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October 1, 2000
FUND PROFILE
T. ROWE PRICE
Equity Income Fund
A stock fund seeking substantial dividend income and long-term capital growth.
This profile summarizes key information about the fund that is included in the
fund's prospectus. The fund's prospectus includes additional information about
the fund, including a more detailed description of the risks associated with
investing in the fund that you may want to consider before you invest. You may
obtain the prospectus and other information about the fund at no cost by calling
1-800-638-5660, or by visiting our Web site at www.troweprice.com.
TROWEPRICELOGO
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FUND PROFILE
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What is the fund's objective?
The fund seeks to provide substantial dividend income as well as long-term
growth of capital through investments in the common stocks of established
companies.
What is the fund's principal investment strategy?
We will normally invest at least 65% of the fund's total assets in the common
stocks of well-established companies paying above-average dividends.
We typically employ a "value" approach in selecting investments. Our in-house
research team seeks companies that appear to be undervalued by various
measures and may be temporarily out of favor, but have good prospects for
capital appreciation and dividend growth.
In selecting investments, we generally look for companies with the following:
. an established operating history;
. above-average dividend yield relative to the S&P 500;
. low price/earnings ratio relative to the S&P 500;
. a sound balance sheet and other positive financial characteristics; and
. low stock price relative to a company's underlying value as measured by
assets, cash flow, or business franchises.
While most assets will be invested in U.S. common stocks, other securities
may also be purchased, including foreign stocks, futures, and options, in
keeping with fund objectives.
The fund may sell securities for a variety of reasons, such as to secure
gains, limit losses, or redeploy assets into more promising opportunities.
Further information about the fund's investments, including a review of
market conditions and fund strategies and their impact on performance, is
available in the annual and semiannual shareholder reports. To obtain free
copies of either of these documents, call 1-800-638-5660.
What are the main risks of investing in the fund?
As with all equity funds, this fund's share price can fall because of
weakness in the broad market, a particular industry, or specific holdings.
The market as a whole can decline for many reasons, including adverse
political or economic developments here or abroad, changes in investor
psychology, or heavy institutional selling. The prospects for an industry or
company may deteriorate because of a variety of factors, including
disappointing earnings or changes in the competitive environment. In
addition, our assessment of companies held in the fund may prove incorrect,
resulting in losses or poor per-
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FUND PROFILE
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formance even in a rising market. Finally, the fund's investment approach
could fall out of favor with the investing public, resulting in lagging
performance versus other types of stock funds.
The value approach carries the risk that the market will not recognize a
security's intrinsic value for a long time, or that a stock judged to be
undervalued may actually be appropriately priced.
The fund's emphasis on stocks of established companies paying high dividends
and its potential investments in fixed-income securities may limit its
potential for appreciation in a broad market advance. Such securities may be
hurt when interest rates rise sharply. Also, a company may reduce or
eliminate its dividend.
Foreign stock holdings are subject to the risk that some holdings may lose
value because of declining foreign currencies or adverse political or
economic events overseas. Investments in futures and options, if any, are
subject to additional volatility and potential losses.
As with any mutual fund, there can be no guarantee the fund will achieve its
objective.
. The fund's share price may decline, so when you sell your shares, you may
lose money.
How can I tell if the fund is appropriate for me?
Consider your investment goals, your time horizon for achieving them, and
your tolerance for the inherent risk of common stock investments. If you seek
a relatively conservative equity investment that provides substantial
dividend income along with the potential for capital growth, the fund could
be an appropriate part of your overall investment strategy. This fund should
not represent your complete investment program or be used for short-term
trading purposes.
The fund can be used in both regular and tax-deferred accounts, such as IRAs.
. Equity investors should have a long-term investment horizon and be willing
to wait out bear markets.
How has the fund performed in the past?
The bar chart showing calendar year returns and the average annual total
return table indicate risk by illustrating how much returns can differ from
one year to the next and over time. Fund past performance is no guarantee of
future returns.
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FUND PROFILE
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The fund can also experience short-term performance swings, as shown by the
best and worst calendar quarter returns during the years depicted in the
chart.
LOGO
<TABLE>
<CAPTION>
Calendar Year Total Returns
"90" "91" "92" "93" "94" "95" "96" "97" "98" "99"
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-6.79 25.28 14.13 14.84 4.53 33.35 20.40 28.82 9.23 3.82
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</TABLE>
Quarter ended Total return
Best quarter 3/31/91 14.76%
Worst quarter 9/30/90 -13.46%
<TABLE>
Table 1 Average Annual Total Returns
<CAPTION>
Periods ended 09/30/2000
1 year 5 years 10 years
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<S> <C> <C> <C>
Equity Income Fund 4.80% 14.48% 16.35%
S&P 500 Stock Index 13.28 21.69 19.44
Lipper Equity Income Funds Average 8.17 13.56 14.84
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</TABLE>
These figures include changes in principal value, reinvested dividends, and
capital gain distributions, if any.
What fees or expenses will I pay?
The 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 fees.
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<TABLE>
Table 2 Fees and Expenses of the Fund
<CAPTION>
Annual fund operating expenses
(expenses that are deducted from fund assets)
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<S> <C>
Management fee 0.57%/ // /
Other expenses 0.20%
Total annual fund operating 0.77%/ // /
expenses
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</TABLE>
Example. The following table gives you a rough idea of how expense ratios
may translate into dollars and helps you to compare the cost of investing in
this fund with that of other funds. Although your actual costs may be higher
or lower, the table shows how much you would pay if operating expenses remain
the same, you invest $10,000, earn a 5% annual return, and hold the
investment for the following periods:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
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<S> <C> <C> <C>
$79 $246 $428 $954
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</TABLE>
Who manages the fund?
The fund is managed by T. Rowe Price Associates, Inc. Founded in 1937, T.
Rowe Price and its affiliates manage investments for individual and
institutional accounts. The company offers a comprehensive array of stock,
bond, and money market funds directly to the investing public.
Brian C. Rogers manages the fund day-to-day and has been chairman of its
Investment Advisory Committee since 1993. He joined T. Rowe Price in 1982 and
has been managing investments since 1983.
Note: The following questions and answers about buying and selling shares and
services do not apply to employer-sponsored retirement plans. If you are a
participant in one of these plans, please call your plan's toll-free number for
additional information.
How can I purchase shares?
Fill out the New Account Form and return it with your check in the postpaid
envelope. The minimum initial purchase is $2,500 ($1,000 for IRAs and gifts
or transfers to minors). The minimum subsequent investment is $100 ($50 for
IRAs, gifts or transfers to minors, or Automatic Asset Builder). You can also
open an account by bank wire, by exchanging from another T. Rowe Price fund,
or by transferring assets from another financial institution.
How can I sell shares?
You may redeem or sell any portion of your account on any business day.
Simply write to us or call. You can also access your account at any time via
Tele*Access /(R)/ or our Web site. We offer convenient exchange among our
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entire family of domestic and international funds. Restrictions may apply in
special circumstances, and some redemption requests need a signature
guarantee. A $5 fee is charged for wire redemptions under $5,000.
When will I receive income and capital gain distributions?
The fund distributes income quarterly and net capital gains, if any, at
year-end. For regular accounts, income and short-term gains are taxable at
ordinary income rates, and long-term gains are taxable at the capital gains
rate. Distributions are reinvested automatically in additional shares unless
you choose another option, such as receiving a check. Distributions paid to
IRAs and employer-sponsored retirement plans are automatically reinvested.
What services are available?
A wide range, including but not limited to:
. retirement plans for individuals and large and small businesses;
. automated information and transaction services by telephone or computer;
. electronic transfers between fund and bank accounts;
. automatic investing and automatic exchange;
. brokerage services; and
. asset manager accounts.
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FUND PROFILE
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T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, MD 21202
www.troweprice.com
LOGO
RPS F71-035
T. Rowe Price Investment Services, Inc., Distributor
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