * 100,000 1,330
Security Capital U.S. Realty (Class A) * 580,000 7,714
Simon DeBartolo Group, REIT 271,400 8,821
United Dominion Realty Trust, REIT 300,000 4,163
82,600
Forest Products 7.4%
Asia Pulp & Paper ADR 550,000 6,187
Champion International 260,000 12,789
Fort James 634,120 28,218
Georgia-Pacific 199,600 11,764
Georgia-Pacific Timber 139,600 3,219
International Paper 210,000 9,030
Jefferson Smurfit * 690,000 10,846
Kimberly-Clark 210,000 9,634
Macmillan Bloedel 325,000 3,484
Willamette Industries 121,400 3,885
99,056
Integrated Petroleum - Domestic 7.4%
Amerada Hess 240,000 13,035
Atlantic Richfield 520,000 40,625
Murphy Oil 230,000 11,658
Unocal 161,000 $ 5,756
USX-Marathon 810,000 27,793
98,867
Integrated Petroleum - International 15.3%
British Petroleum ADR 360,000 31,770
Chevron 180,000 14,951
Elf Aquitaine ADR 130,000 9,230
Mobil 920,000 70,495
PETROBRAS ADR (144a) 601,100 11,120
Royal Dutch Petroleum ADR 768,400 42,118
Texaco 120,000 7,163
TOTAL ADR 290,000 18,959
205,806
Petroleum Exploration and Production 8.3%
Anderson Exploration (CAD) * 275,000 3,177
Barrett Resources * 234,550 8,781
Burlington Resources 350,000 15,072
Canadian Natural Resources (CAD) * 150,000 2,569
EEX * 1,000,000 9,375
Noble Affiliates 150,000 5,700
Northstar Energy (CAD) * 530,000 4,034
Ocean Energy * 1,188,300 23,246
Rutherford-Moran Oil * 633,200 12,704
Santa Fe Energy Resources 928,600 9,982
Union Pacific Resources 654,186 11,489
Vastar Resources 140,000 6,116
112,245
Miscellaneous Energy 0.6%
Kansas City Power & Light 60,000 1,740
Niagara Mohawk * 450,000 6,722
8,462
Energy Services 12.2%
BJ Services * 90,000 2,616
Camco International 502,500 39,132
Coflexip ADR 335,000 20,456
Cooper Cameron * 291,800 14,882
Halliburton 470,000 20,944
McDermott International 716,650 24,680
Noble Drilling * 250,000 $ 6,016
Santa Fe International 50,000 1,513
Schlumberger 270,000 18,444
Western Atlas 180,000 15,277
163,960
Precious Metals 9.4%
Anglo American Platinum ADR 496,744 5,216
Ashanti Goldfields 616,300 5,007
Barrick Gold 320,640 6,152
Battle Mountain Gold 1,400,000 8,312
Cambior 1,536,000 9,024
Dayton Mining * 873,300 600
Getchell Gold * 460,000 7,073
Homestake Mining 660,250 6,850
Newmont Mining 1,610,359 38,045
Normandy Mining (AUD) * 4,475,421 3,667
Placer Dome 1,215,000 14,276
Prime Resources Group 1,287,000 8,929
TVX Gold * 4,257,200 13,038
126,189
Non-ferrous Metals 2.2%
Bougainville Copper (AUD) * 2,030,829 479
Inco 1,239,000 16,882
WMC (AUD) 4,166,615 12,570
29,931
Diversified Metals 5.5%
Alcoa 120,000 7,912
AVMIN (ZAR) 1,397,000 825
Lonrho (GBP) 2,444,486 11,469
Nucor 310,000 14,260
Reynolds Metals 485,000 27,130
Rio Tinto (GBP) 1,055,000 11,890
73,486
Chemicals 4.7%
DuPont 400,000 29,850
Great Lakes Chemical 340,000 13,409
Hercules 210,000 8,636
Lyondell Petrochemical 370,700 11,283
63,178
Diversified Resources 6.3%
Burlington Northern Santa Fe 285,000 $27,983
IMC Global 299,000 9,007
Lonrho Africa (GBP) 1,877,172 2,304
Norfolk Southern 360,000 10,732
Overseas Shipholding Group 200,000 4,075
Penn Virginia 361,800 9,362
Union Pacific 170,000 7,501
Waste Management 285,000 9,975
Western Water * 344,500 3,467
84,406
Total Natural Resource-Related 1,148,186
CONSUMER AND SERVICE 7.4%
Merchandising 5.4%
Petrie Stores Liquidation Trust * 400,000 1,147
Wal-Mart 1,165,000 70,774
71,921
Miscellaneous 2.0%
Bristol-Myers Squibb 120,000 13,792
Corning 260,000 9,035
GE 50,000 4,550
27,377
Total Consumer and Service 99,298
Miscellaneous Common Stocks 2.1% 27,798
Total Common Stocks (Cost $913,431) 1,275,282
Convertible Preferred Stocks 0.1%
Western Water (Series C) * 2,104 1,426
Total Convertible Preferred Stocks (Cost $2,000) 1,426
Convertible Bonds 0.2%
Asia Pulp & Paper, 0%, 11/18/12 $10,000,000 2,078
Total Convertible Bonds (Cost $2,283) 2,078
Short-Term Investments 4.7%
Money Market Funds 4.7%
Reserve Investment Fund, 5.69% # 63,667,161 $ 63,667
Total Short-Term Investments (Cost $63,667) 63,667
Total Investments in Securities
99.9% of Net Assets (Cost $981,381) $ 1,342,453
Other Assets Less Liabilities 1,088
NET ASSETS $ 1,343,541
-----------
Net Assets Consist of:
Accumulated net investment income
- net of distributions $ 10,368
Accumulated net realized gain/loss
- net of distributions 156,587
Net unrealized gain (loss) 361,071
Paid-in-capital applicable to
50,348,669 shares of $1.00 par
value capital stock outstanding;
200,000,000 shares authorized 815,515
NET ASSETS $ 1,343,541
-----------
NET ASSET VALUE PER SHARE $ 26.68
-----------
* Non-income producing
# Seven-day yield
ADR American Depository Receipt
REIT Real Estate Investment Trust
144a Security was purchased pursuant to Rule 144a under the Securities Act of
1933 and may not be resold subject to that rule except to qualified
institutional buyers--total of such securities at period-end amounts to
0.83% of net assets.
AUD Australian dollar
CAD Canadian dollar
GBP British sterling
ZAR South African rand
The accompanying notes are an integral part of these financial statements.
T. Rowe Price New Era Fund
Unaudited
Statement of Operations
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In thousands
6 Months
Ended
6/30/98
Investment Income
Income
Dividend $ 11,677
Interest 2,080
Total income 13,757
Expenses
Investment management 3,992
Shareholder servicing 1,000
Custody and accounting 79
Prospectus and shareholder reports 64
Registration 22
Legal and audit 7
Directors 5
Miscellaneous 21
Total expenses 5,190
Net investment income 8,567
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 122,005
Foreign currency transactions (42)
Net realized gain (loss) 121,963
Change in net unrealized gain
or loss on securities (93,863)
Net realized and
unrealized gain (loss) 28,100
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 36,667
---------
The accompanying notes are an integral part of these financial statements.
T. Rowe Price New Era Fund
Unaudited
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
In thousands
6 Months Year
Ended Ended
6/30/98 12/31/97
Increase (Decrease) in Net Assets
Operations
Net investment income $ 8,567 $ 21,184
Net realized gain (loss) 121,963 152,229
Change in net
unrealized gain or loss (93,863) (9,753)
Increase (decrease) in net
assets from operations 36,667
163,660
Distributions to shareholders
Net investment income -- (19,378)
Net realized gain -- (133,022)
Decrease in net assets from distributions -- (152,400)
Capital share transactions*
Shares sold 84,741 229,959
Distributions reinvested -- 138,855
Shares redeemed (270,529) (355,150)
Increase (decrease) in net
assets from capital
share transactions (185,788) 13,664
Net Assets
Increase (decrease)
during period (149,121) 24,924
Beginning of period 1,492,662 1,467,738
End of period $1,343,541 $1,492,662
---------- ----------
*Share information
Shares sold 3,127 8,212
Distributions reinvested -- 5,456
Shares redeemed (10,289) (12,472)
Increase (decrease) in shares outstanding (7,162) 1,196
The accompanying notes are an integral part of these financial statements.
T. Rowe Price New Era Fund
- --------------------------------------------------------------------------------
Unaudited June 30, 1998
Notes to Financial Statements
Note 1 - Significant Accounting Policies
T. Rowe Price New Era Fund, Inc. (the fund) is registered under the Investment
Company Act of 1940 as a diversified, open-end management investment company and
commenced operations on January 20, 1969.
The accompanying financial statements are prepared in accordance with generally
accepted accounting principles for the investment company industry; these
principles may require the use of estimates by fund management.
Valuation Equity securities listed or regularly traded on a securities exchange
are valued at the last quoted sales price on the day the valuations are made. A
security which is listed or traded on more than one exchange is valued at the
quotation on the exchange determined to be the primary market for such security.
Listed securities not traded on a particular day and securities regularly traded
in the over-the-counter market are valued at the mean of the latest bid and
asked prices. Other equity securities are valued at a price within the limits of
the latest bid and asked prices deemed by the Board of Directors, or by persons
delegated by the Board, best to reflect fair value.
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.
Investments in mutual funds are valued at the closing net asset value per share
of the mutual fund on the day of valuation.
For purposes of determining the fund's net asset value per share, the U.S.
dollar value of all assets and liabilities initially expressed in foreign
currencies is determined by using the mean of the bid and offer prices of such
currencies against U.S. dollars quoted by a major bank.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by or under the supervision of the officers of the
fund, as authorized by the Board of Directors.
Currency Translation Assets and liabilities are translated into U.S. dollars at
the prevailing exchange rate at the end of the reporting period. Purchases and
sales of securities and income and expenses are translated into U.S. dollars at
the prevailing exchange rate on the dates of such transactions. The effect of
changes in foreign exchange rates on realized and unrealized security gains and
losses is reflected as a component of such gains and losses.
Premiums and Discounts Premiums and discounts on debt securities are amortized
for both financial reporting and tax purposes.
Other Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses are
reported on the identified cost basis. Dividend income and distributions to
shareholders are recorded by the fund on the ex-dividend date. Income and
capital gain distributions are determined in accordance with federal income tax
regulations and may differ from those determined in accordance with generally
accepted accounting principles.
Note 2 - Investment Transactions
Purchases and sales of portfolio securities, other than short-term securities,
aggregated $171,759,000 and $349,895,000, respectively, for the six months ended
June 30, 1998.
Note 3 - Federal Income Taxes
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of its
taxable income.
At June 30, 1998, the aggregate cost of investments for federal income tax and
financial reporting purposes was $981,381,000, and net unrealized gain
aggregated $361,072,000, of which $458,833,000 related to appreciated
investments and $97,761,000 to depreciated investments.
Note 4 - Related Party Transactions
The investment management agreement between the fund and T. Rowe Price
Associates, Inc. (the manager) provides for an annual investment management fee,
of which $629,000 was payable at June 30, 1998. The fee is computed daily and
paid monthly, and consists of an individual fund fee equal to 0.25% of average
daily net assets and a group fee. The group fee is based on the combined assets
of certain mutual funds sponsored by the manager or Rowe Price-Fleming
International, Inc. (the group). The group fee rate ranges from 0.48% for the
first $1 billion of assets to 0.30% for assets in excess of $80 billion. At June
30, 1998, and for the six months then ended, the effective annual group fee rate
was 0.32%. The fund pays a pro-rata share of the group fee based on the ratio of
its net assets to those of the group.
In addition, the fund has entered into agreements with the manager and two
wholly owned subsidiaries of the manager, pursuant to which the fund receives
certain other services. The manager computes the daily share price and maintains
the financial records of the fund. T. Rowe Price Services, Inc. (TRPS) is the
fund's transfer and dividend disbursing agent and provides shareholder and
administrative services to the fund. T. Rowe Price Retirement Plan Services,
Inc., provides subaccounting and recordkeeping services for certain retirement
accounts invested in the fund. The fund incurred expenses pursuant to these
related party agreements totaling approximately $668,000 for the six months
ended June 30, 1998, of which $137,000 was payable at period-end.
Additionally, the fund is one of several T. Rowe Price-sponsored mutual funds
(underlying funds) in which the T. Rowe Price Spectrum Funds (Spectrum) may
invest. Spectrum does not invest in the underlying funds for the purpose of
exercising management or control. Expenses associated with the operation of
Spectrum are borne by each underlying fund to the extent of estimated savings to
it and in proportion to the average daily value of its shares owned by Spectrum,
pursuant to special servicing agreements between and among Spectrum, the
underlying funds, T. Rowe Price, and, in the case of T. Rowe Price Spectrum
International, Rowe Price-Fleming International. Spectrum Growth Fund held
approximately 10.3% of the outstanding shares of the New Era Fund at June 30,
1998. For the six months then ended, the fund was allocated $186,000 of Spectrum
expenses, $100,000 of which was payable at period-end.
The fund may invest in the Reserve Investment Fund and Government Reserve
Investment Fund (collectively, the Reserve Funds), open-end management
investment companies managed by T. Rowe Price Associates, Inc. The Reserve Funds
are offered as cash management options only to mutual funds and other accounts
managed by T. Rowe Price and its affiliates and are not available to the public.
The Reserve Funds pay no investment management fees. Distributions from the
Reserve Funds to the fund for the six months ended June 30, 1998, totaled
$1,938,000 and are reflected as interest income in the accompanying Statement of
Operations.
T. Rowe Price Shareholder Services
Investment Services And Information
Knowledgeable Service Representatives
By Phone 1-800-225-5132 Available Monday through Friday from
8 a.m. to 10 p.m. ET and weekends from 8:30 a.m. to 5 p.m. ET.
In Person Available in T. Rowe Price Investor Centers.
Account Services
Checking Available on most fixed income funds ($500 minimum).
Automatic
Investing From your bank account or paycheck.
Automatic Withdrawal Scheduled, automatic redemptions. Distribution Options
Reinvest all, some, or none of your distributions.
Automated 24-Hour Services Including Tele*Access(registered trademark) and the
T. Rowe Price Web site on the Internet. Address: www.troweprice.com
Discount Brokerage*
Individual Investments Stocks, bonds, options, precious metals, and other
securities at a savings over regular commission rates.
Investment Information
Combined Statement Overview of all your accounts with T. Rowe Price.
Shareholder Reports Fund managers' reviews of their strategies and results.
T. Rowe Price Report Quarterly investment newsletter discussing markets and
financial strategies.
Performance Update Quarterly review of all T. Rowe Price fund results.
Insights Educational reports on investment strategies and financial markets.
Investment Guides Asset Mix Worksheet, College Planning Kit, Diversifying
Overseas: A Guide to International Investing, Personal Strategy Planner,
Retirees Financial Guide, and Retirement Planning Kit.
*A division of T. Rowe Price Investment Services, Inc. Member NASD/SIPC.
T. Rowe Price Mutual Funds
- --------------------------------------------------------------------------------
Stock Funds
Domestic
Blue Chip Growth
Capital Appreciation
Capital Opportunity
Diversified Small-Cap Growth
Dividend Growth
Equity Income
Equity Index 500*
Extended Equity Market Index
Financial Services
Growth & Income
Growth Stock
Health Sciences
Media & Telecommunications**
Mid-Cap Growth
Mid-Cap Value
New America Growth
New Era
New Horizons***
Real Estate
Science & Technology
Small-Cap Stock
Small-Cap Value***
Spectrum Growth
Total Equity Market Index
Value
International/Global
Emerging Markets Stock
European Stock
Global Stock
International Discovery
International Stock
Japan
Latin America
New Asia
Spectrum International
Bond Funds
Domestic Taxable
Corporate Income
GNMA
High Yield
New Income
Short-Term Bond
Short-Term U.S. Government
Spectrum Income
Summit GNMA
Summit Limited-Term Bond
U.S. Treasury Intermediate
U.S. Treasury Long-Term
Domestic Tax-Free
California Tax-Free Bond
Florida Insured
Intermediate Tax-Free
Georgia Tax-Free Bond
Maryland Short-Term
Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Summit Municipal Intermediat
Tax-Free High Yield
Tax-Free Income
Tax-Free Insured
Intermediate Bond
Tax-Free Short-Intermediate
Virginia Short-Term
Tax-Free Bond
Virginia Tax-Free Bond
International/Global
Emerging Markets Bond
Global Bond!
International Bond
Money Market Funds!!
Taxable
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
Tax-Free
California Tax-Free Money
New York Tax-Free Money
Summit Municipal
Money Market
Tax-Exempt Money
Blended Asset Funds
Balanced
Personal Strategy Balanced
Personal Strategy Growth
Personal Strategy Income
Tax-Efficient Balanced
T. Rowe Price No-load Variable Annuity
Equity Income Portfolio
International Stock Portfolio
Limited-Term Bond Portfolio
Mid-Cap Growth Portfolio
New America Growth Portfolio
Personal Strategy Balanced Portfolio
Prime Reserve Portfolio
* Formerly named Equity Index.
** Formerly the closed-end New Age Media Fund. Converted to open-end status on
7/28/97.
***Closed to new investors.
!Formerly named Global Government Bond.
!!Neither the funds nor their share prices are insured or guaranteed by the
U.S. government.
Please call for a prospectus. Read it carefully before investing.
The T. Rowe Price No-Load Variable Annuity [#V6021] is issued by Security
Benefit Life Insurance Company. In New York, it [#FSB201(11-96)] is issued by
First Security Benefit Life Insurance Company of New York, White Plains, NY. T.
Rowe Price refers to the underlying portfolios' investment managers and the
distributors, T. Rowe Price Investment Services, Inc.; T. Rowe Price Insurance
Agency, Inc.; and T. Rowe Price Insurance Agency of Texas, Inc. The Security
Benefit Group of Companies and the T. Rowe Price companies are not affiliated.
The variable annuity may not be available in all states. The contract has
limitations. Call a representative for costs and complete details of the
coverage.
For yield, price, last transaction, current balance, or to conduct transactions,
24 hours, 7 days
a week, call Tele*Access(registered trademark):
1-800-638-2587 toll free
For assistance with your existing fund account, call:
Shareholder Service Center
1-800-225-5132 toll free
410-625-6500 Baltimore area
To open a Discount Brokerage
account or obtain information,
call: 1-800-638-5660 toll free
Internet address:
www.troweprice.com
T. Rowe Price Associates
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for
distribution only to shareholders
and to others who have received
a copy of the prospectus of the
T. Rowe Price New Era Fund(registered trademark).
Investor Centers:
101 East Lombard St.
Baltimore, MD 21202
T. Rowe Price
Financial Center
10090 Red Run Blvd.
Owings Mills, MD 21117
Farragut Square
900 17th Street, N.W.
Washington, D.C. 20006
ARCO Tower
31st Floor
515 South Flower St.
Los Angeles, CA 90071
4200 West Cypress St.
10th Floor
Tampa, FL 33607
T. Rowe Price, Invest With Confidence(registered trademark)
T. Rowe Price Investment Services, Inc., Distributor. F41-051 6/30/98
