Semiannual Report
New Era Fund
June 30, 1999
T. Rowe Price
Report Highlights
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New Era Fund
o The environment improved for natural resources stocks as concerns about
deflation were replaced by expectations for renewed global growth.
o The fund posted a strong return for the six months ended June 30 and
positive results for the 12-month period.
o Performance was ahead of the Lipper average for the year but behind it
for the last six months because of the fund's broad diversification.
o Mergers involving key holdings enhanced results.
o Stronger global economic growth, combined with a cautious Fed that is not
likely to overreact to inflation, bodes well for natural resources
companies and the fund.
Fellow Shareholders
The domestic stock market continued to post impressive gains through
mid-year. The environment for the New Era Fund improved substantially as
investors largely dismissed last year's worries about possible deflation
and, instead, began to search for industries that will benefit from the
global economic growth that has started to emerge.
Performance Comparison
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Periods Ended 6/30/99 6 Months 12 Months
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New Era Fund 20.48% 5.60%
S&P 500 12.38 22.76
Lipper Natural Resources
Funds Average 26.82 2.50
Early signs of an economic recovery in Asia, including Japan, suggest that
resource and industrial commodity markets will continue to strengthen over
the next year. In fact, energy markets have already experienced a
substantial recovery. The improvement in the prices of oil and natural gas,
and the expected revival of other commodities, led to strong performance in
the shares of companies that produce and sell these basic materials. As a
result, your fund outperformed the unmanaged Standard & Poor's 500 Stock
Index over the first half of the year. However, the return trailed the
Lipper Natural Resources Funds Average due to our diversification within
natural resources sectors. This resulted in a somewhat lower-than-average
emphasis on energy, which was particularly strong during the first half,
and a higher weighting in precious metals and real estate, both of which
lagged the S&P 500 and other resource stocks. Twelve-month results trailed
the S&P 500 but were more than double that of the Lipper benchmark.
ECONOMIC REVIEW
Tough medicine prescribed by the International Monetary Fund, and reforms
instituted by a number of emerging market economies, contributed to
improved trade balances, higher domestic reserve levels, buoyant local
equity markets, and the beginning of economic recovery for many countries
leveled by last year's currency and banking crises. The results varied
according to the degree of adherence to, and speed of execution of, these
policies. Several major oil companies had noted the beginning of a recovery
late last year in some Asian nations hardest hit by the financial turmoil.
This became particularly evident as crude oil demand rose modestly
throughout the region during the first quarter of 1999, with South Korean
demand particularly strong. Some of the improvement was related to the
restocking of inventories depleted during the economic hardship and to more
normal winter weather conditions. However, a nascent recovery rooted in
fundamentals is also evident. Even Japan, which has been struggling
economically since the beginning of the decade, witnessed nearly 8% GDP
growth in the first quarter, though there is some concern that this
performance may not be sustainable.
The U.S. economy continued to show remarkable strength, especially in the
area of consumer spending, and is serving as the growth engine for the
world. Robust consumer spending has been reinforced by the wealth effect of
high participation in the long-lived bull market in stocks. The Federal
Reserve, concerned that such heavy spending could lead to higher inflation,
preemptively raised the federal funds rate a quarter-point at the end of
June. At present, policymakers seem content with the explanation that high
productivity gains in the workforce, due in large measure to the
application of technology, are holding down inflation. Furthermore, the
labor force still seems more interested in job security than in wage
increases, despite low unemployment. This attitude can partly be attributed
to continuing corporate downsizing and the availability of cheap labor
overseas. These conflicting forces suggest that the Fed will not step on
the monetary brakes too heavily to combat inflation because it does not
want to derail the robust economy. The Fed is fully aware that recovery in
the rest of the world remains fragile and dependent upon U.S. policy.
Information on Year-End Distributions
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To help you with tax planning, we try to give you a good idea of the
per-share income and capital gain amounts our funds may distribute near
year-end. In late October, we will provide estimates of these amounts,
which will be paid on December 16, 1999, to shareholders of record on
December 14. These preliminary numbers will be included in The Price Report
mailing to shareholders in late October and will also be available on our
Web site-www.troweprice.com.
We hope that these preliminary numbers will be useful to you in
approximating the income and capital gains taxes you may pay on
distributions to taxable accounts.
If your fund distributed any capital gains earlier in 1999, you can find
the amounts on your statements and should include them in your tax planning
calculations. Please keep in mind that the numbers are not final and are
likely to be revised before the December 14 declaration and record date. As
the fall progresses, you may want to check our Web site for revisions.
If you would like information on tax matters relating to mutual funds,
please visit our Web site to download our Insights report, Tax Information
for Mutual Fund Investors, or call 1-800-225-5132 to request a copy.
In January, Europe launched its long-awaited Economic and Monetary Union
and unified currency, the euro. Unfortunately, the euro has weakened
considerably against the dollar since its inception, giving rise to doubts
about the future of the EMU itself. The economies of Germany and Italy are
weak relative to many of the other nine members, and doubts about EMU
viability were heightened by the waiving of some policy rules for Italy.
Conversely, the weaker euro could stimulate exports and lead to
consolidation and cost reduction efforts across the Continent. An
unprecedented wave of cross-border mergers and acquisitions has already
occurred. If this continues, the EMU will emerge as a significant
competitor on the world economic scene-as was the original intention. The
political risks remain and bear watching, but we believe the EMU and the
euro will eventually find their footing.
PORTFOLIO MANAGEMENT
As we forecast in our last report to you, energy prices have recovered,
although the strength and speed of the recovery was somewhat surprising. In
an effort to take advantage of this development, we made changes in our
energy holdings, which benefited fund results. Our diversified approach to
resource investing has been rewarding, with less risk to shareholders over
the longer term.
INDUSTRY DIVERSIFICATION
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Reserves and Others 13
Non-Resources 7
Energy 45
Metals and Mining 6
Precious Metals 8
Forest Products 8
Diversified Resources 7
Building and Real Estate 6
Based on net assets as of 6/30/99.
Mergers and acquisitions in resource and associated industries enhanced
performance significantly in the first half. Atlantic Richfield, a sizable
fund holding, agreed to be acquired by BP Amoco subject to regulatory
approval, and Weyerhauser is slated to acquire Canadian forest products and
paper company MacMillan Bloedel. Merger activity in the energy arena was
not limited to the major oil companies and independent producers; two
energy service companies in the portfolio, Daniel Industries and J. Ray
McDermott, were recently acquired as that segment also consolidates.
Several new positions were added during the past six months. Among them
were Azurix, a unique global water resource and utility company; Canadian
Occidental Petroleum, an oil price-sensitive Canadian energy company with
exploration and production assets around the world; Key Energy Services, a
dominant company in the domestic well workover industry, which has
significantly consolidated during the downturn; Sonat, a natural gas
pipeline and production company being acquired by El Paso Corporation; and
W. R. Grace, a recently transformed specialty chemicals company with strong
new management.
OUTLOOK
The outlook for the industries we invest in seems bright on the basis of
expanding global economic growth over the next year. Currently, the U.S. is
benefiting from relatively weak economic conditions in the rest of the
world. Our economy continues to grow rapidly without inflation by drawing
on the underutilized capacity of labor and manufacturing in other
countries. As other economies begin to recover, utilization will rise and
pricing power will be restored, which should translate into greater
profitability for resource and other commodity industries. At center stage
will be the Federal Reserve and its approach to fighting inflation by
raising interest rates in a measured fashion. As mentioned, the Fed is not
aggressively fighting inflation for fear of slowing the only economy with
strong momentum. However, when the rest of the world is able to demonstrate
that recovery is at hand and growth restored, the Fed may decide to raise
interest rates further.
With the recovery in oil and gas prices, health has largely returned to the
energy industry. The price of crude is likely to hover near the current
level for a while, as OPEC gradually lifts the quota restrictions
instituted to tighten oil markets. About seven million barrels per day of
capacity were temporarily held back, and as they are restored to production
over the next two years the price is unlikely to rise much above recent
levels. Domestic natural gas capacity has eroded while demand for it
continues to rise. Structural changes in the industry are likely to result
in a tight market for the next couple of years, and higher prices should be
the consequence. The situation arose as a result of mergers involving many
of major companies in the industry. Capital spending discipline and the
inevitable delays resulting from the mergers of these behemoths should keep
a lid on reinvestment in exploration and development. Therefore, it is
unlikely that new capacity will grow as rapidly as demand for either oil or
natural gas.
Most central banks appear to have concluded that gold is no different from
any other commodity and has limited value as a reserve asset. Since the
preference is to carry reserves of dollars, yen, and euros, gold prices
have been driven down by reserve sales, especially the recent auction by
Great Britain. As in other commodity industries, high-cost capacity must
close down and inventory in weak hands must find a new home before any
recovery is likely. The market is concerned that the gold reserves of
central banks, amounting to well over 10 years of inventory, are now in
weak hands and a sizable amount of bullion must be mobilized before the
market can stabilize at a new price level. Ironically, this is taking place
in spite of concerns about rising inflation and gold's traditional
relationship to it. Accordingly, the stocks of gold mining companies
currently reflect all of these concerns and are at very low historical
valuations relative to the market.
We believe the New Era Fund can continue to perform well in light of the
brighter earnings prospects for portfolio companies. Our outlook hinges on
the forbearance of the Federal Reserve and its reluctance to overreact in
its efforts to restrain inflation, plus continued economic momentum
building in the rest of the world. We will maintain our usual discipline of
investing in companies that are constantly reinventing themselves and
refuse to rest on their laurels as commodity prices begin to move in their
favor.
Respectfully submitted,
Charles M. Ober
President and Chairman of the Investment Advisory Committee
July 23, 1999
T. Rowe Price New Era Fund
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Portfolio Highlights
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TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
6/30/99
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Wal-Mart 5.5%
Mobil 4.7
Royal Dutch Petroleum 3.5
Schlumberger 3.0
Atlantic Richfield 2.9
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USX-Marathon 2.9
Fort James 2.7
Newmont Mining 2.5
DuPont 2.4
Burlington Northern Santa Fe 2.3
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Halliburton 1.9
Amerada Hess 1.8
Chevron 1.8
Burlington Resources 1.5
Reynolds Metals 1.5
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Inco 1.4
Baker Hughes 1.4
Total 1.4
Kimberly-Clark 1.3
Nucor 1.3
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Murphy Oil 1.3
Rouse 1.3
Unocal 1.2
Norfolk Southern 1.2
Rio Tinto 1.2
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Total 53.9%
Note: Table excludes reserves.
T. Rowe Price New Era Fund
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Portfolio Highlights
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MAJOR PORTFOLIO CHANGES
Listed in descending order of size
6 Months Ended 6/30/99
Ten Largest Purchases
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W.R. Grace *
Sonat *
Azurix *
Unocal
Amerada Hess
Key Energy Services *
Devon Energy *
Canadian Occidental Petroleum *
USX-Marathon
Norfolk Southern
Ten Largest Sales
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Wal-Mart
WMC Limited **
Georgia-Pacific **
BP Amoco
Schlumberger
Reynolds Metals
McDermott International
Corning
Inco
Unocal
* Position added
** Position eliminated
T. Rowe Price New Era Fund
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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. An index return does not reflect expenses, which have been deducted
from the fund's return.
NEW ERA FUND
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As of 6/30/99
Lipper
Natural
Resources New Era New Era
S&P 500 Fund Average Fund-Line Fund-Area
6/30/89 10.000 10.000 10.000 10.000
6/90 11.649 11.496 10.969 10.969
6/91 12.510 11.029 11.204 11.204
6/92 14.188 11.130 11.602 11.602
6/93 16.122 13.570 12.933 12.933
6/94 16.348 13.689 13.886 13.886
6/95 20.611 14.876 16.278 16.278
6/96 25.970 18.497 19.338 19.338
6/97 34.982 22.134 23.978 23.978
6/98 45.533 21.447 24.865 24.865
6/99 55.895 22.444 26.258 26.258
Average Annual Compound Total Return
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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 6/30/99 1 Year 3 Years 5 Years 10 Years
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New Era Fund 5.60% 10.73% 13.59% 10.14%
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
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Unaudited
Financial Highlights For a share outstanding throughout each period
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6 Months Year
Ended Ended
6/30/99 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
NET ASSET VALUE
Beginning of period $ 19.78 $ 25.95 $ 26.06 $ 22.65 $ 20.15 $ 20.35
Investment activities
Net investment
income 0.14 0.37 0.40 0.38 0.47 0.36
Net realized and
unrealized gain (lo 3.91 (2.97) 2.40 5.12 3.71 0.69
Total from
investment
activities 4.05 (2.60) 2.80 5.50 4.18 1.05
Distributions
Net investment
income - (0.40) (0.37) (0.38) (0.48) (0.38)
Net realized gain - (3.17) (2.54) (1.71) (1.20) (0.87)
Total distributions - (3.57) (2.91) (2.09) (1.68) (1.25)
NET ASSET VALUE
End of period $ 23.83 $ 19.78 $ 25.95 $ 26.06 $22.65 $ 20.15
Ratios/Supplemental
Data Total return* 20.48% (9.88)% 10.96% 24.25% 20.76% 5.17%
Ratio of total
expenses to average
net assets 0.75%! 0.75% 0.74% 0.76% 0.79 0.80%
Ratio of net
investment income to
average net assets 1.28%! 1.27% 1.33% 1.53% 2.00 1.87%
Portfolio turnover
rate 30.0%! 23.1% 27.5% 28.6% 22.7% 24.7%
Net assets, end
of period
(in millions) $ 1,136 $ 999 $ 1,493 $ 1,468 $ 1,090 $ 979
* 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, 1999
Statement of Net Assets Shares/Par Value
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In thousands
Common Stocks 93.8%
NATURAL RESOURCE-RELATED 83.3%
Building and Real Estate 5.4%
Archstone Communities Trust, REIT 259,000 $ 5,682
Boston Properties, REIT 50,000 1,794
Camden Property Trust, REIT 178,100 4,942
Catellus Development * 395,000 6,122
Equity Office Properties, REIT 88,441 2,266
Federal Realty Investment Trust, REIT 230,000 5,276
Reckson Associates Realty, REIT 340,000 7,990
Rouse 560,000 14,210
Security Cap US Realty * 290,000 5,510
Security Cap US Realty (Class A) * 50,000 950
Simon DeBartolo Group, REIT 271,400 6,887
61,629
Forest Products 7.6%
Bowater 20,000 945
Champion International 170,000 8,139
Domtar 421,200 4,001
Fort James 799,120 30,267
International Paper 140,000 7,070
Kimberly-Clark 260,000 14,820
Macmillan Bloedel (CAD) 325,000 5,880
Smurfit-Stone Container * 530,000 10,882
Willamette Industries 91,400 4,210
86,214
Integrated Petroleum - Domestic 10.1%
Amerada Hess 340,000 20,230
Atlantic Richfield 400,000 33,425
Murphy Oil 300,000 14,644
Unocal 350,000 13,869
USX-Marathon 1,010,000 32,888
115,056
Integrated Petroleum - International 12.9%
BP Amoco ADR 50,000 5,425
Chevron 210,000 19,990
Elf Aquitaine ADR 100,000 $ 7,356
Mobil 535,000 52,965
Royal Dutch Petroleum ADR 668,400 40,271
Texaco 70,000 4,375
Total Fina Sa ADR 250,000 16,109
146,491
Refining & Marketing 0.3%
Tosco 60,000 1,556
Ultramar Diamond Shamrock 40,000 872
Valero Energy 57,400 1,231
3,659
Petroleum Exploration and Production 8.8%
Anadarko Petroleum 160,000 A5,890
Anderson Exploration (CAD) * 275,000 3,614
Barrett Resources * 234,550 9,001
Burlington Resources 400,000 17,300
Canadian Natural Resources (CAD) * 140,000 2,757
Canadian Occidental Petroleum Limited (CAD) 350,000 5,644
Devon Energy 124,550 4,453
EEX * 553,333 3,839
Mitchell Energy & Development (Class B) 500,000 9,187
Noble Affiliates 150,000 4,228
Ocean Energy * 1,247,800 12,010
Pogo Producing 200,000 3,725
Santa Fe Snyder * 928,600 7,081
Union Pacific Resources 654,186 10,671
99,400
Miscellaneous Energy 0.8%
Niagara Mohawk * 590,000 9,477
9,477
Energy Services 10.9%
Baker Hughes 486,000 16,281
BJ Services * 400,000 11,775
Coflexip ADR 300,000 13,163
Cooper Cameron * 241,800 8,962
Halliburton 470,000 21,267
Key Energy * 2,000,000 7,125
McDermott International 386,650 10,923
Schlumberger 540,000 $ 34,391
123,887
Precious Metals 7.6%
Anglo American Platinum ADR 496,744 11,559
Barrick Gold 320,640 6,212
Battle Mountain Gold 1,430,000 3,486
Cambior 1,416,000 4,602
Homestake Mining 1,602,630 13,122
Newmont Mining 1,410,359 28,031
Normandy Mining (AUD) 4,475,421 2,976
Placer Dome 1,006,950 11,895
TVX Gold 4,087,200 4,087
85,970
Non-Ferrous Metals 1.7%
Bougainville Copper (AUD) * 2,030,829 282
Inco 860,000 15,480
Phelps Dodge 60,000 3,716
19,478
Diversified Metals 4.0%
Nucor 310,000 14,706
Reynolds Metals 290,000 17,110
Rio Tinto (GBP) 800,000 13,530
45,346
Chemicals 6.0%
DuPont 400,000 27,325
Great Lakes Chemical 230,000 10,594
Hercules 290,000 11,401
Millennium Chemicals 150,000 3,534
Octel * 169,000 2,113
W. R. Grace * 720,000 13,230
68,197
Diversified Resources 6.3%
Azurix * 500,000 10,000
Burlington Northern Santa Fe 855,000 26,505
IMC Global 549,000 9,676
Lonrho Africa (GBP) 1,251,472 907
Norfolk Southern 460,000 13,858
Overseas Shipholding Group 200,000 2,575
Penn Virginia 361,800 $ 7,146
Western Water * 314,500 1,061
71,728
Gas Transmission 0.9%
Sonat 300,000 9,937
9,937
Total Natural Resource-Related 946,469
CONSUMER AND SERVICE 7.0%
Merchandising 5.4%
Wal-Mart 1,290,000 62,242
62,242
Miscellaneous 1.6%
Bristol-Myers Squibb 100,000 7,044
Corning 110,000 7,714
GE 30,000 3,390
18,148
Total Consumer and Service 80,390
Total Miscellaneous Common Stocks 3.5% 39,501
Total Common Stocks (Cost $747,504) 1,066,360
Convertible Preferred Stocks 0.0%
Western Water (Series C) * 2,259 459
Total Convertible Preferred Stocks (Cost $2,000) 459
Convertible Bonds 0.2%
Inco, Deb. Notes, 5.75%, 7/1/04 2,000,000 1,832
Total Convertible Bonds (Cost $1,801) 1,832
Short-Term Investments 6.0%
Money Market Funds 6.0%
Reserve Investment Fund, 5.05% # 67,725,899 67,726
Total Short-Term Investments (Cost $67,726) 67,726
Total Investments in Securities
100.0% of Net Assets (Cost $819,031) $1,136,377
Other Assets Less Liabilities 74
NET ASSETS $1,136,451
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Net Assets Consist of:
Accumulated net investment income
- - net of distributions $6,755
Accumulated net realized gain/loss
- - net of distributions 73,687
Net unrealized gain (loss) 317,338
Paid-in-capital applicable to 47,693,917
shares of $1.00 par value capital stock
outstanding; 200,000,000 shares authorized 738,671
NET ASSETS $1,136,451
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NET ASSET VALUE PER SHARE $23.83
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# Seven-day yield
* Non-income producing
ADR American Depository Receipt
REIT Real Estate Investment Trust
AUD Australian dollar
CAD Canadian dollar
GBP British sterling
The accompanying notes are an integral part of these financial statements.
T. Rowe Price New Era Fund
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Unaudited
Statement of Operations
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In thousands
6 Months
Ended
6/30/99
Investment Income
Income
Dividend $ 9,104
Interest 1,356
Total income 10,460
Expenses
Investment management 2,938
Shareholder servicing 749
Custody and accounting 74
Prospectus and shareholder reports 67
Registration 22
Legal and audit 8
Directors 4
Miscellaneous 5
Total expenses 3,867
Expenses paid indirectly (1)
Net expenses 3,866
Net investment income 6,594
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 47,570
Foreign currency transactions (90)
Net realized gain (loss) 47,480
Change in net unrealized gain or loss
Securities 138,898
Other assets and liabilities
denominated in foreign currencies (9)
Change in net unrealized gain or loss 138,889
Net realized and unrealized gain (loss) 186,369
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $192,963
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The accompanying notes are an integral part of these financial statements.
T. Rowe Price New Era Fund
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Unaudited
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
In thousands
6 Months Year
Ended Ended
6/30/99 12/31/98
Increase (Decrease) in Net Assets
Operations
Net investment income $ 6,594 $ 15,972
Net realized gain (loss) 47,480 131,148
Change in net unrealized gain or loss 138,889 (276,486)
Increase (decrease) in net
assets from operations 192,963 (129,366)
Distributions to shareholders
Net investment income -- (17,617)
Net realized gain -- (139,565)
Decrease in net assets
from distributions -- (157,182)
Capital share transactions*
Shares sold 104,508 141,620
Distributions reinvested -- 139,441
Shares redeemed (159,584) (488,611)
Increase (decrease) in net
assets from capital
share transactions (55,076) (207,550)
Net Assets
Increase (decrease) during period 137,887 (494,098)
Beginning of period 998,564 1,492,662
End of period $1,136,451 $ 998,564
-----------------------
*Share information
Shares sold 4,762 5,613
Distributions reinvested -- 7,121
Shares redeemed (7,560) (19,753)
Increase (decrease) in
shares outstanding (2,798) (7, 019)
The accompanying notes are an integral part of these financial statements.
T. Rowe Price New Era Fund
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Unaudited June 30, 1999
Notes to Financial Statements
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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. Expenses paid
indirectly reflect credits earned on daily, uninvested cash balances at the
custodian, used to reduce the fund's custody charges.
NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term
securities, aggregated $147,665,000 and $243,560,000, respectively, for the
six months ended June 30, 1999.
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, 1999, the cost of investments for federal income tax purposes
was substantially the same as for financial reporting and totaled
$819,031,000. Net unrealized gain aggregated $317,346,000 at period-end, of
which $403,667,000 related to appreciated investments and $86,321,000 to
depreciated investments.
NOTE 4 - RELATED PARTY TRANSACTIONS
The investment management agreement between the fund and T. Rowe Price
Associates, Inc. (the manager) provides for an annual investment management
fee, of which $527,000 was payable at June 30, 1999. 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, 1999, and for the six months then ended,
the effective annual group fee rate was 0.32%. The fund pays a pro-rata
share of the group fee based on the ratio of its net assets to those of the
group.
In addition, the fund has entered into agreements with the manager and two
wholly owned subsidiaries of the manager, pursuant to which the fund
receives certain other services. The manager computes the daily share price
and maintains the financial records of the fund. T. Rowe Price Services,
Inc. is the fund's transfer and dividend disbursing agent and provides
shareholder and administrative services to the fund. T. Rowe Price
Retirement Plan Services, Inc. provides subaccounting and recordkeeping
services for certain retirement accounts invested in the fund. The fund
incurred expenses pursuant to these related party agreements totaling
approximately $565,000 for the six months ended June 30, 1999, of which
$120,000 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 6.6% of the
outstanding shares of the fund at June 30, 1999. For the six months then
ended, the fund was allocated $90,000 of Spectrum expenses, $16,000 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, 1999, totaled $1,189,000 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
BROKERAGE SERVICES*
Individual Investments Stocks, bonds, options, precious metals, and other
securities at a savings over full-service commission rates.**
INVESTMENT INFORMATION
Combined Statement Overview of all your accounts with T. Rowe Price.
Shareholder Reports Fund managers' reviews of their strategies and results.
T. Rowe Price Report Quarterly investment newsletter discussing markets and
financial strategies.
Performance Update Quarterly review of all T. Rowe Price fund results.
Insights Educational reports on investment strategies and financial
markets.
Investment Guides Asset Mix Worksheet, College Planning Kit, Diversifying
Overseas: A Guide to International Investing, Personal Strategy Planner,
Retirees Financial Guide, and Retirement Planning Kit.
* T. Rowe Price Brokerage is a division of T. Rowe Price Investment
Services, Inc., Member NASD/SIPC.
** Based on a January 1999 survey for representative-assisted stock
trades. Services vary by firm, and commissions may vary depending
on size of order.
T. Rowe Price Mutual Funds
- --------------------------------------------------------------------------------
STOCK FUNDS
Domestic
Blue Chip Growth
Capital Appreciation
Capital Opportunity
Diversified Small-Cap Growth
Dividend Growth
Equity Income
Equity Index 500
Extended Equity Market Index
Financial Services
Growth & Income
Growth Stock
Health Sciences
Media & Telecommunications
Mid-Cap Growth
Mid-Cap Value
New America Growth
New Era
New Horizons*
Real Estate
Science & Technology
Small-Cap Stock
Small-Cap Value
Spectrum Growth
Total Equity Market Index
Value
International/Global
Emerging Markets Stock
European Stock
Global Stock
International Discovery
International Growth & Income
International Stock
Japan
Latin America
New Asia
Spectrum International
BOND FUNDS
Domestic Taxable
Corporate Income
GNMA
High Yield
New Income
Short-Term Bond
Short-Term U.S. Government
Spectrum Income
Summit GNMA
Summit Limited-Term Bond
U.S. Treasury Intermediate
U.S. Treasury Long-Term
Domestic Tax-Free
California Tax-Free Bond
Florida Intermediate Tax-Free**
Georgia Tax-Free Bond
Maryland Short-Term
Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Summit Municipal Intermediate
Tax-Free High Yield
Tax-Free Income
Tax-Free Intermediate Bond***
Tax-Free Short-Intermediate
Virginia Short-Term
Tax-Free Bond
Virginia Tax-Free Bond
International/Global
Emerging Markets Bond
Global Bond
International Bond
MONEY MARKET FUNDS!
Taxable
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
Tax-Free
California Tax-Free Money
New York Tax-Free Money
Summit Municipal
Money Market
Tax-Exempt Money
BLENDED ASSET FUNDS
Balanced
Personal Strategy Balanced
Personal Strategy Growth
Personal Strategy Income
Tax-Efficient Balanced
T. ROWE PRICE NO-LOAD
VARIABLE ANNUITY
Equity Income Portfolio
International Stock Portfolio
Limited-Term Bond Portfolio
Mid-Cap Growth Portfolio
New America Growth Portfolio
Personal Strategy Balanced Portfolio
Prime Reserve Portfolio
* Closed to new investors. ** Formerly named Florida Insured Intermediate
Tax-Free. *** Formerly named Tax-Free Insured Intermediate Bond.
! Investments in the funds are not insured or guaranteed by the FDIC or any
other government agency. Although the funds seek to preserve the value of
your investment at $1.00 per share, it is possible to lose money by
investing in the funds.
Please call for a prospectus. 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 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 appropriate
to the fund or funds covered in this
report.
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
4200 West Cypress St.
10th Floor
Tampa, FL 33607
4410 ArrowsWest Drive
Colorado Springs, CO 80907
Warner Center
21800 Oxnard Street, Suite 270
Woodland Hills, CA 91367
Invest With Confidence(registered trademark)
T. Rowe Price
T. Rowe Price Investment Services, Inc., Distributor. F41-051 6/30/99
