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T. ROWE PRICE
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PRIME RESERVE FUND, INC.
NEW INCOME FUND, INC.
EQUITY INCOME FUND
INTERNATIONAL STOCK FUNDR
Supplement to IRA Combined Statement of Additional Information
dated October 1, 1995, revised to November 22, 1995
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The section entitled "Pricing of Securities" beginning on
page 67 has been revised to read as follows:
PRICING OF SECURITIES
Prime Reserve Fund
Securities are valued at amortized cost.
Maintenance of Net Asset Value Per Share
It is the policy of the Fund to attempt to maintain a net
asset value of $1.00 per share by using the amortized cost method
of valuation permitted by Rule 2a-7 under the Investment Company
Act of 1940. Under this method, securities are valued by
reference to the Fund's acquisition cost as adjusted for
amortization of premium or accumulation of discount rather than
by reference to their market value. Under Rule 2a-7:
(a) The Board of Directors must establish written
procedures reasonably designed, taking into account current
market conditions and the Fund's investment objectives, to
stabilize the fund's net asset value per share, as computed
for the purpose of distribution, redemption and repurchase,
at a single value;
(b) the Fund must (i) maintain a dollar-weighted average
portfolio maturity appropriate to its objective of
maintaining a stable price per share, (ii) not purchase any
instrument with a remaining maturity greater than 397 days,
and (iii) maintain a dollar-weighted average portfolio
maturity of 90 days or less;
(c) the Fund must limit its purchase of portfolio
instruments, including repurchase agreements, to those U.S.
dollar-denominated instruments which the Fund's Board of
Directors determines present minimal credit risks, and which
are eligible securities as defined by Rule 2a-7; and
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(d) the Board of Directors must determine that (i) it is in
the best interest of the Fund and its shareholders to
maintain a stable net asset value per share under the
amortized cost method; and (ii) the Fund will continue to
use the amortized cost method only so long as the Board of
Directors believes that it fairly reflects the Fund's market
based net asset value per share.
Although the Fund believes that it will be able to maintain
its net asset value at $1.00 per share under most conditions,
there can be no absolute assurance that it will be able to do so
on a continuous basis. If the Fund's net asset value per share
declined, or was expected to decline, below $1.00 (rounded to the
nearest one cent), the Board of Directors of the Fund might
temporarily reduce or suspend dividend payments in an effort to
maintain the net asset value at $1.00 per share. As a result of
such reduction or suspension of dividends, an investor would
receive less income during a given period than if such a
reduction or suspension had not taken place. Such action could
result in an investor receiving no dividend for the period during
which he holds his shares and in his receiving, upon redemption,
a price per share lower than that which he paid. On the other
hand, if the Fund's net asset value per share were to increase,
or were anticipated to increase above $1.00 (rounded to the
nearest one cent), the Board of Directors of the Fund might
supplement dividends in an effort to maintain the net asset value
at $1.00 per share.
Prime Money Market Securities Defined. Prime money market
securities are those which are described as First Tier Securities
under Rule 2a-7 of the Investment Company Act of 1940. These
include any security with a remaining maturity of 397 days or
less that is rated (or that has been issued by an issuer that is
rated with respect to a class of short-term debt obligations, or
any security within that class that is comparable in priority and
security with the security) by any two nationally recognized
statistical rating organizations (NRSROs) (or if only one NRSRO
has issued a rating, that NRSRO) in the highest rating category
for short-term debt obligations (within which there may be sub-
categories). First Tier Securities also include unrated
securities comparable in quality to rated securities, as
determined by T. Rowe Price under the supervision of the Fund's
Board of Directors.
New Income Fund
Fixed income securities are generally traded in the over-
the-counter market. Investments in domestic securities with
remaining maturities of one year or more and foreign securities
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are stated at fair value using bid-side valuation as furnished by
dealers who make markets in such securities or by an independent
pricing service, which considers yield or price of bonds of
comparable quality, coupon, maturity, and type, as well as prices
quoted by dealers who make markets in such securities. Domestic
securities with remaining maturities less than one year are
stated at fair value which is determined by using a matrix system
that establishes a value for each security based on bid-side
money market yields.
There are a number of pricing services available, and the
Board of Directors, on the basis of an ongoing evaluation of
these services, may use or may discontinue the use of any pricing
service in whole or in part.
New Income, Equity Income and International Stock Funds
Equity securities listed or regularly traded on a securities
exchange are valued at the last quoted sales price on the day the
valuations are made. A security which is listed or traded on
more than one exchange is valued at the quotation on the exchange
determined to be the primary market for such security. Listed
securities that are not traded on a particular day and securities
that are 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/Trustees, 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. Short-term debt securities
are valued at their cost in local currency which, when combined
with accrued interest, approximates fair value.
All Funds
For purposes of determining the Fund's net asset value per
share, all assets and liabilities initially expressed in foreign
currencies are converted into U.S. dollars at the mean of the bid
and offer prices of such currencies against U.S. dollars quoted
by a major bank.
Assets and 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/Trustees.
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International Stock Fund
Trading in the portfolio securities of the International
Stock Fund may take place in various foreign markets on certain
days (such as Saturday) when the Fund is not open for business
and does not calculate its net asset value. In addition, trading
in the Fund's portfolio securities may not occur on days when the
Fund is open. The calculation of the Fund's net asset value
normally will not take place contemporaneously with the
determination of the value of the Fund's portfolio securities.
Events affecting the values of portfolio securities that occur
between the time their prices are determined and the time the
Fund's net asset value is calculated will not be reflected in the
Fund's net asset value unless Price-Fleming, under the
supervision of the Fund's Board of Directors, determines that the
particular event should be taken into account in computing the
Fund's net asset value.
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The date of this Supplement is November 22, 1995.
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