Annual Report
New Era
Fund
December 31, 1998
T. Rowe Price
Report Highlights
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New Era Fund
o The broad market posted good returns in 1998, but natural resource
stocks languished due to commodity price deflation.
o The fund returned -12.34% and -9.88%, respectively, for the 6- and
12-month periods ended December 31, 1998, behind the S&P 500 but well
ahead of the average for similar funds.
o Most resource and industrial commodity prices fell substantially,
putting pressure on all the sectors in which your fund invests.
o Despite weakness throughout our industries, several portfolio companies
benefited from mergers and acquisitions.
o We believe firmer markets will develop for fuel, metals, and other
resources, creating a better environment for your fund in 1999.
Fellow Shareholders
The S&P 500 concluded the fourth consecutive year of returns exceeding 20%. In
doing so it proved resilient to shocks from the turmoil in emerging economies,
the impeachment of the U.S. President, huge loan losses at financial
institutions, and hedge fund turmoil. However, this performance was partly
attributable to price deflation in resource and industrial commodity markets,
which took a toll on natural resource stocks and your fund.
Performance Comparison
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Periods Ended 12/31/98 6 Months 12 Months
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New Era Fund -12.34% -9.88%
S&P 500 9.22 28.57
Lipper Natural Resources
Funds Average -19.08 -23.92
Many commodity prices hit multiyear lows, an anomaly in this advanced stage of
the business cycle. As a result of weak commodity markets and the consequent
decline in resource company earnings, your fund significantly trailed the
unmanaged Standard & Poor's 500 Stock Index. However, performance surpassed that
of the Lipper Natural Resources Funds Average by a wide margin for both the 6-
and 12-month periods ended December 31. We were able to outpace the Lipper peer
group because of our emphasis on large, well-capitalized companies and our
sector diversification. In addition, within the energy sector we stressed the
larger, defensive international oil companies over energy service and
exploration companies, a strategy that proved beneficial given the weakness in
oil prices. All of the natural resource sectors in which the fund invests lagged
behind the broad market in 1998, making it impossible for funds like ours to
keep pace with the S&P 500.
YEAR-END DISTRIBUTIONS
Your Board of Directors declared an income dividend of $0.40 per share, a
long-term capital gain of $3.16 per share, and a short-term gain of $0.01 per
share, each paid on December 17 to shareholders of record on December 15, 1998.
You should have received your check or statement reflecting this activity, as
well as Form 1099-DIV summarizing this information for 1998 tax purposes.
Preparing For The Year 2000
The Year 2000 draws closer every day, and it holds special meaning beyond the
arrival of a new millennium. The issue for investors is that many computer
programs throughout the world use two digits instead of four to identify the
year and may assume the next century starts with 1900. If these programs are not
modified, they will not be able to correctly handle the century change when the
year changes from "99" to "00" on January 1, 2000, and they will no longer be
able to perform necessary functions. The Year 2000 issue affects all companies
and organizations.
T. Rowe Price has been taking steps to assure that its computer systems and
processes are capable of functioning in the Year 2000. Detailed plans for
remediation efforts have been developed and are currently being executed.
OUR PLAN OF ACTION
We began to address these issues several years ago by requiring that all new
systems process and store four-digit years. All critical systems have been
reprogrammed (including business applications required to service our customers
and processing infrastructure necessary to ensure the integrity of customer data
and investments), and they are currently being tested. Because we exchange data
electronically with customers and vendors, we are working with them to assess
the adequacy of their own compliance efforts. Our goal is to ensure the
continuation of the same level of service to all our mutual fund shareholders
and clients after December 31, 1999. We are asking all vendors and companies we
do business with for a Year 2000 compliance status, with the expectation that
some organizations will not be able to modify their interface files prior to
December 31, 1999. In addition, we are scheduling tests for critical vendors and
companies that claim Year 2000 compliance to ensure that time-related data and
calculations function properly as we move into the next century.
SMOOTH TRANSITION PLANNED
We believe our programs and initiatives will provide a smooth transition into
the next millennium. We are assessing all systems providing products or services
to our retail mutual fund shareholders, retirement plan sponsors, and
participants, and we have modified them where necessary for the Year 2000.
The Securities Industry Association (SIA) is coordinating Year 2000 testing to
assure that securities markets, clearing corporations, depositories, and third
party service providers can send, receive, and process files and transactions
accurately. In late July 1998, the SIA completed a beta test of Year 2000
readiness. The test was considered successful in terms of transactions completed
and will serve as the basis for the SIA's industry-wide approach. During October
1998, T. Rowe Price completed its beta test of Year 2000 readiness with the SIA
and is ready for the industry-wide test that is scheduled for March and April
1999.
For a more detailed discussion of our Year 2000 effort, as well as continuing
updates on our progress, please check our Web site (www.troweprice.com).
ECONOMIC REVIEW
The economic problems in Asia amplified trade imbalances and wounded financial
institutions in the U.S. and Europe in 1998, but the momentum in the U.S.
economy continued unabated despite weakness in the export sector.
Export-sensitive industries saw their business slow in overseas markets, and
some credits extended to foreign buyers had to be written off. The Federal
Reserve and European central banks responded with interest rate cuts to ease the
impact. Exporters downsized in response to this softness, but the economy proved
strong enough to create sufficient new jobs to offset the layoffs. Consequently,
consumers remained confident and retail spending stayed healthy. Stock market
weakness in late summer briefly affected consumer wealth and confidence, but the
subsequent recovery stimulated by global rate cuts confirmed the belief that
Asia's problems alone could not derail the domestic economy.
The dollar and European currencies strengthened against their Asian
counterparts, exacerbating the difficulty Asian governments and corporations
encountered in servicing overseas debt. Western financial institutions and hedge
funds that had gambled heavily on emerging market debt, and the prospect of
normal yield differences versus developed market bonds, suffered significant
losses. Central banks cut rates in an effort to channel capital into areas where
it was most needed. These cuts also helped the Western banking system survive
the impact of illiquidity due to overseas investment losses. The Federal Reserve
and European central banks acted appropriately, in our view, and the damage so
far appears to be limited. Japan has made some effort to kick-start its economy,
although more substantive medicine seems necessary.
As mentioned, most resource and industrial commodity prices declined
substantially last year, and the Commodity Research Bureau Index reached its
lowest level since 1977. The price of gold fell to its lowest level since 1979
because of heavy selling by central banks, producers, and Asian investors. Crude
oil has not been such a bargain since OPEC unraveled in 1986. OPEC attempted to
convince investors that reports of its demise were greatly exaggerated and cut
production early in 1998. However, inventories remained bloated and demand from
developed nations wavered in early fall, causing a further price retreat. Copper
and nickel prices sank to 11-year lows while pulp, the raw material for paper,
and aluminum revisited a four-year low-all due largely to the Asian weakness.
PORTFOLIO MANAGEMENT
Merger and acquisition activity featured prominently in the performance of
natural resource stocks in 1998. Many of these transactions were undertaken for
several reasons: to reduce the number of companies in the various industries,
thereby increasing the market shares of the remaining participants; to eliminate
overlapping functions within remaining entities, allowing earnings improvement
through cost reduction; and to achieve synergies through the application of the
best management disciplines of both companies.
Several actual or pending transactions involved portfolio companies. These
include the acquisition of Amoco by British Petroleum and the proposed
combination of Exxon and Mobil. The latter merger would be particularly
advantageous to your fund, given the 25% premium offered for Mobil, our
second-largest holding-assuming the deal can surmount regulatory hurdles. In
Europe, TOTAL proposed to acquire Petrofina in a stock swap. In the paper
industry, International Paper plans to absorb Union Camp; the resulting
enterprise would have the largest share of the uncoated paper market and the
second-largest share of the linerboard market.
In the current environment, larger companies with healthy balance sheets have
seized on opportunities to acquire attractive assets that are under pressure
from falling commodity prices. Placer Dome is in the process of buying Getchell
Gold; Chevron hopes to gain access to attractive assets in Thailand with a bid
for Rutherford-Moran Oil, whose balance sheet is under stress; and Seagull
Energy is buying Ocean Energy to create a more formidable player in the global
energy exploration business.
SECURITY DIVERSIFICATION
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Others and Metals and Precious
Reserves Non-Resources Energy Mining Metals
7 10 42 9 10
Forest Divesified Building and
Products Resources Real Estate
9 7 6
Based on net assets as of 12/31/98.
We added only a few new positions in the last six months. Among them were
Anadarko Petroleum, a highly successful oil and natural gas explorer with recent
discoveries in Algeria, Alaska, and the Gulf of Mexico; and Baker Hughes, an oil
service company with a broad line of products and services. We had also taken a
position in Triton Energy but subsequently sold it when the company took an
unexpected detour that was not in our interests as shareholders.
We generally like to invest in companies whose managements recognize a need to
be proactive in times of weak commodity prices in an effort to survive and
prosper. Such companies cut costs, close inefficient facilities, zealously guard
their financial health, and seek opportunities to acquire low-cost, world-class
assets. Companies in the international oil, aluminum, and paper industries were
the most aggressive in these efforts, and their stocks performed better than
other resource stocks.
Many of the stocks in which we invest are attractively valued compared with
other segments of the market, given the replacement value of their assets. For
example, following the heavy speculation in recent months, many Internet-related
stocks now sell at extremely high price/earnings and price/book value ratios. In
contrast, your fund invests in resource and capital-intensive businesses, where
the barriers to entry are formidable and, therefore, preserve the advantages of
existing leaders in their industries. At present, their stock prices and
earnings are depressed because of economic conditions in Asia. However, a
recovery there combined with continuing growth in the West should elevate
commodity prices closer to their replacement costs, which in most cases are well
above current prices.
OUTLOOK
We believe we are likely to see higher oil prices in 1999 as supply and demand
come into balance. The oil industry is reacting as it should to lower prices by
reducing capital and maintenance spending and suspending uneconomic production.
Excess inventories are likely to be drained over the year as reduced budgets
give rise to lower production growth.
Gold prices were buffeted over the year by European central bank sales in
anticipation of the formation of the new central bank. There was also concern
about the potential sale by the Swiss of a significant portion of their holdings
to finance a fund for Holocaust victims. Gold producers took measures to secure
capital for new mines and to offset commodity price risk by selling production
forward. Finally, there was liquidation by Asian governments and consumers under
pressure to fund their debt obligations, and speculative short-selling
aggravated these problems. However, if these factors recede and a possible whiff
of inflation appears, some luster would be restored to the precious metal.
The value of resource assets should once again begin to appreciate, since most
prices have fallen below marginal production costs and will have to rise
significantly before new capacity can be built. Energy reserves cannot be
recovered once used, metals can only be recycled or mined for an economic
return, and the forests can only be replaced over time with constant yield
harvesting. As capital flows across the globe and emerging economies rebound in
the 21st century, the requirements for fuel, metals, chemicals, and paper should
reaccelerate, resulting in firmer markets for these commodities and a better
environment for your fund. We will continue to emphasize companies with strong
balance sheets, low production costs, and good management, which we expect to
benefit from the resumption of normal global growth.
Respectfully submitted,
Charles M. Ober
President and Chairman of the Investment Advisory Committee
January 22, 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
12/31/98
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Wal-Mart 7.4%
Mobil 5.2
Schlumberger 3.6
Royal Dutch Petroleum 3.4
Fort James 3.2
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Atlantic Richfield 2.9
Burlington Northern Santa Fe 2.9
Newmont Mining 2.8
USX-Marathon 2.7
Reynolds Metals 2.6
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DuPont 2.1
British Petroleum 1.9
Chevron 1.7
McDermott International 1.7
WMC Limited 1.7
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Burlington Resources 1.6
Rouse 1.5
Inco 1.5
Homestake Mining 1.5
Halliburton 1.4
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Getchell Gold 1.4
TOTAL ADR 1.3
Nucor 1.3
Rio Tinto 1.2
Amerada Hess 1.2
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Total 59.7%
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 12/31/98
Ten Largest Purchases Ten Largest Sales
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Triton Energy* Mobil
Inco Wal-Mart
Chevron British Petroleum
USX-Marathon Lonrho**
Fort James Waste Management**
BJ Services Lyondell Petrochemical**
IMC Global Placer Dome
Unocal Alcoa**
WMC Limited Bristol-Myers Squibb
Anadarko Petroleum* Chevron
* 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. The index
return does not reflect expenses, which have been deducted from the fund's
return.
NEW ERA FUND
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As of 12/31/98
S&P 500 Resources Funds New Era
Index Average Fund
12/88 10,000 10,000 10,000
12/89 13,169 13,286 12,429
12/90 12,760 12,295 11,340
12/91 16,647 12,502 13,012
12/92 17,916 12,607 13,282
12/93 19,721 15,592 15,318
12/94 19,982 15,244 16,111
12/95 27,491 18,318 19,456
12/96 33,803 23,698 24,173
12/97 45,081 25,874 26,823
12/98 57,958 19,813 24,173
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 12/31/98 1 Year 3 Years 5 Years 10 Years
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New Era Fund -9.88% 7.51% 9.55% 9.23%
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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Financial Highlights For a share outstanding throughout each period
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Year
Ended
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
NET ASSET VALUE
Beginning of period $ 25.95 $ 26.06 $ 22.65 $ 20.15 $ 20.35
Investment activities
Net investment income 0.37 0.40 0.38 0.47 0.36
Net realized and
unrealized gain (loss) (2.97) 2.40 5.12 3.71 0.69
Total from
investment activities (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 $ 19.78 $ 25.95 $ 26.06 $ 22.65 $ 20.15
----------------------------------------------------
Ratios/Supplemental Data
Total return* (9.88)% 10.96% 24.25% 20.76% 5.17%
Ratio of expenses to
average net assets 0.75% 0.74% 0.76% 0.79% 0.80%
Ratio of net investment
income to average
net assets 1.27% 1.33% 1.53% 2.00% 1.87%
Portfolio turnover rate 23.1% 27.5% 28.6% 22.7% 24.7%
Net assets, end of period
(in millions) $ 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.
The accompanying notes are an integral part of these financial statements.
T. Rowe Price New Era Fund
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December 31, 1998
Statement of Net Assets Shares/Par Value
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In thousands
Common Stocks 97.5%
NATURAL RESOURCE-RELATED 86.0%
Building and Real Estate 6.5%
Archstone Communities
Trust, REIT 259,000 $ 5,245
Boston Properties, REIT 70,000 2,135
Camden Property Trust, REIT 178,100 4,631
Catellus Development * 357,000 5,109
Equity Office Properties, REIT 98,441 2,362
Federal Realty Investment
Trust, REIT 230,000 5,434
Reckson Associates Realty, REIT 340,000 7,544
Rouse 560,000 15,400
Security Capital U.S. Realty * 100,000 990
Security Capital U.S.
Realty (Class A) * 580,000 5,742
Simon DeBartolo Group, REIT 271,400 7,735
United Dominion Realty
Trust, REIT 280,000 2,887
65,214
Forest Products 8.8%
Champion International 160,000 6,480
Fort James 799,120 31,965
Georgia Pac Timber 139,600 3,324
Georgia-Pacific 199,600 11,689
International Paper 140,000 6,274
Jefferson Smurfit * 690,000 10,889
Kimberly-Clark 210,000 11,445
Macmillan Bloedel 325,000 3,209
Willamette Industries 91,400 3,062
88,337
Integrated Petroleum - Domestic 8.6%
Amerada Hess 240,000 11,940
Atlantic Richfield 450,000 29,362
Murphy Oil 230,000 9,488
Unocal 281,000 8,202
USX-Marathon 880,000 26,510
85,502
Integrated Petroleum - International 15.0%
British Petroleum ADR 200,000 19,000
Chevron 210,000 17,417
Elf Aquitaine ADR 140,000 $ 7,928
Mobil 595,000 51,839
PETROBRAS ADR (144a) 85,000 930
Royal Dutch Petroleum ADR 718,400 34,393
Texaco 90,000 4,759
TOTAL ADR 270,000 13,432
149,698
Petroleum Exploration and Production 6.9%
Anadarko Petroleum 130,000 4,014
Anderson Exploration (CAD) * 275,000 2,501
Barrett Resources * 234,550 5,629
Burlington Resources 450,000 16,116
Canadian Natural Resources
(CAD) * 140,000 2,107
EEX Corporation * 653,333 4,573
Noble Affiliates 150,000 3,694
Ocean Energy * 1,247,800 7,877
Pogo Producing 200,000 2,600
Rutherford-Moran Oil * 633,200 1,840
Santa Fe Energy Resources * 928,600 6,848
Union Pacific Resources 654,186 5,928
Vastar Resources 110,000 4,751
68,478
Miscellaneous Energy 0.7%
Niagara Mohawk * 450,000 7,256
7,256
Energy Services 9.9%
Baker Hughes 486,000 8,596
BJ Services * 400,000 6,250
Coflexip ADR 330,000 10,725
Cooper Cameron * 241,800 5,924
Halliburton 470,000 13,924
McDermott International 686,650 16,952
Schlumberger 782,950 36,113
98,484
Precious Metals 10.3%
Anglo American Platinum ADR 496,744 6,706
Ashanti Goldfields GDR 216,300 2,028
Barrick Gold 320,640 6,253
Battle Mountain Gold 1,450,000 $ 5,981
Cambior 1,486,000 7,337
Dayton Mining * 873,300 218
Getchell Gold 505,000 13,761
Homestake Mining 1,612,630 14,816
Newmont Mining 1,560,359 28,184
Normandy Mining (AUD) 4,475,421 4,141
Placer Dome 515,000 5,923
TVX Gold * 4,257,200 7,716
103,064
Non-Ferrous Metals 3.5%
Bougainville Copper (AUD) 2,030,829 224
Inco 1,289,000 13,615
Phelps Dodge 80,000 4,070
WMC Limited (AUD) 5,566,615 16,783
34,692
Diversified Metals 5.1%
Nucor 310,000 13,408
Reynolds Metals 485,000 25,553
Rio Tinto (GBP) 1,055,000 12,269
51,230
Chemicals 3.9%
DuPont 400,000 21,225
Great Lakes Chemical 250,000 10,000
Hercules 290,000 7,939
39,164
Diversified Resources 6.8%
Burlington Northern Santa Fe 855,000 28,856
IMC Global 549,000 11,735
Lonrho Africa (GBP) 1,251,472 1,123
Norfolk Southern 360,000 11,407
Overseas Shipholding Group 200,000 3,213
Penn Virginia 361,800 6,648
Union Pacific 75,000 3,380
Western Water * 344,500 1,744
68,106
Total Natural Resource-Related 859,225
CONSUMER AND SERVICE 9.8%
Merchandising 7.4%
Wal-Mart 905,000 $ 73,701
73,701
Miscellaneous 2.4%
Bristol-Myers Squibb 50,000 6,690
Corning 260,000 11,700
GE 30,000 3,062
Tribune 40,000 2,640
24,092
Total Consumer and Service 97,793
Total Miscellaneous Common Stocks 1.7% 17,106
Total Common Stocks (Cost $793,805) 974,124
Convertible Preferred Stocks 0.1%
Western Water (Series C) * 2,180 743
Total Convertible Preferred Stocks (Cost $2,000) 743
Convertible Bonds 0.4%
Asia Pulp & Paper,
Zero Coupon, 11/18/12 $10,000,000 1,850
Total Miscellaneous Convertible Bonds 0.2% 1,725
Total Convertible Bonds (Cost $2,404) 3,575
Short-Term Investments 2.3%
Money Market Funds 2.3%
Reserve Investment Fund, 5.42% # 23,378,802 23,379
Total Short-Term Investments (Cost $23,379) 23,379
Total Investments in Securities
100.3% of Net Assets (Cost $823,373) $1,001,821
Other Assets Less Liabilities (3,257)
NET ASSETS $ 998,564
----------
Net Assets Consist of:
Accumulated net investment income -
net of distributions $ 161
Accumulated net realized gain/loss -
net of distributions 26,207
Net unrealized gain (loss) 178,449
Paid-in-capital applicable to 50,492,103
shares of $1.00 par value capital stock
outstanding; 200,000,000 shares authorized 793,747
NET ASSETS $ 998,564
----------
NET ASSET VALUE PER SHARE $ 19.78
----------
# Seven-day yield
* Non-income producing
ADR American Depository Receipt
GDR Global 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 0.09% of net assets.
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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Statement of Operations
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In thousands
Year
Ended
12/31/98
Investment Income
Income
Dividend $ 21,848
Interest 3,529
Total income 25,377
Expenses
Investment management 7,211
Shareholder servicing 1,816
Custody and accounting 150
Prospectus and shareholder reports 123
Registration 41
Legal and audit 20
Directors 10
Miscellaneous 34
Total expenses 9,405
Net investment income 15,972
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 131,157
Foreign currency transactions (9)
Net realized gain (loss) 131,148
Change in net unrealized gain or loss
Securities (276,488)
Other assets and liabilities
denominated in foreign currencies 2
Change in net unrealized gain or loss (276,486)
Net realized and unrealized gain (loss) (145,338)
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $(129,366)
---------
The accompanying notes are an integral part of these financial statements.
T. Rowe Price New Era Fund
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Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
In thousands
Year
Ended
12/31/98 12/31/97
Increase (Decrease) in Net Assets
Operations
Net investment income $ 15,972 $ 21,184
Net realized gain (loss) 131,148 152,229
Change in net unrealized
gain or loss (276,486) (9,753)
Increase (decrease) in net
assets from operations (129,366) 163,660
Distributions to shareholders
Net investment income (17,617) (19,378)
Net realized gain (139,565) (133,022)
Decrease in net assets
from distributions (157,182) (152,400)
Capital share transactions*
Shares sold 141,620 229,959
Distributions reinvested 139,441 138,855
Shares redeemed (488,611) (355,150)
Increase (decrease) in net
assets from capital
share transactions (207,550) 13,664
Net Assets
Increase (decrease)
during period (494,098) 24,924
Beginning of period 1,492,662 1,467,738
End of period $ 998,564 $1,492,662
-----------------------
*Share information
Shares sold 5,613 8,212
Distributions reinvested 7,121 5,456
Shares redeemed (19,753) (12,472)
Increase (decrease) in
shares outstanding (7,019) 1,196
The accompanying notes are an integral part of these financial statements.
T. Rowe Price New Era Fund
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December 31, 1998
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.
NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term
securities, aggregated $275,822,000 and $580,312,000, respectively, for the
year ended December 31, 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 December 31, 1998, the cost of investments for federal income tax
purposes was substantially the same as for financial reporting and totaled
$823,373,000. Net unrealized gain aggregated $178,448,000 at period-end, of
which $314,912,000 related to appreciated investments and $136,464,000 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 $490,000 was payable at December 31, 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 December 31, 1998, and for the year
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 $1,224,000 for the year ended December 31, 1998, 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 6.8% of the
outstanding shares of the New Era Fund at December 31, 1998. For the year
then ended, the fund was allocated $307,000 of Spectrum expenses, $198,000
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 year ended
December 31, 1998, totaled $3,233,000 and are reflected as interest income
in the accompanying Statement of Operations.
During the year ended December 31, 1998, the fund, in the ordinary course
of business, placed security purchase and sale orders aggregating $746,000
with certain affiliates of the manager and paid commissions of $4,000
related thereto.
T. Rowe Price New Era Fund
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Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of
T. Rowe Price New Era Fund, Inc.
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position
of T. Rowe Price New Era Fund, Inc. (the "Fund") at December 31, 1998, and
the results of its operations, the changes in its net assets and the
financial highlights for each of the fiscal periods presented, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which
included confirmation of securities at December 31, 1998, by correspondence
with custodians, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
January 21, 1999
T. Rowe Price New Era Fund
- --------------------------------------------------------------------------------
Tax Information (Unaudited) for the Tax Year Ended 12/31/98
- --------------------------------------------------------------------------------
We are providing this information as required by the Internal Revenue Code. The
amounts shown may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements.
The fund's distributions to shareholders included:
o 440,000 from short-term capital gains,
o 139,125,000 from long-term capital gains, subject to the 20% rate gains
category.
For corporate shareholders, $13,091,000 of the fund's distributed income and
short-term capital gains qualified for the dividends-received deduction.
- --------------------------------------------------------------------------------
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.
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
* Formerly named Equity Index.
** Closed to new investors.
*** Formerly named Florida Insured Intermediate Tax-Free.
! Formerly named Tax-Free Insured Intermediate Bond.
!! 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.
T. Rowe Price Retirement Plans and Resources
- --------------------------------------------------------------------------------
Retirement Plans and Resources
We recognize that saving for retirement is the number one investment goal
for most Americans. We can help you meet your retirement needs, whether you
are starting an IRA or designing a retirement program for your employees.
T. Rowe Price offers an assortment of retirement plans for individuals, the
self-employed, small businesses, corporations, and nonprofit organizations.
We provide recordkeeping, communications, and investment management
services, as well as a variety of educational materials, self-help planning
guides, and software tools to help you choose and implement a retirement
plan appropriate for you. For information or to request literature, call us
at 1-800-638-5660.
IRAs AND QUALIFIED PLANS
---------------------------------------------------------------------------
Traditional IRA
Roth IRA
Rollover IRA
SEP-IRA
SIMPLE IRA
Profit Sharing
Money Purchase Pension
"Paired" Plans (Money Purchase Pension and Profit Sharing Plans)
401(k)
403(b)
457 Deferred Compensation
RETIREMENT RESOURCES AT T. ROWE PRICE
---------------------------------------------------------------------------
Planning and Informational Guides
Minimum Required Distributions Guide
Retirement Planning Kit
Retirees Financial Guide
Tax Considerations for Investors
Investment Kits
The IRA Investing Kit
Roth IRA Conversion Kit
Rollover IRA Kit
The T. Rowe Price SIMPLE IRA Plan Kit
The T. Rowe Price SEP-IRA Plan
The Simplified Keogh Plan(registered trademark) From
T. Rowe Price
The T. Rowe Price 401(k) Century Plan(registered trademark)
(for small businesses)
Money Purchase Pension/Profit Sharing Plan Kit
Investing for Retirement in Your 403(b) Account
The T. Rowe Price No-Load Variable Annuity Information Kit
Insights Reports
The Challenge of Preparing for Retirement
Financial Planning After Retirement
The Roth IRA: A Review
Software Packages
T. Rowe Price Retirement Planning AnalyzerTM CD-ROM or diskette $19.95. To
order, please call 1-800-541-5760. Also available on the Internet for
$9.95.
T. Rowe Price Variable Annuity AnalyzerTM CD-ROM or diskette, free. To
order, please call 1-800-469-5304.
Many of these resources are also available for viewing or ordering on the
Internet at www.troweprice.com.
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 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
Invest With Confidence(registered trademark)
T. Rowe Price
T. Rowe Price Investment Services, Inc., Distributor. F41-050 12/31/98
