Fund Profile
T. Rowe Price
Equity Income Fund
Important
Information
About This Fund
As of 12/31/96
This profile contains key information about the fund. If you
would like more information before you invest, please consult the
fund's prospectus. For details about the fund's holdings or
recent investment strategies, please review the fund's most
recent annual or semi-annual report. The prospectus and reports
may be obtained at no cost by call-ing 1-800-638-5660.
Invest With Confidence
T. Rowe Price
FUND PROFILE
1. What is the fund's goal?
The fund seeks to provide substantial dividend income and
also long-term capital appreciation.
2. What is the fund's investment strategy?
This conservative stock fund uses a "value" strategy in
selecting investments. It seeks out stocks whose prices appear
low relative to their potential. Value investors hope to realize
capital appreciation as other investors recognize a stock's
intrinsic value and drive its price higher.
The fund invests primarily in the common stocks of
established U.S. companies that pay above-average dividends.
However, it may also invest in bonds, preferred stocks, and
convertible securities, as well as foreign and other securities,
in keeping with its investment goal. Most holdings will provide
income.
The fund expects to generate a yield higher than that of the
S&P 500 Stock Index.
3. What is the fund's risk/reward potential?
Risk:
o The Equity Income Fund is primarily a stock fund; like
all stock investments, it exposes the investor to
potential drops in stock prices.
o In bull markets, this fund's focus on income-producing
securities could dampen its performance.
o The market's long rise over time has been punctuated
by declines; even in rising markets, the share prices
of the most profitable companies can fall.
o The fund's price will fluctuate; there is no assurance
you will be able to sell your shares at a profit.
Reward:
o Shareholders will participate in the long-term growth
potential of investing in common stocks.
o Advantages of the fund's focus on income:
- for stocks, dividends are normally a more stable
component of total return than capital
appreciation;
- securities that pay higher levels of income tend
to fluctuate less in price than those paying
little or no income;
- the compounding effect of reinvested dividends can
substantially increase investment returns over
time.
4. How can I tell if the fund is appropriate for me?
The fund is designed for individuals seeking a conservative
approach to investing in stocks - one that provides income in
addition to the prospects of capital appreciation over time.
Because of its long-term orientation, the fund is
appropriate for both regular and tax-deferred accounts (IRAs and
Keoghs).
All investors in the fund should be willing to ride out
inevitable market downturns, which may last for extended periods.
5. What fees or expenses will I pay?
This fund is 100% no load. There are no fees or charges to
buy or sell fund shares, reinvest dividends, or exchange into
other T. Rowe Price funds. There are no 12b-1 marketing fees.
Annual fund expenses as a
percentage of average net assets
Management fee 0.59%
Other expenses 0.26%
Total fund expenses 0.85%
These costs are deducted from the fund's total assets before the
daily share price is calculated and before distributions are
made. You do not pay them directly.
Sample expenses over time
(assuming $1,000 investment earning 5% annual return):
1 year 3 years 5 years 10 years
$9 $27 $47 $105
This is an illustration only; actual expenses and returns will
vary.
6. How has the fund performed in the past?
The bar chart shows the fund's actual performance for each
of the last 10 calendar years through December 31, 1996. It
indicates the relative volatility of returns from one year to the
next.
The fund's average annual compound total returns for
various holding periods through 12/31/96 are compared with its
Lipper peer group average in the other chart. These average
returns smooth out the year-to-year variations in actual returns.
Chart 1 - Calendar Year Total Returns
Average Annual Compound
Total Returns as of 12/31/96 Fund Lipper Average*
1 year 20.40% 18.85%
5 years 17.08% 13.60%
10 years 14.46% 11.63%
*Lipper Equity Income Funds Average
These figures include changes in principal value, reinvested
dividends, and capital gain distributions. Past performance
cannot guarantee future results. Investment return and principal
value will vary, and shares may be worth more or less at
redemption than at original purchase.
7. Who manages the fund?
The fund is managed by T. Rowe Price Associates. Founded in
1937, T. Rowe Price and its affiliates manage about $97 billion
for approximately four million individual and institutional
investor accounts. The company offers a comprehensive range of
stock, bond, and money market funds directly to the investing
public.Brian Rogers has day-to-day responsibility for the fund
and has managed investments for T. Rowe Price since 1983.
8. How can I purchase shares?
Fill out and return the New Account Form in the postpaid
envelope, along with your check for a minimum of $2,500 or more
($1,000 or more for retirement plans and gifts or transfers to
minors) or $50 if investing through Automatic Asset Builder. You
can also open an account by bank wire or by exchanging from
another T. Rowe Price fund.
9. How can I sell shares or close my account?
You may redeem or sell any portion of your account on any
business day. Just write to us or call.
We also offer easy exchange among our entire family of
domestic and international funds. Restrictions may apply in
special circumstances, and some redemption requests need a
signature guarantee.
10. When will I receive distributions?
The fund distributes income quarterly and net capital
gains, if any, at year-end. Income and short-term gains are
taxable at ordinary income rates, and long-term gains are taxable
at the current capital gains rate. Distributions are reinvested
automatically in additional shares unless you choose another
option, such as receiving a check.
11. What services are available?
A wide range, including but not limited to:
o easy exchanges;
o retirement plans for individuals and large and small
businesses (e.g., IRA, SEP, Keogh, 401(k), 403(b),
etc.);
o automated information and transaction services by
telephone or personal computer;
o electronic transfers between your fund and bank
accounts;
o automatic investing and automatic exchange;
o discount brokerage.
To Open an Account
Investor Services
1-800-638-5660
1-410-547-2308
For Existing Accounts
Shareholder Services
1-800-225-5132
1-410-625-6500
For Yields and Prices
Tele*Access(registered trademark)
1-800-638-2587
24 hours, 7 days
For Information via the Internet
http://www.troweprice.com.
T. Rowe Price OnLine
Call us at 1-800-541-3036 for more information on this complete
financial management service.
T. Rowe Price
100 East Pratt Street
Baltimore, MD 21202
Invest With Confidence
T. Rowe Price
PROF-EIF-TST 12/31/96
T. Rowe Price Investment Services, Inc., Distributor
CHART 1 - Calendar Year Total Returns: the chart shows the fund's
actual performance in each of the calendar years since its
inception or for the last decade, whichever is applicable. The
chart is updated on an annual basis. In addition to showing
actual performance for any particular year, it also gives the
investor a visual of the fund's volatility of returns.
